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1. ANSAY VS. NDC, G.R. NO. 13667, APRIL 29, 1960.

SYLLABUS

1. NATURAL OBLIGATIONS; ELEMENT OF; VOLUNTARY FULFILLMENT; WHEN RETENTION CAN BE ORDERED. — An element
of natural obligation before it can be cognizable by the court is voluntary fulfillment by the obligor. Retention can be ordered
only after there has been voluntary performance.
2. ID.; BONUS NOT DEMANDABLE AND ENFORCEABLE; EXCEPTION. — A bonus is not a demandable and enforceable
obligation, except when it is made a part of the wage or salary compensation. (Philippine Education Co. v. CIR and the Union of
Philippine Education Co. Employees (NLU), 92 Phil., 381; 48 Off. Gaz. 5278.) Hence, the grant thereof does not generally
constitute a natural obligation on the part of the company.

DECISION

On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a complaint praying for a 20%
Christmas bonus for the years 1954 and 1955. The court a quo on appellees’ motion to dismiss, issued the following order:

"Considering the motion to dismiss filed on 15 August, 1956, set for this morning; considering that at the hearing thereof, only
respondents appeared thru counsel and there was no appearance for the plaintiffs although the court waited for sometime for
them; considering, however, that petitioners have submitted an opposition which the court will consider together with the
arguments presented by respondents and the Exhibits marked and presented, namely, Exhibits 1 to 5, at the hearing of the
motion to dismiss; considering that the action in brief is one to compel respondents to declare a Christmas bonus for
petitioners workers in the National Development Company; considering that the Court does not see how petitioners may have
a cause of action to secure such bonus because:
"(a) A bonus is an act of liberality and the court takes it that it is not within its judicial powers to command respondents to be
liberal;
"(b) Petitioners admit that respondents are not under legal duty to give such bonus but that they had only ask that such bonus
be given to them because it is a moral obligation of respondents to give that but as this Court understands, it has no power to
compel a party to comply with a moral obligation (Art. 142, New Civil Code).

"IN VIEW WHEREOF, dismissed. No pronouncement as to costs."

A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.

Appellants contend that there exists a cause of action in their complaint because their claim rests on moral grounds or what in
brief is defined by law as a natural obligation.

Since appellants admit that appellees are not under legal obligation to give such claimed bonus; that the grant arises only from
a moral obligation or the natural obligation that they discussed in their brief, this Court feels it urgent to reproduce at this
point, the definition and meaning of natural obligation.

Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations are a right of action to compel
their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of
action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has
been delivered or rendered by reason thereof"

It is thus readily seen that an element of natural obligation before it can be cognizable by the court is voluntary fulfillment by
the obligor. Certainly retention can be ordered but only after there has been voluntary performance. But here there has been
no voluntary performance. In fact, the court cannot order the performance.

At this point, we would like to reiterate what we said in the case of Philippine Education Co. v. CIR and the Union of Philippine
Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278) —

"From the legal point of view a bonus is not a demandable and enforceable obligation. It is so when it is made a part of the
wage or salary compensation."

And while it is true that the subsequent case of H. E. Heacock v. National Labor Union, Et Al., 95 Phil., 553; 50 Off. Gaz., 4253,
we stated that:red:chanrobles.com.ph

"Even if a bonus is not demandable for not forming part of the wage, salary or compensation of an employee, the same may
nevertheless, be granted on equitable consideration as when it was given in the past, though withheld in succeeding two years
from low salaried employees due to salary increases."

still the facts in said Heacock case are not the same as in the instant one, and hence the ruling applied in said case cannot be
considered in the present action.

Premises considered, the order appealed from is hereby affirmed, without pronouncement as to costs.

Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia, Barrera and Gutierrez David, JJ., concur.
 Page |2

2. LUIS PICHEL VS. PRUDENCIO ALONZO G.R.NO. L- 36902 JANUARY 30, 1982
This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City dated January 5, 1973 in Civil
Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant." 

This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed
by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine
Government under Republic Act No. 477. Pertinent portions of the document sued upon read as follows: 

That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine
Currency, in hand paid by the VENDEE to the entire satisfaction of the VENDOR, the VENDOR hereby sells transfers, and
conveys, by way of absolute sale, all the coconut fruits of his coconut land, designated as Lot No. 21 - Subdivision Plan No. Psd-
32465, situated at Balactasan Plantation, Lamitan, Basilan City, Philippines; 

That for the herein sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein
as well as for future fruits to be produced on the said parcel of land during the years period; which shag commence to run as of
SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic); 

That the delivery of the subject matter of the Deed of Sale shall be from time to time and at the expense of the VENDEE who
shall do the harvesting and gathering of the fruits; 

That the Vendor's right, title, interest and participation herein conveyed is of his own exclusive and absolute property, free
from any liens and encumbrances and he warrants to the Vendee good title thereto and to defend the same against any and all
claims of all persons whomsoever. 1

After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in part read thus: 

The following facts are admitted by the parties: 

Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot No. 21 of Subdivision Plan
Psd 32465 of Balactasan, Lamitan, Basilan City in accordance with Republic Act No. 477. The award was cancelled by the
Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff was proved to have alienated the land
to another, in violation of law. In 197 2, plaintiff's rights to the land were reinstated.

On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the coconut trees which may be harvested in the
land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of
sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part of the consideration of the
sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of
the latter. Pending said payment plaintiff refused to snow the defendant to make any harvest.

In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of
the coconut trees in the land.

xxx xxx xxx

Considering the foregoing, two issues appear posed by the complaint and the answer which must needs be tested in the
crucible of a trial on the merits, and they are: 

First.- Whether or nor defendant actually paid to plaintiff the full sum of P4,200.00 upon execution of the deed of sale.

Second.- Is the deed of sale, Exhibit 'A', the prohibited encumbrance contemplated in Section 8 of Republic Act No. 477? 2

Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed that his client ... admits fun payment
thereof by defendant. 3 The remaining issue being one of law, the Court below considered the case submitted for summary
judgment on the basis of the pleadings of the parties, and the admission of facts and documentary evidence presented at the
pre-trial conference.chanroblesvirtualawlibrary

The lower court rendered its decision now under review, holding that although the agreement in question is denominated by
the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and
purposes, a contract of lease of the land itself. According to the Court: 

... the sale aforestated has given defendant complete control and enjoyment of the improvements of the land. That the contract
is consensual; that its purpose is to allow the enjoyment or use of a thing; that it is onerous because rent or price certain is
stipulated; and that the enjoyment or use of the thing certain is stipulated to be for a certain and definite period of time, are
characteristics which admit of no other conclusion. ... The provisions of the contract itself and its characteristics govern its
nature. 4

The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477 which
provides thus:

Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, land acquired under the provisions of
this Act or any permanent improvements thereon shall not be thereon and for a term of ten years from and after the date of
issuance of the certificate of title, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration
of such period.
 Page |3

Any occupant or applicant of lands under this Act who transfers whatever rights he has acquired on said lands and/or on the
improvements thereon before the date of the award or signature of the contract of sale, shall not be entitled to apply for
another piece of agricultural land or urban, homesite or residential lot, as the case may be, from the National Abaca and Other
Fibers Corporation; and such transfer shall be considered null and void. 5

The dispositive portion of the lower Court's decision states:

WHEREFORE, it is the judgment of this Court that the deed of sale, Exhibit 'A', should be, as it is, hereby declared nun and void;
that plaintiff be, as he is, ordered to pay back to defendant the consideration of the sale in the sum of P4,200.00 the same to
bear legal interest from the date of the filing of the complaint until paid; that defendant shall pay to the plaintiff the sum of
P500.00 as attorney's fees.

Costs against the defendant. 6

Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the
respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled
previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs. Sua  7 wherein it was
categorically stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic Act No. 477
does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate
reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that
"until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and
possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that
he may have over the same property." 8 

There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on
January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that the
award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein respondent is
not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the
case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could
exercise all the rights pertaining to a grantee with respect to Lot No. 21.

This brings Us to the issues raised by the instant Petition. In his Brief, petitioner contends that the lower Court erred: 

1. In resorting to construction and interpretation of the deed of sale in question where the terms thereof are clear and
unambiguous and leave no doubt as to the intention of the parties; 

2. In declaring - granting without admitting that an interpretation is necessary - the deed of sale in question to be a contract of
lease over the land itself where the respondent himself waived and abandoned his claim that said deed did not express the
true agreement of the parties, and on the contrary, respondent admitted at the pre-trial that his agreement with petitioner was
one of sale of the fruits of the coconut trees on the land; 

3. In deciding a question which was not in issue when it declared the deed of sale in question to be a contract of lease over Lot
21; 

4. In declaring furthermore the deed of sale in question to be a contract of lease over the land itself on the basis of facts which
were not proved in evidence; 

5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract of sale; 

6. In not deciding squarely and to the point the issue as to whether or not the deed of sale in question is an encumbrance on
the land and its improvements prohibited by Section 8 of Republic Act 477; and 

7. In awarding respondent attorney's fees even granting, without admitting, that the deed of sale in question is violative of
Section 8 of Republic Act 477.

The first five assigned errors are interrelated, hence, We shall consider them together. To begin with, We agree with petitioner
that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any
ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the
agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of
the Civil Code of the Philippines which provides that: 

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control ... .

Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract
according to its express terms, interpretation being resorted to only when such literal application is impossible. 9

Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document
evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for the lease of the land itself as
found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of
the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968;
up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale.
It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus: 
 Page |4

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from
September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil
Code, things having a potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending
crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing Mechem on Sales
and American cases said which have potential existence may be the subject matter of sale. Here, the Supreme Court, citing
Mechem on Sales and American cases said: 

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to
come into existence as the natural increment or usual incident of something already in existence, and then belonging to the
vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67
Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man
may sell property of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard is
expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the
wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or
young animals not yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and
Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).

We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease of the
land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question fits the
definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a
price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The
essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership,
while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing
leased.

In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held: 

Since according to article 1543 of the same Code the contract of lease is defined as the giving or the concession of the
enjoyment or use of a thing for a specified time and fixed price, and since such contract is a form of enjoyment of the property,
it is evident that it must be regarded as one of the means of enjoyment referred to in said article 398, inasmuch as the terms
enjoyment, use, and benefit involve the same and analogous meaning relative to the general utility of which a given thing is
capable. (104 Jurisprudencia Civil, 443)

In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and
enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes
possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain exclusive
use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact
from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits." The
vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of
all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees
cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each
other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A
transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the
principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further
to include the lease of the land itself.

The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated above,
refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower
Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It was from the
context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the instant case.

Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of Section
8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of
the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or
alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are
things incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built,
planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery,
animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of
which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or
industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of
by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative
to sell the coconut fruits of the trees growing on the property.

By virtue of R.A. No. 477,  bona fide occupants, veterans, members of guerilla organizations and other qualified persons were
given the opportunity to acquire government lands by purchase, taking into account their limited means. It was intended for
 Page |5

these persons to make good and productive use of the lands awarded to them, not only to enable them to improve their
standard of living, but likewise to help provide for the annual payments to the Government of the purchase price of the lots
awarded to them. Section 8 was included, as stated by the Court a quo, to protect the grantees from themselves and the
incursions of opportunists who prey on their misery and poverty." It is there to insure that the grantees themselves benefit
from their respective lots, to the exclusion of other persons.

The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of the law
is thereby achieved, for the grantee is encouraged and induced to be more industrious and productive, thus making it possible
for him and his family to be economically self-sufficient and to lead a respectable life. At the same time, the Government is
assured of payment on the annual installments on the land. We agree with herein petitioner that it could not have been the
intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it
would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the
real and complete sense.chanroblesvirtualawlibrary

Respondent through counsel, in his Answer to the Petition contends that even granting arguendo that he executed a deed of
sale of the coconut fruits, he has the "privilege to change his mind and claim it as (an) implied lease," and he has the "legitimate
right" to file an action for annulment "which no law can stop." He claims it is his "sole construction of the meaning of the
transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either misapplies the law or is trying too hard
and going too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, after having received the
consideration for the sale of his coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the
prejudice of petitioner who contracted in good faith and for a consideration.

The issue raised by the seventh assignment of error as to the propriety of the award of attorney's fees made by the lower Court
need not be passed upon, such award having been apparently based on the erroneous finding and conclusion that the contract
at bar is one of lease. We shall limit Ourselves to the question of whether or not in accordance with Our ruling in this case,
respondent is entitled to an award of attorney's fees. The Civil Code provides that: 

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:

(1) When exemplary damages are awarded; 

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest; 

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff; 

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and
demandable claim; 

(6) In actions for legal support; 

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers; 

(8) In actions for indemnity under workmen's compensation and employer's liability laws; 

(9) In a separate civil action to recover civil liability arising from a crime; 

(10) When at least double judicial costs are awarded; 

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be
recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

We find that none of the legal grounds enumerated above exists to justify or warrant the grant of attorney's fees to herein
respondent.

IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another one is entered dismissing the
Complaint. Without costs.

SO ORDERED.
 Page |6

3. BENIGNO DEL RIO VS. CARLO PALANCA.

G.R. NO. L-2450. MAY 31, 1949
This suit was brought to recover money which plaintiff alleges to have furnished from December, 1942 to February, 1945 for
the support and subsistence of defendant's five minor natural children. The amount is itemized in plaintiff's Exhibit A, a
statement signed by the minor's mother and which reads as follows:

Por la presente certifico que en el periodo que cubre del 1 de noviembre de 1942 hastaaa el 31 de enero de 11945 he recibido
en calidad de prestamo y coninteres del 6% anuaal de Don Benigno del Rio las cantidades que mas abajo se detallan en sus
correspondientes recibos:

Recibo primero, 31-Dic-19443 ...................................... P7,200.00

Recibo segundo, 1-Sept-1944 ...................................... 18,668.00

Recibo tercero, 31-Dic-11945 ....................................... 81,400.00

Recibo carto, 21-Ene-1945 ...........................................     54,000.00

Total .................................................................................. P161,2268.00

Son:

Ciento Sesentaa y un Mil Doscientoss sesentta y ocho pesos.

S. E. u O

Manila, 1 de Marzo de1945 (Fda.)

Maria Cuartero Gomez
Tutora de los Menores Palanca Cuatero

Nota: — Aqui no estaa incluido un prestamo hecho a Don Vicente Singson Encarnacion el 19 de Septt. de 1944 del que es
sollidariaaa y mancomunadamente fiador Don Benigno del Rio, prestamo que tiene que reconocer Don Carlos Palanca.

The action is based on article 1894 of the Civil Code which reads:

Cuando, sin conocimiento del obligado a prestar alimentos, los diese un extrañ o, este tendra derecho a reclamarlos de aacquel,
a no constar que los dio por officio de piedad y sin aammino de reclamarlos.

Analyzing the foregoing provision, this Court observed in Ramirez vs. Redfern, 49 Phil., 849, that "For one to ecover under the
provisions of article 1894 of the Civil Code, it must be alleged and proved, first, that support has been furnished a dependent of
one bound to give support but who fails to do so; second, that the support was supplied by a tranger;and third, that the
support was given without the knowledge of the person charged with the duty."

With reference to the first requisite, the record reveals that in acase for support instituted by Maria Dolores Cuartero inn
behalf of her children against the defendant, the Curt of First Instance of Manila handed down a decision on September 22,
1943, approvinng an agreement by the parties wherebythe defendant promised to paay the mother of the mmminors P1,500 a
month for their maintenance. It is also appearss that before that date — on May 9, 1942 — the parties had signed a carta-
convenio for the same purpose but for a lower rate of allowance per month. It is not denied that the defendant more than
complied with the terms of the above decision. Besides P1,500 a month, he sent the children extra cash and foodstuffs, shoes
and clothings.

And the plaintiff admittedly was aware of the foregoing arrangement. What he say is that P1,500 a month was utterly
insufficient. The remedy in that case was to ask the court to increase the allowance. It may be said in this connection that if the
value of the preavaling Japanese currency had deteriorate, the court, in our opinion, retained the jurisdication to increase or
diminish the allowance as the circumstances might justify. However, as matter of fact, P1,500 a month was deemed by the
court as late as August 8, 1944, to be adequate. In denying a motion of the children mother to raise the allowance, the court
stated that P1,500 was sufficient to pullthe children through those critical days in comparative comport.

The third requirement of the law is also lacking. The plaintiff made the alleged advances not only with the knowledge but
apparently against the wishes of the defendant. In Exhibit F, a memorandum dated January 1, 1943, and sent by the plaintiff to
the defendant, Del Rio informed Palanca that up to December 31, 1942, he had bande Maria Dolores Cuartero P750 as a loan
for the support and education of the defendant's children and requested that that amount be paid. It will be noted that in the
same Exhibit, the plaintiff complained that the defendant had not answered his previous letters, "recordandole los prestamos
que yo le hago a Doñ a Maria y Vd. se hace sorio."

