G.R. No.

179127             December 24, 2008

IN-N-OUT BURGER, INC., petitioner,

vs.
SEHWANI, INCORPORATED AND/OR BENITA’S FRITES, INC., respondents.

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1 dated 18 July 2006
rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision2 dated 23 December 2005 of the Director
General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that
the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition.

Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which
is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in
the Philippines. 3

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.4

On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for "IN-N-
OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner later found out, through the Official Action Papers issued by the IPO on 31
May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark "IN N OUT (the inside
of the letter "O" formed like a star)."5 By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of
respondent Sehwani, Incorporated.

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against
respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner
of the trade name IN-N-OUT and the following trademarks: (1) "IN-N-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-
OUT Burger Logo." These trademarks are registered with the Trademark Office of the US and in various parts of the world, are
internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial
use.6 Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the
restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that
their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing
petitioner’s products.7

Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated
to cease and desist from claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its trademark registration. In a letter-
reply dated 23 October 2000, respondents refused to accede to petitioner’ demand, but expressed willingness to surrender the
registration of respondent Sehwani, Incorporated of the "IN N OUT" trademark for a fair and reasonable consideration. 8

Petitioner was able to register the mark "Double Double" on 4 July 2002, based on their application filed on 2 June 1997.9 It alleged
that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benita’s receipts
bore the phrase, "representing IN-N-OUT Burger."10 It should be noted that that although respondent Sehwahi, Incorporated
registered a mark which appeared as "IN N OUT (the inside of the letter "O" formed like a star)," respondents used the mark "IN-N-
OUT."11

To counter petitioner’s complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted
therein that they had been using the mark "IN N OUT" in the Philippines since 15 October 1982. On 15 November 1991, respondent
Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the
registration of the mark "IN N OUT (the inside of the letter "O" formed like a star)." Upon approval of its application, a certificate of
registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August
2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled
the latter to use its registered mark, "IN N OUT." Respondents asserted that respondent Sehwani, Incorporated, being the registered
owner of the mark "IN N OUT," should be accorded the presumption of a valid registration of its mark with the exclusive right to use
the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a
certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue
as it had never operated in the Philippines.12

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,13 in favor
of petitioner. According to said Decision, petitioner had the legal capacity to sue in the Philippines, since its country of origin or
domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner
had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its
corporate and trade name. Petitioner’s marks are internationally well-known, given the world-wide registration of the mark "IN-N-
OUT," and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a
previous inter partes case that "In-N-Out Burger and Arrow Design" was an internationally well-known mark. Given these
circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and
mark "IN-N-OUT" in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark "IN
N OUT" in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to
ride upon petitioner’s goodwill by copying the mark "IN-N-OUT Burger" exactly. The inside of the letter "O" in the mark used by
respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a
pending application for registration of the "IN-N-OUT" mark was not deemed fraudulent. The dispositive part of the Decision of the
IPO Director for Legal Affairs reads:

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN-N-OUT"
(the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED.
Consequently, respondents Sehwani, Inc. and Benita’s Frites are hereby ordered to permanently cease and desist from
using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO" on its goods and in its business. With regards the mark "Double-
Double," considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown
by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and
desist from using the mark Double-Double. NO COSTS. 14

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents’ Motion for
Reconsideration15 and petitioner’s Motion for Partial Reconsideration16 were denied by the IPO Director for Legal Affairs in
Resolution No. 2004-1817 dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18 respectively.

Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar.

G.R. No. 171053

On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for
Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco
(Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General
for being filed beyond the 15-day reglementary period to appeal.

Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December
2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively
affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of
the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In
particular, respondents based their Petition on the following grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE
TECHNICALITY

THE BUREAU OF LEGAL AFFAIR’S (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENT’S CERTIFICATE OF
REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM
USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY
EVIDENCE.

Respondents thus prayed:

WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order
the Office of the Director General of the Intellectual Property Office to reinstate and give due course to [respondent]’s
Appeal No. 14-2004-00004.

Other reliefs, just and equitable under the premises, are likewise prayed for.

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents’ Petition in CA-G.R SP No. 88004 and affirming
the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents’ appeal before the
IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the
name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22
December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the
reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration.

Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a
Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out
Burger and docketed as G.R. No. 171053.19

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20 finding that herein respondents failed to file their
Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to
appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein
petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines,
and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-
known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration
of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008.

G.R. No. 179127

Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal
Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005.

During the pendency of petitioner’s appeal before the IPO Director General, the Court of Appeals already rendered on 21 October
2005 its Decision dismissing respondents’ Petition in CA-G.R. SP No. 88004.

In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioner’s appeal meritorious and modified
the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were
guilty of unfair competition. Despite respondents’ claims that they had been using the mark since 1982, they only started
constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of
the mark "IN-N-OUT." Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from
those of the petitioner was the star inside the letter "O," a minor difference which still deceived purchasers. Respondents were not
even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief
over the respondents’ reasoning for the non-use of the star symbol. The IPO Director General also considered respondents’ use of
petitioner’s registered mark "Double-Double" as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director
General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents’ acts of unfair
competition, exemplary damages, and attorney’s fees.21 The fallo of the Decision reads:

WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No.
2003-02 dated 22 December 2003 is hereby MODIFIED as follows:

[Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]:

1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND
28/100(P212,574.28);

2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00);

3. Attorney’s fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00).

All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used
by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside
the channels of commerce.

Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be
returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and
Technology Transfer Bureau for their information and records purposes.22

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review
under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the
appellate court on the following grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND
IN ORDERING THEM TO PAY DAMAGES AND ATTORNEY’S FEES TO RESPONDENTS

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIR’S DECISION (1)
CANCELLING PETITIONER’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO
PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS

Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that
their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They
argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore,
could not claim that its goods and services had already been identified in the mind of the public. Respondents added that the
disputed mark was not well-known. Finally, they maintained that petitioner’s complaint was already barred by laches.23

At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer:

WHEREFORE, [respondents herein] respectfully pray that this Honorable Court:

(a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents,
successors and assigns, from executing, enforcing and implementing the IPO Director General’s Decision dated 23
December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from
this Honorable Court.

(b) after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing
and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and
to maintain the status quo ante pending the resolution of the merits of this petition; and
 (c) after giving due course to this petition:

(i) reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-
2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorney’s fees to
the respondent

(ii) in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of
the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of unfair competition and hence not liable
to the [petitioner] for damages and attorney’s fees;

(iii) reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA
dated 25 April 2005, insofar as it upheld [petitioner]’s legal capacity to sue; that [petitioner]’s trademarks are well-
known; and that respondent has the exclusive right to use the same; and

(iv) make the injunction permanent.

[Respondents] also pray for other reliefs, as may deemed just or equitable.24

On 18 July 2006, the Court of Appeals promulgated a Decision25 in CA-G.R. SP No. 92785 reversing the Decision dated 23 December
2005 of the IPO Director General.

The Court of Appeals, in its Decision, initially addressed petitioner’s assertion that respondents had committed forum shopping by
the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping,
distinguishing between the respondents’ two Petitions. The subject of Respondents’ Petition in CA-G.R SP No. 88004 was the 7
December 2004 Decision of the IPO Director General dismissing respondents’ appeal of the 22 December 2003 Decision of the IPO
Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani,
Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents’ Petition in CA-
G.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22
December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the
appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and
the awarding of actual and exemplary damages, as well as attorney’s fees, to petitioner.

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The
appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the
BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks.
Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of
these provisions of the Intellectual Property Code.

In the end, the Court of Appeals decreed:

WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the
Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to
acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondent’s
claims in its Complaint docketed as IPV No. 10-2001-00004 are hereby DISMISSED.26

The Court of Appeals, in a Resolution dated 31 July 2007,27 denied petitioner’s Motion for Reconsideration of its aforementioned
Decision.

Hence, the present Petition, where petitioner raises the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006
AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE
COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;

II

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006
AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A
PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING PROPER.28

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its
Decision29 in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director General’s dismissal of respondents’ appeal for
being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling
the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks.

Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the
other.

Formal Defects of the Petition

Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which
petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition.

Respondents point out that the Secretary’s Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner
had authorized the lawyers of Villaraza and Angangco to represent it in the present Petition and to sign the Verification and
Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretary’s
Certificate reads:

Subscribed and sworn to me this 20th day of August 2007 in Irving California.

Rachel A. Blake (Sgd.)

Notary Public30

Respondents aver that the said Secretary’s Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification
on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1) petitioner’s Corporate Secretary, Mr.
Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to
be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.31

Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. Baranda’s
Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the
notary public; (2) the office address of the notary public; (3) the roll of attorneys’ number and the IBP membership number; and (4) a
statement that the Verification/Certification was notarized within the notary public’s territorial jurisdiction, as required under the
2004 Rules on Notarial Practice. 32

Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements
enumerated therein refer to documents which require an acknowledgement, and not a mere jurat.

A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by
the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary
public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court
and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually declares to the notary that the
executor of a document has attested to the notary that the same is his/her own free act and deed.33 A Secretary’s Certificate, as that
executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.34

Even assuming that the Secretary’s Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at
bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct
of his personal knowledge or based on authentic records. 35 The party itself need not sign the verification. A party’s representative,
lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.36 Atty.
Barranda, as petitioner’s counsel, was in the position to verify the truth and correctness of the allegations of the present Petition.
Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such.

Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Baranda’s Verification. It must be
borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been
made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of
pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a
jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for
compelling reasons.37 The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO
Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due
course and resolve the same on the merits.

This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their
jurats or notarial certificates. Parties and their counsel should take care not to abuse the Court’s zeal to resolve cases on their
merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial
Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in
their proper form before presenting said documents before Philippine courts.

Forum Shopping

Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their
earlier filing of the Petition in CA-G.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of
Appeals a patently false Certification of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the
pendency of CA-G.R SP No. 88004.

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or
the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with
courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused
the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related
causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being
rendered by the different bodies upon the same issues.38

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and
reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res judicata in the action under consideration.39

After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents
are guilty of forum shopping.

There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the
same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of Legal
Affair’s (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]’s certificate of registration for the
mark ‘IN-N-OUT’ and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods
and business are contrary to law and/or is (sic) not supported by evidence."40 The same ground was again invoked by respondents in
their Petition in CA-G.R. SP No. 92785, rephrased as follows: "The IPO Director General committed grave error in affirming the
Bureau of Legal Affair’s (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]’s certificate of registration for the
mark "IN-N-OUT," and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods
and business."41 Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs.
Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs
based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle
of res judicata.

Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R.
SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence,
respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they
are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding.
Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they
filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December
2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner.

In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not
necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again
raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair
competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot
readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents
breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals.

True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to
their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the
jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a
certificate against forum shopping is deemed obligatory, it is not jurisdictional.42 Hence, in this case in which such a certification was
in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of
attendant exceptional circumstances.

