defendants described as Nos.

630-638 Ongpin Street,

Binondo, Manila; that they have occupied said spaces
EN BANC
since 1935 and have been religiously paying the rental
and complying with all the conditions of the lease
[G.R. No. 109125. December 2, 1994.]
contract; that on several occasions before October 9,
1986, defendants informed plaintiffs that they are offering
ANG YU ASUNCION, ARTHUR GO AND KEH to sell the premises and are giving them priority to
TIONG, petitioners, vs. THE acquire the same; that during the negotiations, Bobby Cu
HON. COURT OF APPEALS and BUEN REALTY Unjieng offered a price ofP6-million while plaintiffs
DEVELOPMENT CORPORATION,respondents. 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
DECISION 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
VITUG, J p: receive any reply, they sent another letter dated January
28, 1987 with the same request; that since defendants
Assailed, in this petition for review, is the
failed to specify the terms and conditions of the offer to
decision of the Court of Appeals, dated 04 December 1991, in CA-G.R.
sell and because of information received that defendants
SP No. 26345 setting aside and declaring without force and effect the
were about to sell the property, plaintiffs were compelled
orders of execution of the trial court, dated 30 August 1991 and 27
to file the complaint to compel defendants to sell the
September 1991, in Civil Case No. 87-41058.
property to them.
The antecedents are recited in good detail by the
"Defendants filed their answer denying the material
appellate court thusly:
allegations of the complaint and interposing a special
"On July 29, 1987 a Second Amended Complaint for defense of lack of cause of action.
Specific Performance was filed by Ann Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu "After the issues were joined, defendants filed a motion
Unjieng and Jose Tan before the Regional Trial Court, for summary judgment which was granted by the
Branch 31, Manila in Civil Case No. 87-41058, alleging, lower court. The trial court found that defendants' offer to
among others, that plaintiffs are tenants or sell was never accepted by the plaintiffs for the reason
lessees of residential and commercial spaces owned by that the parties did not agree upon the terms and
conditions of the proposed sale, hence, there was no
contractof 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 ofabove-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
nameof 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 Courtpromulgated 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 issue 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 ofExecution 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 ordersof 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. prcd
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-
personswho, 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. cdrep
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 ofa 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 ofArticle 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 withdrawal
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 19of 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." LLjur
(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
matterof 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 ofperfection. 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 theconsideration 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 1319 9 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
classof 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. LexLib
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 ofa 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 19 12 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 ofexecution 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: Cdpr
 "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
decision13 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.
||| (Asuncion v. Court of Appeals, G.R. No. 109125, [December 2, 1994])
FIRST DIVISION
[G.R. No. 135394. April 29, 2003.]
JOSE V. DELA RAMA, petitioner, vs. HON.
FRANCISCO G. MENDIOLA, Judge, RTC Pasay City,
THE COURT OF APPEALS and TITAN
CONSTRUCTION CORP., respondents.
Jose V. Dela Rama and Ceferino Padua Law Office for petitioner.
M.A. Aguinaldo & Associates and Angelito B. Bulao for respondents.
SYNOPSIS
Petitioner sold to the government on expropriation a parcel of land for use
in the construction of the EDSA Extension Project. The sale was subject to
the reconveyance to petitioner of any unused portion of the property after
the project is completed. A few months thereafter, petitioner entered into a
"Contract to Sell," whereby he undertook to sell to respondent Titan
Construction Corporation a parcel of land adjacent to the one expropriated.
Petitioner failed to comply with his obligations under the "Contract to
Sell"; thus respondent filed a complaint for rescission/annulment of
contract with the Regional Trial Court of Pasay City. The parties entered
into a compromise agreement, and pursuant to the compromise judgment,
petitioner executed a deed of absolute sale of the subject property in favor
of respondent. Meanwhile, petitioner sought the reconveyance of the
unused portion of the property from the government. The Office of the
President executed the corresponding Deed of Reconveyance in favor of
petitioner over 303 square meters of unused land. Respondent filed with
the Regional Trial Court of Pasay City a Petition for Declaratory Relief,
Prohibition, Mandamus and Preliminary Injunction with Prayer for
Restraining Order. The trial court dismissed the case. Thus, respondent
instituted a petition for certiorari before the Court which, however, was
referred to the Court of Appeals. Respondent then filed an action for
specific performance based on the compromise judgment with the
Regional Trial Court of Pasay City. Petitioner also filed with the Court of
Appeals, in CA-G.R. SP No. 44094, a Motion for Direct Contempt and to
Dismiss based on Forum Shopping. He also filed a similar motion with the
Regional Trial Court of Pasay City in Civil Case No. 97-0734.
Respondent, however, filed a motion to withdraw the petition in CA-G.R.
SP No. 44094, which the Court of Appeals granted. Thus, the case was
dismissed with finality. Meanwhile, the Regional Trial Court of Pasay City
denied the motion to dismiss and for direct contempt based on forum
shopping filed by petitioner. Petitioner filed a motion for reconsideration,
which was denied. Hence, the present petition.
The Supreme Court granted the petition. The Court ruled that the elements
of res judicata are present in the case at bar. According to the Court, while
the first case was a special civil action for declaratory relief and the second
case was a civil action for specific performance, the difference in form and
nature of the two actions is immaterial because the philosophy behind the
rule on res judicata prohibits the parties from litigating the same issue more
than once. The issue involved in the declaratory relief case was whether
respondent has rights over the property which was reconveyed to petitioner
considering that he waived all his rights by executing the Agreement to Sell
and Buy. In the specific performance case, the issue involved was the same,
that is, whether respondent was entitled to the property reconveyed when
the petitioner failed to comply with the terms of their agreement embodied
in the same Agreement to Sell and Buy. Respondent's alleged right in both
cases depends on one and the same instrument, the Agreement. The Court
further ruled that assuming that res judicata finds no application in the case,
the action for specific performance must nonetheless be dismissed because
the Agreement to Sell and Buy, being one of the prestations of the
compromise agreement which was judicially confirmed, and had long
become final and executory, can no longer be enforced in a separate
action. DAaIHT
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; EFFECT OF JUDGMENTS
AND FINAL ORDERS; RES JUDICATA; ELEMENTS; PRESENT IN
CASE AT BAR. — There is res judicatawhere the following four essential
conditions concur, viz: (1) there must be a final judgment or order; (2) the
court rendering it must have jurisdiction over the subject matter and the
parties; (3) it must be a judgment or order on the merits; and (4) there must
be, between the two cases, identity of parties, subject matter and causes of
action. Reviewing the records of the case, there is no question that all the
first three elements of res judicata are present. The declaratory relief case,
which was elevated by way of a petition for certiorari to the Court of
Appeals, has been dismissed with finality. The decision was rendered by a
court of competent jurisdiction and the case was resolved on its merits. As
regards the fourth condition, it is clear that there is identity of parties in the
two cases. The declaratory relief case was filed by respondent Titan
against Executive Secretary Ruben D. Torres, DPWH Secretary Gregorio
R. Vigilar, the Register of Deed of Pasay City, petitioner
Jose V. Dela Rama and Esperanza Belmonte (deceased). On the other
hand, the specific performance case was filed by respondent Titan against
petitioner Dela Rama and the heirs of Esperanza Belmonte. Although the
public respondents in the declaratory relief case were not impleaded in the
specific performance case, only a substantial identity is necessary to
warrant the application of res judicata. The addition or elimination of
some parties does not alter the situation.
2. ID.; ID.; ID.; ID.; THE SUBJECT MATTER AND CAUSES OF
ACTION OF THE TWO CASES ARE IDENTICAL. — The subject
matters and causes of action of the two cases are likewise identical. A
subject matter is the item with respect to which the controversy has arisen,
or concerning which the wrong has been done, and it is ordinarily the
right, the thing, or the contract under dispute. In the case at bar, both the
first and second actions involve the same real property. A cause of action,
broadly defined, is an act or omission of one party in violation of the legal
right of the other. Its elements are the following: (1) the legal right of
plaintiff; (2) the correlative obligation of the defendant, and (3) the act or
omission of the defendant in violation of said legal right. Causes of action
are identical when there is an identity in the facts essential to the
maintenance of the two actions, or where the same evidence will sustain
both actions. If the same facts or evidence can sustain either, the two actions
are considered the same, so that the judgment in one is a bar to the other. It
is true that the first case was a special civil action for declaratory relief
while the second case was a civil action for specific performance. However,
the difference in form and nature of the two actions is immaterial. The
philosophy behind the rule on res judicataprohibits the parties from
litigating the same issue more than once. The issue involved in the
declaratory relief case was whether respondent has rights over the property
which was reconveyed to petitioner considering that he waived all his rights
by executing the Agreement to Sell and Buy. In the specific performance
case, the issue involved was the same, that is, whether respondent was
entitled to the property reconveyed when the petitioner failed to comply
with the terms of their agreement embodied in the same Agreement to Sell
and Buy. Respondent's alleged right in both cases depends on one and the
same instrument, the Agreement to Sell and Buy. Clearly, respondent's
ultimate objective in instituting the two actions was to have the property
reconveyed in its favor. IHCESD
3. ID.; ID.; ID.; ID.; ASSUMING RES JUDICATA FINDS NO
APPLICATION IN THE INSTANT CASE, THE ACTION FOR SPECIFIC
PERFORMANCE MUST NONETHELESS BE DISMISSED; THE
AGREEMENT TO SELL AND BUY, BEING ONE OF THE
PRESTATIONS OF THE COMPROMISE AGREEMENT WHICH WAS
JUDICIALLY CONFIRMED AND HAD LONG BECOME FINAL AND
EXECUTORY, CANNOT BE ENFORCED IN A SEPARATE ACTION. —
When material facts or questions in issue in a former action were
conclusively settled by a judgment rendered therein, such facts or questions
constitute res judicata and may not be again litigated in a subsequent
action between the same parties or their privies regardless of the form of
the latter. This is the essence of res judicata or bar by prior judgment. The
parties are bound not only as regards every matter offered and received to
sustain or defeat their claims or demand but as to any other admissible
matter which might have been offered for that purpose and of all other
matters that could have been adjudged in that case. Assuming res
judicata finds no application in the instant case, the action for specific
performance must nonetheless be dismissed. The Agreement to Sell and
Buy, being one of the prestations of the compromise agreement which was
judicially confirmed and had long become final and executory, cannot be
enforced in a separate action. The principle of res judicata requires that
stability be accorded to judgments. Controversies once decided on the
merits shall remain in repose for there should be an end to litigation
which, without the doctrine, would be endless. Given the circumstances in
this case, we find that the trial court committed grave abuse of discretion
when it denied the motion to dismiss filed by petitioners.
DECISION
YNARES-SANTIAGO, J p:
This is a petition for certiorari under Rule 65 of the Revised Rules of
Court assailing the orders 1 of the Regional Trial Court of Pasay City,
Branch 115, in Civil Case No. 97-0734 which denied petitioner's Motion
to Dismiss and Motion For Direct Contempt based on Forum Shopping, as
well as his Motion for Reconsideration.
On December 1, 1978, petitioner sold to the government on expropriation
a parcel of land consisting of 1,225 square meters, which was part of Lot
831-A, covered by Transfer Certificate of Title No. 22066, for use in the
construction of the EDSA Extension Project. The sale was subject to the
reconveyance to petitioner of any unused portion of the property after the
project is completed. 2
On June 17, 1988, petitioner entered into a "Contract to Sell," whereby he
undertook to sell to respondent Titan Construction Corporation a parcel of
land adjacent to the one expropriated. 3 Subsequently, petitioner failed to
comply with his obligations under the "Contract to Sell"; thus respondent
filed a complaint for rescission/annulment of contract with the Regional
Trial Court of Pasay City, Branch 116, which was docketed as Civil Case
No. 6020. The parties entered into a compromise agreement and, on May
19, 1989, the trial court rendered judgment approving the parties'
compromise agreement. The pertinent portion of the judgment reads:
1. That the parties shall execute a deed of absolute sale
over the subject property, including the
improvements thereon in the total amount of TWO
MILLION FIVE HUNDRED THOUSAND PESOS
(P2,500,000.00);
2. That relative to the parcel of land sold to the
government, a separate agreement is likewise to be
executed by the parties;
3. That Atty. and Mrs. Dela Rama will be given a period of
60 days from the signing of this document to fully
vacate the premises sold;
4. That failure on their part to vacate within the said period,
an ex-parte ejectment writ of execution shall issue;
5. That the written agreement relative to the lease of houses
in said premises shall be respected. 4
Pursuant to the compromise judgment, petitioner executed a deed of
absolute sale of the subject property in favor of respondent. Likewise, he
executed an Agreement to Sell and Buy, stating among others:
1. That in the event the Republic of the Philippines will
return to the vendors (Jose Dela Rama and
Esperanza Belmonte) the area sold which is 1,224
sq. ms. or any portion therein, the Vendee (Titan
Construction Corporation) is given the exclusive
option to buy any area returned at P2,000.00 per
square meter.
2. That in consideration of said exclusive option granted
to the said Vendee by the Vendors, the Vendee
upon registration of this instrument at the back of
T.C.T. No. 22066 shall pay P200,000.00 to the
Vendors. 5
After the execution of the Agreement to Sell and Buy, respondent paid
petitioner the amount of P200,000.00, for which the latter issued a receipt
which contained the inscription: "amount is not refundable & not
deductible from the agreed price." 6
Meanwhile, petitioner sought the reconveyance of the unused portion of
the property from the government. On December 4, 1996, the Office of the
President executed the corresponding Deed of Reconveyance in favor of
petitioner over 303 square meters of unused land. 7
On January 3, 1997, respondent filed with the Regional Trial Court of
Pasay City, Branch 110, a Petition for Declaratory Relief,
Prohibition, Mandamus and Preliminary Injunction with Prayer for
Restraining Order, 8 which was docketed as Civil Case No. 97-1275. It
prayed that the Deed of Reconveyance be declared void on the grounds
that the same violated its right of preemption under Article 1622 of the
Civil Code; and that no public bidding was conducted, resulting in a denial
of respondent's right to bid considering that petitioners had waived any and
all rights over the land by virtue of their Deed of Agreement to Sell and
Buy. Respondent also prayed that the Office of the President be ordered to
give due course to its application to purchase the subject land. The trial
court dismissed the case for lack of merit on March 5, 1997. 9 Thus,
respondent instituted a petition for certiorari before this Court on March 24,
1997 which, however, was referred to the Court of Appeals, where it was
docketed as CA-G.R. SP No. 44094. 10
On June 4, 1997, respondent filed an action for specific performance based
on the compromise judgment with the Regional Trial Court of Pasay City,
which was docketed as Civil Case No. 97-0734. 11 Petitioner thus filed with
the Court of Appeals, in CA-G.R. SP No. 44094, a Motion for Direct
Contempt and to Dismiss based on Forum Shopping. 12 He also filed a
similar motion with the Regional Trial Court of Pasay City in Civil Case
No. 97-0734. 13
On July 18, 1997, respondent filed a motion to withdraw the petition in CA-
G.R. SP No. 44094, 14 which the Court of Appeals, in its Resolution dated
December 10, 1997, granted. Thus, the case was dismissed with finality. 15
Meanwhile, the Regional Trial Court of Pasay City denied the motion to
dismiss and for direct contempt based on forum shopping filed by petitioner.
It held that the alleged violation of Supreme Court Circular No. 04-94 was
cured when CA-G.R. SP No. 44094 was dismissed by the Court of Appeals.
Moreover, petitioner failed to show that the two cases have the same causes
of action. 16 Petitioner filed a motion for reconsideration, which was
denied. 17
Hence the instant petition based on the sole assigned error:
THE RESPONDENT COURT OF APPEALS GRAVELY
ABUSED ITS DISCRETION IN NOT RESOLVING
PETITIONER'S MOTION TO DISMISS AND FOR
DIRECT CONTEMPT BASED ON FORUM SHOPPING
AND, BY REASON OF THAT SERIOUS ABUSE OF
DISCRETION, IT SANCTIONED THE
CONTINUANCE OF SAID ACTION BEFORE THE
RESPONDENT RTC WHICH ITSELF GRAVELY AND
SERIOUSLY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN REFUSING TO DISMISS THE
CASE BASED ON AUTER ACTION
PENDANT AND RES JUDICATA, AND TO PUNISH
FOR DIRECT CONTEMPT THE PRIVATE
RESPONDENT AND ITS LAWYERS BASED ON
FORUM SHOPPING. 18
The decisive issue posed by petitioner is whether or not the specific
performance case (Civil Case No. 97-0734) is barred by the petition for
declaratory relief case (Civil Case No. 96-1725 and CA-G.R. SP No.
44094) on the ground of res judicata.
There is res judicata where the following four essential conditions
concur, viz: (1) there must be a final judgment or order; (2) the court
rendering it must have jurisdiction over the subject matter and the parties;
(3) it must be a judgment or order on the merits; and (4) there must be,
between the two cases, identity of parties, subject matter and causes of
action. 19
Reviewing the records of the case, there is no question that all the first
three elements of res judicata are present. The declaratory relief case,
which was elevated by way of a petition for certiorari to the Court of
Appeals, has been dismissed with finality. The decision was rendered by a
court of competent jurisdiction and the case was resolved on its merits.
As regards the fourth condition, it is clear that there is identity of parties in
the two cases. The declaratory relief case was filed by respondent Titan
against Executive Secretary Ruben D. Torres, DPWH Secretary Gregorio
R. Vigilar, the Register of Deed of Pasay City, petitioner
Jose V. Dela Rama and Esperanza Belmonte (deceased). On the other hand,
the specific performance case was filed by respondent Titan against
petitioner Dela Rama and the heirs of Esperanza Belmonte. Although the
public respondents in the declaratory relief case were not impleaded in the
specific performance case, only a substantial identity is necessary to warrant
the application of res judicata. 20 The addition or elimination of some
parties does not alter the situation. 21
The subject matters and causes of action of the two cases are likewise
identical. A subject matter is the item with respect to which the controversy
has arisen, or concerning which the wrong has been done, and it is
ordinarily the right, the thing, or the contract under dispute. In the case at
bar, both the first and second actions involve the same real property. A cause
of action, broadly defined, is an act or omission of one party in violation of
the legal right of the other. 22 Its elements are the following: (1) the legal
right of plaintiff; (2) the correlative obligation of the defendant, and (3) the
act or omission of the defendant in violation of said legal right. 23Causes of
action are identical when there is an identity in the facts essential to the
maintenance of the two actions, or where the same evidence will sustain
both actions. If the same facts or evidence can sustain either, the two actions
are considered the same, so that the judgment in one is a bar to the other. 24
It is true that the first case was a special civil action for declaratory relief
while the second case was a civil action for specific performance. However,
the difference in form and nature of the two actions is immaterial. The
philosophy behind the rule on res judicata prohibits the parties from
litigating the same issue more than once. 25The issue involved in the
declaratory relief case was whether respondent has rights over the property
which was reconveyed to petitioner considering that he waived all his rights
by executing the Agreement to Sell and Buy. In the specific performance
case, the issue involved was the same, that is, whether respondent was
entitled to the property reconveyed when the petitioner failed to comply
with the terms of their agreement embodied in the same Agreement to Sell
and Buy. Respondent's alleged right in both cases depends on one and the
same instrument, the Agreement to Sell and Buy. Clearly, respondent's
ultimate objective in instituting the two actions was to have the property
reconveyed in its favor.
When material facts or questions in issue in a former action were
conclusively settled by a judgment rendered therein, such facts or
questions constitute res judicataand may not be again litigated in a
subsequent action between the same parties or their privies regardless of
the form of the latter. This is the essence of res judicata or bar by prior
judgment. The parties are bound not only as regards every matter offered
and received to sustain or defeat their claims or demand but as to any other
admissible matter which might have been offered for that purpose and of
all other matters that could have been adjudged in that case. 26
Assuming res judicata finds no application in the instant case, the action
for specific performance must nonetheless be dismissed. The Agreement to
Sell and Buy, being one of the prestations of the compromise agreement
which was judicially confirmed and had long become final and executory,
cannot be enforced in a separate action. In the case of Jose Dela Rama v.
Hon. Aurora P. Navarrete-Recina, 27 where petitioner assailed the validity
of the Deed of Absolute Sale executed pursuant to the compromise
agreement, we held that:
Moreover, the Deed of Absolute Sale being impugned by
the petitioners is but an offshoot of the compromise
agreement entered into, with judicial confirmation, by the
parties themselves. Thus, as observed by the respondent
court, any further prestations left undone, with regard to
the provisions of the compromise judgment, should be the
 subject of proceedings on execution, and not a separate
action.
In the earlier case of Arkoncel v. Lagamon, 28 we held:
The rule is that a judgment rendered in accordance with a
compromise agreement is immediately executory unless a
motion is filed to set aside the agreement on the ground of
fraud, mistake or duress in which case an appeal may be
taken against the order denying the motion. It then becomes
ministerial for the lower court to order the execution of its
final executory judgment.
Even more than a contract which may be enforced by
ordinary action for specific performance, the compromise
agreement is part and parcel of the judgment, and may
therefore be enforced as such by a writ of execution.
Finally, when the terms of an amicable settlement are
violated, as in the case at bar, the remedy of the aggrieved
party is to move for its execution.
The principle of res judicata requires that stability be accorded to
judgments. Controversies once decided on the merits shall remain in repose
for there should be an end to litigation which, without the doctrine, would
be endless. 29 Given the circumstances in this case, we find that the trial
court committed grave abuse of discretion when it denied the motion to
dismiss filed by petitioners.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The
Order of the Regional Trial Court of Pasay City, Branch 115 in Civil Case
No. 97-0734, denying petitioner's "Motion to Dismiss Complaint and For
Direct Contempt Based on Forum Shopping," as well as the Order denying
petitioner's "Motion for Reconsideration," are REVERSED and SET
ASIDE. The Regional Trial Court of Pasay City, Branch 115, is ordered to
DISMISS Civil Case No. 97-0734 on the ground of res judicata. Costs
against private respondents. IDESTH
SO ORDERED.
||| (Dela Rama v. Mendiola, G.R. No. 135394, [April 29, 2003], 449 PHIL
754-766)
FIRST DIVISION
[G.R. No. 128349. September 25, 1998.]
BACHRACH CORPORATION, petitioner, vs. THE
HONORABLE COURT OF APPEALS and
PHILIPPINE PORTS AUTHORITY, respondents.
SYLLABUS
1. REMEDIAL LAW; JUDGMENT; RES JUDICATA; ELEMENTS
THEREOF CITED. — There are four (4) essential conditions which must
concur in order that res judicata may effectively apply, viz.: (1) The
judgment sought to bar the new action must be final; (2) the decision must
have been rendered by a court having jurisdiction over the subject matter
and the parties; (3) the disposition of the case must be a judgment or order
on the merits; and (4) there must be between the first and second action
identity of parties, identity of subject matter, and
identity of causes of action.
2. ID., CIVIL PROCEDURE; ACTIONS; CAUSE OF ACTION
DISTINGUISHED FROM SUBJECT MATTER; CASE AT BAR. — A
cause of action, broadly defined, is an act or omission of one party in
violation of the legal right of the other. The subject matter, on the other
hand, is the item with respect to which the controversy has arisen, or
concerning which the wrong has been done, and it is ordinarily the right, the
thing, or the contract under dispute. In a breach of contract, the contract
violated is the subject matter while the breach thereof by the obligor is the
cause of action. It would appear quite plain then that the RTC did act aptly
in taking cognizance of the specific performance case. In Civil Case No.
138838 of the MeTC, the unlawful detainer case, the subject matter is the
contract of lease between the parties while the breach thereof, arising from
petitioner's non-payment of rentals, constitutes the suit's cause of action. In
Civil Case No. 73399 of the RTC, the specific performance case, the subject
matter is the compromise agreement allegedly perfected between the same
parties while the cause of action emanates from the averred refusal of PPA
to comply therewith. The ultimate test in ascertaining the
identity of causes of action is said to be to look into whether or not the same
evidence fully supports and establishes both the present cause of action and
the former cause of action, In the affirmative, the former judgment would be
a bar; if otherwise, then that prior judgment would not serve as such a bar to
the second. The evidence needed to establish the cause of action in the
unlawful detainer case would be the lease contract and the violation of that
lease by Bachrach. In the specific performance case, what would be
consequential is evidence of the alleged compromise agreement and its
breach by PPA.
3. ID.; ID.; FINAL JUDGMENT; EXECUTION OF; A MINISTERIAL
DUTY OF THE COURT WHICH CANNOT BE INTERFERED BY
INJUNCTION; EXCEPTION, CITED CASE AT BAR. — The rule indeed
is, and has almost invariably been, that after a judgment has gained finality,
it becomes the ministerial duty of the court to order its execution. Nocourt,
perforce, should interfere by injunction or otherwise to restrain such
execution. The rule, however, concededly admits of exception; hence, when
facts and circumstances later transpire that would render execution
inequitable or unjust, the interested party may ask a competent court to stay
its execution or prevent its enforcement. So, also, a change in the
situation of the parties can warrant an injunctive relief. Evidently, in
issuing its orders of 13 July 1995 and 29 August 1995 assailed by PPA in
the latter's petition for certiorari and prohibition before
the Court of Appeals, the trial court in the case at bar would want to
preserve status quo pending its disposition of the specific performance
case and to prevent the case from being mooted by an early
implementation of the ejectment writ. In holding differently and ascribing
to the trial court grave abuse of discretion amounting to lack or
excess of jurisdiction, the appellate court, in our considered view, has
committed reversible error. DSHTaC
DECISION
VITUG, J p:
Bachrach Corporation ("Bachrach"), in its petition for review
on certiorari, questions the decision of the Court of Appeals in CA-G.R.
SP No. 38763, promulgated on 12 November 1996, the dispositive
part of which reading —
"WHEREFORE, the petition is granted. The assailed RTC
orders are hereby NULLIFIED and SET ASIDE and
public respondent is ordered to dismiss the subject action
before him under Civil Case No. 95-73399. No
pronouncement as to costs." 1
on several counts; viz:
"I. THE COURT OF APPEALS GRAVELY ERRED IN
NOT DISMISSING CA-G.R. SP NO. 38673
DESPITE THE FACT THAT A SIMILAR
 PETITION EARLIER FILED BY PPA WAS
DISMISSED FOR BEING INSUFFICIENT NOT
ONLY IN FORM BUT ALSO IN SUBSTANCE
WHICH DISMISSAL CONSTITUTES RES
JUDICATA INSOFAR AS THE ISSUES RAISED
THEREIN ARE CONCERNED. scaphoid
"II. THE COURT OF APPEALS GRAVELY ERRED IN
RULING THAT THE DECISION IN THE
UNLAWFUL DETAINER CASE
CONSTITUTES RES JUDICATA WHICH BARS
THE SPECIFIC PERFORMANCE CASE.
"III. THE COURT OF APPEALS GRAVELY ERRED IN
RULING THAT THE FILING OF THE SPECIFIC
PERFORMANCE CASE VIOLATES THE RULE
AGAINST FORUM SHOPPING.