In the face of this attitude of the defendant, the plaintiff was not justified in continuing supplying money to the mother of the
children, unless he wanted to give it out of charity or without the expectation of recovering it from the defendant. His remedy
is against Maria Dolores Cuartero.

This conclusion makes unnecessary a discussion of the second requirement. It suffices to estate that the plaintiff and one of the
children were engaged and were married afterward.
 Page |7

G.R. No. L-2450             May 31, 1949

VERONICA RUPERTO, petitioner, vs. CEFERINO FERNANDO and LUCIO M. TIANCO, Judge of Municipal Court of
Rizal City, respondents.

From the record before us, it appears that a complaint of ejectment was filed by Ceferino Fernando, one of the respondents in
this case, against Veronica Ruperto, petitioner, with the municipal court of Rizal City, in which the following, among others, is
alleged:

2. That the plaintiff is the exclusive and lawful lessee of a store space at the Libertad Public Market, Rizal City, by virtue of a
lease contract executed and entered into by and between Rufino F. Mateo, Mayor, Rizal City, and Ceferino Fernando, as lessor
and lessee respectively, under date of March 6, 1948, as per copy of the lease contract hereto attached as Exhibit A and
forming part of this complaint;

The defendant filed a motion to dismiss on the ground (1) that the court has no jurisdiction over the case because it is not
capable of pecuniary estimation, and (2) that the complaint does not state a cause of action.

An opposition to motion to dismiss was filed by the plaintiff in which the latter states the following:

The question at issue is clear: Who is legally entitled to the possession of the space in the Libertad Public Market? In other
words: Who has a better leasehold right? The plaintiff or the defendant? The answer is inescapable, the plaintiff has a better
leasehold right. The defendant claims she has a better leasehold right based upon a contract executed by and between the city
mayor and the plaintiff. The city treasurer's permit was issued not in accordance with the prescribed rules, regulations and
practice of the city in awarding market stalls. It is the practice of the city to lease store space by the treasurer. The court has
jurisdiction, therefor. The jurisdiction of the court in an action of forcible entry and detainer is not lost even if the question of
ownership or title is raised in the answer of the defendant as held in the case of Mediran vs. Villanueva, 37 Phil., 752. The
fundamental issue, to repeat, in the instant case is that the justice of the peace court has jurisdiction to adjudicate the right of
possession, and the defendant in an action before the justice of the peace to recover possession cannot deprive the court of
such jurisdiction by merely claiming ownership or title to the property (Mediran vs. Villanueva, 37 Phil., 752).

The municipal court denied the motion to dismiss for lack of merit on the ground that the defendant bases his contention that
the court has no jurisdiction over the case on facts not alleged in the complaint, and hence the filing of the present civil action
of certiorari, which may properly be considered as of prohibition, because the principal remedy sought is to prevent the
respondent judge from taking cognizance of the case for lack of jurisdiction.

The respondent judge is not correct in holding that, in a motion to dismiss on the ground of lack of jurisdiction, the defendant
cannot "base his arguments on question of facts not touched in the complaint and which partakes the nature of special
defenses, to be prove by presentation of evidence." A motion to dismiss under Rule 8 of the Rules of Court, is not like a
demurrer provided for in the old Code of Civil Procedure that must be based only on the facts alleged in the complaint. Except
where the ground is that the complaint does state no cause of action which must be based only on the allegations in the
complaint, a motion to dismiss may be based on facts not alleged and may even deny those alleged in the complaint; and that is
the reason why it is set for hearing for the presentation of evidence in support of and against the contention of the defendant.

In the present case, although no evidence was adduced in support of the contention of the defendant, the complaint and the
opposition to the motion to dismiss clearly show that the court has no jurisdiction over the subject-matter of the action of the
plaintiff, because it is neither an action of forcible entry nor of illegal detainer, but an action for the recognition of the plaintiff's
preferred right to the use and occupancy of the stall in question in the Libertad Public Market against the claim of the
defendant, and therefore not capable of pecuniary estimation. In the case of Torres vs. Ocampo (80 Phil., 36), this Court held
the following that is squarely applicable to the present case for the determination of the nature of plaintiff's action.

The action of the plaintiff against the defendant is not an action of forcible entry, for the simple reason that it is not an action
instituted by a person who was in possession of a land or building against a person who has deprived him of the possession
thereof by force, intimidation, threat, strategy or stealth, within one year from such unlawful deprivation. Assuming, without
deciding, for the purpose of this decision that a market stall is a building or land within the meaning of Rule 72, Rules of Court;
whatever right the plaintiff may have to occupy the market stall in question, originated upon the alleged award to plaintiff by
the City Health Officer of Manila. And not having entered into possession under that award or lease of the market stall in
dispute, plaintiff had acquired no right in the leased property in the nature of a right in rem, which third persons were bound
to respect or not to infringe.

The action brought by the plaintiff against the defendant was not an action of illegal detainer, because according to section 1,
Rule 72 this action is for the recovery of possession of any land or building, instituted within one year from date of illegal
possession, by a person against whom the possession of any land or building is being unlawfully withheld by another after the
right of the latter to hold possession by virtue of any contract, express or implied, with the plaintiff has expired or terminated. In
the present case, there was no contract whatsoever, express or implied, between plaintiff and defendant for the possession of
the market stall, and hence no expiration or termination of the latter's right to hold possession thereof under contract.

In view of the foregoing, it is evident that the municipal court of Rizal City has no jurisdiction over the case, and the
respondent judge is therefore ordered to desist and refrain from further proceeding in the present case, with costs against the
respondent Ceferino Fernando. So ordered.
 Page |8

4. SAGRADO ORDEN V. NACOCO 91 PHIL 503

G.R. No. L-3756             June 30, 1952

SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff-appellee,

vs.
NATIONAL COCONUT CORPORATION, defendant-appellant.

First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw for appellant.
Ramirez and Ortigas for appellee.

LABRADOR, J.:

This is an action to recover the possession of a piece of real property (land and warehouses) situated in Pandacan Manila, and
the rentals for its occupation and use. The land belongs to the plaintiff, in whose name the title was registered before the war.
On January 4, 1943, during the Japanese military occupation, the land was acquired by a Japanese corporation by the name of
Taiwan Tekkosho for the sum of P140,00, and thereupon title thereto issued in its name (transfer certificate of title No. 64330,
Register of Deeds, Manila). After liberation, more specifically on April 4, 1946, the Alien Property Custodian of the United
States of America took possession, control, and custody thereof under section 12 of the Trading with the Enemy Act, 40 Stat.,
411, for the reason that it belonged to an enemy national. During the year 1946 the property was occupied by the Copra
Export Management Company under a custodianship agreement with United States Alien Property Custodian (Exhibit G), and
when it vacated the property it was occupied by the defendant herein. The Philippine Government made representations with
the Office Alien Property Custodian for the use of property by the Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31,
1947, the defendant was authorized to repair the warehouse on the land, and actually spent thereon the repairs the sum of
P26,898.27. In 1948, defendant leased one-third of the warehouse to one Dioscoro Sarile at a monthly rental of P500, which
was later raised to P1,000 a month. Sarile did not pay the rents, so action was brought against him. It is not shown, however, if
the judgment was ever executed.

Plaintiff made claim to the property before the Alien Property Custodian of the United States, but as this was denied, it brought
an action in court (Court of First Instance of Manila, civil case No. 5007, entitled "La Sagrada Orden Predicadores de la
Provinicia del Santisimo Rosario de Filipinas," vs. Philippine Alien Property Administrator, defendant, Republic of the
Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho, and recover its possession. The Republic of the
Philippines was allowed to intervene in the action. The case did not come for trial because the parties presented a joint
petition in which it is claimed by plaintiff that the sale in favor of the Taiwan Tekkosho was null and void because it was
executed under threats, duress, and intimidation, and it was agreed that the title issued in the name of the Taiwan Tekkosho
be cancelled and the original title of plaintiff re-issued; that the claims, rights, title, and interest of the Alien Property
Custodian be cancelled and held for naught; that the occupant National Coconut Corporation has until February 28, 1949, to
recover its equipment from the property and vacate the premises; that plaintiff, upon entry of judgment, pay to the Philippine
Alien Property Administration the sum of P140,000; and that the Philippine Alien Property Administration be free from
responsibility or liability for any act of the National Coconut Corporation, etc. Pursuant to the agreement the court rendered
judgment releasing the defendant and the intervenor from liability, but reversing to the plaintiff the right to recover from the
National Coconut Corporation reasonable rentals for the use and occupation of the premises. (Exhibit A-1.)

The present action is to recover the reasonable rentals from August, 1946, the date when the defendant began to occupy the
premises, to the date it vacated it. The defendant does not contest its liability for the rentals at the rate of P3,000 per month
from February 28, 1949 (the date specified in the judgment in civil case No. 5007), but resists the claim therefor prior to this
date. It interposes the defense that it occupied the property in good faith, under no obligation whatsoever to pay rentals for
the use and occupation of the warehouse. Judgment was rendered for the plaintiff to recover from the defendant the sum of
P3,000 a month, as reasonable rentals, from August, 1946, to the date the defendant vacates the premises. The judgment
declares that plaintiff has always been the owner, as the sale of Japanese purchaser was void ab initio; that the Alien Property
Administration never acquired any right to the property, but that it held the same in trust until the determination as to
whether or not the owner is an enemy citizen. The trial court further declares that defendant can not claim any better rights
than its predecessor, the Alien Property Administration, and that as defendant has used the property and had subleased
portion thereof, it must pay reasonable rentals for its occupation.

Against this judgment this appeal has been interposed, the following assignment of error having been made on defendant-
appellant's behalf:

The trial court erred in holding the defendant liable for rentals or compensation for the use and occupation of the property
from the middle of August, 1946, to December 14, 1948.

1. Want to "ownership rights" of the Philippine Alien Property Administration did not render illegal or invalidate its grant to
the defendant of the free use of property.

2. the decision of the Court of First Instance of Manila declaring the sale by the plaintiff to the Japanese purchaser null and void
ab initio and that the plaintiff was and has remained as the legal owner of the property, without legal interruption, is not
conclusive.

3. Reservation to the plaintiff of the right to recover from the defendant corporation not binding on the later;

4. Use of the property for commercial purposes in itself alone does not justify payment of rentals.
 Page |9

5. Defendant's possession was in good faith.

6. Defendant's possession in the nature of usufruct.

In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property Administration (PAPA) was a mere
administrator of the owner (who ultimately was decided to be plaintiff), and that as defendant has used it for commercial
purposes and has leased portion of it, it should be responsible therefore to the owner, who had been deprived of the
possession for so many years. (Appellee's brief, pp. 20, 23.)

We can not understand how the trial court, from the mere fact that plaintiff-appellee was the owner of the property and the
defendant-appellant the occupant, which used for its own benefit but by the express permission of the Alien Property
Custodian of the United States, so easily jumped to the conclusion that the occupant is liable for the value of such use and
occupation. If defendant-appellant is liable at all, its obligations, must arise from any of the four sources of obligations, namley,
law, contract or quasi-contract, crime, or negligence. (Article 1089, Spanish Civil Code.) Defendant-appellant is not guilty of
any offense at all, because it entered the premises and occupied it with the permission of the entity which had the legal control
and administration thereof, the Allien Property Administration. Neither was there any negligence on its part. There was also
no privity (of contract or obligation) between the Alien Property Custodian and the Taiwan Tekkosho, which had secured the
possession of the property from the plaintiff-appellee by the use of duress, such that the Alien Property Custodian or its
permittee (defendant-appellant) may be held responsible for the supposed illegality of the occupation of the property by the
said Taiwan Tekkosho. The Allien Property Administration had the control and administration of the property not as
successor to the interests of the enemy holder of the title, the Taiwan Tekkosho, but by express provision of law (Trading with
the Enemy Act of the United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither is it a trustee of the former owner, the plaintiff-
appellee herein, but a trustee of then Government of the United States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own right,
to the exclusion of, and against the claim or title of, the enemy owner. (Youghioheny & Ohio Coal Co. vs. Lasevich [1920], 179
N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From August, 1946, when defendant-appellant took possession, to the late of
judgment on February 28, 1948, Allien Property Administration had the absolute control of the property as trustee of the
Government of the United States, with power to dispose of it by sale or otherwise, as though it were the absolute owner. (U.S
vs. Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d], 191; 50 U.S.C.A., 283.) Therefore, even if defendant-appellant were liable
to the Allien Property Administration for rentals, these would not accrue to the benefit of the plaintiff-appellee, the owner, but
to the United States Government.

But there is another ground why the claim or rentals can not be made against defendant-appellant. There was no agreement
between the Alien Property Custodian and the defendant-appellant for the latter to pay rentals on the property. The existence
of an implied agreement to that effect is contrary to the circumstances. The copra Export Management Company, which
preceded the defendant-appellant, in the possession and use of the property, does not appear to have paid rentals therefor, as
it occupied it by what the parties denominated a "custodianship agreement," and there is no provision therein for the payment
of rentals or of any compensation for its custody and or occupation and the use. The Trading with the Enemy Act, as originally
enacted, was purely a measure of conversation, hence, it is very unlikely that rentals were demanded for the use of the
property. When the National coconut Corporation succeeded the Copra Export Management Company in the possession and
use of the property, it must have been also free from payment of rentals, especially as it was Government corporation, and
steps where then being taken by the Philippine Government to secure the property for the National Coconut Corporation. So
that the circumstances do not justify the finding that there was an implied agreement that the defendant-appellant was to pay
for the use and occupation of the premises at all.

The above considerations show that plaintiff-appellee's claim for rentals before it obtained the judgment annulling the sale of
the Taiwan Tekkosho may not be predicated on any negligence or offense of the defendant-appellant, or any contract, express
or implied, because the Allien Property Administration was neither a trustee of plaintiff-appellee, nor a privy to the obligations
of the Taiwan Tekkosho, its title being based by legal provision of the seizure of enemy property. We have also tried in vain to
find a law or provision thereof, or any principle in quasi contracts or equity, upon which the claim can be supported. On the
contrary, as defendant-appellant entered into possession without any expectation of liability for such use and occupation, it is
only fair and just that it may not be held liable therefor. And as to the rents it collected from its lessee, the same should accrue
to it as a possessor in good faith, as this Court has already expressly held. (Resolution, National Coconut Corporation vs.
Geronimo, 83 Phil. 467.)

Lastly, the reservation of this action may not be considered as vesting a new right; if no right to claim for rentals existed at the
time of the reservation, no rights can arise or accrue from such reservation alone.

Wherefore, the part of the judgment appealed from, which sentences defendant-appellant to pay rentals from August, 1946, to
February 28, 1949, is hereby reversed. In all other respects the judgment is affirmed. Costs of this appeal shall be against the
plaintiff-appellee.
 P a g e | 10

5. PEOPLES CAR INC., VS COMMANDO SECURITY, L-36840 MAY 22, 1973

PEOPLE’S CAR, INC., Plaintiff-Appellant, v. COMMANDO SECURITY SERVICE AGENCY, Defendant-Appellee.

DECISION

TEEHANKEE, J.:

In this appeal from the adverse judgment of the Davao court of first instance limiting plaintiff-appellant’s recovery under its
complaint to the sum of P1,000.00 instead of the actual damages of P8,489.10 claimed and suffered by it as a direct result of
the wrongful acts of defendant security agency’s guard assigned at plaintiff’s premises in pursuance of their "Guard Service
Contract", the Court finds merit in the appeal and accordingly reverses the trial court’s judgment.

The appeal was certified to this Court by a special division of the Court of Appeals on a four-to-one vote as per its resolution of
April 14, 1973 that "since the case was submitted to the court a quo for decision on the strength of the stipulation of facts, only
questions of law can he involved in the present appeal."

The Court has accepted such certification and docketed this appeal on the strength of its own finding from the records that
plaintiff’s notice of appeal was expressly to this Court (not to the appellate court) "on pure questions of law" 1 and its record
on appeal accordingly prayed that "the corresponding records be certified and forwarded to the Honorable Supreme Court." 2
The trial court so approved the same 3 on July 3, 1971 instead of having required the filing of a petition for review of the
judgment sought to be appealed from directly with this Court, in accordance with the provisions of Republic Act 5440. By some
unexplained and hitherto undiscovered error of the clerk of court, furthermore, the record on appeal was erroneously
forwarded to the appellate court rather than to this Court.

