Republic of the Philippines Respondent filed a Petition for Certiorari with the Court of Appeals assailing the Orders

Respondent filed a Petition for Certiorari with the Court of Appeals assailing the Orders of the SEC en banc dated 31 May
SUPREME COURT 1995 and 14 August 1995 in SEC-EB No. 393 and SEC-EB No. 403, respectively. Respondent’s Petition before the appellate
Manila court was docketed as CA-G.R. SP No. 38455.

THIRD DIVISION On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 38455, granting respondent’s
Petition for Certiorari, thus:
G.R. No. 138814 April 16, 2009
WHEREFORE, the petition in so far as it prays for annulment of the Orders dated May 31, 1995 and August 14, 1995 in
MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON C. PAPA, NORBERTO C. NAZARENO, SEC-EB Case Nos. 393 and 403 is GRANTED. The said orders are hereby rendered null and void and set aside.
GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B. ARNAIZ, LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs. Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was denied by the Court of Appeals in a
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS,1 Respondent. Resolution dated 18 May 1999.

DECISION Hence, the present Petition for Review raising the following arguments:

CHICO-NAZARIO, J.: I.

This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision2 dated 11 February 1997 and THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No. 38455. WHEN IT DISMISSED THE PETITION FILED BY RESPONDENT BECAUSE ON ITS FACE, IT FAILED TO STATE A CAUSE OF ACTION.

The facts of the case are as follows: II.

SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos, who filed with the Securities, THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE ACCOMMODATION GIVEN TO HIM BY THE
Investigation and Clearing Department (SICD) of the Securities and Exchange Commission (SEC), a Petition against herein BOARD OF [DIRECTORS] OF THE MAKATI STOCK EXCHANGE, INC.
petitioners Makati Stock Exchange, Inc. (MKSE) and MKSE directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa,
Norberto C. Nazareno, George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio Garcia, Jr. Respondent, in III.
said Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MKSE Board of Directors, which allegedly
THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC COMMITTED GRAVE ABUSE OF DISCRETION
deprived him of his right to participate equally in the allocation of Initial Public Offerings (IPO) of corporations registered with
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT MADE AN EXTENDED INQUIRY AND PROCEEDED TO MAKE A
MKSE; (2) the delivery of the IPO shares he was allegedly deprived of, for which he would pay IPO prices; and (3) the payment of
DETERMINATION AS TO THE TRUTH OF RESPONDENT’S ALLEGATIONS IN HIS PETITION AND USED AS BASIS THE EVIDENCE
₱2 million as moral damages, ₱1 million as exemplary damages, and ₱500,000.00 as attorney’s fees and litigation expenses.
ADDUCED DURING THE HEARING ON THE APPLICATION FOR THE WRIT OF PRELIMINARY INJUNCTION TO DETERMINE THE
On 14 February 1994, the SICD issued an Order granting respondent’s prayer for the issuance of a Temporary Restraining Order to EXISTENCE OR VALIDITY OF A STATED CAUSE OF ACTION.
enjoin petitioners from implementing or enforcing the 3 June 1993 Resolution of the MKSE Board of Directors.
IV.
The SICD subsequently issued another Order on 10 March 1994 granting respondent’s application for a Writ of Preliminary
IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE BROKERS FOR THEMSELVES BUT ARE TO BE
Injunction, to continuously enjoin, during the pendency of SEC Case No. 02-94-4678, the implementation or enforcement of the
DISTRIBUTED TO THE INVESTING PUBLIC. HENCE, RESPONDENT’S CLAIM FOR DAMAGES IS ILLUSORY AND HIS PETITION A
MKSE Board Resolution in question. Petitioners assailed this SICD Order dated 10 March 1994 in a Petition for Certiorari filed with
NUISANCE SUIT.3
the SEC en banc, docketed as SEC-EB No. 393.
On 18 September 2001, counsel for respondent manifested to this Court that his client died on 7 May 2001. In a Resolution
On 11 March 1994, petitioners filed a Motion to Dismiss respondent’s Petition in SEC Case No. 02-94-4678, based on the following
dated 24 October 2001, the Court directed the substitution of respondent by his surviving spouse, Julia Ortigas vda. de
grounds: (1) the Petition became moot due to the cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the
Campos.
Petition; and (3) the Petition failed to state a cause of action.
Petitioners want this Court to affirm the dismissal by the SEC en banc of respondent’s Petition in SEC Case No. 02-94-4678
The SICD denied petitioner’s Motion to Dismiss in an Order dated 4 May 1994. Petitioners again challenged the 4 May 1994 Order
for failure to state a cause of action. On the other hand, respondent insists on the sufficiency of his Petition and seeks the
of SICD before the SEC en banc through another Petition for Certiorari, docketed as SEC-EB No. 403.
continuation of the proceedings before the SICD.
In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en banc nullified the 10 March 1994 Order of SICD in SEC Case No.
A cause of action is the act or omission by which a party violates a right of another.4 A complaint states a cause of action
02-94-4678 granting a Writ of Preliminary Injunction in favor of respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB
where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the
No. 403, the SEC en banc annulled the 4 May 1994 Order of SICD in SEC Case No. 02-94-4678 denying petitioners’ Motion to
Dismiss, and accordingly ordered the dismissal of respondent’s Petition before the SICD.
correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these
elements are absent, the complaint becomes vulnerable to dismissal on the ground of failure to state a cause of action.
If a defendant moves to dismiss the complaint on the ground of lack of cause of action, he is regarded as having hypothetically
admitted all the averments thereof. The test of sufficiency of the facts found in a complaint as constituting a cause of action is
whether or not admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer
thereof. The hypothetical admission extends to the relevant and material facts well pleaded in the complaint and inferences fairly
deducible therefrom. Hence, if the allegations in the complaint furnish sufficient basis by which the complaint can be maintained,
the same should not be dismissed regardless of the defense that may be assessed by the defendant.5
Given the foregoing, the issue of whether respondent’s Petition in SEC Case No. 02-94-4678 sufficiently states a cause of action
may be alternatively stated as whether, hypothetically admitting to be true the allegations in respondent’s Petition in SEC Case No.
02-94-4678, the SICD may render a valid judgment in accordance with the prayer of said Petition.
A reading of the exact text of respondent’s Petition in SEC Case No. 02-94-4678 is, therefore, unavoidable. Pertinent portions of
the said Petition reads:
7. In recognition of petitioner’s invaluable services, the general membership of respondent corporation [MKSE] passed a
resolution sometime in 1989 amending its Articles of Incorporation, to include the following provision therein:
"ELEVENTH – WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the Makati Stock Exchange, Inc. who has
maintained his membership;
"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor from 1977 to the present and as President
from 1972 to 1976 and again as President from 1988 to the present;
"WHEREAS, such dedicated service and leadership which has contributed to the advancement and well being not only of the
Exchange and its members but also to the Securities industry, needs to be recognized and appreciated;
"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has correspondingly adopted a resolution
recognizing his valuable service to the Exchange, reward the same, and preserve for posterity such recognition by proposing a
resolution to the membership body which would make him as Chairman Emeritus for life and install in the Exchange premises a
commemorative bronze plaque in his honor;
"NOW, THEREFORE, for and in consideration of the above premises, the position of the "Chairman Emeritus" to be occupied by
Mr. Miguel Campos during his lifetime and irregardless of his continued membership in the Exchange with the Privilege to attend
all membership meetings as well as the meetings of the Board of Governors of the Exchange, is hereby created."
8. Hence, to this day, petitioner is not only an active member of the respondent corporation, but its Chairman Emeritus as well.
9. Correspondingly, at all times material to this petition, as an active member and Chairman Emeritus of respondent corporation,
petitioner has always enjoyed the right given to all the other members to participate equally in the Initial Public Offerings (IPOs
for brevity) of corporations.
10. IPOs are shares of corporations offered for sale to the public, prior to the listing in the trading floor of the country’s two stock
exchanges. Normally, Twenty Five Percent (25%) of these shares are divided equally between the two stock exchanges which in
turn divide these equally among their members, who pay therefor at the offering price.
11. However, on June 3, 1993, during a meeting of the Board of Directors of respondent-corporation, individual respondents
passed a resolution to stop giving petitioner the IPOs he is entitled to, based on the ground that these shares were allegedly
benefiting Gerardo O. Lanuza, Jr., who these individual respondents wanted to get even with, for having filed cases before
the Securities and Exchange (SEC) for their disqualification as member of the Board of Directors of respondent corporation.
12. Hence, from June 3, 1993 up to the present time, petitioner has been deprived of his right to subscribe to the IPOs of
corporations listing in the stock market at their offering prices.
13. The collective act of the individual respondents in depriving petitioner of his right to a share in the IPOs for the
aforementioned reason, is unjust, dishonest and done in bad faith, causing petitioner substantial financial damage.6
There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor of respondent, particularly,
respondent’s alleged right to subscribe to the IPOs of corporations listed in the stock market at their offering prices; and
stipulates the correlative obligation of petitioners to respect respondent’s right, specifically, by continuing to allow
respondent to subscribe to the IPOs of corporations listed in the stock market at their offering prices.
However, the terms right and obligation in respondent’s Petition are not magic words that would automatically lead to the
conclusion that such Petition sufficiently states a cause of action. Right and obligation are legal terms with specific legal
meaning. A right is a claim or title to an interest in anything whatsoever that is enforceable by law.7 An obligation is
defined in the Civil Code as a juridical necessity to give, to do or not to do.8 For every right enjoyed by any person, there is
a corresponding obligation on the part of another person to respect such right. Thus, Justice J.B.L. Reyes offers9 the
definition given by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor)
the observance of a determinative conduct (the giving, doing or not doing), and in case of breach, may demand satisfaction
from the assets of the latter.
The Civil Code enumerates the sources of obligations:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
Therefore, an obligation imposed on a person, and the corresponding right granted to another, must be rooted in at least
one of these five sources. The mere assertion of a right and claim of an obligation in an initiatory pleading, whether a
Complaint or Petition, without identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading
should state the ultimate facts essential to the rights of action or defense asserted, as distinguished from mere conclusions
of fact or conclusions of law.10 Thus, a Complaint or Petition filed by a person claiming a right to the Office of the
President of this Republic, but without stating the source of his purported right, cannot be said to have sufficiently stated a
cause of action. Also, a person claiming to be the owner of a parcel of land cannot merely state that he has a right to the
ownership thereof, but must likewise assert in the Complaint either a mode of acquisition of ownership or at least a
certificate of title in his name.
In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondent’s right to subscribe to the IPOs of SO ORDERED.
corporations listed in the stock market at their offering prices, and petitioners’ obligation to continue respecting and observing
such right, the Petition utterly failed to lay down the source or basis of respondent’s right and/or petitioners’ obligation. MINITA V. CHICO-NAZARIO
Associate Justice
Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989, granting him the position of
Chairman Emeritus of MKSE for life. However, there is nothing in the said Petition from which the Court can deduce that WE CONCUR:
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by law, contract, or any other legal source, the
CONSUELO YNARES-SANTIAGO
right to subscribe to the IPOs of corporations listed in the stock market at their offering prices.
Associate Justice
A meticulous review of the Petition reveals that the allocation of IPO shares was merely alleged to have been done in accord with Chairperson
a practice normally observed by the members of the stock exchange, to wit:
MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA
IPOs are shares of corporations offered for sale to the public, prior to their listing in the trading floor of the country’s two stock Associate Justice Associate Justice
exchanges. Normally, Twenty-Five Percent (25%) of these shares are divided equally between the two stock exchanges which in
turn divide these equally among their members, who pay therefor at the offering price.11 (Emphasis supplied) DIOSDADO M. PERALTA
Associate Justice
A practice or custom is, as a general rule, not a source of a legally demandable or enforceable right.12 Indeed, in labor cases,
benefits which were voluntarily given by the employer, and which have ripened into company practice, are considered as rights ATTESTATION
that cannot be diminished by the employer.13 Nevertheless, even in such cases, the source of the employees’ right is not custom,
but ultimately, the law, since Article 100 of the Labor Code explicitly prohibits elimination or diminution of benefits. I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer
of the opinion of the Court’s Division.
There is no such law in this case that converts the practice of allocating IPO shares to MKSE members, for subscription at their
offering prices, into an enforceable or demandable right. Thus, even if it is hypothetically admitted that normally, twenty five CONSUELO YNARES-SANTIAGO
percent (25%) of the IPOs are divided equally between the two stock exchanges -- which, in turn, divide their respective allocation Associate Justice
equally among their members, including the Chairman Emeritus, who pay for IPO shares at the offering price -- the Court cannot Chairperson, Third Division
grant respondent’s prayer for damages which allegedly resulted from the MKSE Board Resolution dated 3 June 1993 deviating
CERTIFICATION
from said practice by no longer allocating any shares to respondent.1avvphi1
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that
Accordingly, the instant Petition should be granted. The Petition in SEC Case No. 02-94-4678 should be dismissed for failure to
the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the
state a cause of action. It does not matter that the SEC en banc, in its Order dated 14 August 1995 in SEC-EB No. 403, overstepped
opinion of the Court’s Division.
its bounds by not limiting itself to the issue of whether respondent’s Petition before the SICD sufficiently stated a cause of action.
The SEC en banc may have been mistaken in considering extraneous evidence in granting petitioners’ Motion to Dismiss, but its REYNATO S. PUNO
discussion thereof are merely superfluous and obiter dictum. In the main, the SEC en banc did correctly dismiss the Petition in SEC Chief Justice
Case No. 02-94-4678 for its failure to state the basis for respondent’s alleged right, to wit:

Private respondent Campos has failed to establish the basis or authority for his alleged right to participate equally in the IPO
allocations of the Exchange. He cited paragraph 11 of the amended articles of incorporation of the Exchange in support of his Republic of the Philippines
position but a careful reading of the said provision shows nothing therein that would bear out his claim. The provision merely SUPREME COURT
created the position of chairman emeritus of the Exchange but it mentioned nothing about conferring upon the occupant thereof Manila
the right to receive IPO allocations.14
EN BANC
With the dismissal of respondent’s Petition in SEC Case No. 02-94-4678, there is no more need for this Court to resolve the
propriety of the issuance by SCID of a writ of preliminary injunction in said case. G.R. No. 109125 December 2, 1994

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 11 February 1997 and its Resolution dated 18 ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
May 1999 in CA-G.R. SP No. 38455 are REVERSED and SET ASIDE. The Orders dated 31 May 1995 and 14 August 1995 of the vs.
Securities and Exchange Commission en banc in SEC-EB Case No. 393 and No. 403, respectively, are hereby reinstated. No THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.
pronouncement as to costs.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345
setting aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27
September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al.,
against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No.
87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been
religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions before October
9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same;
that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million;
that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to
defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell;
that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since
defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants
were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them.
Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause
of action.
After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial
court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon
the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that
should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of
first refusal. Thus the dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the
complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for
a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the option to purchase the property or of first refusal,
otherwise, defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in
by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court's judgment,
holding:
In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement,
the claim for specific performance will not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail as
there exists no justifiable ground for its award. Summary judgment for defendants was properly granted. Courts may render
summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment
as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quo is
legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the
following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal
only if the property is sold for a purchase price of Eleven Million pesos or lower; however, considering the mercurial and
uncertain forces in our market economy today. We find no reason not to grant the same right of first refusal to herein
appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as
to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court
denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses
executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and
Development Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in full is hereby
acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs, executors,
administrators or assigns, the above-described property with all the improvements found therein including all the rights
and interest in the said property free from all liens and encumbrances of whatever nature, except the pending ejectment
proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor and other
expenses incidental to the sale of above-described property including capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu
thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the
latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice
of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by
the Court of Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:
Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano. Both
defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty. Anacleto Magno
respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures
upon the copy of the Motion for Execution.
The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the Court of Appeals in its
decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the petition for review and that the same was
denied by the highest tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the Supreme Court as of
June 6, 1991, stating that the aforesaid modified decision had already become final and executory.
It is the observation of the Court that this property in dispute was the subject of the Notice of Lis Pendens and that the modified
decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants
decide to offer the property for sale for a price of P11 Million or lower, and considering the mercurial and uncertain forces in our
market economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold
for a price in excess of Eleven Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of
first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer.
All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation, is
hereby set aside as having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this
Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this
Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the
property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00
and ordering the Register of Deeds of the City of Manila, to cancel and set aside the title already issued in favor of Buen Realty
Corporation which was previously executed between the latter and defendants and to register the new title in favor of the
aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued.1
On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect
the above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue
of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's
purchase of the property on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a
purchase option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some
relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the
concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by
the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation
or conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the
demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code).
A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the
contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence
of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of
minds, i.e., the concurrence of offer and acceptance, on the object and on the cause thereof. A contract which requires, in
addition to the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred
to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of
real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof.
The stage of consummation begins when the parties perform their respective undertakings under the contract culminating
in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In
sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a
person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to
another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing
sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price),
the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force.2 In Dignos vs.
Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still
absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated,
e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery
(e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of
the contract itself, the failure of the condition would prevent such perfection.3 If the condition is imposed on the
obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the
sale (Art. 1545, Civil Code).4
An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be
obligatory on the parties, and compliance therewith may accordingly be exacted.5
An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable
consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This
contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price. (1451a)6
Observe, however, that the option is not the contract of sale itself.7 The optionee has the right, but not the obligation, to buy.
Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy
ensues and both parties are then reciprocally bound to comply with their respective undertakings.8
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public
advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These
relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the
contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico
vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally
govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw
the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by
communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding
that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar
vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez
vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give
rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be
distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact,
the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may
not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of
perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care
should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration
for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a
similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its
normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or
possibly of an offer under Article 13199 of the same Code. An option or an offer would require, among other things,10 a clear
certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object
might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention
to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later
firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed
not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by,
among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an
action for specific performance without thereby negating the indispensable element of consensuality in the perfection of
contracts.11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above,
an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 1912 of the Civil Code, can warrant a
recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of
petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is
here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal,
the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a
proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property,
has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the
registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate
proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first
being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution
varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in
this regard, has observed:
Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As
already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs
and respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs.
IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs.
CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the
execution of any deed of sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991
and 27 September 1991, of the court a quo. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
FIRST DIVISION
G.R. No. 160867 September 20, 2006
BONIFACIO NAKPIL, petitioner,
vs.
MANILA TOWERS DEVELOPMENT CORPORATION, respondent.
x--------------------------------------x
G.R. No. 160886 September 20, 2006
MANILA TOWERS DEVELOPMENT CORPORATION, petitioner,
vs.
BONIFACIO NAKPIL, respondent.
DECISION
CALLEJO, SR., J.:
This is a consolidation of two Petitions for Review, assailing the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 72289
dated August 25, 2003 and the Resolution dated November 19, 2003 denying the motion for reconsideration thereof.
The Antecedents
A 14-storey high rise building was constructed at 777 Ongpin St., Sta. Cruz, Manila. Sometime in 1964, its owner, Cheong Kiao Ang,
leased the building to about 200 Filipino Chinese tenants who used the same for either residential or commercial purposes. One
of these tenants was Atty. Bonifacio Nakpil who leased Room 204 in the mezzanine floor. He used the unit as his law office.2 The
tenants of the building later formed the House International Building Tenants Association, Inc. (HIBTAI).
The property was mortgaged with the Government Service Insurance System (GSIS) as security for a loan Ang had earlier obtained.
Upon failure to pay the loan, the GSIS had the real estate mortgage foreclosed and the property sold at public auction, with GSIS
as the winning bidder. The latter, in turn, sold the property to the Centertown Marketing Corporation (CMC) which assigned all its
rights to its sister-corporation, the Manila Tower Development Corporation (MTDC) for P21,000,000.00. The HIBTAI protested,
claiming that its members had the priority to buy the property.3 The tenants refused to pay their rentals and instead remitted
them to HIBTAI.
On June 29, 1981, the City Engineer wrote the MTDC, through Luis Javellana, requesting that the defects of the building be
corrected. The City Engineer warned the MTDC that the defects were serious and would endanger the lives of the tenants if not
immediately corrected. The City Engineer reiterated his request in a letter dated July 10, 1981 to MTDC urging that the building be
immediately repaired. However, before the MTDC could make the necessary repairs, the HIBTAI, on October 2, 1982, filed a
complaint against the GSIS for injunction and damages in the Court of First Instance (CFI) of Manila.
On January 31, 1983, the court rendered judgment dismissing the complaint. However, on February 23, 1983, HIBTAI filed another
complaint for annulment of contract and damages in the CFI of Manila, docketed as Civil Case No. 83-15875, against the CMC,
MTDC and GSIS. It averred that under Presidential Decree (P.D.) No. 1517, the tenants had the priority right to purchase the
property. The court rendered judgment dismissing the complaint, prompting HIBTAI to appeal the decision to the appellate court.
The ruling of the trial court was later affirmed on February 4, 1986. HIBTAI assailed the ruling in this Court via petition for review.
On June 30, 1987, this Court rendered judgment affirming the decision of the CA.4 According to the Court, the tenants of the
building, not the HIBTAI, were the real parties-in-interest as parties-plaintiffs.
About eight (8) years later, on October 12, 1995, Atty. Samuel S. Samuela, the building administrator, wrote Architect Juan A.
Maravillas, Jr., then Officer-in-Charge (OIC), Office of the Building Official, City of Manila, requesting for an immediate ocular
inspection of the building to determine its safety. The letter mentioned that, as far back as 1981, the City Engineer and Building
Official had ordered the building condemned after inspection. Atty. Samuela stated that when the MTDC was about to initiate the
repairs on the building, the tenants filed several suits against it; this prevented MTDC from complying with the said order. During
the pendency of these cases, the tenants likewise took control of the building and even illegally put up structures in the building
without MTDC's consent. He pleaded to the Building Official to give priority to his request to prevent undue injuries and protect
the lives of the tenants.5
The City Building Official granted the request and scheduled an ocular inspection of the building at 2:00 p.m. on October 24,
1995.6
With prior notices to the tenants and in the presence of a representative of HIBTAI, Amado Ramoneda, the representatives
of the Office of the Building Official conducted an ocular inspection of the building.7 On November 3, 1995, they submitted
a Building Inspection Report with the following findings:
I. STRUCTURAL ASPECT (Sec. 3.1 Rule VII-IRR)
1. Cracks on the exterior interior walls are prominent which manifest earthquake movement and decrease in seismic
resistance. Damages to beams and columns are feasible.
II. ELECTRICAL ASPECT (Sec. 3.3 Rule VII-IRR)
2. Wiring system are already old, obsolete and not properly maintained;
3. Some junction boxes are not properly covered thus exposing the wiring connections;
4. Usage of dangling extension cords and octopus wiring connections were likewise observed.
III. SANITARY/PLUMBING ASPECT (Sec. 3.5 Rule VII-IRR)
5. Defective sanitary/plumbing installations;
6. Poor drainage system that caused the stagnation of waste water within the back part (Ground Floor) of the building;
7. All sanitary/plumbing fixtures on vacated 9th, 10th & 11th floors, due to lack of proper maintenance has los[t] their trap
seals, this allowed the escape of toxicating sewer gas from the system.
IV. ARCHITECTURAL ASPECT (Sec. 3.6 Rule VII-IRR).
8. Steel frames and roofings at deck are rusted/corroded and inadequately maintained;
9. Broken window glass panes and rusted steel casement;
10. Inadequate light and ventilation resulting from illegal constructions at the required open space areas;
11. Illegal use of 14th floor as sauna bath parlor which is non-conforming to City Ordinance.
OTHERS
12. Non-compliance with the provisions of BP 344, the Law to Enhance Mobility of Disabled Persons;
13. Illegal construction at the estero easement area and at the required open spaces in violations of Section 3.8 Rule
VII-IRR.8 (Underscoring supplied)
The City Building Official recommended that the windows glass/frames be repaired and the illegally appended structures
removed. It was also recommended that the use of the sauna bath be discontinued and the old electrical wiring system
and fixtures be replaced. He also stated that the structural integrity of the building was questionable, and that structural
testing was needed.9
Consequently, on November 10, 1995, the City Building Official wrote a letter to the building administrator, ordering him to cause
the tenants to vacate the building and undertake the necessary repairs and rehabilitation of the building. The following warning
was also issued:
Failure to comply herewith shall constrain this Office to impose further administrative sanctions in accordance with the provisions
of the National Building Code PD. 1096, as well as the other existing laws and ordinances. This is without prejudice to further legal
action that may be taken under the provisions of Articles 482 and 694 to 707 of the Civil Code of the Philippines.10
However, the MTDC did not respond to the letter. On January 24, 1996, the City Building Official issued a Closure Order to the
MTDC and ordered the building administrator to cause the tenants to vacate the building within fifteen (15) days from notice and
to commence its repair. He also directed MTDC to file an application for the necessary permits before the start of the actual
repairs, together with a certification on structural stability from the building's structural designer and to attach thereto the results
of the structural testing as well as the recommendation/evaluation reports, scope of project activities, repair/renovation plans
and retrofitting plans. The order would only be lifted after the defects or deficiencies of the subject building or structure shall
have been corrected or substantially complied with in accordance with Section 21, Rule VIII-IRR, P.D. No. 1096, without prejudice
to further action that may be taken under the provisions of Articles 482, and 694 to 707 of the Civil Code, as well as other existing
laws and ordinances.11
The City Building Official conducted a reinspection of the building and, on March 26, 1996, made the following recommendation:
It is recommended that because of:
1) the adamant refusal of the owners of the building to correct the serious defects noted by this Office as early as 1981 up to the
present, notwithstanding notices to this effect;
2) the directive of national as well as local leaders to intensify the campaign against buildings which are dangerous to life and limb
as exemplified in the tragic Ozone case in Quezon City; and
3) the possibility of City officials incurring criminal as well as administrative liabilities for failure to take positive steps to protect
the lives of the people against ruinous or dangerous buildings.
The persistence of the owners of the building in not undertaking the required urgent repairs allegedly because of suits filed
against them, gives this Office no better alternative but to recommend that the City Engineer be authorized and directed to make
the necessary repairs and all expenses thereto be shouldered by the owners of the building and also to order the occupants of the
building to immediately vacate the premises to give way to the repair and to ensure the protection of their lives and property.
Approval of this request is urgently needed.12
The City Mayor approved the recommendation and directed the repairs of the building by the City Building Official with the
expenses therefor to be charged against the account of MTDC.13
On June 28, 1996, notices were sent to the tenants, giving them fifteen (15) days within which to vacate the building to give way
to its general repair.14 However, at the time, Atty. Nakpil was in the United States for medical treatment, and his secretary was
left behind to take care of the law office.
Felix Ong, one of the tenants in the building and the President of the HIBTAI, filed a petition for prohibition with a plea for a writ
of preliminary injunction and/or a temporary restraining order (TRO) with damages against the MTDC, City Engineer and Police
Major Franklin Gacutan, docketed as Civil Case No. 96-79267. Ong prayed that a TRO be issued to enjoin respondents from
conducting repair and rehabilitation work within the building, which the court granted.
Clemente Sy, who claimed to be the Barangay Captain of Barangay No. 297, Zone 29 where the building was located and
the incumbent President of the House International Building Tenants Association, filed a similar petition against the same
respondents, including MTDC.15
At about 4:00 p.m. on July 19, 1996, a group of men led by Engr. Melvin Balagot, the Chief Slum Clearance and Demolition
Services of the Office of the City Building Official, entered the building and, in compliance with the order of the City Mayor
as recommended by the City Building Official, commenced the repairs and tore down some of the structures. However, the
repair works were temporarily suspended on July 22, 1996 as a result of the TRO issued by the court in favor of Ong in Civil
Case No. 96-79267.
On July 23, 1996, Engr. Balagot submitted the following Report:
1. That all the occupants thereat already vacated the premises to give way for the repair work of the subject structure
except for the unit occupied by the security guards at the ground floor;
2. That most of the interior walls were already dismantled by this Office to give way for immediate replacement.
3. It is likewise reported that the said building is not safe for occupancy for the meantime.
For your information and further instruction.
(SGD)
MELVIN Q. BALAGOT
Engineer V
Chief, Slum Clearance and Demolition Services.16
Upon his arrival in the Philippines, Atty. Nakpil filed, on November 5, 1996, a complaint in the Regional Trial Court (RTC) of
Manila against the MTDC, seeking for actual, moral, and exemplary damages, attorney's fees, litigation expenses, costs of
suit and other reliefs. The case was docketed as Civil Case No. 65980. He alleged that the MTDC, through its agents and
representatives and the policemen who accompanied the demolition team, forced the guard to open the gate to the
building, and, thereafter, 200 people armed with hammer and crowbars started destroying the mezzanine floor of the
building on July 19, 1996. His room was destroyed, the walls and partitions were completely hammered down, and the
electricity was cut off. His personal belongings were either scattered, thrown away, or stolen. He pointed out that he had
been renting the premises and complying with the conditions of the lease since 1965. The MTDC violated his right as lessee
to the possession of the premises, unlawfully depriving him of said possession without any lawful authority or court
order.17
Atty. Nakpil prayed that MTDC be ordered to pay the following:
a) P100,000 for actual damages, representing the value of the personal belongings and important papers which were lost
and/or stolen by the representatives of the defendant during the actual demo[li]tion and tearing or hammering down of
the walls and partitions of the room of the plaintiff;
b) The sum of P500,000.00 as moral damages;
c) The sum of P100,000.00 as exemplary damages;
d) The sum equivalent to 20% of the amount due to the plaintiff as attorney's fees; and
e) The sum of P50,000 as litigation expenses, plus costs of suit.
Plaintiff prays for such other relief and remedies he is entitled to in the premises.18
Meantime, the trial court dismissed the complaint of Ong in Civil Case No. 96-79267. In view of this development, the Office of
the Mayor sent a letter dated March 6, 1998 to the President and officers of the MTDC, and the owners of the building, directing
them to undertake immediate repairs within three (3) days from receipt thereof, otherwise, it will undertake the repair and all
expenses shall be charged against them.19 The Office of the Mayor made it clear that the order became necessary to protect the
people from any injury as a consequence of the dilapidated and serious deterioration of the building. The MTDC forthwith applied
for a demolition permit with the Office of the Building Official which was granted on March 30, 1998.20 The MTDC later had the
building demolished.
In due course, the complaint and summons were served on MTDC on April 14, 1998 in Civil Case No. 65980.21 In its answer to the
complaint, MTDC alleged that it was the City of Manila which caused the repair of the building, following the tragic Ozone fire
incident in Quezon City. Consequently, it was not liable for Atty. Nakpil's claims.
Atty. Nakpil testified that he had been a lessee of Room 204 and used the room as a law office; on July 19, 1996, he was in the
United States for treatment when his daughter informed him, through phone, that his place was being demolished. He rushed
back home and arrived in Manila on July 30, 1996, and discovered that he had no more office to speak of. The demolition team
(the sheriff, policemen and laborers), armed with crowbars, looted the room and destroyed the pipes and cabinets and scattered
his things.22 He lost some of his books, a tanguile table, three paintings, two manual typewriters, all valued at P100,000.00. He
averred that he had been in the law practice for 30 years, all spent in Room 204; because of the demolition of his office, he could
not resume his law practice.
For his part, Joseph Villanueva declared that, since 1973, he had leased a portion of the mezzanine floor, Room 200, which he
used as his clinic. At around 3:00 p.m. on July 19, 1996, a group of employees of the City Engineer's Office, accompanied by
policemen and sheriffs, gained entry into the building, cut the electric current, and destroyed the pipes with the use of heavy
equipments and crowbars. They demolished the mezzanine and upper floors and other parts of the building. Around 20 members
of the demolition crew entered the office of Atty. Nakpil. Some members of the demolition crew looted the room and took
everything they could carry. He stated that what he and the tenants received were notices to repair and not notice of demolition.
Atty. Nakpil presented Engr. Guillermo de Leon who testified that he was requested to conduct an ocular inspection of the
building. As per his report dated August 9, 1990, he assessed the building to be safe, sound and stable. The building was not
destroyed by the earthquake on July 6, 1990. He found hairline cracks, caused probably by temperature. He never used any
instrument to determine the structural stability because there was no danger. He stated that upon inspection, he found no
hairline cracks and that the building could be saved by plastering; in fact, it could withstand any earthquake.
Carmelita Tan, a member of the HIBTAI, testified that she owned a grocery store in the ground floor and in the mezzanine. At
about 4:00 p.m. on July 19, 1996, 100 persons, carrying hammers and crowbars and long irons, gained entry into the building. She
rushed to the mezzanine and saw that ten of them were in the law office of Atty. Nakpil and that the door and partitions were
damaged. The lights were off at the time.
MTDC adduced testimonial and documentary evidence that the Office of the City Engineer, through Engr. Melvin Balagot, Jr.,
commenced the repairs of the building on July 19, 1996, with the assistance of the employees of the City Engineer's Office,
laborers and policemen who were tasked to check the flow of traffic. They removed the cracked interior walls of the building with
crowbars, hammers and other instruments, and some portions of the ceiling which needed to be replaced.23 However, they did
not remove the walls and partitions in the mezzanine floor.24 They started the work on the 9th and 10th floors of the
building,25 but had to stop due to the temporary restraining order from the RTC of Manila on the complaint of Felix Ong. During
the ocular inspection of the building on August 8, 1996 conducted by the Clerk of Court in connection with Civil Case No.
96-79267, the Office of Atty. Nakpil was unoccupied.26
On May 20, 2001, the court rendered judgment in favor of MTDC and ordered the dismissal of the complaint. The trial
court declared that Atty. Nakpil failed to prove that the building was demolished on July 30, 1996 and failed to link MTDC
to the incident on July 19, 1996 and the loss of the personal properties of Atty. Nakpil. As admitted by one of his witnesses
(Villanueva), the employees of the City Engineer's office were the ones who demolished the building, while Carmelita Tan
declared that she did not know who those people were.27
Atty. Nakpil appealed to the CA. On August 25, 2003, the CA rendered judgment granting the appeal and reversing the
decision of the RTC. The fallo of the decision reads:
WHEREFORE premises considered, the appealed decision of the Regional Trial Court, Branch 152 in Civil Case No. is
hereby REVERSED and SET ASIDE. A new one is hereby rendered ordering defendant-appellee, Manila Towers to pay herein
plaintiff-appellant Bonifacio Nakpil the amount of P50,000.00 as nominal damages.
SO ORDERED.28
The CA held that MTDC was remiss in its duty as lessor under Article 1654, that is, to make the necessary repairs on the
building. This led to the demolition of the leased premises, thereby disturbing the peaceful and adequate enjoyment of the
lessee. Thus, the failure of MTDC to fulfill such obligation entitled Atty. Nakpil to damages. The appellate court
cited Goldstein v. Roces.29 However, the CA also ruled that no actual damages could be awarded to Atty. Nakpil since he
failed to present competent evidence to prove the actual damages sustained. Neither can moral damages be awarded to
him since he likewise failed to prove bad faith or any fraudulent act on the part of MTDC. Thus, no exemplary damages
could likewise be awarded, and, consequently, he was not entitled to attorney's fees. According to the CA, the most that
could be adjudged in his favor was nominal damages for violation of his right.30
The parties filed their respective motions for reconsideration of the decision, which the CA denied in its Resolution dated
November 19, 2003.31
The parties filed their respective petitions for review on certiorari in this Court, seeking to reverse the decision and
resolution of the appellate court.
In G.R. No. 160867, Nakpil, petitioner therein, contends that, while actual damages must be proven as a general rule and
the amount of damages must possess at least a degree of certainty, it is not necessary to prove exactly how much the loss
was; it is enough that loss is proven. He insists that he has presented proof that he suffered losses when his office was
demolished and the value he gave was a fair and reasonable assessment thereof. He maintains that as of June 1995, there
were already 245 volumes of the Supreme Court Reports Annotated (SCRA). In 1998, the value of each volume of the SCRA
was P520.00; hence, the value of 245 volumes would be P127,400.00, a matter which the court can take judicial notice of.
Assuming that the evidence he presented is not sufficient to entitle him to an award of actual damages, the P50,000.00
nominal damages awarded to him is too minimal. He maintains that he is entitled to moral damages because the MTDC
had the building demolished to have him evicted from his office; he suffered mental anguish and was embarrassed by his
eviction; he had his law office for more than 30 years and considered it his second home.
On the other hand, in G.R. No. 160886, MTDC, petitioner therein, avers that it cannot be made liable for actual, moral and
exemplary damages because it had not been remiss in its duty to make the necessary repairs; it was prohibited from taking
possession of the property by the tenants who had filed several suits against it.32 It alleged that it acquired the building
from the GSIS in 1981, and it was the HIBTAI that had been managing the affairs of the said building and collected the
rentals from the tenants. It pointed out that in CA-G.R. No. 04393, the CA ruled that the HIBTAI had no right to collect the
rentals. Moreover, HIBTAI did not use the rentals to make the necessary repairs but used it instead to pay its accounts and
obligations. By their own actions, the tenants of the subject building prevented MTDC from performing its duty to maintain
them in their peaceful possession and enjoyment of the property. Moreover, Nakpil failed to prove that it had anything to do with
the demolition/repairs and the loss of his personal property.
Nakpil counters that while MTDC may have failed to make the necessary repairs because it was prevented by the tenants'
association from doing so, there is no showing that it failed to maintain him in the peaceful and adequate possession of the leased
premises for the same reason. He contends that MTDC allowed the city to demolish the building even when the order was only
for its repair. He posits that the MTDC is liable for damages because the MTDC, not a third person, deprived him of his possession
of the leased premises.33
The threshold issues are: (1) whether or not the MTDC is liable for actual, moral and exemplary damages to Nakpil; and (2)
whether the award of P50,000.00 for nominal damages has factual and legal basis.
The Ruling of the Court
The petition of the MTDC in G.R. No. 160886 is meritorious. The petition of Nakpil in G.R. No. 160867 is denied for lack of merit.
Article 1654 of the Civil Code enumerates the obligations of the lessor:
(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended;
(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use for which it has been
devoted, unless there is a stipulation to the contrary;
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.
Failure of the lessor to fulfill any of these obligations will render the lessor liable for damages.34 In contracts, the obligor (lessor)
who acted in good faith is liable for damages that are the material and probable consequence of the breach of the obligation and
which the parties have foreseen or could have reasonably foreseen at the time the obligation was contracted. In case of fraud,
bad faith, malice or wanton attitude, he shall be responsible for all damages which may be reasonably attributed to the
non-performance of the obligation.35
We do not agree with the ruling of the CA that the MTDC committed a breach of its lease contract with Nakpil when it failed to
comply with its obligation as lessor, and that the MTDC is liable for nominal damages. Breach of contract is the failure without
legal reason to comply with the terms of a contract. It is also defined as the failure, without legal excuse, to perform any promise
which forms the whole or part of the contract.36 There is no factual and legal basis for any award for damages to respondent.
The duty to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract is merely a
warranty that the lessee shall not be disturbed in his legal, and not physical, possession.37 In the early case of Goldstein v.
Roces,38 the Court, citing the commentaries of Manresa, pointed out that the obligation to maintain the lessee in the peaceful
and adequate enjoyment of the leased property seeks to protect the lessee not only from acts of third persons but also from the
acts of the lessor, thus:
The lessor must see that the enjoyment is not interrupted or disturbed, either by others' acts [save in the case provided for in the
article 1560 (now Article 1664)], or by his own. By his own acts, because, being the person principally obligated by the contract,
he would openly violate it if, in going back on his agreement, he should attempt to render ineffective in practice the right in the
thing he had granted to the lessee; and by others' acts, because he must guarantee the right he created, for he is obliged to give
warranty in the manner we have set forth in our commentary on article 1553, and, in this sense, it is incumbent upon him to
protect the lessee in the latter's peaceful enjoyment.39
When the act of trespass is done by third persons, it must be distinguished whether it is trespass in fact or in law because
the lessor is not liable for a trespass in fact or a mere act of trespass by a third person.40 In the Goldstein case, trespass in
fact was distinguished from legal trespass, thus: "if the act of trespass is not accompanied or preceded by anything which
reveals a juridic intention on the part of the trespasser, in such wise that the lessee can only distinguish the material fact,
stripped of all legal form or reasons, we understand it to be trespass in fact only (de mero hecho)."41 Further, the
obligation under Article 1654(3) arises only when acts, termed as legal trespass (perturbacion de derecho), disturb, dispute,
object to, or place difficulties in the way of the lessee's peaceful enjoyment of the premises that in some manner cast
doubt upon the right of the lessor by virtue of which the lessor himself executed the lease.42
What is evident in the present case is that the disturbance on the leased premises on July 19, 1996 was actually done by
the employees under the City Engineer of Manila and the City Building Official on orders of the City Mayor without the
participation of the MTDC. It bears stressing that the City Building Official is authorized and mandated under Section 214 of
the National Building Code to order the repair, maintenance or demolition of the building found or declared to be
dangerous or ruinous, depending upon the degree of danger to life, health, safety and/or well-being of the general public
and its occupants as provided in Section 215 thereof. This is without prejudice to the provisions of Articles 482, 694 and
707 of the New Civil Code. Sections 214 and 215 of the National Building Code read:
SECTION 214. Dangerous and Ruinous Buildings or Structures
Dangerous buildings are those which are herein declared as such or are structurally unsafe or not provided with safe egress,
or which constitute a fire hazard, or are otherwise dangerous to human life, or which in relation to existing use, constitute
a hazard to safety or health or public welfare because of inadequate maintenance, dilapidation, obsolescence, or
abandonment; or which otherwise contribute to the pollution of the site or the community to an intolerable degree.
SECTION 215. Abatement of Dangerous Buildings
When any building or structure is found or declared to be dangerous or ruinous, the Building Official shall order its repair,
vacation or demolition depending upon the degree of danger to life, health, or safety. This is without prejudice to further
action that may be taken under the provisions of Articles 482 and 694 to 707 of the Civil Code of the Philippines.
When the personnel of the City Building Official/City Engineer in coordination with the Philippine National Police
undertook the repair/rehabilitation of the building, they did so in the lawful performance of their duties, independently of
and separate from the obligation of the MTDC to effect the required immediate repair/rehabilitation of the building.
Admittedly, the MTDC requested the City Building Official for the inspection of the building to determine its safety,
conformably with its obligation under Article 1654 of the New Civil Code to maintain peaceful and adequate enjoyment of
the tenants of the leased premises, and to insure the personal safety of the tenants and their properties. At the time, the
Ozone Bar and Grill in Quezon City had just been burned down, and many lives were lost.
There is no question that the possession by respondent of the leased premises had been disturbed by the attempt of the
personnel of the City Building Official to repair and rehabilitate the building due to MTDC's failure to undertake the same.
Any act or omission by the lessor which causes a substantial interference with the actual possession of the lessee will
constitute a breach of the obligation of quiet enjoyment. In some jurisdictions, the lessor's failure to make repairs or
alterations to the leased premises as required by public authorities, particularly those that are substantial and structural in
nature, constitutes constructive eviction, which makes the lessor liable for damages.43 Such conclusion is grounded on the
fact that the lessors, in those cases, were obliged to make structural and substantial repairs on the leased property. The
same doctrine could very well be applied in our jurisdiction considering that, under our laws, the lessor is likewise obliged
to make the necessary repairs on the leased premises which would undoubtedly include those that are structural and
substantial in nature. In fact, there may be a constructive eviction if the landlord does a wrongful act or is guilty of any
default or neglect whereby the leased premises are rendered unsafe, unfit, or unsuitable for occupancy, in whole, or in auction to satisfy the claim of the OBO. Any amount in excess of the claim of the government realized from the sale of the
substantial part, for the purposes for which they were leased.44 building and/or building materials shall be delivered to the owner.