"IV. THE COURT OF APPEALS GRAVELY ERRED IN
RULING THAT THE WRIT OF PRELIMINARY
INJUNCTION ISSUED BY THE
TRIAL COURT CONSTITUTES
INTERFERENCE WITH ITS JUDGMENT IN
THE UNLAWFUL DETAINER CASE. LLjur
"V. THE COURT OF APPEALS GRAVELY ERRED IN
ORDERING THE DISMISSAL OF CIVIL CASE
NO. 95-73399 THEREBY RULING ON THE
MERITS OF THE CASE WHEN IN FACT, THE
ONLY ISSUES FOR ITS RESOLUTION WERE
THE PROPRIETY OF THE
WRIT OF PRELIMINARY INJUNCTION
ISSUED BY THE TRIAL COURT AND THE
DENIALOF PPA'S MOTION FOR
PRELIMINARY HEARING ON AFFIRMATIVE
DEFENSES." 2
It would appear that petitioner corporation entered into two lease contracts
with the Philippine government covering two specified areas, Block 180
and Block 185, located at the Manila Port Area, then under the control and
management of the Director of Lands, for a term of ninety-nine years each,
the first lease to expire on 19 June 2017 and the other on 14 February
2018. During her tenure, President Corazon Aquino issued Executive Order
No. 321 transferring the management and administration of the entire Port
Area to herein respondent Philippine Ports Authority ("PPA"). Shortly
after its take-over, PPA issued a Memorandum increasing the rental
rates of Bachrach by 1,500%. Bachrach refused to pay the substantial
increased rates demanded by PPA. prLL
On 23 March 1992, PPA initiated unlawful detainer proceedings, docketed
Civil Case No. 138838 of the Metropolitan
Trial Court ("MeTC") of Manila, against Bachrach for non-
payment of rent. On 27 April 1993, MeTC rendered a decision ordering
the eviction of Bachrach from the leased premises. Bachrach appealed to
the Regional TrialCourt ("RTC") of Manila which, on 21 September 1993,
affirmed the decision of the lower court in toto. 3
Bachrach elevated the case to the Court of Appeals by way of a petition
for review. On 29 July 1994, the appellate court affirmed the
decision of the RTC. A motion for reconsideration was filed by Bachrach;
however, the resolution of the motion was put on hold pending
submission of a compromise agreement. 4 When the parties failed to
submit the promised compromise agreement, the Court of Appeals, on 15
May 1995, denied Bachrach's motion for reconsideration. The
decision of the appellate court in the ejectment suit became final and
executory on 20 May 1995. 5
Meanwhile on 28 March 1995, while the motion for reconsideration was yet
pending with the appellate court, Bachrach filed a complaint against PPA
with the Manila RTC, docketed Civil Case No. 95-73399 (hereinafter
referred to also as the specific performance case), for refusing to honor a
compromise agreement said to have been perfected between Bachrach and
PPA during their 04 February 1994 conference that superseded the ejectment
case. In its complaint, Bachrach prayed for specific performance. LLjur
On 08 June 1995, PPA filed a motion for a writ of execution/garnishment in
the ejectment case. The next day, 09 June 1995, Bachrach filed an
application in the specific performance case for the issuance a temporary
restraining order and/or a writ of preliminary injunction to enjoin the MeTC
from issuing the writ ofexecution/garnishment. PPA countered by filing a
motion for preliminary hearing on its affirmative defenses along the same
grounds mentioned in its motion to dismiss the specific performance case, to
wit: (a) the pendency of another action between the same parties for the
same cause; (b) the violation of the anti-forum-shopping rule; (c) the
complaint's lack of cause of action; and (d) the unenforceable
character of the compromise agreement invoked by Bachrach. On 13 July
1995, the trial courtissued an omnibus order, granting the
application of Bachrach for a writ of preliminary injunction, in this tenor —
"PREMISES CONSIDERED, this Court is of the opinion
and so holds (1) that plaintiff (Bachrach) is entitled to the
injunctive relief prayed for and upon the posting of a bond
in the amount of P300,000.00, let a writ of preliminary
injunction be issued enjoining the defendant (PPA), the
Presiding Judge of the Metropolitan Trial Court ofManila,
Branch 2 from issuing a writ of execution/garnishment in
Civil Case No. 238838-CV entitled 'Philippine Ports
Authority vs. Bachrach Corporation'; (2) lifting/setting
aside the order dated June 5, 1995 and (3) denying
defendant's motion for a preliminary hearing on
affirmative defenses." 6
PPA moved for reconsideration of the above order but the
trial court denied the plea in its order of 29 August 1995. prcd
On 25 September 1995, PPA filed a petition for certiorari and prohibition,
with application for the issuance of a temporary restraining order and/or
writ of preliminary injunction, docketed CA-G.R. SP No. 38508, before
the Court of Appeals. The petition was dismissed by resolution dated 28
September 1995, of the appellate court for being insufficient in form and
substance, i.e., the failure of PPA to properly attach a certified true copy
each of the assailed order of 13 July 1995 and 29 August 1995 ofthe
trial court. PPA received on 05 October 1995 7 a copy of the resolution,
dated 28 September 1995, of the appellate court. Undaunted, PPA filed 2
new petition on 11 October 1995, now evidently in proper form,
asseverating that since it had received a copy of the assailed
resolution of the trial court only on 07 September 1995, the refiling of the
petition with the Court of Appeals within a period of less than two months
from the date of such receipt was well within the reasonable time
requirement under the Rules for a special civil action for certiorari. 8 In
the meantime, the resolution, dated 28 September
1995, of the Court of Appeals which dismissed CA-G.R No. 38508
became final on 21 October 1955. 9
In its newly filed petition, docketed CA-G.R. SP No. 38673, PPA invoked
the following grounds for its allowance: prLL
"I. That respondent Judge acted without, or in
excess of jurisdiction, or with grave abuse of discretion
when it issued a writ of preliminary injunction against the
final and executory resolution of the
Honorable Court. of Appeals (Annex 'I') inspite of the
 well-established rule that courts are not allowed to
interfere with each other's judgment or decrees by
injunction, and worse, in this case, against the
execution of the judgment of a superior or
collegiate court which had already become final and
executory.
"II. That respondent Judge acted without, or in
excess of jurisdiction, or with grave abuse of discretion
when it also denied petitioner's motion for a preliminary
hearing on its affirmative defenses or in failing to have the
case below outrightly dismissed on the grounds stated in its
affirmative defenses, when respondent Judge pronounced
there is no identity as to the causes of action between the
case decided by the Court of Appeals (CA-G.R. SP No.
32630) and the case below (Civil Case No. 95-73399)
when clearly the causes of action in both cases revolve on
the same issue of possession of the subject leased
premises. cdrep
"III. That respondent Judge acted without, or in
excess of jurisdiction, or with grave abuse of discretion in
refusing to take cognizance (of), abide (by) and
acknowledge the final
judgment of the Court of Appeals which, on said ground
alone, is enough justification for the dismissal of the case
grounded on res judicata. Moreover private respondent is
guilty of forum-shopping and the penalty therefor is the
dismissal of its case " 10
On 12 November 1996, the Court of Appeals rendered the assailed
decision nullifying and setting aside the orders of the RTC and ordering
the latter to dismiss the specific performance case.
The Court finds merit in the instant appeal interposed by petitioner. LLjur
Verily, the decisive issue raised by the parties before the Court in the
instant petition is whether or not the specific performance case (Civil Case
No. 73399) should be held barred by the unlawful detainer case on the
ground of res judicata. There are four (4) essential conditions which must
concur in order that res judicata may effectively apply, viz: (1) The
judgment sought to bar the new action must be final; (2) the decision must
have been rendered by a court having jurisdiction over the subject matter
and the parties; (3) the disposition of the case must be a judgment or order
on the merits; and (4) there must be between the first and second action
identity of parties, identity of subject matter, and
identity of causes of action." 11 There is no question about the fact that all
the first three elements of res judicata are here extant; it is the final
condition requiring an identity of parties, of subject matter
and of causes of action, particularly the last two, i.e, subject matter and
cause ofaction, that presents a problem.
A cause of action, broadly defined, is an act or omission of one party in
violation of the legal right of the other. 12 The subject matter, on the other
hand, is the item with respect to which the controversy has arisen, or
concerning which the wrong has been done, and it is ordinarily the right,
the thing, or the contract under dispute. 13 In a breach of contract, the
contract violated is the subject matter while the breach thereof by the
obligor is the cause of action. It would appear quite plain then that the
RTC did act aptly in taking cognizance of the specific performance case.
In Civil Case No. 138838 of the MeTC, the unlawful detainer case, the
subject matter is the contract of lease between the parties while the breach
thereof, arising from petitioner's non-payment of rentals, constitutes the
suit's cause of action. In Civil Case No. 73399 of the RTC, the specific
performance case, the subject matter is the compromise agreement
allegedly perfected between the same parties while the cause ofaction
emanates from the averred refusal of PPA to comply therewith. The
ultimate test in ascertaining the identity of causes of action is said to be to
look into whether or not the same evidence fully supports and establishes
both the present cause of action and the former cause of action. In the
affirmative, the former judgment would be a bar; if otherwise, then that
prior judgment would not serve as such a bar to the second 14 The evidence
needed to establish the cause of action in the unlawful detainer case would
be the lease contract and the violation of that lease by Bachrach. In the
specific performance case, what would be consequential is evidence of the
alleged compromise agreement and its breach by PPA. prcd
The next thing to ask, of course, would be the question of whether or not the
issuance by the trial court of the writ of preliminary injunction was an
improper interference with the judgment in the unlawful detainer suit. It
could be argued that, instead of filing a separate action for specific
performance. Bachrach should just have presented the alleged compromise
agreement in the unlawful detainer case. Unfortunately, the refusal of PPA
to honor the agreement after its alleged perfection effectively
prevented Bachrach from seeking the coercive power of the court to enforce
the compromise in the unlawful detainer case. The situation virtually
leftBachrach with but the remedy of independently initiating the specific
performance case in a court of competent jurisdiction. In its challenged
decision, the Court ofAppeals, on its part, has said that respondent PPA's
prayer for the issuance of a writ of execution and garnishment is but the
necessary and legal consequence of its affirmance of the lower court's
decision in the unlawful detainer case which has by then become final and
executory. 15 The rule indeed is, and has almost invariably been, that after a
judgment has gained finality, it becomes the ministerial duty of the court to
order its execution. 16 No court, perforce, should interfere by injunction or
otherwise to restrain such execution. The rule, however, concededly
admits of exceptions; hence, when facts and circumstances later transpire
that would render execution inequitable or unjust, the interested party may
ask a competent court to stay its execution or prevent its
enforcement. 17 So, also, a change in the situation ofthe parties can
warrant an injunctive relief. 18 Evidently, in issuing its orders of 13 July
1995 and 29 August 1995 assailed by PPA in the latter's petition
for certiorari and prohibition before the Court of Appeals, the trial court in
the case at bar would want to preserve status quo pending its
disposition of the specific performance case and to prevent the case from
being mooted by an early implementation of the ejectment writ. In holding
differently and ascribing to the trial court grave abuse of discretion
amounting to lack or excess of jurisdiction, the appellate court, in our.
considered view, has committed reversible error. cdasia
Having reached the above conclusions, other incidental issues raised by
petitioner no longer need to be passed upon.
WHEREFORE, the petition is GRANTED. The
decision of the Court of Appeals is reversed and set aside; Civil Case No.
73399 along with the assailed orders of the Regional Trial Court,
aforedated, are hereby reinstated. No costs.
SO ORDERED.
||| (Bachrach Corp. v. Court of Appeals, G.R. No. 128349, [September
25, 1998], 357 PHIL 483-493)
EN BANC
[G.R. No. 4089. January 12, 1909.]
ARTURO PELAYO, plaintiff-appellant, vs.
MARCELO LAURON, ET AL., defendants-appellees.
J. H. Junquera, for appellant.
Filemon Sotto, for appellees.
SYLLABUS
1. RECIPROCAL OBLIGATION OF HUSBAND AND WIFE;
SUPPORT. — Among the reciprocal obligations existing between a
husband and wife is that of support, which obligation is established by
law.
2. ID.; SUPPORT OF STRANGERS. — The law does not
compel any person to support a stranger unless such person bound
himself to do so by an express contract.
3. ID.; SUPPORT OF WIFE. — Where a husband whom the law
compels to support his wife in living, the father and mother-in-law of the
latter are under no liability to provide for her.
DECISION
TORRES, J p:
On the 23d of November, 1906, Arturo Pelayo, a physician-
residing in Cebu, filed a complaint against Marcelo Lauron and Juana
Abella setting forth that on or about the 13th of October of said year, at
night, the plaintiff was called to the house of the defendants, situated in
San Nicolas, and that upon arrival he was requested by them to render
medical assistance to their daughter-in-law who was about to give birth
to a child; that therefore, and after consultation with the attending
physician, Dr. Escano, it was found necessary, on account of the difficult
birth, to remove the fetus by means of forceps which operation was
performed by the plaintiff, who also had to remove the after birth, in
which service he was occupied until the following morning, and that
afterwards, on the same day, he visited the patient several times; that
the just and equitable value of the services rendered by him was P500,
which the defendants refuse to pay without alleging any good reason
there for; that for said reason he prayed that judgment be entered in his
favor as against the defendants, or any of them, for the sum of P500
and costs, together with any other relief that might be deemed proper.
In answer to the complaint counsel for the defendants denied
all of the allegations therein contained and alleged as a special defense,
that their daughter-in-law had died in consequence of the said
childbirth, and that when she was alive she lived with her husband
independently and in a separate house without any relation whatever
with them, and that, if on the day when she gave birth she was in the
house of the defendants, her stay there was accidental and due to
fortuitous circumstances; therefore, he prayed that the defendants be
absolved of the complaint with costs against the plaintiff.
The plaintiff demurred to the above answer, and the court
below sustained the demurrer, directing the defendants, on the 23d of
January, 1907, to amend their answer. In compliance with this order
the defendants presented, on the same date, their amended answer,
denying each and every one of the allegations contained in the
complaint, and requesting that the same be dismissed with costs.
As a result of the evidence adduced by both parties, judgment
was entered by the court below on the 5th of April, 1907, whereby the
defendants were absolved from the former complaint, on account of
the lack of sufficient evidence to establish a right of action against the
defendants, with costs against the plaintiff, who excepted to the said
judgment and in addition moved for a new trial on the ground that the
judgment was contrary to law; the motion was overruled and the
plaintiff excepted and in due course presented the corresponding bill of
exceptions. The motion of the defendants requesting that the declaration
contained in the judgment that the defendants had demanded he
professional services of the plaintiff he eliminated therefrom, for the
reason that, according to the evidence, no such request had been made,
was also denied, and to the decision the defendants excepted.
Assuming that it is a real fact acknowledged by the defendants,
that the plaintiff, by virtue of having been sent for by the former,
attended as physician and rendered professional services to a daughter-
in-law of the said defendants during a difficult and laborious childbirth,
in order to decide the claim of the said physician regarding the recovery
of his fees, it becomes necessary to decide who is bound to pay the bill,
whether the father and mother-in-law of the patient, or the husband of
the latter.
According to article 1089 of the Civil Code, obligations are
created by law, by contracts, by quasi-contracts, and by illicit acts and
omissions or by those in which any kind of fault or negligence occurs.
Obligations arising from law are not presumed. Those expressly
determined in the code or in special laws, etc., are the only demandable
ones. Obligations arising from contracts have legal force between the
contracting parties and must be fulfilled in accordance with their
stipulations. (Arts. 1090 and 1091.)
The rendering of medical assistance in case of illness is
comprised among the mutual obligations to which spouses are bound by
way of mutual support. (Arts. 142 and 143.).
If every obligation consists in giving, doing, or not doing
something (art. 1088), and spouses are mutually bound to support each
other, there can be no question but that, when either of them by reason
of illness should be in need of medical assistance, the other is under the
unavoidable obligation to furnish the necessary services of a physician
in order that health may be restored, and he or she may be freed from
the sickness by which life is jeopardized; the party bound to furnish
such support is therefore liable for all expenses, including the fees of
the medical expert for his professional services. This liability
originates from the above-cited mutual obligation which the law has
expressly established between the married couple.
In the face of the above legal precepts it is unquestionable that
the person bound to pay the fees due to the plaintiff for the
professional services that he rendered to the daughter-in-law of the
defendants during her childbirth is the husband of the patient and not
her father and mother- in-law, the defendants herein. The fact that it
was not the husband who called the plaintiff and requested his
assistance for his wife is no bar to the fulfillment of the said
obligation, as the defendants, in view of the imminent danger to which
the life of the patient was at that moment exposed, considered that
medical assistance was urgently needed, and the obligation of the
husband to furnish his wife with the indispensable services of a
physician at such critical moments is specially established by the law,
as has been seen, and compliance therewith is unavoidable; therefore,
the plaintiff, who believes that he is entitled to recover his fees, must
direct his action against the husband who is under obligation to furnish
medical assistance to his lawful wife in such an emergency.
From the foregoing it, may readily be understood that it was
improper to have brought an action against the defendants simply
because they were the parties who called the plaintiff and requested
him to assist the patient during her difficult confinement, and also,
possibly, because they were her father and mother-in-law and the
sickness occurred in their house. The defendants were not, nor are they
now, under any obligation by virtue of any legal provision, to pay the
fees claimed, nor in consequence of any contract entered into between
457)
them and the plaintiff from which such obligation might have arisen.
In applying the provisions of the Civil Code in an action for
support, the supreme court of Spain, while recognizing the validity and
efficiency of a contract to furnish support wherein a person bound
himself to support another who was not his relative, established the rule
that the law does impose the obligation to pay for the support of a
stranger, but as the liability arose out of a contract, the stipulations of the
agreement must be upheld. (Decision of May 11 1897.)
Within the meaning of the law, the father and mother law are
strangers with respect to the obligation that devolves upon the husband
to provide support, among which is the furnishing of medical assistance
to his wife at the time of her confinement; and, on the other hand, it does
not appear that a contract existed between the defendants and the
plaintiff physician, for which reason it is obvious that the former can not
be compelled to pay fees which they are under no liability to pay
because it does not appear that they consented to bind themselves.
The foregoing suffices to demonstrate that the first and second
errors assigned to the judgment below are unfounded, because, if the
plaintiff has no right of action against the defendants, it is needless to
declare whether or not the use of forceps is a surgical operation.
Therefore, in view of the considerations hereinbefore set forth, it
is our opinion that the judgment appealed from should be affirmed with
the costs against the appellant. So ordered.
Mapa and Tracey, JJ., concur.
Arellano, C.J. and Carson. J., concur in the result.
Willard, J., dissents.
||| (Pelayo v. Lauron, G.R. No. 4089, [January 12, 1909], 12 PHIL 453-
EN BANC
[G.R. No. L-7089. August 31, 1954.]
DOMINGO DE LA CRUZ, plaintiff-appellant, vs. NOR
THERN THEATRICAL ENTERPRISES INC., ET
AL, defendants-appellees.
Conrado Rubio, for appellant.
Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero, for appellees.
SYLLABUS
1. EMPLOYER AND EMPLOYEE; DAMAGES CAUSED
TO EMPLOYEE BY A STRANGER CAN NOT BE RECOVERED
FROM EMPLOYER GIVING LEGAL ASSISTANCE TO
EMPLOYEE IS NOT A LEGAL BUT A MORAL OBLIGATION. —
A claim of an employee against his employer for damages caused to
the former by a stranger or outsider while said employee was in the
performance of his duties, presents a novel question which under
present legislation can not be decided in favor of the employee. While
it is to the interest of the employer to give legal help to, and defend, its
employees charged criminally in court, in order to show that he was
not guilty of any crime either deliberately or through negligence,
because should the employee be finally held criminally liable and he is
found to be insolvent, the employer would be subsidiarily liable, such
 legal assistance might be regarded as a moral obligation but it does not
at present count with the sanction of man-made laws. If the employer is
not legally obliged to give legal assistance to its employee and provide
him with a lawyer, naturally said employee may not a recover from his
employer the amount he may have paid a lawyer hired by him.
2. ID.; ID.; PARTIES WHO MAY BE HELD RESPONSIBLE
FOR DAMAGES. — If despite the absence of any criminal
responsibility on the part of the employee he was accused of homicide,
the responsibility for the improper accusation may be laid at the door of
the heirs of the deceased at whose instance the action was filed by the
State through the Fiscal. This responsibility can not be transferred to his
employer, who in no way intervened, much less initiated the criminal
proceedings and whose only connection or relation to the whole affair
was that it employed plaintiff to perform a specific duty or task, which
was performed lawfully and without negligence.
DECISION
MONTEMAYOR, J p:
The facts in this Case based on an agreed statement of facts are
simple. In the year 1941 the Northern Theatrical Enterprises Inc., a
domestic corporation operated a movie house in Laoag, Ilocos Norte,
and among the persons employed by it was the plaintiff
DOMINGO DE LA CRUZ, hired as a special guard whose duties were
to guard the main entrance of the cine, to maintain peace and order and
to report the commission of disorders within the premises. As such
guard he carried a revolver. In the afternoon of July 4, 1941, one
Benjamin Martin wanted to crash the gate or entrance of the movie
house. Infuriated by the refusal of plaintiff De la Cruz to let him in
without first providing himself with a ticket, Martin attacked him with
a bolo. De la Cruz defended himself as best he could until he was
cornered, at which moment to save himself he shot the gate crasher,
resulting in the latter's death.
For the killing, De la Cruz was charged with homicide in
Criminal Case No. 8449 of the Court of First Instance of Ilocos Norte.
After a re-investigation conducted by the Provincial Fiscal the latter
filed a motion to dismiss the complaint, which was granted by the
court in January 1943. On July 8, 1947, De la Cruz was again accused
of the same crime of homicide, in Criminal Case No. 431 of the same
Court. After trial, he was finally acquitted of the charge on January 31,
1948. In both criminal cases De la Cruz employed a lawyer to defend
him. He demanded from his former employer reimbursement of his
expenses but was refused, after which he filed the present action
against the movie corporation and the three members of its board of
directors, to recover not only the amounts he had paid his lawyers but
also moral damages said to have been suffered, due to his worry, his
neglect of his interests and his family as well in the supervision of the
cultivation of his land, a total of P15,000. On the basis of the
complaint and the answer filed by defendants wherein they asked for
the dismissal of the complaint, as well as the agreed statement of facts,
the Court of First Instance of Ilocos Norte after rejecting the theory of
the plaintiff that he was an agent of the defendants and that as such
agent he was entitled to reimbursement of the expenses incurred by
him in connection with the agency (Arts. 1709-1729 of the old Civil
Code), found that plaintiff had no cause of action and dismissed the
complaint without costs. De la Cruz appealed directly to this Tribunal
for the reason that only questions of law are involved in the appeal.
We agree with the trial court that the relationship between the
movie corporation and the plaintiff was not that of principal and agent
because the principle of representation was in no way involved. Plaintiff
was not employed to represent the defendant corporation in its dealings
with third parties. He was a mere employee hired to perform a certain
specific duty or task, that of acting as special guard and staying at the
main entrance of the movie house to stop gate crashers and to maintain
peace and order within the premises. The question posed by this appeal
is whether an employee or servant who in line of duty and while in the
performance of the task assigned to him, performs an act which
eventually results in his incurring in expenses, caused not directly by his
master or employer or his fellow servants or by reason of his
performance of his duty, but rather by a third party or stranger not in the
employ of his employer, may recover said damages against his
employer.
The learned trial court in the last paragraph of its decision
dismissing the complaint said that "after studying many laws or
provisions of law to find out what law is applicable to the facts
submitted and admitted by the parties, has found none and it has no
other alternative than to dismiss the complaint." The trial court is right.
We confess that we are not aware of any law or judicial authority that is
directly applicable to the present case, and realizing the importance and
far-reaching effect of a ruling on the subject-matter we have searched,
though vainly, for judicial authorities and enlightenment. All the laws
and principles of law we have found, as regards master and servants, or
employer and employee, refer to cases of physical injuries, light or
serious, resulting in loss of a member of the body or of any one of the
senses, or permanent physical disability or even death, suffered in line of
duty and in the course of the performance of the duties assigned to the
servant or employee, and these cases are mainly governed by the
Employer's Liability Act and the Workmen's Compensation Act. But a
case involving damages caused to an employee by a stranger or outsider
while said employee was in the performance of his duties, presents a
novel question which under present legislation we are neither able nor
prepared to decide in favor of the employee.
In a case like the present or a similar case of say a driver
employed by a transportation company, who while in the course of
employment runs over and inflicts physical injuries on or causes the
death of a pedestrian; and such driver is later charged criminally in
court, one can imagine that it would be to the interest of the employer
to give legal help to and defend its employee in order to show that the
latter was not guilty of any crime either deliberately or through
negligence, because should the employee be finally held criminally
liable and he is found to be insolvent, the employer would be
subsidiarily liable. That is why, we repeat, it is to the interest of the
employer to render legal assistance to its employee. But we are not
prepared to say and to hold that the giving of said legal assistance to its
employees is a legal obligation. While it might yet and possibly be
regarded as a moral obligation, it does not at present count with the
sanction of man-made laws.
If the employer is not legally obliged to give, legal assistance
to its employee and provide him with a lawyer, naturally said
employee may not recover the amount he may have paid a lawyer
hired by him.
Viewed from another angle it may be said that the damage
suffered by the plaintiff by reason of the expenses incurred by him in
remunerating his lawyer, is not caused by his act of shooting to death
the gate crasher but rather by the filing of the charge of homicide
which made it necessary for him to defend himself with the aid of
counsel. Had no criminal charge been filed against him, there would
have been no expenses incurred or damage suffered. So the damage
suffered by plaintiff was caused rather by the improper filing of the
criminal charge, possibly at the instance of the heirs of the deceased
 gate crasher and by the State through the Fiscal. We say improper filing, THIRD DIVISION
judging by the results of the court proceedings, namely, acquittal. In
other words, the plaintiff was innocent and blameless. If despite his [G.R. No. 173320. April 11, 2012.]
innocence and despite the absence of any criminal responsibility on his
part he was accused of homicide, then the responsibility for the EDUARDO B. MANZANO, petitioner, vs.
improper accusation may be laid at the door of the heirs of the deceased ANTONIO B. LAZARO, respondent.
and the State, and so theoretically, they are the parties that may be held
responsible civilly for damages and if this is so, we fail to see how this
responsibility can be transferred to the employer who in no way DECISION
intervened, much less initiated the criminal proceedings and whose only
connection or relation to the whole affairs was that he employed plaintiff
to perform a specific duty or task, which task or duty was performed PERALTA, J p:
lawfully and without negligence.
Still another point of view is that the damages incurred here Before us is a Petition for Review on Certiorari of the Decision 1 and
consisting of the payment of the lawyer's fee did not flow directly from Resolution 2 of the Court of Appeals in CA-G.R. CV No. 82753, dated
the performance of his duties but only indirectly because there was an February 28, 2006 and June 21, 2006, respectively, affirming the
efficient, intervening cause, namely, the filing of the criminal charges. In Decision 3 of the Regional Trial Court (RTC), Branch 97, Quezon City, in
other words, the shooting to death of the deceased by the plaintiff was Civil Case No. Q-98-35924. EHTSCD
not the proximate cause of the damages suffered but may be regarded as On February 16, 1998, petitioner Eduardo B. Manzano and respondent
only a remote cause, because from the shooting to the damages suffered Antonio B. Lazaro entered into a Professional Services
there was not that natural and continuous sequence required to fix civil Contract 4 pertaining to the former's candidacy for the Vice-Mayoralty
responsibility. post in Makati City. Petitioner as the first party and respondent as the
second party agreed that the contract shall take effect on February 16,
1998 until May 15, 1998. The contract provided among others:
In view of the foregoing, the judgment of the lower court is
affirmed. No costs. II. Roles and Responsibilities of Contracting Parties

Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Responsibilities of the Second Party:
Concepción, and Reyes, J.B.L 1. He shall head the organizational machinery of the First
||| (De La Cruz v. Northern Theatrical Enterprises, Inc., G.R. No. L-7089, Party.
[August 31, 1954], 95 PHIL 739-744)
2. He shall be responsible in hiring and firing the required
personnel to man the different positions of the
organization.
3. He shall authorize the expenditures of the campaign.
4. He shall assist in the mobilization of resources for the
campaign.
5. He shall set-up administrative mechanisms to safeguard
the efficient and effective use of resources.
6. He shall take full responsibility for all the furniture and
fixtures to be assigned to the designated
headquarters.
7. He shall develop programs and projects in aid of
ensuring the winnability of the candidate.
Responsibilities of the First Party.
1. He shall ensure the provision of financial resources and
other logistical requirements for the conduct of
operations.
2. He shall compensate the second party as stipulated in the
Section III for Remuneration and Manner of
Payment.
III. Remuneration and Manner of Payment:
A. The monthly rate due for the Second Party is
SEVENTY THOUSAND PESOS (P70,000.00).
This will be given in two equal tranches, on the
15th and 30th of each month, from February 16,
1998 up to May 15, 1998, or a total of three (3)
months.
B. A bonus pay amounting to TWO HUNDRED
THOUSAND PESOS (P200,000.00) shall be
given to the second party in the event that the First
Party win the Vice-Mayoralty post. 5 HSaCcE
Subsequently, petitioner won as Vice-Mayor of Makati. Respondent,
thereafter, learned in a transmittal letter 6 dated June 16, 1998 representing
the last payroll of certain individuals, which included him, that he would
be paid the amount of P15,000.00 only and the balance of P20,000.00
shall be forwarded only upon his final inventory of materials used during
the campaign. Hence, respondent, in his letter 7 dated July 3, 1998 to
petitioner, wrote that he had already turned over the equipment used for
the campaign. Respondent then demanded the payment of P20,000.00 as
balance of his compensation and the P200,000.00 bonus pay agreed upon.
Petitioner acknowledged respondent's demand letter and the delivery of
the campaign equipment and furniture in his letter 8 dated July 17, 1998,
but wrote that he needed to receive the liquidation of the expenses incurred
during the campaign, which task was requested shortly after the May 11,
1998 elections.
In his letter 9 dated July 30, 1998, respondent wrote that the preparation of
the audited financial report of the campaign was not part of his
responsibilities as he was not in charge of the management of campaign
funds; that such function was assigned to Robert Gomez and Soliman Cruz
(Cruz) who acted as petitioner's Director for Finance with petitioner's
brother, Angie Manzano (Angie), as the auditor. He reiterated the payment
of P220,000.00 due him.