The parties submitted the case for judgment on a stipulation of facts. There is thus no dispute as to the factual bases of
plaintiff’s complaint for recovery of actual damages against defendant, to wit, that under the subsisting "Guard Service
Contract" between the parties, defendant-appellee as a duly licensed security service agency undertook in consideration of the
payments made by plaintiff "to safeguard and protect the business premises of (plaintiff) from theft, pilferage, robbery,
vandalism and all other unlawful acts of any person or persons prejudicial to the interest of (plaintiff)." 4

On April 5, 1970 at around 1:00 A.M., however, defendant’s security guard on duty at plaintiff’s premises, "without any
authority, consent, approval, knowledge or orders of the plaintiff and/or defendant brought out of the compound of the
plaintiff a car belonging to its customer, and drove said car for a place or places unknown, abandoning his post as such security
guard on duty inside the plaintiff’s compound, and while so driving said car in one of the City streets lost control of said car,
causing the same to fall into a ditch along J.P. Laurel St., Davao City by reason of which the plaintiff’s complaint for qualified
theft against said driver, was blottered in the office of the Davao City Police Department." 5

As a result of these wrongful acts of defendant’s security guard, the car of plaintiff’s customer, Joseph Luy, which had been left
with plaintiff for servicing and maintenance, "suffered extensive damage in the total amount of P7,07910" 6 besides the car
rental value "chargeable to defendant" in the sum of P1,410.00 for a car that plaintiff had to rent and make available to its said
customer to enable him to pursue his business and occupation for the period of forty-seven (47) days (from April 25 to June
10, 1970) that it took plaintiff to repair the damaged car, 7 or total actual damages incurred by plaintiff in the sum of
P8,489.10.

Plaintiff claimed that defendant was liable for the entire amount under paragraph 5 of their contract whereunder defendant
assumed "sole responsibility for the acts done during their watch hours" by its guards, whereas defendant contended, without
questioning the amount of the actual damages incurred by plaintiff, that its liability "shall not exceed one thousand
(P1,000.00) pesos per guard post" under paragraph 4 of their contract.

The parties thus likewise stipulated on this sole issue submitted by them for adjudication, as follows:

"Interpretation of the contract, ad to the extent of the liability of the defendant to the plaintiff by reason of the acts of the
employees of the defendant is the only issue to be resolved.

"The defendant relies on Par. 4 of the contract to support its contention while the plaintiff relies on Par. 5 of the same contract
in support of its claims against the defendant. For ready reference they are quoted hereunder:chanrob1es virtual 1aw library

‘Par. 4. — Party of the Second Part (defendant) through the negligence of its guards, after an investigation has been conducted
by the Party of the First Part (plaintiff) wherein the Party of the Second Part has been duly represented, shall assume full
responsibilities for any loss or damages that may occur to any property of the Party of the First Part for which it is
accountable, during the watch hours of the Party of the Second Part, provided the same is reported to the Party of the Second
Part within twenty-four (24) hours of the occurrence, except where such loss or damage is due to force majeure, provided
however that after the proper investigation to be made thereof that the guard on post is found negligent and that the amount
of the loss shall not exceed ONE THOUSAND (P1,000.00) PESOS per guard post.’

‘Par. 5— The party of the Second Part assumes the responsibility for the proper performance by the guards employed, of their
duties and (shall) be solely responsible for the acts done during their watch hours, the Party of the First Part being specifically
 P a g e | 11

released from any and all liabilities to the former’s employee or to the third parties arising from the acts or omissions done by
the guards during their tour of duty.’" 8

The trial court, misreading the above-quoted contractual provisions, held that "the liability of the defendant in favor of the
plaintiff falls under paragraph 4 of the Guard Service Contract" and rendered judgment "funding the defendant liable to the
plaintiff in the amount of P1,000.00 with costs."

Hence, this appeal, which, as already indicated, is meritorious and must be granted.

Paragraph 4 of the contract, which limits-defendant’s liability for the amount of loss or damage to any property of plaintiff to
"P1,000.00 per guard post," is by its own terms applicable only for loss or damage "through the negligence of its guards . . .
during the watch hours" provided that the same is duly reported by plaintiff within 24 hours of the occurrence and the guard’s
negligence is verified after proper investigation with the attendance of both contracting parties. Said paragraph is manifestly
inapplicable to the stipulated facts of record, which involve neither property of plaintiff that has been lost or damaged at its
premises nor mere negligence of defendant’s security guard on duty.

Here, instead of defendant, through its assigned security guards, complying with its contractual undertaking "to safeguard and
protect the business premises of (plaintiff) from theft, robbery, vandalism and all other unlawful acts of any person or
persons," defendant’s own guard on duty unlawfully and wrongfully drove out of plaintiff’s premises a customer’s car, lost
control of it on the highway causing it to fall into a ditch, thereby directly causing plaintiff to incur actual damages in the total
amount of P8,489.10.

Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire damages thus incurred, since under paragraph 5
of their contract it "assumed the responsibility for the proper performance by the guards employed of their duties and
(contracted to) be solely responsible for the acts done during their watch hours" and "specifically released (plaintiff) from any
and all liabilities . . . to the third parties arising from the acts or omissions done by the guards during their tour of duty." As
plaintiff had duly discharged its liability to the third party, its customer, Joseph Luy, for the undisputed damages of P8,489.10
caused said customer, due to the wanton and unlawful act of defendant’s guard, defendant in turn was clearly liable under the
terms of paragraph 5 of their contract to indemnify plaintiff in the same amount.

The trial court’s approach that "had plaintiff understood the liability of the defendant to fall under paragraph 5, it should have
told Joseph Luy, owner of the car, that under the Guard Service Contract, it was not liable for the damage but the defendant and
had Luy insisted on the liability of the plaintiff, the latter should have challenged him to bring the matter to court. If Luy
accepted the challenge and instituted an action against the plaintiff, it should have filed a third-party complaint against the
Commando Security Service Agency. But if Luy instituted the action against the plaintiff and the defendant, the plaintiff should
have filed a crossclaim against the latter," 9 was unduly technical and unrealistic and untenable.

Plaintiff was in law liable to its customer for the damages caused the customer’s car, which had been entrusted into its
custody. Plaintiff therefore was in law justified in making good such damages and relying in turn on defendant to honor its
contract and indemnify it for such undisputed damages, which had been caused directly by the unlawful and wrongful acts of
defendant’s security guard in breach of their contract. As ordained in Article 1159, Civil Code, "obligations arising from
contracts have the force of law between the contracting parties and should be complied with in good faith."

Plaintiff in law could not tell its customer, as per the trial court’s view, that "under the Guard Service Contract it was not liable
for the damage but the defendant" — since the customer could not hold defendant to account for the damages as he had no
privity of contract with defendant. Such an approach of telling the adverse party to go to court, notwithstanding his plainly
valid claim, aside from its ethical deficiency among others, could hardly create any goodwill for plaintiff’s business, in the same
way that defendant’s baseless attempt to evade fully discharging its contractual liability to plaintiff cannot be expected to have
brought it more business. Worse, the administration of justice is prejudiced, since the court dockets are unduly burdened with
unnecessary litigation.

ACCORDINGLY, the judgment appealed from is hereby reversed and judgment is hereby rendered sentencing defendant-
appellee to pay plaintiff-appellant the sum of P8,489.10 as and by way of reimbursement of the stipulated actual damages and
expenses, as well as the costs of suit in both instances. It is so ordered.
 P a g e | 12

6. AGCAOILI VS. GSIS, G.R. NO. L-30056 AUGUST 30, 1988

MARCELO AGCAOILI, Plaintiff-Appellee, v. GOVERNMENT SERVICE INSURANCE SYSTEM, Defendant-Appellant.

Artemio L. Agcaoili for Plaintiff-Appellee.

SYLLABUS

1. CIVIL LAW; RECIPROCAL OBLIGATIONS; FAILURE OF SELLER TO DELIVER THING SOLD IN THE CONDITION
CONTEMPLATED BY THE AGREEMENT. — An agreement for the sale of a house and lot on installments stipulating that the
buyer must occupy the house within a specified period under pain of cancellation if he failed to do so, must be construed as
imposing on the seller the obligation to deliver a reasonably habitable dwelling place, one that is in a condition suitable for its
enjoyment by the buyer for the purpose contemplated. The seller’s delivery of a mere shell of a house consisting of four walls,
openings and a roof is a breach of said obligation which prevents him from cancelling the sale on the ground of the purchaser’s
suspension of payment of the amortizations that he latter had undertaken to pay, it being axiomatic that" (i)in reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what
is incumbent upon him." (Art. 1169, last paragraph, Civil Code)

2. ID.; AMBIGUOUS PROVISIONS IN A CONTRACT MUST BE INTERPRETED AGAINST PARTY CAUSING SUCH AMBIGUITY. —
The party to a contract who is responsible for alleged imprecision or ambiguity in its terms will not be permitted to make
capital of such imprecision or ambiguity; the question of interpretation arising therefrom should be resolved against it.

3. ID.; ID.; SPECIFIC PERFORMANCE; EQUITY JURISDICTION, WHEN PROPERLY EXERCISED TO ADJUST CONTRACTUAL
RIGHTS. — Where specific performance according to the literal terms of a contract would result in inequity by reason of the
circumstances obtaining at the time of judgment being significantly different from those existing at the generation of the rights
litigated, the Court may exercise its equity jurisdiction to adjust those rights and, in determining the precise relief to be given,
"balance the equities" or the respective interests of the parties and take account of the relative hardship that one form of relief
or another may occasion to them.

DECISION

The appellant Government Service Insurance System, (GSIS, for short) having approved the application of the appellee Agcaoili
for the purchase of a house and lot in the GSIS Housing Project at Nangka, Marikina, Rizal, subject to the condition that the
latter should forthwith occupy the house, a condition that Agcaoili tried to fulfill but could not for the reason that the house
was absolutely uninhabitable; Agcaoili, after paying the first installment and other fees, having thereafter refused to make
further payment of other stipulated installments until GSIS had made the house habitable; and appellant having refused to do
so, opting instead to cancel the award and demand the vacation by Agcaoili of the premises; and Agcaoili having sued the GSIS
in the Court of First Instance of Manila for specific performance with damages and having obtained a favorable judgment, the
case was appealed to this Court by the GSIS. Its appeal must fail.

The essential facts are not in dispute. Approval of Agcaoili’s aforementioned application for purchase 1 was contained in a
letter 2 addressed to Agcaoili and signed by GSIS Manager Archimedes Villanueva in behalf of the Chairman-General Manager,
reading as follows:

"Please be informed that your application to purchase a house and lot in our GSIS Housing Project at Nangka, Marikina, Rizal,
has been approved by this Office. Lot No. 26, Block No. (48) 2, together with the housing unit constructed thereon, has been
allocated to you.

"You are, therefore, advised to occupy the said house immediately.

"If you fail to occupy the same within three (3) days from receipt of this notice, your application shall be considered
automatically disapproved and the said house and lot will be awarded to another applicant."

Agcaoili lost no time in occupying the house. He could not stay in it, however, and had to leave the very next day, because the
house was nothing more than a shell, in such a state of incompleteness that civilized occupation was not possible: ceiling,
stairs, double walling, lighting facilities, water connection, bathroom, toilet kitchen, drainage, were inexistent. Agcaoili did
however ask a homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending completion of
the construction of the house. Agcaoili thereafter complained to the GSIS, to no avail.

The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly installment and the
incidental fees, 3 but refused to make further payments until and unless the GSIS completed the housing unit. What the GSIS
did was to cancel the award and require Agcaoili to vacate the premises. 4 Agcaoili reacted by instituting suit in the Court of
First Instance of Manila for specific performance and damages. 5 Pending the action, a written protest was lodged by other
awardees of housing units in the same subdivision, regarding the failure of the System to complete construction of their own
houses. 6 Judgment was in due course rendered, 7 on the basis of the evidence adduced by Agcaoili only, the GSIS having opted
to dispense with presentation of its own proofs. The judgment was in Agcaoili’s favor and contained the following dispositions,
8 to wit:
 P a g e | 13

"1) Declaring the cancellation of the award (of a house and lot) in favor of plaintiff (Mariano Agcaoili) illegal and void;

2) Ordering the defendant (GSIS) to respect and enforce the aforesaid award to the plaintiff-relative to Lot No. 26, Block No.
(48) 2 of the Government Service Insurance System (GSIS) low cost housing project at Nangka, Marikina, Rizal;

3) Ordering the defendant to complete the house in question so as to make the same habitable and authorizing it (defendant)
to collect the monthly amortization thereon only after said house shall have been completed under the terms and conditions
mentioned in Exhibit A; and

4) Ordering the defendant to pay P100.00 as damages and P300.00 as and for attorney’s fees, and costs."

Appellant GSIS would have this Court reverse this judgment on the argument that -

1) Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his housing unit, since said
unit had been sold "in the condition and state of completion then existing . . . (and) he is deemed to have accepted the same in
the condition he found it when he accepted the award;" and assuming indefiniteness of the contract in this regard, such
circumstance precludes a judgment for specific performance. 9

2) Perfection of the contract of sale between it and Agcaoili being conditioned upon the latter’s immediate occupancy of the
house subject thereof, and the latter having failed to comply with the condition, no contract ever came into existence between
them; 10

3) Agcaoili’s act of placing his homeless friend, Villanueva, in possession, "without the prior or subsequent knowledge or
consent of the defendant (GSIS)" operated as a repudiation by Agcaoili of the award and a deprivation of the GSIS at the same
time of the reasonable rental value of the property. 11

Agcaoili’s offer to buy from GSIS was contained in a printed form drawn up by the latter, entitled "Application to Purchase a
House and/or Lot." Agcaoili filled up the form, signed it, and submitted it. 12 The acceptance of the application was also set out
in a form (mimeographed) also prepared by the GSIS. As already mentioned, this form sent to Agcaoili, duly filled up, advised
him of the approval of his "application to purchase a house and lot in our GSIS Housing Project at NANGKA, MARIKINA, RIZAL,"
and that "Lot No. 26, Block No. (48) 2, together with the housing unit constructed thereon, has been allocated to you." Neither
the application form nor the acceptance or approval form of the GSIS — nor the notice to commence payment of monthly
amortizations, which again refers to "the house and lot awarded" — contained any hint that the house was incomplete, and
was being sold "as is," i.e., in whatever state of completion it might be at the time. On the other hand, the condition explicitly
imposed on Agcaoili — "to occupy the said house immediately," or in any case within three (3) days from notice, otherwise his
"application shall be considered automatically disapproved and the said house and lot will be awarded to another applicant"
— would imply that construction of the house was more or less complete, and it was by reasonable standards, habitable, and
that indeed, the awardee should stay and live in it; it could not be interpreted as meaning that the awardee would occupy it in
the sense of a pioneer or settler in a rude wilderness, making do with whatever he found available in the environment.

There was then a perfected contract of sale between the parties; there had been a meeting of the minds upon the purchase by
Agcaoili of a determinate house and lot in the GSIS Housing Project at Nangka, Marikina, Rizal at a definite price payable in
amortizations at P31.56 per month, and from that moment the parties acquired the right to reciprocally demand performance.
13 It was, to be sure, the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the
buyer for the purpose contemplated, 14 in other words, to deliver the house subject of the contract in a reasonably livable
state. This it failed to do.

It sold a house to Agcaoili, and required him to immediately occupy it under pain of cancellation of the sale. Under the
circumstances there can hardly be any doubt that the house contemplated was one that could be occupied for purposes of
residence in reasonable comfort and convenience. There would be no sense to require the awardee to immediately occupy and
live in a shell of a house, a structure consisting only of four walls with openings, and a roof, and to theorize, as the GSIS does,
that this was what was intended by the parties, since the contract did not clearly impose upon it the obligation to deliver a
habitable house, is to advocate an absurdity, the creation of an unfair situation. By any objective interpretation of its terms, the
contract can only be understood as imposing on the GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in
return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the
house in habitable state, it cannot invoke Agcaoili’s suspension of payment of amortizations as cause to cancel the contract
between them. It is axiomatic that" (i)n reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him." 15

Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili by the claim that the latter had not complied
with the condition of occupying the house within three (3) days. The record shows that Agcaoili did try to fulfill the condition;
he did try to occupy the house but found it to be so uninhabitable that he had to leave it the following day. He did however
leave a friend in the structure, who being homeless and hence willing to accept shelter even of the most rudimentary sort,
agreed to stay therein and look after it. Thus the argument that Agcaoili breached the agreement by failing to occupy the
house, and by allowing another person to stay in it without the consent of the GSIS, must be rejected as devoid of merit.

Finally, the GSIS should not be heard to say that the agreement between it and Agcaoili is silent, or imprecise as to its exact
 P a g e | 14

prestation. Blame for the imprecision cannot be imputed to Agcaoili; it was after all the GSIS which caused the contract to
come into being by its written acceptance of Agcaoili’s offer to purchase, that offer being contained in a printed form supplied
by the GSIS. Said appellant having caused the ambiguity of which it would now make capital, the question of interpretation
arising therefrom, should be resolved against it.

