FIRST DIVISION

[G.R. No. 133107. March 25, 1999]

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. COURT
OF APPEALS and FELIPE LUSTRE, respondents.
DECISION
KAPUNAN, J.:
A simple telephone call and an ounce-of good faith on the part of
petitioner could have prevented the present controversy.
On March 10, 1993, private respondent Atty. Felipe Lustre purchased
a Toyota Corolla from Toyota Shaw, Inc. for which he made a down
payment of P164,620.00, the balance of the purchase price to be paid
in 24 equal monthly installments. Private respondent thus issued 24
postdated checks for the amount of P14,976.00 each. The first was
dated April 10, 1991; subsequent checks were dated every 10th day of
each succeeding month.
To secure the balance, private respondent executed a promissory
note[1] and a contract of chattel mortgage[2] over the vehicle in favor of
Toyota Shaw, Inc. The contract of chattel mortgage, in paragraph 11
thereof, provided for an acceleration clause stating that should the
mortgagor default in the payment of any installment, the whole
amount remaining unpaid shall become due. In addition, the
mortgagor shall be liable for 25% of the principal due as liquidated
damages.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and
interests in the chattel mortgage to petitioner Rizal Commercial
Banking Corporation (RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were
thereafter encashed and debited by RCBC from private respondent's
account, except for RCBC Check No. 279805 representing the payment
for August 10, 1991, which was unsigned. Previously, the amount
represented by RCBC Check No. 279805 was debited from private
respondent's account but was later recalled and re-credited to
him.Because of the recall, the last two checks, dated February 10, 1993
and March 10, 1993, were no longer presented for payment. This was
purportedly in conformity with petitioner bank's procedure that once a
client's account was forwarded to its account representative, all
remaining checks outstanding as of the date the account was
forwarded were no longer presented for payment.
 On the theory that respondent defaulted in his payments, the check
representing the payment for August 10, 1991 being unsigned,
petitioner, in a letter dated January 21, 1993, demanded from private
respondent the payment of the balance of the debt, including
liquidated damages. The latter refused, prompting petitioner to file an
action for replevin and damages before the Pasay City Regional Trial
Court (RTC). Private respondent, in his Answer, interposed a
counterclaim for damages.
After trial, the RTC[3] rendered a decision disposing of the case as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as
follows:
I. The complaint, for lack of cause of action, is hereby DISMISSED and
plaintiff RCBC is hereby ordered,
A. To accept the payment equivalent to the three checks
amounting to a total of P44,938.00, without interest
B. To release/cancel the mortgage on the car xxx upon
payment of the amount of P44,938.00 without interest.
C. To pay the cost of suit
II. On The Counterclaim
A. Plaintiff RCBC to pay Atty. Lustre the amount of
P200,000.00 as moral damages.
B. RCBC to pay P100,000.00 as exemplary damages.
C. RCBC to pay Atty. Obispo P50,000.00 as Attorney's
fees. Atty. Lustre is not entitled to any fee for lawyering
for himself.
All awards for damages are subject to payment of fees to be
assessed by the Clerk of Court, RTC, Pasay City.
SO ORDERED.
On appeal by petitioner, the Court of Appeals affirmed the decision
of the RTC, thus:
We xxx concur with the trial court's ruling that the Chattel Mortgage
contract being a contract of adhesion that is, one wherein a party,
usually a corporation, prepares the stipulations the contract, while the
other party merely affixes his signature or his "adhesion" thereto xxx -
is to be strictly construed against appellant bank which prepared the
form Contract xxx. Hence xxx paragraph 11 of the Chattel Mortgage
contract [containing the acceleration clause] should be construed to
cover only deliberate and advertent failure on the part of the
mortgagor to pay an amortization as it became due in line with the
consistent holding of the Supreme Court construing obscurities and
ambiguities in the restrictive sense against the drafter thereof xxx in
the light of
Article 1377 of the Civil Code.
In the case at bench, plaintiff-appellant's imputation of default to
defendant-appellee rested solely on the fact that the 5th check issued
by appellee xxx was recalled for lack of signature. However, the check
was recalled only after the amount covered thereby had been
deducted from defendant-appellee's account, as shown by the
testimony of plaintiff's own witness Francisco Bulatao who was in
charge of the preparation of the list and trial balances of bank
customers xxx. The "default" was therefore not a case of failure to
pay, the check being sufficiently funded, and which amount was in fact
already debitted [sic] from appellee's account by the appellant bank
which subsequently re-credited the amount to defendant-appellee's
account for lack of signature. All these actions RCBC did on its own
without notifying defendant until sixteen (16) months later when it
wrote its demand letter dated January 21, 1993.
Clearly, appellant bank was remiss in the performance of its functions
for it could have easily called the defendant's attention to the lack of
signature on the check and sent the check to, or summoned, the latter
to affix his signature. It is also to be noted that the demand letter
contains no explanation as to how defendant-appellee incurred
arrearages in the amount of P66,255.70, which is why defendant-
appellee made a protest notation thereon.
Notably, all the other checks issued by the appellee dated subsequent
to August 10, 1991 and dated earlier than the demand letter, were duly
encashed. This fact should have already prompted the appellant bank
to review its action relative to the unsigned check. xxx[4]
We take exception to the application by both the trial and appellate
courts of Article 1377 of the Civil Code, which states:
The interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity.
It bears stressing that a contract of adhesion is just as binding as
ordinary contracts.[5] 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.[6] Nevertheless, contracts of
adhesion are not invalid per se;[7] they are not entirely
prohibited.[8] The one who adheres to the contract is in reality free to
reject it entirely; if he adheres, he gives his consent.[9]
While ambiguities in a contract of adhesion are to be construed
against the party that prepared the same,[10] this rule applies only if the
stipulations in such contract are obscure or ambiguous. If the terms
thereof are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall
control.[11] In the latter case, there would be no need for
construction.[12]
Here, the terms of paragraph 11 of the Chattel Mortgage
Contract[13] are clear. Said paragraph states:
11. In case the MORTGAGOR fails to pay any of the installments, or to
pay the interest that may be due as provided in the said promissory
note, the whole amount remaining unpaid therein shall immediately
become due and payable and the mortgage on the property (ies)
herein-above described may be foreclosed by the MORTGAGEE, or the
MORTGAGEE may take any other legal action to enforce collection of
the obligation hereby secured, and in either case the MORTGAGOR
further agrees to pay the MORTGAGEE an additional sum of 25% of the
principal due and unpaid, as liquidated damages, which said sum shall
become part thereof. The MORTGAGOR hereby waives reimbursement
of the amount heretofore paid by him/it to the MORTGAGEE.
The above terms leave no room for construction. All that is required
is the application thereof.
Petitioner claims that private respondent's check representing the
fifth installment was "not encashed,[14] such that the installment for
August 1991 was not paid. By virtue of paragraph 11 above, petitioner
submits that it "was justified in treating the entire balance of the
obligation as due and demandable."[15] Despite demand by petitioner,
however, private respondent refused to pay the balance of the
debt. Petitioner, in sum, imputes delay on the part of private
respondent.
We do not subscribe to petitioner's theory.
Article 1170 of the Civil Code states that those who in the
performance of their obligations are guilty of delay are liable for
damages. The delay in the performance of the obligation, however,
must be either malicious or negligent.[16] Thus, assuming that private
respondent was guilty of delay in the payment of the value of the
unsigned check, private respondent cannot be held liable for
damages. There is no imputation, much less evidence, that private
respondent acted with malice or negligence in failing to sign the
check. Indeed, we agree with the Court of Appeals' finding that such
omission was mere "inadvertence" on the part of private
respondent. Toyota salesperson Jorge Geronimo testified that he even
verified whether private respondent had signed all the checks and in
fact returned three or four unsigned checks to him for signing:
Atty. Obispo:
After these receipts were issued, what else did you do about the
transaction?
A: During our transaction with Atty. Lustre, I found out when he
issued to me the 24 checks, I found out 3 to 4 checks are unsigned
and I asked him to sign these checks.
Atty. Obispo:
What did you do?
A: I asked him to sign the checks. After signing the checks, I reviewed
again all the documents, after I reviewed all the documents and
found out that all are completed and the downpayments was
completed, we released to him the car.[17]
Even when the checks, were delivered to petitioner, it did not object to
the unsigned check. In view of the lack of malice or negligence on the
part of private respondent, petitioner's blind and mechanical
invocation of paragraph 11 of the contract of chattel mortgage was
unwarranted.
Petitioners conduct, in the light of the circumstances of this case,
can only be described as mercenary. Petitioner had already debited the
value of the unsigned check from private respondent's account only to
re-credit it much later to him. Thereafter, petitioner encashed checks
subsequently dated, then abruptly refused to encash the last
two. More than a year after the date of the unsigned check, petitioner,
claiming delay and invoking paragraph 11, demanded from private
respondent payment of the value of said check and. that of the last
two checks, including liquidated damages. As pointed out by the trial
court, this whole controversy could have been avoided if only
petitioner bothered to call up private respondent and ask him to sign
the check. Good faith not only in compliance with its contractual
obligations,[18] but also in observance of the standard in human
relations, for every person "to act with justice, give everyone his due,
and observe honesty and good faith."[19] behooved the bank to do so.
Failing thus, petitioner is liable for damages caused to private
respondent.[20] These include moral damages for the mental anguish,
serious anxiety, besmirched reputation, wounded feelings and social
humiliation suffered by the latter.[21] The trial court found that private
respondent was
[a] client who has shared transactions for over twenty years with a
bank xxx. The shabby treatment given the defendant is unpardonable
since he was put to shame and embarrassment after the case was filed
in Court. He is a lawyer in his own right, married to another member of
the bar. He sired children who are all professionals in their chosen
field. He is known to the community of golfers with whom he
gravitates. Surely, the filing of the case made defendant feel so bad
and bothered.
To deter others from emulating petitioners callous example, we
affirm the award of exemplary damages.[22] As exemplary damages are
warranted, so are attorney's fees.[23]
We, however, find excessive the amount of damages awarded by
the trial court in favor of private respondent with respect to his
counterclaims and, accordingly, reduce the same as follows:
(a) Moral damages - fromP200,000.00 to P100,000.00,
(b) (b)Exemplarydamages from P100,000.00 to P75,000.00,
(c) (c) Attorney's fees - from P 50,000,00 to P 30,000.00.
WHEREFORE, subject to these modifications, the decision of
the Court of Appeals is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Melo, and Pardo, JJ., concur.

[1]
Exhibit A.
[2]
Exhibit B.
[3]
Branch 108, presided by Judge Priscilla Mijares.
[4]
Rollo, pp.6-8.
[5]
Articles 1305, 1308, Civil Code. Serra vs. Court of Appeals, 229 SCRA
60 (1994).
[6]
Phil. Commercial International Bank vs. Court Bank vs. Court of
Appeals, 255 SCRA 299 (1996).
[7]
Philippine Airlines, Inc. vs. Court of Appeals, 255 SCRA 48 (1996);
Telengtan Brothers & Sons, Inc. vs. Court of Appeals, 236 SCRA 617
(1994).
[8]
Telengtan Brothers & Sons, Inc. vs. Court of Appeals, supra,
Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc.,
212 SCRA 194 (1992); Pan American Airways vs. Rapadas, 209 SCRA 67
(1992); Saludo, Jr. vs. Court of Appeals, 207 SCRA 498 (1992).
[9]
Serra vs. Court of Appeals, supra; Philippine American General
Insurance Co., Inc. vs. Sweet Lines, Inc., supra; Saludo, Jr. vs. Court of
Appeals, supra.
[10]
Angeles vs. Calasanz, 135 SCRA 323 (1985).
[11]
Article 1370, Civil Code. Salvatierra vs. Court of Appeals, 261 SCRA 45
(1996); Abella vs. Court of Appeals 257 SCRA 482 (1996); Syquia vs.
Court of Appeals, 217 SCRA 624 (1993); Lufthansa German Airlines vs.
Court of Appeals, 208 SCRA 708 (1992); Papa vs. Alonzo, 198 SCRA 564
(1991).
[12]
Leveriza vs. Intermediate Appellate Court, 157 SCRA 283 (1988).
[13]
Exhibit B.
[14]
Rollo, p. 12.
[15]
Id., at 13.
[16]
IV Tolentino, Commentaries and Jurisprudence on the Civil Code of
the Philippines, 1991 ed., p. 113.
[17]
TSN, March 10, 1994, pp. 15-16.
[18]
Article 1159, Civil Code.
[19]
Article 19, Civil Code.
[20]
Article 19, in relation to Article 21, id.
[21]
Article 2217, id.
[22]
Article 2229, id.
[23]
Article 2208 (1), id
ROSENDO O. CHAVES, PLAINTIFF-APPELLANT, VS. FRUCTUOSO
GONZALES, DEFENDANT-APPELLEE.
G.R. No. L-27454 | 1970-04-30
D E C I S I O N

REYES, J.B.L., J.:

This is a direct appeal by the party who prevailed in a suit for breach of
oral contract and recovery of damages but was unsatisfied with the
decision rendered by the Court of First Instance of Manila, in its Civil
Case No. 65138, because it awarded him only P31.10 out of his total
claim of P690.00 for actual, temperate and moral damages and
attorney's fees.

The appealed judgment, which is brief, is hereunder quoted in full:

In the early part of July, 1963, the plaintiff delivered to the

defendant, who is a typewriter repairer, a portable typewriter for
routine cleaning and servicing. The defendant was not able to finish
the job after some time despite repeated reminders made by the
plaintiff. The defendant merely gave assurances, but failed to comply
with the same. In October, 1963, the defendant asked from the
plaintiff the sum of P6.00 for the purchase of spare parts, which
amount the plaintiff gave to the defendant. On October 26, 1963, after
getting exasperated with the delay of the repair of the typewriter, the
plaintiff went to the house of the defendant and asked for the return
of the typewriter. The defendant delivered the typewriter in a
wrapped package. On reaching home, the plaintiff examined the
typewriter returned to him by the defendant and found out that the
same was in shambles, with the interior cover and some parts and
screws missing. On October 29, 1963, the plaintiff sent a letter to the
defendant formally demanding the return of the missing parts, the
interior cover and the sum of P6.00 (Exhibit D). The following day, the
defendant returned to the plaintiff some of the missing parts, the
interior cover and the P6.00.

"On August 29, 1964, the plaintiff had his typewriter repaired by
Freixas Business Machines, and the repair Job cost him a total of
P89.85, including labor and materials (Exhibit C).

"On August 23, 1965, the plaintiff commenced this action before the
City Court of Manila, demanding from the defendant the payment of
P90.00 as actual and compensatory damages, P100.00 for temperate
damages, P500.00 for moral damages, and P500.00 as attorney's fees.

"In his answer as well as in his testimony given before this court, the
defendant made no denials of the facts narrated above, except the
claim of the plaintiff that the typewriter was delivered to the de-
fendant through a certain Julio Bocalin, which the defendant denied
allegedly because the typewriter was delivered to him personally by
the plaintiff.

"The repair done on the typewriter by Freixas Business Machines

with the total cost of P89.85 should not, however, be fully chargeable
against the defendant. The repair invoice, Exhibit C, shows that the
missing parts had a total value of only P31.10.

"WHEREFORE, judgment is hereby rendered ordering the defendant

to pay the plaintiff the sum of P31.10, and the costs of suit.

"SO ORDERED."

The error of the court a quo according to the plaintiff-appellant,

Rosendo O. Chaves is that it awarded only the value of the missing
parts of the typewriter, instead of the whole cost of labor and
materials that went into the repair of the machine, as provided for in
Article 1167 of the Civil Code, reading as follows:

"Art. 1167. If a person obliged to do something fails to do it, the same

shall be executed at his cost.

