i.

HUMAN RELATIONS

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. Nos. L-66870-72 June 29, 1985

AGAPITO MAGBANUA, INENIAS MARTIZANO, CARLITO HERRERA, SR., PAQUITO LOPEZ, AND FRANCISCO HERRERA, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT (SECOND SPECIAL CASES DIVISION), EDUARDO, BUTCH, DIEGO AND NENA All Surnamed
PEREZ, respondents.

Romulo A. Deles for petitioner.

Jose Valmayor for respondents.

ABAD SANTOS, J.:

A joint decision was rendered in CAR Case Nos. 827, 828 and 829 of the defunct Court of Agrarian Relations stationed in San Carlos
City (Negros Occidental) because the six plaintiffs who are the petitioners at bar all alleged that they are share tenants of the
defendants; that the defendants diverted the free flow of water from their farm lots which caused portions of their landholdings to
dry up to their great damage and prejudice: and that they were told by the defendants' overseer to vacate their respective areas for
they could not plant palay any longer due to lack of water. They prayed that they be declared as leasehold tenants and that the
defendants be ordered to pay attorney's fees and different kinds of damages.

The trial court rendered judgment in favor of the plaintiffs as follows:

WHEREFORE, coherent with the foregoing, this Court, in judgment, hereby:

1) Declares all the plaintiffs in the above-entitled cases to be maintained as agricultural lessees in peaceful
cultivation in their respective landholdings;

2) Prohibits defendants from closing and/or disrupting the free flow of water supplying plaintiffs' landholdings;

3) Declares the Writ of Preliminary Injunction issued on February 23, 1982 to be permanent;

4) Orders plaintiffs to seek the assistance of the Ministry of Agrarian Reforms in the fixing of their lease rentals;

5) Orders the defendants to pay all the six plaintiffs in the above-entitled cases individually moral and exemplary
damages in the sum of TEN THOUSAND (P10,000.00) PESOS, each;

6) Orders the defendants to pay the attorney's fees in the amount of P5,000.00; and

7) Dismiss all other claims and counterclaims of the parties for lack of merit (Rollo, pp. 28-29.)

The defendants appealed to the Intermediate Appellate Court which in turn rendered the following judgment:

WHEREFORE, with the modification above indicated, deleting the award of moral and exemplary damages and
attorney's fees, the decision appealed from is hereby AFFIRMED in all other respects, with costs against appellants.
(Rollo, pp. 37-38.)
In this petition, the prayer is for the reinstatement of the moral and exemplary damages and the attorney's fees which had been
awarded by the trial court on the ground that the Intermediate Appellate Court committed a grave abuse of discretion in eliminating
them.

In awarding damages and attorney's fees, the trial court said:

This Court has likewise noted the manifestation submitted by plaintiffs on June 3, 1982 wherein they have attached
photographs of their dried-up landholdings and wilted palay crops. The allegations in this pleading and the
accompanying pictures were never rebutted by the defendants.

In view of this circumstances, this Court holds the opinion that between the period of the inspection by the PC
Team on February 24, 1982 and June 13, 1982 when plaintiffs' manifestation was filed, there has been complete
closure of water supplying plaintiffs' landholdings which resulted to the drying up of the same that greatly
hampered the healthy growth of the palay crop. This Court does not believe that the disruption of the water supply
which led to the very poor harvest is due to the fault/negligence of the plaintiffs.

Under the law, the landowner has an obligation to keep the tenant in the peaceful and continuous cultivation of
his landholding. A disturbance of possession, such as the act complained of, is violative of the law.

The Honorable Court of Appeals, thru Associate Justice Porfirio V. Sison, in June 23, 1982, promulgated a decision
in the case of Buenaventura Garcia, plaintiff-appellant, vs. Eduardo Jalandoni, Salud Garcia and Chester Garcia,
defendant-appellees, which ruling is relevant to the above-entitled cases when the said Honorable Court state:

The law forbids the use of tenants like balls on a pool table, whacked and volleyed and pocketed
at the whim and caprice of the player, or their positions placed on the auction block like slaves to
be sold to the highest bidder. Such a calamitous situation erode wholehearted dedication to the
soil; it is destructive of the system itself, as such an attitude takes away the freedom the
emancipated tenants won under the aegis of the New Republic.

The plaintiff-appellant is entitled to moral damages in the sum of P5,000.00 and exemplary
damages in the further sum of P5,000.00 to be paid by defendant Eduardo Jalandoni. Let this be
a warning to those who flout the lofty purpose of the agrarian reform program.

Plaintiffs have all their legal rights to protect their interests under the law in filing these cases, for what the
defendants have done to them, and as such they are entitled attorney's fees. (Rollo, pp. 27-28.)

Upon the other hand, in deleting the questioned award the Intermediate Appellate Court said:

However, We are not inclined to sustain the award of moral and exemplary damages, as well as attorney's fees.
There is no evidence showing that, in dealing with plaintiffs, defendants acted fraudulently or in bad faith. There is
no showing either that attorney's fees are recoverable under Art: 2208, Civil Code. (Rollo, P. 37.)

Under the facts of the case, the plaintiffs (now petitioners) are entitled to a measure of moral damages. Article 2219 of the Civil
Code permits the award of moral damages for acts mentioned in Article 21 of the same code and the latter stipulates that: "Any
person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage."

It appears that the petitioners were denied irrigation water for their farm lots in order to make them vacate their landholdings. The
defendants violated the plaintiffs' rights and caused prejudice to the latter by the unjustified diversion of the water.

The petitioners are also entitled to exemplary damages because the defendants acted in an oppressive manner. (See Art. 2232. Civil
Code.)

It follows from the foregoing that the petitioners are also entitled to attorney's fees but the size of the fees as well as the damages is
subject to the sound discretion of the court.
WHEREFORE, the petition is granted; the decision under review is modified and each of the plaintiffs is entitled to the following to be
paid by the defendants jointly and severally:

Moral damages — P1,000.00

Exemplarly damages — 500.00

Attorney's fees — 1,000.00

P2,500.00

The costs shall be assessed against the private respondents.

SO ORDERED.
ii. NUISANCE

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 74816 March 17, 1987

ERNESTO R. RODRIGUEZ, JR., ERNESTO LL. RODRIGUEZ III, SACHA DEL ROSARIO, JOSE P. GENITO, ZENAIDA Z. RODRIGUEZ, and
ENECERIO MONDIA, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and DAYTONA CONSTRUCTION & DEVELOPMENT CORPORATION, respondents.

Pelaez, Adriano & Gregorio Law Office for petitioners.

Balgos & Perez Law Office for respondents.

PARAS, J.:

Before Us is a petition to review by certiorari 1) respondent court's decision which sets aside the order of default rendered by the
trial court and 2) respondent court's resolution dated April 18, 1986 denying petitioners' (plaintiffs-appellees' therein) motion for
extension of time to file motion for reconsideration of its decision. 1

The antecedent facts of the case are as follows:

Plaintiffs (petitioners herein) filed on December 16, 1980, an action for abatement of a public nuisance with damages against
defendant (private respondent herein). After being granted four (4) extensions of time to file an answer, defendant moved to
dismiss the complaint on February 27, 1981 upon the ground that the lower court has no jurisdiction to hear the instant case and for
lack of cause of action. However, the motion was denied by the court on April 3, 1981, a copy of which decision was received by the
defendant on April 23, 1981. On May 5, 1981 defendant filed a motion for reconsideration which motion was denied on July 7, 1981.

Instead of filing an answer, petitioner filed with Us in G.R. No. 57593, Daytona Construction & Development Corporation vs.
Rodriguez, et al. a motion for extension of time to file a petition for review, but it never filed one, prompting Us to issue a resolution
dated October 5, 1981 informing the parties and the trial court that no petition for review was filed within the period that expired on
August 15, 1981.

Upon motion of plaintiffs, the court declared the defendant in default on November 4, 1981, and authorized the plaintiffs to present
evidence ex-parte. Upon learning of the said order, the defendant on November 9, 1981 filed a motion to set aside the order of
default and a motion to admit answer with counterclaim which motions were denied by the lower court in an order dated November
23, 1981.

On June 30, 1982, the court a quo rendered judgment for the plaintiffs and against defendant, its dispositive portion reading as
follows:

WHEREFORE, judgment is hereby rendered as follows:

1. Declaring the operation of the cement hatching plant of the defendant corporation as a nuisance and ordering
its permanent closure;

2. Ordering the defendant to pay plaintiff Ernesto Rodriguez, Jr. the amount of P250,000.00 as moral damages and
the amount of P5,000.00 as nominal damages;
 3. Ordering the defendant to pay plaintiff Ernesto LL. Rodriguez III the amount of P200,000.00 as actual damages,
the amount of P500,000.00 as moral damages and the amount of P5,000.00 as nominal damages;

4. Ordering the defendant to pay plaintiff SACHA del Rosario the amount of P20,000.00 as actual damages, the
amount of P50,000.00 as moral damages and the amount of P5,000.00 as nominal damages;

5. Ordering the defendant to pay plaintiff Zenaida Z. Rodriguez the amount of P100,000.00 as actual damages, the
amount of P100,000.00 as moral damages and the amount of P5,000.00 as nominal damages; and

6. Ordering the defendant to pay the plaintiffs the amount of P50,000.00 as attorney's fees, plus the costs of suit.

SO ORDERED. (pp. 63-64, Record on Appeal)

In an order dated July 9, 1982, the trial court upon motion of plaintiffs granted execution pending appeal it indeed appearing as
alleged in the motion that the continued operation of the cement batching plant of the defendant poses a "great menace to the
neighborhood, both in point of health and property."

On July 23, 1982, defendant filed a petition for relief which was however denied by the lower court. On July 29, 1982, defendant
filed a petition for injunction with the Intermediate Appellate Court which found the petition unmeritorious.   The appellate court
2

promulgated on October 5, 1983, a decision denying due course to defendant's petition.

Its motion for reconsideration having been denied by the Appellate Court, defendant went on appeal by certiorari to the Supreme
Court (G.R. No. 66097) which, after the submission of plaintiffs' comment and defendant's reply thereto, denied its petition for lack
of merit.

The petition for injunction having been denied by both the IAC and this Court, defendant pursued the remedy of appeal in
respondent IAC, assigning the following errors.

I. THE TRIAL COURT ERRED WHEN IT DECLARED APPELLANT IN DEFAULT DESPITE THE FACT THAT ITS FAILURE TO
FILE ITS ANSWER ON TIME WAS DUE SOLELY TO THE NEGLIGENCE OF ITS COUNSEL AND DESPITE THE FACT THAT
THE MOTION TO DISMISS THAT IT HAD FILED COULD HAVE VERY WELL STOOD AS THE ANSWER OF THE
APPELLANT.

II. THE TRIAL COURT ERRED WHEN IT ASSUMED JURISDICTION OVER THE CASE AND WHEN IT RENDERED
JUDGMENT BY DEFAULT AGAINST THE APPELLANT ON GROUNDS AND/OR BASIS NOT ALLEGED IN THE COMPLAINT
FILED AGAINST THE APPELLANT.

III. THE TRIAL COURT ERRED WHEN IT DID NOT ALLOW RELIEF FROM JUDGMENT IN THE FACE OF THE REASONS
PRESENTED TO IT AS BASIS FOR SUCH RELIEF.

IV. THE TRIAL COURT ERRED WHEN DESPITE THE APPEAL HAVING BEEN DULY PERFECTED, IT DETAINED THE CASE
WITH IT AND THEREAFTER, ISSUED AN ALIAS WRIT OF EXECUTION PENDING APPEAL WITHOUT APPROPRIATE
PRIOR NOTICE TO THE APPELLANT. (pp. 1-2, Appellant's Brief)

On March 21, 1986, respondent court promulgated its decision, the decretal portion of which is as follows:

WHEREFORE, the Decision appealed from is hereby reversed and set aside and another one entered, remanding
the case to the court of origin for further proceedings and thereafter, to render judgment accordingly.

No pronouncement as to costs.

Notice of respondent Court's decision was received by plaintiffs-appellees thru counsel on April 3, 1986. Plaintiffs filed on April 15,
1986 a motion for extension of 30 days from April 18, 1986 or up to May 18, 1986 to file a motion for reconsideration. However, on
May 10, 1986, they filed a 24-page motion for reconsideration.
Meanwhile, on April 23, 1986, defendant's opposition to the motion for extension and counter-motion to enter final judgment were
received by plaintiffs. Plaintiffs countered with a reply filed April 29, 1986. (Annex "C-2") Plaintiffs' counsel was surprised to receive
on April 24, 1986, respondent Court's resolution dated April 18, 1986, denying the motion for extension. Plaintiffs requested
respondent Court to treat their aforesaid reply filed on April 29, 1986 as a motion for reconsideration of the said resolution of April
18, 1986, received by them on April 21, 1986, the request being contained in their opposition dated May 22, 1986, to defendant-
appellant's motion to strike out the said opposition attached thereto as Annex C-3 " Neither the motion for reconsideration
(converted from the reply filed on April 29, 1986) nor the motion for reconsideration of the decision itself was acted upon by
respondent court.

Hence this petition to review, petitioners alleging that "Respondent court's challenged resolution purporting to deny appellees'
motion for extension of time to file a motion for reconsideration is a nullity because the decision in Habaluyas v. Japson  case,   solely
3

relied on by the said resolution has been made by the Supreme Court to operate prospectively and thereby rendered inapplicable to
parties situated as petitioners are, in order precisely to spare them from unfair and unjust deprivation of their right to appeal."

In Our resolution, promulgated May 30, 1986 in the Habaluyas case itself (G.R. No. 70895), We set aside the original judgment
therein, thus:

However, the law and the Rules of Court do not expressly prohibit the filing of a motion for extension of time to
file a motion for reconsideration of a final order or judgment.

In the case of Gibbs vs. Court of First Instance (80 Phil. 160), the Court dismissed the petition for certiorari and
ruled that the failure of defendant's attorney to file the petition to set aside the judgment within the reglementary
period was due to excusable neglect, and, consequently, the record on appeal was allowed. The Court did not rule
that the motion for extension of time to file a motion for new trial or reconsideration could not be granted.