The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to
remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the
submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in
the absence of justifiable circumstances.

The Jurisdiction of the IPO

The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R.
SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director
General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of
the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively.
According to the said provision:

Section 163. Jurisdiction of Court.–All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the
proper courts with appropriate jurisdiction under existing laws.
The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section
164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on
Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of
Origin, False Description or Representation.

The Court disagrees with the Court of Appeals.

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus:

Section 10. The Bureau of Legal Affairs.–The Bureau of Legal Affairs shall have the following functions:

10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the
provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory
licensing of patents;

10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property
rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two
hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in
accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all
those who disregard orders or writs issued in the course of the proceedings.

(b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative
penalties:

(i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist
from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the
order;

(ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary
assurance may include one or more of the following:

(1) An assurance to comply with the provisions of the intellectual property law violated;

(2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal
investigation

(3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in
commerce; and

(4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in
the Bureau of Legal Affairs.

The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and
file a bond to guarantee compliance of his undertaking.

(iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be
disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale,
donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other
goods, or any combination thereof, under such guidelines as he may provide;

(iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of
the offense;

(v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs,
which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos
(P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each
day of continuing violation;

(vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office,
or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem
reasonable which shall not exceed one (1) year;

(vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent
from the Office;

(viii) The assessment of damages;

 (ix) Censure; and

(x) Other analogous penalties or sanctions.

10.3 The Director General may by Regulations establish the procedure to govern the implementation of this
Section.43 (Emphasis provided.)

Unquestionably, petitioner’s complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani,
Incorporated, and damages for violation of petitioner’s intellectual property rights, falls within the jurisdiction of the IPO Director of
Legal Affairs.

The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of
the IPO Director of Legal Affairs, to wit:

Section 7. The Director General and Deputies Director General. 7.1 Fuctions.–The Director General shall exercise the
following powers and functions:

xxxx

b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of
Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The
decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of
Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court;
and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall
be appealable to the Secretary of Trade and Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO
jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific
provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and
tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks,
including charges of unfair competition, are under the exclusive jurisdiction of civil courts.

Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil
courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction
over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found
under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair
competition cases. These two provisions read:

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.–Any foreign national or
juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may
bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false
designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws.

xxxx

Section 170. Penalties.–Independent of the civil and administrative sanctions imposed by law, a criminal penalty of

imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred
thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in
Section 155, Section168, and Subsection169.1.

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioner’s administrative case
against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of
Legal Affairs.

Unfair Competition

The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal
Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark "IN-N-
OUT" and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an
issue has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No. 171053, Sehwani,
Incorporated v. In-N-Out Burger,44 ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner
has the superior right to own and use the "IN-N-OUT" trademarks vis-à-vis respondents is a finding which this Court may no longer
disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly
adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on
the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies
whether or not the claims, demands, purposes, or subject matters of the two actions are the same.45
Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of
unfair competition for which he awarded damages to petitioner.

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2)
intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks,
but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be
inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be
shown.46

In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair
competition in this case, viz:

The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the
[petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter
"O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT
BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the
latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover,
[respondents] are also using [petitioner’s] registered mark Double-Double for use on hamburger products. In fact, the
burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the
[respondent], but the [petitioner’s] IN-N-OUT Burger’s name and trademark IN-N-OUT with Arrow design.

There is no evidence that the [respondents] were authorized by the [petitioner] to use the latter’s marks in the business.
[Respondents’] explanation that they are not using their own registered trademark due to the difficulty in printing the "star"
does not justify the unauthorized use of the [petitioner’s] trademark instead.

Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe
that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods
as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x.

xxxx

[Respondents’] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit
"GG," which shows the business establishment of [respondents] illustrates the imitation of [petitioner’s] corporate name
IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held:

"We also note that In-N-Out Burger is likewise, [petitioner’s] corporate name. It has used the "IN-N-OUT" Burger
name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has
the exclusive right to use the tradenems "In-N-Out" Burger in the Philippines and the respondents’ are unlawfully
using and appropriating the same."

The Office cannot give credence to the [respondent’s] claim of good faith and that they have openly and continuously used
the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is
value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the
subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents]
also claim that actual or probable deception and confusion on the part of customers by reason of respondents’ practices
must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable.

In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the
mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered
trademark, which they claimed to be using as early as 1982, but did not.

[Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the
mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants’] marks of DOUBLE
DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the
[respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that
the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents]
even indicate "representing IN-N-OUT." These acts cannot be considered acts in good faith. 47

Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an administrative case would have
to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint
or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to
support a conclusion.48 As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to
support his finding that respondents are guilty of unfair competition.

With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the
Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis
mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the
following manner:
 Section 156. Actions, and Damages and Injunction for Infringement.–156.1 The owner of a registered mark may recover
damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable
profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the
defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained
with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross
sales of the defendant or the value of the services in connection with which the mark or trade name was used in the
infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by
applying the reasonable percentage of 30% to the respondents’ gross sales, and then doubling the amount thereof on account of
respondents’ actual intent to mislead the public or defraud the petitioner,49 thus, arriving at the amount of actual damages
of P212,574.28.

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be
awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or
correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of
similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to
serve as a deterrent against or as a negative incentive to curb socially deleterious action.50 While there is no hard and fast rule in
determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss
or injury suffered.51 Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates
the actual damages awarded.

In accordance with Article 2208(1) of the Civil Code, attorney’s fees may likewise be awarded to petitioner since exemplary damages
are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than
reasonable, given the fact that the case has dragged on for more than seven years, despite the respondent’s failure to present
countervailing evidence. Considering moreover the reputation of petitioner’s counsel, the actual attorney’s fees paid by petitioner
would far exceed the amount that was awarded to it.52

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No.
92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23 December 2005, is
hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00.

SO ORDERED.
G.R. No. 84751 June 6, 1990

SPOUSES EDUARDO and ANN AGUSTIN, petitioners,

vs.
HON. COURT OF APPEALS and LABRADOR DEVELOPMENT CORPORATION, respondents.

This petition for review on certiorari  impugns the decision of the Court of Appeals, dated March 28, 1988, with the following
decretal portion:

WHEREFORE, the present appeal is accordingly resolved deleting the adjudicated award of P20,000.00 as
exemplary damages, and otherwise by AFFIRMING the Decision dated October 10, 1985 in Civil Case No. Q-42390
entitled "Labrador Development Corporation vs. Sps. Eduardo Agustin, et al." in all other respects.

Without pronouncement as to costs. 1

Said judgment of respondent court is based on the findings of fact set out in its decision thus:

Plaintiff-appellee, being a subdivision developer, owned Lot 14, Block 1 of the San Pedro Compound IV at Tandang
Sora, Quezon City, under Transfer Certificate of Title No. 277209. On November 7, 1981, plaintiff-appellee agreed
to sell said parcel of land to defendants-appellants on a package deal together with a residential house per House
Plan Model B-203 to be constructed thereon for the sum of P202,980.00 (Exh. 'B'). As therein stipulated, the
defendants-appellants were to pay P42,980.00 as equity-P30,133.00 as down payment and the balance of
P12,847.00 upon completion and de very of the property, the other P160,000.00 to have been funded through a
Pag-Ibig Fund loan to be applied for by defendants-appellants. Central to the above was a stipulation that in the
event the housing loan be insufficient to pay the full contract price owing, they shall pay the same in cash on or
before occupancy and acceptance of the housing unit (ref. Exh. 'B', para. [e]). The agreement further provided —

(f) Failure of the Vendee to comply with any or all of the above stipulations shall ipso facto cancel this contract to
sell; and thereupon, this contract to sell or any other contract executed in connection thereof, shall be of no
further force and effect; and the title to the property, if already transferred in the name of the Vendee, shall
automatically revert to the Vendor.

The foregoing stipulation encompassed the necessity of transferring title to the lot to defendants-appellants as an
accommodation to enable their application for a housing loan in their names.

Hence, plaintiff-appellee executed a deed of sale over the lot (Exh. 'C') in favor of defendants-appellants, without
additional consideration beyond the P30,133.00 down payment adverted to, and the issuance to said defendants-
appellants of Transfer Certificate of title No. 29435 * (Exh. 'D'). Thusly accommodated, defendants-appellants
applied for a P160,000.00 housing loan with the First Summa Savings and Mortgage Bank as an accredited
financing institution.

After initial approval in the amount applied for, the Pag-ibig housing loan was downgraded to P128,000.00 after
reassessment. Under date of December 18, 1982, plaintiff-appellee apprised defendants-appellants of said
development (Exh. 'F') enclosing the formal bank December 16, 1982 letter (Exh. 'E') requiring a co-borrower
related within the fourth degree of consanguinity should the defendants-appellants desire approval of an
increased loan amount.

Defendants-appellants appear to have disdained a reply to plaintiff-appellee's said letter. Thus, under date of
December 28, 1982, plaintiff-appellee again wrote a follow- up letter to defendants-appellants (Exh. 'G') affording
the latter time to decide on their options, on pain of enforcement of the terms of the contract to sell.

Failing reaction from defendants-appellants thereto, plaintiff-appellee resorted to enforcement of the contractual
stipulations under date of March 1, 1983 (Exh. 'H') and remitted an enclosed check for P30,133.00 (Exh. 'I')
representing the equity paid in by defendants-appellants. The latter accepted said check and deposited same into
their account.

Instead of reconveyance of title to the lot, defendants-appellants however sought time to buy the property;
plaintiff-appellee agreed provided that payment be effected in cash. Defendants-appellants failed to make such
payment in cash, despite the lapse of a second 30-day period afforded therefor. Thereupon, plaintiff-appellee
demanded anew for reconveyance in a July 27, 1984 letter (Exh. 'J').

On August 8, 1984, plaintiff-appellee filed Civil Case No. Q42390 for reconveyance and damage. In answer,
defendants-appellants maintained inter alia that approval of a P160,000.00 housing loan had been assured upon
completion of the house with proof of its delivery and acceptance, but that acceptance could not be reasonably
given by them in that certain specifications for the housing unit had not been complied with. 2

After trial on the merits, the lower court rendered judgment in favor of private respondent, the dispositive part whereof reads:
 WHEREFORE, judgment is hereby rendered ordering defendants, jointly and severally:

a) to reconvey to plaintiff the parcel of land covered by Transfer Certificate of Title No. 284735 ** of the Register of
Deeds, Quezon City;

b) to pay plaintiff the sum of P20,000.00 as exemplary damages;

c) to pay plaintiff the sum of P5,000.00 as attorney's fees, plus costs of the suit. 3

which judgment, as earlier stated, was affirmed by respondent court but with the deletion of the award of exemplary damages.