It will not do, however, to dispose of the controversy by simply declaring that the contract between the parties had not been
validly cancelled and was therefore still in force, and that Agcaoili could not be compelled by the GSIS to pay the stipulated
price of the house and lot subject of the contract until and unless it had first completed construction of the house. This would
leave the contract hanging or in suspended animation, as it were, Agcaoili unwilling to pay unless the house were first
completed, and the GSIS averse to completing construction, which is precisely what has been the state of affairs between the
parties for more than twenty (20) years now. On the other hand, assuming it to be feasible to still finish the construction of the
house at this time, to compel the GSIS to do so that Agcaoili’s prestation to pay the price might in turn be demanded, without
modifying the price therefor, would not be quite fair. The cost to the GSIS of completion of construction at present prices
would make the stipulated price disproportionate, unrealistic.

The situation calls for the exercise by this Court of its equity jurisdiction, to the end that it may render complete justice to both
parties.

"As we . . . reaffirmed in Air Manila, Inc. v. Court of Industrial Relations (83 SCRA 579, 589 [1978]).’(E)quity as the complement
of legal jurisdiction seeks to reach and do complete justice where courts of law, through the inflexibility of their rules and want
of power to adapt their judgments to the special circumstances of cases, are incompetent so to do. Equity regards the spirit of
and not the letter, the intent and not the form, the substance rather than the circumstance, as it is variously expressed by
different courts . . .," 16

In this case, the Court can not require specific performance of the contract in question according to its literal terms, as this
would result in inequity. The prevailing rule is that in decreeing specific performance equity requires 17 —

". . . not only that the contract be just and equitable in its provisions, but that the consequences of specific performance
likewise be equitable and just. The general rule is that this equitable relief will not be granted if, under the circumstances of
the case, the result of the specific enforcement of the contract would be harsh, inequitable, oppressive, or result in an
unconscionable advantage to the plaintiff . . ."

In the exercise of its equity jurisdiction, the Court may adjust the rights of parties in accordance with the circumstances
obtaining at the time of rendition of judgment, when these are significantly different from those existing at the time of
generation of those rights.

"The Court is not restricted to an adjustment of the rights of the parties as they existed when suit was brought, but will give
relief appropriate to events occurring ending the suit. 18

"While equitable jurisdiction is generally to be determined with reference to the situation existing at the time the suit is filed,
the relief to be accorded by the decree is governed by the conditions which are shown to exist at the time of making thereof,
and not by the circumstances attending the inception of the litigation. In making up the final decree in an equity suit the judge
may rightly consider matters arising after suit was brought. Therefore, as a general rule, equity will administer such relief as
the nature, rights, facts and exigencies of the case demand at the close of the trial or at the time of the making of the decree."
19

That adjustment is entirely consistent with the Civil Law principle that in the exercise of rights a person must act with justice,
give everyone his due, and observe honesty and good faith. 20 Adjustment of rights has been held to be particularly applicable
when there has been a depreciation of currency.

"Depreciation of the currency or other medium of payment contracted for has frequently been held to justify the court in
withholding specific performance or at least conditioning it upon payment of the actual value of the property contracted for.
Thus, in an action for the specific performance of a real estate contract, it has been held that where the currency in which the
plaintiff had contracted to pay had greatly depreciated before enforcement was sought, the relief would be denied unless the
complaint would undertake to pay the equitable value of the land." (Willard & Tayloe [U.S] 8 Wall 557, 19 L. Ed 501;
Doughdrill v. Edwards, 59 Ala 424) 21

In determining the precise relief to give, the Court will "balance the equities" or the respective interests of the parties, and take
account of the relative hardship that one relief or another may occasion to them. 22

The completion of the unfinished house so that it may be put into habitable condition, as one from of relief to the plaintiff
Agcaoili, no longer appears to be a feasible option in view of the not inconsiderable time that has already elapsed. That would
require an adjustment of the price of the subject of the sale to conform to present prices of construction materials and labor. It
is more in keeping with the realities of the situation, and with equitable norms, to simply require payment for the land on
which the house stands, and for the house itself, in its unfinished state, as of the time of the contract. In fact, this is an
alternative relief proposed by Agcaoili himself, i.e., "that judgment issue . . . (o)rdering the defendant (GSIS) to execute a deed
of sale that would embody and provide for a reasonable amortization of payment on the basis of the present actual unfinished
 P a g e | 15

and uncompleted condition, worth and value of the said house." 23

WHEREFORE, the judgment of the Court a quo insofar as it invalidates and sets aside the cancellation by respondent GSIS of
the award in favor of petitioner Agcaoili of Lot No. 26, Block No. (48) 2 of the GSIS low cost housing project at Nangka,
Marikina, Rizal, and orders the former to respect the aforesaid award and to pay damages in the amounts specified, is
AFFIRMED as being in accord with the facts and the law. Said judgments is however modified by deleting the requirement for
respondent GSIS "to complete the house in question so as to make the same habitable," and instead it is hereby ORDERED that
the contract between the parties relative to the property above described be modified by adding to the cost of the land, as of
the time of perfection of the contract, the cost of the house in its unfinished state also as of the time of perfection of the
contract, and correspondingly adjusting the amortizations to be paid by petitioner Agcaoili, the modification to be effected
after determination by the Court a quo of the value of said house on the basis of the agreement of the parties, or if this is not
possible, by such commissioner or commissioners as the Court may appoint. No pronouncement as to costs.

7. FEDERATION OF FREE FARMERS V. COURT OF APPEALS, 107 SCRA 352 [1981]

LONG…LONG…LONG…LONG…LONG…LONG…LONG…LONG…LONG…LONG…
 P a g e | 16

8. PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS AND B.P. MATA AND CO., G.R. NO.
97995, JANUARY 21, 1993.
G.R. No. 97995 January 21, 1993

PHILIPPINE NATIONAL BANK, petitioner,

vs.
COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.

Roland A. Niedo for petitioner.

Benjamin C. Santos Law Office for respondent.

ROMERO, J.:

Rarely is this Court confronted with a case calling for the delineation in broad strokes of the distinctions between such closely
allied concepts as the quasi-contract called "solutio indebiti" under the venerable Spanish Civil Code and the species of implied
trust denominated "constructive trusts," commonly regarded as of Anglo-American origin. Such a case is the one presented to
us now which has highlighted more of the affinity and less of the dissimilarity between the two concepts as to lead the legal
scholar into the error of interchanging the two. Presented below are the factual circumstances that brought into juxtaposition
the twin institutions of the Civil Law quasi-contract and the Anglo-American trust.

Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping
companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star Kist Foods,
Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crew's medical expenses, National Seaman's
Board fees, Seaman's Welfare fund, and standby fees and for the crew's basic personal needs. Subsequently, Mata sends
monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through
banks for credit to the latter's account.

Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency
arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB to pay
the amount of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order
of Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's International Department noticed an error and
sent a service message to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should only be for
US$1,400.

On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95)
representing reimbursement from Star Kist, was issued by the Star Kist for the account of Mata on February 25, 1975 through
the Insular Bank of Asia and America (IBAA).

However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashier's Check No. 270271 in the
amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private
respondent's foreign principal.

Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it
discovered its error in effecting the second payment.

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a
constructive trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to
respondent Mata.1

After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint ruling that the instant case falls
squarely under Article 2154 on solutio indebiti and not under Article 1456 on constructive trust. The lower court ruled out
constructive trust, applying strictly the technical definition of a trust as "a right of property, real or personal, held by one party
for the benefit of another; that there is a fiduciary relation between a trustee and a cestui que trust as regards certain property,
real, personal, money or choses in action."2

In affirming the lower court, the appellate court added in its opinion that under Article 2154 on solutio indebiti, the person
who makes the payment is the one who commits the mistake vis-a-vis the recipient who is unaware of such a
mistake.3 Consequently, recipient is duty bound to return the amount paid by mistake. But the appellate court concluded that
petitioner's demand for the return of US$14,000 cannot prosper because its cause of action had already prescribed under
Article 1145, paragraph 2 of the Civil Code which states:

The following actions must be commenced within six years:

xxx xxx xxx

(2) Upon a quasi-contract.

This is because petitioner's complaint was filed only on February 4, 1982, almost seven years after March 11, 1975 when
petitioner mistakenly made payment to private respondent.
 P a g e | 17

Hence, the instant petition for certiorari proceeding seeking to annul the decision of the appellate court on the basis that
Mata's obligation to return US$14,000 is governed, in the alternative, by either Article 1456 on constructive trust or Article
2154 of the Civil Code on quasi-contract.4

Article 1456 of the Civil Code provides:

If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property comes.

On the other hand, Article 2154 states:

If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to
return it arises.

Petitioner naturally opts for an interpretation under constructive trust as its action filed on February 4, 1982 can still prosper,
as it is well within the prescriptive period of ten (10) years as provided by Article 1144, paragraph 2 of the Civil Code. 5

If it is to be construed as a case of payment by mistake or solutio indebiti, then the prescriptive period for quasi-contracts of six
years applies, as provided by Article 1145. As pointed out by the appellate court, petitioner's cause of action thereunder shall
have prescribed, having been brought almost seven years after the cause of action accrued. However, even assuming that the
instant case constitutes a constructive trust and prescription has not set in, the present action has already been barred by
laches.

To recall, trusts are either express or implied. While express trusts are created by the intention of the trustor or of the parties,
implied trusts come into being by operation of law.6 Implied trusts are those which, without being expressed, are deducible
from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the parties. 7

In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A resulting trust is a trust raised by implication of
law and presumed always to have been contemplated by the parties, the intention of which is found in the nature of the
transaction, but not expressed in the deed or instrument of conveyance. 9 Examples of resulting trusts are found in Articles
1448 to 1455 of the Civil Code.10 On the other hand, a constructive trust is one not created by words either expressly or
impliedly, but by construction of equity in order to satisfy the demands of justice. An example of a constructive trust is Article
1456 quoted above.11

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12 for in a typical trust, confidence is
reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property
which is held by the trustee for the benefit of the cestui que trust.13 A constructive trust, unlike an express trust, does not
emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential
or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called
trustee neither accepts any trust nor intends holding the property for the beneficiary. 14

In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no intent of holding the same for a
supposed beneficiary or cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely a constructive
trust, for the benefit of the person from whom the property comes, in this case PNB, for reasons of justice and equity.

At this juncture, a historical note on the codal provisions on trust and quasi-contracts is in order.

Originally, under the Spanish Civil Code, there were only two kinds of quasi contracts: negotiorum gestio and solutio indebiti.
But the Code Commission, mindful of the position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts
may be indefinite," added Section 3 entitled "Other Quasi-Contracts." 15

Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the succeeding article provides that: "The provisions
for quasi-contracts in this Chapter do not exclude other quasi-contracts which may come within the purview of the preceding
article."16

Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts enumerated from Articles 2144 to 2175
but is open to the possibility that, absent a pre-existing relationship, there being neither crime nor quasi-delict, a quasi-
contractual relation may be forced upon the parties to avoid a case of unjust enrichment. 17 There being no express consent, in
the sense of a meeting of minds between the parties, there is no contract to speak of. However, in view of the peculiar
circumstances or factual environment, consent is presumed to the end that a recipient of benefits or favors resulting from
lawful, voluntary and unilateral acts of another may not be unjustly enriched at the expense of another.

Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti  as defined in Article 2154 that something
(in this case money) has been received when there was no right to demand it and (2) the same was unduly delivered through
mistake. There is a presumption that there was a mistake in the payment "if something which had never been due or had
already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of
liberality or for any other just cause."18

In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's Check No. 269522 had already been made
by PNB for the account of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB effected another payment
through Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to be another transmittal of
reimbursement from Star Kist, private respondent's foreign principal.
 P a g e | 18

While the principle of undue enrichment or solutio indebiti, is not new, having been incorporated in the subject on quasi-
contracts in Title XVI of Book IV of the Spanish Civil Code entitled "Obligations incurred without contract," 19 the chapter on
Trusts is fairly recent, having been introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to
be found in the Spanish Civil Code, the framers of our present Civil Code incorporated implied trusts, which includes
constructive trusts, on top of quasi-contracts, both of which embody the principle of equity above strict legalism. 20

In analyzing the law on trusts, it would be instructive to refer to Anglo-American jurisprudence on the subject. Under
American Law, a court of equity does not consider a constructive trustee for all purposes as though he were in reality a
trustee; although it will force him to return the property, it will not impose upon him the numerous fiduciary obligations
ordinarily demanded from a trustee of an express trust. 21 It must be borne in mind that in an express trust, the trustee has
active duties of management while in a constructive trust, the duty is merely to surrender the property.

Still applying American case law, quasi-contractual obligations give rise to a personal liability ordinarily enforceable by an
action at law, while constructive trusts are enforceable by a proceeding in equity to compel the defendant to surrender specific
property. To be sure, the distinction is more procedural than substantive. 22

Further reflection on these concepts reveals that a constructive "trust" is as much a misnomer as a "quasi-contract," so far
removed are they from trusts and contracts proper, respectively. In the case of a constructive trust, as in the case of quasi-
contract, a relationship is "forced" by operation of law upon the parties, not because of any intention on their part but in order
to prevent unjust enrichment, thus giving rise to certain obligations not within the contemplation of the parties. 23

Although we are not quite in accord with the opinion that "the trusts known to American and English equity jurisprudence are
derived from the fidei commissa of the Roman Law,"24 it is safe to state that their roots are firmly grounded on such Civil Law
principles are expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari potest," 25 particularly the concept of
constructive trust.

Returning to the instant case, while petitioner may indeed opt to avail of an action to enforce a constructive trust or the quasi-
contract of solutio indebiti, it has been deprived of a choice, for prescription has effectively blocked quasi-contract as an
alternative, leaving only constructive trust as the feasible option.

Petitioner argues that the lower and appellate courts cannot indulge in semantics by holding that in Article 1456 the recipient
commits the mistake while in Article 2154, the recipient commits no mistake. 26 On the other hand, private respondent,
invoking the appellate court's reasoning, would impress upon us that under Article 1456, there can be no mutual mistake.
Consequently, private respondent contends that the case at bar is one of solutio indebiti and not a constructive trust.

We agree with petitioner's stand that under Article 1456, the law does not make any distinction since mutual mistake is a
possibility on either side — on the side of either the grantor or the grantee. 27 Thus, it was error to conclude that in a
constructive trust, only the person obtaining the property commits a mistake. This is because it is also possible that a grantor,
like PNB in the case at hand, may commit the mistake.

Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it erroneously paid private respondent
under a constructive trust, we rule in the negative. Although we are aware that only seven (7) years lapsed after petitioner
erroneously credited private respondent with the said amount and that under Article 1144, petitioner is well within the
prescriptive period for the enforcement of a constructive or implied trust, we rule that petitioner's claim cannot prosper since
it is already barred by laches. It is a well-settled rule now that an action to enforce an implied trust, whether resulting or
constructive, may be barred not only by prescription but also by laches. 28

While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable delay. 29 It is amazing that it
took petitioner almost seven years before it discovered that it had erroneously paid private respondent. Petitioner would
attribute its mistake to the heavy volume of international transactions handled by the Cable and Remittance Division of the
International Department of PNB. Such specious reasoning is not persuasive. It is unbelievable for a bank, and a government
bank at that, which regularly publishes its balanced financial statements annually or more frequently, by the quarter, to notice
its error only seven years later. As a universal bank with worldwide operations, PNB cannot afford to commit such costly
mistakes. Moreover, as between parties where negligence is imputable to one and not to the other, the former must perforce
bear the consequences of its neglect. Hence, petitioner should bear the cost of its own negligence.

WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against private respondent is AFFIRMED.

Costs against petitioner.

SO ORDERED.
 P a g e | 19

9. ANDAMO VS IAC, 191 SCRA 204

G.R. No. 74761 November 6, 1990

NATIVIDAD V. ANDAMO and EMMANUEL R. ANDAMO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT (First Civil Cases Division) and MISSIONARIES OF OUR LADY OF LA SALETTE,
INC., respondents.

Lope E. Adriano for petitioners.

Padilla Law Office for private respondent.

FERNAN, C.J.:

The pivotal issue in this petition for certiorari, prohibition and mandamus is whether a corporation, which has built through
its agents, waterpaths, water conductors and contrivances within its land, thereby causing inundation and damage to an
adjacent land, can be held civilly liable for damages under Articles 2176 and 2177 of the Civil Code on quasi-delicts such that
the resulting civil case can proceed independently of the criminal case.

The antecedent facts are as follows:

Petitioner spouses Emmanuel and Natividad Andamo are the owners of a parcel of land situated in Biga (Biluso) Silang, Cavite
which is adjacent to that of private respondent, Missionaries of Our Lady of La Salette, Inc., a religious corporation.