"This same rule shall be observed if he does it in contravention of the

tenor of the obligation. Furthermore, it may be decreed that what has
been poorly done be undone."
On the other hand, the position of the defendant-appellee, Fructuoso
Gonzales, is that he is not liable at all, not even for the sum of P31.10,
because his contract with plaintiff-appellant did not contain a period,
so that plaintiff-appellant should have first filed a petition for the court
to fix the period, under Article 1197 of the Civil Code, within which the
defendant-appellee was to comply with the contract before said
defendant-appellee could be held liable for breach of contract.

Because the plaintiff appealed directly to the Supreme Court and the
appellee did not interpose any appeal, the facts, as found by the trial
court, are now conclusive and non-reviewable.[1]
The appealed judgment states that the "plaintiff delivered to the
defendant ……..a portable typewriter for routine cleaning and
servicing"; that the "defendant was not able to finish the job after
some time despite repeated reminders made by the plaintiff"; that the
"defendant merely gave assurances, but failed to comply with the
same"; and that "after getting exasperated with the delay of the repair
of the typewriter" , the plaintiff went to the house of the defendant
and asked for its return, which, was done. The inferences derivable
from these findings of fact, are that the appellant and the appellee had
a perfected contract for cleaning and servicing a typewriter; that they
intended that the defendant was to finish it at some future time
although such time was not specified; and that such time had passed
without the work having been accomplished, for the defendant
returned the typewriter cannibalized and unrepaired, which in itself is a
breach of his obligation, without demanding that he should be given
more time to finish the job, or compensation for the work he had
already done. The time for compliance having evidently expired, and
there being a breach of contract by non-performance, it was academic
for the plaintiff to have first petitioned the court to fix a period for the
performance of the contract before filing his complaint in this case.
Defendant cannot invoke Article 1197 of the Civil Code for he virtually
admitted non-performance by returning the typewriter that he was
obliged to repair in a non-working condition, with essential parts
missing. The fixing of a period would thus be a mere formality and
would serve no purpose than to delay (of. Tiglao, et al. v. Manila
Railroad Co., 98 Phil. 181).

It is clear that the defendant-appellee contravened the tenor of his

obligation because he not only did not repair the typewriter but
returned it "in shambles", according to the appealed decision. For
such contravention, as appellant contends, he is liable under Article
1167 of the Civil Code, jam quot, for the cost of executing the obligation
in a proper manner. The cost of the execution of the obligation in this
case should be the cost of the labor or service expended in the repair
of the typewriter, which is in the amount of P58.75, because the
obligation or contract was to repair it.

In addition, the defendant-appellee is likewise liable, under Article 1170

of the Code, for the cost of the missing parts, in the amount of P31.10,
for in his obligation to repair the typewriter he was bound, but failed or
neglected, to return it in the same condition it was when he received it.

Appellant's claims for moral and temperate damages and attorney's

fees were, however, correctly rejected by the trial court, for these
were not alleged in his complaint (Record on Appeal, pages 1-5).
Claims for damages and attorney's fees must be pleaded, and the
existence of the actual basis thereof must be proved.[2] The appealed
judgment thus made no findings on these claims, nor on the fraud or
malice charged to the appellee. As no findings of fact were made on
the claims for damages and attorney's fees, there is no factual basis
upon which to make an award therefor. Appellant is bound by such
judgment of the court, a quo, by reason of his having resorted directly
to the Supreme Court on questions of law.

IN VIEW OF THE FOREGOING REASONS the appealed judgment is

hereby modified, by ordering the defendant?appellee to pay, as he is
hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with
interest at the legal rate from the filing of the complaint. Costs in all
instances against appellee Fructuoso Gonzales.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Ruiz Castro, Fernando,

Teehankee, and Villamor, JJ., concur.
Barredo, J., did not take part.

[1] Perez v. Araneta, L-18414, 15 July 1968, 24 SCRA 43; Cebu Portland
Cement Co. v. Mun. of Naga, L-24116-17, 22 August 1968, 24 SCRA 708.

[2] Malonzo v. Galang, L-13851, 27 July 1960; Darang v. Belizar, L-22399,

31 March 1967, 19 SCRA 214.

FIRST DIVISION
[G.R. No. 117190. January 2, 1997]
JACINTO TANGUILIG doing business under the name and style J.M.T.
ENGINEERING AND GENERAL
MERCHANDISING, petitioner, vs. COURT OF APPEALS and
VICENTE HERCE JR., respondents.
DECISION
BELLOSILLO, J.:
This case involves the proper interpretation of the contract entered
into between the parties.
Sometime in April 1987 petitioner Jacinto M. Tanguilig doing
business under the name and style J. M. T. Engineering and General
Merchandising proposed to respondent Vicente Herce Jr. to construct a
windmill system for him. After some negotiations they agreed on the
construction of the windmill for a consideration of P60,000.00 with
a one-year guaranty from the date of completion and acceptance by
respondent Herce Jr. of the project. Pursuant to the agreement
respondent paid petitioner a down payment of P30,000.00 and an
installment payment of P15,000.00, leaving a balance of P15,000.00.
On 14 March 1988, due to the refusal and failure of respondent to
pay the balance, petitioner filed a complaint to collect the amount. In
his Answer before the trial court respondent denied the claim saying
that he had already paid this amount to the San Pedro General
Merchandising Inc. (SPGMI) which constructed the deep well to which
the windmill system was to be connected. According to respondent,
since the deep well formed part of the system the payment he
tendered to SPGMI should be credited to his account by
petitioner. Moreover, assuming that he owed petitioner a balance
of P15,000.00, this should be offset by the defects in the windmill
system which caused the structure to collapse after a strong wind hit
their place.[1]
Petitioner denied that the construction of a deep well was included
in the agreement to build the windmill system, for the contract price
of P60,000.00 was solely for the windmill assembly and its installation,
exclusive of other incidental materials needed for the project. He also
disowned any obligation to repair or reconstruct the system and
insisted that he delivered it in good and working condition to
respondent who accepted the same without protest. Besides, its
collapse was attributable to a typhoon, a forcemajeure, which relieved
him of any liability.
 In finding for plaintiff, the trial court held that the construction of
the deep well was notpart of the windmill project as evidenced clearly
by the letter proposals submitted by petitioner to respondent.[2] It
noted that "[i]f the intention of the parties is to include the
construction of the deep well in the project, the same should be stated
in the proposals.In the absence of such an agreement, it could be
safely concluded that the construction of the deep well is not a part of
the project undertaken by the plaintiff."[3] With respect to the repair of
the windmill, the trial court found that "there is no clear and
convincing proof that the windmill system fell down due to the defect
of the construction."[4]
The Court of Appeals reversed the trial court. It ruled that the
construction of the deep well was included in the agreement of the
parties because the term "deep well" was mentioned in both
proposals. It also gave credence to the testimony of respondent's
witness Guillermo Pili, the proprietor of SPGMI which installed the
deep well, that petitioner Tanguilig told him that the cost of
constructing the deep well would be deducted from the contract price
of P60,000.00. Upon these premises the appellate court concluded
that respondent's payment of P15,000.00 to SPGMI should be applied
to his remaining balance with petitioner thus effectively extinguishing
his contractual obligation.However, it rejected petitioner's claim
of force majeure and ordered the latter to reconstruct the windmill in
accordance with the stipulated one-year guaranty.
His motion for reconsideration having been denied by the Court of
Appeals, petitioner now seeks relief from this Court. He raises two
issues: firstly, whether the agreement to construct the windmill system
included the installation of a deep well and, secondly,whether
petitioner is under obligation to reconstruct the windmill after it
collapsed.
We reverse the appellate court on the first issue but sustain it on
the second.
The preponderance of evidence supports the finding of the trial
court that the installation of a deep well was not included in the
proposals of petitioner to construct a windmill system for
respondent. There were in fact two (2) proposals: one dated 19 May
1987 which pegged the contract price at P87,000.00 (Exh. "1"). This
was rejected by respondent. The other was submitted three days later,
i.e., on 22 May 1987 which contained more specifications but proposed
a lower contract price of P60,000.00 (Exh. "A"). The latter proposal
was accepted by respondent and the construction immediately
followed. The pertinent portions of the first letter-proposal (Exh. "1")
are reproducedhereunder -
In connection with your Windmill System and Installation, we would
like to quote to you as follows:
One (1) Set - Windmill suitable for 2 inches diameter deepwell, 2 HP,
capacity, 14 feet in diameter, with 20 pieces blade, Tower 40 feet high,
including mechanism which is not advisable to operate during extra-
intensity wind. Excluding cylinder pump.
UNIT CONTRACT PRICE P87,000.00
The second letter-proposal (Exh. "A") provides as follows:
In connection with your Windmill system Supply of Labor Materials and
Installation, operated water pump, we would like to quote to you as
follows -
One (1) set - Windmill assembly for 2 inches or 3 inches deep-well
pump, 6 Stroke, 14 feet diameter, 1-lot blade materials, 40 feet Tower
complete with standard appurtenances up to Cylinder pump, shafting
U.S. adjustable International Metal.
One (1) lot - Angle bar, G. I. pipe, Reducer Coupling, Elbow Gate valve,
cross Tee coupling.
One (1) lot - Float valve.
One (1) lot - Concreting materials foundation.
F. O. B. Laguna
Contract Price P60,000.00
Notably, nowhere in either proposal is the installation of a deep well
mentioned, even remotely. Neither is there an itemization or
description of the materials to be used in constructing the deep
well. There is absolutely no mention in the two (2) documents that a
deep well pump is a component of the proposed windmill system. The
contract prices fixed in both proposals cover only the features
specifically described therein and no other.While the words "deep
well" and "deep well pump" are mentioned in both, these do not
indicate that a deep well is part of the windmill system. They merely
describe the type of deep well pump for which the proposed windmill
would be suitable. As correctly pointed out by petitioner, the
words "deep well" preceded by the prepositions "for" and "suitable
for" were meant only to convey the idea that the proposed windmill
would be appropriate for a deep well pump with a diameter of 2 to 3
inches. For if the real intent of petitioner was to include a deep well in
the agreement to construct a windmill, he would have used instead the
conjunctions "and" or "with." Since the terms of the instruments are
clear and leave no doubt as to their meaning they should not be
disturbed.
Moreover, it is a cardinal rule in the interpretation of contracts
that the intention of the parties shall be accorded primordial
consideration[5] and, in case of doubt, their contemporaneous and
subsequent acts shall be principally considered.[6] An examination of
such contemporaneous and subsequent acts of respondent as well as
the attendant circumstances does not persuade us to uphold him.
Respondent insists that petitioner verbally agreed that the contract
price of P60,000.00 covered the installation of a deep well pump. He
contends that since petitioner did not have the capacity to install the
pump the latter agreed to have a third party do the work the cost of
which was to be deducted from the contract price. To prove his point,
he presented Guillermo Pili of SPGMI who declared that petitioner
Tanguilig approached him with a letter from respondent Herce Jr.
asking him to build a deep well pump as "part of the price/contract
which Engineer (Herce) had with Mr. Tanguilig."[7]
We are disinclined to accept the version of respondent. The claim of
Pili that Herce Jr. wrote him a letter is unsubstantiated. The alleged
letter was never presented in court by private respondent for reasons
known only to him. But granting that this written communication
existed, it could not have simply contained a request for Pili to install a
deep well; it would have also mentioned the party who would pay for
the undertaking. It strains credulity that respondent would keep silent
on this matter and leave it all to petitioner Tanguilig to verbally convey
to Pili that the deep well was part of the windmill construction and that
its payment would come from the contract price of P60,000.00.
We find it also unusual that Pili would readily consent to build a
deep well the payment for which would come supposedly from the
windmill contract price on the mere representation of petitioner,
whom he had never met before, without a written commitment at
least from the former. For if indeed the deep well were part of the
windmill project, the contract for its installation would have been
strictly a matter between petitioner and Pili himself with the former
assuming the obligation to pay the price. That it was respondent Herce
Jr. himself who paid for the deep well by handing over to Pili the
amount of P15,000.00 clearly indicates that the contract for the deep
well was not part of the windmill project but a separate agreement
between respondent and Pili. Besides, if the price of P60,000.00
included the deep well, the obligation of respondent was to pay the
entire amount to petitioner without prejudice to any action that
Guillermo Pili or SPGMI may take, if any, against the latter. Significantly,
when asked why he tendered payment directly to Pili and not to
petitioner, respondent explained, rather lamely, that he did it "because
he has (sic) the money, so (he) just paid the money in his
possession."[8]
Can respondent claim that Pili accepted his payment on behalf of
petitioner? No.While the law is clear that "payment shall be made to
the person in whose favor theobligation has been constituted, or
his successor in interest, or any person authorizedto receive it,".[9] It
does not appear from the record that Pili and/or SPGMI was so
authorized.
Respondent cannot claim the benefit of the law concerning
"payments made by a third person."[10] The Civil Code provisions do not
apply in the instant case because no creditor-debtor relationship
between petitioner and Guillermo Pili and/or SPGMI has been
established regarding the construction of the deep well. Specifically,
witness Pili did not testify that he entered into a contract with
petitioner for the construction of respondent's deep well. If SPGMI
was really commissioned by petitioner to construct the deep well, an
agreement particularly to this effect should have been entered into.
The contemporaneous and subsequent acts of the parties
concerned effectively belie respondent's assertions. These
circumstances only show that the construction of the well by SPGMI
was for the sole account of respondent and that petitioner merely
supervised the installation of the well because the windmill was to be
connected to it. There is no legal nor factual basis by which this Court
can impose upon petitioner an obligation he did not expressly assume
nor ratify.
The second issue is not a novel one. In a long line of cases[11] this
Court has consistently held that in order for a party to claim exemption
from liability by reason of fortuitous event under Art. 1174 of the Civil
Code the event should be the sole andproximate cause of the loss or
destruction of the object of the contract. In Nakpil vs. Court of
Appeals,[12] four (4) requisites must concur: (a) the cause of the breach
of the obligation must be independent of the will of the debtor; (b) the
event must be either unforeseeable or unavoidable; (c) the event must
be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner; and, (d) the debtor must be free from any
participation in or aggravation of the injury to the creditor.
Petitioner failed to show that the collapse of the windmill was due
solely to a fortuitous event. Interestingly, the evidence does not
disclose that there was actually a typhoon on the day the windmill
collapsed. Petitioner merely stated that there was a "strong wind." But
a strong wind in this case cannot be fortuitous - unforeseeable nor
unavoidable. On the contrary, a strong wind should be present in
places where windmills are constructed, otherwise the windmills
will not turn.
The appellate court correctly observed that "given the newly-
constructed windmill system, the same would not have collapsed had
there been no inherent defect in it which could only be attributable to
the appellee."[13] It emphasized that respondent had in hisfavor the
presumption that "things have happened according to the ordinary
course of nature and the ordinary habits of life."[14] This presumption
has not been rebutted by petitioner.
Finally, petitioner's argument that private respondent was already
in default in the payment of his outstanding balance of P15,000.00 and
hence should bear his own loss, is untenable. In reciprocal obligations,
neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon
him.[15]When the windmill failed to function properly it became
incumbent upon petitioner to institute the proper repairs in
accordance with the guaranty stated in the contract. Thus, respondent
cannot be said to have incurred in delay; instead, it is petitioner who
should bear the expenses for the reconstruction of the
windmill. Article 1167 of the Civil Code is explicit on this point that if a
person obliged to do something fails to do it, the same shall be
executed at his cost.
WHEREFORE, the appealed decision is MODIFIED. Respondent
VICENTE HERCE JR. is directed to pay petitioner JACINTO M.
TANGUILIG the balance of P15,000.00 with interest at the legal rate
from the date of the filing of the complaint. In return, petitioner is
ordered to "reconstruct subject defective windmill system, in
accordance with the one-year guaranty"[16]and to complete the same
within three (3) months from the finality of this decision.
SO ORDERED.
Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, JJ., concur.