On August 22, 1988, respondent court denied petitioners' motion for reconsideration, hence this present petition raising the
following issues:

The 'Contract to Sell' dated November 7, 1981 creates a reciprocal obligation between Labrador Development
Corporation, as seller, and spouses Eduardo and Ann Agustin, as buyer, of the questioned house and lot.

II

The failure of Labrador Development Corporation (LADECO) to complete construction of the housing unit pursuant
to the 'Contract to Sell' constitutes a substantial and serious breach thereof as would bar LADECO from executing
the option of cancellation (rescission) of the 'Contract to Sell' under Article 1191 of the Civil Code.

III

The justifiable refusal of Spouses Agustin to sign the 'House Acceptance Form' certifying that they accept the house
as 100% complete constitutes merely a slight or casual breach of the 'Contract to Sell' which does not warrant the
unilateral cancellation (rescission,) of the contract under par. 4 (f) thereof and Article 1191 of the Civil Code.

IV

The remedy of reconveyance of title of the property in question cannot be availed of by LADECO as there was no
valid, binding and effective cancellation (rescission) of the 'Contract to Sell'.

Private respondent LADECO is not entitled to attorney's fees of P5,000.00 under the facts and circumstances of the
case. 4

We agree with the Court of Appeals that reconveyance is proper in this case. Herein petitioners are already barred from questioning
the validity of the cancellation of the contract to sell by their acquiescence thereto. Their acceptance and encashment of the checks
representing the total amount paid by them to private respondent as equity, coupled by their failure to object or file an action,
despite due notice, to question the validity of the extrajudicial cancellation of said contract and to ask for specific performance for
more than one year, clearly show that they assented to the same.

Furthermore, after receiving the check refunding their equity payment incident to the reconveyance desired by private respondents,
petitioners, disregarding the original agreement of the parties, offered to purchase anew the property in question to which private
respondent agreed. This novatory agreement, however, was not consummated as petitioners again failed to raise and pay the
purchase price despite two 30-day extensions. They never at that juncture questioned the propriety of the rescission and
reconveyance desired by private respondent. Obviously, extrajudicial rescission produces legal effects where the other party does
not oppose it. 5

Moreover, even assuming that there was no implied assent to the cancellation of the contract to sell, reconveyance is still proper.
The non-fulfillment by petitioners of their obligation to pay, which is a suspensive condition to the obligation of private respondent
to sell and deliver the house and lot, rendered the contract to sell and the subsequent contract executed pursuant thereto
ineffective and without force and effect.

The contract between petitioners and private respondent is not an absolute sale but a conditional sale or contract to sell, whereby
ownership is retained by the vender until full payment of the purchase price. Without such full payment, there is no obligation to sell
and deliver. The subsequent execution of the deed of absolute sale and the transfer and registration of the title of the lot in the
name of petitioners is of no moment, considering that the same, by mutual agreement of the parties, was made without
consideration and solely for the purpose of facilitating the approval and release of the PAG-IBIG loan and not for the purpose of
actually transferring ownership.
Under the contract to sell, the obligation of petitioners to completely pay the purchase price is a condition precedent to the
obligation of private respondent to sell and deliver the house as provided in the contract to sell, which specifically states:

5. Upon complete payment of the VENDEE/S of the purchase price herein above stated, and faithful compliance
with all his obligations stipulated therein, the VENDOR, agrees to execute a valid deed of sale in favor of the
VENDEE/S and cause the issuance of the Certificate of Title in the name of the latter, free from all liens and
encumbrances except those provided for in the Land Registration Act and other laws, Presidential Decrees, General
Orders, Letters of Instruction, Zoning Ordinances, and the attached Deed of Restrictions, which form part of this
Contract; ... 6

The repeated failure and refusal of petitioners, despite due notice, to look for a co- borrower related to them within the fourth
degree of consanguinity as required by the bank in order to prevent the downgrading of the loan, nor to communicate to private
respondent the arrangement they intended to make regarding the difference between the approved loan of P128,000.00 and the
unpaid amount of P160,000.00, clearly indicate their intention not to perform their obligations under the contract. This constituted
not only a substantial or serious breach, but prevented the happening of the condition precedent which would give rise to the
obligation of private respondent to sell and transfer ownership of the house and lot to petitioners.

We have repeatedly ruled that:

In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment of the price,
such payment, as we said is a positive suspensive condition, the failure of which is not a breach, casual or serious,
but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force, in
accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from
the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not
the case.

... appellant overlooks that its contract with appellee Myers is not the ordinary sale envisaged by Article 1592,
transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor
retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer
strictly complied with the terms of the contract (see paragraph [d], ante, page 5). In suing to recover possession of
the building from Maritime, appellee Myers is not after the resolution or setting aside of the contract and the
restoration of the parties to the status quo ante, as contemplated by Article 1592, but precisely enforcing the
provisions of the agreement that it is no longer obligated to part with the ownership or possession of the property
because Maritime failed to comply with the specific condition precedent, which is to pay the installment as they
fell due.

The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court
in repeated decisions upholding the power of promissors under contracts to sell in case of failure of the other
party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and
retain the sums or installments already received, where such rights are expressly provided for, as in the case at
bar. 7

We repeat, the obligation of petitioners to fully comply with their undertakings was necessarily determinative of the obligation of
private respondent to complete the construction of the house. Where one of the parties to a contract did not perform the
undertaking which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the
other party. 8 For failure of one party to assume and perform the obligation imposed on him, the other patty does not incur in
delay. 9

Correspondingly, we reject the argument of petitioners that the failure of private respondent to complete the construction of the
house constitutes a substantial breach as would bar the latter from cancelling the contract. Instead, the facts of this case persuade
us to hold that petitioners were merely posturing when, after being required to reconvey the premises, they came up with belated
complaints about the imperfections or incompleteness of the house involved, in the same manner that they also pretended to be
interested in purchasing the property but failed to do so after importuning private respondents to grant them extensions of time for
that purpose.

With the foregoing circumstances, reconveyance is proper and exigible pursuant to Paragraph 4 (f) of the contract to sell quoted in
the decision of respondent court, supra, and on the basic principle that when an obligation has been extinguished or resolved, it is
the duty of the court to require the parties to surrender whatever they may have received from the other, and the parties must be
restored, as far as practicable, to their original situation. 10

The award to private respondent of attorney's fees, however, must be disallowed considering that the award of exemplary damages
was eliminated by respondent court and the text of the decision of the trial court, which was aimed by the Court of Appeals, is bereft
of any findings of fact and law to justify such award. The accepted rule is that the reason for the award of attorney's fees must be
stated in the text of the court's decision; otherwise, if it is stated only in the dispositive portion of the decision, the same must be
disallowed on appeal. The award of attorney's fees being an exception rather than the general rule, it is necessary for the court to
make findings of facts and law that would bring the case within the exception and justify the grant of such award. 11

WHEREFORE, except for the award of attorney's fees which is hereby deleted, the decision of respondent Court of Appeals is hereby
AFFIRMED.
G.R. NO. 158361 April 10, 2013

INTERNATIONAL HOTEL CORPORATION, Petitioner, 

vs 

FRANCISCO B. JOAQUIN, JR. and RAFAEL SUAREZ, Respondents.

To avoid unjust enrichment to a party from resulting out of a substantially performed contract, the principle of quantum meruit may
be used to determine his compensation in the absence of a written agreement for that purpose. The principle of quantum meruit
justifies the payment of the reasonable value of the services rendered by him.

The Case

Under review is the decision the Court of Appeals (CA) promulgated on November 8, 2002,1 disposing:chanroblesvirtualawlibrary

WHEREFORE, premises considered, the decision dated August 26, 1993 of the Regional Trial Court, Branch 13, Manila in Civil Case
No. R-82-2434 is AFFIRMED with Modification as to the amounts awarded as follows: defendant-appellant IHC is ordered to pay
plaintiff-appellant Joaquin P700,000.00 and plaintiff-appellant Suarez P200,000.00, both to be paid in cash.

SO ORDERED.

Antecedents

On February 1, 1969, respondent Francisco B. Joaquin, Jr. submitted a proposal to the Board of Directors of the International Hotel
Corporation (IHC) for him to render technical assistance in securing a foreign loan for the construction of a hotel, to be guaranteed
by the Development Bank of the Philippines (DBP).2 The proposal encompassed nine phases, namely: (1) the preparation of a new
project study; (2) the settlement of the unregistered mortgage prior to the submission of the application for guaranty for processing
by DBP; (3) the preparation of papers necessary to the application for guaranty; (4) the securing of a foreign financier for the project;
(5) the securing of the approval of the DBP Board of Governors; (6) the actual follow up of the application with DBP3; (7) the overall
coordination in implementing the projections of the project study; (8) the preparation of the staff for actual hotel operations; and (9)
the actual hotel operations.4chanroblesvirtualawlibrary

The IHC Board of Directors approved phase one to phase six of the proposal during the special board meeting on February 11, 1969,
and earmarked P2,000,000.00 for the project.5 Anent the financing, IHC applied with DBP for a foreign loan guaranty. DBP processed
the application,6 and approved it on October 24, 1969 subject to several conditions.7chanroblesvirtualawlibrary

On July 11, 1969, shortly after submitting the application to DBP, Joaquin wrote to IHC to request the payment of his fees in the
amount of P500,000.00 for the services that he had provided and would be providing to IHC in relation to the hotel project that were
outside the scope of the technical proposal. Joaquin intimated his amenability to receive shares of stock instead of cash in view of
IHC's financial situation.8chanroblesvirtualawlibrary

On July 11, 1969, the stockholders of IHC met and granted Joaquin's request, allowing the payment for both Joaquin and Rafael
Suarez for their services in implementing the proposal.9chanroblesvirtualawlibrary

On June 20, 1970, Joaquin presented to the IHC Board of Directors the results of his negotiations with potential foreign financiers.
He narrowed the financiers to Roger Dunn & Company and Materials Handling Corporation. He recommended that the Board of
Directors consider Materials Handling Corporation based on the more beneficial terms it had offered. His recommendation was
accepted.10chanroblesvirtualawlibrary

Negotiations with Materials Handling Corporation and, later on, with its principal, Barnes International (Barnes), ensued. While the
negotiations with Barnes were ongoing, Joaquin and Jose Valero, the Executive Director of IHC, met with another financier, the
Weston International Corporation (Weston), to explore possible financing.11 When Barnes failed to deliver the needed loan, IHC
informed DBP that it would submit Weston for DBP's consideration.12 As a result, DBP cancelled its previous guaranty through a
letter dated December 6, 1971.13chanroblesvirtualawlibrary

On December 13, 1971, IHC entered into an agreement with Weston, and communicated this development to DBP on June 26, 1972.
However, DBP denied the application for guaranty for failure to comply with the conditions contained in its November 12, 1971
letter.14chanroblesvirtualawlibrary

Due to Joaquin's failure to secure the needed loan, IHC, through its President Bautista, canceled the 17,000 shares of stock
previously issued to Joaquin and Suarez as payment for their services. The latter requested a reconsideration of the cancellation, but
their request was rejected.