In the case of Roque vs. Gunigundo (Administrative Case No. 1684, March 30, 1979, 89 SCRA 178), a division of the
Court cited the Gibbs decision to support a statement that a motion to extend the reglementary period for filing
the motion for reconsideration is not authorized or is not in order.

The Intermediate Appellate Court   is sharply divided on this issue. Appeals have been dismissed on the basis of the
4

original decision in this case.

After considering the able arguments of counsels for petitioners and respondents, the Court resolved that
the interest of justice  would be better served if the ruling in the original decision were applied prospectively from
the time herein stated The reason is that it would be unfair to deprive parties of their fight to appeal simply
because they availed themselves of a procedure which was not expressly prohibited or allowed by the law or the
Rules. ... (pp. 3-4; Resolution dated May 30, 1986 in G.R. No. 70895; emphasis supplied)

This Court further elucidated:

1). Beginning one month after the promulgation of this Resolution, the rule shall be strictly enforced that no
motion for extension of time to file a motion petition for new trial or reconsideration may be filed with the
Metropolitan or Municipal Trial Courts, the Regional Trial Courts, and the Intermediate Appellate Court. Such a
motion may be filed only in cases pending with the Supreme Court as the court of last resort, which may in its
sound discretion either grant or deny the extension requested. (p. 4, emphasis supplied)

The above new rules are made effective no earlier than June 30, 1986. In the instant case, respondent Court's decision was received
by plaintiffs on April 3, 1986. Plaintiffs or petitioners herein filed on April 15, 1986 a motion for extension of 30 days from April 18,
1986 or up to May 18, 1986 to file a motion for reconsideration. On May 10, 1986, plaintiffs filed their motion for reconsideration.
Plaintiffs' motion for extension of time was not intended for delay but upon showing of good cause, to wit: "for lack of material time
due to heavy pressure of work on the part of petitioners' counsel presently taking charge thereof, what is more the counsel handling
this case was doing so for the first time in substitution of Atty. Emmanuel Pelaez, who was recently appointed Philippine
Ambassador to the U.S"

It is clear therefore that petitioners' motion was based on good cause and was filed opportunely making the act of respondent Court
unwarranted in denying petitioners' motion for extension of time to file its motion for reconsideration.
Another important issue raised by the petitioners is that the "subject decision which purports to set aside the order of default
rendered by the trial court is a nullity because respondent court arbitrarily ignored in grave abuse of discretion amounting to lack of
jurisdiction 1) the conclusive effect of the trial court's final and unappealed order denying defendant's motion to set aside the
default order," and 2) the res judicata  effect of the appellate court's final judgment in the injunction case aforementioned upholding
the trial court's order granting execution of its Judgment pending appeal and, necessarily, the default order as well 3) the law of the
case effect of the appellate court's express ruling in the said injunction case sustaining the default order.

Petitioners' contentions merit our consideration.

It has been Our consistent ruling that a default order, being interlocutory, is not appealable but an order denying a motion or
petition to set aside an order of default is not merely interlocutory but final and therefore immediately appealable.  5

Since the trial court's order of November 13, 1981, denying defendant's motion to set aside the order of default was appealable but
was not appealed by defendant, the necessary conclusion is that the default order became final. Clearly therefore, respondent Court
committed a grave abuse of discretion in disregarding the finality of the default order.

The validity and finality of the default order was upheld by the judgment of the Appellate Court in the injunction case (which passed
upon the merits of the issuance of an order of execution pending appeal) by virtue of the principle of res judicata and the doctrine re
the law of the case.

There is no question that there were good reasons for the trial court to issue the order of execution pending appeal. The order
categorically stated that there was a need for the closure and stoppage of the operation of defendant's (Daytona Construction)
cement batching plant because it posed "a great menace to the neighborhood both in point of health and property." The trial court
thus stated:

From the uncontroverted evidence presented by the plaintiffs, there is hardly any question that the cement dust
coming from the batching plant of the defendant corporation is injurious to the health of the plaintiffs and other
residents in the area. The noise, the vibration, the smoke and the odor generated by the day and night operation
of the plant must indeed be causing them serious discomfort and untold miseries. Its operation therefore violates
certain rights of the plaintiffs and causes them damage. It is thus a nuisance and its abatement justified. (Decision,
p. 5; p. 90, Rollo)

after taking into consideration evidence presented by plaintiffs (petitioners herein) as follows:

The evidence shows that the defendant is a domestic corporation duly organized and existing under the laws of the
Philippines with business address of 252 Don Mariano Marcos Avenue (actually South Zuzuarregui Avenue),
Quezon City. It was issued by the Quezon City government a business permit (Exhibit B) for the manufacture of
road and building concrete materials such as concrete aggregates, with cement batching plant. Among the
conditions set forth in the permit are that the said batching plant shall (1) institute measures to prevent dust
emission during the manual charging of cement from bags to the receiving hopper of the bucket elevator of the
batching plant; (2) remove all sediment deposit in the settling of tank for process water and proper maintenance
should be observed at all times. While the original permit issued to the defendant stated that its operation at the
place shall "not (be) beyond Dec. 31, 1979" (Exhibit B-2), it was somehow allowed to operate way beyond said
period.

Plaintiff Ernesto LL. Rodriguez Ill testified that he has three parcels of residential lots adjacent to the Daytona
compound. He informed the Court that his property, with an area of 8,892 square meters has been over-run by
effluence from the cement batching plant of the defendant. The sediment settled on the lots and all forms of
vegetation have died as a result, and the land tremendously diminished in value. His three lots are located in a
prime residential zone and each square meter in the area is easily valued at P500.00. While he would like to sell at
least a part of his property, he finds no buyer because of its condition. It would cost him no less than P250,000.00
to be able to repair the damage done to his property, and since its present condition has been existing during the
five years, he claimed that the interest on his loss would be about P5,000.00. He has agreed to his counsel's fee of
P200,000.00. Zenaida Rodriguez testified that she owns a lot with an area of 1,500 square meters. Two thirds of
this area has been damaged by the cement dust, emanating from the defendant's cement batching plant. The
continous flow of cement dust into her property affected her deep well, their source of drinking water, and most of
their fruit-bearing and ornamental trees dried up. She also said that she has had sleepless nights and became
 nervous as a result of the batching plant operation. Even her previous pedigreed poodles have been afflicted by all
sorts of illnesses, many of them dying in the process. She claimed to have sustained damages amounting to
P370,000.00.

SACHA del Rosario testified that her house has to close its windows most of the time because of the dust pollution
and her precious plants have been destroyed by the cement powder coming from the constant traffic of trucks and
other vehicles carrying the product of the batching plant passing through her area. She claims damages amounting
to more than P100,000.00.

A chemical engineer, Alexander Cruz, said that the effluence deposited on the properties of Ernesto LL. Rodriguez
III and Zenaida Rodriguez has a very high PH 11.8, and the soil is highly alkaline and cannot support plant life; that
pollution coming from the batching plant can cause stomach disorder and skin problems; that the place of Ernesto
LL. Rodriguez III is bare of grass and the trees are dying, (Exhibits J, J-1 and J-2 and that there is also a high degree
of calcium on the property in question.

Witness Guido L. Quiban a civil engineer, testified that on the basis of his examination of the property of Rodriguez
I I I affected by the pollution, it would cost at least P250,000.00 for the excavation filling, concreting of canal and
rental of equipment to repair it or restore it to its status quo ante.

Lawyer Ernesto R. Rodriguez, Jr., the 70-year old father of both Ernesto Ill and Zenaida Z. Rodriguez, submitted a
medical certificate that he had recently been taken ill with acute bronchial asthma, hypertension and
atherosclerotic heart disease. (Exhibits L, L-1 to L-4). His physician, a specialist graduate from the University of
London and connected with various hospitals in Manila, advised him against exposure to environmental allegens,
specifically cement dust and pollution. He also submitted as exhibits various newspaper clippings (Exhibit M and
excerpts from a book (Exhibits N and N-1 showing that pollution can irritate the eye, sear lungs and destroy
vegetation, raise blood pressure, increase cholesterol levels, interfere with sleep, cause ulcer, trigger heart attacks
and the like; that it is the common denominator of respiratory diseases, especially asthma chronic bronchitis,
bronchial asthma and emphysema and that polluted air can develop abnormalities in lung function.

Dr. Raul I. del Rosario, a neighboring physician, testified that he had treated several patients who traced their
sickness to the pollution caused by defendant Daytona batching plant. He said that cement dust produces
broncho-pulmonary obstructive diseases, broncho fibriotic lesions which may produce cardio pulmonary
complications, and the people living in the neighborhood of the batching plant are the most susceptible to these
diseases. He reported many cases of bronchial asthma in both children and adult who live in the vicinity of the
cement batching plant and these cases have been intermittently admitted and discharged from the Quirino Labor
Hospital where he presently works as a resident physician. He had intended to open a medical clinic at his
residence but he could not do so because the washings from the cement mixers are dumped on the access road in
front of his house and when these washings are dried up they pollute the neighborhood, rendering his intended
medical clinic unfit and impractical for the treatment of patients, particularly those suffering from respiratory
ailments.

Another lawyer, Eliseo Alampay, Jr., who likewise resides a few meters away from the site of the Daytona batching
plant, testified that the said plant is certainly injurious to the health; that the cement dust are agents of lung
ailments, impair the growth of plants and even kill the birds in their cages; that it is a demonstrable nuisance
because its uncontrolled engine noise and night long pounding prevent the neighborhood from being able to sleep
soundly and peacefully. He told the court that there was a time when he felt like organizing the whole
neighborhood into a demolition team to forcibly dismantle the entire Daytona plant because "the authorities
concerned apparently have chosen to close their eyes and leave us to our miserable plight." He said that the
homes in the community all look dirty and dusty because of the pollution that the batching plant of the defendant
causes. (Decision in Injunction Case, AC-G.R. No. 14602-SP, pp. 10-14)

Anent the default order, the appellate court in the injunction case said:

From the foregoing, it appears that petitioner was recreant in failing to file an answer after respondent judge
denied its motion to dismiss the complaint. The motion to dismiss was denied in the order of the lower court under
date of April 3, 1981, a copy of which was received by petitioner on April 23, 1981. A motion for reconsideration of
the order of denial filed by petitioner on May 7, 1981 was denied by said court on July 7, 1981. Instead of filing an
 answer promptly, petitioner filed with the Supreme Court a motion for extension of time to file a petition for
review,  but it never filed one,  prompting the Supreme Court to issue a resolution dated October 5, 1981 informing
the parties that no petition for review was filed within the period that expired on August 15, 1981. Inspite of the
Supreme Court's resolution, petitioner still failed to file any answer or pleading to arrest the running of the
prescriptive period. It was only on July 23, 1982, when petitioner filed its Petition for Relief which was nine (9)
months after the Supreme Court's resolution was issued. Petitioner's assertion in its Petition for Relief that the
failure to file the answer was caused by "the unforseen sickness of its corporate secretary who has custody of the
records necessary for the preparation of its defense" cannot be taken without much doubt and hesitation.
Petitioner did not even point out who was the supposed corporate secretary or explain why the records were in
the possession of the corporate secretary instead of the counsel handling the case. (Decision in Injunction case, p.
16; emphasis supplied)

With reference to defendant's allegation that it thought that the period within which to answer (after its motion to dismiss had been
denied) had been suspended by its having filed a petition for review before the Supreme Court, same is without merit. The
circumstances of the case point to a deliberate desire to delay: the corporation, governed as it is by knowledgeable business
executives, should have taken steps to prevent its being declared in default. The corporation waited six (6) months before verifying
the status of the case: in the meantime it had been declared in default, a judgment by default had been rendered against it,
execution was already pending before it woke up to file the case at hand.

We agree with Justice Luis A. Javellana in his concurring opinion in the injunction case before the appellate court, thus:

Petitioner's conduct here appears to me to be tainted with fraud and intended simply to delay the disposition of
the case. When its motion to dismiss the complaint was denied, and its motion for reconsideration of that denial
was, Unwise denied, it manifested its intention to elevate these orders to the Supreme Court on a petition for
review. Yet, it did nothing to this end. The purpose of the ploy is obvious. Once it had announced its intention to go
to the Supreme Court, it effectively suspended the proceedings in the trial court, or, at least, that was the effect.
This enabled it to continue with its operations and it would have done so indefinitely if it had not been declared in-
default and private respondents allowed to present their evidence. It is quite apparent that petitioner really had
no intention of elevating the case to the Supreme Court otherwise, it would not have allowed the extended period
given to it by the Supreme Court to lapse without filing the petition. Or, if it was in good faith, there it should have
informed the trial court that it was no longer pursuing its remedy in the Supreme Court after it had decided that it
is no longer availing of such remedy. Instead, it concealed this fact from the trial court and the adverse party, and
allowed matters to take their course. It was not until it received the adverse decision that it frantically sought to set
things right I do not think that petitioner deserves any consideration for trifling with the administration of
justice. (pp. 3-4; emphasis supplied)

WHEREFORE, the assailed decision and resolution are hereby SET ASIDE, and a new judgment is hereby rendered REINSTATING the
decision of the trial court with the modification that all awards for nominal damages are hereby eliminated. Costs against private
respondent.

SO ORDERED.
iii. DAMAGES

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-65935 September 30, 1988

FILINVEST CREDIT CORPORATION, petitioner,

vs.
THE INTERMEDIATE APPELLATE COURT and NESTOR B. SUÑGA JR., respondents.

Labaguis, Loyola, Angara Law Offices for petitioner.

Juan C. Navarro, Jr. for private respondent.