[1]
TSN, 20 December 1988, pp. 10-12.
[2]
Exh. "A" and Exh. "1."
[3]
Rollo, p. 36.
[4]
Id., p. 37.
[5]
Kasilag v. Rodriguez, 69 Phil. 217 (1939).
[6]
Art. 1371, New Civil Code; GSIS v. Court of Appeals, G.R. No. 52478, 30
October 1986, 145 SCRA 311; Serrano v. Court of Appeals, No. L-
46357, 9 October 1985, 139 SCRA 179.
[7]
TSN, 13 April 1989, pp. 18-19.
[8]
TSN, 13 April 1989, p. 22.
[9]
Art. 1240, New Civil Code.
[10]
Arts. 1236 and 1237, New Civil Code .
[11]
Nakpil v. Court of Appeals, Nos. L-47851, L-47863, L-47896, 3 October
1986, 144 SCRA
596; NationalPower Corporation v. Court of Appeals, G.R. Nos. L-
47379 and 47481, 16 May 1988, 161 SCRA 334;
National Power Corporation v. Court of Appeals, G.R. Nos. 103442-
45, 21 May 1993, 222 SCRA 415.
[12]
See Note 11.
[13]
Rollo, p. 44.
[14]
Sec. 3, par. (y), Rule 131, Revised Rules on Evidence.
[15]
Art. 1169, last par., New Civil Code.
[16]
See CA Decision, p. 7; Rollo, p. 27.

G.R. No. L-53692 November 26, 1986

LOURDES RAMOS, ENRIQUE RAMOS, MILAGROS RAMOS, ANTONIO
RAMOS, and ANGELITA RAMOS, plaintiffs-appellants,
vs.
GUILLERMO N. PABLO, PRIMITIVA C. CRUZ, the EX-OFFICIO SHERIFF
OF QUEZON CITY, and the REGISTER OF DEEDS OF QUEZON
CITY, defendants-appellees.
Santos, Madric, As, Cacho & Associates for plaintiffs-appellants.
Galilee P. Brion & Associates for defendants-appellees.

PARAS, J.:
This is an appeal from the Order dated December 1, 1977 in Civil Case
No. Q-22850 of the Court of First Instance of Rizal, Branch XVI sitting
in Quezon City, dismissing the complaint upon motion filed by
defendants-appellees (private respondents herein) just after answer
on grounds of res judicata, improper remedy, failure to raise the issue
of inadequacy of price as shocking to conscience, and being moot and
academic. Their motion for reconsideration having been denied,
plaintiffs-appellants (Petitioners herein) went on appeal to the
respondent Court of Appeals, docketed as CA-G.R. No. 63718-R.
By virtue of a resolution of the Court of Appeals in said case, acting on
a "Motion to Transfer Case to the Supreme Court" filed by plaintiffs-
appellants, as the issues in the present case are all purely legal, this
case was forwarded to Us for consideration as a Petition for Review
on Certiorari.
This case originated from the decision of the Court of First Instance of
Rizal Branch VII, Pasay City in Civil Case No. 3066-P entitled Guillermo
N. Pablo and Primitive C. Cruz vs. Estate of deceased Socorro
Ramosfinding in favor of the plaintiffs and which was affirmed by the
Court of Appeals on appeal in CA-G.R. No. 49848-R.
The complaint in Civil Case No. 3066-P, Court of First Instance of Rizal,
Branch VII sitting in Pasay City, alleged the following material
statements.
2. On July 31, 1957, plaintiffs entered into an 'Agreement'
with Pedro del Rosario/Del Rosario Realty, whereby the
latter agreed to sell on installment basis a parcel of land
covered by a subdivision Transfer Certificate of Title No.
34610, more particularly described as follows:
A parcel of land (Lot 3, Block 1 of the subdivision plan Psd-
5073, being a portion of Lot 614-C (LRC) described on plan
Psd. 1879, G.L.R.O. Record No. 5975, situated in the District of
Bago Bantay, Quezon City. Bounded on the NE., along line 1-2
by Lot 4; along line 2-3 by Lot 3, both of Block 1; along line 3-4
by Road Lot 2; along line 4-5 by Lot 7; and along line 5-1 by
Lot 6, both of Block 1, all the subdivision plan. Beginning at a
point marked "1" on plan, being S. 3 deg. 23'E., 978.72 m.
from L. M. 9, Piedad Estate, ... containing an area of FOUR
HUNDRED ONE (401) Square Meters.
which said contract and all rights and interests appertaining
thereto belonging to Pedro del Rosario/Del Rosario Realty
were transferred and assigned by the latter to Socorro A.
Ramos on June 16, 1959 under an Assignment of Right
whereby, Socorro A. Ramos obtained Transfer Certificate of
Title No. 44501 under her name.
3. Plaintiffs, having paid in full the amount of P8,020.00,
selling price stated in the foregoing Agreement, Socorro A.
Ramos executed a Deed of Absolute Sale of the land on
March 28, 1963 in their favor, a copy of which, is integrated
hereto as Annex A, subject to the condition that plaintiffs
will not register this deed for purposes of transferring the
title of the said property to them and in their names until
and after the final determination of the case between,
Rodrigo Enriquez, et al., and Socorro A. Ramos, presently
pending before the Supreme Court under G.R. No. L-16797,
and the subsequent release thereof by said Rodrigo
Enriquez, et al.
4. Unknown to the plaintiff, as Socorro A. Ramos did not
disclose to them, is the fact that when the foregoing deed of
sale was executed, it had already an existing mortgage in
favor of Rodrigo Enriquez and that the latter had already
filed an action for foreclosure of the same in the Court of
First Instance of Rizal on April 29, 1959, which is the subject
of appeal in the aforecited case, and the further fact, that
when the same deed was executed by Socorro A. Ramos on
March 28, 1963, she already knew that the Supreme Court
case referred to had already been decided as her lawyer,
Atty. Vicente K. Aranda received the decision rendered
therein on March 1, 1963, whereby she lost the case, and
consequently, the transfer of the land to Rodrigo Enriquez-
all wanton acts of dishonesty and bad faith.
5. Till her death on November 10, 1965, Socorro A. Ramos did
not to disclose the plaintiffs the foregoing facts nor what
happened to said case, so much so that upon verification
later with the Register of of Quezon City, plaintiffs
discovered that the land sold to them by Soccoro A. Ramos
had been foreclosed and titled under the of Rodrigo
Enriquez, who later on, sold the same to Maria F. Villadolid.
6. The acts imputed to Socorro A. Ramos in pars. 3, 4 and
5 supra, and the unjust refusal Of her children-heirs,
defendants herein, to substitute the lost land from the mass
estate of the deceased Socorro A. Ramos or to pay its
equivalent market value to the plaintiffs in spite of repeated
verbal and written demands, resulted in Plaintiffs' loss of
not less than P30,000.00, representing the present market
value of the said land, which, the defendants are duty bound
to compensate plaintiffs by way of actual damages.
7. The same acts, as well as the consquences thereof,caused
and still is, causing plaintiffs mental anguish, wounded
feelings, serious anxiety and the like which, defendants are
under obligation to compensate plaintiffs the sum of
P40,000.00, by way of moral damages.
8. And, by way of example for the public good, defendants,
are likewise, under obligation to compensate plaintiffs the
sum of P15, 000.00 by way of exemplary damages.
9. By reason of the unjust refusal of the defendants to
return to the plaintiffs the present market price of the lost
land or to substitute the same with another land from the
mass estate left by the late Socorro A. Ramos, plaintiffs
were compelled to file the instant suit and in so doing was
constrained to seek the services of their undersigned
counsel for P10,000.00, which, defendants should be
compelled to pay plus expenses of litigation as may be duly
proved and costs.
WHEREFORE, it is respectfully prayed that judgment be
rendered in favor of the plaintiffs and against the
defendants directing the latter to pay to the former the
following:
 a) Actual damages in the sum of P30,000.00 or to
direct the defendants to execute a "Deed of
Absolute Sale" of a land with the same value from
the mass estate left by the deceased Socorro A.
Ramos in favor of the plaintiffs;
b) Moral damages in the sum of P40,000.00;
c) Exemplary damages in the sum of Pl5,000.00;
d) Attorney's fees in the sum of P10,000.00;
e) Expenses of tigation as may be duly provided
;and
f) Costs of the instant suit. (Emphasis supplied
Record on Appeal in CA-G.R. No. 49848-R, pp. 2-6).
Pursuant to said decision, the Ex-Officio Sheriff of Quezon City levied
upon and sold at execution 18 parcels of land, each with an average
area of 500 square meters, more or less or having a total area of
10,588 square meters covered by separate Transfer Certificates of
Title of the Registry of Deeds of Quezon City in the name of Socorro
A. Ramos to defendants-spouses (respondents herein) Guillermo N.
Pablo and Primitive C. Cruz as the sole bidders for one lump sum bid
price of P 56,885.22. Said amount constituted the entire judgment
debt of Socorro Ramos including the expenses of sale as reflected in
the "Minutes of the Public Auction Sale." The certificate of sale was
issued after a "Motion for the Confirmation of the Sheriff's Final Deed
of Sale and for the issuance of Writ of Possession" was filed
unopposed. Subsequently, the Register of Deeds (one of the
respondents herein) cancelled the certificates of title in the name of
Socorro Ramos and issued new Transfer Certificates of Title in the
name of spouses Guillermo Pablo and Primitiva Cruz.
Such facts having been brought to the knowledge of the heirs of the
deceased Socorro A. Ramos, they filed an action in the Court of First
Instance of Quezon City to declare as null and void 1) the public
auction sale or execution sale held by the Sheriff of Quezon City 2) the
minutes of the Public Auction Sale 3) the Certificate of Sale 4) the
Sheriff's Final Deed of Sale and 5) the Transfer Certificate of Title
issued in the name of spouses Pablo, alleging among other things that
the aforementioned transactions or events were in gross violation of
plaintiffs' rights as the lump sum sale of the 18 parcels of land was
contrary to the provision of Sec. 21, Rule 39 of the Rules of Court
which requires the separate bidding and individual sale of real estate
properties levied upon on execution and of Sec. 27, Rule 39 which
requires the statement of the price paid for each distinct lot or parcel.
Plaintiffs alleged that a larger amount could have been realized from
a sale in parcels or that a sale of less than the whole of the 18 parcels
would have brought sufficient proceeds to satisfy the debt. Plaintiffs
alleged that they were not given the required notice as surviving heirs
of their deceased mother, thereby preventing them from taking part
therein at least to the extent of directing the order in which the said
18 parcels of land shall be sold to their advantage as permitted by the
rules. Defendants filed their answer setting forth as special and
affirmative defenses lack of cause of action, lack of jurisdiction,
estoppel and multiplicity of suits. Thereafter, defendants filed their
motion to dismiss which was set for hearing. Defendants formally
offered their documentary exhibits for admission to the trial court.
After hearing, the trial court dismissed the case, hence this appeal by
plaintiffs assigning errors in their brief, to wit:
I
THE TRIAL COURT ERRED IN HOLDING THAT THE PRINCIPLE
OF RES JUDICATA WAS APPLICABLE IN THE INSTANT CASE.
II
GRANTING EN ARGUENDO THAT THE PRINCIPLE OF RES
JUDICATA IS APPLICABLE HAD IT BEEN RAISED, THE TRIAL
COURT ERRED IN IMPROPERLY CONSIDERING THE SAME AS
IT WAS NOT RAISED.
III
THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS'
"REMEDY IS NOT ANOTHER ACTION BUT A MOTION WITH
THE COURT OF ORIGIN ATTACKING THE EXECUTION SALE."
IV
THE TRIAL COURT ERRED IN CONSIDERING THE [I]N THE
INSTANT CASE IT IS NOT MERELY THE DECISION OF COURT
OF FIRST INSTANCE WHICH IS SOUGHT TO BE ANNULLED
BUT ALSO THE DECISION OF THE HIGHER COURT ...."
V
GRANTING EN ARGUENDO THAT ASSAILING AN EXECUTION
SALE CAN BE CONSIDERED AS AN ATTACK AGAINST THE
DECISION OF THE TRIAL COURT, SAID COURT ERRED IN NOT
APPLYING THE AUTHORITATIVE DOCTRINE LAID DOWN IN
 DULAP V. COURT OF APPEALS, G.R. NO. L-28306,18
DECEMBER 1971, 42 SCRA 537.
VI
THE TRIAL COURT ERRED IN FINDING THAT "PLAINTIFFS DID
NOT RAISE THE ISSUE THAT THE PRICE IS SO INADEQUATE
AS SHOCKING TO CONSCIENCE."
VII
THE TRIAL COURT ERRED IN HOLDING THAT THE FINALITY
OF THE DECISION OF THE SUPREME COURT IN G.R. NO. L-
23616,30 SEPTEMBER 1976 ENTITLED "RODRIGO ENRIQUEZ,
ET AL. V. SOCORRO A. RAMOS, ET AL. "MADE THE INSTANT
CASE MOOT AND ACADEMIC."
We find merit in petitioners' contentions. The principle of res
judicata to be applicable must have the following requisites: 1) the
judgment or order invoked as res judicata must be final 2) the court
rendering the same must have jurisdiction over the subject matter
and the parties; 3) the judgment or order must be upon the merits
and 4) there must be, between the two cases, identity of parties,
identity of subject matter and identity of causes of action. Petitioner
allege that the last requirement is absent. (a) There is no identity of
parties. Petitioners while parties in the first case are impleaded only
in their representative character, the principal party is the "estate of
the deceased Socorro A. Ramos." Respondents are made parties in
the present case, they being the buyers in the execution sale, the Ex
Oficio Sheriff of Quezon City is the principal and indispensable party
since he conducted the execution sale but he was not a party in the
first case. Neither is the Register of Deeds of Quezon City who is a
new party. (b) There is no identity of causes of action. The cause of
action of the first case was the alleged failure of Socorro A. Ramos to
comply with her obligation, in the second case it is the illegal and
improper execution or holding of the public sale by the Ex-
Oficio Sheriff of Quezon City. In other words, the first is an action for
damages and the second is an action for the annulment of the
execution sale. (c) There is no identity of subject matter. In the first
case the subject matter are the contracts of 1) Agreement to Sell and
2) a Deed of Absolute Sale, dated May 28, 1963 while in the second
case the subject matter are the 18 parcels of land sold at the execution
sale. The land involved in the first case is not even part of the 18
parcels in the second case. Moreover, the issue of res judicata is not
even raised by respondents in their motion to dismiss before the
lower court.
There is no question that the action of petitioners in the lower court
for annulment does not seek to annul the final decision of the Court
of Appeals but only to annul the execution sale and acts done in
pursuance thereof. The acts complained of in the present case arose
after the Court of Appeals issued its decision and therefore, it is not
possible that the matter of execution sale now in question could have
been covered or considered in or a part of the decision of the
appellate court.
We find that a separate action for annulment of execution sales is in
order. The lower court ruled that plaintiffs' (petitioners') remedy is
not another action but a motion attacking the execution sale with the
court of origin. Petitioners do not agree because 1) improper remedy
was not raised by spouses in their motion to dismiss 2) there is no
provision of law limiting an attack on an execution sale only through
a motion with the court of origin.
A reading of plaintiffs' (petitioners') complaint shows that
inadequacy of price was raised as one of the issues. Assuming that the
price was shockingly low, the same cannot vitiate the auction sale
for redemptionwould be comparatively easier.
Finally, the lower court erred in holding that the finality of Our
decision in G.R. No. L-23616, 73 SCRA 116 entitled Rodrigo Enriquez, et.
al, vs. Socorro A. Ramos 1 made the instant case moot and academic. In
said case, Rodrigo Enriquez, et. al., sold to Socorro A. Ramos 20
subdivision lots in Quezon City for the sum of P235,056.00 of which
only P35,056.00 had been paid and the balance of P200,000.00 was
not paid within the stipulated period by the buyer Socorro A. Ramos.
The sellers obtained favorable judgment this Court ruling that:
Should the defendant-appellee 2 fail to pay the
aforementioned mortgage indebtedness within the period
granted in this decision, the properties mortgaged shall be
sold at public auction and the proceeds thereof shall be
applied to the satisfaction of this judgment and the costs of
the auction sale. Costs against the defendant-appellee. The
motion of Guillermo N. Pablo to join defendant-appellee as
co-party is denied.
We find merit in petitioners' contention that there is nothing in the
records of the present case to show what happened after an order
(Exh. "5-Motion") had been issued on October 17, 1977 in Civil Case No.
Q-7229, Court of First Instance of Rizal. But the lower court gratuitously
assumed that the issuance of said order allowed for the foreclosure
over the 18 parcels of land, the subject matter of the instant case. In
other words, the evidence on record is clear that no actual foreclosure
yet has been effected by the prevailing party in Civil Case No. 7229, and
the lower court was in palpable error in prematurely concluding that
"whoever wins in that case is of no moment, because the plaintiffs'
and defendants' rights if any on the subject 18 lots are now
subordinated to Rodrigo Enriquez in Civil Case No. Q-7229, making the
instant case moot and academic." Petitioners argue that the "action
object" of the present appeal should be litigated for if the execution
sale is vacated, and even if again sold at public sale the obligation
secured by the 18 parcels of land, also involved in the present case
would be satisfied in the best manner possible. Furthermore, for a case
to be considered as moot and academic, the determination of such
event can only be passed upon in a trial on the merits and not in a
motion to dismiss. This case is far from being moot and academic
because whoever wins will be the one who win have the right to pay
the mortgage in favor of Rodrigo Enriquez, et al. As pointed out by
petitioners in their brief, obviously, it will be foolish for herein plaintiff
s (petitioners) to pay the mortgage when the titles to the said eighteen
(18) lots have already been transferred to the names of the said
defendants-spouses Pablo (respondents).
WHEREFORE, premises considered, the Order dated December 1, 1977
and the Order, dated March 8, 1978 of the lower court are hereby SET
ASIDE, and the case is hereby REMANDED to the lower court for
proper trial on the merits.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