On even date, Cruz wrote petitioner a letter 10 dated July 30, 1998, stating
that he did not volunteer respondent to prepare the liquidation of expenses,
as respondent had nothing to do with the campaign accounting records;
and that petitioner's request for liquidation of campaign expenses was
another switch in petitioner's condition prior to settling his obligation with
respondent.
As respondent's demand for petitioner to pay him remained unheeded, he
filed with the RTC an action for collection of sum of money against
petitioner.
In his defense, petitioner argued that he hired respondent's services because
of the latter's representation of being a seasoned and an experienced
campaign manager. However, during the campaign period, he discovered
that respondent had no expertise or capacity for political organization and
was often absent during campaign sorties and public meetings; that he failed
to provide petitioner with poll watchers to safeguard his chances of winning
against electoral fraud. Petitioner deemed it best to merely exclude him
from the strategic planning sessions rather than confront him as he had
already the knowledge of the campaign activities and supporters. Petitioner
opined that he won the elections due to his popularity and the support of his
family and friends; and that respondent was not entitled to a bonus pay,
since respondent failed to show any significant contribution or role in his
electoral victory.
On June 7, 2004, the RTC rendered its Decision, the dispositive portion of
which reads: SCHIcT
WHEREFORE, premises considered, Decision is hereby
rendered directing the defendant Eduardo B. Manzano to
pay to the plaintiff the following:
1. Two Hundred Twenty Thousand Pesos
(PHP220,000.00) representing the plaintiff's
professional service fee covering the May 1-
15, 1998 period and bonus for the
defendant's electoral victory as stipulated in
the Professional Service Contract, plus legal
interests from 03 July 1998 until fully
paid; and
2. Thirty Thousand Pesos (PHP30,000.00) as
Attorney's Fees. 11
In so ruling, the RTC said that to allege that petitioner's consent was
vitiated would not justify the refusal to pay the agreed remuneration in the
absence of a court ruling annulling the subject contract; and that unless
said contract was annulled, the terms therein remained enforceable. As to
the alleged failure to comply with the responsibilities set forth in the
contract, the RTC said that the power to rescind obligation is implied in
reciprocal ones, but in the absence of a stipulation to the contrary, the
power must be invoked judicially and cannot be exercised solely on a
party's own judgment that the other has committed a breach of obligation.
It also found petitioner's allegation of breach of contract inconsistent with
the statement in the last payroll where petitioner acknowledged the
balance due respondent, since if petitioner believed that respondent failed
to perform his responsibilities, he should not have stated in the last payroll
that the balance due respondent would be given upon submission of the
inventory of the campaign materials. The RTC concluded that petitioner's
contention was merely used as an excuse to evade payment after
respondent had complied with the conditions requiring the latter to submit
such inventory. The RTC awarded attorney's fees, because of petitioner's
refusal to pay respondent's claim which compelled him to litigate.
Dissatisfied, petitioner filed his appeal with the CA. Respondent filed his
Comment and petitioner his Reply thereto. Thereafter, the case was
submitted for decision.
On February 28, 2006, the CA rendered its assailed Decision, which
dismissed the appeal and affirmed the RTC decision.
Petitioner's motion for reconsideration was denied in a Resolution dated
June 21, 2006.
Hence, the instant petition which raises the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN
LIMITING THE DISCUSSION OF ITS QUESTIONED
DECISION ONLY TO THE SUBJECT OF THE
PROFESSIONAL SERVICES CONTRACT BETWEEN
PETITIONER AND RESPONDENT BEING VOIDABLE
AND ITS ALLEGED RATIFICATION BY PETITIONER.
THE RULING OF THE COURT OF APPEALS, DOES
NOT, IN ANY WAY, TOUCH UPON THE ISSUE OF
RESPONDENT'S MATERIAL BREACH OF THE
CONTRACT, AND WHETHER HE IS ENTITLED TO
THE BONUS OF P200,000.00 AS A RESULT OF SUCH
BREACH.
II
THE COURT OF APPEALS GRAVELY ERRED IN
FAILING TO HOLD THAT RESPONDENT
COMMITTED SERIOUS BREACH BY FAILING TO
PERFORM HIS DUTIES UNDER HIS PROFESSIONAL
SERVICES CONTRACT WITH PETITIONER AS HEAD
OF THE LATTER'S CAMPAIGN AND
ORGANIZATIONAL MACHINERY.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT RESPONDENT COMMITTED A
BREACH OF HIS PROFESSIONAL SERVICES
CONTRACT WITH PETITIONER BY
MISREPRESENTING THAT HE WAS AN EXPERT IN
ESTABLISHING A POLITICAL CAMPAIGN
MACHINERY. EaDATc
IV
THE COURT OF APPEALS GRAVELY ERRED IN
NOT HOLDING THAT RESPONDENT SHOULD NOT
BE PAID THE BALANCE OF HIS REMUNERATION
ON THE BASIS OF EQUITY AND SUBSTANTIAL
JUSTICE, AND BECAUSE HE WILL BE UNJUSTLY
ENRICHED AS A RESULT OF SUCH PAYMENT. 12
Petitioner contends that the CA decision was limited to the issue that the
contract was merely voidable and its alleged ratification by petitioner but
did not take into account respondent's breach of his obligations which goes
into the heart of the issue of respondent's entitlement to the bonus; and that
awarding him of bonus despite such breach would result to unjust
enrichment. He argues that respondent was always absent or unavailable
during the campaign sorties and public meetings which resulted in
petitioner's having to continue his campaign with little or no assistance
from respondent; that he failed to provide the required personnel to man
the different positions of the organization since the personnel provided by
respondent were also working for another candidate in Mandaluyong City;
that there was no assistance extended in the mobilization of resources for
his campaign because of the less visibility of the personnel hired to serve
as his advance party to the territories covered by petitioner's campaign
which constrained petitioner to proceed to the areas on his own; and that
during the canvassing of votes, respondent only made a brief appearance
and was thereafter gone with his whereabouts unknown; and that he also
failed to provide petitioner with poll watchers in the precinct level to
ensure that all votes cast for him were all accounted for.
Petitioner also argues that respondent misrepresented himself to be an
expert in carrying out a political campaign, thus, his consent into entering
the contract with respondent was vitiated by fraud and mistake as to the
latter's qualifications and credentials.
We find no merit in the petition.
The above-stated arguments by petitioner raise factual matters. As a rule,
only questions of law may be appealed to the Court by a petition for review.
The Court is not a trier of facts, its jurisdiction being limited to errors of
law. Moreover, factual findings of the trial court, particularly when affirmed
by the Court of Appeals, are generally binding on this Court. 13 In weighing
the evidence of the parties, the RTC, as affirmed by the CA, found
respondent's evidence to be sufficient in proving his case. We found no
reason to disturb such finding as it was borne by the evidence on record.
Under the Professional Services Contract executed between petitioner and
respondent on February 16, 1998, particularly under the subheading of
remuneration and manner of payment, it was provided that:
A. The monthly rate due for the Second Party is
SEVENTY THOUSAND PESOS (P70,000.00). This will
be given in two equal tranches, on the 15th and 30th of
each month, from February 16, 1998 up to May 15, 1998,
or a total of three (3) months. DHEACI
B. A bonus pay amounting to TWO HUNDRED
THOUSAND PESOS (P200,000.00) shall be given to the
second party in the event that the First Party wins the Vice-
Mayoralty post.
It is basic that a contract is the law between the parties. Obligations arising
from contracts have the force of law between the contracting parties and
should be complied with in good faith. 14 Unless the stipulations in a
contract are contrary to law, morals, good customs, public order or public
policy, the same are binding as between the parties. 15
In this case, the three-month period stated in the contract had already
elapsed and petitioner won as Vice-Mayor of Makati in the 1998 elections,
thus, respondent is entitled not only to the full payment of his
compensation but also to a bonus pay. However, respondent's
compensation for the period from May 1 to 15, 1998 was not yet paid in
full as there was still a balance of P20,000.00 as well as his bonus pay.
Petitioner refuses to pay the said amounts on the allegation that respondent
failed to fulfill his obligations under the contract.
We are not persuaded.
Petitioner's claim of breach of obligation consisted only of his
uncorroborated and self-serving statement which was contradicted by the
evidence on record.
In the June 1998 remittance of the last payroll, it was stated that
respondent would be paid the amount of P15,000.00 and the balance of
P20,000.00 shall be forwarded upon his final inventory of equipment used
during the campaign. Clearly, the payment of the balance of P20,000.00
was conditioned upon respondent's final inventory of the equipment used
in the campaign. On July 3, 1998, respondent wrote petitioner a letter
informing the latter that he had already turned over the equipment by
delivering the same to petitioner's doorstep on July 2, 1998; and that his
final act of turning over his obligation merited petitioner's reciprocal
action. Consequently, respondent demanded the payment of P20,000.00 as
well as the P200,000.00 bonus pay as petitioner won the Vice-Mayoralty
race.
Petitioner admitted having received the equipment in his letter reply dated
July 17, 1998 to respondent as he wrote:
. . . I appreciate your delivering the inventory at my
doorstep even though it was never requested. With
regards to my reciprocal action, I have yet to receive the
liquidation of the expenses incurred during the campaign.
 Mrs. Rufino informed me about two weeks back that when
we requested said liquidation from Mr. S. Cruz he
volunteered that you would be the individual who will be
preparing the report. We have yet to receive the breakdown
from either you or Mr. Cruz considering it was requested
shortly after the May 11, 1998 elections. I, more than
anyone else, would like to end this chapter of my life. I
hope to hear from either of you soonest. 16 cDCHaS
In respondent's letter reply dated July 30, 1998, he clearly indicated that the
preparation of the audited financial report was not part of his responsibilities
as he was not in charge of the management of campaign funds; that such
function was assigned to Cruz who would write a separate letter to support
his statement.
In his letter to petitioner, Cruz clarified that there was never a request for
liquidation of expenses, as what Ms. Rufino requested from him was the
preparation of the summary of transportation and other expenses which
would form part of the petitioner's campaign expenses to be filed with the
Comelec; that he did not volunteer respondent to prepare anything as he had
nothing to do with the campaign's accounting records; that he only
instructed his secretary to assemble the needed information and asked her to
seek respondent's help for expediency. He also wrote that to ask respondent
with the liquidation of campaign expenses was another switch in petitioner's
condition prior to settling his obligation with respondent.
As shown by the foregoing exchange of correspondences, the first condition
imposed before the payment of P20,000.00 balance was the inventory of
campaign equipment. After respondent complied with such condition which
petitioner even acknowledged, respondent asked for the payment of the
balance as well as his bonus. However, a subsequent condition was imposed
on respondent before payment would be given, i.e., submission of report on
the liquidation of expenses incurred during the campaign, which respondent
and Cruz wrote that respondent had nothing to do with, to which petitioner
failed to show evidence to the contrary.
Surprisingly, respondent's alleged breach of obligation was never brought
up by petitioner during the time that the former was asking for the
payment of the amounts owing to him which betrays the falsity of
petitioner's allegation. Noteworthy to mention is the fact that petitioner
had even paid respondent his salary for the three-month period with only a
balance of P20,000.00, conditioned upon respondent's delivery of the
inventory of campaign equipment. Such payment established that indeed
respondent had performed his responsibilities under the contract. We,
therefore, agree with the RTC's conclusion that petitioner's claim of breach
of contract was merely used as an excuse to evade payment of the amounts
due respondent.
Petitioner's contention that respondent's misrepresentation that he had the
expertise in establishing a political machinery for his campaign, was not at
all true thus his consent was vitiated, is not meritorious. Again, petitioner's
allegation was not supported by the evidence on record. We find apropos
what the CA said on this issue, to wit:
It bears emphasis that vitiated consent does not make a
contract unenforceable but merely voidable. Such
contract is binding on all the contracting parties until
annulled and set aside by a court of law. If indeed
appellant's consent was vitiated, his remedy would have
been to annul the contract, considering that voidable
contracts produce legal effects until they are annulled.
This is the clear import of Article 1390 (2) of the Civil
Code,which provides:
Art. 1390. — The following contracts are voidable
or annullable, even though there may have been
no damage to the contracting parties. aIAEcD
 1. Those where one of the parties is incapable of
giving consent to a contract.
2. Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are
annulled by a proper action in court. They are
susceptible of ratification.
Pursuant to the above-quoted provision, the alleged fraud
committed by appellee upon appellant made the contract
for professional services a voidable contract. Being a
voidable contract, it is susceptible of either ratification or
annulment. If the contract is ratified, the action to annul it
is extinguished and the contract is cleansed from all its
defects. But if the contract is annulled, the contracting
parties are restored to their respective situations before the
contract and mutual restitution follows as a consequence.
As stated earlier, an annullable contract may be rendered
perfectly valid by ratification, which can be express or
implied. Implied ratification may take the form of
accepting and retaining the benefits of a contract. This is
what happened in this case. No action was taken by
appellant to annul the professional service contract.
Appellant also did not confront appellee regarding the
latter's poor campaign services. This silence, taken together
with appellant's demand for appellee to make an inventory
of equipment and a liquidation of the funds used during the
campaign, constitutes in itself an effective ratification of
the original agreement in accordance with Article 1393 of
the Civil Code,which reads:
xxx xxx xxx
If appellant was, indeed, tricked into contracting with
appellee and was unsatisfied with the latter's services, he
should have taken steps in order for the latter not to
expect any bonus. After all, the bonus was dependent
solely on the condition of appellant's victory in the
elections. Or he could have immediately instituted an
action for annulment of their contract. But none of these
happened. As the records show, appellant even went
further by giving appellant other election related tasks.
This bolsters the view that, indeed there was ratification.
One cannot continue on demanding a certain task to be
performed but at the same time contend that the contract
cannot be enforced because of poor performance and
misrepresentation. Notably, it was only when appellee
already demanded the payment of the stipulated amount
that appellant raised the defense of vitiated consent.
Clearly, appellant was agreeable to the contract except
that appellee's expertise fell short of appellant's
expectations. 17
We also affirm the award of attorney's fees, as respondent was compelled
to litigate and incur expenses to protect his interest because of petitioner's
unjust refusal to satisfy respondent's claim. 18 TIESCA
The RTC, as affirmed by the CA, ordered petitioner to pay respondent the
amount of P220,000.00 plus legal interest, however, the legal rate of
interest was not specified. As to computation of legal interest, Eastern
Shipping Lines, Inc. v. Court of Appeals 19 laid down the following guidelines,
thus:
xxx xxx xxx
II.With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:
1. . . .
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or
until the demand can be established with reasonable
certainty. Accordingly, where the demand is
established with reasonable certainty, the interest
shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably
established at the time the demand is made, the
interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to have
been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of
legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this
interim period being deemed to be by then an
equivalent to a forbearance of credit. 20
In this case, petitioner's obligation does not constitute a loan or
forbearance of money, but a contract for professional service of respondent
as petitioner's campaign manager. Hence, the amount of P220,000.00
owing to respondent shall earn an interest of 6% per annum to be
computed from the time the extrajudicial demand for payment was made
on July 3, 1998 until the finality of this decision. As ruled in Eastern
Shipping, after a judgment has become final and executory, the rate of
legal interest, whether the obligation was in the form of a loan or
forbearance of money or otherwise, shall be 12% per annum from such
finality until its satisfaction. Thus, from the date the liability for the
principal obligation has become final and executory, an annual interest of
12% shall be imposed until its final satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit. 21
WHEREFORE, in view of all the foregoing, the instant petition
is DENIED. The Decision dated February 28, 2006 and the Resolution
dated June 21, 2006 of the Court of Appeals in CA-G.R. CV No. 82753,
which affirmed the RTC decision ordering petitioner to pay respondent the
amount of P220,000.00, plus P30,000.00 as attorney's fees,
are AFFIRMED with the MODIFICATION that the award of
P220,000.00 shall earn interest at the rate of 6% per annum from July 3,
1998 until the finality of this decision. After this decision becomes final
and executory, petitioner is ORDERED to pay interest at 12% per annum
on the principal obligation until full payment. ECaTAI
SO ORDERED.
||| (Manzano v. Lazaro, G.R. No. 173320, [April 11, 2012], 685 PHIL
445-460)
SECOND DIVISION
[G.R. No. 142830. March 24, 2006.]
 WILLIAM GOLANGCO CONSTRUCTION
CORPORATION, petitioner, vs. PHILIPPINE
COMMERCIAL INTERNATIONAL
BANK * , respondent.
DECISION
CORONA, J p:
The facts of this case are straightforward. 1
William Golangco Construction Corporation (WGCC) and the Philippine
Commercial International Bank (PCIB) entered into a contract for the
construction of the extension of PCIB Tower II (denominated as PCIB
Tower II, Extension Project [project]) 2 on October 20, 1989. The project
included, among others, the application of a granitite wash-out finish 3 on
the exterior walls of the building.
PCIB, with the concurrence of its consultant TCGI Engineers (TCGI),
accepted the turnover of the completed work by WGCC in a letter dated
June 1, 1992. To answer for any defect arising within a period of one year,
WGCC submitted a guarantee bond dated July 1, 1992 issued by Malayan
Insurance Company, Inc. in compliance with the construction contract. 4
The controversy arose when portions of the granitite wash-out finish of the
exterior of the building began peeling off and falling from the walls in 1993.
WGCC made minor repairs after PCIB requested it to rectify the
construction defects. In 1994, PCIB entered into another contract with
Brains and Brawn Construction and Development Corporation to re-do the
entire granitite wash-out finish after WGCC manifested that it was "not in a
position to do the new finishing work," though it was willing to share part of
the cost. PCIB incurred expenses amounting to P11,665,000 for the repair
work.
PCIB filed a request for arbitration with the Construction Industry
Arbitration Commission (CIAC) for the reimbursement of its expenses for
the repairs made by another contractor. It complained of WGCC's alleged
non-compliance with their contractual terms on materials and
workmanship. WGCC interposed a counterclaim for P5,777,157.84 for
material cost adjustment.
The CIAC declared WGCC liable for the construction defects in the
project. 5 WGCC filed a petition for review with the Court of Appeals
(CA) which dismissed it for lack of merit. 6 Its motion for reconsideration
was similarly denied. 7
In this petition for review on certiorari, WGCC raises this main question
of law: whether or not petitioner WGCC is liable for defects in the
granitite wash-out finish that occurred after the lapse of the one-year
defects liability period provided in Art. XI of the construction contract. 8
We rule in favor of WGCC. TADIHE
The controversy pivots on a provision in the construction contract referred
to as the defects liability period:
ARTICLE XI — GUARANTEE
Unless otherwise specified for specific works, and
without prejudice to the rights and causes of action of the
OWNER under Article 1723 of the Civil Code, the
CONTRACTOR hereby guarantees the work
stipulated in this Contract, and shall make good any
defect in materials and workmanship which [becomes]
evident within one (1) year after the final acceptance
of the work. The CONTRACTOR shall leave the work in
 perfect order upon completion and present the final
certificate to the ENGINEER promptly.
If in the opinion of the OWNER and ENGINEER, the
CONTRACTOR has failed to act promptly in rectifying
any defect in the work which appears within the period
mentioned above, the OWNER and the ENGINEER may,
at their own discretion, using the Guarantee Bond amount
for corrections, have the work done by another contractor
at the expense of the CONTRACTOR or his bondsmen.
However, nothing in this section shall in any way affect
or relieve the CONTRACTOR'S responsibility to the
OWNER. On the completion of the [w]orks, the
CONTRACTOR shall clear away and remove from the site
all constructional plant, surplus materials, rubbish and
temporary works of every kind, and leave the whole of the
[s]ite and [w]orks clean and in a workmanlike condition to
the satisfaction of the ENGINEER and
OWNER. 9 (emphasis ours)
Although both parties based their arguments on the same stipulations, they
reached conflicting conclusions. A careful reading of the stipulations,
however, leads us to the conclusion that WGCC's arguments are more
tenable.
AUTONOMY OF CONTRACTS
The autonomous nature of contracts is enunciated in Article 1306 of the
Civil Code.
Article 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
Obligations arising from contracts have the force of law between the
parties and should be complied with in good faith. 10 In characterizing the
contract as having the force of law between the parties, the law stresses the
obligatory nature of a binding and valid agreement.
The provision in the construction contract providing for a defects liability
period was not shown as contrary to law, morals, good customs, public
order or public policy. By the nature of the obligation in such contract, the
provision limiting liability for defects and fixing specific guaranty periods
was not only fair and equitable; it was also necessary. Without such
limitation, the contractor would be expected to make a perpetual guarantee
on all materials and workmanship.
The adoption of a one-year guarantee, as done by WGCC and PCIB, is
established usage in the Philippines for private and government
construction contracts. 11 The contract did not specify a different period
for defects in the granitite wash-out finish; hence, any defect therein
should have been brought to WGCC's attention within the one-year defects
liability period in the contract. SaICcT
We cannot countenance an interpretation that undermines a contractual
stipulation freely and validly agreed upon. The courts will not relieve a
party from the effects of an unwise or unfavorable contract freely entered
into. 12
[T]he inclusion in a written contract for a piece of work
[,] such as the one in question, of a provision defining a
warranty period against defects, is not uncommon. This
kind of a stipulation is of particular importance to the
contractor, for as a general rule, after the lapse of the
period agreed upon therein, he may no longer be held
accountable for whatever defects, deficiencies or
imperfections that may be discovered in the work
executed by him. 13
 INTERPRETATION OF CONTRACTS
To challenge the guarantee period provided in Article XI of the contract,
PCIB calls our attention to Article 62.2 which provides:
62.2 Unfulfilled Obligations
Notwithstanding the issue of the Defects Liability
Certificate[,] the Contractor and the Owner shall remain
liable for the fulfillment of any obligation[,] incurred
under the provisions of the Contract prior to the issue
of the Defects Liability Certificate[,] which remains
unperformed at the time such Defects Liability
Certificate is issued[. And] for the purpose of determining
the nature and extent of any such obligation, the Contract
shall be deemed to remain in force between the parties of
the Contract. (emphasis ours)
The defects in the granitite wash-out finish were not the "obligation"
contemplated in Article 62.2. It was not an obligation that remained
unperformed or unfulfilled at the time the defects liability certificate was
issued. The alleged defects occurred more than a year from the final
acceptance by PCIB.
An examination of Article 1719 of the Civil Code is enlightening:
Art. 1719. Acceptance of the work by the employer
relieves the contractor of liability for any defect in the
work, unless:
(1) The defect is hidden and the employer is not, by
his special knowledge, expected to
recognize the same; or
(2) The employer expressly reserves his rights
against the contractor by reason of the
defect.
The lower courts conjectured that the peeling off of the granitite wash-
out finish was probably due to "defective materials and workmanship."
This they characterized as hidden or latent defects. We, however, do
not agree with the conclusion that the alleged defects were hidden.
First, PCIB's team of experts 14 (who were specifically employed to detect
such defects early on) supervised WGCC's workmanship. Second, WGCC
regularly submitted progress reports and photographs. Third, WGCC
worked under fair and transparent circumstances. PCIB had access to the
site and it exercised reasonable supervision over WGCC's work. Fourth,
PCIB issued several "punch lists" for WGCC's compliance before the
issuance of PCIB's final certificate of acceptance. Fifth, PCIB supplied the
materials for the granitite wash-out finish. And finally, PCIB's team of
experts gave their concurrence to the turnover of the project.
The purpose of the defects liability period was precisely to give PCIB
additional, albeit limited, opportunity to oblige WGCC to make good any
defect, hidden or otherwise, discovered within one year.
Contrary to the CA's conclusion, the first sentence of the third paragraph
of Article XI on guarantee previously quoted did not operate as a blanket
exception to the one-year guarantee period under the first paragraph.
Neither did it modify, extend, nullify or supersede the categorical terms of
the defects liability period. cEISAD
Under the circumstances, there were no hidden defects for which WGCC
could be held liable. Neither was there any other defect for which PCIB
made any express reservation of its rights against WGCC. Indeed, the
contract should not be interpreted to favor the one who caused the
confusion, if any. The contract was prepared by TCGI for PCIB. 15
WHEREFORE, the petition is hereby GRANTED. The decision of the
Court of Appeals in CA-G.R. SP No. 41152 is ANNULLED and SET
ASIDE.
SO ORDERED.
||| (William Golangco Construction Corp. v. Philippine Commercial
International Bank, G.R. No. 142830, [March 24, 2006], 520 PHIL 167-
174)
FIRST DIVISION
[G.R. No. 169578. November 30, 2006.]
TERESITA DIO, petitioner, vs. ST. FERDINAND
MEMORIAL PARK, INC. and MILDRED F.
TANTOCO, respondents.
DECISION
CALLEJO, SR., J p:
Before us is a Petition for Review on Certiorari assailing the Decision 1 of
the Court of Appeals (CA) in CA-G.R. CV No. 52311 which affirmed the
decision of the Regional Trial Court (RTC), Branch 57 of Lucena City, in
Civil Case No. 86-152. Likewise sought to be reversed and set aside is the
resolution of the appellate court denying reconsideration of the assailed
decision.
On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a
memorial lot from the St. Ferdinand Memorial Park, Inc. (SFMPI) in
Lucena City. The 36-square-meter memorial lot is particularly described as
Block 2, Section F, Lot 15. The purchase was evidenced by a Pre-Need
Purchase Agreement 2 dated December 11, 1973 and denominated as
Contract No. 384. She obliged herself to abide by all such rules and
regulations governing the SFMPI dated May 25, 1972.
SFMPI issued a Deed of Sale and Certificate of Perpetual Care 3 dated
April 1, 1974 denominated as Contract No. 284. The ownership
of Dio over the property was made subject to the rules and regulations of
SFMPI, as well as the government, including all amendments, additions
and modifications that may later be adopted. Rule 69 of the Rules reads:
Rule 69. Mausoleum building and memorials should be
constructed by the Park Personnel. Lot Owners
cannot contract other contractors for the
construction of the said buildings and memorial,
however, the lot owner is free to give their own
design for the mausoleum to be constructed, as
long as it is in accordance with the park standards.
The construction shall be under the close
supervision of the Park Superintendent.
Meanwhile, the mortal remains of Dio's husband and father were interred
in the lot at her own expense, without the knowledge and intervention of
SFMPI. She engaged the services of a private contractor for the fabrication
of niches and improvements on her lot. In August 1974, the remains
of Dio's daughter were likewise interred in the niche constructed on the
lot, again without the knowledge and intervention of SFMPI. TcICEA
In 1986, Dio decided to build a mausoleum on the lot. In September that
year, she caused the preparation of a design-plan for the construction of a
mausoleum and the bidding out of the project.
In the early part of October 1986, Dio informed SFMPI, through its
president and controlling stockholder, Mildred F. Tantoco, that she was
planning to build a mausoleum on her lot and sought the approval
thereof. Dio even showed to Tantoco the plans and project specifications
accomplished by her private contractor at an estimated cost of P60,000.00.
The plans and specifications were approved, but Tantoco insisted that the
mausoleum be built by it or its agents at a minimum cost of P100,000.00 as
provided in Rule 69 of the Rules and Regulations the SFMPI issued on May
25, 1972. The total amount excluded certain specific designs in the
approved plan which if included would cost Dio much more. In a
letter 4 dated October 13, 1986, Dio, through counsel, demanded that she be
allowed to construct the mausoleum within 10 days, otherwise, she would
be impelled to file the necessary action/s against SFMPI and Tantoco.
On October 17, 1986, SFMPI wrote Dio informing her that under Rule 69 of
SFMPI Rules and Regulations, she was prohibited from engaging an outside
contractor for the construction of buildings, improvements and memorials.
A lot owner was only allowed to submit a preferred design as long as it is in
accordance with park standards.
On December 23, 1986, Dio filed a Complaint for Injunction with
Damages 5 against SFMPI and Tantoco before the RTC of Lucena City. She
averred that she was not aware of Rule 69 of the SFMPI Rules and
Regulations; the amount of P100,000.00 as construction cost of the
mausoleum was unconscionable and oppressive. She prayed that, after trial,
judgment be rendered in her favor, granting a final injunction perpetually
restraining defendants from enforcing the invalid Rule 69 of SFMPI's
"Rules for Memorial Work in the Mausoleum of the Park" or from refusing
or preventing the construction of any improvement upon her property in the
park. 6 The court issued a cease and desist order against defendants.