It bears stressing, however, that two factors must exist before there can be a constructive eviction: (1) an act or omission by the Assuming that Atty. Nakpil lost any of his personal properties, at the very least, he should have inquired from the office of
landlord, or someone acting under his authority, which permanently interferes with the tenant's beneficial enjoyment or use of the City Engineer/City Building Official and requested that they be returned to him.
the leased premises; and (2) an abandonment of possession by the lessee within a reasonable time.45
WHEREFORE, premises considered, the petition in G.R. No 160867 is DENIED. The petition in G.R. No. 160886 is GRANTED.
Nakpil failed to establish any of the foregoing factors. The City Building Official was tasked merely to repair/rehabilitate the The Decision of the Court of Appeals is REVERSED AND SET ASIDE. The decision of the Regional Trial Court is AFFIRMED. No
building and not to demolish the same and cause the placement eviction of the tenants. Neither did respondent abandon the costs.
leased premises. Admittedly, the MTDC failed to make the necessary repairs in the building despite requests of the City Building
Official as early as June 29, 1981 and July 10, 1981. However, the MTDC cannot be faulted for such failure. No less than the HIBTAI SO ORDERED.
or its members prevented MTDC from instituting the necessary repairs. Even Villanueva, Nakpil's witness, admitted that HIBTAI
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur.
objected to the orders of the City Building Official for the repair of the building.46
Republic of the Philippines
Moreover, a complaint for injunction and damages was filed by the HIBTAI on October 2, 1982 against the MTDC. Even after the
SUPREME COURT
dismissal of the complaint, on January 31, 1983, the HIBTAI filed a complaint against the GSIS, CMC and MTDC with the RTC of
Manila
Manila for the nullification of the deed of conditional sale between the GSIS and the CMC and the deed of assignment executed
by the defendant CMC and the MTDC over the property. Plaintiff alleged therein that its members, presumably including Nakpil, THIRD DIVISION
the tenants in the building had the priority right under P.D. No. 1517 to purchase the property; that the CMC was not qualified to
purchase the property from the GSIS under its Articles of Information and, hence, the deed of conditional sale was ultra vires; G.R. No. 170633 October 17, 2007
consequently, the deed of assignment executed by the CMC and its sister corporation was null and void. The tenants in the
building, including Nakpil, refused to pay rentals and remitted the same to the HIBTAI which used the money partly to finance its MCC INDUSTRIAL SALES CORPORATION, petitioner,
suits against the MTDC, thus depriving the latter from generating funds for the repair of the building. In fine, the tenants, through vs.
the HIBTAI, already controlled the premises. The RTC dismissed the complaint of HIBTAI. The Intermediate Appellate Court SSANGYONG CORPORATION, respondents.
affirmed the dismissal on February 4, 1986. The HIBTAI filed a petition for review in this Court and, on June 30, 1987, the petition
DECISION
was denied for lack of merit.47 The Court ruled that the HIBTAI had no personality to assail the contracts and to invoke P.D. No.
1517 for its members, including Nakpil. Shortly, thereafter, in 1988, a complaint was filed against the GSIS by one of the tenants NACHURA, J.:
entitled Dy v. Government Service Insurance System.48 In 1994, a similar complaint was filed against the GSIS by another tenant
entitled Cruz v. GSIS.49 Before the Court is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV No. 82983 and
its Resolution2 denying the motion for reconsideration thereof.
Even Nakpil admitted that the MTDC was prevented by the HIBTAI and its members from undertaking any repairs in the building.
The only recourse of the MTDC was for the repair/rehabilitation of the building through the Office of the City Engineer/City Petitioner MCC Industrial Sales (MCC), a domestic corporation with office at Binondo, Manila, is engaged in the business of
Building Official. Thus, in 1995, it requested for an immediate ocular inspection of the building to determine the condition and importing and wholesaling stainless steel products.3 One of its suppliers is the Ssangyong Corporation (Ssangyong),4 an
safety of the building under Sections 214 and 215 of the National Building Code. The MTDC had no involvement in the actual international trading company5 with head office in Seoul, South Korea and regional headquarters in Makati City,
repairs/rehabilitation of the building, nor in the selection, supervision and control of the laborers to initially repair/rehabilitate Philippines.6 The two corporations conducted business through telephone calls and facsimile or telecopy
the building. transmissions.7 Ssangyong would send the pro forma invoices containing the details of the steel product order to MCC; if
the latter conforms thereto, its representative affixes his signature on the faxed copy and sends it back to Ssangyong, again
Moreover, Atty. Nakpil failed to present preponderance of evidence to prove that any of the laborers under the Office of the City by fax.8
Building Official/City Engineer carried away his books, table, painting, and typewriter. Villanueva merely testified that the laborers
carried away "things they could carry." The evidence of Nakpil shows that the mezzanine floor was dark, as the lights had been On April 13, 2000, Ssangyong Manila Office sent, by fax, a letter9 addressed to Gregory Chan, MCC Manager [also the
turned off to prevent a conflagration. If at all the laborers had taken any of the materials from any of the rooms in the building, President10 of Sanyo Seiki Stainless Steel Corporation], to confirm MCC's and Sanyo Seiki's order of 220 metric tons (MT)
these were building materials which they were authorized to carry away under Section 10, Rule II of the Implementing Rules of of hot rolled stainless steel under a preferential rate of US$1,860.00 per MT. Chan, on behalf of the corporations, assented
the National Building Code which reads: and affixed his signature on the conforme portion of the letter.11

10. The building/structure as repaired or in case of demolition, the building materials gathered after the demolition thereof shall On April 17, 2000, Ssangyong forwarded to MCC Pro Forma Invoice No. ST2-POSTSO40112 containing the terms and
be held by the OBO until full reimbursement of the cost of repair, renovation, demolition and removal is made by the owner conditions of the transaction. MCC sent back by fax to Ssangyong the invoice bearing the conformity signature13 of Chan.
which, in no case, shall extend beyond thirty (30) days from the date of completion of the repair, renovation, demolition and As stated in the pro forma invoice, payment for the ordered steel products would be made through an irrevocable letter of
removal. After such period, said building materials of the building thus repaired, renovated or removed shall be sold at public
credit (L/C) at sight in favor of Ssangyong.14 Following their usual practice, delivery of the goods was to be made after the L/C had
been opened.
In the meantime, because of its confirmed transaction with MCC, Ssangyong placed the order with its steel manufacturer, Pohang
Iron and Steel Corporation (POSCO), in South Korea15 and paid the same in full.
Because MCC could open only a partial letter of credit, the order for 220MT of steel was split into two,16 one for 110MT covered
by Pro Forma Invoice No. ST2-POSTS0401-117 and another for 110MT covered by ST2-POSTS0401-2,18 both dated April 17, 2000.
On June 20, 2000, Ssangyong, through its Manila Office, informed Sanyo Seiki and Chan, by way of a fax transmittal, that it was
ready to ship 193.597MT of stainless steel from Korea to the Philippines. It requested that the opening of the L/C be
facilitated.19 Chan affixed his signature on the fax transmittal and returned the same, by fax, to Ssangyong.20
Two days later, on June 22, 2000, Ssangyong Manila Office informed Sanyo Seiki, thru Chan, that it was able to secure a
US$30/MT price adjustment on the contracted price of US$1,860.00/MT for the 200MT stainless steel, and that the goods were to
be shipped in two tranches, the first 100MT on that day and the second 100MT not later than June 27, 2000. Ssangyong reiterated
its request for the facilitation of the L/C's opening.21
Ssangyong later, through its Manila Office, sent a letter, on June 26, 2000, to the Treasury Group of Sanyo Seiki that it was looking
forward to receiving the L/C details and a cable copy thereof that day.22 Ssangyong sent a separate letter of the same date to
Sanyo Seiki requesting for the opening of the L/C covering payment of the first 100MT not later than June 28, 2000.23 Similar
letters were transmitted by Ssangyong Manila Office on June 27, 2000.24 On June 28, 2000, Ssangyong sent another facsimile
letter to MCC stating that its principal in Korea was already in a difficult situation25 because of the failure of Sanyo Seiki and MCC
to open the L/C's.
The following day, June 29, 2000, Ssangyong received, by fax, a letter signed by Chan, requesting an extension of time to open the
L/C because MCC's credit line with the bank had been fully availed of in connection with another transaction, and MCC was
waiting for an additional credit line.26 On the same date, Ssangyong replied, requesting that it be informed of the date when the
L/C would be opened, preferably at the earliest possible time, since its Steel Team 2 in Korea was having problems and Ssangyong
was incurring warehousing costs.27 To maintain their good business relationship and to support MCC in its financial predicament,
Ssangyong offered to negotiate with its steel manufacturer, POSCO, another US$20/MT discount on the price of the stainless steel
ordered. This was intimated in Ssangyong's June 30, 2000 letter to MCC.28 On July 6, 2000, another follow-up letter29 for the
opening of the L/C was sent by Ssangyong to MCC.
However, despite Ssangyong's letters, MCC failed to open a letter of credit.30 Consequently, on August 15, 2000, Ssangyong,
through counsel, wrote Sanyo Seiki that if the L/C's were not opened, Ssangyong would be compelled to cancel the contract and
hold MCC liable for damages for breach thereof amounting to US$96,132.18, inclusive of warehouse expenses, related interests
and charges.31
Later, Pro Forma Invoice Nos. ST2-POSTS080-132 and ST2-POSTS080-233 dated August 16, 2000 were issued by Ssangyong and
sent via fax to MCC. The invoices slightly varied the terms of the earlier pro forma invoices
(ST2-POSTSO401, ST2-POSTS0401-1 and ST2-POSTS0401-2), in that the quantity was now officially 100MT per invoice and the
price was reduced to US$1,700.00 per MT. As can be gleaned from the photocopies of the said August 16, 2000 invoices
submitted to the court, they both bear the conformity signature of MCC Manager Chan.
On August 17, 2000, MCC finally opened an L/C with PCIBank for US$170,000.00 covering payment for 100MT of stainless steel
coil under Pro Forma Invoice No. ST2-POSTS080-2.34 The goods covered by the said invoice were then shipped to and received by
MCC.35
MCC then faxed to Ssangyong a letter dated August 22, 2000 signed by Chan, requesting for a price adjustment of the
order stated in Pro Forma Invoice No. ST2-POSTS080-1, considering that the prevailing price of steel at that time was
US$1,500.00/MT, and that MCC lost a lot of money due to a recent strike.36
Ssangyong rejected the request, and, on August 23, 2000, sent a demand letter37 to Chan for the opening of the second
and last L/C of US$170,000.00 with a warning that, if the said L/C was not opened by MCC on August 26, 2000, Ssangyong
would be constrained to cancel the contract and hold MCC liable for US$64,066.99 (representing cost difference,
warehousing expenses, interests and charges as of August 15, 2000) and other damages for breach. Chan failed to reply.
Exasperated, Ssangyong through counsel wrote a letter to MCC, on September 11, 2000, canceling the sales contract
under ST2-POSTS0401-1 /ST2-POSTS0401-2, and demanding payment of US$97,317.37 representing losses, warehousing
expenses, interests and charges.38
Ssangyong then filed, on November 16, 2001, a civil action for damages due to breach of contract against defendants MCC,
Sanyo Seiki and Gregory Chan before the Regional Trial Court of Makati City. In its complaint,39 Ssangyong alleged that
defendants breached their contract when they refused to open the L/C in the amount of US$170,000.00 for the remaining
100MT of steel under Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2.
After Ssangyong rested its case, defendants filed a Demurrer to Evidence40 alleging that Ssangyong failed to present the
original copies of the pro forma invoices on which the civil action was based. In an Order dated April 24, 2003, the court
denied the demurrer, ruling that the documentary evidence presented had already been admitted in the December 16,
2002 Order41 and their admissibility finds support in Republic Act (R.A.) No. 8792, otherwise known as the Electronic
Commerce Act of 2000. Considering that both testimonial and documentary evidence tended to substantiate the material
allegations in the complaint, Ssangyong's evidence sufficed for purposes of a prima facie case.42
After trial on the merits, the RTC rendered its Decision43 on March 24, 2004, in favor of Ssangyong. The trial court ruled
that when plaintiff agreed to sell and defendants agreed to buy the 220MT of steel products for the price of US$1,860 per
MT, the contract was perfected. The subject transaction was evidenced by Pro Forma Invoice Nos. ST2-POSTS0401-1
and ST2-POSTS0401-2, which were later amended only in terms of reduction of volume as well as the price per MT,
following Pro Forma Invoice Nos. ST2-POSTS080-1 and ST2-POSTS080-2. The RTC, however, excluded Sanyo Seiki from
liability for lack of competent evidence. The fallo of the decision reads:
WHEREFORE, premises considered, Judgment is hereby rendered ordering defendants MCC Industrial Sales Corporation
and Gregory Chan, to pay plaintiff, jointly and severally the following:
1) Actual damages of US$93,493.87 representing the outstanding principal claim plus interest at the rate of 6% per annum
from March 30, 2001.
2) Attorney's fees in the sum of P50,000.00 plus P2,000.00 per counsel's appearance in court, the same being deemed just
and equitable considering that by reason of defendants' breach of their obligation under the subject contract, plaintiff was
constrained to litigate to enforce its rights and recover for the damages it sustained, and therefore had to engage the
services of a lawyer.
3) Costs of suit.
No award of exemplary damages for lack of sufficient basis.
SO ORDERED.44
On April 22, 2004, MCC and Chan, through their counsel of record, Atty. Eladio B. Samson, filed their Notice of Appeal.45 On June
8, 2004, the law office of Castillo Zamora & Poblador entered its appearance as their collaborating counsel.
In their Appeal Brief filed on March 9, 2005,46 MCC and Chan raised before the CA the following errors of the RTC:
I. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT APPELLANTS VIOLATED THEIR CONTRACT WITH APPELLEE
A. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT APPELLANTS AGREED TO PURCHASE 200 METRIC TONS OF
STEEL PRODUCTS FROM APPELLEE, INSTEAD OF ONLY 100 METRIC TONS.
1. THE HONORABLE COURT A QUO PLAINLY ERRED IN ADMITTING IN EVIDENCE THE PRO FORMA INVOICES WITH REFERENCE NOS.
ST2- POSTS0401-1 AND ST2-POSTS0401-2.
II. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING ACTUAL DAMAGES TO APPELLEE.
III. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING ATTORNEY'S FEES TO APPELLEE.
IV. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING APPELLANT GREGORY CHAN JOINTLY AND SEVERALLY LIABLE
WITH APPELLANT MCC.47
On August 31, 2005, the CA rendered its Decision48 affirming the ruling of the trial court, but absolving Chan of any liability. The
appellate court ruled, among others, that Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E", "E-1" and
"F") were admissible in evidence, although they were mere facsimile printouts of MCC's steel orders.49 The dispositive portion of
the appellate court's decision reads:
WHEREFORE, premises considered, the Court holds:
(1) The award of actual damages, with interest, attorney's fees and costs ordered by the lower court is hereby AFFIRMED.
(2) Appellant Gregory Chan is hereby ABSOLVED from any liability.
SO ORDERED.50
A copy of the said Decision was received by MCC's and Chan's principal counsel, Atty. Eladio B. Samson, on September 14,
2005.51 Their collaborating counsel, Castillo Zamora & Poblador,52 likewise, received a copy of the CA decision on September 19,
2005.53
On October 4, 2005, Castillo Zamora & Poblador, on behalf of MCC, filed a motion for reconsideration of the said
decision.54 Ssangyong opposed the motion contending that the decision of the CA had become final and executory on account of
the failure of MCC to file the said motion within the reglementary period. The appellate court resolved, on November 22, 2005, to
deny the motion on its merits,55 without, however, ruling on the procedural issue raised.
Aggrieved, MCC filed a petition for review on certiorari56 before this Court, imputing the following errors to the Court of Appeals:
THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN ACCORDANCE WITH JURISPRUDENCE AND SANCTIONED A
DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS BY REVERSING THE COURT A
QUO'S DISMISSAL OF THE COMPLAINT IN CIVIL CASE NO. 02-124 CONSIDERING THAT:
I. THE COURT OF APPEALS ERRED IN SUSTAINING THE ADMISSIBILITY IN EVIDENCE OF THE PRO-FORMA INVOICES WITH
REFERENCE NOS. ST2-POSTSO401-1 AND ST2-POSTSO401-2, DESPITE THE FACT THAT THE SAME WERE MERE PHOTOCOPIES OF
FACSIMILE PRINTOUTS.
II. THE COURT OF APPEALS FAILED TO APPRECIATE THE OBVIOUS FACT THAT, EVEN ASSUMING PETITIONER BREACHED THE
SUPPOSED CONTRACT, THE FACT IS THAT PETITIONER FAILED TO PROVE THAT IT SUFFERED ANY DAMAGES AND THE
AMOUNT THEREOF.
III. THE AWARD OF ACTUAL DAMAGES IN THE AMOUNT OF US$93,493.87 IS SIMPLY UNCONSCIONABLE AND SHOULD HAVE
BEEN AT LEAST REDUCED, IF NOT DELETED BY THE COURT OF APPEALS.57
In its Comment, Ssangyong sought the dismissal of the petition, raising the following arguments: that the CA decision
dated 15 August 2005 is already final and executory, because MCC's motion for reconsideration was filed beyond the
reglementary period of 15 days from receipt of a copy thereof, and that, in any case, it was a pro forma motion; that MCC
breached the contract for the purchase of the steel products when it failed to open the required letter of credit; that the
printout copies and/or photocopies of facsimile or telecopy transmissions were properly admitted by the trial court
because they are considered original documents under R.A. No. 8792; and that MCC is liable for actual damages and
attorney's fees because of its breach, thus, compelling Ssangyong to litigate.
The principal issues that this Court is called upon to resolve are the following:
I – Whether the CA decision dated 15 August 2005 is already final and executory;
II – Whether the print-out and/or photocopies of facsimile transmissions are electronic evidence and admissible as such;
III – Whether there was a perfected contract of sale between MCC and Ssangyong, and, if in the affirmative, whether MCC
breached the said contract; and
IV – Whether the award of actual damages and attorney's fees in favor of Ssangyong is proper and justified.
-I-
It cannot be gainsaid that in Albano v. Court of Appeals,58 we held that receipt of a copy of the decision by one of several
counsels on record is notice to all, and the period to appeal commences on such date even if the other counsel has not yet
received a copy of the decision. In this case, when Atty. Samson received a copy of the CA decision on September 14, 2005,
MCC had only fifteen (15) days within which to file a motion for reconsideration conformably with Section 1, Rule 52 of the
Rules of Court, or to file a petition for review on certiorari in accordance with Section 2, Rule 45. The period should not be
reckoned from September 29, 2005 (when Castillo Zamora & Poblador received their copy of the decision) because notice
to Atty. Samson is deemed notice to collaborating counsel.
We note, however, from the records of the CA, that it was Castillo Zamora & Poblador, not Atty. Samson, which filed both
MCC's and Chan's Brief and Reply Brief. Apparently, the arrangement between the two counsels was for the collaborating,
not the principal, counsel to file the appeal brief and subsequent pleadings in the CA. This explains why it was Castillo
Zamora & Poblador which filed the motion for the reconsideration of the CA decision, and they did so on October 5, 2005,
well within the 15-day period from September 29, 2005, when they received their copy of the CA decision. This could also
be the reason why the CA did not find it necessary to resolve the question of the timeliness of petitioner's motion for
reconsideration, even as the CA denied the same.
Independent of this consideration though, this Court assiduously reviewed the records and found that strong concerns of
substantial justice warrant the relaxation of this rule.
In Philippine Ports Authority v. Sargasso Construction and Development Corporation,59 we ruled that:
In Orata v. Intermediate Appellate Court, we held that where strong considerations of substantive justice are manifest in the
petition, this Court may relax the strict application of the rules of procedure in the exercise of its legal jurisdiction. In addition to
the basic merits of the main case, such a petition usually embodies justifying circumstance which warrants our heeding to the
petitioner's cry for justice in spite of the earlier negligence of counsel. As we held in Obut v. Court of Appeals:
[W]e cannot look with favor on a course of action which would place the administration of justice in a straight jacket for then the
result would be a poor kind of justice if there would be justice at all. Verily, judicial orders, such as the one subject of this petition,
are issued to be obeyed, nonetheless a non-compliance is to be dealt with as the circumstances attending the case may warrant.
What should guide judicial action is the principle that a party-litigant is to be given the fullest opportunity to establish the merits
of his complaint or defense rather than for him to lose life, liberty, honor or property on technicalities.
The rules of procedure are used only to secure and not override or frustrate justice. A six-day delay in the perfection of the appeal,
as in this case, does not warrant the outright dismissal of the appeal. In Development Bank of the Philippines vs. Court of Appeals,
we gave due course to the petitioner's appeal despite the late filing of its brief in the appellate court because such appeal
involved public interest. We stated in the said case that the Court may exempt a particular case from a strict application of the
rules of procedure where the appellant failed to perfect its appeal within the reglementary period, resulting in the appellate
court's failure to obtain jurisdiction over the case. In Republic vs. Imperial, Jr., we also held that there is more leeway to exempt a
case from the strictness of procedural rules when the appellate court has already obtained jurisdiction over the appealed case.
We emphasize that:
[T]he rules of procedure are mere tools intended to facilitate the attainment of justice, rather than frustrate it. A strict and rigid
application of the rules must always be eschewed when it would subvert the rule's primary objective of enhancing fair trials and
expediting justice. Technicalities should never be used to defeat the substantive rights of the other party. Every party-litigant
must be afforded the amplest opportunity for the proper and just determination of his cause, free from the constraints of
technicalities.60
Moreover, it should be remembered that the Rules were promulgated to set guidelines in the orderly administration of justice,
not to shackle the hand that dispenses it. Otherwise, the courts would be consigned to being mere slaves to technical rules,
deprived of their judicial discretion. Technicalities must take a backseat to substantive rights. After all, it is circumspect leniency in
this respect that will give the parties the fullest opportunity to ventilate the merits of their respective causes, rather than have
them lose life, liberty, honor or property on sheer technicalities.61
The other technical issue posed by respondent is the alleged pro forma nature of MCC's motion for reconsideration, ostensibly
because it merely restated the arguments previously raised and passed upon by the CA.
In this connection, suffice it to say that the mere restatement of arguments in a motion for reconsideration does not per se result
in a pro forma motion. In Security Bank and Trust Company, Inc. v. Cuenca,62 we held that a motion for reconsideration may not
be necessarily pro forma even if it reiterates the arguments earlier passed upon and rejected by the appellate court. A movant
may raise the same arguments precisely to convince the court that its ruling was erroneous. Furthermore, the pro forma rule will
not apply if the arguments were not sufficiently passed upon and answered in the decision sought to be reconsidered.
- II -
The second issue poses a novel question that the Court welcomes. It provides the occasion for this Court to pronounce a definitive
interpretation of the equally innovative provisions of the Electronic Commerce Act of 2000 (R.A. No. 8792) vis-à-vis the Rules on
Electronic Evidence.
Although the parties did not raise the question whether the original facsimile transmissions are "electronic data messages" or
"electronic documents" within the context of the Electronic Commerce Act (the petitioner merely assails as inadmissible evidence
the photocopies of the said facsimile transmissions), we deem it appropriate to determine first whether the said fax
transmissions are indeed within the coverage of R.A. No. 8792 before ruling on whether the photocopies thereof are
covered by the law. In any case, this Court has ample authority to go beyond the pleadings when, in the interest of justice
or for the promotion of public policy, there is a need to make its own findings in order to support its conclusions.63
Petitioner contends that the photocopies of the pro forma invoices presented by respondent Ssangyong to prove the
perfection of their supposed contract of sale are inadmissible in evidence and do not fall within the ambit of R.A. No. 8792,
because the law merely admits as the best evidence the original fax transmittal. On the other hand, respondent posits that,
from a reading of the law and the Rules on Electronic Evidence, the original facsimile transmittal of the pro forma invoice is
admissible in evidence since it is an electronic document and, therefore, the best evidence under the law and the Rules.
Respondent further claims that the photocopies of these fax transmittals
(specifically ST2-POSTS0401-1 and ST2-POSTS0401-2) are admissible under the Rules on Evidence because the respondent
sufficiently explained the non-production of the original fax transmittals.
In resolving this issue, the appellate court ruled as follows:
Admissibility of Pro Forma
Invoices; Breach of Contract
by Appellants
Turning first to the appellants' argument against the admissibility of the Pro Forma Invoices with Reference Nos.
ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E", "E-1" and "F", pp. 215-218, Records), appellants argue that the said
documents are inadmissible (sic) being violative of the best evidence rule.
The argument is untenable.
The copies of the said pro-forma invoices submitted by the appellee are admissible in evidence, although they are mere
electronic facsimile printouts of appellant's orders. Such facsimile printouts are considered Electronic Documents under
the New Rules on Electronic Evidence, which came into effect on August 1, 2001. (Rule 2, Section 1 [h], A.M. No.
01-7-01-SC).
"(h) 'Electronic document' refers to information or the representation of information, data, figures, symbols or other
modes of written expression, described or however represented, by which a right is established or an obligation
extinguished, or by which a fact may be proved and affirmed, which is received, recorded, transmitted, stored, processed,
retrieved or produced electronically. It includes digitally signed documents and any printout or output, readable by sight or
other means, which accurately reflects the electronic data message or electronic document. For purposes of these Rules,
the term 'electronic document' may be used interchangeably with 'electronic data message'.
An electronic document shall be regarded as the equivalent of an original document under the Best Evidence Rule, as long
as it is a printout or output readable by sight or other means, showing to reflect the data accurately. (Rule 4, Section 1,
A.M. No. 01-7-01-SC)
The ruling of the Appellate Court is incorrect. R.A. No. 8792,64 otherwise known as the Electronic Commerce Act of 2000,
considers an electronic data message or an electronic document as the functional equivalent of a written document for
evidentiary purposes.65 The Rules on Electronic Evidence66 regards an electronic document as admissible in evidence if it
complies with the rules on admissibility prescribed by the Rules of Court and related laws, and is authenticated in the
manner prescribed by the said Rules.67 An electronic document is also the equivalent of an original document under the
Best Evidence Rule, if it is a printout or output readable by sight or other means, shown to reflect the data accurately.68
Thus, to be admissible in evidence as an electronic data message or to be considered as the functional equivalent of an original
document under the Best Evidence Rule, the writing must foremost be an "electronic data message" or an "electronic document."
The Electronic Commerce Act of 2000 defines electronic data message and electronic document as follows:
Sec. 5. Definition of Terms. For the purposes of this Act, the following terms are defined, as follows:
xxx
c. "Electronic Data Message" refers to information generated, sent, received or stored by electronic, optical or similar means.
xxx
f. "Electronic Document" refers to information or the representation of information, data, figures, symbols or other modes of
written expression, described or however represented, by which a right is established or an obligation extinguished, or by which a
fact may be proved and affirmed, which is received, recorded, transmitted, stored, processed, retrieved or produced
electronically.
The Implementing Rules and Regulations (IRR) of R.A. No. 8792,69 which was signed on July 13, 2000 by the then Secretaries of
the Department of Trade and Industry, the Department of Budget and Management, and then Governor of the Bangko Sentral ng
Pilipinas, defines the terms as:
Sec. 6. Definition of Terms. For the purposes of this Act and these Rules, the following terms are defined, as follows:
xxx
(e) "Electronic Data Message" refers to information generated, sent, received or stored by electronic, optical or similar means, but
not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy. Throughout these Rules, the term
"electronic data message" shall be equivalent to and be used interchangeably with "electronic document."
xxxx
(h) "Electronic Document" refers to information or the representation of information, data, figures, symbols or other modes of
written expression, described or however represented, by which a right is established or an obligation extinguished, or by which a
fact may be proved and affirmed, which is received, recorded, transmitted, stored, processed, retrieved or produced
electronically. Throughout these Rules, the term "electronic document" shall be equivalent to and be used interchangeably with
"electronic data message."
The phrase "but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy" in the IRR's
definition of "electronic data message" is copied from the Model Law on Electronic Commerce adopted by the United Nations
Commission on International Trade Law (UNCITRAL),70 from which majority of the provisions of R.A. No. 8792 were
taken.71 While Congress deleted this phrase in the Electronic Commerce Act of 2000, the drafters of the IRR reinstated it. The
deletion by Congress of the said phrase is significant and pivotal, as discussed hereunder.
The clause on the interchangeability of the terms "electronic data message" and "electronic document" was the result of the
Senate of the Philippines' adoption, in Senate Bill 1902, of the phrase "electronic data message" and the House of
Representative's employment, in House Bill 9971, of the term "electronic document."72 In order to expedite the reconciliation of
the two versions, the technical working group of the Bicameral Conference Committee adopted both terms and intended them to
be the equivalent of each one.73 Be that as it may, there is a slight difference between the two terms. While "data message" has
reference to information electronically sent, stored or transmitted, it does not necessarily mean that it will give rise to a right or
extinguish an obligation,74 unlike an electronic document. Evident from the law, however, is the legislative intent to give
the two terms the same construction.
The Rules on Electronic Evidence promulgated by this Court defines the said terms in the following manner:
SECTION 1. Definition of Terms. – For purposes of these Rules, the following terms are defined, as follows:
xxxx
(g) "Electronic data message" refers to information generated, sent, received or stored by electronic, optical or similar
means.
(h) "Electronic document" refers to information or the representation of information, data, figures, symbols or other
modes of written expression, described or however represented, by which a right is established or an obligation
extinguished, or by which a fact may be proved and affirmed, which is received, recorded, transmitted, stored, processed,
retrieved or produced electronically. It includes digitally signed documents and print-out or output, readable by sight or
other means, which accurately reflects the electronic data message or electronic document. For purposes of these Rules,
the term "electronic document" may be used interchangeably with "electronic data message."
Given these definitions, we go back to the original question: Is an original printout of a facsimile transmission an electronic
data message or electronic document?
The definitions under the Electronic Commerce Act of 2000, its IRR and the Rules on Electronic Evidence, at first glance,
convey the impression that facsimile transmissions are electronic data messages or electronic documents because they
are sent by electronic means. The expanded definition of an "electronic data message" under the IRR, consistent with the
UNCITRAL Model Law, further supports this theory considering that the enumeration "xxx [is] not limited to, electronic
data interchange (EDI), electronic mail, telegram, telex or telecopy." And to telecopy is to send a document from one place
to another via a fax machine.75
As further guide for the Court in its task of statutory construction, Section 37 of the Electronic Commerce Act of 2000
provides that
Unless otherwise expressly provided for, the interpretation of this Act shall give due regard to its international origin and
the need to promote uniformity in its application and the observance of good faith in international trade relations. The
generally accepted principles of international law and convention on electronic commerce shall likewise be considered.
Obviously, the "international origin" mentioned in this section can only refer to the UNCITRAL Model Law, and the
UNCITRAL's definition of "data message":
"Data message" means information generated, sent, received or stored by electronic, optical or similar means including,
but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.76
is substantially the same as the IRR's characterization of an "electronic data message."
However, Congress deleted the phrase, "but not limited to, electronic data interchange (EDI), electronic mail, telegram,
telex or telecopy," and replaced the term "data message" (as found in the UNCITRAL Model Law ) with "electronic data
message." This legislative divergence from what is assumed as the term's "international origin" has bred uncertainty and
now impels the Court to make an inquiry into the true intent of the framers of the law. Indeed, in the construction or
interpretation of a legislative measure, the primary rule is to search for and determine the intent and spirit of the law.77 A
construction should be rejected that gives to the language used in a statute a meaning that does not accomplish the
purpose for which the statute was enacted, and that tends to defeat the ends which are sought to be attained by the
enactment.78
Interestingly, when Senator Ramon B. Magsaysay, Jr., the principal author of Senate Bill 1902 (the predecessor of R.A. No. 8792),
sponsored the bill on second reading, he proposed to adopt the term "data message" as formulated and defined in the UNCITRAL
Model Law.79 During the period of amendments, however, the term evolved into "electronic data message," and the phrase "but
not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy" in the UNCITRAL Model Law was
deleted. Furthermore, the term "electronic data message," though maintaining its description under the UNCITRAL Model Law,
except for the aforesaid deleted phrase, conveyed a different meaning, as revealed in the following proceedings:
xxxx
Senator Santiago. Yes, Mr. President. I will furnish a copy together with the explanation of this proposed amendment.
And then finally, before I leave the Floor, may I please be allowed to go back to Section 5; the Definition of Terms. In light of the
acceptance by the good Senator of my proposed amendments, it will then become necessary to add certain terms in our list of
terms to be defined. I would like to add a definition on what is "data," what is "electronic record" and what is an "electronic
record system."
If the gentleman will give me permission, I will proceed with the proposed amendment on Definition of Terms, Section 5.
Senator Magsaysay. Please go ahead, Senator Santiago.
Senator Santiago. We are in Part 1, short title on the Declaration of Policy, Section 5, Definition of Terms.
At the appropriate places in the listing of these terms that have to be defined since these are arranged alphabetically, Mr.
President, I would like to insert the term DATA and its definition. So, the amendment will read: "DATA" MEANS REPRESENTATION,
IN ANY FORM, OF INFORMATION OR CONCEPTS.
The explanation is this: This definition of "data" or "data" as it is now fashionably pronounced in America - - the definition of
"data" ensures that our bill applies to any form of information in an electronic record, whether these are figures, facts or ideas.
So again, the proposed amendment is this: "DATA" MEANS REPRESENTATIONS, IN ANY FORM, OF INFORMATION OR CONCEPTS.
Senator Magsaysay. May I know how will this affect the definition of "Data Message" which encompasses electronic records,
electronic writings and electronic documents?
Senator Santiago. These are completely congruent with each other. These are compatible. When we define "data," we are simply
reinforcing the definition of what is a data message.
Senator Magsaysay. It is accepted, Mr. President.
Senator Santiago. Thank you. The next term is "ELECTRONIC RECORD." The proposed amendment is as follows:
"ELECTRONIC RECORD" MEANS DATA THAT IS RECORDED OR STORED ON ANY MEDIUM IN OR BY A COMPUTER SYSTEM OR
OTHER SIMILAR DEVICE, THAT CAN BE READ OR PERCEIVED BY A PERSON OR A COMPUTER SYSTEM OR OTHER SIMILAR DEVICE. IT
INCLUDES A DISPLAY, PRINTOUT OR OTHER OUTPUT OF THAT DATA.
The explanation for this term and its definition is as follows: The term "ELECTRONIC RECORD" fixes the scope of our bill. The
record is the data. The record may be on any medium. It is electronic because it is recorded or stored in or by a computer system
or a similar device.
The amendment is intended to apply, for example, to data on magnetic strips on cards or in Smart cards. As drafted, it
would not apply to telexes or faxes, except computer-generated faxes, unlike the United Nations model law on electronic
commerce. It would also not apply to regular digital telephone conversations since the information is not recorded. It
would apply to voice mail since the information has been recorded in or by a device similar to a computer. Likewise, video
records are not covered. Though when the video is transferred to a website, it would be covered because of the
involvement of the computer. Music recorded by a computer system on a compact disc would be covered.
In short, not all data recorded or stored in digital form is covered. A computer or a similar device has to be involved in its
creation or storage. The term "similar device" does not extend to all devices that create or store data in digital form.
Although things that are not recorded or preserved by or in a computer system are omitted from this bill, these may well
be admissible under other rules of law. This provision focuses on replacing the search for originality proving the reliability
of systems instead of that of individual records and using standards to show systems reliability.
Paper records that are produced directly by a computer system such as printouts are themselves electronic records being
just the means of intelligible display of the contents of the record. Photocopies of the printout would be paper record
subject to the usual rules about copies, but the original printout would be subject to the rules of admissibility of this bill.
However, printouts that are used only as paper records and whose computer origin is never again called on are treated as
paper records. In that case, the reliability of the computer system that produces the record is irrelevant to its reliability.
Senator Magsaysay. Mr. President, if my memory does not fail me, earlier, the lady Senator accepted that we use the term
"Data Message" rather than "ELECTRONIC RECORD" in being consistent with the UNCITRAL term of "Data Message." So
with the new amendment of defining "ELECTRONIC RECORD," will this affect her accepting of the use of "Data Message"
instead of "ELECTRONIC RECORD"?
Senator Santiago. No, it will not. Thank you for reminding me. The term I would like to insert is ELECTRONIC DATA
MESSAGE in lieu of "ELECTRONIC RECORD."
Senator Magsaysay. Then we are, in effect, amending the term of the definition of "Data Message" on page 2A, line 31, to
which we have no objection.
Senator Santiago. Thank you, Mr. President.
xxxx
Senator Santiago. Mr. President, I have proposed all the amendments that I desire to, including the amendment on the
effect of error or change. I will provide the language of the amendment together with the explanation supporting that
amendment to the distinguished sponsor and then he can feel free to take it up in any session without any further
intervention.
Senator Magsaysay. Before we end, Mr. President, I understand from the proponent of these amendments that these are
based on the Canadian E-commerce Law of 1998. Is that not right?
Senator Santiago. That is correct.80
Thus, when the Senate consequently voted to adopt the term "electronic data message," it was consonant with the
explanation of Senator Miriam Defensor-Santiago that it would not apply "to telexes or faxes, except computer-generated
faxes, unlike the United Nations model law on electronic commerce." In explaining the term "electronic record" patterned
after the E-Commerce Law of Canada, Senator Defensor-Santiago had in mind the term "electronic data message." This
term then, while maintaining part of the UNCITRAL Model Law's terminology of "data message," has assumed a different
context, this time, consonant with the term "electronic record" in the law of Canada. It accounts for the addition of the word
"electronic" and the deletion of the phrase "but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex
or telecopy." Noteworthy is that the Uniform Law Conference of Canada, explains the term "electronic record," as drafted in the
Uniform Electronic Evidence Act, in a manner strikingly similar to Sen. Santiago's explanation during the Senate deliberations:
"Electronic record" fixes the scope of the Act. The record is the data. The record may be any medium. It is "electronic" because it
is recorded or stored in or by a computer system or similar device. The Act is intended to apply, for example, to data on magnetic
strips on cards, or in smart cards. As drafted, it would not apply to telexes or faxes (except computer-generated faxes), unlike the
United Nations Model Law on Electronic Commerce. It would also not apply to regular digital telephone conversations, since the
information is not recorded. It would apply to voice mail, since the information has been recorded in or by a device similar to a
computer. Likewise video records are not covered, though when the video is transferred to a Web site it would be, because of the
involvement of the computer. Music recorded by a computer system on a compact disk would be covered.
In short, not all data recorded or stored in "digital" form is covered. A computer or similar device has to be involved in its creation
or storage. The term "similar device" does not extend to all devices that create or store data in digital form. Although things that
are not recorded or preserved by or in a computer system are omitted from this Act, they may well be admissible under other
rules of law. This Act focuses on replacing the search for originality, proving the reliability of systems instead of that of individual
records, and using standards to show systems reliability.
Paper records that are produced directly by a computer system, such as printouts, are themselves electronic records, being just
the means of intelligible display of the contents of the record. Photocopies of the printout would be paper records subject to the
usual rules about copies, but the "original" printout would be subject to the rules of admissibility of this Act.
However, printouts that are used only as paper records, and whose computer origin is never again called on, are treated as paper
records. See subsection 4(2). In this case the reliability of the computer system that produced the record is relevant to its
reliability.81
There is no question then that when Congress formulated the term "electronic data message," it intended the same meaning as
the term "electronic record" in the Canada law. This construction of the term "electronic data message," which excludes telexes
or faxes, except computer-generated faxes, is in harmony with the Electronic Commerce Law's focus on "paperless"
communications and the "functional equivalent approach"82 that it espouses. In fact, the deliberations of the Legislature are
replete with discussions on paperless and digital transactions.
Facsimile transmissions are not, in this sense, "paperless," but verily are paper-based.
A facsimile machine, which was first patented in 1843 by Alexander Bain,83 is a device that can send or receive pictures and text
over a telephone line. It works by digitizing an image—dividing it into a grid of dots. Each dot is either on or off, depending on
whether it is black or white. Electronically, each dot is represented by a bit that has a value of either 0 (off) or 1 (on). In this way,
the fax machine translates a picture into a series of zeros and ones (called a bit map) that can be transmitted like normal
computer data. On the receiving side, a fax machine reads the incoming data, translates the zeros and ones back into dots, and
reprints the picture.84 A fax machine is essentially an image scanner, a modem and a computer printer combined into a highly
specialized package. The scanner converts the content of a physical document into a digital image, the modem sends the image
data over a phone line, and the printer at the other end makes a duplicate of the original document.85 Thus, in Garvida v. Sales,
Jr.,86 where we explained the unacceptability of filing pleadings through fax machines, we ruled that:
A facsimile or fax transmission is a process involving the transmission and reproduction of printed and graphic matter by scanning
an original copy, one elemental area at a time, and representing the shade or tone of each area by a specified amount of electric
current. The current is transmitted as a signal over regular telephone lines or via microwave relay and is used by the receiver to
reproduce an image of the elemental area in the proper position and the correct shade. The receiver is equipped with a
stylus or other device that produces a printed record on paper referred to as a facsimile.
x x x A facsimile is not a genuine and authentic pleading. It is, at best, an exact copy preserving all the marks of an original.
Without the original, there is no way of determining on its face whether the facsimile pleading is genuine and authentic
and was originally signed by the party and his counsel. It may, in fact, be a sham pleading.87
Accordingly, in an ordinary facsimile transmission, there exists an original paper-based information or data that is scanned,
sent through a phone line, and re-printed at the receiving end. Be it noted that in enacting the Electronic Commerce Act of
2000, Congress intended virtual or paperless writings to be the functional equivalent and to have the same legal
function as paper-based documents.88 Further, in a virtual or paperless environment, technically, there is no original copy
to speak of, as all direct printouts of the virtual reality are the same, in all respects, and are considered as
originals.89 Ineluctably, the law's definition of "electronic data message," which, as aforesaid, is interchangeable with
"electronic document," could not have included facsimile transmissions, which have an original paper-based copy as
sent and a paper-based facsimile copy as received. These two copies are distinct from each other, and have different legal
effects. While Congress anticipated future developments in communications and computer technology90 when it drafted
the law, it excluded the early forms of technology, like telegraph, telex and telecopy (except computer-generated faxes,
which is a newer development as compared to the ordinary fax machine to fax machine transmission), when it defined the
term "electronic data message."
Clearly then, the IRR went beyond the parameters of the law when it adopted verbatim the UNCITRAL Model Law's
definition of "data message," without considering the intention of Congress when the latter deleted the phrase "but not
limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy." The inclusion of this phrase in
the IRR offends a basic tenet in the exercise of the rule-making power of administrative agencies. After all, the power of
administrative officials to promulgate rules in the implementation of a statute is necessarily limited to what is found in the
legislative enactment itself. The implementing rules and regulations of a law cannot extend the law or expand its coverage,
as the power to amend or repeal a statute is vested in the Legislature.91 Thus, if a discrepancy occurs between the basic
law and an implementing rule or regulation, it is the former that prevails, because the law cannot be broadened by a mere
administrative issuance—an administrative agency certainly cannot amend an act of Congress.92 Had the Legislature really
wanted ordinary fax transmissions to be covered by the mantle of the Electronic Commerce Act of 2000, it could have
easily lifted without a bit of tatter the entire wordings of the UNCITRAL Model Law.
Incidentally, the National Statistical Coordination Board Task Force on the Measurement of E-Commerce,93 on November
22, 2006, recommended a working definition of "electronic commerce," as "[a]ny commercial transaction conducted
through electronic, optical and similar medium, mode, instrumentality and technology. The transaction includes the sale or
purchase of goods and services, between individuals, households, businesses and governments conducted over
computer-mediated networks through the Internet, mobile phones, electronic data interchange (EDI) and other channels
through open and closed networks." The Task Force's proposed definition is similar to the Organization of Economic
Cooperation and Development's (OECD's) broad definition as it covers transactions made over any network, and, in
addition, it adopted the following provisions of the OECD definition: (1) for transactions, it covers sale or purchase of goods
and services; (2) for channel/network, it considers any computer-mediated network and NOT limited to Internet alone;
(3) it excludes transactions received/placed using fax, telephone or non-interactive mail; (4) it considers payments done
online or offline; and (5) it considers delivery made online (like downloading of purchased books, music or software
programs) or offline (deliveries of goods).94
We, therefore, conclude that the terms "electronic data message" and "electronic document," as defined under the
Electronic Commerce Act of 2000, do not include a facsimile transmission. Accordingly, a facsimile transmission cannot be
considered as electronic evidence. It is not the functional equivalent of an original under the Best Evidence Rule and is not E-2 Conforme signature of Mr. Gregory To show that defendants sent their confirmation of the (i)
admissible as electronic evidence. Chan, contained in facsimile/thermal paper delivery to it of the total of 220MT specified stainless
faxed by defendants to plaintiff showing the steel products, (ii) defendants' payment thereof by way
Since a facsimile transmission is not an "electronic data message" or an "electronic document," and cannot be considered as
printed transmission details on the upper of an irrevocable letter of credit in favor of plaintiff,
electronic evidence by the Court, with greater reason is a photocopy of such a fax transmission not electronic evidence. In the
portion of said paper as coming from among other conditions.
present case, therefore, Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E" and "F"), which are mere
defendant MCC on 26 Apr 00 08:41AM
photocopies of the original fax transmittals, are not electronic evidence, contrary to the position of both the trial and the
appellate courts.
F Pro forma Invoice dated 17 April 2000 with To show that defendants contracted with plaintiff for
- III - Contract No. ST2-POSTSO401-2, photocopy delivery of another 110 MT of stainless steel from Korea
payable by way of an irrevocable letter of credit in favor
Nevertheless, despite the pro forma invoices not being electronic evidence, this Court finds that respondent has proven by of plaintiff, among other conditions.
preponderance of evidence the existence of a perfected contract of sale.
G Letter to defendant SANYO SEIKE dated 20 To prove that defendants were informed of the date of
In an action for damages due to a breach of a contract, it is essential that the claimant proves (1) the existence of a perfected June 2000, contained in facsimile/thermal L/C opening and defendant's conforme/approval thereof.
contract, (2) the breach thereof by the other contracting party and (3) the damages which he/she sustained due to such paper
breach. Actori incumbit onus probandi. The burden of proof rests on the party who advances a proposition affirmatively.95 In
other words, a plaintiff in a civil action must establish his case by a preponderance of evidence, that is, evidence that has greater G-1 Signature of defendant Gregory
weight, or is more convincing than that which is offered in opposition to it.96 Chan, contained in facsimile/thermal paper.
In general, contracts are perfected by mere consent,97 which is manifested by the meeting of the offer and the acceptance upon
H Letter to defendants dated 22 June To prove that defendants were informed of the
the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.98 They are,
2000, original successful price adjustments secured by plaintiff in favor
moreover, obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are
of former and were advised of the schedules of its L/C
present.99 Sale, being a consensual contract, follows the general rule that it is perfected at the moment there is a meeting of the
opening.
minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally
demand performance, subject to the provisions of the law governing the form of contracts.100
I Letter to defendants dated 26 June To prove that plaintiff repeatedly requested defendants
The essential elements of a contract of sale are (1) consent or meeting of the minds, that is, to transfer ownership in exchange for 2000, original for the agreed opening of the Letters of Credit,
the price, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established.101 defendants' failure and refusal to comply with their
J Letter to defendants dated 26 June obligations and the problems of plaintiff is incurring by
In this case, to establish the existence of a perfected contract of sale between the parties, respondent Ssangyong formally offered 2000, original reason of defendants' failure and refusal to open the
in evidence the testimonies of its witnesses and the following exhibits: L/Cs.
K Letter to defendants dated 27 June
Exhibit Description Purpose 2000, original