Within the land of respondent corporation, waterpaths and contrivances, including an artificial lake, were constructed, which
allegedly inundated and eroded petitioners' land, caused a young man to drown, damaged petitioners' crops and plants,
washed away costly fences, endangered the lives of petitioners and their laborers during rainy and stormy seasons, and
exposed plants and other improvements to destruction.

In July 1982, petitioners instituted a criminal action, docketed as Criminal Case No. TG-907-82, before the Regional Trial Court
of Cavite, Branch 4 (Tagaytay City), against Efren Musngi, Orlando Sapuay and Rutillo Mallillin, officers and directors of herein
respondent corporation, for destruction by means of inundation under Article 324 of the Revised Penal Code.

Subsequently, on February 22, 1983, petitioners filed another action against respondent corporation, this time a civil case,
docketed as Civil Case No. TG-748, for damages with prayer for the issuance of a writ of preliminary injunction before the
same court. 1

On March 11, 1983, respondent corporation filed its answer to the complaint and opposition to the issuance of a writ of
preliminary injunction. Hearings were conducted including ocular inspections on the land. However, on April 26, 1984, the
trial court, acting on respondent corporation's motion to dismiss or suspend the civil action, issued an
order suspending further hearings in Civil Case No, TG-748 until after judgment in the related Criminal Case No. TG-907-82.

Resolving respondent corporation's motion to dismiss filed on June 22, 1984, the trial court issued on August 27, 1984 the
disputed order dismissing Civil Case No. TG-748 for lack of jurisdiction, as the criminal case which was instituted ahead of the
civil case was still unresolved. Said order was anchored on the provision of Section 3 (a), Rule III of the Rules of Court which
provides that "criminal and civil actions arising from the same offense may be instituted separately, but after the criminal
action has been commenced the civil action cannot be instituted until final judgment has been rendered in the criminal
action." 2

Petitioners appealed from that order to the Intermediate Appellate Court. 3

On February 17, 1986, respondent Appellate Court, First Civil Cases Division, promulgated a decision 4 affirming the
questioned order of the trial court. 5 A motion for reconsideration filed by petitioners was denied by the Appellate Court in its
resolution dated May 19, 1986. 6

Directly at issue is the propriety of the dismissal of Civil Case No. TG-748 in accordance with Section 3 (a) of Rule 111 of the
Rules of Court. Petitioners contend that the trial court and the Appellate Court erred in dismissing Civil Case No. TG-748 since
it is predicated on a quasi-delict. Petitioners have raised a valid point.

It is axiomatic that the nature of an action filed in court is determined by the facts alleged in the complaint as constituting the
cause of action. 7 The purpose of an action or suit and the law to govern it, including the period of prescription, is to be
determined not by the claim of the party filing the action, made in his argument or brief, but rather by the complaint itself, its
allegations and prayer for relief. 8 The nature of an action is not necessarily determined or controlled by its title or heading but
the body of the pleading or complaint itself. To avoid possible denial of substantial justice due to legal technicalities, pleadings
as well as remedial laws should be liberally construed so that the litigants may have ample opportunity to prove their
respective claims. 9

Quoted hereunder are the pertinent portions of petitioners' complaint in Civil Case No. TG-748:

4) That within defendant's land, likewise located at Biga (Biluso), Silang, Cavite, adjacent on the right side of the aforesaid land
of plaintiffs, defendant constructed waterpaths starting from the middle-right portion thereof leading to a big hole or opening,
 P a g e | 20

also constructed by defendant, thru the lower portion of its concrete hollow-blocks fence situated on the right side of its
cemented gate fronting the provincial highway, and connected by defendant to a man height inter-connected cement culverts
which were also constructed and lain by defendant cross-wise beneath the tip of the said cemented gate, the left-end of the
said inter-connected culverts again connected by defendant to a big hole or opening thru the lower portion of the same
concrete hollowblocks fence on the left side of the said cemented gate, which hole or opening is likewise connected by
defendant to the cemented mouth of a big canal, also constructed by defendant, which runs northward towards a big hole or
opening which was also built by defendant thru the lower portion of its concrete hollow-blocks fence which separates the land
of plaintiffs from that of defendant (and which serves as the exit-point of the floodwater coming from the land of defendant,
and at the same time, the entrance-point of the same floodwater to the land of plaintiffs, year after year, during rainy or stormy
seasons.

5) That moreover, on the middle-left portion of its land just beside the land of plaintiffs, defendant also constructed an
artificial lake, the base of which is soil, which utilizes the water being channeled thereto from its water system thru inter-
connected galvanized iron pipes (No. 2) and complimented by rain water during rainy or stormy seasons, so much so that the
water below it seeps into, and the excess water above it inundates, portions of the adjoining land of plaintiffs.

6) That as a result of the inundation brought about by defendant's aforementioned water conductors, contrivances and
manipulators, a young man was drowned to death, while herein plaintiffs suffered and will continue to suffer, as follows:

a) Portions of the land of plaintiffs were eroded and converted to deep, wide and long canals, such that the same can no longer
be planted to any crop or plant.

b) Costly fences constructed by plaintiffs were, on several occasions, washed away.

c) During rainy and stormy seasons the lives of plaintiffs and their laborers are always in danger.

d) Plants and other improvements on other portions of the land of plaintiffs are exposed to destruction. ... 10

A careful examination of the aforequoted complaint shows that the civil action is one under Articles 2176 and 2177 of the Civil
Code on quasi-delicts. All the elements of a quasi-delict are present, to wit: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, or some other person for whose acts he must respond; and (c) the connection of cause and effect
between the fault or negligence of the defendant and the damages incurred by the plaintiff. 11

Clearly, from petitioner's complaint, the waterpaths and contrivances built by respondent corporation are alleged to have
inundated the land of petitioners. There is therefore, an assertion of a causal connection between the act of building these
waterpaths and the damage sustained by petitioners. Such action if proven constitutes fault or negligence which may be the
basis for the recovery of damages.

In the case of Samson vs. Dionisio, 12 the Court applied Article 1902, now Article 2176 of the Civil Code and held that "any
person who without due authority constructs a bank or dike, stopping the flow or communication between a creek or a lake
and a river, thereby causing loss and damages to a third party who, like the rest of the residents, is entitled to the use and
enjoyment of the stream or lake, shall be liable to the payment of an indemnity for loss and damages to the injured party.

While the property involved in the cited case belonged to the public domain and the property subject of the instant case is
privately owned, the fact remains that petitioners' complaint sufficiently alleges that petitioners have sustained and will
continue to sustain damage due to the waterpaths and contrivances built by respondent corporation. Indeed, the recitals of the
complaint, the alleged presence of damage to the petitioners, the act or omission of respondent corporation supposedly
constituting fault or negligence, and the causal connection between the act and the damage, with no pre-existing contractual
obligation between the parties make a clear case of a quasi delict or culpa aquiliana.

It must be stressed that the use of one's property is not without limitations. Article 431 of the Civil Code provides that "the
owner of a thing cannot make use thereof in such a manner as to injure the rights of a third person." SIC UTERE TUO UT
ALIENUM NON LAEDAS. Moreover, adjoining landowners have mutual and reciprocal duties which require that each must use
his own land in a reasonable manner so as not to infringe upon the rights and interests of others. Although we recognize the
right of an owner to build structures on his land, such structures must be so constructed and maintained using all reasonable
care so that they cannot be dangerous to adjoining landowners and can withstand the usual and expected forces of nature. If
the structures cause injury or damage to an adjoining landowner or a third person, the latter can claim indemnification for the
injury or damage suffered.

Article 2176 of the Civil Code imposes a civil liability on a person for damage caused by his act or omission constituting fault or
negligence, thus:

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this chapter.

Article 2176, whenever it refers to "fault or negligence", covers not only acts "not punishable by law" but also acts criminal in
character, whether intentional and voluntary or negligent. Consequently, a separate civil action lies against the offender in a
criminal act, whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not
allowed, (if the tortfeasor is actually charged also criminally), to recover damages on both scores, and would be entitled in
such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. 13
 P a g e | 21

The distinctness of quasi-delicta is shown in Article 2177 of the Civil Code, which states:

Article 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or
omission of the defendant.

According to the Report of the Code Commission "the foregoing provision though at first sight startling, is not so novel or
extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal law,
while the latter is a distinct and independent negligence, which is a "culpa aquiliana" or quasi-delict, of ancient origin, having
always had its own foundation and individuality, separate from criminal negligence. Such distinction between criminal
negligence and "culpa extra-contractual" or "cuasi-delito" has been sustained by decisions of the Supreme Court of Spain ... 14

In the case of Castillo vs. Court of Appeals, 15 this Court held that a quasi-delict or culpa aquiliana is a separate legal institution
under the Civil Code with a substantivity all its own, and individuality that is entirely apart and independent from a delict or
crime — a distinction exists between the civil liability arising from a crime and the responsibility for quasi-delicts or culpa
extra-contractual. The same negligence causing damages may produce civil liability arising from a crime under the Penal Code,
or create an action for quasi-delicts or culpa extra-contractual under the Civil Code. Therefore, the acquittal or conviction in
the criminal case is entirely irrelevant in the civil case, unless, of course, in the event of an acquittal where the court has
declared that the fact from which the civil action arose did not exist, in which case the extinction of the criminal liability would
carry with it the extinction of the civil liability.

In Azucena vs. Potenciano, 16 the Court declared that in quasi-delicts, "(t)he civil action is entirely independent of the criminal
case according to Articles 33 and 2177 of the Civil Code. There can be no logical conclusion than this, for to subordinate the
civil action contemplated in the said articles to the result of the criminal prosecution — whether it be conviction or acquittal
— would render meaningless the independent character of the civil action and the clear injunction in Article 31, that his action
may proceed independently of the criminal proceedings and regardless of the result of the latter."

WHEREFORE, the assailed decision dated February 17, 1986 of the then Intermediate Appellate Court affirming the order of
dismissal of the Regional Trial Court of Cavite, Branch 18 (Tagaytay City) dated August 17, 1984 is hereby REVERSED and SET
ASIDE. The trial court is ordered to reinstate Civil Case No. TG-748 entitled "Natividad V. Andamo and Emmanuel R. Andamo
vs. Missionaries of Our Lady of La Salette Inc." and to proceed with the hearing of the case with dispatch. This decision is
immediately executory. Costs against respondent corporation.

SO ORDERED.
 P a g e | 22

10.PEOPLE VS. ABUNGAN, 341 SCRA 258 (2000)

The instant petition for review under Rule 45 assails the Decision 1 of the Court of Appeals dated November 29, 2001 and the
subsequent Resolution dated August 1, 2002 denying the motion for reconsideration. The CA affirmed with modification the
decision of the Regional Trial Court, Makati City, Branch 145 in Criminal Case No. 96-1226, 2 finding herein petitioner, Ma.
Lourdes de Guzman guilty beyond reasonable doubt of Theft.

The Information filed on July 9, 1996 reads as follows:

That on or about the 8th day of February, 1995, in the City of Makati, Metro Manila, Philippines and within the jurisdiction of
this Honorable Court, the above-named accused, did then and there willfully, unlawfully and feloniously with intent of gain and
without the consent of the owner thereof, take, steal and carry away several pieces of jewelry valued at ₱4,600,000.00
belonging to one Jasmine Gongora, to the damage and prejudice of the said owner in the aforementioned amount of
₱4,600,000.00.3

After due hearing, the trial court rendered its judgment on December 11, 1997, the dispositive portion of which reads:

WHEREFORE, the guilt of the accused having been sufficiently established by proof beyond reasonable doubt, the Court hereby
finds the accused MA. LOURDES DE GUZMAN GUILTY of the present charge of THEFT and committed without aggravating
circumstance charged nor mitigating circumstance proved and applying the Indeterminate Sentence Law, sentences her to
suffer the minimum penalty of FOUR (4) YEARS and NINE (9) MONTHS and TEN (10) DAYS of prision correccional, and the
maximum penalty of TWENTY (20) YEARS of reclusion temporal, as well as the penalties accessory thereto.

The Court further finds the accused MA. LOURDES DE GUZMAN civilly liable and orders her to pay the private offended party,
JASMINE GONGORA the sums of FOUR MILLION SIX HUNDRED FORTY THOUSAND PESOS (P4,640,000.00) representing the
value as proven of the stolen jewelries; FIVE HUNDRED THOUSAND PESOS (P500,000.00) in moral damages and TWO
HUNDRED THOUSAND PESOS (P200,000.00) as reasonable attorneys fees and litigation expenses. 4

On appeal, the CA affirmed the conviction but reduced the award of damages, to wit:

WHEREFORE, upon the premises, We AFFIRM the decision appealed from with the MODIFICATION that the award for actual
damages is reduced to P1,500,00 and moral damages to P100,000. The award for attorney’s fees is DELETED. 5

Hence, this petition filed on September 24, 2002, raising the same issues in the CA that the decision of the trial court was tried
and decided by a biased judge; and that the judgment of conviction was not proven beyond reasonable doubt.

The Court required the Office of the Solicitor General (OSG) to comment.1awphi1.nét

On January 30, 2003, counsel for the petitioner filed a Manifestation informing the Court that the petitioner passed away on
January 13, 2003.6 The death of the petitioner resulted from a vehicular accident, as indicated in the Certificate of Death
attached thereto.7

At issue now before the Court is the effect of petitioner’s death on the instant petition.

Article 89 (1) of the Revised Penal Code clearly provides that:

Art. 89. How criminal liability is totally extinguished. -Criminal liability is totally extinguished;

1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties, liability therefore is extinguished only
when the death of the offender occurs before final judgment;

The issue as to whether an action on the civil liability can survive and proceed against the estate of the deceased has been
settled in the case of People v. Bayotas 8 where it was held that:

Upon death of the accused pending appeal of his conviction, the criminal action is extinguished inasmuch as there is no longer
a defendant to stand as the accused; the civil action instituted therein for recovery of civil liability ex delicto is ipso facto
extinguished, grounded as it is on the criminal.9 1awphi1.nét

The pecuniary liabilities adjudged against the petitioner are undeniably ex delicto. The petitioner was ordered to pay actual
damages, which is the value of the pieces of jewelry allegedly taken from the private complainant in the amount of P1,500,000,
as modified by the Court of Appeals; and moral damages of P100,000 for the fear and trauma caused to the complainant
because of the petitioner’s intrusion into her bedroom. These civil liabilities arose from the crime of Theft and are based solely
on said delict.

Although both the trial and the appellate courts found petitioner guilty beyond reasonable doubt, she had the right to appeal
her case to this Court of last resort and challenge the findings of the two courts below. The judgment of conviction was
pending review until her untimely demise. It has, therefore, not yet attained finality. Thus, pursuant to Article 89 of the
Revised Penal Code, it is incumbent upon the Court to dismiss the instant petition for review. The Court is dismissing the case
because there is no longer a need to continue with the review of the appeal. The lower court’s decision has thus become
ineffectual.10

Needless to state, the civil liability attendant to the crime which includes the restitution of personal or real property 11 is also
extinguished. A substitution of heirs in petitioner’s stead is no longer necessary.

WHEREFORE, the petition for review is DENIED. In view of the death of the petitioner, the appealed decision is SET ASIDE.
Costs de oficio.
 P a g e | 23

11.METRO MANILA TRANSPORT CORPORATION AND APOLINARIO AJOC VS. C.A. AND COL.
SABALBURO ET AL, G.R.NO. 141089, AUGUST 1, 2002.
[G.R. No. 141089. August 1, 2002.]

METRO MANILA TRANSIT CORPORATION and APOLINARIO AJOC, Petitioners, v. THE COURT OF APPEALS and COL.
MARTIN P. SABALBURO, NAPOLEON G. SABALBURO, MARTIN G. SABALBURO, JR., BABY MARIFLOR G. SABALBURO, and
MIRASOL G. SABALBURO, Respondents.