Footnotes
1 Said case is docketed as Civil Case No. Q-7229 in the Court of
First Instance of Rizal.
2 Socorro A. Ramos.
DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee, vs.
DIONISIO MIRANG, defendant-appellant.
G.R. No. L-29130 | 1975-08-08
D E C I S I O N

MAKALINTAL, J:

This appeal was originally taken to the Court of Appeals, which

certified it here because it involves purely legal questions.

The appealed decision was rendered by the Court of First Instance of

Davao on May 14, 1963 in its Civil Case No. 3762, and modified by its
Order of July 1, 1963. It directed the defendant, now appellant, to pay
the plaintiff Development Bank of the Philippines, now appellee, the
sum of P16,013.13 plus 6% interest per annum from July 30, 1957 1 up to
the date of payment, but deducting therefrom the sum of P360.00
representing the value of an engine, referred to in paragraph 11 of the
stipulation of facts. The defendant was likewise ordered to pay
P500.00 as attorney's fees, plus the costs of the suit.

From the stipulation submitted to the trial court it appears that on

September 7, 1950 the appellant obtained approval of a loan of
P14,000.00 from the Rehabilitation Finance Corporation, 2 secured by a
first mortgage on defendant's homestead, for the following purposes:

P1,000 for purchase of work animals and farm implements;

P1,500 for construction of farmhouse and laborers' quarters; and
P11,500 for development and maintenance of 18.5 hectares of abaca
land.
The loan was released gradually to the appellant up to a total of
P13,000.00. Thereafter the appellee refused to make any further
releases because the plantation which was being financed was
attacked by mosaic disease, which destroyed the abaca plants. The
appellant, on his part, failed to pay the yearly amortizations; so in
accordance with the terms of the promissory notes he had signed and
the mortgage contract itself, the provincial sheriff of Davao, upon
request of the appellee, foreclosed the mortgage extrajudicially under
the provisions of Act 3135, as amended, and sold the mortgaged
property at public auction on July 30, 1957. By that time the appellant's
indebtedness, including interest, had reached P19,714.35, besides the
expenses of the auction sale and registration fees, which amounted to
P101.00. The appellee, as the highest bidder for P2,010.00, acquired
ownership of the mortgaged property. The appellant was duly advised
of the sale, with the information that the same was subject to his right
of redemption within one year from July 30, 1957. This right he had not
exercised when the complaint was filed by the appellee on May 29,
1962.
In his brief the appellant assigns five (5) errors, which may be
condensed into the following issues:

(1)Whether or not the creditor Development Bank of the Philippines

has a right to recover the balance of the indebtedness after the
mortgaged property was sold for less than the amount thereof under
extrajudicial foreclosure pursuant to Act 3135, as amended:

(2)Whether or not the debtor, appellant Mirang, may be exempted

from paying the loan on the ground that it had been granted to him for
the purpose of developing his homestead by planting it to abaca, and
that said abaca was destroyed by mosaic disease; or, failing that,
whether or not his obligation may be reduced by this Court; and

(3)Whether or not the mortgage debtor who wishes to repurchase his

homestead should pay therefor only the price paid by the purchaser at
the auction sale, or the total obligation incurred by him and still
outstanding.

On the first issue, the appellant contends that because the mortgage
was extrajudicially foreclosed and sold at less than the mortgage debt
under Act 3135 the appellee is not entitled to recover the deficiency
because neither this Act, as amended, nor the mortgage contract itself,
contains any provision giving such right to the mortgagee.
The same question has been settled by this Court in the case of
Philippine Bank of Commerce vs. Tomas de Vera, 3 where We held:

"The sole issue to be resolved in this case is whether the trial Court
acted correctly in holding appellee Bank entitled to recover from
appellant the sum of P99,033.20 as deficiency arising after the
extrajudicial foreclosure, under Act No. 3135, as amended, of the
mortgaged properties in question. It is urged, on appellant's part, that
since Act No. 3135, as amended, is silent as to the mortgagee's right to
recover deficiency arising after an extrajudicial foreclosure sale of
mortgage, he (Mortgagee) may not recover the same.

"A reading of the provisions of Act No. 3135, as amended, (re

extrajudicial foreclosure) discloses nothing, it is true, as to
mortgagee's right to recover such deficiency. But neither do we find
any provision thereunder which expressly or impliedly prohibits such
recovery.

"Article 2131 of the new Civil Code, on the contrary, expressly provides
that 'The form, extent and consequences of a mortgage, both as to its
constitution, modification and extinguishment, and as to other matters
not included in this Chapter, shall be governed by the provisions of the
Mortgage Law and of the Land Registration Law.' Under the Mortgage
Law, which is still in force, the mortgagee has the right to claim for the
deficiency resulting from the price obtained in the sale of the real
property at public auction and the outstanding obligation at the time
of the foreclosure proceedings. (See Soriano vs. Enriquez, 24 Phil. 584;
Banco de las Islas Filipinas vs. Concepcion e Hijos, 53 Phil. 806; Banco
Nacional vs. Barreto, 53 Phil. 955.) Under the Rules of Court (Section 6,
Rule 70 * ), 'Upon the sale of property, under an order for a sale to
satisfy a mortgage or other incumbrance thereon, if there be a balance
due to the plaintiff after applying the proceeds of the sale, the Court,
upon motion, should render a judgment against the defendant for any
such balance for which, by the record of the case, he may be personally
liable to the plaintiff, . . .' It is true that this refers to a judicial
foreclosure, but the underlying principle is the same, that the
mortgage is but a security and not a satisfaction of indebtedness."

Appellant invites the attention of this Court to the new provisions of

the Civil Code on pledge, particularly Article 2115, which provides:

"The sale of the thing pledged shall extinguish the principal obligation,
whether or not the proceeds of the sale are equal to the amount of the
principal obligation, interest and expenses in a proper case. . . . If the
price of the sale is less, neither shall the creditor be entitled to the
deficiency, notwithstanding any stipulation to the contrary."
as well as to the fact that in chattel mortgage under Art. 1484,
paragraph 3, the creditor shall have no further action to recover any
unpaid balance if he has chosen to foreclose the chattel mortgage.
These provisions, far from supporting the appellant's stand, militate
against it, because they show that when the Legislature intends to bar
or occlude a creditor from suing for any deficiency after foreclosing
and selling the security given for the obligation, it makes express
provision to that effect. In the same case of Philippine Bank of
Commerce vs. De Vera, supra, this Court said apropos:

"It is then clear that in the absence of a similar provision in Act 3135, as
amended, it cannot be concluded that the creditor loses his right given
him under the Mortgage Law and recognized in the Rules of Court, to
take action for the recovery of any unpaid balance on the principal
obligation, simply because he has chosen to foreclose his mortgage
extrajudicially, pursuant to a special power of attorney given him by
the mortgagor in the mortgage contract. As stated by this Court in
Medina vs. Philippine National Bank (56 Phil. 651). a case analogous to
the one at bar, the step taken by the mortgagee-bank in resorting to
extrajudicial foreclosure under Act No. 3135, was 'merely to find a
proceeding for the sale, and its action cannot be taken to mean a
waiver of its right to demand the payment of the whole debt.'"

On the second issue the appellant asks that if he cannot be completely

absolved he should at least be given a reduction of his indebtedness
because of his inability to realize any income from the abaca he
planted. His predicament may evoke sympathy, but it does not justify a
disregard of the terms of the contract he entered into. His obligation
thereunder is neither conditional nor aleatory; its terms are clear and
subject to no exception.
The third issue has likewise been resolved by this Court in a similar
case. 4 The issue posed there involved the price at which the
mortgagor should redeem his property after the same had been sold at
public auction whether the amount for which the property was sold, as
contended by the mortgagor, or the balance of the loan obtained from
the banking institution, as contended by the mortgagee RFC. Cited in
that case was Section 31 of Com. Act No. 459, which was the special
law applicable exclusively to properties mortgaged with the RFC, as
follows:

"The mortgagor or debtor to the Agricultural and Industrial Bank * ,

whose real property has been sold at public auction, judicially or
extrajudicially, for the full or partial payment of an obligation to said
Bank, shall, within one year from the date of the auction sale, have the
right to redeem the real property by paying to the Bank all the amount
he owed the latter on the date of the sale, with interest on the total
indebtedness at the rate agreed upon in the obligation from said date,
unless the bidder has taken material possession of the property or
unless this has been delivered to him, in which case the proceeds of
the property shall compensate the interest. . . ."

The same provision applies in the instant case. The unavoidable

conclusion is that the appellant, in redeeming the foreclosed property,
should pay the entire amount he owed to the Bank on the date of the
sale, with interest thereon at the rate agreed upon.
WHEREFORE, the decision appealed from is affirmed, with costs.
Teehankee, Esguerra and Muñoz Palma, JJ., concur.

Separate Opinions

CASTRO, J., concurring:

If we go by conventional legal wisdom, there can be no debate on the

three conclusions reached by Chief Justice Makalintal in his resolution
of the main issues in the case at bar; they are clearly in accord with
statutory law and jurisprudence.
These conclusions may be restated thus:

(a)The Development Bank of the Philippines as creditor can recover

the balance of the defendant Mirang's indebtedness after the latter's
real estate property was sold for very much less than the amount of his
indebtedness by virtue of an extrajudicial foreclosure under the
provisions of Act 3135, as amended;

(b)Mirang is not exempt from paying the balance of his indebtedness

even if the proceeds of the loan he obtained from the DBP which he
invested in the planting of abaca in his homestead went to waste
because of the destruction of his abaca plants by mosaic disease; nor
has this Court authority to reduce his net liability to the DBP; and

(c)To redeem his homestead Mirang must pay not merely the price
paid for it by the DBP at the auction sale but the total of his obligation
still due and owing to the DBP.
But even as I perforce concur in the above-stated conclusions, I cannot
ignore as in fact I here add my own emphasis to the cogent and
pointed observations articulated by Justice Felix V. Makasiar in his
dissenting opinion.
I find the following inescapably and at once particularly disturbing:

(a)The DBP, as the highest bidder at the auction sale, bought the
property of the debtor Mirang, which has a quite sizeable area of 18-1/2
hectares, for the minuscule sum of only P2,010, or a miserable P110 per
hectare;
(b)The DBP displayed not an ounce of sympathy for Mirang's inability
to amortize his mortgage loan, occasioned by a fortuitous event of
course beyond his control in the form of infestation of his abaca
plantation by mosaic disease, a disease that the Government itself,
with all its expertise and resources, has thus far been unable to
eradicate;

(c)The DBP apparently did not attach the least bit of importance to the
fact that the destruction of Mirang's abaca plantation by mosaic
disease was not caused by his negligence nor by his failure to take
necessary precautionary measures; and

(d)Created fundamentally to assist, by extending credit facilities, in the

development and expansion of agriculture and industry and the
broadening and diversification of the national economy, the DBP, in
relation to Mirang, has actually, by the action it has taken, negated its
basic mission.

Justice Makasiar makes the pertinent suggestion that the DBP

restructure the account of Mirang. Like Justice Makasiar, I personally
know that the DBP and similar Government financial institutions (the
Philippine National Bank, the Government Service Insurance System,
and the Social Security System) have restructured accounts of debtors.
Considering the inordinate appreciation of land values everywhere,
there appears to be no insuperable obstacle to the DBP restructuring
the account of Mirang, not only to enable him to pay his indebtedness
in easy terms over a period of years but as well to make available
additional funds to be utilized by him in the development of his 18-1/2-
hectare land. It is not too late in the day in this, our compassionate
society for the DBP to do so.

It is well to remember that uncompromising or mechanical application

of the letter of the law has resulted, not infrequently, in the denial of
moral justice.
MAKASIAR, J., dissenting:

The Courts of the Republic are courts of equity as well as of law.

While as a matter of strict law, the position of appellant is untenable;
the admitted equities of the case should absolve appellant from
further liability on the following grounds:

1.The abaca plantation mortgaged on September 7, 1950 for the

original loan of P14,000.00 to the appellee DBP, has an area of 18.5
hectares. Out of the approved loan, only the amount of P13,000.00
was gradually released to the appellant, after which further releases
were stopped because the abaca plantation was attacked by mosaic
disease which destroyed the abaca plants. The outstanding
indebtedness however of appellant later amounted to P19,714.35
including interest. As the highest bidder, the appellee DBP bought the
said property for only P2,010.00 at the auction sale on July 30, 1957.
Obviously, the market value of the plantation must have increased in
1957 after the lapse of about 7 years, and especially now after about 18
years. Its market value even in 1957 could not be less than the
outstanding indebtedness of the appellant considering that it merited
in 1950 a loan of P14,000.00; and its present market value must be a lot
more.

2.The failure of the appellant to pay the yearly amortizations on the

mortgage was neither malicious nor deliberate. His inability to meet
the yearly amortization was due to the fact that his plantation was
attacked by mosaic disease, which not even the government could
successfully eradicate until this date. This is practically a fortuitous
event like epidemic, pestilence, floods or locusts (Vol. IV, Tolentino,
Civil Law, 1973 ed. p. 119, citing 3 Salvat 83-84; Vol. IV, Caguioa, Civil
Law, 1968 ed. pp. 88-89, citing 3 Castan, 8th ed., p. 159). There is no
showing that the disease infected his abaca plantation because of his
negligence or omission to take precautions against it. Considering the
unforeseen tragedy that befell appellant as well as the importance of
abaca in the economy of the nation, the government should not
merely view the sad plight of appellant with sympathy, but must give
positive recognition to the appellant's right under the circumstances to
be relieved of further liability. As above intimated, the present market
value of the abaca plantation of about 18.5 hectares could amply cover
the unpaid deficiency of P16,013.13 including interest.