E Pro forma Invoice dated 17 April 2000 with To show that defendants contracted with plaintiff for the L Facsimile message to defendants dated 28
Contract No. ST2-POSTS0401-1, photocopy delivery of 110 MT of stainless steel from Korea payable June 2000, photocopy
by way of an irrevocable letter of credit in favor of
plaintiff, among other conditions. M Letter from defendants dated 29 June To prove that defendants admit of their liabilities to
2000, contained in facsimile/thermal paper plaintiff, that they requested for "more extension" of
E-1 Pro forma Invoice dated 17 April 2000 with To show that defendants sent their confirmation of the (i) faxed by defendants to plaintiff showing the time for the opening of the Letter of Credit, and begging
Contract No. ST2-POSTS0401, contained in delivery to it of the specified stainless steel products, (ii) printed transmission details on the upper for favorable understanding and consideration.
facsimile/thermal paper faxed by defendants defendants' payment thereof by way of an irrevocable portion of said paper as coming from
to plaintiff showing the printed transmission letter of credit in favor of plaintiff, among other defendant MCC on 29 June 00 11:12 AM
details on the upper portion of said paper as conditions.
coming from defendant MCC on 26 Apr 00 M-1 Signature of defendant Gregory
08:41AM Chan, contained in facsimile/thermal paper
faxed by defendants to plaintiff showing the
 printed transmission details on the upper X Pro forma Invoice dated 16 August To prove that defendant MCC agreed to adjust and split
portion of said paper as coming from 2000, photocopy the confirmed purchase order into 2 shipments at 100
defendant MCC on June 00 11:12 AM metric tons each at the discounted price of
US$1,700/ton.
N Letter to defendants dated 29 June
2000, original X-1 Notation "1/2", photocopy To prove that the present Pro forma Invoice was the first
of 2 pro forma invoices.
O Letter to defendants dated 30 June To prove that plaintiff reiterated its request for
2000, photocopy defendants to L/C opening after the latter's request for X-2 Ref. No. ST2-POSTS080-1, photocopy To prove that the present Pro forma Invoice was the first
extension of time was granted, defendants' failure and of 2 pro forma invoices.
refusal to comply therewith extension of time
notwithstanding. X-3 Conforme signature of defendant Gregory To prove that defendant MCC, acting through Gregory
Chan, photocopy Chan, agreed to the sale and purchase of the balance of
P Letter to defendants dated 06 July 100 metric tons at the discounted price of US$1,700/ton,
2000, original apart from the other order and shipment of 100 metric
tons which was delivered by plaintiff SSANGYONG and
Q Demand letter to defendants dated 15 Aug To prove that plaintiff was constrained to engaged paid for by defendant MCC.
2000, original services of a lawyer for collection efforts.
DD Letter from defendant MCC to plaintiff To prove that there was a perfected sale and purchase
R Demand letter to defendants dated 23 Aug To prove that defendants opened the first L/C in favor of SSANGYONG dated 22 August agreement between plaintiff SSANGYONG and defendant
2000, original plaintiff, requested for further postponement of the final 2000, contained in facsimile/thermal paper MCC for the balance of 100 metric tons, apart from the
L/C and for minimal amounts, were urged to open the with back-up photocopy other order and shipment of 100 metric tons which was
final L/C on time, and were informed that failure to delivered by plaintiff SSANGYONG and paid for by
comply will cancel the contract. defendant MCC.

S Demand letter to defendants dated 11 Sept To show defendants' refusal and failure to open the final DD-1 Ref. No. ST2-POSTS080-1, contained in To prove that there was a perfected sale and purchase
2000, original L/C on time, the cancellation of the contract as a facsimile/thermal paper with back-up agreement between plaintiff SSANGYONG and defendant
consequence thereof, and final demand upon defendants photocopy MCC for the balance of 100 metric tons, apart from the
to remit its obligations. other order and shipment of 100 metric tons which was
delivered by plaintiff SSANGYONG and paid for by
W Letter from plaintiff SSANGYONG to To prove that there was a perfected sale and purchase defendant MCC.
defendant SANYO SEIKI dated 13 April 2000, agreement between the parties for 220 metric tons of
with fax back from defendants SANYO steel products at the price of US$1,860/ton. DD-2 Signature of defendant Gregory Chan, To prove that defendant MCC, acting through Gregory
SEIKI/MCC to plaintiff SSANGYONG, contained contained in facsimile/thermal paper with Chan, agreed to the sale and purchase of the balance of
in facsimile/thermal paper with back-up back-up photocopy 100 metric tons, apart from the other order and
photocopy shipment of 100 metric tons which was delivered by
plaintiff Ssangyong and paid for by defendant MCC.102
W-1 Conforme signature of defendant Gregory To prove that defendants, acting through Gregory Chan,
Chan, contained in facsimile/thermal paper agreed to the sale and purchase of 220 metric tons of Significantly, among these documentary evidence presented by respondent, MCC, in its petition before this Court, assails
with back-up photocopy steel products at the price of US$1,860/ton. the admissibility only of Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E" and "F"). After sifting
through the records, the Court found that these invoices are mere photocopies of their original fax transmittals. Ssangyong
W-2 Name of sender MCC Industrial Sales To prove that defendants sent their conformity to the avers that these documents were prepared after MCC asked for the splitting of the original order into two, so that the
Corporation sale and purchase agreement by facsimile transmission. latter can apply for an L/C with greater facility. It, however, failed to explain why the originals of these documents were
not presented.

To determine whether these documents are admissible in evidence, we apply the ordinary Rules on Evidence, for as
discussed above we cannot apply the Electronic Commerce Act of 2000 and the Rules on Electronic Evidence.
Because these documents are mere photocopies, they are simply secondary evidence, admissible only upon compliance with Rule
130, Section 5, which states, "[w]hen the original document has been lost or destroyed, or cannot be produced in court, the
offeror, upon proof of its execution or existence and the cause of its unavailability without bad faith on his part, may prove its
contents by a copy, or by a recital of its contents in some authentic document, or by the testimony of witnesses in the order
stated." Furthermore, the offeror of secondary evidence must prove the predicates thereof, namely: (a) the loss or destruction of
the original without bad faith on the part of the proponent/offeror which can be shown by circumstantial evidence of routine
practices of destruction of documents; (b) the proponent must prove by a fair preponderance of evidence as to raise a reasonable
inference of the loss or destruction of the original copy; and (c) it must be shown that a diligent and bona fide but unsuccessful
search has been made for the document in the proper place or places. It has been held that where the missing document is the
foundation of the action, more strictness in proof is required than where the document is only collaterally involved.103
Given these norms, we find that respondent failed to prove the existence of the original fax transmissions of Exhibits E and F, and
likewise did not sufficiently prove the loss or destruction of the originals. Thus, Exhibits E and F cannot be admitted in evidence
and accorded probative weight.
It is observed, however, that respondent Ssangyong did not rely merely on Exhibits E and F to prove the perfected contract. It also
introduced in evidence a variety of other documents, as enumerated above, together with the testimonies of its witnesses.
Notable among them are Pro Forma Invoice Nos. ST2-POSTS080-1 and ST2-POSTS080-2 which were issued by Ssangyong and sent
via fax to MCC. As already mentioned, these invoices slightly varied the terms of the earlier invoices such that the quantity was
now officially 100MT per invoice and the price reduced to US$1,700.00 per MT. The copies of the said August 16, 2000 invoices
submitted to the court bear the conformity signature of MCC Manager Chan.
Pro Forma Invoice No. ST2-POSTS080-1 (Exhibit "X"), however, is a mere photocopy of its original. But then again, petitioner MCC
does not assail the admissibility of this document in the instant petition. Verily, evidence not objected to is deemed admitted and
may be validly considered by the court in arriving at its judgment.104 Issues not raised on appeal are deemed abandoned.
As to Pro Forma Invoice No. ST2-POSTS080-2 (Exhibits "1-A" and "2-C"), which was certified by PCIBank as a true copy of its
original,105 it was, in fact, petitioner MCC which introduced this document in evidence. Petitioner MCC paid for the order stated
in this invoice. Its admissibility, therefore, is not open to question.
These invoices (ST2-POSTS0401, ST2-POSTS080-1 and ST2-POSTS080-2), along with the other unchallenged documentary evidence
of respondent Ssangyong, preponderate in favor of the claim that a contract of sale was perfected by the parties.
This Court also finds merit in the following observations of the trial court:
Defendants presented Letter of Credit (Exhibits "1", "1-A" to "1-R") referring to Pro Forma Invoice for Contract No.
ST2POSTS080-2, in the amount of US$170,000.00, and which bears the signature of Gregory Chan, General Manager of MCC.
Plaintiff, on the other hand, presented Pro Forma Invoice referring to Contract No. ST2-POSTS080-1, in the amount of
US$170,000.00, which likewise bears the signature of Gregory Chan, MCC. Plaintiff accounted for the notation "1/2" on the right
upper portion of the Invoice, that is, that it was the first of two (2) pro forma invoices covering the subject contract between
plaintiff and the defendants. Defendants, on the other hand, failed to account for the notation "2/2" in its Pro Forma Invoice
(Exhibit "1-A"). Observably further, both Pro Forma Invoices bear the same date and details, which logically mean that they both
apply to one and the same transaction.106
Indeed, why would petitioner open an L/C for the second half of the transaction if there was no first half to speak of?
The logical chain of events, as gleaned from the evidence of both parties, started with the petitioner and the respondent agreeing
on the sale and purchase of 220MT of stainless steel at US$1,860.00 per MT. This initial contract was perfected. Later, as
petitioner asked for several extensions to pay, adjustments in the delivery dates, and discounts in the price as originally agreed,
the parties slightly varied the terms of their contract, without necessarily novating it, to the effect that the original order
was reduced to 200MT, split into two deliveries, and the price discounted to US$1,700 per MT. Petitioner, however, paid
only half of its obligation and failed to open an L/C for the other 100MT. Notably, the conduct of both parties sufficiently
established the existence of a contract of sale, even if the writings of the parties, because of their contested admissibility,
were not as explicit in establishing a contract.107 Appropriate conduct by the parties may be sufficient to establish an
agreement, and while there may be instances where the exchange of correspondence does not disclose the exact point at
which the deal was closed, the actions of the parties may indicate that a binding obligation has been undertaken.108
With our finding that there is a valid contract, it is crystal-clear that when petitioner did not open the L/C for the first half
of the transaction (100MT), despite numerous demands from respondent Ssangyong, petitioner breached its contractual
obligation. It is a well-entrenched rule that the failure of a buyer to furnish an agreed letter of credit is a breach of the
contract between buyer and seller. Indeed, where the buyer fails to open a letter of credit as stipulated, the seller or
exporter is entitled to claim damages for such breach. Damages for failure to open a commercial credit may, in appropriate
cases, include the loss of profit which the seller would reasonably have made had the transaction been carried out.109
- IV -
This Court, however, finds that the award of actual damages is not in accord with the evidence on record. It is axiomatic
that actual or compensatory damages cannot be presumed, but must be proven with a reasonable degree of
certainty.110 In Villafuerte v. Court of Appeals,111 we explained that:
Actual or compensatory damages are those awarded in order to compensate a party for an injury or loss he suffered. They
arise out of a sense of natural justice and are aimed at repairing the wrong done. Except as provided by law or by
stipulation, a party is entitled to an adequate compensation only for such pecuniary loss as he has duly proven. It is
hornbook doctrine that to be able to recover actual damages, the claimant bears the onus of presenting before the court
actual proof of the damages alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such pecuniary loss actually suffered by him as he has duly proved.
Such damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree
of certainty. We have emphasized that these damages cannot be presumed and courts, in making an award must point out
specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne.112
In the instant case, the trial court awarded to respondent Ssangyong US$93,493.87 as actual damages. On appeal, the
same was affirmed by the appellate court. Noticeably, however, the trial and the appellate courts, in making the said
award, relied on the following documents submitted in evidence by the respondent: (1) Exhibit "U," the Statement of
Account dated March 30, 2001; (2) Exhibit "U-1," the details of the said Statement of Account); (3) Exhibit "V," the contract
of the alleged resale of the goods to a Korean corporation; and (4) Exhibit "V-1," the authentication of the resale contract
from the Korean Embassy and certification from the Philippine Consular Office.
The statement of account and the details of the losses sustained by respondent due to the said breach are, at best,
self-serving. It was respondent Ssangyong itself which prepared the said documents. The items therein are not even
substantiated by official receipts. In the absence of corroborative evidence, the said statement of account is not sufficient
basis to award actual damages. The court cannot simply rely on speculation, conjecture or guesswork as to the fact and
amount of damages, but must depend on competent proof that the claimant had suffered, and on evidence of, the actual
amount thereof.113
Furthermore, the sales contract and its authentication certificates, Exhibits "V" and "V-1," allegedly evidencing the resale
at a loss of the stainless steel subject of the parties' breached contract, fail to convince this Court of the veracity of its
contents. The steel items indicated in the sales contract114 with a Korean corporation are different in all respects from the items 4.0 MM X 4' X C 15.0MT
ordered by petitioner MCC, even in size and quantity. We observed the following discrepancies:
4.5 MM X 4' X C 15.0MT
List of commodities as stated in Exhibit "V":
5.0 MM X 4' X C 10.0MT
COMMODITY: Stainless Steel HR Sheet in Coil, Slit Edge
SPEC: SUS304 NO. 1
6.0 MM X 4' X C 25.0MT
SIZE/Q'TY:
TOTAL: 100MT116
2.8MM X 1,219MM X C 8.193MT
From the foregoing, we find merit in the contention of MCC that Ssangyong did not adequately prove that the items resold
at a loss were the same items ordered by the petitioner. Therefore, as the claim for actual damages was not proven, the
3.0MM X 1,219MM X C 7.736MT
Court cannot sanction the award.

3.0MM X 1,219MM X C 7.885MT Nonetheless, the Court finds that petitioner knowingly breached its contractual obligation and obstinately refused to pay
despite repeated demands from respondent. Petitioner even asked for several extensions of time for it to make good its
3.0MM X 1,219MM X C 8.629MT obligation. But in spite of respondent's continuous accommodation, petitioner completely reneged on its contractual duty.
For such inattention and insensitivity, MCC must be held liable for nominal damages. "Nominal damages are 'recoverable
4.0MM X 1,219MM X C 7.307MT where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present
loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have
4.0MM X 1,219MM X C 7.247MT been or can be shown.'"117 Accordingly, the Court awards nominal damages of P200,000.00 to respondent Ssangyong.

4.5MM X 1,219MM X C 8.450MT As to the award of attorney's fees, it is well settled that no premium should be placed on the right to litigate and not every
winning party is entitled to an automatic grant of attorney's fees. The party must show that he falls under one of the
4.5MM X 1,219MM X C 8.870MT instances enumerated in Article 2208 of the Civil Code.118 In the instant case, however, the Court finds the award of
attorney's fees proper, considering that petitioner MCC's unjustified refusal to pay has compelled respondent Ssangyong
5.0MM X 1,219MM X C 8.391MT to litigate and to incur expenses to protect its rights.

WHEREFORE, PREMISES CONSIDERED, the appeal is PARTIALLY GRANTED. The Decision of the Court of Appeals in CA-G.R.
6.0MM X 1,219MM X C 6.589MT CV No. 82983 is MODIFIED in that the award of actual damages is DELETED. However, petitioner is ORDERED to pay
respondent NOMINAL DAMAGES in the amount of P200,000.00, and the ATTORNEY'S FEES as awarded by the trial court.
6.0MM X 1,219MM X C 7.878MT
SO ORDERED.
6.0MM X 1,219MM X C 8.397MT
Ynares-Santiago, Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur.
TOTAL: 95.562MT115

List of commodities as stated in Exhibit "X" (the invoice that was not paid): FIRST DIVISION

DESCRIPTION: Hot Rolled Stainless Steel Coil SUS 304 G.R. No. 129018 November 15, 2001

SIZE AND QUANTITY: CARMELITA LEAÑO, assisted by her husband GREGORIO CUACHON, petitioner,
vs.
2.6 MM X 4' X C 10.0MT COURT OF APPEALS and HERMOGENES FERNANDO, respondents.

PARDO, J.:
3.0 MM X 4' X C 25.0MT
The Case
The case is a petition for review on certiorari of the decision1 of the Court of Appeals affirming that of the Regional Trial Court,
Malolos, Branch 72 ordering petitioner Leaño to pay respondent Hermogenes Fernando the sum of P183,687.70 corresponding to
her outstanding obligations under the contract to sell, with interest and surcharges due thereon, attorney's fees and
costs.1âwphi1.nêt
The Facts
On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a contract to sell involving a
piece of land, Lot No. 876-B, with an area of 431 square meters, located at Sto. Cristo, Baliuag, Bulacan.3
In the contract, Carmelita Leaño bound herself to pay Hermogenes Fernando the sum of one hundred seven thousand and seven
hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. The manner of paying the total purchase price was as
follows:
"The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE (P10,775.00) PESOS, shall be paid at the signing of this contract as
DOWN PAYMENT, the balance of NINETY SIX THOUSAND NINE HUNDRED SEVENTY FIVE PESOS (P96,975.00) shall be paid within a
period of TEN (10) years at a monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at eighteen per
cent (18%) per annum based on balances."4
The contract also provided for a grace period of one month within which to make payments, together with the one corresponding
to the month of grace. Should the month of grace expire without the installments for both months having been satisfied, an
interest of 18% per annum will be charged on the unpaid installments.5
Should a period of ninety (90) days elapse from the expiration of the grace period without the overdue and unpaid installments
having been paid with the corresponding interests up to that date, respondent Fernando, as vendor, was authorized to declare
the contract cancelled and to dispose of the parcel of land, as if the contract had not been entered into. The payments made,
together with all the improvements made on the premises, shall be considered as rents paid for the use and occupation of the
premises and as liquidated damages.6
After the execution of the contract, Carmelita Leaño made several payments in lump sum.7 Thereafter, she constructed a house
on the lot valued at P800,000.00.8 The last payment that she made was on April 1, 1989.
On September 16, 1991, the trial court rendered a decision in an ejectment case9 earlier filed by respondent Fernando ordering
petitioner Leaño to vacate the premises and to pay P250.00 per month by way of compensation for the use and occupation of the
property from May 27, 1991 until she vacated the premises, attorney's fees and costs of the suit.10 On August 24, 1993, the trial
court issued a writ of execution which was duly served on petitioner Leaño.
On September 27, 1993, petitioner Leaño filed with the Regional Trial Court of Malolos, Bulacan a complaint for specific
performance with preliminary injunction.11 Petitioner Leaño assailed the validity of the judgment of the municipal trial
court12 for being violative of her right to due process and for being contrary to the avowed intentions of Republic Act No. 6552
regarding protection to buyers of lots on installments. Petitioner Leaño deposited P18,000.00 with the clerk of court, Regional
Trial Court, Bulacan, to cover the balance of the total cost of Lot 876-B.13
On November 4, 1993, after petitioner Leaño posted a cash bond of P50,000.00,14 the trial court issued a writ of preliminary
injunction15 to stay the enforcement of the decision of the municipal trial court.16
On February 6, 1995, the trial court rendered a decision, the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered as follows:
"1. The preliminary injunction issued by this court per its order dated November 4, 1993 is hereby made permanent;
"2. Ordering the plaintiff to pay to the defendant the sum of P103,090.70 corresponding to her outstanding obligations
under the contract to sell (Exhibit "A" – Exhibit "B") consisting of the principal of said obligation together with the interest
and surcharges due thereon as of February 28, 1994, plus interest thereon at the rate of 18% per annum in accordance
with the provision of said contract to be computed from March 1, 1994, until the same becomes fully paid;
"3. Ordering the defendant to pay to plaintiff the amount of P10,000 as and by way of attorney's fees;
"4. Ordering the defendant to pay to plaintiff the costs of the suit in Civil Case No. 1680 aforementioned.
"SO ORDERED.
"Malolos, Bulacan, February 6, 1995.
"(sgd.) DANILO A. MANALASTAS
Judge"17
On February 21, 1995, respondent Fernando filed a motion for reconsideration18 and the supplement19 thereto. The trial
court increased the amount of P103,090.70 to P183,687.00 and ordered petitioner Leaño ordered to pay attorney's fees.20
According to the trial court, the transaction between the parties was an absolute sale, making petitioner Leaño the owner
of the lot upon actual and constructive delivery thereof. Respondent Fernando, the seller, was divested of ownership and
cannot recover the same unless the contract is rescinded pursuant to Article 1592 of the Civil Code which requires a
judicial or notarial demand. Since there had been no rescission, petitioner Leaño, as the owner in possession of the
property, cannot be evicted.
On the issue of delay, the trial court held:
"While the said contract provides that the whole purchase price is payable within a ten-year period, yet the same contract
clearly specifies that the purchase price shall be payable in monthly installments for which the corresponding penalty shall
be imposed in case of default. The plaintiff certainly cannot ignore the binding effect of such stipulation by merely
asserting that the ten-year period for payment of the whole purchase price has not yet lapsed. In other words, the plaintiff
has clearly defaulted in the payment of the amortizations due under the contract as recited in the statement of account
(Exhibit "2") and she should be liable for the payment of interest and penalties in accordance with the stipulations in the
contract pertaining thereto."21
The trial court disregarded petitioner Leaños claim that she made a downpayment of P10,000.00, at the time of the
execution of the contract.
The trial court relied on the statement of account22 and the summary23 prepared by respondent Fernando to determine
petitioner Leaño's liability for the payment of interests and penalties.
The trial court held that the consignation made by petitioner Leaño in the amount of P18,000.00 did not produce any legal
effect as the same was not done in accordance with Articles 1176, 1177 and 1178 of the Civil Code.
In time, petitioner Leaño appealed the decision to the Court of Appeals.24 On January 22, 1997, Court of Appeals promulgated a
decision affirming that of the Regional Trial Court in toto.25 On February 11, 1997, petitioner Leaño filed a motion for
reconsideration.26 On April 18, 1997, the Court of Appeals denied the motion.27
Hence, this petition.28
The Issues
The issues to be resolved in this petition for review are (1) whether the transaction between the parties in an absolute sale or a
conditional sale; (2) whether there was a proper cancellation of the contract to sell; and (3) whether petitioner was in delay in the
payment of the monthly amortizations.
The Court's Ruling
Contrary to the findings of the trial court, the transaction between the parties was a conditional sale not an absolute sale. The
intention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase price.
Consider the following:
First, the contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the contract to sell.29
Second, what was transferred was the possession of the property, not ownership. The possession is even limited by the following:
(1) that the vendee may continue therewith "as long as the VENDEE complies with all the terms and conditions mentioned, and (2)
that the buyer may not sell, cede, assign, transfer or mortgage or in any way encumber any right, interest or equity that she may
have or acquire in and to the said parcel of land nor to lease or to sublease it or give possession to another person without the
written consent of the seller.30
Finally, the ownership of the lot was not transferred to Carmelita Leaño. As the land is covered by a torrens title, the act of
registration of the deed of sale was the operative act that could transfer ownership over the lot.31 There is not even a deed that
could be registered since the contract provides that the seller will execute such a deed "upon complete payment by the VENDEE
of the total purchase price of the property" with the stipulated interest.32
In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the
failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring any obligatory force.33 The transfer of ownership and title would occur after full payment of the
price.34
In the case at bar, petitioner Leaño's non-payment of the installments after April 1, 1989, prevented the obligation of respondent
Fernando to convey the property from arising. In fact, it brought into effect the provision of the contract on cancellation.
Contrary to the findings of the trial court, Article 1592 of the Civil Code is inapplicable to the case at bar.35 However, any attempt
to cancel the contract to sell would have to comply with the provisions of Republic Act No. 6552, the "Realty Installment Buyer
Protection Act."
R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to
cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the
vendor to convey title from acquiring binding force.36 The law also provides for the rights of the buyer in case of cancellation.
Thus, Sec. 3 (b) of the law provides that:
"If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property
equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every
year but not to exceed ninety percent of the total payment made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash surrender value to the buyer." [Emphasis supplied]
The decision in the ejectment case37 operated as the notice of cancellation required by Sec. 3(b). As petitioner Leaño was
not given then cash surrender value of the payments that she made, there was still no actual cancellation of the contract.
Consequently, petitioner Leaño may still reinstate the contract by updating the account during the grace period and before
actual cancellation.38
Should petitioner Leaño wish to reinstate the contract, she would have to update her accounts with respondent Fernando
in accordance with the statement of account39 which amount was P183,687.00.40
On the issue of whether petitioner Leaño was in delay in paying the amortizations, we rule that while the contract
provided that the total purchase price was payable within a ten-year period, the same contract specified that the purchase
price shall be paid in monthly installments for which the corresponding penalty shall be imposed in case of default.
Petitioner Leaño cannot ignore the provision on the payment of monthly installments by claiming that the ten-year period
within which to pay has not elapsed.
Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.1âwphi1.nêt
In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leaño to continue in
possession and use of the property. Clearly, when petitioner Leaño did not pay the monthly amortizations in accordance
with the terms of the contract, she was in delay and liable for damages.41 However, we agree with the trial court that the
default committed by petitioner Leaño in respect of the obligation could be compensated by the interest and surcharges
imposed upon her under the contract in question.42
It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.43 Thus, as there is no ambiguity in
the language of the contract, there is no room for construction, only compliance.
The Fallo
IN VIEW WHEREOF, we DENY the petition and AFFIRM the decision of the Court of Appeals44 in toto.
No costs.
SO ORDERED.
Davide, Jr., Puno, Kapunan, and Ynares-Santiago, JJ., concur.
FIRST DIVISION
G.R. No. 141968 February 12, 2001
THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES), petitioner,
vs.
SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, respondents.
KAPUNAN, J.:
The respondent Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of the Philippines)
to purchase a car - a Nissan Sentra 1600 4DR, 1989 Model. In consideration thereof, the Spouses executed promissory notes
which were payable in monthly installments and chattel mortgage over the car to serve as security for the notes.1âwphi1.nêt
The Spouses defaulted in payment of installments. Consequently, the Bank filed on August 7, 1995 a civil action docketed as Civil
Case No. 658-95 for "Sum of Money with Prayer for a Writ of Replevin"1 before the Metropolitan Trial Court of Pasay City, Branch
45.2 On August 25, 1995, Dr. Francis Gueco was served summons and was fetched by the sheriff and representative of the bank
for a meeting in the bank premises. Desi Tomas, the Bank's Assistant Vice President demanded payment of the amount of
P184,000.00 which represents the unpaid balance for the car loan. After some negotiations and computation, the amount was
lowered to P154,000.00, However, as a result of the non-payment of the reduced amount on that date, the car was detained
inside the bank's compound.
On August 28, 1995, Dr. Gueco went to the bank and talked with its Administrative Support, Auto Loans/Credit Card Collection
Head, Jefferson Rivera. The negotiations resulted in the further reduction of the outstanding loan to P150,000.00.
On August 29, 1995, Dr. Gueco delivered a manager's check in amount of P150,000.00 but the car was not released because of his
refusal to sign the Joint Motion to Dismiss. It is the contention of the Gueco spouses and their counsel that Dr. Gueco need not
sign the motion for joint dismissal considering that they had not yet filed their Answer. Petitioner, however, insisted that the joint
motion to dismiss is standard operating procedure in their bank to effect a compromise and to preclude future filing of claims,
counterclaims or suits for damages.
After several demand letters and meetings with bank representatives, the respondents Gueco spouses initiated a civil action for
damages before the Metropolitan Trial Court of Quezon City, Branch 33. The Metropolitan Trial Court dismissed the complaint for
lack of merit.3
On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision of the Metropolitan Trial Court was reversed. In its
decision, the RTC held that there was a meeting of the minds between the parties as to the reduction of the amount of
indebtedness and the release of the car but said agreement did not include the signing of the joint motion to dismiss as a
condition sine qua non for the effectivity of the compromise. The court further ordered the bank:
1. to return immediately the subject car to the appellants in good working condition; Appellee may deposit the Manager's check -
the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance, whereas
the funds have long been paid by appellants to .secure said Manager's Check, over which appellants have no control;
2. to pay the appellants the sum of P50,000.00 as moral damages; P25,000.00 as exemplary damages, and P25,000.00 as
attorney's fees, and
3. to pay the cost of suit.
In other respect, the decision of the Metropolitan Trial Court Branch 33 is hereby AFFIRMED.4
The case was elevated to the Court of Appeals, which on February 17, 2000, issued the assailed decision, the decretal portion of
which reads:
WHEREFORE, premises considered, the petition for review on certiorari is hereby DENIED and the Decision of the Regional
Trial Court of Quezon City, Branch 227, in Civil Case No. Q-97-31176, for lack of any reversible error, is AFFIRMED in
toto. Costs against petitioner.
SO ORDERED.5
The Court of Appeals essentially relied on the respect accorded to the finality of the findings of facts by the lower court and
on the latter's finding of the existence of fraud which constitutes the basis for the award of damages.
The petitioner comes to this Court by way of petition for review on certiorari under Rule 45 of the Rules of Court, raising
the following assigned errors:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO AGREEMENT WITH RESPECT TO THE EXECUTION OF THE
JOINT MOTION TO DISMISS AS A CONDITION FOR THE COMPROMISE AGREEMENT.
II
THE COURT OF APPEALS ERRED IN GRANTING MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES IN FAVOR OF
THE RESPONDENTS.
III
THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN THE SUBJECT CAR TO THE RESPONDENTS,
WITHOUT MAKING ANY PROVISION FOR THE ISSUANCE OF THE NEW MANAGER'S/CASHIER'S CHECK BY THE RESPONDENTS
IN FAVOR OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIER'S CHECK THAT ALREADY BECAME STALE.6
As to the first issue, we find for the respondents. The issue as to what constitutes the terms of the oral compromise or any
subsequent novation is a question of fact that was resolved by the Regional Trial Court and the Court of Appeals in favor of
respondents. It is well settled that the findings of fact of the lower court, especially when affirmed by the Court of Appeals,
are binding upon this Court.7 While there are exceptions to this rule,8 the present case does not fall under anyone of them,
the petitioner's claim to the contrary, notwithstanding.
Being an affirmative allegation, petitioner has the burden of evidence to prove his claim that the oral compromise entered
into by the parties on August 28, 1995 included the stipulation that the parties would jointly file a motion to dismiss. This
petitioner failed to do. Notably, even the Metropolitan Trial Court, while ruling in favor of the petitioner and thereby
dismissing the complaint, did not make a factual finding that the compromise agreement included the condition of the
signing of a joint motion to dismiss.
The Court of Appeals made the factual findings in this wise:
In support of its claim, petitioner presented the testimony of Mr. Jefferson Rivera who related that respondent Dr. Gueco
was aware that the signing of the draft of the Joint Motion to Dismiss was one of the conditions set by the bank for the
acceptance of the reduced amount of indebtedness and the release of the car. (TSN, October 23, 1996, pp. 17-21, Rollo, pp.
18, 5). Respondents, however, maintained that no such condition was ever discussed during their meeting of August 28,
1995 (Rollo, p. 32).
The trial court, whose factual findings are entitled to respect since it has the 'opportunity to directly observe the witnesses
and to determine by their demeanor on the stand the probative value of their testimonies' (People vs. Yadao, et al. 216
SCRA 1, 7 [1992]), failed to make a categorical finding on the issue. In dismissing the claim of damages of the respondents, it
merely observed that respondents are not entitled to indemnity since it was their unjustified reluctance to sign of the Joint
Motion to Dismiss that delayed the release of the car. The trial court opined, thus:
'As regards the third issue, plaintiffs' claim for damages is unavailing. First, the plaintiffs could have avoided the renting of another
car and could have avoided this litigation had he signed the Joint Motion to Dismiss. While it is true that herein defendant can
unilaterally dismiss the case for collection of sum of money with replevin, it is equally true that there is nothing wrong for the
plaintiff to affix his signature in the Joint Motion to Dismiss, for after all, the dismissal of the case against him is for his own good
and benefit. In fact, the signing of the Joint Motion to Dismiss gives the plaintiff three (3) advantages. First, he will recover his car.
Second, he will pay his obligation to the bank on its reduced amount of P150,000.00 instead of its original claim of P184,985.09.
And third, the case against him will be dismissed. Plaintiffs, likewise, are not entitled to the award of moral damages and
exemplary damages as there is no showing that the defendant bank acted fraudulently or in bad faith.' (Rollo, p. 15)
The Court has noted, however, that the trial court, in its findings of facts, clearly indicated that the agreement of the parties on
August 28, 1995 was merely for the lowering of the price, hence -
'xxx On August 28, 1995, bank representative Jefferson Rivera and plaintiff entered into an oral compromise agreement, whereby
the original claim of the bank of P184,985.09 was reduced to P150,000.00 and that upon payment of which, plaintiff was
informed that the subject motor vehicle would be released to him.' (Rollo, p. 12)
The lower court, on the other hand, expressly made a finding that petitioner failed to include the aforesaid signing of the Joint
Motion to Dismiss as part of the agreement. In dismissing petitioner's claim, the lower court declared, thus:
'If it is true, as the appellees allege, that the signing of the joint motion was a condition sine qua non for the reduction of the
appellants' obligation, it is only reasonable and logical to assume that the joint motion should have been shown to Dr. Gueco in
the August 28, 1995 meeting. Why Dr. Gueco was not given a copy of the joint motion that day of August 28, 1995, for his family
or legal counsel to see to be brought signed, together with the P150,000.00 in manager's check form to be submitted on the
following day on August 29, 1995? (sic) [I]s a question whereby the answer up to now eludes this Court's comprehension. The
appellees would like this Court to believe that Dr Gueco was informed by Mr. Rivera Rivera of the bank requirement of signing the
joint motion on August 28, 1995 but he did not bother to show a copy thereof to his family or legal counsel that day August 28,
1995. This part of the theory of appellee is too complicated for any simple oral agreement. The idea of a Joint Motion to Dismiss
being signed as a condition to the pushing through a deal surfaced only on August 29, 1995.
'This Court is not convinced by the appellees' posturing. Such claim rests on too slender a frame, being inconsistent with human
experience. Considering the effect of the signing of the Joint Motion to Dismiss on the appellants' substantive right, it is more in
accord with human experience to expect Dr. Gueco, upon being shown the Joint Motion to Dismiss, to refuse to pay the
Manager's Check and for the bank to refuse to accept the manager's check. The only logical explanation for this inaction is that Dr.
Gueco was not shown the Joint Motion to Dismiss in the meeting of August 28, 1995, bolstering his claim that its signing was
never put into consideration in reaching a compromise.' xxx.9
We see no reason to reverse.
Anent the issue of award of damages, we find the claim of petitioner meritorious. In finding the petitioner liable for damages,
both .the Regional Trial Court and the Court of Appeals ruled that there was fraud on the part of the petitioner. The CA thus
declared:
The lower court's finding of fraud which became the basis of the award of damages was likewise sufficiently proven. Fraud under
Article 1170 of the Civil Code of the Philippines, as amended is the 'deliberate and intentional evasion of the normal fulfillment of
obligation' When petitioner refused to release the car despite respondent's tender of payment in the form of a manager's check,
the former intentionally evaded its obligation and thereby became liable for moral and exemplary damages, as well as
attorney's fees.10
We disagree.
Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the voluntary execution of a
wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or
omission; the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal
fulfillment of obligation.11 We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint
motion to dismiss could constitute as fraud. True, petitioner may have been remiss in informing Dr. Gueco that the signing
of a joint motion to dismiss is a standard operating procedure of petitioner bank. However, this can not in anyway have
prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner
against it before the lower court would be dismissed with prejudice. The whole point of the parties entering into the
compromise agreement was in order that Dr. Gueco would pay his outstanding account and in return petitioner would
return the car and drop the case for money and replevin before the Metropolitan Trial Court. The joint motion to dismiss
was but a natural consequence of the compromise agreement and simply stated that Dr. Gueco had fully settled his
obligation, hence, the dismissal of the case. Petitioner's act of requiring Dr. Gueco to sign the joint motion to dismiss can
not be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. It
should, likewise, be noted that in cases of breach of contract, moral damages may only be awarded when the breach was
attended by fraud or bad faith.12 The law presumes good faith. Dr. Gueco failed to present an iota of evidence to
overcome this presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco from P184,000.00 to
P150,000.00 is indicative of its good faith and sincere desire to settle the case. If respondent did suffer any damage, as a
result of the withholding of his car by petitioner, he has only himself to blame. Necessarily, the claim for exemplary
damages must fait. In no way, may the conduct of petitioner be characterized as "wanton, fraudulent, reckless, oppressive
or malevolent."13
We, likewise, find for the petitioner with respect to the third assigned error. In the meeting of August 29, 1995, respondent
Dr. Gueco delivered a manager's check representing the reduced amount of P150,000.00. Said check was given to Mr.
Rivera, a representative of respondent bank. However, since Dr. Gueco refused to sign the joint motion to dismiss, he was
made to execute a statement to the effect that he was withholding the payment of the check.14 Subsequently, in a letter
addressed to Ms. Desi Tomas, vice president of the bank, dated September 4, 1995, Dr. Gueco instructed the bank to
disregard the 'hold order" letter and demanded the immediate release of his car,15 to which the former replied that the
condition of signing the joint motion to dismiss must be satisfied and that they had kept the check which could be claimed
by Dr. Gueco anytime.16 While there is controversy as to whether the document evidencing the order to hold payment of
the check was formally offered as evidence by petitioners,17 it appears from the pleadings that said check has not been
encashed.
The decision of the Regional Trial Court, which was affirmed in toto by the Court of Appeals, orders the petitioner:
1. to return immediately the subject car to the appellants in good working condition. Appellee may deposit the Manager's
Check - the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its
issuance, whereas the funds have long been paid by appellants to secure said Manager's Check over which appellants have
no control.18
Respondents would make us hold that petitioner should return the car or its value and that the latter, because of its own
negligence, should suffer the loss occasioned by the fact that the check had become stale.19 It is their position that
delivery of the manager's check produced the effect of payment20 and, thus, petitioner was negligent in opting not to
deposit or use said check. Rudimentary sense of justice and fair play would not countenance respondents' position.
A stale check is one which has not been presented for payment within a reasonable time after its issue. It is valueless and,
therefore, should not be paid. Under the negotiable instruments law, an instrument not payable on demand must be presented
for payment on the day it falls due. When the instrument is payable on demand, presentment must be made within a reasonable
time after its issue. In the case of a bill of exchange, presentment is sufficient if made within a reasonable time after the last
negotiation thereof.21
A check must be presented for payment within a reasonable time after its issue,22 and in determining what is a "reasonable
time," regard is to be had to the nature of the instrument, the usage of trade or business with respect to such instruments, and
the facts of the particular case.23 The test is whether the payee employed such diligence as a prudent man exercises in his own
affairs.24 This is because the nature and theory behind the use of a check points to its immediate use and payability. In a case, a
check payable on demand which was long overdue by about two and a half (2-1/2) years was considered a stale check.25 Failure
of a payee to encash a check for more than ten (10) years undoubtedly resulted in the check becoming stale.26 Thus, even a delay
of one (1) week27 or two (2) days,28 under the specific circumstances of the cited cases constituted unreasonable time as a
matter of law.
In the case at bar, however, the check involved is not an ordinary bill of exchange but a manager's check. A manager's check is
one drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to effect and use. A cashier's check
is a check of the bank's cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank upon
the bank itself, and accepted in advance by the act of its issuance.29 It is really the bank's own check and may be treated as a
promissory note with the bank as a maker.30 The check becomes the primary obligation of the bank which issues it and
constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If treated as
promissory note, the drawer would be the maker and in which case the holder need not prove presentment for payment or
present the bill to the drawee for acceptance.31
Even assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of
the drawer only to the extent of the loss caused by the delay.32 Failure to present on time, thus, does not totally wipe out all
liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In this case, the
Gueco spouses have not alleged, much less shown that they or the bank which issued the manager's check has suffered damage
or loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it becomes imperative that the circumstances that caused its
non-presentment be determined.33 In the case at bar, there is no doubt that the petitioner bank held on the check and refused
to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. We see no bad faith or
negligence in this position taken by the Bank.1âwphi1.nêt
WHEREFORE, premises considered, the petition for review is given due course. The decision of the Court of Appeals affirming the
decision of the Regional Trial Court is SET ASIDE. Respondents are further ordered to pay the original obligation amounting to
P150,000.00 to the petitioner upon surrender or cancellation of the manager's check in the latter's possession, afterwhich,
petitioner is to return the subject motor vehicle in good working condition.
SO ORDERED.
Davide, Jr., Puno, Pardo, and Ynares-Santiago, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 183774 November 14, 2012
PHILIPPINE BANKING CORPORATION, Petitioner,
vs.
ARTURO DY, BERNARDO DY, JOSE DELGADO AND CIPRIANA DELGADO, Respondents.
DECISION
PERLAS-BERNABE, J.:
This Petition for Review on Certiorari assails the January 30, 2008 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
51672, which set aside the October 5, 1994 Decision2 of the Regional Trial Court of Cebu City, Branch 22 (RTC) and
directed the Register of Deeds of Cebu City to cancel Transfer Certificate of Title (TCT) Nos. 517683 and 519014 in the
names of respondents Arturo Dy and Bernardo Dy (Dys) and to issue the corresponding TCTs in the name of respondent
Cipriana Delgado (Cipriana).
The Factual Antecedents
Cipriana was the registered owner of a 58,129-square meter (sq.m.) lot, denominated as Lot No. 6966, situated in Barrio
Tongkil, Minglanilla, Cebu, covered by TCT No. 18568. She and her husband, respondent Jose Delgado (Jose), entered into
an agreement with a certain Cecilia Tan (buyer) for the sale of the said property for a consideration of P10.00/sq.m. It was
agreed that the buyer shall make partial payments from time to time and pay the balance when Cipriana and Jose (Sps.
Delgado) are ready to execute the deed of sale and transfer the title to her.
At the time of sale, the buyer was already occupying a portion of the property where she operates a noodle (bihon) factory
while the rest was occupied by tenants which Sps. Delgado undertook to clear prior to full payment. After paying the total
sum of P147,000.00 and being then ready to pay the balance, the buyer demanded the execution of the deed, which was
refused. Eventually, the buyer learned of the sale of the property to the Dys and its subsequent mortgage to petitioner
Philippine Banking Corporation (Philbank), prompting the filing of the Complaint5 for annulment of certificate of title,
specific performance and/or reconveyance with damages against Sps. Delgado, the Dys and Philbank.
In their Answer, Sps. Delgado, while admitting receipt of the partial payments made by the buyer, claimed that there was
no perfected sale because the latter was not willing to pay their asking price of P17.00/sq.m. They also interposed a
cross-claim against the Dys averring that the deeds of absolute sale in their favor dated June 28, 19826 and June 30, 19827
covering Lot No. 6966 and the adjoining Lot No. 4100-A (on which Sps. Delgado's house stands), were fictitious and merely
intended to enable them (the Dys) to use the said properties as collateral for their loan application with Philbank and
thereafter, pay the true consideration of P17.00/sq.m. for Lot No. 6966. However, after receiving the loan proceeds, the
Dys reneged on their agreement, prompting Sps. Delgado to cause the annotation of an adverse claim on the Dys' titles
and to inform Philbank of the simulation of the sale. Sps. Delgado, thus, prayed for the dismissal of the complaint, with a
counterclaim for damages and a cross-claim against the Dys for the payment of the balance of the purchase price plus
damages.
For their part, the Dys denied knowledge of the alleged transaction between cross-claimants Sps. Delgado and buyer. They
claimed to have validly acquired the subject property from Sps. Delgado and paid the full consideration therefor as the
latter even withdrew their adverse claim and never demanded for the payment of any unpaid balance.
On the other hand, Philbank filed its Answer8 asserting that it is an innocent mortgagee for value without notice of the defect in
the title of the Dys. It filed a cross-claim against Sps. Delgado and the Dys for all the damages that may be adjudged against it in
the event they are declared seller and purchaser in bad faith, respectively.
In answer to the cross-claim, Sps. Delgado insisted that Philbank was not a mortgagee in good faith for having granted the loan
and accepted the mortgage despite knowledge of the simulation of the sale to the Dys and for failure to verify the nature of the
buyer’s physical possession of a portion of Lot No. 6966. They thereby prayed for the cancellation of the mortgage in Philbank's
favor.
Subsequently, Sps. Delgado amended their cross-claim against the Dys to include a prayer for the nullification of the deeds of
absolute sale in the latter's favor and the corresponding certificates of title, and for the consequent reinstatement of Cipriana’s
title.9
The complaints against the Dys and Philbank were subsequently withdrawn. On the other hand, both the buyer and Sps. Delgado
never presented any evidence in support of their respective claims. Hence, the RTC limited itself to the resolution of the claims of
Sps. Delgado, Philbank and the Dys against one another.
The RTC Ruling
In the Decision10 dated October 5, 1994, the RTC dismissed the cross-claims of Sps. Delgado against the Dys and Philbank. It
noted that other than Sps. Delgado's bare allegation of the Dys' supposed non-payment of the full consideration for Lot Nos. 6966
and 4100-A, they failed to adduce competent evidence to support their claim. On the other hand, the Dys presented a cash
voucher11 dated April 6, 1983 duly signed by Sps. Delgado acknowledging receipt of the total consideration for the two lots.
The RTC also observed that Sps. Delgado notified Philbank of the purported simulation of the sale to the Dys only after the
execution of the loan and mortgage documents and the release of the loan proceeds to the latter, negating their claim of bad
faith. Moreover, they subsequently notified the bank of the Dys' full payment for the two lots mortgaged to it.
The CA Ruling
However, on appeal, the CA set aside12 the RTC's decision and ordered the cancellation of the Dys' certificates of title and the
reinstatement of Cipriana's title. It ruled that there were no perfected contracts of sale between Sps. Delgado and the Dys in view
of the latter's admission that the deeds of sale were purposely executed to facilitate the latter's loan application with Philbank
and that the prices indicated therein were not the true consideration. Being merely simulated, the contracts of sale were, thus,
null and void, rendering the subsequent mortgage of the lots likewise void.
The CA also declared Philbank not to be a mortgagee in good faith for its failure to ascertain how the Dys acquired the properties
and to exercise greater care when it conducted an ocular inspection thereof. It thereby canceled the mortgage over the two lots.
The Petition
In the present petition, Philbank insists that it is a mortgagee in good faith. It further contends that Sps. Delgado are estopped
from denying the validity of the mortgage constituted over the two lots since they participated in inducing Philbank to grant a
loan to the Dys.
On the other hand, Sps. Delgado maintain that Philbank was not an innocent mortgagee for value for failure to exercise due
diligence in transacting with the Dys and may not invoke the equitable doctrine of estoppel to conceal its own lack of diligence.
For his part, Arturo Dy filed a Petition-in-Intervention13 arguing that while the deeds of absolute sale over the two properties
were admittedly simulated, the simulation was only a relative one involving a false statement of the price. Hence, the parties are
still bound by their true agreement. The same was opposed/objected to by both Philbank14 and Sps. Delgado15 as
improper, considering that the CA judgment had long become final and executory as to the Dys who neither moved for
reconsideration nor appealed the CA Decision.
The Ruling of the Court
The petition is meritorious.
At the outset, the Court takes note of the fact that the CA Decision nullifying the questioned contracts of sale between Sps.
Delgado and the Dys had become final and executory. Accordingly, the Petition-in-Intervention filed by Arturo Dy, which
seeks to maintain the subject contracts' validity, can no longer be entertained. The cancellation of the Dys' certificates of
title over the disputed properties and the issuance of new TCTs in favor of Cipriana must therefore be upheld.
However, Philbank's mortgage rights over the subject properties shall be maintained. While it is settled that a simulated
deed of sale is null and void and therefore, does not convey any right that could ripen into a valid title,16 it has been
equally ruled that, for reasons of public policy,17 the subsequent nullification of title to a property is not a ground to
annul the contractual right which may have been derived by a purchaser, mortgagee or other transferee who acted in good
faith.18
The ascertainment of good faith or lack of it, and the determination of whether due diligence and prudence were exercised
or not, are questions of fact19 which are generally improper in a petition for review on certiorari under Rule 45 of the
Rules of Court (Rules) where only questions of law may be raised. A recognized exception to the rule is when there are
conflicting findings of fact by the CA and the RTC,20 as in this case.
Primarily, it bears noting that the doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title. This
is in deference to the public interest in upholding the indefeasibility of a certificate of title as evidence of lawful ownership
of the land or of any encumbrance thereon.21 In the case of banks and other financial institutions, however, greater care
and due diligence are required since they are imbued with public interest, failing which renders the mortgagees in bad
faith. Thus, before approving a loan application, it is a standard operating practice for these institutions to conduct an
ocular inspection of the property offered for mortgage and to verify the genuineness of the title to determine the real
owner(s) thereof.22 The apparent purpose of an ocular inspection is to protect the "true owner" of the property as well as
innocent third parties with a right, interest or claim thereon from a usurper who may have acquired a fraudulent certificate
of title thereto.23
In this case, while Philbank failed to exercise greater care in conducting the ocular inspection of the properties offered for
mortgage,24 its omission did not prejudice any innocent third parties. In particular, the buyer did not pursue her cause
and abandoned her claim on the property. On the other hand, Sps. Delgado were parties to the simulated sale in favor of
the Dys which was intended to mislead Philbank into granting the loan application. Thus, no amount of diligence in the
conduct of the ocular inspection could have led to the discovery of the complicity between the ostensible mortgagors (the
Dys) and the true owners (Sps. Delgado).1âwphi1 In fine, Philbank can hardly be deemed negligent under the premises
since the ultimate cause of the mortgagors' (the Dys') defective title was the simulated sale to which Sps. Delgado were
privies.
Indeed, a finding of negligence must always be contextualized in line with the attendant circumstances of a particular case.
As aptly held in Philippine National Bank v. Heirs of Estanislao Militar,25 "the diligence with which the law requires the
individual or a corporation at all times to govern a particular conduct varies with the nature of the situation in which one is
placed, and the importance of the act which is to be performed."26 Thus, without diminishing the time-honored principle
that nothing short of extraordinary diligence is required of banks whose business is impressed with public interest, Philbank's
inconsequential oversight should not and cannot serve as a bastion for fraud and deceit.
Republic of the Philippines
To be sure, fraud comprises "anything calculated to deceive, including all acts, omissions, and concealment involving a breach of SUPREME COURT
legal duty or equitable duty, trust, or confidence justly reposed, resulting in damage to another, or by which an undue and Manila
unconscientious advantage is taken of another."27 In this light, the Dys' and Sps. Delgado's deliberate simulation of the sale
intended to obtain loan proceeds from and to prejudice Philbank clearly constitutes fraudulent conduct. As such, Sps. Delgado FIRST DIVISION
cannot now be allowed to deny the validity of the mortgage executed by the Dys in favor of Philbank as to hold otherwise would
G.R. No. 168522 December 19, 2007
effectively sanction their blatant bad faith to Philbank's detriment.
UNIWIDE HOLDINGS, INC., Petitioner,
Accordingly, in the interest of public policy, fair dealing, good faith and justice, the Court accords Philbank the rights of a
vs.
mortgagee in good faith whose lien to the securities posted must be respected and protected. In this regard, Philbank is entitled
JANDECS TRANSPORTATION CO., INC., Respondent.
to have its mortgage carried over or annotated on the titles of Cipriana Delgado over the said properties.
RESOLUTION
WHERFORE, the assailed January 30, 2008 Decision of the Court of Appeals in CA-G.R. CV No. 51672 is hereby AFFIRMED with
MODIFICATION upholding the mortgage rights of petitioner Philippine Banking Corporation over the subject properties. CORONA, J.:
SO ORDERED. Petitioner Uniwide Holdings Inc. filed a petition for review for certiorari under Rule 45 of the Rules of Court assailing the
decision1 of the Court of Appeals (CA) dated February 16, 2005 in CA-G.R. CV No. 78931 entitled Jandecs Transportation
ESTELA M. PERLAS-BERNABE
Co., Inc. v. Uniwide Holdings, Incorporated. In a resolution dated August 17, 2005,2 we denied the petition for failure to
Associate Justice
show that the CA committed reversible error. Thereafter, petitioner filed a "Motion to Suspend Proceedings with Motion
WE CONCUR: for Reconsideration" calling this Court's attention to the order of suspension of payments and approval of its rehabilitation
plan by the Securities and Exchange Commission (SEC).3
ANTONIO T. CARPIO
Associate Justice The antecedent facts follow.
Chairperson
In January 1997, petitioner and respondent Jandecs Transportation Co., Inc. entered into a contract of "Assignment of
Leasehold Rights" under which the latter was to operate food and snack stalls at petitioner's Uniwide Coastal Mall in
ARTURO D. BRION MARIANO C. DEL CASTILLO
Parañaque City. The contract was for a period of 18 years, commencing October 1, 1997 up to September 30, 2015, for a
Associate Justice Associate Justice
consideration of ₱2,460,630.15. The parties also agreed that respondent's stalls would be located near the movie houses
and would be the only stalls to sell food and beverages in that area.
JOSE PORTUGAL PEREZ
Associate Justice On February 7, 1997, respondent paid the contract price in full. Petitioner, however, failed to turn over the stall units on
October 1, 1997 as agreed upon. Respondent sought the rescission of the contract and the refund of its payment.
ATTESTATION
Petitioner refused both.
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
On July 23, 1999, respondent filed a complaint in the Regional Trial Court (RTC), Branch 257 of Parañaque City, for breach
the opinion of the Court's Division.
of contract, rescission of contract, damages and issuance of a writ of preliminary attachment. In the
ANTONIO T. CARPIO complaint,4 respondent claimed that, despite full payment, petitioner (1) failed to deliver the stall units on the stipulated
Associate Justice date; (2) opened its own food and snack stalls near the cinema area and (3) refused to accommodate its request for the
Chairperson, Second Division rescission of the contract and the refund of payment.