SARMIENTO, J.:

In this special civil action for certiorari, Filinvest Credit Corporation implores us to declare the nullity of the Decision 1 dated
September 30, 1983 and the Resolution 2 dated December 16, 1983 of the Intermediate Appellate Courts 3 (now Court of Appeals)
which were allegedly issued with grave abuse of discretion, amounting to lack of jurisdiction, or in excess of jurisdiction, and with
patent denial of due process. 4

The facts as found by the trial court are as follows:  5

This is a case for damages filed by Nestor B. Sunga Jr., businessman and owner of the NBS Machineries Marketing
and the NAP-NAP Transit. Plaintiff alleged that he purchased a passenger minibus Mazda from the Motor center,
Inc. at Calasiao, Pangasinan on March 21, 1978 and for which he executed a promissory note (Exhibit "B") to cover
the amount of P62,592.00 payable monthly in the amount of P2,608.00 for 24 months due and payable the 1st day
of each month starting May 1, 1978 thru and inclusive of May 1, 1980. On the same date, however, a chattel
mortgage was executed by him in favor of the Motor center, Inc. (Exhibit "A"). The Chattel Mortgage and
Assignment was assigned to the Filinvest Credit Corporation with the conformity of the plaintiff. Nestor Sunga
claimed that on October 21, 1978, the minibus was seized by two (2) employees of the defendant Filinvest Credit
Corporation upon orders of the branch manager Mr. Gaspar de los Santos, without any receipt, who claimed that
he was delinquent in the payments of his vehicle. The plaintiff reported the loss to the PC (Exhibit "Y") and after
proper verification from the office of the Filinvest, the said vehicle was recovered from the Crisologo Compound
which was later released by Rosario Fronda Assistant Manager of the Filinvest, and Arturo Balatbat as caretaker of
the compound. The police blotter of the Integrated National Police of Dagupan City shows that Nestor Sunga and
T/Sgt. Isidro Pascual of the 153rd PC Company sought the assistance of the Dagupan police and one Florence Onia
of the Filinvest explained that the minibus was confiscated because the balance was already past due. After
verification that his accounts are all in order, Florence Onia admitted it was their fault. The motor vehicle was
returned to the plaintiff upon proper receipt.

After trial, the court a quo rendered its decision   the decretal portion of which reads:
6

WHEREFORE, premises considered, this Court hereby renders judgment as follows, to wit:

(1) ORDERING the defendant Filinvest Credit Corporation to pay the plaintiff Nestor Sunga Jr. the following
damages, to wit:

(a) Moral Damages P30,000.00

(b) Loss on Income of the minibus for three days 600.00
(c) Actual damages 500.00
(d) Litigation expenses 5,000.00
(e) Attorney's Fees 10,000.00

(2) And to pay the costs.

SO ORDERED.

Dissatisfied with the aforecited decision, the defendant (petitioner herein), interposed a timely appeal with the respondent court.
On September 30, 1983, the latter promulgated its decision affirming in toto  the decision of the trial court dated July 17, 1981,
"except with regard to the moral damages which, under the circumstances of the accounting error incurred by Filinvest, is hereby
increased from P30,000.00 to P50,000.00."   As the reconsideration of said decision proved futile in view of its denial by the
7

respondent court in its resolution of December 16, 1983, the petitioners come to us thru this instant petition for certiorari under
Rule 65 of the Rules of Court.

The petitioner alleges the following errors:  8

It is a patent grave abuse of discretion amounting to lack of jurisdiction and a bare denial of petitioner's
constitutional right to due process of law, when the respondent Court completely ignored the assigned errors in
the petitioner's Brief upon which private respondent had joined issues with petitioner.

In resolving the appeal before it thru matters and questions not raised at the trial or on appeal, by either of the
parties, respondent Court exceeded its jurisdiction and acted with grave abuse of discretion.

When the respondent Court granted private respondent MORAL DAMAGES in an exaggerated and unconscionable
amount, respondent Court exceeded the bounds of its discretion, amounting to an absence or lack of jurisdiction.

Respondent Court had NO authority to increase the award of DAMAGES to private respondent when the latter did
not appeal the decision because private respondent considered the judgment (questioned by petitioner on appeal)
as "perfect", "sound" and "wise" (at pp. 17 to 20, Brief for Appellee).

In relying upon a BILL pending before the Batasan Pambansa to buttress its judgment, the respondent Court acted
contrary to law and jurisprudence, making of its judgment a NULLITY.

The extensive citation and adherence by the respondent Court on (sic) its decision in the case of "Edilberto
Rebosura, et al. versus Rogaciano Oropeza, CA-G.R. No. 63048-R, December 17, 1983" (which is non-doctrinal and
under question in the Honorable Supreme Court) is not warranted in law and jurisprudence, and amounts to a
grave abuse of discretion.

The various assignments of error may be synthesized into the sole issues   of. Whether or not the respondent court a) in allegedly
9

ignoring the various assigned errors in petitioners brief; b) in resolving issues not raised at the trial and on appeal; c) in increasing
the amount of moral damages; and (d) in adhering to its decision in Edilberto Rebosura et al. vs. Rogaciano Oropeza, CA-G.R. No.
63048-R, as well as to Batasan Bill No. 3075, which is yet to be enacted into law, acted with grave abuse of discretion amounting to
lack of jurisdiction.

Contrary views are espoused by the parties in this case. Petitioner maintains that it was patent grave abuse of discretion amounting
to lack of jurisdiction and a bare denial of the petitioner's constitutional right to due process of law, when the respondent court
completely brushed aside the assigned errors in its brief.   It asserts that the constitutionality of the contractual stipulation between
10

the parties embodied in the documents denominated as Promissory Note and Deed of Mortgage was not in issue in the
court a quo and neither was the same raised on appea   and therefore should not have been passed upon based on the premise that
11

the appellate court should not consider any error other than those assigned or specified.   Further, it submits that the controversy
12

on appeal is capable of adjudication on other substantive grounds, without necessarily treading into constitutional questions.   It is
13

also the petitioner's submission that the increase in the award of moral damages from the P30,000.00 adjudged by the trial court
which was not appealed by respondent Sunga who felt that the award was "perfect," "sound," and "wise," to a "whopping
P50,000.00" imposed by the respondent Intermediate Appellate Court (now Court of Appeals) amounted to a grave abuse of
discretion.   Thus, the increase in the award which the respondent appellate court justified by the accounting error committed by
14

the petitioner, should not be countenanced, as the same had no legal basis.   It rationalizes that the respondent court's invocation of
15
a pending bill in the legislature, Batasan Bill 3075, to support its decision, is untenable.   Lastly, it deposits that Rebosura is riot on all
16

fours with the case at bar and therefore adherence thereto was misplaced,   citing the following distinctions:   1) In Rebosura, there
17 18

was unlawful entry while in this case, there was none; 2) in the former, the plaintiff did not breach the contract whereas in this case
there is a finding by the court a quo of such violation; 3) in the former, the contract was denominated Deed of Sale with Reservation
of Title, while in this case, the contracts referred to are the Promissory Note and Deed of Mortgage; 4) in the former, the defendant
Oropeza was an unpaid seller while the plaintiff Rebosura was the buyer, whereas, in this case, the petitioner is the promissor-
mortgagee while Sunga is the promissor-mortgagor; 5) in the former, there was no notice of delinquency and repossession, whereas,
in this case, there is notice and demand; and 6) in the former, the contract was in fine print, whereas, in this case, it is not so.

On the other side, the private respondent maintains that the respondent court did not abuse its discretion, stressing that a careful
reading and understanding of the assailed decision would manifest that all assigned errors were resolved, citing portions of the
decision which dealt specifically with each of the errors assigned.   He maintains that the award of moral damages, impeached as
19

exaggerated and unconscionable, is justified by the prayer in the appellee's (respondent Sunga's brief, to wit: FURTHER REMEDIES
AND RELIEFS DEEMED JUST AND EQUITABLE UNDER AND WITHIN THE PREMISES ARE PRAYED FOR.   Lastly, the private respondent
20

submits that the references to Batasan Bill No. 3075 and Rebosura were mere passing comments which did not in any way detract
from the validity of the assailed decision. 21

After carefully considering and weighing all the arguments of both protagonists, we hold that the respondent court committed a
grave abuse of discretion in increasing extravagantly the award of moral damages and in granting litigation expenses. In those
respects, the petition is granted and to that extent the questioned decision is modified.

There is no gainsaying that the plaintiff-appellee (respondent Sunga did not appeal from the decision of the court a quo which
awarded him the sum of P30,000.00 by way of moral damages. "Well settled is the rule in this jurisdiction that whenever an appeal is
taken in a civil case an appellee who has not himself appealed cannot obtain from the appellate court any affirmative relief other
than the ones granted in the decision of the court below."   Verily the respondent court disregarded such a well settled rule when it
22

increased the award for moral damages from P30,000.00 to P50,000.00, notwithstanding the fact that the private respondent did
not appeal from the judgment of the trial court, an act indicative of grave abuse of discretion amounting to lack of jurisdiction.

Certiorari lies when a court has acted without or in excess of jurisdiction or with grave abuse of discretion. 'without
jurisdiction' means that the court acted with absolute want of jurisdiction. There is "excess of jurisdiction" where
the court has jurisdiction but has transcended the same or acted without any statutory authority Leung Ben vs.
O'Brien, 38 Phils., 182; Salvador Campos y CIA vs. Del Rosario, 41 Phil., 45). "Grave abuse of discretion" implies
such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Abad Santos vs. Province
of Tarlac, 38 Off. Gaz., 83.) or in other words, where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. (Talavera-Luna vs.
Nable, 38 Off. Gaz., 62). 23

Or, as held in the recent case of  Robert Young vs. Julio A. Sulit, Jr.,   "(F)or certiorari to lie, there must be capricious, arbitrary, and
24

whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of civil law and common law
tradition."

We had occasion to state that "there is no hard and fast rule in the determination of what would be a fair amount of moral damages,
since each case must be governed by its own peculiar circumstances."   Be that as it may and in amplification of this generalization,
25

we set the criterion that "in the case of moral damages, the yardstick should be that the "amount awarded should not be palpably
and scandalously excessive" so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial
court ... . Moreover, the actual losses sustained by the aggrieved parties and the gravity of the injuries must be considered in arriving
at reasonable levels ... ." 
26

There is no dispute that the private respondent, a businessman and owner of the NBS Machineries Marketing and NAP-NAP Transit,
is entitled to moral damages due to the unwarranted seizure of the minibus Mazda, allegedly because he was delinquent in the
payment of its monthly amortizations, which as stated above, turned out to be incorrect.   No doubt such intent tainted private
27

respondent Sunga's reputation in the business community, thus causing him mental anguish, serious anxiety, besmirched reputation,
wounded feelings, moral shock, and social humiliation. Considering, however, that respondent Sunga was dispossessed of his motor
vehicle for barely three days, that is, from October 21, 1978 to October 23, 1978, possession of which was restored to him soon after
the accounting errors were ironed out, we find that the award of moral damages even in the sum of P30,000.00 is excessive for it
must be emphasized that "damages are not intended to enrich the complainant at the expense of a defendant. They are awarded
only to enable the injured parties to obtain means, diversions or amusements that will serve to alleviate the moral sufferings the
injured parties have undergone by reason of defendant's culpable action. In other words, the award of moral damages is aimed at a
restoration within the limits of the possible, of the spiritual status quo ante; and therefore it must be proportionate to the suffering
inflicted."   Moreover, "(M)oral damages though not incapable of pecuniary estimations, are in the category of an award designed to
28

compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.  29

It behooves us therefore to reiterate the caveat to lower courts "to guard against the award of exorbitant damages that are way out
of proportion to the environmental circumstances of a case and which time and again, this Court has reduced or eliminated. Judicial
discretion granted to the courts in the assessment of damages must always be exercised with balanced restraints and measured
objectivity.  30

We do not agree with private respondent's argument that the increase in the award of moral damages is justified by the prayer in its
brief, to wit: FURTHER REMEDIES AND RELIEFS DEEMED JUST AND EQUITABLE UNDER AND WITHIN THE PREMISES ARE PRAYED FOR.
Such statement is usually extant in practically all pleadings as a final statement; it is rhetorical flourish as it were and could not be a
substitute for appeal as required by the rules for "the appellee cannot seek modification or reversal of the judgment or affirmative
relief, unless he has also appealed therefrom."  31

With regard to the award of litigation expenses in the sum of P5,000.00, the same is hereby disallowed, there being no price for
litigation.

WHEREFORE, the petition is partially GRANTED. The award of moral damages is REDUCED to P10,000.00 and the grant of litigation
expenses is ELIMINATED. The rest of the judgment is AFFIRMED. Without costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-64515 June 22, 1984

R & B SURETY & INSURANCE CO., INC., petitioner,

vs.
THE INTERMEDIATE APPELLATE COURT and ANGELINA USON, respondents.

Raul A. Mora for petitioner.

Celedonio Tiongson for respondents.

GUTIERREZ, JR., J.:

This is a petition for review on centiorari, seeking to set aside the decision of the in Intermediate Appellate Court which awarded the
private respondent moral and exemplary damages plus attorney's fees, after finding that the petitioner acted in bad faith in filing an
action against said respondent.

The facts are stated in the desision of the appellate court:

xxx xxx xxx

... On January 3, 1969, defendant Maria Isabel Diaz was granted a loan of P20,000.00 by the Philippine National
Bank. To secure the repayment of the loan, Maria Isabel Diaz submitted a surety bond (Exh. B) of plaintiff R & B
Surety & Insurance Co., Inc. for the sum of P20,000.00 in favor of the Philippine National Bank. In turn, defendants
executed an indemnity agreement with the chattel mortgage (Exh. C) to indemnify the plaintiff surety "for any
damage, prejudice, loss, costs, payments, advances and expenses of whatever kind and nature, including attorney's
fees, which the corporation may, at any time, become liable for, sustain or incur as a consequence of having
executed the above-mentioned Bond, its renewals, extensions, or substitutions and said attorney's fees not to be
less than twenty (20%) per cent of the total amount claimed by the corporation in each action, the same to be due,
demandable and payable, irrespective of whether the case is settled judicially or extra-judicially and whether the
amount has been actually paid or not."

Maria Isabel Diaz did not file her answer to the complaint or the crossclaim of defendant Angelina Uson, and she
was declared in default in both cases. Defendant Eliseo Santos filed his answer to the complaint wherein he admits
signing the indemnity agreement but claims that "all the time he thought he was and actually intended to be a
character witness only." In his counterclaim, he asks for attorney's fees, expenses of litigation and other damages
in unspecified amounts against the plaintiff. Defendant Angelina Uson filed a separate answer, stating her
signatures appearing on the indemnity agreement are all forgeries. By way of counterclaim against the plaintiff,
she asks for P100,000.00 as moral damages and a sum equivalent to 25% of the amount of damages she may
recover as and for counsel fees. By way of crossclaim against defendant Maria Isabel Diaz, she asks for the
payment of moral damages and attorney's fees in like amounts for forging or causing to be forged her signature in
the indemnity agreement.