Consequently, Joaquin and Suarez commenced this action for specific performance, annulment, damages and injunction by a
complaint dated December 6, 1973 in the Regional Trial Court in Manila (RTC), impleading IHC and the members of its Board of
Directors, namely, Felix Angelo Bautista, Sergio O. Rustia, Ephraim G. Gochangco, Mario B. Julian, Benjamin J. Bautista, Basilio L.
Lirag, Danilo R. Lacerna and Hermenegildo R. Reyes.15 The complaint alleged that the cancellation of the shares had been illegal, and
had deprived them of their right to participate in the meetings and elections held by IHC; that Barnes had been recommended by
IHC President Bautista, not by Joaquin; that they had failed to meet their obligation because President Bautista and his son had
intervened and negotiated with Barnes instead of Weston; that DBP had canceled the guaranty because Barnes had failed to release
the loan; and that IHC had agreed to compensate their services with 17,000 shares of the common stock plus cash
of P1,000,000.00.16chanroblesvirtualawlibrary

IHC, together with Felix Angelo Bautista, Sergio O. Rustia, Mario B. Julian and Benjamin J. Bautista, filed an answer claiming that the
shares issued to Joaquin and Suarez as compensation for their "past and future services" had been issued in violation of Section 16
of the Corporation Code; that Joaquin and Suarez had not provided a foreign financier acceptable to DBP; and that they had already
received P96,350.00 as payment for their services.17chanroblesvirtualawlibrary

On their part, Lirag and Lacerna denied any knowledge of or participation in the cancellation of the
shares.18chanroblesvirtualawlibrary

Similarly, Gochangco and Reyes denied any knowledge of or participation in the cancellation of the shares, and clarified that they
were not directors of IHC.19 In the course of the proceedings, Reyes died and was substituted by Consorcia P. Reyes, the
administratrix of his estate.20chanroblesvirtualawlibrary

Ruling of the RTC

Under its decision rendered on August 26, 1993, the RTC held IHC liable pursuant to the second paragraph of Article 1284 of the Civil
Code, disposing thusly:chanroblesvirtualawlibrary

WHEREFORE, in the light of the above facts, law and jurisprudence, the Court hereby orders the defendant International Hotel
Corporation to pay plaintiff Francisco B. Joaquin, the amount of Two Hundred Thousand Pesos (P200,000.00) and to pay plaintiff
Rafael Suarez the amount of Fifty Thousand Pesos (P50,000.00); that the said defendant IHC likewise pay the co-plaintiffs, attorney's
fees of P20,000.00, and costs of suit.

IT IS SO ORDERED.21chanroblesvirtualawlibrary

The RTC found that Joaquin and Suarez had failed to meet their obligations when IHC had chosen to negotiate with Barnes rather
than with Weston, the financier that Joaquin had recommended; and that the cancellation of the shares of stock had been proper
under Section 68 of the Corporation Code, which allowed such transfer of shares to compensate only past services, not future ones.

Ruling of the CA

Both parties appealed.22chanroblesvirtualawlibrary

Joaquin and Suarez assigned the following errors, to wit:chanroblesvirtualawlibrary

DESPITE HAVING CORRECTLY ACKNOWLEDGED THAT PLAINTIFFS-APPELLANTS FULLY PERFORMED ALL THAT WAS INCUMBENT UPON
THEM, THE HONORABLE JUDGE ERRED IN NOT ORDERING THAT:chanroblesvirtualawlibrary

A. DEFENDANTS WERE UNJUSTIFIED IN CANCELLING THE SHARES OF STOCK PREVIOUSLY ISSUED TO PLAINTIFFS-APPELLANTS; AND

B. DEFENDANTS PAY PLAINTIFFS-APPELLANTS TWO MILLION SEVEN HUNDRED PESOS (sic) (P2,700,000.00), INCLUDING INTEREST
THEREON FROM 1973, REPRESENTING THE TOTAL OBLIGATION DUE PLAINTIFFS-APPELLANTS.23chanroblesvirtualawlibrary

On the other hand, IHC attributed errors to the RTC, as follows:chanroblesvirtualawlibrary

I.

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLANTS HAVE NOTBEEN COMPLETELY PAID FOR THEIR SERVICES, AND
IN ORDERING THE DEFENDANT-APPELLANT TO PAY TWO HUNDRED THOUSAND PESOS (P200,000.00) AND FIFTY THOUSAND PESOS
(P50,000.00) TO PLAINTIFFS-APPELLANTS FRANCISCO B. JOAQUIN AND RAFAEL SUAREZ, RESPECTIVELY.

II.

THE LOWER COURT ERRED IN AWARDING PLAINTIFFS-APPELLANTS ATTORNEY'S FEES AND COSTS OF
SUIT.24chanroblesvirtualawlibrary

In its questioned decision promulgated on November 8, 2002, the CA concurred with the RTC, upholding IHC's liability under Article
1186 of the Civil Code. It ruled that in the context of Article 1234 of the Civil Code, Joaquin had substantially performed his
obligations and had become entitled to be paid for his services; and that the issuance of the shares of stock was ultra vires for having
been issued as consideration for future services.
Anent how much was due to Joaquin and Suarez, the CA explained thusly:chanroblesvirtualawlibrary

This Court does not subscribe to plaintiffs-appellants' view that defendant-appellant IHC agreed to pay them P2,000,000.00. Plaintiff-
appellant Joaquin's letter to defendant-appellee F.A. Bautista, quoting defendant-appellant IHC's board resolutions which
supposedly authorized the payment of such amount cannot be sustained. The resolutions are quite clear and when taken together
show that said amount was only the "estimated maximum expenses" which defendant-appellant IHC expected to incur in
accomplishing phases 1 to 6, not exclusively to plaintiffs-appellants' compensation.This conclusion finds support in an unnumbered
board resolution of defendant-appellant IHC dated July 11, 1969:chanroblesvirtualawlibrary

"Incidentally, it was also taken up the necessity of giving the Technical Group a portion of the compensation that was authorized by
this corporation in its Resolution of February 11, 1969 considering that the assistance so far given the corporation by said Technical
Group in continuing our project with the DBP and its request for guaranty for a foreign loan is 70% completed leaving only some
details which are now being processed. It is estimated that P400,000.00 worth of Common Stock would be reasonable for the
present accomplishments and to this effect, the President is authorized to issue the same in the name of the Technical Group, as
follows:chanroblesvirtualawlibrary

P200,000.00 in common stock to Rafael Suarez, as associate in the Technical Group, and P200,000.00 in common stock to Francisco
G. Joaquin, Jr., also a member of the Technical Group.

It is apparent that not all of the P2,000,000.00 was allocated exclusively to compensate plaintiffs-appellants. Rather, it was intended
to fund the whole undertaking including their compensation. On the same date, defendant-appellant IHC also authorized its
president to pay-appellant Joaquin P500,000.00 either in cash or in stock or both.

The amount awarded by the lower court was therefore less than what defendant-appellant IHC agreed to pay plaintiffs-appellants.
While this Court cannot decree that the cancelled shares be restored, for they are without a doubt null and void, still and all,
defendant-appellant IHC cannot now put up its own ultra vires act as an excuse to escape obligation to plaintiffs-appellants. Instead
of shares of stock, defendant-appellant IHC is ordered to pay plaintiff-appellant Joaquin a total of P700,000.00 and plaintiff-appellant
Suarez P200,000.00, both to be paid in cash.

Although the lower court failed to explain why it was granting the attorney's fees, this Court nonetheless finds its award proper
given defendant-appellant IHC's actions.25chanroblesvirtualawlibrary

Issues

In this appeal, the IHC raises as issues for our consideration and resolution the following:chanroblesvirtualawlibrary

WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN AWARDING COMPENSATION AND EVEN MODIFYING THE PAYMENT TO
HEREIN RESPONDENTS DESPITE NON-FULFILLMENT OF THEIR OBLIGATION TO HEREIN PETITIONER

II

WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN AWARDING ATTORNEY'S FEES TO

RESPONDENTS26chanroblesvirtualawlibrary

IHC maintains that Article 1186 of the Civil Code was erroneously applied; that it had no intention of preventing Joaquin from
complying with his obligations when it adopted his recommendation to negotiate with Barnes; that Article 1234 of the Civil Code
applied only if there was a merely slight deviation from the obligation, and the omission or defect was technical and unimportant;
that substantial compliance was unacceptable because the foreign loan was material and was, in fact, the ultimate goal of its
contract with Joaquin and Suarez; that because the obligation was indivisible and subject to a suspensive condition, Article 1181 of
the Civil Code27 applied, under which a partial performance was equivalent to non-performance; and that the award of attorney's
fees should be deleted for lack of legal and factual bases.

On the part of respondents, only Joaquin filed a comment,28 arguing that the petition was fatally defective for raising questions of
fact; that the obligation was divisible and capable of partial performance; and that the suspensive condition was deemed fulfilled
through IHC's own actions.29chanroblesvirtualawlibrary

Ruling

We deny the petition for review on certiorari subject to the ensuing disquisitions.

1. IHC raises questions of law

We first consider and resolve whether IHC's petition improperly raised questions of fact.

A question of law exists when there is doubt as to what the law is on a certain state of facts, but, in contrast, a question of fact exists
when the doubt arises as to the truth or falsity of the facts alleged. A question of law does not involve an examination of the
probative value of the evidence presented by the litigants or by any of them; the resolution of the issue must rest solely on what the
law provides on the given set of circumstances.30 When there is no dispute as to the facts, the question of whether or not the
conclusion drawn from the facts is correct is a question of law.31chanroblesvirtualawlibrary

Considering that what IHC seeks to review is the CA's application of the law on the facts presented therein, there is no doubt that
IHC raises questions of law. The basic issue posed here is whether the conclusions drawn by the CA were correct under the pertinent
laws.

2. Article 1186 and Article 1234 of the Civil Code cannot be the source of IHC's obligation to pay respondents IHC argues that it
should not be held liable because: (a) it was Joaquin who had recommended Barnes; and (b) IHC's negotiation with Barnes had been
neither intentional nor willfully intended to prevent Joaquin from complying with his obligations.

IHC's argument is meritorious.