DECISION

QUISUMBING, J.:

On appeal is the decision 1 of the Court of Appeals promulgated on August 25, 1999 in CA-G.R. CV No. 45002, which affirmed in
toto the judgment of the Regional Trial Court of Makati, Branch 62, in Civil Case No. 16062. The trial court found herein
petitioners liable for the death of Florentina Sabalburo in a vehicular accident involving a passenger bus owned by petitioner
Metro Manila Transit Corporation (MMTC) and driven by petitioner Apolinario Ajoc, and ordered them to pay damages to
private respondents.chanrob1es virtua1 1aw 1ibrary

The factual backdrop of this case, as found by the Court of Appeals, is as follows:chanrob1es virtual 1aw library

The eyewitness account of plaintiffs’ witness, Maria Zenaida Baylon, tends to show that in the afternoon of December 24, 1986,
she, her daughter Maria Zenia and the victim, Florentina Sabalburo, were on their way to Baclaran to buy foodstuffs for their
Noche Buena. For some time, they stood on the island at the intersection of St. Andrews Street 2 and Domestic Road, [Pasay
City] waiting for the traffic light to change so they could cross to the other side of St. Andrews Street where they intended to
take a ride for Baclaran. When the traffic light turned red and the vehicles along St. Andrews Street had stopped, the three of
them stepped off the island. Just as they started to cross the street, she (Baylon) saw an MMTC bus coming from their right
(Tramo) which was moving at a fast speed. The next moment, the left front portion of the bus hit the victim on the right side of
her head. The impact was of such force that the victim’s right ear was slashed off and she thereupon fell on the cement and
became unconscious. The victim was brought by the bus driver, Apolinario Ajoc and the bus conductress to the San Juan de
Dios Hospital where she was given medical attention. Florentina Sabalburo never regained consciousness and it was on
January 3, 1987 that she succumbed to her injuries. 3

On February 16, 1987, private respondents filed a complaint 4 for damages against MMTC and its driver, Ajoc, with the
Regional Trial Court of Makati. Docketed as Civil Case No. 16062, the complaint essentially alleged that Ajoc drove the MMTC
bus in a wanton and reckless manner, in gross violation of traffic rules and regulations, without due regard for the safety of
others, thus causing the untimely death of the victim.

Petitioners denied the material allegations of the complaint, disclaimed any liability for the incident, and insisted that the
accident was solely due to the victim’s own negligence. The appellate court summed up their version of the incident as
follows:chanrob1es virtual 1aw library

x       x       x

That at the time material to this case, bus no. 033, with defendant Ajoc driving, then bound towards the direction of Baclaran
proper, was slowly accelerating speed on the outer right lane of the road, in response to the go signal of the traffic light
situated in the intersection of Domestic Road [and Andrew Avenue], while the vehicles on the inner right lane which were
going to turn left towards Domestic Road were at a stop position, the deceased FLORENTINA G. SABALBURO, whose stationary
position was then covered from Ajoc’s peripheral vision by a big truck then bound to MIA Road [that] was at a stop position,
suddenly, without regard to her own safety and in total defiance of traffic signs designed to protect pedestrian[s], suddenly
darted across the road; Ajoc, thus caught by surprise, tried to prevent impact by releasing his accelerator pedal and applying
his brakes but the time lag between the deceased’s negligent act and Ajoc’s prudent and diligent reaction to the former made
the impact a certainty. 5

As special and affirmative defenses, petitioners also claimed that:chanrob1es virtual 1aw library

(1) MMTC "hires its drivers, conductors and other employees only after they have successfully passed rigid and extensive
theoretical and practical examinations designed to determine their skills and competence . . . and imposes upon its drivers the
duty to undergo regular seminars in defensive driving techniques and road safety habits;" 6

(2) MMTC had "taken every human care and foresight possible in carrying their passengers safely to their respective place
(sic) of destination as well as in avoiding harm to the life and limbs or risk against pedestrians so that they not be held liable;"
7 and

(3)" [T]he buses of the defendant corporation, including its bus no. 033 were all properly maintained . . . before the buses left
the garage for their respective routes on that particular day, as in all other days, they were rigidly inspected and examined and
properly certified as roadworthy." 8
 P a g e | 24

The trial court found private respondents’ version more credible and on August 12, 1993, decided the case as
follows:chanrob1es virtual 1aw library

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against defendants as
follows:chanrob1es virtual 1aw library
1. Ordering defendants to jointly and severally pay plaintiff Martin Sabalburo actual damages in the sum of P63,943.88
representing the unpaid expenses of plaintiff in connection with the death of Florentina Sabalburo;
2. Ordering defendants to jointly and severally pay plaintiffs the sum of P180,000.00 for the loss of the earning capacity of the
deceased for a period of ten (10) years;
3. Ordering defendants to jointly and severally pay plaintiff Martin Sabalburo the amount of P500,000.00 as moral damages;
4. Ordering defendants to jointly and severally pay plaintiff Martin Sabalburo the sum of P50,000.00 as exemplary damages;
5. Ordering defendants [to] jointly and severally pay plaintiff Martin Sabalburo the sum of P50,000.00 as attorney’s fees;
6. Ordering defendants jointly and severally to pay plaintiffs the costs of this suit.

SO ORDERED. 9

Petitioners seasonably appealed to the Court of Appeals, which docketed their appeal as CA-G.R. CV No. 45002. Before the
appellate court, petitioners insisted that the accident was solely the fault of the victim since she suddenly crossed a very busy
street with complete disregard for her safety and in violation of traffic rules and regulations designed to protect pedestrians.

As earlier stated, the appellate court, in CA-G.R. CV No. 45002, affirmed the trial court’s decision, thus:chanrob1es virtual 1aw
library

IN JUDGMENT, we hold that the appeal interposed by appellants is not meritorious and the judgment of the lower court which
we find to be in accordance with law and the evidence is therefore AFFIRMED in toto. Costs against appellants.

SO ORDERED. 10

Petitioners then moved for reconsideration, but the appellate court denied their motion in its resolution of December 10,
1999. 11

Hence, the present petition.

Petitioners submit as sole issue for our resolution the following:chanrob1es virtual 1aw library

WHETHER OR NOT ARTICLE 2179 12 AS AN EXCEPTION TO ARTICLE 2176 13 OF THE CIVIL CODE IS APPLICABLE IN THE
INSTANT CASE.

Petitioners insist that a closer look at the facts established by the trial court would show that the incident happened at around
3:30 in the afternoon of December 24, 1986 or barely eight (8) hours before Christmas Eve. Thus, the victim’s thoughts were
naturally directed towards the Noche Buena. The victim then crossed busy Andrew Avenue for the purpose of getting a ride to
Baclaran to buy food for the Christmas Eve celebration. Since her thoughts were on the Christmas Eve feast, she crossed where
there was no pedestrian lane and while the green light for vehicular traffic was on. Petitioner MMTC submits that petitioner
Ajoc cannot be charged with negligence considering that he cannot see what is in the mind of a pedestrian. Considering that
the victim’s own negligence was the direct and proximate cause of her injuries and untimely demise, it was error for the Court
of Appeals not to have applied Article 2179 of the Civil Code to the instant case.

Petitioners’ claim that at the time of the incident, the victim’s mind was preoccupied with the preparations for the Noche
Buena, is naught but pure conjecture and speculation, with nary a scintilla of proof to support it, according to respondents.
Both the trial and appellate courts established that the immediate and proximate cause of the victim’s death was the negligent
and careless driving by petitioner Ajoc. Therefore, the full force of Article 2176 of the Civil Code applies, concluded
respondents.

In asking us to apply Article 2179 of the Civil Code, we note that petitioners are asking us to make a finding that the victim’s
own negligence was the direct and proximate cause of her death. This we cannot do. The issue of whether a person is negligent
or not is a question of fact. 14 The Supreme Court is not a trier of facts, 15 although it has the power and authority to review
and reverse the factual findings of lower courts where these do not conform to the evidence 16 or where the courts below
came up with contradictory factual findings. 17

We have thoroughly perused the records of this case, and nowhere do we find evidence to support petitioners’ claim that the
victim was so engrossed in thinking about Noche Buena while crossing a busy street. Petitioners’ stance regarding the victim’s
alleged negligence is non sequitur. It simply does not follow that one who is run over by a vehicle on Christmas Eve (or any
other holiday for that matter) is negligent because his thoughts were on the holiday festivities.

Instead, the records support private respondents’ claim that the MMTC bus was being driven carelessly. As found by the trial
court and affirmed by the Court of Appeals, the victim and her companions were standing on the island of Andrew Avenue,
waiting for the traffic light to change so they could cross. Upon seeing the red light, the victim and her companions started to
 P a g e | 25

cross. It was then when petitioner Ajoc, who was trying to beat the red light, hit the victim. As the court a quo noted, Ajoc’s
claim that "he failed to see the victim and her companions proves his recklessness and lack of caution in driving his vehicle."
18 Findings of fact of the trial court, especially when affirmed by the Court of Appeals, are binding and conclusive on the
Supreme Court. 19 More so, as in this case, where petitioners have not adequately shown that the courts below overlooked or
disregarded certain facts or circumstances of such import as would have altered the outcome of the case. Contrary to
petitioners’ insistence, the applicable law in this case is Article 2176 of the Civil Code and not Article 2179.

Petitioner MMTC next contends that the Court of Appeals erred in finding it solidarily liable for damages with its
driver/employee, Ajoc, pursuant to the relevant paragraphs of Article 2180 20 of the Civil Code. It argues that the act of Ajoc in
bringing the victim to a hospital reflects MMTC’s diligence in the selection and supervision of its drivers, particularly with
regard to safety measures. Hence, having exercised the diligence of a good father of a family in the selection and supervision of
its employees to prevent damage, MMTC should not be held vicariously liable.

It should be stressed, however, that whenever an employee’s negligence causes damage or injury to another, there instantly
arises a presumption juris tantum that there was negligence on the part of the employer, either in the selection of the
employee (culpa in eligiendo) or the supervision over him after the selection (culpa in vigilando). 21 Hence, to escape solidary
liability for a quasi-delict committed by his employee, an employer must rebut the presumption by presenting convincing
proof that in the selection and supervision of his employee, he has exercised the care and diligence of a good father of a family.
22 In the present case, petitioner MMTC failed to rebut the presumption of negligence on its part.

The claim that Ajoc’s act of bringing the victim to the nearest medical facility shows adequate supervision by MMTC over its
employees deserves but scant consideration. For one, the act was after the fact of negligence on Ajoc’s part. For another, the
evidence on record shows that Ajoc’s act was neither voluntary nor spontaneous; he had to be prevailed upon by the victim’s
companions to render assistance to his victim. 23 Moreover, the evidence to show that MMTC had exercised due diligence in
the selection and supervision of its employees consisted merely of the pertinent guidelines for the screening and selection of
its drivers, as well as periodic seminars on road safety. As found by the trial court, and affirmed by the appellate court,
petitioner MMTC failed to show that its driver, Ajoc, had actually undergone such screening or had attended said seminars. As
previously held," [t]he mere formulation of various company policies on safety without showing that they were being
complied with is not sufficient to exempt (an employer) from liability arising from negligence of its employees. It is incumbent
upon petitioner to show that in recruiting and employing the erring driver the recruitment procedures and company policies
on efficiency and safety were followed." 24 In this case, MMTC has made no satisfactory showing that it had paid more than lip
service to its guidelines and policies in hiring and supervision. Its failure to do so cannot but warrant the proper sanctions
from this Court, considering that MMTC is a government-owned public utility organized for the public welfare. Having failed to
rebut the presumption of negligence on its part, MMTC is primarily and directly liable for the damages caused by its employee,
the erring driver, Ajoc, pursuant to Article 2180 of the Civil Code, which provides as follows:chanrob1es virtual 1aw library

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those
of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children
who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their
company.

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees
in the service of the branches in which the latter are employed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry.

The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the
official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or
apprentices, so long as they remain in their custody.

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.

The owners of public utilities fall within the scope of this article. 25 As earlier stated, MMTC is a public utility, organized and
owned by the government for public transport service. Hence, its liability to private respondents, for the negligent and
reckless acts of its driver, Ajoc, under Article 2180 of the Civil Code is both manifest and clear.chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the instant petition is DISMISSED. The assailed decision of the Court of Appeals in CA-G.R. CV No. 45002 is
AFFIRMED. Costs against petitioners.

SO ORDERED.
 P a g e | 26

12.LRTA VS. NAVIDAD, GR 145804, 6 FEBRUARY 2003

G.R. No. 145804             February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,

vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents.

DECISION

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000
and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad
vs. Rodolfo Roman, et. al.," which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig
City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo
Roman liable for damages on account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT
station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the
LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the
fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact
moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the
moving train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint
for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and
Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection
and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court
rendered its decision; it adjudged:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito
Escartin ordering the latter to pay jointly and severally the plaintiffs the following:

"a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision
exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and
severally liable thusly:

"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death of
Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his death
and are hereby directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage
theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare
 P a g e | 27

and getting the corresponding token therefor. In exempting Prudent from liability, the court stressed that there was nothing to
link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the
victim and the evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned
and managed by the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to
present expert evidence to establish the fact that the application of emergency brakes could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

"I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT

"II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF
NICANOR NAVIDAD, JR.

"III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."3

Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding
them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not
overcome. Petitioners would insist that Escartin’s assault upon Navidad, which caused the latter to fall on the tracks, was an
act of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate court’s conclusion on
the existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had
testified being an employee of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from
the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights
and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the
death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is
burdened with the duty of exercising utmost diligence in ensuring the safety of passengers. 4 The Civil Code, governing the
liability of a common carrier for death of or injury to its passengers, provides:

"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances.

"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755."

"Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the
former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders
of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employees."

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence
of other passengers or of strangers, if the common carrier’s employees through the exercise of the diligence of a good father of
a family could have prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due
regard for all circumstances.5 Such duty of a common carrier to provide safety to its passengers so obligates it not only during
the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers (a) through
the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if
the common carrier’s employees through the exercise of due diligence could have prevented or stopped the act or omission. 7 In
case of such death or injury, a carrier is presumed to have been at fault or been negligent, and 8 by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts
upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. 9 In the absence of satisfactory
explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to
show, the presumption would be that it has been at fault, 10 an exception from the general rule that negligence must be
proved.11

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach
of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of
 P a g e | 28

an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 12 and
related provisions, in conjunction with Article 2180, 13 of the Civil Code. The premise, however, for the employer’s liability is
negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and
supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how
then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes
the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 14 of the Civil Code can well
apply.15 In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. 16 Stated
differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual
liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing
the rules on tort to apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by
the factual finding of the Court of Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the
reason that the negligence of its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not
without substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must
also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him. 18 It is an established rule that nominal damages cannot co-
exist with compensatory damages.19

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of
nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs.

SO ORDERED.
 P a g e | 29

13.METROPOLITAN BANK AND TRUST COMPANY VS. ANA GRACE ROSALES, G.R. NO. 183204,
JANUARY 13, 2014
G.R. No. 183204               January 13, 2014

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.

DECISION

DEL CASTILLO, J.:

Bank deposits, which are in the nature of a simple loan or mutuum, 1 must be paid upon demand by the depositor.2

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2, 2008 Decision4 and the May 30,
2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV No. 89086.

Factual Antecedents

Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly organized and existing under the
laws of the Philippines.6 Respondent Ana Grace Rosales (Rosales) is the owner of China Golden Bridge Travel Services, 7 a travel
agency.8 Respondent Yo Yuk To is the mother of respondent Rosales.9

In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo Branch.11 As of August 4, 2004, respondents’
Joint Peso Account showed a balance of ₱2,515,693.52. 12

In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National applying for a retiree’s visa
from the Philippine Leisure and Retirement Authority (PLRA), to petitioner’s branch in Escolta to open a savings account, as
required by the PLRA.13 Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as an interpreter for
her.14

On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar Account 15 with an initial deposit of
US$14,000.00.16

On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts. 17

On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre, filed before the Office of
the Prosecutor of Manila a criminal case for Estafa through False Pretences, Misrepresentation, Deceit, and Use of Falsified
Documents, docketed as I.S. No. 03I-25014,18 against respondent Rosales.19 Petitioner accused respondent Rosales and an
unidentified woman as the ones responsible for the unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu
Fang’s dollar account with petitioner’s Escolta Branch.20 Petitioner alleged that on February 5, 2003, its branch in Escolta
received from the PLRA a Withdrawal Clearance for the dollar account of Liu Chiu Fang; 21 that in the afternoon of the same
day, respondent Rosales went to petitioner’s Escolta Branch to inform its Branch Head, Celia A. Gutierrez (Gutierrez), that Liu
Chiu Fang was going to withdraw her dollar deposits in cash;22 that Gutierrez told respondent Rosales to come back the
following day because the bank did not have enough dollars; 23 that on February 6, 2003, respondent Rosales accompanied an
unidentified impostor of Liu Chiu Fang to the bank;24 that the impostor was able to withdraw Liu Chiu Fang’s dollar deposit in
the amount of US$75,000.00;25 that on March 3, 2003, respondents opened a dollar account with petitioner; and that the bank
later discovered that the serial numbers of the dollar notes deposited by respondents in the amount of US$11,800.00 were the
same as those withdrawn by the impostor.26

Respondent Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal from the dollar account of
Liu Chiu Fang.27 Respondent Rosales claimed that she did not go to the bank on February 5, 2003. 28 Neither did she inform
Gutierrez that Liu Chiu Fang was going to close her account.29 Respondent Rosales further claimed that after Liu Chiu Fang
opened an account with petitioner, she lost track of her.30 Respondent Rosales’ version of the events that transpired thereafter
is as follows:

On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was at the bank to close her
account.31 At noon of the same day, respondent Rosales went to the bank to make a transaction. 32 While she was transacting
with the teller, she caught a glimpse of a woman seated at the desk of the Branch Operating Officer, Melinda Perez
(Perez).33 After completing her transaction, respondent Rosales approached Perez who informed her that Liu Chiu Fang had
closed her account and had already left.34 Perez then gave a copy of the Withdrawal Clearance issued by the PLRA to
respondent Rosales.35 On June 16, 2003, respondent Rosales received a call from Liu Chiu Fang inquiring about the extension
of her PLRA Visa and her dollar account.36 It was only then that Liu Chiu Fang found out that her account had been closed
without her knowledge.37 Respondent Rosales then went to the bank to inform Gutierrez and Perez of the unauthorized
withdrawal.38 On June 23, 2003, respondent Rosales and Liu Chiu Fang went to the PLRA Office, where they were informed
that the Withdrawal Clearance was issued on the basis of a Special Power of Attorney (SPA) executed by Liu Chiu Fang in favor
of a certain Richard So.39 Liu Chiu Fang, however, denied executing the SPA.40 The following day, respondent Rosales, Liu Chiu
Fang, Gutierrez, and Perez met at the PLRA Office to discuss the unauthorized withdrawal. 41 During the conference, the bank
officers assured Liu Chiu Fang that the money would be returned to her. 42
 P a g e | 30

On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing the criminal case for lack of
probable cause.43 Unfazed, petitioner moved for reconsideration.