After due trial, judgment was rendered by the Court of First Instance the dispositive portion of which reads as
follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants
Maria Isabel Diaz and Eliseo Santos, ordering them, jointly and severally, to pay the former the
sum of P20,000.00, with interest thereon at the rate of 13-l/2% from January 16, 1974, the date
 when plaintiff paid the Philippine National Bank; a sum equal to 20% thereof as and for attorney's
fees; and the costs of suit. The complaint is dismissed as against the defendant Angelina Uson.

The counterclaims of the defendants Eliseo Santos and Angelina Uson are hereby dismissed.

xxx xxx xxx

Respondent appealed the dismissal of her counterclaim. On April 29, 1982, the Intermediate Appellate Court** modified the
decision of the lower court and ordered the plaintiff-appellee R & B Surety and Insurance Co., Inc. R & B), to pay "the sum of
P100,000.00 as moral damages, twenty five (25%) per cent of said amount as attorney's fees and P10,000.00 as exemplary
damages ..." on a finding that R & B acted in bad faith when it filed the action against defendant-appellant Uson. A motion for
reconsideration was filed by R & B but the same was denied. Hence, this petition.

Petitioner R & B assigns the following errors:

1. The respondent appellate Court has committed grievous error in drawing from the established facts a conclusion that herein
Petitioner is guilty of bad faith and negligence, and, therefore liable to private respondent for moral and exemplary damages,
attomey's fees and costs;

2. The respondent appellate Court has committed grave error in over- riding legal presumptions of law by and with conjectural,
illogical, flimsy and misleading deductions not supported by the established facts;

3. The respondent appellate Court has awarded a kind of damage (exemplary damage) which is not within the contemplation of the
pleadings and which, even the private respondent had not conceived and asked for; and

4. Generally, the respondent appellate Court had rendered a decision which, in a way, is not in accord with law or with the
applicable decisions of this Honorable Supreme Court.

The only issue raised in the above assignments of errors is whether or not, on the basis of the evidence found in the records, the
respondent court correctly adjudged the petitioner guilty of bad faith and negligence in filing the complaint against respondent Uson
sufficiently to warrant an award of moral and exemplary damages and attorney's fees in the total amount of P135,000.00.

The appellate court tried to justify the award by stating:

The plaintiff did not appeal from the findings of the lower court that the signatures appearing in the indemnity
agreement (Exh. C), purporting to be those of Miss Uson, are all forgeries, which meant that some other person,
upon the inducement of Maria Isabel Diaz, signed the names of Uson in said Exhibit C. This could only be done if
Exhibit C was signed in the absence of the representative of the plaintiff corporation, or because the corporation
entrusted blank copies or forms of the indemnity agreement to Maria Isabel Diaz to be signed and accomplished.
Herein lies the plaintiff's bad faith. The perpetration of the forgeries was made possible due to the negligence of
plaintiff. Yet, the plaintiff presented Crisoforo Lopez, its Assistant Manager, who had the temerity to claim that
Miss Uson signed Exhibit C. On top of all this is the uncontradicted testimony of Uson that before the case was filed
in court she personally informed Atty. Armando Abad, an official of plaintiff, that the signatures appearing to be
hers in Exhibit C are forgeries (pp. 13-15, t.s.n., Nov. 6, 1974). Plaintiff's negligence is also demonstrated by its
omission to request, as required of it by Commonwealth Act No. 465, otherwise known as the Residence
Certificate Law, Uson, if she was really present, to exhibit her latest residence certificate before it signed said
indemnity agreement. This circumstance likewise shows that Uson was not present during the execution of Exhibit
C.

Petitioner contends that bad faith and negligence cannot be deduced from the fact that it handed out blank forms of the indemnity
agreement to Maria Isabel Diaz for her and her co-signatories to accomplish without any representative from the petitioner
corporation being present and to return the same to the latter already duly notarized. Petitioner also maintains that neither can bad
faith be presumed from the fact that it pursued the filing of an action against Uson notwithstanding the fact that the latter had
already informed petitioner beforehand that her signatures on the said agreement were forged.

We find merit in the petition.

While petitioner might have been negligent in not verifying the authenticity of the signatures in the indemnity agreement, still the
same does not amount to bad faith as to justify the award of damages and the conclusion that the act of filing the complaint against
respondent Uson amounts to malicious prosecution In filing the action, the petitioner was only protecting its business interests by
trying to recover the amount it had already paid to the Philippine National Bank.

In a long line of cases, we have consistently ruled that in the absence of a wrongful act or omission or of fraud or bad faith, moral
damages cannot be awarded and that the adverse result of an action does not per se make the action wrongful and subject the actor
to the payment of damages, for the law could not have meant to impose a penalty on the right to litigate. (Salao v. Salao, 70 SCRA
86, 87, citing Barreto v. Arevalo, 99 Phil. 771, 779; Herrera v. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justina v. Gustilo, 61 O.G.
6959; Castillo v. Castillo, 95 SCRA 68; Mirasol v. De la Cruz, 84 SCRA 342, 343; citing Pacific Merchandising Corporation v. Diestro
Logging Development Corporation, 34 SCRA 704; Octot v. Ybañez 111 SCRA 84, 85; citing Ong Yiu v. Court of Appeals, 91 SCRA 223
and Inhelder Corporation v. Court of Appeals, 122 SCRA 584-585, citing Buenaventura v. Sto. Domingo, 103 Phil. 239). lwphl@itç

In the case at bar, the act of filing the complaint against respondent Uson was not at all motivated by ill will or by any desire to vex
and humiliate the respondent. This can be gleaned from the fact that after the termination of the case before the trial court, the
petitioner did not appeal the dismissal of the case against the respondent even though it knew that it would have a greater chance
of collecting what it paid for if all the defendants were adjudged to pay the amount in the indemnity agreement especially since the
main signatory to the agreement had already been declared in default and was nowhere to be found.

We agree with the trial court in its finding that:

As regards Uson's counterclaim against the plaintiff, the evidence does not support a finding that the filing of the
complaint against this defendant was done in bad faith and with malice. The plaintiff, it must be assumed was
guided solely by the records in its possession in the firing of this case and it cannot be faulted if the defendant
Uson was impleaded as a defendant since her name appears in the indemnity agreement and other supporting
papers. It must be borne in mind that this case was filed more than four years after the said document was
executed and, considering the volume of business done by the plaintiff of the same nature, defendant Angelina
Uson was only a name as far as it is concerned.

Neither can bad faith be presumed from the fact that inspite of the respondent's declaration outside the court that her signatures
were forged, the petitioner still included her in the complaint. There is no reason why such declaration should be given full faith and
credit by herein petitioner as to totally exclude respondent from the complaint. It is natural for a prospective defendant to deny any
participation or involvement in the subject matter of the litigation. Precisely, the very purpose of going to trial was to ascertain
whether or not her signatures were indeed forged. And as stated earlier, the mere fact that an action is later found to be based on
an erroneous ground does not per se make its initiator guilty of bad faith and liable for damages, much less in the amount of
P110,000.00. Sound principles of justice and public policy demand that persons shall have free resort to courts of law for redress of
wrongs and vindication of their rights without fear of later on standing trial for damages should their actions lose ground. (Inhelder
Corporation v. Court of Appeals, supra citing Buenaventura v. Sto. Domingo, 103 Phil. 239). In one case, we held that the award of
moral and exemplary damages was uncalled for on the ground that the petitioner had not acted with malice, fraud or in bad faith
despite the fact that petitioner in instituting the action, solely relied on a letter of the accounting firm which it knew was still
unverified, undetailed, and incomplete. (Panay Electric Co., Inc. v. Court of Appeals, 119 SCRA 459). We reiterate the reminder to
lower courts "to guard against the award of exhorbitant damages that are way out of proportion to the environmental
circumstances of a case and which time and again, this Court has reduced or eliminated. Judicial discretion granted to the courts in
the assessment of damages must always be exercised with balanced restraint and measured objectivity." Inhelder Corporation v.
Court of Appeals, supra). In the case at bar, even if the respondent were entitled to damages, the award of a total amount of
P135,000.00 as damages and attorney's fees was entirely way out of proportion.

In any case, we hold that the award of damages was erroneous. Moral damages are emphatically not intended to enrich a
complainant at the expense of a defendant; they are awarded only to enable the injured party to obtain means, diversion or
amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendants culpable action. In other
words, the award of moral damages is aimed at a restoration, within the limits of the possible of the spiritual status quo ante, and it
must be proportionate to the suffering inflicted. (Grand Union Supermarket, Inc. v. Espino, Jr., 94 SCRA 966, citing the concurring
and dissenting opinion of Justice J.B.L. Reyes in Pangasinan Transportation Company, Inc. v. Legaspi, 12 SCRA 598) In the absence of
a wrongful act or omission or of fraud or bad faith, petitioner cannot be adjudged to pay moral damages. The award of exemplary
damages and attorney's fees are likewise untenable for they can only be given in case the petitioner acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner and if the action instituted by it was clearly unfounded and so untenable as to amount to
gross and evident bad faith. (See Ong Yiu v. Court of Appeals, supra and Mirasol v. De la Cruz, supra, citing Rizal Surety & Insurance
Co. v. Court of Appeals, 20 SCRA 61). The records are bereft of proof to support any finding of bad faith on the part of the petitioner.
WHEREFORE, the petition is GRANTED. The decision of the Intermediate Appellate Court is hereby REVERSED and SET ASIDE and the
decision of the Court of First Instance of Manila, Branch XVI is REINSTATED and AFFIRMED in toto.

SO ORDERED.
iv. QUASI-DELICTS

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-12986             March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA ONG, petitioners-appellants,
vs.
CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondents-appellees.

Ross, Selph, Carrascoso and Janda for the respondents.

Bernabe Africa, etc. for the petitioners.

MAKALINTAL., J.:

This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed that of the Court of First
Instance of Manila dismissing petitioners' second amended complaint against respondents.

The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the afternoon of March 18, 1948 a
fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It started while gasoline was
being hosed from a tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of the hose
was inserted. The fire spread to and burned several neighboring houses, including the personal properties and effects inside them.
Their owners, among them petitioners here, sued respondents Caltex (Phil.), Inc. and Mateo Boquiren, the first as alleged owner of
the station and the second as its agent in charge of operation. Negligence on the part of both of them was attributed as the cause of
the fire.

The trial court and the Court of Appeals found that petitioners failed to prove negligence and that respondents had exercised due
care in the premises and with respect to the supervision of their employees.

The first question before Us refers to the admissibility of certain reports on the fire prepared by the Manila Police and Fire
Departments and by a certain Captain Tinio of the Armed Forces of the Philippines. Portions of the first two reports are as follows:

1. Police Department report: —

Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores was transferring gasoline
from a tank truck, plate No. T-5292 into the underground tank of the Caltex Gasoline Station located at the corner
of Rizal Avenue and Antipolo Street, this City, an unknown Filipino lighted a cigarette and threw the burning match
stick near the main valve of the said underground tank. Due to the gasoline fumes, fire suddenly blazed. Quick
action of Leandro Flores in pulling off the gasoline hose connecting the truck with the underground tank prevented
a terrific explosion. However, the flames scattered due to the hose from which the gasoline was spouting. It
burned the truck and the following accessorias and residences.

2. The Fire Department report: —

In connection with their allegation that the premises was (sic) subleased for the installation of a coca-cola and cigarette
stand, the complainants furnished this Office a copy of a photograph taken during the fire and which is submitted herewith.
it appears in this picture that there are in the premises a coca-cola cooler and a rack which according to information
gathered in the neighborhood contained cigarettes and matches, installed between the gasoline pumps and the
underground tanks.
The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the history of the gasoline station
and what the chief of the fire department had told him on the same subject.

The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence inadmissible. This ruling is now
assigned as error. It is contended: first, that said reports were admitted by the trial court without objection on the part of
respondents; secondly, that with respect to the police report (Exhibit V-Africa) which appears signed by a Detective Zapanta
allegedly "for Salvador Capacillo," the latter was presented as witness but respondents waived their right to cross-examine him
although they had the opportunity to do so; and thirdly, that in any event the said reports are admissible as an exception to the
hearsay rule under section 35 of Rule 123, now Rule 130.

The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953 (pp. 167-170) shows that the
reports in question, when offered as evidence, were objected to by counsel for each of respondents on the ground that they were
hearsay and that they were "irrelevant, immaterial and impertinent." Indeed, in the court's resolution only Exhibits J, K, K-5 and X-6
were admitted without objection; the admission of the others, including the disputed ones, carried no such explanation.

On the second point, although Detective Capacillo did take the witness stand, he was not examined and he did not testify as to the
facts mentioned in his alleged report (signed by Detective Zapanta). All he said was that he was one of those who investigated "the
location of the fire and, if possible, gather witnesses as to the occurrence, and that he brought the report with him. There was
nothing, therefore, on which he need be cross-examined; and the contents of the report, as to which he did not testify, did not
thereby become competent evidence. And even if he had testified, his testimony would still have been objectionable as far as
information gathered by him from third persons was concerned.

Petitioners maintain, however, that the reports in themselves, that is, without further testimonial evidence on their contents, fall
within the scope of section 35, Rule 123, which provides that "entries in official records made in the performance of his duty by a
public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are  prima facie evidence of
the facts therein stated."

There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made by a public officer, or by
another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his duties, or by
such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had
sufficient knowledge of the facts by him stated, which must have been acquired by him personally or through official information
(Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398).

Of the three requisites just stated, only the last need be considered here. Obviously the material facts recited in the reports as to the
cause and circumstances of the fire were not within the personal knowledge of the officers who conducted the investigation. Was
knowledge of such facts, however, acquired by them through official information? As to some facts the sources thereof are not even
identified. Others are attributed to Leopoldo Medina, referred to as an employee at the gas station were the fire occurred; to
Leandro Flores, driver of the tank truck from which gasoline was being transferred at the time to the underground tank of the
station; and to respondent Mateo Boquiren, who could not, according to Exhibit V-Africa, give any reason as to the origin of the fire.
To qualify their statements as "official information" acquired by the officers who prepared the reports, the persons who made the
statements not only must have personal knowledge of the facts stated but must have the duty to give such statements for record. 1

The reports in question do not constitute an exception to the hearsay rule; the facts stated therein were not acquired by the
reporting officers through official information, not having been given by the informants pursuant to any duty to do so.