Article 1186 of the Civil Code reads:chanroblesvirtualawlibrary

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

This provision refers to the constructive fulfillment of a suspensive condition,32 whose application calls for two requisites, namely: (a)
the intent of the obligor to prevent the fulfillment of the condition, and (b) the actual prevention of the fulfillment. Mere intention
of the debtor to prevent the happening of the condition, or to place ineffective obstacles to its compliance, without actually
preventing the fulfillment, is insufficient.33chanroblesvirtualawlibrary

The error lies in the CA's failure to determine IHC's intent to pre-empt Joaquin from meeting his obligations. The June 20, 1970
minutes of IHC's special board meeting discloses that Joaquin impressed upon the members of the Board that Materials Handling
was offering more favorable terms for IHC, to wit:chanroblesvirtualawlibrary

xxx

At the meeting all the members of the Board of Directors of the International Hotel Corporation were present with the exception of
Directors Benjamin J. Bautista and Sergio O. Rustia who asked to be excused because of previous engagements. In that meeting, the
President called on Mr. Francisco G. Joaquin, Jr. to explain the different negotiations he had conducted relative to obtaining the
needed financing for the hotel project in keeping with the authority given to him in a resolution approved by the Board of Directors.

Mr. Joaquin presently explained that he contacted several local and foreign financiers through different brokers and after examining
the different offers he narrowed down his choice to two (2), to wit: the foreign financier recommended by George Wright of the
Roger Dunn & Company and the offer made by the Materials Handling Corporation.

After explaining the advantages and disadvantages to our corporation of the two (2) offers specifically with regard to the terms and
repayment of the loan and the rate of interest requested by them, he concluded that the offer made by the Materials Handling
Corporation is much more advantageous because the terms and conditions of payment as well as the rate of interest are much more
reasonable and would be much less onerous to our corporation. However, he explained that the corporation accepted, in principle,
the offer of Roger Dunn, per the corporation's telegrams to Mr. Rudolph Meir of the Private Bank of Zurich, Switzerland, and until
such time as the corporation's negotiations with Roger Dunn is terminated, we are committed, on one way or the other, to their
financing.

It was decided by the Directors that, should the negotiations with Roger Dunn materialize, at the same time as the offer of Materials
Handling Corporation, that the funds committed by Roger Dunn may be diverted to other borrowers of the Development Bank of the
Philippines. With this condition, Director Joaquin showed the advantages of the offer of Materials Handling Corporation. Mr. Joaquin
also informed the corporation that, as of this date, the bank confirmation of Roger Dunn & Company has not been received. In view
of the fact that the corporation is racing against time in securing its financing, he recommended that the corporation entertain other
offers.

After a brief exchange of views on the part of the Directors present and after hearing the clarification and explanation made by Mr.
C. M. Javier who was present and who represented the Materials Handling Corporation, the Directors present approved
unanimously the recommendation of Mr. Joaquin to entertain the offer of Materials Handling
Corporation.34chanroblesvirtualawlibrary

Evidently, IHC only relied on the opinion of its consultant in deciding to transact with Materials Handling and, later on, with Barnes.
In negotiating with Barnes, IHC had no intention, willful or otherwise, to prevent Joaquin and Suarez from meeting their undertaking.
Such absence of any intention negated the basis for the CA's reliance on Article 1186 of the Civil Code.

Nor do we agree with the CA's upholding of IHC's liability by virtue of Joaquin and Suarez's substantial performance. In so ruling, the
CA applied Article 1234 of the Civil Code, which states:chanroblesvirtualawlibrary

Article 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a
strict and complete fulfillment, less damages suffered by the obligee.
It is well to note that Article 1234 applies only when an obligor admits breaching the contract35 after honestly and faithfully
performing all the material elements thereof except for some technical aspects that cause no serious harm to the obligee.36 IHC
correctly submits that the provision refers to an omission or deviation that is slight, or technical and unimportant, and does not
affect the real purpose of the contract.

Tolentino explains the character of the obligor's breach under Article 1234 in the following manner, to
wit:chanroblesvirtualawlibrary

In order that there may be substantial performance of an obligation, there must have been an attempt in good faith to perform,
without any willful or intentional departure therefrom. The deviation from the obligation must be slight, and the omission or defect
must be technical and unimportant, and must not pervade the whole or be so material that the object which the parties intended to
accomplish in a particular manner is not attained. The non-performance of a material part of a contract will prevent the
performance from amounting to a substantial compliance.

The party claiming substantial performance must show that he has attempted in good faith to perform his contract, but has through
oversight, misunderstanding or any excusable neglect failed to completely perform in certain negligible respects, for which the other
party may be adequately indemnified by an allowance and deduction from the contract price or by an award of damages. But a party
who knowingly and wilfully fails to perform his contract in any respect, or omits to perform a material part of it, cannot be
permitted, under the protection of this rule, to compel the other party, and the trend of the more recent decisions is to hold that the
percentage of omitted or irregular performance may in and of itself be sufficient to show that there had not been a substantial
performance.37chanroblesvirtualawlibrary

By reason of the inconsequential nature of the breach or omission, the law deems the performance as substantial, making it the
obligee's duty to pay.38 The compulsion of payment is predicated on the substantial benefit derived by the obligee from the partial
performance. Although compelled to pay, the obligee is nonetheless entitled to an allowance for the sum required to remedy
omissions or defects and to complete the work agreed upon.39chanroblesvirtualawlibrary

Conversely, the principle of substantial performance is inappropriate when the incomplete performance constitutes a material
breach of the contract. A contractual breach is material if it will adversely affect the nature of the obligation that the obligor
promised to deliver, the benefits that the obligee expects to receive after full compliance, and the extent that the non-performance
defeated the purposes of the contract.40 Accordingly, for the principle embodied in Article 1234 to apply, the failure of Joaquin and
Suarez to comply with their commitment should not defeat the ultimate purpose of the contract.

The primary objective of the parties in entering into the services agreement was to obtain a foreign loan to finance the construction
of IHC's hotel project. This objective could be inferred from IHC's approval of phase 1 to phase 6 of the proposal. Phase 1 and phase
2, respectively the preparation of a new project study and the settlement of the unregistered mortgage, would pave the way for
Joaquin and Suarez to render assistance to IHC in applying for the DBP guaranty and thereafter to look for an able and willing foreign
financial institution acceptable to DBP. All the steps that Joaquin and Suarez undertook to accomplish had a single objective to
secure a loan to fund the construction and eventual operations of the hotel of IHC. In that regard, Joaquin himself admitted that his
assistance was specifically sought to seek financing for IHC's hotel project.41chanroblesvirtualawlibrary

Needless to say, finding the foreign financier that DBP would guarantee was the essence of the parties' contract, so that the failure
to completely satisfy such obligation could not be characterized as slight and unimportant as to have resulted in Joaquin and
Suarez's substantial performance that consequentially benefitted IHC. Whatever benefits IHC gained from their services could only
be minimal, and were even probably outweighed by whatever losses IHC suffered from the delayed construction of its hotel.
Consequently, Article 1234 did not apply.

3. IHC is nonetheless liable to pay under the rule on constructive fulfillment of a mixed conditional obligation

Notwithstanding the inapplicability of Article 1186 and Article 1234 of the Civil Code, IHC was liable based on the nature of the
obligation.

Considering that the agreement between the parties was not circumscribed by a definite period, its termination was subject to a
condition the happening of a future and uncertain event.42 The prevailing rule in conditional obligations is that the acquisition of
rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event that
constitutes the condition.43chanroblesvirtualawlibrary

To recall, both the RTC and the CA held that Joaquin and Suarez's obligation was subject to the suspensive condition of successfully
securing a foreign loan guaranteed by DBP. IHC agrees with both lower courts, and even argues that the obligation with a suspensive
condition did not arise when the event or occurrence did not happen. In that instance, partial performance of the contract subject to
the suspensive condition was tantamount to no performance at all. As such, the respondents were not entitled to any
compensation.

We have to disagree with IHC's argument.

To secure a DBP-guaranteed foreign loan did not solely depend on the diligence or the sole will of the respondents because it
required the action and discretion of third persons an able and willing foreign financial institution to provide the needed funds, and
the DBP Board of Governors to guarantee the loan. Such third persons could not be legally compelled to act in a manner favorable to
IHC. There is no question that when the fulfillment of a condition is dependent partly on the will of one of the contracting
parties,44 or of the obligor, and partly on chance, hazard or the will of a third person, the obligation is mixed.45 The existing rule in a
mixed conditional obligation is that when the condition was not fulfilled but the obligor did all in his power to comply with the
obligation, the condition should be deemed satisfied.46chanroblesvirtualawlibrary

Considering that the respondents were able to secure an agreement with Weston, and subsequently tried to reverse the prior
cancellation of the guaranty by DBP, we rule that they thereby constructively fulfilled their obligation.

4. Quantum meruit should apply in the absence of an express agreement on the fees

The next issue to resolve is the amount of the fees that IHC should pay to Joaquin and Suarez.

Joaquin claimed that aside from the approved P2,000,000.00 fee to implement phase 1 to phase 6, the IHC Board of Directors had
approved an additional P500,000.00 as payment for his services. The RTC declared that he and Suarez were entitled to P200,000.00
each, but the CA revised the amounts to P700,000.00 for Joaquin and P200,000.00 for Suarez.

Anent the P2,000,000.00, the CA rightly concluded that the full amount of P2,000,000.00 could not be awarded to respondents
because such amount was not allocated exclusively to compensate respondents, but was intended to be the estimated maximum to
fund the expenses in undertaking phase 6 of the scope of services. Its conclusion was unquestionably borne out by the minutes of
the February 11, 1969 meeting, viz:chanroblesvirtualawlibrary

xxx

II

The preparation of the necessary papers for the DBP including the preparation of the application, the presentation of the mechanics
of financing, the actual follow up with the different departments of the DBP which includes the explanation of the feasibility studies
up to the approval of the loan, conditioned on the DBP's acceptance of the project as feasible. The estimated expenses for this
particular phase would be contingent, i.e. upon DBP's approval of the plan now being studied and prepared, is somewhere
around P2,000,000.00.

After a brief discussion on the matter, the Board on motion duly made and seconded, unanimously adopted a resolution of the
following tenor:chanroblesvirtualawlibrary

RESOLUTION NO. ______

(Series of 1969)

"RESOLVED, as it is hereby RESOLVED, that if the Reparations allocation and the plan being negotiated with the DBP is realized the
estimated maximum expenses of P2,000,000.00 for this phase is hereby authorized subject to the sound discretion of the committee
composed of Justice Felix Angelo Bautista, Jose N. Valero and Ephraim G. Gochangco."47 (Emphasis supplied)

Joaquin's claim for the additional sum of P500,000.00 was similarly without factual and legal bases. He had requested the payment
of that amount to cover services rendered and still to be rendered to IHC separately from those covered by the first six phases of the
scope of work. However, there is no reason to hold IHC liable for that amount due to his failure to present sufficient proof of the
services rendered towards that end. Furthermore, his July 11, 1969 letter revealed that the additional services that he had
supposedly rendered were identical to those enumerated in the technical proposal, thus:chanroblesvirtualawlibrary

The Board of Directors

International Hotel Corporation

Thru: Justice Felix Angelo Bautista

President & Chairman of the Board

Gentlemen:chanroblesvirtualawlibrary

I have the honor to request this Body for its deliberation and action on the fees for my services rendered and to be rendered to the
hotel project and to the corporation. These fees are separate from the fees you have approved in your previous Board Resolution,
since my fees are separate. I realize the position of the corporation at present, in that it is not in a financial position to pay my
services in cash, therefore, I am requesting this Body to consider payment of my fees even in the form of shares of stock, as you
have done to the other technical men and for other services rendered to the corporation by other people.