3.As originally conceived on October 29, 1946 in its charter, Republic

Act No. 85 as approved by Congress, the main purpose of the RFC was
"to provide credit facilities for the rehabilitation and development of
agriculture, commerce and industry, the reconstruction of property
damaged by war, and broadening and diversification of the national
economy . . ." (Sec. 1, R.A. No. 85). As amended on June 15, 1958 by the
passage of Republic Act No. 2081, the DBP, the successor to RFC, was
primarily established "to provide credit facilities for rehabilitation and
development and expansion of agriculture and industry, the
reconstruction of property damaged by war and the broadening and
diversification of the national economy . . ." It is thus patent that the
RFC, now the DBP, was created principally to assist the agricultural
producers and industrialists in developing their farms and industries to
accelerate national progress, more than to realize profit for itself.
Appellant is in great need of such assistance as he apparently is not a
man of means. For the DBP to exact its "pound of flesh" would be to
play the hated role of a Shylock, which is at war with the ideals of a
compassionate society, to which the government is dedicated. It
would be unjust enrichment on the part of DBP, which could breed
disenchantment and discontent.

The dictum that "the letter of the law killeth; its spirit giveth life" has a
special relevance to the instant case. And to appellant, if he is
exempted from liability for any deficiency, social justice, which
guarantees him together with the rest of the citizenry "dignity, welfare
and security" (Sec. 6, Art. II, 1973 Constitution), becomes a living
reality, not a myth.

Further assistance could have been extended by the DBP to appellant

by restructuring his account, as the DBP has done and is doing, in favor
of some of its debtors.

Footnotes

1.The date of the auction sale of the mortgaged property.

2.Later converted into the Development Bank of the Philippines under
R.A. 2081, approved June 14, 1958.
3.G.R. No. L-18816, Dec. 29, 1962, 6 SCRA 1026.
Now Rule 68, New Rules of Court.
4.Jesus Nepomuceno, et al. vs. RFC, L-14897, Nov. 23, 1960, 110 Phil. 42.
The Agricultural & Industrial Bank subsequently became the RFC, under
Rep. Act No. 85.
G.R. No. L-13438 November 20, 1918
FRANCISCO GUTIERREZ REPIDE, plaintiff-appellant,
vs.
IVAR O. AFZELIUS and his wife, PATROCINIO R. AFZELIUS, defendants-
appellees.
Ramon Fernandez for appellant.
T. L. McGirr for appellees.
MALCOLM, J.:
The subject of Specific Performance, with reference to its common law
and civil law status, it to be considered on this appeal. The particular
action is for the specific performance of a contract for the sale and
purchase of real estate.
The plaintiff is the owner of a certain parcel of realty consisting of
2,695.24 square meters, situated in the city of Manila, and fully
described in the complaint. About the month of December, 1916, the
defendants made a proposition to the plaintiff for the purchase of this
property. After negotiating for some time, it was agreed that the
defendants would pay plaintiff the sum of P10,000 for the land, P2,000
of which was to be handed over upon the signing of the deed, and the
balance of P8,000, paid in monthly installments of P150. The property
was to be mortgaged to the plaintiff to secure the payment of this
balance of P8,000. The plaintiff proceeded to have survey made of the
land and to prepare the deed and mortgage. Expenses to the amount
of P83.93 were incurred for these purposes. The deed was ready about
December 28, 1916, when the defendants were notified to appear and
sign the same. They failed to do this, and instead, the defendant,
Patrocinio R. Afzelius, wrote a letter to plaintiff, as follows:

MANILA, January 3, 1917.

MR. FRANCISCO GUTIERREZ,
Manila.
MY DEAR SIR: It is with regret that I inform you that it is
now absolutely impossible for us to effect the purchase
of the property at Juan Luna Street, as it was our desire
to do. The reason for this is that the business has failed,
in which we had invested all the money we had and from
which he hope to obtain sure gains and to get the
P2,000 which we were to give you in advance for the
purchase of said property, and consequently, we have
lost our savings and our hope of being able to purchase
the property for the time being.
Before closing, I request you to pardon us for the
troubles we have caused you, for, in truth, we acted in
good faith, but, as you will readily realize, without having
 the P2,000 in our hands, it will be impossible for us to
effect the purchase.
Reiterating my request that you pardon us for all the
trouble, I am
Very truly yours.
(Sgd.) PATROCINIO R. AFZELIUS.
In addition to the letter above quoted, Afzelius testified on the trial
that although he and his wife had available the sum of P2,000 to pay
the first installment on the purchase price of the land, yet it belonged
in part to his wife's sister, and that, as she subsequently needed the
money for something else, they had to return it to her, and in order to
give excuses to the plaintiff, his wife wrote this letter to the plaintiff.
Plaintiff was, and still is, willing to execute the deed in accordance with
the terms agreed upon with the defendants. Accordingly, plaintiff, in
his action in the Court of First Instance of the city of Manila, asked
judgment against the defendants condemning them to sign the deed
and mortgage to the land in question, and to pay the purchase price
stipulated, with costs. The defendants filed a general denial, alleging
that the plaintiff has not sustained damages of any kind or character,
and praying that the case be dismissed at the cost of the plaintiff. The
trial court, after finding the facts as herein stated, made application
thereto of the law of Specific Performance. After stating the general
principles of this branch of the law, the court deduced therefrom that
the remedy by specific performance is one the granting or denying of
which rests in the exercise of sound judicial discretion. The court said:
Whether or not the defendants are able to perform the contract is
a matter of defense, and there is no special defense on that
subject in the answer; but it appears from the evidence that the
defendants have not the funds available for the cash payment on
the contract, and apparently the performance of the contract in
the terms agreed between the plaintiff and defendants would be
impracticable; the court would not be able to enforce a decree for
specific performance, and such a decree might operate as a great
hardship upon the defendants; therefore, the court is of the
opinion that it would be useless, unjust and inequitable to render
judgment herein for specific performance.lawphil.net
The judgment then was in favor of the defendants, dismissing the
plaintiff's complaint, without prejudice to any other remedy which the
plaintiff might have, and without any finding as to the costs.
The plaintiff and appellant bases his argument on articles 1254, 1258,
1278, 1450, and 1279 of the Civil Code. The provisions of the five articles
first cited and others that could be mentioned merely tend to
corroborate what is self-evident, namely, the existence of a valid
contract between the parties. Indisputably, there has been an offer
and an acceptance, and all that remained to effectuate the contract
was the execution of the deed and the mortgage.
The article of the Civil code chiefly relied upon by appellant, No. 1279,
would seem to settle favorably the first branch of the prayer of the
complaint, asking that the defendants be required to sign the deed and
mortgage to the land in question. This article of the Civil Code appears
to have been prepared to meet exactly such a situation, to the end that
the contracting parties can reciprocally compel the observance of the
necessary formalities.
Other portions of the Civil Code not called to our attention by the
appellant, notably articles 1096, 1098, 1124 and 1451, recognize what is
denominated in the common law as Specific Performance. Article 1451
provides that, "A promise to sell or buy, when there is an agreement as
to the thing and the price, entitles the contracting parties reciprocally
to demand the fulfillment of the contract." But the article in
recognition of a negative result also provides, "whenever the promise
to purchase and sell cannot be fulfilled, the provisions relative to
obligations and contracts, contained in this book, shall be applicable in
the respective cases to the vendor and the vendee." Turning to these
provisions relating to obligations and contracts, we find article 1096
making a distinction between a specific thing to be delivered and an
indeterminate or generic thing; article 1098 providing that a person is
obligated to do a certain thing according to the tenor of the obligation;
and finally, article 1124 in absolute approval of contractual mutually
decreeing that "the person prejudiced may choose between exacting
the fulfillment of the obligation or its resolution with indemnity for
damages and payment of interest in either cases."
As to whether the vendor can compel the vendee to perform, which is
the point before the court, the jurisprudence of the supreme court of
Spain and the commentaries of Manresa do not in the least attempt to
distinguish between one or the other party, the vendor or the vendee,
but constantly and without exception use the word "reciprocamente."
the following decisions of the supreme court of Spain interpretative of
these articles can be noted: April 17, 1897; October 10, 1904; February 4,
1905.
The vendee is entitled to specific performance essentially as a matter
of course. Philippine cases have so held. (Irureta
Goyena vs. Tambunting [1902], 1 Phil., 490; Thunga Chui vs. Que Bentec
[1903], 2 Phil., 561; Couto Soriano vs. Cortes [1907, 8 Phil., 459;
Dievas vs. Co Chongco [1910], 16 Phil., 447.) If the doctrine of mutuality
of remedy is to apply, the vendor should likewise be entitled to similar
relief. Philippine jurisprudence, however, has never as yet been
afforded an opportunity to so hold. The nearest approach to the idea
has been, with reference to merchandise, in a decision to the effect
that if the purchaser refuses without lawful reason to accept delivery
when tendered by the seller in conformity with the contract of sale,
the seller may elect to enforce compliance or to rescind.
(Matute vs. Cheong Boo [1918], 37 Phil., 372.)
Thus far, in this opinion we have discussed the question of whether the
vendor as well as the vendee is entitled to the specific performance of
the contract for the sale of land, from the standpoint of the civil law.
Now, of course, specific performance of contracts is, under this name,
an equitable remedy. As such, since there exist no courts of equity and
no equity jurisprudence in this jurisdiction, the authority arising from
the common law is not of binding force in the Philippines.
Nevertheless, as the civil law and the common law seem to arrive at
the same goal on this subject, we should at least notice as persuasive
authority the jurisprudence of the United States and Great Britain.
The American and English cases that relate to specific performance by
the vendor are with a few exceptions all one way. In the language of
Chief Justice Marshall, "The right of a vendor to come into a court of
equity to enforce a specific performance is unquestionable."
(Cathcart vs. Robinson [1831], 5 Pet., 264.) The rule in nearly all
jurisdictions is that specific performance may be had at the suit of the
vendor of land, the vendee being decreed to accept the deed and pay
the purchase price. (Freeman vs. Paulson [1909], 107 Minn., 64;
Migatz vs. Stieglitz [1905], 166 Ind., 362; Robinson vs. Appleton [1888],
124 Ill., 276; Hodges vs. Kowing [1889], 58 Conn., 12; Curtis Land & Loan
Co. vs. Interior Land Co. [1908], 137 Wis., 341; The Maryland Clay
Co. vs. Simpers [1903], 96 Md., 1; Old Colony R. Corp. vs. Evans [1856], 6
Gray, 25; Raymond vs. San Gabriel rec. Co. [1893], 53 Fed., 883; 36 Cyc.,
565.) The reasoning supporting the authorities is that the performance
of contracts must and should be mutual. The contract is ordinarily
bilateral. So should the respective rights of the parties be. Nor does an
action to recover damages for breach of contract ordinarily afford a
complete and adequate remedy. The equitable doctrine is not applied
where it will be productive of great hardship.
Here we have presented a good and valid contract, bilateral in
character, and free from all taint of fraud. The stability of commercial
transactions requires that the rights of the seller be protected just as
effectively as the rights of the buyer. If this plaintiff had refused to
comply with the contract, specific performance of the obligation could
have been asked by the defendants. Just as surely should the plaintiff
who has lived up to his bargain and who has been put to expense to do
so, be permitted to coerce the defendant into going through with the
contract.
The excuse of the defendants is that they do not now have the money
to pay the first installment. In other words, they plead impossibility of
performance. The rule of equity jurisprudence in such a case is that
mere pecuniary inability to fulfill an engagement does not discharge
the obligation of the contract, not does it constitute any defense to a
decree for specific performance. (Hopper vs. Hopper [1863], 16 N. J.
Eq., 147.) Now, the courts will not make an order obviously nugatory.
But the courts should lend their assistance to the plaintiff to compel
the defendants to fulfill their obligation. Besides requiring the
defendants to sign the contract and the mortgage, the judgment of
the court can be aided by execution on the property of the defendants.
If, then, it is found that it is impossible for the defendants to live up to
their agreement, naturally the plaintiff will rest content if for no other
reason than for the protection of his financial interests.
Judgment shall be reversed, and an order shall issue, condemning the
defendants to sign the deed and mortgage to the land in question and
to pay the first installment of the purchase price as stipulated.
The appellant shall recover costs of both instances. The Code of Civil
Procedure in its Chapter XXI entitled "Costs in the Several Courts"
states in section 487 that "Costs shall ordinarily be allowed to the
prevailing party as a matter of course . . . . " Philippine law is, in this
respect, identical with the general rule, which is that "On reversal, . . .
the costs will generally go to the prevailing party, that is, to the
appellant." (7 R. C. L., 801, citing cases.) No special reasons exist in this
case for modifying the general rule. So ordered.
Johnson, Street, Avanceña and Fisher, JJ., concur.

Separate Opinions

TORRES, J., concurring:

The undersigned concurs in the result, but nevertheless believes that
all the costs of this action and half of those of the first ought to be paid
by the defendants.
The reasons upon which the reversal of the judgment is based are
those prescribed by section 487 of Act No. 190 whereby the costs are
allowed to the prevailing party who, for good cause, appealed and
obtained the reversal of the judgment, so in accordance with law the
plaintiff should not pay the costs of both instances, but a part or half
only of the costs of the first instance.
PEDRO D. DIOQUINO, plaintiff-appellee,
vs.
FEDERICO LAUREANO, AIDA DE LAUREANO and JUANITO LAUREANO,
defendants-appellants.
G.R. No. L-25906 | 1970-05-28
EN BANC
DECISION

Fernando, J.:

The present lawsuit had its origin in a relationship, if it could be called

such, the use of a car owned by plaintiff Pedro D. Dioquino by
defendant Federico Laureano, clearly of a character casual and
temporary but unfortunately married by an occurrence resulting in its
windshield being damaged. A stone thrown by a boy who, with his
other companions, was thus engaged in what undoubtedly for them
must have been mistakenly thought to be a none too harmful prank
did not miss its mark. Plaintiff would hold defendant Federico
Laureano accountable for the loss thus sustained, including in the
action filed the wife, Aida de Laureano, and the father, Juanito
Laureano. Plaintiff prevail in the lower court, the judgment however
going only against the principal defendant, his spouse and his father
being absolved of any responsibility. Nonetheless, all three of them
appealed directly to us, raising two questions of law, the first being the
failure of the lower court to dismiss such a suit as no liability could have
been incurred as a result of a fortuitous event and the other being its
failure to award damages against plaintiff for the unwarranted
inclusion of the wife and the father in this litigation. We agree that the
lower court ought to have dismissed the suit, but it does not follow
that thereby damages for the inclusion of the above two other parties
in the complaint should have been awarded appellants.