CERTIFICATION In its answer,5 petitioner admitted respondent's full payment of the contract price but denied that it was bound to deliver
the stalls on October 1, 1997. According to petitioner, the contract was clear that it was to turn over the units only upon
I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of completion of the mall. It likewise claimed that, under the contract, it had the option to offer substitute stalls to
the opinion of the Court's Division. respondent which the latter, however, rejected.

MA. LOURDES P. A. SERENO After trial, the RTC ruled in favor of respondent. It held:
Chief Justice
It is not disputed that [petitioner] had failed to [turn over] the units leased to [respondent]. Since the term of the contract is for
18 years to commence on October 1, 1997 to September 30, 2015, it is understood that [petitioner] was obliged to deliver to
[respondent] the leased units on October 1, 1997. [Petitioner's] failure to deliver the leased units as provided in the contract
obviously constitutes breach thereof.
[Respondent] had paid [petitioner] the full consideration of ₱2,460,680.15 for the leasehold rights. While [respondent] had fully
complied with [its] obligation, [petitioner] has not performed its part of the obligation to deliver to [respondent] the 2 units
leased. Hence, [respondent] has the right to rescind the contract. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him (Art. 1191, Civil Code).6
xxx xxx xxx
WHEREFORE, finding the act of [respondent] in rescinding the Assignment of Leasehold Rights proper, the same is declared valid
and lawful. Accordingly, [petitioner] is ordered to return to [respondent] the amount of ₱2,460,630.15 plus interest at the legal
rate and to pay [respondent] the amount of ₱30,000.00 for attorney's fees.
SO ORDERED.7
Aggrieved, petitioner appealed the decision to the CA. Except for the award of attorney's fees which it found to be bereft of any
basis, the CA upheld the RTC decision saying:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the Decision of the Regional Trial Court, Parañaque City, Branch 257 in Civil Case
No. 99-0268 dated March 12, 2003 is hereby AFFIRMED, with the sole modification that the award of attorney's fees to
[respondent] be DELETED. Costs shall also be taxed against [petitioner].
SO ORDERED.8
Petitioner filed a partial motion for reconsideration (MR) of the CA decision but it was denied as well.9 Hence, it filed the petition
for review on certiorari which we denied on August 17, 2005.10 Thereafter, petitioner filed the "Motion to Suspend Proceedings
with Motion for Reconsideration."
In its motion to suspend the proceedings, petitioner prays that the action in this Court be held in abeyance in view of the SEC's
order of suspension of payments and approval of its rehabilitation plan.11 In its MR, on the other hand, it insists that we should
find (1) the rescission decreed by the lower courts erroneous and (2) the order for refund of the ₱2,460,630.15 (with legal interest)
to respondent unwarranted.
Suspension of Proceedings
When Warranted
The relevant law dealing with the suspension of payments for money claims against corporations under rehabilitation is
Presidential Decree (PD) No. 902-A,12 as amended. The term "claim" under said law refers to debts or demands of pecuniary
nature.13 It is the assertion of rights for the payment of money.14 The raison d' être behind the suspension of claims pending
rehabilitation was explained in the case of BF Homes, Inc. v. CA15 :
...the reason for suspending actions for claims against the corporation should not be difficult to discover. It is not really to enable
the management committee or the rehabilitation receiver to substitute the [corporation] in any pending action against it before
any court, tribunal, board or body. Obviously, the real justification is to enable the management committee or the rehabilitation
receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or
prevent the "rescue" of the debtor [corporation]. To allow such other action to continue would only add to the burden of the
management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its restructuring and rehabilitation.
In Philippine Air Lines [(PAL)], Incorporated v. Zamora,16 we said that "all actions for claims against a corporation pending
before any court, tribunal or board shall ipso jure be suspended in whatever stage such actions may be found upon the
appointment by the SEC of a management committee or a rehabilitation receiver."
However, we would still find no cogent reason to reverse our August 17, 2005 resolution denying petitioner's appeal even
if the proceedings here were to be suspended in the meantime. And such suspension would not at all affect our position
that the MR should be denied as well.
Right of Rescission
When Available
Article 1191 of the Civil Code provides:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he had chosen fulfillment, if the latter should become impossible.
xxx xxx xxx
From the foregoing, the right of rescission is implied in every reciprocal obligation where one party fails to perform what is
incumbent upon him while the other is willing and ready to comply. Certainly, petitioner's failure to deliver the units on the
commencement date of the lease on October 1, 1997 gave respondent the right to rescind the contract after the latter had
already paid the contract price in full.
Furthermore, respondent's right to rescind the contract cannot be prevented by the fact that petitioner had the option to
substitute the stalls. Even if petitioner had that option, it did not, however, mean that it could insist on the continuance of
the contract by forcing respondent to accept the substitution. Neither did it mean that its previous default had been
obliterated completely by the exercise of that option.
However, so as not to run counter to or depart from the well-established doctrines in BF Homes, Inc. and PAL, and
considering further the SEC's appointment of a receivership committee,17 we will defer the entry of judgment in this case
even after this resolution attains finality. In effect, the execution of the RTC decision (which the CA and this Court have
affirmed) is suspended until further advice from us.
One final note. Petitioner's extreme bad faith in dealing with respondent was too glaring for the Court to
ignore.1awphil Petitioner’s lack of good and honest intentions, as well as the evasive manner by which it was able to
frustrate respondent's claim for a decade, should not go unsanctioned. Parties in a contract cannot be allowed to engage in
double-dealing schemes to dupe those who transact with them in good faith.
WHEREFORE, premises considered, the motion for reconsideration of our August 17, 2005 resolution is DENIED with
finality. However, the motion for suspension of proceedings is GRANTED and the entry of judgment held in abeyance until
further orders of this Court. Accordingly, petitioner Uniwide Holdings, Inc. is hereby DIRECTED to make a quarterly report
to this Court on the status of its ongoing rehabilitation.
Treble costs against petitioner. On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of way was filed by Pacifico Mabasa against
Cristino Custodio, Brigida R. Custodio, Rosalina R. Morato, Lito Santos and Maria Cristina C. Santos before the Regional Trial
SO ORDERED. Court of Pasig and assigned to Branch 22 thereof.2
RENATO C. CORONA The generative facts of the case, as synthesized by the trial court and adopted by the Court of Appeals, are as follows:
Associate Justice
Perusing the record, this Court finds that the original plaintiff Pacifico Mabasa died during the pendency of this case and
WE CONCUR: was substituted by Ofelia Mabasa, his surviving spouse [and children].
REYNATO S. PUNO The plaintiff owns a parcel of land with a two-door apartment erected thereon situated at Interior P. Burgos St., Palingon,
Chief Justice Tipas, Tagig, Metro Manila. The plaintiff was able to acquire said property through a contract of sale with spouses
Chairperson Mamerto Rayos and Teodora Quintero as vendors last September 1981. Said property may be described to be surrounded
by other immovables pertaining to defendants herein. Taking P. Burgos Street as the point of reference, on the left side,
ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA going to plaintiff's property, the row of houses will be as follows: That of defendants Cristino and Brigido Custodio, then
Associate Justice Associate Justice that of Lito and Maria Cristina Santos and then that of Ofelia Mabasa. On the right side (is) that of defendant Rosalina
Morato and then a Septic Tank (Exhibit "D"). As an access to P. Burgos Street from plaintiff's property, there are two
TERESITA J. LEONARDO-DE CASTRO possible passageways. The first passageway is approximately one meter wide and is about 20 meters distan(t) from
Associate Justice Mabasa's residence to P. Burgos Street. Such path is passing in between the previously mentioned row of houses. The
second passageway is about 3 meters in width and length from plaintiff Mabasa's residence to P. Burgos Street; it is about
CERTIFICATION
26 meters. In passing thru said passageway, a less than a meter wide path through the septic tank and with 5-6 meters in
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above resolution had been reached in length, has to be traversed.
consultation before the case was assigned to the writer of the opinion of the Court’s Division.
When said property was purchased by Mabasa, there were tenants occupying the remises and who were acknowledged by
REYNATO S. PUNO plaintiff Mabasa as tenants. However, sometime in February, 1982, one of said tenants vacated the apartment and when
Chief Justice plaintiff Mabasa went to see the premises, he saw that there had been built an adobe fence in the first passageway making
it narrower in width. Said adobe fence was first constructed by defendants Santoses along their property which is also
along the first passageway. Defendant Morato constructed her adobe fence and even extended said fence in such a way
that the entire passageway was enclosed. (Exhibit "1-Santoses and Custodios, Exh. "D" for plaintiff, Exhs. "1-C", "1-D" and
Republic of the Philippines "1-E") And it was then that the remaining tenants of said apartment vacated the area. Defendant Ma. Cristina Santos
SUPREME COURT testified that she constructed said fence because there was an incident when her daughter was dragged by a bicycle
Manila pedalled by a son of one of the tenants in said apartment along the first passageway. She also mentioned some other
inconveniences of having (at) the front of her house a pathway such as when some of the tenants were drunk and would
SECOND DIVISION
bang their doors and windows. Some of their footwear were even lost. . . .3 (Emphasis in original text; corrections in
G.R. No. 116100 February 9, 1996 parentheses supplied)

SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES LITO and MARIA CRISTINA SANTOS, petitioners, On February 27, 1990, a decision was rendered by the trial court, with this dispositive part:
vs.
Accordingly, judgment is hereby rendered as follows:
COURT OF APPEALS, HEIRS OF PACIFICO C. MABASA and REGIONAL TRIAL COURT OF PASIG, METRO MANILA, BRANCH
181, respondents. 1) Ordering defendants Custodios and Santoses to give plaintiff permanent access ingress and egress, to the public street;
DECISION 2) Ordering the plaintiff to pay defendants Custodios and Santoses the sum of Eight Thousand Pesos (P8,000) as indemnity
for the permanent use of the passageway.
REGALADO, J.:
The parties to shoulder their respective litigation expenses.4
This petition for review on certiorari assails the decision of respondent Court of Appeals in CA-G.R. CV No. 29115, promulgated on
November 10, 1993, which affirmed with modification the decision of the trial court, as well as its resolution dated July 8, 1994 Not satisfied therewith, therein plaintiff represented by his heirs, herein private respondents, went to the Court of Appeals
denying petitioner's motion for reconsideration.1 raising the sole issue of whether or not the lower court erred in not awarding damages in their favor. On November 10,
1993, as earlier stated, the Court of Appeals rendered its decision affirming the judgment of the trial court with modification, the
decretal portion of which disposes as follows:
WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED WITH MODIFICATION only insofar as the herein grant
of damages to plaintiffs-appellants. The Court hereby orders defendants-appellees to pay plaintiffs-appellants the sum of Sixty
Five Thousand (P65,000) Pesos as Actual Damages, Thirty Thousand (P30,000) Pesos as Moral Damages, and Ten Thousand
(P10,000) Pesos as Exemplary Damages. The rest of the appealed decision is affirmed to all respects.5
On July 8, 1994, the Court of Appeals denied petitioner's motion for reconsideration.6 Petitioners then took the present recourse
to us, raising two issues, namely, whether or not the grant of right of way to herein private respondents is proper, and whether or
not the award of damages is in order.
With respect to the first issue, herein petitioners are already barred from raising the same. Petitioners did not appeal from the
decision of the court a quo granting private respondents the right of way, hence they are presumed to be satisfied with the
adjudication therein. With the finality of the judgment of the trial court as to petitioners, the issue of propriety of the grant of
right of way has already been laid to rest.
For failure to appeal the decision of the trial court to the Court of Appeals, petitioners cannot obtain any affirmative relief other
than those granted in the decision of the trial court. That decision of the court below has become final as against them and can no
longer be reviewed, much less reversed, by this Court. The rule in this jurisdiction is that whenever an appeal is taken in a civil
case, an appellee who has not himself appealed may not obtain from the appellate court any affirmative relief other than what
was granted in the decision of the lower court. The appellee can only advance any argument that he may deem necessary to
defeat the appellant's claim or to uphold the decision that is being disputed, and he can assign errors in his brief if such is
required to strengthen the views expressed by the court a quo. These assigned errors, in turn, may be considered by the appellate
court solely to maintain the appealed decision on other grounds, but not for the purpose of reversing or modifying the judgment
in the appellee's favor and giving him other affirmative reliefs.7
However, with respect to the second issue, we agree with petitioners that the Court of Appeals erred in awarding damages in
favor of private respondents. The award of damages has no substantial legal basis. A reading of the decision of the Court of
Appeals will show that the award of damages was based solely on the fact that the original plaintiff, Pacifico Mabasa, incurred
losses in the form of unrealized rentals when the tenants vacated the leased premises by reason of the closure of the passageway.
However, the mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the recovery
of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff
therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely
part of the remedy allowed for the injury caused by a breach or wrong.8
There is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt,
or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus,
there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty.
These situations are often called damnum absque injuria.9
In order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such injuries resulted
from a breach of duty which the defendant owed to the plaintiff a concurrence of injury to the plaintiff and legal responsibility by
the person causing it.10 The underlying basis for the award of tort damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be the breach of some duty and the imposition of liability for that breach before
damages may be awarded; it is not sufficient to state that there should be tort liability merely because the plaintiff suffered some
pain and suffering.11
Many accidents occur and many injuries are inflicted by acts or omissions which cause damage or loss to another but
which violate no legal duty to such other person, and consequently create no cause of action in his favor. In such cases, the
consequences must be borne by the injured person alone. The law affords no remedy for damages resulting from an act
which does not amount to a legal injury or wrong.12
In other words, in order that the law will give redress for an act causing damage, that act must be not only hurtful, but
wrongful. There must be damnum et injuria.13 If, as may happen in many cases, a person sustains actual damage, that is,
harm or loss to his person or property, without sustaining any legal injury, that is, an act or omission which the law does
not deem an injury, the damage is regarded as damnum absque injuria.14
In the case at bar, although there was damage, there was no legal injury. Contrary to the claim of private respondents,
petitioners could not be said to have violated the principle of abuse of right. In order that the principle of abuse of right
provided in Article 21 of the Civil Code can be applied, it is essential that the following requisites concur: (1) The defendant
should have acted in a manner that is contrary to morals, good customs or public policy; (2) The acts should be willful; and
(3) There was damage or injury to the plaintiff.15
The act of petitioners in constructing a fence within their lot is a valid exercise of their right as owners, hence not contrary
to morals, good customs or public policy. The law recognizes in the owner the right to enjoy and dispose of a thing, without
other limitations than those established by law.16 It is within the right of petitioners, as owners, to enclose and fence
their property. Article 430 of the Civil Code provides that "(e)very owner may enclose or fence his land or tenements by
means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon."
At the time of the construction of the fence, the lot was not subject to any servitudes. There was no easement of way
existing in favor of private respondents, either by law or by contract. The fact that private respondents had no existing
right over the said passageway is confirmed by the very decision of the trial court granting a compulsory right of way in
their favor after payment of just compensation. It was only that decision which gave private respondents the right to use
the said passageway after payment of the compensation and imposed a corresponding duty on petitioners not to interfere
in the exercise of said right.
Hence, prior to said decision, petitioners had an absolute right over their property and their act of fencing and enclosing
the same was an act which they may lawfully perform in the employment and exercise of said right. To repeat, whatever
injury or damage may have been sustained by private respondents by reason of the rightful use of the said land by
petitioners is damnum absque injuria.17
A person has a right to the natural use and enjoyment of his own property, according to his pleasure, for all the purposes
to which such property is usually applied. As a general rule, therefore, there is no cause of action for acts done by one
person upon his own property in a lawful and proper manner, although such acts incidentally cause damage or an
unavoidable loss to another, as such damage or loss is damnum absque injuria. 18 When the owner of property makes use
thereof in the general and ordinary manner in which the property is used, such as fencing or enclosing the same as in this
case, nobody can complain of having been injured, because the incovenience arising from said use can be considered as a
mere consequence of community life. 19
The proper exercise of a lawful right cannot constitute a legal wrong for which an action will lie, 20 although the act may
result in damage to another, for no legal right has been invaded. 21 One may use any lawful means to accomplish a lawful
purpose and though the means adopted may cause damage to another, no cause of action arises in the latter's favor. An
injury or damage occasioned thereby is damnum absque injuria. The courts can give no redress for hardship to an
individual resulting from action reasonably calculated to achieve a lawful means. 22
WHEREFORE, under the compulsion of the foregoing premises, the appealed decision of respondent Court of Appeals is hereby Tui Peck, also known as Lim fan Chiao, and Tan King, also known as Tiu To Suan, both signed the Agreement to which the
REVERSED and SET ASIDE and the judgment of the trial court is correspondingly REINSTATED. five (5) middlemen also affixed their signatures as witnesses.

Romero and Puno, JJ., concur. The abovesaid Agreement reads its follows:
Mendoza, J., took no part.
AGREEMENT ON THE APPORTION OF
PARTNERSHIP BUSINESSES

Republic of the Philippines The undersigned LIM YAN CHIAO and TIU TO SUAN hereby agreed to terminate their partnership in business and
SUPREME COURT apportion(ment) of their lumber and hardware store and piggery farm under following conditions:
Manila
First: The joint business shall be divided and apportioned on a lottery basis.
SECOND DIVISION
Second: The collection of accounts receivable to the partnerships (sic) shall be divided into four phases, such accounts shall
be collected by the person who gets the lot, and the collected funds shall be divided equally by the partners after
deducting commissions as follows:
G.R. No. 104404 May 6, 1993
First phase — 20% commission
SPOUSES TIU PECK and LEE YOK YAN, petitioners, Second phase — 30% commission
vs. Third phase — 40% commission
THE HONORABLE COURT OF APPEALS (Seventeenth Division) and SPOUSES CONCHITA M. RUBIATO and TAN KING, respondents. Fourth phase — 50% commission

J.P. Villanueva & Associates for petitioners. Third: The partnership shall appropriate an amount of funds for the separation of employees of the partnership, which
shall be sole responsibility of the lot winners concerned henceforth.
Estanislao L. Cesa, Jr. for private respondents.
Fourth: The partnership shall likewise appropriate an amount of hinds to the lot winners concerned for the payment of
unpaid taxes and fees.
PADILLA, J.:
Fifth: The joint business are estimated of its assets as follows:
This is a petition for review on certiorari of the decision 1 of the Seventeenth Division of respondent Court of Appeals in CA-G.R.
(a) Lumber & Hardware — One Million and Six Hundred Thousand Pesos (P1,600,000.00) including building and lot, and all
CV No. 24912, dated 11 October 1991, modifying the trial court's judgment.
the merchandise.
The antecedent facts of the case are as follows:
(b) Piggery — One Million Pesos (P1,000,000.00) including the building and lot and all the goods including the feeds.
In his lifetime, Joaquin Tiu Singco, father of petitioner Tiu Peck, owned and operated the Argentina Trading, a business engaged in
Sixth: The person who wan(s) the lot for the lumber and hardware shall give Three Hundred Thousand Pesos (P300,000.00)
the buying and selling of lumber, hardware and general merchandise in San Marcelino, Zambales. Helping him run the business
to the person who got (sic) the lot for the piggery.
were private respondents: Tan King who helped manage the store and receiving P200.00 a month, while his wife Conchita M.
Rubiato did the marketing and cooking for which work she received a salary of around P180.00 to P240.00 a month. The business Seventh: This agreement shall take effect upon the lottery.
license was, however, in the name of Conchita M. Rubiato.
Done on the 31st day of August on the year of our Lord Nineteen Hundred and Eighty-Three.
After the death of Joaquin Tiu Singco in 1974, Tiu Peck took over and continued the business left by his father. Tan King and
Conchita M. Rubiato continued to help him in the management of the said business, eventually becoming partners thereof. (Sgd.) LIM YAN CHIAO (Sgd.) TIU TO SUAN