In their answer with counterclaim, defendants averred that the construction
of a mausoleum on plaintiff's lot at a minimum cost of P100,000.00 was not
oppressive and unconscionable. They averred that the estimated amount was
commensurate to the plan and specified expensive materials to be used in
the construction from which defendants did not expect any unreasonable
gain. They stressed that Rule 69 was made in good faith and was adopted
prior to plaintiff's purchase of the lot in question. They insisted that
plaintiff was aware of the existence of Rule 69 when the Pre-Need
Purchase Agreement and Deed of Sale was executed, that plaintiff made
no protest thereto, and was therefore estopped from questioning its
application and enforcement.
Plaintiff testified that when she bought the memorial lot from defendant,
she transferred the remains of her father and husband on the said property.
In August 1974, her daughter Serconsicion died and was likewise buried in
the memorial lot. 7 She narrated that she wanted a mausoleum to be
constructed over the niches of her loved ones to protect the remains of her
dead relatives. She requested Engr. Alex Tan to prepare a plan for a
mausoleum. The blueprint for the mausoleum was estimated at
P60,000.00. Thereafter, plaintiff informed defendant Tantoco of her
intention to build a mausoleum on her lot. Tantoco retorted that plaintiff
could not hire an outside contractor to build a mausoleum. 8 Plaintiff was
initially surprised by Tantoco's statement because she knew that their
contract did not provide for such stipulation. Tantoco then offered to
construct the mausoleum but at the lowest cost of P100,000.00, excluding
the stainless name and the Coloroof. 9 She also testified that when she
bought the lot on December 11, 1973, the agreement was that she would
cause the construction of the niche and all improvements necessary for the
tombs. When asked by the court if the witness had read the rules and
regulations stated in the Pre-Need Purchase Agreement and the Deed of
Sale and Certificate of Perpetual Care, she answered in the negative. 10
Plaintiff presented National Bureau of Investigation (NBI) Document
Examiner Bienvenido Albacea to prove that the rules and regulations of
SFMPI were not yet in existence on May 25, 1972. The witness declared
that, as a document examiner since 1976, he examines documents being
questioned to determine their authenticity and source. Papers are likewise
examined to check if there is any forgery, and photographed to compare the regulations of the memorial park; otherwise, she would not have sought
original from the photocopy. He declared that he conducted a laboratory the permission of defendants of her intention to build a mausoleum.
examination and analysis of the original of the rules and regulations of Plaintiff was obliged to abide by the terms and conditions of the Pre-Need
defendant and subjected the same under stereoscopic microscope. He used Purchase Agreement and the Deed of Sale and the rules and regulations
measuring test plates to calibrate the size of the typewriter, the horizontal issued by defendant SFMPI.
and vertical pitch and slots of the typewriter used in the document. He On appeal, the CA affirmed the decision of the trial court. 15 The appellate
concluded that the date "May 25, 1972" was an intercalation on page one of court ratiocinated that when the parties executed the Pre-Need Purchase
defendant's rules and regulations and were not typed in one and the same Agreement, Dio agreed to be bound not only by the existing rules and
occasion as the other provisions on the document. 11 regulations for the use and governance of the cemetery, but also future
On cross-examination, Albacea admitted that it was possible that the date ones.
"May 25, 1972" was typed on the same day when the other entries in the Aggrieved, Dio, now petitioner, filed the present petition for review
rules and regulations were typed. He also admitted that the date could have on certiorari, alleging that:
been typed after the whole page one was removed from the
typewriter. 12 He produced test plates, a photograph enlargement, and the I. THE APPELLATE COURT ERRED IN RULING
laboratory analysis result of the original specimens, as well as the carbon THAT THE DATE "MAY 25, 1972" COULD
duplicate of SFMPI Rules and Regulations. HCacDE NOT HAVE BEEN A BELATED ATTEMPT TO
SHOW THAT RULE 69 WAS ADOPTED PRIOR
On August 3, 1995, the trial court rendered judgment in favor of TO PETITIONER'S PURCHASE OF THE
defendants. 13 The dispositive portion of the decision reads: MEMORIAL LOT BECAUSE IT WAS
WHEREFORE, premises considered, this Court hereby POSSIBLE THAT SAID DATE COULD HAVE
renders Judgment against the plaintiff and in favor of the BEEN TYPED RIGHT AFTER THE
defendants. Consequently, [the] instant Complaint is hereby DOCUMENT CONTAINING RULE 69 WAS
DISMISSED. PREPARED.
No pronouncement on award of damages could be made as II. THE APPELLATE COURT ERRED IN RULING
the same has not been sufficiently proven. THAT PETITIONER WAS BOUND NOT ONLY
BY RULES EXISTING AT THE TIME OF THE
SO ORDERED. 14
PURCHASE OF THE MEMORIAL LOT BUT
The trial court rejected the claim of plaintiff that defendants failed to inform ALSO BY THOSE THAT MAY BE ADOPTED
her of the rules and regulations of SFMPI. The court declared that she even BY RESPONDENTS AFTER THE PURCHASE.
informed them of her intention to construct a mausoleum. According to the
court a quo, this was proof that plaintiff was fully aware of the rules and
 III. THE APPELLATE COURT ERRED IN RULING
THAT PETITIONER WAS BOUND BY THE
RULES BECAUSE SHE VOLUNTARILY
ENTERED INTO THE SALE AND PURCHASE
OF THE MEMORIAL LOT.
IV. THE APPELLATE COURT ERRED IN SUSTAINING
THE VALIDITY OF RULE 69 DESPITE THE
FACT THAT IT WAS VOID FOR BEING
CONTRARY TO LAW, MORALS, PUBLIC
ORDER, AND PUBLIC POLICY.
V. THE APPELLATE COURT ERRED IN NOT
ORDERING RESPONDENTS TO PAY
PETITIONER DAMAGES AS PRAYED FOR IN
HER COMPLAINT AND PROVED DURING
THE TRIAL. 16
The issues are whether or not petitioner had knowledge of Rule 69 of
SFMPI Rules and Regulations for memorial works in the mausoleum areas
of the park when the Pre-Need Purchase Agreement and the Deed of Sale
was executed; and whether the said rule is valid and binding upon
petitioner. TSIDEa
Petitioner argues that respondents failed to prove that respondent SFMPI
approved the rules and regulations on May 25, 1972, before she purchased
the lot. Petitioner avers that as testified to by NBI Document Examiner
Albacea, the rules and regulations were not drafted on May 25, 1972. In any
event, she never consented to comply with the memorial park rules and
regulations, and all amendments, additions, and modifications thereto.
Petitioner further avers that the questioned Rule 69 is unreasonable and
oppressive, therefore, void for being contrary to law, morals, public order,
and public policy. Petitioner additionally denies being in estoppel as she
never made any admission or representation in the contracts she signed,
which, according to petitioner, were both contracts of adhesion.
Respondents, on the other hand, contend that petitioner's plea for
injunction had become moot and academic because petitioner had already
caused the completion of said mausoleum as early as July 8, 1997, in
patent violation of the trial and appellate courts' orders to cease and desist
construction. Moreover, petitioner presented NBI Document Examiner
Albacea as a witness, and is thus barred from assailing the probative
weight thereof. Respondents maintain that the Pre-Need Purchase
Agreement as well as the Deed of Sale and Certificate of Perpetual Care
are not contracts of adhesion, and petitioner could have easily refused to
enter into said contracts if she truly had concerns regarding any of the
stipulations therein. Rule 69 of the SFMPI Rules and Regulations does not
permanently deprive the owners of their right to use their own property;
hence, the rule is not oppressive or unconscionable.
The petition is denied for lack of merit.
Time and again the Court has emphasized that findings of facts of lower
courts, particularly when affirmed by the appellate court, are deemed final
and conclusive. The Supreme Court cannot go over such findings on
appeal, especially when they are borne out by the records or are based on
substantial evidence. It is not the function of this Court to analyze or
weigh the evidence all over again, unless there is a showing that the
findings of the lower court are entirely devoid of support or are glaringly
erroneous as to constitute palpable error or grave abuse of discretion. 17
The reason for the rule is that the trial court is in a better position to
examine the demeanor of the witnesses while testifying. Our jurisdiction is
in principle limited to reviewing errors of law that might have been
committed by the CA. A fortiori, as in this case, where the factual findings
of the trial court are affirmed in toto by the CA, there is great reason for
not disturbing such findings and for regarding them as not reviewable by
this Court. 18There are also settled exceptions to this rule: (1) when the
factual findings of the CA and the trial court are contradictory; (2) when the
conclusion is a finding grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the CA from its findings of fact
is manifestly mistaken, absurd, or impossible; (4) when there is a grave
abuse of discretion in the appreciation of facts; (5) when the appellate court,
in making its findings, went beyond the issues of the case and such findings
are contrary to the admissions of both appellant and appellee; (6) when the
judgment of the CA is premised on a misapprehension of facts; (7) when the
CA failed to notice certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the findings of fact are
themselves conflicting; (9) when the findings of fact are conclusions
without citation of the specific evidence on which they are based; and (10)
when the findings of fact of the CA are premised on the absence of evidence
but such findings are contradicted by the evidence on record. 19 In the case
at bar, none of these exceptions is present which would warrant a review of
the factual findings of the courts below. TCacIA
Under the Pre-Need Purchase Agreement executed by petitioner and
respondents, the parties covenanted that upon the completion of all
payments by the purchaser, the seller would convey to the purchaser a
certificate of ownership to the aforesaid interment property for the interment
of human remains only. The certificate of SFMPI now existing or which
may hereafter be adopted for the government of said cemetery and said
certificate shall be in the form used by the seller, a copy of which petitioner
acknowledged she had examined and approved. Petitioner agreed to abide
by all such rules and regulations governing SFMPI, 20 among them Rule 69
which prevents lot owners from "contract[ing] other contractors for the
construction of the said buildings and memorial" but gives the owners free
rein "to give their own design for the mausoleum to be constructed, as long
as it is in accordance with the park standards."
Under the Deed of Sale and Certificate of Perpetual Care, petitioner agreed
to be bound not only by the existing rules but also by future rules and
regulations that may be adopted by respondent SFMPI. It is also stated in
the said rules and regulations kept in the office of respondent which could
be inspected by petitioner at any time:
2. The PURCHASER, his heirs, successors and assigns,
shall have, hold and use the property subject to the rules
and regulations of SELLER for the government of the
cemetery now in force and those which may hereafter be
adopted. A copy of said rules and regulations and all
amendments, additions and modifications thereto is kept
in the office of the SELLER and is subject to inspection
by the PURCHASER at all times during normal office
hours. Said rules and regulations and all amendments,
additions, and modifications thereto are hereby
incorporated herein and made integral parts hereof by
reference as if set forth herein in full. 21
Thus, when petitioner executed the Pre-Need Purchase Agreement and
conformed to the Deed of Sale, it was with full knowledge of the terms
and conditions thereof, including the rules and regulations issued by
respondent SFMPI. Hence, petitioner is precluded from asserting that she
had no knowledge of said rules and regulations, and that she never
consented to comply with them. More importantly, petitioner cannot feign
ignorance of said rules. In law, whatever fairly puts a person on inquiry is
sufficient notice, where the means of knowledge are at hand, which if
pursued by the proper inquiry, the full truth might have been
ascertained. 22 In this case, the appellate court declared:
x x x [k]knowledge will be imputed and may be implied
from circumstances where the circumstances known to
one concerning a matter in which he is interested are
 sufficient to require him, as an honest and prudent person,
to investigate concerning the rights of others in the same
matter, and diligent investigation will lead to discovery of
any right conflicting with his own. 23
For its part, the trial court made the following findings:
Plaintiff's allegation that she was not aware of the said
Rules and Regulations lacks credence. Admittedly, in her
Complaint and during the trial, plaintiff testified that she
informed the defendants of her intention to construct a
mausoleum. Even counsel for the plaintiff, who is the son
of the plaintiff, informed the Court during the trial in this
case that her mother, the plaintiff herein, informed the
defendants of her plan to construct and erect a
mausoleum. This act of the plaintiff clearly shows that she
was fully aware of the said rules and regulations otherwise
she should not consult, inform and seek permission from
the defendants of her intention to build a mausoleum if she
is not barred by the rules and regulations to do the same.
When she signed the contract between [sic] the defendants,
she is [sic] estopped to question and attack the legality of
said contract later on. (Emphasis supplied) 24
Petitioner is obliged to abide by the terms and conditions of the Pre-Need
Purchase Agreement and the Deed of Sale, as well as said rules and
regulations which formed integral parts of said deeds.
Basic is the principle that contracts, once perfected, bind both contracting
parties. 25 The parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided these are not contrary to
law, morals, good customs, public order, or public policy. It follows that
obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith. 26
We quote with approval the ruling of the trial court:
The appellant's ownership of the memorial lot was subject
to the rules and regulations legally and
validly restricting her enjoyment and use of the property.
Art. 428, Civil Code, states that the owner has the right to
enjoy and dispose of a thing without other limitations
than those established by law. It is recognized that the
limitations include those that are imposed by the will of
the transmitting owner, that is, the transmitting owner
transfers his property by whatever title and imposes on
the acquirer whatever limitations he wishes as long as the
limitations are not contrary to the nature of ownership
and not prohibited by law (e.g., servitudes,
encumbrances, prohibition against alienation).
Otherwise stated, the appellant should adhere to and
comply with the terms and conditions of the pre-need
purchase agreement and the deed of sale and certificate
of perpetual care. Her perceived disadvantage does not
amount to her deprivation of property or other rights
without due process of law considering that she had
voluntarily entered into the purchase and considering also
that she remains free to exercise her right as property
owner, under which she can build a mausoleum provided
she does so in accordance with the memorial park's
standards and rules common to all owners of lots. 27
Petitioner is an experienced businesswoman. She doubtlessly dealt with
numerous documents, and is therefore presumed to know the import
thereof. It cannot be further emphasized that it behooves every contracting
party to learn and know the contents of an instrument before signing and
agreeing to it. 28
We are not persuaded by petitioner's claim that Rule 69 of respondent's rules
and regulations is unreasonable and oppressive because the provision
unduly restricts her right of ownership over the property. Rule 69 of the said
rules and regulations is neither excessive nor despotic. The rule itself
specifies that the "lot owner is free to give their own design for the
mausoleum to be constructed, as long as it is in accordance with the park
standards." Clearly, the rule allows the construction of a mausoleum but
with certain restrictions. Moreover, as the proprietor of the entire memorial
park, the formulation of a reasonable set of rules and regulations is within
the power of the management of respondent SFMPI. It is noteworthy that
the same rule permits petitioner, or any other buyer of memorial lot, to use
the property for the purpose for which it was contemplated. DaIACS
A contract of adhesion, wherein one party imposes a readymade form of
contract on the other, is not strictly against the law. 29 A contract of
adhesion is as binding as ordinary contracts, the reason being that the party
who adheres to the contract is free to reject it entirely. 30 Contrary to
petitioner's contention, not every contract of adhesion is an invalid
agreement. As we had the occasion to state in Development Bank of the
Philippines v. Perez: 31
x x x In discussing the consequences of a contract of
adhesion, we held in Rizal Commercial Banking
Corporation v. Court of Appeals:
It bears stressing that a contract of adhesion is just
as binding as ordinary contracts. It is true that we
have, on occasion, struck down such contracts as
void when the weaker party is imposed upon in
dealing with the dominant bargaining party and is
reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain
on equal footing, Nevertheless, contracts of
adhesion are not invalid per se; they are not
entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he
adheres, he gives his consent.32
The validity or enforceability of the impugned contracts will have to be
determined by the peculiar circumstances obtaining in each case and the
situation of the parties concerned. Indeed, Article 24 of the New Civil
Code provides that "[in] all contractual, property or other relations, when
one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age, or other handicap, the
courts must be vigilant for his protection." 33 In this case, however, there
is no reason for the Court to apply the rule on stringent treatment towards
contracts of adhesion. To reiterate, not only is petitioner educated, she is
likewise a well-known and experienced businesswoman; thus, she cannot
claim to be the weaker or disadvantaged party in the subject contracts so
as to call for a strict interpretation against respondents. Moreover, she
executed the Pre-Need Purchase Agreement and Deed of Sale without any
complaint or protest. She assailed Rule 69 of the Rules and Regulations of
respondent SFMPI only when respondents rejected her request to cause
the construction of the mausoleum.
WHEREFORE, the instant petition is DENIED. The Decision of the Court
of Appeals in CA-G.R. CV No. 52311 dated May 10, 2005, and the
Resolution dated September 6, 2005, are AFFIRMED. Costs against
petitioner.
SO ORDERED.
||| (Dio v. St. Ferdinand Memorial Park, Inc., G.R. No. 169578,
[November 30, 2006], 538 PHIL 944-960)
 FIRST DIVISION
[G.R. No. 156437. March 1, 2004.]
NATIONAL HOUSING AUTHORITY, petitioner, vs.
GRACE BAPTIST CHURCH and the COURT OF
APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J p:
This is a petition for review under Rule 45 of the Rules of Court, seeking to
reverse the Decision of the Court of Appeals dated February 26, 2001, 1 and
its Resolution dated November 8, 2002, 2 which modified the decision of
the Regional Trial Court of Quezon City, Branch 90, dated February 25,
1997. 3
On June 13, 1986, respondent Grace Baptist Church (hereinafter, the
Church) wrote a letter to petitioner National Housing Authority (NHA),
manifesting its interest in acquiring Lots 4 and 17 of the General Mariano
Alvarez Resettlement Project in Cavite. 4 In its letter-reply dated July 9,
1986, petitioner informed respondent:
In reference to your request letter dated 13 June 1986,
regarding your application for Lots 4 and 17, Block C-3-
CL, we are glad to inform you that your request was
granted and you may now visit our Project Office at
General Mariano Alvarez for processing of your
application to purchase said lots.
We hereby advise you also that prior to approval of such
application and in accordance with our existing policies
and guidelines, your other accounts with us shall be
maintained in good standing. 5
Respondent entered into possession of the lots and introduced
improvements thereon. 6
On February 22, 1991, the NHA's Board of Directors passed Resolution
No. 2126, approving the sale of the subject lots to respondent Church at
the price of P700.00 per square meter, or a total price of
P430,500.00. 7 The Church was duly informed of this Resolution through
a letter sent by the NHA. 8
On April 8, 1991, the Church tendered to the NHA a manager’s check in
the amount of P55,350.00, purportedly in full payment of the subject
properties.9 The Church insisted that this was the price quoted to them by
the NHA Field Office, as shown by an unsigned piece of paper with a
handwritten computation scribbled thereon. 10 Petitioner NHA returned
the check, stating that the amount was insufficient considering that the
price of the properties have changed. The Church made several demands
on the NHA to accept their tender of payment, but the latter refused. Thus,
the Church instituted a complaint for specific performance and damages
against the NHA with the Regional Trial Court of Quezon City, 11 where it
was docketed as Civil Case No. Q-91-9148.
On February 25, 1997, the trial court rendered its decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. Ordering the defendant to reimburse to the plaintiff the
amount of P4,290.00 representing the overpayment made
for Lots 1, 2, 3, 18, 19 and 20;
 2. Declaring that there was no perfected contract of sale
with respect to Lots 4 and 17 and ordering the plaintiff to
return possession of the property to the defendant and to
pay the latter reasonable rental for the use of the property at
P200.00 per month computed from the time it took
possession thereof until finally vacated. Costs against
defendant.
SO ORDERED. 12
On appeal, the Court of Appeals, affirmed the trial court’s finding that there
was indeed no contract of sale between the parties. However, petitioner was
ordered to execute the sale of the lots to Grace Baptist Church at the price of
P700.00 per square meter, with 6% interest per annum from March 1991.
The dispositive portion of the Court of Appeals’ decision, dated February
26, 2001, reads:
WHEREFORE, the appealed Decision is hereby
AFFIRMED with the MODIFICATION that defendant-
appellee NHA is hereby ordered to sell to plaintiff-
appellant Grace Baptist Church Lots 4 and 17 at the price
of P700.00 per square meter, or a total cost P430,000.00
with 6% interest per annum from March, 1991 until full
payment in cash.
SO ORDERED. 13
The appellate court ruled that the NHA's Resolution No. 2126, which earlier
approved the sale of the subject lots to Grace Baptist Church at the price of
P700.00 per square meter, has not been revoked at any time and was
therefore still in effect. As a result, the NHA was estopped from fixing a
different price for the subject properties. Considering further that the Church
had been occupying the subject lots and even introduced improvements
thereon, the Court of Appeals ruled that, in the interest of equity, it should
be allowed to purchase the subject properties. 14
Petitioner NHA filed a Motion for Reconsideration which was denied in a
Resolution dated November 8, 2002. Hence, the instant petition for review
on the sole issue of: Can the NHA be compelled to sell the subject lots to
Grace Baptist Church in the absence of any perfected contract of sale
between the parties?
Petitioner submits that the Court cannot compel it to sell the subject
property to Grace Baptist Church without violating its freedom to
contract. 15Moreover, it contends that equity should be applied only in the
absence of any law governing the relationship between the parties, and that
the law on sales and the law on contracts in general apply to the present
case. 16
We find merit in petitioner’s submission.
Petitioner NHA is not estopped from selling the subject lots at a price
equal to their fair market value, even if it failed to expressly revoke
Resolution No. 2126. It is, after all, hornbook law that the principle of
estoppel does not operate against the Government for the act of its
agents, 17 or, as in this case, their inaction. HTcDEa
On the application of equity, it appears that the crux of the controversy
involves the characterization of equity in the context of contract law.
Preliminarily, we reiterate that this Court, while aware of its equity
jurisdiction, is first and foremost, a court of law. While equity might tilt on
the side of one party, the same cannot be enforced so as to overrule
positive provisions of law in favor of the other. 18 Thus, before we can
pass upon the propriety of an application of equitable principles in the case
at bar, we must first determine whether or not positive provisions of law
govern.
It is a fundamental rule that contracts, once perfected, bind both
contracting parties, and obligations arising therefrom have the force of law
between the parties and should be complied with in good
faith. 19 However, it must be understood that contracts are not
the only source of law that govern the rights and obligations between the
parties. More specifically, no contractual stipulation may contradict law,
morals, good customs, public order or public policy. 20 Verily, the
mere inexistence of a contract, which would ordinarily serve as the law
between the parties, does not automatically authorize disposing of a
controversy based on equitable principles alone. Notwithstanding the
absence of a perfected contract between the parties, their relationship may
be governed by other existing laws which provide for their reciprocal rights
and obligations.
It must be remembered that contracts in which the Government is a party are
subject to the same rules of contract law which govern the validity and
sufficiency of contract between individuals. All the essential elements and
characteristics of a contract in general must be present in order to create a
binding and enforceable Government contract. 21
It appearing that there is no dispute that this case involves an unperfected
contract, the Civil Law principles governing contracts should apply. In Vda.
de Urbano v. Government Service Insurance System, 22 it was ruled that a
qualified acceptance constitutes a counter-offer as expressly stated
by Article 1319 of the Civil Code. In said case, petitioners offered to redeem
mortgaged property and requested for an extension of the period of
redemption. However, the offer was not accepted by the GSIS. Instead, it
made a counter-offer, which petitioners did not accept. Petitioners again
offer to pay the redemption price on staggered basis. In deciding said case, it
was held that when there is absolutely no acceptance of an offer or if the
offer is expressly rejected, there is no meeting of the minds. Since
petitioners’ offer was denied twice by GSIS, it was held that there was
clearly no meeting of the minds and, thus, no perfected contract. All that is
established was a counter-offer. 23
In the case at bar, the offer of the NHA to sell the subject property, as
embodied in Resolution No. 2126, was similarly not accepted by the
respondent. 24Thus, the alleged contract involved in this case should be
more accurately denominated as inexistent. There being no concurrence of
the offer and acceptance, it did not pass the stage of generation to the point
of perfection. 25 As such, it is without force and effect from the very
beginning or from its incipiency, as if it had never been entered into, and
hence, cannot be validated either by lapse of time or ratification. 26 Equity
can not give validity to a void contract, 27 and this rule should apply with
equal force to inexistent contracts.
We note from the records, however, that the Church, despite knowledge
that its intended contract of sale with the NHA had not been perfected,
proceeded to introduce improvements on the disputed land. On the other
hand, the NHA knowingly granted the Church temporary use of the
subject properties and did not prevent the Church from making
improvements thereon. Thus, the Church and the NHA, who both acted in
bad faith, shall be treated as if they were both in good faith. 28 In this
connection, Article 448 of the Civil Code provides:
The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles
546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be
obliged to buy the land and if its value is considerably
more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall
fix the terms thereof.
 J.P. Villanueva & Associates for petitioners.
Pursuant to our ruling in Depra v. Dumlao, 29 there is a need to remand this Estanislao L. Cesa, Jr. for private respondents.
case to the trial court, which shall conduct the appropriate proceedings to
assess the respective values of the improvements and of the land, as well as
SYLLABUS
the amounts of reasonable rentals and indemnity, fix the terms of the lease if
the parties so agree, and to determine other matters necessary for the proper
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT,
application of Article 448, in relation to Articles 546 and 548, of the Civil
LAW BETWEEN THE PARTIES; CASE AT BAR. — There is no
Code.
question that petitioners and the private respondents voluntarily entered
WHEREFORE, in view of the foregoing, the petition is GRANTED. The into the agreement to apportion or divide their businesses, whether as
Court of Appeals' Decision dated February 26, 2001 and Resolution dated partners or co-owners. That agreement is the law between them. Contracts
November 8, 2002 are REVERSED and SET ASIDE. The Decision of the shall be obligatory in whatever form they may have been entered into,
Regional Trial Court of Quezon City-Branch 90, dated February 25, 1997, is provided all the essential requisites for their validity are present. The fact
REINSTATED. This case is REMANDED to the Regional Trial Court of that after signing the agreement both parties immediately took possession
Quezon City, Branch 90, for further proceedings consistent with Articles of their respective shares is the most compelling evidence that there was
448 and 546 of the Civil Code. indeed a binding partition of the properties. Contracts, once perfected,
No costs. 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
SO ORDERED.
other, renege therefrom.
||| (National Housing Authority v. Grace Baptist Church, G.R. No. 156437,
[March 1, 2004], 468 PHIL 266-276) 2. ID.; ID.; CONTRACTS; MAY NOT BE OVERTURNED BY
INCONCLUSIVE PROOF. — Contracts solemnly and deliberately
entered into may not be overturned by inconclusive proof or by reason of
SECOND DIVISION mistake of one of the parties to which the other in no way has contributed.
3. ID.; ID.; ID.; TITLE THEREOF DOES NOT NECESSARILY
[G.R. No. 104404. May 6, 1993.] DETERMINE ITS NATURE. — The title of the contract does not
necessarily determine its true nature.
SPOUSES TIU PECK and LEE YOK
YAN, petitioners, vs. THE HONORABLE COURT OF
APPEALS (Seventeenth Division) and SPOUSES DECISION
CONCHITA M. RUBIATO and TAN
KING, respondents.
PADILLA, J p:
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. CV No.
24912, dated 11 October 1991, modifying the trial court's judgment.
The antecedent facts of the case are as follows:
In his lifetime, Joaquin Tiu Singco; father of petitioner Tiu Peck, owned and
operated the Argentina Trading, a business engaged in the buying and
selling of lumber, hardware and general merchandise in San Marcelino,
Zambales. Helping him run the business 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
license was, however, in the name of Conchita M. Rubiato. LLphil
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.
Sometime in 1983, petitioners and private respondents decided to end their
business partnership. Accordingly, they sought the help of five (5) respected
members of the Filipino Chinese Chamber of Commerce and Industry of
Olongapo City (of which 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 "Agreement on the
Apportionment of Partnership Business" was drawn up. Tiu Peck, also
known as Lim Yan Chiao, and Tan King, also known as Tiu To Suan, both
signed the Agreement to which the five (5) middlemen also affixed their
signatures as witnesses.
The abovesaid Agreement reads as follows:
"AGREEMENT ON THE APPORTION OF
PARTNERSHIP BUSINESSES
The undersigned LIM YAN CHIAO and TIU TO SUAN
hereby agreed to terminate their partnership in business
and apportion(ment) of their lumber and hardware store
and piggery farm under following conditions:
First: The joint business shall be divided and apportioned
on a lottery basis.
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:
First phase — 20% commission
Second phase — 30% commission
Third phase — 40% commission
Fourth phase — 50% commission
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.
Fourth: The partnership shall likewise appropriate an
amount of funds to the lot winners concerned for the
payment of unpaid taxes and fees. cdphil
Fifth: The joint business are estimated of its assets as
follows:.
 (a) Lumber & Hardware — One Million and
Six Hundred Thousand Pesos (P1,600,000.00)
including building and lot, and all the merchandise.
(b) Piggery — One Million Pesos
(P1,000.000.00) including the building and lot and
all the goods including the feeds.
Sixth: The person who win(s) the lot for the lumber and
hardware shall give Three Hundred Thousand Pesos
(P300,000.00) to the person who got (sic) the lot for the
piggery.