On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a Complaint 44 for Breach of
Obligation and Contract with Damages, docketed as Civil Case No. 04110895 and raffled to Branch 21, against petitioner.
Respondents alleged that they attempted several times to withdraw their deposits but were unable to because petitioner had
placed their accounts under "Hold Out" status.45 No explanation, however, was given by petitioner as to why it issued the "Hold
Out" order.46 Thus, they prayed that the "Hold Out" order be lifted and that they be allowed to withdraw their deposits. 47 They
likewise prayed for actual, moral, and exemplary damages, as well as attorney’s fees. 48

Petitioner alleged that respondents have no cause of action because it has a valid reason for issuing the "Hold Out" order. 49 It
averred that due to the fraudulent scheme of respondent Rosales, it was compelled to reimburse Liu Chiu Fang the amount of
US$75,000.0050 and to file a criminal complaint for Estafa against respondent Rosales. 51

While the case for breach of contract was being tried, the City Prosecutor of Manila issued a Resolution dated February 18,
2005, reversing the dismissal of the criminal complaint.52 An Information, docketed as Criminal Case No. 05-236103, 53 was
then filed charging respondent Rosales with Estafa before Branch 14 of the RTC of Manila. 54

Ruling of the Regional Trial Court

On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages for breach of contract. 56 The RTC
ruled that it is the duty of petitioner to release the deposit to respondents as the act of withdrawal of a bank deposit is an act of
demand by the creditor.57 The RTC also said that the recourse of petitioner is against its negligent employees and not against
respondents.58 The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner] METROPOLITAN BANK & TRUST
COMPANY to allow [respondents] ANA GRACE ROSALES and YO YUK TO to withdraw their Savings and Time Deposits with the
agreed interest, actual damages of ₱50,000.00, moral damages of ₱50,000.00, exemplary damages of ₱30,000.00 and 10% of
the amount due [respondents] as and for attorney’s fees plus the cost of suit.

The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.

SO ORDERED.59

Ruling of the Court of Appeals

Aggrieved, petitioner appealed to the CA.

On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual damages because "the basis for
[respondents’] claim for such damages is the professional fee that they paid to their legal counsel for [respondent] Rosales’
defense against the criminal complaint of [petitioner] for estafa before the Office of the City Prosecutor of Manila and not this
case."60 Thus, the CA disposed of the case in this wise:

WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch 21, Manila in Civil Case No. 04-
110895 is AFFIRMED with MODIFICATION that the award of actual damages to [respondents] Rosales and Yo Yuk To is hereby
DELETED.

SO ORDERED.61

Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008 Resolution. 62

Issues

Hence, this recourse by petitioner raising the following issues:

A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND AGREEMENT FOR DEPOSIT
ACCOUNT DOES NOT APPLY IN THIS CASE.

B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE NEGLIGENT IN RELEASING LIU CHIU FANG’S
FUNDS.

C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY DAMAGES, AND ATTORNEY’S FEES.63

Petitioner’s Arguments

Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Application and Agreement for
Deposit Account.64 It posits that the said clause applies to any and all kinds of obligation as it does not distinguish between
obligations arising ex contractu or ex delictu.65 Petitioner also contends that the fraud committed by respondent Rosales was
clearly established by evidence;66 thus, it was justified in issuing the "Hold-Out" order. 67 Petitioner likewise denies that its
employees were negligent in releasing the dollars. 68 It claims that it was the deception employed by respondent Rosales that
caused petitioner’s employees to release Liu Chiu Fang’s funds to the impostor. 69

Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s fees. It insists that respondents
failed to prove that it acted in bad faith or in a wanton, fraudulent, oppressive or malevolent manner. 70
 P a g e | 31

Respondents’ Arguments

Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold their deposits because they have
no monetary obligation to petitioner.71 They insist that petitioner miserably failed to prove its accusations against respondent
Rosales.72 In fact, no documentary evidence was presented to show that respondent Rosales participated in the unauthorized
withdrawal.73 They also question the fact that the list of the serial numbers of the dollar notes fraudulently withdrawn on
February 6, 2003, was not signed or acknowledged by the alleged impostor. 74 Respondents likewise maintain that what was
established during the trial was the negligence of petitioner’s employees as they allowed the withdrawal of the funds without
properly verifying the identity of the depositor.75 Furthermore, respondents contend that their deposits are in the nature of a
loan; thus, petitioner had the obligation to return the deposits to them upon demand. 76 Failing to do so makes petitioner liable
to pay respondents moral and exemplary damages, as well as attorney’s fees. 77

Our Ruling

The Petition is bereft of merit.

At the outset, the relevant issues in this case are (1) whether petitioner breached its contract with respondents, and (2) if so,
whether it is liable for damages. The issue of whether petitioner’s employees were negligent in allowing the withdrawal of Liu
Chiu Fang’s dollar deposits has no bearing in the resolution of this case. Thus, we find no need to discuss the same.

The "Hold Out" clause does not apply

to the instant case.

Petitioner claims that it did not breach its contract with respondents because it has a valid reason for issuing the "Hold Out"
order. Petitioner anchors its right to withhold respondents’ deposits on the Application and Agreement for Deposit Account,
which reads:

Authority to Withhold, Sell and/or Set Off:

The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, all monies, properties or
securities of the Depositor now in or which may hereafter come into the possession or under the control of the Bank, whether
left with the Bank for safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much thereof as will be
sufficient to pay any or all obligations incurred by Depositor under the Account or by reason of any other transactions
between the same parties now existing or hereafter contracted, to sell in any public or private sale any of such properties or
securities of Depositor, and to apply the proceeds to the payment of any Depositor’s obligations heretofore mentioned.

xxxx

JOINT ACCOUNT

xxxx

The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert a lien on any balance of
the Account and apply all or any part thereof against any indebtedness, matured or unmatured, that may then be owing to the
Bank by any or all of the Depositors. It is understood that if said indebtedness is only owing from any of the Depositors, then
this provision constitutes the consent by all of the depositors to have the Account answer for the said indebtedness to the
extent of the equal share of the debtor in the amount credited to the Account. 78

Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account is misplaced.

The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of the sources of obligation
enumerated in Article 115779 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-
delict. And although a criminal case was filed by petitioner against respondent Rosales, this is not enough reason for petitioner
to issue a "Hold Out" order as the case is still pending and no final judgment of conviction has been rendered against
respondent Rosales. In fact, it is significant to note that at the time petitioner issued the "Hold Out" order, the criminal
complaint had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the five sources of
obligation, there was no legal basis for petitioner to issue the "Hold Out" order. Accordingly, we agree with the findings of the
RTC and the CA that the "Hold Out" clause does not apply in the instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiably refused to release
respondents’ deposit despite demand. Having breached its contract with respondents, petitioner is liable for damages.

Respondents are entitled to moral and

exemplary damages and attorney’s fees.1âwphi1

In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or in bad faith, 80 or is
"guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations." 81

In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order reveals that petitioner issued the
"Hold Out" order in bad faith. First of all, the order was issued without any legal basis. Second, petitioner did not inform
respondents of the reason for the "Hold Out."82 Third, the order was issued prior to the filing of the criminal complaint.
Records show that the "Hold Out" order was issued on July 31, 2003, 83 while the criminal complaint was filed only on
 P a g e | 32

September 3, 2003.84 All these taken together lead us to conclude that petitioner acted in bad faith when it breached its
contract with respondents. As we see it then, respondents are entitled to moral damages.

As to the award of exemplary damages, Article 222985 of the Civil Code provides that exemplary damages may be imposed "by
way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages."
They are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 86

In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent manner when it
refused to release the deposits of respondents without any legal basis. We need not belabor the fact that the banking industry
is impressed with public interest.87 As such, "the highest degree of diligence is expected, and high standards of integrity and
performance are even required of it."88 It must therefore "treat the accounts of its depositors with meticulous care and always
to have in mind the fiduciary nature of its relationship with them." 89 For failing to do this, an award of exemplary damages is
justified to set an example.

The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 2208 90 of the Civil Code.

In closing, it must be stressed that while we recognize that petitioner has the right to protect itself from fraud or suspicions of
fraud, the exercise of his right should be done within the bounds of the law and in accordance with due process, and not in bad
faith or in a wanton disregard of its contractual obligation to respondents.

WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30, 2008 Resolution of the Court
of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Court’s Division.

ANTONIO T CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson s Attestation, I certify that the conclusions
in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

MARIA LOURDES P. A. SERENO

Chief Justice
 P a g e | 33

14.SALUDAGA VS. FEU, G.R. NO. 179337, APRIL 30, 2008

G.R. No. 179337             April 30, 2008

JOSEPH SALUDAGA, petitioner,
vs.
FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his capacity as President of FEU, respondents.

DECISION

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the June 29, 2007 Decision 2 of the Court of
Appeals in CA-G.R. CV No. 87050, nullifying and setting aside the November 10, 2004 Decision 3 of the Regional Trial Court of
Manila, Branch 2, in Civil Case No. 98-89483 and dismissing the complaint filed by petitioner; as well as its August 23, 2007
Resolution4 denying the Motion for Reconsideration.5

The antecedent facts are as follows:

Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University (FEU) when he was shot by
Alejandro Rosete (Rosete), one of the security guards on duty at the school premises on August 18, 1996. Petitioner was
rushed to FEU-Dr. Nicanor Reyes Medical Foundation (FEU-NRMF) due to the wound he sustained. 6 Meanwhile, Rosete was
brought to the police station where he explained that the shooting was accidental. He was eventually released considering that
no formal complaint was filed against him.

Petitioner thereafter filed a complaint for damages against respondents on the ground that they breached their obligation to
provide students with a safe and secure environment and an atmosphere conducive to learning. Respondents, in turn, filed a
Third-Party Complaint7 against Galaxy Development and Management Corporation (Galaxy), the agency contracted by
respondent FEU to provide security services within its premises and Mariano D. Imperial (Imperial), Galaxy's President, to
indemnify them for whatever would be adjudged in favor of petitioner, if any; and to pay attorney's fees and cost of the suit. On
the other hand, Galaxy and Imperial filed a Fourth-Party Complaint against AFP General Insurance. 8

On November 10, 2004, the trial court rendered a decision in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, from the foregoing, judgment is hereby rendered ordering:

1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay jointly and severally Joseph Saludaga the amount of
P35,298.25 for actual damages with 12% interest per annum from the filing of the complaint until fully paid; moral damages of
P300,000.00, exemplary damages of P500,000.00, attorney's fees of P100,000.00 and cost of the suit;

2. Galaxy Management and Development Corp. and its president, Col. Mariano Imperial to indemnify jointly and severally 3rd
party plaintiffs (FEU and Edilberto de Jesus in his capacity as President of FEU) for the above-mentioned amounts;

3. And the 4th party complaint is dismissed for lack of cause of action. No pronouncement as to costs.

SO ORDERED.9

Respondents appealed to the Court of Appeals which rendered the assailed Decision, the decretal portion of which
provides, viz:

WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10, 2004 is hereby REVERSED and SET ASIDE.
The complaint filed by Joseph Saludaga against appellant Far Eastern University and its President in Civil Case No. 98-89483 is
DISMISSED.

SO ORDERED.10

Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition based on the following grounds:

THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT:

5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;

5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY RESULTING FROM A GUNSHOT WOUND SUFFERED BY
THE PETITIONER FROM THE HANDS OF NO LESS THAN THEIR OWN SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN
CONTRACTUAL OBLIGATION TO PETITIONER, BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE HIM WITH A SAFE
AND SECURE EDUCATIONAL ENVIRONMENT;

5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT PETITIONER WHILE HE WAS WALKING ON HIS WAY TO THE LAW
LIBRARY OF RESPONDENT FEU IS NOT THEIR EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY SERVICES
BETWEEN GALAXY AND FEU NOTWITHSTANDING THE FACT THAT PETITIONER, NOT BEING A PARTY TO IT, IS NOT BOUND
BY THE SAME UNDER THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and

5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS THE AGENCY WHICH WOULD PROVIDE SECURITY
SERVICES WITHIN THE PREMISES OF RESPONDENT FEU.11

Petitioner is suing respondents for damages based on the alleged breach of student-school contract for a safe learning
environment. The pertinent portions of petitioner's Complaint read:
 P a g e | 34

6.0. At the time of plaintiff's confinement, the defendants or any of their representative did not bother to visit and inquire
about his condition. This abject indifference on the part of the defendants continued even after plaintiff was discharged from
the hospital when not even a word of consolation was heard from them. Plaintiff waited for more than one (1) year for the
defendants to perform their moral obligation but the wait was fruitless. This indifference and total lack of concern of
defendants served to exacerbate plaintiff's miserable condition.

xxxx

11.0. Defendants are responsible for ensuring the safety of its students while the latter are within the University premises. And
that should anything untoward happens to any of its students while they are within the University's premises shall be the
responsibility of the defendants. In this case, defendants, despite being legally and morally bound, miserably failed to protect
plaintiff from injury and thereafter, to mitigate and compensate plaintiff for said injury;

12.0. When plaintiff enrolled with defendant FEU, a contract was entered into between them. Under this contract, defendants
are supposed to ensure that adequate steps are taken to provide an atmosphere conducive to study and ensure the safety of
the plaintiff while inside defendant FEU's premises. In the instant case, the latter breached this contract when defendant
allowed harm to befall upon the plaintiff when he was shot at by, of all people, their security guard who was tasked to maintain
peace inside the campus.12

In Philippine School of Business Administration v. Court of Appeals,13 we held that:

When an academic institution accepts students for enrollment, there is established a contract between them, resulting in
bilateral obligations which both parties are bound to comply with. For its part, the school undertakes to provide the student
with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education
or a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules
and regulations.

Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that
promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the
intricacies of physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or
grenades exploding in the air or where there looms around the school premises a constant threat to life and limb. Necessarily,
the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent
the breakdown thereof.14

It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU. As such, there was created a
contractual obligation between the two parties. On petitioner's part, he was obliged to comply with the rules and regulations
of the school. On the other hand, respondent FEU, as a learning institution is mandated to impart knowledge and equip its
students with the necessary skills to pursue higher education or a profession. At the same time, it is obliged to ensure and take
adequate steps to maintain peace and order within the campus.

It is settled that in culpa contractual, the mere proof of the existence of the contract and the failure of its compliance justify,
prima facie, a corresponding right of relief.15 In the instant case, we find that, when petitioner was shot inside the campus by
no less the security guard who was hired to maintain peace and secure the premises, there is a prima facie showing that
respondents failed to comply with its obligation to provide a safe and secure environment to its students.

In order to avoid liability, however, respondents aver that the shooting incident was a fortuitous event because they could not
have reasonably foreseen nor avoided the accident caused by Rosete as he was not their employee; 16 and that they complied
with their obligation to ensure a safe learning environment for their students by having exercised due diligence in selecting
the security services of Galaxy.

After a thorough review of the records, we find that respondents failed to discharge the burden of proving that they exercised
due diligence in providing a safe learning environment for their students. They failed to prove that they ensured that the
guards assigned in the campus met the requirements stipulated in the Security Service Agreement. Indeed, certain documents
about Galaxy were presented during trial; however, no evidence as to the qualifications of Rosete as a security guard for the
university was offered.