The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur  should
apply so as to presume negligence on the part of appellees. Both the trial court and the appellate court refused to apply the doctrine
in the instant case on the grounds that "as to (its) applicability ... in the Philippines, there seems to he nothing definite," and that
while the rules do not prohibit its adoption in appropriate cases, "in the case at bar, however, we find no practical use for such
doctrine." The question deserves more than such summary dismissal. The doctrine has actually been applied in this jurisdiction, in
the case of Espiritu vs. Philippine Power and Development Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the
Court of Appeals was penned by Mr. Justice J.B.L. Reyes now a member of the Supreme Court.

The facts of that case are stated in the decision as follows:

In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading grass between the
municipalities of Bay and Calauan, in the province of Laguna, with clear weather and without any wind blowing, an electric
 transmission wire, installed and maintained by the defendant Philippine Power and Development Co., Inc. alongside the
road, suddenly parted, and one of the broken ends hit the head of the plaintiff as he was about to board the truck. As a
result, plaintiff received the full shock of 4,400 volts carried by the wire and was knocked unconscious to the ground. The
electric charge coursed through his body and caused extensive and serious multiple burns from skull to legs, leaving the
bone exposed in some parts and causing intense pain and wounds that were not completely healed when the case was
tried on June 18, 1947, over one year after the mishap.

The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific act of negligence, but the
appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said:

The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its defense. While it is the rule,
as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the burden of proof is on the
plaintiff to establish that the proximate cause of his injury was the negligence of the defendant, it is also a recognized
principal that "where the thing which caused injury, without fault of the injured person, is under the exclusive control of the
defendant and the injury is such as in the ordinary course of things does not occur if he having such control use proper care,
it affords reasonable evidence, in the absence of the explanation, that the injury arose from defendant's want of care."

And the burden of evidence is shifted to him to establish that he has observed due care and diligence. (San Juan Light &
Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name of res ipsa loquitur (the transaction
speaks for itself), and is peculiarly applicable to the case at bar, where it is unquestioned that the plaintiff had every right to
be on the highway, and the electric wire was under the sole control of defendant company. In the ordinary course of
events, electric wires do not part suddenly in fair weather and injure people, unless they are subjected to unusual strain
and stress or there are defects in their installation, maintenance and supervision; just as barrels do not ordinarily roll out of
the warehouse windows to injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co. 722; 159 Eng.
Reprint 299, the leading case that established that rule). Consequently, in the absence of contributory negligence (which is
admittedly not present), the fact that the wire snapped suffices to raise a reasonable presumption of negligence in its
installation, care and maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts inconsistent with
negligence, it is for the defendant to prove."

It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the Supreme Court, but we do not
consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. Gasoline is a highly combustible
material, in the storage and sale of which extreme care must be taken. On the other hand, fire is not considered a fortuitous event,
as it arises almost invariably from some act of man. A case strikingly similar to the one before Us is Jones vs. Shell Petroleum
Corporation, et al., 171 So. 447:

Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was leased to the Shell Petroleum
Corporation for a gasoline filling station. On October 8, 1934, during the term of the lease, while gasoline was being
transferred from the tank wagon, also operated by the Shell Petroleum Corporation, to the underground tank of the
station, a fire started with resulting damages to the building owned by Jones. Alleging that the damages to his building
amounted to $516.95, Jones sued the Shell Petroleum Corporation for the recovery of that amount. The judge of the district
court, after hearing the testimony, concluded that plaintiff was entitled to a recovery and rendered judgment in his favor
for $427.82. The Court of Appeals for the First Circuit reversed this judgment, on the ground the testimony failed to show
with reasonable certainty any negligence on the part of the Shell Petroleum Corporation or any of its agents or employees.
Plaintiff applied to this Court for a Writ of Review which was granted, and the case is now before us for decision. 1äwphï1.ñët

In resolving the issue of negligence, the Supreme Court of Louisiana held:

Plaintiff's petition contains two distinct charges of negligence — one relating to the cause of the fire and the other relating
to the spreading of the gasoline about the filling station.

Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses were placed on the stand by
the defendant.

Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established by the record that the filling
station and the tank truck were under the control of the defendant and operated by its agents or employees. We further
find from the uncontradicted testimony of plaintiff's witnesses that fire started in the underground tank attached to the
filling station while it was being filled from the tank truck and while both the tank and the truck were in charge of and being
 operated by the agents or employees of the defendant, extended to the hose and tank truck, and was communicated from
the burning hose, tank truck, and escaping gasoline to the building owned by the plaintiff.

Predicated on these circumstances and the further circumstance of defendant's failure to explain the cause of the fire or to
show its lack of knowledge of the cause, plaintiff has evoked the doctrine of res ipsa loquitur. There are many cases in which
the doctrine may be successfully invoked and this, we think, is one of them.

Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants
and the accident is such as in the ordinary course of things does not happen if those who have its management or control
use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose from want
of care. (45 C.J. #768, p. 1193).

This statement of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last resort. Some of
the cases in this jurisdiction in which the doctrine has been applied are the following, viz.: Maus v. Broderick, 51 La. Ann.
1153, 25 So. 977; Hebert v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101, 100 Am. St. Rep. 505; Willis v.
Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115 La. 560, 39 So. 599.

The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its appliances,
equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring
houses. The persons who knew or could have known how the fire started were appellees and their employees, but they gave no
explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care.

In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa) the following appears:

Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of occupies a lot approximately
10 m x 10 m at the southwest corner of Rizal Avenue and Antipolo. The location is within a very busy business district near
the Obrero Market, a railroad crossing and very thickly populated neighborhood where a great number of people mill
around t

until

gasoline

tever be theWactjvities of these peopleor lighting a cigarette cannot be excluded and this constitute a secondary hazard to
its operation which in turn endangers the entire neighborhood to conflagration.

Furthermore, aside from precautions already taken by its operator the concrete walls south and west adjoining the
neighborhood are only 2-1/2 meters high at most and cannot avoid the flames from leaping over it in case of fire.

Records show that there have been two cases of fire which caused not only material damages but desperation and also
panic in the neighborhood.

Although the soft drinks stand had been eliminated, this gasoline service station is also used by its operator as a garage and
repair shop for his fleet of taxicabs numbering ten or more, adding another risk to the possible outbreak of fire at this
already small but crowded gasoline station.

The foregoing report, having been submitted by a police officer in the performance of his duties on the basis of his own personal
observation of the facts reported, may properly be considered as an exception to the hearsay rule. These facts, descriptive of the
location and objective circumstances surrounding the operation of the gasoline station in question, strengthen the presumption of
negligence under the doctrine of res ipsa loquitur, since on their face they called for more stringent measures of caution than those
which would satisfy the standard of due diligence under ordinary circumstances. There is no more eloquent demonstration of this
than the statement of Leandro Flores before the police investigator. Flores was the driver of the gasoline tank wagon who, alone and
without assistance, was transferring the contents thereof into the underground storage when the fire broke out. He said: "Before
loading the underground tank there were no people, but while the loading was going on, there were people who went to drink coca-
cola (at the coca-cola stand) which is about a meter from the hole leading to the underground tank." He added that when the tank
was almost filled he went to the tank truck to close the valve, and while he had his back turned to the "manhole" he, heard someone
shout "fire."
Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part
of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. As it was the
concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of galvanized iron sheets, which would
predictably crumple and melt when subjected to intense heat. Defendants' negligence, therefore, was not only with respect to the
cause of the fire but also with respect to the spread thereof to the neighboring houses.

There is an admission on the part of Boquiren in his amended answer to the second amended complaint that "the fire was caused
through the acts of a stranger who, without authority, or permission of answering defendant, passed through the gasoline station
and negligently threw a lighted match in the premises." No evidence on this point was adduced, but assuming the allegation to be
true — certainly any unfavorable inference from the admission may be taken against Boquiren — it does not extenuate his
negligence. A decision of the Supreme Court of Texas, upon facts analogous to those of the present case, states the rule which we
find acceptable here. "It is the rule that those who distribute a dangerous article or agent, owe a degree of protection to the public
proportionate to and commensurate with a danger involved ... we think it is the generally accepted rule as applied to torts that 'if
the effects of the actor's negligent conduct actively and continuously operate to bring about harm to another, the fact that the
active and substantially simultaneous operation of the effects of a third person's innocent, tortious or criminal act is also a
substantial factor in bringing about the harm, does not protect the actor from liability.' (Restatement of the Law of Torts, vol. 2, p.
1184, #439). Stated in another way, "The intention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer
from consequences of negligence, if such negligence directly and proximately cooperates with the independent cause in the
resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.)

The next issue is whether Caltex should be held liable for the damages caused to appellants. This issue depends on whether
Boquiren was an independent contractor, as held by the Court of Appeals, or an agent of Caltex. This question, in the light of the
facts not controverted, is one of law and hence may be passed upon by this Court. These facts are: (1) Boquiren made an admission
that he was an agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the equipment therein; (3) Caltex
exercised control over Boquiren in the management of the state; (4) the delivery truck used in delivering gasoline to the station had
the name of CALTEX painted on it; and (5) the license to store gasoline at the station was in the name of Caltex, which paid the
license fees. (Exhibit T-Africa; Exhibit U-Africa; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa).

In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his drivers to remove gasoline
from the truck into the tank and alleged that the "alleged driver, if one there was, was not in his employ, the driver being an
employee of the Caltex (Phil.) Inc. and/or the owners of the gasoline station." It is true that Boquiren later on amended his answer,
and that among the changes was one to the effect that he was not acting as agent of Caltex. But then again, in his motion to dismiss
appellants' second amended complaint the ground alleged was that it stated no cause of action since under the allegations thereof
he was merely acting as agent of Caltex, such that he could not have incurred personal liability. A motion to dismiss on this ground is
deemed to be an admission of the facts alleged in the complaint.

Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the business conducted at the
service station in question was owned and operated by Boquiren. But Caltex did not present any contract with Boquiren that would
reveal the nature of their relationship at the time of the fire. There must have been one in existence at that time. Instead, what was
presented was a license agreement manifestly tailored for purposes of this case, since it was entered into shortly before the
expiration of the one-year period it was intended to operate. This so-called license agreement (Exhibit 5-Caltex) was executed on
November 29, 1948, but made effective as of January 1, 1948 so as to cover the date of the fire, namely, March 18, 1948. This
retroactivity provision is quite significant, and gives rise to the conclusion that it was designed precisely to free Caltex from any
responsibility with respect to the fire, as shown by the clause that Caltex "shall not be liable for any injury to person or property
while in the property herein licensed, it being understood and agreed that LICENSEE (Boquiren) is not an employee, representative
or agent of LICENSOR (Caltex)."

But even if the license agreement were to govern, Boquiren can hardly be considered an independent contractor. Under that
agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the use of the premises and all the equipment therein.
He could sell only Caltex Products. Maintenance of the station and its equipment was subject to the approval, in other words
control, of Caltex. Boquiren could not assign or transfer his rights as licensee without the consent of Caltex. The license agreement
was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until terminated by Caltex upon two days prior
written notice. Caltex could at any time cancel and terminate the agreement in case Boquiren ceased to sell Caltex products, or did
not conduct the business with due diligence, in the judgment of Caltex. Termination of the contract was therefore a right granted
only to Caltex but not to Boquiren. These provisions of the contract show the extent of the control of Caltex over Boquiren. The
control was such that the latter was virtually an employee of the former.
 Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or
terminate his services at will; that the service station belonged to the company and bore its tradename and the operator
sold only the products of the company; that the equipment used by the operator belonged to the company and were just
loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company
supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of
the products sold by the operator was fixed by the company and not by the operator; and that the receipts signed by the
operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the
company and not an independent contractor should not be disturbed.

To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the
contracting parties, should thereby a controversy as to what they really had intended to enter into, but the way the
contracting parties do or perform their respective obligations stipulated or agreed upon may be shown and inquired into,
and should such performance conflict with the name or title given the contract by the parties, the former must prevail over
the latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance Company of Newark, New Jersey, 100 Phil. 757).

The written contract was apparently drawn for the purpose of creating the apparent relationship of employer and
independent contractor, and of avoiding liability for the negligence of the employees about the station; but the company
was not satisfied to allow such relationship to exist. The evidence shows that it immediately assumed control, and
proceeded to direct the method by which the work contracted for should be performed. By reserving the right to terminate
the contract at will, it retained the means of compelling submission to its orders. Having elected to assume control and to
direct the means and methods by which the work has to be performed, it must be held liable for the negligence of those
performing service under its direction. We think the evidence was sufficient to sustain the verdict of the jury. (Gulf Refining
Company v. Rogers, 57 S.W. 2d, 183).

Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices were presented to show that
Boquiren had bought said gasoline from Caltex. Neither was there a sales contract to prove the same.

As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of P2,000.00 collected by them on
the insurance of the house. The deduction is now challenged as erroneous on the ground that Article 2207 of the New Civil Code,
which provides for the subrogation of the insurer to the rights of the insured, was not yet in effect when the loss took place.
However, regardless of the silence of the law on this point at that time, the amount that should be recovered be measured by the
damages actually suffered, otherwise the principle prohibiting unjust enrichment would be violated. With respect to the claim of the
heirs of Ong P7,500.00 was adjudged by the lower court on the basis of the assessed value of the property destroyed, namely,
P1,500.00, disregarding the testimony of one of the Ong children that said property was worth P4,000.00. We agree that the court
erred, since it is of common knowledge that the assessment for taxation purposes is not an accurate gauge of fair market value, and
in this case should not prevail over positive evidence of such value. The heirs of Ong are therefore entitled to P10,000.00.

Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants, and ordered to
pay them the aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from the filing of the complaint, and costs.

v. EASEMENTS
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 172077               October 9, 2009

BICOL AGRO-INDUSTRIAL PRODUCERS COOPERATIVE, INC. (BAPCI), Petitioner,

vs.
EDMUNDO O. OBIAS, PERFECTO O. OBIAS, VICTOR BAGASINA, ELENA BENOSA, MELCHOR BRANDES, ROGELIO MONTERO, PEDRO
MONTERO, CLAUDIO RESARI, PILAR GALON, ANTONIO BUISON, PRUDENCIO BENOSA, JR., MARIA VILLAMER and ROBERTO
PADUA, Respondent.