Seventh: This agreement shall take effect upon the lottery.
Done on the 31st day of August on the year of our Lord
Nineteen Hundred and Eighty-Three.
(Sgd.) LIM YAN CHIAO (Sgd.) TIU TO SAUNA
Lim Yan Chiao got the lot of the Lumber
Tiu To Suan got the lot of the piggery.
Witnesses:
(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. 10985 are owned in common by the plaintiffs
(private respondents) and the defendants (petitioners) 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. prLL
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. LLjur
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 wag 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 Peckthat 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. LLjur
". . . 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).
Cost against private respondents. LLphil
SO ORDERED.
Narvasa, C .J ., Regalado and Nocon, JJ ., concur.
||| (Spouses Tiu Peck and Lee Yok Yan v. Court of Appeals, G.R. No.
104404, [May 6, 1993])
FIRST DIVISION
 [G.R. No. 146021. March 10, 2006.]
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs.
ELIZABETH G. SARMIENTO, respondent.
DECISION
AUSTRIA-MARTINEZ, J p:
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, 2000 1 and the Resolution dated November 13, 2000 2 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. TCaEIc
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. DEHcTI
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. CHcESa
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 indebitiunder Article 2154 11 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. . . . The quasi-contract
ofsolutio 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.
Panganiban, C.J., Ynares-Santiago, Callejo, Sr. and Chico-Nazario,
JJ., concur.
||| (Bank of the Philippine Islands v. Sarmiento, G.R. No. 146021,
[March 10, 2006], 519 PHIL 247-257)
 EN BANC
[G.R. No. 1299. November 16, 1903.]
VICENTE PEREZ, plaintiff-appellee, vs.
EUGENIO POMAR, Agent of the Compania-General de
Tabacos, defendant-appellant.
Francisco Dominguez for appellant.
Ledesma, Sumulong & Quintos for appellee.
SYLLABUS
1. CONTRACTS; CONSENT. — Contracts resulting from an
implied consent of the parties are valid and enforceable.
2. ID.; ID.; HIRING. — Where one has rendered services to
another, and these services are accepted by the latter, in the absence of
proof that the service was rendered gratuitously, an obligation results to
pay the reasonable worth of the services rendered upon the implied
contract of hiring.
3. ID.; ID.; ID. — Although no fixed amount may have been
determined as the consideration for the contract of hiring, the contract is
nevertheless valid if the amount of the implied compensation can be
determined by custom or frequent use in the place where the services
were rendered.
DECISION
TORRES, J p:
In a decision dated February 9, 1903, the judge of the Sixth
Judicial District, deciding a case brought by the plaintiff against the
defendant for the recovery of wages due and unpaid, gave judgment
against the latter for the sum of $600 and the costs of suit, less the sum
of $50, Mexican.
On August 27, 1902, Don Vicente Perez filed in the Court of First Instance
of Laguna a complaint, which was amended on the 17th of January of this
year, asking that the court determine the amount due the plaintiff, at the
customary rate of compensation for interpreting in these Islands, for
services rendered the Tabacalera Company, and that, in view of the
circumstances of the case, judgment be rendered in his favor for such sum.
The complaint also asked that the defendant be condemned to the payment
of damages in the sum of $3,200, gold, together with the costs of suit. In
this complaint it was alleged that Don Eugenio Pomar, as general agent of
the Compania General de Tabacos in the said province, verbally requested
the plaintiff on the 8th of December, 1901, to act as interpreter between
himself and the military authorities, that after the date mentioned the
plaintiff continued to render such services up to and including May 31,
1902; that he had accompanied the defendant, Pomar during that time at
conferences between the latter and the colonel commanding the local
garrison, and with various officers and doctors residing in the capital, and
at conferences with Captain Lemen in the town of Pilar, and with the
major in command at the town of Pagsanjan, concerning the shipment of
goods from Manila, and with respect to goods shipped from the towns of
Santa Cruz, Pilar, and Pagsanjan to this city; that the plaintiff during this
period of time was at the disposal of the defendant,Pomar, and held
himself in readiness to render services whenever required; that on this
account his private business, and especially a soap factory established in
the capital, was entirely abandoned; that to the end that such services
might be punctually rendered, the agent, Pomar, assured him that the
Tabacalera Company always generously repaid services rendered it, and that
he therefore did not trouble himself about his inability to devote the
necessary amount of time to his business, the defendant going so far as to
make him flattering promises of employment with the company, which he
did not accept; that these statements were made in the absence of witnesses
and that therefore his only proof as to the same was Mr. Pomar's word as a
gentleman; that the employees of the company did not understand English,
and by reason of the plaintiff's mediation between the agent and the military
authorities large profits were obtained, as would appear from the account
and letterpress books of the agency corresponding to those dates. In the
amended complaint it was added that the defendant, on behalf of the
company, offered to remunerate the plaintiff for the services rendered in the
most advantageous manner in which such services are compensated, in view
of the circumstances under which they were requested; and that the plaintiff,
by rendering the company such services, was obliged to abandon his own
business, the manufacture of soap, and thereby suffered damages in the sum
of $3,200, United States currency.
The defendant, on the 25th of September, 1902, filed an answer asking for
the dismissal of the complaint, with costs to the plaintiff. In his answer the
defendant denied the allegation in the first paragraph of the complaint,
stating that it was wholly untrue that the company, and the defendant as its
agent, had solicited the services of the plaintiff as interpreter before the
military authorities for the period stated, or for any other period, or that the
plaintiff had accompanied Pomar at the conferences mentioned, concerning
shipments from Manila and exports from some of the towns of the province
to this capital. He stated that he especially denied paragraph 2 of the
complaint, as it was absolutely untrue that the plaintiff had been at the
disposal of the defendant for the purpose of rendering such services; that he
therefore had not been obliged to abandon his occupation or his soap
factory, and that the statement that an offer of employment with the
company had been made to him was false. The defendant also denied that
through the mediation of the plaintiff the company and himself had
obtained large profits. The statements in paragraphs 6, 7, 8, and 9 of the
complaint were also denied. The defendant stated that, on account of the
friendly relations which sprang up between the plaintiff and himself, the
former borrowed from him from time to time money amounting to $175
for the purposes of his business, and that he had also delivered to the
plaintiff 36 arrobas of oil worth $106, and three packages of resin for use
in coloring his soap; that the plaintiff accompanied the defendant to
Pagsanjan, Pilar, and other towns when the latter made business trips to
them for the purpose of extending his business and mercantile relations
therein; that on these excursions, as well as on private and official visits
which he had to make, the plaintiff occasionally accompanied him through
motives of friendship, and especially because of the free transportation
given him, and not on behalf of the company of which he was never
interpreter and for which he rendered no services; that the plaintiff in these
conferences acted as interpreter of his own free will, without being
requested to do so by the defendant and without any offer of payment or
compensation; that therefore there existed no legal relation whatever
between the company and the plaintiff, and that the defendant, when
accepting the spontaneous voluntary, and officious services of the plaintiff,
did so in his private capacity and not as agent of the company, and that it
was for this reason that he refused to enter into negotiations with the
plaintiff, he being in no way indebted to the latter. The defendant
concluded by saying that he answered in his individual capacity.
A complaint having been filed against the Compania General de Tabacos
and Don Eugenio Polmar, its agent in the Province of Laguna, the latter,
having been duly summoned, replied to the complaint, which was
subsequently amended, and stated that he made such reply in his
individual capacity and not as agent of the company, with which the
plaintiff had no legal relations. The suit was instituted between the
plaintiff and Pomar, who, as such, accepted the issue and entered into the
controversy without objection, opposed the claim of the plaintiff, and
concluded by asking that the complaint be dismissed, with the costs to the
plaintiff. Under these circumstances and construing the statutes liberally, we
think it proper to decide the case pending between both parties in
accordance with law and the strict principles of justice.
From the oral testimony introduced at the trial, it appears that the
plaintiff, Perez, did on various occasions render Don
Eugenio Pomar services as interpreter of English; and that he obtained
passes and accompanied the defendant upon his journeys to some of the
towns in the Province of Laguna. It does not appear from the evidence,
however, that the plaintiff was constantly at the disposal of the defendant
during the period of six months or that he rendered services as such
interpreter continuously and daily during that period of time.
It does not appear that any written contract was entered into between the
parties for the employment of the plaintiff as interpreter, or that any other
innominate contract was entered into; but whether the plaintiff's services
were solicited or whether they were offered to the defendant for his
assistance, inasmuch as these services were accepted and made use of by the
latter, we must consider that there was a tacit and mutual consent as to the
rendition of the services. This gives rise to the obligation upon the person
benefited by the services to make compensation therefor, since the bilateral
obligation to render service as interpreter, on the one hand, and on the other
to pay for the services rendered, is thereby incurred. (Arts. 1088, 1089, and
1262 of the Civil Code). The supreme court of Spain in its decision of
February 12, 1889, holds, among other things, "that not only is there an
express and tacit consent which produces real contracts but there is also a
presumptive consent which is the basis of quasi contracts, this giving rise to
the multiple juridical relations which result in obligations for the delivery of
a thing or the rendition of a service."
Notwithstanding the denial of the defendant, it is unquestionable that it
was with his consent that the plaintiff rendered him-services as interpreter,
thus aiding him at a time when, owing to the existence of an insurrection
in the province, the most disturbed conditions prevailed. It follows, hence,
that there was consent on the part of both in the rendition of such services
as interpreter. Such service not being contrary to law or to good custom, it
was a perfectly licit object of contract, and such a contract must
necessarily have existed between the parties, as alleged by the plaintiff.
(Art. 1271, Civil Code.)
The consideration for the contract is also evident, it being clear that a
mutual benefit was derived in consequence of the service rendered. It is to
be supposed that the defendant accepted these services and that the
plaintiff in turn rendered them with the expectation that the benefit would
be reciprocal. This shows the concurrence of the three elements necessary
under article 1261 of the Civil Code to constitute a contract of lease of
service, or other innominate contract, from which an obligation has arisen
and whose fulfillment is now demanded.
Article 1254 of the Civil Code provides that a contract exists the moment
that one or more persons consent to be bound. With respect to another or
others, to deliver some thing or to render some service. Article 1255
provides that the contracting parties may establish such covenants, terms,
and conditions as they deem convenient, provided they are not contrary to
law, morals, or public policy. Whether the service was solicited or offered,
the fact remains that Perez rendered to Pomar services as interpreter. As it
does not appear that he did this gratuitously, the duty is imposed upon the
defendant, he having accepted the benefit of the service, to pay a just
compensation therefor, by virtue of the innominate contract of facio ut
desimplicitly established.
The obligations arising from this contract are reciprocal, and, apart from the
general provisions with respect to contracts and obligations, the special
provisions concerning contracts for lease of services are applicable by
analogy.
In this special contract, as determined by article 1544 of the Civil Code, one
of the parties undertakes to render the other a service for a price certain. The
tacit agreement and consent of both parties with respect to the service
rendered by the plaintiff, and the reciprocal benefits accruing to each, are
the best evidence of the fact that there was an implied contract sufficient to
create a legal bond, from which arose enforceable rights and obligations of a
bilateral character.
In contracts the will of the contracting parties is law, this being a legal
doctrine based upon the provisions of articles 1254, 1258, 1262, 1278, 1281,
1282, and 1289 of the Civil Code. If it is a fact sufficiently proven that the
defendant, Pomar, on various occasions consented to accept an interpreter's
services, rendered in his behalf and not gratuitously, it is but just that he
should pay a reasonable remuneration therefor, because it is a well-known
principle of law that no one should be permitted to enrich himself to the
damage of another.
With respect to the value of the services rendered on different occasions, the
most important of which was the first, as it does not appear that any salary
was fixed upon by the parties at the time the services were accepted, it
devolves upon the court to determine, upon the evidence presented, the
value of such services, taking into consideration the few occasions on which
they were rendered. The fact that no fixed or determined consideration for
the rendition of the services was agreed upon does not necessarily involve a
violation of the provisions of article 1544 of the Civil Code, because at the
time of the agreement this consideration was capable of being made certain.
The discretionary power of the court, conferred upon it by the law, is also
supported by the decisions of the supreme court of Spain, among which may
be cited that of October 18, 1899, which holds as follows: "That as stated
in the article of the Code cited, which follows the provisions of law 1 title
8, of the fifth partida, the contract for lease of services is one in which one
of the parties undertakes to make some thing or to render some service to
the other for a certain price, the existence of such a price being
understood, as this court has held not only when the price has been
expressly agreed upon but also when it may be determined by the custom
and frequent use of the place in which such services were rendered."
No exception was taken to the judgment below by the plaintiff on account
of the rejection of his claim for damages. The decision upon this point is,
furthermore, correct.
Upon the supposition that the recovery of the plaintiff should not exceed
200 Mexican pesos, owing to the inconsiderable number of times he acted
as interpreter, it is evident that the contract thus implicitly entered into was
not required to be in writing and that therefore it does not fall within
article 1280 of the Civil Code; nor is it included within the provisions of
section 335 of the Code of Civil Procedure, as this innominate contract is
not covered by that section. The contract of lease of services is not
included in any of the cases expressly designated by that section of the
procedural law, as affirmed by the appellant. The interpretation of the
other articles of the Code alleged to have been infringed has also been
stated fully in this opinion.
For the reasons stated, we are of the opinion that judgment should be
rendered against Don Eugenio Pomar for the payment to the plaintiff of
the sum of 200 Mexican pesos, from which will be deducted the sum of 50
pesos due the defendant by the plaintiff. No special declaration is made as
to the costs of this instance. The judgment below is accordingly affirmed
in so far as it agrees with this opinion, and reversed in so far as it may be
in conflict therewith. Judgment will be entered accordingly twenty days
after this decision is filed.
 Arellano, C .J ., Willard and Mapa, JJ ., concur.
||| (Perez v. Pomar, G.R. No. 1299, [November 16, 1903], 2 PHIL 682-689)
FIRST DIVISION
[G.R. No. 134241. August 11, 2003.]
DAVID REYES (Substituted by Victoria R.
Fabella), petitioner, vs. JOSE LIM, CHUY CHENG
KENG and HARRISON LUMBER, INC.,respondents.
Romulo Mabanta Buenaventura Sayoc & Delos Angeles for petitioner.
Limqueco & Macaraeg Law Office for respondents.
Beltran & Reyes-Beltran for Chuy Cheng Keng and Harrison Lumber, Inc.
SYNOPSIS
Petitioner Reyes filed a complaint for annulment of contract and damages
against respondents alleging that petitioner as seller and respondent Lim as
buyer entered into a contract to sell a parcel of land. Lim paid ten million
pesos as down payment upon the signing of the contract. However, before
the payment of the balance, Lim learned that Reyes had already sold the
property to another buyer. Lim sought the cancellation of the contract to sell
and requested in open court that Reyes be ordered to deposit the ten million
down payment with the trial court which was granted by the
latter. Reyes filed a Motion to Set Aside the Order but the same was
denied. Reyes filed a Petition for Certiorari with the Court of Appeals (CA),
but it was dismissed. Hence, this petition for review.
In affirming the decision of the CA, the Supreme Court ruled that the trial
court, in the exercise of its equity jurisdiction, may validly order the
deposit of the ten million down payment in court. The purpose of the
exercise of equity jurisdiction in this case is to prevent unjust enrichment
and to ensure restitution. The application of equity always involves the
balancing of the equities in a particular case, a matter addressed to the
sound discretion of the court. Here, the Court found the equities weigh
heavily in favor of Lim, who paid the ten million down payment in good
faith, only to discover that Reyeshad subsequently sold the subject
property to another buyer.
The Court further held that rescission creates the obligation to return the
things that are the subject of the contract. Thus, since Reyes is demanding
to rescind the contract to sell, he cannot refuse to deposit the ten million
down payment in court. Such deposit will ensure restitution of the ten
million to its rightful owner. Lim, on the other hand, has nothing to refund,
as he has not received anything under the contract to sell. Moreover, in this
case, it was just, equitable and proper for the trial court to order the deposit
of the ten million down payment to prevent unjust enrichment by Reyes at
the expense of Lim.
SYLLABUS
1. REMEDIAL LAW; COURTS; EQUITY JURISDICTION; AIMS TO
DO COMPLETE JUSTICE IN CASES WHERE A COURT OF LAW IS
UNABLE TO ADAPT ITS JUDGMENTS TO THE SPECIAL
CIRCUMSTANCES OF A CASE BECAUSE OF THE INFLEXIBILITY
OF ITS STATUTORY OR LEGAL JURISDICTION; CASE AT BAR. —
The instant case ... is precisely one where there is a hiatus in the law and
in the Rules of Court. If left alone, the hiatus will result in unjust
enrichment toReyes at the expense of Lim. The hiatus may also imperil
restitution, which is a precondition to the rescission of the Contract to Sell
that Reyes himself seeks. This is not a case of. equity overruling a positive
provision of law or judicial rule for there is none that governs this particular
case. This is a case of silence or insufficiency of the law and the Rules of
Court. In this case, Article 9 of the Civil Code expressly mandates the courts
to make a ruling despite the "silence, obscurity or insufficiency of the laws."
This calls for the application of equity, which "fills the open spaces in the
law." Thus, the trial court in the exercise of its equity jurisdiction may
validly order the deposit of the P10 million down payment in court. The
purpose of the exercise of equity jurisdiction in this case is to prevent unjust
enrichment and to ensure restitution. Equity jurisdiction aims to do complete
justice in cases where a court of law is unable to adapt its judgments to the
special circumstances of a case because of the inflexibility of its statutory or
legal jurisdiction. Equity is the principle by which substantial justice may be
attained in cases where the prescribed or customary forms of ordinary law
are inadequate. ... The application of equity always involves a balancing of
the equities in a particular case, a matter addressed to the sound discretion
of the court. Here, we find the equities weigh heavily in favor of Lim, who
paid the P10 million down payment in good faith only to discover later
that Reyes had subsequently sold the Property to another buyer.
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; RESCISSIBLE
CONTRACTS; RESCISSION CREATES THE OBLIGATION TO
RETURN THE THINGS THAT ARE THE OBJECT OF THE CONTRACT;
CASE AT BAR. — Under Article 1385 of the Civil Code, rescission creates
the obligation to return the things that are the object of the contract.
Rescission is possible only when the person demanding rescission can
return whatever he may be obliged to restore. A court of equity will not
rescind a contract unless there is restitution, that is, the parties are restored
to the status quo ante. Thus, since Reyes is demanding to rescind the
Contract to Sell, he cannot refuse to deposit the P10 million down payment
in court. Such deposit will ensure restitution of the P10 million to its rightful
owner. Lim, on the other hand, has nothing to refund, as he has not
received anything under the Contract to Sell. ... [A] court may not permit a
seller to retain, pendente lite, money paid by a buyer if the seller himself
seeks rescission of the sale because he has subsequently sold the same
property to another buyer. By seeking rescission, a seller necessarily offers
to return what he has received from the buyer. Such a seller may not take
back his offer if the court deems it equitable, to prevent unjust enrichment
and ensure restitution, to put the money in judicial deposit.
3. ID:; UNJUST ENRICHMENT; THE PRINCIPLE OF UNJUST
ENRICHMENT MAY BE INVOKED BY AN AGGRIEVED PARTY
WHO HAS NO OTHER ACTION BASED ON CONTRACT, QUASI-
CONTRACT, CRIME, QUASI-DELICT OR ANY OTHER PROVISION
OF LAW. — The principle that no person may unjustly enrich himself at
the expense of another is embodied in Article 22 of the Civil Code. This
principle applies not only to substantive rights but also to procedural
remedies. One condition for invoking this principle is that the aggrieved
party has no other action based on contract, quasi-contract, crime, quasi-
delict or any other provision of law. Courts can extend this condition to
the hiatus in the Rules of Court where the aggrieved party, during the
pendency of the case, has no other recourse based on the provisional
remedies of the Rules of Court.
4. ID.; ID.; WHEN PRESENT: CASE AT BAR. — There is unjust
enrichment when a person unjustly retains a benefit to the loss of another,
or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience. In this case,
it was just, equitable and proper for the trial court to order the deposit of
the P10 million down payment to prevent unjust enrichment by Reyes at
the expense of Lim.
DECISION
CARPIO, J p:
The Case
This is a petition for review on certiorari of the Decision 1 dated 12 May
1998 of the Court of Appeals in CA-G.R. SP No. 46224. The Court of
Appeals dismissed the petition for certiorari assailing the Orders dated 6
March 1997, 3 July 1997 and 3 October 1997 of the Regional Trial Court of
Parañaque, Branch 260 2 ("trial court") in Civil Case No. 95-032.
The Facts
On 23 March 1995, petitioner David Reyes ("Reyes") filed before the trial
court a complaint for annulment of contract and damages against
respondents Jose Lim ("Lim"), Chuy Cheng Keng ("Keng") and Harrison
Lumber, Inc. ("Harrison Lumber").
The complaint 3 alleged that on 7 November 1994, Reyes as seller
and Lim as buyer entered into a contract to sell ("Contract to Sell") a parcel
of land ("Property") located along F.B. Harrison Street, Pasay City. Harrison
Lumber occupied the Property as lessee with a monthly rental of P35,000.
The Contract to Sell provided for the following terms and conditions:
1. The total consideration for the purchase of the
aforedescribed parcel of land together with the perimeter
walls found therein is TWENTY EIGHT MILLION
(P28,000,000.00) PESOS payable as follows:
(a) TEN MILLION (P10,000,000.00) PESOS upon
signing of this Contract to Sell;
(b) The balance of EIGHTEEN MILLION
(P18,000,000.00) PESOS shall be paid on or before
March 8, 1995 at 9:30 A.M. at a bank to be
designated by the Buyer but upon the complete
vacation of all the tenants or occupants of the
property and execution of the Deed of Absolute
Sale. However, if the tenants or occupants have
vacated the premises earlier than March 8, 1995,
the VENDOR shall give the VENDEE at least one
week advance notice for the payment of the
balance and execution of the Deed of Absolute
Sale.
2. That in the event, the tenants or occupants of the
premises subject of this sale shall not vacate the premises
on March 8, 1995 as stated above, the VENDEE shall
withhold the payment of the balance of P18,000,000.00
and the VENDOR agrees to pay a penalty of Four percent
(4%) per month to the herein VENDEE based on the
amount of the downpayment of TEN MILLION
(P10,000,000.00) PESOS until the complete vacation of
the premises by the tenants therein. 4
The complaint claimed that Reyes had informed Harrison Lumber to
vacate the Property before the end of January 1995. Reyes also informed
Keng 5 and Harrison Lumber that if they failed to vacate by 8 March
1995, he would hold them liable for the penalty of P400,000 a month as
provided in the Contract to Sell. The complaint further alleged
that Lim connived with Harrison Lumber not to vacate the Property until
the P400,000 monthly penalty would have accumulated and equaled the
unpaid purchase price of P18,000,000.
On 3 May 1995, Keng and Harrison Lumber filed their Answer 6 denying
they connived with Lim to defraud Reyes. Keng and Harrison Lumber
alleged that Reyes approved their request for an extension of time to
vacate the Property due to their difficulty in finding a new location for
their business. Harrison Lumber claimed that as of March 1995, it had
already started transferring some of its merchandise to its new business
location in Malabon. 7
On 31 May 1995, Lim filed his Answer 8 stating that he was ready and
willing to pay the balance of the purchase price on or before 8 March
1995. Limrequested a meeting with Reyes through the latter's daughter on
the signing of the Deed of Absolute Sale and the payment of the balance
but Reyeskept postponing their meeting. On 9 March 1995, Reyes offered to
return the P10 million down payment to Lim because Reyes was having
problems in removing the lessee from the Property. Lim rejected Reyes'
offer and proceeded to verify the status of Reyes' title to the
Property. Lim learned thatReyes had already sold the Property to Line One
Foods Corporation ("Line One") on 1 March 1995 for P16,782,840. After
the registration of the Deed of Absolute Sale, the Register of Deeds issued
to Line One TCT No. 134767 covering the Property. Lim denied conniving
with Keng and Harrison Lumber to defraud Reyes. TAEcCS
On 2 November 1995, Reyes filed a Motion for Leave to File Amended
Complaint due to supervening facts. These included the filing by Lim of a
complaint for estafa against Reyes as well as an action for specific
performance and nullification of sale and title plus damages before another
trial court.9 The trial court granted the motion in an Order dated 23
November 1995.
In his Amended Answer dated 18 January 1996, 10 Lim prayed for the
cancellation of the Contract to Sell and for the issuance of a writ of
preliminary attachment against Reyes. The trial court denied the prayer for a
writ of preliminary attachment in an Order dated 7 October 1996.
On 6 March 1997, Lim requested in open court that Reyes be ordered to
deposit the P10 million down payment with the cashier of the Regional Trial
Court of Parañaque. The trial court granted this motion.
On 25 March 1997, Reyes filed a Motion to Set Aside the Order dated 6
March 1997 on the ground the Order practically granted the
reliefs Lim prayed for in his Amended Answer. 11 The trial court
denied Reyes' motion in an Order 12 dated 3 July 1997. Citing Article
1385 of the Civil Code, the trial court ruled that an action for rescission
could prosper only if the party demanding rescission can return whatever
he may be obliged to restore should the court grant the rescission.
The trial court denied Reyes' Motion for Reconsideration in its
Order 13 dated 3 October 1997. In the same order, the trial court
directed Reyes to deposit the P10 million down payment with the Clerk of
Court on or before 30 October 1997.
On 8 December 1997, Reyes 14 filed a Petition for Certiorari 15 with the
Court of Appeals. Reyes prayed that the Orders of the trial court dated 6
March 1997, 3 July 1997 and 3 October 1997 be set aside for having been
issued with grave abuse of discretion amounting to lack of jurisdiction. On
12 May 1998, the Court of Appeals dismissed the petition for lack of
merit.
Hence, this petition for review.
The Ruling of the Court of Appeals
The Court of Appeals ruled the trial court could validly issue the assailed
orders in the exercise of its equity jurisdiction. The court may grant
equitable reliefs to breathe life and force to substantive law such as Article
1385 16 of the Civil Code since the provisional remedies under the Rules
of Court do not apply to this case.
The Court of Appeals held the assailed orders merely directed Reyes to
deposit the P10 million to the custody of the trial court to protect the
interest ofLim who paid the amount to Reyes as down payment. This did
not mean the money would be returned automatically to Lim.
The Issues
Reyes raises the following issues:
1. Whether the Court of Appeals erred in holding the trial
court could issue the questioned Orders dated
March 6, 1997, July 3, 1997 and October 3, 1997,
requiring petitioner David Reyes to deposit the
amount of Ten Million Pesos (P10,000,000.00)
during the pendency of the action, when deposit is
not among the provisional remedies enumerated in
Rule 57 to 61 of the 1997 Rules on Civil Procedure.
2. Whether the Court of Appeals erred in finding the trial
court could issue the questioned Orders on grounds
of equity when there is an applicable law on the
matter, that is, Rules 57 to 61 of the 1997 Rules on
Civil Procedure. 17
The Court's Ruling
Reyes' contentions are without merit.
Reyes points out that deposit is not among the provisional remedies
enumerated in the 1997 Rules of Civil Procedure. Reyes stresses the
enumeration in the Rules is exclusive. Not one of the provisional remedies
in Rules 57 to 61 18 applies to this case. Reyes argues that a court cannot
apply equity and require deposit if the law already prescribes the specific
provisional remedies which do not include deposit. Reyes invokes the
principle that equity is "applied only in the absence of, and never against,
statutory law or . . . judicial rules of procedure." 19 Reyes adds the fact that
the provisional remedies do not include deposit is a matter of dura lex sed
lex. 20
The instant case, however, is precisely one where there is a hiatus in the law
and in the Rules of Court. If left alone, the hiatus will result in unjust
enrichment to Reyes at the expense of Lim. The hiatus may also imperil
restitution, which is a precondition to the rescission of the Contract to Sell
thatReyes himself seeks. This is not a case of equity overruling a positive
provision of law or judicial rule for there is none that governs this
particular case. This is a case of silence or insufficiency of the law and the
Rules of Court. In this case, Article 9 of the Civil Code expressly
mandates the courts to make a ruling despite the "silence, obscurity or
insufficiency of the laws." 21 This calls for the application of
equity, 22 which "fills the open spaces in the law." 23
Thus, the trial court in the exercise of its equity jurisdiction may validly
order the deposit of the P10 million down payment in court. The purpose
of the exercise of equity jurisdiction in this case is to prevent unjust
enrichment and to ensure restitution. Equity jurisdiction aims to do
complete justice in cases where a court of law is unable to adapt its
judgments to the special circumstances of a case because of the
inflexibility of its statutory or legal jurisdiction. 24 Equity is the principle
by which substantial justice may be attained in cases where the prescribed
or customary forms of ordinary law are inadequate. 25
Reyes is seeking rescission of the Contract to Sell. In his amended
answer, Lim is also seeking cancellation of the Contract to Sell. The trial
court then ordered Reyes to deposit in court the P10 million down
payment that Lim made under the Contract to Sell. Reyes admits receipt of
the P10 million down payment but opposes the order to deposit the
amount in court. Reyes contends that prior to a judgment annulling the
Contract to Sell, he has the "right to use, possess and enjoy" 26 the P10
million as its "owner" 27 unless the court orders its preliminary
attachment. 28
To subscribe to Reyes' contention will unjustly enrich Reyes at the
expense of Lim. Reyes sold to Line One the Property even before the
balance of P18 million under the Contract to Sell with Lim became due on
8 March 1995. On 1 March 1995, Reyes signed a Deed of Absolute
Sale 29 in favor of Line One. On 3 March 1995, the Register of Deeds
issued TCT No. 134767 30 in the name of Line One. 31 Reyes cannot claim
ownership of the P10 million down payment because Reyes had already
sold to another buyer the Property for which Lim made the down payment.