Sometime in 1983, petitioners and private respondents decided to end their business partnership. Accordingly, they sought the Lim Yan Chiao got the lot of the Lumber
help of five (5) respected members of the Filipino Chinese Chamber of Commerce and Industry of Olongapo City (of which Tiu To Suan got the lot of the piggery
petitioners and private respondents are members) to act as middlemen. Together with the five (5) middlemen, Tiu Peck and Tan
King discussed the manner of their separation and the liquidation of the partnership properties. As a result of the discussion, an Witnesses:
"Agreement on the Apportionment of Partnership Business" was drawn up.
(Sgd.) CHUA PUN SU (Sgd.) CO CHU TONG
(Sgd.) Ting Kok Bin (Sgd.) CHENG SUY LEY
(Sgd.) Ting Kim Yek 2
Immediately thereafter, Tiu Peck took possession of the lumber and hardware business including the lot and building as well as
the merchandise therein. On the other hand, Tan King and Conchita M. Rubiato took possession of the piggery business, the lot
and all the improvements thereon as well as the hogs.
After three (3) years, or specifically on 21 April 1986, private respondents wrote petitioners demanding partition of the same
properties subject of the Agreement of 31 August 1983. Eventually, private respondents filed an action against petitioners for
partition of the parcel of land covered by TCT No. T-24999 where the lumber and hardware business was conducted and the
parcel of land covered by Tax Declaration No. 10985 where the piggery business was located.
After trial, the Regional Trial Court of the Third Judicial Region, Branch 72, Olongapo City, rendered judgment, declaring, among
other, things, that the parcels of land covered by Transfer Certificate of Title No. T-24999 and Tax Declaration No. 1098 are owned
in common by the plaintiffs (private respondents) and the defendants in pro-indiviso equal shares; that the plaintiffs (private
respondents) are the owners of the building covered by Tax Declaration No. 59345 built on the parcel of land covered by TCT No.
T-24999; and ordering plaintiffs and defendants to partition the said parcels of land among themselves.
Petitioners (as defendants) appealed the above decision to respondent Court of Appeals. On 11 October 1991, respondent Court
promulgated the challenged decision modifying the trial court's judgment as follows:
WHEREFORE, the judgment appealed from is modified, to read as follows:
1. The parcel of land covered by Transfer Certificate of Title No. T-24999 (Exhibit A), the building erected thereon covered by Tax
Declaration No. 59345 (Exhibit B), and the parcel of land covered by Tax Declaration No. 10985 (Exhibit I) are declared owned in
common by the plaintiffs spouses Conchita M. Rubiato and Tan King and the appellants spouses Tiu Peck and Lee Yok Yan, pro
indiviso in equal shares, which properties are hereby ordered partitioned in accordance with the provisions of Rule 69 of the
Revised Rules of Court, the trial Court to follow the procedure provided therein;
2. The defendants are ordered to return to the plaintiffs the personal belongings kept in the building covered by Tax Declaration
No. 59345 (Exhibit B); and
3. The defendants' counterclaim against the plaintiffs is dismissed.
No pronouncement as to costs in this instance.
SO ORDERED. 3
Undaunted, petitioners are now before us seeking a review of respondent court's decision and assigning the following errors to
said court:
A. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING THE RESULT OF THE PARTITION AGREEMENT
ENTITLED 'AGREEMENT ON THE APPORTION (SIC) OF PARTNERSHIP BUSINESSES' BY DECLARING THE PROPERTIES SUBJECT
THEREIN AGAIN AS OWNED IN COMMON BY THE PETITIONERS AND RESPONDENT PRO INDIVISO AND ORDERING A NEW
PARTITION UNDER RULE 69 THUS SUPERSEDING AND VIOLATING THE BINDING AGREEMENT THAT WERE (SIC) ALREADY
EXECUTED AND CONSUMMATED BY AND BETWEEN THE CO-OWNERS, WHICH TOOK EFFECT THREE YEARS AGO, BEFORE THE
RESPONDENT FILED THE PETITION FOR PARTITION.
B. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING THE PRINCIPLE THAT THE CONTRACT ONCE
PERFECTED HAS THE FORCE OF LAW BETWEEN THE PARTIES WITH WHICH THEY ARE BOUND TO COMPLY IN GOOD FAITH
AND NEITHER ONE OF THE PARTIES WITHOUT THE CONSENT OF THE OTHER RENEGE ON (SIC) THEREFROM.
C. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN COMPLETELY IGNORING THE PRINCIPLE OF EQUITY
APPLICABLE IN THE CASE AT BAR IN ORDER TO PROTECT THE VESTED RIGHTS THAT ACCRUED TO THE PETITIONERS WHEN
THE PARTIES HAD ACTUALLY IMPLEMENTED AND EXECUTED THE PARTITION AGREEMENT, AND WHO HAD EXERCISE(D)
OWNERSHIP OR ACTS OF STRICT DOMINION OVER THE PROPERTIES ALLOTED TO EACH BY VIRTUE OF THE AGREEMENT.
D. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN COMPLETELY IGNORING THE PRINCIPLE OF ESTOPPEL
APPLICABLE AGAINST THE RESPONDENT THAT HAS BARRED THEM FROM QUESTIONING THE BINDING FORCE AND EFFECT
OF THE AGREEMENT. 4
The foregoing recital of errors may be reduced to two (2) principal issues.
The first issue concerns the alleged business partnership between Tiu Peck on the one hand and the spouses Tan King and
Conchita M. Rubiato on the other.
We agree with the resolution of the respondent court on this issue.
To begin with, it cannot be said that there was a business partnership between the appellants on the one hand and the
appellees on the other, absent the required public instrument constituting the partnership, immovable properties having
been contributed by the parties (Article 1771, Civil Code) and recording thereof in the Securities and Exchange Commission
(Article 1772, Civil Code).
Nonetheless, the parties may be deemed as co-owners of the real properties and the businesses they are engaged in
mentioned in the agreement aforequoted (Exhibits 62 and 63). (Underscoring supplied)
But the parties be (they) partners or co-owners as the case may be, the parcel of land mentioned in the agreement
(Exhibits 62 and 63) where the lumber and hardware business was conducted, covered by TCT No. 24999 (Exhibit A), and
the building erected thereon covered by Tax Declaration No. 59345 (Exhibit B); and the parcel of land where their piggery
business was located, covered by Tax Declaration No. 10985 (Exhibit I), including the building and lot and all the goods
including the feeds therein belong to appellants on the one hand and appellees on the other. 5
Following the abovequoted ratiocination of respondent court, we expected it to then rule on the validity and binding effect
of the partition of the subject properties between the two (2) contending parties as co-owners. Unfortunately, it diverted
from the trend of its position when it disregarded the real intention of the parties which was to divide the businesses and
properties owned by them in common. Respondent court itself perceived this intention when it stated:
. . . Such is the import of their agreement where appellant Tiu Peck and appellee Tan King agreed to terminate their
partnership in business and apportion their lumber and hardware business valued P1,600,000, including (the) building and
lot, and all the merchandise and piggery valued P1,000,000, including the building and lot and all the goods including the
feeds (Exhibits 62 and 63). 6 (Emphasis supplied)
It should be noted that private respondent Conchita M. Rubiato initiated the move to terminate the so-called partnership
when she informed Tiu Peck that since their children were already grown-up, it was a propitious time for them to separate
their businesses. To this proposal, Tiu Peck agreed. With the help of five (5) respected middlemen, they drew-up on 31
August 1983 the Agreement on the Apportionment of Partnership Businesses which they all signed. There can be no doubt,
therefore, that the two (2) parties wanted to go their separate ways in their business and to get their respective shares of the
properties which they owned in common when they drew up and executed the 31 August 1983 agreement.
This brings us to the second issue: whether or not the agreement of 31 August 1983 is valid and binding between the petitioners
and private respondents.
There is no question that petitioners and the private respondents voluntarily entered into the agreement to apportion or divide
their businesses, whether as partners or co-owners. That agreement is the law between them. Contracts shall be obligatory in
whatever form they may have been entered into, provided all the essential requisites for their validity are present.7 The fact that
after signing the agreement both parties immediately took possession of their respective shares is the most compelling evidence
that there was indeed a binding partition of the properties. Contracts, once perfected, have the force of law between the parties
who are bound to comply therewith in good faith, and neither one may, without the consent of the other, renege therefrom. 8
And, as held by respondent court, even though petitioner Lee Yok Yan and respondent Conchita M. Rubiato were not actual
signatories to the agreement, nonetheless, such agreement is persuasive for or against them. Indeed, private respondents have
no justification to refuse delivery of TCT No. T-24999 to petitioners after they agreed to the partition and consequently took
possession of the piggery business and operated it for three (3) years before changing their minds and seeking a new partition. It
has not been explained by them — as perhaps explanation is not possible — why it took them three (3) years before they decided
for another partition of the same properties subject of their agreement on 31 August 1983.
. . . Contracts solemnly and deliberately entered into may not be overturned by inconclusive proof or by reason of mistake of one
of the parties to which the other in no way has contributed. 9
The respondent court, in our view, erred in ordering another partition after ruling that there is no partnership but a co-ownership
of the real properties and businesses between the petitioners and private respondents.
Moreover, the title of the contract does not necessarily determine its true nature.
The acts of the contracting parties, subsequent to, and in connection with, the performance of the contract must be considered in
the interpretation of the contract. . . . To determine the nature of a contract, courts do not have or are not bound to rely upon the
name or title given it by the contracting parties . . . but the way the contracting parties do or perform their respective obligations,
stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the
contract by the parties, the former must prevail over the latter. 10
WHEREFORE, in view of the foregoing, the decision appealed from ordering the partition of the properties in question is hereby
SET ASIDE. Accordingly:
1. the partition of the properties subject of the Agreement On the Apportionment of Partnership Businesses, dated 31 August
1983, is hereby declared valid and binding between petitioners and the private respondents;
2. Transfer Certificate of Title No. T-24999 (Exhibit A) covering the lot of the lumber and hardware business as well as Tax
Declaration No. 59345 covering the building thereon are hereby ordered consolidated in the name of petitioners;
3. the Register of Deeds of Zambales is hereby ordered to issue a new Transfer Certificate of Title in the names of petitioners Tiu
Peck and Lee Yok Yan in lieu of TCT No. T-24999, Book No. T-230, page 199; and
4. the lot covered by Tax Declaration No. 10985 and all improvements therein devoted to the piggery business are declared
properties of the private respondents; and
5. the petitioners are ordered to return to private respondents the personal belongings kept in the building covered by Tax
Declaration No. 59345 (Exhibit B).
Costs against private respondents.
SO ORDERED.
Narvasa, C.J., Regalado and Nocon, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-27239 August 20, 1986
ROYAL LINES, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and THE NATIONAL SHIPYARDS AND STEEL CORPORATION, respondents.
Regino Hermosisimo for petitioner.
CRUZ, J.:
Petitioner and the National Shipyards and Steel Corporation (NASSCO) entered into a written contract for the conversion of
the former's yacht, the M/V Sea Belle, into a passenger and cargo vessel for the stipulated price of
P121,980.00.1 Additional work was done on the ship, for which NASSCO demanded the sum of P196,245.37, representing
the difference between the amount already paid by the petitioner and the contract price.2 Petitioner rejected the demand,
claiming it had not authorized the additional work in writing as required under Article 1724 of the Civil Code. The trial court
sustained NASSCO, and petitioner appealed. The Court of Appeals, in a 3-2 decision, affirmed the court a quo, holding that
the said article was not applicable in the instant case as it referred only to structures on land and did not include
vessels. 3 Petitioner come to us on certiorari to challenge this decision.
The lone assignment of error is the refusal of the Court of Appeals to apply Article 1724 of the Civil Code reading in full as
follows:
Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with
plans and specifications agreed upon with the landowner can neither withdraw from the contract nor demand an increase
in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and
specifications, provided:
(1) Such change has been authorized by the proprietor in writing, and
(2) The additional price to be paid to the contractor has been determined in writing by both parties.
Petitioner contends that it cannot be held liable for the additional work (which it admits) because it had not given any written
authorization therefor. The change had not been authorized "in writing" and the additional price to be paid had not "been
determined in writing by the parties." 4 To bolster its position, petitioner cites the case of San Diego v. Sayson 5 and Tui Suico v.
Habana,6 where this Court rejected claims for payment for additional work because these had not been authorized in writing by
the parties, nor had the price therefor been previously determined by written agreement of the parties.
For its part, NASSCO argues that the above provision is not in point for the simple reason that it refers only to buildings or
structures constructed on land.7 The article in question constitutes the special rule applicable only to those constructions. All
other matters come under the general rules on contract and under such rules no particular form is required for the agreement
under consideration.8 Moreover, the cases cited by petitioner are not in point because they involved buildings and not, as in this
case, a vessel.9
There is no ambiguity in the language of Article 1724. Plainly, it refers to a structure or any other work to be built on land by
agreement between the contractor and the landowner. It cannot apply to work done upon a vessel which is not erected on land
or owned by a landowner. Hence, the said article is not controlling in this case.
However, it does not follow that petitioner is absolved of liability for the work done upon its vessel which, to repeat, it does not
deny. Regarding this matter, the applicable rules, as it itself contends, are the general rules on contracts.
A contract is a meeting of minds between the parties and is perfected by mere consent10 except in the case of certain
agreements like deposit, pledge and commodatum. 11 It may be entered into in whatever form 12 save where the law requires a
document or other special form as in the contract enumerated in Article 1388 of the Civil Code. As a general rule , therefore, the
contract may be oral or written.
In the case at bar, the original contract of services was in writing. It does not follow, however, that all supplements of that written
contract should also be written.
In Article IV of the written contract of services it was provided that:
during the performance of the work required on the vessel at the Bataan National Shipyard at Mariveles, Bataan, the OWNER, at
his option may send an authorized representative to be present while the work is being performed. In the event that the OWNER
requests for any modification, change, and/or extra work to be performed on the vessel which are not otherwise specified herein
and which have not been included in the Specifications submitted by the BUILDER to the OWNER, the same shall be subject of
another contract between the parties hereto.
In stipulating that "any modification, change and/or extra work" shall be "subject of another contract," the contracting parties did
not necessarily or explicitly agree that the second contract should be in writing. The second contract could be merely verbal, as in
fact it was, and was binding on the parties as long as it represented a meeting of minds between them.
We are satisfied with the finding of the Court of Appeals that Victorino Estrella and Steve Pierre were sent by petitioner to the
NASSCO shipyard in Mariveles while the M/V Sea Belle was being repaired and that they represented said petitioner when they
requested the extra work that was subsequently done on the vessel.13 This second contract was not reduced to writing, but it
was nonetheless as binding between the parties as the first written contract.
As for the consideration for the extra work, it has been held that the same can be determined in relation to a definite thing or
under the usage and customs of the place or by leaving it to the judgment of the court in case of disagreement or disputes. 14 The
Court of Appeals has made its determination on the basis of the evidence before it, and we shall also accept this finding.
We deplore the efforts of petitioner to evade a legitimate obligation for benefits it has admittedly received from the
additional work done by NASSCO. Strict legal considerations apart, what we see here is a shabby attempt to enrich oneself
at the expense of another by a clever disowning of benefits while at the same time enjoying them. This is hardly sporting,
to say the least; at worst, it is downright dishonest.
The study of the law is not an exact science with definite fields of black and white and unbending rules and rigid dogmas.
The beauty of this discipline is the "penumbra shading gradually from one extreme to another," in the words of Justice
Holmes, that gives rise to those honest differences of opinion among the brotherhood as to its correct interpretation.
Honest differences are allowed and, indeed, inevitable, but we certainly must frown on stilted readings to suit one's
motives, especially if they are less than noble. The law does not permit this, and much less, for that matter, does equity.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED, with costs against the petitioner.
SO ORDERED.
Yap (Chairman), Narvasa, Melencio-Herrera and Paras, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-25885 November 16, 1978
LUZON BROKERAGE CO., INC., plaintiff-appellee,
vs.
MARITIME BUILDING CO., INC. AND MYERS BUILDING CO., INC., defendants, MARITIME BUILDING CO.,
INC., defendant-appellant.
RESOLUTION ON SECOND
MOTION FOR RECONSIDERATION
TEEHANKEE, J.:
The Court denies appellant Maritime Building Co. Inc.'s (Maritime) Second Motion for Reconsideration of October 7, 1972
on the following grounds and considerations:
1. A party litigant is entitled to only one Supreme Court to adjudicate his suit and should not be permitted to keep a case
pending by repetitious reiterations of the same contentions (already repeatedly and lengthily discussed by appellant and
extensively dealt with and rejected by the Court in its decision of January 21, 1972 and extended resolution of August 18,
1972) in the expectation that his claim may eventually gain acceptance from vital changes in the Court's composition with
the passage of time.
2. The second motion for reconsideration raises no new grounds but is merely a reiteration of the self-same arguments
already found to be unmeritorious and rejected for the reasons and considerations extensively discussed in the Court's
decision of January 31, 1972 (6 years and 8 months ago) and in the Resolution of August 18, 1972 denying the first motion for
reconsideration. Such second motions for reconsideration are patently pro forma and serve no apparent purpose but to gain time
and therewith vital changes in the Court's composition. Such dilatory motions should have long been denied in consonance with
public interest and public policy which demand that judgments of courts determining controversies should not be left hanging but
should become final at some definite time fixed by law or by a rule of practice recognized by law and that the Court's time and
attention should not be inordinately diverted to this case which is of no special significance but is a "mere adjudication of
adversary rights between two litigants" (although they may be of "some substantial financial standing" 1 ) to the prejudice of
other cases in its fun docket which are still awaiting the Court's determination and judgment.
3. In the 81 volumes of Supreme Court Reports Annotated, there appears the preface written by now Chief Justice Castro wherein
he stresses the importance of precedents and the governing principle of stare decisis which have given consistency and stability to
the law." The whole thrust of appellant's stand since the filing of the case on June 17, 1961 up to its pending second motion for
reconsideration (seventeen years later) has been to ask the Court to disregard the rule of stare decisis and to overturn the long-
standing doctrine of 39 years upholding the promissor's contractual right, as stipulated in contracts to sell, to declare the contract
cancelled upon breach thereof and the putative buyer's failure to pay the stipulated installments which is simply an event that
prevent(s) the obligation of the vendor to convey title from acquiring binding force" 2 and ruling that Article 1592 (formerly
Article 1504) of the New Civil Code 3 (which grants the vendee of immovable property the right to pay even after the expiration of
the period for payment despite a stipulation to the contrary, as long as no demand by suit or notarial act has been made upon
him but further provides that "after the demand, the Court may not grant him a new term") does not apply to a contract to sell.
The Court has seen no valid reason for yielding to the appellant's insistent importunings to cast aside the precedents (as an
exception in its case) and to disregard the contractual stipulations, freely entered into by it with the assistance of counsel and
with full awareness of the import of the covenanted terms and conditions and of the legal consequence of breach thereof in
accordance with past precedents, as the binding law between the parties.
4. The governing law and precedents which demand denial of the second motion for reconsideration as stated and reiterated in
the decision and resolution denying reconsideration may briefly be summarized thus:
(a) The contract between the parties was a contract to sell or conditional sale with title expressly reserved in the vendor Myers
Building Co., Inc. (Myers) until the suspensive condition of full and punctual payment of the full price shall have been met on pain
of automatic cancellation of the contract upon failure to pay any of the monthly installments when due and retention of the sums
theretofore paid as rentals. When the vendee, appellant Maritime, willfully and in bad faith failed since March, 1961 to pay the
P5,000. — monthly installments notwithstanding that it was punctually collecting P10,000.00 monthly rentals from the lessee
Luzon Brokerage Co., Myers was entitled, as it did in law and fact, to enforce the terms of the contract to sell and to declare the
same terminated and cancelled.
(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to sell or conditional sales and no
error was committed by the trial court in refusing to extend the periods for payment.
(c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's infringement of its contract was casual or
serious" for as pointed out in Manuel vs. Rodriguez. 4 (I)n contracts to sell, where ownership is retained by the seller and is not to
pass until the full payment of the price, such payment, as we said, is a positive suspensive condition, the failure of which is not a
breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding
force ..." 5
(d) It should be noted, however, that Maritime's breach was far from casual but a most serious breach of contract: since the
execution of the contract to sell on April 30, 1949, Maritime, after paying the P50,000. down payment, was merely paying for the
balance of the purchase price in the sum of P950,000.00 with the property's own rental earnings of P13,000.00, later P10,000.00,
a month from the lessee Luzon Brokerage Co. Maritime had as of the time of its willful refusal and failure to pay the
stipulated installments of P5,000.00 a month collected a total of P1,500,000.00 in rentals from the property, out of which it
had paid Myers P973,000.00 on account of both the principal and stipulated 5% interest per annum, 6 leaving still
a substantial unpaid balance of P319,300.65 on the principal with a net gain of P527,000.00 out of the
collected rentals alone for Maritime. Yet, Maritime had deliberately defaulted on the monthly installments due after its
request for a suspension of payments until the close of 1961 had been expressly rejected "under any condition" by Myers
and then nevertheless withheld the payments and gave Myers notice that it would "withhold any further payments" unless
the heirs of the late F.H. Myers honored a totally unconnected alleged personal promise of the F.H. Myers to indemnify it
for a possible liability of about P396,000.00 to a labor union in connection with a completely different transaction (which
alleged liability was already barred against the estate of F. H. Myers and with which appellee Myers corporation had
nothing whatsoever to do).
(e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code could be deemed
applicable, Myers' answer to the complaint for interpleader in the court below constituted a judicial demand for rescission
of the contract and by the very provision of the cited codal article, 7 "after the demand, the court may not grant him a new
term' for payment; and
(f) Assuming further that Article 1191 of the new Civil Code governing rescission of reciprocal obligations could be applied
(although Article 1592 of the same Code is controlling since it deals specifically with sales of real property", said article
provides that "(T)he court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period"
and there exists no "just cause" as shown above, for the fixing of a further period. Assuming further that Article 1234 of
the Civil Code which provides that "(I)f the obligation has been substantially performed in good faith, the obligor may
recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee" could be applied,
Maritime cannot invoke its benefits because as shown above there has not been substantial performance on its part and it
has been guilty of bad faith in defaulting on and withholding payment of the stipulated installments.
5. The enactment on September 14, 1972 by Congress of Republic Act No. 6552 entitled "An Act to Provide Protection to
Buyers of Real Estate on Installment Payments" (known also as the Maceda law) has now placed the 39-year old
jurisprudence of this Court (recognizing the right of cancellation of the contract of conditional sale of real estate or on
installments upon failure to pay the stipulated installments and retention or forfeiture as rentals of the installments
previously paid) into the category of a law (insofar as industrial lots and commercial buildings as is the case at bar are
concerned) which is now beyond overturning even by this Court. The Court cannot now deny or refuse to honor
Myers contractual right of cancellation which is now reaffirmed and recognized by the law itself and is no longer a matter
of precedents or doctrinal jurisprudence.
6. The plea for equitable considerations on behalf of Maritime has no basis in law and in fact. As shown above, it acted
with dolo or bad faith and must bear the consequences of its deliberate withholding of, and refusal to make, the monthly
payments, notwithstanding Myers' rejection of its request for suspension of payments, by asserting against Myers
corporation (as if it had a right of offset) a totally unconnected alleged personal liability to it of the late F. H. Myers and
seeking to burden Myers corporation for such liability which it could no longer collect from F.H. Myers. Maritime still came
out of the cancelled contract with a net profit of P527,000.60 derived totally from the rental-earnings of the property. On
the other hand, Myers acted but in consonance with law and equity and established precedents of 39 years standing in
asserting its right of cancellation pursuant to the express provisions of the contract which constitutes the law between the
parties, and the mandate of Article 1159 of the Civil Code that "Obligations arising from contracts have the force of
law between the contracting parties and should be complied with, in good faith. As the Court stressed in Garcia vs. Rita
Legarda Inc. 8 "when the contract is thus cancelled, the agreement of the parties is in reality being fulfilled. Indeed, the
power thus granted can not be said to be immoral, much less unlawful, for it could be exercised - not arbitrarily -
but only upon the other contracting party committing the breach of contract of non-payment of the installments agreed
upon. Obviously, all that said party had to do to prevent the other from exercising the power to cancel the contract was for him
to comply with his part of the contract". This is aside from the fact that what is involved here is a pure business contract between
two big real estate corporations and to paraphrase Justice Fernando 9 such a plea for equity would not elicit, especially from the
higher tribunals, an affirmative response since considering their economic status they are "very likely ... to be able to protect
themselves in the clinches."
What follows now is an amplification of the above grounds and considerations which were stated in precise form or by way of a
brief summary of the essential points for denying Maritime's second and pro forma motion for reconsideration which somehow
remained pending in this Court for six (6) years now.
1. A party is entitled to only one Supreme Court, vital changes in the Court's composition since 1972; Justice Barredo's dissent
never gathered sufficient votes to reverse.
A party litigant is entitled to only one Supreme Court to adjudicate his suit, but here over six years after this Court (the
Concepcion Court 1966-April 17, 1973) had rendered the decision of January 31, 1972 affirming on appeal the trial court's
decision and the resolution of August 18, 1972 denying reconsideration, the composition of the Court has so radically changed
that out of the present membership of twelve, only four members of the Court who took part in the original decision and
resolution of January 31, and August 18, 1972 remain and this Court (the Castro Court, December 22, 1975) may truly be said to
be in effect another Supreme Court. The very raison d'etre of courts, more so the Supreme Court, is to put an end to controversy
and public policy and sound practice demand that no second motion for reconsideration be kept pending this long as to allow the
litigant to speculate on changes in the membership of the Court and to have another Supreme Court review his lost case once
more.
(a) The original decision at bar of January 31, 1972 10 (penned by Justice J.B.L. Reyes, retired on August 19, 1972) affirming on
direct appeal (prior to the effectivity of Republic Act 5440) the judgment of the Court of First Instance of Manila of November 26,
1965, was unanimously concurred in by nine members of its ten-member composition then namely, (Concepcion, C.J., Reyes,
Makalintal (A.C.J. April 17, 1973, C.J. October 24, 1973 to Dec. 22, 1975), Zaldivar, Castro, (now C.J.) Teehankee, Barredo, Villamor
and Makasiar, JJ. with Justice Fernando having inhibited himself and not taking part.
(b) This same Court with a full membership of eleven denied appellant's motion for reconsideration of March 27, 1972 in its
extended and signed 8-page Resolution of August 18, 1972 11 (penned by Justice J.B.L. Reyes on the eve of his retirement in
consonance with the Court's tradition of the ponente disposing with the Court of pending motions for reconsideration before his
retirement). A majority of six of the original nine Justices, namely Concepcion, C.J., Reyes, Makalintal (in the result), Castro,
Teehankee and Makasiar, JJ. concurred in the resolution. Justice Barredo, however, dissented with an 86-page opinion and was
joined by Justice Zaldivar and a new member Justice Antonio (appointed on April 10, 1972). Justice Fernando maintained his
inhibition and took no part, while the eleventh member Justice Esguerra (a new member appointed on June 21, 1972 to fill the
vacancy left by Justice Villamor who retired on April 12, 1972) likewise inhibited himself and did not take part.
(c) It is readily seen that during the pendency for six (6) years of appellant's second motion for reconsideration of October 7, 1972
the Court's composition has seen vital changes. Only four of the original 10-member Court that rendered the decision of January
31, 1972 are still members, namely, now Chief Justice Castro, and Justice Teehankee, Barredo and Makasiar. As noted above,
Justice Fernando had inhibited himself and did not take part in the case.
(d) In the six-year interval, the Court's membership was increased to fifteen and the retirement age of new appointees reduced to
65 years under the 1973 Constitution. Ten (10) new members joined the Supreme Court in this interval (all after the 1973
Constitution except the first two named), as follows: Antonio, Esguerra (retired on June 19, 1976), Estanislao Fernandez (retired
on March 28, 1975), Muñoz Palma, Aquino, Concepcion Jr., Martin (retired on January 12, 1978), Santos, Ramon Fernandez and
Guerrero, JJ., so that in effect this is another Supreme Court. There is no call for such special treatment for a simple private case
— of no public import at all — of cancellation of a conditional sale effected in accordance with the contract between the
parties which has the binding force of law between them and which is backed up by the 39-year standing jurisprudence of
this Code now confirmed and given statutory force by the Maceda law.
(e) Maritime's second motion for reconsideration violates the warning given by the Court in Zarate vs. Director of
Lands 12 that litigants should not be "allowed to speculate on changes in the personnel of the Court" and to keep
importuning the Court for "reagitation, reexamination and reformulation." Although stated in support of the principle of
the "law of the case" this warning is equally and specially applicable to motions for reconsideration, particularly a second
motion for reconsideration, when vital changes have taken place in the Court's membership as has happened:
... Without the rule there would be no end to criticism, reagitation, re-examination and reformulation. In short, there
would be endless litigation. It would be, intolerable if parties litigant were allowed to speculate on changes in the
personnel of a court, or on t chance of our rewriting propositions once gravely ruled on solemn argument and handed
down as the law of a given case. An itch to reopen questions foreclosed on a first appeal would result in the foolishness of
the inquisitive youth who pulled up his corn to see how it grew, Courts are allowed, if they so choose, to act like ordinary
sensible persons. The administration of justice is a practical affair. The rule is a practical and a good one of frequent and
beneficial use. (Mangold v. Bacon, 237 Mo. 496).
(f) Withal let it be noted that during this period of six years as vital changes in its membership were taking place, periodic
tentative votes were taken on the pending second motion for reconsideration and on no occasion were there ever
mustered the required eight votes to support Justice Barredo's dissent and to reverse the original decision. (Of the writer's
own knowledge, even Justice Zaldivar who had joined Justice Barredo's dissent in the August 18, 1972 resolution denying
reconsideration had expressed second thoughts about such dissent and was ready to rejoin the original majority, when he
compulsory retired from the Court on September 13, 1974).
2. Second motion for reconsideration is pro forma — "a mere dilatory strategy" which should have been given short shrift
long ago.
(a) Maritime's second motion for reconsideration has raised no new grounds or special circumstances not available at the
time of the filing of the first motion for reconsideration but is merely a reiteration of reasons and arguments or
amplification thereof which have already been considered, weighed and resolved adversely and which serve no apparent
purpose but to gain time and therewith possible changes in the Court's composition. As invariably held by the Court, such
second motions which are based on grounds already existing at the time of the first motion are clearly pro forma. 13
As such pro forma motion for reconsideration (although with leave) such second motion deserves no further consideration
and should be denied in consonance with the Court's consistent stand against multiplicity of motions (Rule 52, sec. 1) in
the interest of avoiding further delay in the remand of a case already decided and to avoid needless slowdowns in the
Court's disposition of other cases in its full docket which are more deserving of its study and attention. Cases entitled to
preferential attention under the law have incurred in delay because of the inordinate time and attention this case has
received, including the preparation and submittal intra-Court of extensive research papers and memoranda.
(b) As has ever been stressed since the early case of Arnedo vs. Llorente (18 Phil. 257, 263 [1911])" controlling and
irresistible reasons of public policy and of sound practice in the courts demand that at the risk of occasional error,
judgments of courts determining controversies submitted to them should become final at some definite time fixed by law,
or by a rule of practice recognized by law, so as to be thereafter beyond the control even of the court which rendered
them for the purpose of correcting errors of fact or of law, into which, in the opinion of the court it may have fallen. The
very purpose for which the courts are organized is to put an end to controversy, to decide the questions submitted to the
litigants, and to determine the respective rights of the parties."
(c) Now Chief Justice Castro succinctly restated the pro forma doctrine in Dacanay vs. Alvendia thus: "Mere citation and/or
amplification of authorities not previously brought to the court's attention on the same argument does not remove the pleading
from the ambit of the pro forma doctrine. The Rules of Court, looking with disfavor on piecemeal argumentation, have provided
the omnibus motion rule, whereunder "(A) motion attacking a pleading or proceeding shall include an objections then available,
and all objections not so included shall be deemed waived." The salutary purpose of the rule is to obviate multiplicity of
motions as wen as discourage dilatory pleadings. As we said in Medran vs. Court of Appeals, 'litigants should not be allowed to
reiterate Identical motions, speculating on the possible change of opinion of the Court or of the judges thereof.' The mere citation
of additional authorities by the petitioner in his last motion for reconsideration reiterating his thrice-rejected Identical arguments
as to the sufficiency of his amended complaints did not salvage the said motion from the proper application thereto of the pro
forma doctrine." 14
(d) Justice Barredo in Lucas vs. Mariano 15 emphasized that "it is in the public interest and consistent with the public policy, that
controversial rights in property be settled as soon as possible in order to promote stability in all matters affected thereby" and
that a second motion for reconsideration which contains "mere iterations and reiterations of the same points and arguments over
and over again ... becomes, in effect, a mere dilatory strategy and consequently nothing more than pro forma " The pertinent
excerpts from said case are fully applicable, mutatis mutandis to the case at bar:
Looking at this case from other angles, however, the Court is inclined to agree with private respondents that the order of
dismissal of September 16, 1965 has already become final and executory. Taking all relevant matters into consideration, We are
loathe to let this litigation to protract further. Involving as it does the ownership and possession of a rather large piece of
residential land, it is in the public interest and consistent with the public policy, that controversial rights in property be settled as
soon as possible, in order to promote stability in all matters affected thereby that this case is terminated right here in this
proceeding, it being within the authority of this Court to do so in the premises.
Not only have petitioners had enough occasions and opportunities to present their main contentions and to be heard amply on
them, but, more than that, We see no possibility that their pretensions, whether factual or legal, can prosper. In their complaint
in the court below, as well as in their various motions for reconsideration in relation to as many of its orders and their oppositions
to the motions for reconsideration also on the part of private respondents, petitioners have as often lengthily discussed and
explained repeatedly their position as to all aspects of their claim of title. We have gone over all these representations and We
find them to be mere iterations and reiterations of the same points and arguments over and over again. Thus both the first and
second motions for reconsideration of petitioners respectively dated November 5, 1965 and January 25, 1966 raised exactly the
same issues as their opposition to the motions to dismiss separately filed by private respondents. When the opportunity to appeal
to a higher court is open to a party aggrieved by an order of an inferior court, tribunal, commission or body, our procedural rules
allow the filing of only one motion for reconsideration of its final order and judgment, and a second motion may be filed only
when there is need to raise new points or matters not touched upon in the first motion, since otherwise, litigations will
unnecessarily drag in the trial courts to the obvious detriment of the interests of justice not only in the particular case on hand
but more so in the other cases pending in the court which cannot be attended to. As earlier noted, a second motion for
reconsideration is actually a motion for reconsideration only of the order of denial of the first motion and if it does not raise any
new issue relative to the first order, naturally, it cannot affect the legality and validity thereof, and becomes, in effect, a mere
dilatory strategy and consequently, nothing more than pro forma An attempt to have a reconsideration of the denial of a previous
plea for reconsideration is not conducive to a speedy administration of justice. After all, the party aggrieved has a more effective
recourse by appealing immediately to the appropriate appellate tribunal.
In the lower courts, the pro forma motion does not stop the period for appeal from slipping away — and results in the judgment
sought to be appealed becoming final and executory. In this Court, the pro forma first and/or second motion for reconsideration
(although with leave of Court) — which merely reiterate the same grounds already considered and resolved in its decision or
resolution denying due course (as the case may be) — have similarly been treated and the decision or resolution sought to be
reconsidered have invariably been denied with a declaration of finality and entry of judgment, by virtue of "controlling and
irresistible reasons of public policy and of sound practice in the courts" which demand an end to litigation at some definite
point of time as a "fundamental concept in the organization of civil society." Interest republicae ut sit finis litium. 15-a
3. The governing principle of stare decisis.
In each volume of Supreme Court Reports Annotated, Chief Justice Castro's preface cites the governing principle of
precedents and stare decisis "which has given consistency and stability to the law" by which lawyers and litigants may
know the law in concrete controverted cases, thus:
In his famous essay, the Path of the Law, Justice Oliver Wendell Holmes defined law as a prediction of what the court will
do.
The prediction is based on precedents. The governing principle, which has given consistency and stability to the law,
is stare decisis et petition quieta movere (follow past precedents and do not disturb what has been settled).
The officials enforcing statutory law and regulations, the lawyers and litigants seeking to know the law in concrete
controverted cases, and the judges in adversary litigations, should be well posted on precedents.
Such precedents and jurisprudence of this Court form part of our legal system by force of the provision of Article 8 of the
new Civil Code that "Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal
system of the Philippines" and may not be lightly treated.
Reconsideration may not be granted without doing violence to this cardinal principle and overturning well established
principles and provisions of law such as freedom of contract which is the law between the parties as provided by Article
1306 of the Civil Code 16 the right of a vendor in contracts to sell or conditional sales with reserved title to cancel the sale
upon failure of the vendee to pay the stipulated installments and retain the sums already paid (which has now been
elevated into the category of a law in the case of industrial and commercial real properties as in this case by the Maceda
law, and which not even this Court can now overturn) and that he who pleads for equity must come to court with clean
hands.
4. The governing law and precedents.
The governing law and established precedents which demand peremptory denial of the second motion for reconsideration
have been hereinabove stated, supra.17 Suffice it to herein underscore the following.
(a) As stated in the Court's decision, the vendor's right in contracts to sell with reserved title to extrajudicially cancel the
sale upon failure of the vendee to pay the stipulated installments and retain the sums or installments already received has
long been recognized by the well-established doctrine of 39 years standing. "(T)he distinction between contracts of
sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions (Manila Racing Club vs.
Manila Jockey Club, 69 Phil. 57; Caridad Estates vs. Santero, 71 Phil. 114; Miranda vs. Caridad Estates, L-2077, 3 October
1950; Jocson vs. Capitol Subdivision, L-6573, 28 February 1955; Manuel vs. Rodriguez, 109 Phil. 1; see also Sing Yee Cuan,
Inc. vs. Santos [C App.] 47 O. G. 6372) upholding the power of promisors under contracts to sell in case of failure of the
other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain
the sums or installments already received, where such rights are expressly provided for, as in the case at bar." 18
(b) In the Resolution of August 18, 1972, Justice J.B.L. Reyes further stressed for the Court that: "(M)ovant Maritime's
insistence upon the application to the present case of Art. 1191 of the Civil Code of the Philippines (tacit resolutory
condition in reciprocal obligations) studiously ignores the fact that Myers' obligation to convey the property was expressly
made subject to a suspensive (precedent) condition of tile punctual and full payment of the balance of the purchase price."
He cited the express stipulations of the contract of conditional sale thus:
(d) It is hereby agreed, covenanted and stipulated by and between the parties hereto that the Vendor will execute, and deliver to
the Vendee a definite or absolute deed of sale upon the full payment by the Vendee of the unpaid balance of the purchase price
hereinabove stipulated; that should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply
with any of the terms and conditions herein stipulated, then this deed of conditional sale shall automatically and without any
further formality, become null and void, and all sums so paid by the Vendee by reason thereof, shall be considered as rentals and
the vendor shall then and there be free to enter into the premises, take possession thereof or sell the properties to any other
party.
xxx xxx xxx
(i) Title to the properties subject of this contract remains with the Vendor and shall pass to, an be transferred in the name of the
Vendee only upon complete payment of the full price above agreed upon. (Emphasis supplied).
He had previously cited in the decision the acceleration clause in the contract that: "... the failure to pay any installment or
interest when due shall ipso facto cause the whole unpaid balance of the principal and interest to be and become immediately
due and payable." 19
He thus articulated the inescapable conclusion that the express contractual stipulations "make it crystal clear that the full
payment of the price (through the punctual performance of the monthly payments) was a condition precedent to the execution of
the final sale and to the transfer of the property from Myers to Maritime; so that there was to be no actual sale until and unless
full payment was made. It is uncontroverted that none was here made. The upshot of all these stipulations is that in seeking the
ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the
contract, but precisely enforcing it according to its express terms," citing from the well known Spanish commentators, Castan and
Puig Pena.
(c) The Resolution of August 18, 1972 likewise clearly disposed of Maritime's contention that its breach of contract was casual
thus: "there is no point in discussing whether or not Maritime's breach of contract was casual or serious, since the issue here is
whether the suspensive condition (of paying P5,000.00 monthly until full price is paid) was or was not fulfilled, and it is not open
to dispute that the stipulated suspensive condition was left unaccomplished through the deliberate actions of movant Maritime.
The stubborn fact is that there can be no rescission or resolution of an obligation as yet non-existent, because the suspensive
condition did not happen.
Resolving Identical arguments, as those of Maritime, this Court ruled in Manuel vs. Rodriguez. 109 Phil. 9-10, as follows:
... Plaintiff-appellant, however, argues (Errors I-IV; VI; VIII) that the Payatas Subdivision had no right to cancel the contract, as
there was no demand by suit or notarial act, as provided by Article 1504 of the old Code (Art. 1592, N. C. C.). This is without merit,
because Article 1504 requiring demand by suit or notarial act in case the vendor or realty wants to rescind, does not apply to a
contract to sell or promise to sell, where title remains with the vendor until fulfillment to a positive suspensive condition, such as
full payment of the price (Caridad Estates vs. Santero, 71 Phil. 114, 121; Albea vs. Inquimboy, 86 Phil. 476; 47 OFF. Gaz. Supp. 12,
p. 131; Jocson vs. Capitol Subdivision Inc. et al., L-6573, February 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs.
Caridad Estates, L2121, October 23, 1950).
The contention of plaintiff-appellant that Payatas Subdivision inc. had no right to cancel the contract as there was only a 'casual
breach' is likewise untenable. In contracts to sell, where ownership is retained by the seller and is not to pass until the full
payment of the price, such payment, as we said, is a positive suspensive condition, the failure of which is not a breach, casual or
serious, but simply an even that prevented the obligation of the vendor to convey title from acquiring binding force, in
accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case.
(d) It should also be appreciated that Maritime's breach of contract, far from being casual, was of the gravest character. As
stated above, this was pure business contract between two real estate corporations where Maritime as conditional vendee
got the most liberal terms and was purchasing the property out of the property's rental earnings with plenty to spare for
its own gains. Thus, it was receiving the rentals from the property of P10,000.00 a month (or P120,000.00 per annum) and
had only to pay punctually the stipulated monthly installments of only P5,000.00 a month (or P60,000.00 per annum
leaving it with a clear superavit of P60,000.00 every year). Under these circumstances, the only condition demanded by
Myers as vendee was that Maritime pay religiously the monthly installments when due under pain of automatic voiding of
the contract for non-fulfillment of the suspensive (precedent) condition of punctual and full payment of the balance of the
purchase price.
Yet, Maritime willfully and deliberately defaulted on the payments due since March, 1961 notwithstanding that its request
for a suspension of payments until the end of 1961 had been expressly rejected "under any condition" by Myers and
notwithstanding that it was collecting from the lessee Luzon Brokerage Co. the corresponding rentals of P10,000.00
monthly for March, April and May, 1961 or a total of P30,000.00 (double the amount of the stipulated monthly
installments due from it). Worse, it injected a totally unconnected alleged personal promise of the late F.H. Myers to
indemnify it for a possible liability to a labor union of some P396,000.00 in connection with a completely separate
transaction totally unrelated to their contract to sell and gave notice that it was "withholding any further payments" unless
the heirs of the deceased honored his claim, notwithstanding that it was already barred against the deceased's estate
which had already been closed.
As further noted in the Court's Resolution of August 18, 1972, "(M)aritime's bad faith is further confirmed by Schedler's
letter to his counsel informing the latter that the attorneys in the United States were trying to reopen the closed Myers'
estate to be able to file a contingent claim therein. And yet he was already seeking to burden Myers' Corporation with that
very obligation."
(e) Maritime's breach of Contract therefore was most serious:
1. It refused to pay the monthly installments from March to May, 1961 totalling P15,000.00 notwithstanding that it had the
money and had collected the corresponding rentals in double the amount of P30,000.00 for said months. (The trial court's
judgment as affirmed by this Court consequently sentenced Maritime inter alia to pay Myers "the sum of P30,000.00
representing rentals wrongfully collected by (Maritime) from the plaintiff in interpleader corresponding to the months of
March, April and May, 1961";
2. Its unpaid balance on account of the purchase price amounted to almost one-third of the stipulated price in the sum
of P319,300.65 which besides the stipulated interest became immediately due and payable under the contract's
acceleration clause;
3. Having breached the contract, Maritime completely foiled Myers' plans for investment and utilization of the monthly
installments as due. Worse, Maritime did not honor either its obligation extrajudicially to return the property, so much so
that since March, 1961 Myers could not avail of the fruits and rentals of its reserved title which had then reverted
absolutely to it with the cancellation of the contract, so much so that the lessee Luzon Brokerage Co. had to file the
interpleader below and all the rentals which properly belong to Myers as owner since then have been tied up in Court
for seventeen (17) long years to the present.
4. And it is the height of irony for Maritime to plead now that the accumulated rentals on the property — which it had
prevented Myers from rightfully making use of as the lawful owner all these seventeen (17) long years come up to seven
figures — to contend that after all it had willfully failed only to pay the three months' installments in March to May, 1961. This is
not all Maritime failed to pay. It also failed to pay the whole unpaid balance of P319,300.65 besides the stipulated interests which
under the acceleration clause became immediately due and payable upon default. The rentals that Luzon Brokerage Co. as
plaintiff in interpleader deposited monthly with the trial court beginning June, 1961 were not sufficient at the time of default in
March 1961 to pay — this unpaid balance. But the whole irony of it is that these rentals belonged no longer to Maritime
but solely and wholly to Myers as the lawful owner in whom its reserved title had reverted by virtue of the cancellation of the
contract due to Maritime's willful and deliberate default with dolo.
5. As the Court pointed out in Garcia vs. Rita Legarda, Inc. 20 the buyer on installments has only himself to blame for the power of
cancellation "could be exercised - not arbitrarily — but only upon the other party committing the breach of contract
of non-payment of the installments agreed upon" and that to avoid the stipulated and foreseen consequences of cancellation and
forfeiture of all previous payments all that (the buyer) had to do ... was to comply with (its) part of the bargain. Having failed to do
so, (it) really have no valid reason to complain". Parenthetically, due to the most liberal terms of the contract, Maritime here,
despite cancellation and forfeiture of all previous installments in the concept of rentals, still came out of the transaction with a
gain of P527,000.00 and a net gain of P514,000.00 after deducting the P13,000.00 in stipulated damages and attorneys' fees
granted by the trial court's decision as affirmed by this Court due to Myers having had to avail of judicial recourse to enforce its
right of cancellation and regain possession of its property.
(f) Finally, no case can be cited where this Court has denied the vendor on installments the stipulated right of cancellation of the
contract to sell or of sale on installments of industrial or commercial real estate with forfeiture of an previous payments upon
breach of the contract by failure to pay the stipulated installments when due in line with the long line of precedents above cited.
As discussed in the next following part, this right of cancellation in the case of industrial and commercial properties is now
expressly recognized in the Maceda law.
(g) The agitation by Maritime for reexamination of the Court's 39-year old doctrine of the vendor's right of extrajudicial
cancellation with forfeiture of previous payments (assuming that it is not barred by the enactment of R.A. 6522) cannot be
properly done in this case which was decided more than six (6) years ago (on January 31, 1972 with reconsideration denied in the
extended Resolution of August 18, 1972) and been frequently cited authoritatively in law books and treatises including Maritime's
counsel, former Senator Ambrosio Padilla's extensive Annotations on the Civil Code and the Philippine Law Journal's Survey of
Philippine Law and Jurisprudence 21 citing anew the "important distinction" drawn by this Court between a contract of sale and a
contract to sell, to which latter contract Article 1592 of the Civil Code has always been held to be inapplicable. The bench and bar
would needlessly be subjected to confusion if now this case which has been cited for over 6 years as maintaining the 39-year old
doctrine re cancellation of contracts to sell should all of a sudden no longer be a valid authority.
The Court itself has rejected pleas for reexamination of the doctrine in petitions filed after this Court's decision and Resolution of
August 18, 1972 at bar citing Justice Barredo's dissent in support thereof, as in the petition in L-44593 entitled Lim Hu vs. Court of
Appeals, wherein the Court denied the petition per its Resolution of March 18, 1977 22 and denied reconsideration per its
Resolution of June 6, 1977. 23
5. R.A. 6552 (Maceda Law) expressly recognizes vendor's right of cancellation of sale on installments of industrial and commercial
properties with full retention of previous payments.
(a) The enactment on September 14, 1972 by Congress of Republic Act No. 6552 entitled "An Act to Provide Protection to Buyer of
Real Estate on installment Payments" which inter alia compels the seller of real estate on installments (but excluding industrial
lots, commercial buildings among others from the Act's coverage) to grant one month's grace period for every one year of
installments made before the contract to sell may be cancelled for non-payment of the installments due forecloses any
overturning of this Court's long-established jurisprudence. Republic Act 6552 recognizes in conditional sales of all kinds of real
estate (industrial and commercial as well as residential) the non-applicability of Article 1592 (1504)Civil Code to such contracts to
sell on installments and the right of the seller to cancel the contract (in accordance with the established doctrine of this
Court) upon non-payment "which is simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force." (Manuel vs. Rodriguez, 109 Phil. 1, 10, per Reyes, J.B.L.). The Act in modifying the terms and
application of Art. 1592 Civil Code reaffirms the vendor's right to cancel unqualifiedly in the case of "industrial
lots and commercial buildings (as in the case at bar) and requires a grace period in other cases, particularly residential lots,
with a refund of certain percentages of payments made on account of the cancelled contract. 24
(b) Since Congress has through R.A. 6552 adopted into law the 39-year jurisprudence of the Court and recognized that in
the sale of industrial lots and commercial buildings (as in the case at bar), non-payment of installments is simply an event
that prevents the conditional obligation of the vendor to convey title from acquiring binding force and entitles the vendor
to cancel the conditional contract, the Court can no longer overturn the doctrine long enunciated by it for 39 years since it
would be in effect overturning the law itself. Certainly, the Court cannot deny Myers' right of cancellation recognized by
the law itself.
(c) Justice Barredo explained and premised his extensive 86-page dissent, as follows:
Considering that Our decision in this case is a unanimous one penned by no less than Justice J.B.L. Reyes whose views on
the legal issues We have resolved are admittedly authoritative, ordinarily, my concurrence in a denial resolution should be
practically a matter of course. After going over the motion for reconsideration, however, my curiosity was aroused by it
principally on two points, namely, (1) the unhappy and helpless plight of thousands upon thousands of subdivision
buyers who under the ruling We laid down are bound to suffer the loss of their life earnings only because of an oversight
or difficulty in paying one or two installments, unless We firmed up the doctrine laid down by the Chief Justice in Javier or
We made clearer their right to avail of Article 1592 of the New Civil Code under so called contracts or promises to sell
which are in vogue in subdivision sales; and (2) the clarification once and for all of the juridical concepts We have been
adopting in Our decisions concerning promises or contracts to sell with reservation of title, lest We perpetuate a posture in
doctrinal law which may be questioned later. 25
(1) Congress in enacting in September 1972 Republic Act 6552 (the Maceda law), has by law which is its proper and
exclusive province (and not that of this Court which is not supposed to legislate judicially) has taken care of Justice
Barredo's concern over "the unhappy and helpless plight of thousands upon thousands of subdivision buyers"
of residential lots.
The Act even in residential properties recognizes and reaffirms the vendor's right to cancel the contract to sell upon breach
and non-payment of the stipulated installments but requires a grace period after at least two years of regular installment
payments (of one month for every one year of installment payments made, but to be exercise by the buyer only once in
every five years of the life of the contract) with a refund of certain percentages of payments made on account of the
cancelled contract (starting with fifty percent with gradually increasing percentages after five years of installments). In case
of industrial and commercial properties, as in the case at bar, the Act recognizes and reaffirms the Vendor's
right unqualifiedly to cancel the sale upon the buyer's default.
(2) As to the clarification of "juridical concepts", the decision and resolution penned by Justice J. B. L. Reyes are quite clear
that in cases of contracts to sell with reserved title, non-payment of the stipulated installment is simply the failure of a
positive suspensive condition - an event that prevents the conditional obligation of the vendor to convey title from
acquiring binding force and entitles the vendor to cancel the conditional contract. Justice Barredo's premise that there was
no such thing as a promise to sell under the Spanish Civil Code and that Article 1478 of the Philippine Civil Code (1950)
providing that "ART. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he
has fully paid the price" is an entirely new concept not recognized in the Spanish Civil Code is with all due respect a
misconception and error, for said Article 1478 merely incorporated in the Philippine Civil Code a principle long recognized
in Spanish in Philippine jurisprudence. The Court's decision and Resolution of August 18, 1972 cited Castan, Derecho Civil, Vol. 3,
7th Ed. page 129 and Pairo's Teoria de Obligaciones, the line of Philippine decisions prior to the effectivity in 1950 of the
Philippine Civil Code, as well as decisions of the Supreme Court of Spain, all holding to the same effect that:
El repetido convenio de no quedar transferido al comprador el dominio completo de la hasta el completo pago del precio
envuelve sustancialmente una verdadera condicion suspensiva TS Sent. 11 March 1929) (Emphasis supplied).
El vendedor por razon de esta reserva solo transmite el difrute de la cosa entrega mientras el precio no sea totalmente entregado
(TS. sent. 7 March 1906). 26
(d) Justice Barredo's reply re the enactment of R.A. 6552 (the Maceda law) on September 14, 1972 is that it "need not be
considered because it is based on the new Civil Code" (1950) and not on the old Code which was in force at the time that the
parties executed their contract in 1949. This is not quite the case.
The point is that Congress thru R.A. 6552 adopted and elevated into law the 39-year old jurisprudence and now reaffirms as law
the doctrine held by the Court since 1939 (when it first ruled that Article 1504 [now Article 1592] of the Civil Code
is not applicable to contracts to sell or conditional sales). In other words, Congress could have overturned the doctrine by
providing nevertheless that there can no longer be an automatic cancellation upon the buyer's default and failure to pay the
stipulated installments, i.e. by outlawing this standard provision in tens if not hundreds, of thousands of such installments
contracts. Since such standard right of cancellation of the sale upon the buyer's default with the seller's retention of all previous
payments (sustains Myers' cancellation of the sale, as has always been upheld by this Court) has now been expressly recognized
and ratified by the law. it is now — beyond this Court's power to reexamine and overturn its said doctrine (with the end of
denying Myers' right of cancellation) since such right is now recognized and reaffirmed by the law itself and not even this Court
can overturn and go against the law itself. (In sensu contrario, and this is where Justice Barredo's reply would have relevance, if
RA 6552 had outlawed the seller's right of cancellation, since it was enacted only in September, 1972. it certainly would be open
to the grave question of whether it could retroact and negate buyer's right of cancellation of the sale as recognized under the
Court's established doctrine).
6. No basis for plea for equitable considerations, — on balance, Maritime comes off the cancellation with a net gain of over
P500,000.00 from the property's rental earnings; contract is pure business contract between two big real estate corporations and
their contract is the law between them; corporations are not people and their business is simply business.
(a) There is no basis for the plea for equitable consideration petitions and even Justice Barredo in his memorandum to the Court
of July 27, 1978 that "I am not aware that there is any such appeal [for equity] in the record." His thesis is that the Court's rulings
in Tuason vs. Javier, 31 SCRA 829 and Legarda vs. Saldaña, 55 SCRA 324 which involved small residential subdivision lots be
applied to this million-peso transaction between two big real estate corporations on the premise that "(T)o insist that the ruling
applied in one case should also be applied in another where the facts are similar and to disregard the difference in the economic
positions of the parties involved is not an appeal for equity but for plain legal justice." Javier's case involved a
small residential subdivision lot with a price of P3,691.20 and the Court in the interest of justice and equity granted the buyer an
additional period of sixty days since the buyer had substantially complied with the contract in good faith. 27 Saldaña's case in turn
involved the purchase of two small residential lots and the Court found that "the appellate court's judgment finding that of the
total sum of P3,582.06 (including interests of P 1,889.78) already paid by respondent (which was more than the value of two lots),
the sum applied by petitioners to the principal alone in the amount of P 1,682.28 was already more than the value of one lot of P
1,500.00 and hence one of the two lots as chosen by respondent would be considered as fully paid, is fair and just and in
accordance with law and equity," while the cancellation of the sale for the other lot due to failure to pay the installments was
upheld. 28 It should be noted that the buyer Saldaña therein "adhered to the validity of the doctrine of the Caridad
Estates cases (Caridad Estates vs. Santero, 71 Phil. 114; Miranda vs. Caridad Estates, L-2077, Oct. 3, 1950)" but disputed its
applicability contending inter alia that the sellers "were equally in default as the lots were completely under water ..." 29
It is patently seen that there is no parity nor justification for applying said cases to the one at bar. The said cases involved
merely small residential subdivision lots where the price had been in fact substantially paid in good faith and the Court's
ruling therein was the precursor to the enactment of RA 6522 which provided certain measures of protection for the
buyers of residential lots but recognized and reaffirmed the vendor's right of cancellation of contracts to sell without
refund of previous payments upon the buyer's default in sales of commercial and industrial properties, as in the case at
bar.
(b) The Court expressly found no basis for the application of equity under the facts of the case at bar, thus:
Maritime also pleads that as the stipulated forfeiture of the monthly payments already made is in fact a penalty, and the
same should be equitably reduced. We fin(t no justification for such reduction for the following reasons:
a) Maritime intentionally risked the penalty by deliberately refusing to make the monthly payments for March to May,
1961, and trying to inject into its contract with Myers corporation the totally unconnected personal promise of F. H. Myers
to indemnify its eventual liability to the Luzon Labor Union, allegedly made on the occasion of the sale of the Luzon
(Stevedoring) to E. Schedler by F. H. Myers, and trying to extrajudicially force Myers corporation to assume responsibility
for such liability.
b) Under Article 1234 of the present Civil Code, an obligation must be substantially performed in good faith, for such
performance to stand in lieu of payment, Maritime, on the contrary, acted with dolo or bad faith, and is not a position to
invoke the benefits of the article.
c) Maritime's loss of the forfeited payments was more than balanced by the rentals it received from the Luzon Brokerage
as lessee of the building for the corresponding periods, at a rate of double the monthly payments required of Maritime
under its contract with Myers. 30
In terms of pesos and centavos, Maritime received a total amount of some P1,500,000.00 from the property's own rental
earnings. By virtue of its willful default and the resulting cancellation of the sale, the P973,000.00 previously paid by it to
Myers out of the same rental earnings as installments on account of the principal and interest (with an
unpaid balance of P319,000.65 representing still almost 1/3 of the principal agreed price) were retained by Myers as
rentals in turn from Maritime under the express terms of their contract, since Maritime was the one collecting the rentals
from the property's lessee at double the rate of its installments and continued to do so until May, 1961 despite its default
three months earlier in May. Still, Maritime came out of the cancelled sale with excess earnings from the property's rentals
of P527,000.00 Maritime really has no valid reason to complain of having lost the right to the property and the larger share
of the rentals — for all that "(it) had to do ... was to comply with its part of the bargain. 31
(c) The injunction of how Chief Justice Castro in Dy Pac Workers Union vs. Dy Pac & Co. Inc. 32 that "equitable
considerations ... cannot offset the demands of public policy and public interest which are also responsive to the tenets of
equity" is controlling here, viz: "(T)he equitable considerations that led the lower court to take the action complained
of cannot offset the demands of public policy and public interest — which are also responsive to the tenets of equity —
requiring that all issues passed upon in decisions or final order that have become executory, be deemed conclusively
disposed of and definitely closed, for, otherwise, there would be no end to litigations, thus setting at naught the main
role of courts of justice, which is to assist in the enforcement of the rule of law and the maintenance of peace and order,
by settling justiciable controversies with finality."
(d) This is out a case involving two big real estate corporations which entered into the contract to sell with the assistance
of counsel and with full awareness of the import of the covenants, terms and conditions expressly stipulated and of the
legal consequences of non-compliance therewith. Their contract is the binding law between them and equity cannot be
pleaded by one who has not come with clean hands nor complied therewith in good faith as mandated by Article 1159 of
the Civil Code (supra, page 5) but instead willfully and deliberately breached the contract and refused to pay the stipulated
installments despite prior rejection "under any condition" of its request for suspension of payments and its having collected the
property's rentals out of which it could easily pay the stipulated installments.
This suit represents a mere adjudication of private adversary rights between two litigants with no significance in terms of
doctrinal value since Maritime only pleads that it be given special treatment and that the cancellation of its contract be somehow
rejected notwithstanding Myers I clear and incontrovertible right under the contract and the law to do so and Maritime's willful
and deliberate breach of the contract in bad faith.
Justice Fernando's observation in Chemplex vs. Pamatian 33 that "struggles between prototypes of what was referred to by
Roosevelt as economic royalists, do not automatically elicit, especially from the high tribunals, an affirmative response to the plea
that they be heard"; that "the morality of the business world is not the morality of institutions of rectitude like the pulpit and the
academe"; and "... It is not the interest of the parties as such, but the significant it possesses in terms of its doctrinal value, that
supplies the criterion. Chafee had occasion to refer to an opinion of Justice Frankfurter which implies that what is decisive is a
question of import for public policy presented, not a mere adjudication of adversary rights between the two litigants. At any rate,
such a mode of viewing the matter is not likely to be productive of injustice to the main protagonists before us who, considering
their economic status, are very likely, to paraphrase that caustic but realistic critic of law and of life, Professor Rodell, to be able
to protect themselves in the clinches," may well be heeded.
As was recently observed, "it's time to put an end to the fiction that corporations are people." 34 The business of big corporation
such as the protagonists at bar is business. they are bound by the law contracts that they enter into and they do not ask for the
nor are they entitled to considerations of equity.
For a final note of the writer. While the vote of Justice Fernando to grant the second motion for reconsideration when heretofore
he has inhibited himself and did not take part in the decision of January 31, 1972 and Resolution of August 18, 1972 has not
proven to be decisive, the writer took exception and herein makes of record his objection to the participation of Justice Fernando.
This is done in all objectivity and with all due respect. If he had inhibited himself before from taking part in the decision and
resolution against Maritime presumably for valid reasons, the writer feels that we are entitled to know whether those reasons no
longer exist and he feels uninhibited now to vote for Maritime and granting its second motion for reconsideration. The writer is all
too aware of his views shared with some other member(s) of the Court that their inhibition or disqualification is a matter of their
own personal decision and conscience notwithstanding the provisions of Rule 137 of the Rules of Court which they consider in a
way as not applicable to member of the Supreme Court. This delicate question has heretofore not been addressed nor resolved
by the Court ... 35 and should be determined once and for all for the guidance of the bench and bur and the litigants in court.
ACCORDINGLY, and for lack of the necessary votes (five votes for denying the second motion and seven votes for granting the
same 36 , appellant Maritime's second motion for reconsideration is denied and this denial is final.
Makasiar, Muñoz Palma and Guerrero, JJ., concur.
Castro, C.J., on the basis of the Court's decision of January 31, 1972 (43 SCRA 93) and the Court's resolution of August 18, 1972 (46
SCRA 38 1), I vote to deny the wond motion for reconsideration.
Fernando, J., concurs in the dissent of Justice Barredo and, in addition, submits a brief opinion.
Barredo, J., voted to grant the second motion for reconsideration for the reasons stated in a separate opinion.
Antonio, Aquino, Concepcion, Jr., Santos and Fernandez, JJ., voted to grant the second motion for reconsideration.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-23749 April 29, 1977
FAUSTINO CRUZ, plaintiff-appellant,
vs.
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees.
BARREDO, J.:
Appeal from the order dated August 13, 1964 of the Court of First Instance of Quezon City in Civil Case No.
Q-7751, Faustino Cruz vs. J.M. Tuason & Co., Inc., and Gregorio Araneta, Inc., dismissing the complaint of appellant Cruz for
the recovery of improvements he has made on appellees' land and to compel appellees to convey to him 3,000 square
meters of land on three grounds: (1) failure of the complaint to state a cause of action; (2) the cause of action of plaintiff is
unenforceable under the Statute of Frauds; and (3) the action of the plaintiff has already prescribed.
Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two separate causes of action, namely: (1)
that upon request of the Deudors (the family of Telesforo Deudor who laid claim on the land in question on the strength of
an "informacion posesoria" ) plaintiff made permanent improvements valued at P30,400.00 on said land having an area of
more or less 20 quinones and for which he also incurred expenses in the amount of P7,781.74, and since
defendants-appellees are being benefited by said improvements, he is entitled to reimbursement from them of said
amounts and (2) that in 1952, defendants availed of plaintiff's services as an intermediary with the Deudors to work for the
amicable settlement of Civil Case No. Q-135, then pending also in the Court of First Instance of Quezon City, and involving
50 quinones of land, of Which the 20 quinones aforementioned form part, and notwithstanding his having performed his
services, as in fact, a compromise agreement entered into on March 16, 1963 between the Deudors and the defendants
was approved by the court, the latter have refused to convey to him the 3,000 square meters of land occupied by him, (a
part of the 20 quinones above) which said defendants had promised to do "within ten years from and after date of signing
of the compromise agreement", as consideration for his services.
Within the Period allowed by the rules, the defendants filed separate motions to dismiss alleging three Identical grounds:
(1) As regards that improvements made by plaintiff, that the complaint states no cause of action, the agreement regarding
the same having been made by plaintiff with the Deudors and not with the defendants, hence the theory of plaintiff based
on Article 2142 of the Code on unjust enrichment is untenable; and (2) anent the alleged agreement about plaintiffs
services as intermediary in consideration of which, defendants promised to convey to him 3,000 square meters of land,
that the same is unenforceable under the Statute of Frauds, there being nothing in writing about it, and, in any event, (3)
that the action of plaintiff to compel such conveyance has already prescribed.
Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that the Statute of Frauds cannot be
invoked by defendants, not only because Article 1403 of the Civil Code refers only to "sale of real property or of an interest
therein" and not to promises to convey real property like the one supposedly promised by defendants to him, but also
because, he, the plaintiff has already performed his part of the agreement, hence the agreement has already been partly
executed and not merely executory within the contemplation of the Statute; and that his action has not prescribed for the
reason that defendants had ten years to comply and only after the said ten years did his cause of action accrue, that is, ten
years after March 16, 1963, the date of the approval of the compromise agreement, and his complaint was filed on January 24, SO ORDERED. (Pp. 65-69, Rec. on Appeal,)
1964.
On August 22, 1964, plaintiff's counsel filed a motion for reconsideration dated August 20, 1964 as follows:
Ruling on the motion to dismiss, the trial court issued the herein impugned order of August 13, 1964:
Plaintiff through undersigned counsel and to this Honorable Court, respectfully moves to reconsider its Order bearing date
In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc. prayed that the complaint against it be dismissed on the of 13 August 1964, on the following grounds:
ground that (1) the claim on which the action is founded is unenforceable under the provision of the Statute of Frauds; and (2) the
plaintiff's action, if any has already prescribed. In the other motion of February 11, 1964, defendant J. M. Tuason & Co., Inc. 1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM
sought the dismissal of the plaintiffs complaint on the ground that it states no cause of action and on the Identical grounds stated PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES, IS CONCERNED;
in the motion to dismiss of defendant Gregorio Araneta, Inc. The said motions are duly opposed by the plaintiff.
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS., THE SAME HAS NOT PRESCRIBED AND THE STATUTE OF
From the allegations of the complaint, it appears that, by virtue of an agreement arrived at in 1948 by the plaintiff and the FRAUDS IS NOT APPLICABLE THERETO;
Deudors, the former assisted the latter in clearing, improving, subdividing and selling the large tract of land consisting of 50
ARGUMENT
quinones covered by the informacion posesoria in the name of the late Telesforo Deudor and incurred expenses, which are valued
approximately at P38,400.00 and P7,781.74, respectively; and, for the reasons that said improvements are being used and Plaintiff's complaint contains two (2) causes of action — the first being an action for sum of money in the amount of
enjoyed by the defendants, the plaintiff is seeking the reimbursement for the services and expenses stated above from the P7,781.74 representing actual expenses and P38,400.00 as reasonable compensation for services in improving the 50
defendants. quinones now in the possession of defendants. The second cause of action deals with the 3,000 sq. ms. which defendants
have agreed to transfer into Plaintiff for services rendered in effecting the compromise between the Deudors and
Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs claim for the reimbursement of the amounts of
defendants;
P38,400.00 and P7,781.74 is concerned, it is not a privy to the plaintiff's agreement to assist the Deudors n improving the 50
quinones. On the other hand, the plaintiff countered that, by holding and utilizing the improvements introduced by him, the Under its order of August 3, 1964, this Honorable Court dismissed the claim for sum of money on the ground that the
defendants are unjustly enriching and benefiting at the expense of the plaintiff; and that said improvements constitute a lien or complaint does not state a cause of action against defendants. We respectfully submit:
charge of the property itself
1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM
On the issue that the complaint insofar as it claims the reimbursement for the services rendered and expenses incurred by the FOR PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES IS CONCERNED.
plaintiff, states no cause of action, the Court is of the opinion that the same is well-founded. It is found that the defendants are
not parties to the supposed express contract entered into by and between the plaintiff and the Deudors for the clearing and Said this Honorable Court (at p. 2, Order):
improvement of the 50 quinones. Furthermore in order that the alleged improvement may be considered a lien or charge on the
property, the same should have been made in good faith and under the mistake as to the title. The Court can take judicial notice ORDER
of the fact that the tract of land supposedly improved by the plaintiff had been registered way back in 1914 in the name of the
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predecessors-in-interest of defendant J. M. Tuason & Co., Inc. This fact is confirmed in the decision rendered by the Supreme
Court on July 31, 1956 in Case G. R. No. L-5079 entitled J.M. Tuason & Co. Inc. vs. Geronimo Santiago, et al., Such being the case, On the issue that the complaint, in so far as it claims the reimbursement for the services rendered and expenses incurred
the plaintiff cannot claim good faith and mistake as to the title of the land. by the plaintiff, states no cause of action, the Court is of the opinion that the same is well-founded. It is found that the
defendants are not parties to the supposed express contract entered into by and between the plaintiff and the Deudors for
On the issue of statute of fraud, the Court believes that same is applicable to the instant case. The allegation in par. 12 of the
the clearing and improvement of the 50 quinones. Furthermore, in order that the alleged improvement may he considered
complaint states that the defendants promised and agreed to cede, transfer and convey unto the plaintiff the 3,000 square
a lien or charge on the property, the same should have been made in good faith and under the mistake as to title. The
meters of land in consideration of certain services to be rendered then. it is clear that the alleged agreement involves an interest
Court can take judicial notice of the fact that the tract of land supposedly improved by the plaintiff had been registered
in real property. Under the provisions of See. 2(e) of Article 1403 of the Civil Code, such agreement is not enforceable as it is not
way back in 1914 in the name of the predecessors-in-interest of defendant J. M. Tuason & Co., Inc. This fact is confirmed in
in writing and subscribed by the party charged.
the decision rendered by the Supreme Court on July 31, 1956 in case G. R. No. L-5079 entitled 'J M. Tuason & Co., Inc. vs,
On the issue of statute of limitations, the Court holds that the plaintiff's action has prescribed. It is alleged in par. 11 of the Geronimo Santiago, et al.' Such being the case, the plaintiff cannot claim good faith and mistake as to the title of the land.
complaint that, sometime in 1952, the defendants approached the plaintiff to prevail upon the Deudors to enter to a compromise
The position of this Honorable Court (supra) is that the complaint does not state a cause of action in so far as the claim for
agreement in Civil Case No. Q-135 and allied cases. Furthermore, par. 13 and 14 of the complaint alleged that the plaintiff acted
services and expenses is concerned because the contract for the improvement of the properties was solely between the
as emissary of both parties in conveying their respective proposals and couter-proposals until the final settlement was effected on
Deudors and plaintiff, and defendants are not privies to it. Now, plaintiff's theory is that defendants are nonetheless liable
March 16, 1953 and approved by Court on April 11, 1953. In the present action, which was instituted on January 24, 1964, the
since they are utilizing and enjoying the benefit's of said improvements. Thus under paragraph 16 of "he complaint, it is
plaintiff is seeking to enforce the supposed agreement entered into between him and the defendants in 1952, which was already
alleged:
prescribed.

WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED without pronouncement as to costs.
(16) That the services and personal expenses of plaintiff mentioned in paragraph 7 hereof were rendered and in fact paid by him
to improve, as they in fact resulted in considerable improvement of the 50 quinones, and defendants being now in possession of
and utilizing said improvements should reimburse and pay plaintiff for such services and expenses.
Plaintiff's cause of action is premised inter alia, on the theory of unjust enrichment under Article 2142 of the civil Code:
ART. 2142. Certain lawful voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one
shill be unjustly enriched or benefited at the expense of another.
In like vein, Article 19 of the same Code enjoins that:
ART. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give every-one his
due and observe honesty and good faith.
We respectfully draw the attention of this Honorable Court to the fact that ARTICLE 2142 (SUPRA) DEALS WITH
QUASI-CONTRACTS or situations WHERE THERE IS NO CONTRACT BETWEEN THE PARTIES TO THE ACTION. Further, as we can
readily see from the title thereof (Title XVII), that the Same bears the designation 'EXTRA CONTRACTUAL OBLIGATIONS' or
obligations which do not arise from contracts. While it is true that there was no agreement between plaintiff and defendants
herein for the improvement of the 50 quinones since the latter are presently enjoying and utilizing the benefits brought about
through plaintiff's labor and expenses, defendants should pay and reimburse him therefor under the principle that 'no one may
enrich himself at the expense of another.' In this posture, the complaint states a cause of action against the defendants.
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS. THE SAME HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS
IS NOT APPLICABLE THERETO.
The Statute of Frauds is CLEARLY inapplicable to this case:
At page 2 of this Honorable Court's order dated 13 August 1964, the Court ruled as follows:
ORDER
xxx xxx xxx
On the issue of statute of fraud, the Court believes that same is applicable to the instant Case, The allegation in par. 12 of the
complaint states that the defendants promised and agree to cede, transfer and convey unto the plaintiff, 3,000 square meters of
land in consideration of certain services to be rendered then. It is clear that the alleged agreement involves an interest in real
property. Under the provisions of Sec. 2(e) of Article 1403 of the Civil Code, such agreement is not enforceable as it is not in
writing and subscribed by the party charged.
To bring this issue in sharper focus, shall reproduce not only paragraph 12 of the complaint but also the other pertinent
paragraphs therein contained. Paragraph 12 states thus:
COMPLAINT
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12). That plaintiff conferred with the aforesaid representatives of defendants several times and on these occasions, the latter
promised and agreed to cede, transfer and convey unto plaintiff the 3,000 sq. ms. (now known as Lots 16-B, 17 and 18) which
plaintiff was then occupying and continues to occupy as of this writing, for and in consideration of the following conditions:
(a) That plaintiff succeed in convincing the DEUDORS to enter into a compromise agreement and that such agreement be
actually entered into by and between the DEUDORS and defendant companies;
(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of the 3,000 sq. ms. but the
documents evidencing his title over this property shall be executed and delivered by defendants to plaintiff within ten (10)
years from and after date of signing of the compromise agreement;
(c) That plaintiff shall, without any monetary expense of his part, assist in clearing the 20 quinones of its occupants;
13). That in order to effect a compromise between the parties. plaintiff not only as well acted as emissary of both parties in
conveying their respective proposals and counter- proposals until succeeded in convinzing the DEUDORS to settle with
defendants amicably. Thus, on March 16, 1953, a Compromise Agreement was entered into by and between the DEUDORS
and the defendant companies; and on April 11, 1953, this agreement was approved by this Honorable Court;
14). That in order to comply with his other obligations under his agreement with defendant companies, plaintiff had to
confer with the occupants of the property, exposing himself to physical harm, convincing said occupants to leave the
premises and to refrain from resorting to physical violence in resisting defendants' demands to vacate;
That plaintiff further assisted defendants' employees in the actual demolition and transfer of all the houses within the
perimeter of the 20 quinones until the end of 1955, when said area was totally cleared and the houses transferred to
another area designated by the defendants as 'Capt. Cruz Block' in Masambong, Quezon City. (Pars. 12, 13 and 14,
Complaint; Emphasis supplied)
From the foregoing, it is clear then the agreement between the parties mentioned in paragraph 12 (supra) of the
complaint has already been fully EXECUTED ON ONE PART, namely by the plaintiff. Regarding the applicability of the
statute of frauds (Art. 1403, Civil Code), it has been uniformly held that the statute of frauds IS APPLICABLE ONLY TO
EXECUTORY CONTRACTS BUT NOT WHERE THE CONTRACT HAS BEEN PARTLY EXECUTED:
SAME ACTION TO ENFORCE. — The statute of frauds has been uniformly interpreted to be applicable to executory and not
to completed or contracts. Performance of the contracts takes it out of the operation of the statute. ...
The statute of the frauds is not applicable to contracts which are either totally or partially performed, on the theory that
there is a wide field for the commission of frauds in executory contracts which can only be prevented by requiring them to
be in writing, a facts which is reduced to a minimum in executed contracts because the intention of the parties becomes
apparent buy their execution and execution, in mots cases, concluded the right the parties. ... The partial performance may
be proved by either documentary or oral evidence. (At pp. 564-565, Tolentino's Civil Code of the Philippines, Vol. IV, 1962
Ed.; Emphasis supplied).
Authorities in support of the foregoing rule are legion. Thus Mr. Justice Moran in his 'Comments on the Rules of Court', Vol.
III, 1974 Ed., at p. 167, states:
2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO EXECUTORY CONTRACTS: CONTRACTS WHICH ARE EITHER TOTALLY OR
PARTIALLY PERFORMED ARE WITHOUT THE STATUE. The statute of frauds is applicable only to executory contracts. It is
neither applicable to executed contracts nor to contracts partially performed. The reason is simple. In executory contracts
there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the
contracting parties. The statute has been enacted to prevent fraud. On the other hand the commission of fraud in
executed contracts is reduced to minimum in executed contracts because (1) the intention of the parties is made apparent
by the execution and (2) execution concludes, in most cases, the rights of the parties. (Emphasis supplied)
Under paragraphs 13 and 14 of the complaint (supra) one can readily see that the plaintiff has fulfilled ALL his obligation under
the agreement between him defendants concerning the 3,000 sq. ms. over which the latter had agreed to execute the proper
documents of transfer. This fact is further projected in paragraph 15 of the complaint where plaintiff states;
15). That in or about the middle of 1963, after all the conditions stated in paragraph 12 hereof had been fulfilled and fully
complied with, plaintiff demanded of said defendants that they execute the Deed of Conveyance in his favor and deliver the title
certificate in his name, over the 3,000 sq. ms. but defendants failed and refused and continue to fail and refuse to heed his
demands. (par. 15, complaint; Emphasis supplied).
In view of the foregoing, we respectfully submit that this Honorable court erred in holding that the statute of frauds is applicable
to plaintiff's claim over the 3,000 sq. ms. There having been full performance of the contract on plaintiff's part, the same takes
this case out of the context of said statute.
Plaintiff's Cause of Action had NOT Prescribed:
With all due respect to this Honorable court, we also submit that the Court committed error in holding that this action has
prescribed:
ORDER
xxx xxx xxx
On the issue of the statute of limitations, the Court holds that the plaintiff's action has prescribed. It is alleged in par. III of the
complaint that, sometime in 1952, the defendants approached the plaintiff to prevail upon the Deudors to enter into a
compromise agreement in Civil Case No. Q-135 and allied cases. Furthermore, pars. 13 and 14 of the complaint alleged that
plaintiff acted as emissary of both parties in conveying their respective proposals and counter-proposals until the final settlement
was affected on March 16, 1953 and approved by the Court on April 11, 1953. In the present actin, which was instituted on
January 24, 1964, the plaintiff is seeking to enforce the supposed agreement entered into between him and the defendants in
1952, which has already proscribed. (at p. 3, Order).
The present action has not prescribed, especially when we consider carefully the terms of the agreement between plaintiff and
the defendants. First, we must draw the attention of this Honorable Court to the fact that this is an action to compel defendants
to execute a Deed of Conveyance over the 3,000 sq. ms. subject of their agreement. In paragraph 12 of the complaint, the terms
and conditions of the contract between the parties are spelled out. Paragraph 12 (b) of the complaint states:
(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of the 3,000 sq. ms. but the documents
evidencing his title over this property shall be executed and delivered by defendants to plaintiff within ten (10) years from and
after date of signing of the compromise agreement. (Emphasis supplied).
The compromise agreement between defendants and the Deudors which was conclude through the efforts of plaintiff, was signed
on 16 March 1953. Therefore, the defendants had ten (10) years signed on 16 March 1953. Therefore, the defendants had ten (10)
years from said date within which to execute the deed of conveyance in favor of plaintiff over the 3,000 sq. ms. As long as the 10
years period has not expired, plaintiff had no right to compel defendants to execute the document and the latter were under no
obligation to do so. Now, this 10-year period elapsed on March 16, 1963. THEN and ONLY THEN does plaintiff's cause of action
plaintiff on March 17, 1963. Thus, under paragraph 15, of the complaint (supra) plaintiff made demands upon defendants for the
execution of the deed 'in or about the middle of 1963.
Since the contract now sought to be enforced was not reduced to writing, plaintiff's cause of action expires on March 16, 1969 or
six years from March 16, 1963 WHEN THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil Code).
In this posture, we gain respectfully submit that this Honorable Court erred in holding that plaintiff's action has prescribed.
PRAYER
WHEREFORE, it is respectfully prayed that " Honorable Court reconsider its Order dated August 13, 1964; and issue
another order denying the motions to dismiss of defendants G. Araneta, Inc. and J. M. Tuason Co. Inc. for lack of merit. (Pp.
70-85, Record on Appeal.)
Defendants filed an opposition on the main ground that "the arguments adduced by the plaintiff are merely reiterations of
his arguments contained in his Rejoinder to Reply and Opposition, which have not only been refuted in herein defendant's
Motion to Dismiss and Reply but already passed upon by this Honorable Court."
On September 7, 1964, the trial court denied the motion for reconsiderations thus:
After considering the plaintiff's Motion for Reconsideration of August 20, 1964 and it appearing that the grounds relied
upon in said motion are mere repetition of those already resolved and discussed by this Court in the order of August 13,
1964, the instant motion is hereby denied and the findings and conclusions arrived at by the Court in its order of August 13,
1964 are hereby reiterated and affirmed.
SO ORDERED. (Page 90, Rec. on Appeal.)
Under date of September 24, 1964, plaintiff filed his record on appeal.
In his brief, appellant poses and discusses the following assignments of error:
I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT ON THE GROUND THAT APPELLANT'S CLAIM OVER THE
3,000 SQ. MS. IS ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE OF FRAUDS;
II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN DISMISSING APPELLANT'S COMPLAINT ON THE GROUND
THAT HIS CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY BARRED BY THE STATUTE OF LIMITATIONS; and
III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION IN SO FAR
AS APPELLANT'S CLAIM FOR REIMBURSEMENT OF EXPENSES AND FOR SERVICES RENDERED IN THE IMPROVEMENT OF THE
FIFTY (50) QUINONES IS CONCERNED.
We agree with appellant that the Statute of Frauds was erroneously applied by the trial court. It is elementary that the
Statute refers to specific kinds of transactions and that it cannot apply to any that is not enumerated therein. And the only
agreements or contracts covered thereby are the following:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or
who has acted beyond his powers;
(2) Those do not comply with the Statute of Frauds as set forth in this number, In the following cases an agreement
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer
accept and receive part of such goods and chattels, or the evidences, or some of them of such things in action, or pay at the time
some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose
account the sale is made, it is a sufficient memorandum:
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein:
(f) a representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract. (Art. 1403, civil Code.)
In the instant case, what appellant is trying to enforce is the delivery to him of 3,000 square meters of land which he claims
defendants promised to do in consideration of his services as mediator or intermediary in effecting a compromise of the civil
action, Civil Case No. 135, between the defendants and the Deudors. In no sense may such alleged contract be considered as
being a "sale of real property or of any interest therein." Indeed, not all dealings involving interest in real property come under
the Statute.
Moreover, appellant's complaint clearly alleges that he has already fulfilled his part of the bargains to induce the Deudors to
amicably settle their differences with defendants as, in fact, on March 16, 1963, through his efforts, a compromise agreement
between these parties was approved by the court. In other words, the agreement in question has already been partially
consummated, and is no longer merely executory. And it is likewise a fundamental principle governing the application of the
Statute that the contract in dispute should be purely executory on the part of both parties thereto.
We cannot, however, escape taking judicial notice, in relation to the compromise agreement relied upon by appellant, that in
several cases We have decided, We have declared the same rescinded and of no effect. In J. M. Tuason & Co., Inc. vs. Bienvenido
Sanvictores, 4 SCRA 123, the Court held:
It is also worthy of note that the compromise between Deudors and Tuason, upon which Sanvictores predicates his right to buy
the lot he occupies, has been validly rescinded and set aside, as recognized by this Court in its decision in G.R. No. L-13768,
Deudor vs. Tuason, promulgated on May 30, 1961.
We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio Macalindong, 6 SCRA 938. Thus, viewed from what would be
the ultimate conclusion of appellant's case, We entertain grave doubts as to whether or not he can successfully maintain his
alleged cause of action against defendants, considering that the compromise agreement that he invokes did not actually
materialize and defendants have not benefited therefrom, not to mention the undisputed fact that, as pointed out by appellees,
appellant's other attempt to secure the same 3,000 square meters via the judicial enforcement of the compromise agreement in
which they were supposed to be reserved for him has already been repudiated by the courts. (pp. 5-7. Brief of Appellee Gregorio
Araneta, Inc.)
As regards appellant's third assignment of error, We hold that the allegations in his complaint do not sufficiently Appellants'
reliance. on Article 2142 of Civil Code is misplaced. Said article provides:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of another.
From the very language of this provision, it is obvious that a presumed qauasi-contract cannot emerge as against one party when
the subject mater thereof is already covered by an existing contract with another party. Predicated on the principle that no one
should be allowed to unjustly enrich himself at the expense of another, Article 2124 creates the legal fiction of a
quasi-contract precisely because of the absence of any actual agreement between the parties concerned. Corollarily, if the
one who claims having enriched somebody has done so pursuant to a contract with a third party, his cause of action should
be against the latter, who in turn may, if there is any ground therefor, seek relief against the party benefited. It is essential
that the act by which the defendant is benefited must have been voluntary and unilateral on the part of the plaintiff. As
one distinguished civilian puts it, "The act is voluntary. because the actor in quasi-contracts is not bound by any
pre-existing obligation to act. It is unilateral, because it arises from the sole will of the actor who is not previously bound by
any reciprocal or bilateral agreement. The reason why the law creates a juridical relations and imposes certain obligation is
to prevent a situation where a person is able to benefit or take advantage of such lawful, voluntary and unilateral acts at
the expense of said actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.) In the case at bar, since appellant has a
clearer and more direct recourse against the Deudors with whom he had entered into an agreement regarding the
improvements and expenditures made by him on the land of appellees. it Cannot be said, in the sense contemplated in
Article 2142, that appellees have been enriched at the expense of appellant.
In the ultimate. therefore, Our holding above that appellant's first two assignments of error are well taken cannot save the
day for him. Aside from his having no cause of action against appellees, there is one plain error of omission. We have
found in the order of the trial court which is as good a ground as any other for Us to terminate this case favorably to
appellees. In said order Which We have quoted in full earlier in this opinion, the trial court ruled that "the grounds relied
upon in said motion are mere repetitions of those already resolved and discussed by this Court in the order of August 13,
1964", an observation which We fully share. Virtually, therefore. appellant's motion for reconsideration was ruled to be
pro-forma. Indeed, a cursory reading of the record on appeal reveals that appellant's motion for reconsideration
above-quoted contained exactly the same arguments and manner of discussion as his February 6, 1964 "Opposition to
Motion to Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal) as well as his February 17, 1964
"Opposition to Motion to Dismiss of Defendant J. M. Tuason & Co." (pp. 33-45, Rec. on Appeal and his February 29, 1964
"Rejoinder to Reply Oil Defendant J. M. Tuason & Co." (pp. 52-64, Rec. on Appeal) We cannot see anything in said motion
for reconsideration that is substantially different from the above oppositions and rejoinder he had previously submitted
and which the trial court had already considered when it rendered its main order of dismissal. Consequently, appellant's
motion for reconsideration did not suspend his period for appeal. (Estrada vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as
this point was covered by appellees' "Opposition to Motion for Reconsideration" (pp. 8689), hence, within the frame of the
issues below, it is within the ambit of Our authority as the Supreme Court to consider the same here even if it is not
discussed in the briefs of the parties. (Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life
Assurance Co., Ltd. [Resolution en banc of March 10, 1977 in G. R. No. L-25291).
Now, the impugned main order was issued on August 13, 1964, while the appeal was made on September 24, 1964 or 42
days later. Clearly, this is beyond the 30-day reglementary period for appeal. Hence, the subject order of dismissal was
already final and executory when appellant filed his appeal.
WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.
Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 154028. July 29, 2005
PHILIPPINE GEOTHERMAL, INC., Petitioners, ...
vs.
THE COMMISSIONER OF INTERNAL REVENUE, Respondents. 6. Fiscal Incentives Review Board (FIRB) Resolution 17-87 specifically restored the tax and duty exemption privileges of the
NPC, including those pertaining to its domestic purchases of petroleum and petroleum products granted under the terms
DECISION and conditions of Commonwealth Act 120 as amended, effective March 10, 1987.

QUISUMBING, J.:
The present petition for review on certiorari assails the September 14, 2001 Decision1 and June 14, 2002 Resolution2 of the Court
of Appeals in CA-G.R. SP No. 54730, which affirmed the April 21, 1999 Decision3 of the Court of Tax Appeals in C.T.A. Case No.
5541.
The facts of the case as found by the Court of Appeals and Court of Tax Appeals are as follows:
Petitioner is a resident foreign corporation licensed by the Securities and Exchange Commission (SEC) to engage in the exploration,
development and exploitation of geothermal energy and resources in the Philippines. In September 1971, it entered into a service
contract with the National Power Corporation (NPC) to supply steam to the latter.
From September 1995 to February 1996, petitioner billed NPC, Value Added Tax (VAT) computed at ten percent of the service fee
charged on the supply of steam. NPC did not pay the VAT. To avoid any possible tax deficiency, petitioner remitted VAT equivalent
to 1/11 of the fees received from NPC or ₱39,328,775.41, broken down as follows:
However, the restoration of the tax and duty exemption privileges does not apply to importations of fuel oil (crude
equivalents) and coal, commercially-funded importations (i.e. importations which include but are not limited to those
foreign-based private financial institutions, etc.) and interest income derived from any source. Such exemption also does
not include purchases of goods and services. Hence, any contracting services of NPC is not qualified for zero-rated VAT
(VAT Ruling 250-89, October, 1989).
7. It is clear from the aforecited FIRB resolution that the tax exemption privilege granted to NPC does not include
purchases of goods and services, such as the supply of steam to NPC.
...
10. The subject taxes have been paid and collected in accordance with law and regulation.
11. In a claim for refund, it is incumbent upon petitioner to show that it is indubitably entitled thereto. Petitioner’s failure
to establish the same is fatal to its claim for refund.

Exhibit Period covered Payment Date VAT Paid 12. .The present case is no exception to the basic rule that claims for refund are construed strictly against claimant for the
same partake of the nature of exemption from taxation.
C 7/95 to 9/95 10/18/95 P 8,977,117.26
Simply put, the sole issue in this case is whether petitioner’s supply of steam to NPC is a VAT-exempt transaction.
H 10/95 to 12/95 1/18/96 11,248,194.31
FIRB Resolution No. 17-87 dated June 24, 1987, on which petitioner anchors its claim for tax exemption, provides as
follows:
M 11/95 12/13/95 8,243,090.27
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That the tax and duty exemption privileges of the National Power Corporation,
S 1/96 2/19/96 5,213,400.45 including those pertaining to its domestic purchases of petroleum and petroleum products, granted under the terms and
conditions of Commonwealth Act No. 120 (Creating the National Power Corporation, defining its powers, objectives and
W 2/96 3/18/96 5,646,973.12 functions, and for other purposes), as amended, are restored effective March 10, 1987, subject to the following conditions:

P 39,328,775.41 1. The restoration of the tax and duty exemption privileges does not apply to the following:

Petitioner filed an administrative claim for refund with the Bureau of Internal Revenue on July 10, 1996. According to petitioner, 1.1 Importation of fuel oil (crude equivalent) and coal;
the sale of steam to NPC is a VAT-exempt transaction under Sec. 103 of the Tax Code.4 Petitioner claimed that Fiscal Incentives
Review Board (FIRB) Resolution No. 17-87, approved by President Aquino pursuant to Executive Order No. 93,5 expressly 1.2 Commercially-funded importations (i.e., importations which include but are not limited to those financed by the NPC’s
exempted NPC from VAT. own internal funds, domestic borrowings from any source whatsoever, borrowing from foreign-based private financial
institutions, etc.); and
Since respondent failed to act on the claim, on July 2, 1997, petitioner filed a petition to toll the running of the two-year
prescriptive period before the Court of Tax Appeals. 1.3 Interest income derived from any source.7