Inasmuch as my fees are contingent on the successful implementation of this project, I request that my fees be based on a
percentage of the total project cost. The fees which I consider reasonable for the services that I have rendered to the project up to
the completion of its construction is P500,000.00. I believe said amount is reasonable since this is approximately only of 1% of the
total project cost.
So far, I have accomplished Phases 1-5 of my report dated February 1, 1969 and which you authorized us to do under Board
Resolution of February 11, 1969. It is only Phase 6 which now remains to be implemented. For my appointment as Consultant dated
May 12, 1969 and the Board Resolution dated June 23, 1969 wherein I was appointed to the Technical Committee, it now follows
that I have been also authorized to implement part of Phases 7 & 8.

A brief summary of my accomplished work has been as follows:chanroblesvirtualawlibrary

1. I have revised and made the new Project Study of your hotel project, making it bankable and feasible.

2. I have reduced the total cost of your project by approximately P24,735,000.00.

3. I have seen to it that a registered mortgage with the Reparations Commission did not affect the application with the IBP for
approval to processing.

4. I have prepared the application papers acceptable to the DBP by means of an advance analysis and the presentation of the
financial mechanics, which was accepted by the DBP.

5. I have presented the financial mechanics of the loan wherein the requirement of the DBP for an additional P19,000,000.00 in
equity from the corporation became unnecessary.

6. The explanation of the financial mechanics and the justification of this project was instrumental in changing the original
recommendation of the Investment Banking Department of the DBP, which recommended disapproval of this application, to the
present recommendation of the Real Estate Department which is for the approval of this project for proceeding.

7. I have submitted to you several offers already of foreign financiers which are in your files. We are presently arranging the said
financiers to confirm their funds to the DBP for our project,

8. We have secured the approval of the DBP to process the loan application of this corporation as per its letter July 2, 1969.

9. We have performed other services for the corporation which led to the cooperation and understanding of the different factions of
this corporation.

I have rendered services to your corporation for the past 6 months with no clear understanding as to the compensation of my
services. All I have drawn from the corporation is the amount of P500.00 dated May 12, 1969 and personal payment advanced by
Justice Felix Angelo Bautista in the amount of P1,000.00.

I am, therefore, requesting this Body for their approval of my fees. I have shown my good faith and willingness to render services to
your corporation which is evidenced by my continued services in the past 6 months as well as the accomplishments above
mentioned. I believe that the final completion of this hotel, at least for the processing of the DBP up to the completion of the
construction, will take approximately another 2 years. In view of the above, I again reiterate my request for your approval of my
fees. When the corporation is in a better financial position, I will request for a withdrawal of a monthly allowance, said amount to be
determined by this Body.

Very truly yours,

(Sgd.)
Francisco G., Joaquin, Jr.48
(Emphasis supplied)

Joaquin could not even rest his claim on the approval by IHC's Board of Directors. The approval apparently arose from the confusion
between the supposedly separate services that Joaquin had rendered and those to be done under the technical proposal. The
minutes of the July 11, 1969 board meeting (when the Board of Directors allowed the payment for Joaquin's past services and for
the 70% project completion by the technical group) showed as follows:chanroblesvirtualawlibrary

III

The Third order of business is the compensation of Mr. Francisco G. Joaquin, Jr. for his services in the corporation.

After a brief discussion that ensued, upon motion duly made and seconded, the stockholders unanimously approved a resolution of
the following tenor:chanroblesvirtualawlibrary

RESOLUTION NO. ___

(Series of 1969)

"RESOLVED that Mr. Francisco G. Joaquin, Jr. be granted a compensation in the amount of Five Hundred Thousand (P500,000.00)
Pesos for his past services and services still to be rendered in the future to the corporation up to the completion of the Project. The
President is given full discretion to discuss with Mr. Joaquin the manner of payment of said compensation, authorizing him to pay
part in stock and part in cash."

Incidentally, it was also taken up the necessity of giving the Technical Group a portion of the compensation that was authorized by
this corporation in its Resolution of February 11, 1969 considering that the assistance so far given the corporation by said Technical
Group in continuing our project with the DBP and its request for guaranty for a foreign loan is 70% completed leaving only some
details which are now being processed. It is estimated that P400,000.00 worth of Common Stock would be reasonable for the
present accomplishments and to this effect, the President is authorized to issue the same in the name of the Technical Group, as
follows:chanroblesvirtualawlibrary

P200,000.00 in Common Stock to Rafael Suarez, an associate in the Technical Group, and P200,000.00 in Common stock to Francisco
G. Joaquin, Jr., also a member of the Technical Group.49chanroblesvirtualawlibrary

Lastly, the amount purportedly included services still to be rendered that supposedly extended until the completion of the
construction of the hotel. It is basic, however, that in obligations to do, there can be no payment unless the obligation has been
completely rendered.50chanroblesvirtualawlibrary

It is notable that the confusion on the amounts of compensation arose from the parties' inability to agree on the fees that
respondents should receive. Considering the absence of an agreement, and in view of respondents' constructive fulfillment of their
obligation, the Court has to apply the principle of quantum meruit in determining how much was still due and owing to respondents.
Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value of the services rendered despite the
lack of a written contract.51 The measure of recovery under the principle should relate to the reasonable value of the services
performed.52 The principle prevents undue enrichment based on the equitable postulate that it is unjust for a person to retain any
benefit without paying for it. Being predicated on equity, the principle should only be applied if no express contract was entered
into, and no specific statutory provision was applicable.53chanroblesvirtualawlibrary

Under the established circumstances, we deem the total amount of P200,000.00 to be reasonable compensation for respondents'
services under the principle of quantum meruit.

Finally, we sustain IHC's position that the grant of attorney's fees lacked factual or legal basis. Attorney's fees are not awarded every
time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. There should be factual
or legal support in the records before the award of such fees is sustained. It is not enough justification for the award simply because
respondents were compelled to protect their rights.54chanroblesvirtualawlibrary

ACCORDINGLY, the Court DENIES the petition for review on certiorari; and AFFIRMS the decision of the Court of Appeals
promulgated on November 8, 2002 in C.A.-G.R. NO. 47094 subject to the MODIFICATIONS that: (a) International Hotel Corporation is
ordered to. pay Francisco G. Joaquin, Jr. and Rafael Suarez P100,000.00 each as compensation for their services, and (b) the award
of P20,000.00 as attorney's fees is deleted.

No costs of suit.

SO ORDERED.
G.R. No. 189871               August 13, 2013

DARIO NACAR, PETITIONER,
vs.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS.

This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the Court of Appeals (CA) in CA-G.R. SP
No. 98591, and the Resolution2 dated October 9, 2009 denying petitioner’s motion for reconsideration.

The factual antecedents are undisputed.

Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the National Labor Relations
Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he was dismissed from
employment without a valid or just cause. Thus, petitioner was awarded backwages and separation pay in lieu of reinstatement in
the amount of ₱158,919.92. The dispositive portion of the decision, reads:

With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that complainant was dismissed
from employment for a just or valid cause. All the more, it is clear from the records that complainant was never afforded due
process before he was terminated. As such, we are perforce constrained to grant complainant’s prayer for the payments of
separation pay in lieu of reinstatement to his former position, considering the strained relationship between the parties, and his
apparent reluctance to be reinstated, computed only up to promulgation of this decision as follows:

SEPARATION PAY

Date Hired = August 1990

Rate = ₱198/day

Date of Decision = Aug. 18, 1998

Length of Service = 8 yrs. & 1 month

₱198.00 x 26 days x 8 months = ₱41,184.00

BACKWAGES

Date Dismissed = January 24, 1997

Rate per day = ₱196.00

Date of Decisions = Aug. 18, 1998

a) 1/24/97 to 2/5/98 = 12.36 mos.

₱196.00/day x 12.36 mos. = ₱62,986.56

b) 2/6/98 to 8/18/98 = 6.4 months

Prevailing Rate per day = ₱62,986.00

₱198.00 x 26 days x 6.4 mos. = ₱32,947.20

TOTAL = ₱95.933.76

xxxx

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of constructive dismissal and are
therefore, ordered:

To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six pesos and 56/100
(₱62,986.56) Pesos representing his separation pay;

To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred thirty-three and 36/100
(₱95,933.36) representing his backwages; and
All other claims are hereby dismissed for lack of merit. SO ORDERED.4

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated February 29, 2000. Accordingly,
the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for reconsideration, but it was denied.6

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000, the CA issued a Resolution
dismissing the petition. Respondents filed a Motion for Reconsideration, but it was likewise denied in a Resolution dated May 8,
2001.7

Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no reversible error on the part of
the CA, this Court denied the petition in the Resolution dated April 17, 2002.8

An Entry of Judgment was later issued certifying that the resolution became final and executory on May 27, 2002.9 The case was,
thereafter, referred back to the Labor Arbiter. A pre-execution conference was consequently scheduled, but respondents failed to
appear.10

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages be computed from the date of
his dismissal on January 24, 1997 up to the finality of the Resolution of the Supreme Court on May 27, 2002.11 Upon recomputation,
the Computation and Examination Unit of the NLRC arrived at an updated amount in the sum of ₱471,320.31.12

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to collect from respondents the
total amount of ₱471,320.31. Respondents filed a Motion to Quash Writ of Execution, arguing, among other things, that since the
Labor Arbiter awarded separation pay of ₱62,986.56 and limited backwages of ₱95,933.36, no more recomputation is required to be
made of the said awards. They claimed that after the decision becomes final and executory, the same cannot be altered or amended
anymore.14 On January 13, 2003, the Labor Arbiter issued an Order15 denying the motion. Thus, an Alias Writ of Execution16 was
issued on January 14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting the appeal in favor of the
respondents and ordered the recomputation of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final and executory. Consequently,
another pre-execution conference was held, but respondents failed to appear on time. Meanwhile, petitioner moved that an Alias
Writ of Execution be issued to enforce the earlier recomputed judgment award in the sum of ₱471,320.31.18

The records of the case were again forwarded to the Computation and Examination Unit for recomputation, where the judgment
award of petitioner was reassessed to be in the total amount of only ₱147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original amount as determined by the
Labor Arbiter in his Decision dated October 15, 1998, pending the final computation of his backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment award that was due to petitioner in
the amount of ₱147,560.19, which petitioner eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award to include the appropriate
interests.19

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount of ₱11,459.73. The Labor
Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced considering that it was the one that became final
and executory. However, the Labor Arbiter reasoned that since the decision states that the separation pay and backwages are
computed only up to the promulgation of the said decision, it is the amount of ₱158,919.92 that should be executed. Thus, since
petitioner already received ₱147,560.19, he is only entitled to the balance of ₱11,459.73.

Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its Resolution22 dated September 27, 2006.
Petitioner filed a Motion for Reconsideration, but it was likewise denied in the Resolution23 dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.

On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since petitioner no longer appealed
the October 15, 1998 Decision of the Labor Arbiter, which already became final and executory, a belated correction thereof is no
longer allowed. The CA stated that there is nothing left to be done except to enforce the said judgment. Consequently, it can no
longer be modified in any respect, except to correct clerical errors or mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9, 2009.

Hence, the petition assigning the lone error:I

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED GRAVE ABUSE OF DISCRETION AND
DECIDED CONTRARY TO LAW IN UPHOLDING THE QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY
10, 2005 ORDER OF LABOR ARBITER MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF LABOR
ARBITER LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME DECISION.26

Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor Arbiter’s decision, the same
is not final until reinstatement is made or until finality of the decision, in case of an award of separation pay. Petitioner maintains
that considering that the October 15, 1998 decision of the Labor Arbiter did not become final and executory until the April 17, 2002
Resolution of the Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May 27, 2002, the reckoning point for the
computation of the backwages and separation pay should be on May 27, 2002 and not when the decision of the Labor Arbiter was
rendered on October 15, 1998. Further, petitioner posits that he is also entitled to the payment of interest from the finality of the
decision until full payment by the respondents.

On their part, respondents assert that since only separation pay and limited backwages were awarded to petitioner by the October
15, 1998 decision of the Labor Arbiter, no more recomputation is required to be made of said awards. Respondents insist that since
the decision clearly stated that the separation pay and backwages are "computed only up to [the] promulgation of this decision,"
and considering that petitioner no longer appealed the decision, petitioner is only entitled to the award as computed by the Labor
Arbiter in the total amount of ₱158,919.92. Respondents added that it was only during the execution proceedings that the petitioner
questioned the award, long after the decision had become final and executory. Respondents contend that to allow the further
recomputation of the backwages to be awarded to petitioner at this point of the proceedings would substantially vary the decision
of the Labor Arbiter as it violates the rule on immutability of judgments.

The petition is meritorious.

The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division),27 wherein the
issue submitted to the Court for resolution was the propriety of the computation of the awards made, and whether this violated the
principle of immutability of judgment. Like in the present case, it was a distinct feature of the judgment of the Labor Arbiter in the
above-cited case that the decision already provided for the computation of the payable separation pay and backwages due and did
not further order the computation of the monetary awards up to the time of the finality of the judgment. Also in Session Delights,
the dismissed employee failed to appeal the decision of the labor arbiter. The Court clarified, thus:

In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiter's original computation of
the awards made, pegged as of the time the decision was rendered and confirmed with modification by a final CA decision, is legally
proper. The question is posed, given that the petitioner did not immediately pay the awards stated in the original labor arbiter's
decision; it delayed payment because it continued with the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the original labor arbiter framed
his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is the finding of
the illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages, attorney's fees, and legal
interests.

The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows that it was time-
bound as can be seen from the figures used in the computation. This part, being merely a computation of what the first part of the
decision established and declared, can, by its nature, be re-computed. This is the part, too, that the petitioner now posits should no
longer be re-computed because the computation is already in the labor arbiter's decision that the CA had affirmed. The public and
private respondents, on the other hand, posit that a re-computation is necessary because the relief in an illegal dismissal decision
goes all the way up to reinstatement if reinstatement is to be made, or up to the finality of the decision, if separation pay is to be
given in lieu reinstatement.

That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place, also made a computation of
the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules of Procedure which requires that a computation
be made. This Section in part states:

[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable, shall embody in any such
decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the labor arbiter's decision. As we noted above, this
implication is apparent from the terms of the computation itself, and no question would have arisen had the parties terminated the
case and implemented the decision at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of illegality as well as on all the
consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the labor arbiter's decision.
By law, the NLRC decision is final, reviewable only by the CA on jurisdictional grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule 65 petition for
certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13th month pay and indemnity,
lapsed to finality and was subsequently returned to the labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor arbiter's decision,
the implementing labor arbiter ordered the award re-computed; he apparently read the figures originally ordered to be paid to be
the computation due had the case been terminated and implemented at the labor arbiter's level. Thus, the labor arbiter re-
computed the award to include the separation pay and the backwages due up to the finality of the CA decision that fully terminated
the case on the merits. Unfortunately, the labor arbiter's approved computation went beyond the finality of the CA decision (July 29,
2003) and included as well the payment for awards the final CA decision had deleted - specifically, the proportionate 13th month
pay and the indemnity awards. Hence, the CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the labor arbiter's
original decision in accordance with its basic component parts as we discussed above. To reiterate, the first part contains the finding
of illegality and its monetary consequences; the second part is the computation of the awards or monetary consequences of the
illegal dismissal, computed as of the time of the labor arbiter's original decision.28

Consequently, from the above disquisitions, under the terms of the decision which is sought to be executed by the petitioner, no
essential change is made by a recomputation as this step is a necessary consequence that flows from the nature of the illegality of
dismissal declared by the Labor Arbiter in that decision.29 A recomputation (or an original computation, if no previous computation
has been made) is a part of the law – specifically, Article 279 of the Labor Code and the established jurisprudence on this provision –
that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add up until full satisfaction, as
expressed under Article 279 of the Labor Code. The recomputation of the consequences of illegal dismissal upon execution of the
decision does not constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands;
only the computation of monetary consequences of this dismissal is affected, and this is not a violation of the principle of
immutability of final judgments.30

That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran
when it continued to seek recourses against the Labor Arbiter's decision. Article 279 provides for the consequences of illegal
dismissal in no uncertain terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement
is allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the
reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares that the employment
relationship ended so that separation pay and backwages are to be computed up to that point.31

Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals,32 the Court laid
down the guidelines regarding the manner of computing legal interest, to wit:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money,
the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.33

Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated May 16, 2013,
approved the amendment of Section 234 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799,35 Series of 2013,
effective July 1, 2013, the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest in
the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for Banks and Sections 4305Q.1,37 4305S.338 and
4303P.139 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of
legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve
percent (12%) per annum - as reflected in the case of Eastern Shipping Lines40 and Subsection X305.1 of the Manual of Regulations
for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%)
per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be
the prevailing rate of interest when applicable.

Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. Bangko Sentral Monetary
Board,41 this Court affirmed the authority of the BSP-MB to set interest rates and to issue and enforce Circulars when it ruled that
"the BSP-MB may prescribe the maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any money,
goods or credits, including those for loans of low priority such as consumer loans, as well as such loans made by pawnshops, finance
companies and similar credit institutions. It even authorizes the BSP-MB to prescribe different maximum rate or rates for different
types of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries."

Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013, said judgments shall not be
disturbed and shall continue to be implemented applying the rate of interest fixed therein.1awp++i1

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines42 are accordingly modified to
embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.1âwphi1

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest,
as well as the accrual thereof, is imposed, as follows:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand
is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case
falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall
continue to be implemented applying the rate of interest fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in CA-G.R. SP No. 98591, and the
Resolution dated October 9, 2009 are REVERSED and SET ASIDE. Respondents are Ordered to Pay petitioner:

(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to May 27, 2002, when the
Resolution of this Court in G.R. No. 151332 became final and executory;

(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of service; and

(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27, 2002 to June 30,
2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits awarded and due to petitioner
in accordance with this Decision. SO ORDERED.
G.R. No. 213582

NYMPHA ODIAMAR,1 Petitioner
vs.
LINDA ODIAMAR VALEN CIA, Respondent

Before the Court is a petition for review on certiorari2  assailing the Decision3 dated March 16, 2012 and the Resolution4 dated July
14, 2014 of the Court of Appeals (CA) in C.A. G.R. CV No. 93624, which affirmed the Decision5 dated May 5, 2009 of the Regional Trial
Court of San Jose, Camarines Sur, Branch 58 (RTC) in Civil Case No. T-962 ordering petitioner Nympha S. Odiamar (petitioner) to pay
respondent Linda Odiamar Valencia (respondent) the amount of Pl,710,049.00 plus twelve percent (12%) interest, attorney's fees,
litigation expenses, and the costs of suit.

Facts

On August 20, 2003, respondent filed a complaint6 for sum of money and damages against petitioner, alleging that the latter owed
her P2,100,000.00. Petitioner purportedly issued China Bank Check No. GH

B 114 72127 (the check) for the said amount to guarantee the payment of the debt, but upon presentment, the same was
dishonored.8 Respondent lamented that petitioner refused to pay despite repeated demands, and that had she invested the money
loaned to petitioner or deposited the same in a bank, it would have earned interest at the rate of 36% per annum or three percent
(3%) per month.9

For her part, petitioner sought the dismissal10 of the complaint on the ground that it was her deceased parents who owed
respondent money. Accordingly, respondent's claim should be filed in the proceedings for the settlement of their estates. Petitioner
averred that respondent had, in fact, participated in the settlement proceedings and had issued a certification 11 stating that it was
petitioner's deceased parents who were indebted to respondent for P2,000,000.00. She further maintained that as administratix of
her parents' estates, she agreed to pay such indebtedness on installment but respondent refused to accept her payments.12

Respondent countered13 that petitioner personally borrowed almost half of the P2, 100,000.00 from her, as evidenced by the check
which she issued after agreeing to settle the same in installments.14 While respondent conceded that petitioner made several
installment payments from December 29, 2000 until May 31, 2003, she pointed out that the latter failed to make any succeeding
payments.15 Moreover, respondent denied participating in the proceedings for the settlement of the estates of petitioner's parents,
clarifying that petitioner was the one who prepared the certification alluded to and that she (respondent) signed it on the belief that
petitioner would make good her promise to pay her (respondent).16

In an Order17 dated October 3, 2003, the RTC denied petitioner's motion to dismiss, thus prompting her to file an answer. 18 She
asserted that respondent merely persuaded her to issue the check to guarantee her deceased parents' loan. She further claimed that
the check was blank when she issued it and that despite having no authority to fill up the same, respondent wrote the amount and
date thereon.19 She also maintained that from December 29, 2000 to May 31, 2003, she made, in almost daily installments,
payments to respondent ranging from P500.00 to Pl0,000.00, and that while she tried to make succeeding payments, respondent
refused to accept the same, demanding, instead, the payment of the entire balance.20 As counterclaim, petitioner prayed that moral
damages, attorney's fees, litigation expenses, and exemplary and punitive damages be awarded to her.21