DECISION

PERALTA, J.:

Before this Court is a Petition for Review on certiorari 1 under Rule 65 of the Rules of Court, seeking to set aside the August 24, 2005
Decision2 and March 28, 2006 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 59016.

The facts of the case:

Sometime in 1972, the Bicol Sugar Development Corporation (BISUDECO) was established at Himaao, Pili, Camarines Sur. In the
same year, BISUDECO constructed a road ("the disputed road") – measuring approximately 7 meters wide and 2.9 kilometers long.
The disputed road was used by BISUDECO in hauling and transporting sugarcane to and from its mill site (Pensumil) and has thus
become indispensable to its sugar milling operations. 4

On October 30, 1992, petitioner Bicol Agro-Industrial Producers Cooperative, Inc. acquired the assets of BISUDECO. On April 19,
1993, petitioner filed a Complaint5 against respondents Edmundo Obias, Perfecto Obias, Victor Bagasina, Elena Benosa, Melchor
Brandes, Rogelio Montero, Pedro Montero, Claudio Resari, Pilar Galon, Antonio Buison, Prudencio Benosa, Jr., Victor Bagasina Jr.,
Maria Villamer, and Roberto Padua, alleging that on March 27, 1993 and April 3, 1993, respondents unjustifiably barricaded the
disputed road by placing bamboos, woods, placards and stones across it, preventing petitioner’s and the other sugar planter’s
vehicles from passing through the disputed road, thereby causing serious damage and prejudice to petitioner. 6

Petitioner alleged that BISUDECO constructed the disputed road pursuant to an agreement with the owners of the ricefields the road
traversed. The agreement provides that BISUDECO shall employ the children and relatives of the landowners in exchange for the
construction of the road on their properties. Petitioner contends that through prolonged and continuous use of the disputed road,
BISUDECO acquired a right of way over the properties of the landowners, which right of way in turn was acquired by it when it
bought BISUDECO’s assets. Petitioner prayed that respondents be permanently ordered to restrain from barricading the disputed
road and from obstructing its free passage.7

In an Order8 dated April 19, 1993, the Regional Trial Court of Pili (RTC), Camarines Sur, 5th Judicial Region, Branch 31, ordered
respondents, their agents and representatives to cease and desist from placing barricades on the disputed road. 9

In their Answer,10 respondents denied having entered into an agreement with BISUDECO regarding the construction and the use of
the disputed road. They alleged that BISUDECO, surreptitiously and without their knowledge and consent, constructed the disputed
road on their properties and has since then intermittently and discontinuously used the disputed road for hauling sugarcane despite
their repeated protests. Respondents claimed they tolerated BISUDECO in the construction and the use of the road since BISUDECO
was a government-owned and controlled corporation, and the entire country was then under Martial Law. Respondents likewise
denied that the road has become a public road, since no public funds were used for its construction and maintenance. Moreover,
respondents alleged that with the exception of Edmundo and Perfecto Obias, they are actual tillers of the ricelands, having acquired
their rights over said lands under Presidential Decree No. 27 (PD 27). Edmundo and Perfecto Obias are the owners of the eastern
portion of the property on which a portion of the road going to BISUDECO was constructed. Respondents denied that they
barricaded the road.11
Jaime Manubay and Manolito Maralit, for themselves and in representation of other sugarcane planters, filed the first complaint-in-
intervention.12

Petitioner filed an Amended Complaint13 and with leave of court a Re-Amended Complaint,14 where it averred, as an alternative cause
of action in the event the lower court does not find merit in its causes of action, that it will avail of the benefits provided for under
Article 64915 of the New Civil Code. Petitioner thus demanded from respondents a right of way over the disputed road for its use. 16

Respondents filed an Answer17 to refute petitioner’s alternative cause of action. Respondents claimed that the road from the
sugarmill to the Maharlika Highway at Barangay Romero, Bula, Camarines Sur, which exits at the Rural Bank of Bula site, had a
distance of only about 15 kilometers; hence, respondents asserted that said road was shorter and was a more appropriate right of
way than the disputed road.18

On July 21, 1993, the RTC issued a Writ of Preliminary Injunction 19 ordering the respondents to desist from constructing barricades
across the road.

On June 28, 1994, nine other cooperatives 20 filed their Complaint-in-Intervention.21

On June 25, 1997 the RTC rendered a Decision,22 the dispositive portion of which reads:

WHEREFORE, premises considered, a decision is hereby rendered declaring the Writ of Preliminary Injunction issued against all the
herein defendants, their agents, representatives and such other persons acting in their behalf, permanent and perpetual BUT the
plaintiff Bicol Agro-Industrial Cooperative, Inc., (BAPCI) is hereby ordered to pay the owners of the lots affected by the road, viz:
Pedro Montero – ₱299,040.00; Pedro Galon – ₱52,920.00; Clara Padua – ₱46,410.00; Antonio Buizon – ₱35,070.00; Rogelio Montero
– ₱41,160.00; Maria Villamer – ₱41,580.00; Melchor Brandes – ₱76,440.00; Prudencio Benosa – ₱41, 650.00; Elena Benosa –
₱39,550.00; Victor Bagasina, Jr. – ₱39,410.00; and Claudio Resari – ₱40,950.00. Upon full payment thereof, the plaintiff shall be
declared the absolute owner of the road in question. Legal rate if interest is hereby imposed upon the plaintiff from the finality of
this decision until fully payment hereof. No costs.

SO ORDERED.23

The RTC ruled that petitioner failed to present any concrete evidence to prove that there was an agreement between BISUDECO and
respondents for the construction of the disputed road. 24 Moreover, it held that petitioner did not acquire the same by
prescription.25 The RTC, however, also held that petitioner was entitled to a compulsory easement of right of way as provided for
under Article 649 of the New Civil Code upon payment of proper indemnity to respondents. 26

Both parties filed a motion for reconsideration of the RTC Decision. Petitioner contended that: (1) the value of the land is excessive;
(2) the evidence is insufficient to justify the award; (3) the decision is contrary to law and jurisprudence. Respondents, on the other
hand, alleged that: (1) the trial court erred in declaring the persons mentioned in the decision’s dispositive portion to be entitled to
indemnity for the construction and the use of the disputed road; (2) BAPCI should not be declared the absolute owner of the
disputed road upon full payment of the indemnity due to the defendants; and (3) the decision failed to award damages. 27

On September 24, 1997, the RTC denied both motions for reconsideration. 28 The parties then appealed to the CA.

On August 24, 2005, the CA rendered a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The assailed decision of the Regional Trial Court, Branch 31, Pili,
Camarines Sur, in Civil Case No. P-1899 is hereby MODIFIED as follows: the awards of Php46,410.00 to Clara Padua and
Php41,650.00 to Prudencio Benosa are hereby DELETED, and the declaration that the plaintiff BAPCI shall become the absolute
owner of the disputed road upon full payment of indemnity is REVERSED and SET ASIDE. Accordingly, the owners of the servient
estate in the easement of right of way recognized in this Decision shall retain ownership of the lands affected by the easement in
accordance with Art. 630 of the Civil Code. We hereby AFFIRM the appeal in all other respects.

SO ORDERED.29

The CA affirmed the finding of the RTC that there was no conclusive proof to sufficiently establish the existence of an agreement
between BISUDECO and respondents regarding the construction of the disputed road. 30 Moreover, the CA also declared that an
easement of right of way is discontinuous and as such cannot be acquired by prescription. 31 The CA likewise affirmed the finding of
the RTC that petitioner was entitled to a compulsory easement of right of way upon payment of proper indemnity to respondents.
The CA, however, declared that ownership over the disputed road should remain with respondents, despite the grant of a
compulsory easement.32 Lastly, the CA deleted the awards to Prudencio Benosa (Benosa) and Clara Padua (Padua), since the former
never claimed ownership of any portion of the lands affected by the disputed road and the latter was not a party to the proceedings
below.33

Petitioner then filed a Motion for Reconsideration alleging among others that the CA Decision failed to rule on the issue of estoppel
and laches. Moreover, Benosa and Padua filed a Motion for Reconsideration assailing the portion of the CA Decision deleting the
award of indemnity to them. On March 28, 2006, the CA issued a Resolution denying the same.

Hence, herein petition, with petitioner raising the following assignment of errors, to wit:

I.

THE HONORABLE COURT OF APPEALS ERRED SERIOUSLY IN NOT FINDING THAT THERE WAS FORGED AN AGREEMENT BETWEEN
BISUDECO MANAGEMENT AND THE PRIVATE RESPONDENTS FOR THE CONTRUCTION OF THE ROAD IN QUESTION.

II.

THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE PRINCIPLES OF PRESCRIPTION,
LACHES AND ESTOPPEL IN THE CASE AT BAR.

III.

THE HONORABLE COURT OF APPEALS ERRED IN COMPLETELY DISREGARDING THE CLASSIFICATION OF THE ROAD IN QUESTION AS
BARANGAY ROAD.

IV.

IN THE ALTERNATIVE CAUSE OF ACTION, THE PUBLIC RESPONDENT SERIOUSLY ERRED IN CONSIDERING THE VALUATION OF THE
LANDS AFFECTED BY THE ROAD IN 1994, AND NOT IN 1974, WHEN SAID ROAD WAS CONSTRUCTED.

V.

THE HONORABLE PUBLIC RESPONDENT ERRED SERIOUSLY WHEN IT FAILED ALSO TO CONSIDER THE LEGAL PRINCIPLE OF UNJUST
ENRIGHTMENT AT THE EXPENSE OF ANOTHER.34

At the outset, this Court shall address some procedural matters. Quite noticeably, herein petition is denominated as one filed under
Rule 6535 of the Rules of Court notwithstanding that it seeks to assail the Decision and Resolution of the CA. Clearly, petitioner had
availed of the improper remedy as the appeal from a final disposition of the CA is a petition for review under Rule 45 and not a
special civil action under Rule 65 of the Rules of Court. 36

In Active Realty and Development Corporation v. Fernandez, 37 this Court discussed the difference between petitions filed under Rule
65 and Rule 45, viz:

A petition for certiorari under Rule 65 is proper to correct errors of jurisdiction committed by the lower court, or grave abuse of
discretion which is tantamount to lack of jurisdiction. This remedy can be availed of when "there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of law."

Appeal by certiorari  under Rule 45 of the Rules of Court, on the other hand, is a mode of appeal available to a party desiring to raise
only questions of law from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courts whenever authorized by law.

x x x The general rule is that the remedy to obtain reversal or modification of judgment on the merits is appeal. Thus, the proper
remedy for the petitioner should have been a petition for review on certiorari  under Rule 45 of the Rules of Court since the decision
sought to be reversed is that of the CA. The existence and availability of the right of appeal proscribes a resort to certiorari, because
one of the requisites for availment of the latter is precisely that "there should be no appeal. The remedy of appeal under Rule 45 of
the Rules of Court was still available to the petitioner. 38

Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the
action or proceeding involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the
appellate process over the original case.39 Moreover, it is basic that one cannot avail of the remedy provided for under Rule 65 when
an appeal is still available. Hence, petitioner should have filed its petition under Rule 45.

The procedural infirmity notwithstanding and in the interest of substantial justice, this Court shall consider herein petition as one
filed under Rule 45 especially since it was filed well within the reglementary period proscribed under the said Rule. The Court also
takes notice that the assignment of errors raised by petitioner does not allege grave abuse of discretion or lack of jurisdiction on the
part of the CA.

On the Existence of an Agreement between BISUDECO and Respondents

Anent the first error raised, petitioner argues that the CA erred in not finding that BISUDECO and respondents forged an agreement
for the construction of the road in dispute. Petitioner thus asserts its entitlement to an easement of right of way over the properties
of respondents by virtue of said agreement.

An easement of right of way was succinctly explained by the CA in the following manner, to wit:

Easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a
different owner. By its creation, easement is established either by law (in which case it is a legal easement) or by will of the parties (a
voluntary easement). In terms of use, easement may either be continuous or discontinuous. The easement of right of way – the
privilege of persons or a particular class of persons to pass over another’s land, usually through one particular path or linen – is
characterized as a discontinuous easement because its use is in intervals and depends on the act of man. Because of this
character, an easement of a right of way may only be acquired by virtue of a title .40

Article 622 of the New Civil Code is the applicable law in the case at bar, viz:

Art. 622. Continuous non-apparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of
a title.

Based on the foregoing, in order for petitioner to acquire the disputed road as an easement of right-of-way, it was incumbent upon
petitioner to show its right by title or by an agreement with the owners of the lands that said road traversed.

While conceding that they have no direct evidence of the alleged agreement, petitioner posits that they presented circumstantial
evidence which, if taken collectively, would prove its existence. 41 Specifically, petitioner cites the following circumstances, to wit:

a. The agreement was of public knowledge.42 Allegedly BISUDECO and respondents entered into an agreement for the
construction of the road provided that the latter, their children or relatives were employed with BISUDECO.

b. The road was continuously used by BISUDECO and the public in general. 43

c. There was no protest or complaint from respondents for almost a period of two decades. 44

d. The portions of the land formerly belonging to respondents affected by the road were already segregated and surveyed
from the main lots.45

e. The road in dispute is already a barangay road.

The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition for review on
certiorari. This rule, however, is not iron-clad and admits certain exceptions, such as when (1) the conclusion is grounded on
speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of
discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of
specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of
evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals
manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10)
the findings of the Court of Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both
parties.46

After a painstaking review of the records, this Court finds no justification to warrant the application of any exception to the general
rule.

Crucial to the petitioner’s cause was its burden of proving the existence of the alleged agreement between BISUDECO and
respondents for the construction of the road. In this regard, the RTC found that petitioner failed to prove its existence, to wit:

It is clear that the plaintiff failed to present any concrete evidence to prove that there was such an agreement between BISUDECO
and defendants. Hereunder quoted are the testimonies of plaintiff’s witnesses regarding the alleged agreement.

Romeo Deveterbo, Transportation Superintendent of BISUDECO testified –

Cross Examination by Atty. Pejo

Q: You also mentioned that there was an agreement between Senator Cea, Mr. Obias and some of the tenants?

A: Yes.