Respondent, in his Answer,6 averred: This Supreme Court has confirmed this exemption. In Maceda v. Macaraig, Jr.,8 this Court ruled that Republic Act No.
3589 exempts the NPC from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, and
... its provinces, cities and municipalities. This exemption is broad enough to include both direct and indirect taxes the NPC
may be required to pay. To limit the exemption granted the NPC to direct taxes, notwithstanding the general and broad
4. The claim of petitioner Philippine Geothermal Incorporated (PGI for short) for Value-Added Tax refund has no legal basis.
language of the statute, will be to thwart the legislative intention in giving exemption from all forms of taxes and impositions,
without distinguishing between those that are direct and those that are not.
A chronological review of the NPC laws will show that it has been the lawmakers’ intention that the NPC is to be completely tax
exempt from all forms of taxes - both direct and indirect.10
The ruling dated March 15, 1996, issued to petitioner by Assistant Commissioner Alicia P. Clemeno of the Bureau of Internal
Revenue, likewise confirms this exemption:
In view of the foregoing, this Office is of the opinion as it hereby holds, that the supply of steam by your client, Philippine
Geothermal, Inc. (PGI) to National Power Corporation NPC/NAPOCOR to be used in generating electricity is exempt from the
value-added tax. (BIR Ruling No. 078-95 dated April 26, 1995)11
On April 21, 1999, the CTA ruled that the supply of steam to NPC by petitioner being a VAT-exempt transaction, neither petitioner
nor NPC is liable to pay VAT. Petitioner, therefore, may rightfully claim for a refund of the value-added tax paid. The CTA held,
WHEREFORE, in the light of the foregoing, RESPONDENT is hereby ORDERED to REFUND or in the alternative, ISSUE A TAX CREDIT
CERTIFICATE to PETITIONER the sum of P9,012,310.26 representing erroneously paid value added tax.
SO ORDERED.12
According to the CTA, based on the evidence presented by petitioner, out of the refund claim of ₱39,328,775.41, only
₱9,012,310.2613 or that pertaining to output tax paid for September 1995 and the interest on late payment on peso cash call,
were not paid by NPC. As to the rest of petitioner’s claim, it appears that the official receipts petitioner issued to NPC included the
VAT payable shown in the Summary of Payments Received from NPC for each production period.
Petitioner raised the matter before the Court of Appeals praying that the respondent be ordered to refund the sum of
₱39,328,775.41 or issue a tax credit certificate representing erroneous payments of VAT from September 1995 to February 1996.
The Court of Appeals denied the petition and affirmed the assailed decision of the Court of Tax Appeals.
Hence this appeal. Petitioner assigns the following errors to the appellate court:
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMING IN TOTO THE DECISION OF THE COURT OF TAX APPEALS,
BECAUSE:
A). THE DECISION OF THE COURT OF TAX APPEALS WAS BASED ON A MISAPPREHENSION OF FACTS, NAMELY, THAT THE NPC PAID
₱30,316,465.15 AS VAT;
B). THE PETITIONER HAD ESTABLISHED BY UNDISPUTABLE EVIDENCE THAT IT PAID THE VAT ON THE SUPPLY OF STEAM TO NPC;
ACCORDINGLY, IT IS ENTITLED TO THE REIMBURSEMENT OF THE FULL AMOUNT OF VAT ERRONEOUSLY PAID.14
The CTA Decision stated categorically that the supply of steam to NPC is exempt from VAT. However, it only granted a partial VAT
refund of ₱9,012,310.26, believing that only this amount was not reimbursed by NPC. The CTA ruled that petitioner was no longer
entitled to a refund of the remaining balance of ₱30,316,465.15, since it appears that the official receipts petitioner issued to NPC
included the VAT payable shown in the Summary of Payments Received from NPC for each production period.
We disagree with the CTA. In this case, the only issue is the amount of refund to be granted based on the amount of tax
erroneously paid. Tax refunds are in the nature of tax exemptions, and are to be construed strictissimi juris against the entity
claiming the same.15 Thus, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence, its
entitlement to a claim for refund. In the Bureau of Internal Revenue’s Ruling dated March 15, 1996, that the supply of
steam by petitioner to NPC is exempt from VAT, petitioner has indubitably established its basis for claiming a refund.
That NPC may have reimbursed petitioner the 10% VAT is not a ground for the denial of the claim for refund. The CTA
overlooked the fact that it was petitioner who paid the VAT out of its own service fee. The erroneous payments of the VAT
were only discontinued when the BIR issued its Ruling No. DA-111-96 in favor of petitioner on March 15, 1996. By then,
petitioner had already remitted a sizeable amount of ₱39,328,775.41 to the Government. The only recourse of petitioner is
the complete restitution of the erroneous payments of taxes.
The amount of refund should have been based on the VAT Returns filed by the taxpayer. Whether NPC had reimbursed
petitioner is not the concern of the CTA. It is solely a matter between petitioner and NPC.16 For indirect taxes like VAT, the
proper party to question or seek a refund of the tax is the statutory taxpayer, the person on whom the tax is imposed by
law and who paid the same even when he shifts the burden thereof to another.17
Petitioner has the legal personality to apply for a refund since it is the one who made the erroneous VAT payments and
who will suffer financially by paying in good faith what it had believed to be its potential VAT liability.
Under the principle of solutio indebiti,18 the government has to restore to petitioner the sums representing erroneous
payments of taxes.19 It is of no moment whether NPC had already reimbursed petitioner or not because in this case, there
should have been no VAT paid at all.
The Summary of Payments and Official Receipts issued by a supplier is not a reliable basis for determining the VAT
payments of said supplier. The CTA grossly misappreciated the evidence and erroneously concluded in this case that NPC
paid the VAT. The CTA should have relied on the VAT Returns filed by the taxpayer to determine the actual amount
remitted to the BIR for the purpose of ascertaining the refund due. The presentation of the VAT Returns is considered
sufficient to ascertain the amount of the refund. Thus, upon finding that the supply of steam to NPC is exempt from VAT,
the CTA should have ordered respondent to reimburse petitioner the full amount of ₱39,328,775.41 as erroneously paid
VAT.
WHEREFORE, the petition is hereby GRANTED. Respondent is ORDERED to refund or in the alternative, issue a Tax Credit
Certificate to petitioner in the sum of ₱39,328,775.41 as erroneously paid VAT.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
FIRST DIVISION
GR NO. 146021 March 10, 2006
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
ELIZABETH G. SARMIENTO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari filed by Bank of the Philippine Islands (petitioner) seeking to annul the
Decision dated September 15, 20001 and the Resolution dated November 13, 20002 of the Court of Appeals (CA) in CA G.R. CV No.
50135 affirming in toto the decision of the Regional Trial Court of Quezon City dismissing the complaint for sum of money filed by
petitioner against Elizabeth Sarmiento (respondent).
The factual backdrop as found by the CA is as follows:
Appellee Sarmiento was the assistant manager of appellant bank's España Branch. Sometime in 1987, the España Branch was
investigated for several alleged anomalous transactions involving time deposits (Exhibit A). Among the suspects in the alleged
scam was appellee Sarmiento. From October 10, 1987 to June 30, 1988, appellee Sarmiento did not regularly report for work but
went to her office in the bank only once in a while. She however received her full salary for the said period totaling P116,003.52.
Subsequently, she received a demand from the appellant bank to return said amount because it was mistakenly paid to her. She
refused to do so and so appellant bank instituted an action for collection in the court below.
Appellant bank asserted that since appellee Sarmiento did not actually work during the period adverted to, she was not therefore,
entitled to receive any salary. The payment to her of said salary was a mistake.
According to appellee Sarmiento however, when an internal audit was being undertaken in connection with the investigation of
the alleged bank scam, Vice President Arturo Kimseng of the Audit Department of appellant bank verbally directed her to stop
working while the investigation was going on. This directive was obviously for the purpose of preventing appellee Sarmiento from
tampering with the records or from influencing her subordinates to cover-up for her. It was because of said oral instruction that
appellee Sarmiento went to office sparingly.3
On April 3, 1995, the Regional Trial Court of Quezon City, Branch 98, dismissed 4 the complaint for failure of petitioner to
establish its case by preponderance of evidence with costs against it. The trial court found that the principle of solutio
indebiti upon which petitioner based its complaint for a sum of money is untenable. It ruled that since respondent was
petitioner's Assistant Manager at the España Branch, she was a managerial employee who was not under obligation to punch in
her card in the bundy clock; that she was allowed to visit the business establishments of petitioner's several clients thus she could
not be seen reporting for work which was not a conclusive proof that she was not rendering service to her employer; that
respondent was lawfully entitled for payment of her salaries for the period from October 10, 1987 to June 30, 1988, amounting
to P116,003.52; that petitioner's averment that during the periods aforementioned respondent had already ceased reporting rest
on a very shaky ground since respondent claimed that she was instructed by petitioner's Assistant Vice-President of the Auditing
Department to refrain from reporting regularly inasmuch as there was an on-going internal audit; that petitioner failed to present
countervailing evidence on this point, hence such claim remained unrebutted; and that petitioner did not even bother to adduce
clear and convincing evidence when the services of respondent was terminated.
Petitioner filed its appeal with the CA which in a Decision dated September 15, 2000 affirmed the Decision of the trial court and
dismissed the appeal. Petitioner's motion for reconsideration was likewise denied in a Resolution dated November 13, 2000.
In finding for the respondent, the CA made the following disquisition:
These are admitted or fully established facts which constitute the foundation of this Court's verdict, to wit:
1. Appellee Sarmiento was an assistant manager of appellant bank's España Branch and therefore was a managerial employee.
2. As a managerial employee, appellee Sarmiento was not required to report for work in accordance with a definite time
schedule.
3. For the period, October 10, 1987 to June 30, 1988, appellee Sarmiento went to her office only once in a while but
received her full salary for said period.
4. According to appellant bank, appellee Sarmiento's services in said bank were terminated on August 26, 1988.
Consequently, for the period, October 10, 1987 to June 30, 1988, appellee was still an employee of the bank.
5. During the period in question, appellee Sarmiento was not suspended from office.
6. No criminal, civil or administrative action has been instituted by appellant bank against appellee Sarmiento.
In this suit, the basis of appellant's bank's claim for reimbursement of the salary paid to appellee Sarmiento for the period
in question is the rule of "no work, no pay". Since she did not work during the period in question, she was not entitled to
any salary. Appellee Sarmiento counters this position with the argument that the reason why she did not report for work
regularly was because she was verbally instructed by Vice-President Arturo Kimseng not to report for work while the
investigation in the bank was going on. Consequently, it was not her desire, much less her fault, that she went to office
very rarely.
The only issue to resolve is whether or not appellee Sarmiento was indeed verbally instructed by Vice President Arturo
Kimseng not to report for work while the investigation was still going on.
It is true that Vice President Arturo Kimseng denied having given said oral instruction to appellee Sarmiento. That
notwithstanding, this Court shares the view of the lower court that indeed appellee Sarmiento was enjoined from
reporting for work during the period of investigation.
This is plausible because it jibes with the common practice in the business world. When a managerial employee is under
investigation, the employer has three options. First: to suspend the managerial employee during the period of
investigation - but this entails notice and hearing to comply with the demands of administrative due process. Second: to
allow the managerial employee to continue working during the period of investigation so that the employer can derive
benefit out of the salary being paid to the former. Third: to let the managerial employee discontinue working during the
period of investigation but continue paying his salary. Usually, the employers choose the third option because they
consider the salary paid without work a reasonable price to pay for ensuring the integrity of the records under the control
and to avoid influence being exerted upon subordinate employees who may be potential witnesses against the former.
If there had been no such instruction to appellee Sarmiento, why did not the branch manager or even higher corporate
officials call her attention for not reporting to office regularly? If her attention was called but she continued to be absent,
why was she not suspended? Why was her salary paid? These questions were not satisfactorily answered by appellant
bank.
Accordingly, this Court holds that the payment of the salary to appellee Sarmiento during the period in question was
correct and the latter's receipt was legal. She has therefore, no obligation to return it.5
Hence, the instant petition for review on the following grounds:
I. The Honorable Court of Appeals erred in holding based on a misapprehension of facts that the "only issue to resolve is
whether it is true or not that appellee Sarmiento was indeed verbally instructed by Vice President Arturo Kimseng not to
report for work while the investigation was still going on."
II. In connection with the foregoing, the Honorable Court of Appeals also erred in holding without any basis at all, that it
"shares the view of the lower court that indeed appellee Sarmiento was enjoined from reporting for work during the
period of investigation."
III. The Honorable Court of Appeals erred in holding based entirely on speculations, surmises or conjectures that "the payment of
the salary to appellee Sarmiento during the period in question was correct and the latter's receipt (thereof) was legal" and
accordingly, "she has therefore no obligation to return it."
IV. The Honorable Court of Appeals erred in dismissing the appeal of BPI and affirming the Decision under appeal. 6
Respondent filed her Comment. Subsequently, upon directive of the Court, the parties submitted their respective memoranda.
Petitioner claims that: when the CA declared that the only issue to resolve is whether it is true or not that appellee Sarmiento was
indeed verbally instructed by Assistant Vice-President Arturo Kimseng (AVP Kimseng) not to report for work while the
investigation was still going on, the CA impliedly acknowledged that it is convinced that respondent did not report for work while
the investigation was going on; petitioner fully agrees with the CA in making such an assumption as it was based on the evidence
on record; it was even respondent who admitted in her Answer to the complaint as well as in her testimony in cross-examination
that she stopped reporting for work on September 12, 1987; the CA erred in its assumption that AVP Kimseng had the power or
authority to order or direct respondent not to report for work since no evidence was presented by the defense to that effect; AVP
Kimseng rebutted such claim when he testified that he had no authority to do so; if it was really petitioner's intention not to allow
respondent to report for work and yet pay her salaries, there is no reason why it should now proceed to recover from her; it is not
uncommon for an employee who is under investigation to cease from reporting for work on her own because she does not want
to cooperate or to participate in the investigation being conducted.
The Court dismisses the petition.
It is a settled rule that in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and does not
normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case
considering that the findings of facts of the CA are conclusive and binding on the Court.7 Jurisprudence has recognized several
exceptions in which factual issues may be resolved by this Court, such as: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record; or (11) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.8 None of these exceptions find application in the present case.
After a thorough review of the instant case, the Court finds that the petition raises no substantial question of law. The questions
raised as to whether or not respondent was verbally instructed not to report for work by petitioner's AVP Kimseng while the
investigation was going on and whether he possesses such authority considering that on rebuttal, he denied having given such
instruction claiming that he had no authority to do so, are patently questions of fact beyond the pale of Rule 45 of the Rules of
Court which mandates that only questions of law be raised in the petition.
The Court finds no cogent reason to deviate from the findings of the trial court and the CA that respondent is entitled to the
payment of her salary from October 10, 1987 to June 30, 1988. Petitioner's witness, Eduardo Cascarro, Head of the Branches
Division Investigation Unit, testified that respondent was terminated only on August 26, 1988,9 thus, there is no question that
respondent was still an employee of petitioner during the period in question. There was no showing that respondent was even
suspended during the said period.
Although respondent testified that she stopped reporting for work on September 12, 1987, she also testified on
cross-examination that she still went to her office from September to December 1987 although admittedly she was not
doing anything but she still received her salary. The Court likewise agrees with the CA that respondent could not be faulted
for not reporting for work because she merely complied with the verbal instruction of AVP Kimseng not to report for work
when the latter was conducting the investigation of the branch for anomalies. While AVP Kimseng denied that he made
such instruction and declared that he had no authority to give such instruction, the trial court gave more credence to the
testimony of respondent that indeed she was instructed not to report for work.
We find no cogent reason to disturb the findings of the trial court in light of the settled rule that the evaluation of the
testimonies of witnesses by the trial court is entitled to the highest respect because such court has the direct opportunity
to observe the witnesses' demeanor and manner of testifying and thus, is in a better position to assess their credibility.10
The CA finding was supported by the evidence on record. Petitioner contends that respondent was not reporting for work
from October 10, 1987 to June 30, 1988, however, petitioner failed to show why its España Branch Manager allowed
respondent to be absent or not to do anything during that period if indeed there was no such instruction from AVP
Kimseng for her not to report for work. It bears stressing that as an Assistant Branch Manager, respondent has some
official duties to perform pertaining to the internal operation of petitioner's branch and yet her Branch Manager allowed
her to be absent for such a long period of time without calling her attention on such absences. The only plausible
explanation is that, as declared by respondent, which remained unrebutted, she had relayed to her Branch Manager the
verbal instruction of AVP Kimseng for her not to report for work while the investigation was on-going. If indeed there was
no such instruction, the Branch Manager could have immediately called respondent's attention regarding her absences and
that she should have been required to perform her official duties inside the branch office. And if she continued to be
absent, she could have been sanctioned or given the corresponding memorandum. Moreover, there is no evidence to
show that such absences, if unauthorized, were reported by the Branch Manager to higher authorities of petitioner. On the
contrary, without qualification or reservation, respondent's salary and other benefits were given to her by petitioner
during the said period.
Petitioner insists that its payment of respondent's salary was by mistake since respondent who chose not to report for
work was not entitled to it under the principle of "no work, no pay", thus she has the obligation to return the same.
Petitioner based such contention on the principle of solutio indebiti under Article 215411 of the Civil Code.
There is solutio indebiti where: (1) payment is made when there exists no binding relation between the payor, who has no
duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through
liberality or some other cause. x x x The quasi-contract of solutio indebiti is based on the ancient principle that no one shall
enrich himself unjustly at the expense of another.12
Both elements are lacking in the present case. Mr. Cascarro, the Head of the Branches Division Investigation Unit, had
categorically stated that respondent was only terminated from service on August 26, 1988. Respondent was not suspended
from office. Consequently, during the period in question, there still existed an employer-employee relationship between
petitioner and respondent which entitled respondent to the payment of her salary during the said period. Thus, there can
be no mistaken payment in this case. Moreover, it has been shown that the payment of respondent's salary was with the
knowledge and approval of respondent's immediate superior officers. Hence, the principle of solutio indebiti finds no
application in this case.
WHEREFORE, the petition is DENIED and the Decision dated September 15, 2000 and the Resolution dated November 13,
2000 of the Court of Appeals are AFFIRMED.
Costs against petitioner.
SO ORDERED. marked for transportation to Manila, and paid freight on said clocks from New York to Manila in advance. The said
steampship arrived in the port of Manila on or about the 10th day of September, 1919, consigned to the defendant herein
MA. ALICIA AUSTRIA-MARTINEZ as agent and representative of said vessel in said port. Neither the master of said vessel nor the defendant herein, as its
Associate Justice agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them for
their delivery.
WE CONCUR:
(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and the market value of the
ARTEMIO V. PANGANIBAN
same in the City of Manila at the time when they should have been delivered to the plaintiff was P420.
Chief Justice
Chairperson (3) The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton Castle contained,
among others, the following clauses:
CONSUELO YNARES-SANTIAGO ROMEO J. CALLEJO, SR.
Associate Justice Asscociate Justice 1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in
proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon.
MINITA V. CHICO-NAZARIO
Associate Justice 9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for
more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the
CERTIFICATION carrier may be liable shall be adjusted pro rata on the said basis.

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were (4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the freight ton value thereof
reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. was $1,480, U. S. currency.

ARTEMIO V. PANGANIBAN (5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks, and no
Chief Justice ad valorem freight was paid thereon.

(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value of the
aforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected.
Republic of the Philippines
SUPREME COURT The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the plaintiff
Manila against the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and
insurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint, together with costs.
EN BANC From that judgment both parties appealed to this court.
G.R. No. L-16598 October 3, 1921 The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in question, to
wit: the sum of P420. The defendant-appellant, on the other hand, contends that, in accordance with clause 1 of the bill of
H. E. HEACOCK COMPANY, plaintiff-appellant,
lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton value of the said clocks. The
vs.
claim of the plaintiff is based upon the argument that the two clause in the bill of lading above quoted, limiting the liability
MACONDRAY & COMPANY, INC., defendant-appellant.
of the carrier, are contrary to public order and, therefore, null and void. The defendant, on the other hand, contends that
Fisher & DeWitt for plaintiff-appellant. both of said clauses are valid, and the clause 1 should have been applied by the lower court instead of clause 9.
Wolfson, Wolfson & Schwarzkopf for defendant-appellant.
I. The appeal of the plaintiff presents this question; May a common carrier, by stipulations inserted in the bill of lading,
limit its liability for the loss of or damage to the cargo to an agreed valuation of the latter? 1awph!l.net