Respondents also failed to show that they undertook steps to ascertain and confirm that the security guards assigned to them
actually possess the qualifications required in the Security Service Agreement. It was not proven that they examined the
clearances, psychiatric test results, 201 files, and other vital documents enumerated in its contract with Galaxy. Total reliance
on the security agency about these matters or failure to check the papers stating the qualifications of the guards is negligence
on the part of respondents. A learning institution should not be allowed to completely relinquish or abdicate security matters
in its premises to the security agency it hired. To do so would result to contracting away its inherent obligation to ensure a
safe learning environment for its students.

Consequently, respondents' defense of force majeure must fail. In order for force majeure to be considered, respondents must
show that no negligence or misconduct was committed that may have occasioned the loss. An act of God cannot be invoked to
protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss. One's negligence
may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate
or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is
found to be partly the result of a person's participation - whether by active intervention, neglect or failure to act - the whole
occurrence is humanized and removed from the rules applicable to acts of God. 17
 P a g e | 35

Article 1170 of the Civil Code provides that those who are negligent in the performance of their obligations are liable for
damages. Accordingly, for breach of contract due to negligence in providing a safe learning environment, respondent FEU is
liable to petitioner for damages. It is essential in the award of damages that the claimant must have satisfactorily proven
during the trial the existence of the factual basis of the damages and its causal connection to defendant's acts. 18

In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization and other medical
expenses.19 While the trial court correctly imposed interest on said amount, however, the case at bar involves an obligation
arising from a contract and not a loan or forbearance of money. As such, the proper rate of legal interest is six percent (6%)
per annum of the amount demanded. Such interest shall continue to run from the filing of the complaint until the finality of
this Decision.20 After this Decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum
until its satisfaction.

The other expenses being claimed by petitioner, such as transportation expenses and those incurred in hiring a personal
assistant while recuperating were however not duly supported by receipts. 21 In the absence thereof, no actual damages may be
awarded. Nonetheless, temperate damages under Art. 2224 of the Civil Code may be recovered where it has been shown that
the claimant suffered some pecuniary loss but the amount thereof cannot be proved with certainty. Hence, the amount of
P20,000.00 as temperate damages is awarded to petitioner.

As regards the award of moral damages, 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. 22 The testimony of petitioner about his
physical suffering, mental anguish, fright, serious anxiety, and moral shock resulting from the shooting incident 23 justify the
award of moral damages. However, moral damages are in the category of an award designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer. The award is not meant to enrich the complainant at the
expense of the defendant, but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate
the moral suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo
ante, and should be proportionate to the suffering inflicted. Trial courts must then guard against the award of exorbitant
damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it was due to passion,
prejudice, or corruption on the part of the trial court.24 We deem it just and reasonable under the circumstances to award
petitioner moral damages in the amount of P100,000.00.

Likewise, attorney's fees and litigation expenses in the amount of P50,000.00 as part of damages is reasonable in view of
Article 2208 of the Civil Code.25 However, the award of exemplary damages is deleted considering the absence of proof that
respondents acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

We note that the trial court held respondent De Jesus solidarily liable with respondent FEU. In Powton Conglomerate, Inc. v.
Agcolicol,26 we held that:

[A] corporation is invested by law with a personality separate and distinct from those of the persons composing it, such that,
save for certain exceptions, corporate officers who entered into contracts in behalf of the corporation cannot be held
personally liable for the liabilities of the latter. Personal liability of a corporate director, trustee or officer along (although not
necessarily) with the corporation may so validly attach, as a rule, only when - (1) he assents to a patently unlawful act of the
corporation, or when he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders or other persons; (2) he consents to the issuance of watered down
stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto;
(3) he agrees to hold himself personally and solidarily liable with the corporation; or (4) he is made by a specific provision of
law personally answerable for his corporate action.27

None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus should not be held solidarily
liable with respondent FEU.

Incidentally, although the main cause of action in the instant case is the breach of the school-student contract, petitioner, in the
alternative, also holds respondents vicariously liable under Article 2180 of the Civil Code, which provides:

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.

We agree with the findings of the Court of Appeals that respondents cannot be held liable for damages under Art. 2180 of the
Civil Code because respondents are not the employers of Rosete. The latter was employed by Galaxy. The instructions issued
by respondents' Security Consultant to Galaxy and its security guards are ordinarily no more than requests commonly
envisaged in the contract for services entered into by a principal and a security agency. They cannot be construed as the
element of control as to treat respondents as the employers of Rosete. 28
 P a g e | 36

As held in Mercury Drug Corporation v. Libunao:29

In Soliman, Jr. v. Tuazon,30 we held that where the security agency recruits, hires and assigns the works of its watchmen or
security guards to a client, the employer of such guards or watchmen is such agency, and not the client, since the latter has no
hand in selecting the security guards. Thus, the duty to observe the diligence of a good father of a family cannot be demanded
from the said client:

… [I]t is settled in our jurisdiction that where the security agency, as here, recruits, hires and assigns the work of its watchmen
or security guards, the agency is the employer of such guards or watchmen. Liability for illegal or harmful acts committed by
the security guards attaches to the employer agency, and not to the clients or customers of such agency. As a general rule, a
client or customer of a security agency has no hand in selecting who among the pool of security guards or watchmen employed
by the agency shall be assigned to it; the duty to observe the diligence of a good father of a family in the selection of the guards
cannot, in the ordinary course of events, be demanded from the client whose premises or property are protected by the
security guards.

xxxx

The fact that a client company may give instructions or directions to the security guards assigned to it, does not, by itself,
render the client responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions. 31

We now come to respondents' Third Party Claim against Galaxy. In Firestone Tire and Rubber Company of the Philippines v.
Tempengko,32 we held that:

The third-party complaint is, therefore, a procedural device whereby a 'third party' who is neither a party nor privy to the act
or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-
party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other
relief, in respect of the plaintiff's claim. The third-party complaint is actually independent of and separate and distinct from the
plaintiff's complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately
from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party
defendant or so to speak, to litigate his separate cause of action in respect of plaintiff's claim against a third-party in the
original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of
disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts. 33

Respondents and Galaxy were able to litigate their respective claims and defenses in the course of the trial of petitioner's
complaint. Evidence duly supports the findings of the trial court that Galaxy is negligent not only in the selection of its
employees but also in their supervision. Indeed, no administrative sanction was imposed against Rosete despite the shooting
incident; moreover, he was even allowed to go on leave of absence which led eventually to his disappearance. 34 Galaxy also
failed to monitor petitioner's condition or extend the necessary assistance, other than the P5,000.00 initially given to
petitioner. Galaxy and Imperial failed to make good their pledge to reimburse petitioner's medical expenses.

For these acts of negligence and for having supplied respondent FEU with an unqualified security guard, which resulted to the
latter's breach of obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU for such damages equivalent to
the above-mentioned amounts awarded to petitioner.

Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being grossly negligent in directing the
affairs of the security agency. It was Imperial who assured petitioner that his medical expenses will be shouldered by Galaxy
but said representations were not fulfilled because they presumed that petitioner and his family were no longer interested in
filing a formal complaint against them.35

WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of Appeals in CA-G.R. CV No. 87050 nullifying
the Decision of the trial court and dismissing the complaint as well as the August 23, 2007 Resolution denying the Motion for
Reconsideration are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2, in Civil Case No.
98-89483 finding respondent FEU liable for damages for breach of its obligation to provide students with a safe and secure
learning atmosphere, is AFFIRMED with the following MODIFICATIONS:

a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual damages in the amount of P35,298.25, plus
6% interest per annum from the filing of the complaint until the finality of this Decision. After this decision becomes final and
executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction;

b. respondent FEU is also ORDERED to pay petitioner temperate damages in the amount of P20,000.00; moral damages in the
amount of P100,000.00; and attorney's fees and litigation expenses in the amount of P50,000.00;

c. the award of exemplary damages is DELETED.

The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims of respondents are
likewise DISMISSED.

Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D. Imperial are ORDERED to jointly
and severally pay respondent FEU damages equivalent to the above-mentioned amounts awarded to petitioner.

SO ORDERED.
 P a g e | 37

15.ANDRES VS. MANUFACTURERS HANOVER AND TRUST CORPORATION, G.R. NO. 82670,
SEPTEMBER 15, 1989
G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING APPAREL," petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF APPEALS, respondents.

Roque A. Tamayo for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent.

CORTES, J.:

Assailed in this petition for review on certiorari is the judgment of the Court of Appeals, which, applying the doctrine of solutio
indebiti, reversed the decision of the Regional Trial Court, Branch CV, Quezon City by deciding in favor of private respondent.

Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of ladies garments, children's
wear, men's apparel and linens for local and foreign buyers. Among its foreign buyers was Facets Funwear, Inc. (hereinafter
referred to as FACETS) of the United States.

In the course of the business transaction between the two, FACETS from time to time remitted certain amounts of money to
petitioner in payment for the items it had purchased. Sometime in August 1980, FACETS instructed the First National State
Bank of New Jersey, Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via
Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as PNB).

Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and Trust Corporation to effect the
above- mentioned transfer through its facilities and to charge the amount to the account of FNSB with private respondent.
Although private respondent was able to send a telex to PNB to pay petitioner $10,000.00 through the Pilipinas Bank, where
petitioner had an account, the payment was not effected immediately because the payee designated in the telex was only
"Wearing Apparel." Upon query by PNB, private respondent sent PNB another telex dated August 27, 1980 stating that the
payment was to be made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received the remittance of $10,000.00
through Demand Draft No. 225654 of the PNB.

Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the money to petitioner, FACETS informed
FNSB about the situation. On September 8, 1980, unaware that petitioner had already received the remittance, FACETS
informed private respondent about the delay and at the same time amended its instruction by asking it to effect the payment
through the Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB) instead of PNB.

Accordingly, private respondent, which was also unaware that petitioner had already received the remittance of $10,000.00
from PNB instructed the PCIB to pay $10,000.00 to petitioner. Hence, on September 11, 1980, petitioner received a second
$10,000.00 remittance.

Private respondent debited the account of FNSB for the second $10,000.00 remittance effected through PCIB. However, when
FNSB discovered that private respondent had made a duplication of the remittance, it asked for a recredit of its account in the
amount of $10,000.00. Private respondent complied with the request.

Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the latter refused to pay. On
May 12, 1982 a complaint was filed with the Regional Trial Court, Branch CV, Quezon City which was decided in favor of
petitioner as defendant. The trial court ruled that Art. 2154 of the New Civil Code is not applicable to the case because the
second remittance was made not by mistake but by negligence and petitioner was not unjustly enriched by virtue thereof
[Record, p. 234]. On appeal, the Court of Appeals held that Art. 2154 is applicable and reversed the RTC decision. The
dispositive portion of the Court of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one entered in favor of plaintiff-
appellant and against defendant-appellee Domelita (sic) M. Andres, doing business under the name and style "Irene's Wearing
Apparel" to reimburse and/or return to plaintiff-appellant the amount of $10,000.00, its equivalent in Philippine currency,
with interests at the legal rate from the filing of the complaint on May 12, 1982 until the whole amount is fully paid, plus
twenty percent (20%) of the amount due as attomey's fees; and to pay the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]

Thereafter, this petition was filed. The sole issue in this case is whether or not the private respondent has the right to recover
the second $10,000.00 remittance it had delivered to petitioner. The resolution of this issue would hinge on the applicability of
Art. 2154 of the New Civil Code which provides that:

Art. 2154. If something received when there is no right to demand it, and it was unduly delivered through mistake, the
obligation to return it arises.

This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:
 P a g e | 38

Art. 1895. If a thing is received when there was no right to claim it and which, through an error, has been unduly delivered, an
obligation to restore it arises.

In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo explained the nature of this article
thus:

Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore applicable. This legal provision, which determines
the quasi-contract of solution indebiti, is one of the concrete manifestations of the ancient principle that no one shall enrich
himself unjustly at the expense of another. In the Roman Law Digest the maxim was formulated thus: "Jure naturae acquum
est, neminem cum alterius detrimento et injuria fieri locupletiorem." And the Partidas declared: "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Such axiom has grown through the centuries in legislation, in the science of law and in court
decisions. The lawmaker has found it one of the helpful guides in framing statutes and codes. Thus, it is unfolded in many
articles scattered in the Spanish Civil Code. (See for example, articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295, 1303,
1304, 1893 and 1895, Civil Code.) This time-honored aphorism has also been adopted by jurists in their study of the conflict of
rights. It has been accepted by the courts, which have not hesitated to apply it when the exigencies of right and equity
demanded its assertion. It is a part of that affluent reservoir of justice upon which judicial discretion draws whenever the
statutory laws are inadequate because they do not speak or do so with a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he who paid was not under obligation to do so; and, (2)
that payment was made by reason of an essential mistake of fact" [City of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].

It is undisputed that private respondent delivered the second $10,000.00 remittance. However, petitioner contends that the
doctrine of solutio indebiti, does not apply because its requisites are absent.

First, it is argued that petitioner had the right to demand and therefore to retain the second $10,000.00 remittance. It is
alleged that even after the two $10,000.00 remittances are credited to petitioner's receivables from FACETS, the latter
allegedly still had a balance of $49,324.00. Hence, it is argued that the last $10,000.00 remittance being in payment of a pre-
existing debt, petitioner was not thereby unjustly enriched.

The contention is without merit.

The contract of petitioner, as regards the sale of garments and other textile products, was with FACETS. It was the latter and
not private respondent which was indebted to petitioner. On the other hand, the contract for the transmittal of dollars from
the United States to petitioner was entered into by private respondent with FNSB. Petitioner, although named as the payee
was not privy to the contract of remittance of dollars. Neither was private respondent a party to the contract of sale between
petitioner and FACETS. There being no contractual relation between them, petitioner has no right to apply the second
$10,000.00 remittance delivered by mistake by private respondent to the outstanding account of FACETS.

Petitioner next contends that the payment by respondent bank of the second $10,000.00 remittance was not made by mistake
but was the result of negligence of its employees. In connection with this the Court of Appeals made the following finding of
facts:

The fact that Facets sent only one remittance of $10,000.00 is not disputed. In the written interrogatories sent to the First
National State Bank of New Jersey through the Consulate General of the Philippines in New York, Adelaide C. Schachel, the
investigation and reconciliation clerk in the said bank testified that a request to remit a payment for Facet Funwear Inc. was
made in August, 1980. The total amount which the First National State Bank of New Jersey actually requested the plaintiff-
appellant Manufacturers Hanover & Trust Corporation to remit to Irene's Wearing Apparel was US $10,000.00. Only one
remittance was requested by First National State Bank of New Jersey as per instruction of Facets Funwear (Exhibit "J", pp. 4-5).

That there was a mistake in the second remittance of US $10,000.00 is borne out by the fact that both remittances have the
same reference invoice number which is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley Panasow" and "A-2-Deposition of
Mr. Stanley Panasow").

Plaintiff-appellant made the second remittance on the wrong assumption that defendant-appellee did not receive the first
remittance of US $10,000.00. [Rollo, pp. 26-27.]

It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which petitioner would have this
Court review. The Court holds that the finding by the Court of Appeals that the second $10,000.00 remittance was made by
mistake, being based on substantial evidence, is final and conclusive. The rule regarding questions of fact being raised with
this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante v. Tibe, G.R. No.
59514, February 25, 1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised
Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing
and revising the errors of law imputed to it, its findings of fact being conclusive" [Chan v. Court of Appeals, G.R. No. L-27488,
June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that "it is not the
function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing
errors of law that might have been committed by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58
SCRA 89; Corona v. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. No. L-
47531, February 20, 1984, 127 SCRA 596]. "Barring, therefore, a showing that the findings complained of are totally devoid of
support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must
 P a g e | 39

stand, for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the
parties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394, December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent persons must suffer by the wrongful act of a third
person, the loss must be borne by the one whose negligence was the proximate cause of the loss.

The rule is that principles of equity cannot be applied if there is a provision of law specifically applicable to a case [Phil. Rabbit
Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958, July
10, 1986, 142 SCRA 587; Rural Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA 409; Cruz v.
Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971,
37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31, 1965, 13 SCRA 486, held:

... The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law
imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in
a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law
principle and a statutory provision, the latter must prevail in this jurisdiction. [at p. 135.]

Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutio indebiti, applies in the case at bar, the
Court must reject the common law principle invoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact that from the time the second
$10,000.00 remittance was made, five hundred and ten days had elapsed before private respondent demanded the return
thereof. Needless to say, private respondent instituted the complaint for recovery of the second $10,000.00 remittance well
within the six years prescriptive period for actions based upon a quasi-contract [Art. 1145 of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.