The facts as found by the lower court follow: "Attorney Pedro

Dioquino, a practicing lawyer of Masbate, is the owner of a car. On
March 31, 1964, he went to the office of the MVO, Masbate, to register
the same. He met the defendant Federico Laureano, a patrol officer of
said MVO office, who was waiting for a jeepney to take him to the
office of the Provincial Commander, PC, Masbate. Attorney Dioquino
requested the defendant Federico Laureano to introduce him to one of
the clerks in the MVO Office, who could facilitate the registration of his
car and the request was graciously attended to. Defendant Laureano
rode on the car of Atty. Dioquino on his way to the P.C. Barracks at
Masbate. While about to reach their destination, the car driven by
plaintiff's driver and with defendant Federico Laureano as the sole
passenger was stoned by some 'mischievous boys,' and its windshield
was broken. Defendant Federico Laureano chased the boys and he was
able to catch one of them. The boy was taken to Atty. Dioquino [and]
admitted having thrown the stone that broke the car's windshield. The
plaintiff and the defendant Federico Laureano with the boy returned to
the P.C. barracks and the father of the boy was called, but no
satisfactory arrangements [were] made about the damage to the
windshield." 1

It was likewise noted in the decision now on appeal: "The defendant

Federico Laureano refused to file any charges against the boy and his
parents because he thought that the stone-throwing was merely
accidental and that it was due to force majeure. So he did not want to
take any action and after delaying the settlement, after perhaps
consulting a lawyer, the defendant Federico Laureano refused to pay
the windshield himself and challenged that the case be brought to
court for judicial adjudication. There is no question that the plaintiff
tried to convince the defendant Federico Laureano just to pay the
value of the windshield and he even came to the extent of asking the
wife to convince her husband to settle the matter amicably but the
defendant Federico Laureano refused to make any settlement, clinging
[to] the belief that he could not be held liable because a minor child
threw a stone accidentally on the windshield and therefore, the same
was due to force majeure." 2
1. The law being what it is, such a belief on the part of defendant
Federico Laureano was justified. The express language of Art. 1174 of
the present Civil Code which is a restatement of Art. 1105 of the Old
Civil Code, except for the addition of the nature of an obligation
requiring the assumption of risk, compels such a conclusion. It reads
thus: "Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for
those events which could not be, foreseen, or which, though foreseen
were inevitable." Even under the old Civil Code then, as stressed by us
in the first decision dating back to 1908, in an opinion by Justice Mapa,
the rule was well-settled that in the absence of a legal provision or an
express covenant, "no one should be held to account for fortuitous
cases." 3 Its basis, as Justice Moreland stressed, is the Roman law
principle major casus est, cui humana infirmitas resistere non potest. 4
Authorities of repute are in agreement, more specifically concerning an
obligation arising from contract "that some extraordinary
circumstance independent of the will of the obligor, or of his
employees, is an essential element of a caso fortuito." 5 If it could be
shown that such indeed was the case, liability is ruled out. There is no
requirement of "diligence beyond what human care and foresight can
provide." 6

The error committed by the lower court in holding defendant Federico

Laureano liable appears to be thus obvious. Its own findings of fact
repel the motion that he should be made to respond in damages to the
plaintiff for the broken windshield. What happened was clearly
unforeseen. It was a fortuitous event resulting in a loss which must be
borne by the owner of the car. An element of reasonableness in the
law would be manifestly lacking if, on the circumstances as thus
disclosed, legal responsibility could be imputed to an individual in the
situation of defendant Laureano. Art. 1174 of the Civil Code guards
against the possibility of its being visited with such a reproach.
Unfortunately, the lower court was of a different mind and thus failed
to heed its command.

It was misled, apparently, by the inclusion of the exemption from the

operation of such a provision of a party assuming the risk, considering
the nature of the obligation undertaken. A more careful analysis would
have led the lower court to a different and correct interpretation. The
very wording of the law dispels any doubt that what is therein
contemplated is the resulting liability even if caused by a fortuitous
event where the party charged may be considered as having assumed
the risk incident in the nature of the obligation to be performed. It
would be an affront, not only to the logic but to the realities of the
situation, if in the light of what transpired, as found by the lower court,
defendant Federico Laureano could be held as bound to assume a risk
of this nature. There was no such obligation on his part.

Reference to the leading case of Republic v. Luzon Stevedoring Corp. 7

will illustrate when the nature of the obligation is such that the risk
could be considered as having been assumed. As noted in the opinion
of Justice J.B.L. Reyes, speaking for the Court: "The appellant strongly
stresses the precautions taken by it on the day in question: that it
assigned two of its most powerful tugboats to tow down river its
barge L-1892; that it assigned to the task the more competent and
experienced among its patrons, had the towlines, engines and
equipment double-checked and inspected; that it instructed its patrons
to take extra-precautions; and concludes that it had done all it was
called to do, and that the accident, therefore, should be held due to
force majeureor fortuitous event." Its next paragraph explained clearly
why the defense of caso fortuito or force majeure does not lie. Thus:
"These very precautions, however, completely destroy the appellant's
defense. For caso fortuito or force majeure (which in law are identical
in so far as they exempt an obligor from liability) by definition, are
extraordinary events not foreseeable or avoidable, 'events that could
not be foreseen, or which, though foreseen, were inevitable' (Art. 1174,
Civil Code of the Philippines). It is, therefore, not enough that the
event should not have been foreseen or participated, as is commonly
believed, but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to foresee
the same: un hecho no constituye caso fortuito por la sola
circunstancia de que su existencia haga mas dificil o mas onerosa la
accion diligente del presente ofensor' (Peirano Facio, Responsibilidad
Extra-contractual, p. 465; Mazeaud, Traite de la Responsibilite Civile,
Vol. 2, sec. 1569). The very measures adopted by appellant prove that
the possibility of danger was not only foreseeable, but actually
foreseen, and was not caso fortuito."
In that case then, the risk was quite evident and the nature of the
obligation such that a party could rightfully be deemed as having
assumed it. It is not so in the case before us. It is anything but that. If
the lower court, therefore, were duly mindful of what this particular
legal provision contemplates, it could not have reached the conclusion
that defendant Federico Laureano could be held liable. To repeat, that
was clear error on its part.

2. Appellants do not stop there. It does not suffice for them that
defendant Federico Laureano would be freed from liability. They would
go farther. They would take plaintiff to task for his complaint having
joined the wife, Aida de Laureano, and the father, Juanita Laureano.
They were far from satisfied with the lower court's absolving these
two from any financial responsibility. Appellants would have plaintiff
pay damages for their inclusion in this litigation. We are not disposed
to view the matter thus.

It is to be admitted, of course, that plaintiff, who is a member of the

bar, ought to have exercised greater care in selecting the parties
against whom he would proceed. It may be said that his view of the
law that would consider defendant Federico Laureano liable on the
facts as thus disclosed, while erroneous, is not bereft of plausibility.
Even the lower court, mistakenly of course, entertained similar view.
For plaintiff, however, to have included the wife and the father would
seem to indicate that his understanding of the law is not all that it
ought to have been.

Plaintiff apparently was not entirely unaware that the inclusion in the
suit filed by him was characterized by unorthodoxy. He did attempt to
lend some color of justification by explicitly setting forth that the
father was joined as party defendant in the case as he was the
administrator of the inheritance of an undivided property to which
defendant Federico Laureano could lay claim and that the wife was
likewise proceeded against because the conjugal partnership would be
made to respond for whatever liability would be adjudicated against
the husband.

It cannot be said that such an attempt at justification is impressed with

a high persuasive quality. Far from it. Nonetheless, mistaken as plaintiff
apparently was, it cannot be concluded that he was prompted solely
by the desire to inflict needless and unjustified vexation on them.
Considering the equities of the situation, plaintiff having suffered a
pecuniary loss which, while resulting from a fortuitous event, perhaps
would not have occurred at all had not defendant Federico Laureano
borrowed his car, we, feel that he is not to be penalized further by his
mistaken view of the law in including them in his complaint. Well-worth
paraphrasing is the thought expressed in a United States Supreme
Court decision as to the existence of an abiding and fundamental
principle that the expenses and annoyance of litigation form part of
the social burden of living in a society which seeks to attain social
control through law. 8

WHEREFORE, the decision of the lower court of November 2, 1965

insofar as it orders defendant Federico Laureano to pay plaintiff the
amount of P30,000.00 as damages plus the payment of costs, is hereby
reversed. It is affirmed insofar as it dismissed the case against the
other two defendants, Juanita Laureano and Aida de Laureano, and
declared that no moral damages should be awarded the parties.
Without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Teehankee,

Barredo and Villamor, JJ., concur.
Castro. J., is on leave.

Footnotes

1 Decision, Record on Appeal, pp. 29-30.

2 Ibid, pp. 36-37.

3 Crame Sy Panco v. Gonzaga, 10 Phil. 646, 648. Cf. Chan Keep v. Chan
Gioco, 14 Phil. 5 (1909) and Novo & Co. v. Ainsworth, 26 Phil. 380 (1913).

4 Roman Catholic Bishop of Jaro v. De la Pena, 26 Phil. 144, 146 (1913).

5 Lasam v. Smith, 45 Phil. 657, 661-662 (1924). Cf. Yap Kim Chuan v.
Tiaoqui, 31 Phil. 433 (1955); University of Santo Tomas v. Descals, 38
Phil. 267 (1918); Lizares v. Hernaez, 40 Phil. 981 (1920); Garcia v.
Escudero, 43 Phil. 437 (1922); Millan v. Rio y Olabarrieta, 45 Phil. 718
(1924); Obejera v. Iga Sy, 76 Phil. 580 (1946).

6 Gillaco v. Manila Railroad Co., 97 Phil. 884 (1955).

7 L-21749, Sept. 29, 1967, 21 SCRA 279.

8 Cf. Petroleum Exploration v. Public Service Commission, 304 US 209

(1938).

G.R. No. L-21749 September 29, 1967

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
LUZON STEVEDORING CORPORATION, defendant-appellant.
Office of the Solicitor General for plaintiff-appellee.
H. San Luis and L.V. Simbulan for defendant-appellant.

REYES, J.B.L., J.:

The present case comes by direct appeal from a decision of the Court
of First Instance of Manila (Case No. 44572) adjudging the defendant-
appellant, Luzon Stevedoring Corporation, liable in damages to the
plaintiff-appellee Republic of the Philippines.
In the early afternoon of August 17, 1960, barge L-1892, owned by the
Luzon Stevedoring Corporation was being towed down the Pasig river
by tugboats "Bangus" and "Barbero"1 also belonging to the same
corporation, when the barge rammed against one of the wooden piles
of the Nagtahan bailey bridge, smashing the posts and causing the
bridge to list. The river, at the time, was swollen and the current swift,
on account of the heavy downpour of Manila and the surrounding
provinces on August 15 and 16, 1960.
Sued by the Republic of the Philippines for actual and consequential
damage caused by its employees, amounting to P200,000 (Civil Case
No. 44562, CFI of Manila), defendant Luzon Stevedoring Corporation
disclaimed liability therefor, on the grounds that it had exercised due
diligence in the selection and supervision of its employees; that the
damages to the bridge were caused by force majeure; that plaintiff has
no capacity to sue; and that the Nagtahan bailey bridge is an
obstruction to navigation.
After due trial, the court rendered judgment on June 11, 1963, holding
the defendant liable for the damage caused by its employees and
ordering it to pay to plaintiff the actual cost of the repair of the
Nagtahan bailey bridge which amounted to P192,561.72, with legal
interest thereon from the date of the filing of the complaint.
Defendant appealed directly to this Court assigning the following
errors allegedly committed by the court a quo, to wit:
I — The lower court erred in not holding that the herein
defendant-appellant had exercised the diligence required of it in
the selection and supervision of its personnel to prevent damage
or injury to others.1awphîl.nèt
II — The lower court erred in not holding that the ramming of the
Nagtahan bailey bridge by barge L-1892 was caused by force
majeure.
III — The lower court erred in not holding that the Nagtahan
bailey bridge is an obstruction, if not a menace, to navigation in
the Pasig river.
IV — The lower court erred in not blaming the damage sustained
by the Nagtahan bailey bridge to the improper placement of the
dolphins.
V — The lower court erred in granting plaintiff's motion to adduce
further evidence in chief after it has rested its case.
VI — The lower court erred in finding the plaintiff entitled to the
amount of P192,561.72 for damages which is clearly exorbitant and
without any factual basis.
However, it must be recalled that the established rule in this
jurisdiction is that when a party appeals directly to the Supreme Court,
and submits his case there for decision, he is deemed to have waived
the right to dispute any finding of fact made by the trial Court. The only
questions that may be raised are those of law (Savellano vs. Diaz, L-
17441, July 31, 1963; Aballe vs. Santiago, L-16307, April 30, 1963; G.S.I.S.
vs. Cloribel, L-22236, June 22, 1965). A converso, a party who resorts to
the Court of Appeals, and submits his case for decision there, is barred
from contending later that his claim was beyond the jurisdiction of the
aforesaid Court. The reason is that a contrary rule would encourage
the undesirable practice of appellants' submitting their cases for
decision to either court in expectation of favorable judgment, but with
intent of attacking its jurisdiction should the decision be unfavorable
(Tyson Tan, et al. vs. Filipinas Compañia de Seguros) et al., L-10096,
Res. on Motion to Reconsider, March 23, 1966). Consequently, we are
limited in this appeal to the issues of law raised in the appellant's brief.
Taking the aforesaid rules into account, it can be seen that the only
reviewable issues in this appeal are reduced to two:
1) Whether or not the collision of appellant's barge with the
supports or piers of the Nagtahan bridge was in law caused by
fortuitous event or force majeure, and
2) Whether or not it was error for the Court to have permitted the
plaintiff-appellee to introduce additional evidence of damages
after said party had rested its case.
As to the first question, considering that the Nagtahan bridge was an
immovable and stationary object and uncontrovertedly provided with
adequate openings for the passage of water craft, including barges like
of appellant's, it is undeniable that the unusual event that the barge,
exclusively controlled by appellant, rammed the bridge supports raises
a presumption of negligence on the part of appellant or its employees
manning the barge or the tugs that towed it. For in the ordinary course
of events, such a thing does not happen if proper care is used. In Anglo
American Jurisprudence, the inference arises by what is known as the
"res ipsa loquitur" rule (Scott vs. London Docks Co., 2 H & C 596; San
Juan Light & Transit Co. vs. Requena, 224 U.S. 89, 56 L. Ed., 680;
Whitwell vs. Wolf, 127 Minn. 529, 149 N.W. 299; Bryne vs. Great Atlantic
& Pacific Tea Co., 269 Mass. 130; 168 N.E. 540; Gribsby vs. Smith, 146
S.W. 2d 719).
The appellant strongly stresses the precautions taken by it on the day
in question: that it assigned two of its most powerful tugboats to tow
down river its barge L-1892; that it assigned to the task the more
competent and experienced among its patrons, had the towlines,
engines and equipment double-checked and inspected; that it
instructed its patrons to take extra precautions; and concludes that it
had done all it was called to do, and that the accident, therefore,
should be held due to force majeure or fortuitous event.
These very precautions, however, completely destroy the appellant's
defense. For caso fortuito or force majeure(which in law are identical in
so far as they exempt an obligor from liability)2 by definition, are
extraordinary events not foreseeable or avoidable, "events that could
not be foreseen, or which, though foreseen, were inevitable" (Art.
1174, Civ. Code of the Philippines). It is, therefore, not enough that the
event should not have been foreseen or anticipated, as is commonly
believed, but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to foresee
the same: "un hecho no constituye caso fortuito por la sola
circunstancia de que su existencia haga mas dificil o mas onerosa la
accion diligente del presento ofensor" (Peirano Facio, Responsibilidad
Extra-contractual, p. 465; Mazeaud Trait de la Responsibilite Civil, Vol. 2,
sec. 1569). The very measures adopted by appellant prove that the
possibility of danger was not only foreseeable, but actually foreseen,
and was not caso fortuito.
Otherwise stated, the appellant, Luzon Stevedoring Corporation,
knowing and appreciating the perils posed by the swollen stream and
its swift current, voluntarily entered into a situation involving obvious
danger; it therefore assured the risk, and can not shed responsibility
merely because the precautions it adopted turned out to be
insufficient. Hence, the lower Court committed no error in holding it
negligent in not suspending operations and in holding it liable for the
damages caused.
It avails the appellant naught to argue that the dolphins, like the
bridge, were improperly located. Even if true, these circumstances
would merely emphasize the need of even higher degree of care on
appellant's part in the situation involved in the present case. The
appellant, whose barges and tugs travel up and down the river
everyday, could not safely ignore the danger posed by these allegedly
improper constructions that had been erected, and in place, for years.
On the second point: appellant charges the lower court with having
abused its discretion in the admission of plaintiff's additional evidence
after the latter had rested its case. There is an insinuation that the
delay was deliberate to enable the manipulation of evidence to
prejudice defendant-appellant.
We find no merit in the contention. Whether or not further evidence
will be allowed after a party offering the evidence has rested his case,
lies within the sound discretion of the trial Judge, and this discretion
will not be reviewed except in clear case of abuse.3
In the present case, no abuse of that discretion is shown. What was
allowed to be introduced, after plaintiff had rested its evidence in
chief, were vouchers and papers to support an item of P1,558.00
allegedly spent for the reinforcement of the panel of the bailey bridge,
and which item already appeared in Exhibit GG. Appellant, in fact, has
no reason to charge the trial court of being unfair, because it was also
able to secure, upon written motion, a similar order dated November
24, 1962, allowing reception of additional evidence for the said
defendant-appellant.4
WHEREFORE, finding no error in the decision of the lower Court
appealed from, the same is hereby affirmed. Costs against the
defendant-appellant.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles
and Fernando, JJ., concur.
Bengzon, J.P. J., on leave, took no part.
Footnotes
1
The lead-tugboat "Bangus" was pulling the barge, while the
tugboat "Barbero" was holding or restraining it at the back.
2
Lasam vs. Smith, 45 Phil. 661.
3
Lopez vs. Liboro, 81 Phil. 429.
4
p. 89, Record on Appeal.
G.R. No. L-6648 July 25, 1955
VICTORIAS PLANTERS ASSOCIATION, INC., NORTH NEGROS PLANTERS
ASSOCIATION, INC., FERNANDO GONZAGA, JOSE GASTON and CESAR
L. LOPEZ, on their own behalf and on behalf of other sugar cane
planters in Manapla, Cadiz and Victorias Districts, petitioners-
appellees,
vs.
VICTORIAS MILLING CO., INC., respondent-appellant.
Ross, Selph, Carrascoso and Janda for appellant.
Tañada, Pelaez and Teehankee for appellees.
PADILLA, J.:
This is an action for declaratory judgment under Rule 66. The relief
prayed for calls for an interpretation of contracts entered into by and
between the sugar cane planters in the districts of Manapla, Cadiz and
Victorias, Occidental Negros, and the Victorias Milling Company, Inc.
After issues had been joined the parties submitted the case for
judgment upon the testimony of Jesus Jose Ossorio and the following
stipulation of facts:
1. That petitioners Victorias Planters Association, Inc. and North
Negros Planters Association, Inc. are non-stock corporations duly
established and existing under and by virtue of the laws of the
Philippines, with main offices at Victorias, Negros Occidental, and
Manapla, Negros Occidental, respectively, and were organized by,
and are composed of, sugar cane planters in the districts of
Victorias, Manapla and Cadiz, respectively, having been
established principally as the representative entities of the
numerous sugar cane planters in said districts whose sugar cane
productions are milled by the respondent corporation, with the
main object of safeguarding their interests and of taking up with
the latter problems and questions which from time to time, may
come up between the said respondent corporation the said sugar
cane planters; the other petitioners are Filipinos, of legal age, and
together with numerous other sugar cane planters who own
sugar cane producing properties at Victorias, Manapla, and Cadiz
Districts, Negros Occidental, are bona fide officials and members
of either one of the two petitioner associations; that petitioner
Fernando Gonzaga is a resident of Victorias, Negros Occidental,
petitioner Jose Gaston is a resident of Victorias, Negros
Occidental, and petitioner Cesar L. Lopez is a resident of Bacolod
City, Negros Occidental; and that said petitioners bring this action
for the benefit and on behalf of all their fellow sugar cane
planters, owners of sugar cane producing lands in the said
districts of Victorias, Manapla, and Cadiz, whose sugar cane
productions are milled by respondent corporation, and who are so
numerous that it would be impractical to include them all as
parties herein;
2. That respondent Victorias Milling Co., Inc. is a corporation
likewise duly organized and established under and by virtue of the
laws of the Philippines, with main offices at Ayala Building Manila,
where it may be served with summons;
3. That at various dates, from the year 1917 to 1934, the sugar cane
planters pertaining to the districts of Manapla and Cadiz, Negros
Occidental, executed identical milling contracts, setting forth the
terms and conditions under which the sugar central "North
Negros Sugar Co. Inc." would mill the sugar produced by the sugar
cane planters of the Manapla and Cadiz districts;
A copy of the standard form of said milling contracts with North
Negros Sugar Co., Inc. is hereto attached and made an integral
part hereof as Annex "A.
As may be seen from the said standard form of milling contract,
Annex "A," the sugar cane planters of Manapla and Cadiz, Negros
Occidental had executed on November 17, 1916 with Miguel J.
Ossorio, a contract entitled "Contrato de la Central Azucarrera de
300 Toneladas," whereby said Miguel J. Ossorio was given a
period up to December 31, 1916 within which to make a study of
and decide whether he would construct a sugar central or mill
with a capacity of milling 300 tons of sugar cane every 24 hours
and setting forth the mutual obligations and undertakings of such
central and the planters and the terms and conditions under
which the sugar cane produced by said sugar can planters would
be milled in the event of the construction of such sugar central by
said Miguel J. Ossorio. Such central was in fact constructed by said
Miguel J. Ossorio in Manapla, Negros Occidental, through the
North Negros Sugar Co., Inc., where after the standard form of
milling contracts (Annex "A") were executed, as above stated.
The parties cannot stipulate as to the milling contracts executed
by the planters by Victorias, Negros Occidental, other than as
follows; a number of them executed such milling contracts with
the North Negros Sugar Co., Inc., as per the standard forms hereto
attached and made an integral part as Annexes "B" and "B-1,"
while a number of them executed milling contracts with the
Victorias Milling Co., Inc., which was likewise organized by Miguel
J. Ossorio and which had constructed another Central at Victorias,
Negros Occidental, as per the standard form hereto attached and
made an integral part hereof as Annex "C".
4. The North Negros Sugar Co., Inc. had its first molienda or milling
during the 1918-1919 crop year, and the Victorias Milling Co., had
its first molienda or milling during the 1921-1922 crop year.
Subsequent moliendas or millings took place every successive crop
year thereafter, except the 6-year period, comprising 4 years of
the last World War II and 2 years of post-war reconstruction of
respondent's central at Victorias, Negros Occidental.
5. That after the liberation, the North Negros Sugar Co., Inc. did
not reconstruct its destroyed central at Manapla, Negros
Occidental, and in 1946, it advised the North Negros Planters
Association, Inc. that it had made arrangements with the
respondent Victorias Milling Co., Inc. for said respondent
corporation to mill the sugar cane produced by the planters of
Manapla and Cadiz holding milling contracts with it. Thus, after
the war, all the sugar cane produced by the planters of petitioner
associations, in Manapla, Cadiz, as well as in Victorias, who held
milling contracts, were milled in only one central, that of the
respondent corporation at Victorias;
6. Beginning with the year 1948, and in the following years, when
the planters-members of the North Negros Planters Association,
Inc. considered that the stipulated 30-year period of their milling
contracts executed in the year 1918 had already expired and
terminated in the crop year 1947-1948, and the planters-members
of the Victorias Planters Association, Inc. likewise considered the
stipulated 30-year period of their milling contracts, as having
likewise expired and terminated in the crop year 1948-1949, under
the pertinent provisions of the standard milling contract (Annex
"A") on the duration thereof, which provided in Par. 21 thereof as
follows:
(a) Que entregaran a la Central de la `North Negros Sugar Co., Inc.'
o a la que se construya en Victorias por Don Miguel J. Ossorio o
sus cesionarios por espacio de treinta (30) años desde la
primera molienda, la caña que produzcan sus respectivas
haciendas, obligandose ademas a sembrar anualmente con
cañadulce por lo menos en tres quintas partes de su extension
total apropiado para caña, incluyendo en esta denominacion tanto
la siembra con puntas nuevas como el cultivo del retoño o cala-
anan y sujetando la siembra a las epocas convenientes designadas
por el comite de hacenderos a fin de poder proporcionar caña a la
Central de conformidad con las clausulas 17 y 18 de esta escritura.
xxx xxx xxx
(i) Los hacenderos' imponen sobre sus haciendas mencionadas y
citadas en esta escritura servidumbres voluntarias a favor de Don
Miguel J. Ossorio de sembrar caña por lo menos en tres quintas
partes (3/5) de su extension superficial y entregar la caña que
produzcan a Don Miguel J. Ossorio, de acuerdo con este contrato,
por espacio de treinta (30) años, a contar un (1) año desde la fecha
de la primera molienda. repeated representation were made with
respondent corporation for negotiations regarding the execution
of new milling contracts which would take into consideration the
charged circumstances presently prevailing in the sugar industry
as compared with those prevailing over 30 years ago and would
provide for an increased participation in the milled sugar for the
benefit of the planters and their workers.
7. That notwithstanding these repeated representations made by
the herein petitioners with the respondent corporation for the
negotiation and execution of new milling contracts, the herein
respondent has refused and still refuses to accede to the same,
contending that under the provisions of the mining contract
(Annex "A".) "It is the view of the majority of the stockholder-
investors, that our contracts with the planters call for 30 years of
milling — not 30 years in time" and that "as there was no milling
 during 4 years of the recent war and two years of reconstruction,
when these six years are added on to the earliest of our contracts
in Manapla, the contracts by this view terminate in the autumn of
1952," and the "the contracts for the Victorias Planters would
terminate in 1957, and still later for those in the Cadiz districts,"
and that "apart from the contractual agreements, the Company
believes these war and reconstruction years accrue to it in equity.
The trial court rendered judgment the dispositive part of which is —
Wherefore, the Court renders judgment in favor of the petitioners
and against the respondent and declares that the milling contracts
executed between the sugar cane planters of Victorias, Manapla
and Cadiz, Negros Occidental, and the respondent corporation or
its predecessors-in-interest, the North Negros Sugar Co., Inc.,
expired and terminated upon the lapse of the therein stipulated
30-year period, and that respondent corporation is not entitled to
claim any extension of or addition to the said 30-year term or
period of said milling contracts by virtue of an equivalent to 6
years of the last war and reconstruction of its central, during
which there was no planting and/or milling.
From this judgment the respondent corporation has appealed.
The appellant contends that the term stipulated in the contracts is
thirty milling years and not thirty calendar years and postulates that
the planters fulfill their obligation — the six installments of their
indebtedness--which they failed to perform during the six milling years
from 1941-42 to 1946-47. The reason the planters failed to deliver the
sugar cane was the war or a fortuitious event. The appellant ceased to
run its mill due to the same cause.
Fortuitious event relieves the obligor from fulfilling a contractual
obligation.1 The fact that the contracts make reference to "first milling"
does not make the period of thirty years one of thirty milling years. The
term "first milling" used in the contracts under consideration was for
the purpose of reckoning the thirty-year period stipulated therein.
Even if the thirty-year period provided for in the contracts be
construed as milling years, the deduction or extension of six years
would not be justified. At most on the last year of the thirty-year
period stipulated in the contracts the delivery of sugar cane could be
extended up to a time when all the amount of sugar cane raised and
harvested should have been delivered to the appellant's mill as agreed
upon. The seventh paragraph of Annex "C", not found in the earlier
contracts (Annexes "A", "B", and "B-1"), quoted by the appellant in its
brief, where the parties stipulated that in the event of flood, typhoon,
earthquake, or other force majeure, war, insurrection, civil commotion,
organized strike, etc., the contract shall be deemed suspended during
said period, does not mean that the happening of any of those events
stops the running of the period agreed upon. It only relieves the
parties from the fulfillment of their respective obligations during that
time — the planters from delivering sugar cane and the central from
milling it. In order that the central, the herein appellant, may be
entitled to demand from the other parties the fulfillment of their part
in the contracts, the latter must have been able to perform it but failed
or refused to do so and not when they were prevented by force
majeure such as war. To require the planters to deliver the sugar cane
which they failed to deliver during the four years of the Japanese
occupation and the two years after liberation when the mill was being
rebuilt is to demand from the obligors the fulfillment of an obligation
which was impossible of performance at the time it became due. Nemo
tenetur ad impossibilia. The obligee not being entitled to demand from
the obligors the performance of the latters' part of the contracts under
those circumstances cannot later on demand its fulfillment. The
performance of what the law has written off cannot be demanded and
required. The prayer that the plaintiffs be compelled to deliver sugar
cane to the appellant for six more years to make up for what they
failed to deliver during those trying years, the fulfillment of which was
impossible, if granted, would in effect be an extension of the term of
the contracts entered into by and between the parties.
In accord with the rule laid down in the case of Lacson vs. Diaz, 47 Off.
Gaz., Supp. No. 12, p. 337, where despite the fact that the lease
contract stipulated seven sugar crops and not seven crop years as the
term thereof, we held that such stipulation contemplated seven
consecutive agricultural years and affirmed the judgment which
declared that the leasee was not entitled to an extension of the term
of the lease for the number of years the country was occupied by the
Japanese Army during which no sugar cane was planted2 we are of the
opinion and so hold that the thirty-year period stipulated in the
contracts expired on the thirtieth agricultural year. The period of six
years — four during the Japanese occupation when the appellant did
not operate its mill and the last two during which the appellant
reconstructed its mill — cannot be deducted from the thirty-year
period stipulated in the contracts.
The judgment appealed from is affirmed, with costs against the
appellant.
Bengzon, Acting C. J., Montemayor, Reyes, A., Jugo, Bautista Angelo,
Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.

Footnotes
1
Article 1105, old Civil Code; article 1174, new Civil Code.
2
Cf. Lo Ching vs. Court of Appeals, 46 Off. Gaz., Supp. No. 1, p.
399, 81 Phil., 601 and American Far Eastern School of
Aviation vs. Ayala y Cia., 89 Phil., 292.

[G.R. No. 4190. December 17, 1908. ]

IN THE MATTER OF THE ESTATE OF JOSE MA. CEBALLOS, deceased. —

ANGEL ORTIZ, Appellant.

Chicote & Miranda, and Rafael de la Sierra, for Appellant.

Manly & McMahon, for Appellee.

SYLLABUS
1. ESTATES; SALE; REDEMPTION; PARTIES TO ESTATE PROCEEDINGS.
— Upon the dissolution of a partnership, two haciendas were awarded
to one of the partners, now deceased. His widow had an interest in the
property, which was sold by the sheriff under an execution issued
upon a judgment against her in favor of the purchaser, the
present Appellant. The certificate purported to convey the land and all
rights and interests whatsoever of the widow. Appellant claims that he
is consequently entitled to appear as owner in the accounting and in all
other proceedings relative to the estate and to exclude the widow
from all participation therein: Held, That, as to the real estate, at least,
the widow retained the right of redemption which gave a standing in
the estate proceedings; that, for the statutory period, she was entitled
to remain in any possession she may have had of the realty sold, and
might defeat the sale by redemption at any time during such period,
and that the existence of the right of redemption was sufficient to
prevent an entire subrogation.

2. PLEADING AND PRACTICE; MOOT CASES; JURISDICTION. — It is a

rule of almost universal application that courts of justice, constituted
to pass upon substantial rights, will not consider questions in which no
actual interests are involved; they decline jurisdiction of moot cases.

DECISION

TRACEY, J. :

This is an appeal from two orders of the Court of First Instance of

Albay, both dated April 8, 1907, in the matter of the testamentary
estate of Don Jose Maria Ceballos, deceased.