In fact, in his Comment 32 dated 20 March 1996, Reyes reiterated his offer
to return to Lim the P10 million down payment. TCHEDA
On balance, it is unreasonable and unjust for Reyes to object to the deposit
of the P10 million down payment. The application of equity always involves
a balancing of the equities in a particular case, a matter addressed to the
sound discretion of the court. Here, we find the equities weigh heavily in
favor ofLim, who paid the P10 million down payment in good faith only to
discover later that Reyes had subsequently sold the Property to another
buyer.
In Eternal Gardens Memorial Parks Corp. v. IAC, 33 this Court held the
plaintiff could not continue to benefit from the property or funds in
litigation during the pendency of the suit at the expense of whomever the
court might ultimately adjudge as the lawful owner. The Court declared:
In the case at bar, a careful analysis of the records will
show that petitioner admitted among others in its complaint
in Interpleader that it is still obligated to pay certain
amounts to private respondent; that it claims no interest in
such amounts due and is willing to pay whoever is declared
entitled to said amounts. . . . .
Under the circumstances, there appears to be no plausible
reason for petitioner's objections to the deposit of the
amounts in litigation after having asked for the assistance
of the lower court by filing a complaint for interpleader
where the deposit of aforesaid amounts is not only required
by the nature of the action but is a contractual obligation of
the petitioner under the Land Development Program
(Rollo, p. 252).
There is also no plausible or justifiable reason for Reyes to object to the
deposit of the P10 million down payment in court. The Contract to Sell
can no longer be enforced because Reyes himself subsequently sold the
Property to Line One. Both Reyes and Lim are now seeking rescission of
the Contract to Sell. Under Article 1385 of the Civil Code, rescission
creates the obligation to return the things that are the object of the contract.
Rescission is possible only when the person demanding rescission can
return whatever he may be obliged to restore. A court of equity will not
rescind a contract unless there is restitution, that is, the parties are restored
to the status quo ante. 34
Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot
refuse to deposit the P10 million down payment in court. 35 Such deposit
will ensure restitution of the P10 million to its rightful owner. Lim, on the
other hand, has nothing to refund, as he has not received anything under
the Contract to Sell. 36
In Government of the Philippine Islands v. Wagner and Cleland
Wagner, 37 the Court ruled the refund of amounts received under a
contract is a precondition to the rescission of the contract. The Court
declared:
The Government, having asked for rescission, must
restore to the defendants whatever it has received under
the contract. It will only be just if, as a condition to
rescission, the Government be required to refund to the
defendants an amount equal to the purchase price, plus
the sums expended by them in improving the land. (Civil
Code, Art. 1295.)
The principle that no person may unjustly enrich himself at the expense of
another is embodied in Article 22 38 of the Civil Code. This principle
applies not only to substantive rights but also to procedural remedies. One
condition for invoking this principle is that the aggrieved party has no other
action based on contract, quasi-contract, crime, quasi-delict or any other
provision of law. 39 Courts can extend this condition to the hiatus in the
Rules of Court where the aggrieved party, during the pendency of the case,
has no other recourse based on the provisional remedies of the Rules of
Court.
Thus, a court may not permit a seller to retain, pendente lite, money paid by
a buyer if the seller himself seeks rescission of the sale because he has
subsequently sold the same property to another buyer. 40 By seeking
rescission, a seller necessarily offers to return what he has received from the
buyer. Such a seller may not take back his offer if the court deems it
equitable, to prevent unjust enrichment and ensure restitution, to put the
money in judicial deposit.
There is unjust enrichment when a person unjustly retains a benefit to the
loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good
conscience. 41 In this case, it was just, equitable and proper for the trial
court to order the deposit of the P10 million down payment to prevent unjust
enrichment by Reyes at the expense of Lim. 42
WHEREFORE, we AFFIRM the Decision of the Court of Appeals.
SO ORDERED.
||| (Reyes v. Lim, G.R. No. 134241, [August 11, 2003], 456 PHIL 1-14)
THIRD DIVISION
[G.R. No. 109087. May 9, 2001.]
RODZSSEN SUPPLY CO. INC., petitioner, vs. FAR
EAST BANK & TRUST CO., respondent.
DECISION
PANGANIBAN, J p:
When both parties to a transaction are mutually negligent in the
performance of their obligations, the fault of one cancels the negligence of
the other. Thus, their rights and obligations may be determined equitably.
No one shall enrich oneself at the expense of another.
The Case
Before us is a Petition for Review on Certiorari 1 under Rule 45 of the
Rules of Court, assailing the January 21, 1993 Decision 2 of the Court of
Appeals 3(CA) in CA-GR CV No. 26045. The challenged Decision
affirmed with modification the ruling of the Regional Trial Court of
Bacolod City in Civil Case No. 2296. The CA ruled as follows:
"WHEREFORE, the decision under appeal should be, as
it is hereby affirmed in all its aspects, except for the
deletion of paragraph 2 of its dispositive portion, which
paragraph shall be replaced by a new paragraph which
shall read as follows:
'2. ordering the defendant to pay the plaintiff the
sum equivalent to 10% of the total amount due
and collectible, as attorney's fees; and'
"No pronouncement as to costs." 4
On the other hand, the trial court had rendered this judgment:
"1. Ordering the defendant to pay the plaintiff the sum of
P76,000.00, representing the principal amount being
claimed in this action, plus interest thereon at the rate of
12% per annum counted from October 1979 until fully
paid;
"2. Ordering the defendant to pay the plaintiff the sum
equivalent to 25% of the total amount due and collectible;
and
"3. Ordering the defendant to pay the costs of the suit." 5
The Facts
The factual and procedural antecedents of the case are summarized by the
Court of Appeals as follows:
"In the complaint from which the present proceedings
originated, it is alleged that on January 15, 1979,
defendant Rodzssen Supply, Inc. opened with plaintiff Far
East Bank and Trust Co. a 30-day domestic letter of credit,
LC No. 52/0428/79-D, in the amount of P190,000.00 in
favor of Ekman and Company, Inc. (Ekman) for the
purchase from the latter of five units of hydraulic loaders,
to expire on February 15, 1979; that subsequent
amendments extended the validity of said LC up to October
16, 1979; that on March 16, 1979, three units of the
hydraulic loaders were delivered to defendant for which
plaintiff on March 26, 1979, paid Ekman the sum of
P114,000.00, which amount defendant paid plaintiff before
the expiry date of the LC; that the shipment of the
remaining two units of hydraulic loaders valued at
P76,000.00 sent by Ekman was 'readily received by the
defendant' before the expiry date [of] subject LC; that
upon Ekman's presentation of the documents for the
P76,000.00 'representing final negotiation' on the LC
before the expiry date, and 'after a series of negotiations',
plaintiff paid to Ekman the amount of P76,000.00; and
that upon plaintiff's demand on defendant to pay for said
amount (P76,000.00), defendant' refused to pay . . .
without any valid reason'. Plaintiff prays for judgment
ordering defendant to pay the abovementioned
P76,000.00 plus due interest thereon, plus 25% of the
amount of the award as attorney's fees.
"In the Answer, defendant interposed, inter alia, by way
of special and affirmative defenses that plaintiff ha[d] no
cause of action against defendant; that there was a breach
of contract by plaintiff who in bad faith paid Ekman,
knowing that the two units of hydraulic loaders had been
delivered to defendant after the expiry date of subject LC;
and that in view of the breach of contract, defendant
offered to return to plaintiff the two units of hydraulic
loaders, 'presently still with the defendant' but plaintiff
refused to take possession thereof.
"The trial court's ruling that plaintiff [was] entitled to
recover from defendant the amount of P76,000.00 was
based on its following findings/conclusions: (1) under the
contract of sale of the five loaders between Ekman and
defendant, upon Ekman's delivery to, and acceptance by,
defendant of the two remaining units of the five loaders,
defendant became liable to Ekman for the payment of
said two units. However, as defendant did not pay Ekman,
the latter pressed plaintiff for the payment of said two
loaders in the amount of P76,000.00. In the honest belief
 that it was still under obligation to Ekman for said amount,
considering that Ekman had presented all the necessary
documents, plaintiff voluntarily paid the said amount to
Ekman. Plaintiff's . . . voluntary and lawful act of payment
g[a]ve rise to a quasi-contract between plaintiff and
defendant; and if defendant should escape liability for said
amount, the result would be to allow defendant to enrich
itself at plaintiff's expense . . . . SEHTA.
". . . . While defendant, indeed offered to return the two
loaders to plaintiff, . . . this offer was made 3 years after
defendant's receipt of the goods, when plaintiff pressed for
payment. By said voluntary acceptance of the two loaders,
estoppel works against defendant who should have refused
delivery of, and/or immediately offered to return, the
goods.
"Accordingly, judgment was rendered in favor of the
plaintiff and against the defendant . . . ." 6
The CA Ruling
The CA rejected petitioner's imputation of bad faith and negligence to
respondent bank for paying for the two hydraulic loaders, which had been
delivered after the expiration of the subject letter of credit. The appellate
court pointed out that petitioner received the equipment after the letter of
credit had expired. "To absolve defendant from liability for the price of the
same," the CA explained, "is to allow it to get away with its unjust
enrichment at the expense of the plaintiff."
Hence, this Petition. 7
Issues
Petitioner presents the following issues for resolution:
"1. Whether or not it is proper for a banking institution to
pay a letter of credit which has long expired or been
cancelled.
"2. Whether or not respondent courts were correct in their
conclusion that there was a consummated sale between
petitioner and Ekman Co.
"3. Whether or not Respondent Court of Appeals was
correct in evading the issues raised in the appeal that
under the trust receipt, petitioner was merely the
depositary of private respondent with respect to the goods
covered by the trust receipt." 8
The Court's Ruling
We affirm the Court of Appeals, but lower the interest rate to only 6
percent and delete the award of attorney's fees.
First Issue:
Efficacy of Letter of Credit
Petitioner asserts that respondent bank was negligent in paying for the two
hydraulic loaders, when it no longer had any obligation to do so in view of
the expiration and cancellation of the Letter of Credit.
Petitioner Rodzssen Supply Inc. applied for and obtained an irrevocable
30-day domestic Letter of Credit from Far East Bank and Trust Company
Inc. on January 15, 1979, in favor of Ekman and Company Inc., in order to
finance the purchase of five units of hydraulic loaders in the amount of
P190,000. Originally set to expire on February 15, 1979, the subject Letter
of Credit was amended several times to extend its validity until October
16, 1979.
The Letter of Credit expressly restricted the negotiation to respondent
bank and specifically instructed Ekman and Company Inc. to tender the
following documents: (1) delivery receipt duly acknowledged by the buyer,
(2) accepted draft, and (3) duly signed commercial invoices. Likewise, the
instrument contained a provision with regard to its expiration date. 9
For the first three hydraulic loaders that were delivered, the bank paid the
amount specified in the letter of credit. The present dispute pertains only to
the last two hydraulic loaders.
Clearly, the bank paid Ekman when the former was no longer bound to do
so under the subject Letter of Credit. The records show that respondent paid
the latter P76,000 for the last two hydraulic loaders on March 14,
1980, 10 five months after the expiration of the Letter of Credit on October
16, 1979. 11In fact, on December 27, 1979, the bank had
informed Rodzssen of the cancellation of the commercial paper and credited
P22,800 to the account of the latter. The amount represented the marginal
deposit, which petitioner had been required to put up for the unnegotiated
portion of the Letter of Credit — P76,000 for the two hydraulic loaders. 12
The subject Letter of Credit had become invalid upon the lapse of the period
fixed therein. 13 Thus, respondent should not have paid Ekman; it was not
obliged to do so. In the same vein, of no moment was Ekman's presentation,
within the prescribed period, of all the documents necessary for collection,
as the Letter of Credit had already expired and had in fact been cancelled.
Second Issue:
Was Petitioner Liable to Respondent?
Be that as it may, we agree with the CA that petitioner should pay
respondent bank the amount the latter expended for the equipment belatedly
delivered by Ekman and voluntarily received and kept by petitioner.
Respondent bank's right to seek recovery from petitioner is anchored, not
upon the inefficacious Letter of Credit, but on Article 2142 of the Civil
Code which reads as follows:
"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."
Indeed, equitable considerations behoove us to allow recovery by
respondent. True, it erred in paying Ekman, but petitioner itself was not
without fault in the transaction. It must be noted that the latter had
voluntarily received and kept the loaders since October 1979.
Petitioner claims that it accepted the late delivery of the equipment, only
because it was bound to accept it under the company's trust receipt
arrangement with respondent bank.
Granting that petitioner was bound under such arrangement to accept the
late delivery of the equipment, we note its unexplained inaction for almost
four years with regard to the status of the ownership or possession of the
loaders. Bewildering was its lack of action to validate the ownership and
possession of the loaders, as well as its stolidity over the purported failed
sales transaction. Significant too is the fact that it formalized its offer to
return the two pieces of equipment only after respondent's demand for
payment, which came more than three years after it accepted delivery.
When both parties to a transaction are mutually negligent in the
performance of their obligations, the fault of one cancels the negligence of
the other and, as in this case, their rights and obligations may be
determined equitably under the law proscribing unjust enrichment.
Payment of Interest
We, however, disagree with both the CA and the trial court's imposition of
12 percent interest on the sum to be paid by petitioner. In Eastern
Shipping Lines v. CA, 14 the Court laid down the following guidelines in
the imposition of interest:
 "xxx xxx xxx
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed
to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit."
Although the sum of money involved in this case was payable to a bank, the
present factual milieu clearly shows that it was not a loan or forbearance of
money. Thus, pursuant to established jurisprudence and Article 2009 of the
Civil Code, petitioner is bound to pay interest at 6 percent per annum,
computed from April 7, 1983, the time respondent bank demanded payment
from petitioner. From the finality of the judgment until its satisfaction, the
interest shall be 12 percent per annum.
Attorney's Fees
Considering that negligence is imputable to both parties, both should bear
their respective costs of the suit. We also delete the award of attorney's
fees in favor of respondent bank. 15
WHEREFORE, the Petition is DENIED and the assailed Decision of the
Court of Appeals AFFIRMED with the following MODIFICATIONS:
1. Petitioner Rodzssen Supply Co., Inc. is ORDERED to
reimburse Respondent Far East Bank and Trust Co., Inc.
P76,000 plus interest thereon at the rate of 6 percent per
annum computed from April 7, 1983. After this judgment
becomes final, the interest shall be 12 percent per
annum. HDITCS
2. The award of attorney's fees in favor of respondent is
DELETED.
3. No pronouncement as to costs.
SO ORDERED.
||| (Rodzssen Supply Co. Inc. v. Far East Bank & Trust Co., G.R. No.
109087, [May 9, 2001], 409 PHIL 706-717)
EN BANC
[G.R. No. 137842. August 23, 2001.]
PEOPLE OF THE PHILIPPINES, plaintiff-
appellee, vs. DANILO CATUBIG y HORIO, accused-
appellant.
The Solicitor General for plaintiff-appellee.
Public Attorney's Office for accused-appellant.
SYNOPSIS
Danilo Catubig was charged with the crime of rape before the Regional
Trial Court, Branch 78 of Malolos, Bulacan. Prosecution evidence showed
that on November 27, 1997, at around 4:00 o'clock in the afternoon, 12-year
old Dannilyn Catubig and her four younger siblings were watching
television in thesala of their house. When Dannilyn's father, Danilo Catubig,
arrived, the latter told Dannilyn's sibling to go to her aunt's house which is
just located nearby. Thereafter, Danilo told Dannilyn to go inside the room
and to lie down on the bed. After Dannilyn had complied, Danilo removed
Dannilyn's shorts and panty. Danilo, after removing his brief and t-shirt, laid
on top of Dannilyn and succeeded in inserting his penis to her vagina.
Dannilyn did not resist because she is afraid her father who beat and raped
her in the past. However, Dannilyn's aunt who got suspicious of what Danilo
was doing to Dannilyn, informed the latter's mother. Thus, when confronted
by her mother, Dannilyn was forced to reveal that she was indeed raped by
her father. Contrarily, Danilo denied the accusation against him. He claimed
that the rape charge was brought about because of the ill will between him
and his wife and daughter Dannilyn, following a quarrel. Thus, the trial
court convicted Danilo of the crime charged and the penalty of death was
imposed upon him. Hence, this automatic review.
The Court ruled that Dannilyn had given her testimony in a plain,
categorical, spontaneous and frank manner, remaining consistent
throughout, and there was hardly anything on record that can cast doubt on
her sincerity. The revelations of an innocent child whose chastity had been
abused, coupled with her willingness to face police investigation and to
undergo the trouble and humiliation of a public trial, should merit credence
unless strong justifications dictate otherwise. Indeed, it would take a most
senseless kind of depravity for a young daughter to just make up a story
which could put her own father to an undeserved indictment and even to
possibly face death in the hands of the law. However, the information
failed to state the minority of the victim and her relationship with the
offender, both special qualifying circumstances under Republic Act No. 7659,
and for want of such allegations, the trial court erred in imposing the death
penalty on the accused. Appellant could only thus be convicted under
Article 335 of the Revised Penal Code, as amended, of simple rape
punishable by reclusion perpetua. HCEcAa
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; CREDIBILITY OF WITNESSES;
REVELATIONS OF INNOCENT, CHILD MERIT CREDENCE. —
Dannilyn has given her testimony in a plain, categorical, spontaneous and
frank manner, remaining consistent throughout, and there is hardly,
anything on record that can cast doubt on her sincerity. The revelations of
an innocent child whose chastity has been abused, coupled with her
willingness to face police investigation and to undergo the trouble and
humiliation of a public trial, should merit credence unless strong
justifications dictate otherwise. Indeed, it would take a most senseless kind
of depravity for a young daughter to just make up a story which could put
her own father to an undeserved indictment and to even possibly face
death in the hands of the law.
2. CRIMINAL LAW; RAPE; INCESTUOUS RAPE; MORAL
ASCENDANCY AND INFLUENCE OF THE FATHER SUBSTITUTE
THE REQUISITE FOR VIOLENCE AND INTIMIDATION. — When
rape is committed against one's own daughter, the moral ascendancy and
influence of the father, that necessarily flows from his parental authority,
can sufficiently cow the child to submission and can rightly be held to
substitute for the requisite "violence or intimidation" that, normally, would
be characterized by physical acts and uttered threats made on the victim.
3. REMEDIAL LAW; EVIDENCE; ALIBI AND DENIAL; CANNOT
PREVAIL OVER POSITIVE AND CATEGORICAL STATEMENTS OF
PRIVATE COMPLAINANT. — The trite defenses of alibi and denial
proferred by appellant cannot prevail over the positive and categorical
statements of private complainant. Alibi is often viewed with suspicion and
received with caution not only because it is inherently weak and unreliable
but also because it is easy to fabricate. In order that this defense can prosper,
it must be convincing to preclude any doubt on the physical impossibility of
the presence of the accused at the locus criminis at the time of the incident.
These conditions have not been met in the case at bar.
4. ID.; ID.; CREDIBILITY OF WITNESSES; MERE RESENTMENT OF
A WIFE AND DAUGHTER IS NOT SO COMPELLING TO MOTIVATE
THEM TO WRONGLY LODGE A COMPLAINT FOR A MORE
SERIOUS CRIME THAN EXPECTED. — The contention of appellant that
his wife and daughter Dannilyn have accused him merely because of his
violent ways is much too flimsy to be believed. The mere resentment of a
wife and daughter is not so compelling as to have motivated them to
wrongly lodge a complaint for a crime much more serious than might, if at
all, be expected.
5. ID.; ID.; ID.; ASSESSMENT MADE BY THE TRIAL COURT
DESERVES GREAT REGARD AND WEIGHT ON APPEAL. — It is
likewise a settled doctrine that the assessment made by the trial court on the
credibility of witnesses deserves great regard and weight on appeal. The rule
is not without reason; the trial judge has a unique position of hearing first
hand the witnesses and observing their deportment, conduct and attitude
during the course of the testimony in open court. There is no valid reason to
now ignore this long accepted jurisprudence in this instance.
6. CRIMINAL LAW; RAPE; FOR IMPOSITION OF DEATH PENALTY,
SPECIAL QUALIFYING CIRCUMSTANCES MUST BE ALLEGED IN
THE COMPLAINT OR INFORMATION. — The concurrence of the
minority of the victim and her relationship to the offender are special
qualifying circumstances that are needed to be alleged in the complaint or
information for the penalty of death to be decreed. The Constitution
guarantees to be inviolable the, right of an accused to be informed of the
nature and cause of the accusation against him. It is a requirement that
renders it essential for every element of the offense with which he is
charged to be properly alleged in the complaint or information.
7. ID.; ID.; ID.; NOT COMPLIED WITH IN CASE AT BAR. — [T]he
information failed to state the minority of the victim and her relationship
with the offender, both special qualifying circumstances under Republic Act
No. 7659, and for want of such allegations, the trial court erred in imposing
the death penalty on the accused. Appellant could only thus be convicted
under Article 335 of the Revised Penal Code, as amended, of simple rape
punishable byreclusion perpetua.
8. CRIMINAL LAW; RAPE; CIVIL LIABILITY; P50,000.00 AS
MORAL DAMAGES, P50,000.00 AS CIVIL INDEMNITY,
COMPENSATORY DAMAGES AND P25,000.00 AS EXEMPLARY
DAMAGES. — Anent the award of damages, the trial court has correctly
awarded P50,000.00 moral damages, an award that rests on the jural
foundation that the crime of rape necessarily brings with it shame, mental
anguish, besmirched reputation, moral shock and social humiliation to the
offended party. In addition, the offended party deserves to receive the
amount of P50,000.00 civil indemnity, the equivalent of compensatory
damages, and exemplary damages in the amount of P25,000.00.
9. CIVIL LAW; DAMAGES; EXEMPLARY DAMAGES;
ATTENDANCE OF AGGRAVATING CIRCUMSTANCES IN THE
PERPETRATION OF CRIME JUSTIFY AN AWARD THEREOF. — The
attendance of aggravating circumstances in the perpetration of the crime
serves to increase the penalty (the criminal liability aspect), as well as to
justify an award of exemplary or corrective damages (the civil liability
aspect), moored on the greater perversity of the offender manifested in the
commission of the felony such as may be shown by (1) the motivating
power itself, (2) the place of commission, (3) the means and ways
employed, (4) the time, or (5) the personal circumstances of the offender or
the offended party or both. There are various types of aggravating
circumstances, among them, the ordinary and the qualifying. Relationship is
an alternative circumstance under Article 15 of the Revised Penal Code. . . .
As a rule, relationship is held to be aggravating in crimes against chastity,
such as rape and acts of lasciviousness, whether the offender is a higher or a
lower degree relative of the offended party.
10. ID.; ID.; ID.; ID.; "AGGRAVATING CIRCUMSTANCES," TO BE
UNDERSTOOD IN ITS BROAD OR GENERIC SENSE. — The term
"aggravating circumstances" used by the Civil Code, the law not having
specified otherwise, is to be understood in its broad or generic sense. The
commission of an offense has a two-pronged effect, one on the public as it
breaches the social order and the other upon the private victim as it causes
personal sufferings, each of which is addressed by, respectively, the
prescription of heavier punishment for the accused and by an award of
additional damages to the victim. The increase of the penalty or a shift to a
graver felony underscores the exacerbation of the offense by the attendance
of aggravating circumstances, whether ordinary or qualifying, in its
commission. Unlike the criminal liability which is basically a State concern,
the award of damages, however, is likewise, if not primarily, intended for
the offended party who suffers thereby. It would make little sense for an
award of exemplary damages to be due the private offended party when the
aggravating circumstance is ordinary but to be withheld when it is
qualifying. Withal, the ordinary or qualifying nature of an aggravating
circumstance is a distinction that should only be of consequence to the
criminal, rather than to the civil, liability of the offender. In fine, relative
to the civil aspect of the case, an aggravating circumstance, whether
ordinary or qualifying, should entitle the offended party to an award of
exemplary damages within the unbridled meaning of Article 2230 of the
Civil Code.
11. ID.; ID.; ID.; PURPOSE. — Also known as "punitive" or "vindictive"
damages, exemplary or corrective damages are intended to serve as a
deterrent to serious wrongdoings, and as a vindication of undue sufferings
and wanton invasion of the rights of an injured or a punishment for those
guilty of outrageous conduct.
12. ID.; ID.; ID.; DIFFERENTIATED FROM PUNITIVE OR
VINDICTIVE DAMAGES. — These terms are generally, but not always,
used interchangeably. In common law, there is preference in the use of
exemplary damages when the award is to account for injury to feelings and
for the sense of indignity and humiliation suffered by a person as a result
of an injury that has been maliciously and wantonly inflicted, the theory
being that there should be compensation for the hurt caused by the highly
reprehensible conduct of the defendant — associated with such
circumstances as willfulness; wantonness; malice, gross negligence or
recklessness, oppression, insult or fraud or gross fraud — that intensifies
the injury. The terms punitive or vindictive damages are often used to refer
to those species of damages that may be awarded against a person to
punish him for his outrageous conduct. In either case, these damages are
intended in good measure to deter the wrongdoer and other like him from
similar conduct in the future.
13. REMEDIAL LAW; REVISED RULES ON CRIMINAL
PROCEDURE; REQUIRED AGGRAVATING CIRCUMSTANCES TO
BE STATED IN THE COMPLAINT OR INFORMATION. — [T]he
Revised Rules on Criminal Procedure, made effective on 01 December
2000, requires aggravating circumstances, whether ordinary or qualifying, to
be stated in the complaint or information. . . . A court would thus be
precluded from considering in its judgment the attendance of "qualifying or
aggravating circumstances" if the complaint or information is bereft of any
allegation of the presence of such circumstances.
14. ID.; ID; CIVIL LIABILITY INCURRED BY ACCUSED PRIOR TO
THE EFFECTIVITY THEREOF REMAINS UNAFFECTED; CASE AT
BAR. — The retroactive application of procedural rules, nevertheless,
cannot adversely affect the rights of the private offended party that have
become vested prior to the effectivity of said rules. Thus, in the case at bar,
although relationship has not been alleged in the information, the offense
having been committed, however, prior to the effectivity of the new rules,
the civil liability already incurred by appellant remains unaffected thereby.
DECISION
VITUG, J p:
In an information, dated 29 January 1998, the accused, Danilo Catubig y
Horio, was charged with the crime of rape before the Regional Trial Court,
Branch 78, of Malolos, Bulacan; viz:
"The undersigned Asst. Provincial Prosecutor on complaint
of the offended party Dannilyn Catubig y Lazaro accuses
Danilo Catubig y Horio of the crime of rape, penalized
under the provisions of Art. 335 of the Revised Penal Code,
committed as follows:
"That on or about the 27th day of November, 1997, in the
municipality of San Jose del Monte, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, did then and there
wilfully, unlawfully and feloniously, by means of force,
threats and intimidation and with lewd design have carnal
knowledge of the said offended party against her will." 1
When arraigned on 16 July 1998, accused Catubig, represented by counsel
de oficio, pleaded "not guilty" to the offense charged; forthwith, trial
ensued.
The case for the prosecution was laid bare in Appellee's Brief submitted by
the Office of the Solicitor General.
"On November 27, 1997, at around 4:00 o'clock in the
afternoon, private complainant Dannilyn Catubig, who
was born on August 9, 1985, and her four (4) younger
siblings were watching television in the sala of their
house located at Sunlife Subdivision, San Jose del Monte,
Bulacan.