The RTC Ruling

In a Decision22 dated May 5, 2009, the RTC ruled in favor of respondent and ordered petitioner to pay: (a) ₱1,710,049.00 which
represents the unpaid portion of the ₱2,100,000.00 debt; (b) twelve percent (12%) interest computed from the time judicial demand
was made on August 20, 2003 until fully paid; (c) ₱10,000.00 as attorney's fees; (d)  litigation expenses amounting to ₱19,662.78;
and (e)  the costs of suit.23

The RTC refused to give credence to petitioner's contention that it was her deceased parents who borrowed money from
respondent, observing that while the latter acknowledged that the former's deceased parents owed her ₱700,000.00 out of the
₱2,100,000.00, petitioner likewise admitted that she obtained personal loans from respondent.24 Hence, according to the RTC,
petitioner cannot deny her liability to respondent. Further, by assuming the liability of her deceased parents and agreeing to pay
their debt in installments - which she in fact paid from December 29, 2000 to May 31, 2003 in amounts of ₱500.00 to ₱10,000.00,
and which payments respondent did actually accept - a mixed novation took place and petitioner was substituted in their place as
debtor. Thus, the liabilities of the estates of petitioner's deceased parents were extinguished and transferred to petitioner.25

Anent the sum due, the RTC surmised that petitioner and her deceased parents owed respondent the sum of ₱2,000,000.00 as
principal and since petitioner undertook to pay the same in installments, ₱100,000.00 was added as interest; hence, petitioner
issued the check for ₱2,100,000.00.26 Based on the receipts submitted by petitioner, the genuineness and due execution of which
were not put in issue, petitioner had paid a total of ₱389,95l.00 in installments, leaving an unpaid balance of ₱l,710,049.00, subject
to interest of twelve percent (12%) per annum from the time judicial demand was made on August 20, 2003, in the absence of any
written stipulation on interest.27

Aggrieved, petitioner appealed28 to the CA, arguing that novation did not take place and no interest was due respondent.29
 The CA Ruling

In a Decision30 dated March 16, 2012, the CA affirmed the ruling of the RTC.31 It agreed that petitioner cannot deny her liability to
respondent in view of her admission that she borrowed money from the latter several times.32 The CA also found petitioner's claim
that she issued a blank check incredible, pointing out that petitioner testified in court that she personally wrote the amount thereon
after she and respondent agreed that the loans she and her deceased parents obtained amounted to P2,100,000.00.33

Anent the issue of novation, the CA concurred with the RTC that novation took place insofar as petitioner was substituted in place of
petitioner's late parents, considering that petitioner undertook to pay her deceased parents' debt. However, the CA opined that
there was no novation with respect to the object of the contract, following the rule that an obligation is not novated by an
instrument which expressly recognizes the old obligation and changes only the terms of paying the same, as in this case where the
parties merely modified the terms of payment of the ₱2,100,000.00.34

Dissatisfied, petitioner moved for reconsideration,35 which was, however, denied in a Resolution36 dated July 14, 2014; hence, this
petition.

The Issue Before the Court

The primary issue for the Court's resolution is whether or not petitioner should be held liable to respondent for the entire debt in
the amount of ₱2,100,000.00.

The Court's Ruling

At the outset, it must be emphasized that the fact of petitioner's liability to respondent is well-established. As correctly pointed out
by the RTC and the CA, while respondent acknowledged that petitioner's deceased parents owed her money, petitioner also
admitted obtaining loans from respondent, viz. :

From [respondent's] recollection, the amount due from [petitioner's] parents is ₱700,000.00. Aside from her parents' loans,
however, [petitioner] herself admitted having obtained personal loans from the respondent while her parents were still alive. She
testified:

ATTY. P ASA: You also know that [respondent] was also in [lending]?

[PETITIONER]: Yes, Madam.

Q: Because she was in lending you have borrowed money also? (sic)

A: Yes, Madam.

Q: Separate from your father?

A: Yes, Madam.

xxxx

Q: You borrowed money from [respondent] separate from your father prior to his death?

A: Yes, Madam.37

Having admitted that she obtained loans from respondent without showing that the same had already been paid or otherwise
extinguished, petitioner cannot now aver otherwise. It is settled that judicial admissions made by the parties in the pleadings or in
the course of the trial or. Other proceedings in the same case are conclusive and do not require further evidence to prove
them.38 They are legally binding on the party making it, 39 except when it is shown that they have been made through palpable
mistake or that no such admission was actually made, 40 neither of which was shown to exist in this case. Accordingly, petitioner is
bound by her admission of liability and the only material question remaining is the extent of such liability.

Based on the records of this case, respondent, for her part, admitted that petitioner's deceased parents owed her ₱700,000.00 of
the ₱2,100,000.00 debt and that petitioner owed her ₱l,400,000.00 only:

ATTY. VILLEGAS:

Q When was the first time that the [petitioner] obtained cash advances from you?

A About 1996, sir and then she made several others and she kept on borrowing money from me.

Q Do you mean to say that she obtained part of her loan while her father was still alive?
A Yes, when he was still alive she already borrowed.

Q Are you telling us that this 2.1 Million Pesos was entirely borrowed from you by the [petitioner]?

A There were loans which were obtained by her father, some by her mother and since they died already[,] when we summarized the
amount that was the total amount that she owes me, sir.

Q How much is the amount owe[d] to you by the [petitioner's] father?

A I could no longer recall, sir because that was already long time ago but it was part of the summary that we made, sir.

Q Could it be P200,000.00?

A More or less, that much, sir.

Q What about the defendant's mother? How much was her obligation to you?

A ₱500,000.00, more or less, but I cannot exactly recall.

Q So, the defendant's parents owed you more than ₱700,000.00 is it not?

A Yes, sir.

xxxx

COURT:

Q Is it the impression of the Court that the x x x amount of ₱700,000.00 is not a personal indebtedness of [petitioner] but that of
her parents? Is that the impression xxx the Court is getting?

A Yes, Your Honor.

xxxx

ATTY. VILLEGAS:

Q Tell us, how much really to your recollection is the indebtedness of the [petitioner's] parents?

A To the best of my recollection, that is the amount. More or less [₱]700,000[.00] for both spouses, sir. 41 (Emphases supplied)

ATTY. PASA:

Q Madam witness, during the last hearing you stated that the [petitioner's] parents were indebted [to] you for about ₱700,000.00?

A Yes, Madam.

Q How about the [petitioner], how much did she [owe] you?

A More or less 1.4 [Million] Madam.42 (Emphasis supplied)

Applying the same principle on judicial admissions above, it is therefore incontrovertible that petitioner's debt to respondent
amounted to only ₱l,400,000.00 and not ₱2,100,000.00. Thus, respondent only remains liable to petitioner for such amount.
Considering that petitioner had already paid ₱389,951.00 in installments as evidenced by the receipts submitted by petitioner - the
genuineness and due execution of which were not put in issue - the unpaid balance of petitioner's ₱l,400,000.00 debt to respondent
stands at ₱l,010,049.00. On the other hand, the remaining ₱700,000.00 of the total ₱2,100,000.00 debt to respondent is properly
for the account of the estates of petitioner's deceased parents and, hence, should be claimed in the relevant proceeding therefor.

At this juncture, the Court finds it apt to correct the mistaken notions that: (a)  novation by substitution of the debtor took place so
as to release the estates of the petitioner's deceased parents from their obligation, which, thus, rendered petitioner solely liable for
the entire ₱2,100,000.00 debt; and (b) the ₱100,000.00 of the ₱2,100,000.00 debt was in the nature of accrued monetary interests.

On the first matter, while it is observed that petitioner had indeed admitted that she agreed to settle her late parents' debt, which
was supposedly evinced by (a)  the ₱2,100,000.00 check she issued therefor, and (b) several installment payments she made to
respondent from December 29, 2000 to May 31, 2003, there was no allegation, much less any proof to show, that the estates of
her deceased parents were released from liability thereby. In S.C. Megaworld Construction and Development Corporation v.
Parada,43 the Court held that to constitute novation by substitution of debtor, the former debtor must be expressly released from
the obligation and the third person or new debtor must assume the former's place in the contractual relations.44 Moreover, the
Court ruled that the "fact that the creditor accepts payments from a third person, who has assumed the obligation, will result
merely in the addition of debtors and not novation."45 At its core, novation is never presumed, and the animus novandi,  whether
totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be
mistaken. 46 Here, the intent to novate was not satisfactorily proven by respondent. At best, petitioner only manifested her desire to
shoulder the debt of her parents, which, as above-discussed, does not amount to novation. Thus, the courts a quo  erred in holding
petitioner liable for the debts obtained by her deceased parents on account of novation by substitution of the debtor.

Similarly, both courts faultily concluded that the principal sum loaned by petitioner and her deceased parents amounted to
₱2,000,000.00 and the ₱100,000.00 was added as interest because petitioner undertook to pay the loan in installments.

It is fundamental that for monetary interest to be due, there must be an express written agreement therefor.47 Article 1956 of the
Civil Code provides that "[n]o interest shall be due unless it bas been expressly stipulated in writing." In this relation, case law
states that the lack of a written stipulation to pay interest on the loaned amount bars a creditor from charging monetary
interest48 and the collection of interest without any stipulation therefor in writing is prohibited by law.49

Here, respondent herself admitted that there was no written agreement that interest would be due on the sum loaned, only that
there was an implicit understanding that the same would be subject to interest since she also borrowed the same from banks which,
as a matter of course, charged interest. Respondent also testified on cross examination that the ₱2,100,000.00 corresponds only to
the principal and does not include

interest, viz.  :

[Atty. Villegas]: Now, are these loans interest bearing?

[Respondent]: Yes, sir, because the money I loaned to them I have also obtained as a loan from the bank.1âwphi1

Q: This 2.1 Million Pesos are included (sic) the interest that you charge[d] to the [petitioner's] parents and to the petitioner, is it not?

A: That is the basis of the interest bearing, 2.1 Million Pesos at 3 percent per month.

Q: Are you telling us that when you summarized and computed the entire total obligations of the [petitioner and her parents] you
computed the interest and come out (sic) with 2.1 Million Pesos?

A: Interest has not yet been included in the 2.1 Million Pesos.

Q: This agreement of yours to pay interest is not in writing, is it not (sic)?

A: It is not in writing, sir. 50

All told, having established that no novation took place and that no interest was actually due, and factoring in the payments already
made for her account, petitioner is, thus, ordered to pay respondent the amount of

₱l,010,049.00, which is the remaining balance of her principal debt to the latter in the original amount of ₱l,400,000.00.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated March 16, 2012 and the Resolution dated July 14, 2014 of the
Court of Appeals (CA) in C.A. G.R. CV No. 93624 are hereby AFFIRMED with MODIFICATION in that petitioner Nympha S. Odiamar
is ORDERED to pay respondent Linda Odiamar Valencia the amount of ₱l,010,049.00, which is the remaining balance of her principal
debt to the latter in the original amount of Pl,400,000.00.

SO ORDERED.