Q: You mentioned that this was not in writing, am I right?

A: Yes.

Q: How did you know about it that it was not in writing, who told you, Senator Cea?

A: It was commonly known to all original employees of the BISUDECO.

Q: You know it from the management?

A: From co-employees.

Q: You learned about that agreement from you co-employees?

A: Yes.

Q: In other words, therefore, that is why you said you are confused between Edmundo Cea and Perfecto Obias because you
just learned it from other employees and you were never present when they talked about it, am I right?

A: Yes. x x x

To this effect also is the testimony of Angel Lobo, head of the agricultural Department of BAPCI, to wit:

A: Yes, your Honor?

COURT: From where did you learn?

A: From people whom I talked with at that time and it is a public common knowledge at that time.

xxx

Atty. Carandang: I repeat my question, Your Honor.

 You said you acquired it from or because of common knowledge and you mentioned some people. Who are those people
you are referring to whom you acquired that knowledge?

A: Most of all, the late Benjamin Bagasina, Barangay Captain at that time who was our employee in consideration of this
agreement, then we have also a Civil Engineering Head, Civil Engineering Department who is responsible for the
maintenance of this road. I learned from him that this arrangement established the fact why this road was constructed.

Q: Who is the head of the Engineering Dept?

xxx

COURT: May answer.

A: Engineer Pablo Tordilla who was then the head of our Civil Engineering Dept.

But this Engineer Pablo Tordilla, Lobo’s alleged source of the information, was never presented in Court. And, according to
the Chief Accountant of BAPCI, David Severo:

A: When I was interviewing Mrs. Alma Montero Penaflor she filed to me a certain arrangement related to the used of the
land to Himaao as road going to the central.

COURT: You mean Himaao Millsite road?

A: Yes, sir.

Atty. Carandang:

Q: What arrangement is that supposedly filed to you?

A: She told me in exchange for the use of the road, the relatives or owners or tenants of the land will be hired by the sugar
Central?

COURT:

Q: So, only the tenants not the owners?

A: The tenant’s children the road belongs.

xxx

Finally, intervenor Antonio Austria, in trying to show you that there was consent and approval on the part of the defendant
Edmundo Obias to give the right of way to BISUDECO at the time to be used in hauling the sugarcane of the planters to the
Central, averred the following uncertain statements:

A: Well, he has (sic) having a case against PENSUNIL, regarding the property I think the right of way going to PENSUMIL right
now we discuss it and he said he is allowing it anymore but then I reminded him wayback in 1974 to 1980 he was one of the
biggest planters in the part of Partido so he consented to the late I think Edmundo Cea, the owner of BISUDECO at that time
to pass his property since he is also milling a lot of things at that time and many other things one of the concession mill was
I think some of the tenants there in Himaao will be employed in the mill.

xxx

These aforequoted testimonies of the plaintiff’s witnesses failed to satisfactorily establish the plaintiff’s contention that there was
such an agreement. Likewise, the list of the Employees of Defendants’ relatives, son/daughter employed by the BISUDECO (Exhibit
H) does not in any manner prove the alleged agreement. 47
For its part, the CA also ruled that petitioner failed to prove the existence of the said agreement, to wit:

Like the lower court, we found no conclusive proof to sufficiently establish the existence of an agreement between BISUDECO and
the defendants-appellants regarding the construction and the use of the disputed road. The lower court correctly disbelieved the
plaintiffs-appellants’ contention that an agreement existed because there is simply no direct evidence to support this allegation.
BAPCI submitted purely circumstantial evidence that are not sufficiently adequate as basis for the inference than an agreement
existed. By themselves, the circumstances the plaintiffs-appellants cited – i.e., the employment of sixteen (16) relatives of the
defendants-appellants; the defendants-appellants’ unjustified silence; the fact that the existence of the agreement is known to
everyone, etc. – are events susceptible of diverse interpretations and do not necessarily lead to BAPCI’s desired conclusion.
Additionally, the testimonies that the plaintiffs-appellants presented are mainly hearsay, as not one among the witnesses had
personal knowledge of the agreement by reason of direct participation in the agreement or because the witness was present when
the agreement was concluded by the parties. Thus, given the defendants-appellants’ categorical denial that an agreement existed,
we sustain the lower’s conclusion that no agreement existed between BISUDECO and the defendants-appellants. 48

Based on the foregoing, the inability of petitioner to prove the existence of an agreement militates its allegations in herein petition.
On this score, both the RTC and the CA are one in ruling that petitioner had failed to prove the existence of the agreement between
BISUDECO and the respondents for the construction of the road. Also, well-established is the rule that "factual findings of the Court
of Appeals are conclusive on the parties and carry even more weight when the said court affirms the factual findings of the trial
court."49 Hence, this Court finds no reason to reverse such findings.

On Acquisition by Prescription

Petitioner would have this Court re-examine Costabella Corporation v. Court of Appeals 50 (Costabella) where the Court held that, "It
is already well-established that a right of way is discontinuous and, as such, cannot be acquired by prescription." 51 Petitioner
contends that some recognized authorities52 share its view that an easement of right of way may be acquired by prescription.

Be that as it may, this Court finds no reason to re-examine Costabella. This Court is guided by Bogo-Medellin Milling Co., Inc. v. Court
of Appeals53 (Bogo-Medellin), involving the construction of a railroad track to a sugar mill. In Bogo-Medellin, this Court discussed the
discontinuous nature of an easement of right of way and the rule that the same cannot be acquired by prescription, to wit:

Continuous and apparent easements  are acquired either by virtue of a title or by prescription of ten years.

The trial court and the Court of Appeals both upheld this view for the reason that the railroad right of way was, according to
them, continuous and apparent in nature. The more or less permanent railroad tracks were visually apparent and
they continuously  occupied the subject strip of land from 1959 (the year the easement granted by Feliciana Santillan to petitioner
expired). Thus, with the lapse of the 10-year prescriptive period in 1969, petitioner supposedly acquired the easement of right of
way over the subject land.

Following the logic of the courts a quo, if a road for the use of vehicles or the passage of persons is permanently cemented or
asphalted, then the right of way over it becomes continuous in nature. The reasoning is erroneous.

Under civil law and its jurisprudence, easements are either continuous or discontinuous according to the manner they are
exercised, not according to the presence of apparent signs or physical indications of the existence of such easements. Thus,
easement is continuous if its use is, or may be, incessant without the intervention of any act of man, like the easement of drainage;
and it is discontinuous if it is used at intervals and depends on the act of man, like the easement of right of way.

The easement of right of way is considered discontinuous because it is exercised only if a person passes or sets foot on somebody
else’s land. Like a road for the passage of vehicles or persons, an easement of right of way of railroad tracks is discontinuous because
the right is exercised only if and when a train operated by a person passes over another's property. In other words, the very exercise
of the servitude depends upon the act or intervention of man which is the very essence of discontinuous easements.

The presence of more or less permanent railroad tracks does not, in any way, convert the nature of an easement of right of way to
one that is continuous. It is not the presence of apparent signs or physical indications  showing the existence of an easement, but
rather the manner of exercise thereof, that categorizes such easement into continuous or discontinuous. The presence of physical or
visual signs only classifies an easement into apparent or non-apparent. Thus, a road (which reveals a right of way) and a window
(which evidences a right to light and view) are apparent easements, while an easement of not building beyond a certain height is
non-apparent.
In Cuba, it has been held that the existence of a permanent railway does not make the right of way a continuous one; it is only
apparent. Therefore, it cannot be acquired by prescription. In Louisiana, it has also been held that a right of passage over another's
land cannot be claimed by prescription because this easement is discontinuous and can be established only by title.

In this case, the presence of railroad tracks for the passage of petitioner’s trains denotes the existence of an apparent but
discontinuous easement of right of way. And under Article 622 of the Civil Code, discontinuous easements, whether apparent or not,
may be acquired only by title. Unfortunately, petitioner Bomedco never acquired any title over the use of the railroad right of way
whether by law, donation, testamentary succession or contract. Its use of the right of way, however long, never resulted in its
acquisition of the easement because, under Article 622, the discontinuous easement of a railroad right of way can only be
acquired by title and not by prescription.54

Applying Bogo-Medellin to the case at bar, the conclusion is inevitable that the road in dispute is a discontinuous easement
notwithstanding that the same may be apparent. To reiterate, easements are either continuous or discontinuous according to the
manner they are exercised, not according to the presence of apparent signs or physical indications of the existence of such
easements. Hence, even if the road in dispute has been improved and maintained over a number of years, it will not change its
discontinuous nature but simply make the same apparent. To stress, Article 622 of the New Civil Code states that discontinuous
easements, whether apparent or not, may be acquired only by virtue of a title.

On Laches and Estoppel

Petitioner argues that estoppel and laches bar respondents from exercising ownership rights over the properties traversed by the
road in dispute. In support of said argument, petitioner posits that BISUDECO had been peacefully and continuously using the road
without any complaint or opposition on the part of the respondents for almost twenty years. Respondents, on the other hand, claim
that they merely tolerated the use of their land as BISUDECO was a government-owned and controlled corporation and considering
that the disputed road was constructed during the time of Martial Law.

There is no absolute rule on what constitutes laches. It is a rule of equity and applied not to penalize neglect or sleeping on one’s
rights, but rather to avoid recognizing a right when to do so would result in a clearly unfair situation. The question of laches is
addressed to the sound discretion of the court and each case must be decided according to its particular circumstances. 55 It is the
better rule that courts, under the principle of equity, should not be guided or bound strictly by the statute of limitations or the
doctrine of laches if wrong or injustice will result. 56

In herein petition, the CA denied petitioner’s argument in the wise:

As previously explained in our Decision, the applicable law is Article 622 of the Civil Code of the Philippines, which provides:

Art. 622. Continuous non-apparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of
a title.

The eminent jurist, former Senator Arturo M. Tolentino, opines that this provision seeks to prevent the imposition of a burden on a
tenement based purely on the generosity, tolerance and spirit of neighborliness of the owners thereof.

We applied the cited provision to the case in ruling that no easement of right of way was acquired; based on the evidence
presented, the plaintiff-appellant failed to satisfactorily prove the existence of an agreement evidencing any right or title to use the
disputed road. We additionally rejected the plaintiff-appellant’s position that it had acquired the easement of right of way through
acquisitive prescription, as settled jurisprudence states that an easement of right of way cannot be acquired by prescription.

We hold the same view on the issue of acquisition of an easement of right of way by laches. To our mind, settled jurisprudence on
the application of the principle of estoppel by laches militates against the acquisition of an easement of right of way by laches.

Laches is a doctrine in equity and our courts are basically courts of law and not courts of equity; equity, which has been aptly
described as "justice outside legality," should be applied only in the absence of, and never against, statutory law; Aeguetas nunguam
contravenit legis. Based on this principle, we find that the positive mandate of Article 622 of the Civil Code – the statutory provision
requiring title as basis for the acquisition of an easement of a right of way – precludes the application of the equitable principle of
laches.57
This Court agrees with the CA. The fact that the law is categorical that discontinuous easements cannot be acquired by prescription
militates against petitioner’s claim of laches. To stress, discontinuous easements can only be acquired by title. More importantly,
whether or not the elements of laches are present is a question involving a factual determination by the trial court. 58 Hence, the
same being a question of fact, it cannot be the proper subject of herein petition. On the other hand, as to the issue of estoppel, this
Court likewise agrees with the finding of the CA that petitioner did not present any evidence that would show an admission,
representation or conduct by respondents that will give rise to estoppel. 59

Classification of the Road in Dispute as a Barangay Road

Petitioner argues that the CA erred when it disregarded the classification of the road in question as a barangay road. In support of
said argument, petitioner presented Exhibit Q, a Tax Declaration or Field Appraisal and Assessment Sheet 60 (1991 FAAS) with Survey
Number 1688-40 and PIN No. 026-01-009-08-037, dated April 30, 1991, which they claim proves that the road in dispute is already a
barangay road.

The same is again a question of fact which cannot be the proper subject of herein petition. Petitioner cannot have this Court re-
examine the evidentiary value of the documents it presented before the RTC as the same is not a function of this Court. In any case,
after a closer scrutiny of the 1991 FAAS, this Court holds that the same is insufficient to prove petitioner’s claim.

Respondents, in their Comment,61 argue against the classification of the road in dispute as a barangay road in the wise:

Petitioner also stated that the Honorable Court of Appeals fails to consider the fact that the owner of the road in question is the
Municipality of Pili in the Province of Camarines Sur and as proof of such claim they presented and marked as Exhibit Q, tax
declaration no. 009-756 or Annex D of their Petition. However, private respondents wish to call the attention of this Honorable Court
to the following:

a. Tax Declaration No. 009-828 attached as Annex C-6 of the Verified Petition declared in the name of Edmundo Obias (one
of the private respondents);

b. Actual Use portion of said Annex C-6 marked as Exh. No. N-6-a-1 which states "Road Lot (BISUDECO Road)"; and

c. The Memoranda portion in the second page of Annex C-6 which states: "Revised to declare the property in The name of
the rightful owner, Edmundo Obias based from the approved subdivision plan, Bsd-05-000055 (OLT) & technical
descriptions. Likewise area was made to conform with the said subdivision plan from 4,773 sq.m. to 11,209 sq.m.

Obviously, the alleged Exhibit Q of the Petitioner is an erroneous tax declaration, thus, negates the claim of the Petitioner that the
same is owned by the Municipality of Pili and has been declared a barangay road. Private respondents cannot understand why the
herein Petitioner alleged this matter and used it as a proof to support their claim when they are already in possession of a tax
declaration correcting the same and even attached the same as part of their Petition. 62

In its Reply,63 petitioner counters:

II. While Petitioners claim that the road belongs to the Municipal Government of Pili, yet what they attached to the Petition as Annex
"C-7" is a tax declaration of Edmundo Obias. Petitioners have the following observations:

xxxx

(b) That land of Edmundo Obias covered by Annex "C-6" to the Petition is not included or involved in this case at bar. His name does
not appear to be awarded in the Decision of the Honorable Court of Appeals and also in the list of beneficiaries to receive monetary
considerations made by Mr. Angel Lobo.64

After a painstaking review of the records, this Court is more inclined to believe the claim of respondents. The claim of petitioner to
the effect that the land of Edmundo Obias is not included in the case at bar is misleading. It may be true that Edmundo was not
awarded indemnity by the lower courts, however, the same does not mean that his lands do not form part of the subject matter of
herein petition.
It bears to stress that Edmundo claimed in the CA that he was the owner of the affected ricelands and that respondents were merely
his tenants-beneficiaries under PD 27, otherwise known as the Tenant Emancipation Decree. 65 The CA, however, dismissed said claim
because it was raised for the first time on appeal. It also held that the averments in the documents submitted by Edmundo in the
RTC described respondents as "owners" of the land they till; hence, the same constituted binding judicial admissions. 66

Based on the foregoing, petitioner's attempt to refute the contents of the 1995 FAAS by claiming that the lands of Edmundo are not
involved in the case at bar must fail. It is clear that respondents are the tenant-beneficiaries of the lands of Edmundo under PD 27;
hence, contrary to the claim of petitioner, the lands of Edmundo are the subject matter of herein petition.