"After an hour, Dannilyn's father, herein appellant
Danilo Catubig, arrived and told Dannilyn's siblings to
proceed, as in fact they did proceed, to her aunt's house
which is just located nearby. Thereafter, appellant told
Dannilyn to go inside a room and to lie down on the bed.
After Dannilyn had complied, appellant removed
Dannilyn's shorts and panty, while appellant, after
removing his brief and t-shirt, [laid] on top of Dannilyn.
Afraid of appellant who beat and raped her in the past,
Dannilyn was not able to resist appellant who succeeded
in inserting his penis into Dannilyn's vagina.
"However, Dannilyn's aunt, who got suspicious of what
appellant was doing to Dannilyn, informed the latter's
mother, Jocelyn Catubig, about the said suspicion. Thus,
when confronted by her mother, Dannilyn was forced to
 reveal that she was indeed raped by appellant. The sexual
assault was reported to the San Jose del Monte Police
Station where Dannilyn's sworn statement was
subsequently taken on December 3, 1997.
"Upon the request of the police authorities, Dannilyn was
examined on December 1, 1997 by Dr. Wilfredo E. Tiera,
Medico-Legal Officer of the National Bureau of
Investigation, who found out that Dannilyn's healed
laceration in the hymen was caused by sexual
intercourse." 2
The accused denied the accusation against him. He claimed that the rape
charge was brought about only because of the ill-will between him, on the
one hand, and his wife and daughter Dannilyn, on the other hand, following
a quarrel. On 27 November 1997, he asseverated, he had fought with his
wife, hitting her and his daughter. His wife then threatened him that it was
the last time that she would allow him to harm her and that he would regret
what he did. True to her foreboding, the next day, he was arrested and a
complaint for rape was filed against him. ICHcTD
On 11 December 1998, the Regional Trial Court rendered a decision holding
the accused guilty of the crime of rape; it adjudged:
"WHEREFORE, in view of the foregoing, the Court hereby
finds accused DANILO CATUBIG Y HORIO GUILTY
beyond reasonable doubt of the crime of Rape defined and
penalized under Article 335 of the Revised Penal Code, as
amended by Republic Act No. 7659, and hereby sentences him
to suffer the penalty of DEATH, and to pay private
complainant Dannilyn Catubig the amount of Fifty
Thousand Pesos (P50,000.00) as moral damages." 3
With the imposition of the death penalty by the trial court, the records were
elevated to this Court for automatic review.
In his brief, appellant submitted thusly:
"1. The lower court erred in finding the accused guilty of
the crime of rape in violation of Article 335 of the
Revised Penal Code as amended byRepublic Act 7659.
"2. The lower court erred in not taking into consideration
the fact that the information was defective for failure to
state that the accused is the father of the victim and that
the victim was under 18 years [of] age at the time of the
commission of the alleged rape." 4
Private complainant Dannilyn Catubig narrated how she was repeatedly
abused by her own father; she testified:
"Q Now, after your sisters and brother [went] to the house
of your aunt, what did your father do?
"A He instructed me to go inside the room.
"Q How many rooms were there in your house? IDaCcS
"A Only one.
"Q Did you go to the room per instruction?
"A Yes, sir.
"Q And what happened inside the room?
"A My father entered the room.
"Q And when your father entered the room, what did he
do next?
"A He removed my short [pants] and my panty.
"Q What was your position at that time when your father
removed your short pants and panty?
"A I was lying.
"Q When you entered the room, did you lie immediately?
"A No, I just sat.
"Q How come as you claimed a while ago, you were lying
when your father removed your short pants and
panty?
"A Once I entered the room, I was sitting then he removed
my short [pants] and panty.
"Q You said upon entering the room, you sat and while
sitting, all of a sudden your father removed your
short pants and panty while already lying at that
time, how come you were lying when according to
you, you were sitting inside the room?
"A I was sitting first and he instructed me to lie down.
"Q While you were sitting inside the room and you were
instructed by your father to lie, what comes to your
mind?
"A That he will rape me.
"Q How did you come to know that?
"A He was raping me before, doing that before.
"Q In other words, that was not the first time your father
raped you on that particular date?
"A No, sir.
"Q When was the first time, if you remember? CTAIDE
"A When I was still in grade 1.
"Q How many times were you raped by your father?
"A I can no longer remember how many it was — several.
"Q When was the last time your father raped you?
"A November 27.
"Q Now, when your father removed your short pants and
panty, what did he do next?
"A He removed his brief and shirt.
"Q After removing his brief and shirt, what did he do?
"A He [laid] on top me.
"Q When your father [laid] on top of you, what did he
do?
"A He was inserting his penis to my vagina.
"Q At this juncture, may we make of record that witness
starts to cry.
"Q How did you know your father inserted his penis to
your vagina?
"A I can feel it and it is painful.
"Q That was the time when your father was already lying
on top of you?
"A Yes, sir.
"Q And what was the movement of the body of your
father while he was lying on top of you?
"A Push and pull movement.
"Q For how long did your father stay on top of you doing
that push and pull movement?
"A That must be about 1 hour, but my aunt arrived.
"Q Aside from the pain, what else did you feel? AacSTE
 "A Mahapdi at parang may pumipitik sa loob ng ari ko.
"Q Did you not try to resist?
"A No, because I am afraid of him.
"Q You are afraid of your father?
"A Yes, sir.
"Q Afraid of what?
"A Because he was beating us, hitting us.
"Q Why, what was the reason why your father was hitting
you?
"A To threaten us.
"Q For what purpose?
"A Whenever my mother sided with us, my father and
mother engaged in a fight.
"Q In this case, you were raped and sexually abused by
your father, what made you afraid of him? CSIHDA
"A Because we were afraid of my father since
childhood." 5
Dannilyn has given her testimony in a plain, categorical, spontaneous and
frank manner, remaining consistent throughout, and there is hardly anything
on record that can cast doubt on her sincerity. The revelations of an innocent
child whose chastity has been abused, coupled with her willingness to face
police investigation and to undergo the trouble and humiliation of a public
trial, should merit credence unless strong justifications dictate otherwise.
Indeed, it would take a most senseless kind of depravity for a young
daughter to just make up a story which could put her own father to an
undeserved indictment and to even possibly face death in the hands of the
law. 6
When rape is committed against one's own daughter, the moral ascendancy
and influence of the father, that necessarily flows from his parental
authority, can sufficiently cow the child to submission and can rightly be
held to substitute for the requisite "violence or intimidation" that,
normally, would be characterized by physical acts and uttered threats made
on the victim.
The trite defenses of alibi and denial proferred by appellant cannot prevail
over the positive and categorical statements of private
complainant. Alibi is often viewed with suspicion and received with
caution not only because it is inherently weak and unreliable but also
because it is easy to fabricate. In order that this defense can prosper, it
must be convincing to preclude any doubt on the physical impossibility of
the presence of the accused at the locus criminis at the time of the incident.
These conditions have not been met in the case at bar.
The contention of appellant that his wife and daughter Dannilyn have
accused him merely because of his violent ways is much too flimsy to be
believed. The mere resentment of a wife and daughter is not so compelling
as to have motivated them to wrongly lodge a complaint for a crime much
more serious than might, if at all, be expected.
It is likewise a settled doctrine that the assessment made by the trial court
on the credibility of witnesses deserves great regard and weight on appeal.
The rule is not without reason; the trial judge has a unique position of
hearing first hand the witnesses and observing their deportment, conduct
and attitude during the course of the testimony in open court. There is no
valid reason to now ignore this long accepted jurisprudence in this
instance.
This Court, however, finds the second assignment of error impressed with
merit.
Article 335 of the Revised Penal Code, as amended by Section 11 of Republic
Act No. 7659, at times also referred to as the Death Penalty Law, states in part:
"ARTICLE 335. When and how rape is committed. . . .
"xxx xxx xxx
"The death penalty shall also be imposed if the crime of
rape is committed with any of the following attendant
circumstances:
"1. When the victim is under eighteen (18) years of age and
the offender is a parent, ascendant, step-parent, guardian,
relative by consanguinity or affinity within the third civil
degree, or the common-law spouse of the parent of the
victim."
The concurrence of the minority of the victim and her relationship to the
offender are special qualifying circumstances that are needed to be
alleged in the complaint or information for the penalty of death to be
decreed. 7 The Constitution guarantees to be inviolable the right of an
accused to be informed of the nature and cause of the accusation against
him. 8 It is a requirement that renders it essential for every element of
the offense with which he is charged to be properly alleged in the
complaint or information.
Here, the information failed to state the minority of the victim and her
relationship with the offender, both special qualifying circumstances
underRepublic Act No. 7659, and for want of such allegations, the trial court
erred in imposing the death penalty on the accused. 9 Appellant could only
thus be convicted under Article 335 of the Revised Penal Code, as amended,
of simple rape punishable by reclusion perpetua.
Anent the award of damages, the trial court has correctly awarded
P50,000.00 moral damages, an award that rests on the jural foundation that
the crime of rape necessarily brings with it shame, mental anguish,
besmirched reputation, moral shock and social humiliation to the offended
party. 10 In addition, the offended party deserves to receive the amount of
P50,000.00 civil indemnity, 11 the equivalent of compensatory damages,
and exemplary damages in the amount of P25,000.00.
An apparent discord in the award of exemplary damages in simple and
qualified rape cases perhaps deserves more than just a passing remark.
The Civil Code of the Philippines provides, in respect to exemplary or
corrective damages, thusly:
"ARTICLE 2229. Exemplary or corrective damages are
imposed, by way of example or correction for the public
good, in addition to the moral, temperate, liquidated or
compensatory damages. DTAcIa
"ARTICLE 2230. In criminal offenses, exemplary
damages as a part of the civil liability may be imposed
when the crime was committed with one or more
aggravating circumstances. Such damages are separate
and distinct from fines and shall be paid to the offended
party.
"ARTICLE 2231. In quasi-delicts, exemplary damages
may be granted if the defendant acted with gross
negligence.
"ARTICLE 2232. In contracts and quasi-contracts, the
court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.
"ARTICLE 2233. Exemplary damages cannot be
recovered as a matter of right; the court will decide
whether or not they should be adjudicated.
 "ARTICLE 2234. While the amount of the exemplary
damages need not be proved, the plaintiff must show that
he is entitled to moral, temperate or compensatory damages
before the court may consider the question of whether or
not exemplary damages should be awarded. In case
liquidated damages have been agreed upon, although no
proof of loss is necessary in order that such liquidated
damages may be recovered, nevertheless, before the court
may consider the question of granting exemplary in
addition to the liquidated damages, the plaintiff must show
that he would be entitled to moral, temperate or
compensatory damages were it not for the stipulation for
liquidated damages. DIEACH
"ARTICLE 2235. A stipulation whereby exemplary
damages are renounced in advance shall be null and void."
The attendance of aggravating circumstances in the perpetration of the
crime serves to increase the penalty (the criminal liability aspect), 12 as well
as to justify an award of exemplary or corrective damages (the civil liability
aspect), 13 moored on the greater perversity of the offender manifested in
the commission of the felony such as may be shown by (1) the motivating
power itself, (2) the place of commission, (3) the means and ways
employed, (4) the time, or (5) the personal circumstances of the offender or
the offended party or both. There are various types of aggravating
circumstances, among them, the ordinary and the qualifying. Relationship is
an alternative circumstance under Article 15 of the Revised Penal Code.
"ARTICLE 15. Their concept. — Alternative
circumstances are those which must be taken into
consideration as aggravating or mitigating according to the
nature and effects of the crime and other conditions
attending its commission. They are relationship,
intoxication, and degree of instruction and education of
the offender.
"The alternative circumstance of relationship shall be
taken into consideration when the offended party is the
spouse, ascendant, descendant, legitimate, natural, or
adopted brother or sister, or relative by affinity in the
same degree of the offender."
As a rule, relationship is held to be aggravating in crimes against
chastity, such as rape and acts of lasciviousness, whether the offender
is a higher or a lower degree relative of the offended party. 14
Under Section 11 of Republic Act No. 7659, amending Article 335 of the
Revised Penal Code, the death penalty is to be imposed in rape cases
"when the victim is under eighteen (18) years of age and the offender is a
parent, ascendant, step-parent, guardian, relative by consanguinity or
affinity within the third civil degree, or the common-law spouse of the
parent of the victim." The Court has since held that the circumstances
enumerated by the amendatory law are to be regarded as special qualifying
(aggravating) circumstances. Somehow doubts linger on whether
relationship may then be considered to warrant an award for exemplary
damages where it is used to qualify rape as a heinous crime, thereby
becoming an element thereof, as would subject the offender to the penalty
of death. Heretofore, the Court has not categorically laid down a specific
rule, preferring instead to treat the issue on a case to case basis.
In People vs. Fundano, 15 People vs. Ramos, 16 People vs. Medina, 17 Pe
ople vs. Dimapilis, 18 People vs. Calayca, 19 People vs. Tabion, 20 Peopl
e vs. Bayona,21 People vs. Bayya, 22 and People vs. Nuñez, 23 along with
still other cases, the Court has almost invariably appreciated relationship
as an ordinary aggravating circumstance in simple rape and thereby
imposed exemplary damages upon the offender whether or not the offense
has been committed prior to or after the effectivity of Republic Act No. 7659.
Exceptionally, as
in People vs. Decena, 24 People vs. Perez, 25 People vs. Perez, 26 and Peo
ple vs.Ambray, 27 the Court has denied the award of exemplary damages
following the effectivity of that law. In qualified rape cases, such as
in People vs.Magdato, 28 People vs. Arizapa, 29 and People vs. Alicante, 30
the Court decreed the payment of exemplary damages to the offended party
but it did not so do as
in People vs. Alba, 31 People vs. Mengote, 32 and People vs. Maglente. 33
It may be time for the Court to abandon its pro hac vice stance and provide,
for the guidance of the bar and the bench, a kind of standard on the
matter.caTESD
Also known as "punitive" or "vindictive" damages, exemplary or corrective
damages are intended to serve as a deterrent to serious wrongdoings and as a
vindication of undue sufferings and wanton invasion of the rights of an
injured or a punishment for those guilty of outrageous conduct. These terms
are generally, but not always, used interchangeably. In common law, there is
preference in the use of exemplary damages when the award is to account
for injury to feelings and for the sense of indignity and humiliation suffered
by a person as a result of an injury that has been maliciously and wantonly
inflicted, 34 the theory being that there should be compensation for the hurt
caused by the highly reprehensible conduct of the defendant — associated
with such circumstances as willfulness, wantonness, malice, gross
negligence or recklessness, oppression, insult or fraud or gross fraud 35 —
that intensifies the injury. The terms punitive or vindictive damages are
often used to refer to those species of damages that may be awarded against
a person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer and others
like him from similar conduct in the future. 36
The term "aggravating circumstances" used by the Civil Code, the law not
having specified otherwise, is to be understood in its broad or generic
sense. The commission of an offense has a two-pronged effect, one on the
public as it breaches the social order and the other upon the private victim
as it causes personal sufferings, each of which is addressed by,
respectively, the prescription of heavier punishment for the accused and by
an award of additional damages to the victim. The increase of the penalty
or a shift to a graver felony underscores the exacerbation of the offense by
the attendance of aggravating circumstances, whether ordinary or
qualifying, in its commission. Unlike the criminal which is basically a
State concern, the award of damages, however, is likewise, if not
primarily, intended for the offended party who suffers thereby. It would
make little sense for an award of exemplary damages to be due the private
offended party when the aggravating circumstance is ordinary but to be
withheld when it is qualifying. Withal, the ordinary or qualifying nature of
an aggravating circumstance is a distinction that should only be of
consequence to the criminal, rather than to the civil, liability of the
offender. In fine, relative to the civil aspect of the case, an aggravating
circumstance, whether ordinary or qualifying, should entitle the offended
party to an award of exemplary damages within the unbridled meaning of
Article 2230 of the Civil Code. TaCDcE
Relevantly, the Revised Rules on Criminal Procedure, made effective on
01 December 2000, requires aggravating circumstances, whether ordinary
or qualifying, to be stated in the complaint or information. Sections 8 and
9 of Rule 110 of the Rules of Court now provide:
"SECTION 8. Designation of the offense. — The
complaint or information shall state the designation of the
offense given by the statute, aver the acts or omissions
constituting the offense, and specify its qualifying and
aggravating circumstances. If there is no designation of
 the offense, reference shall be made to the section or
subsection of the statute punishing it.
"SECTION 9. Cause of the accusation. — The acts or
omissions complained of as constituting the offense
and the qualifying and aggravating circumstances must be
stated in ordinary and concise language and not
necessarily in the language used in the statute but in
terms sufficient to enable a person of common
understanding to know what offense is being charged as
well as its qualifying and aggravating circumstances and
for the court to pronounce judgment."
A court would thus be precluded from considering in its judgment the
attendance of "qualifying or aggravating circumstances" if the complaint
or information is bereft of any allegation on the presence of such
circumstances.
The retroactive application of procedural rules, nevertheless, cannot
adversely affect the rights of the private offended party that have become
vested prior to the effectivity of said rules. Thus, in the case at bar, although
relationship has not been alleged in the information, the offense having been
committed, however, prior to the effectivity of the new rules, the civil
liability already incurred by appellant remains unaffected thereby.
WHEREFORE, the decision of the court a quo is AFFIRMED with
MODIFICATION in that appellant Danilo Catubig y Horio is found guilty
only of simple rape and not in its qualified form, and he is hereby sentenced
to suffer the penalty of reclusion perpetua and to pay complainant
Dannilyn CatubigP50,000.00 civil indemnity, P50,000.00 moral damages
and P25,000.00 exemplary damages. Costs de oficio.
SO ORDERED.
||| (People v. Catubig y Horio, G.R. No. 137842, [August 23, 2001], 416
PHIL 102-121)
EN BANC
[G.R. No. L-21438. September 28, 1966.]
AIR FRANCE, petitioner, vs. RAFAEL CARRASCOS
O and THE HONORABLE COURT OF
APPEALS, respondents.
Lichauco, Picazo & Agcaoili for petitioner.
Bengzon, Villegas & Zarraga for respondent R. Carrascoso.
SYLLABUS
1. JUDGMENT; FINDINGS OF FACT; REQUIREMENT OF LAW. —
Courts of justice are not burdened with the obligation to specify in the
sentence every bit and piece of evidence presented by the parties upon the
issues raised. The law solely insists that a decision state the "essential
ultimate facts" upon which the court's conclusion is drawn.
2. ID.; ID.; ID.; APPEAL AND ERROR; FAILURE TO MAKE
FINDINGS ON EVIDENCE AND CONTENTIONS OF ONE PARTY,
EFFECT OF; DECISION NOT TO BE CLOGGED WITH DETAILS. —
The mere failure to make specific findings of fact on the evidence
presented for the defense or to specify in the decision the contentions of
the appellant and the reasons for refusing to believe them is not sufficient
to hold the same contrary to the requirement of the law and the
Constitution. There is no law that so requires. A decision is not to be
clogged with details such that prolixity, if not confusion, may result.
3. ID.; ID.; ID.; FINDINGS OF FACT BY COURTS DEFINED. —
Findings of fact may be defined as the written statement of the ultimate facts
as found by the court and essential to support the decision and judgment
rendered thereon; they consist of the court's "conclusions with respect to the
determinative facts on issue."
4. ID.; ID.; ID.; QUESTION OF LAW EXPLAINED. — A question of law
is "one which does not call for an examination of the probative value of the
evidence presented by the parties."
5. PLEADING AND PRACTICE; APPEAL; WHAT MAY BE RAISED ON
APPEAL FROM COURT OF APPEALS. — It is not appropriately the
business of the Supreme Court to alter the facts or to review the questions of
fact because, by statute, only questions of law may be raised in an appeal by
certiorari from a judgment of the Court of Appeals, which judgment is
conclusive as to the facts.
6. ID.; ID.; EFFECT OF AFFIRMANCE BY COURT OF APPEALS OF
TRIAL COURT'S DECISION. — When the Court of Appeals affirms a
judgment of the trial court, and the findings of fact of said appellate court
are not in any way at war with those of the trial court, nor is said affirmance
upon a ground or grounds different from those which were made the basis of
the trial court's conclusions, such judgment of affirmance is (1) a
determination by the Court of Appeals that the proceeding in the lower court
was free from prejudicial error; (7) that all questions raised by the
assignments of error and all questions that might have been so raised have
been finally adjudicated as free from all error.
7. ID.; COMPLAINT; SPECIFIC MENTION OF THE TERM "BAD
FAITH" IN THE COMPLAINT NOT REQUIRED. — Although there is no
specific mention of the term bad faith in the complaint, the inference of bad
faith may be drawn from the facts and circumstances set forth therein. 8.
EVIDENCE; FINDING OF COURT OF APPEALS THAT RESPONDENT
WAS ENTITLED TO A FIRST CLASS SEAT. — The Court of Appeals
properly found that a first class-ticket holder is entitled to first class seat,
given the fact that seat availability in specific flights is therein confirmed;
otherwise, an air passenger will be placed in the hollow of the hands of an
airline, because it will always be easy for an airline to strike out the very
stipulations in the ticket and say that there was verbal agreement to the
contrary. If only to achieve stability in the relations between passenger
and air carrier, adherence to the ticket so issued is desirable.
9. ID.; LACK OF SPECIFIC AVERMENT OF BAD FAITH CURED BY
NOTICE TO DEFENDANT OF WHAT PLAINTIFF INTENDS TO
PROVE AND BY EVIDENCE PRESENTED WITHOUT OBJECTION;
AMENDMENT OF COMPLAINT TO CONFORM TO EVIDENCE
UNNECESSARY. — If there was lack of specific averment of bad faith in
the complaint, such deficiency was cured by notice, right at the start of the
trial, by plaintiff's counsel to defendant as to what plaintiff intended to
prove: while in the plane in Bangkok, plaintiff was ousted by defendant's
manager who gave his seat to a white man; and by evidence of bad faith in
the fulfillment of the contract presented without objection on the part of
the defendant. An amendment of the complaint to conform to the evidence
is not even required.
10. ID.; ADMISSIBILITY OF TESTIMONY ON AN ENTRY IN A
NOTEBOOK; TESTIMONY NOT COVERED BY BEST EVIDENCE
RULE. — The testimony of a witness that the purser made an entry in his
notebook reading "First Class passenger was forced to go to the tourist
class against his will and that the captain refused to intervene," is
competent and admissible because the subject of the inquiry is not the
entry but the ouster incident. It does not come within the prescription of
the best evidence rule.
11. CONTRACT OF CARRIAGE; QUASI-DELICT; LIABILITY OF
COMMON CARRIERS; CASE AT BAR. — Neglect or malfeasance of
the carrier's employees could give ground for an action for damages.
Damages here are proper because the stress of respondent's action is placed
upon his wrongful expulsion, which is a violation of a public duty by
petitioner-aircarrier — a case of quasi-delict.
12. ID.; ID.; ID.; AWARD OF MORAL DAMAGES FOR BREACH OF
CONTRACT. — Award of moral damages is proper, despite petitioner's
argument that respondent's action is planted upon breach of contract, where
the stress of the action is put on wrongful expulsion, the contract having
been averred only to establish the relation between the parties.
13. ID.; ID.; ID.; EMPLOYER IS RESPONSIBLE FOR TORTIOUS ACTS
OF HIS EMPLOYEE; CASE AT BAR. — The responsibility of an
employer for the tortious act of his employees is well settled in law. (Art.
2130, Civil Code). Petitioner-aircarrier must answer for the willful,
malevolent act of its manager.
14. ID.; ID.; ID.; LIABILITY FOR EXEMPLARY DAMAGES; POWER
OF COURTS TO GRANT; CASE AT BAR. — The Civil Code gives the
court ample power to grant exemplary damages, the only condition being
that defendant should have "acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner." As the manner of ejectment of plaintiff
from his first class seat fits into this legal precept, exemplary damages are
well awarded, in addition to moral damages.
15. ID.; ID.; LIABILITY FOR ATTORNEY'S FEES; COURT
DISCRETION WELL EXERCISED SHOULD NOT BE DISTURBED. —
The grant of exemplary damages justifies a similar judgment for attorney's
fees. The court below felt that it is but just and equitable that attorney's fees
be given and the Supreme Court does not intend to break faith with the
tradition that discretion well-exercised — as it is here should not be
disturbed.
16. ID.; RIGHTS OF PASSENGERS. — Passengers do not contract merely
for transportation. They have a right to be treated by the carrier's employees
with kindness, respect, courtesy and due consideration. They are entitled to
be protected against personal misconduct, injurious language, indignities
and abuses from such employees. So, any rude or discourteous conduct on
the part of employees towards a passenger gives the latter an action for
damages against the carrier. (4 R. C. L-1174-1175).
17. ID.; BREACH OF CONTRACT MAY BE A TORT. — Although the
relation of passenger and carrier is contractual both in origin and nature,
nevertheless, the act that breaks the contract may also be a tort.
18. WORDS AND PHRASES; BAD FAITH DEFINED. — "Bad faith", as
understood in law, contemplates a state of mind affirmatively operating
with furtive design or with some motive of self-interest or ill will or for
ulterior purpose
DECISION
SANCHEZ, J p:
The Court of First Instance of Manila 1 sentenced petitioner to pay
respondent Rafael Carrascoso P25,000.00 by way of moral damages;
P10,000.00 as exemplary damages; P393.20 representing the difference in
fare between first class and tourist class for the portion of the trip
Bangkok-Rome, these various amounts with interest at the legal rate, from
the date of the filing of the complaint until paid; plus P3,000.00 for
attorneys' fees; and the costs of suit.
On appeal, 2 the Court of Appeals slightly reduced the amount of refund
on Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm
the appealed decision "in all other respects", with costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as "fully supported by the Coming into focus is the constitutional mandate that "No decision shall be
evidence of record", are: rendered by any court of record without expressing therein clearly and
distinctly the facts and the law on which it is based". 5 This is echoed in
"Plaintiff, a civil engineer, was a member of a group of 48
the statutory demand that a judgment determining the merits of the case
Filipino pilgrims that left Manila for Lourdes on March 30,
shall state "clearly and distinctly the facts and the law on which it is
1958.
based", 6 and that "Every decision of the Court of Appeals shall contain
On March 28, 1958, the defendant, Air France, through its complete findings of fact on all issues properly raised before it." 7
authorized agent, Philippine Air Lines, Inc., issued to
A decision with absolutely nothing to support it is a nullity. It is open to
plaintiff a 'first class' round trip airplane ticket from Manila
direct attack. 8 The law, however, solely insists that a decision state the
to Rome. From Manila to Bangkok, plaintiff traveled in
"essential ultimate facts" upon which the court's conclusion is drawn. 9 A
'first class', but at Bangkok, the Manager of the defendant
court of justice is not hidebound to write in its decision every bit and piece
airline forced plaintiff to vacate the 'first class' seat that he
of evidence 10presented by one party and the other upon the issues raised.
was occupying because, in the words of the witness Ernesto
Neither is it to be burdened with the obligation "to specify in the sentence
G. Cuento, there was a 'white man', who, the Manager
the facts" which a party "considered as proved". 11 This is but a part of the
alleged, had a 'better right to the seat. When asked to vacate
mental process from which the Court draws the essential ultimate facts. A
his 'first class' seat, the plaintiff, as was to be expected,
decision is not to be so clogged with details such that prolixity, if not
refused, and told defendant's Manager that his seat would
confusion, may result. So long as the decision of the Court of Appeals
be taken over his dead body; a commotion ensued, and,
contains the necessary facts to warrant its conclusions, it is no error for
according to said Ernesto G. Cuento, many of the Filipino
said court to withhold therefrom "any specific finding of facts with respect
passengers got nervous in the tourist class; when they
to the evidence for the defense". Because, as this Court well observed,
found out that Mr. Carrascoso was having a hot discussion
"There is no law that so requires". 12 Indeed, "the mere failure to specify
with the white man [manager], they came all across to
(in the decision) the contentions of the appellant and the reasons for
Mr. Carrascoso and pacified Mr. Carrascoso to give his seat
refusing to believe them is not sufficient to hold the same contrary to the
to the 'white man' (Transcript, p. 12, Hearing of May 26,
requirements of the provisions of law and the Constitution". It is in this
1959); and plaintiff reluctantly gave his 'first class' seat in
setting that in Manigque, it was held that the mere fact that the findings
the plane." 3
"were based entirely on the evidence for the prosecution without taking
1. The thrust of the relief petitioner now seeks is that we review "all the into consideration or even mentioning the appellant's side in the
findings" 4 of respondent Court of Appeals. Petitioner charges that controversy as shown by his own testimony", would not vitiate the
respondent court failed to make complete findings of fact on all the issues judgment. 13 If the court did not recite in the decision the testimony of
properly laid before it. We are asked to consider facts favorable to petitioner, each witness for, or each item of evidence presented by, the defeated party,
and then, to overturn the appellate court's decision. it does not mean that the court has overlooked such testimony or such item
of evidence. 14 At any rate, the legal presumptions are that official duty has
been regularly performed, and that all the matters within an issue in a case
were laid before the court and passed upon by it. 15
Findings of fact, which the Court of Appeals is required to make, may be
defined as "the written statement of the ultimate facts as found by the court .