After the dissolution of the partnership of Sanchez-Ceballos, the heirs

of Sanchez were awarded the haciendas of Bonga and Basag in Ligao,
in the Province of Albay, and the heirs of Ceballos the haciendas of La
Trinidad and Pilar in Sorsogon. Doña Matilde Aramburu, as widow of
the deceased partner, Don Jose Maria Ceballos y Muñoz de Bustillo,
had an interest in the property assigned to his estate, which was sold
by the deputy sheriff of Albay under an execution issued on a
judgment against her in favor of Don Angel Ortiz and bought in by him.
The sheriff’s certificate purported to convey not only the real estate
but all the shares, action, or interest of any kind which Doña Matilde
might have in any of the goods or actions forming part of the estate of
her deceased husband, including; usufructuary and conjugal rights. The
purchaser claims that by virtue of this sale he is entitled not only to
appear as the owner of this property in the accounting and in other
proceedings relating to the estate, but also to exclude the widow from
further participation therein. She had appealed from the order
confirming the partition and the first order of April 8, 1907, made by
Judge Gilbert, denied a motion of Don Angel Ortiz that her appeal be
disallowed; that she be declared to have no interest in the pending
proceedings, and that Don Angel Ortiz be adjudged subrogated to all
her rights in the estate.

The second order of the same date permitted the appeal of Doña
Matilde.

The appellant assigned three errors corresponding with the prayer of

his motion:chanrob1es virtual 1aw library

First. That the judge erred in allowing the appeal of the widow from
the order of partition, but it appears in the case that that appeal has
since been abandoned and in concluding their presentation of this
point the appellant’s counsel say:jgc:chanrobles.com.ph

"Now, however, the question referring to this appeal allowed Doña

Matilde has lost its importance. Inasmuch as she has not perfected it,
has abandoned it, and the court dismissed it in the February term,
there remains the question of law involved requiring a determination
by the Supreme Court in order that it may serve as a guide in similar
cases."cralaw virtua1aw library

It is a rule of almost universal application that courts of justice

constituted to pass upon substantial rights will not consider questions
in which no actual interests are involved; they decline jurisdiction of
moot cases.

Second. That the judge erred in not declaring that Doña Matilde
Aramburu had no further interest in the estate.
Passing over the obvious doubts as to the regularity of the sheriff ’s
sale and the procedure thereat, it is plain that in the real estate at least
the widow retained a right of redemption from the execution sale
which gave her a standing in the estate proceedings. She was entitled
to remain in any possession which she may have had of the real estate
sold, for the statutory term of twelve months, and she might at any
time defeat the sale by a proper redemption within that period. (Secs.
463 and 464, Code of Civil Procedure; De la Rosa v. Santos, 10 Phil.
Rep., 148.) Moreover, even before the Code of Civil Procedure the
creditor was not clothed with such rights of his debtor as were
inherent in the person (art. 1111, Civil Code), and in this case her strictly
personal rights would have alone entitled her to a representation in
the estate proceedings.

Third. That the court erred in not declaring the purchaser subrogated
to the rights of Doña Matilde Aramburu in the estate.

Even if it were proper in proceedings for the settlement of an estate to

make such a declaration in favor of a third person, the existence of the
right of redemption heretofore noticed would suffice to prevent an
entire subrogation.

In none of the respects alleged did the Court of First Instance commit
error and its order of April 8, denying the motion of Don Angel Ortiz is
hereby affirmed, and his appeal therefrom is dismissed, with the costs
of this instance. So ordered.

Arellano, C.J., Torres, Mapa, Johnson and Willard, JJ., concur.

Carson, J., did not sit in this case.

FRANCISCO BASTIDA and JUAN YSMAEL & CO., INC., plaintiffs-
appellees, vs. DY BUNCIO & CO., INC., defendant-appellant.
G.R. No. L-5145 | 1953-05-27
D E C I S I O N

BAUTISTA ANGELO, J.:

This is an appeal from a decision of the Court of First Instance of Manila

ordering defendant to execute a deed of sale covering its oil and lard
factory located in Makati, Rizal, together with the lot but excluding the
machinery for manufacturing paper, in favor of plaintiff Juan Ysmael &
Co., Inc., which in turn is ordered to pay defendant the sum of
P260,000 as purchase price, and the sum of P4,503.10 as rental for
September, 1950, said decision further ordering defendant to pay the
plaintiffs the sum of P10,000 as attorney's fees and the costs of action.

On February 20, 1948, Francisco Bastida and Juan Ysmael & Co., Inc.,
hereafter to be designated as Ysmael, entered into a partnership
agreement for the operation of a lard and oil factory under the name
of "Washington Lard and Oil Factory", with the former as an industrial
partner and the latter as a capitalist partner.

While Bastida and Ysmael were thus engaged in the business of oil and
lard manufacturing, on August 10, 1948, Dy Buncio & Co., Inc., whose
president is Guillermo Dy Buncio, both of whom to be hereinafter
known as Dy Buncio, authorized Bastida as a broker to offer for sale its
own oil and lard factory in Makati, Rizal, for P300,000, of which
P100,000 would be paid on the signing of the deed of sale and the
balance of P200,000 in 12 monthly installments with interest at 8 per
cent a year. Said authority would expire 30 days from August 10, 1948.

Bastida offered the factory to his partner Ysmael who, while willing to
make the purchase, found the price of P300,000 very high, but
expressed a desire to be given some time to inspect the factory and
determine whether it was in good working condition.
Bastida transmitted to Dy Buncio the reaction of Ysmael to his offer,
and suggested that the latter be given more time to consider the offer.
Dy Buncio agreed and to this effect he leased the factory for two years
to Bastida and gave him an opinion to buy it within the same period at
the reduced price of P260,000. The rental of the factory was fixed at
P3,000 a month. Explaining why the option to buy was placed in his
name, Bastida said that Dy Buncio had previously prepared a letter
addressed to Hemady, manager of Ysmael & Co., Inc., giving him the
option to buy said factory, and granting Bastida a commission of 3 per
cent in the transaction, but Bastida suggested that the option be
placed in his name to give him a chance to earn extra money in the
transaction.

Pursuant to the lease with option to buy, Bastida and Ysmael took
possession of the lard and oil factory on September 28, 1948 and
operated the business under the name of "Washington Lard and Oil
Factory". This arrangement was well known to Dy Buncio. In fact,
Ysmael paid to Dy Buncio all the rentals beginning October 15, 1948,
and a current account was opened between Dy Buncio and Ysmael
whereby the former purchased lard and oil on credit from the factory
and sometimes Dy Buncio's debt was set off against the rentals on the
factory leased.

Although the factory was occupied by Bastida and Ysmael on

September 28, 1948, it actually commenced to function on October 15,
1948. The reason for the delay in the operation was that the machinery
had to be repaired and cleaned. New motors had to be installed.

On December 2, 1948, an agreement was entered into between Ysmael

and Bastida whereby the latter assigned to the former his option to
buy the factory (Exhibit G). This assignment was communicated in
writing to Dy Buncio on August 29, 1950 wherein Bastida asked to be
furnished with the necessary data for the preparation of the deed of
sale, informing him at the same time that he had assigned his option to
Hemady as early as December, 1948. By this time, Ysmael had already
invested more than P300,000 worth of improvements on the factory
which explains his interest in buying it.

Dy Buncio wrote to Bastida on the following day, August 30,

expressing his objection to the transfer of the option to a third person.
Bastida countered with a letter to Dy Buncio dated September 1, 1950
wherein Bastida said he would exercise the option himself. Bastida had
an understanding with Hemady that the latter would supply the money
for the purchase of the factory and then Bastida would transfer the
factory to Ysmael.

Instead of answering the letter, Dy Buncio referred it to his lawyers

who wrote Bastida on September 20, 1950 telling him that, before
discussing his offer to exercise the option, he should first pay the
rental for the month of September. Bastida tendered to Dy Buncio the
rental for said month, but Dy Buncio refused to accept the same
alleging that Bastida owed him more and sent him a statement of
account, dated September 8, 1950, for P4,503.10 which, besides the
rent, included other items and charges. Bastida found the statement
excessive by P100, but in order to expedite the execution of the sale he
tendered to Dy Buncio the sum demanded in full settlement of the
account. Dy Buncio's lawyers issued a receipt which was objected to by
Bastida's counsel because of a statement included therein to the effect
that the receipt was to be without prejudice to the rescission of the
lease agreement. As a result the payment was not carried out. On
September 25, 1950, Dy Buncio's counsel wrote a letter to Bastida
announcing the rescission of the lease due to the alleged failure to pay
the rental for September, 1950 and asking him to return the leased
property to Dy Buncio.

Upon the foregoing facts, the court a quo rendered decision holding in
substance that the option given by Dy Buncio to Bastida to buy the oil
and lard factory in question is valid and binding, that it was validly
assigned to Ysmael, who gave notice of his intention to exercise the
option within the two-year period agreed upon, and that,
consequently, defendant is bound to respect it and to execute the
corresponding deed of sale as called for in the option. From this
decision defendant has appealed.

The option which was given by defendant to Bastida to buy the factory
in question appears in the following letter of defendant dated
September 28, 1950:
"28 de septiembre de 1948

"Don FRANCISCO BASTIDA

1988 Calle Roberts
Ciudad de Rizal.

Muy señor nuestro:

La presente es para confirmar el convenio hecho eon Ud. en arrendarle

nuestra fabrica de manteca situada en San Pedro Makati, por un perá-
odo de dos años a partir desde la fecha en que la fabrica comience a
funcionar.

Ud. nos pagara un alquiler mensual de P3,000. Durante la vigencia de

este contrato le damos a Ud. la opcion de comprar la mencionada
fabrica con todas sus maquinarias por la cantidad de P260,000,
excluyendo las maquinarias para papel.

De Uds. atto. y s.s.,

(Fdo.) G. DY BUNCIO
Presidente"

It appears from the evidence that the option to buy the factory for the
sum of P260,000 was given to Bastida, and when the latter assigned
his right to Ysmael and the latter gave notice of his desire to exercise
the option, Dy Buncio changed his mind and refused to perform the
sale alleging as his reason the fact that the option was given to Bastida
and not to any other person. Defendant, however, now contends that
the option he has given has no valid effect on Bastida because, being a
Spanish citizen, he has no right to buy the factory under our
Constitution.

This contention cannot be sustained for several reasons. In the first

place, there is enough evidence in the record to show that as far back
as August l0, 1958, Dy Buncio was very much desirous of disposing of
his factory so much so that he gave Bastida a written authority to sell it
as a broker to any interested person for the sum of P300,000. Dy
Buncio had known Bastida for many years and knew well that Bastida
did not possess the necessary financial means to buy the factory or
operate it himself. Dy Buncio also knew that at that time Bastida and
Ysmael had entered into a partnership agreement for the operation of
a lard and oil factory under the name of "Washington Lard and Oil
Factory" with the Former as industrial partner and the latter as
capitalist partner, and when he gave Bastida the authority to sell his
factory he, Dy Buncio, was toying with the idea that if the matter be
brought to the knowledge of Ysmael the latter might be interested in
buying it. In fact, such offer was made to Ysmael who, while he evinced
interest in the property, he considered the price very high, and to give
him an opportunity to see the factory and determine its worth the idea
of leasing it was born. And though the original plan was to place the
lease in the name of Ysmael, because it was Ysmael who had the
means to buy the factory, the plan was later changed upon the
suggestion of Bastida who asked that the transaction be placed in his
name so that he may have a chance to earn extra money in the form of
overprice. It therefore appears that while the letter containing the
option was written in the name of Bastida, that was done merely for
his accommodation, but in effect it was intended for Ysmael.

In the second place, in the supposition that the lease with option to
buy was in truth and in fact given to Bastida, we believe that, to
dispute it now on the technical ground that Bastida, being a Spanish
citizen, cannot be given that option, is most unfair considering the time
and effort he has spent in the transaction. There is no doubt that this
objection is but a mere afterthought motivated by Dy Buncio's desire
to retain the factory considering its future and the handsome
improvements made thereon by Ysmael. This Dy Buncio cannot do.
There are certain moral and legal considerations that stand on his way.
He is barred from doing so not only by the rule of equity which requires
that whoever goes to court must do so with clean hands, but by the
well-known rule of law that he who has capacity to contract may not
invoke the incapacity of the party with whom he contracted as a
defense against performance (Articles 1397, New Civil Code; Article
1302, Spanish Civil Code).

But Dy Buncio contends that the assignment made by Bastida to

Ysmael is ineffective because under the contract he could not make
the assignment without his consent. And when he did it, Dy Buncio
contends, he withheld his approval. This, according to him, renders the
assignment ineffective.

We disagree with this contention. The contract, Exhibit C, does not

contain any stipulation forbidding Bastida from assigning the option or
requiring Dy Buncio's consent for the assignment. Nor was the option
given to Bastida in consideration of his personal qualifications. On the
contrary, there is enough evidence to show that the intention was just
the opposite. It appears that, at the time the authority was given, the
manifest purpose of Dy Buncio was to have Bastida offer the property
for sale to Ysmael. The intention was not to sell it exclusively to
Bastida, as now claimed by Dy Buncio, so much so that he previously
gave Bastida an authority to sell the property for P300,000 to any
interested person. There is therefore no impediment on the part of
Bastida to transfer his right under the option, and this he can do either
under the contract or under the law. Thus, "All rights acquired by
virtue of an obligation are transmissible in accordance with law if the
contrary is not stipulated" (Article 1112, Old Civil Code).

As to whether Bastida actually made the assignment of his option to

Ysmael which is now disputed by Dy Buncio, we find correct the
following findings of the lower court:

"The Court likewise made no merit in the contention of the defendant

that there was in fact no assignment of the option nor any exercise
thereof by plaintiff Ysmael. Exhibit G indubitably proves the
assignment of the option even before December 2, 1948. Ysmael,
through Bastida, its industrial partner, served notice upon defendant
on August 29, 1950 that it would exercise the option, (Exhibit H). And,
as correctly contended by plaintiffs, the filing of the instant action for
specific performance on September 23, 1950, or before the expiration
of the term of the option (which date of expiration is September 28,
1950, according to the defendant and October 15, 1950, according to
plaintiffs) is itself an exercise of the option.

"Defendant in its letter to Bastida dated August 30, 1950 sought to

cancel the option because the latter allegedly had not complied with
the terms of the agreement between them. (Exhibits I, M & 5).
Presumably, the agreement referred to was the alleged
intransferability of the option. As already noted, the Court does not
believe that there was an agreement that the option should not be
transferred. All the surrounding circumstances, on the contrary,
indicate that the option was in fact to be exercised by Ysmael.

"The Court cannot believe that Ysmael would have invested more than
P300,000 if it had not believed that it was entitled to exercise the
option given to its industrial partner Bastida, and if had known that it
would be required to remove all the improvements from the factory so
soon after they were installed.

"The explanation for defendant's conduct is not hard to find. In the

beginning it wanted to get rid of the factory because it was not
inclined to operate the same. But later, it realized that the factory
would become a profitable business, so it changed its attitude and
sought a way to escape from its obligation under the irrevocable
option given to Bastida. Defendant is estopped from assailing the
validity of the option or its assignment to Ysmael." (pp. 45-47, Record
on Appeal).

Defendant makes the final plea that, should the plaintiff be declared
entitled to exercise the option given to Bastida by defendant to
purchase the land in question, it be ordered that, if plaintiff should fail
to pay the purchase price and the rental of P4,503.10, the plaintiff
should return to defendant the property and pay defendant a monthly
rental until the land should have been returned to the defendant, in
addition to a reasonable sum for attorney's fees.

This point was not raised in the lower court. It is raised for the first
time in this appeal. To accede to the plea now would be prejudging the
failure of plaintiff to exercise the option as declared in the decision.
Since this is an action for specific performance, it is to be presumed
that if the relief prayed for is granted, plaintiff will comply with the
decision of the court. To take action on defendant's plea now would be
premature.

Wherefore, the decision appealed from is hereby affirmed, with costs

against the appellant.
Paras, C.J., Feria, Pablo, Bengzon, Tuason, Montemayor, Reyes, Jugo
and Labrador, JJ., concur.