In addition, it is curious that petitioner relies on the 1991 FAAS yet finds exception to the contents of the 1995 FAAS. After a closer
scrutiny of both documents, it appears to this Court that the land described in the 1991 FAAS is also the same land described in the
1995 FAAS. Both FAAS involve land measuring 4,773 square meters. Likewise, both FAAS have the same PIN Number (026-01-009-
08-037) and Survey Number (1688-40). Accordingly, the annotation contained in the 1995 FAAS, to the effect that a "BISUDECO
road" does not belong to the Municipality of Pili, serves to weaken petitioner’s claim. 1avvphi1

The Court also considers portions of the RTC Decision where it can be gathered that the road in dispute is not a barangay road, to
wit:

At this point, it is important to note that defendants admitted the identity of the road and the area of the same as reflected in the
Commissioner’s Report, during the Pre-trial held last September 19, 1995.

Engr. Roberto Revilla testified that a portion of the road inside the property of Edmundo Obias, is a barangay road which are lots A-
52 sq.m., B-789 sq.m. and C-655 sq.m. or a total of 1,497 sq.m. which starts from the intersection of the National Road and the road
to Pensumil up to Corner 9 of Lot 37, Bsc-05-000055 (OCT) in the name of Pedro O. Montero. Engr. Revilla concluded that the actual
area occupied by the road in question is the sum of areas of Lots D-2042 sq.m., E-2230 sq.m., F-756 sq.m., G-663 sq.m., H-501 sq.m. ,
I-588 sq.m., J-594 sq.m., K-l092 sq.m., L-595 sq.m., M-459 sq.m., N-106 sq.m., O-585 sq.m. and P-563 sq.m., or a total of 10,774
square meters. Said road starts from corner 9 of the lot of Pedro Montero which is equivalent to corner 25 of Lot 40 Bsd-05-000055
(OCT) going to the Southern Direction and ending at corner 25 of Lot 1688 Cad. 291 Pili Cadastre covered by OCT No. 120-217 (1276)
in the name of spouses Edmundo Obias and Nelly Valencia and spouses Perfecto Obias and Adelaida Abenojar. 67

The RTC findings of fact thus shows that while certain portions of the property of Edmundo is a barangay road, the same only
pertains to Lots A, B and C, or a total of 1,497 square meters, which is distinct from the road in dispute which pertains to different
lots (lots E to P) and covers a total area of 10,774 square meters.

In light of the foregoing, considering that the contents of the 1991 FAAS is disputable, it was incumbent on petitioner to present
documents which would evidence the expropriation of the road in dispute by the local government as a barangay road. Under the
prevailing circumstances, the documents of the expropriation proceedings would have been the best evidence available and the
absence thereof is certainly damaging to petitioner’s cause.

Amount of Indemnity Due & On Unjust Enrichment

Petitioner manifested in the RTC its desire, in the alternative, to avail of a compulsory easement of right of way as provided for
under Article 649 the New Civil Code. Said relief was granted by the RTC because of the unavailability of another adequate outlet
from the sugar mill to the highway. Despite the grant of a compulsory easement of right of way, petitioner, however, assails both the
RTC and CA Decision with regard to the amount of indemnity due respondents.

Petitioner likens the proceedings at bar to an expropriation proceeding where just compensation must be based on the value of the
land at the time of taking.68 Petitioner thus maintains that the compensation due to respondents should have been computed in
1974 when the road was constructed.69

This Court does not agree. Article 649 of the New Civil Code states:

The owner, or any person who by virtue of a real right may cultivate or use any immovable, which is surrounded by other
immovables pertaining to other persons and without adequate outlet to a public highway, is entitled to demand a right of way
through the neighboring estates, after payment of the proper indemnity.
Should this easement be established in such a manner that its use may be continuous for all the needs of the dominant estate,
establishing a permanent passage, the indemnity shall consist of the value of the land occupied and the amount of the damage
cause to the servient estate.

Based on the foregoing, it is clear that the law does not provide for a specific formula for the valuation of the land. Neither does the
same state that the value of the land must be computed at the time of taking. The only primordial consideration is that the same
should consist of the value of the land and the amount of damage caused to the servient estate. Hence, the same is a question of
fact which should be left to the sound discretion of the RTC. In this regard, the RTC ruled:

The market value per hectare in 1974 or at the time of taking or prior to its conversion to road is ₱6,500/hectare, the same being a
first class riceland irrigated therefore the total market value is ₱6,864.31. The 1994 Market Value of ₱1,292,880.00 is the value
assigned to the property in question after it was already developed as a road lot where the unit value applied per square meter is
₱120.00 for 5th class residential lot.

It has to be remembered however that the cost of transforming the land to road was entirely borne by BISUDECO including its
maintenance, repair and the cost of the improvements and by plaintiff after its acquisition. Thus, the ₱120.00 unit value is exorbitant
while the 1974 valuation of ₱6,500/hectare is low and unreasonable.

In fine, this Court will adopt the unit value of ₱70.00 per square meter as shown by Exhibit "Q," the Real Property Field Assessment
Sheet No. 009-756.70

In addition, the CA ruled:

We stress that the amount of proper indemnity due to the landowners does not only relate to the market value of their property but
comprehends as well the corresponding damage caused to the servient estate. It is undisputed that the BISUDECO began the
construction and used of the disputed road in 1974. While the maintenance was borne by BISUDECO and now by BAPCI who
principally used the disputed road for their sugar milling operations, the defendants-appellants have been deprived of the use do
their ricefields because of the road’s construction since 1974. Thus, it is but proper to compensate them for this deprivation, over
and above the prevailing market value of the affected property. To our mind, in light of the circumstances surrounding the
acquisition of the affected ricelands and the construction of the disputed road, particularly the absence of a definitive agreement to
show that the defendants-appellants consented to the road’s construction, we find the ₱70.00 per square meter indemnity awarded
by the lower court in accordance with the Real Property Field Assessment Sheet No. 009-756, to be fair and reasonable under the
circumstances.71

Withal, this Court finds no error as to the proper amount of indemnity due respondents as the findings of both the RTC and the CA
appear to be fair and reasonable under the prevailing circumstances and in accordance with the provisions of Article 649 of the New
Civil Code.

WHEREFORE, premises considered, the petition is DENIED. The August 24, 2005 Decision and October 27, 2005 Resolution of the
Court of Appeals in CA-G.R. CV No. 59016 are hereby AFFIRMED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-14116             June 30, 1960

LAUREANA A. CID, petitioner,
vs.
IRENE P. JAVIER, MANUEL P. JAVIER, JOSEFINA P. JAVIER, FERNANDO P. JAVIER, JOSE P. JAVIER, GUILLERMO P. JAVIER, ISIDORA P.
JAVIER, BENJAMIN P. JAVIER, and LEONOR CRISOLOGO, respondents.

Antonio V. Raquiza for petitioner.

Cesar D. Javier for respondents.

BARRERA, J.:

The legal issue presented in this petition to review by certiorari a decision of the Court of appeals, is whether the respondents Irene
P. Javier, et al., owners of a building standing on their lot with windows overlooking the adjacent lot, had acquired by prescription an
enforceable easement of light and view arising from a verbal prohibition to obstruct such view and light, alleged to have been made
upon petitioner's
predecessor-in-interest as owner of the adjoining lot, both of which lots being covered by Torrens titles. Both the trial court and the
Court of Appeals are of the view and so declared that respondents Javier et al., did acquire such easement and gave judgment
accordingly. Hence, petitioner has come to us seeking review, alleging that both courts are in error.

The windows in question are admittedly in respondents' own building erected on their own lot. The easement, if there is any, is
therefore a negative one.1 The alleged prohibition having been avowedly made in 1913 or 1914, before the present Civil Code took
effect, the applicable legal provision is Article 538 of the Spanish Civil Code which provides:

Art. 538. In order to acquire by prescription the easements referred to in the next preceding article, the time of the
possession shall be computed, ... in negative easements, from the day on which the owner of the dominant estate has, by a
formal act, forbidden the owner of the servient estate to perform any act which would be lawful without the easement.
(Emphasis supplied.)

As may be seen, the only question hinges on the interpretation of the phrase "a formal act". The lower court and the Court of
Appeals considered any prohibition made by the owner of the dominant estate, be it oral or written, sufficient compliance with the
law. The Court of Appeals declared:

In the light of the foregoing decisions, (Cortes vs. Yu Tibo, 2 Phil., 26 and the decisions of the Supreme Court of Spain
therein cited), we agree with the trial court that the "formal act" of prohibition contemplated by Art. 538 of the old Civil
Code may be either a written or verbal act. The decisions of the Supreme Court of Spain above-quoted do not at all mention
written but merely some act of prohibition. . . . .

We are inclined to take the contrary view. The law is explicit. It requires not any  form of prohibition, but exacts, in a parenthetical
expression, for emphasis, the doing not only of a specific, particular act, but a formal act. The following definitions are pertinent:

Formal—or pertaining to form, characterized by one due form or order, done in due form with a solemnity regular; relating
to matters of form. (C. J. S. vol. 37, p. 115.)

Act—In civil law, a writing which states in legal form that a thing has been done, said or agreed. (1 Bouvier's Law Dictionary,
p. 150, citing Marlin Report.)

From these definitions, it would appear that the phrase "formal act" would require not merely any writing, but one executed in due
form and/or with solemnity. That this is the intendment of the law although not expressed in exact language is the reason for
the clarification2 made in Article 621 of the new Civil Code which specifically requires the prohibition to be in "an instrument
acknowledged before a notary public". This is as it should be. Easements are in the nature of an encumbrance on the servient estate.
They constitute a limitation of the dominical right of the owner of the subjected property. Hence, they can be acquired only by title
and by prescription, in the case of positive easement, only as a result of some sort of invasion, apparent and continuous, of the
servient estate. By the same token, negative easements can not be acquired by less formal means. Hence, the requirement that the
prohibition (the equivalent of the act of invasion) should be by "a formal act", "an instrument acknowledged before a notary public."
The Court of Appeals found as undisputed the fact 'that plaintiffs' lot (dominant) as well as defendant's lot (servient) are covered by
Original Certificates of Title Nos. 7225 and 7545, respectively", both issued by the Register of Deeds of Ilocos Norte, in pursuance of
the decrees of registration issued on December 27, 1937, in Cadastral Case No. 51, G.L.R.O. Cadastral Record No. 1212 of Laoag,
Ilocos Norte. Certified copies of these certificates of title are found as Annexes "A" and "B", pages 77 to 80 inclusive of the Record on
Appeal. In both of them, it does not appear any annotation in respect to the easement supposedly acquired by prescription which,
counting the twenty (20) years from 1913 or 1914, would have already ripened by 1937, date of the decrees of registration.
Consequently, even conceding arguendo  that such an easement has been acquired, it had been cut off or extinguished by the
registration of the servient estate under the Torrens System without the easement being annotated on the corresponding certificate
of title, pursuant to Section 39 of the Land Registration Act. 3

Wherefore, the decision of the Court of Appeals appealed from is hereby reversed; the injunction issued herein dissolved; and the
case remanded to the court of origin for adjudication of the damages, if any, occasioned by the issuance of the injunction. Without
pronouncement as to costs. So ordered.

Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., and Gutierrez David, JJ., concur.

RESOLUTION

January 20, 1961

BARRERA, J.:

The Decision in this case, promulgated on June 30, 1960, provided, among others, for the lifting of the preliminary injunction issued
by the lower court directed against petitioner's construction of a building allegedly being made in violation of Municipal Ordinance
No. 3, series of 1909 of the municipality of Laoag, and in disregard of respondents' right to light and view.

In their motion for reconsideration timely presented, respondents claim that the findings of the lower court, affirmed by the Court of
Appeals, that the building under construction violated the aforementioned ordinance (from which no appeal was interposed) having
become final, justify the issuance of and making permanent the injunction already issued.

There is no question that respondents' house, as well as that of petitioner, are within their respective properties; that respondents'
wall stands only 50 centimeters from the boundary of the 2 lots, whereas, the wall of the petitioner's building was constructed 1
meter from the boundary or 1 meter and 50 centimeters from the wall of the house of respondents. As a result, the lower court
found that the eaves of the two houses overlap each other by 24 centimeters. This, the Court of Appeals declared to be violative of
Ordinance No. 3, series of 1903, amending Sections 1, 5, 6, and 13 of the Municipal Ordinance of June 3, 1903, which requires a
distance of 2 meters, measured from eaves to eaves of adjoining buildings of strong materials.

It must be noted, however, that the Ordinance in question was adopted since 1909 and was, therefore, already in force at the time
the house of respondents was reconstructed in 1946 after the building originally erected thereon was burned in 1942. If respondents
constructed their house at least one meter from the boundary line, as petitioner has constructed hers, there would be no
overlapping of the eaves and there would not be any violation of the ordinance. As things now stand, in view of such construction by
the respondents, the overlapping of the eaves and the consequential violation of the ordinance can not entirely be attributed to
petitioner, as to require her alone to make the adjustments necessary for the observance of the 2-meter eaves-to-eaves distance
from her neighbors. If any compliance with the ordinance would be made not only by petitioner, but also by the respondents. There
is, therefore, no reason for the continuation of the injunction.

In view of the foregoing, and as the other grounds respondents' motion for reconsideration had been already duly considered in the
Decision, the said motion is hereby denied, for lack of merit. So ordered.