. . and essential to support the decision and judgment rendered
thereon". 16 They consist of the court's "conclusions with respect to
the determinative facts in issue" 17 A question of law, upon the other hand,
has been declared as "one which does not call for an examination of the
probative value of the evidence presented by the parties." 18
2. By statute, "only questions of law may be raised" in an appeal by
certiorari from a judgment of the Court of Appeals 19 That judgment is
conclusive as to the facts. It is not appropriately the business of this Court to
alter the facts or to review the questions of fact. 20
With these guideposts, we now face the problem of whether the findings of
fact of the Court of Appeals support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received
from petitioner a first class ticket. But petitioner asserts that said ticket did
not represent the true and complete intent and agreement of the parties; that
said respondent knew that he did not have confirmed reservations for first
class on any specific flight, although he had tourist class protection; that,
accordingly, the issuance of a first class ticket was no guarantee that he
would have a first class ride, but that such would depend upon the
availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed
in its brief before the Court of Appeals under its third assignment of error,
which reads: "The trial court erred in finding that plaintiff had confirmed
reservations for, and a right to, first class seats on the 'definite' segments of
his journey, particularly that from Saigon to Beirut." 21
And, the Court of Appeals disposed of this contention thus:
"Defendant seems to capitalize on the argument that the
issuance of a first-class ticket was no guarantee that the
passenger to whom the same had been issued, would be
accommodated in the first-class compartment, for as in
the case of plaintiff he had yet to make arrangements
upon arrival at every station for the necessary first class
reservation. We are not impressed by such a reasoning.
We cannot understand how a reputable firm like
defendant airplane company could have the indiscretion
to give out ticket it never meant to honor at all. It
received the corresponding amount in payment of first-
class tickets end yet it allowed the passenger to be at the
mercy of its employees. It is more in keeping with the
ordinary course of business that the company should
know whether or not the tickets it issues are to be
honored or not." 22
Not that the Court of Appeals is alone. The trial court similarly disposed of
petitioner's contention, thus:
"On the fact that plaintiff paid for, and was issued a 'First
class ticket, there can be no question. Apart from his
testimony, see plaintiffs Exhibits 'A', 'A-1' 'B', 'B-1', 'B-2',
'C' and 'C-1', and defendant's own witness, Rafael
Altonaga, confirmed plaintiff's testimony and testified as
follows:
Q. In these tickets there are marks 'O.K.'
From what you know, what does this
O.K. mean?
 A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, 'first class'. (Transcript, p. 169)
xxx xxx xxx
"Defendant tried to prove by the testimony of its witnesses
Luis Zaldariaga and Rafael Altonaga that although plaintiff
paid for, and was issued a 'first class' airplane ticket, the
ticket was subject to confirmation in Hongkong. The court
cannot give credit to the testimony of said witnesses. Oral
evidence cannot prevail over written evidence, and
plaintiff's Exhibits 'A', 'A1', 'B', 'B-1', 'C' and 'C- 1' belie the
testimony of said witnesses, and clearly show that the
plaintiff was issued, and paid for, a first class ticket without
any reservation whatever.
Furthermore, as hereinabove shown, defendant's own
witness Rafael Altonaga testified that the reservation for a
'first class' accommodation for the plaintiff was confirmed.
The court cannot believe that after such confirmation
,defendant had a verbal understanding with plaintiff that
the 'first class' ticket issued to him by defendant would be
subject to confirmation in Hongkong." 23
We have heretofore adverted to the fact that except for a slight difference of
a few pesos in the amount refunded on Carrascoso's ticket, the decision of
the Court of First Instance was affirmed by the Court of Appeals in all other
respects. We hold the view that such a judgment of affirmance has merged
the judgment of the lower court. 24 Implicit in that affirmance is a
determination by the Court of Appeals that the proceeding in the Court of
First Instance was free from prejudicial error and that 'all questions raised
by the assignments of error and all questions that might have been so raised
are to be regarded as finally adjudicated against the appellant". So also, the
judgment affirmed "must be regarded as free from all error" 25 We
reached this policy construction because nothing in the decision of the
Court of Appeals on this point would suggest that its findings of fact are in
any way at war with those of the trial court. Nor was said affirmance by
the Court of Appeals upon a ground or grounds different from those which
were made the basis of the conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is not entitled to a
first class seat, notwithstanding the fact that seat availability in specific
flights is therein confirmed, then an air passenger is placed in the hollow
of the hands of an airline. What security then can a passenger have? It will
always be an easy matter for an airline aided by its employees, to strike
out the very stipulations in the ticket, and say that there was a verbal
agreement to the contrary. What if the passenger had a schedule to fulfill?
We have long learned that, as a rule, a written document speaks a uniform
language; that spoken word could be notoriously unreliable. If only to
achieve stability in the relations between passenger and air carrier,
adherence to the ticket so issued is desirable. Such is the case here. The
lower courts refused to believe the oral evidence intended to defeat the
covenants in the ticket.
The foregoing are the considerations which point to the conclusion that
there are facts upon which the Court of Appeals predicated the finding that
respondent Carrascoso had a first class ticket and was entitled to a first
class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of
the flight,27 We perceive no "welter of distortions by the Court of Appeals
of petitioner's statement of its position", as charged by petitioner. 28 Nor
do we subscribe to petitioners accusation that
respondent Carrascoso "surreptitiously took a first class seat to provoke an
issue". 29 And this because, as petitioner states, Carrascoso went to see the
Manager at his office in Bangkok "to confirm my seat and because from
Saigon I was told again to see the Manager. 30 Why, then, was he allowed
to take a first class seat in the plane at Bangkok, if he had no seat? Or, if
another had a better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's
trenchant claim is that Carrascoso's action is planted upon breach of
contract; that to authorize an award for moral damages there must be an
averment of fraud or bad faith; 31 and that the decision of the Court of
Appeals fails to make a finding of bad faith. The pivotal allegations in the
complaint bearing on this issue are:
"3. That . . . plaintiff entered into a contract of air carriage
with the Philippine Air Lines for a valuable consideration,
the latter acting as general agents for and in behalf of the
defendant, under which aid contract, plaintiff was entitled
to, as defendant agreed to furnish plaintiff, First Class
passage on defendant's plane during the entire duration of
plaintiff's tour of Europe with Hongkong as starting point
up to and until plaintiff's return trip to Manila, . . .
4. That during the first two legs of the trip from Hongkong
to Saigon and from Saigon to Bangkok, defendant
furnished to the plaintiff First Class accommodation but
only after protestations, arguments and/or insistence were
made by the plaintiff with defendant's employees.
5. That finally, defendant failed to provide First Class
passage, but instead furnished plaintiff only Tourist
Class accommodations from Bangkok to Teheran and/or
Casablanca, . . . the plaintiff has been compelled by
defendant's employees to leave the First Class
accommodation berths at Bangkokafter he was already
seated.
6. That consequently, the plaintiff, desiring no repetition of
the inconvenience and embarrassments brought by
defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from
Madrid to Manila. 32
xxx xxx xxx
2. That likewise, as a result of defendant's failure to
furnish First Class accommodations aforesaid, plaintiff
suffered inconveniences, embarrassments, and
humiliations, thereby causing plaintiff mental anguish,
serious anxiety, wounded feelings, social humiliation, and
the like injury, resulting in moral damages in the amount
of P30,000.00." 33
xxx xxx xxx
The foregoing, in our opinion, substantially aver: First, That there was a
contract to furnish plaintiff a first class passage covering, amongst others,
the Bangkok-Teheran leg; Second, That said contract was breached when
petitioner failed to furnish first class transportation at Bangkok; and Third,
That there was bad faith when petitioner's employee
compelled Carrascoso to leave his first class accommodation berth "after
he was already seated" and to take a seat in the tourist class, by reason of
which he suffered inconvenience, embarrassments and humiliations,
thereby causing him mental anguish, serious anxiety, wounded feelings
and social humiliation, resulting in moral damages. It is true that there is
no specific mention of the term bad faith in the complaint. But, the
inference of bad faith is there; it may be drawn from the facts and
circumstances set forth therein. 34 The contract was averred to establish
the relation between the parties. But the stress of the action is put on
wrongful expulsion.
Quite apart from the foregoing is that (a) right at the start of the trial,
respondent's counsel placed petitioner on guard on
what Carrascoso intended to prove: That while sitting in the plane in
Bangkok, Carrascoso was ousted by petitioner's manager who gave his seat
to a white man; 35 and (b) evidence of bad faith in the fulfillment of the
contract was presented without objection on the part of the petitioner. It is,
therefore, unnecessary to inquire as to whether or not there is sufficient
averment in the complaint to justify an award for moral damages.
Deficiency in the complaint, if any, was cured by the evidence. An
amendment thereof to conform to the evidence is not even required. 36 On
the question of bad faith, the Court of Appeals declared:
"That the plaintiff was forced out of his seat in the first
class compartment of the plane belonging to the
defendant Air France while at Bangkok, and was
transferred to the tourist class not only without his consent
but against his will, has been sufficiently established by
plaintiff in his testimony before the court, corroborated by
the corresponding entry made by the purser of the plane in
his notebook which notation reads as follows:
'First-class passenger was forced to go
to the tourist class against his will and that the
captain refused to intervene',
and by the testimony of an eye-witness Ernesto G.
Cuento, who was a co-passenger. The captain of the
plane who was asked by the manager of defendant
company at Bangkok to intervene even refused to do
so. It is noteworthy that no one on behalf of
defendant ever contradicted or denied this evidence
for the plaintiff. It could have been easy for defendant
to present its manager at Bangkok to testify at the
trial of the case, or yet to secure his deposition; but
defendant did neither. 37
The Court of Appeals further stated —
"Neither is there evidence as to whether or ,not a prior
reservation was made by the white man. Hence, if the
employees of the defendant at Bangkok sold a first-class
ticket to him when all the seats had already been taken,
surely the plaintiff should not have been picked out as the
one to suffer the consequences and to be subjected to the
humiliation and indignity of being ejected from his seat in
the presence of others. Instead of explaining to the white
man the improvidence committed by defendant's
employees, the manager adopted the more drastic step of
ousting the plaintiff who was then safely ensconced in his
rightful seat. We are strengthened in our belief that this
probably was what happened there, by the testimony of
defendant's witness Rafael Altonaga who, when asked to
explain the meaning of the letters 'O.K., appearing on the
tickets of plaintiff, said that 'the space is confirmed' for
first class. Likewise, Zenaida Faustino, another witness
for defendant, who was the chief of the Reservation
Office of defendant, testified as follows:
'Q. How does the person in the ticket-issuing
office know what reservation the
passenger has arranged with you?
A. They call us up by phone and ask for the
confirmation.' (t.s.n., p. 247, June 19,
1959)
In this connection, we quote with approval what the trial Judge has said on
this point:
'Why did the, using the words of witness Ernesto G.
Cuento, 'white man' have a 'better right' to the seat
occupied by Mr. Carrascoso? The record is silent. The
 defendant airline did not prove 'any better', nay, any right
on the part of the 'white man' to the 'First class' seat that the
plaintiff was occupying and for which he paid and was
issued a corresponding 'first class' ticket.
'If there was a justified reason for the action of the
defendant's Manager in Bangkok, the defendant could have
easily proven it by having taken the testimony of the said
Manager by deposition, but defendant did not do so; the
presumption is that evidence willfully suppressed would be
adverse if produced [Sec. 69, par. (e) Rules of Court]; and,
under the circumstances, the Court is constrained to find, as
it does find, that the Manager of the defendant airline in
Bangkok not merely asked but threatened the plaintiff to
throw him out of the plane if he did not give up his 'first
class' seat because the said Manager wanted to
accommodate using the words of the witness Ernesto G.
Cuento, the 'white man'." 38
It is really correct to say that the Court of Appeals in the quoted portion first
transcribed did not use the term "bad faith". But can it be doubted that the
recital of facts therein points to bad faith? The manager not only
prevented Carrascoso from enjoying his right to a first class seat; worse, he
imposed his arbitrary will; he forcibly ejected him from his seat, made him
suffer the humiliation of having to go to the tourist class compartment —
just to give way to another passenger whose right thereto has not been
established. Certainly, this is bad faith. Unless, of course, bad faith has
assumed a meaning different from what is understood in law. For, "bad
faith" contemplates a "state of mind affirmatively operating with furtive
design or with some motive of self-interest or ill will or for ulterior
purposes." 39
And if the foregoing were not yet sufficient, there is the express finding
of bad faith in the judgment of the Court of First Instance, thus:
"The evidence shows that defendant violated its contract
of transportation with plaintiff in bad faith, with the
aggravating circumstances that defendant's Manager in
Bangkok went to the extent of threatening the plaintiff in
the presence of many passengers to have him thrown out
of the airplane to give the 'first class' seat that he was
occupying to, again using the words of witness Ernesto
G. Cuento, a 'white man' whom he (defendant's Manager)
wished to accommodate, and the defendant has not
proven that this 'white man' had any 'better right' to
occupy the 'first class' seat that the plaintiff was
occupying, duly paid for, and for which the corresponding
'first class' ticket was issued by the defendant to him." 40
5. The responsibility of an employer for the tortuous act of its employees-
need not be essayed. It is well settled in law. 41 For the willful malevolent
act of petitioner's manager, petitioner's his employer, must answer. Article
21 of the Civil Code says:
"Art. 21. Any person who willfully causes loss or injury
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the damage."
In parallel circumstances, we applied the foregoing legal precept; and, we
held that upon the provisions of Article 2219 (10), Civil Code, moral
damages are recoverable. 42
6. A contract to transport passengers is quite different in kind and degree
from any other contractual relation. 43 And this, because of the relation
which an air-carrier sustains with the public. Its business is mainly with
the travelling public. It invites people to avail of the comforts and
advantages it offers. The contract of air carriage, therefore, generates a "Q. You mentioned about an attendant. Who
relation attended with a public duty. Neglect or malfeasance of the carrier's is that attendant and purser?
employees, naturally, could give ground for an action for damages. A. When we left already — that was already
Passengers do not contract merely for transportation. They have a light to be in the trip — I could not help it. So
treated by the carrier's employees with kindness, respect, courtesy and due one of the flight attendants
consideration. They are entitled to be protected against personal misconduct, approached me and requested from
injurious language, indignities and abuses from such employees. So it is, me my ticket and I said, What for?
that any rude or discourteous conduct on the part of employees towards a and she said, 'We will note that you
passenger gives the latter an action for damages against the carrier. 44 were transferred to the tourist class'.
I said, 'Nothing of that kind. That is
Thus, "Where a steamship company 45 had accepted a passenger's check, it
tantamount to accepting my transfer.'
was a breach of contract and a tort, giving a right of action for its agent in
And I also said, You are not going to
the presence of third persons to falsely notify her that the check was
note anything there because I am
worthless and demand payment under threat of ejection, though the
protesting to this transfer.
language used was not insulting and she was not ejected. 46 And this,
because, altho the relation of passenger and carrier is "contractual both in Q. Was she able to note it?
origin and nature" nevertheless "the act that breaks the contract may be also A. No, because I did not give my ticket.
a tort". 47 And in another case, "Where a passenger on a railroad train,
when the conductor came to collect his fare, tendered him the cash fare to a Q. About that purser?
point where the train was scheduled not to stop, and told him that as soon as A. Well, the seats there are so close that you
the train reached such point he would pay the cash fare from that point to feel uncomfortable and you don't
destination, there was nothing in the conduct of the passenger which have enough leg room, I stood up
justified the conductor in using insulting language to him, as by calling him and I went to the pantry that was
a lunatic," 48 and the Supreme Court of South Carolina there held the next to me and the purser was there.
carrier liable for the mental suffering of said passenger. He told me, 'I have recorded the
Petitioner's contract with Carrascoso is one attended with public duty. The incident in my notebook.' He read it
stress of Carrascoso's action as we have said, is placed upon his wrongful and translated it to me — because it
expulsion. This is a violation of public duty by the petitioner-air carrier — a was recorded in French — 'First
case of quasi-delict. Damages are proper. class passenger was forced to go to
the tourist class against his will, and
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus that the captain refused to intervene.'
—
 MR. VALTE —
I move to strike out the last part of the
testimony of the witness because the
best evidence would be the notes. Your
Honor.
COURT —
I will allow that as part of his testimony." 49
Petitioner charges that the finding of the Court of Appeals that the purser
made an entry in his notebooks reading "First class passenger was forced to
go to the tourist class against his will, and that the captain refused to
intervene" is predicated upon evidence [Carrascoso's testimony above]
which is incompetent. We do not think so. The subject of inquiry is not the
entry, but the ouster incident. Testimony of the entry does not come within
the proscription of the best evidence rule. Such testimony is admissible. 49
Besides, from a reading of the transcript just quoted, when the dialogue
happened, the impact of the startling occurrence was still fresh and
continued to be felt. The excitement had not as yet died down. Statements
then, in this environment, are admissible as part of the res gestae. 50 For,
they grow "out of the nervous excitement and mental and physical condition
of the declarant". 51 The utterance of the purser regarding his entry in the
notebook was spontaneous, and related to the circumstances of the ouster
incident. Its trustworthiness has been guaranteed. 52 It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.
At all events, the entry was made outside the Philippines. And, by an
employee of petitioner. It would have been an easy matter for petitioner to
have contradicted Carrascoso's testimony. If it were really true that no such
entry was made, the deposition of the purser could have cleared up the
matter.
We, therefore, hold that the transcribed testimony of Carrascoso is
admissible in evidence.
8. Exemplary damages are well awarded. The Civil Code gives the Court
ample power to grant exemplary damages — in contracts and quasi-
contracts. The only condition is that defendant should have "acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner". 53 The
manner of ejectment of respondent Carrascoso from his first class seat fits
into this legal precept. And this, in addition to moral damages. 54
9. The right to attorneys' fees is fully established. The grant of exemplary
damages justifies a similar judgment for attorneys' fees. The least that can
be said is that the courts below felt that it is but just and equitable that
attorneys' fees be given. 55 We do not intend to break faith with the
tradition that discretion well exercised — as it was here —should not be
disturbed.
10. Questioned as excessive are the amounts decreed by both the trial
court and the Court of Appeals, thus: P25,000.00 as moral damages;
P10,000.00, by way of exemplary damages, and P3,000.00 as attorney's
fees. The task of fixing these amounts is primarily with the trial-
court. 56 The Court of Appeals did not interfere with the same. The
dictates of good sense suggest that we give our imprimatur thereto.
Because, the facts and circumstances point to the reasonableness
thereof. 57
On balance, we say that the judgment of the Court of Appeals does not
suffer from reversible error. We accordingly vote to affirm the same. Costs
against petitioner. So ordered.
||| (Air France v. Carrascoso, G.R. No. L-21438, [September 28, 1966],
124 PHIL 722-742)
THIRD DIVISION
 [G.R. No. 138814. April 16, 2009.]
MAKATI STOCK EXCHANGE, INC., 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. petitioners, vs. MIGUEL V.CAMPOS, substituted by
JULIA ORTIGAS VDA. DE CAMPOS, 1 respondent.
DECISION
CHICO-NAZARIO, J p:
This is a Petition for Review on Certiorari under Rule 45
seeking the reversal of the Decision 2 dated 11 February 1997 and
Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP
No. 38455. ADCIca
The facts of the case are as follows:
SEC Case No. 02-94-4678 was instituted on 10 February 1994
by respondent Miguel V. Campos, who filed with the Securities,
Investigation and Clearing Department (SICD) of the Securities
and Exchange Commission (SEC), a Petition against herein
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 said Petition, sought:
(1) the nullification of the Resolution dated 3 June 1993 of the MKSE
Board of Directors, which allegedly deprived him of his right to
participate equally in the allocation of Initial Public Offerings (IPO) of
corporations registered with 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 P2 million as moral damages, P1 million as
exemplary damages, and P500,000.00 as attorney's fees and litigation
expenses.
On 14 February 1994, the SICD issued an Order granting
respondent's prayer for the issuance of a Temporary Restraining Order
to enjoin petitioners from implementing or enforcing the 3 June 1993
Resolution of the MKSE Board of Directors.
The SICD subsequently issued another Order on 10 March
1994 granting respondent's application for a Writ of Preliminary
Injunction, to continuously enjoin, during the pendency of SEC Case
No. 02-94-4678, the implementation or enforcement of the MKSE
Board Resolution in question. Petitioners assailed this SICD Order
dated 10 March 1994 in a Petition for Certiorari filed with the SEC en
banc, docketed as SEC-EB No. 393.
On 11 March 1994, petitioners filed a Motion to Dismiss
respondent's Petition in SEC Case No. 02-94-4678, based on the
following grounds: (1) the Petition became moot due to the
cancellation of the license of MKSE; (2) the SICD had no jurisdiction
over the Petition; and (3) the Petition failed to state a cause of action.
The SICD denied petitioner's Motion to Dismiss in an Order
dated 4 May 1994. Petitioners again challenged the 4 May 1994 Order
of SICD before the SEC en banc through another Petition
for Certiorari, docketed as SEC-EB No. 403.
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. 02-94-4678 granting a Writ of Preliminary Injunction in favor of
respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB
No. 403, the SEC en bancannulled the 4 May 1994 Order of SICD in II.
SEC Case No. 02-94-4678 denying petitioners' Motion to Dismiss, and THE GRANT OF THE IPO ALLOCATIONS IN FAVOR
accordingly ordered the dismissal of respondent's Petition before the OF RESPONDENT WAS A MERE
SICD. aDcEIH ACCOMMODATION GIVEN TO HIM BY THE
Respondent filed a Petition for Certiorari with the Court of BOARD OF [DIRECTORS] OF
Appeals assailing the Orders of the SEC en banc dated 31 May 1995 and THE MAKATI STOCK EXCHANGE, INC.
14 August 1995 in SEC-EB No. 393 and SEC-EB No. 403, respectively. III.
Respondent's Petition before the appellate court was docketed as CA-
G.R. SP No. 38455. THE COURT OF APPEALS ERRED IN HOLDING
THAT THE SEC EN BANC COMMITTED GRAVE
On 11 February 1997, the Court of Appeals promulgated its ABUSE OF DISCRETION AMOUNTING TO LACK
Decision in CA-G.R. SP No. 38455, granting respondent's Petition OR EXCESS OF JURISDICTION WHEN IT MADE AN
for Certiorari, thus: EXTENDED INQUIRY AND PROCEEDED TO MAKE
WHEREFORE, the petition in so far as it prays for A DETERMINATION AS TO THE TRUTH OF
annulment of the Orders dated May 31, 1995 and August RESPONDENT'S ALLEGATIONS IN HIS PETITION
14, 1995 in SEC-EB Case Nos. 393 and 403 is GRANTED. AND USED AS BASIS THE EVIDENCE ADDUCED
The said orders are hereby rendered null and void and set DURING THE HEARING ON THE APPLICATION
aside. FOR THE WRIT OF PRELIMINARY INJUNCTION TO
DETERMINE THE EXISTENCE OR VALIDITY OF A
Petitioners filed a Motion for Reconsideration of the foregoing
STATED CAUSE OF ACTION. DaIACS
Decision but it was denied by the Court of Appeals in a Resolution dated
18 May 1999. IV.
Hence, the present Petition for Review raising the following IPO ALLOCATIONS GRANTED TO BROKERS ARE
arguments: NOT TO BE BOUGHT BY THE BROKERS FOR
THEMSELVES BUT ARE TO BE DISTRIBUTED TO
I.
THE INVESTING PUBLIC. HENCE, RESPONDENT'S
THE SEC EN BANC DID NOT COMMIT GRAVE CLAIM FOR DAMAGES IS ILLUSORY AND HIS
ABUSE OF DISCRETION AMOUNTING TO LACK OR PETITION A NUISANCE SUIT. 3
EXCESS OF JURISDICTION WHEN IT DISMISSED
On 18 September 2001, counsel for respondent manifested to
THE PETITION FILED BY RESPONDENT BECAUSE
this Court that his client died on 7 May 2001. In a Resolution dated 24
ON ITS FACE, IT FAILED TO STATE A CAUSE OF
ACTION.
October 2001, the Court directed the substitution of respondent by his SICD may render a valid judgment in accordance with the prayer of
surviving spouse, Julia Ortigas vda. de Campos. said Petition.
Petitioners want this Court to affirm the dismissal by the SEC en A reading of the exact text of respondent's Petition in SEC Case
banc of respondent's Petition in SEC Case No. 02-94-4678 for failure to No. 02-94-4678 is, therefore, unavoidable. Pertinent portions of the
state a cause of action. On the other hand, respondent insists on the said Petition reads: aEIADT
sufficiency of his Petition and seeks the continuation of the proceedings 7. In recognition of petitioner's invaluable services, the
before the SICD. general membership of respondent corporation [MKSE]
A cause of action is the act or omission by which a party violates passed a resolution sometime in 1989 amending its
a right of another. 4 A complaint states a cause of action where it Articles of Incorporation, to include the following
contains three essential elements of a cause of action, namely: (1) the provision therein:
legal right of the plaintiff, (2) the correlative obligation of the defendant, "ELEVENTH – WHEREAS, Mr.
and (3) the act or omission of the defendant in violation of said legal Miguel Campos is the only surviving incorporator
right. If these elements are absent, the complaint becomes vulnerable to of the Makati Stock Exchange, Inc. who has
dismissal on the ground of failure to state a cause of action. maintained his membership;
If a defendant moves to dismiss the complaint on the ground of "WHEREAS, he has unselfishly served
lack of cause of action, he is regarded as having hypothetically admitted the Exchange in various capacities, as governor
all the averments thereof. The test of sufficiency of the facts found in a from 1977 to the present and as President from
complaint as constituting a cause of action is whether or not admitting 1972 to 1976 and again as President from 1988 to
the facts alleged, the court can render a valid judgment upon the same in the present;
accordance with the prayer thereof. The hypothetical admission extends
to the relevant and material facts well pleaded in the complaint and "WHEREAS, such dedicated service and
inferences fairly deducible therefrom. Hence, if the allegations in the leadership which has contributed to the
complaint furnish sufficient basis by which the complaint can be advancement and well being not only of
maintained, the same should not be dismissed regardless of the defense the Exchange and its members but also to the
that may be assessed by the defendant. 5 Securities industry, needs to be recognized and
appreciated;
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 "WHEREAS, as such, the Board of Governors in
alternatively stated as whether, hypothetically admitting to be true the its meeting held on February 09, 1989 has
allegations in respondent's Petition in SEC Case No. 02-94-4678, the 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.
MiguelCampos 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. TcIaHC
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 thestock 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
offers 9 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. cTAaDC
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
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.
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 respondent, by
virtue of his position as Chairman Emeritus of MKSE, was granted by
law, contract, or any other legal source, the right to subscribe to the
IPOs of corporations listed in thestock market at their offering prices.
A meticulous review of the Petition reveals that the allocation
of IPO shares was merely alleged to have been done in accord with
a practicenormally observed by the members of the stock exchange, to
wit:
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 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)
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 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. SEIcAD
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 percent (25%) of
the IPOs are divided equally between the two stock exchanges — which,
in turn, divide their respective allocation equally among their members,
including the Chairman Emeritus, who pay for IPO shares at the offering
price — the Court cannot grant respondent's prayer for damages which
allegedly resulted from the MKSE Board Resolution dated 3 June 1993
deviating from said practice by no longer allocating any shares to
respondent.
Accordingly, the instant Petition should be granted. The Petition
in SEC Case No. 02-94-4678 should be dismissed for failure to 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 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 discussion thereof are merely
superfluous and obiter dictum. In the main, the SEC en banc did
correctly dismiss the Petition in SEC 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 theExchange. He cited paragraph
11 of the amended articles of incorporation of
the Exchange in support of his position but a careful
reading of the said provision shows nothing therein that
would bear out his claim. The provision merely created
the position of chairman emeritus of the Exchange but it
mentioned nothing about conferring upon the occupant
thereof the right to receive IPO allocations. 14
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.
WHEREFORE, the Petition is GRANTED. The Decision of the
Court of Appeals dated 11 February 1997 and its Resolution dated 18
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
Securities and Exchange Commissionen banc in SEC-EB Case No.
393 and No. 403, respectively, are hereby reinstated. No
pronouncement as to costs.
SO ORDERED.
||| (Makati Stock Exchange, Inc. v. Campos, G.R. No. 138814, [April 16,
2009], 603 PHIL 121-134)