JOHNSON, J.:
This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P240 together with interest
thereon. The facts are stipulated by the parties, and are, briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of steamship Bolton Castle, then in the
harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks properly boxed and
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all
liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of
such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority,
the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable.
The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]: Louisville Ry.
Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742) support the proposition that the
first and second stipulations in a bill of lading are invalid which either exempt the carrier from liability for loss or damage
occasioned by its negligence, or provide for an unqualified limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the
third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper
declares a higher value and pays a higher rate of freight, is valid and enforceable. This proposition is supported by a uniform lien
of decisions of the Supreme Court of the United States rendered both prior and subsequent to the passage of the Harter Act, from
the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke
(decided Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage, signed by the shipper, is fairly
made with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the condition
that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of
the carrier, the contract will be upheld as proper and lawful mode of securing a due proportion between the amount for which
the carrier may be responsible and the freight he receives, and protecting himself against extravagant and fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the decision in Hart vs. Pennsylvania
R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston and M. R. Co. vs. Piper (246 U. S., 439; 62 L.
ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared to be the settled Federal law that if a
common carrier gives to a shipper the choice of two rates, the lower of the conditioned upon his agreeing to a stipulated
valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes such a choice, understandingly and
freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property. As a
matter of legal distinction, estoppel is made the basis of this ruling, — that, having accepted the benefit of the lower rate, in
common honesty the shipper may not repudiate the conditions on which it was obtained, — but the rule and the effect of it are
clearly established."
The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its liability in
case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice of
rates, based on valuation."
A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public
policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and
then recover a larger value in case of loss. (Adams Express Co. vs. Croninger 226 U. S. 491, 492.) See also Reid vs. Farbo (130 C. C.
A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and Co. (227 U. S., 278); Wells, Fargo &
Co. vs. Neiman-Marcus Co. (227 U. S., 469).
It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not contrary to
public order. Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms and
conditions they may deem advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill of
lading are, therefore, valid and binding upon the parties thereto.
II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in question is to
be adopted as the measure of defendant's liability. Clause 1 provides as follows:
1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for
any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon. Clause 9 provides:
9. Also, that in the even of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for
more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the
carrier may be liable shall be adjusted pro rata on the said basis.
The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier
stipulate and agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the invoice
value of the goods be less than $500 per freight ton, then the invoice value governs; that since in this case the invoice
value is more than $500 per freight ton, the latter valuation should be adopted and that according to that valuation, the
proportionate value of the clocks in question is only P76.36 which the defendant is ready and willing to pay to the plaintiff.
It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis
of not exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice
price plus freight and insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable conflict
between the two clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing
violence to the language used and reading exceptions and conditions into the undertaking contained in clause 9 that are
not there. This being the case, the bill of lading in question should be interpreted against the defendant carrier, which
drew said contract. "A written contract should, in case of doubt, be interpreted against the party who has drawn the
contract." (6 R. C. L. 854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement must
be construed most strongly against the party causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained in
bills of lading. "In construing a bill of lading given by the carrier for the safe transportation and delivery of goods shipped
by a consignor, the contract will be construed most strongly against the carrier, and favorably to the consignor, in case of
doubt in any matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)
It follows from all of the foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So
ordered.
Araullo, street, Avanceña and Villamor, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-14040 January 31, 1961
SEGUNDA PORNELLOSA and JOSE ANGELES, petitioners,
vs.
THE LAND TENURE ADMINISRATION and HERMINIO GUZMAN, respondents.
Bustos Meneses and Pingol for petitioners.
Arturo M. Tolentino for respondents.
PADILLA, J.:
Petition for certiorari under Rule 46 to review a judgment of the Court of Appeals (C.A.-G.R. No. 13901-R).
An action to compel the Director of Lands to execute a deed of sale of a residential lot in favor of the petitioners upon payment of
the purchase price of P1,505, to declare null and void a deed of sale of the lot executed by the then Minister of Agriculture and
Natural Resources in favor of the respondent Herminio Guzman, to collect from the defendants the sum of P1,000 as actual and
P5,000 as moral damages, and to secure other just and equitable relief, was brought by the petitioners in the Court of First
Instance of Manila (civil No. 8695). After trial the Court rendered judgment in favor of the petitioners granting them the relief
prayed for except the amount of moral damages which was reduced to P2,000. The trial court dismissed the defendant's
counterclaim. They appealed and the Court of Appeals rendered judgment reversing that of the Court of First Instance and
dismissing the petitioners' complaint (C.A.-G.R. No. 13901-R). Hence this petition for certiorari to review the judgment rendered
by the Court of Appeals.
The facts as found by the appellate court are:
The lot in controversy is a part of the Santa Clara Estate on which many families have settled through the consent of its owner.
Each paid a rental which, in all likelihood, was fixed proportionately to the extent of the holding. There is no evidence whether or
not an occupant was given a formal contract for the specific portion he holds.
In May, 1941, the Santa Clara Estate was acquired by the Government under the provisions of Commonwealth Act No. 539,
section 1 of which recites thus:.
The President of the Philippines is authorized to acquire private lands or any interest therein, through purchase or expropriation,
and to subdivide the same into home lots or small farms for resale at reasonable prices and under such conditions as he may fix to
their bona fide tenants or occupants or to private individuals who will work the lands themselves and who are qualified to acquire
and own lands in the Philippines.
The administration and disposition of the land so acquired was entrusted to an Office known as the Rural Progress
Administration.1 This Office was abolished later on and its functions were transferred to the Bureau of Lands.2 Recently, such
duties were given to the Land Tenure Administration.3
The evidence tends to show that on April 1, 1941 the plaintiffs acquired by purchase the rights of occupation of the lot in question
on the strength of a document which reads as follows:.
DAPAT MABATID NG MADLA:
Akong si VICENTA SAN JOSE, may sapat na gulang,walang asawa (balo), na nakatira sa daang Galicia, Sampaloc,Maynila, ay
pinatotohanan kong tinanggap ko ang halagang ISANG DAAN AT LIMANG PONG PISO ) p150.00) kay Gng. Segunda Pornellosa
bilang kabayaran sa aking bahay na nakatayo sa daang Galicia, bilang 502. Kaya't isinasalin ko sa kanila ang boong kapangyarihan
sa nasabing bahay, ganoon din ang karapatan na sila na ang makikipag-unawaan sa Pamahalaan sa pag-bili ng nasabing lupa.
Sa katotohanan ay aking inilagda and aking pangalan sakasunduan ito sa harap ng mga saksi, at ganon and tatak ng aking hinlalaki,
ngayon ika 1 ng Abril ng 1941.
(FDO.) VICENTA SAN JOSE
SAKSI:.
MOISES SAN PEDRO"
(Exhibit A).
The vendor, Vicenta San Jose, was an old tenant thereof.After the purchase of the Santa Clara Estate by the plaintiffs were
allowed to make payments on account of the purchase price of the lot which, as fenced, included two hundred (200)
square meters. All the amounts so paid were duly receipted as shows by Exhs. B, C, D, E, F, G, H and I. Following these
payments the plaintiffs sent a check in the amount of P200.00 but it was not accepted. Thereafter the plaintiffs found out
that the lot, the right of occupancy of which they had purchased from Vicenta San Jose, had been subdivided into two
smaller lots, Nos. 44 and 78, Block 12. Lot No. 44 had been sold to Herminio Guzman. The plaintiffs then filed a complaint
and, as a result, the investigator, Atty. Vizconde, recommended that the lot vacated by San Jose be restored to them.
The evidence of the defendants is purely documentary. We do not deem it necessary to dwell thereon.
The appellate court held:.
Our discussion will be confined to the proposition of whether or not the plaintiffs are entitled to purchase from the
Government the lot formerly held by San Jose, allegedly including about two hundred (200) square meters. The plaintiffs
believe they are, relying mainly on the deed of sale executed by San Jose in their favor (Exh. A). In that document, however,
the area of the lot on which San Jose's house stood had not been specified, nor had the boundaries thereof been
mentioned. Any receipt for the rentals paid San Jose to the old management of the Santa Clara Estate would have given us
an idea of the extent of her holding on the basis of the amount of the rent paid, but none was presented. The plaintiffs
presented a sketch, Exh. L-1, which allegedly represents the lot they claim. But his piece of evidence is devoid of persuasive
value, considering that the old subdivision plan was not offered.
Significantly, the plaintiffs cannot show a contract whereby the Rural Progress Administration has sold or promised to sell
them a lot of two hundred square meters. It is true that they hold receipts (Exhs. B, C, D, E, F, G, H and I) for payments
made on account of the purchase price of a lot, but in none of them are the number of the lot and its area stated. On the
contrary, a note was visible in all the said receipts, except two, which reads: "subject to further re-adjustment." The
plaintiffs claim that a certain Moises San Pedro, Sr., supervisor of collectors of the Sta. Clara Estate, made them believe
that the lot they had purchase was, more or less, of 200 square meters, as enclosed by a fence at the time San Jose
vacated it. They furthermore claim that San Pedro explained that the note "subject to further re-adjustment" appearing in
their receipts meant that their lot would be increased or decreased should the proposed extension of the adjoining street
(the Lealtad St.)would eventually be carried out. It suffices to say that it does not appear that San Pedro by his position in
the Government had power to sell any of the lots included in the Santa Clara Estate. It is obvious that such power resides
only in the Chief of the Office in charge of the disposition of lands acquired by the Government for resale to the needy. It
would not be amiss to state further that receipts of payment issued to other purchasers of lots not adjoining any street
invariably carries the warning: "subject to further re-adjustment.".
Pornellosa, one of the plaintiffs, was given lot No. 78 and she would not agree. She tried to convince us that lot No. 44 was
given to a wrong party, Herminio Guzman, who was not a bona fide occupant thereof. Guzman might not have been
a bona fide occupant, but the law does not bar him from acquiring the lot, at least, as against the plaintiffs who have not
satisfactorily established their right thereto. The intention of the law in authorizing the acquisition of the Santa Clara Estate
was to give home to the homeless. Jose B. Angeles, the husband of Segunda Pornellosa and one of the plaintiffs here,
presently resides with his family in a house built on a lot included in the Santa Clara Estafa and which had been sold to him
by the government. The intention of the law, as stated, is to give home to the homeless, and let that be a reality if we are
to lend a contributing to the building of a strong and law-abiding citizenry.
Now, for all the reasons stated above, we believe that the plaintiffs failed to establish their right to compel the Director of Lands,
now the Chairman of the Land Tenure Administration, to execute a deed of sale conveying to them a residential lot as they claim
in this action.
It appearing that the functions of the Bureau of Lands in the administration of lands acquired through purchase or expropriation
by the government for resale have passed to the Land Tenure Administration, the Director of Lands, as one of the defendants
here, is understood substituted by the Chairman of the Land Tenure Administration, and all the pleadings are accordingly
amended.
The finding of the Court of Appeals that the petitioners have failed to prove that lot 44 is included in the lot formerly occupied by
Vicenta San Jose, their predecessor-in-interest, is binding upon this Court. A party claiming a right granted or created by law must
prove his claim by competent evidence. A plaintiff is duty bound to prove his allegations in the complaint. He must rely on the
strength of his evidence and not on the weakness of that of his opponent.
In their amended complaint, the petitioners, allege that they and their predecessor Vicenta San Jose, from whom they bought the
residential lot in litigation containing an area of 200 sq. m. more or less, had been for many years in actual possession thereof,
and that following the avowed policy of the government to sell the lots acquired from the Santa Clara Estate, of which the
residential lot in litigation forms part, only to bona fide occupants or tenants thereof, the defunct Rural Progress Administration
agreed to sell to them the said residential lot (pp.1, 2-3, rec. on app.). Reviewing the petitioners' evidence, the Court of Appeals
found that in Exhibit A, the deed of sale executed by Vicenta San Jose in favor of Pornellosa, "the area of the lot on which San
Jose's house stood had not been specified, nor had the boudaries thereof been mentioned;" and that there is no showing of the
extent of the alleged vendor's holding or interest. Besides, the petitioners have not presented any document or evidence showing
that the defunct Rural Progress Administration had agreed to sell to them the residential lot in litigation. Granting that the
respondent Herminio Guzman is not entitled to acquire by purchase the said residential lot, still that fact does not relieve the
petitioners from the duty of proving by competent evidence the allegations of their complaint.
Moreover, the deed of sale (Exhibit A), allegedly executed by Vicenta San Jose in favor of Pornellosa is a mere private document
and does not conclusively establish their right to the parcel of land. While it is valid and binding upon the parties with respect to
the sale of the house erected thereon, yet it is not sufficient to convey title or any right to the residential lot in litigation. Acts and
contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable
property must appear in a public document.4
The petitioners having failed to prove their right to acquire lot 44 under Commonwealth Act No. 539 cannot compel the
respondent, the Land Tenure Administration, to convey the lot to them.
The judgment under review is affirmed, with costs against the petitioners.
Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Gutierrez David and Paredes, JJ., concur.
G.R. No. L-27454. April 30, 1970.]
ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO GONZALES, Defendant-Appellee.
Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.
Sulpicio E. Platon, for Defendant-Appellee.
SYLLABUS
1. CIVIL LAW; CONTRACTS; BREACH OF CONTRACT FOR NON-PERFORMANCE; FIXING OF PERIOD BEFORE FILING OF
COMPLAINT FOR NON-PERFORMANCE, ACADEMIC.— Where the time for compliance had expired and there was breach of
contract by non-performance, it was academic for the plaintiff to have first petitioned the court to fix a period for the
performance of the contract before filing his complaint.
2. ID.; ID.; ID.; DEFENDANT CANNOT INVOKE ARTICLE 1197 OF THE CIVIL CODE OF THE PHILIPPINES.— Where the
defendant virtually admitted non-performance of the contract by returning the typewriter that he was obliged to repair in
a non-working condition, with essential parts missing, Article 1197 of the Civil Code of the Philippines cannot be invoked.
The fixing of a period would thus be a mere formality and would serve no purpose than to delay.
3. ID.; ID.; ID.; DAMAGES RECOVERABLE; CASE AT BAR.— Where the defendant-appellee contravened the tenor of his
obligation because he not only did not repair the typewriter but returned it "in shambles,’’ he is liable for the cost of the
labor or service expended in the repair of the typewriter, which is in the amount of P58.75, because the obligation or
contract was to repair it. In addition, he is likewise liable under Art. 1170 of the Code, for the cost of the missing parts, in
the amount of P31.10, for in his obligation to repair the typewriter he was bound, but failed or neglected, to return it in
the same condition it was when he received it.
4. ID.; ID.; ID.; CLAIMS FOR DAMAGES OR ATTORNEY’S FEES NOT RECOVERABLE; NOT ALLEGED OR PROVED IN INSTANT
CASE.— Claims for damages and attorney’s fees must be pleaded, and the existence of the actual basis thereof must be
proved. As no findings of fact were made on the claims for damages and attorney’s fees, there is no factual basis upon
which to make an award therefor.
5. REMEDIAL LAW; APPEALS; APPEAL FROM COURT OF FIRST INSTANCE TO SUPREME COURT; ONLY QUESTIONS OF LAW
REVIEWABLE.— Where the appellant directly appeals from the decision of the trial court to the Supreme Court on
questions of law, he is bound by the judgment of the court a quo on its findings of fact.
DECISION
REYES, J.B.L., J.:
This is a direct appeal by the party who prevailed in a suit for breach of oral contract and recovery of damages but was
unsatisfied with the decision rendered by the Court of First Instance of Manila, in its Civil Case No. 65138, because it
awarded him only P31.10 out of his total claim of P690 00 for actual, temperate and moral damages and attorney’s fees.
The appealed judgment, which is brief, is hereunder quoted in full:jgc:chanrobles.com.ph
"In the early part of July, 1963, the plaintiff delivered to the defendant, who is a typewriter repairer, a portable typewriter
for routine cleaning and servicing. The defendant was not able to finish the job after some time despite repeated reminders made
by the plaintiff. The defendant merely gave assurances, but failed to comply with the same. In October, 1963, the defendant
asked from the plaintiff the sum of P6.00 for the purchase of spare parts, which amount the plaintiff gave to the defendant. On
October 26, 1963, after getting exasperated with the delay of the repair of the typewriter, the plaintiff went to the house of the
defendant and asked for the return of the typewriter. The defendant delivered the typewriter in a wrapped package. On reaching
home, the plaintiff examined the typewriter returned to him by the defendant and found out that the same was in shambles, with
the interior cover and some parts and screws missing. On October 29, 1963. the plaintiff sent a letter to the defendant formally
demanding the return of the missing parts, the interior cover and the sum of P6.00 (Exhibit D). The following day, the defendant
returned to the plaintiff some of the missing parts, the interior cover and the P6.00.
"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines, and the repair job cost him a total of
P89.85, including labor and materials (Exhibit C).
"On August 23, 1965, the plaintiff commenced this action before the City Court of Manila, demanding from the defendant the
payment of P90.00 as actual and compensatory damages, P100.00 for temperate damages, P500.00 for moral damages, and
P500.00 as attorney’s fees.
"In his answer as well as in his testimony given before this court, the defendant made no denials of the facts narrated above,
except the claim of the plaintiff that the typewriter was delivered to the defendant through a certain Julio Bocalin, which the
defendant denied allegedly because the typewriter was delivered to him personally by the plaintiff.
"The repair done on the typewriter by Freixas Business Machines with the total cost of P89.85 should not, however, be fully
chargeable against the defendant. The repair invoice, Exhibit C, shows that the missing parts had a total value of only P31.10.
"WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P31.10, and the costs of suit.
"SO ORDERED."cralaw virtua1aw library
The error of the court a quo, according to the plaintiff-appellant, Rosendo O. Chaves, is that it awarded only the value of the
missing parts of the typewriter, instead of the whole cost of labor and materials that went into the repair of the machine, as
provided for in Article 1167 of the Civil Code, reading as follows:jgc:chanrobles.com.ph
"ART. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore it may be decreed that
what has been poorly done he undone."cralaw virtua1aw library
On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is that he is not liable at all, not even for the sum
of P31.10, because his contract with plaintiff-appellant did not contain a period, so that plaintiff-appellant should have first filed a
petition for the court to fix the period, under Article 1197 of the Civil Code, within which the defendant appellee was to comply
with the contract before said defendant-appellee could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the appellee did not interpose any appeal, the facts, as found by
the trial court, are now conclusive and non-reviewable. 1
The appealed judgment states that the "plaintiff delivered to the defendant . . . a portable typewriter for routine cleaning and
servicing" ; that the defendant was not able to finish the job after some time despite repeated reminders made by the plaintiff" ;
that the "defendant merely gave assurances, but failed to comply with the same" ; and that "after getting exasperated with
the delay of the repair of the typewriter", the plaintiff went to the house of the defendant and asked for its return, which
was done. The inferences derivable from these findings of fact are that the appellant and the appellee had a perfected
contract for cleaning and servicing a typewriter; that they intended that the defendant was to finish it at some future time
although such time was not specified; and that such time had passed without the work having been accomplished, far the
defendant returned the typewriter cannibalized and unrepaired, which in itself is a breach of his obligation, without
demanding that he should be given more time to finish the job, or compensation for the work he had already done. The
time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic
for the plaintiff to have first petitioned the court to fix a period for the performance of the contract before filing his
complaint in this case. Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance
by returning the typewriter that he was obliged to repair in a non-working condition, with essential parts missing. The
fixing of a period would thus be a mere formality and would serve no purpose than to delay (cf. Tiglao. Et. Al. V. Manila
Railroad Co. 98 Phil. 18l).
It is clear that the defendant-appellee contravened the tenor of his obligation because he not only did not repair the
typewriter but returned it "in shambles", according to the appealed decision. For such contravention, as appellant
contends, he is liable under Article 1167 of the Civil Code. jam quot, for the cost of executing the obligation in a proper
manner. The cost of the execution of the obligation in this case should be the cost of the labor or service expended in the
repair of the typewriter, which is in the amount of P58.75. because the obligation or contract was to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code, for the cost of the missing parts, in
the amount of P31.10, for in his obligation to repair the typewriter he was bound, but failed or neglected, to return it in
the same condition it was when he received it.
Appellant’s claims for moral and temperate damages and attorney’s fees were, however, correctly rejected by the trial
court, for these were not alleged in his complaint (Record on Appeal, pages 1-5). Claims for damages and attorney’s fees
must be pleaded, and the existence of the actual basis thereof must be proved. 2 The appealed judgment thus made no
findings on these claims, nor on the fraud or malice charged to the appellee. As no findings of fact were made on the
claims for damages and attorney’s fees, there is no factual basis upon which to make an award therefor. Appellant is
bound by such judgment of the court, a quo, by reason of his having resorted directly to the Supreme Court on questions
of law.
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified, by ordering the defendant-appellee to
pay, as he is hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with interest at the legal rate from the filing
of the complaint. Costs in all instances against appellee Fructuoso Gonzales.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Villamor, JJ., concur.
Barredo, J., did not take part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-13602 April 6, 1918
LEUNG BEN, plaintiff,
vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of Manila, defendants.
Thos. D. Aitken and W. A. Armstrong for plaintiff.
Kincaid & Perkins for defendants.
STREET, J.:
This is an application for a writ of certiorari, the purpose of which is to quash an attachment issued from the Court of First
Instance of the City of Manila under circumstances hereinbelow stated.
Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover of
Leung Ben the sum of P15,000 alleged to have been lost by the plaintiff to the defendant in a series of gambling, banking and
percentage games conducted ruing the two or three months prior to the institution of the suit. In his verified complaint the
plaintiff asked for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of the
defendant, on the ground that the latter was about to depart from the Philippine islands with intent to defraud his creditors. This
attachment was issued; and acting under the authority thereof, the sheriff attached the sum of P15,000 which had been
deposited by the defendant with the International Banking Corporation.
The defendant thereupon appeared by his attorney and moved the court to quash the attachment. Said motion having dismissed
in the Court of First Instance, the petitioner, Leung Ben, the defendant in that action, presented to this court, upon January 8,
1918 his petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of the city of
Manila whose names are mentioned in the caption hereof. The prayer is that the Honorable James A. Ostrand, as the judge having
cognizance of the action in said court be required to certify the record to this court for review and that the order of attachment
which had been issued should be revoked and discharged. with costs. Upon the filing of said petition in this court the usual order
was entered requiring the defendants to show cause why the writ should not issue. The response of the defendants, in the nature
of a demurrer, was filed upon January 21, 1918; and the matter is now heard upon the pleadings thus presented.
The provision of law under which this attachment was issued requires that there should be accuse of action arising upon contract,
express or implied. The contention of the petitioner is that the statutory action to recover money lost at gaming is that the
statutory action to recover money lost at gaming is no such an action as is contemplated in this provision, and he therefore insists
that the original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court of First
Instance acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy, and
adequate remedy by appeal or otherwise; and that consequently the writ of certiorari supplies the appropriate remedy for his
relief.
The case presents the two following questions of law, either of which, if decided unfavorably to the petitioner, will be fatal to his
application:
(1) Supposing that the Court of First Instance has granted an attachment for which there is no statutory authority, can this court
entertain the present petition and grant the desired relief?
(2) Is the statutory obligation to restore money won at gaming an obligation arising from "contract, express or implied?"
We are of the opinion that the answer to the first question should be in the affirmative. Under section 514 of the Code of
Civil Procedure the Supreme Court has original jurisdiction by the writ of certiorari over the proceedings of Courts of First
Instance, wherever said courts have exceeded their jurisdiction and there is no plaint, speedy, and adequate remedy. In
the same section, it is further declared that the proceedings in the Supreme Court in such cases hall be as prescribed for
Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme Court, so far as applicable, the provisions
contained in those section to the same extent as if they had been reproduced verbatim immediately after section 514.
Turning to section 217, we find that, in defining the conditions under which certiorari can be maintained in a Court of First
Instance substantially the same language is used as is the same remedy can be maintained in the Supreme Court of First
Instance, substantially the same language is used as is found in section 514 relative to the conditions under which the same
remedy can be maintained in the Supreme Court, namely, when the inferior tribunal has exceeded its jurisdiction and
there is no appeal, nor any plain, speedy and adequate remedy. In using these expressions the author of the Code of Civil
Procedure merely adopted the language which, in American jurisdictions at least, had long ago reached the stage of
stereotyped formula.
In section 220 of the same Code, we have a provision relative to the final proceedings in certiorari, and herein it is stated
that the court shall determine whether the inferior tribunal has regularly pursued its authority it shall give judgment either
affirming annulling, or modifying the proceedings below, as the law requires. The expression, has not regularly pursued its
authority as here used, is suggestive, and we think it should be construed in connection with the other expressions have
exceeded their jurisdiction, as used in section 514, and has exceeded their jurisdiction as used in section 217. Taking the
three together, it results in our opinion that any irregular exercise of juridical power by a Court of First Instance, in excess
of its lawful jurisdiction, is remediable by the writ of certiorari, provided there is no other plain, speedy, and adequate
remedy; and in order to make out a case for the granting of the writ it is not necessary that the court should have acted in
the matter without any jurisdiction whatever. Indeed the repeated use of expression excess of jurisdiction shows that the
lawmaker contemplated the situation where a court, having jurisdiction should irregularly transcend its authority as well as
the situation where the court is totally devoid of lawful power.
It may be observed in this connection that the word jurisdiction as used in attachment cases, has reference not only to the
authority of the court to entertain the principal action but also to its authority to issue the attachment, as dependent upon
the existence of the statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the attachment as an
ancillary remedy incident to the principal litigation is of importance; as a court's jurisdiction over the main action may be
complete, and yet it may lack authority to grant an attachment as ancillary to such action. This distinction between
jurisdiction over the ancillary has been recognized by this court in connection with actions involving the appointment of a
receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), a receiver had been appointed without legal
justification. It was held that the order making the appointment was beyond the jurisdiction of the court; and though the
court admittedly had jurisdiction of the main cause, the order was vacated by this court upon application a writ
of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde,
1 Phil. Rep., 404.)
By parity of reasoning it must follow that when a court issues a writ of attachment for which there is no statutory authority,
it is acting irregularly and in excess of its jurisdiction, in the sense necessary to justify the Supreme Court in granting relief
by the writ of certiorari. In applying this proposition it is of course necessary to take account of the difference between a
ground of attachment based on the nature of the action and a ground of attachment based on the acts or the conditions of
the defendant. Every complaint must show a cause of action some sort; and when the statue declares that the attachment
may issue in an action arising upon contract, the express or implied, it announces a criterion which may be determined
from an inspection of the language of the complaint. The determination of this question is purely a matter of law. On the
other hand, when the stature declares that an attachment may be issued when the defendant is about to depart from the
Islands, a criterion is announced which is wholly foreign to the cause of action; and the determination of it may involve a
disputed question of fact which must be decided by the court. In making this determination, the court obviously acts within its
powers; and it would be idle to suppose that the writ of certiorari would be available to reverse the action of a Court of First
Instance in determining the sufficiency of the proof on such a disputed point, and in granting or refusing the attachment
accordingly.
We should not be understood, in anything that has been said, as intending to infringe the doctrine enunciated by this court in
Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly applied. It was there held that we would not, upon
application for a writ of certiorari, dissolve an interlocutory mandatory injunction that had been issued in a Court of First Instance
as an incident in an action of mandamus. The issuance of an interlocutory injunction depends upon conditions essentially
different from those involved in the issuance of an attachment. The injunction is designed primarily for the prevention of
irreparable injury and the use of the remedy is in a great measure dependent upon the exercise of discretion. Generally, it may be
said that the exercise of the injunctive powers is inherent in judicial authority; and ordinarily it would be impossible to distinguish
between the jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory injunction, for the latter is
involved in the former. That the writ of certiorari can not be used to reverse an order denying a motion for a preliminary
injunction is of course not to cavil. (Somes vs. Crossfield and Molina, 8 Phil. Rep., 284.)
But it will be said that the writ of certiorari is not available in this cae, because the petitioner is protected by the attachment bond,
and that he has a plain, speedy, and adequate remedy appeal. This suggestion seems to be sufficiently answered in the case of
Rocha & Co vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there cited. The remedy by
appeal is not sufficiently speedy to meet the exigencies of the case. An attachment is extremely violent, and its abuse may often
result in infliction of damage which could never be repaired by any pecuniary award at the final hearing. To postpone the granting
of the writ in such a case until the final hearing and to compel the petitioner to bring the case here upon appeal merely in order
to correct the action of the trial court in the matter of allowing the attachment would seem both unjust and unnecessary.
Passing to the problem propounded in the second question it may be observed that, upon general principles,. recognize both the
civil and common law, money lost in gaming and voluntarily paid by the loser to the winner can not in the absence of statue, be
recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling,
contains numerous provisions recognizing the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7,
8, 9, 11). The original complaint in the action in the Court of First Instance is not clear as to the particular section of Act No. 1757
under which the action is brought, but it is alleged that the money was lost at gambling, banking, and percentage game in which
the defendant was banker. It must therefore be assumed that the action is based upon the right of recovery given in Section 7 of
said Act, which declares that an action may be brought against the banker by any person losing money at a banking or percentage
game.
Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the Code of Civil Procedure? To
begin the discussion, the English version of the Code of Civil Procedure is controlling (sec. 15, Admin. Code, ed. of 1917).
Furthermore it is universally admitted to be proper in the interpretation of any statute, to consider its historical antecedents and
its juris prudential sources. The Code of Civil Procedure, as is well known, is an American contribution to Philippine legislation. It
therefore speaks the language of the common-law and for the most part reflects its ideas. When the draftsman of this Code used
the expression contract, express or implied, he used a phrase that has been long current among writers on American and English
law; and it is therefore appropriate to resort to that system of law to discover the appropriate to resort to that system of law to
discover the meaning which the legislator intended to convey by those meaning which the legislator intended to convey by those
terms. We remark in passing that the expression contrato tracito, used in the official translation of the Code of Civil Procedure as
the Spanish equivalent of implied contract, does not appear to render the full sense of the English expression.
The English contract law, so far as relates to simple contracts is planted upon two foundations, which are supplied by two very
different conceptions of legal liability. These two conceptions are revealed in the ideas respectively underlying (1) the common-
law debt and (2) the assumptual promise. In the early and formative stages of the common-law the only simple contract of which
the courts took account was the real contract or contract re, in which the contractual duty imposed by law arises upon the
delivery of a chattle, as in the mutuum, commodatum, depositum, and the like; and the purely consensual agreements of
the Roman Law found no congenial place in the early common law system.
In course of time the idea underlying the contract re was extended so as to include from one person to another under such
circumstances as to constitute a justa cuas debendi. The obligation thereby created was a debt. The constitutive element
in this litigation is found in the fact that the debtor has received something from the creditor, which he is bound by the
obligation of law to return or pay for. From an early day this element was denominated the quid pro quo, an ungainly
phrase coined by Mediaeval Latinity. The quid pro quo was primarily a materials or physical object, and its constituted the
recompense or equivalent acquired by the debtor. Upon the passage of the quid pro quo from one party to the other, the
law imposed that real contractual duty peculiar to the debt. No one conversant with the early history of English law would
ever conceive of the debt as an obligation created by promise. It is the legal duty to pay or deliver a sum certain of money
or an ascertainable quantity of ponderable or measurable chattles.
The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to the debtor at the time of
the creation of the debt, but the term is equally applicable to duties imposed by custom or statute, or by judgment of a
court.
The existence of a debt supposes one person to have possession of thing (res) which he owes and hence ought to turn over
the owner. This obligation is the oldest conception of contract with which the common law is familiar; and notwithstanding
the centuries that have rolled over Westminster Hall that conception remains as one of the fundamental bases of the
common-law contract.
Near the end of the fifteenth century there was evolved in England a new conception of contractual liability, which
embodied the idea of obligation resulting from promise and which found expression in the common law assumpsit, or
parol promise supported by a consideration. The application of this novel conception had the effect of greatly extending
the filed of contractual liability and by this means rights of action came to be recognized which had been unknown before.
The action of assumpsit which was the instrument for giving effect to this obligation was found to be a useful remedy; and
presently this action came to be used for the enforcement of common-law debts. The result was to give to our contract
law the superficial appearance of being based more or less exclusively upon the notion of the obligation of promise.
An idea is widely entertained to the effect that all simple contracts recognized in the common-law system are referable to
a singly category. They all have their roots, so many of us imagine, in one general notion of obligation; and of course the
obligation of promise is supposed to supply this general notion, being considered a sort of menstruum in which all other
forms of contractual obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the debt
which was the first conception of contract liability revealed in the common law, has remained, although it was detained to
be in a measure obscured by the more modern conception of obligation resulting from promise.
What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of money or an
ascertainable quantity of ponderable or measurable chattles — which is indicated by them debt — has ever been
recognized, in the common-law system, as a true contract, regardless, of the source of the duty or the manner in which it is
create — whether derived from custom, statue or some consensual transaction depending upon the voluntary acts of the
parties. the form of contract known as the debt is of the most ancient lineage; and when reference is had to historical
antecedents, the right of the debt to be classed as a contract cannot be questioned. Indeed when the new form of
engagement consisting of the parol promise supported by a consideration first appeared, it was looked upon as an upstart
and its right to be considered a true contract was questioned. It was long customary to refer to it exclusively as an
assumpsit, agreement, undertaking, or parol promise, in fact anything but a contract. Only in time did the new form of
engagement attain the dignity of being classed among true contract.
The term implied takers us into shadowy domain of those obligations the theoretical classification of which has engaged the
attention of scholars from the time of Gaius until our own day and has been a source of as much difficulty to the civilian as to the
common-law jurist. There we are concerned with those acts which make one person debtor to another without there having
intervened between them any true agreement tending to produce a legal bond (vinculum juris). Of late years some American and
English writers have adopted the term quasi-contract as descriptive of these obligations or some of them; but the expression
more commonly used is implied contract.
Upon examination of these obligations, from the view point of the common-law jurisprudence, it will be found that they fall
readily into two divisions according as they bear an analogy to the common-law debt or to the common law assumpsit. To exhibit
the scope of these different classes of obligations is here impracticable. It is only necessary in this connection to observe that the
most conspicuous division is that which comprises duties in the nature of debt. The characteristic feature of these obligations is
that upon certain states of fact the law imposes an obligation to pay a sum certain of money; and it is characteristic of this
obligation that the money in respect to which the duty is raised is conceived as being equivalent of something taken or detained
under circumstances giving rise to the duty to return or compensate therefore. The proposition that no one shall be allowed to
enrich himself unduly at the expense of another embodies the general principle here lying at the basis of obligation. The right to
recover money improperly paid (repeticion de lo indebido) is also recognized as belong to this class of duties.
It will observed that according to the Civil Code obligations are supposed to be derived either from (1) the law, (2) contracts and
quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob lame or negligence is present. This enumeration of
sources of obligations and the obligation imposed by law are different types. The learned Italian jurist, Jorge Giorgi, criticises this
assumption and says that the classification embodied in the code is theoretically erroneous. His conclusion is that one or the
other of these categories should have been suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish ed.,
vol. 5 arts. 5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of interest to note that the common law makes no
distinction between the two sources of liability. The obligations which in the Code are indicated as quasi-contracts, as well as
those arising ex lege, are in the common la system, merged into the category of obligations imposed by law, and all are
denominated implied contracts.
Many refinements, more or less illusory, have been attempted by various writers in distinguishing different sorts of implied
contracts, as for example, the contract implied as of fact and the contract implied as of law. No explanation of these distinctions
will be here attempted. Suffice it to say that the term contract, express or implied, is used to by common-law jurists to include all
purely personal obligations other than those which have their source in delict, or tort. As to these it may be said that, generally
speaking, the law does not impose a contractual duty upon a wrongdoer to compensate for injury done. It is true that in certain
situations where a wrongdoer unjustly acquired something at the expense of another, the law imposes on him a duty to surrender
his unjust acquisitions, and the injured party may here elect to sue upon this contractual duty instead of suing upon the tort; but
even here the distinction between the two liabilities, in contract and in tort, is never lost to sight; and it is always recognized that
the liability arising out of the tort is delictual and not of a contractual or quasi-contractual nature.
In the case now under consideration the duty of the defendant to refund the money which he won from the plaintiff at gaming is
a duty imposed by statute. It therefore arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from the
plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in the nature of debt and is properly
classified as an implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery, if
recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money had and received. (Clarke vs.
Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the common law the
duty to return money won in this way is an implied contract, or quasi-contract.
It is no argument to say in reply to this that the obligation here recognized is called an implied contract merely because the
remedy commonly used in suing upon ordinary contract can be here used, or that the law adopted the fiction of promise in order
to bring the obligation within the scope of the action of assumpsit. Such statements fail to express the true import of the
phenomenon. Before the remedy was the idea; and the use of the remedy could not have been approved if it had not been
for historical antecedents which made the recognition of this remedy at one logical and proper. Furthermore, it should not
be forgotten that the question is not how this duty but what sort of obligation did the author of the Code of Civil
Procedure intend to describe when he sued the term implied contract in section 412.
In what has been said we have assumed that the obligation which is at the foundation of the original action in the court
below is not a quasi-contract, when judge by the principles of the civil law. A few observations will show that this
assumption is not by any means free from doubt. The obligation in question certainly does not fall under the definition of
either of the two-quasi- contracts which are made the subject of special treatment in the Civil Code, for its does not arise
from a licit act as contemplated in article 1895. The obligation is clearly a creation of the positive law — a circumstance
which brings it within the purview of article 1090, in relation with article, 1089; and it is also derived from an illicit act,
namely, the playing of a prohibited game. It is thus seen that the provisions of the Civil Code which might be consulted
with a view to the correct theoretical classification of this obligation are unsatisfactory and confusing.
The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the obligation incident to the
officious management of the affairs of other person (gestion de negocios ajenos) and (2) the recovery of what has been
improperly paid (cabro de lo indebido). That the authors of the Civil Code selected these two obligations for special
treatment does not signify an intention to deny the possibility of the existence of other quasi-contractual obligations. As is
well said by the commentator Manresa.
The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the generations of the said
obligations; but the Code, just as we shall see further on, in the impracticableness of enumerating or including them all in a
methodical and orderly classification, has concerned itself with two only — namely, the management of the affairs of other
person and the recovery of things improperly paid — without attempting by this to exclude the others. (Manresa, 2d ed.,
vol. 12, p. 549.)
It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence of more than a thousand
years, should have arbitrarily assumed to limit the quasi-contract to two obligations. The author from whom we have just
quoted further observes that the two obligations in question were selected for special treatment in the Code not only
because they were the most conspicuous of the quasi-contracts, but because they had not been the subject of
consideration in other parts of the Code. (Opus citat., 550.)
It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide range. The Italian jurist, Jorge
Giorgi, to whom we have already referred, considers under this head, among other obligations, the following: payments
made upon a future consideration which is not realized or upon an existing consideration which fails; payments wrongfully
made upon a consideration which is contrary to law, or opposed to public policy; and payments made upon a vicious
consideration or obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.)
Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the application of articles
1798, 180`, and 1305 of the Civil Code. The first two of these articles relate to gambling contracts, while article 1305 treats
of the nullity of contracts proceeding from a vicious or illicit consideration. Taking all these provisions together, it must be
apparent that the obligation to return money lost at play has a decided affinity to contractual obligations; and we believe
that it could, without violence to the doctrines of the civil law, be held that such obligations is an innominate
quasi-contract. It is, however, unnecessary to place the decision on this ground.
From what has been said it follows that in our opinion the cause of action stated in the complaints in the court below is
based on a contract, express or implied and is therefore of such nature that the court had authority to issue writ of
attachment. The application for the writ of certiorari must therefore be denied and the proceedings dismissed. So ordered.
Arellano, C.J., Torres, Johnson and Carson, JJ., concur.
Separate Opinions
MALCOLM, J., concurring:
As I finished reading the learned and interesting decision of the majority, the impression which remained was that the court was
enticed by the nice and unusual points presented to make a hard case out of an easy one and unfortunately t do violence to the
principles of certiorari. The simple questions are : Di the Court of First Instance of city of Manila exceed its jurisdiction in granting
an attachments against the property of the defendant, now plaintiff? Has this defendant, now become the plaintiff, any other
plain, speedy and adequate remedy? The answer are found in the decision of thinks court, in Herrera vs. Barretto and Joaquin
([1913], 25 Phil., 245), from which I quote the following:
It has been repeatedly held by this court that a writ of certiorari will not be issued unless it clearly appears that the court to which
it is to be directed acted without or in excess of jurisdiction. It will not be issued to cure errors in the proceedings or to correct
erroneous conclusions of law or of fact. If the court has jurisdiction. It will not be issued to cure errors in the proceedings to
correct jurisdiction of the subject matter and f the person, decisions upon all question pertaining to the cause are decisions within
its jurisdiction and, however irregular or erroneous they may be, cannot be corrected by certiorari. The Code of Civil Procedure
giving Courts of First Instance general jurisdiction in actions for mandamus, it goes without saying that the Court of First Instance
had jurisdiction in the present case to resolve every question arising in such an action and t decide every question presented to it
which pertained to the cause. It has already been held by this court, that while it is a power to be exercised only in extreme case,
a Court of First Instance has power to issue a mandatory injunction t stand until the final determination of the action in which it is
issued. While the issuance of the mandatory injunction in this particular case may have been irregular and erroneous, a question
concerning which we express no opinion, nevertheless its issuance was within the jurisdiction of the court and its action is not
reveiwable on certiorari. It is not sufficient to say that it was issued wrongfully and without sufficient grounds and in the absence
of the other party. The question is, Did the court act with jurisdiction?
It has been urged that the court exceeded its jurisdiction in requiring the municipal president t issue the license, for the reason
that he was not the proper person to issue it and that, if he was the proper person, he had the right to exercise a discretion as to
whom the license should be issued. We do not believe that either of these questions goes to the jurisdiction of the court to act.
One of the fundamental question in a mandamus against a public officer is whether or not that officer has the right to exercise
discretion in the performance of the act which the plaintiff asks him to perform. It is one of the essential determinations of the
cause. To claim that the resolution of that question may deprive the court of jurisdiction is to assert a novel proposition. It is
equivalent to the contention that a court has jurisdiction if he decides right but no jurisdiction if he decides wrong. It may be
stated generally that it is never necessary to decide the fundamental questions of a cause to determine whether the court has
jurisdiction. The question of jurisdiction is preliminary and never touches the merits of the case. The determination of the
fundamental questions of a cause are merely the exercise of a jurisdiction already conceded. In the case at bar no one denies the
power, authority or jurisdiction of the Court of First Instance to take cognizance of an action for mandamus and to decide very
question which arises in that cause and pertains thereto. The contention that the decision of one of those question, if wrong,
destroys jurisdiction involves an evident contradiction.
Jurisdiction is the authority to hear and determine a cause — the right to act in a case. Since it is the power to hear and determine,
it does not depend either upon the regularity of the exercise of that power or upon the rightfulness of the decision made.
Jurisdiction should therefore be distinguished from the exercise of jurisdiction. The authority to decide a case at all, and not the
decision rendered therein, is what makes up jurisdiction. Where there is jurisdiction of the person and subject matter, as we have
said before, the decision of all other questions arising in the case an exercise of that jurisdiction.
Then follows an elaborate citation and discussion of American authorities, including a decision of the United States
Supreme Court and of the applicable Philippine cases. The decision continues"
The reasons givens in these cases last cited for the allowance of the writ of prohibition are applicable only to the class of
cases with which the decision deal and do not in any way militate against the general proposition herein asserted. Those
which relate to election contest are based upon the principle that those proceedings, are special in their nature and must
be strictly followed, a material departure from the statute resulting a loss, or in an excess of jurisdiction. The cases relating
to receivers are based, in a measure, upon the principle the appointment of a receiver being governed by the statute; and
in part upon the theory that the appointment of a receiver in an improper case is in substance a bankruptcy proceeding,
the taking of which is expressly prohibited by law. The case relative to the allowance of alimony pendente lite when the
answer denies the marriage is more difficult to distinguish. The reasons in support of the doctrine laid down in that case
are given the opinion in full and they seem to place the particular case to which they refer in a class by itself.
It is not alight things that the lawmakers have abolished writs of error and with them certiorari and prohibition, in so far as
they were methods by which the mere errors of an inferior curt could be corrected. As instruments to that end they no
longer exist. Their place is no taken by the appeal. So long as the inferior court retains jurisdiction its errors can be
corrected only by that method. The office of the writ of certiorari has been reduced to the correction of defects
of jurisdiction solely and cannot legally be used for any other purpose. It is truly an extra ordinary remedy and in this
jurisdiction, its use is restricted to truly extraordinary cases — cases in which the action of the inferior court is wholly void,
where any further steps in the case would result in a waste of time and money and would produce no result whatever;
where the parties, or their privies, would be utterly deceived; where a final judgment or decree would be nought but a
snare and a delusion, deciding nothing, protecting nobody, a juridical pretension, a recorded falsehood, a standing menace.
It is only to avoid such result as these that a writ of certiorari is issuable; and even here an appeal will lie if the aggrieved
party prefers to prosecute it.
A full and thorough examination of all the decided cases in this court touching the question of certiorari and prohibition
fully supports the proposition already stated that, where a Court of First Instance has jurisdiction of the subject matter and
of the person, its decision of any question pertaining to the cause, however, erroneous, cannot be reviewed by certiorari,
but must be corrected by appeal.
I see no reason to override the decision in Herrera vs. Barretto and Joaquin (supra). Accordingly, I can do no better than to
make the language of Justice Moreland my own. applying these principles, it is self-evident that this court should no
entertain the present petition and should not grant the desired relief.
FISHER, J., dissenting:
I am in full accord with the view that the remedy of certiorari may be invoked in such cases as this, but I am constrained to
dissent from the opinion of the majority as regards the meaning of the term implied contract.
Section 412 of the code of Civil Procedure in connection with section 424, authorizes the preliminary attachment of the
property of the defendant: "(1) In an action for the recovery of money or damages on a cause of action arising upon
contract, express or implied, when the defendant is about to depart from the Philippine Islands, with intent to defraud his
creditors; (2) . . .; (3) . . .; (4) . . .; (5) When the defendant has removed or disposed of his property, or is about to do so,
with intent to defraud his creditors."
It is evident that the terms of paragraph five of the article cited are much broader than those of the first paragraph. The
fifth paragraph is not limited to action arising from contract, but is by its terms applicable to actions brought for the
purpose of enforcing extra-contractual rights as well as contract rights. The limitation upon cases falling under paragraph five is to
be found, not in the character of the obligation for the enforcement for which the action is brought, but in the terms of article
4265, which requires that the affidavit show that the amount due the plaintiff . . . is as much as the sum for which the order is
granted.
That is to say, when application is made for a preliminary attachment upon the ground that the plaintiff is about to dispose of his
property with intent to defraud his creditors — thus bringing the case within the terms of paragraph five of the section — it is not
necessary to show that the obligation in suit is contractual in its origin, but is sufficient to show that the breach of the obligation,
as shown by the facts stated in the complaint and affidavit, imposes upon the defendant the obligation to pay a specific and
definite sum. For example, if it is alleged in the complaint that the defendant by negligence, has caused the destruction by fire of
a building belonging to plaintiff, and that such building was worth a certain sum of money, these facts would show a definite basis
upon which to authorize the granting of the writ. But if it were averred that the defendant has published a libel concerning the
plaintiff, to the injury of his feeling and reputation, there is no definite basis upon which to grant an attachment, because the
amount of the damage suffered, being necessarily uncertain and indeterminate, cannot be ascertained definitely until the trail
has been completed.
But it appears that the legislature although it has seen fit to authorize a preliminary attachment in aid of action of all kinds when
the defendant is concealing his property with intent to defraud his creditors, has provided is about to depart from the country
with intent to defraud his creditos, the writ will issue only when the action in aid of which it is sought arises from
a contract express or implied. If an attachment were permitted upon facts bringing the application with the first paragraph of the
section in support of action of any kind, whether the obligation sued upon is contractual or not, then paragraph five would by
construction be made absolutely identical with paragraph one, and this would be in effect equivalent to the complete eliminated
of the last two lines of the first paragraph. It is a rule of statutory construction that effect should be given to all parts of the statue,
if possible. I can see no reason why the legislature should have limited cases falling within the firs paragraph to action arising from
contract and have refrained from imposing this limitation with respect to cases falling within the terms of the fifth paragraph, but
this should have no effect upon us in applying the law. Whether there be a good reason for it or not the distinction exists.
Had the phrase express or implied not been used to qualify contract, there would be no doubt whatever with regard to the
meaning of the word. In the Spanish Civil law contract are always consensual, and it would be impossible to define as a contract
the judicial relation existing between a person who has lost money at gaming and the winner of such money, simple because the
law imposes upon the winner the obligation of making restitution. An obligation of this kind, far from being consensual in its
origin, arises against the will of the debtor. To call such a relation a contract is, from the standpoint of the civil law, a
contradiction in terms.
But is said that as the phase express or implied has been used to qualify the word contract and these words are found in statue
which speaks the language of the common law, this implies the introduction into our law of the concept of the implied contract of
the English common-law, a concept which embraces a certain class of obligation originating ex lege, which have been arbitrarily
classified as contracts, so that they might be enforced by one of the formal actions of the common law which legal tradition and
practice has reserved for the enforcement of contract. I cannot concur in this reasoning. I believe that when a technical juridical
term of substantive law is used in the adjective law of these islands, we should seek its meaning in our own substantive law rather
than in the law of America or of England. The code of Civil Procedure was not enacted to establish rules of substantive law, but
upon the assumption of the existence of these rules.
In the case of Cayce vs. Curtis (Dallam's Decisions Texas Reports, 403), it appears that the legislature, at a time when that State
still retained to a large extent the Spanish substantive civil law, enacted a statue in which the word bonds is used. In litigation
involving the construction of that statute, one of the parties contended that the work bond should be given the technical meaning
which it had in the English Common Law. The court rejected this contention saying —
On the first point it is urged by counsel for the appellant that the word bond used in the statute being a common law term,
we must refer to the common law for its legal signification; and that by that law no instrument is a bond which is not under
seal. The truth of the proposition that sealing is an absolute requisite to the validity of a bond at common law is readily
admitted; but the applicability of that rule of the case under consideration is not perceived. This bond was taken at a time
when the common law afforded no rule of decision or practice in this country, and consequently that law cannot be
legitimately resorted to, even for the purpose for which it is invoked by the counsel for the appellant, unless it be shown
that the civil law had not term of similar import for we regard it as a correct rule of construction, that where technical
terms are used in a statute they are to be referred for their signification to terms f similar import in the system of laws
which prevails in the country where the statues is passed, and not to another system which is entirely foreign t the whole
system of municipal regulations by which that country is governed. (Martin's Reports, vol. 3, 185; 7 Martin [N. S.], 162.)"
Consequently, I believe that in the interpretation of phase "contract, express or implied," we should apply the rules of our
own substantive law. The phrase in itself offers no difficulty. The concept of the contract, under the Civil Code, as a legal
relation of exclusively consensual origin, offers no difficulty. Nor is any difficulty encountered in the gramatical sense of the
words express and "implied". Express according to the New International Dictionary is that which is directly and distinctly
stated; expressed, not merely implied or left to interference. Therefore, a contract entered into by means of letters, in
which the offer and the acceptance have been manifested by appropriate words, would be an "express contract." The
word "imply" according to the same dictionary, is to involve in substance or essence, or by fair inference, or by
construction of law, when not expressly stated in words or signs; to contain by implication to include virtually.
Therefore, if I enter a tailor shop and order a suit of clothes, although nothing is said regarding payment, it is an inference,
both logical and legal, from my act that is my intention to pay the reasonable value of the garments. The contract is
implied, therefore, is that in which the consent of the parties is implied.
Manresa, commenting upon article 1262 of the Civil Code, says:
The essence of consent is the agreement of the parties concerning that which is to constitute the contract . . . . The forms
of this agreement may vary according to whether it is expressed verbally or in writing, by words or by acts. Leaving the
other differences for consideration hereafter, we will only refer now to those which exist between express consent
and implied consent . . . . It is unquestionable that implied consent manifested by act or conduct, produces a contract. . . .
If it were necessary to have recourse to the English common law for the purpose of ascertaining the meaning of the phrase
under consideration, we could find many decisions which gave it the same meaning as that for which I contend.
An implied contract is where one party receives benefits from another party, under such circumstances that the law
presume a promise on the part of the party benefited to pay a reasonable price for the same. (Jones vs. Tucker [Del.], 84
Atlantic, 1012.)
It is true that English courts have extended the concept of the term contract to include certain obligations arising ex
lege without consent, express or implied. True contracts created by implied consent are designated in the English common
law as contracts implied in the fact, while the so-called contracts in which the consent is a fiction of law are called
contracts implied by law. But is evident that the latter are not real contracts. They have been called contract arbitrarily by
the courts of England, and those of the Untied States in which the English common law is in force, in order that certain
actions arising ex lege may be enforced by the action of assumpsit. In the rigid formulism of the English common law the
substantive right had to be accommodated to the form of action. As is stated in the monograph on the action of assumpsit
in Ruling Case Law. (volume 2, 743) —
In theory it wan action to recover for the nonperformance f simple contracts, and the formula and proceedings were
constructed and carried on accordingly. . . . From the reign of Elizabeth this action has been extended to almost every case
where an obligation arises from natural reason, . . . and it is now maintained in many cases which its principles do not gave rise to the obligation ex lege relied upon by the plaintiff in the court below is illicit — an unlawful gambling game. In
comprehend and where fictions and intendments are resorted to, to fit the actual cause of action to the theory of the remedy. It the second place, the first paragraph of section 412 of the Code of Civil Procedure does not authorize an attachment in
is thus sanctioned where there has been no . . . real contract, but where some duty is deemed sufficient to justify the court in actions arising out of quasi contracts, but only in actions arising out of contract, express or implied.
imputing the promise to perform its, and hence in bending the transaction to the form of action.
I am therefore of the opinion that the court below was without jurisdiction to issue that writ of attachment and that the
In the ancient English common law procedure the form of the action was regarded as being much more important than the writ should be declared null and void.
substantive right to be enforced. If no form of action was found in which the facts would fit, so much the worse for the facts! to
avoid the injustices to which this condition of affairs gave rise, the judges invented those fictions which permitted them to Avanceña, J., concurs.
preserve the appearance of conservatism and change the law without expressly admitting that they were doing so. The
indispensable averment, that they were doing so. The indispensable avernment without which the action of assumpsit would not
lie, was that the defendant promised to pay plaintiff the amount demanded. (Sector vs. Holmes, 17 Vs., 566.) In true contracts,
whether express or implied, this promise in fact exists. In obligations arising ex lege there is no such promise, and therefore the
action of assumpsit could not be maintained, and therefore the action of assumpsit could not be maintained, although by reason Republic of the Philippines
of its relative simplicity it was one of the most favored forms of action. In order to permit the litigant to make use of this form of SUPREME COURT
action for the enforcement of ascertain classes of obligations arising ex lege, the judges invented the fiction of the promise of the Manila
defendant to pay the amount of the obligation, and as this fictitious promise give the appearance of consensuality to the legal
relations of the parties, the name of implied contract is given to that class of extra-contractual obligations enforcible by the action SECOND DIVISION
of assumpsit.
G.R. No. 158086 February 14, 2008
Now, it is not be supposed that it was the intention of the Legislature in making use in the first paragraph of article 412 of the
ASJ CORPORATION and ANTONIO SAN JUAN, petitioners,
phrase contract, express or implied to corrupt the logical simplicity of our concept of obligations by importing into our law the
vs.
antiquated fictions of the mediaeval English common law. If one of the concepts of the term "implied contract" in the English
SPS. EFREN & MAURA EVANGELISTA, respondents.
common law, namely, that in which consent is presume from the conduct of the debtor, harmonizes with the concept of the
contract in our law, why should we reject that meaning and hold that the Legislature intended to use this phrase in the foreign DECISION
and illogical sense of a contract arising without consent? This is a civil law country. why should we be compelled to study the
fictions of the ancient English common law, in order to be informed as to the meaning of the word contract in the law of the QUISUMBING, J.:
Philippine Islands? Much more reasonable to my mind was the conclusion of the Texas court, under similar circumstances, to the
effect to be referred for their signification to terms of similar import in the system of laws which prevails in the country where the For review on certiorari is the Decision1 dated April 30, 2003 of the Court of Appeals in CA-G.R. CV No. 56082, which had
statue is passed." (Cayce vs. Curtis, supra.) affirmed the Decision2 dated July 8, 1996 of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 9 in Civil Case No.
745-M-93. The Court of Appeals, after applying the doctrine of piercing the veil of corporate fiction, held petitioners ASJ
My conclusion is that the phase contract, express or implied should be interpreted in the grammatical sense of the words and Corporation (ASJ Corp.) and Antonio San Juan solidarily liable to respondents Efren and Maura Evangelista for the
limited to true contracts, consensual obligations arising from consent, whether expressed in words, writing or signs, or presumed unjustified retention of the chicks and egg by-products covered by Setting Report Nos. 108 to 113.3
from conduct. As it is evident that the defendant in the present case never promised, him in the gambling game in question, his
obligation to restor the amounts won, imposed by the law, is no contractual, but purely extra-contractual and therefore the The pertinent facts, as found by the RTC and the Court of Appeals, are as follows:
action brought not being one arising upon contract express or implied, the plaintiff is not entitled to a preliminary attachment
Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale business of buying broiler eggs,
upon the averment that the defendant is about to depart from the Philippine Islands with with intent t defraud his creditors, no
hatching them, and selling their hatchlings (chicks) and egg by-products4 in Bulacan and Nueva Ecija. For the incubation
averment being made in the compliant or in the affidavit that the defendant has removed or disposed of his property, or is about
and hatching of these eggs, respondents availed of the hatchery services of ASJ Corp., a corporation duly registered in the
to depart with intent to defraud his creditors, so as to bring the case within the terms of the fifth paragraph of section 412.
name of San Juan and his family.
I am unable to agree with the contention of the application (Brief, p. 39) here that the phase in question should be interpreted in
Sometime in 1991, respondents delivered to petitioners various quantities of eggs at an agreed service fee of 80 centavos
such a way as to include all obligations, whether arising from consent or ex lege, because that is equivalent to eliminating all
per egg, whether successfully hatched or not. Each delivery was reflected in a "Setting Report" indicating the following: the
distinction between the first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The
number of eggs delivered; the date of setting or the date the eggs were delivered and laid out in the incubators; the date
Legislature has deliberately established this distinction, and while we may be unable to see any reason why it should have been
of candling or the date the eggs, through a lighting system, were inspected and determined if viable or capable of being
made, it is our duty to apply and interpret the law, and we are not authorized under the guise of interpretation to virtually repeal
hatched into chicks; and the date of hatching, which is also the date respondents would pick-up the chicks and by-products.
part of the statute.
Initially, the service fees were paid upon release of the eggs and by-products to respondents. But as their business went
Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first place, quasi- contracts are along, respondents’ delays on their payments were tolerated by San Juan, who just carried over the balance, as there may
"lawful and purely voluntary acts by which the authors thereof become obligated in favor of a third person. . . ." The act which be, into the next delivery, out of keeping goodwill with respondents.
From January 13 to February 3, 1993, respondents had delivered to San Juan a total of 101,3[50]5 eggs, detailed as follows:6 and intimidations on respondents.12 The RTC disregarded the corporate fiction of ASJ Corp.,13 and held it and San Juan
solidarily liable to respondents for P529,644.80 as actual damages, P100,000.00 as moral damages, P50,000.00 as
Date Set SR Number No. of eggs delivered Date hatched/ attorney’s fees, plus interests and costs of suit. The decretal portion of the decision reads:
Pick-up date
WHEREFORE, based on the evidence on record and the laws/jurisprudence applicable thereon, judgment is hereby
rendered ordering the defendants to pay, jointly and severally, unto the plaintiffs the amounts of P529,644.80,
1/13/1993 SR 108 32,566 eggs February 3, 1993
representing the value of the hatched chicks and by-products which the plaintiffs on the average expected to derive under
Setting Reports Nos. 108 to 113, inclusive, with legal interest thereon from the date of this judgment until the same shall
1/20/1993 SR 109 21,485 eggs February 10, 1993
have been fully paid, P100,000.00 as moral damages and P50,000.00 as attorney’s fees, plus the costs of suit.

1/22/1993 SR 110 7,213 eggs February 12, 1993 SO ORDERED.14

1/28/1993 SR 111 14,495 eggs February 18, 1993
1/30/1993 SR 112 15,346 eggs February 20, 1993
2/3/1993 SR 113 10,24[5]7 eggs February 24, 1993
TOTAL 101,350 eggs
On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and by-products covered by Setting Report No.
108, but San Juan refused to release the same due to respondents’ failure to settle accrued service fees on several setting reports
starting from Setting Report No. 90. Nevertheless, San Juan accepted from Efren 10,245 eggs covered by Setting Report No. 113
and P15,000.008 in cash as partial payment for the accrued service fees.
On February 10, 1993, Efren returned to the hatchery to pick up the chicks and by-products covered by Setting Report No. 109,
but San Juan again refused to release the same unless respondents fully settle their accounts. In the afternoon of the same day,
respondent Maura, with her son Anselmo, tendered P15,000.009 to San Juan, and tried to claim the chicks and by-products. She
explained that she was unable to pay their balance because she was hospitalized for an undisclosed ailment. San Juan accepted
the P15,000.00, but insisted on the full settlement of respondents’ accounts before releasing the chicks and by-products.
Believing firmly that the total value of the eggs delivered was more than sufficient to cover the outstanding balance, Maura
promised to settle their accounts only upon proper accounting by San Juan. San Juan disliked the idea and threatened to impound
their vehicle and detain them at the hatchery compound if they should come back unprepared to fully settle their accounts with
him.
On February 11, 1993, respondents directed their errand boy, Allan Blanco, to pick up the chicks and by-products covered by
Setting Report No. 110 and also to ascertain if San Juan was still willing to settle amicably their differences. Unfortunately, San
Juan was firm in his refusal and reiterated his threats on respondents. Fearing San Juan’s threats, respondents never went back to
the hatchery.
The parties tried to settle amicably their differences before police authorities, but to no avail. Thus, respondents filed with the
RTC an action for damages based on petitioners’ retention of the chicks and by-products covered by Setting Report Nos. 108 to
113.
On July 8, 1996, the RTC ruled in favor of respondents and made the following findings: (1) as of Setting Report No. 107,
respondents owed petitioners P102,336.80;10 (2) petitioners withheld the release of the chicks and by-products covered by
Setting Report Nos. 108-113;11 and (3) the retention of the chicks and by-products was unjustified and accompanied by threats
Both parties appealed to the Court of Appeals. Respondents prayed for an additional award of P76,139.00 as actual
damages for the cost of other unreturned by-products and P1,727,687.52 as unrealized profits, while petitioners prayed
for the reversal of the trial court’s entire decision.
On April 30, 2003, the Court of Appeals denied both appeals for lack of merit and affirmed the trial court’s decision, with
the slight modification of including an award of exemplary damages of P10,000.00 in favor of respondents. The Court of
Appeals, applying the doctrine of piercing the veil of corporate fiction, considered ASJ Corp. and San Juan as one entity,
after finding that there was no bona fide intention to treat the corporation as separate and distinct from San Juan and his
wife Iluminada. The fallo of the Court of Appeals’ decision reads:
WHEREFORE, in view of the foregoing, the Decision appealed from is hereby AFFIRMED, with the slight modification that
exemplary damages in the amount of P10,000.00 are awarded to plaintiffs.
Costs against defendants.
SO ORDERED.15
Hence, the instant petition, assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING, AS DID THE COURT A QUO, THAT PETITIONERS
WITHHELD/OR FAILED TO RELEASE THE CHICKS AND BY-PRODUCTS COVERED BY SETTING REPORT NOS. 108 AND 109.
II.
THE HONORABLE COURT OF APPEALS ERRED IN ADMITTING THE HEARSAY TESTIMONY OF MAURA EVANGELISTA
SUPPORTIVE OF ITS FINDINGS THAT PETITIONERS WITHHELD/OR FAILED TO RELEASE THE CHICKS AND BY-PRODUCTS
COVERED BY SETTING REPORT NOS. 108 AND 109.
III.
THE HONORABLE COURT OF APPEALS, AS DID THE COURT A QUO, ERRED IN NOT FINDING THAT RESPONDENTS FAILED TO
RETURN TO THE PLANT TO GET THE CHICKS AND BY-PRODUCTS COVERED BY SETTING REPORT NOS. 110, 111, 112 AND
113.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING, AS DID THE COURT A QUO, THAT THE PIERCING OF THE VEIL OF
CORPORATE ENTITY IS JUSTIFIED, AND CONSEQUENTLY HOLDING PETITIONERS JOINTLY AND SEVERALLY LIABLE TO PAY
RESPONDENTS THE SUM OF P529,644.[80].
V.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS HAVE VIOLATED THE PRINCIPLES ENUNCIATED IN
ART. 19 OF THE NEW CIVIL CODE AND CONSEQUENTLY IN AWARDING MORAL DAMAGES, EXEMPLARY DAMAGES AND
ATTORNEY’S FEES.
VI.
THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING PETITIONERS’ COUNTERCLAIM.16
Plainly, the issues submitted for resolution are: First, did the Court of Appeals err when (a) it ruled that petitioners withheld or
failed to release the chicks and by-products covered by Setting Report Nos. 108 and 109; (b) it admitted the testimony of Maura;
(c) it did not find that it was respondents who failed to return to the hatchery to pick up the chicks and by-products covered by
Setting Report Nos. 110 to 113; and (d) it pierced the veil of corporate fiction and held ASJ Corp. and Antonio San Juan as one
entity? Second, was it proper to hold petitioners solidarily liable to respondents for the payment of P529,644.80 and other
damages?
In our view, there are two sets of issues that the petitioners have raised.
The first set is factual. Petitioners seek to establish a set of facts contrary to the factual findings of the trial and appellate courts.
However, as well established in our jurisprudence, only errors of law are reviewable by this Court in a petition for review under
Rule 45.17 The trial court, having had the opportunity to personally observe and analyze the demeanor of the witnesses while
testifying, is in a better position to pass judgment on their credibility.18 More importantly, factual findings of the trial court, when
amply supported by evidence on record and affirmed by the appellate court, are binding upon this Court and will not be disturbed
on appeal.19 While there are exceptional circumstances20 when these findings may be set aside, none of them is present in this
case.
Based on the records, as well as the parties’ own admissions, the following facts were uncontroverted: (1) As of Setting Report No.
107, respondents were indebted to petitioners for P102,336.80 as accrued service fees for Setting Report Nos. 90 to 107;21 (2)
Petitioners, based on San Juan’s own admission,22 did not release the chicks and by-products covered by Setting Report Nos. 108
and 109 for failure of respondents to fully settle their previous accounts; and (3) Due to San Juan’s threats, respondents never
returned to the hatchery to pick up those covered by Setting Report Nos. 110 to 113.23
Furthermore, although no hard and fast rule can be accurately laid down under which the juridical personality of a corporate
entity may be disregarded, the following probative factors of identity justify the application of the doctrine of piercing the veil of
corporate fiction24 in this case: (1) San Juan and his wife own the bulk of shares of ASJ Corp.; (2) The lot where the hatchery plant
is located is owned by the San Juan spouses; (3) ASJ Corp. had no other properties or assets, except for the hatchery plant and the
lot where it is located; (4) San Juan is in complete control of the corporation; (5) There is no bona fide intention to treat ASJ Corp.
as a different entity from San Juan; and (6) The corporate fiction of ASJ Corp. was used by San Juan to insulate himself from the
legitimate claims of respondents, defeat public convenience, justify wrong, defend crime, and evade a corporation’s subsidiary
liability for damages.25 These findings, being purely one of fact,26 should be respected. We need not assess and evaluate the
evidence all over again where the findings of both courts on these matters coincide.
On the second set of issues, petitioners contend that the retention was justified and did not constitute an abuse of rights since it
was respondents who failed to comply with their obligation. Respondents, for their part, aver that all the elements on abuse of
rights were present. They further state that despite their offer to partially satisfy the accrued service fees, and the fact that
the value of the chicks and by-products was more than sufficient to cover their unpaid obligations, petitioners still chose to
withhold the delivery.
The crux of the controversy, in our considered view, is simple enough. Was petitioners’ retention of the chicks and
by-products on account of respondents’ failure to pay the corresponding service fees unjustified? While the trial and
appellate courts had the same decisions on the matter, suffice it to say that a modification is proper. Worth stressing,
petitioners’ act of withholding the chicks and by-products is entirely different from petitioners’ unjustifiable acts of
threatening respondents. The retention had legal basis; the threats had none.
To begin with, petitioners’ obligation to deliver the chicks and by-products corresponds to three dates: the date of
hatching, the delivery/pick-up date and the date of respondents’ payment. On several setting reports, respondents made
delays on their payments, but petitioners tolerated such delay. When respondents’ accounts accumulated because of their
successive failure to pay on several setting reports, petitioners opted to demand the full settlement of respondents’
accounts as a condition precedent to the delivery. However, respondents were unable to fully settle their accounts.
Respondents’ offer to partially satisfy their accounts is not enough to extinguish their obligation. Under Article 124827 of
the Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express
stipulation to that effect. More so, respondents cannot substitute or apply as their payment the value of the chicks and
by-products they expect to derive because it is necessary that all the debts be for the same kind, generally of a monetary
character. Needless to say, there was no valid application of payment in this case.
Furthermore, it was respondents who violated the very essence of reciprocity in contracts, consequently giving rise to
petitioners’ right of retention. This case is clearly one among the species of non-performance of a reciprocal obligation.
Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and a creditor of the
other, such that the performance of one is conditioned upon the simultaneous fulfillment of the other.28 From the
moment one of the parties fulfills his obligation, delay by the other party begins.29
Since respondents are guilty of delay in the performance of their obligations, they are liable to pay petitioners actual
damages of P183,416.80, computed as follows: From respondents’ outstanding balance of P102,336.80, as of Setting
Report No. 107, we add the corresponding services fees of P81,080.0030 for Setting Report Nos. 108 to 113 which had
remain unpaid.
Nonetheless, San Juan’s subsequent acts of threatening respondents should not remain among those treated with
impunity. Under Article 1931 of the Civil Code, an act constitutes an abuse of right if the following elements are present: (a)
the existence of a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring
another.32 Here, while petitioners had the right to withhold delivery, the high-handed and oppressive acts of petitioners,
as aptly found by the two courts below, had no legal leg to stand on. We need not weigh the corresponding pieces of
evidence all over again because factual findings of the trial court, when adopted and confirmed by the appellate court, are
binding and conclusive and will not be disturbed on appeal.33
Since it was established that respondents suffered some pecuniary loss anchored on petitioners’ abuse of rights, although
the exact amount of actual damages cannot be ascertained, temperate damages are recoverable. In arriving at a
reasonable level of temperate damages of P408,852.10, which is equivalent to the value of the chicks and by-products,
which respondents, on the average, are expected to derive, this Court was guided by the following factors: (a) award of
temperate damages will cover only Setting Report Nos. 109 to 113 since the threats started only on February 10 and 11,
1993, which are the pick-up dates for Setting Report Nos. 109 and 110; the rates of (b) 41% and (c) 17%, representing the
average rates of conversion of broiler eggs into hatched chicks and egg by-products as tabulated by the trial court based on
available statistical data which was unrebutted by petitioners; (d) 68,784 eggs,34 or the total number of broiler eggs under Setting ANTONIO T. CARPIO
Report Nos. 109 to 113; and (e) P14.00 and (f) P1.20, or the then unit market price of the chicks and by-products, respectively. Associate Justice

Thus, the temperate damages of P408,852.10 is computed as follows: CONCHITA CARPIO MORALES DANTE O. TINGA
Associate Justice Associate Justice
[b X (d X e) + c X (d X f)] = Temperate Damages
PRESBITERO J. VELASCO, JR.
41% X (68,784 eggs X P14) = P394,820.16 Associate Justice

17% X (68,784 eggs X P1.20) = P 14,031.94

ATTESTATION
[P394,820.16 + P14,031.94] = P408,852.10
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
At bottom, we agree that petitioners’ conduct flouts the norms of civil society and justifies the award of moral and exemplary
damages. As enshrined in civil law jurisprudence: Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live LEONARDO A. QUISUMBING
virtuously, not to injure others and to give everyone his due.35 Since exemplary damages are awarded, attorney’s fees are also Associate Justice
proper. Article 2208 of the Civil Code provides that: Chairperson

In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded; CERTIFICATION

xxxx Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 30, 2003 of the Court of Appeals in CA-G.R. CV No. 56082
opinion of the Court’s Division.
is hereby MODIFIED as follows:
REYNATO S. PUNO
a. Respondents are ORDERED to pay petitioners P183,416.80 as actual damages, with interest of 6% from the date of filing of the
Chief Justice
complaint until fully paid, plus legal interest of 12% from the finality of this decision until fully paid.

b. The award of actual damages of P529,644.80 in favor of respondents is hereby REDUCED to P408,852.10, with legal interest of
12% from the date of finality of this judgment until fully paid.

c. The award of moral damages, exemplary damages and attorney’s fees of P100,000.00, P10,000.00, P50,000.00, respectively, in
favor of respondents is hereby AFFIRMED.

d. All other claims are hereby DENIED.

No pronouncement as to costs.

SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR: