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EN BANC

G.R. No. L-12164             May 22, 1959

BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants, 

vs.
WORKMEN'S COMPENSATION COMMISSION, ET AL., respondents-appellees.

J. de Guia for appellants.

Estanislao R. Bayot for appellees.

ENDENCIA, J.:

Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply, a
commercial guard who while in line of duty, was skilled by criminal hands. His widow Ciriaca Vda. de
Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama, in due time
filed a claim for compensation with the Workmen's Compensation Commission, which was granted in
an award worded as follows:

WHEREFORE, the order of the referee under consideration should be, as it is hereby, affirmed
and respondents Benito Liwanag and Maria Liwanag Reyes, ordered.

1. To pay jointly and severally the amount of three thousand Four Hundred Ninety Four and
40/100 (P3,494.40) Pesos to the claimants in lump sum; and

To pay to the Workmen's Compensation Funds the sum of P4.00 (including P5.00 for this
review) as fees, pursuant to Section 55 of the Act.

In appealing the case to this Tribunal, appellants do not question the right of appellees to
compensation nor the amount awarded. They only claim that, under the Workmen's Compensation
Act, the compensation is divisible, hence the commission erred in ordering appellants to pay jointly
and severally the amount awarded. They argue that there is nothing in the compensation Act which
provides that the obligation of an employer arising from compensable injury or death of an employee
should be solidary obligation, the same should have been specifically provided, and that, in absence
of such clear provision, the responsibility of appellants should not be solidary but merely joint.

At first blush appellants' contention would seem to be well, for ordinarily, the liability of the partners in
a partnership is not solidary; but the law governing the liability of partners is not applicable to the case
at bar wherein a claim for compensation by dependents of an employee who died in line of duty is
involved. And although the Workmen's Compensation Act does not contain any provision expressly
declaring solidary obligation of business partners like the herein appellants, there are other provisions
of law from which it could be gathered that their liability must be solidary. Arts. 1711 and 1712 of the
new Civil Code provide:

ART. 1711. Owners of enterprises and other employers are obliged to pay compensation for
the death of or injuries to their laborers, workmen, mechanics or other employees, even though
the event may have been purely accidental or entirely due to a fortuitous cause, if the death or
personal injury arose out of and in the course of the employment. . . . .
 ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the
employer shall be solidarily liable for compensation. . . . .

And section 2 of the Workmen's Compensation Act, as amended reads in part as follows:

. . . The right to compensation as provided in this Act shall not be defeated or impaired on the
ground that the death, injury or disease was due to the negligence of a fellow servant or
employee, without prejudice to the right of the employer to proceed against the negligence
party.

The provisions of the new Civil Code above quoted taken together with those of Section 2 of the
Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of
business partners, like appellants, should be solidary; otherwise, the right of the employee may be
defeated, or at least crippled. If the responsibility of appellants were to be merely joint and solidary,
and one of them happens to be insolvent, the amount awarded to the appellees would only be
partially satisfied, which is evidently contrary to the intent and purposes of the Act. In the previous
cases we have already held that the Workmen's Compensation Act should be construed fairly,
reasonably and liberally in favor of and for the benefit of the employee and his dependents; that all
doubts as to the right of compensation resolved in his favor; and that it should be interpreted to
promote its purpose. Accordingly, the present controversy should be decided in favor of the
appellees.

Moreover, Art. 1207 of the new Civil Code provides:

. . . . There is solidary liability only when the obligation expressly so states, or when the law
or the nature of the obligation requires solidarity.

Since the Workmen's Compensation Act was enacted to give full protection to the employee, reason
demands that the nature of the obligation of the employers to pay compensation to the heirs of their
employee who died in line of duty, should be solidary; otherwise, the purpose of the law could not be
attained.

Wherefore, finding no error in the award appealed from, the same is hereby affirmed, with costs
against appellants.

Paras, C. J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, and Concepcion, JJ., concur.
 FIRST DIVISION

[G.R. No. L-46095. November 23, 1977.]

PHILIPPINE NATIONAL BANK, Petitioner, v. HONORABLE ELIAS B. ASUNCION, FABAR

INCORPORATED, JOSE MA. BARREDO, CARMEN B. BORROMEO and TOMAS L.
BORROMEO, Respondents.

Nestor L. Kalaw, Carlos R. Cruz & Rolando S. Santos for Petitioner.

Conrado B. Enriquez for Private Respondents.

DECISION

MAKASIAR, J.:

Philippine National Bank (hereafter referred to as the petitioner), on January 16, 1963, granted in
favor of respondent Fabar Incorporated various credit accommodations and advances in the form of a
discounting line, overdraft line, temporary overdraft line and letters of credit covering the importation
of machinery and equipment. Petitioner likewise made advances by way of insurance premiums
covering the chattels subject matter of a mortgage securing the aforementioned credit
accommodations. Said credit accommodations had an outstanding balance of P8,449,169.98 as of
May 13, 1977.

All of the above credit accommodations are secured by the joint and several signatures of Jose Ma.
Barredo, Carmen B. Borromeo and Tomas L. Borromeo (private respondents herein) and Manuel H.
Barredo. For failure of private respondents to pay their obligations notwithstanding repeated
demands, petitioner instituted a case for collection against all private respondents and Manuel H.
Barredo in a complaint dated October 31, 1972, and which was filed before the sala of the Honorable
Elias B. Asuncion, Judge of the Court of First Instance of Manila, Branch XII (hereafter referred to as
the respondent Court).

On May 19, 1975, before the case could be decided, Manuel H. Barredo died. In a Manifestation
dated June 6, 1975, counsel for private respondents informed the respondent Court of said death.

Subsequently, respondent Court issued an Order of dismissal dated November 29, 1976, which is
hereinbelow quoted as follows:jgc:chanrobles.com.ph

"In view of the death of defendant Manuel Barredo, the Court hereby dismisses this case since the
present suit is for a money claim which does not survive the death of said defendant.

"Pursuant to the provisions of Section 6, Rule 86 of the Revised Rules of Court, which
provides:chanrob1es virtual 1aw library

‘Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against
the decedent as if he were the only debtor, without prejudice to the right of the estate to recover
contribution from the other debtor . . .’
the claim of plaintiff may be filed with the estate proceedings of the decedent."cralaw virtua1aw library

Petitioner thereupon filed a Motion dated December 14, 1976 praying for the reconsideration of
respondent Court’s Order dismissing the case as against all the defendants, contending that the
dismissal should only be as against the deceased defendant Manuel H. Barredo.

In an order dated January 26, 1977, respondent Court denied petitioner’s motion for reconsideration
for lack of meritorious grounds.

Hence, this instant petition for review on certiorari.

Petitioner, in its lone assignment of error, alleged that the respondent Court erred in dismissing the
case against all the defendants, instead of dismissing the case only as against the deceased
defendant and thereafter proceeding with the hearing as against the other defendants, private
respondents herein.

Petitioner’s contention is well taken. Respondent Court’s reliance on Section 6, Rule 86 of the
Revised Rules of Court was erroneous.

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets
up the procedure in enforcing collection in case a creditor chooses to pursue his claim against the
estate of the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary
obligation) has the option whether to file or not to file a claim against the estate of the solidary debtor.
In construing Section 6, Rule 87 of the old Rules of Court, which is the precursor of Section 6, Rule
86 of the Revised Rules of Court, this Court said, in the case of Manila Surety & Fidelity Co., Inc. v.
Villarama, Et. Al. (107 Phil. 891) that:jgc:chanrobles.com.ph

"It is evident from the foregoing that Section 6 of Rule 87 (of the Old Rules of Court) provides the
procedure should the creditor desire to go against the deceased debtor, but there is certainly nothing
in the said provision making compliance with such procedure a condition precedent before an
ordinary action against the surviving debtors, should the creditor choose to demand payment from the
latter, could be entertained to the extent that failure to observe the same would deprive the court
jurisdiction to take cognizance of the action against the surviving debtors. Upon the other hand, the
Civil Code expressly allow the creditor to proceed against any one of the solidary debtors or some or
all of them simultaneously."cralaw virtua1aw library

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said
provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all
of them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against
whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor)
may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a
claim in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed as
against the surviving debtors and file its claim against the estate of the deceased solidary debtor, as
was made apparent in the aforequoted decision. For to require the creditor to proceed against the
estate, making it a condition precedent for any collection action against the surviving debtors to
prosper, would deprive him of his substantive rights provided by Article 1216 of the New Civil
Code.chanrobles law library

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied
literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of
Court, petitioner has no choice but to proceed against the estate of Manuel Barredo only. Obviously,
this provision diminishes the Bank’s right under the New Civil Code to proceed against any one, some
or all of the solidary debtors. Such a construction is not sanctioned by the principle, which is too well
settled to require citation, that a substantive law cannot be amended by a procedural rule. Otherwise
stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216
of the New Civil Code, the former being merely procedural, while the latter, substantive.

Moreover, no less than the New Constitution of the Philippines, in Section 5, Article X, provides that
rules promulgated by the Supreme Court should not diminish, increase or modify substantive rights.

WHEREFORE, JUDGMENT IS HEREBY RENDERED MODIFYING THE APPEALED ORDERS OF

RESPONDENT COURT DATED NOVEMBER 29, 1976 AND JANUARY 26, 1977 IN THE SENSE
THAT AS AGAINST THE DECEASED MANUEL H. BARREDO, THE CASE IS DISMISSED, BUT AS
AGAINST ALL THE OTHER SOLIDARY DEBTORS, THE CASE IS REMANDED TO RESPONDENT
COURT FOR FURTHER PROCEEDINGS.

NO COSTS.

SO ORDERED.
 EN BANC

G.R. No. L-12471             April 13, 1959

ROSARIO L. DE BRAGANZA, ET AL., petitioners, 

vs.
FERNANDO F. DE VILLA ABRILLE, respondent.

Oscar M. Herrera for petitioners.

R. P. Sarandi and F. Valdez Anama for respondents.

BENGZON, J.:

Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the Court of
Appeal's decision whereby they were required solidarily to pay Fernando F. de Villa Abrille the sum of
P10,000 plus 2 % interest from October 30, 1944.

The above petitioners, it appears, received from Villa Abrille, as a loan, on October 30, 1944 P70,000
in Japanese war notes and in consideration thereof, promised in writing (Exhibit A) to pay him
P10,000 "in legal currency of the P. I. two years after the cessation of the present hostilities or as
soon as International Exchange has been established in the Philippines", plus 2 % per annum.

Because payment had not been made, Villa Abrille sued them in March 1949.

In their answer before the Manila court of first Instance, defendants claimed to have received P40,000
only — instead of P70,000 as plaintiff asserted. They also averred that Guillermo and Rodolfo were
minors when they signed the promissory note Exhibit A. After hearing the parties and their evidence,
said court rendered judgment, which the appellate court affirmed, in the terms above described.

There can be no question about the responsibility of Mrs. Rosario L. Braganza because the minority
of her consigners note release her from liability; since it is a personal defense of the minors.
However, such defense will benefit her to the extent of the shares for which such minors may be
responsible, (Art. 1148, Civil Code). It is not denied that at the time of signing Exhibit A, Guillermo
and Rodolfo Braganza were minors-16 and 18 respectively. However, the Court of Appeals found
them liable pursuant to the following reasoning:

. . . . These two appellants did not make it appears in the promissory note that they were not
yet of legal age. If they were really to their creditor, they should have appraised him on their
incapacity, and if the former, in spite of the information relative to their age, parted with his
money, then he should be contended with the consequence of his act. But, that was not the
case. Perhaps defendants in their desire to acquire much needed money, they readily and
willingly signed the promissory note, without disclosing the legal impediment with respect to
Guillermo and Rodolfo. When minor, like in the instant case, pretended to be of legal age, in
fact they were not, they will not later on be permitted to excuse themselves from the fulfillment
of the obligation contracted by them or to have it annulled. (Mercado, et al. vs. Espiritu, 37
Phil., 215.) [Emphasis Ours.]

We cannot agree to above conclusion. From the minors' failure to disclose their minority in the same
promissory note they signed, it does not follow as a legal proposition, that they will not be permitted
thereafter to assert it. They had no juridical duty to disclose their inability. In fact, according to Corpuz
Juris Secundum, 43 p. 206;
 . . . . Some authorities consider that a false representation as to age including a contract as
part of the contract and accordingly hold that it cannot be the basis of an action in tort. Other
authorities hold that such misrepresentation may be the basis of such an action, on the theory
that such misrepresentation is not a part of, and does not grow out of, the contract, or that the
enforcement of liability for such misrepresentation as tort does not constitute an indirect of
enforcing liability on the contract. In order to hold infant liable, however, the fraud must be
actual and not constructure. It has been held that his mere silence when making a contract as
to age does not constitute a fraud which can be made the basis of an action of decit.
(Emphasis Ours.)

The fraud of which an infant may be held liable to one who contracts with him in the belief that
he is of full age must be actual not constructive, and mere failure of the infant to disclose his
age is not sufficient. (27 American Jurisprudence, p. 819.)

The Mecado case1 cited in the decision under review is different because the document signed
therein by the minor specifically stated he was of age; here Exhibit A contained no such statement. In
other words, in the Mercado case, the minor was guilty of active misrepresentation; whereas in this
case, if the minors were guilty at all, which we doubt it is of passive (or constructive)
misrepresentation. Indeed, there is a growing sentiment in favor of limiting the scope of the
application of the Mercado ruling, what with the consideration that the very minority which
incapacitated from contracting should likewise exempt them from the results of misrepresentation.

We hold, on this point, that being minors, Rodolfo and Guillermo Braganza could not be legally bound
by their signatures in Exhibit A.

It is argued, nevertheless, by respondent that inasmuch as this defense was interposed only in 1951,
and inasmuch as Rodolfo reached the age of majority in 1947, it was too late to invoke it because
more than 4 years had elapsed after he had become emancipated upon reaching the age of majority.
The provisions of Article 1301 of the Civil Code are quoted to the effect that "an action to annul a
contract by reason of majority must be filed within 4 years" after the minor has reached majority age.
The parties do not specify the exact date of Rodolfo's birth. It is undenied, however, that in October
1944, he was 18 years old. On the basis of such datum, it should be held that in October 1947, he
was 21 years old, and in October 1951, he was 25 years old. So that when this defense was
interposed in June 1951, four years had not yet completely elapsed from October 1947.

Furthermore, there is reason to doubt the pertinency of the 4-years period fixed by Article 1301 of the
Civil Code where minority is set up only as a defense to an action, without the minors asking for any
positive relief from the contract. For one thing, they have not filed in this case an action for
annulment.2 They merely interposed an excuse from liability.

Upon the other hand, these minors may not be entirely absolved from monetary responsibility. In
accordance with the provisions of Civil Code, even if their written contact is unenforceable because of
non-age, they shall make restitution to the extent that they have profited by the money they received.
(Art. 1340) There is testimony that the funds delivered to them by Villa Abrille were used for their
support during the Japanese occupation. Such being the case, it is but fair to hold that they had
profited to the extent of the value of such money, which value has been authoritatively established in
the so-called Ballantine Schedule: in October 1944, P40.00 Japanese notes were equivalent to P1 of
current Philippine money.

Wherefore, as the share of these minors was 2/3 of P70,000 of P46,666.66, they should now return
P1,166.67.3Their promise to pay P10,000 in Philippine currency, (Exhibit A) can not be enforced, as
already stated, since they were minors incapable of binding themselves. Their liability, to repeat, is
presently declared without regard of said Exhibit A, but solely in pursuance of Article 1304 of the Civil
Code.

Accordingly, the appealed decision should be modified in the sense that Rosario Braganza shall pay
1/3 of P10,000 i.e., P3,333.334 plus 2% interest from October 1944; and Rodolfo and Guillermo
Braganza shall pay jointly5 to the same creditor the total amount of P1,166.67 plus 6% interest
beginning March 7, 1949, when the complaint was filed. No costs in this instance.

Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia,
JJ., concur.
PDF 2

FIRST DIVISION

G.R. No. L-32425 November 21, 1984

THE IMPERIAL INSURANCE, INC., plaintiff-appellee, 

vs.
EMILIA T. DAVID, defendant-appellant.

RELOVA, J.:

Petition for review on certiorari of the decision rendered by the then Court of First Instance of Manila
in Civil Case No. 67713, sustaining the money claims of plaintiff-appellee, The Imperial Insurance,
Inc. against defendant-appellant Emilia T. David, based on three (3) different causes of action in the
complaint.

The first two causes of action involve the indemnity agreements which defendant-appellant and her
deceased husband, Felicisimo V. Reyes, jointly and severally, executed in favor of herein appellee,
for and in consideration of two (2) surety bonds underwritten by it to lift the lift the writs of attachment
in Civil Case No. 5213 of the Rizal Court of First Instance for the amount of P60,000.00, and in Civil
Case No. Q-5214, also with the same court for the amount of P40,000.00

The third cause of action involves accrued premiums and documentary stamps for four (4) years with
legal interest therein from the filing of the complaint also underwritten by appellee.

Records show that Felicisimo V. Reyes and his wife, herein appellant, executed two (2) indemnity
agreements in favor of appellee jointly and severally to assure indemnification of the latter for
whatever liability it may incur in connection with its posting the security bonds to lift the attachments in
Civil Case No. Q-5213 for the amount of P60,000.00, and in Civil Case No. Q-5214 for the amount of
P40,000.00, for the benefit of Felicisimo V. Reyes.

Later, Felicisimo V. Reyes and his wife, jointly and severally, executed another indemnity agreement
in favor of appellee to assure indemnification of the latter under a homestead bond for the sum of
P7,500.00 it had executed jointly and severally with them in favor of the Development Bank of the
Philippines. On the same date, Felicisimo V. Reyes and his wife paid to appellee the sum of P153.33
covering the premium and other expenses for the homestead bond on the first year.

Felicisimo V.Reyes died and Special Proceedings No. 12948 of the then Court of First Instance of
Bulacan, entitled "In the Matter of the Instestate of Felicisimo V. Reyes," was commenced. His wife,
herein appellant, qualified and took her oath of office as the administratrix of said intestate estate.
Corresponding notices to creditors were issued and published for three (3) consecutive weeks in the
"Manila Chronicle" and were duly posted in the required places.

Meanwhile, judgment was rendered in the aforesaid two cases (Civil Cases Nos. Q-5213 and Q-
5214) against the spouses Felicisimo V. Reyes and appellant Emilia T. David which has become final
and executory. Writs of execution of the decision on the said cases were returned unsatisfied. As a
consequence, judgment was rendered against the surety bonds for the sum of P60,000.00 in Civil
Case No. Q-5213 and for the sum of P40,000.00 in Civil Case No. Q-5214.

Appellee made demands on Emilia T. David to pay the amounts of P60,000.00 and P40,000.00 under
the surety bonds and arrears in premiums thereon. When appellant David failed to make payments,
appellee filed Civil Case No. 67713 in the then Court of First Instance of Manila, Branch 1, for
collection of sums of money under three (3) different causes of action.

A motion to dismiss was filed by herein appellant on the following grounds. to wit: (1) the court has no
jurisdiction over the nature of the action or suit; (2) the complaint states no cause of action; and (3)
the plaintiff's causes of action, if there be any, have been barred for its failure to file its claims against
the estate of the deceased Felicisimo V. Reyes in due time.

The lower court denied the motion for lack of merit. Thereafter, appellant, as defendant in said Civil
Case No. 67713, filed her answer.

After trial, the court rendered judgment ordering defendant Emilia T. David (herein appellant)

1. to pay the plaintiff under the first cause of action, the amount of P60,000.00 with
interest at legal rate from the filing of the complaint until fun payment shall be effected;
and a further sum of P1,522.50 annually from June 20, 1961 until termination of this
case, said amount representing premiums and documentary stamps in the surety bond,
Exh. "B", with interest at legal rate from the filing of the complaint until full payment is
made;

2. to pay the plaintiff under the second cause of action, the amount of P40,000.00 with
interest at the legal rate from the filing of the complaint until full payment shag be made;
and a further sum of P1,105.00 annually from June 20, 1961 until termination of this
case, said amount representing premiums and documentary stamps on the surety bond
Exh. "B", with interest at the legal rate from the filing of the complaint until full payment
is made;

3. to pay the plaintiff under the third cause of action the amount of P153.33 annually for
a period of 4 years from June 29, 1962 representing premiums and documentary
stamps on the Homestead Bond Exh. "C-1" with interest at the legal rate from the filing
of the complaint until full payment is made;

4. to pay the plaintiff in concept of attorney's fees the sum of P20,000.00, representing
20% of the principal claim of plaintiff; plus cost. (pp. 39-40, Rollo)

The principal issue raised by appellant Emilia T. David in this appeal is whether or not the lower court
has jurisdiction over plaintiff's causes of action. She contends that appellee's claim should have been
presented according to Rule 86 of the Revised Rules of Court and its failure to do so operates to bar
its claim forever; that the complaint failed to state a cause of action; that the writ of attachment was
improvidently issued; and, that the lower court should have discharged the writs. Further, she argues
that the judgment on attorney's fees has neither legal nor factual basis.

We find no merit in this appeal. Under the law and well settled jurisprudence, when the obligation is a
solidary one, the creditor may bring his action in toto against any of the debtors obligated in solidum.
Thus, if husband and wife bound themselves jointly and severally, in case of his death her liability is
independent of and separate from her husband s; she may be sued for the whole debt and it would
be error to hold that the claim against her as well as the claim against her husband should be made in
the decedent's estate. (Agcaoili vs. Vda. de Agcaoili, 90 Phil. 97)

In the case at bar, appellant signed a joint and several obligation with her husband in favor of herein
appellee; as a consequence, the latter may demand from either of them the whole obligation. As
distinguished from a joint obligation where each of the debtor is liable only for a proportionate part of
the debt and the creditor is entitled only to a proportionate part of the credit, in a solidary obligation
the creditor may enforce the entire obligation against one of the debtors.

Where the obligation assumed by several persons is joint and several, each of the
debtors is answerable for the whole obligation with the right to seek contribution from
his co-debtors. (Philippine International Surety Co., Inc. vs. Gonzales, 3 SCRA 391)

And, in Manila Surety and Fidelity Co., Inc. vs. Villarama, et al., 107 Phil. 891, this Court
ruled that the Rules of Court provide the procedure should the creditor desire to go
against the. deceased debtor, "but there is noting in the aid provision making
compliance with such procedure a condition precedent an ordinary action against the
solidary debtors. should the creditor choose to demand payment from the latter, could
be entertained to the extent that failure to observe the same would deprive the court
jurisdiction to make cognizance of the action against the surviving debtors. Upon lie
other hand, the Civil Code expressly allows the creditor to proceed against any one of
the solidary debtors or some or all of them simultaneously. Hence, there is nothing
improper in the creditor's filing of an action against the surviving solidary debtors alone,
instead of instituting a proceeding for the settlement of the estate of the deceased
debtor wherein his claim could be filed.

ACCORDINGLY, the decision of the court a quo is hereby AFFIRMED in toto with costs against
appellant.

SO ORDERED.
PETITIONER
United States
RESPONDENT
Ronald Dale Dunn
LOCATION
Ronald Dunn’s Ranch
DOCKET NO.
85-998
DECIDED BY
Rehnquist Court
LOWER COURT
United States Court of Appeals for the Fifth Circuit
CITATION
480 US 294 (1987)
ARGUED
Jan 20, 1987
DECIDED
Mar 3, 1987
GRANTED
Jun 23, 1986
ADVOCATES
Roy T. Englert, Jr.on behalf of the Petitioner
Louis Dugas, Jr.on behalf of the Respondent

Facts of the case

Using electronic beepers and aerial photography, police tracked certain drug making supplies to Ronald Dale
Dunn’s ranch. The ranch had a fence surrounding the perimeter as well as several interior fences. Law
enforcement officers entered the property without a warrant and crossed several fences to get near Dunn’s barn.
The barn was about 60 yards away from Dunn’s house and a fence separated the two buildings. Police smelled
phenylacetic acid and heard a motor running in the barn. Police approached the barn but did not enter. The
officers did shine a flashlight through netting above the door and observed what looked like a drug laboratory.
The officers made several similar visits, not entering, but looking into the barn, before obtaining a warrant to
search the barn and Dunn’s house. During this search, police seized chemicals and equipment use for making
drugs.

At trial, Dunn unsuccessfully moved to suppress evidence obtained during the search. A jury convicted him on
federal drug charges. The U.S. Court of Appeals for the Fifth Circuit reversed, holding that the barn was “within
the curtilage” of Dunn’s house, so the police officers’ warrantless visits to the barn violated the Fourth
Amendment. The U.S. Supreme Court vacated the court of appeals judgment and remanded in light of Oliver v.
United States. This time, the court of appeals found that the warrantless searches of the barn violated Dunn’s
reasonable expectation of privacy.
 Question

Is a search warrant needed to peer into the open side of a barn that is located in a field on private property?

Conclusion

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 7–2 DECISION FOR UNITED STATES 

MAJORITY OPINION BY BYRON R. WHITE

Marshall

Brennan

White

Blackmun

Powell

Rehnquist

Stevens

O'Connor

Scalia

No. Justice Byron R. White, writing for a 7-2 majority, reversed the court of appeals. The Supreme Court held
that the barn and the area around it lay outside the protected area of curtilage around Dunn’s house. The barn
was separated from the house by a fence and was a substantial distance away from the house, the officers had
other data that lead them to suspect Dunn, and Dunn did little to protect the barn from observation. Even if
Dunn did have a reasonable expectation of privacy, the search still did not violate the Fourth Amendment
because the officers never entered the barn. Justice Antonin Scalia concurred, writing that the officers
perception of the way Dunn used the barn was not as important as the way the barn actually was used.

Justice William J. Brennan, Jr. dissented, arguing that the barn was within the area of protected curtilage, and
the officers violated Dunn’s reasonable expectation of privacy because the barn was an essential part of Dunn’s
business. Justice Thurgood Marshall joined in the dissent.
 FIRST DIVISION

G.R. No. L-29587 November 28, 1975

PHILIPPINE NATIONAL BANK, petitioner, 

vs.
LUZON SURETY CO., INC. and THE HONORABLE COURT OF APPEALS, respondent.

Medina and Magtalas for petitioner.

Tolentino, Garcia, Cruz and Reyes for private respondent.

ESGUERRA, J.:

Petitioner Philippine National Bank seeks a review and reversal of the decision dated June 26, 1968,
of the Court of Appeals in its case CA-G.R. No. 30282-R, absolving Luzon Surety Co., Inc. of its
liability to said petitioner and thus reversing the decision of the Court of First Instance of Negros
Occidental, the dispositive portion of which reads as follows:

IN VIEW THEREOF, judgment is hereby rendered ordering defendant Augusto R.

Villarosa to pay plaintiff PHILIPPINE NATIONAL BANK the sum of P81,200.00 plus
accrued interest of 5% per annum on P63,222.78 from August 31, 1959; to pay 10% of
said amount as attorney's fees and to pay the costs. Defendant Luzon Surety Co., Inc.
is hereby ordered to pay jointly and severally with defendant Villarosa to the plaintiff the
sum of P10,000.00; defendant Central Surety and Insurance Company jointly and
severally with defendant Villarosa the sum of P20,000 to the plaintiff, and Associated
Surety And Insurance Co. jointly and severally with defendant Villarosa the sum of
P15,000.00 to the plaintiff, with the understanding that should said bonding companies
pay the aforementioned amounts of their respective bonds to the plaintiff, said amounts
should be deducted from the total outstanding obligation of defendant Villarosa in favor
of the plaintiff.

Above-quoted decision was modified in an order of the Court of First Instance dated June 5, 1961,
granting petitioner Philippine National Bank (PNB) the right to recover accrued interest at the rate of
5% per annum from December 24, 1953, from the defendants bonding companies.

The facts as found by the Court of Appeals are as follows:

... sometime prior to 27 November 1951, defendant Augusto R. Villarosa, a sugar

planter adhered to the Lopez Sugar Central Milling Company, Inc. applied for a crop
loan with the plaintiff, Philippine National Bank, Exhibit A; this application was approved
on 6 March, 1952 in the amount of P32,400, according to the complaint; but the
document of approval has not been exhibited; at any rate, the planter Villarosa executed
a Chattel Mortgage on standing crops to guarantee the crop loan, Exhibit B and as
shown in Exhibits C to C-30 on various dates from 28 January, 1952 to 9 January,
1953, in consideration of periodical sums of money by him received from PNB, planter
 Villarosa executed these promissory notes from which will be seen that the credit line
was that the original amount of P32,400 and was thus maintained up to the promissory
note Exhibit C-9 dated 30 May, 1952 but afterwards it was increased and promissory
notes Exhibits C-10 to C-30 were based on the increased credit line; and as of 27
September, 1953 as shown in the accounts, Exhibits D and D-1, there was a balance of
P63,222.78 but as of the date when the complaint was filed on 8 June, 1960, because
of the interest accrued, it had reached a much higher sum; that was why due to its non-
payment, plaintiff filed this complaint, as has been said, on 8 June, 1960; now the
complaint sought relief not only against the planter but also against the three (3)
bondsmen, Luzon Surety, Central Surety and Associated Surety because Luzon Surety
had filed the bond Exhibit E dated 18 February, 1952 in the sum of P10,000; Central
Surety Exhibit F dated 24 February, 1952 in the sum of P20,000 and Associated Surety
the bond Exhibit G dated 11 September, 1952 in the sum of P15,000; in gist, the
obligation of each of the bondsmen being to guarantee the faithful performance of the
obligation of the planter with PNB; now each of the defendants in their answers raised
various defenses but as far as principal defendant Augusto R. Villarosa and other
defendants Central Surety and Associated Surety are concerned, their liability is no
longer material because they have not appealed; and in the trial of the case, plaintiff
submitted Exhibits A to J-1 and witness Romanito Brillantes; but the defense of Luzon
Surety thru its witness Jose Arroyo and Exhibits 1 to 3 being 1st that the evidence of the
plaintiff did not establish a cause of action to make Luzon Surety liable and 2ndly, in any
case that there had been material alteration in the principal obligation, if any,
guaranteed by it; ... .

Unable to obtain reconsideration of the decision of the Appellate Court, PNB came to this Court and
alleged the following errors.

1. The Court of Appeals erred in the application of the law involved by invoking Article
2055 of the New Civil Code, which properly should have been the law on suretyship
which are covered by Section 4, Chapter 3, Title 1, Book IV of the New Civil Code;

2. Consequently, when the Court of Appeals released the surety from liability, it
committed a grave or gross misappreciation of facts amounting to an error of law;

3. The Court of Appeals erred when it held that there must have been a principal crop
loan contract, guaranteed by the surety bonds;

4. The Court of Appeals erred when it released the surety from liability. The above
assigned errors boil down to the single question of whether or not the Court of Appeals
was justified in absolving Luzon Surety Co., Inc., from liability to petitioner Philippine
National Bank. We have examined the record thoroughly and found the appealed
decision to be erroneous.

Excerpt of the Chattel Mortgage executed to guarantee the crop loan clearly provided as follows:

xxx xxx xxx

1. That the Mortgagor does by these presents grant, cede and convey unto the
Mortgagee by way of First Mortgage free from any encumbrances, all the crops of the
absolute property of the Mortgagor, corresponding to the 1952-53 and subsequent
yearly sugar crops agricultural season at present growing in the Hda. known as San
Antonio, Washington (P) Audit 24-124 and 24-16 la and Hda. Aliwanay (non-quota
 land); milling with LSMC and CAD Municipality of Sagay, and Escalante, Province of
Negros Occidental covered by cadastral lots no. Various of the Cadastral Survey at the
Municipality of Sagay, Escalante particularly bounded and described in Transfer
Certificate of Title No. Various issued by the Register of Deeds of said province. The
said mortgage crops consist of all the Mortgagor's first available entire net share of the
1952-53 and subsequent yearly sugar crops thereafter conservatively estimated at but
not less than Three Thousand Four Hundred Twenty and 14/00 (3,420.14) piculs of
export and domestic sugar, including whatever addition thereto, and such aids,
subsidies, indemnity payments and other benefits as maybe awarded to the Mortgagor,
coming from any source, governmental or otherwise.

xxx xxx xxx

4. This Mortgage is executed to secure payment by the Mortgagor to the Mortgagee at

the latter's office of a loan herein granted to the Mortgagor in the sum of Thirty Two
Thousand Four Hundred (P32,400.00) Pesos, Philippine Currency, with interest at the
rate of five per cent per annum, which loan shall be given to the Mortgagor either in
lump sum or in installments as the mortgagee may determine. The Mortgagee may
increase or decrease the amount of the loan as well as the installments as it may deem
convenient and the Mortgagor shall submit such periodical reports on the crops
mortgaged as the Mortgagee may require. In the event that the loan is increased such
increase shall likewise be secured by Mortgage. This Mortgage shall also secure any
other loans or advances that the Mortgagee may extend to the Mortgagor, including
interest and expenses or any other obligation owing to the Mortgagee, whether direct or
indirect, principal or secondary as appears in the account books and records of the
Mortgagee.

xxx xxx xxx

Likewise an extract from the Surety Bond executed by and between the PNB on one hand and
Augusto Villarosa and respondent Luzon Surety Company, Inc. on the other, is hereby reproduced,
viz:

That we Augusto Villarosa of Bacolod City, as principal and Luzon Surety Company,
Inc. a corporation duly organized and existing under and by virtue of the laws of the
Philippines, as surety, are held firmly bound unto Philippine National Bank, Bacolod
City, Philippines, in the sum of Ten Thousand Pesos (P10,000.00) Philippine Currency,
for the payment of which sum, well and truly to be made, we bind ourselves, our heirs,
executors, administrators, successors, and assigns jointly and severally, firmly by these
presents:

The condition of the obligation are as follows:

WHEREAS, the above bounden principal, on the — day of February, 1952, entered into
a crop loan contract with obligee Philippine National Bank, Bacolod Branch of Bacolod
City, Philippines to fully and faithfully —

Comply with all the terms and condition stipulated in said crop loan contract which are
hereby incorporated as essential parts hereof, and principally to meet and pay from the
proceeds of the sugar produced from his Hda. Antonio and Hda. Aliwanay, Escalante,
Occidental Negros credit advances made by the Philippine National Bank Bacolod
 Branch not to exceed P32,800 as stated in said contract. Provided further that the
liability under this bond shall not exceed the amount of P10,000.00

WHEREAS, said Philippine National Bank Bacolod Branch requires said principal to
give a good and sufficient bond in the above stated sum to secure the full and faithful
performance on his part of said crop loan contract.

NOW, THEREFORE, if the principal shall well and truly perform and fulfill all the
undertakings, covenants, terms and conditions and agreement stipulated in said crop
loan contract then, this obligation shall be null and void, otherwise it shall remain in full
force and effect.

xxx xxx xxx

The foregoing evidences clearly the liability of Luzon Surety to petitioner Philippine National Bank not
merely as a guarantor but as surety-liable as a regular party to the undertaking (Castelvi de Higgins
vs. Sellner 41 Phil. 142). The Court of Appeals, however, in absolving the bonding company
ratiocinates that the Surety Bond executed on February 18, 1952, made specific references to a crop
loan contract executed by Augusto Villarosa sometime in February 1952. And, therefore, the Chattel
Mortgage, Exhibit B dated March 6, 1952, could not have been the obligations guaranteed by the
surety bond. Thus the Court of Appeals stated:

... one is really at a loss to impose any liability upon Luzon Surety in the absence of the
principal obligation which was a crop loan contract executed in February, 1952, and to
which there was made an express reference in the surety bond, Exhibit E; let it not be
overlooked further that one can secure a crop loan without executing a Chattel
Mortgage on his crops because the crop loan is the principal obligation while the Chattel
Mortgage is only an ancillary and secondary contract to guarantee fulfillment of a crop
loan; stated otherwise and as Luzon Surety never intervened in the execution of the
Chattel Mortgage, Exhibit B, there is no way under the evidence from which it can be
made to answer for liability to Augusto Villarosa under Exhibit E; ... "

The Court of Appeals, to Our mind did not give credence to an otherwise significant and unrebutted
testimony of petitioner's witness, Romanito Brillantes, that Exhibit B was the only chattel mortgage
executed by Augusto Villarosa evidencing the crop loan contract and upon which Luzon Surety
agreed to assume liability up to the amount of P10,000 by posting the said surety bond. Moreover
Article 1354 of our New Civil Code which provides:

Art. 1354.— Although the cause is not stated in the contract., it is presumed that it exist
and is lawful, unless the debtor proves the contrary.

bolster petitioner's stand. Considering too that Luzon Surety company is engaged in the business of
furnishing guarantees, for a consideration, there is no reason that it should be entitled to a rule
of strictissimi juris or a strained and over-strict interpretation of its undertaking. The presumption
indulged in by the law in favor of guarantors was premised on the fact that guarantees were originally
gratuitous obligations, which is not true at present, at least in the great majority of cases. (Aurelio
Montinola vs. Alejo Gatila, et al, G.R. No L-7558, October 31, 1955).

We have likewise gone over the answer of Luzon Surety Company dated June 17, 1960 (p. 73
Record on Appeal) and noted the following:

xxx xxx xxx

 3. Defendant LUZON admits the portion of paragraph 3 referring to the grant of P32,400
secured by a Chattel Mortgage dated March 6, 1952, copy of which is attached as
Annex "A" of the complaint.

xxx xxx xxx

As special defenses:

8. The terms and conditions of the surety bond as well as the contract it guaranteed was
materially altered and or novated without the knowledge and consent of the surety
thereby releasing the latter from liability.

11. The maximum liability, if any, of defendant LUZON is P10.000.00.

The principal obligation, therefore, has never been put in issue by then defendant now respondent
Luzon Surety Co., Inc. On the other hand it raised as its defense the alleged material alteration of the
terms and conditions of the contract as the basis of its prayer for release. Even this defense of
respondent Luzon Surety Co., Inc. is untenable under the facts obtaining. As a surety, said bonding
company is charged as an original promissory and is an insurer of the debt. While it is an accepted
rule in our jurisdiction that an alteration of the contract is a ground for release, this alteration, We
stress must be material. A cursory examination of the record shows that the alterations in the form of
increases were made with the full consent of Luzon Surety Co., Inc. Paragraph 4 of the Chattel
Mortgage explicitly provided for this increase(s), viz:

... the Mortgagee may increase or decrease the amount of the loan as well as the
installment as it may deem convenient ...

and this contract, Exhibit "B", was precisely referred to and mentioned in the Surety Bond itself. In the
case of Lim Julian vs. Tiburcio Lutero, et al No. 25235, 49 Phil. 703, 717, 718, this Court held:

It has been decided in many cases that the consideration named in a mortgage for
future advancements does not limit the amount for which such contract may stand as
security, if from the four corners of the document, the intent to secure future
indebtedness is apparent. Where, by the plain terms of the contract, such an intent is
evident, it will control. ...

The next question to take up is the liability of Luzon Surety Co. for interest which, it contends, would
increase its liability to more than P10,000 which is the maximum of its bond. We cannot agree to this
reasoning. In the cases of Tagawa vs. Aldanese, 43 Phil. 852, 859; Plaridel Surety Insurance Co. vs.
P. L. Galang Machinery Co., 100 Phil. 679, 682, cited in Paras Civil Code of the Philippines, Vol. V,
7th Ed. 1972, p. 772, it was held:

If a surety upon demand fails to pay, he can be held liable for interest, even if in thus
paying, the liability becomes more than that in the principal obligation. The increased
liability is not because of the contract but because of the default and the necessity of
judicial collection. It should be noted, however, that the interest runs from the time the
complaint is filed, not from the time the debt becomes due and demandable.

PREMISES CONSIDERED, the judgment appealed from is reversed and set aside. In lieu thereof
another is rendered reinstating the judgment of the Court of First Instance of Negros Occidental, 12th
Judicial District, dated March 29, 1961, holding Luzon Surety liable for the amount of P10,000.00 with
the modification that interest thereon shall be computed at the legal rate from June 8, 1960 when the
complaint was filed.

SO ORDERED.
 EN BANC

[G.R. No. 35925. November 10, 1932.]

RICARDO SIKAT, Judicial Administrator of the intestate estate of the deceased

Mariano P. Villanueva, Plaintiff-Appellant, v. QUITERIA VIUDA DE VILLANUEVA,
Judicial Administratrix of the intestate estate of the deceased Pedro
Villanueva, Defendant-Appellee. 

Feria & La O for Appellant. 

Jesus Paredes for Appellee. 

SYLLABUS

1. DESCENT AND DISTRIBUTION; TESTATE AND INTESTATE PROCEEDINGS; CLAIMS

AGAINST HEREDITARY PROPERTIES. —Whenever a creditor’s claim presented in the
intestate proceedings of the estate of his debtor is not allowed because the court has no
jurisdiction, and such creditor permits more than three years to elapse before instituting
the same proceedings in the competent court, the claim is barred by laches, applying
the provisions of section 49 of the Code of Civil Procedure by analogy. 

2. ID.; ID.; ID. —To hold otherwise would be to permit a creditor having knowledge of
his debtor’s death to keep the latter’s estate in suspense indefinitely, by not instituting
either testate or intestate proceedings in order to present his claim, to the prejudice of
the heirs and legatees.

DECISION

VILLA-REAL, J.:

The plaintiff Ricardo Sikat, as judicial administrator of the intestate estate of Mariano P.
Villanueva, appeals to this court from the judgment of the Court of First Instance of
Manila, the dispositive part of which reads as follows:jgc:chanrobles.com.ph

"In view of the foregoing consideration, let judgment be entered absolving the defendant
from the complaint, and, no evidence having been adduced in support of the
counterclaim, the plaintiff is also absolved therefrom, without special pronouncement as
to costs."cralaw virtua1aw library

In support of his appeal, the appellant assigns the following alleged errors as committed
by the court a quo in its judgment, to wit:jgc:chanrobles.com.ph

"1. The lower court erred in holding that the claim of the administrator of the estate of
Mariano P. Villanueva against the estate of Pedro Villanueva has already prescribed. 
"2. The lower court erred in dismissing the complaint."cralaw virtua1aw library

The present case was commenced by virtue of a complaint filed by Ricardo Sikat, as
judicial administrator of the intestate estate of Mariano P. Villanueva, against Quiteria
Vda. de Villanueva, as judicial administratrix of the intestate estate of Pedro Villanueva,
praying that the decision of the committee on claims and appraisal in the intestate
proceedings of the aforesaid Pedro Villanueva with regard to the credit of the late
Mariano P. Villanueva be confirmed by the court, and the defendant as judicial
administratrix, be ordered to pay the plaintiff the amount of P10,192.92, with legal
interest from July 15, 1919 until fully paid, and the costs. 

In answer to the complaint, the defendant denied each and every allegation thereof, and
set up a special defense of prescription, and a counterclaim for P15,536.69 which she
alleges the estate of Mariano P. Villanueva owes to the estate of Pedro Villanueva; and
she prayed for judgment absolving her from the complaint and sentencing the plaintiff to
pay her said amount with interest and costs. 

At the hearing of the case, the parties submitted the following agreed statement of facts
to the court:jgc:chanrobles.com.ph

"1. That plaintiff and defendant are both of age, the former residing in the municipality
of Malinao, and the latter in the municipality of Tabaco, Province of Albay, P.I.; that the
plaintiff, Ricardo Sikat, instituted the present action as judicial administrator of the
estate of Mariano P. Villanueva, duly appointed in place of the former administrator,
Enrique V. Kare, by the Court of First Instance of Albay; and the defendant is the judicial
administratrix of the estate of Pedro Villanueva, duly appointed by the Court of First
Instance of the City of Manila. 

"2. That the intestate proceedings of the estate of Mariano P. Villanueva were instituted
in the Court of First Instance of Albay, and Julio V. Quijano was appointed administrator;
that the intestate proceedings for the settlement of the estate of Pedro Villanueva, were
also commenced therein as civil case No. 3011, upon application of Julio V. Quijano, for
the purpose mentioned in the order of the court, dated August 14, 1919, a copy of which
is attached and made a part of this agreed statement of facts, as Exhibit A. 

"3. That by an order dated August 19, 1919, the Court of First Instance of Albay
appointed Quiteria Vda. de Villanueva administratrix of the estate of Pedro Villanueva,
and on September 11, 1919 Tomas Almonte and Pablo Rocha were appointed
commissioners to compose the committee on claims and appraisal. 

"4. That on September 16, 1919 the then administrator of the estate of Marinao P.
Villanueva, Julio V. Quijano, filed with said committee a written claim for the same sums
as now claimed, according to Exhibit B, attached to and made a part of this agreed
statement of facts, and adduced evidence in support thereof before the committee. 

"5. That in view of the fact that Quiteria Vda. de Villanueva questioned the jurisdiction of
the Court of First Instance of Albay over the intestate proceedings of the estate of Pedro
Villanueva, and upon appeal the Supreme Court decided (see decision of October 21,
1921, a copy of which is attached to and made a part hereof as Exhibit C) that said
Court of First Instance had no jurisdiction to take cognizance of the said intestate
proceedings, at the instance of both parties, the committee composed of Tomas Almonte
and Pablo Rocha abstained from making any report on the aforementioned claim to the
Court of First Instance of Albay. 

"6. That in view of this decision of the Supreme Court holding the Court of First Instance
of Albay incompetent to take cognizance of the intestate proceedings in the estate of
Pedro Villanueva, these proceedings were instituted in the Court of First Instance of
Manila through the application of Enrique Kare, as judicial administrator of the intestate
estate of Mariano P. Villanueva in Case No. 28244, filed on June 18, 1925, upon the
ground that when Pedro Villanueva died he owed the estate of Mariano P. Villanueva the
sum of P10,192.92, with legal interest from June 15, 1919. 

"7. That after the Court of First Instance of Manila had appointed Quiteria Vda. de
Villanueva, administratrix and the estate of Pedro Villanueva, and Mamerto Roxas and
Nicanor Roxas as commissioners to compose the committee on claims and appraisal,
Enrique Kare, as administrator of the estate of Mariano P. Villanueva, filed his claim with
the committee on September 22, 1925, and that some claim appears in the present
complaint. 

"8. That the said committee on claims and appraisal, composed of Mamerto Roxas and
Nicanor Roxas, admitted the claim and decided in favor of the estate of Mariano P.
Villanueva, filing their report with the court accordingly. 

"9. That the defendant administratrix, Quiteria Vda. de Villanueva, took a timely appeal
from this report, and so the present complaint has been filed. 

"10. That the evidence presented to this committee on claims and appraisal by the
parties to the present case, and the rulings and decisions of said committee upon all the
claims and counterclaims filed with it, are contained in the record entitled ’Report of the
Committee on Claims and Appraisal’ of the intestate proceedings of Pedro Villanueva,
No. 28244 of the Court of First Instance of Manila. 

"Manila, December 18, 1930."cralaw virtua1aw library

In addition to the agreed statement of facts quoted above, there was adduced in
evidence the document dated September 22, 1909, executed by the late Pedro
Villanueva in favor of his father, the late Mariano P. Villanueva, which literally reads as
follows:jgc:chanrobles.com.ph

"I owe my father, Mariano P. Villanueva, the following amounts:jgc:chanrobles.com.ph

"For the balance account, three thousand five hundred thirty-nine pesos and eight
centavos, Philippine currency. 

"For the capital invested by Mariano P. Villanueva in said bazaar, three thousand pesos,
Philippine currency. 

"For the debt of the late Sulpicio Briznela, six hundred forty- nine pesos and seventy-
seven centavos, Philippine currency. 

"For salary accruing to me during the months of January, February, March, and April,
1907, unduly withheld, having worked in his office during that time, four hundred pesos,
Philippine currency. 

"For the entry in the book, dated October 31, 1904, but if it is thereafter discovered to
have been paid, it shall be null and void, two thousand four hundred forty pesos and
seven centavos, Philippine currency. 

"For the cost of a horse from Muños y Cia., Manila, one hundred sixty-four pesos,
Philippine currency. "The amounts stated above are written as they appear in my
father’s books. 

(Sgd.) "PED. VILLANUEVA."cralaw virtua1aw library

The sole question to decide in this appeal, raised in the first assignment of error, is
whether the trial court erred in holding that the aforesaid claim of Mariano P.
Villanueva’s estate against Pedro Villanueva’s estate has already prescribed. 

There is no question that at the time of Pedro Villanueva’s death the right of Mariano P.
Villanueva’s estate to collect the credit against him by virtue of the abovequoted
acknowledgment of indebtedness had not yet prescribed. 

Section 703 of the Code of Civil Procedure provides:jgc:chanrobles.com.ph

"SEC. 703. CERTAIN ACTIONS SURVIVE. — Actions to recover the title or possession of
real estate, buildings, or any interest therein, actions to recover damages for an injury
to person or property, real or personal, and actions to recover the possession of specific
articles of personal property, shall survive, and may be commenced and prosecuted by
or against the executor or administrator; but all other actions commenced against the
deceased before his death shall be discontinued, and the claims therein involved
presented before the committee as herein provided."cralaw virtua1aw library

If in pursuance of the legal provision just quoted, all actions commenced against the
debtor shall be discontinued upon his death, and the claims involved filed with the
committee on claims and appraisal appointed in the testate or intestate proceedings
unless they are actions to recover the title or possession of real estate, buildings, or any
interest therein, damages for an injury to person or property, real or personal, or the
possession of specific articles of personal property, which actions shall survive and may
be commenced and prosecuted by or against the executor or administrator, then with a
greater reason should credits that have not prescribed at the debtor’s death, and upon
which no action had been brought, be presented before the committee on claims and
appraisal for collection. 

Section 689 of the same Code provides:jgc:chanrobles.com.ph

"SEC. 689. COURT OF LIMIT TIME FOR PRESENTING CLAIMS. — The court shall allow
such time as the circumstances of the case require for the creditors to present their
claims to the committee for examination and allowance; but not, in the first instance,
more than twelve months, or less than six months; and the time allowed shall be stated
in the commission. The court may extend the time as circumstances require, but not so
that the whole time shall exceed eighteen months."cralaw virtua1aw library

The question arises as to which of these two prescriptions should govern the case:
ordinary prescription, established in chapter III, or extraordinary prescription, created in
section 689 aforecited, both of the Code of Civil Procedure. It is a rule statutory
construction that when there are two different provisions upon one subject matter, one
of them general and the other specific, the latter should prevail, if both cannot stand
together. In the present case according to the law, Mariano P. Villanueva’s credit cannot
be judicially collected from Pedro Villanueva although the right of action has not
prescribed, because the latter is dead; and it cannot be collected from his estate
because the action is not one of those that survive upon his death. To remedy this
situation the law established a new prescriptive period for such cases, which, being
incompatible with the ordinary period of prescription both in commencement and in
duration, must be deemed to have superseded the latter. 

This court has so held in Santos v. Manarang (27 Phil., 209, 213), in treating of the
period of prescription established in section 689 of the Code of Civil Procedure, as
follows:jgc:chanrobles.com.ph

"It cannot be questioned that this section supersedes the ordinary limitation of actions
provided for in chapter 3 of the Code. It is strictly confined, in its application, to claims
against the estates of deceased persons, and has been almost universally adopted as
part of the probate law of the United States. It is commonly termed the statute of non-
claims, and its purpose is to settle the affairs of the estate with dispatch, so that the
residue may be delivered to the persons entitled thereto without their being afterwards
called upon to respond in actions for claims, which, under the ordinary statute of
limitations, have not yet prescribed."cralaw virtua1aw library

Now then, with reference to the extraordinary prescription established for claims against
deceased persons, has the claim of Mariano P. Villanueva’s estate against Pedro
Villanueva’s estate prescribed?

The trial court decided the question in the affirmative, citing section 49 of the aforesaid
Act No. 190, which reads:jgc:chanrobles.com.ph

"SEC. 49. SAVING IN OTHER CASES. — If, in an action commenced, or attempted to be

commenced, in due time, a judgment for the plaintiff be reversed, or if the plaintiff fail
otherwise than upon the merits, and the time limited for the commencement of such
action has, at the date of such reversal or failure, expired, the plaintiff, or, if he die and
the cause of action survive, his representatives, may commence a new action within one
year after such date, and this provision shall apply to any claim asserted in any pleading
by a defendant."cralaw virtua1aw library

This provision of law speaks of an "action", which, according to section 1 of Act No. 190,
"means an ordinary suit in a court of justice, by which one party prosecutes another for
the enforcement or protection of a right, or the redress or prevention of a wrong."
According to this definition, the proceeding here in question is not an action but a special
proceeding, which, according to the same section, is any other remedy provided by law.
The very reference in section 49 to actions brought against debtors before their death
clearly means ordinary actions and not special proceedings. 

The saving clause, then, in section 49 of Act No. 190 does not directly apply to special
proceedings. 

In re Estate of De Dios (24 Phil., 573), cited in the aforementioned case of Santos v.
Manarang, this court laid down the following doctrine:jgc:chanrobles.com.ph

"The purpose of the law, in fixing a period within which claims against an estate must be
presented, is to insure a speedy settlement of the affairs of the deceased person and the
early delivery of the property to the persons entitled to receive it."cralaw virtua1aw
library

The speedy settlement of the estate of deceased persons for the benefit of creditors and
those entitled to the residue by way of inheritance or legacy after the debts and
expenses of administration have been paid, is the ruling spirit of our probate law. 

Thus section 642, paragraph 2, of the Code of Civil Procedure

provides:jgc:chanrobles.com.ph

"SEC. 642. TO WHOM ADMINISTRATION GRANTED. — If no executor is named in the

will, or if a person dies intestate, administration shall be granted:chanrob1es virtual 1aw
library

x       x       x

2. If such surviving husband or wife, as the case may be, or next of kin, or the person
selected by them, be unsuitable, or if the husband or widow, or next of kin neglect for
thirty days after the death of the person to apply for administration, or to request that
administration be granted to some other person, it may be granted to one or more of
the principal creditors, if competent and willing to serve. . . ."cralaw virtua1aw library

We have seen that under section 689 of the Code, the maximum period for the
presentation of claims against the estate of a deceased person is eighteen months from
the time fixed by the committee on claims and appraisal in its notice, and this period
may be extended one month if a creditor applies for it within six months after the first
term, according to section 690. 

It may be argued in this case that inasmuch as none of the persons entitled to be
appointed administrators or to apply for the appointment of an administrator have taken
any step in that direction, and since no administrator or committee on claims and
appraisal has been appointed to fix the time for filing claims, the right of the plaintiff, as
administrator of Mariano P. Villanueva’s estate, to present the latter’s claim against
Pedro Villanueva’s estate could not prescribe. 
If, as we have stated, the object of the law in fixing short special periods for the
presentation of claims against the estate of a deceased person is to settle the affairs of
the estate as soon as possible in order to pay off the debts and distribute the residue;
and if a creditor having knowledge of the death of his debtor is interested in collecting
his credit as soon as possible; and if according to law the persons entitled to the
administration or to propose another person for administrator have thirty days from the
death within which to claim that right, after which time the court may appoint any
creditor of the intestate debtor: then the plaintiff herein as administrator of Mariano P.
Villanueva’s estate, was guilty of laches in not instituting the intestate proceedings of
Pedro Villanueva in the Court of First Instance of Manila until after the lapse of three
years after this court had set aside the intestate proceedings begun in the Court of First
Instance of Albay for lack of jurisdiction over the place where the decedent had died,
that is, from October 21, 1921, to June 18, 1925. Wherefore, taking into account the
spirit of law upon the settlement and partition of estates, and the fact that the
administration of Mariano P. Villanueva’s estate had knowledge of Pedro Villanueva’s
death, and instituted the intestate proceedings for the settlement of the latter’s estate in
the Court of First Instance of Albay and filed Mariano P. Villanueva’s claim against it,
which was not allowed because this court held those proceedings void for lack of
jurisdiction, the estate of Mariano P. Villanueva was guilty of laches in not instituting the
same proceedings in the competent court, the Court of First Instance of Manila, until
after three years had elapsed, and applying the provisions of section 49 of the Code of
Civil Procedure by analogy, we declare the claim of Mariano P. Villanueva to have
prescribed. To hold otherwise would be to permit a creditor having knowledge of his
debtor’s death to keep the latter’s estate in suspense indefinitely, by not instituting
either testate or intestate proceedings in order to present his claim, to the prejudice of
the heirs and legatees. Even in the case of the summary settlement of an estate under
section 598, as amended by Act No. 2331, the Code of Civil Procedure limits the time
within which a creditor may file his claim to two years after the settlement and
distribution of the estate. 

In view of the foregoing considerations, we are of opinion and so hold that whenever a
creditor’s claim presented in the intestate proceedings of the estate of his debtor is not
allowed because the court has no jurisdiction, and such creditor permits more than three
years to elapse before instituting the same proceedings in the competent court, the
claim is barred by laches, applying the provisions of section 49 of the Code of Civil
Procedure, by analogy. 

By virtue whereof, the judgment appealed from is affirmed with costs against the
appellant. So ordered. 
 FIRST DIVISION

G.R. No. L-25806 April 29, 1977

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, 

vs.
ELMO CELESTE, accused, RIZAL SURETY & INSURANCE COMPANY, INC., bondsman-
appellant.

Carlos, Madarang, Carballo & Valdez for appellant.

Solicitor General Antonio P. Barredo, Assistant Solicitor General Frine C. Zaballero and Solicitor
Sumilang V. Bernardo for appellee.

MUÑOZ PALMA, J.:

The crux of this appeal lies in the question, viz: for purposes of discharge of a bondsman from his
liability under a bail bond, is it sufficient that he produces the accused before the court for the
promulgation of the judgment without need of his filing a motion or verbally moving for discharge and
without the court expressly relieving the bondsman from further liability on his bond?

Appellant Rizal Surety & Insurance Co. answers the query in the affirmative and avers that the
court a quo erred in holding the contrary and declaring it liable under its bail bond of Twelve
Thousand Pesos (P12,000.00) filed in Criminal Case No. 4066 of the Court of First Instance of
Misamis Oriental.

The antecedent facts follow:

On January 17, 1963, Elmo D. Celeste was charged with frustrated murder in an Information filed with
the Municipal Court of Cagayan de Oro City. A warrant for his arrest was issued and a bail bond for
his provisional release was fixed at P12,000.00. The accused filed the required bond of P12,000.00
with the Rizal Surety & Insurance Company as his bondsman, the bail bond been approved on
February 14, 1963. The accused waived his right to a preliminary investigation and the record of the
case was forwarded to the Court of First Instance of Misamis Oriental for trial on the merits. 1

After the trial was completed, the case was set for promulgation of judgment and on January 31,
1964, the decision was read to the accused in open court whereby he was found guilty and
sentenced accordingly for the crime of frustrated homicide. 2

On February 7, 1964, the accused, through counsel, filed a notice of appeal, hence, on the same date
the trial court issued an order fixing the bail bond on appeal at P12,000.00. 3 Because of the failure of
the accused to file the required bail bond, the court ordered the arrest of the accused. 4

In the meantime the record of the case had been forwarded to the Court of Appeals. On April 21,
1965, the Appellate Court dismissed the appeal of accused Celeste for failure to file the appellant's
brief within the reglementary period. 5
The case was then remanded to the trial court which set the promulgation of the Resolution of the
Court of Appeals sending notice thereof to the Rizal Surety as bondsman of the accused. For non-
appearance of the accused, the Presiding Judge, Hon. Benjamin K. Gorospe, issued in open court on
September 15, 1965, an order for the arrest of the defendant and the confiscation of his bail bond. 6

Appellant herein in a motion dated October 21, 1965, moved for 30 days extension of time to produce
the accused in court and this was granted. 7

Subsequently, another motion dated November 5, 1965, was filed praying that the order of
confiscation be lifted and that the bail bond be cancelled and the bondsman released under said
bond, alleging inter alia that conscious of its undertaking under the bond, movant-appellant notified
and caused the appearance of the accused in court for the reading of the sentence, that the record
shows that the judgment was promulgated in the presence of the accused and consequently, the
bonding company was relieved of its obligation, having faithfully complied with its undertaking, to wit:

NOW THEREFORE, the RIZAL SURETY & INSURANCE COMPANY, of Manila, hereby
undertakes that the above-named ELMO D. CELESTE, will appear and answer the
charge abovementioned in whatever court it may be tried, and will at all times hold
himself/herself amenable to the order and processes of the court, and if convicted, will
appear for judgment and render himself/herself to the execution thereof; ... 8

Appellant's foregoing motion was denied for lack of merit in an order dated November 13, 1965. 9

A second motion dated November 26, 1965, was filed praying for another 30-day extension to
produce the accused which was granted by the court counted from November 27, 1965 with warning
however of no further extension. 10

In a motion dated December 24, 1965, appellant moved for a reconsideration of the November 13,
1965 order which denied its motion to lift order of forfeiture, praying, in the alternative, for another
extension of 30 days within which to produce the accused counted from December 27, 1965. The
motion for reconsideration was denied in an order dated January 5, 1966, although the surety was
given another extension of 30 days from December 27, 1965 to surrender the accused. 11

Hence, this appeal from the Orders of September 15, 1965, November 13, 1965, and January 5,
1966.

Appellant in its assignment of errors poses the following questions:

1. Whether or not it has fully complied with its undertaking under the bond;

2. Whether or not it has been relieved of its liability; and

3. Whether or not its bail bond would still answer for the presence of the accused before
the Court for the promulgation of the judgment of conviction rendered by the Court of
Appeals. (pp. 6-7, Appellant's brief)

1. Appellant submits that its liability under the bail bond extended "only up to the promulgation of the
judgment of conviction" and inasmuch as it had produced the accused in court during the
promulgation, it is now relieved from its obligation under the bond; that to hold otherwise would be to
extend the liability of the surety beyond that stipulated in the bail bond and to impose an additional
obligation to the bondsman, contrary to Article 1231 of the Civil Code which provides that obligations
are extinguished, among others, by payment or performance. 12
Appellant's assertion is unfounded. The very terms of the bail bond provide that the surety undertakes
that the accused will at all times hold himself amenable to the order and processes of the court and if
convicted will appear for judgment and render himself to the execution thereof.

Here, the criminal proceeding in the trial court consisted mainly of three stages: the trial, the
promulgation of judgment, and the execution of the sentence. The surety's liability covered all the
three stages — appearance of the accused at the trial, appearance during the promulgation of
judgment, and service by the accused of the sentence imposed upon him. This undertaking of the
surety is derived from Section 2, Rule 114 of the Rules of Court which sets forth the conditions of bail
in criminal cases, viz:

SEC. 2. Condition of the bail. — The condition of the bail is that the defendant shall
answer the complaint or information in the court in which it is filed or to which it may be
transferred for trial, and after conviction, if the case is appealed to the Court of First
Instance upon application supported by an undertaking or bail, that he will surrender
himself in execution of such judgment as the appellate court may render, or that, in case
the cause is to be tried anew or remanded for a new trial, he will appear in the court to
which it may be remanded and submit himself to the orders and processes thereof.

2. To effect the discharge of appellant surety from its undertaking, it was not enough that it produced
the person of the accused at the time of promulgation of the decision. Section 16, Rule 114 sets forth
a procedure for discharge of sureties which was not followed by herein appellant.

In the early case of People vs. Lorredo, 1927, the Court, speaking through Justice Antonio Villa-Real,
explicitly ruled that the mere presentation or presence of an accused in an open court is not sufficient
in itself to cause the discharge of a bond, for the attention of the court must be called to his presence
and the intention to surrender the body of the accused must be clearly and definitely stated and
understood by the Court, and that a surety who desires to produce and surrender the body of the
accused is not relieved from further liability upon his bond until the court accepts said surrender. 13

The ruling in Lorredo was reiterated in People vs. Valle, defendant, Alto Surety & Insurance Co.,
bondsman-appellant, through then Justice, later Chief Justice, Roberto Concepcion where the Court
stated inter alia that the appellant surety's liability continued until after the accused had been
surrendered and the court had ordered the cancellation of its bonds.  14

Again in Mabuhay Insurance & Guaranty, Inc, vs. Court of Appeals, et al., the Court, this time through
Justice Claudio Teehankee, adhering to the pronouncements made in Lorredo and following Sec. 16,
Rule 114 of the Rules of Court, held that a bondsman who wishes to be relieved from its
undertaking should petition the court for his discharge as a surety, and inasmuch as petitioner
Mabuhay did not avail itself of Sec. 16, Rule 114 and ask for its discharge as a surety nor did it
manifest to the trial court at the promulgation of sentence its wish to be relieved of its responsibility for
the custody of the accused, its liability under the bond continued to exist. 15

The circumtances present in the instant case are not course exactly the same as those
in Valle and Mabuhay, nonetheless, the principles enunciated therein given above are equally
applicable to now appellant Rizal Surety who as stated earlier did not petition the trial court that it be
discharged from its bond upon the appearance of the accused Celeste during the promulgation of the
court's decision for which reason there was no order of the court cancelling said bond.

3. It is contention of appellant Rizal Surety that when the accused Celeste filed on February 7, 1964,
that is, seven days after the promulgation of judgment, a notice of appeal, it was relieved from its
undertaking considering that the trial court ordered the accused to file a new bond on appeal for
P12,000.00, and that consequently there is no legal basis for holding appellant liable for the non-
appearance of the accused at the promulgation of the decision of the Court of Appeals.

At first blush there appears to be some merit to appellant's plea, but again We cannot dissociate the
situation from the Lorredo Decision to which We are bound to adhere based as it is on existing law
and authoritative jurisprudence.

The sureties ibn the Lorredo case were even in a more pathetic situation, We may say, than Rizal
Surety. There the accused was presented by the sureties in open court for the promulgation of the
judgment and upon the decision being read which imposed a fine of Fifty Pesos (P50.00) on the
accused, the latter's counsel offered a guaranty that the accused would comply with the judgment
within the period of ten days. Forthwith, the sureties filed a motion stating that they were surrendering
the body of the accused and asking that they be relieved of all liability in connection with their bond.
The record of the case did not show that their motion was acted upon by the court. The 10-day period
expired without the accused paying the fine as promised. On motion of the fiscal the trial court
ordered the execution of the judgment, directed the sureties to produce the body of the accused and
at the same time issued warrants of arrest. The sureties then explained to the court that they were
relieved from their undertaking with the acceptance by the court of the guaranty of the lawyer that the
accused would comply with the judgment. This explanation was not found satisfactory and an order of
forfeiture of the bonds was issued. On appeal, this Court, as earlier indicated, sustained the liability of
the sureties, and We quote further from the decision as follows:

From what has been said it follows that the mere filing of a motion stating the surrender
of the person of the accused and asking for their release from liability upon the
obligation contracted by virtue of a bond for temporary release, where it does not
appear that the attention of the court had been called to said surrender and that the
latter had so understood it, and without an express order accepting said surrender and
relieving the sureties from all liability, does not relieve them from the same,
notwithstanding the fact that the court granted the accused the period of ten days within
which to comply with the judgment under a verbal guaranty of his attorney. (supra, p.
218) I

Thus, in Lorredo the accused promised to comply with the judgment in ten days, while in this case
of Rizal Surety, the accused filed a notice of appeal on the seventh day; in Lorredo the accused failed
to comply within the promised period, in Rizal Surety the accused failed to file a bond on appeal and
his appeal was eventually dismissed; in Lorredo, the sureties filed a motion to be discharged, in Rizal
Surety no such motion was ever filed by the sureties; in Lorredo, the accused eventually appeared
and paid his fine, while in Rizal Surety, the accused remains at large; in both, there was no court
order cancelling the bonds.

Under these circumstances, We cannot but hold Rizal Surety liable under its bond which through its
own inaction it allowed to remain uncancelled by the trial court. The legal question posed at the
opening of this Decision calls therefore for a negative answer as correctly asserted by the Solicitor
General. 16

To restate, for a surety to be discharged it is necessary that he petitions the court for relief from
liability and that the court grants the petition and cancels the bond.

PREMISES CONSIDERED, We find this appeal without merit and We hereby affirm the appealed
order of Hon. Benjamin K. Gorospe dated September 15, 1965, and all subsequent orders relative
thereto with double costs against appellant. So ordered.
PDF 3

EN BANC

G.R. No. L-4871             January 26, 1953

In the matter of the intestate estate of EUGENIA PEREGRINA, deceased. ANG LAM,
administrator, creditor-appellant, 
vs.
HILARIO PEREGRINA, special administrator-appellee.

Reyes, Matias and Peralta for appellant.

Enday and Cabasal for appellee.

LABRADOR, J.:

On December 26, 1944, Eugenia Peregrina borrowed P100,000, Philippine currency prevailing on
that date, from Ang Lam, promising to pay it within a period of one year therefrom. Peregrina died on
April 1, 1945, and thereupon Ang Lam presented a claim against her estate for the full amount of the
indebtedness. Judgment having been rendered thereon for P1,000, the equivalent thereof according
to the Ballantyne Conversion Table, Ang Lam has prosecuted this appeal, contending that as the
currency in which the indebtedness was to be paid was not agreed upon or stipulated in the contract
of loan, this should be in the legal tender on December 25, 1945, or one year from the date of the
loan, because both parties had elected to subject their rights to a contingency, i.e., the change in the
intrinsic value and purchasing power of the currency.

The cases cited by the appellant in his brief do not support his contention. In the case of
Gomez vs. Tabia,* 47 Off. Gaz. (No. 2) 641, the period fixed for the vendor a retro to redeem the land
he sold was "within 30 days after the expiration of one year from June 24, 1944," and in that of
Roño vs. Gomez,1 et al., 46 Off. Gaz., (Supp. No. 11) 339, the loan was to be paid one year
after October 5, 1944, date of the loan. In the first case the land was redeemable only after June 24,
1945, and in the second the loan was payable only on October 5, 1945. The obligations could not be
paid before these dates. The obligations were, therefore, held payable in the currency in existence on
those dates.

In the case at bar, however, the loan was payable within one year from December 26, 1944. It could
be paid the following day, or any day before liberation, in Japanese military notes, had the debtor
chosen to do so. It is incorrect to assume that the parties intended to subject their rights and
obligations under the contract to a contingency, a change in the currency, without evidence of said
intent. While perhaps they could be presumed to be bound by the fluctuations in the value of the
currency they contracted in, it may not be presumed that they intended to gamble on a change
therein, in the absence of an agreement, express or implied, to that effect. If it is unfair and unjust that
the loan be decreased or completely wiped out because of a change in the currency; it is also unfair
and unjust that the loan be paid in the same amount in which it was contracted and at the restored
currency, because then the lender would be unduly enriched at the expense of the debtor. The fair
and just rule to apply is, therefore, for the debtor to pay the actual value or worth of the loan at the
time it was contracted in the currency in existence at the time of payment. This is the spirit of the
ruling of this Court in the leading case of Hilado vs. De la Costa,2 et al., Off. Gaz. (No. 11)5472, which
follows the doctrine laid down by the Supreme Court of the United States in the leading case of
Thorington vs. Smmith, 19 Law. ed. 361. To the same effect is our ruling in the case of
Soriano vs. Abalos,3 et al., 47 Off. Gaz. (No. 1) 168, where an award of P3,200 as yearly damages
granted in a judgment rendered in December, 1944, was reduced after liberation to its equivalent of
P35.53 yearly.

We find that the judgment appealed from is correct, and we therefore, affirm it, with cost against the
appellant.

Paras, C.J., Feria, Pablo, Bengzon, Padilla, Tuason, Montemayor, Jugo and Bautista Angelo,
JJ., concur.
 EN BANC

G.R. No. L-18793            October 11, 1968

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, 

vs.
GETULIO PANTOJA, defendant-appellant.

Office of the Solicitor General for plaintiff-appellee.

Gamaliel Magsaysay for defendant-appellant.

CAPISTRANO, J.:

This murder case is before us for review of the sentence of death passed upon the accused by the
Court of First Instance of Quezon.

Late in the night of June 28, 1957, in the Barrio of Malinao, Atimonan, Quezon, a group of seven
young men serenaded the house, where Estelita Erotes lived. Invited to come up, the young men
accepted the invitation. When Wenceslao Hernandez was seated beside Estelita, an uninvited
Philippine Army Sergeant, Getulio Pantoja, in T-Shirt, came up and asked Hernandez to allow him to
sit beside Estelita, but Hernandez refused the request. The time was about 1:30 A.M., June 29.
Pantoja said nothing and showed no sign of anger. However, he immediately left and went to his
camp about half a kilometer distant, put on his fatigue uniform, got a rifle went back to the house and
stationed himself on the stairway. The time was about 2:00 A.M. At this time, the serenaders left the
house to go to and serenade another house in the Northern part of the Barrio. Pantoja followed the
group. When the serenaders had walked a distance of about thirty meters with Pantoja following them
at a distance of about five meters, Pantoja suddenly shouted "Ano yan? Ano yan?" Turning their
heads back they saw Pantoja raise the garand rifle and aim at them. Before any of them could run
away, Pantoja fired two shots in rapid succession. The first shot hit Angel Marasigan who instantly fell
on his back. The second shot hit Wenceslao Hernandez who fell down. The other serenaders
scampered away for safety. Pantoja, who had walked nearer, then fired one more shot at the
prostrate body of Marasigan and four more shots at the prostrate body of Hernandez.

The accused, testifying in his own defense, admitted that the shots he fired from the garand rifle killed
Marasigan and Hernandez. The autopsy report attributed the deaths to internal hemorrhage and the
destruction of vital organs.

The lower court found the defendant guilty of double murder, that is, of a complex crime, and
sentenced him to the penalty of death.

We immediately noted that the lower court erred in finding the appellant guilty of a complex crime.
Appellant's brief, however, does not contain an assignment of this error. This notwithstanding, we can
consider the error, the case under review being a criminal case.

It is well known to students of criminal law, as early as thirty-five years ago, that, according to Article
48 as amended, of the Revised Penal Code, there are two classes of complex crimes. The first class
comprises cases where a single act constitutes two or more crimes. The second class covers cases
where one crime is the necessary means for committing the other. The case at bar does not fall under
the first class because in this case there were two acts, two shots, one killing Marasigan, and the
other killing Hernandez. If there were only one shot killing both Marasigan and Hernandez, there
would have been a complex crime, double murder. The second class, obviously, does not cover the
case at bar. We are of the considered opinion that the appellant is guilty of two separate and distinct
murders and that he should suffer the penalty for each murder.

Appellant contends that the qualifying circumstances of evident premeditation and treachery did not
exist. The contention is tenable with respect to evident premeditation because the appellant only had
about half an hour (1:30 to 2:00 A.M.) for meditation and reflection from the time he left the house,
went to his camp, put on his fatigue uniform, got a garand rifle and returned to said house, followed
the serenaders a short distance and then fired the two shots. The time in the circumstances was
insufficient for full meditation and reflection. It was insufficient, in the juridical sense, for his
conscience to overcome the resolution of his will had he desired to hearken to its warning. The
contention is untenable with respect to treachery.The appellant followed the serenaders as they
walked, made no indication that he would shoot, and then suddenly fired from behind two shots in
rapid succession at Marasigan and Hernandez from a distance of about five meters. Under the
circumstances, clearly there was treachery.

Appellant contends that the generic aggravating circumstances of abuse of public position and
ignominy were not present. The contention is meritorious.There is nothing to show that the appellant
took advantage of his being a sergeant in the Philippine Army in order to commit the crimes. The
mere fact that he was in fatigue uniform and had an army rifle at the time is not sufficient to establish
that he misused his public position in the commission of the crimes. With regard to ignominy the mere
fact that the appelant fired one more shot at the prostrate body of Marasigan and four more shots at
the prostrate body of Hernandez is not sufficient to show the existence of said aggravating
circumstance.

Appellant contends that he should be given the benefit of the mitigating circumstance of voluntary
surrender. The contention is tenable. The evidence shows that immediately after the commission of
the murders, the appellant voluntarily surrendered to his detachment camp commander to whom he
also surrendered the garand rifle, and that he was ordered confined in the stockade.

The penalty for murder is reclusion temporal in its maximum period to death (Art. 248, Revised Penal
Code). There being one mitigating circumstance, voluntary surrender, the penalty for each murder
should be reclusion temporal in its maximum period in relation to the Indeterminate Sentence Law.

The appellant contends that the lower court erred in rejecting his defense of insanity. The contention
lacks merit. The legal presumption of sanity is reinforced by the evidence showing that when he
committed the crimes, appellant was calm and collected, and did not show any sign of anger. The fact
that he fired four more shots at the prostrate body of Hernandez, who had refused his request to be
allowed to sit beside Estelita, shows that revenge was in his heart. The report of Dr. Cesar Catindig of
the V. Luna General Hospital where appellant was confined for one month by order of the trial court
does not show that appellant was insane. It merely shows that he was suffering from psychoneurotic
depressive reaction and psychoneurotic dissociative reaction. The report, however, concludes:

In the absence of reliable information it could not be ascertained whether the crime imputed to
him was committed when he was in such a state of mind.

That part of the judgment below awarding compensatory damages in the amounts of P6,000 to the
heirs of Angel Marasigan and P6.000 to the heirs of Wenceslao Hernandez should be modified. In
1947, when the Project of Civil Code was drafted, the Code Commission fixed the sum of P3,000 as
the minimum amount of compensatory damages for death caused by a crime or quasi-delict. The
Project of Civil Code was approved by both Houses of the Congress in 1949 as the New Civil Code of
the Philippines, which took effect in 1950. In 1948 in the case of People vs. Amansec, 80 Phil. 424,
the Supreme Court awarded P6,000 as compensatory damages for death caused by a crime
"considering the difference between the value of the present currency and that at the time when the
law fixing a minimum indemnity of P2,000 was enacted." The law referred to was Commonwealth Act
No. 284 which took effect in 1938. In 1948, the purchasing power of the Philippine peso was one-third
of its pre-war purchasing power. In 1950, when the New Civil Code took effect, the minimum amount
of compensatory damages for death caused by a crime or quasi-delict was fixed in Article 2206 of the
Code at P3,000. The article repealed by implication Commonwealth Act No. 284. Hence, from the
time the New Civil Code took effect, the Courts could properly have awarded P9,000 as
compensatory damages for death caused by a crime or quasi- delict. It is common knowledge that
from 1948 to the present (1968), due to economic circumstances beyond governmental control, the
purchasing power of the Philippine peso has declined further such that the rate of exchange now in
the free market is U.S. $1.00 to almost P4.00 Philippine pesos. This means that the present
purchasing power of the Philippine peso is one-fourth of its pre-war purchasing power. We are,
therefore, of the considered opinion that the amount of award of compensatory damages for death
caused by a crime or quasi-delict should now be P12,000.

Parenthetically, we should point out that, in proper cases, besides compensatory damages in the sum
of P12,000, the courts may also award additional sums as further compensatory damages for loss of
earnings and for support. The courts may likewise award additional sums as moral damages and as
exemplary damages. (Arts 2206 and 2230, New Civil Code.)

PREMISES CONSIDERED, the judgment of the court below is hereby modified by: 1. Sentencing the
appellant for each murder to an indeterminate penalty of from 15 years to 20 years; 2. Ordering the
appellant to pay the heirs of Angel Marasigan the sum of P12,000 as compensatory damages, and to
pay the heirs of Wenceslao Hernandez the sum of P12,000 as compensatory damages. Costs
against appellant.
 EN BANC

G.R. No. L-18390 August 6, 1971

PEDRO J. VELASCO, plaintiff-appellant, 
vs.
MANILA ELECTRIC CO., WILLIAM SNYDER, its President; JOHN COTTON and
HERMENEGILDO B. REYES, its Vice-Presidents; and ANASTACIO A. AGAN, City Engineer of
Quezon City, defendants-appellees.

Q. Paredes, B. Evangelista and R. T. Durian for plaintiff-appellant.

Ross, Selph and Carrascoso for defendants-appellees Manila Electric Co., etc., et al.

Asst. City Fiscal Jaime R. Agloro for defendant-appellee Anastacio A. Agan, etc.

REYES, J.B.L., J.:

The present case is direct appeal (prior to Republic Act 5440) by the herein plaintiff-appellant, Pedro
J. Velasco (petitioner in L-14035; respondent in L-13992) * from the decision of the Court of First
Instance of Rizal, Quezon City Branch, in its Civil Case No. 1355, absolving the defendants from a
complaint for the abatement of the sub-station as a nuisance and for damages to his health and
business in the amount of P487,600.00.

In 1948, appellant Velasco bought from the People's Homesite and Housing Corporation three (3)
adjoining lots situated at the corner of South D and South 6 Streets, Diliman, Quezon City. These lots
are within an area zoned out as a "first residence" district by the City Council of Quezon City.
Subsequently, the appellant sold two (2) lots to the Meralco, but retained the third lot, which was
farthest from the street-corner, whereon he built his house.

In September, 1953, the appellee company started the construction of the sub-station in question and
finished it the following November, without prior building permit or authority from the Public Service
Commission (Meralco vs. Public Service Commission, 109 Phil. 603). The facility reduces high
voltage electricity to a current suitable for distribution to the company's consumers, numbering not
less than 8,500 residential homes, over 300 commercial establishments and about 30 industries
(T.s.n., 19 October 1959, page 1765). The substation has a rated capacity of "2 transformers at 5000
Kva each or a total of 10,000 Kva without fan cooling; or 6250 Kva each or a total of 12,500 Kva with
fan cooling" (Exhibit "A-3"). It was constructed at a distance of 10 to 20 meters from the appellant's
house (T.s.n., 16 July 1956, page 62; 19 December 1956, page 343; 1 June 1959, page 29). The
company built a stone and cement wall at the sides along the streets but along the side adjoining the
appellant's property it put up a sawale wall but later changed it to an interlink wire fence.

It is undisputed that a sound unceasingly emanates from the substation. Whether this sound
constitutes an actionable nuisance or not is the principal issue in this case.
Plaintiff-appellant Velasco contends that the sound constitutes an actionable nuisance under Article
694 of the Civil Code of the Philippines, reading as follows:

A nuisance is any act, omission, establishment, business condition of property or

anything else which:

(1) Injuries or endangers the health or safety of others; or

(2) Annoys or offends the senses;

xxx xxx xxx

because subjection to the sound since 1954 had disturbed the concentration and sleep of said
appellant, and impaired his health and lowered the value of his property. Wherefore, he sought a
judicial decree for the abatement of the nuisance and asked that he be declared entitled to recover
compensatory, moral and other damages under Article 2202 of the Civil Code.

ART. 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages
which are the natural and probable consequences of the act or omission complained of.
It is not necessary that such damages have been foreseen or could have reasonably
been foreseen by the defendant.

After trial, as already observed, the court below dismissed the claim of the plaintiff, finding that the
sound of substation was unavoidable and did not constitute nuisance; that it could not have caused
the diseases of anxiety neurosis, pyelonephritis, ureteritis, lumbago and anemia; and that the items of
damage claimed by plaintiff were not adequate proved. Plaintiff then appealed to this Court.

The general rule is that everyone is bound to bear the habitual or customary inconveniences that
result from the proximity of others, and so long as this level is not surpassed, he may not complain
against them. But if the prejudice exceeds the inconveniences that such proximity habitually brings,
the neighbor who causes such disturbance is held responsible for the resulting damage, 1 being guilty
of causing nuisance.

While no previous adjudications on the specific issue have been made in the Philippines, our law of
nuisances is of American origin, and a review of authorities clearly indicates the rule to be that the
causing or maintenance of disturbing noise or sound may constitute an actionable nuisance (V. Ed.
Note, 23 ALR, 2d 1289). The basic principles are laid down in Tortorella vs. Traiser & Co., Inc., 90
ALR 1206:

A noise may constitute an actionable nuisance, Rogers vs. Elliott, 146 Mass, 349, 15
N.E. 768, 4 Am. St. Rep. 316, Stevens v. Rockport Granite Co., 216 Mass. 486, 104
N.E. 371, Ann. Cas. 1915B, 1954, Stodder v. Rosen Talking Machine Co., 241 Mass.
245, 135 N. E. 251, 22 A. L. R. 1197, but it must be a noise which affects injuriously the
health or comfort of ordinary people in the vicinity to an unreasonable extent. Injury to a
particular person in a peculiar position or of specially sensitive characteristics will not
render the noise an actionable nuisance. Rogers v. Elliott, 146 Mass. 349, 15 N. E. 768,
4 Am. St. Rep. 316. In the conditions of present living noise seems inseparable from the
conduct of many necessary occupations. Its presence is a nuisance in the popular
sense in which that word is used, but in the absence of statute noise becomes
actionable only when it passes the limits of reasonable adjustment to the conditions of
the locality and of the needs of the maker to the needs of the listener. What those limits
are cannot be fixed by any definite measure of quantity or quality. They depend upon
 the circumstances of the particular case. They may be affected, but are not controlled,
by zoning ordinances. Beane v. H. J. Porter, Inc., 280 Mass. 538, 182 N. E.
823, Marshal v. Holbrook, 276 Mass. 341, 177 N. E. 504, Strachan v. Beacon Oil Co.,
251 Mass. 479, 146 N. E. 787. The delimitation of designated areas to use for
manufacturing, industry or general business is not a license to emit every noise
profitably attending the conduct of any one of them. Bean v. H. J. Porter, Inc.. 280
Mass. 538, 182 N. E. 823. The test is whether rights of property of health or of comfort
are so injuriously affected by the noise in question that the sufferer is subjected to a loss
which goes beyond the reasonable limit imposed upon him by the condition of living, or
of holding property, in a particular locality in fact devoted to uses which involve the
emission of noise although ordinary care is taken to confine it within reasonable bounds;
or in the vicinity of property of another owner who though creating a noise is acting with
reasonable regard for the rights of those affected by it. Stevens v. Rockport Granite Co.,
216 Mass. 486, 104 NE 371, Ann. Cas. 1915B, 1054.

With particular reference to noise emanating from electrical machinery and appliances, the court,
in Kentucky & West Virginia Power Co. v. Anderson, 156 S. W. 2d 857, after a review of authorities,
ruled as follows:

There can be no doubt but that commercial and industrial activities which are lawful in
themselves may become nuisances if they are so offensive to the senses that they
render the enjoyment of life and property uncomfortable. It is no defense that skill and
care have been exercised and the most improved methods and appliances employed to
prevent such result. Wheat Culvert Company v. Jenkins, 246 Ky. 319, 55 S. W. 2d 4; 46
C.J. 683, 705; 20 R. C. L. 438; Annotations, 23 A. L. R. 1407; 90 A. L. R. 1207. Of
course, the creation of trifling annoyance and inconvenience does not constitute an
actionable nuisance, and the locality and surroundings are of importance. The fact that
the cause of the complaint must be substantial has often led to expressions in the
opinions that to be a nuisance the noise must be deafening or loud or excessive and
unreasonable. Usually it was shown to be of that character. The determinating factor
when noise alone is the cause of complaint is not its intensity or volume. It is that the
noise is of such character as to produce actual physical discomfort and annoyance to a
person of ordinary sensibilities, rendering adjacent property less comfortable and
valuable. If the noise does that it can well be said to be substantial and unreasonable in
degree; and reasonableness is a question of fact dependent upon all the circumstances
and conditions. 20 R. C. L. 445, 453; Wheat Culvert Company v. Jenkins, supra. There
can be no fixed standard as to what kind of noise constitutes a nuisance. It is true some
witnesses in this case say they have been annoyed by the humming of these
transformers, but that fact is not conclusive as to the nonexistence of the cause of
complaint, the test being the effect which is had upon an ordinary person who is neither
sensitive nor immune to the annoyance concerning which the complaint is made. In the
absence of evidence that the complainant and his family are supersensitive to
distracting noises, it is to be assumed that they are persons of ordinary and normal
sensibilities. Roukovina v. Island Farm Creamery Company, 160 Minn. 335, 200 N. W.
350, 38 A. L. R. 1502.

xxx xxx xxx

In Wheat Culvert Company vs. Jenkins, supra, we held an injunction was properly
decreed to stop the noise from the operation of a metal culvert factory at night which
interfered with the sleep of the occupants of an adjacent residence. It is true the
clanging, riveting and hammering of metal plates produces a sound different in
 character from the steady hum or buzz of the electric machinery described in this case.
In the Jenkins case the noise was loud, discordant and intermittent. Here it is
interminable and monotonous. Therein lies the physical annoyance and disturbance.
Though the noise be harmonious and slight and trivial in itself, the constant and
monotonous sound of a cricket on the earth, or the drip of a leaking faucet is irritating,
uncomfortable, distracting and disturbing to the average man and woman. So it is that
the intolerable, steady monotony of this ceaseless sound, loud enough to interfere with
ordinary conversation in the dwelling, produces a result generally deemed sufficient to
constitute the cause of it an actionable nuisance. Thus, it has been held the continuous
and monotonous playing of a phonograph for advertising purposes on the street even
though there were various records, singing, speaking and instrumental, injuriously
affected plaintiff's employees by a gradual wear on their nervous systems, and
otherwise, is a nuisance authorizing an injunction and damages. Frank F. Stodder, et al.
v. Rosen Talking Machine Company, 241 Mass. 245, 135 N. E. 251, 22 A. L. R. 1197.

The principles thus laid down make it readily apparent that inquiry must be directed at the character
and intensity of the noise generated by the particular substation of the appellee. As can be
anticipated, character and loudness of sound being of subjective appreciation in ordinary witnesses,
not much help can be obtained from the testimonial evidence. That of plaintiff Velasco is too plainly
biased and emotional to be of much value. His exaggerations are readily apparent in paragraph V of
his amended complaint, signed by him as well as his counsel, wherein the noise complained of as —

fearful hazardous noise and clangor are produced by the said electric transformer of the
MEC's substation, approximating a noise of a reactivated about-to-explode volcano,
perhaps like the nerve wracking noise of the torture chamber in Germany's Dachau or
Buchenwald (Record on Appeal, page 6).

The estimate of the other witnesses on the point of inquiry are vague and imprecise, and fail to give a
definite idea of the intensity of the sound complained of. Thus:

OSCAR SANTOS, Chief Building Inspector, Department of Engineering, Quezon City ____ "the
sound (at the front door of plaintiff Velasco's house) becomes noticeable only when I tried to
concentrate ........" (T.s.n., 16 July 1956, page 50)

SERAFIN VILLARAZA, Building Inspector ____ "..... like a high pitch note." (the trial court's
description as to the imitation of noise made by witness:"........ more of a hissing sound) (T.s.n., 16
July 1956, pages 59-60)

CONSTANCIO SORIA, City Electrician ____ "........ humming sound" ..... "of a running car". (T.s.n., 16
July 1956, page 87)

JOSE R. ALVAREZ, Sanitary Engineer, Quezon City Health Department ____ "..... substation emits a
continuous rumbling sound which is audible within the premises and at about a radius of 70 meters."
"I stayed there from 6:00 p.m. to about 1:00 o'clock in the morning" ..... "increases with the approach
of twilight." (T.s.n., 5 September 1956, pages 40-44)

NORBERTO S. AMORANTO, Quezon City Mayor ____ (for 30 minutes in the street at a distance of
12 to 15 meters from sub-station) "I felt no effect on myself." "..... no [piercing noise]" (T.s.n., 18
September 1956, page 189)

PACIFICO AUSTRIA, architect, appellant's neighbor: "..... like an approaching airplane ..... around
five kilometers away." (T.s.n., 19 November 1956, pages 276-277)
ANGEL DEL ROSARIO, radiologist, appellant's neighbor: "..... as if it is a running motor or a running
dynamo, which disturbs the ear and the hearing of a person." T.s.n., 4 December 1956, page 21)

ANTONIO D. PAGUIA, lawyer ____ "It may be likened to the sound emitted by the whistle of a boat at
a far distance but it is very audible." (T.s.n., 19 December 1956, page 309)

RENE RODRIGUEZ, sugar planter and sugar broker, appellant's neighbor ____ "It sounds like a big
motor running continuously." (T.s.n., 19 December 1956, page 347)

SIMPLICIO BELISARIO, Army captain, ____ (on a visit to Velasco) "I can compare the noise to an
airplane C-47 being started - the motor." [Did not notice the noise from the substation when passing
by, in a car, Velasco's house] (T.s.n., 7 January 1957, pages 11-12)

MANOLO CONSTANTINO, businessman, appellant's neighbor ____ "It disturbs our concentration of
mind." (T.s.n., 10 January 1957, page 11)

PEDRO PICA, businessman, appellant's neighbor: "..... We can hear it very well [at a distance of 100
to 150 meters]. (T.s.n., 10 January 1957, page 41)

CIRENEO PUNZALAN, lawyer ____ "..... a continuous droning, ..... like the sound of an airplane."
(T.s.n., 17 January 1957, page 385)

JAIME C. ZAGUIRRE, Chief, Neuro-Psychiatry Section, V. Luna Gen. Hospital ____ ".....
comparatively the sound was really loud to bother a man sleeping." (T.s.n., 17 January 1957, page
406)

We are thus constrained to rely on quantitative measurements shown by the record. Under
instructions from the Director of Health, samplings of the sound intensity were taken by Dr. Jesus
Almonte using a sound level meter and other instruments. Within the compound of the plaintiff-
appellant, near the wire fence serving as property line between him and the appellee, on 27 August
1957 at 11:45 a.m., the sound level under the sampaloc tree was 46-48 decibels, while behind
Velasco's kitchen, the meter registered 49-50; at the same places on 29 August 1957, at 6:00 a.m.,
the readings were 56-59 and 61-62 decibels, respectively; on 7 September 1957, at 9:30 a.m., the
sound level under the sampaloc tree was 74-76 decibels; and on 8 September 1957 at 3:35 in the
morning, the reading under the same tree was 70 decibels, while near the kitchen it was 79-80
decibels. Several measurements were also taken inside and outside the house (Exhibit "NN-7, b-f").
The ambient sound of the locality, or that sound level characteristic of it or that sound predominating
minus the sound of the sub-station is from 28 to 32 decibels. (T.s.n., 26 March 1958, pages 6-7)

Mamerto Buenafe, superintendent of the appellee's electrical laboratory, also took sound level
samplings. On 19 December 1958, between 7:00 to 7:30 o'clock in the evening, at the substation
compound near the wire fence or property line, the readings were 55 and 54 and still near the fence
close to the sampaloc tree, it was 52 decibels; outside but close to the concrete wall, the readings
were 42 to 43 decibels; and near the transformers, it was 76 decibels (Exhibit "13").

Buenafe also took samplings at the North General Hospital on 4 January 1959 between 9:05 to 9:45
in the evening. In the different rooms and wards from the first to the fourth floors, the readings varied
from 45 to 67 decibels.

Technical charts submitted in evidence show the following intensity levels in decibels of some familiar
sounds: average residence: 40; average office: 55; average automobile, 15 feet: 70; noisiest spot at
Niagara Falls: 92 (Exhibit "11- B"); average dwelling: 35; quiet office: 40; average office: 50;
conversation: 60; pneumatic rock drill: 130 (Exhibit "12"); quiet home — average living room: 40;
home ventilation fan, outside sound of good home airconditioner or automobile at 50 feet: 70 (Exhibit
"15-A").

Thus the impartial and objective evidence points to the sound emitted by the appellee's substation
transformers being of much higher level than the ambient sound of the locality. The measurements
taken by Dr. Almonte, who is not connected with either party, and is a physician to boot (unlike
appellee's electrical superintendent Buenafe), appear more reliable. The conclusion must be that,
contrary to the finding of the trial court, the noise continuously emitted, day and night, constitutes an
actionable nuisance for which the appellant is entitled to relief, by requiring the appellee company to
adopt the necessary measures to deaden or reduce the sound at the plaintiff's house, by replacing
the interlink wire fence with a partition made of sound absorbent material, since the relocation of the
substation is manifestly impracticable and would be prejudicial to the customers of the Electric
Company who are being serviced from the substation.

Appellee company insists that as the plaintiff's own evidence (Exhibit "NN-7[c]") the intensity of the
sound (as measured by Dr. Almonte) inside appellant's house is only 46 to 47 decibels at the
consultation room, and 43 to 45 decibels within the treatment room, the appellant had no ground to
complain. This argument is not meritorious, because the noise at the bedrooms was determined to be
around 64-65 decibels, and the medical evidence is to the effect that the basic root of the appellant's
ailments was his inability to sleep due to the incessant noise with consequent irritation, thus
weakening his constitution and making him easy prey to pathogenic germs that could not otherwise
affect a person of normal health.

In Kentucky and West Virginia Co., Inc. vs. Anderson, 156 SW. 857, the average of three readings
along the plaintiff's fence was only 44 decibels but, because the sound from the sub-station was
interminable and monotonous, the court authorized an injunction and damages. In the present case,
the three readings along the property line are 52, 54 and 55 decibels. Plaintiff's case is manifestly
stronger.

Appellee company argues that the plaintiff should not be heard to complain because the sound level
at the North General Hospital, where silence is observed, is even higher than at his residence. This
comparison lacks basis because it has not been established that the hospital is located in
surroundings similar to the residential zone where the plaintiff lived or that the sound at the hospital is
similarly monotonous and ceaseless as the sound emitted by the sub-station.

Constancio Soria testified that "The way the transformers are built, the humming sound cannot be
avoided". On this testimony, the company emphasizes that the substation was constructed for public
convenience. Admitting that the sound cannot be eliminated, there is no proof that it cannot be
reduced. That the sub-station is needed for the Meralco to be able to serve well its customers is no
reason, however, why it should be operated to the detriment and discomfort of others. 2

The fact that the Meralco had received no complaint although it had been operating hereabouts for
the past 50 years with substations similar to the one in controversy is not a valid argument. The
absence of suit neither lessens the company's liability under the law nor weakens the right of others
against it to demand their just due.

As to the damages caused by the noise, appellant Velasco, himself a physician, claimed that the
noise, as a precipitating factor, has caused him anxiety neurosis, which, in turn, predisposed him to,
or is concomitant with, the other ailments which he was suffering at the time of the trial, namely,
pyelonephritis, ureteritis and others; that these resulted in the loss of his professional income and
reduced his life expectancy. The breakdown of his claims is as follows:
 Loss of professional earnings P12,600
Damage to life expectancy 180,000
Moral damages 100,000
Loss due to frustration of sale of house 125,000
Exemplary damages 25,000
Attorneys' fees 45,000

A host of expert witnesses and voluminous medical literature, laboratory findings and statistics of
income were introduced in support of the above claims.

The medical evidence of plaintiff's doctors preponderates over the expert evidence for defendant-
appellee, not merely because of its positive character but also because the physicians presented by
plaintiff had actually treated him, while the defense experts had not done so. Thus the evidence of the
latter was to a large extent conjectural. That appellant's physical ailments should be due to infectious
organisms does not alter the fact that the loss of sleep, irritation and tension due to excessive noise
weakened his constitution and made him easy prey to the infection.

Regarding the amount of damages claimed by appellant, it is plain that the same are exaggerated. To
begin with, the alleged loss of earnings at the rate of P19,000 per annum is predicated on the Internal
Revenue assessment, Exhibit "QQ-1", wherein appellant was found to have undeclared income of
P8,338.20 in additional to his declared gross income of P10,975.00 for 1954. There is no competent
showing, however, that the source of such undeclared income was appellant's profession. In fact, the
inference would be to the contrary, for his gross income from the previous years 1951 to 1953
[Exhibits "QQ-1 (d)" to "QQ-1 (f)"] was only P8,085.00, P5,860.00 and P7,120.00, respectively, an
average of P7,000.00 per annum. Moreover, while his 1947 and 1948 income was larger (P9,995.00
and P11,900.00), it appears that P5,000 thereof was the appellant's annual salary from the Quezon
Memorial Foundation, which was not really connected with the usual earnings derived from practice
as a physician. Considering, therefore, his actual earnings, the claimed moral damages of
P100,000.00 are utterly disproportionate. The alleged losses for shortening of appellant's, life
expectancy are not only inflated but speculative.

As to the demand for exemplary or punitive damages, there appears no adequate basis for their
award. While the appellee Manila Electric Company was convicted for erecting the substation in
question without permit from the Public Service Commission, We find reasonable its explanation that
its officials and counsel had originally deemed that such permit was not required as the installation
was authorized by the terms of its franchise (as amended by Republic Act No. 150) requiring it to
spend within 5 years not less than forty million pesos for maintenance and additions to its electric
system, including needed power plants and substations. Neither the absence of such permit from the
Public Service Commission nor the lack of permit from the Quezon City authorities (a permit that was
subsequently granted) is incompatible with the Company's good faith, until the courts finally ruled that
its interpretation of the franchise was incorrect.

There are, moreover, several factors that mitigate defendant's liability in damages. The first is that the
noise from the substation does not appear to be an exclusive causative factor of plaintiff-appellant's
illnesses. This is proved by the circumstance that no other person in Velasco's own household nor in
his immediate neighborhood was shown to have become sick despite the noise complained of. There
is also evidence that at the time the plaintiff-appellant appears to have been largely indebted to
various credit institutions, as a result of his unsuccessful gubernatorial campaign, and this court can
take judicial cognizance of the fact that financial worries can affect unfavorably the debtor's
disposition and mentality.
The other factor militating against full recovery by the petitioner Velasco in his passivity in the face of
the damage caused to him by the noise of the substation. Realizing as a physician that the latter was
disturbing or depriving him of sleep and affecting both his physical and mental well being, he did not
take any steps to bring action to abate the nuisance or remove himself from the affected area as soon
as the deleterious effects became noticeable. To evade them appellant did not even have to sell his
house; he could have leased it and rented other premises for sleeping and maintaining his office and
thus preserve his health as ordinary prudence demanded. Instead he obstinately stayed until his
health became gravely affected, apparently hoping that he would thereby saddle appellee with large
damages.

The law in this jurisdiction is clear. Article 2203 prescribes that "The party suffering loss or injury must
exercise the diligence of a good father of a family to minimize the damages resulting from the act or
omission in question". This codal rule, which embodies the previous jurisprudence on the
point,3 clearly obligates the injured party to undertake measures that will alleviate and not aggravate
his condition after the infliction of the injury, and places upon him the burden of explaining why he
could not do so. This was not done.

Appellant Velasco introduced evidence to the effect that he tried to sell his house to Jose Valencia,
Jr., in September, 1953, and on a 60 day option, for P95,000.00, but that the prospective buyer
backed out on account of his wife objecting to the noise of the substation. There is no reliable
evidence, however, how much were appellant's lot and house worth, either before the option was
given to Valencia or after he refused to proceed with the sale or even during the intervening period.
The existence of a previous offer for P125,000.00, as claimed by the plaintiff, was not corroborated by
Valencia. What Valencia testified to in his deposition is that when they were negotiating on the price
Velasco mentioned to him about an offer by someone for P125,000.00. The testimony of Valencia
proves that in the dialogue between him and Velasco, part of the subject of their conversation was
about the prior offer, but it does not corroborate or prove the reality of the offer for P125,000.00. The
testimony of Velasco on this point, standing alone, is not credible enough, what with his penchant for
metaphor and exaggeration, as previously adverted to. It is urged in appellant's brief, along the lines
of his own testimony, that since one (1) transformer was measured by witness, Jimenez with a noise
intensity of 47.2 decibels at a distance of 30.48 meters, the two (2) transformers of the substation
should create an intensity of 94.4 decibels at the same distance. If this were true, then the residence
of the plaintiff is more noisy than the noisiest spot at the Niagara Falls, which registers only 92
decibels (Exhibit "15-A").

Since there is no evidence upon which to compute any loss or damage allegedly incurred by the
plaintiff by the frustration of the sale on account of the noise, his claim therefore was correctly
disallowed by the trial court. It may be added that there is no showing of any further attempts on the
part of appellant to dispose of the house, and this fact suffices to raise doubts as to whether he truly
intended to dispose of it. He had no actual need to do so in order to escape deterioration of his
health, as heretofore noted.

Despite the wide gap between what was claimed and what was proved, the plaintiff is entitled to
damages for the annoyance and adverse effects suffered by him since the substation started
functioning in January, 1954. Considering all the circumstances disclosed by the record, as well as
appellant's failure to minimize the deleterious influences from the substation, this Court is of the
opinion that an award in the amount of P20,000.00, by way of moderate and moral damages up to the
present, is reasonable. Recovery of attorney's fees and litigation expenses in the sum of P5,000.00 is
also 
justified — the factual and legal issues were intricate (the transcript of the stenographic notes is about
5,000 pages, side from an impressive number of exhibits), and raised for the first time in this
jurisdiction.4
The last issue is whether the City Engineer of Quezon City, Anastacio A. Agan, a co-defendant, may
be held solidarily liable with Meralco.

Agan was included as a party defendant because he allegedly (1) did not require the Meralco to
secure a building permit for the construction of the substation; (2) even defended its construction by
not insisting on such building permit; and (3) did not initiate its removal or demolition and the criminal
prosecution of the officials of the Meralco.

The record does not support these allegations. On the first plea, it was not Agan's duty to require the
Meralco to secure a permit before the construction but for Meralco to apply for it, as per Section 1.
Ordinance No. 1530, of Quezon City. The second allegation is not true, because Agan wrote the
Meralco requiring it to submit the plan and to pay permit fees (T.s.n., 14 January 1960, pages 2081-
2082). On the third allegation, no law or ordinance has been cited specifying that it is the city
engineer's duty to initiate the removal or demolition of, or for the criminal prosecution of, those
persons who are responsible for the nuisance. Republic Act 537, Section 24 (d), relied upon by the
plaintiff, requires an order by, or previous approval of, the mayor for the city engineer to cause or
order the removal of buildings or structures in violation of law or ordinances, but the mayor could not
be expected to take action because he was of the belief, as he testified, that the sound "did not have
any effect on his body."

FOR THE FOREGOING REASONS, the appealed decision is hereby reversed in part and affirmed in
part. The defendant-appellee Manila Electric Company is hereby ordered to either transfer its
substation at South D and South 6 Streets, Diliman, Quezon City, or take appropriate measures to
reduce its noise at the property line between the defendant company's compound and that of the
plaintiff-appellant to an average of forty (40) to fifty (50) decibels within 90 days from finality of this
decision; and to pay the said plaintiff-appellant P20,000.00 in damages and P5,000.00 for attorney's
fees. In all other respects, the appealed decision is affirmed. No costs.

Concepcion, C.J., Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ.,
concur.

Dizon and Castro, JJ., are on leave.

PDF 4

SECOND DIVISION

G.R. Nos. L-34317 and L-34335 November 28, 1973

MARCELO STEEL CORPORATION, HON. WALFRIDO DE LOS ANGELES, in his capacity as

Judge, Court of First Instance of Rizal, Branch IV, Quezon City, and THE SHERIFF OF
QUEZON CITY, petitioners, 
vs.
COURT OF APPEALS, PETRA R. FARIN and BENJAMIN FARIN, respondents.

Florentino I. Capco for petitioners.

Ramon M. de Claro for respondents.

BARREDO, J.:

Petitions for review of the decision of the Court of Appeals in CA-G. R. No. 47519-R, entitled Petra
Farin, et al., vs. Hon. Walfrido de los Angeles, etc. et al., granting a petition for certiorari of herein
private respondents, the spouses Benjamin and Petra Farin, and annulling and setting aside the
orders separately issued by the Court of First Instance of Quezon City in its Civil Case No. Q-9384
and in L. R. C. Record No. 7681, the first being an order dated December 9, 1970 denying private
respondents' motion to stop the Sheriff of Quezon City from proceeding with the extrajudicial
foreclosure sale of the properties herein involved which said private respondents had mortgaged to
herein petitioner Marcelo Steel Corporation, after the said court had already rendered judgment
dismissing the complaint for prohibition to enjoin said foreclosure, but pending the appeal thereof, and
the second being the order dated February 4, 1971 granting the same petitioner's motion for a writ of
possession of the said properties which it had acquired in the foreclosure sale which the court had
refused to restrain in the other case.

The background facts are stated in the decision of the Court of Appeals thus:

This is a petition for certiorari to annul the order dated December 9, 1970, issued in Civil
Case No. Q-9384 of the Court of First Instance of Quezon City, Branch IV, and the writ
of possession issued in L.R.C. Rec. No. 7681 of said court.

It appears that on October 30, 1964, the petitioner spouses executed a deed of real
estate mortgage, in favor of respondent Marcelo Steel Corporation, hereinafter referred
to as respondent corporation over a parcel of land covered by T.C.T. No. 42689 of the
Register of Deeds of Quezon City, as security for the payment of a promissory note in
the sum of P600,000.00.

On July 24, 1965, the respondent corporation filed with the Sheriff of Quezon City a
verified letter-petition for the extra-judicial foreclosure of the afore-mentioned real estate
mortgage. Accordingly, the respondent Sheriff of Quezon City advertised and scheduled
the extra-judicial foreclosure sale of the mortgaged property for August 26, 1965.

On August 21, 1965, the petitioners filed against the respondent corporation and the
respondent Sheriff of Quezon City a petition captioned "Prohibition with Injunction and
Damages" docketed as Civil Case No. Q-9384 of the Court of First Instance of Rizal,
wherein they prayed that the respondent sheriff be permanently enjoined from
proceeding with the scheduled sale at public auction of the mortgaged property, and
that the respondent corporation be condemned to pay the petitioners P200,000.00 as
actual and moral damages and P50,000.00 as penal and compensatory damage and
P30,000.00 as attorney's fees, on the ground that they have not been in default in the
payment of their obligation.

On August 21, 1965, the respondent judge issued an order commanding the respondent
Sheriff and the respondent corporation to desist from proceeding with the public auction
sale of the mortgage property scheduled on August 26, 1965.

After trial, the respondent judge rendered a decision on October 3, 1970, the dispositive
portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered as follows:

1. The above-entitled case is hereby ordered DISMISSED, for lack of sufficient basis;

2. Ordering the petitioners, jointly and severally, to pay the sum equivalent to 15% of the
total obligation due, as reasonable attorney's fees;

3. Ordering petitioners to pay respondent Marcelo Steel Corporation, jointly and

severally, the sum of P50,000.00 as actual exemplary damages;

4. Ordering the petitioners, jointly and severally, to pay the costs of the suit.

The order of status quo issued by the Court under date of August 21, 1965 is hereby
LIFTED and SET ASIDE, and the Sheriff of Quezon City may now proceed with the
extrajudicial foreclosure of the mortgage."

Petitioners received a copy of the decision on October 15, 1970.

On October 19, 1970, respondent corporation filed with respondent Sheriff another
verified letter-petition informing the latter of the decision rendered in Civil Case No. Q-
9384 and praying for the extra-judicial foreclosure of the real estate mortgage. Acting on
said letter-petition, the respondent Sheriff issued the necessary notices setting the
public auction sale of the mortgaged property on December 9, 1970.

On October 30, 1970, petitioners filed their notice of appeal, appeal bond and record on
appeal.

On December 4, 1970, petitioners riled an "Urgent Motion to Require Respondents to

Desist From Proceeding With The Public Auction Sale of Petitioners' Properties."
 After respondent corporation filed its opposition to said motion, the respondent judge
issued on December 9, 1970, an order denying petitioners' aforementioned motion to
stop respondent Sheriff from proceeding with the scheduled auction sale of petitioners'
mortgaged property. On the same date, the respondent Sheriff proceeded with the
auction sale of the mortgaged property, respondent corporation being the successful
bidder, and issued the correspondent certificate of sale dated December 9, 1970.

On the same date, December 9, 1970, the respondent Judge issued an order approving
petitioners record on appeal.

On January 12, 1971, the respondent corporation filed in L.R.C. Rec. No. 7681 an
independent petition for the issuance of a writ of possession entitled "In the Matter of
the Petition For Issuance of Writ of Possession Over a Parcel of Land Covered By
Transfer Certificate of Title No. 42589 of The Office of The Register Of Deeds of
Quezon City In The Name Of Mortgagor Petra R. Farin Married To Benjamin Farin;
Marcelo Steel Corporation (Mortgage) Petitioner". This petition was also assigned to the
respondent Judge. Petitioners did not file an opposition to said petition.

On January 18, 1971, the respondent Judge issued an order directing the presentation
and submission of evidence before the Branch Clerk of Court. After the respondent
corporation had submitted its evidence in support of its petition, the respondent Judge
issued an order on February 4, 1971, granting the petition for the issuance of a writ of
possession.

Thereupon, the petitioners filed the present petition.

Upon these facts, the Court of Appeals held the trial court exceeded its jurisdiction when it denied the
motion of the Farins seeking to enjoin the foreclosure sale of their mortgaged properties inasmuch as
they had already perfected their appeal from the decision dismissing their petition for prohibition
against said sale. According to the appellate court, since the remedy pursued by the Farins was not
an ordinary action of injunction within the contemplation of Section 4 of Rule 39 nor one for the
annulment of mortgage, but a special civil action of prohibition, the decision therein is not immediately
executory as a matter of right but only of sound judicial discretion under Section 2 of the same rule,
and considering that the prevailing party had not even moved for immediate execution, the trial court
could not have availed of its powers under this last mentioned provision.

It is quite obvious that the Court of Appeals has missed the point. As a matter of fact, it is plain that
the trial court did not issue any order of execution. The sheriff's act of proceeding with the foreclosure
sale was not done by virtue of any such order of execution, but pursuant to his authority and duty
under Act 3135 as amended by Act 4118 governing the extrajudicial foreclosure of mortgages, which
is simply to sell the mortgaged properties at public auction to the highest bidder, upon verified petition
of the mortgagee and without the need of any judicial order. In other words, the sheriff went ahead
not because he was so ordered by the court, but precisely because the court refused to restrain him
by dismissing respondents' petition for prohibition and lifting the status quo order it had preliminarily
issued upon the filing of the complaint. Under these circumstances, the perfection of respondents'
appeal could not by itself have had the effect of restoring the status quo order, without an express
order in that sense, which, of course, the court had the power to issue. The Court has so held as
early as November 13, 1902 in Watson & Co. vs. Enriquez, found in Volume I of the Philippine
Reports at pages 480 to 484. The ruling therein made which is very illuminating applies four-square to
the case at bar.
The plaintiff, at the commencement of this action obtained a preliminary injunction as
prayed for in its complaint. The case was afterwards tried, and in September, 1902, a
final judgment therein was entered in favor of the defendants and the temporary
injunction was dissolved.

On the 20th of September a bill of exceptions was perfected and signed by the judge,
and a certified copy thereof was then transmitted to this court. In this court the plaintiff
has presented a motion asking that the preliminary injunction be continued.

Before discussing the power of this court to grant a preliminary injunction, under these
circumstances, it seems necessary to determine whether or not the preliminary
injunction granted below was continued in force by the filing of the bill of exceptions.
Article 144 of the Law of Civil Procedure, now in force, says: "But the filing of a bill of
exceptions shall of itself stay execution until the final determination of the action,
unless," etc. Article 1007 of the Revised Statutes of the United States states the manner
of obtaining a supersedeas in cases pending in the Federal courts. The meaning of the
word "supersedeas" as used in that section has been defined as follows: "A
supersedeas, properly so called, is a suspension of the power of the court below to
issue an execution on the judgment or decree appealed from; or, if a writ of execution
has issued, it is a prohibition emanating from the court of appeals against the execution
of the writ. (Hovey vs. McDonald, 109 U.S. 150.)

As so construed, article 1007 of the Revised Statutes of the United States is

substantially the equivalent of our article 144. This question as to whether a
supersedeas has, in the Federal courts, the effect of continuing in force an injunction
dissolved by the lower court has frequently been passed upon by the Supreme Court.
That court has said: "The general ruling is well settled that an appeal from a decree
granting, refusing, or dissolving an injunction does not disturb its operative effect.
(Hovey vs. McDonald, 109 U.S. 150-161; Slaughterhouse Cases, 10 Wall., 273-297;
Leonard vs. Ozark Land Company, 115 U.S., 465-468.) When an injunction has been
dissolved it can not be revived except by a new exercise of judicial power, and no
appeal by a dissatisfied party can of itself revive it. (Knox Co. vs. Harshman, 132 U.S.,
14.)

The truth is that the case is not governed by the ordinary rules that relate to a
supersedeas of execution, but by those principles and rules which relate to chancery
proceedings exclusively. ... In this country the matter is usually regulated by statutes or
rules of court, and, generally speaking, an appeal, upon giving the security required law,
when security is required, suspends further proceedings and operates as a
supersedeas of execution. ... But the decree itself may have an intrinsic effect which
can only be suspended by an affirmative order either of the court which makes the
decree or of the appellate tribunal. This court, in the Slaughterhouse Cases, 10 Wall.,
273, decided that an appeal from a decree granting, refusing, or dissolving an injunction
does not disturb its operative effect. Mr. Justice Clifford, delivering the opinion of the
court, says: "It is quite certain that neither an injunction nor a decree dissolving an
injunction passed in circuit court is reversed or nullified by an appeal or writ of error
before the cause is heard in this court." It was decided that neither a decree for an
injunction nor a decree dissolving an injunction was suspended in its effect by the writ of
error, though all the requisites for supersedeas were complied with. It was not decided
that the court below had no power, if the purpose of justice required it, to order a
continuance of the status quo until a decision should be made by the appellate court, or
until that court should order the contrary. This power undoubtedly exists, and should
 always be exercised when any irremediable injury may result from the decree as
rendered. ( Hovey vs. McDonald, 109, U.S., 159.)

In Minnesota the supersedeas statute provided that the appeal from the order of
judgment should "stay all proceedings thereon and save all rights affected thereby." The
court of this State, relying upon the last of the two clauses quoted, held that an appeal
from an order dissolving an injunction continued the injunction in force. The evils which
would result from such a holding are forcibly pointed out by Judge Mitchell in a
dissenting opinion. He said: "Although a plaintiffs papers are so insufficient on their face
or so false in their allegations that if he should apply on notice for an injunction, any
court would, on a hearing, promptly refuse to grant one, yet, if he can find anywhere in
the State a judge or court commissioner who will improvidently grant one ex parte,
which the court on the first and only hearing ever had dissolves, he can, by appealing
and filing bond, make the ex parte injunction impervious to all judicial interference until
the appeal is determined in this court. ... Such result is so unjust and so utterly
inconsistent with all known rules equity practice that no court should adopt such a
construction unless absolutely shut up to it by the clear and unequivocal language of the
statute. (State vs. Duluth St. Ry. Co., 47 Minn., 369.)

The supreme court of that State afterwards, although adhering to that decision on the
ground of stare decisis, stated that in their opinion it was unsound. (State ex rel. Leary
vs. District Court, 78 Minn., 464.)

We have in these Islands no appeal from orders granting or dissolving preliminary

injunctions, yet what was said by Justice Mitchell applies to a case where, upon a full
trial in a court below, the judge has decided that neither upon the facts nor the law is the
plaintiff entitled to any relief. To allow a plaintiff in such a case, by taking an appeal and
giving a supersedeas bond, to continue an injunction in force would be manifestly
unjust.

We adopt the rule announced by the Supreme Court of the United States and hold that
the filing of the bill of exceptions in the case at bar did not operate to revive the
preliminary injunction which was dissolved in and by the final judgment.

We also adopt the other conclusion of that court to the effect that the judge below has
the power, if the purposes of justice require it, to order a continuance of the status
quo until a decision should be made by the appellate court or until that court should
order to the contrary. We have already in effect declared that principle in the case
of Maximo Cortes vs. Palanca Yutivo, decided August 6, 1902.

This doctrine was reiterated a few days later in Sitia Teco vs. Ventura, 1 Phil. 497 thus:

During the pendency of the suit the plaintiff applied for a preliminary injunction on the
ground, as stated in the oral argument of counsel, that the house placed by the plaintiff
upon the lot having been destroyed by order of the municipality the defendants
repossessed themselves of the premises and were preparing to build a house thereon.

Upon a trial of the case judgment was rendered against the plaintiff on the merits of the
suit, and the injunction was dissolved. The plaintiff has appealed the case by a bill of
exceptions and has made application to this court to restore the injunction on the
ground that the operative effect of the judgment by which the injunction was dissolved
has, by virtue of the appeal taken and the giving of a supersedeas bond, been lost, and
 that the judgment in the case should not have the effect of disturbing the interlocutory
injunction. In the case of Watson & Co. vs. Enriquez, decided by this court October 26,
1902, it is held that an appeal from an order dissolving an injunction does not suspend
the operation of the decision so as to revive the interlocutory injunction.

We had occasion to reaffirm the same ruling in Aguilar vs. Tan, G. R. No. L-23600, rendered in
January 30, 1970 31 SCRA 205-214.

Now, in connection with the issuance by the trial court, upon motion of petitioner and without
objection of the Farins, of the writ of possession in the L.R.C. case, the appellate court ruled that the
same amounted to an execution of the decision in the civil case, and such being the case, the trial
court should have desisted from doing it in view of the respondents' appeal. We do not agree. It is
Our considered opinion that the writ of possession was properly issued, since, as already discussed
above, the foreclosure proceeding conducted by the sheriff was not predicated on any judicial order.
Again, the erroneous pose of the Court of Appeals runs counter to standing jurisprudence on the
matter. In De Gracia vs. San Jose, 94 Phil. 623, which is likewise on all fours with the situation
presently before Us, the Court held:

Petitioner is the registered owner of the real property described in Transfer Certificate of
Title No. 3731 of the Land Records of the city of Manila, which, by way of extrajudicial
foreclosure of a mortgage constituted upon the same in favor of the Rehabilitation
Finance Corporation, was on November 14, 1952, sold to the Republic Surety &
insurance Co., Inc., as the highest bidder at a public auction conducted by the sheriff of
said city under a special power of attorney attached to the mortgage deed and pursuant
Act. No. 3135, as amended by Act No. 4118. Three days after the sale, the purchaser
filed an ex parte motion, duly verified, in the four branch of the Court of First Instance of
Manila as authorized section 7 of the same Act, as amended, praying that it be given
possession of the property during the redemption period and offering to furnish the
corresponding bond. But before the motion could acted upon, herein petitioner filed an
opposition thereto and followed it with a complaint for the annulment of the sale and a
motion dismiss the petition for a writ of possession or to postpone consideration thereof
until the complaint for annulment could be decided. Being specifically empowered by
the Act to grant such writ on an ex parte motion by the purchaser, the court refused to
be side tracked and authorized the issuance of the writ upon the filing of a bond without
prejudice to the right of the oppositor to question the validity of the sale in the manner
provided by law.

Contending that the lower court acted without jurisdiction and with grave abuse of
discretion in authorizing the issuance of the writ, petitioner has come to this Court for a
writ of certiorari and prohibition.

The petition is without merit.

Sections 7 and 8 of Act No. 3L35, as amended, provide:

SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition
the Court of First Instance of the province or place where the property or any part
thereof is situated, to give him possession thereof during the redemption period,
furnishing bond in an amount equivalent to the use of the property for a period of twelve
months, to indemnify the debtor in case it be shown that the sale was made without
violating the mortgage or without complying with the requirements of this Act. Such
petition shall be made under oath and filed in form or an ex parte motion in the
 registration or cadastral proceedings if the property is registered, or in special
proceedings in the case of property registered under the Mortgage Law or under section
one hundred and ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of court shall, upon the
filing of such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety six, as amended by
Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of
the bond, order that a writ of possession issue addressed to the sheriff of the province
in which the property is situated, who shall execute said order immediately.

SEC. 8. The debtor may, in the proceedings in which possession was requested but not
later than thirty days after the purchaser was given possession, petition that the sale be
set aside and the writ of possession cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was not made in accordance with
the provisions hereof, and the court shall take cognizance of this petition in accordance
with the summary procedure provided for in section one hundred and twelve of Act
Numbered Four hundred and ninety-six; and if it finds the complaint of the debtor
justified, it shall dispose in his favor of all or part of the bond furnished by the person
who obtained possession. Either of the parties may appeal from the order of the judge
in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but
the order of possession shall continue in effect during the pendency of the appeal.

As may be seen, the law expressly authorizes the purchaser to petition for a writ of
possession during the redemption period by filing an ex parte motion under oath for that
purpose in the corresponding registration or cadastral proceeding in the case of
property with Torrens title; and upon the filing of such motion and the approval of the
corresponding bond, the law also in express terms directs the court to issue the order
for a writ of possession. Under the legal provisions above copied, the order for a writ of
possession issues as a matter of course upon the filing of the proper motion and the
approval of the corresponding bond. No discretion is left to the court. And any question
regarding the regularity and validity of the sale (and the consequent cancellation of the
writ) is left to be determined in a subsequent proceeding as outlined in section 8. Such
question is not to be raised as a justification for opposing the issuance of the writ of
possession, since, under the Act, the proceeding for this is ex parte.

It thus appear that the respondent Judge, in ordering the issuance of a writ of
possession in this case, merely obeyed an express mandate of the law in the manner
and upon the terms therein provided, and petitioner may not complain that he has been
deprived of a substantial right without due process, because the order states that it is to
be "without prejudice to the rights of the oppositor to question the validity of the above
mentioned sale in the manner provided by law.

Having merely followed an express provision of the law, whose validity is not
questioned, the Judge cannot be charged with having acted without jurisdiction or with
grave abuse of discretion. The rule that the purchaser at a judicial public auction is not
entitled to possession during the period of redemption is not applicable to a sale under
Act No. 3135 where the granting of said possession expressly authorized. ...

As may be gleaned from the foregoing dissertation of Justice Alex Reyes for the Court, even the main
remedy of prohibition sought by the Farins was uncalled for. The plain, speedy and adequate and
even more expeditious remedy available to them was that specifically provided for in Section 8 of Act
3135, as amended, quoted in the opinion, which is by the summary petition under Section 112 of Act
496, the Land Registration Act. We surmise that the issue of alleged usury raised by respondents
must have been considered by the trial judge who also decided the civil case in which said defense
was raised as not substantial enough to warrant its being taken up in an ordinary action outside of the
land court.

PREMISES CONSIDERED, the decision of the Court of Appeals under review is reversed and the
petition for certiorari filed by the respondent Farins therein is dismissed, with costs against said
respondents.

Zaldivar (Chairman), Fernando, Antonio, Fernandez and Aquino, JJ., concur.

PDF 5

SECOND DIVISION

G.R. Nos. L-50405-06 August 5, 1981

VICENTA P. TOLENTINO and JOSE TOLENTINO, petitioners, 

vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS, CONSUELO B. DE LA CRUZ, et
al., respondents.

DE CASTRO, J.:

A petition for review by certiorari of the consolidated decision 1 of the respondent Court of Appeals in
CA-G.R. Nos. 53907-R 2 and 54004-R 3 promulgated on February 22, 1978, as well as the
Resolution 4 of said Court of Appeals, promulgated on March 30, 1979, denying the Motion for
Reconsideration of the aforesaid consolidated decision.

Ceferino de la Cruz died in Davao City on April 19, 1960 leaving as his only heirs his widow,
Consuelo de la Cruz, and their children Hilario, Tarcelo, and Godofredo, all surnamed de la Cruz
(hereinafter referred to as the De la Cruzes). At the time of his demise, Ceferino left a parcel of land
(homestead land) containing 131,705 square meters covered by Original Certificate of Title No. P-16
in his name, issued by virtue of Homestead Patent No. V-1728.

In a deed of sale executed by the De la Cruzes on April 30, 1962, the homestead land was sold to the
spouses Jose Tolentino and Vicenta Tolentino (hereinafter referred to as the Tolentinos). The
Tolentinos took immediate possession of the homestead land and caused the cancellation of O.C.T.
No. P-16 and the issuance of T.C.T. No. T-11135 in their names.

In 1963, the Tolentinos constituted a first mortgage over the homestead land, together with two other
parcels of land covered by T.C.T. Nos. 11085 and 11626 in their names, in favor of the Bank of the
Philippine Islands, (BPI) Davao Branch, for a loan of P40,000. Another mortgage was constituted
over the said properties in 1964 in favor of Philippine Banking Corporation. The Tolentinos failed to
pay their mortgage indebtedness to the BPI upon maturity in the judicial foreclosure sale that
followed, conducted by the City Sheriff of Davao on July 15, 1967, BPI was the sole and highest
bidder. The Sheriff's Certificate of Sale in favor of BPI was registered only on April 2, 1969 in the
Registry of Deeds of Davao.

Meanwhile, on February 4, 1967, the De la Cruzes filed an action 5 with the Court of First Instance of
Davao against the Tolentinos for the repurchase of the homestead land under Section 119 of the
Public Land Act (CA 141), with a prayer for damages and accounting of fruits on the ground that they
had tried to repurchase said land extrajudicially for several tunes already but that the Tolentinos
would not heed their request, thus constraining the De la Cruzes to file a court action for the
repurchase thereof. BPI and Philippine Banking Corporation were included in the action as formal
party defendants, being the first and second mortgagees, respectively, of the homestead land. On
June 1, 1967, the Tolentinos filed a motion for extension of ten (10) days "from and after June lst" to
file their answer. This motion was granted by the lower court.
On June 14, 1967, the De la Cruzes filed a petition to declare the Tolentinos in default for failure to
file an answer. On that same day, the Tolentinos filed a Motion to Dismiss the repurchase case on the
ground that the complaint states no cause of action, but said motion was denied by the lower court on
the ground that the same was filed out of time. Subsequently, the Tolentinos were declared in default
and the De la Cruzes were allowed to present their evidence ex parte.

On November 24, 1967, the Tolentinos filed their answer interposing the defense that the complaint
states no cause of action because from the face of T.C.T. No. T-11135 alone, only the original
patentee, Ceferino, is given the right to repurchase the homestead land and not the De la Cruzes and
because the complaint does not allege that there was a bona fide offer to repurchase or a valid tender
of payment, as well as an allegation that the De la Cruzes intended to pay not only the purchase price
but all the other expenses of the sale which includes the necessary and useful expenses made on the
thing sold, as required under Article 1616 of the new Civil Code.

Upon a manifestation filed by the De la Cruzes, the lower court issued an Order dated December 8,
1967 declaring the Tolentinos as "having no standing" in the proceedings therein, to which the latter
filed a motion for its reconsideration. This motion, as well as their second Motion for Reconsideration,
was denied by the lower court.

On March 27, 1969, the lower court rendered a decision allowing the De la Cruzes to repurchase the
homestead land. Upon payment by the De la Cruzes of the amount of P16,000 representing the
repurchase price to the BPI, the latter executed a deed of conveyance over the homestead land on
August 25, 1969. On motion, the lower court issued a writ of possession in favor of the De la Cruzes
on September 4, 1969, which was served by the City Sheriff upon the Tolentinos on September 8,
1969. Accordingly, the possession of the homestead land was delivered to the De la Cruzes on
September 13,1969.

On September 19, 1969, the Tolentinos filed a petition for relief from the Decision dated March 27,
1969 on the ground of excusable mistake in the counting of the reglementary period for the filing of an
answer, with a prayer that the Order declaring them in default be lifted and that they be allowed to
present their defense.

On October 1, 1969, the Tolentinos filed a Motion to Quash the writ of possession alleging as
principal grounds therefor the absence of service on their counsel of a copy of the writ of possession,
as well as the decision of the lower court declaring the De la Cruzes entitled to repurchase the
homestead land. The De la Cruzes filed an opposition to this Motion and prayed for the investigation
of an alleged tampering of records of the case particularly the page containing the proofs of the
service of a copy of the writ of possession as well as of the decision of the lower court to the
Tolentinos. On October 4, 1969, the lower court denied the Motion to Quash. A motion for
reconsideration was likewise denied by the lower court on December 6,1969.

On October 6, 1970, the Tolentinos filed before the respondent Court of Appeals a petition for
certiorari (CA-G.R. No. SP-46321) against the De la Cruzes, wherein the Tolentinos raise the
propriety of the issuance of the Writ of Possession alleging that it was issued improvidently because
the decision of the lower court declaring them in default was not served upon them and, therefore, the
judgment has not become final and executory. This petition was denied by the respondent court in a
decision rendered on November 15, 1971 on the ground that the Tolentino were actually and duly
served with a copy of the questioned decision.

On March 5, 1973, the trial court issued an Order denying for lack of merit the petition for relief from
judgment filed therein by the Tolentinos. It likewise denied a motion for reconsideration filed
subsequently by the Tolentinos in its Order of July 5, 1973. Consequently, the Tolentinos appealed to
the respondent Court of Appeals the above 2 Orders of the lower court, docketed therein as CA G.R.
No. 54004-R, claiming that the lower court erred and abused its discretion in not lifting its Order of
default and in not ordering resumption of trial for the reception of their evidence; and, in finally
ordering execution of the default judgment.

In the meantime, on March 2, 1970, petitioner Vicente Tolentino went to see Mr. Ramon Lopez,
Branch Manager of BPI Davao Branch, carrying a letter of even date, offering to redeem the
homestead property for P16,000 covered by a check. Upon being informed that she can no longer
redeem the same for the reason that it was already conveyed to the De la Cruzes pursuant to the
decision dated March 27, 1969, Vicenta left the office of the manager, bringing with her the letter
which she later on sent to Mr. Lopez by registered mail, inclosed In another letter dated March 3,
1970, reteirating her desire to redeem the homestead land. Mr. Lopez sent said letters to the BPI's
legal counsel with specific request to inform the Tolentinos that they can still redeem the two other
properties covered by T.C.T. Nos. 11085 and 11626 before the expiration of the redemption period
upon payment of the amount of P75,995.07 — the balance remaining after deducting the amount of
P16,000 paid by the De la Cruzes for the homestead property. However, instead of complying with
BPI's advice, Vicente consigned with the Office of the City Sheriff of Davao a crossed PNB check for
P91,995.07 drawn against the PNB Kidapawan Branch, Cotabato, on March 31, 1970, allegedly for
the redemption of the 3 lots, including the homestead land. The following day, however, upon advice
of their counsel, Vicente issued a stop-payment order against the said crossed check purportedly to
protect her rights and to prevent BPI cashing said check without returning all the properties which BPI
had foreclosed and purchased.

Simultaneously with the consignation of the crossed check with the City Sheriff of Davao on March
31, 1970, the Tolentinos filed a complaint (redemption case) 6 against BPI, amended on April 15,
1970, with the Davao Court of First Instance for the redemption of their properties covered by T.C.T.
Nos. 11135, 11085 and 11626, which were foreclosed by and sold to BPI, with a prayer for damages,
imputing bad faith on BPI in allegedly refusing to allow them to redeem all three lots and praying that
BPI be ordered to allow the Tolentinos to redeem their properties, to accept the payment consigned
by them with the City Sheriff's Office of Davao, and to pay moral and exemplary damages in the sum
of P95,000 plus attorney's fees and costs of suit. BPI seasonably filed an answer with counterclaim,
denying the material averments of the complaint, the truth being that the Tolentinos did not have an
intention to redeem their said properties but only the homestead land. BPI counterclaimed for
exemplary damages in the sum of P5,000 and attorney's fees in the sum of P4,000 plus costs.

On April 10, 1973, the trial court rendered its decision dismissing the complaint of the Tolentinos, with
no particular pronouncement as to attorney's fees but with costs against the Tolentinos. From that
decision, both the Tolentinos and BPI appealed to the respondent Court of Appeals, docketed under
CA-G.R. No. 53907- R, the Tolentinos claiming that -

l. The lower court erred in finding that the title to the land covered by T.C.T. No. 11135
legally passed to the heirs of Ceferino de la Cruz;

2. The lower court erred in holding that defendant-appellant (herein respondent BPI)
was legally justified, in refusing plaintiffs-appellants' (Tolentinos) demand to be allowed
to redeem the lands in question; and

3. The lower court erred in not granting plaintiffs-appellants' (Tolentinos) claim for
damages.

while BPI claims that the trial court erred in not holding the Tolentinos liable for damages and
attorney's fees despite its findings that they acted in evident bad faith in —
 a. filing the complaint in the redemption case; and

b. issuing a crossed check drawn against the PNB, Kidapawan Branch, and likewise, in
depositing said check with the Sheriff's Office allegedly to redeem the foreclosed
properties and, thereafter, the day following the deposit in issuing a stop-payment order
on said check.

Acting upon a written request dated March 26, 1976 filed by the Tolentinos for the consolidation of the
two appealed cases, CA-G.R. Nos. 53907-R (Civil Case No. 6830) and 54004-R (Civil Case No.
5432), the respondent Court of Appeals resolved, after considering the comment of the BPI and the
opposition of the De la Cruzes, to grant the motion for consolidation by the Tolentinos.

In a consolidated decision 7 promulgated on February 22, 1978, the respondent Court of Appeals

held:

In the Repurchase Case —

(1) that "despite the order of the trial court as prayed for by appellants granting them a ten-day period
of extension to file their answer which was to expire on June 12, 1967, extended by operation of law
to June 13, 1967, because June 12 was a holiday, the Tolentinos failed to file their answer. Instead,
on June 14, 1967, which was already late, the Tolentinos filed a motion to dismiss, which is not even
a responsive pleading, followed by their answer filed more than five months after, on November 24,
1967. The Tolentinos having failed to observe the requirements of the Rules of Court, no abuse of
discretion could be imputed to the court a quo in ordering them in default." 8 While "default orders are
judicially frowned upon, Quirante vs. Verano (L-30207, February 27, 1971, 37 SCRA 801) explicitly
admonishes that such 'is true only in meritorious cases, that is, where the failure to file answer on
time was due to fraud, accident, mistake, or excusable negligence and when the existence of a good
and substantial defense has been shown.' No showing was made in the case at bar, that the
Tolentinos' failure to file their answer on time was due to any of these grounds. The contention and
insistence of counsel for the Tolentinos that he filed through his clerk the motion to dismiss on June
13 but only stamped June 14, 1967, attributing negligence instead to the docket clerk of the lower
court was not believed by the lower court, and we (Court of Appeals) find no cogent reason for
believing otherwise. " 9 The Court of Appeals ruled further that "compounding the errors, is the failure
of the Tolentinos and/or their counsel to appear on January 12, 1968, the date set for hearing of their
petition for relief, the reason given by counsel that he was out-of-town when his clerk received the
notice, and that his said clerk did not notify him nor did he note said date on their trial calendar, being
clearly a case of inexcusable negligence. "

(2) that the supposed existence of a good and meritorious defense relied by the Tolentinos consisting
of the alleged expiration of the five-year period for the repurchase of the homestead lot under
Commonwealth Act No. 141 is clearly belied by the records of the case which show that the offer to
repurchase the homestead land made by the De la Cruzes was well within the 5-year period required
by law; and

(3) that the Tolentinos' claim that the lower court ordered the execution of the default judgment before
its finality due to the absence of service of the default judgment on them is not well- taken because
this issue has already been settled in CA G.R. No. SP-46321 rendered on November 15, 1971, where
it was found, after an investigation was conducted on the alleged disappearance of that page of the
record where the receipts by the respective parties were indicated, that the Tolentinos through their
counsel were duly served with a copy of the default judgment.

In the Redemption Case

(1) in dismissing the Tolentinos' appeal, the respondent court reasoned that although there is no
quarrel that the Tolentinos had 12 months within which to redeem the properties sold at the Sheriff's
sale counted from the time it was registered on April 2, 1969, the problem, however, lies in the
manner of the tender of payment made by them, granting they made one, "since consignation by
crossed check does not satisfy the requirements set forth in Article 1249 of the New Civil Code
governing the payment of debts in money, which 'shall be made in the Currency stipulate and if it is
not possible to deliver such currency, then in the currency which is legal tender in the Philippines.'
Admittedly, a check, even if good when offered, does not satisfy the requirements of a legal tender,
and for that very reason, BPI was not legally bound to accept such tender of payment." Hence, no
error was committed by the court a quo in dismissing the Tolentinos' complaint for redemption with
damages.

(2) in dismissing BPI's appeal, the respondent Court stated that "no bad faith should be attributed to
the Tolentinos for filing the instant case for redemption, in the absence of a proven motive to harass
the BPI considering that in so filing these cases, the Tolentinos acted in the belief that they are
exercising certain rights under the law, and considering further that they, too, had to spend in
prosecuting their claims, no matter how unfounded they may have proven to be."

On April 24, 1978, the Tolentinos filed a Motion for Reconsideration 10 in the Court of Appeals of the
decision rendered in CA-G.R. No. 53907-R on the ground that "the right to redeem is not an
obligation or debt but rather a privilege, hence, the provisions of Article 1249 N.C.C. governing
payment of debts in money" do not apply in this case; and, of the decision rendered in CA-G.R. No.
54004-R on the ground that the respondent court erred in not considering that the trial court abused
its discretion in declaring the Tolentinos in default, and that the period within which the De la Cruzes
can repurchase the homestead land had already expired, This Motion for Reconsideration was
denied by the respondent court for lack of merit in a Resolution dated March 30, 1979.

Hence, the instant petition for review from the foregoing consolidated Decision and Resolution raising
the following issues:

WHETHER OR NOT ARTICLE 1249 OF THE NEW CIVIL CODE APPLIES IN THE
CASE AT BAR;

II

WHETHER OR NOT THE TENDER OF PAYMENT AND CONSIGNATION MADE BY

THE TOLENTINOS BEFORE THE CITY SHERIFF OF DAVAO WERE VALID; and

III

WHETHER THE DEFAULT JUDGMENT AGAINST THE TOLENTINOS IN CIVIL CASE

NO. 5432 (CA-G.R. No. 54004-R) HAS BECOME FINAL AND EXECUTORY.

It is worthwhile to remember that Article 1249 of the new Civil Code deals with a mode of extinction of
an obligation and expressly provides for the medium in the "payment of debts." Thus, it provides that:

The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines.
 The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in
abeyance.

We are of the considered view that the aforequoted Article should not be applied in the instant case,
hereinafter explained, together with the exposition on the resolution of the second issue raised in this
petition, the first two issues raised hinging ultimately on whether the Tolentinos may redeem the
properties in suit.

To start with, the Tolentinos are not indebted to BPI their mortgage indebtedness having been
extinguished with the foreclosure and sale of the mortgaged properties. After said foreclosure and
sale, what remains is the right vested by law in favor of the Tolentinos to redeem the properties within
the prescribed period. This right of redemption is an absolute privilege, the exercise of which is
entirely dependent upon the will and discretion of the redemptioners. There is, thus, no legal
obligation to exercise the right of redemption. 11 Said right, can in no sense, be considered an
obligation, for the Tolentinos are under no compulsion to exercise the same. Should they choose not
to exercise it, nobody can compel them to do so nor win such choice give rise to a cause of action in
favor of the purchaser at the auction sale. In fact, the relationship between said purchaser and the
redemptioners is not even that of creditor and debtor. 12

On the other hand, if the redemptioners choose to exercise their right of redemption, it is the policy of
the law to aid rather than to defeat the right of redemption. 13 It stands to reason therefore, that
redemptions should be looked upon with favor and where no injury is to follow, a liberal construction
will be given to our redemption laws as well as to the exercise of the right of redemption. In the instant
case, the ends of justice would be better served by affording the Tolentinos the opportunity to redeem
the properties in question other than the homestead land, in line with the policy aforesaid, to which
We adhere fully notwithstanding the reason advanced by the Court of Appeals in its Resolution,
denying a reconsideration of its decision, which reads:

We agree that the act of redeeming of a property mortgaged is not an obligation but a
privilege, in the sense that the mortgagor may or may not redeem his property. That of
course is a privilege. He may choose to give up the property and have the mortgage
foreclosed, or redeem the property with the obligation of course to pay the loan or
indebtedness. But where he elects to redeem the property and he has to pay the loan
for which the mortgage was constituted, then Art. 1249 of the Civil Code applies
because it involves now the 'payment of debts.' It is only the act of redeeming or not that
is considered a privilege, but not the act of paying the obligation once the mortgagor
has elected to redeem the property, in which case the check issued or drawn shall
produce the effect of payment only when it has been cashed. 14

Under existing jurisprudence, what the redemptioner should pay, is not the amount of the "loan for
which the mortgage was constituted" as stated by the Court of Appeals, but the auction purchase
price plus 1 % interest per month on the said amount up to the time of redemption, together with the
taxes or assessment paid by the purchaser after the purchase, if any. 15 And in this connection, a
formal offer to redeem, accompanied by a bona fide tender of the redemption price, although proper,
is not essential where, as in the instant case, the right to redeem is exercised thru the filing of judicial
action, which as noted earlier was made simultaneously with the deposit of the redemption price with
the Sheriff, within the period of redemption. The formal offer to redeem, accompanied by a bona
fide tender of the redemption price within the period of redemption prescribed by law, is only essential
to preserve the right of redemption for future enforcement even beyond such period of redemption.
The filing of the action itself, within the period of redemption, is equivalent to a formal offer to
redeem. 16 Should the court allow redemption, the redemptioners should then pay the amount already
adverted to.

Moreover, when the action to redeem was filed, a simultaneous deposit of the redemption money was
tendered to the Sheriff and under the last sentence of Section 31, Rule 39 of the Rules of Court, it is
expressly provided that the tender of the redemption money may be made to the Sheriff who made
the sale. 17 And the redemption is not rendered in valid by the fact that the said officer accepted a
check for the amount necessary to make the redemption instead of requiring payment in money. It
goes without saying that if he had seen fit to do so, the officer could have required payment to be
made in lawful money, and he undoubtedly, in accepting a check, placed himself in a position where
he could be liable to the purchaser at the public auction if any damage had been suffered by the latter
as a result of the medium in which payment was made. But this cannot affect the validity of the
payment. The check as a medium of payment in commercial transactions is too firmly established by
usage to permit of any doubt upon this point at the present day. 18 No importance may thus be
attached to the circumstance that a stop-payment order was issued against said check the day
following the deposit, for the same will not militate against the right of the Tolentinos to redeem, in the
same manner that a withdrawal of the redemption money being deposited cannot be deemed to have
forfeited the right to redeem, such redemption being optional and not compulsory. 19 Withal, it is not
clearly shown that said stop payment order was made in bad faith. But while we uphold the right of
redemption of the Tolentinos, the same does not apply to the homestead land, for the reason that
shall be indicated in the discussion of the third issue.

It is a matter beyond dispute that We can review decisions of the Court of Appeals only on errors of
law, its findings 6f fact being generally conclusive. BPI argued that the default judgment in Civil Case
No. 5432 (CA-G.R. No. 54004-R) had already become final and executory; that the lower court found,
after an investigation was conducted on the matter, that petitioners were duly served with the default
judgment; that this finding was affirmed by the Court of Appeals in CA G.R. No. SP-46321 rendered
on November 15, 1971, which decision G.R. No. SP-46321 rendered on November 15, 1971, which
decision had already been final and, therefore, the question of whether or not petitioners were duly
served with a copy of said judgment should now be considered closed, said question being factual. 20

As may be expected, the Tolentinos maintain that said question is one of law; that they did not in fact
receive a copy of the default judgment; and that the only reason for the finding of the lower court that
there was a valid service of default judgment was the sole testimony of BPI's counsel, who cannot
even recall the date when the alleged service was made, and there is no evidence as to the mode of
such service. 21

In resolving their diametrically opposed propositions, it should be remembered that for a question to
be one of law, it must involve no examination of the probative value of the evidence presented by the
litigants or any of them. 22 The query here presented, necessarily invites calibration of the evidence to
determine whether or not there was really such service. As such, the question must be deemed to be
factual in character and content, and as correctly pointed out by BPI, the jurisprudence on the matter
is that findings of facts of the lower court are accorded the highest degree of respect. 23 It is not the
function of this Court to analyze or weight the evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by the lower court. 24

And as already intimated earlier, appreciation of evidence is within the domain of the respondent
Court of Appeals because its findings of facts, as a general rule, are not reviewable by the Supreme
Court. 25 This has been the oft-repeated and well-established rule which has been reiterated in a long
line of cases enumerated in Chan v. Court of Appeals 26 and Tapas v. Court of Appeals, 27 and in the
more recent cases of Baptista v. Carillo  28 and Vda. de Catindig v. Heirs of Catalino Roque, 29 and We
find no circumstance existing in this case, to justify a departure from the said rule, More importantly,
the petitioners not having appealed therefrom, the decision had already attained the character of
finality. The question of service cannot now be reopened or raised again in this proceedings for
otherwise, there will be no end to a litigation. Public policy and sound practice demand that judgment
of courts should become final at some definite date fixed by law. 30

Finally, We find no abuse of discretion, much less a grave abuse thereof, committed by the lower
court in issuing an order, which was affirmed by respondent Court of Appeals, denying the Tolentinos'
petition for relief from judgment for lack of merit, the same being supported by substantial evidence.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the appealed consolidated decision and

resolution of the Court of Appeals are hereby MODIFIED and judgment is hereby rendered
authorizing the petitioners to redeem the properties subject matter hereof, other than the homestead
land, within thirty (30) days from entry of judgment, and ordering private respondent BPI to execute a
deed of absolute conveyance thereof in favor of the petitioners upon payment by the latter of the
purchase price thereof, with 1% per month interest thereon in addition, up to the time of redemption,
together with the amount of any taxes or assessments which BPI may have paid thereon after
purchase, if any. In all other respects, the aforesaid consolidated decision and resolution of the Court
of Appeals are hereby AFFIRMED. No pronouncement as to costs at this instance.

SO ORDERED.
 SECOND DIVISION

[G.R. No. L-8093. October 29, 1955. ] * 

DOMINADOR NICOLAS and OLIMPIA MATIAS, Plaintiffs-Appellants, v. VICENTA

MATIAS, AMADO CORNEJO, JR., JOSE POLICARPIO, and MATILDE
MANUEL, Defendants-Appellees. 

Jose R. Jacinto for Appellants. 

Roy, Kong & Paraso for Appellees.

SYLLABUS

1. OBLIGATION AND CONTRACT; MORTGAGOR CANNOT ACCELERATE DATE OF

MATURITY WITHOUT MORTGAGEE’S CONSENT; CONSIGNATION; MADE BEFORE DATE
OF MATURITY, VALIDITY OF. — The mortgagors could not, without the mortgagees’
consent, accelerate the date of maturity of the obligation in question, which is payable
after the fifth year from June 29, 1944. Neither could the mortgagees be compelled to
accept payment prior to the expiration of said fifth year. Hence the judicial consignation,
made by the mortgagors in August, 1944, is invalid, except as regards the amount
corresponding to the interest for one (1) year from June 29, 1944. 

2. ID.; PAYMENT; BELLENTYNE SCHEDULE NOT APPLICABLE; WHERE OBLIGATION

FALLS DUE AFTER LIBERATION. — If, according to the stipulation of the parties, the
money to be paid by the debtor to the creditor, or by the vendor with pacto to the
creditor, to redeem the property mortgaged, or sold shall be due and payable after
liberation, as agreed upon by the parties in the present case, it shall be paid in legal
tender or Philippine currency at par value or at the rate of one Philippine peso for each
peso in Japanese military notes; but if it shall be due and payable before liberation after
the liberation shall be made in Philippine currency, in accordance with the Balletyne
schedule. (De la Cruz v. Del Rosario, G.R. No. L-4859, July 24, 1951.) 

3. ID.; ID.; FREEDOM OF PARTIES TO STIPULATE AS TO CURRENCY. — It is settled that

the contracting parties are free to stipulate on the currency in which their respective
obligations shall be settled, and that, wherever, pursuant to the terms of an agreement,
an obligation, assumed during the Japanese Occupation, is not payable until after
liberation of the Philippines, the parties to the agreement are deemed to have intended
that the amount stated in the contract be paid in such currency as may be legal tender
when the obligation becomes due.

DECISION

CONCEPCION, J.:
By an instrument dated June 29, 1944, Vicenta Matias Vda. de Cornejo, and her son,
Amado Cornejo, Jr., mortgaged to the spouses Dominador Nicolas and Olimpia Matias,
four (4) parcels of land, situated in San Roque, municipality of Gapan, Province of Nueva
Ecija, to guarantee the payment of the sum of P30,000 — then lent by the mortgagees
to the mortgagors and received by the latter, in Japanese military notes — one (1) year
after the expiration of five (5) years from said date ("pagbabayaran isang [1] taon
pagkatapos ng limang [5] taong simula sa fecha ng kasulatang ito"), with interest
thereon, at the rate of six per cent (6%) per annum. On July 15, 1944, said mortgagors
offered to pay the debt, with interest for five (5) years, but the mortgagees rejected the
offer. Whereupon, in August, 1944, the mortgagors dnosited judicially the sum of
P39,000 — representing the principal (P30,000), plus interest for five (5) years, at the
stipulated rate — and instituted Civil Case No. 156 of the Court of First Instance of
Nueva Ecija, entitled "Vicenta Matias, Et. Al. v. Dominador Nicolas, Et Al.," for the
purpose of compelling the mortgagees to accept said amount and to discharge the
mortgage. Although holding that the mortgagees were not justified in rejecting the
tender of payment made by the mortgagors, said court rendered judgment, on August
12, 1946, declaring the consignation invalid for failure of the mortgagors to give
previous notice thereof, and sentencing the mortgagors to pay the mortgagees the sum
of P2,000 — as the equivalent in Philippine currency, pursuant to the Ballantyne
schedule, of P30,000 in Japanese military notes — with interest, at the legal rate, from
June 29, 1944. On appeal from this judgment, the Court of Appeals, CA-G. R. No. 554-R
(L-1195), in a decision promulgated on September 16, 1947, held the consignation valid
and the obligation guaranteed by the mortgage fully discharged. The mortgagees,
however, brought the case, for review by writ of certiorari, to this Court, which, in a
decision promulgated on May 29, 1951 * (G. R. No. L-1743), held that the mortgagors
could not, without the mortgagees’ consent, accelerate the date of maturity of the
obligation in question, which is payable after the fifth year from June 29, 1944; that the
mortgagees cannot be compelled to accept payment prior to the expiration of said fifth
year; and that the judicial consignation made by the mortgagors is, consequently,
invalid, except as regards the amount corresponding to the interest for one (1) year
from June 29, 1944. The dipositive part of our aforementioned decision
reads:jgc:chanrobles.com.ph

"Hence we must of necessity declare, that the offer and consignation were not valid,
except for the satisfaction of the interest for the year 1944 which was then due. The
appealed decision will thus be modified. Though the defendants have asked for
judgment against the plaintiffs ’in the sixth year from 1944’ for the amount of the note
plus interest, we must decline to render such judgment now, firstly because at the time
the case was instituted the mortgage was not yet payable, and secondly because there
is the moratorium law. Anyway they will be at liberty to collect that mortgage plus
interest when the moratorium is lifted, and in that foreclosure proceedings the amount
of recovery shall be determined. Let judgment be entered accordingly."cralaw virtua1aw
library

Soon thereafter, or on August 22, 1951, the mortgagees instituted the present action for
foreclosure of said mortgage. The only issue raised in the lower court was whether the
sum of P30,000, lent by the mortgagees in Japanese war notes, should be paid by the
mortgagors in Philippine currency, peso for peso, or in accordance with the Ballantyne
schedule. The lower court chose the latter alternative and, accordingly, rendered
judgment "ordering defendants to pay plaintiffs the amount of P2,000, Philippine
currency, with interest at six per cent (6%) a year, from June 29, 1945, up to the date
when it is actually paid." The case is now before us on appeal taken by the mortgagees. 

In Cruz v. Del Rosario (G. R. No. L-4859) decided on July 24, 1951, it was
held:jgc:chanrobles.com.ph

"In passing upon the petitioner’s first assignment of error, which was the only one that
deserved consideration, and dismissing the petition for certiorari, we have cited in our
minute resolution the cases already decided by this Court as applicable to the present,
not because they are similar in fact and law to this case as the attorneys for the
petitioner erroneously believe, but because the doctrine laid down in those cases is
squarely applicable to the present. That is, if according to the stipulation of the parties,
the money to be paid by the debtor to the creditor, or by the vendor with pacto to the
creditor to redeem the property mortgaged, or sold, shall be due and payable after
liberation as agreed upon by the parties in the present case, it shall be paid in legal
tender or Philippine currency at par value or at the rate of one Philippine peso for each
peso in Japanese military notes; but if it shall be due and payable before liberation it
shall be paid after the liberation in Philippine currency in accordance with the Ballentyne
schedule. Besides, according to the facts found by the Court of Appeals which we cannot
disturb in the present case, in fixing the amount of P5,000 to be paid by a vendor with
pacto de retro to the vendee or by the debtor to his creditor after liberation, the parties
had stipulated that the debtor or vendor, who had received P70,000 in Japanese military
notes, shall pay the said sum of P5,000 Philippine currency within a certain period after
liberation." (Underscoring supplied.) 

This ruling was reiterated in Arevalo v. Barreto (89 Phil., 633) decided on July 31, 1951,
in the following language:jgc:chanrobles.com.ph

"After a consideration of the question raised in the second assignment of error of the
appellant, we are of the opinion, and so hold, that the lower court erred in evaluating
the repurchase price of the property sold and the value of the promissory note, at
P516.70 Philippine currency. The parties have stipulated or agreed that the right to
repurchase the property for P12,000 Philippine Currency ’shall only commence from
January 1, 1947, and shall end on January 10, 1948,’ and the promissory note for
P4,000 Philippine currency ’shall be paid on or after October 31, 1946.’ As the said
amounts were to become due after liberation, they shall be paid in Philippine currency
according to a long line of decisions rendered by this Court. Besides, in the present case,
the agreement of the parties was, not only that said amounts be paid after liberation,
but they had stipulated that of the 60,000 pesos in Japanese military notes, the vendee
shall pay P12,000 in Philippine currency for the repurchase of the property, and of the
20,000 in Japanese military notes received by the plaintiff from the defendant as a loan,
the former shall pay the latter P4,000 in Philippine currency, after liberation." (Italics
supplied.) 

To the same effect was the conclusion reached in the case of Wilson v. Berkenkotter (49
Off. Gaz., p. 1401), in which we said:jgc:chanrobles.com.ph
"In several cases involving the application of the Ballantyne schedule, this Court has
held that said schedule is applicable to obligations contracted during the Japanese
occupation where said obligations are made payable on demand or during said Japanese
occupation, but not after the war or at a specified date or period which may indicate that
the parties were speculating on the continuation or cessation of the war at time of
payment. If the obligation on the part of Wilson to pay Berkenkotter the amount paid by
the latter to wipe out their debt to the Bank was created during the occupation, then the
Ballantyne schedule is applicable; but if said obligation was created before the war,
particularly on date when plaintiff and defendant signed the promissory note in favor of
the Bank, then the Ballantyne schedule may not be applied." (Italics supplied.) 

The foregoing view has been consistently applied by this Court in a number of other
cases, among which the following may be mentioned: Ilusorio v. Busuego, 84 Phil., 630;
Roño v. Gomez, 46 Off. Gaz., Supp. No. 11, 339; Gomez v. Tabia, 47 Off. Gaz., 641,
Ponce de Leon v. Syjuco, 90 Phil., 311; Garcia v. De los Santos, 49 Off. Gaz., 4830.
What is more, the strong dissents written in some of the cases cited indicated that
adherence to said view was effected upon thorough consideration of the different
aspects thereof, that said doctrine is now in the nature of stare decisis and that the
issue is now close as regards this Court. 

It is thus settled that the contracting parties are free to stipulate on the currency in
which their respective obligations shall be settled, and that whenever, pursuant to the
terms of an agreement, an obligation assumed during the Japanese occupation is not
payable until after liberation of the Philippines, the parties to the agreement are deemed
to have intended that the amount stated in the contract be paid in such currency as may
be legal tender at the time when the obligation becomes due. This is, precisely, the
situation obtaining in the case at bar. The deed of mortgage in question provides that
the obligation of the mortgagees shall be paid one year after the expiration of five (5)
years from June 29, 1944, which is the date of said instrument. In other words, the
obligation is not payable until June 29, 1949. Indeed, in the decision of this Court in
case G. R. No. L-1743, we reversed the decision of the Court of Appeals sustaining the
theory of the mortgagors, upon the ground that the latter were not entitled to
accelerate, without the consent of the mortgagees, the date of the maturity of the
obligation; that the mortgagees could not be compelled, and were under no obligation,
to accept the tender of payment made on July 15, 1944 (except as to the interest for
one [1] year) despite the fact that said tender included the interest for five (5) years
from June 29, 1944; and that, consequently, the consignation effected simultaneously
with the institution of civil case No. 156 of the Court of First Instance of Nueva Ecija in
August, 1944, was null and void, with the exception above mentioned. 

In other words, said decision of this Court was implicitly held, and the doctrine laid down
in the cases above referred to, leave us no choice but to declare, as we do, that the
obligation involved in the present case must be satisfied, peso for peso, in Philippine
currency. 

Wherefore, the defendants-appellees are hereby sentenced to pay to the plaintiffs-

appellants, either directly or through he Clerk of the lower court, within ninety (90) days
from the date on which this decision shall become final, the sum of P30,000, in
Philippine currency, with interest thereon at the rate of six per centum (6%) a year,
from June 29, 1945. In default of such payment, let the mortgage in question be
foreclosed in the manner provided by law and the rules of court. 

With costs against the defendants-appellees. So ordered. 

 SECOND DIVISION

[G.R. Nos. 21651-25153. December 29, 1924. ]

LOTHAR F. ENGEL, ET AL., Plaintiffs-Appellees, v. MARIANO VELASCO &

CO., Defendant-Appellant. 

Crossfield & O’Brien and Fisher, DeWitt, Perkins & Brady for Appellant. 

Gibbs & McDonough for Appellees. 

SYLLABUS

1. CONTRACTS; TELEGRAPHIC MESSAGE AS MEDIUM OF COMMUNICATION;

CONFIRMATORY LETTER. — Under the second paragraph of article 51 of the Code of
Commerce, as the same stood prior to its repeal by Act No. 3089, telegraphic
correspondence could not serve as a basis of obligation between contracting parties who
had not admitted this medium in a written contract, nevertheless, where telegraphic
communications are followed by letters expressly referring to the telegrams and
confirming the same, such telegrams become admissible as part of the correspondence
between the parties. 

2. ID.; ID.; ID.; RATIFICATION. — There is nothing in the provision cited which prohibits
the parties to a contract from ratifying agreements effected by telegram; and
subsequent ratification or incorporation if the telegraphic message in a letter of the
same or late date has all the effect of a previous written agreement under said
provision. 

3. ID.; DELAY IN SHIPMENT OF GOODS. — Delay on the part of the seller in dispatching
goods is sufficiently excused where it appears not only that the delay was requested by
the purchaser but also was further rendered necessary by the inability of the purchaser
to comply with an agreement to supply the credit necessary to transport the goods. 

4. ID.; DEVIATION FROM TERMS OF CONTRACT; ACQUIESCENCE OF PURCHASER. —

The purchaser of merchandise will not be released from his obligation to accept and pay
for the goods by deviations on the part of the seller from the exact terms of the
contract, if the purchaser acquiesces in such deviations after due notice thereof. 

5. ID.; ID.; ID.; CASE AT THE BAR. — various minor deviations from the exact terms of
the defendant’s orders are considered by the court and held to be justified under the
circumstances involved in the case, and especially by the circumstance that the plaintiffs
acted as agents for the defendant in placing orders and possessed a certain discretion in
the filling of orders which was recognized as necessary by the defendant.

DECISION

STREET, J.  :
The three consolidated actions now before us were instituted in the Court of First
Instance Manila by Lothar F. Engel, Carl J. Upmann and Max Kummer, of New York City,
copartners under the firm name of Engel, Upmann & Co., a general partnership engaged
in mercantile business in the City of Manila, for the purpose of recovering various sums
of money, with interest, for the alleged failure of the defendant to accept and pay for
various consignments of merchandise ordered from the plaintiffs by the defendant. the
defendant interposed answers in the three cases denying generally the allegations of the
complaints and setting forth various special defenses, with counterclaims and an
affirmative cross action. Upon hearing the proof the trial judge absolved the plaintiffs
from the defendants counterclaims and cross complaint and gave judgment for the
plaintiffs to recover to the defendant the sum of P152,217.74, with interest at six per
centum, to be calculated upon different portions of the total from specified dates. From
this judgment the defendant appealed. 

In reality this appeal involves twenty different cause of action, sixteen of which are set
out in the plaintiffs three complaint, and four in the defendant’s counterclaims and cross
complaint. These various cause of action are set forth fully in the pleadings, and an
analysis of each is found in the appealed decision. The record is necessarily voluminous
beyond the ordinary, but the labor of handling so great a mass of matter is in some
degree lessened by the circumstance that all of the different causes of action present
features in common. 

At the time of the transactions with which we are here concerned the plaintiffs were
export brokers, or jobbers, of textile merchandise in the City of New York, while the
defendant was the owner, as it still is, of a large store in Manila where general
merchandise is sold both at wholesale and retail. In connection with this business the
defendant from time to time has occasion to import textile fabrics on a large scale. In
the beginning of the year 1920 commercial relations were established between the
plaintiffs and the defendant, and in the succeeding three months the defendant, and in
the succeeding three months the defendant sent to the plaintiffs numerous orders for
merchandise. The general course of business between the two parties appears to have
been this: The defendant would first obtain from the plaintiffs by cable information as to
the prices of the goods desired, and would there upon send a cablegram to the plaintiffs,
instructing them to buy and hold specified qualities of goods in the amount and at the
prices stated. Contemporaneously with the sending of the cablegram the defendant
would dispatch by mail more extended instructions, confirming the cablegram and giving
such other advice as was desirable. The cablegram were written in cipher and were
necessarily brief, while the letters of confirmation and vice were more extended,
containing specifications as to pattern in the case of suitings and the stampings in the
case of fabrics commonly called coco blanco. Upon receipt of the cabled order, the
plaintiffs cabled their acceptance in reply, indicating the approximate time of delivery or,
if the goods could not be obtained, so advised. At or about the same time the plaintiffs
placed an order for the same goods with the manufacturer, subject to subsequent
specifications as to patterns and stampings. 

Upon receiving the defendant’s written order by mail the plaintiffs transmitted the
transmitted the instructions contained therein to the manufacturer for the execution and
at the same time prepared and forwarded to the defendant a formal written sales note,
conforming in the main to the terms specified in the previous communications between
the plaintiffs and the defendant. As a result of this procedure the plaintiffs came directly
obligated to the manufacturer who produced the goods, while the defendant became
obligated to the plaintiffs, assuming that all conditions essential to the creation of
liability had been fulfilled. 

It is said that as many as thirty-seven orders were given by the defendant to the
plaintiffs beginning in the month of January, 1920. A number of these orders were duly
honored by the defendant upon the receipt of the goods and the price paid in due
course. The causes of action stated in the three complaints have their origin in sixteen
or seventeen orders nearly all of which were sent to the plaintiffs between February 5
and April 2, 1920, inclusive. These orders appear to have been promptly placed with the
manufacturers by the plaintiffs, but delay occurred in the matter of shipment; and when
delivery was finally tendered in Manila of the goods covered by the orders included in
actions 19917 and 201637 of the lower court, acceptance was refused. These goods
were there upon sold by the plaintiffs in Manila and claim made upon the defendant for
the difference between the amount realized and the contract price. The goods involved
in the orders covered by case No. 20321 were never shipped from New York to Manila.
and after it was found that said goods would not be here accepted, the plaintiffs caused
the same to be sold in New York City. 

The plaintiffs proceed upon the idea of breach of contract on the part of the defendant in
its failure to accept and to pay for the goods covered by the orders above referred to.
On the part of the defense a preliminary question is made with reference to the
admissibility of so much of the correspondence as was conducted by cable, and for the
rest it is claimed that the plaintiffs have not complied with the terms of the various
orders and that the refusal of the defendant to accept and pay for the goods in question
was justified. 

To dispose first of the controversy regarding the admissibility of the cablegrams,

reference must be made to paragraph 2 of article 51 of the Code of Commerce, as it
stood prior to the enactment of Act No. 3098 of the Philippine Legislature by which said
paragraph was repealed. The provision referred to is as follows:jgc:chanrobles.com.ph

"Telegraphic correspondence shall only be the basis of an obligation between contracting

parties who have previously admitted this medium in a written contract, and provided
the telegram fulfill the conventional conditions or conventional signs which may have
been previously fixed and agreed to by the contracting parties."cralaw virtua1aw library

This provision was in force at the time all of the orders involved in this litigation were
given, and it is therefore insisted that the messages transmitted by cable are
inadmissible against the defendant. In this agreement is in evidence by which the
parties expressly admitted telegraphic correspondence with the plaintiffs had been
supplied by the latter. 

We are unable to concede to this provision the effect claimed for it by the defendant,
namely, of eliminating entirely from the case so much of the correspondence as was
conducted by cable. Upon examining the documentary proof, it will be found that upon
sending its orders by cable, the defendant followed with letters of confirmation by mail,
in which the various cables were referred to and in effect incorporated in the written
correspondence. By reason of this circumstance it is proper to refer to the cablegrams in
relation with the letters. There is nothing in the provision quoted from article 51 which
prohibits parties to a contract from ratifying agreements effected by telegraphic
communications; and subsequent ratification, or incorporation of the telegraphic
communications in written letters of the same or later date, must be conceded to have
all the effect of a previous written agreement under the provision quoted. Furthermore,
it is apparent that even under the statute telegraphic communication conveying
notification of acts done could not be ignored, where the basis of a contract has already
been established, and the same must be true of telegraphic directions communicated by
one contracting party to another in relation with the performance of the contract. In this
connection we note that the attorneys for the defendant, while vigorously insisting upon
the elimination of the telegraphic correspondence in general, have not hesitated to rely
upon more than one cablegram passing between the parties. 

The failure of the defendant to accept and pay for all the goods ordered and shipped to
Manila was undoubtedly due, as will hereafter more fully appear, to the inability of the
defendant to command the funds necessary to meet the obligation, but when confronted
with the necessity of dishonoring the orders, the responsible officers of the defendant
put forth various pretexts to justify its position. Several of this excuses are manifestly of
trivial import, but inasmuch as they have been called upon to do service in the
defendant’s answer and cross complaint, they will be examined by us in due time. 

The principal defense, and the one which requires most attentive consideration, is that
which has relation to the belated dates of shipment of the goods from New York City, in
the case of these goods which were actually dispatched, and the failure of the plaintiffs
to dispatch in the stipulated time such of the goods as never left New York. In this
connection we note that the dates for delivery, or shipment, specified in the different
sales notes relating to the goods which were in fact sent to Manila, run through the
months of May, June, July, August, September and December, while the actual dates of
departure of said goods from New York City were in September, October and December,
1920, and there was one shipment which, for reasons to be explained, occurred as late
as May, 1921. 

Upon giving its orders the defendant in each case specified the time when delivery was
desired, adding in nearly every instance, the words "sooner, if possible." In conformity
with the suggestion contained in these words the plaintiffs, in specifying the time do
delivery and their sales notes, nearly always added the same word, "sooner if possible."
It resulted that the plaintiffs were at liberty to ship all of the ordered goods at an earlier
date than that specified, if practicable; and except for the circumstances presently to be
mentioned, they were obligated to make deliveries at least as soon as the dates
specified for delivery or shipment of each order. 

Upon the delays that actually occurred in shipment, as above indicated, the defense
claims that delivery was not made within the time specified in the contract and that as a
consequence the defendant should be absolved from all liability. The answer to this
question requires an exposition of events that occurred between the time when the
goods were shipped, and of the manner in which the relations of the parties to this
contract were affected by said occurrences as revealed in their correspondences by cable
and by letters. 

It will remembered that the early months of the year 1920 constituted a period of
unparalleled activity in industrial and mercantile circles. The prices of textile fabrics, in
common with other commodities, had reached very high levels in said period. and it
seemed to many merchants that the extraordinarily prosperous conditions through which
the world of industry was then passing would continue for a considerable time. Now, all
of the defendant’s orders with which we are here concerned were given while prices
were rising and before the peak was reached in May, 1920. The defendant company
appears to have had a large business, and in connection with its own requirements as a
dealer in merchandise, both at wholesale and retail, it had adopted a practice of giving
orders in its own name for the shipment of goods to other merchants, its customer in
the Philippine Islands, who did not have a high mercantile rating and who could not
command the credit facilities necessary to enable them to import goods upon their own
account. the officers in charge of the defendant company appear at about the same time
to have conceived the ambition of gaining complete control of the textile market in the
Philippine Islands, and this circumstance possibly accounts in part for the large orders
which were transmitted by the defendant to the plaintiffs. 

A touch of reaction was felt by the trade in Manila in the month of May, owing to the fact
that the banks about that time were becoming somewhat wary, and credit facilities were
not so easily commanded by importers as before. The situations in this respect became
more delicate as weeks passed, and the textile market soon began to decline. In
September and October the real crash came, enormous declines in values being
registered in all lines. The last three orders here in litigation were given by the
defendant in the first half of the month of May, 1920, and in the two months that
followed the officers of the defendant company apparently began to feel that they had
overdone the matter of giving orders. Thus, on July 7, 1921, the defendant cabled the
plaintiffs to delay as much as possible the shipments of its orders of coco blanco
(Amsinck red), and in a letter of the same date, explanatory of this cablegram, the
defendant said: "During the last two months business is absolutely dead in textiles as
well as in other lines and we don’t think there will be a change for the better in the next
few months. There is no ready money available here and the banks refuse to open
credit, claiming that they have no gold on hand." And in a postscript to the same letter
the defendant added: "P.S. — in view of the bad situation of the market we beg you to
retard the shipment of coco blanco and coco encarnado as much as possible."cralaw
virtua1aw library

It will be noted that part of the goods mentioned in these communications were goods
that had been ordered by the defendant for direct shipment upon the defendant’s
account to Chua Soco, one of the large customers of the defendant in Manila. Others of
the goods referred to were goods that were intended for the defendant ’s own store. In a
latter cablegram, of July 19, the defendant, referring specifically to the Chua Soco
orders, directed that shipment should not be made earlier than September; and in a
letter explanatory of this cablegram, the defendant said:jgc:chanrobles.com.ph

"Referring to our cablegram regarding Chua Soco please note, that present hauling
(sic?) conditions are in such a state, that it is impossible for us or any one else to open
up a credit in gold anywhere. 

"This has nothing to do at all with the standing of a commercial house, but the banks
here claim, that they have no gold at present and a change of the present situation
cannot be expected before a month from now. 

"In view of the present situation, Mr. Chua Soco begs that the shipment of his orders
covered by the two credits in question be postponed until September, which month
means the end of the rainy season here and in October, November, when these goods
would arrive, business is picking up as usual at that time of the year."cralaw virtua1aw
library

At an early stage of the correspondence between the plaintiffs and the defendant the
latter had agreed to supply through banking agencies in New York confirmed letters of
credit to cover the price of such goods as the defendant should order to be sent upon its
account directly to defendant’s customers, like Chua Soco, in Manila. As for the goods
which were to be shipped directly to the defendant, no express undertaking to supply
confirmed letters of credit appears to have been made, but the first letter written by the
defendant to the plaintiffs (Exhibit A) contained the following paragraph concerning the
discounting of the drafts to be drawn on the defendant for the goods to be ordered by
it:jgc:chanrobles.com.ph

"Should there be any difficulty in discounting your drafts on us then please cable and we
shall arranged this matter by wire."cralaw virtua1aw library

This communication is important; for as will be seen, the solution of the cases before us
depends mainly upon the failure of the defendant to supply the draft discounting
facilities promised in this paragraph. Certainly, it was not contemplated that the
plaintiffs should handle the vast amount of merchandise involved in these transactions
on its own unassisted credit; and the credit of the defendant was so highly esteemed in
banking circles that no trouble was expected in the matter of the necessary banking
arrangements. An indication of the plaintiffs’ position was conveyed in its letter of April
16 to the defendant, as follows:jgc:chanrobles.com.ph

"Whereas we had the good fortune of being able to make a favorable arrangement with
our own bank for a fairly large drafts credit when our business was in its infancy, it was
our plan to make use of this credit partially for your business but find this impossible for
our business in Central and South America which has grown very large of late. 

"It is with regret therefore that we have to ask you to take the necessary steps to open
credits in our favor against orders in excess of $40,000 to $50,000, which we believe
will be easy at your end."cralaw virtua1aw library

In May, 1920, the plaintiffs ascertained from the bank which had been handling the
defendant’s paper in New York City that it would not discount drafts thereafter drawn by
the plaintiffs upon the defendant for amounts in excess of $50,000, in the absence of
confirmed letters of credit from Manila. The plaintiffs thereupon cabled this information
to the defendant and asked it to make necessary arrangements. On June 18 the
plaintiffs advised that the same bank (American Foreign Banking Corporation) would
take no further drafts without security and asked the defendant if it had opened credit.
To this the defendant replied that it had sent forward credit for P50,000 through the
Philippine National Bank. 

On September 14, 1920, the defendant cabled the plaintiffs as

follows:jgc:chanrobles.com.ph

"Quite impossible at present obtained credit. Can you ship draw at sixty days sight
payable in exchange for documents?" 

On the same date the defendant wrote the plaintiffs a letter in which it
said:jgc:chanrobles.com.ph

"We beg to confirm our telegrams of even date translation of which find attached. 

"We have tried our best to obtain credits from the banks but without success so far and
we don’t know when condition will change. Unless a firm does also export business it is
impossible to get credits in gold. 

"We hope, that you will be able to ship our orders as we are sure that within three to
five months from now there will be a shortage of goods in this market."cralaw virtua1aw
library

In reply to the cablegram of September 20, the plaintiffs, in September 25, cabled the
defendant as follows:jgc:chanrobles.com.ph

"Not able to make arrangements draft credit. Please arrange by wire a credit for us as
soon as possible $100,000. Goods now ready for shipment $50,000."cralaw virtua1aw
library

On September 29, 1920, in reply to plaintiffs’ cablegram of September 25, the

defendant cabled as follows:jgc:chanrobles.com.ph

"Upon no consideration whatever bank give credit for the present on account of imports.
No one knows how long it will take conditions to alter. Will telegraph immediately there
is any change."cralaw virtua1aw library

On October 6, plaintiffs in reply to defendant’s above quoted cable of September 29

cabled:jgc:chanrobles.com.ph

"Cannot hold goods long time. We cannot discount drafts. We must pay prompt. Do the
best possible. Please arrange by wire a credit for us."cralaw virtua1aw library

On October 27, plaintiffs further wired defendant as follows:jgc:chanrobles.com.ph

"We are informed credit can be arranged apply to China Banking Corporation. Are much
in need of $75,000."cralaw virtua1aw library

On October 30, defendant in reply to the foregoing cable, wrote a letter in which, among
other things, it said:jgc:chanrobles.com.ph

"We beg to acknowledge receipt of your cablegram as per translation enclosed. As

already mentioned in our former letters, it is impossible to get a credit, also not from the
Chinese Banking Corporation. We have tried every thing possible to get credit, but it is
an impossibility for us as well as for our competitors. The market is at standstill and no
business transactions are made at all."cralaw virtua1aw library

Meanwhile the goods to supply the defendant’s orders were coming in upon the plaintiffs
from the factories, and it was necessary for the plaintiffs to meet its obligations.
Confronted with the breakdown of the defendant’s credit, the plaintiffs had no other
recourse than to act upon defendant’s cable of September 14 and ship the goods out
with drafts at sixty days on the defendant. In making these shipments the plaintiffs were
not able to discount the drafts in full, but were able to obtain advances for a certain
percentage. Necessarily, when the drafts were dishonored, the plaintiffs were compelled
to take them up and refund the amount advanced upon them. All of the goods involved
in case 19917 and 20637 of the lower court appear to have been dispatched in this
manner upon dates and in amounts as follows:jgc:chanrobles.com.ph

"Goods to the value of $20, 510.02, loaded Sept. 25, 1920; $17,740.74 on Bolton
Castle, which sailed Oct. 14; and $2,769.28 on S.S. Telemachus, which sailed Sept. 25. 

"Goods to the value of $29,632.82, loaded in early part of November on S.S. Satsuma,
which sailed Dec. 4. 

"Goods to the value of $15,539.04, loaded end of November or early part of December
on S.S. Duquesne, which sailed on Dec. 9. 

"Goods to the value of $12,352.68, loaded on S.S. Haleric, which sailed on May 8,
1921."cralaw virtua1aw library

On November 6 the plaintiffs informed the defendant by cable of the first shipment
above noted, against sixty-day sight drafts. In reply to this advice the defendant, on
November 9, cabled the plaintiffs as follows:jgc:chanrobles.com.ph

"Cease all shipments. We cannot meet drafts, due to money scarcity."cralaw virtua1aw
library

On the following day the defendant wrote to the plaintiffs to the following
effect:jgc:chanrobles.com.ph

"We beg to confirm our cablegram of even date translation of which please find
enchosed. Business at present is at a stand still and there is no hope, as far as we can
see, that business will get better within the first two months. 

"At present we are not selling one-twentieth part of that what we sell in regular times
and as business has been like this for the last three months you will be able to figure out
what this means for us. 
"There is absolutely no money obtained her in the Philippines; also the banks have no
money and will not give credit or extend drafts. 

"We are very sorry indeed, as this is the first time that we ever had to stop our orders;
but if our orders are coming forward, we shall not be able to take up the drafts for the
want of money or credit. Of course everybody else is in the same fix."cralaw virtua1aw
library

Upon receipt of defendant’s cable of November 9 plaintiffs

answered:jgc:chanrobles.com.ph

"We expect payment of all drafts. $30,000 is all on board steamer. We shall draw on you
at sixty days sight. We cannot hold goods longer. We have much need of money
because pending orders must be paid by us."cralaw virtua1aw library

In reply to the foregoing cable of the plaintiffs, defendant again cabled as

follows:jgc:chanrobles.com.ph

"It is now impossible pay drafts. Quite a panic in the market. Bank cancel loan, refuse
credit."cralaw virtua1aw library

In a letter of December 13 the plaintiffs, in explanation of the course pursued by them,

made this statement:jgc:chanrobles.com.ph

"In view of your cable of September 14, in which you authorized is to draw sixty days
sight drafts, we made our arrangements accordingly. In order to meet your wishes we
delayed our shipments as long as we were able to; however, we could not hold them
back for any further length of time and were compelled to get the goods under
way."cralaw virtua1aw library

The shipment aboard the Duquesne, of December 9, appears to have been made,
notwithstanding the defendant’s cablegram of November 9, because the plaintiffs had
already been compelled to take delivery and pay for the goods thus shipped and
because the only reason given in the cable of November 9, because the plaintiffs that
Mr. Kummer, who was then on his way to Manila, would be able by extensions of time to
arrange for payment by defendant. 

The last shipment in the Haleric, made on May 8, 1921, was of coco encarnado under
order No. 707. The material included in this order was specially stamped under
instructions from defendant for the Manila trade with Tagalog stamping and could not be
advantageously disposed of in any other market. Said goods had been retained in New
York pending efforts of Mr. Kummer to arrange matters with defendant, and upon his
ascertaining that he could not do so, were shipped to Manila for sale here. 

The goods which are the subject of action in case No. 20321 of the lower court are said
to have been held in New York in account of the plaintiffs’ inability to get further
advances from the banks, the factories meanwhile having the plaintiffs’ negotiations with
the defendant in Manila had proved fruitless, it was decided that these goods could be
disposed of more advantageously in the New York market, and they were accordingly
sold there for the account of the defendant. 

From the correspondence exhibited above it is plain that the defendant is not in a
position successfully to invoke delay in the making of shipments as ground for its release
from the obligation to pay for the merchandise. When the defendant found itself caught
with these large orders in a paralyzed market, the only hope that presented itself to the
defendant’s officers was that the shipments might be delayed for a few months until
business should improve, as was expected would be the case in the autumn. The
requests for delay contained in the cables and letters if July 7 and September 14 were
accordingly dispatched, and the plaintiffs were kept well informed as to the situation in
which the defendant was placed. The requests for delay, as well as the proven inability
of the defendant to comply with its promise to supply the credit necessary to move the
goods, considered as a ground for the dissolution of the defendant’s obligations. It
should be noted that the cable and the letter of September 14 were dispatched at a date
subsequent to the times originally stipulated for shipments of most of the goods,
indicating that the defendant waived the delay in delivery. Upon referring to the
plaintiffs’ acceptances it will be noted that one small shipment of moderate amount was
to be shipped in December, while only three others were scheduled for date as late as
September. All the other shipments had been intended for dates then already past,
namely, in May, June, July and August. 

The attorneys for the defendant submit the surmise that the plaintiffs were really not in
a position to have shipped the goods anyway, owing to the previous urgent demand in
all markets for textile goods, — a demand which abated only when the reaction came in
the autumn. How much truth there may be in this suggestion it is unnecessary to
inquire. the defendant could have tested the matter by standing strictly on its contract,
without further compromising itself by requests for delayed shipments. We may observe
in passing that it is not necessary to hold that the original contracts were abrogated and
a new agreement substituted by mutual agreement of the parties as a consequence of
the communications above mentioned; and all discussion of the question whether the
minds of the parties ever met in a complete new agreement, with the condition that the
plaintiffs should ship against sixty-day sight drafts, is superfluous. It is enough to say
that delay in the shipment of the goods was favorable to the defendant and was in effect
requested by it. 

Other contentions advanced for the defendant as justification of the nonacceptance of

the goods are based upon minor deviations in the consignments from the literal terms of
the defendant’s orders. In this connection we note: (1) That the length of some of the
pieces of merchandise shipped by the plaintiffs were not exactly fifty yards as specified
in the written order by deviated there from in some instances to the extent of several of
several yards; (2) that some of the orders of the defendant were delivered in single
shipments whereas partial shipments had been specified in the orders. and vice versa;
(3) that the plaintiffs had shipped some of the goods in question after they had received
the cablegram of November 9 instructing them to cease shipments; (4) and, finally, that
the date of contemplated delivery specified in the sales notes did not conform in all
respects to the exact terms of the written orders. 

As to the deviation in the lengths of pieces, it appears that manufactures of fabrics of

the kind here in question do not put up the goods in pieces of exactly fifty yards length,
the practice being to make the pieces of about the specified lengths. In conformity with
this usage, the private code of the plaintiffs, which was being used by the defendant,
was so constructed that the code words referring to particular qualities of goods
indicated pieces of length of about fifty yards; and the defendant’s cablegrams therefore
called for pieces of this length. In preparing the written orders, however, corresponding
to some of these cablegrams, the individual in charge of defendant’s correspondence
department by mistake indicated lengths of fifty without qualification, instead of about
fifty yards, in some of these orders. The plaintiffs sales notes corresponded with the
cabled order, with the result that some deviation from the stated length was discovered
in these lots, the pieces being longer than had been called for. As the goods were to be
paid for by the yard, the resulting price was somewhat greater than it otherwise would
have been. 

With reference to the irregular deliveries, namely, delivery by partial shipments where
delivery of the whole was called for, or of the whole where partial shipments were called
for, we note that in one or more instances the defendant’s written orders specified the
manner of delivery, and that these instructions were not in all case observed by the
plaintiffs. The explanation given of this is that in view of the delays that had occurred
the plaintiffs considered that the advice to ship part of an order on one boat and part on
the following boat had lapsed. Furthermore, in view of the confessed inability of the
defendant to finance the shipments, the plaintiffs say that they shipped as much as they
could on their own credit but were not able to ship all; and; therefore, in the exercise of
a fair discretion, and with a view to relieving the defendant as much as possible they
thought best to distribute their shipments over several classes of goods rather than to
ship one or more larger orders entire. 

In regard to the plaintiffs’ shipment of goods after the receipt of the cablegram of
November 9 from the defendant instructing the plaintiffs to cease shipment, the
plaintiffs suggest that said cablegram was not interpreted as a flat repudiation of the
contract but was taken rather as a temporary cry of distress, owing to the inability of the
defendant to meet its financial arrangements; and it was believed that the plaintiffs’
representative, Mr. Kummer, could adjust the matter by making arrangement for long
extensions in Manila. Some of the goods were therefore forwarded that might have been
stopped; but others had already been embarked and the shipment could not be recalled
though the sailing of the vessel occurred after the cablegram was received. 

None of the contentions above referred to, nor others of less moment, constitutes in our
opinion any sufficient ground of absolving the defendant from liability. None of these
contentions came to light in the defendant’s correspondence; and even while
negotiations were being conducted in the early months of 1921 between Kummer, the
plaintiffs’ representative, and the defendant, no word of complaint from the defendant
was heard upon any of these points. Even the question about the undue delay in the
shipment of the goods was never raise by the defendant until the drafts covering the
goods shipped in the autumn began to arrive in Manila and were presented by the bank
to the defendant. Then finding itself without funds and unable to confront the situation,
the defendant put forth the claim that the shipment of the goods had been out of time.
That this was a mere pretext, and felt to be such, appears clearly from the testimony of
the individual who had charge of the correspondence in the defendant’s import
department. We may add that when Mr. Kummer was engaged in negotiations with the
defendant in Manila, its manager made no complaint or recrimination against the
plaintiffs on any score, except as to the quality of the goods covered by one order; and
its refusal to accept the goods was placed exclusively on the ground of money scarcity
and the drop in prices. when Kummer, by way of compromise, offered to extend the
drafts from six to nine months the defendant’s manager refused, with the observation
that if the matter were left to the course of law, the litigation could be protracted
probably for three years, thereby assuring the defendant cheap money — or words to
that effect. 

There is another feature of the case which is pertinent to all of the contentions now
advanced by the defendant as a justification of its denial liability. It will be remembered
that the plaintiffs were brokers, and the proof shows that the defendant considered
them in the light of agents. The cabled orders themselves show that the defendant
treated the plaintiffs as agents for making these purchases. "Buy and hold" was the
formula uniformly used in these instructions. The defendant’s officers were well aware
that under the conditions then existing, buyers could not be dictators and that the
merchant who undertook to stand on precise details on every point would probably not
get any goods. The contract relation between plaintiffs and defendant was technically
that of seller and buyer, but in considering the acts of the parties in the course of
performance and the interpretation to be placed on the contracts, it is not improper to
bear in mind that the plaintiffs were acting as agents of the defendant in the placing of
orders. In this capacity the plaintiffs undoubtedly possessed a certain discretion, which
was recognized as necessary by the defendant acquiesced in such deviations on the part
of the plaintiffs from written orders as have been made the subject of criticism. 

A situation requiring a few words of comment is revealed in the contention contained in

the third cause of action in case No. 20637 of the lower court, which relates to an
alleged excessive shipment of Turkish red. In this connection it appears that in February,
1920, the defendant had dispatched a letter to the plaintiffs, requesting prices and
samples for twenty-five inches wide and twenty-four yards per pieces. In response to
this the plaintiffs, quoted on two thousand pieces. Later the defendant cabled an order,
followed by a letter, directing the shipment of one thousand pieces. Upon this order the
plaintiffs purchase and held for the defendant enough of the unfinished material to make
one thousand pieces of fifty yards each, explaining in their letter of May 14 that all prints
are usually sold in pieces of fifty yards lengths. 

It appears that the plaintiffs intended to inclose the sales note relating to this
transaction in this letter, but apparently the sales note was not inclosed, as the same
document, produced in evidence by the defendant, bears date of May 25, having
probably been forwarded by later mail. In the natural course of events the letter of the
plaintiffs of May 14, 1920, explaining what had been done, must have reached the
defendant at least by the first days of July; and it was on July 7, 1920, that the
defendant cabled to the plaintiffs to delay as much as possible the shipment of coco
blanco and Turkish red. Instructions to the same effect were contained in a letter of the
same date confirming said cablegram. Neither in this letter nor in any subsequent
communication did the defendant make any complaint as to the excessive quantity of
the Turkish red which had been bought for it by the plaintiffs. On the contrary, as we
have already seen, in its letter of September 14 the defendant expressed the earnest
hope that the plaintiffs would be able to ship the orders ("our orders") upon drafts at
sixty-day sight. Upon the facts stated the trial judge held that the defendant was
estopped from rejecting the surplus or any part of the order. His conclusion on this point
appears to us to be correct. If not satisfied with what had been done by the plaintiffs, it
was the duty of the defendant to have indicated its dissent, and under the circumstances
it is estopped from now making a question as to excess in the shipment. 

What has been thus far said is sufficient, we believe, to dispose of the main contentions
advanced in justification of the defendant’s refusal to accept the goods; and other less
important contentions advanced in its behalf must necessarily be determined upon
similar considerations. Moreover, the same consideration that are fatal to the defense in
the controversies presented in the plaintiffs’ three original complaints are also decisive
against the contentions advanced by the defendant in its counterclaims and cross
complaint, with a single exception now to be discussed. 

The goods involved in the controversy now to be considered were intended for Chua
Soco and were paid for upon arrival in Manila from a letter of credit that had been
supplied by the defendant. As there was no default in the matter of payment for these
goods, they are not involved in any of the plaintiffs’ actions. The controversy was
therefore presented by the defendant itself in its independent cross complaint (first of
action). 

It appears that the finishers of textile goods are accustomed to use a certain unbleached
cloth, or grey sheeting, as a basis for two different finished goods, namely, the cambrid
finish and the madapolan finish. the only difference between the two is that the cambric
finish is smooth while the madapolan finish is somewhat coarse and stiff. The cost of the
different finishes appears from the testimony of Mr. Kummer to be the same. The
defendant’s order called for quality No. 5119, which indicates a cambric finish. This
order was not accompanied by stamping instructions, this matter being left to future
direction. Upon receiving the order for quality No. 5119, the plaintiffs bought grey
sheetings in sufficient quality to supply the order, supposing that the goods were to be
given a cambric finish. Later, the stamping instructions were received, accompanied by a
model of the label to be placed on goods. This label bore the words "Extra
Madapolan."cralaw virtua1aw library

Upon receiving this model, seeing that the brand indicated madapolan finish, the
plaintiffs naturally concluded that the defendant intended a modification of its order
upon this point. This conclusion was the more reasonable as the distinction between
cambric finish and madapolan finish is well known to the trade, and it would be a
misrepresentation for any seller of textile goods to put upon the market cambric goods
under the madapolan brand. The plaintiffs accordingly gave the goods the madapolan
finish and stamped it with a label conforming to the model supplied by the defendant. 

When thirteen cases of these goods reached Manila they were rejected by Chua Soco,
for whom they had been ordered, and were thrown back on the defendant’s hands and
sold by it at a loss. There can be no question that Chua Soco had a right to reject the
goods because he had ordered cambric finish from the defendant, and the goods were
different from what he had ordered. But it is quite evident that the defendant has no
cause of complaint against the plaintiffs, upon either legal or moral grounds. When the
defendants manager sent the stamping instructions, he was perhaps inadvertent to the
distinction between cambric finish and madapolan finish; but the error was his, and the
loss resulting from the failure of Chua Soco to accept the goods cannot be shifted upon
the plaintiffs, who appear to have acted in good faith. We need only add that the claim
put forth by the defendant to the effect that, apart from the finish, the goods comprised
in this consignment were materially inferior in quality to the kind contracted for is not
established by a preponderance of the evidence. We note that there were really twenty
cases of goods involve in the order which is now under discussion, and only thirteen
case were actually shipped to Manila. The other seven were never shipped, and no
damages were claimed by the plaintiffs with respect to these. This circumstance
materially reduces the excess contained in the plaintiffs’ acceptance over the amount
which the defendant had actually ordered, though not otherwise affecting the legal
aspects of the case. In view of the course that events took, the failure of the plaintiffs to
ship the seven cases was beneficial to the defendant and cannot now be made the
subject of complaint. 

The foregoing discussion suffices to dispose of the grounds upon which the appellant
seeks to justify its refusal to accept the goods, though we are aware that a number of
points have been vigorously pressed in the voluminous briefs of the appellant which
have not been touched upon in this opinion. the general discussion, however, indicates
what the solution of those matters would necessarily be if analyzed in accordance with
the ideas her accepted. For the rest we are content to refer to the lengthier exposition
contained in the opinion of the trial court with which, barring one or two points, we fully
agree. We accordingly proceed to consider these features of the case that are connected
with the consequences of the defendant’s breach of contract. 

When the plaintiffs’ efforts to induce the defendant to accept and pay for the goods
finally proved fruitless, they elected to treat the contract as broken and to sue for
damages, and at the same time, in order to limit the loss, they proceeded to sell the
goods in Manila and New York for the best prices obtainable, after notification of the
defendant. 

The right of the seller to treat the contract as abrogated in case of nonacceptance by the
buyer and to sue for damages for the breach, without the formality of judicial rescission,
is not called in this case by the attorneys for the defendant; and the matter needs no
comment her further than to say that this practice has of late years been sanctioned by
this court in more than one case involving the breach of a mercantile contract. 

While the defendant has not called in question the diligence of the plaintiffs with respect
to obtaining the best prices procurable for the goods at the time sold, criticism is made
with respect to the time at which the sales took place; and it is insisted that the sales
were made so long after defendant’s default that the prices received afford no just basis
for estimating the market prices of the goods at the time of default. It is true that
considerable time elapsed between default and the dates of the sales; but it does not
appear that it would have been practicable to have made the sales sooner, and the
proofs shows that the market price of textiles at the time the sales were effected were
at least equal to the market price at the date of defendant’s default, while the two lots
which were sold latest sold for a higher price. the defendant was therefore not
prejudiced by this delay. 
With respect to the goods which were actually dispatched to Manila the trial court
allowed interest at the rate of six per centum per annum upon the total amount due,
estimated from the respective dates when the goods were embarked from New York
City. In the case of the goods which were retained in New York City interest at the legal
rate was allowed from the time when the manufacturers delivered the goods to the
plaintiffs. This was the time when the plaintiffs had to pay for the goods, and the time
when they were prepared to ship, as they would have been sooner , but for the course
pursued by the defendant. We see no error in the action of the court upon this point. By
the terms of the contract the price was to be due when the goods were placed on board
the vessels for shipment; and except for default of the defendant in failing to make and
timely arrangement for payment, all of the goods which were dispatched would have
been at its disposal from the date of embarkation. By article 341 of the Code of
Commerce delay in the payment of the price of merchandise obligate the purchaser to
pay the legal rate of interest on the amount due to the seller. 

The last point necessary to be discussed in this opinion has relation to a question which
is treated in the briefs under the topic "Exchange," but which is really rather a problem
in the conversion of the plaintiffs’ claim for damages, as estimated in American
currency, into Philippine currency. This matter is not discussed in the appealed decision,
as no question was raised in the lower court as to the propriety of the method of
computation used by the plaintiffs in their complaint and the accompanying bill of
particulars. 

The facts necessary to make this question intelligible are as follows: The prices charged
by the plaintiffs for the goods covered by the orders which gave rise to this litigation
were expressed in American currency, and it was agreed that on the shipment of the
goods the plaintiffs should draw in the defendant in Manila for the amount due. As we
have already seen the defendant in Manila for the amount to arrange the necessary
credit, through proper banking channels, to enable the plaintiffs to negotiate the drafts,
and it was the duty of the defendant to accept and pay said drafts in Manila. The goods
covered by the orders which are the subject of action in case No. 20321 were never
shipped to Manila, and in the complaint in said case the plaintiffs did not ask to be
allowed "Exchange." As a consequences the court did not there allow this item, and the
question which we are now to consider is not in any wise involved in that case. In case
No. 19917 and 20637 the goods were shipped and drafts drawn on the defendant in
Manila for the value thereof. All of the drafts so drawn were expressed in dollars, United
States currency, and some were stamped as "Payable at the bank’s selling rate for sight
drafts on New York." In accordance with banking practice it would have been necessary
of course for the defendant, in case it had accepted the drafts, to have satisfied the
same by paying an amount of Philippine currency equivalent to the value to the drafts
expressed in dollars, as of the date of payment. 

It well known fact in our economic history that during the period when these
transactions occurred, Philippine currency had become depressed, owing to the depletion
of our gold-standard fund; and it was proved by the plaintiffs at the hearing of this
cause, and not questioned by the defendant, that at the time when the defendant’s
default occurred American currency commanded a premium of thirteen and one-half per
centum above parity in relation to Philippine pesos. In the liquidation submitted by the
plaintiffs, in connection with its complaints in the two causes above mentioned, the
plaintiffs’ claims for damages in dollars, as of the date of the defendant’s defaults, are
converted into Philippine currency upon the basis of the premium then commanded by
American currency. 

It further appears that when the drafts drawn by the plaintiffs’ representative, Mr.
Kummer, took up at the banks in Manila some of these drafts. amounting to twenty
thousand dollars ($20,000), for which he paid in Philippine currency at the rate of
premium for dollars as above indicated. The depression in Philippine currency is now
past, and the court takes judicial notice of the fact that Philippine pesos have again
returned to parity with American gold, which means that the Philippine peso is now
worth fifty cents gold in Manila. 

Upon the foregoing facts the defendant-appellant contends that there is error in the
judgment of the court below, in that, in the liquidation of the account, as submitted by
the plaintiffs and adopted by the lower court, the defendant is charge, in the conversion
of American currency into Philippine currency, with a premium at the rate of thirteen and
one-half centum; and it is insisted for the defendant that the plaintiffs can only be
allowed a judgment which should either be expressed in American currency or which
should be expressed in Philippine currency at the rate now current of two pesos for one
dollar. 

Thus question thus presented has certain perplexing aspects, but two propositions seem
to be clear beyond the possibility of dispute. The first is that the judgment of this court
should be expressed in Philippine currency, which is the lawful currency of these Islands
and the only currency in universal use. The circumstance that gold coins of the United
States are by law made a legal tender in these Islands for all debts, public and private,
at the rate of one dollar for two pesos (Admin. Code 1612) does not effect the
proposition that the judgments of the courts here should be expressed in our own
currency. When the sheriff is dispatched with execution in hand to make money in
satisfaction of a judgment, he is commanded to collect the debt or make the money in
Philippine currency and not in dollars or in the money of any other country. 

The second obvious thing is that the questions now before us is not a question of
exchange, or reexchange, in the sense merely of a charge for the transmission of money
between manila and New York. The question is chiefly one of monetary equivalence, and
although this equivalence would be commonly determined by the rate of exchange for
drafts, nevertheless, it is not the cost of transmitting this money from Manila to New
York which the plaintiffs is primarily entitled to recover, by the equivalent of the
plaintiffs’ claim stated in Philippine currency. This conducts us to the real point which is
to be decided, which is whether, in converting the plaintiffs’ claim from dollars to pesos,
we shall take the value prevailing at the time of defendant’s breach or that prevailing
supposedly at the date of this judgment. 

It should be explained here that on September 26, 1924, this court promulgated an
opinion , written by this ponente, in which the decision of the lower court in the cases
now before us was in all respects affirmed, but a petition for a reconsideration was filed
by the appellant and the court was so far impressed with the merit of the petition that it
caused the cases to be set for reargument upon this point only; and the majority of the
Justices participating in the decision of those cases are now of the opinion that the
plaintiffs’ claim for damages will be properly satisfied of the exchange allowed by the
lower court be eliminated from the judgment. Our former decision will therefore be
modified to this extent and the exchange disallowed. The author of the opinion is
compelled to record his dissent for the judgment of the court on this point, upon which
he is in accord with the view expressed in the dissenting opinion of Mr. Justice Johns. 

The ground upon which the court rules against the allowance of exchange may be briefly
expressed as follows: As The actions before us are actions for the recovery of damages
the plaintiffs are entitled to recover a sum of money which, with the interest allowed .
will constitute indemnity for the damage occasioned by the defendant’s breach of
contract. the obligation assumed by the defendant was to pay to the plaintiffs a sum of
money expressed in American currency; and the indemnity to be allowed should be
expressed in Philippine currency at the present rate of exchange rather than at the rate
prevailing on the date if the defendant’s breach. Otherwise the plaintiffs upon collecting
the judgment would be able to convert the amount received into a larger sum of
American money than would have been received by them if the contract had been in all
respects fulfilled by the defendant. 

Authority to the effect that in cases of this kind the conversion is to be effected at the
rate prevailing at the time of judgment is found in the following cases: Hawes v.
Woolcock (26 Wis., 629); Lee v. Wilcocks (5 Serg. & R. [Pa. ], 48); Marburg (26 Md.,
8;90 Am., Dec., 84); The Saigon Maru (267 Fed., 881); The Hurona (268 Fed., 910);
Liberty National Bank of New York v. Burr (270 Fed., 251); Kirsch & Co. v. Allen, H. &
Co. ([1920], 89 L.J.K.B.N.S., 265). 

In Hawes v. Woolcock (26 Wis., 629, 635), the court said:jgc:chanrobles.com.ph

"Perhaps a strict application of logical reasoning to the question would lead to the result
that the premium should be estimated at the rate when the note fell due. That was when
the money should have been paid, and when the default in performing the contract
occurred. This conclusion would be supported by the analogy derived from the rule of
damages on contracts to deliver specific articles, fixing the market price at the time
when they ought to have been delivered as the criterion. This rule might sometimes be
to the advantage of the holder of the note, as in the present case. In other cases where
the premium was less at the time the note became due than at the time of trial, it would
be to his detriment. And in view of these uncertainties and fluctuations in the rate, upon
grounds of policy as well as for its tendency to do as complete justice between the
parties as is possible, we have come to the conclusion that the true rule in such cases is
to give judgment for such an amount as will, at the time of the judgment, purchase in
which it is payable. To accomplish this, of course, the premium should be estimated at
the rate prevailing at the time of trial. By this rule the holder would neither gain nor lose
by the fluctuations in the rate, but when ever he obtained a judgment would obtain it for
a sum which would then procure him the exact amount to which he was entitled in the
proper currency. This does complete justice between the parties and seems, therefore,
to indicate the true extent to which the difference of exchange in such cases should
affect the amount of recovery."cralaw virtua1aw library

The reasoning contained in the passage above quoted not only approves itself to the
sense of justice but appears to be more in harmony with the rule expressed in article
1170 of the Civil Code than the contrary doctrine. 

The cause will therefore be returned to the lower court with instructions to enter a
judgment eliminating the premium of thirteen and one-half per centum charged against
the defendant in the plaintiffs liquidation of the claims contained in actions Nos. 19917
and 20637. In all other respects the judgment is affirmed. 

Avanceña and Villamor, JJ., concur. 

 EN BANC

G.R. No. L-2091             October 18, 1905

COMPAÑIA GENERAL DE TABACOS, plaintiff-appellant, 

vs.
SEBASTIAN VICTOR MOLINA, ET AL., defendants-appellees.

Francisco Dominguez for appellant.

Alberto Barretto for appellees.

WILLARD, J.:

In the months of November and December, 1895, the defendant, Sebastian Victor Molina, was the
owner of a tobacco store in Binondo, in Manila. During these months the plaintiff, a manufacturer,
sold to the said defendant cigars and cigarettes, which the said defendant resold in his store. After
the month of December the parties, by mutual agreement, determined that the amount due to the
plaintiff from the said defendant by reason of the previous sales was 3,319.74 pesos. On January 23,
1896, the said defendant, Sebastian Victor Molina, executed and delivered to the plaintiff a written
instrument, of which the following is a copy:

For $3,319.74. Three months after date I promise to pay to the order of the Compañia General
de Tabacos de Filipinas three thousand three hundred and nineteen pesos and seventy-four
cents, value received in merchandise to my entire satisfaction. Manila, January 23, '96. S.
Molina. There is a rubric. Surety. J.V. Molina. There is a rubric. There is a regulation stamp,
cancelled, of the value of two pesos.

The other defendant signed the instrument as surety for its payment, as indicated thereon. When the
note became due it was duly protested. No part of it, or of the debt on account of which it was given,
has been paid, except the sum of 432.80 pesos. On the 17th day of July, 1903, the plaintiff
commenced this action against both of the defendants. Judgment in the court below was entered in
favor of the defendants on the ground that the note above described was a commercial instrument,
and that the cause of action thereon has prescribed by virtue of the limitation of three years
mentioned in article 950 of the Code of Commerce. The plaintiff has brought the case here by bill of
exceptions.lawphil.net

Two questions are presented by the record: First, is the instrument in question one of the instruments
mentioned in said article 950? Second, if it is, can the plaintiff maintain an action against the
defendant, Sebastian Victor Molina, based upon the original sale of merchandise to him?

(1) It is claimed by the plaintiff that the document in question is not a commercial note, because it
does not comply with requirements of article 531 of the Code of Commerce. He relies upon the fact
that the sixth requisite of that article, which requires the promissory note to state the place where it is
to be paid, has been entirely omitted, and that the note in question does not fulfill the requirements of
the seventh paragraph, which says that the promissory note must state the source and the kind of
value which it represents. We think the contention as to the sixth requisite can not be sustained. This
article 531, at the end thereof, provides that bills which are to be paid in a different place from that of
the residence of the payor should indicate a domicile for their payment. Blanco, in his Treatise on
Commercial Law, makes the following statement:

Bills or notes must contain the same requisites as drafts already enumerated (3), with the sole
difference that in those bill in which the payment is to be effected in a different place from that
of the residence of the payor, the place of payment should be stated therein. (2 Derecho
Mercantil, p. 274.)

Estasen, in his work on Commercial Law, makes the following statement:

Messrs. La Serna and Reus invite attention, that although the supreme court of Spain (1) has
determined that promissory notes which do not contain the requisites prescribed in article 563
of the old Code of Commerce are not commercial, it should not be understood that said
requisites are essential since the same code provides for cases in which they are wanting.
(4 Derecho Mercantil, p. 95.)

It will be observed that article 531 refers to drafts as well as to bills and notes, and this sixth requisite
was intended to be applied in any event to drafts, but the addition to the article indicates that it was
not always to be applied to bills or notes.

Neither do we think that the contention of the plaintiff in regard to the seventh requisite can be
sustained. The origin of the debt is sufficiently stated, for as the plaintiff itself says in its brief, the
receipt of merchandise in exchange for money necessarily supposes a contract of purchase and sale.
We think also the nature of the consideration is sufficiently stated. It was not necessary to insert in the
document an inventory of the different articles that had been sold by the plaintiff to the said
defendant, Sebastian. As the appellees say in their brief in this court, if this was required, an ordinary
commercial note would be more extensive than a government expediente. In order to bring the
document within the Code of Commerce it must appear that it had its origin in commercial operations.
It seems to be the contention of the appellant that this fact must appear in the note itself. This, in our
opinion, can not be sustained. If the requirements of article 531 are complied with, and, nevertheless,
it does not appear from the note itself that it had its origin in commercial operations, this fact can be
proved by other evidence. In other words, if the origin and nature of the consideration is stated, and
that statement does not show that the note proceeded from commercial operations, the document,
nevertheless, is a commercial document, if it can be proved by other evidence that it did proceed from
such operations. (Judgment of the supreme court of Spain of the 7th of November, 1870.)

We therefore hold that the action upon the note was barred by the statute of limitations in the Code of
Commerce. As the only obligation which the defendant, Juan Victor Molina, assumed was the
obligation evidenced by this note the action against him is barred.

(2) It remains to be considered whether an action can be maintained against the defendant,
Sebastian, based upon the original contract of purchase and sale of the articles in question. This
purchase and sale was undoubtedly a commercial transaction. (Art. 2, Code of Commerce.) This
code says nothing concerning the way in which obligations shall be extinguished. It is therefore
necessary to apply the rules of the common law. (Art. 50, Code of Commerce.) Article 1170 of the
Civil Code provides in part as follows:

The delivery of promissory notes to order or bills of exchange or other commercial paper shall
only produce the effects of payment when collected or when, by the fault of the creditor, their
value has been prejudiced.

In the meantime the action arising from the original obligation shall be suspended.
We think that this article is applicable not only to those instruments, executed by third persons, which
the debtor delivers to the creditor, but also to a note executed by the debtor himself and delivered to
the creditor. The clause relating to prejudice caused to the instrument by the fault of the creditor is
applicable only to the first class of documents, and not to the second.

It is apparent also that there was no novation of the contract in accordance with the provisions of
article 1204 of the Civil Code. (Eigth Commentaries on the Civil Code, Manresa, 397, 2 Derecho
Mercantil, Blanco, 90.)

Our conclusion upon this branch of the case is that the plaintiff's cause of action against the
defendant, Sebastian Victor Molina, growing out of the sale of these articles, still exists and can be
enforced.

The facts stated in paragraphs 1 to 5 of the amended complaint (omitting the last seven lines of the
fifth paragraph) are a sufficient statement of this cause of action. In view of the fact that a demurrer to
the original complaint was sustained, on the ground that the complaint was based upon the note
alone, and that the note was outlawed, it is apparent that the plaintiff, when he presented his
amended complaint, which contained allegations in regard to the sale of the articles in question, did
not intend to rely solely upon the note for a cause of action, but, on the contrary, did intend to rely
upon the original contract of sale. Otherwise the allegations relating to this sale would have been
entirely useless. The quotation which the appellees make in the third page of their brief in this court is
taken from the original complaint, which was entirely superseded by the amended complaint. The
defendant, Sebastian, admitted in his answer that on January 23, 1896, he owed the plaintiff 3,319.74
pesos for the said merchandise.

The judgment of the court below is affirmed, in so far as it related to the defendant Juan Victor
Molina. It is reversed in so far as it relates to the defendant Sebastian Victor Molina, and the case is
remanded to the court below with instructions to enter a judgment in favor of the plaintiff and against
the defendant Sebastian, for the equivalent in Philippine pesos of 3,319.74 pesos, Mexican currency,
less 432.80 pesos, Mexican currency with interest from the commencement of the action, and costs.
No costs will be allowed to either party in this court, and after the expiration of twenty days judgment
shall be entered in accordance herewith. So ordered.

Arellano, C.J., Torres, Johnson, and Carson, JJ., concur.

 EN BANC

[G.R. No. 39815. April 28, 1934.]

EULALIO BELISARIO, Plaintiff-Appellant, v. PAZ NATIVIDAD VIUDA DE

ZULUETA, Defendant-Appellee. 

Jose V. Claravall for Appellant. 

Jose C. Zulueta for Appellee. 

SYLLABUS

1. BANKS AND BANKING; LEGAL TENDER; PAYMENT BY CHECK. — A creditor is not

bound to accept a check in satisfaction of his demand, because a check, even if good
when offered, does not meet the requirements of a legal tender.

DECISION

BUTTE, J.:

This is an appeal from a judgment of the Court of First Instance of Nueva Ecija in an
action for the recovery of two tracks of land situated in the barrio of San Francisco,
municipality of Lupao, in said province, and described in certificate of transfer Nos. 3357
and 3358 issued by the register of deeds of the Province of Pangasinan (in which the
lands were formerly situated) in favor of the defendant. 

It appears from Exhibit A that the plaintiff sold the said lands absolutely and without
reservation to the defendant for the consideration of P37,000, which was duly paid, and
the agreement on the part of the grantee to assume an indebtedness secured by a lien
for P4,500, which was likewise duly paid. The deed recites that the sale is absolute and
in perpetuity and the grantor warrants to defend the title. The deed bears the date of
April 29, 1927. 

On the same date the defendant executed and delivered in favor of the plaintiff Exhibit B
which, after reciting that the defendant is the absolute owner of the lands referred to,
granted the plaintiff an option to repurchase the lands on or before the end of May,
1931, for the sum of P37,000. 

These two instruments are very clear in their terms, were duly signed by both parties in
the presence of two witnesses and acknowledged before a notary public and recorded.
We see no reason whatever for varying the terms thereof. 

On the 28th of May, 1931, the plaintiff appeared at the house of the defendant and
offered to exercise his option of repurchase under said Exhibit B by tendering to the
defendant a check in the sum of P37,000, drawn by Rosendo Santiago against his
account in the Peoples Bank and Trust Company. The books of the bank disclosed that at
the time said check was tendered to the defendant the drawer thereof had on deposit in
the said bank subject to check the sum of P5.85. Even if the check had been good, the
defendant was not legally bound to accept it because such a check does not satisfy the
requirements of a legal tender. Finding no merit in this appeal, the judgment of the
court below is affirmed with costs against the Appellant. 
 EN BANC

G.R. No. L-45625 April 28, 1939

MARGARITA VILLANUEVA, as judicial administratrix of the deceased Lorenzo

Villanueva, Plaintiff-Appellant, vs. JUAN SANTOS, Defendant-Appellee.

J. Fernando Rodrigo for appellant.

Magno S. Gatmaitan and Jose C. Borlo�gan for appellee.

IMPERIAL, J.: chanrobles virtual law library

This appeal was taken by the plaintiff from the order of the Court of First Instance of
Bulacan, holding that the consignation made by said plaintiff was invalid and that the
sale with the right of repurchase of the parcels of land in litigation was final, and
ordering her to yield possession thereof to the defendant within ten days from receipt of
notice of the said order.chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff, as judicial administratrix of the deceased Lorenzo Villanueva, commenced

in the Court of First Instance of Bulacan civil case No. 5249 against the defendant to
annul the deed of sale with the right of repurchase of two parcels of land executed by
the said Lorenzo Villanueva while living in favor of the defendant. The following decision
was rendered in the said case:

When this case was called for trial, the parties through their respective attorneys
submitted the following stipulation for the decision of the court:chanrobles virtual law
library

"Both parties, assisted by their respective attorneys, agree that the plaintiff shall pay on
December 4, 1936, to the defendant to repurchase the two parcels of land described in
the complaint, the sum of three hundred fifty-nine pesos and sixty centavos (P356.60),
with legal interest thereon from January 8, 1934 until the said date, December 4, 1936;
and that should she fail to pay the said sum of P359.60, or a part thereof, or the interest
thereon, wholly or partially, then the sale with the right of repurchase of said parcels, as
they appear in the deed of sale Exhibit A of the complaint, shall be deemed final; and
that the plaintiff shall deliver the possession of said
parcels.chanroblesvirtualawlibrary chanrobles virtual law library

"They likewise agree that should the plaintiff pay the aforesaid sums within the
stipulated period, the expenses for the execution of the corresponding deed and the
transfer of certificates shall be defrayed by the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library

"They also agree that the plaintiff shall on this very date ask the authority of the court to
enter into this stipulation in the intestate of the deceased Lorenzo Villanueva; and to
render a decision in accordance therewith."chanrobles virtual law library
Wherefore, the court approves this stipulation and orders the parties to observe and
comply strictly with the conditions thereof, without pronouncement as to the costs. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library

Malolos, Bulacan, today November 5, 1936.

(Sgd.) PEDRO MA. SISON 

Judge (B. E., p. 7.)

On the night of December 4, 1936, the date of the expiration of the period granted to
the plaintiff to pay the repurchase price, the latter offered to the defendant the check
No. D-8695 for P421.04, issued by Ramon Meneses against the Bank of the Philippines
Islands in payment of the repurchase price. As the defendant refused to accept the
check on the allegation that the payment should be made in money or legal tender, the
plaintiff, through counsel, deposited the check with the clerk of court who received the
same, and at the same time put in a motion asking that the payment be deemed
effected and the two parcels of land redeemed, and, further, that the defendant be
ordered to pay her the sum of P120 as damages. After hearing the motion, the court on
April 30, 1937, issued the aforementioned order from which the plaintiff
appealed.chanroblesvirtualawlibrary chanrobles virtual law library

In her sole assigned error the plaintiff contends that the court erred in holding that the
consignation of the check with the clerk of court was invalid and that it did not have the
effect of paying her obligation. The court correctly held that the consignation was
unavailing and that it did not produce any legal effect because the defendant did not
accept it and it was not in the form of money or legal tender. Article 1170 of the Civil
Code provides that payment of debts of money shall be made in the specie stipulation
and, should it not be possible to deliver such specie, in silver or gold coin legally current;
and provides, further, that the delivery of promissory notes payable to order, or drafts
or other commercial paper, shall produce the effects of payment only when realized or
when, by the fault of the creditor, the privileges inherent in their negotiable character
have been lost. Under this legal provision the defendant was not under a duty to accept
the check because it is known that it does not constitute legal tender, and the
consignation having been refused, it did not produce any legal effect and could not be
considered as payment made by the plaintiff of the repurchase price. In Belisario vs.
Natividad ([1934]), 60 Phil., 156), it was held that a creditor is not bound to accept a
check in satisfaction of his demand, because a check, even if good when offered, does
not meet the requirements of a legal tender.chanroblesvirtualawlibrary chanrobles
virtual law library

The defendant, in turn, alleges that the court erred in concluding that he testified that
the plaintiff's indebtedness was P421.04, and in not holding that the consignation was
invalid because the plaintiff's debt was P422.29 and the check only amounted to
P421.04. These assigned errors can neither be considered nor passed for the simple
reason that the defendant did not appeal from any part of the court's
order.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the foregoing, the appealed order is affirmed, with the costs of this instance
to the plaintiff-appellant. So ordered.
 EN BANC

G.R. No. L-31025 August 15, 1929

FRANCISCO GUTIERREZ, ET AL., Plaintiffs-Appellees, v. JUAN CARPIO, Defendant-

Appellant.

Eusebio Orense and Marcelino Aguas for appellant.

Gutierrez David, Dizon & David for appellee.

ROMUALDEZ, J.:

The litigants herein compromised a civil case on July 13, 1928, agreeing that if within
one month from the date thereof the plaintiffs failed to repurchase certain land, its
ownership would vest in the defendant.chanroblesvirtualawlibrary chanrobles virtual law
library

The question now raised is whether or not the plaintiffs duly tendered the amount of the
reimbursement agreed upon in the proper form of money to the
defendant.chanroblesvirtualawlibrary chanrobles virtual law library

The court below held in the affirmative, but the defendant, appealing from such
judgment, maintains that on August 13, when the plaintiffs tendered it, the stipulated
period had already elapsed; that the tender of reimbursement made by check is
insufficient; and that the holding of the trial court that the land in question is valued at
P27,000 is groundless.chanroblesvirtualawlibrarychanrobles virtual law library

When did the stipulated month terminate? This is the first point in controversy, the
determination of which depends upon the kind of month agreed upon by the parties, and
on the day from its should be counted.chanroblesvirtualawlibrary chanrobles virtual law
library

As to the kind of month, it is to be noted that, according to the ruling in the case of
Guzman vs. Lichauco (42 Phil., 291), article 7 of the Civil Code had been modified by
section 13 of the Administrative Code, according to which "month" now means the civil
or calendar month and not the regular thirty-day
month.chanroblesvirtualawlibrary chanrobles virtual law library

And the civil or calendar month is defined as follows :

The civil or solar month is that which agrees with the Gregorian calendar; and these
months are known by the names of January, February, March, etc. They are composed
of unequal portions of time . . . (Bouvier's Law Dictionary.)chanrobles virtual law library

A calendar month is a month as designated in the calendar, without regard to the

number of days it may contain. In commercial transactions it means a month ending on
the day in the succeeding month corresponding to the day in the preceding month from
which the computation began, and if the last month have not so many days, then on the
last day of that month. Daley vs. Anderson, 48 Pac., 839, 840; 7 Wyo., 1; 75 Am. St.
Rep., 870 (citing Migotti vs. Colvill, 4 C.P. Div., 233). (1 Words and Phrases, 943.)

Hence, this court held in the case of Villegas vs. Capistrano (9 Phil., 416), that the
period of three months counted from February 13 did not expire on the 12th of the
following May.chanroblesvirtualawlibrary chanrobles virtual law library

As to when said month began, said section 13 of the Administrative Code provides as
follows:

In computing any fixed period of time, with reference to the performance of an act
required by law or contract to be done at a certain time or within a certain limit of time,
the day of date, or day from which the time is reckoned, is to be excluded and the date
of performance included, unless otherwise provided. (Emphasis ours)

Similar provisions may be found in article 1130 of the Civil Code, and in section 4 of the
Code of Civil Procedure.chanroblesvirtualawlibrary chanrobles virtual law library

There is nothing in the agreement under discussion providing otherwise, and according
to the phrase therein contained, "one month from this date," said date, which was July
13, 1928, is exactly the date which must be excluded being the "day from which the
time is reckoned," according to the words of the aforementioned section 13 of the
Administrative Code, which we have italicized
above.chanroblesvirtualawlibrary chanrobles virtual law library

Wherefore, that civil month of thirty-one days began on July 14 and terminated with the
end of the thirteenth day of the following August. And as it has been proved without
discussion that the plaintiffs offered to repurchase the land from the defendant on
August 13th, it follows that such offer was made within the period
stipulated.chanroblesvirtualawlibrary chanrobles virtual law library

But the defendant alleges that the offer to repurchase made by check was legally
insufficient. We agree that the payment by check does not per se have the effect of such
payment. (Section 189, Act No. 2031, on Negotiable Instruments; article 1170, Civil
Code; Bryan, Landon Co. vs. American Bank, 7 Phil., 255; and Tan Sunco vs. Santos, 9
Phil., 44; 21 R.C.L., 60, 61.) But it appears from Felipe Gutierrez's testimony that the
defendant told him on August 12th that he would accept the repurchase by check. Felipe
Gutierrez is not very explicit about it, but we deem this to be the drift of his testimony.
The defendant must have so understood it, seeing that he thought it necessary to rebut
said detail in his testimony which, notwithstanding the defendant's denial, we hold to be
established by a preponderance of evidence, considering all the circumstances of the
case. The defendant having thus consented to the repurchase by check and having
signified that by reason of such repurchase the plaintiffs could return to their home, said
defendant was in estoppel, and could not, on the following day, refuse to accept such
payment by check, because he induced the plaintiffs to act upon the belief that he had
consented to said manner of payment.chanroblesvirtualawlibrary chanrobles virtual law
library
From this it follows that by virtue of the defendant's having consented to that payment
by check, which was neither alleged nor proved to be in any way defective, that offer to
repurchase was legally effective and sufficient to compel the defendant to accept
it.chanroblesvirtualawlibrary chanrobles virtual law library

We conclude that the offer to repurchase was made within the stipulated period and in
the form of money accepted by the defendant, from whose refusal to allow the
repurchase in such terms originates the plaintiffs' right of action
herein.chanroblesvirtualawlibrary chanrobles virtual law library

The last assignment of error touching the value of the land, cannot be a cause for the
reversal of the judgment appealed from for under the circumstances of the case, it has
no bearing on the decision of the case nor affects the result
thereof.chanroblesvirtualawlibrary chanrobles virtual law library

The judgment appealed from is modified, and it is hereby ordered that the plaintiffs
may, within ten days from the date on which this judgment becomes final, repurchase
the land, the subject matter of these proceedings, through the delivery to the defendant
at the latter's residence in the municipality of Santa Rita, Pampanga, of the sum of
fourteen thousand six hundred forty three pesos and forty-three centavos (P14,643.43),
Philippine currency (in coin or paper money). The judgment appealed from is affirmed in
all other respects, with costs against the appellant. So ordered.
U.S. Supreme Court

De Haro v. United States, 72 U.S. 5 Wall. 599 599 (1866)

De Haro v. United States

72 U.S. (5 Wall.) 599

APPEAL FROM THE DISTRICT COURT FOR

THE NORTHERN DISTRICT OF CALIFORNIA

Syllabus

1. In 1844, persons in California petitioned the Mexican governor of that province for a grant of certain
described land, situated in the vicinity of the Mission of San Francisco. The petition was referred to
the secretary of state, who reported that the land was unoccupied, but that inasmuch as "common
lands" (ejidos) were to be assigned to the said mission, he was of opinion that in the meanwhile the
petitioners might occupy the land solicited under a provisional license. The governor thereupon made
a decree declaring the petitioners "empowered to occupy provisionally" the land, and directing a
proper document to be issued to them and a registry made of it. An instrument was accordingly
issued to the petitioners, signed by the governor and attested by the secretary of state, by which the
governor, in virtue of the authority vested in him and in the name of the Mexican nation, granted "to
them the occupation" of the land, subject to the measurement to be made of common lands for the
establishment of San Francisco, with conditions against alienation, and for the occupation of the land
within a year, and for forfeiture in case the conditions were not complied with. On this case

Held that the decree of the governor constituted only a naked license to occupy the land provisionally,
and that the instrument issued pursuant to the decree did not pass any title to or interest in the land;
that this license was a personal privilege of the parties, and upon their death did not extend to their
heirs; that a claim for land resting upon a license of this character is not entitled to confirmation under
the Act of Congress of March 3, 1851.

Page 72 U. S. 600

2. The term "titulo," in the Spanish language, only means the instrument which is given as evidence
of the right, interest, or estate conferred; it does not indicate the measure of such right, interest, or
estate; hence it applies equally to papers which convey title in the usual acceptation of the term, and
to those which confer a mere right of occupancy.

Appeal from the District Court for the Northern District of California in a claim for land, now of
immense value, originally presented to the board of land commissioners established by the Act of
March 3, 1851. The case was thus:

In April, 1844, Ramon and Francisco de Haro presented a petition to the Mexican governor of the
province of California for a grant of a tract of land, called the "Potrero of San Francisco," situated near
the mission of that name. The petitioners were minors, and their petition was accompanied with the
consent of their father that they might present it, and also his application to the local alcalde for
information as to the condition of the land solicited, and the alcalde's reply thereto. The petition and
accompanying papers were referred to the secretary of state for his report thereon. The secretary
reported that the land was unoccupied, but, for reasons stated, he was of opinion that a provisional
license to occupy it should be given to the petitioners. A decree was accordingly made pursuant to
this suggestion, and was followed by the issue and delivery to the petitioners of a formal document
ceding to them the occupation provisionally, subject to certain conditions. The following is a
translation of the several papers mentioned:

"[Petition for the Grant]"

"EXCELLENT SENOR GOVERNOR OF BOTH CALIFORNIAS:"

"We, Francisco de Haro and Ramon de Haro, in the name of our family, Mexican citizens by birth and
residents of the ex-Mission of San Francisco de Asis, represent to your Excellency with due
submission that inasmuch as we have to remove the share of cattle appertaining to our deceased
mother out of the rancho of the deceased Jose Antonio Sanchez, and as we have in view to tame
them, we entreat your Excellency to grant to us in the exercise of your Excellency's powers a small
parcel of land called Potrero de San Francisco &c., because there is no

Page 72 U. S. 601

competent person to do it, according to the annexed sketch that we submit to your Excellency; and as
said parcel of land can be enclosed, we intend to place on it the tamed cattle, because of the small
extent of the location occupied at present by the cattle of our father, who has given us due permission
to petition, as we are under the parental power and control. Therefore we entreat your Excellency to
grant us this benefit, whereby we shall receive favor and grace. We swear not to proceed moved by
malice &c. This memorial has not been written on paper of the corresponding stamp, there not being
any here."

"RAMON DE HARO"

"FRANCISCO DE HARO."

"SAN FRANCISCO, April 12, 1844"

"[Consent of the Father of the Petitioners]"

"I, the undersigned, grant by the present document, to my sons, Francisco and Ramon de Haro, the
corresponding assent enabling them (because they are minors) to solicit the Superior Government of
the Department the grant of the Potrero of the ex-Mission of San Francisco de Asis, at present lying
unoccupied, and represented in the sketch accompanying the petition."

"The said Potrero being intended to be (if it should please the Superior authority to grant it) for the
benefit of their other brothers as well as themselves, and to answer due ends I give them this
document in the aforementioned ex-Mission of San Francisco de Asis, on the 12th day of April, 1844."

"FRANCISCO DE HARO"

"[Application of the Father of the Petitioners to the local Alcalde"

"for Information as to the Condition of the land solicited]"

"TO THE HONORABLE THE ALCALDE OF FIRST NOMINATION OF SAN FRANCISCO:"

"I, Francisco de Haro, a resident of this jurisdiction, in the name of my sons, Francisco and Ramon,
formally appear and say that my sons aforementioned have received my assent to solicit of the
Superior Government of the Department the grant of the Potrero that lies opposite the ex-Mission of
San Francisco de Asis, which stands unoccupied, and the enclosures of which

Page 72 U. S. 602

are thrown down and lying on the ground, and inasmuch as I wish to remove the obstacles that may
obstruct the speedy dispatch of said petition, and since it must be referred thence to this place for
report and information and I want to obviate this delay, I therefore apply to you, in order that you be
pleased to report as you may think convenient, in the subject of my solicitation."

"Therefore I entreat you to proceed in this matter according to right, and to direct this memorial,
written on common paper, there not being here any of the corresponding stamped. Thus I swear &c."

"FRANCISCO DE HARO"

"SAN FRANCISCO, April 13, 1844"

"[Reply of the local Alcalde to the Application for Information]"

"SAN FRANCISCO DE ASIS, April 13, 1844"

"In consideration of the reasons presented by the party who solicits, I proceed to report about the
location in request, declaring that up to this day there are no claimants of any kind, and it is not
occupied by any community or private individual."

"G. HINKLEY"

"[Order of Governor referring Petition and accompanying Papers to the"

"Secretary of state to report thereon]"

"MONTEREY, April 29, 1844"

"Let the secretary of state report on the same and take the necessary information."

"MICHELTOREAN"

"[The Report of the Secretary]"

"MONTEREY, April 29, 1844"

"EXCELLENT SENOR GOVERNOR:"

"The Mission of San Francisco no longer holds property of any kind, and consequently the Potrero (or
enclosed place for keeping horses) in request is lying unoccupied, as the soliciting parties show by
means of a report proceeding from the respective judge, and inasmuch as there are to be assigned to
said establishment, its

Page 72 U. S. 603
corporation or common land (ejidos [Footnote 1]), I am of opinion that in the meanwhile the parties
might occupy the plot of land, by virtue of a provisional license of your Excellency, because no
prejudice is caused thereby to the community, to any private individual. Your Excellency's own
decision will doubtless be the most proper one."

"MANUEL JIMENO"

"MONTEREY, April 30, 1844"

"In conformity"

"MICHELTORENA"

"[The Decree of the Governor upon the Petition and Secretary's Report]"

"MONTEREY, April 30, 1844"

"After examining the petition at the head of this proceeding, the preceding reports, and whatever else
was thought to the purpose, in conformity with the laws and regulations on the subject, I declare
Francisco and Ramon de Haro empowered to occupy provisionally the piece of land called Potrero de
San Francisco, to the extent of half a square league, the boundaries to be the extremities of the
mouth of the Potrero, and the range of hillocks or highlands environing it. Let the corresponding
patent be issued; let it be duly entered, and let this information be communicated to the person in
charge of said establishment."

"[The Document issued by the Governor, and delivered to the petitioners"

"pursuant to the above decree]"

"MANUEL MICHELTORENA, GENERAL OF BRIGADE IN THE MEXICAN ARMY, ADJUTANT-

GENERAL OF THE STAFF OF THE SAME, COMMANDANT-GENERAL, GOVERNOR AND
INSPECTOR OF THE DEPARTMENT OF CALIFORNIA:"

"Whereas, Francisco and Ramon de Haro have solicited the grant of the Potrero de San Francisco,
so called, from the mouth of the estuaries, together with the high land surrounding it, all the
necessary investigations having been made according as the laws and regulations in the matter
prescribed, by virtue of the authority in me vested, I have thought proper, in the name of the Mexican
nation, to grant to them the occupation of the aforementioned

Page 72 U. S. 604

Potrero, subject to the mensuration to be made of the corporation or common lands (ejidos) for the
establishment of San Francisco, and under the following conditions: [Footnote 2]"

"1st. They shall have no power, under any consideration, to sell or alienate it to the detriment of any
of the proprietors of the establishment of San Francisco."

"2d. They shall not obstruct the paths, roads, and servitudes, using it for culture and cattle they intend
to introduce on it, but within a year at the most it must be occupied."
"3d. The parcel of land to which reference is made is of half a square league, and if they should
transgress any of these conditions, they shall lose their right to this provisional grant, which is
delivered to the parties concerned for their security, and other ends."

"Given in Monterey on the first day of May, 1844."

"MANUEL MICHELTORENA"

"MANUEL JIMENO"

Under the last document, the De Haros went into possession of the land and occupied if for the
pasturage of horses and cattle until their death, which occurred in May, 1846. [Footnote 3] The land
was enclosed on three sides by water, and a wall had been erected by the priests of the mission on
the fourth side. This wall had gone to ruin, and the De Haros, after obtaining their concession,
repaired it. The land was not a fertile tract, and was only fit for pasturage. The father of the De Haros
succeeded to whatever interest they possessed in the property at their death, and he occupied the
land afterwards in a similar manner -- that is, for the pasturage of horses and cattle -- until his death,
which took place in 1849. His successors in interest were his children, six girls and one son, all
minors at the time. From these children the property passed into the hands of numerous American
citizens, for whose benefit, after our conquest, the claim was

Page 72 U. S. 605

presented for confirmation to the board of land commissioners, established by the Act of March,
1851, to settle private land claims in California.

When the claim was pending before the land commissioners, two papers additional to those set out at
pages <|72 U.S. 600|>600-604 were produced and given in evidence, one of them purporting to be a
grant in fee simple of the land to the De Haros, signed by Governor Micheltorena, bearing date May
24, 1844, and the other purporting to be a grant of a similar nature signed by the same officer
September 18, 1844. The signature to both was genuine, but it was added after the cession of the
country to the United States. The instruments were antedated, but by whom they were prepared was
not shown.

The commission confirmed the claim, rejecting the paper of May 24, 1844, as a forgery or antedated,
but relying upon the paper of September 18, 1844, though not without grave doubts as to its
genuineness.

On appeal to the district court, additional proof as to the second paper was taken and its real
character exposed, and it, as well as the first paper, was formally abandoned by the counsel of the
claimants, and the claim for confirmation was based solely on the provisional license and the proofs
showing an occupation under it.

The clause which usually appears in Mexican grants of land in California, namely, that the party shall
lose his right to the land in case he violates the conditions attached, was altered in the document of
May 1, 1844, issued to the De Haros by the governor, to the words, "he shall lose his right to
this provisional concession" in case he violates the conditions.

The document was mentioned in the list of grants made by the secretary of state, Jimeno, known as
Jimeno's Index, and is noted in the record Toma de Razon. The entry in this last book was as follows:

"226. Don Francisco and Ramon Haro, on the 1st May, 1844. "
Page 72 U. S. 606

"Title (titulo) delivered to them of the tract named El Potrero, in extent of one half league square."

The district court rejected the claim, holding that the right conferred by the document in question was
a mere license to occupy the premises until the ejidos, or common lands, should be measured.

In distinguishing the case from some others cited, the court in its opinion said:

"In this case the permission is given to occupy only until an assignment of the land to the pueblo is
effected. The governor not only indicates no willingness or intention to grant, but, in obedience to
Jimeno's suggestion, he refuses to grant, and ex industria limits the concession to the permission to
occupy land not then used by the Mission."

From the decree of that court the case was now here on the appeal of the claimants.

Page 72 U. S. 622

MR. JUSTICE DAVIS delivered the opinion of the Court.

The case, on account of the large pecuniary value of the land in controversy, has elicited great
interest. We have been aided by oral and written arguments of rare ability, and the question of pueblo
and mission rights and the powers of the Mexican governors of California over them has been much
pressed upon our attention.

The construction, however, which we give to the espediente, conceded to be genuine, and on which
the plaintiffs must recover if at all, supersedes the necessity of discussing the remaining questions,
which in any other aspect of the case it would be important to do.

In order to ascertain the proper effect of the espediente as an entire thing, it is necessary to analyze
all its parts. And with this analysis, the meaning of it, in our opinion, cannot be mistaken. The petition
presented by Francisco

Page 72 U. S. 623

and Ramon de Haro, residents of the ex-mission of San Francisco, to Governor Micheltorena, asks
for the grant of the potrero for the purpose of pasturing cattle inherited from their mother, which they
were desirous of taming and had to remove out of the rancho where they then were. The assent of
their father was necessary to enable them to solicit the grant, as they were minors, and it was given.

According to the custom of the country, this petition was referred to the secretary of the department to
ascertain what was the true state of facts and report to the governor. The informe, as it is called, or
official report of Jimeno, who was then secretary, as it was approved by the governor, and formed the
basis of his action, is of material assistance in arriving at the true nature of the right which was
subsequently conceded. It is in these words, addressed to the governor:

"The mission of San Francisco has no longer any property, and consequently the potrero which is
petitioned for is lying unoccupied, as the soliciting parties show by means of a report proceeding from
the respective judge; and inasmuch as there are to be assigned to said establishment, its corporation
or common lands, I am of opinion that in the meanwhile the parties might occupy the plot of land, by
virtue of a provisional license of your Excellency, because no prejudice is caused thereby to the
community (or) to any private individual."

The significant fact appearing on the face of this document is that it ignores the very matter for which
the De Haros petitioned. They solicited a grant of the land pertaining to the potrero, but Jimeno,
among the most intelligent of Mexican officials, knew if the mission was secularized, there would
remain an incipient pueblo, which might embrace for its common lands, the piece of ground asked for,
and therefore reported that the grant of it could not be safely conceded, as it might prejudice the
rights of the community. But as the enclosure was vacant, no harm could result to the public or any
private individual by its temporary occupancy, and as the petitioners wanted very

Page 72 U. S. 624

much a place to pasture the cattle, which had fallen to them in right of their deceased mother, he
recommended that they be permitted to occupy it temporarily, and for their security, the governor
should issue to them a provisional license. The report was evidently predicated on the belief that the
grant of the land would interfere with the rights of the mission or pueblo; but in the meantime, as they
were not ascertained, there could be no reasonable objection to the De Haros having the permissive
occupation of the tract. It nowhere appears an interest in the land was in any event to be conceded,
nor were any promises held out to the De Haros, if the potrero should prove to be outside of the
common lands, a title in fee, or any less title should be assured to them. Jimeno recommended
nothing more than a provisional license, enabling the parties to occupy the land for the occasion. The
question arises, was Micheltorena's decision in conformity with Jimeno's recommendation? The
material part of the order or decree of the governor, and which was extended on the same day of the
approval of the report, is as follows:

"I declare Francisco and Ramon de Haro, empowered to occupy provisionally the piece of land called
Potrero de San Francisco to the extent of half a square league. . . . Librese el correspondiente
despacho -- let the corresponding order or dispatch be delivered; let it be duly entered, and let this
information be communicated to the person in charge of said establishment."

It is very clear that this decree conforms to the recommendations of the report, and that Micheltorena
did not intend to confer any greater powers on the De Haros than Jimeno advised.

There are no words used indicating an intention to give a title, or to vary from the position taken in the
informe. The document to be issued is one corresponding to the right conferred, which was to occupy
provisionally the potrero. And the dispatch which did issue for the protection of the parties conformed
to the terms of the decree, as will sufficiently appear by an examination of its essential provisions. "I
have determined," says the governor,

"to permit the Messrs. De Haro to occupy the beforementioned pasture

Page 72 U. S. 625

ground, subjecting themselves to the limits that shall be prescribed to the establishment of San
Francisco."

If language has any meaning, Micheltorena intended by this instrument to give nothing more than the
power to occupy, and even this power was made expressly subject to the paramount claim of the
establishment of San Francisco. To permit pasture ground to be occupied excludes all idea that a
grant of the land was contemplated. There are absolutely no words indicating an intention to make a
future grant on the happening of any event whatever. But the dispatch goes further and forbids the De
Haros to sell or alien it or do any act prejudicial to the property of the establishment, on penalty "of
losing their right to this provisional concession." The prohibition against sale and alienation by
necessary intendment refers to the right of occupancy, for no other right was to be conceded, and this
right was to cease if the fundamental conditions attached to "the provisional concession," delivered to
the De Haros for their protection, were violated. If they were to lose their right to the land, as is
contended, why were the words appropriate to a concession of the land, which an inspection of the
original document shows were written in it, stricken out, and the phrase "they shall lose their right to
this provisional concession" substituted in their stead? It is clear enough that Jimeno, who was in the
habit of writing grants for land, inadvertently pursued the usual form for such grants, but recovering
himself, wrote the words appropriate to confer a license to occupy, which he had recommended and
the governor approved.

It surely cannot need more evidence to demonstrate that the Mexican officials intended the
espediente to be what it is, a mere license to occupy, not permanently, but "in the meantime," until
the ejidos were measured. It is impossible to divest the mind of the conviction that Micheltorena and
Jimeno either believed they had not the power to grant the potrero or, if they had, the circumstances
of the mission forbade its exercise, and conceded a permissive occupation, not of right, but by way of
grace and favor.

Page 72 U. S. 626

But it is said the occupation thus permitted could ripen into a grant in fee or some lesser estate in
case the potrero was not included within the admeasurement of the ejidos. Not so, however, for there
are in the title papers no words granting the tract of land, either absolutely or on condition,
provisionally or otherwise, nor any words by which any estate or interest in it can be raised by
implication. The power conferred resembles a grant in no particular, but is a bare naked license, and
to be governed by the rules of law applicable to such a power.

But the authority of the "Toma de Razon" is invoked to bolster up the claim of title because in the
entry of this case the word "titulo" is used.

It is proper to remark that the nature and effect of an espediente, when it is clearly ascertainable from
contemporaneous and official construction, cannot be defeated by an entry in the Toma de Razon.
The office of the Toma de Razon is to support, not destroy, the espediente. In this case, however, the
entry did not mistake the character of the transaction, for the Spanish word "titulo" does not indicate
the measure of the right, interest, or estate of the party. "It means," according to Spanish authority,
[Footnote 4] "the cause in virtue of which anything is possessed, and the instrument by which the
right is accredited," and in Spain and Mexico there are a class of titles (titulos), not translative of
property. Therefore Jimeno did not err in characterizing the instrument given to the De Haros as a
"titulo," for the word "titulo" is a nomen generalissimum, to be applied as well to title papers, which
convey title, in the usual acceptation of the term, as to those which confer a mere right of occupancy.
And the claimants can derive no help from the use of the word "concession," for a distinguished
Spanish scholar (Escriche) gives this definition of it: "Whatsoever is granted as favor or reward, as
the privileges granted by the prince." As a matter of favor, Micheltorena conceded to the De Haros
the privilege of temporarily occupying the

Page 72 U. S. 627

potrero in question. There was no contract to do more nor the semblance of one.

Without pursuing the subject further, we are satisfied from a careful examination of this Mexican
record that the only thing conferred or intended to be conferred on the De Haros was a provisional or
temporary license of occupation, which the governor was willing should be in writing, instead of by
parol, to enable the licensees to enjoy their possession with greater security. And this leads us to a
consideration of the law on the subject of licenses. If the license in question has been terminated,
there is an end to this case, and it is wholly unnecessary to consider the other questions which have
been discussed at the bar.

There is a clear distinction between the effect of a license to enter lands, uncoupled with an interest,
and a grant. A grant passes some estate of greater or less degree, must be in writing, and is
irrevocable unless it contains words of revocation, whereas a license is a personal privilege, can be
conferred by parol or in writing, conveys no estate or interest, and is revocable at the pleasure of the
party making it. There are also other incidents attaching to a license. It is an authority to do a lawful
act which without it would be unlawful, and while it remains unrevoked is a justification for the acts
which it authorizes to be done. It ceases with the death of either party, and cannot be transferred or
alienated by the licensee, because it is a personal matter and is limited to the original parties to it. A
sale of the lands by the owner instantly works its revocation, and in no sense is it property
descendible to heirs. These are familiar and well established principles of law, hardly requiring a
citation of authorities for their vindication, but if they are needed, they will be found collected in the
notes to 2d Hare & Wallace's American Leading Cases commencing on page 376. [Footnote 5] We
are not aware of any difference between the civil and common law on this subject.

Testing this case by these rules of law, is not the license

Page 72 U. S. 628

given by Micheltorena ended? The De Haros died in 1846, while the Mexican government owned
California, and with their death the license terminated. As long as they were in full life, they had a
valid authority to enter upon the potrero and pasture their cattle, but as the privilege was a personal
one, it ceased when they died, and did not extend to their heirs. The continued possession by the
father and those under him estops no one -- certainly not a sovereign power like Mexico or the United
States. The representatives of the De Haros could doubtless lawfully enter upon the potrero in order
to remove the property left there, but their authority extended no further.

It is argued the license was to last until the ejidos were measured, and therefore is not determinable
until that event occurs. This argument has no force unless it was the intention of Micheltorena to give
some interest in the land to the De Haros when the ejidos were assigned, if they did not embrace the
potrero, but we have seen that he had no such intention. He promised nothing; he did not say what
he would do or not do when the common lands were measured, but told the De Haros, meanwhile,
until they are measured, you can occupy the potrero for a pasture ground for your cattle. This was not
a contract on consideration that they and their heirs should have the right of occupancy until the
happening of this event. It might never happen, and what was intended as a mere license would be
thus converted into a grant. Micheltorena could have lawfully ousted the De Haros from the
possession at any time before their death, because the privilege conferred was at all times within his
control, and liable to be countermanded.

The De Haros, so to speak, were tenants at will, and held at the sufferance of the Mexican
authorities. They could not have been deceived as to the nature of the right conferred, for they
repaired to Monterey to get the land in full property, and returned to San Francisco with only a
provisional license to pasture their cattle on it. The term provisional excludes the idea of permanency;
it means something temporary and for the occasion.

Page 72 U. S. 629
It may be true that Micheltorena, when he conceded to the De Haros the privilege of pasturing cattle
on the potrero, did not intend to revoke it, if the conditions were observed, until the ejidos were
measured, and that it was so understood by them; but this can in no aspect of the case alter the
relations of the parties to this suit. It was a personal privilege conceded to the De Haros alone, and
with their death it ceased. The license itself not only contains no words extending it beyond the lives
of the parties, but all the circumstance of the case exclude the idea that the governor intended to
pass any interest descendible to heirs.

If this is so, this claim, if presented to the Mexican government, would have been rejected, and is
therefore not entitled to confirmation under the act of Congress against the United States.

In concluding this opinion, we are sorry to have to state that this record is not a clean one. It is tainted
with fraud and forgery. When this claim was originally pressed for confirmation, it was on title papers
conveying a grant of the land, which are now withdrawn as being forgeries. If the espediente on which
the claim is now rested carried the title to the property, why substitute forged grants? A crime is never
committed without an adequate motive, and it is clear that, in the opinion of the party who did it, the
genuine espediente fell short of a concession of the potrero in full property.

We are gratified, on a consideration of the evidence, to learn that the young De Haros, during the
short period they occupied the potrero, did not mistake the nature of the power conferred on them.
They did not add to the value of the land by improvements, and left nothing on it but what could be
easily removed and made available to their heirs.

Decree affirmed
 EN BANC

G.R. No. L-27991 December 24, 1927

PHILIPPINE NATIONAL BANK, Plaintiff-Appellant, vs. TAN ONG ZSE, VDA. DE TAN

TOCO, Defendant-Appellee.

Roman Lacson for appellant.

Soriano and Nepomuceno for appellee.

VILLA-REAL, J.:

In this instance the plaintiff Philippine National Bank appeals from the judgment of the
Court of First Instance of Iloilo dismissing said plaintiff's complaint against the defendant
Tan Ong Zse Vda. de Tan Toco for the sum of P357,075.80, plus interest on the capital
of P300,000 at the rate of 8 per cent per annum from November 15, 1924 until fully
paid, and an additional sum equivalent to 10 per cent of said amount as attorney's fees,
with the costs of the action. It was further prayed that, should the defendant fail to pay
the amount of the judgment within the period of three months from the date thereof,
the mortgaged property be ordered sold at public auction; and furthermore, should the
proceeds from the mortgaged property be insufficient to cover the amount of the
judgment that a writ of attachment be issued against whatever other property the
defendant may have not exempt from execution.chanroblesvirtualawlibrary chanrobles
virtual law library

In support of its appeal, the appellant bank assigns the following alleged errors as
committed by the trial court in its decision, to wit: (1) In striking out from the record all
of the testimony of witness Ramon Mendoza; (2) in finding that the defendant Tan Ong
Zse's attorney's had asked, during the hearing, that all of Ramon Mendoza's testimony
be stricken out; (3) in refusing to admit as plaintiff's evidence, the documents marked
Exhibit A, B, C, D, E and F; (4) in not finding that the evidence shows that Tan Bunco or
Mariano de la Rama Tan Bunco was empowered to administer and mortgage the
property of the defendant Tan Ong Zse Vda. de Tan Toco; (5) in not finding that the
promissory note Exhibit B and the mortgage deed Exhibit E are obligations contracted by
the defendant Tan Ong Zse to the Philippine National Bank through M. de la Rama Tan
Bunco, her attorney in fact; (6) in not finding that on May 23, 1922, the defendant Tan
Ong Zse Vda. de Tan Toco obtained a loan of P300,00 from the Philippine National Bank,
with interest at 8 per cent per annum; (7) in not holding that on May 28, 1927, the
defendant Tan Ong Zse Vda. de Tan Toco owed the Philippine National Bank, for the loan
secured by Exhibit E, the sum of P414,333.35 and that the Philippine National Bank is
entitled to recover said sum from the defendant; (8) in not sentencing the defendant
Tan Ong Zse Vda. de Tan Toco to pay the plaintiff bank the said sum of P414,333.35
with interest at 8 per cent annum from March 29, 1927 until fully paid, 10 per cent of
the total debt by way of attorney's fees, and the costs of the action; (9) in not ordering
that, if after the lapse of three months from the date of the judgment, the defendant has
not paid to the plaintiff the said sum of P414,333.35 with interest at 8 per cent per
annum from March 29, 1927, plus 10 per cent of the Province of Iloilo should sell at
public auction the mortgaged property described in Exhibit E; and (10) in dismissing the
complaint with the costs against the plaintiff.chanroblesvirtualawlibrary chanrobles
virtual law library

The principal question to determine in the present appeal, and on which depends the
solution of the other questions raised by the remaining assignments of error, is that
contained in the fourth assignment of error, with reference to the sufficiency of the
evidence to establish the existence of a power of attorney from the defendant Tan Ong
Zse Vda. de Tan Toco to Mariano de la Rama Tan Bunco to administer and mortgage
property belonging to her.chanroblesvirtualawlibrary chanrobles virtual law library

The only evidence presented by the plaintiff's entity to prove the existence such power
of attorney is the original certificate of title, exhibit F, issued to Tan Ong Zse Vda. de
Tan Toco, on the back of which, among other things, there is a memorandum which
reads:

Memorandum of the incumbrances affecting the property described in the original

certificate of title No. 329, issued in favor of Tan Ong Zse, a widow

Doc. Kind Executed in Conditions Date of Date of

No. favor of instrument inscription
Power of Tan Bunco Authority is hereby conferred, among other 1916 1919
attorney things, to mortgage as well as to administer Sept. 14 Sept. 10
property belonging to Tan Ong Zse.

The appellant contends that said memorandum is sufficient the fact that Tan Ong Zse
Vda. de Tan Toco authorized Mariano Tan Bunco, to administer her property, obtain
loans, and mortgage said property to secure said loans. It cites, in support of its claim,
section 47 of Act No. 496, which reads as follows:

SEC. 47. The original certificate in the registration book, any copy thereof duly certified
under the signature of the clerk, or of the deeds of the province or city where the land is
situate, and the seal of the court, and also the owner's duplicate certificate, shall be
received as evidence in all the courts of the Philippines Islands and shall be conclusive as
to all matters contained therein except so far as otherwise provided in this Act.

From a careful examination of the section just quoted, it will be seen that it is the
original certificate in the registration book, a copy thereof certified under the signature
of the clerk of court or of the registrar of deeds of the province or city in which the land
is situated, the duplicate of the same for the owner, and the seal of the court that must
be received evidence of all the matters contained
therein.chanroblesvirtualawlibrary chanrobles virtual law library

Section 41 of the same Act defines a "certificate of title" as follows:

SEC. 41. Immediately upon the entry of the decree of registration the clerk shall send a
certified copy thereof, under the seal of the court, to the register of deeds for the
province, or provinces, or city in which the land lies, and the register of deeds shall
transcribe the decree in a book to be called the "Registration Book," in which a leaf, or
leaves, in consecutive order, shall be devoted exclusively to each title. The entry made
by the register of deeds in this book in each case shall be the original certificate of title,
and shall be signed by him and sealed with the seal of the court. . . .

According to this legal definition, the certificate of the title is the transcript of the decree
of registration made by the registrar of deeds in the
registry.chanroblesvirtualawlibrary chanrobles virtual law library

And, according to section 40 of the same Act, the decree of registration must contain the
following data:

SEC. 40. Every decree of registration shall bear the day of the year, hour, and minute of
its entry, and shall be signed by the clerk. It shall state whether the owner is married or
unmarried, and if married, the name of the husband or wife. If the owner is under
disability, it shall state the nature of the disability, and if a minor, shall state his age. It
shall contain a description of the land as finally determined by the court, and shall set
forth the estate of the owner, and also, in such manner as to show their relative priority,
all particular estates, mortgages, easements liens, attachments, and other
incumbrances, including rights or husband or wife, if any, to which the land or owner's
estate is subject, and may contain any other matter properly to be determined in
pursuance of this Act. The decree shall be stated in a convenient form for transcription
upon the certificates of title hereinafter mentioned.

If, according to the above cited section 47, only the original certificate in the registry of
deeds, a certified copy of the same, or the seal of the court, will be admitted as
conclusive proof of its contents and if, according to section 41, also above quoted, the
original certificate of title is no other than the transcript of the decree of registration
made in the registration book, then the notations, or memoranda on the back of the
certificate of title are not admissible as proof of the contents of the documents to which
they refer, inasmuch as they do not form a part of the contents of the decree of
registration. The said notations or memoranda are at most, proof of the existence of the
transactions and judicial orders noted, which affect the registered land, of its
presentation to the registrar of its entry in the registry, and a notice to the whole world
of such facts, as provided for in section 51 of said Act No. 496, which reads as follows:

SEC. 51. Every conveyance, mortgage, lease, lien, attachment, order, decree,
instrument, or entry effecting registered land which would under existing laws, if
recorded, filed, or entered in the office of the register of deeds, affect the real estate to
which it relates shall, if registered, filed, or entered in the office of the register of deeds
in the province or city where the real estate to which such instrument relates, lies, be
notice to all persons from the time of such registering, filing, or entering.

It could not have been the Legislature's intention to make the original certificate of title,
or a certified copy thereof, or a duplicate of the same for the owner, conclusive proof not
only of its contends but also of the contents of the documents and judicial orders noted
since, unlike the original certificates or certified copies thereof, said notation do not
contain the full text of the documents or judicial orders noted, but only a memorandum,
or extract of the same, consisting of the designation of the kind of the document, the
name of the person to whom it was issued, the date of its execution and the date and
hour of its registration. It would be extremely hazardous to accept such notations or
memoranda as conclusive proof of the contents of the documents or judicial orders
noted, because then the document itself which is an unnquestionable and indubitable
evidence of its contents would be supplanted by an extract of its contents made by the
registrar, which extract of the conditions stipulated therein. And even if such an extract
as exact as could be desired, still, it cannot be a guarantee of the authenticity and due
execution of the document from which the extract is made. Moreover, it would be
contrary to the fundamental rule that the document itself is the best proof of its contents
and that only in case of destruction or loss can secondary or suppletory proof of the
same be admitted. (Sec. 321, Act No. 190.)chanrobles virtual law library

In the case of Government of the Philippine Islands vs. Martinez and Martinez (44 Phil.,
817), this court, speaking of the probatory value of the registration in the public
registry, said the following:

1. EVIDENCE; PRIMARY AND SECONDARY. - While it is true that the record of any
document, yet before the record or a certified copy of the recital made in a public
registry of the contents of a deed of sale, may be admitted as evidence of the contents
of said deed, it is indispensable to establish first that said deed really existed, was duly
executed and was lost; for while it may be true that said document was really presented
to the registry, as stated in the entry or the books of the registry, yet the document
actually presented may have been falsified or stimulated, and may not have really been
executed by the parties appearing thereon to have signed the same. And if it really
existed, it should been lost, in which case, and only then, secondary evidence may be
introduced.

By analogy, we may say that the memorandum of a power of attorney noted on the
back of an original certificate of title is not admissible as proof of the contents of said
power of attorney, but only of the fact of its execution, of its presentation for notation
and of its notation for the purposes or preferential rights to the registered land covered
by the title.chanroblesvirtualawlibrarychanrobles virtual law library

The non-presentation of power of attorney as evidence of the authority conferred by the

defendant Tan Ong Zse Vda. de Tan Toco upon Mariano de la Rama Tan Bunco to
administer and mortgage her property, deprives us of the best means determining
whether the acts performed by the alleged attorney in fact are included in the powers
conferred by said power of attorney.chanroblesvirtualawlibrary chanrobles virtual law
library

In view of the importance of the case, in the interest of equity and justice it is ordered
that it be reopened and the record be remanded to the court of origin for the
presentation of the power of attorney together with such evidence connected therewith
as the parties might deem fit to present, without the necessity of again submitting that
already presented at the original trial, and that a new judgment be rendered in
accordance with all the evidence in the record, without special pronouncement as to
costs. So ordered.c
 FIRST DIVISION

[G.R. No. CA. -8677. September 29, 1948.]

GUILLERMO P. VILLASOR, Plaintiff-Appellant, v. RODOLFO A. MEDEL, MARIANO

MEDALLA, MILAGROS C. ARANETA, represented by her legal guardian, Lorenzo
L. Araneta and JOSE L. JUSTINIANI, Defendants-Appellees. 

Guilllermo P. Villasor, Jose T. Liboon and Amado B. Parreño for Appellant. 

Hilado & Hilado for appellee Medalla. 

SYLLABUS

1. PURCHASE AND SALE; LEGAL REDEMPTION; ARTICLE 1524 OF CIVIL CODE; NINE
DAYS, PERIOD OF, IN FORCE; DISTINCTION BETWEEN LEGAL REDEMPTION AND LEGAL
ACTION. — Article 1524 of the Civil Code which fixes the period of nine days within
which the right of legal redemption may be exercised has not been repealed or modified
by the Code of Civil Procedure or the Rules of Court. The right of legal redemption and
the right to commence actions are entirely of different nature. The first is a substantive
right which, in the absence of the article, would never exist; the second restricts the
period in which the cause of action may be asserted. 

2. ID.; ID.; ID.; ID.; ID.; OTHER DISSIMILARITIES BETWEEN LEGAL REDEMPTION AND
LEGAL ACTION; PERIOD OF LEGAL REDEMPTION NOT SUSPENDED BY MINORITY;
NATURAL GUARDIAN MAY MAKE LEGAL REDEMPTION. — There are other notable
dissimilarities between legal redemption and legal action which challenge any attempt to
bring the former within the rule of the statute of limitations which suspends the running
of the period of prescription during minority. An action is addressed to a court of justice;
legal redemption partakes of a rescission of contract and is addressed to one of the
contracting parties by the other. An action may be brought only by persons not working
under any disability; legal redemption may be exercised by a minor of sufficient
discretion; at any rate, his natural guardian or whoever has the minor in his custody
may validly make the repurchase in his behalf. (Guinto v. Lim Bonfing and Abendan, 48
Phil., 884, 887.) An action seeks to assert a fundamental, primary right of which the
plaintiff has been unlawfully deprived, or to redress a wrong which has been inflicted;
legal redemption is in the nature of a mere privilege created by law partly for reasons of
public policy and partly for the benefit and convenience of the redemptioner, to afford
him a way out of what might be a disagreeable or inconvenient association into which he
has been thrust. 

3. ID.; ID.; ID.; ID.; ID.; ID.; ID. — The law in prescribing certain contingencies as the
starting point from which the nine-day period should be counted, is to be presumed to
exclude all others. Exclusio unius est exclusio alterius. The starting point is registration
or, in the absence of registration, knowledge of the conveyance by the co-owners. It is
logical to assume that if minority had been contemplated, the law would have so
expressly stated. 

4. ID.; ID.; ID.; ID.; ID.; ID.; ID. — The period of nine days within which the right of
 legal redemption may be taken advantage of, counted from the date of registration or,
in the absence of registration, from the date the redemptioner acquired knowledge of
the sale, is absolute. In fact, there is much stronger reason against relaxing the period
in favor of a legal redemptioner than in favor of a vendor with pacto de retro. In the
latter transaction, there is a contractual relation founded on valuable consideration, a
contract by which the party from whom the repurchase is sought has been benefited.
The right of legal redemption is a pure creature of the law, regulated by law, and works
only one way — in favor of the redemptioner. Not having parted with anything, the legal
redemptioner can compel the purchaser to sell but can not be compelled to buy.

DECISION

TUASON, J.:

This was an action of legal redemption brought under articles 1521 and 1522 of the Civil
Code. 

In so far as they are pertinent to this appeal, the facts may be condensed as follows: A
large tract of land situated in the municipality of Bacolod, Negros Occidental, and
covered by several certificates of title, formerly belonged as conjugal property to
Guillermo Villasor and Basilisa Camento, man and wife. Guillermo Villasor died on
September 21, 1914, leaving as universal heirs his widow and five children. One of the
children died intestate while a minor and her share of the land passed to her mother,
Basilisa Camento. 

On July 15, 1921, Basilisa Camento, as judicial administratrix of her deceased husband’s
estate, submitted to the court a project of partition, whereby 4/10 undivided part of the
estate was allotted to her four surviving children and 6/10 to herself. That partition was
approved in due course. 

On April 16, 1926, Basilisa Camento executed a deed of donation intervivos by which
she gave all her 6/10 undivided share to her grandchildren in equal undivided shares.
One of her grandchildren was Guillermo P. Villasor, the present plaintiff, who, by virtue
of the donation, became the owner of 3/20 undivided part of the estate. The donation
was duly accepted by the legal guardian of the minors, Jose C. Villasor, duly appointed
by the court, but it was not registered until December 2, 1936. 

Meanwhile, on July 1, 1931, Jose C. Villasor, as guardian and in behalf of three

grandchildren of Basilisa Camento named Remedios, Luis and Lilia Jurilla, and with the
necessary permission of the court, sold their shares to Mariano Medalla, appellee. The
sale included the share of Resurreccion Villasor, one of the daughters of the original
owners and the mother of the three minors just mentioned and represented by Jose C.
Villasor; and both Resurreccion Villasor and her husband, Felipe Jurilla, signed the deed
of sale with their children’s legal guardian. The total sale price was P22,000, of which
P12,000 pertained to the three minors’ shares, according to the plaintiff’s computation. 
On March 11, 1939, the plaintiff, who had reached majority on the 6th of that month,
"through his attorneys addressed a registered special delivery letter to Mariano Medalla,
formally offering him the amount of P12,000 for the repurchase" of the shares of the
three minors surnamed Jurilla, but he made no offer for Resurreccion Villasor’s share.
Rodolfo A. Medel, Milagros C. Araneta and Jose J. Justiniani bought the shares of other
co-owners of the tract. Refusing at first to sell to the plaintiff, they were made
defendants with Medalla in the same case under separate causes of action, but the suit
as to them was settled in some form or other before trial or appeal. 

Mariano Medalla, by way of special defenses, alleged that by virtue of a final project of
partition filed and approved by the court in case No. 7612 on August 10, 1939, (after
the present suit was instituted but before it was tried), the portions of the estate now
known as lots Nos. 832, 833, 834 and 836, had been segregated and adjudicated to him
(Medalla); (2) that the complaint did not state facts sufficient to constitute a cause of
action; and (3) that the plaintiff at the time of the sale of those portions to Mariano
Medalla on July 1, 1931, was not yet a co-owner of the hacienda, having become such
only on December 2, 1936, when for the first time he appeared as one of its registered
owners. Medalla maintained that the plaintiff became a co-owner, not from the date of
the donation but from the date of its registration. Under the third special defense, it was
also alleged that Medalla, since July 1, 1931, had made important improvements on the
portions of the hacienda purchased by him and had, through his labor, efforts and
sacrifices, obtained for those portions a valuable sugar production quota for all of which
he had spent considerable sums of money. 

The trial court overruled the above defenses except the second, which it sustained.
Under the second special defense, it was contended that the plaintiff’s right of
redemption, if ever he had any, had expired. The defendant and appellee, not satisfied
with the lower court’s rejection of his other defenses, reiterates them in this instance
and urges that they be considered, to which the appellant objects. Without passing on
the legal validity of the appellant’s objection, we shall take up only the question on
which the court below dismissed the suit. From our view of the case it is unnecessary to
touch on the other issues formulated by the appellee. 

Article 1524 of the Civil Code reads:jgc:chanrobles.com.ph

"The right of legal redemption may not be exercised except within nine days, counted
from the inscription in the Registry, and, in the absence thereof, from the time the
redemptioner shall have had knowledge of the sale. 

"The right of redemption of co-owners excludes that of adjacent owners."cralaw

virtua1aw library

The provision of this article which fixes the period of nine days within which the right of
legal redemption may be exercised has not been repealed or modified by the Code of
Civil Procedure or the Rules of Court. The right of legal redemption and the right to
commence actions are entirely of different nature. The first is a substantive right which,
in the absence of the article, would never exist; the second restricts the period in which
the cause of action may be asserted (Sempio v. Del Rosario, 44 Phil., 1.) 
There are other notable dissimilarities between legal redemption and legal action which
challenge any attempt to bring the former within the rule of the statute of limitations
which suspends the running of the period of prescription during minority. An action is
addressed to a court of justice; legal redemption partakes of a recission of contract and
is addressed to one of the contracting parties by the other. An action may be brought
only by persons not working under any disability; legal redemption may, we believe, be
exercised by a minor of sufficient discretion; at any rate, his natural guardian or
whoever has the minor in his custody may validly make the repurchase in his behalf.
(Guinto v. Lim Bonfing, 48, Phil., 884, 887.) An action seeks to assert a fundamental,
primary right of which the plaintiff has been unlawfully deprived, or to redress a wrong
which has been inflicted; legal redemption is in the nature of a mere privilege created by
law partly for reasons of public policy and partly for the benefit and convenience of the
redemptioner, to afford him a way out of what might be a disagreeable or inconvenient
association into which he has been thrust. (10 Manresa, 4th ed., 317.) 

The law in prescribing certain contingencies as the starting point from which the nine-
day period should be counted, is to be presumed to exclude all others. Exclusio unius est
exclusio alterius. The starting point is registration or, in the absence of registration,
knowledge of the conveyance by the co-owners. It is logical to assume that if minority
had been contemplated, the law would have so expressly stated. This is specially true in
a code which, unlike an ordinary statute, is framed with meticulous care and thorough
reflection. The role of minors in cases of legal redemption is too conspicuous and
perceptible to have been overlooked in the framing of article 1524. The onerous position
of the purchaser and considerations of public interest, we believe, forbade liberality as to
time in favor of redemptioners; hence the limitation of the causes of extension to those
factors (actual or constructive notice) without which the exercise of the right of
redemption would not be possible. The shortness of the period fixed in the above article
is itself a safe index, in our opinion, of its peremptoriness and inflexibility. 

The policy of the law with regard to the period of conventional redemption (pacto de
retro) furnishes the key to the scope of article 1524 with reference to the period for legal
redemption. It is to be noted that legal redemption and conventional redemption are of
the same nature. The provisions governing both are to be found in the same Chapter VI
entitled "Resolution of the Sale" ; the same Title IV entitled "Contract of Purchase or
Sale" ; and the same Book entitled "Obligations and Contracts," all of the Civil Code. It
is also to be noted that the law fixes the duration of conventional redemption at four
years, in default of an express agreement, and at ten years the maximum period beyond
which the parties themselves may not agree. (Article 1508.) Now, it would hardly be
contended that a period of grace might be claimed by a vendor with the right of
repurchase or his successor by reason of mental disability or non-age. Commenting on
articles 1507 and 1509 of the Code, Manresa says:jgc:chanrobles.com.ph

"Ante todo, debemos notar que la cuestion del plazo, durante el cual puede ejercitarse el
derecho de retracto, esta unanimemente considerada como una cuestion de interes
publico. Ya Portalis observaba que no convenia a la propiedad el estar por mucho tiempo
sujeta a condiciones resolutorias de esta indole. Por esta razon, el sentido del Codigo es
restrictivo y limitativo, debiendo resolverse con este criterio, en nuestra opinion, las
dudas que puedan ocurrir, pues tal criterio es, sin duda, el que mejor concuerda con el
espiritu de la ley." (10 Manresa, 2nd ed., p. 302.) 
Reasoning by analogy, the conclusion must be that the period of nine days within which
the right of legal redemption may be taken advantage of, counted from the date of
registration or, in the absence of registration, from the date the redemptioner acquired
knowledge of the sale, is absolute. In fact, there is much stronger reason against
relaxing the period in favor of a legal redemptioner than in favor of a vendor with pacto
de retro. In the latter transaction, there is a contractual relation founded on valuable
consideration, a contract by which the party from whom the repurchase is sought has
been benefited. The right of legal redemption is a pure creature of the law, regulated by
law, and works only one way — in favor of the redemptioner. Not having parted with
anything, the legal redemptioner can compel the purchaser to sell but can not be
compelled to buy. 

We do not believe that the framers of the Civil Code ever intended to countenance a
situation so unjust to one of the parties and prejudicial to social interest. The
construction of article 1524 which the plaintiff offers would keep the property in a state
of indivision even if one of the co-owners wanted to separate. This is contrary to the
express policy of the law that "No co-owner shall be obliged to remain a party to the
community, but each may, at any time, demand partition of the thing held in common."
(Article 400, Civil Code.) It would be extremely unfair to the purchaser and injurious to
the public welfare to keep in a state of suspense, for possibly as long as 20 years or
more, what his co-owner might do when he becomes of age. While the uncertainty
continued the purchaser could not make any improvement on the property without
running the risk of losing his investments and the fruits of his labor. 

The case of Wenceslao v. Calimo, 46 Phil., 906, is obiter dictum in so far as it insinuates
or states that the period fixed in article 1524 does not run against minors. But even if
that decision had value as a precedent, it could not serve as a pattern upon which to
base judgment for the plaintiff here. The dictum stressed the fact that the minors in that
case had no legal guardian. The present appellant not only had such a guardian but it
was this very guardian, Jose C. Villasor, who, as guardian of plaintiff’s cousins and
former co- owners, sold the lots in question to the defendant-appellee. This guardian not
only could have repurchased those lots for the plaintiff within nine days but could have
sold them, with the court’s authority, directly to the plaintiff himself instead of to
Medalla. 

This brings home more eloquently than anything else can illustrate the injustice which a
prolonged period for legal redemption would entail. Here, the plaintiff would repurchase
the lots nine years after the defendant bought them, during which years, the latter
claims, he has improved the property. To the argument such as that advanced that a
purchaser does not have to improve the property and need only reap its fruits, the
answer is that not all lands are in a condition of full productivity when purchased. Some
require investments of capital and toil to bring them into a state of usefulness. 

The judgment of the lower court is affirmed with costs against the Appellant
 EN BANC

G.R. No. L-23374 September 30, 1970

TEOFILA FELICES, Plaintiff-Appellant, v. FRANCISCO COLEGADO defendant-appellee.

Ezekiel S. Grageda for plaintiff-appellant.

Reyes and Dy-Liacco for defendant- appellee.

ZALDIVAR, J.:

Appeal from the decision of the Court of First Instance of Camarines Sur, in its Civil Case
No. 55510, on a question of law - the facts having been stipulated by the parties in the
court below.chanroblesvirtualawlibrarychanrobles virtual law library

Felipe Felices died on November 5, 1938. The only property left by him was a
homestead located in Barrio Curry, Pili, Camarines Sur, comprising 21 hectares, more or
less, for which Original Certificate of Title No. 73 was issued in his name. Soon after his
death, five of his seven surviving children, namely, Marta, Maria, Teofila Silverio, and
Pedro, all surnamed Felices, physically partitioned among themselves the
aforementioned homestead, each one taking actual and exclusive possession of the
specific portion pertaining to him/her, although no transfer certificate of title was issued
in their individual names. 1 On February 24, 1949, Maria Felices sold her share to Roman
Iriola with right of repurchase (con pacto de retro), which share is on the extreme
northern part of the homestead, more particularly described as follows:

A parcel of irrigated rice land covering an area of four (4) and one-fourth hectares
situated in the Barrio of Curry, Municipality of Pili, Province of Camarines Sur,
Philippines, bounded on the North by the property of Mamerto Iriola; on the East by the
Himaao River; on the South by the property of the heirs of Felipe Felices; and on the
West by the Lagundi Creek. This land is an integral part of the land described under
Original Certificate of Title No. 73 issued on October 20, 1948. Proportionate assessed
value: P704.00.

Upon the insistence of Roman Iriola, the deed of conditional sale was signed by all the
brothers and sisters of Maria and soon after the execution of the deed Iriola took
possession of the above-described property.chanroblesvirtualawlibrarychanrobles virtual
law library

Sometime, in 1951, Silverio Felices, Pedro Felices, Marta Felices and Maria Felices
agreed to sell absolutely to Francisco Colegado their respective shares in the homestead
for the total price of P8,500.00. Knowing, however, that such sale could not be validly
effected because of the prohibition to alienate a homestead within five years from the
issuance of the patent, they agreed to execute the document of sale later on. In the
meantime, and inasmuch as the share of Maria Felices was still in the possession of
Roman Iriola by virtue of its having been previously sold to him with right of repurchase,
Francisco Colegado advanced the amount for the repurchase of Maria's share from
Roman Iriola.chanroblesvirtualawlibrarychanrobles virtual law library

When the repurchase price was offered to Roman Iriola, the latter refused to allow the
repurchase. The Felices brothers and sisters (Silverio, Pedro, Marta and Maria),
therefore, consigned the amount for the repurchase with the court and filed Civil Case
No. 1991 in the Court of First Instance of Camarines Sur to compel Roman Iriola to allow
the repurchase and accept the proffered repurchase money. In the complaint, Teofila
Felices, the other sister, who had a share in the homestead, was joined as party
defendant along with Roman Iriola because she refused to join as a party plaintiff with
her brothers and sisters.chanroblesvirtualawlibrarychanrobles virtual law library

On September 11, 1953, Maria, Marta, Silverio and Pedro, all surnamed Felices, and
Francisco Colegado finally executed a deed of absolute sale whereby the said Felices
brothers and sisters ceded to the latter their respective shares in the homestead
inherited by them from their deceased father.chanroblesvirtualawlibrarychanrobles
virtual law library

On June 19, 1954, a decision was rendered by the Court of First Instance of Camarines
Sur in Civil Case No. 1991 ordering Roman Iriola to allow Maria Felices to repurchase the
property that she had previously sold conditionally to him. Iriola appealed from that
decision to the Court of Appeals, and the latter court affirmed the decision. Upon
payment by Francisco Colegado on August 21, 1962, of the sum of P2,053.61 to the
heirs of Roman Iriola, 2 as finally determined by the Court of Appeals, said heirs
surrendered the possession of the land to
Colegado.chanroblesvirtualawlibrarychanrobles virtual law library

Shortly thereafter, or on September 7, 1962, Teofila Felices, thru her lawyer, addressed
a letter to Francisco Colegado informing him of her desire to redeem the parcel of land
sold to him by Maria Felices and at the same time offering the sum of P2,053.61 as the
redemption price of the land - which amount was later on deposited with the Clerk of
Court - but this offer to redeem was refused by Francisco Colegado on September 19,
1962, Teofila Felices commenced the present action against Francisco Colegado in the
Court of First Instance of Camarines Sur (Civil Case No. 5510), asserting that being a
co-owner defendant Colegado can be compelled to allow her to exercise the right of legal
redemption over that portion which her sister Maria Felices had conditionally sold to
Roman Iriola and later repurchased from Iriola by Colegado invoking the provision of
Article 1620 of the Civil Code which reads:

A co-owner of a thing may exercise the right of redemption in case the shares of all the
other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable
one.chanroblesvirtualawlibrarychanrobles virtual law library

Should two or more co-owners desire to exercise the right of redemption, they may only
do so in proportion to the share they may respectively have in the thing owned in
common.
In his answer, which contains a counterclaim, defendant Francisco Colegado maintains
that plaintiff is now precluded to redeem the land in question. He bases his stand on
Article 1088 of the same Code, 3 and asserts that once a property is partitioned among
the heirs, as in the case at bar, the sale by any one of the heirs of his share to a third
person cannot be the subject of redemption by his co-
heirs.chanroblesvirtualawlibrarychanrobles virtual law library

On February 26, 1964, the trial court rendered its decision dismissing the complaint, as
well as defendant's counterclaim, with costs against plaintiff. In its decision, the trial
court made the following findings and conclusions:

The partition of the homestead left by the deceased Felipe Felices is a fact undisputed by
the parties. This was the subject of their stipulation which reads:

"That even before the issuance of Original Certificate of Title No. 73 on October 20, 1948
to the deceased Felipe Felices the children of the said deceased immediately after his
death had already made a physical partition of the land among themselves, although no
transfer certificate of title was actually issued in favor of each heir to his or her
corresponding share."

The partition conferred upon each heir "the exclusive ownership of the property
adjudicated to him" (Javelesa vs. Barrios, et al., 66 Phil. 107; Aliases vs. Alcantara, 16
Phil. 489, Alcala vs. Alcala 35 Phil. 679). In other words, after the partition of the
homestead of Felipe Felices immediately following his death on November 5, 1938, the
co-ownership or co-heirship among his children ceased and each of them became the
exclusive owner of the portion of the homestead adjudicated to him or her own
individual share. Consequently, Teofila Felices is not a co-owner of the share of Maria
Felices in the said homestead and she has, therefore, no right to redeem the same from
Francisco Colegado.chanroblesvirtualawlibrarychanrobles virtual law library

The defendant's counterclaim for damages is not supported by the evidence. It is

convincingly disproved by the emphatic denial of the plaintiff.

WHEREFORE, the complaint and counterclaims are DISMISSED with costs against the
plaintiff. 4chanrobles virtual law library

Hence the present appeal by plaintiff Teofila

Felices.chanroblesvirtualawlibrarychanrobles virtual law library

The only question to be resolved in this appeals whether or not, under the facts stated in
the foregoing paragraphs, plaintiff-appellant can exercise the right of legal redemption of
the land in question from defendant-appellee, pursuant to the provisions of Article 1620
and/or Article 1088 of the Civil Code. As correctly held by the trial court, Article 1088 of
the Civil Code has no application in the present case because said article can only be
availed of when a co-heir sells his share before the partition of the hereditary
estate. 5 That article refers to the hereditary right itself, in the abstract sense, without
specifying any particular portion, although the proportionate participation of each co-heir
is ascertainable. This article presupposes that there has as yet been no distribution of
the estate among the heirs, for the moment such distribution has taken place, even in a
state of pro-indiviso, the heirs ceased to be considered simply as co-heirs, but they have
thereby become co-owners. 6 Consequently, if one of the owners sells his share to a
stranger, a co-owner may claim his right of redemption as a co-owner under Article
1620 of the Civil Code, 7 not as a co-heir under Article 1088 of the same
Code.chanroblesvirtualawlibrarychanrobles virtual law library

But in the instant case, We also find that plaintiff-appellant has no right to redeem the
property as co-owner under Article 1620 of the Civil Code. Co-ownership exists when the
ownership of an undivided thing or right belongs to different persons. 8 It is an inherent
and peculiar feature of co-ownership that although the co-owners may have unequal
shares in the common property, quantitatively speaking, each co-owner has the same
right in a qualitative sense as any one of the other co-owners. In other words, every co-
owner is the owner of the whole, and over the whole he exercises the right of dominion,
but he is at the same time the owner of a portion which is truly abstract, because until
division is effected such portion is not concretely
determined.chanroblesvirtualawlibrarychanrobles virtual law library

In the case before Us, it is admitted by plaintiff-appellant herself that immediately after
the death of their father Felipe Felices, she and her brothers and sisters divided or
partitioned the homestead among themselves extrajudicially, each heir taking physical
and exclusive possession and control of his or her aliquot share. The portion given to
Maria Felices, which plaintiff-appellant now seeks to redeem, is about one-fifth of the
homestead on the northernmost part, marked out by metes and bounds, as described in
paragraph 3 of the complaint. And when Maria Felices sold her share to Roman Iriola in
1949, she delivered to him the possession of the particular portion of the homestead
constituting her distinct share, and since then Roman Iriola, and later his heirs upon his
death, have continuously cultivated the land and introduced improvements thereon until
the possession thereof was in turn delivered to defendant-appellee Francisco Colegado
April 1962 pursuant to the decision of the Court of Appeals. There is, therefore, no doubt
that at the time Maria Felices sold her share to defendant-appellee Colegado and even
prior thereto when she ceded the same property to Roman Iriola, the community of
interest over the entire homestead of their father between her (Maria) and her brothers
and sisters had already ceased, and so the claim of plaintiff-appellant to redeem the
property under Article 1620 can not be sustained because when that property was sold
by Maria Felices to defendant-appellee she (plaintiff-appellant) was no longer a co-owner
of that particular property. The following ruling of this Court, speaking through Mr.
Justice J. B. L. Reyes, is pertinent to the resolution of the issue in the present case:

The foregoing theory is untenable. Tested against the concept of co-ownership, as

authoritatively expressed by the commentators, appellant is not a co-owner of the
registered parcel of land, taken as a unit or subject of co-ownership, since he and the
spouses do not "have a spiritual part of a thing which is not physically divided" (3
Sanchez Roman 162), nor is each of them an "owner of the whole, and over the whole
he exercises the right of dominion, but he is at the same time the owner of a portion
which is truly abstract ..." (3 Manresa 405). The portions of appellant-plaintiff and of the
defendant spouses are correctly determined and identifiable, for to the former belongs
the northern half, and to the latter belongs the remaining southern half, of the land.
That their respective portions are not technically described, or that said portions are still
embraced in one and the same certificate of title, does not make said portions less
determinable or identifiable, or distinguishable, one from the other, nor that dominion
over each portion less exclusive, in their respective owners. Hence, no right of
redemption among co-owners exists. (De la Cruz v. Cruz, et al., L-27759, April 17,
1970, 32 SCRA, 307, 311). 9chanrobles virtual law library

The foregoing sufficiently disposes of the issue raised in this appeal. However, even
granting the claim of plaintiff-appellant that co-ownership of the homestead still existed
as of the time defendant-appellee repurchased the share of Maria Felices from Roman
Iriola still she can not exercise the right of legal redemption of the controverted
property. The record shows that on September 11, 1953 defendant-appellee Colegado
bought the respective shares of Silverio Felices, Pedro Felices, and Marta Felices in the
homestead. By such purchase defendant-appellee had thereby become a co-owner of
the homestead. When defendant-appellee thereafter paid for the portion allotted to
Maria Felices, in August, 1962, he was at that time not a stranger but already a co-
owner of the homestead. hence, plaintiff-appellant cannot redeem the land from
defendant-appellee because the latter and plaintiff-appellant had become co-owners,
and as co-owners neither of them has the right of legal redemption against the
other. 10 In the case of Viola v. Roura & Tecson (49 Phil., 808), this Court held that the
right of legal redemption is not limited solely and exclusively to original co-owners but
applies as well to those who subsequently acquire the respective shares of the co-
owners while the community exists.chanroblesvirtualawlibrarychanrobles virtual law
library

WHEREFORE, the decision appealed from is affirmed, with costs against plaintiff-
appellant. It is so ordered.
 EN BANC

[G.R. No. 25739. December 24, 1926. ]

MAXIMO VIOLA and JUANA ROURA, Plaintiffs-Appellants, v. VICENTA TECSON,

DONATA LAJON and AURELIA TECSON, Defendants-Appellees. 

M. H. de Joya and Ramon P. Gomez for Appellants. 

Jesus Paredes for Appellees. 

SYLLABUS

1. LEGAL REDEMPTION; COOWNERS. — The right of legal redemption (art. 1522 of the
Civil Code) is not granted solely and exclusively to the original coowners but applies to
those who subsequently acquire their respective shares while the community subsists.
The purpose of the law in establishing the right of legal redemption between coowners is
to reduce the member of the participants until the community is done away with, as
being a hindrance to the development and better administration of the property and this
reason exists while the community subsists and the participants continue to be so
whether they be the original coowners or their successors. The law must be so
interpreted not only because it is in accordance with the spirit thereof, but because there
is nothing in its provisions which expressly, or by inference, limits the right of
redemption to the original coowners.

DECISION

AVANCEÑA, C.J.  :

The property in question described in the complaint was originally held in common by
Fortunato Capistrano, Nicolas C. Cruz and Felix Cepilio Cruz. On September 26, 1923 the
plaintiffs, the spouses Maximo Viola and Juana Roura, acquired from Fortunato
Capistrano and Nicolas C. Cruz three-fourths of their share in this property. Felix Cepilio
Cruz did not exercise his right of legal redemption in this sale. On March 7, 1925 Clara
Santos, as administratrix of the intestate estate of the deceased Felix Cepilio Cruz, sold
one-fourth of Felix Cepilio Cruz’ share in this property for the sum of P4,000 to the
defendant sisters, Vicenta and Aurelia Tecson. This sale was authorized by the court and
was approved on March 10th. On the 20th of the same month the plaintiffs filed the
complaint which initiated this action, in which they prayed that by, virtue of the right of
legal redemption which they had in the sale of this one-fourth part of the property made
to the defendants, judgment be rendered for the transfer of this share to them. The
court holding that the right of legal redemption is granted by law only to the original
coowners and not to those who may later acquire their share in the community, and
considering that the plaintiffs are not the original coowners of the property in question,
absolved the defendants from the complaint. From this judgment the plaintiffs
appealed. 
As a question of fact, there is no doubt that the plaintiffs exercised their right of
redemption within the period of nine days provided by law, even taking into
consideration that they did so only when they filed their complaint on March 20, 1925.
While the sale appears to have been made on the 7th of the month, it was not approved
by the court until the 10th, so that, excluding the latter date, only nine days elapsed up
to the 20th. But, besides this, before filing their complaint, the plaintiffs had already
requested the defendants to permit them to repurchase Felix Cepilio Cruz’ share. And,
moreover, we are of the opinion that the plaintiffs had knowledge of the sale only on the
15th of that month. 

In regard to the question of law, we are of the opinion that the right of legal redemption
(art. 1522 of the Civil Code) is not conceded solely and exclusively to the original
coowners but applies to those who subsequently acquire their respective shares while
the community subsists. The purpose of the law in establishing the right of legal
redemption between coowners is to reduce the number of participants until the
community is done away with, being a hindrance to the development and better
administration of the property, and this reason exists while the community subsists and
the participants continue to be so whether they be the original coowners, or their
successors. The law must be so interpreted not only because it is in accordance with the
spirit thereof but because there is nothing in its provisions which expressly, or by
inference, limits the right of redemption to the original coowners. 

The judgment appealed from is revoked and it is held that the plaintiffs have the right to
repurchase from the defendants, the one-fourth share of the land in question which they
acquired from Felix Cepilio Cruz, after complying with the conditions prescribed by law
for exercising this right, without any special pronouncement as to costs. So ordered. 
 EN BANC

G.R. No. 10432 November 4, 1916

JULIAN H. DEL PILAR, Plaintiff-Appellant, vs. MANUEL CATINDIG, Defendant-

Appellee.

Santos and Tomacruz for appellant.

No appearance for appellee.

ARAULLO, J.:

The plaintiff in these proceedings, relying upon the right of legal redemption by adjacent
owners, provided for in article 1523 of the Civil Code, brought suit against the defendant
in the justice of the peace court of the municipality of Bulacan, of the province of the
same name, and prayed for judgment in his favor and against the defendant, declaring
him to be surrogated in place of the latter in the ownership of a parcel of land which the
defendant had recently acquired from a woman named Maria Cornelio, in exchange for
one of his own. After a hearing in the justice of the peace court judgment was rendered
in favor of the plaintiff, from which judgment the defendant appealed to the Court of
First Instance of the province. There the plaintiff filed a new complaint in which, after
describing both the land acquired by the defendant in exchange for that of the said
Maria Cornelio and the sum of P21, and his own land abutting in that of the defendant so
acquired by the latter, prayed the court to render judgment by declaring him, the
plaintiff, to be entitled to the legal redemption of the property described in the complaint
and acquired by the defendant from Maria Cornelio as aforestated; and that the court
order the defendant to deliver this property to the plaintiff, on payment of the sum of
P21, the value of the property or, at most, the sum of P57, the value of the defendant's
land that was exchanged with Maria Cornelio.chanroblesvirtualawlibrary chanrobles
virtual law library

The defendant in his answer denied each and all of the facts contained in the complaint
and in special defense alleged that the plaintiff's lands that adjoined his own were larger
than the defendant's and that the land in question afforded the only means of ingress
through which work animals could reach the defendant's land, if the plaintiff's lands
were excluded. The defendant therefore prayed the court to absolve him from the
complaint, with the costs against the plaintiff.chanroblesvirtualawlibrary chanrobles
virtual law library

The parties stipulated in writing to submit the case to the Court of First Instance as
though it had been originally filed before the same, in view of the fact that, according to
the rule laid down by the Supreme Court, the justice of the peace court of Bulacan which
first took cognizance thereof had no jurisdiction in the matter. After trial and the
introduction of evidence in the said Court of First Instance, judgment was rendered on
August 6, 1914, dismissing the complaint with the costs against the plaintiff. From that
judgment the plaintiff appealed, with the right to have the evidence reviewed, and
forwarded to this Supreme Court the proper bill of exceptions in which he alleged for the
purpose of his appeal that the lower court erred:
First. In holding that the appellant had not proven his right to acquire the land in
question, but that his sole purpose appeared to be to molest the appellee. Second. In
holding that the appellee acquired the land in question in order that it might serve as a
passage way for his stock to his other land that was surrounded by those of the
appellant, and in considering this fact as the basis of the judgment. Third. In not holding
the right of legal redemption of adjacent owners to lie in the appellant, and in not
recognizing the latter's right of subrogation in place of the appellee with regard to the
land in question, by payment of either of the sums mentioned in the complaint.

Article 1521 of the Civil Code provides:

Legal redemption is the right to be subrogated, with the same conditions stipulated in
the contract, in the place of the person who acquires a thing by purchase or in payment
of a debt.

An article 1523 of the same Code prescribes:

The owners of the adjacent lands shall also have the right of redemption when the sale
of a rural estate is involved the area of which does not exceed one
hectare.chanroblesvirtualawlibrary chanrobles virtual law library

The right referred to in the preceding paragraph is not applicable to adjacent lands
which are divided by brooks, drains, ravines, roads, and other apparent easements for
the benefit of other estates.chanroblesvirtualawlibrary chanrobles virtual law library

If two or more adjacent owners should make use of the redemption at the same time,
the one who is owner of the adjacent land of lesser area shall be preferred; and, should
both be equal in area, the person who first requested it.

Manresa, in his noted work Commentaries on the Civil Code, in treating of the said
article 1523 (vol. 10, p. 358, 2 d ed.) says as follows:

This right being limited in scope to rural lands not exceeding one hectare in extent, it is
seen that the intention of the Code in this respect is solely to favor the development of
the ownership of land and agricultural interests .An estate of not more than a hectare in
area does not, as a general rule, produce enough to keep one family; its cultivation can
not be accomplished economically, as the agricultural implements used have to be
brought in across lands belonging to other owners, and the same may be said with
regard to the gathering and transportation of the produce .All these difficulties disappear
if, on the sale of the estate, it is purchased by one of the adjacent owners, whereby the
public interests is favored, because the production increases, the private interests of the
redemptioner are respected and no ostensible harm is occasioned either the vendor or
the purchaser.

x x x           x x x           x x x chanrobles virtual law library

The purpose of this article, as stated by the Code Commission in the revised edition of
the Civil Code, was to furnish with the course of time some remedy for the excessive
subdivision of real estate which offers an insuperable obstacle to the development of
wealth.

As may be seen, the object of the lawmaker in allowing the redemption by adjacent
owners is to prevent a rural estate, adjacent to that belonging to another owner or other
owners and the area of which does not exceed one hectare, from passing into the hands
of a person other than some one of the adjacent owners so that the property of these
latter would be divide without benefit to the public weal and perhaps to the prejudice of
the adjacent owners themselves who are interested in preserving the integrity of their
respective properties and in using the alienated estate for the improvement and
development of their own lands.chanroblesvirtualawlibrary chanrobles virtual law library

The right of redemption by adjacent owners cannot be exercised by any of these latter
among themselves, but only by them against a stranger who acquires from any one of
them, by purchase or gift, in payment, or by any other title for value, a rural estate of
the area fixed by law. The purpose of the right of action granted in such a case to the
redemptioner (in connection with the right provided for in the articles 1521 and 1523 of
the Civil Code, above transcribed, to subrogate himself, under the same conditions
stipulated in the contract, in place of the person who acquired the property by any of the
means mentioned) is to give preference to any of the owners of the adjacent lands as
against the purchaser (that is, against the third person who, not being an adjacent
owner, acquired the property) in order that he may have and hold the land under the
same conditions as those stipulated in the respective
contract.chanroblesvirtualawlibrary chanrobles virtual law library

The supreme court of Spain made an explicit declaration in that sense, in its decisions of
November 26, 1895, December 4, 1896, and March 8,
1901.chanroblesvirtualawlibrary chanrobles virtual law library

This last decision was rendered in a case in which the plaintiff, exercising the right of
legal redemption, alleged that he was the owner of one celemin of land which on the
north adjoined a piece of land of an approximate area of one fanega, less than one
hectare, which had belonged to a woman named Juana Peña Romero, and which had
been sold to one Zacarias Cuerda. The plaintiff prayed the court to hold that he was
entitled to redeem the said land and to order Cuerda to execute a deed of conveyance of
all his rights in the property to the plaintiff. Cuerda opposed the plaintiff's petition,
alleging that it was evident that the right of legal redemption could be availed of only by
the adjacent owners, when the sale thereof had been made to a person who had no
property adjoining the land so alienated, and that he was the owner of a piece of land
which on the north was coterminous with the property sought to be redeemed. The civil
branch of the Audiencia of Caceres rendered judgment affirming that of the lower court
and allowing the redemption prayed for in the complaint; whereupon the plaintiff filed an
appeal in cessation before the supreme court and alleged that article 1523 of the Civil
Code had been violated, as well as the rule laid down in the two first cited decisions of
the same court pursuant to which a right of action for legal redemption lies only against
strangers who buy the property sought to be redeemed, but not against another
adjacent owner who has the same interest as the plaintiff in the consolidation of the
scattered holdings and in the disappearance of the small parcels of property. In deciding
that case the supreme court said:
Legal redemption can only be enforced against a stranger who buys the property sought
to be redeemed and not against another adjacent owner who has the same interest.

As the defendant in the case at bar is the owner of the land abutting upon that sought to
be redeemed by the plaintiff and is also one of the adjacent owners of this same land, it
is evident that the plaintiff has no right whatever in the said property and that the action
brought by him against the defendant is improper.chanroblesvirtualawlibrary chanrobles
virtual law library

For the foregoing reasons, we affirm the judgment of dismissal, appealed from, with the
costs of this instance against the appellant. So ordered
 EN BANC

G.R. No. L-21677 June 29, 1972

ANTONIO G. DE SANTOS, petitioner-appellant, vs. CITY OF MANILA and ARELLANO

UNIVERSITY, INC., Respondents-Appellees.

De Santos & Delfino for petitioner-appellant.

E. Voltaire Garcia for respondents-appellees.

MAKASIAR, J.:

Petitioner-appellant seeks the review by certiorari of a decision dated July 11, 1963 of
the Court of Appeals, in CA-G.R. No. 29354-R, which affirmed that of the Court of First
Instance of Manila in Civil Case No. 39730.chanroblesvirtualawlibrarychanrobles virtual
law library

The facts as found by the appellate court are as follows:

On October 1, 1958, a contract of exchange was made and entered into by and between
the City of Manila and the Arellano University, Inc., in accordance with, and by virtue of,
Resolution No. 442 of the Municipal Board of Manila, adopted on August 15, 1958, and
approved by the City Mayor on August 22, 1958, whereby five parcels of land of the City
of Manila (Lots 1, 2, 3, 4 and 5, Psu-167195) containing an aggregate area of 2458.3
square meters, more or less, were exchanged for three parcels of land of the Arellano
University, Inc. (Lots 4-A, 9-A, and 10-A, Psd-53347) containing an aggregate area of
2171.4 square meters, more or less, which were needed for the construction of the
Azcarraga (now Claro M. Recto) Extension.chanroblesvirtualawlibrarychanrobles virtual
law library

On account of said contract of exchange, (the present) action was brought on March 25,
1959, by Antonio G. de Santos, plaintiff, against the City of Manila and the Arellano
University, Inc., defendants, (1) to declare the said contract of exchange null and void
insofar as Lot No. 1 of Psu-167195 is concerned; (2) in the event that the validity of said
contract is sustained, to declare Lot 1 subject to plaintiff's right of redemption within 30
days from the written notice of such exchange; and (3) in the event that said Lot 1 be
declared not to belong to the City of Manila, to enjoin the said City, "in the event that it
finally acquires the aforesaid property, to respect plaintiff's right of
preemption."chanrobles virtual law library

Defendant University filed answer with counterclaim for P5,000.00 "for services of
counsel to protect its interests and defend this suit against the unfounded complaint of
plaintiff."chanrobles virtual law library

Defendant City also filed answer, alleging that it is the owner of the lot in question, Lot
No. 1 of Psu-167195, and that plaintiff has no preferential or better right than defendant
Arellano University to acquire said lot by preemption, legal redemption, sale, exchange
or other form of acquisition.chanroblesvirtualawlibrarychanrobles virtual law library

The lot under controversy - Lot No. 1 Psu-167195 - contains 221.50 square meters. It
was a part of the partially dried bed of the Estero de San Miguel or Sampaloc, and is
situated south of Lot No. 4, Block 2646, Manila Cadastre, which contains an area of 1460
square meters and which was acquired by plaintiff on January 31, 1958 from Enrique C.
Lopez (Exh. F). It also adjoins the properties belonging to the Arellano University,
Inc.chanroblesvirtualawlibrarychanrobles virtual law library

By letter of May 14, 1957, the City of Manila advised the Arellano University, Inc., that
about 2,400 square meters of its site on Legarda Street were needed by the City for the
construction of Azcarraga extension. This letter was answered on May 21, 1957, with the
proposition that in exchange for said 2,400 square meters, the City cede to the
University the esteros adjoining the Arellano site, on the basis of 2 square meters
of estero (filled) for every square meter of the Arellano land, or in case of
unfilled esteros, on the basis of 3 to 1 (Exh. 2). The negotiations culminated in the
passage of the aforementioned Resolution No. 442 followed by the execution of the
contract of exchange sought to be annulled.chanroblesvirtualawlibrarychanrobles virtual
law library

Upon the other hand, Enrique C. Lopez, predecessor-in- interest of plaintiff Antonio G.
de Santos, having been advised that his property, Lot 4, Block 2646, would be affected
by the widening of Legarda St., Sampaloc, and that the necessary area (56 sq. m.)
would be expropriated, wrote the City Engineer under date of August 8, 1957, proposing
that the required area "be exchanged with the City property back of my same Lot 4, Bloc
2646 ... The City property at the back of my lot, I am referring to, is at present a part of
the Estero de San Miguel" (Exh. E). This letter of Mr. Lopez was coursed through official
channels, and the City Appraisal Committee stated that the exchange of the lot of Mr.
Enrique C. Lopez affected by the widening of Legarda St., with the lot (around 190 sq.
m.) formerly a part of the abandoned estero bed "may be made on the basis of meter
for meter, the excess area in favor of the City to be paid for at the rate of P45.00 per
square meter" (Exh. E-3). The papers were then forwarded to the City Mayor by the City
Engineer per indorsement of April 15, 1958 (Exh. E-6). Meanwhile, on January 31, 1958,
the aforesaid Lot 4, Block 2646, Manila Cadastre, was exchanged by Mr. Enrique C.
Lopez for 6 parcels of land situated in Jose Abad Santos belonging to the herein plaintiff,
a copy of the deed of exchange being Exhibit F. By letter dated February 25, 1959 (Exh.
J-1), the City Mayor informed plaintiff, in effect, that his Office approved an indorsement
of the Officer in charge of the Department of Engineering and Public Works of the City
(Exb. J-2) wherein it was recommended that "action on the claim of Dr. Antonio Santos
as successor-in-interest of Mr. Lopez be held in abeyance," for the reasons stated
therein, to wit:

"Azcarraga Extension was planned long before the war. It is considered as a major
thoroughfare to bypass Legarda. After the war, with the creation of the National
Planning Commission, Azcarraga Extension was again incorporated in their plans so that
the opening of Azcarraga Extension from Mendiola to the Rotonda is being given great
importance. Azcarraga Extension passes thru the property of the Arellano University and
the San Beda College on which we have an expropriation proceedings against the
College. The expropriation case is now in court and the chances are great that we will
win the case.chanroblesvirtualawlibrarychanrobles virtual law library

"There were plans before to widen Legarda to relieve traffic on this street, but in view of
the tremendous cost of expropriation involved and in view of the proposed opening of
the Azcarraga Extension, negotiations for the widening of Legarda Street even on a
piece-meal basis were suspended temporarily.chanroblesvirtualawlibrarychanrobles
virtual law library

"In view of the above, any exchange now involving the widening of Legarda Street with
any property that the City has, should be held in abeyance. On the other hand, efforts
should be concentrated on the acquisition of properties along Azcarraga Extension
because of its prime importance for lessening traffic on Legarda without widening it."

After hearing, the trial court on March 7, 1961 rendered judgment for the defendants
holding that plaintiff has no right to exercise any right of pre-emption or redemption
over the lot in question; denying the alternative cause of action for annulment of the
deed of exchange on the ground that such an issue cannot be raised by plaintiff, who is
not a proper party in interest; dismissing the complaint; and directing plaintiff to pay
defendant Arellano University the sum of P5,000.00 as attorney's fees, with costs
against the plaintiff (Annex "E", pp. 67-76, ROA).chanroblesvirtualawlibrarychanrobles
virtual law library

On appeal by plaintiff, the Court of Appeals affirmed on July 11, 1963 the above decision
of the trial court (Annex "A", pp. 24-32, rec.).chanroblesvirtualawlibrarychanrobles
virtual law library

Hence, this present petition for review by certiorari.chanroblesvirtualawlibrarychanrobles

virtual law library

The assignment of errors posed by petitioner-appellant in his brief boils down to two
issues: (1) whether or not petitioner-appellant has any right of pre-emption or
redemption over Lot No. 1 of Psu-167195, or, as an alternative cause of action, to seek
the annulment of the deed of exchange executed by and between respondents-
appellees; and (2) whether or not the award of P5,000.00 as attorney's fees in favor of
Arellano University is justified.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner-appellant has no right to pre-empt or redeem the lot in question as adjoining

owner under the pertinent provision of law on the matter, Article 1622 of the new Civil
Code, thus:

ART. 1622. Whenever a piece of urban land is so small and so situated that a major
portion thereof cannot be used for any practical purpose within a reasonable time,
having been bought merely for speculation, is about to be re-sold, the owner of any
adjoining land has a right of pre-emption at a reasonable
price.chanroblesvirtualawlibrarychanrobles virtual law library
If the re-sale has been perfected, the owner of the adjoining land shall have a right of
redemption, also at a reasonable price.chanroblesvirtualawlibrarychanrobles virtual law
library

When two or more owners of adjoining lands wish to exercise the right of pre-emption or
redemption, the owner whose intended use of the land in question appears best justified
shall be preferred.

The aforequoted provision grants to the adjacent owner the right of pre-emption under
paragraph one, if the urban land is about to be re-sold, and the right of redemption
under paragraph two, if the re-sale has been perfected. The exercise of either right,
however, is premised on the existence of two conditions, namely: (1) the piece of urban
land is so small that it cannot be used for any practical purpose within a reasonable
time; and (2) such small urban land was bought merely for speculation.  1chanrobles
virtual law library

In the instant case, petitioner-appellant had neither alleged in his complaint nor proved,
either that Lot No. 1 of Psu-167195 "is so small and so situated that a major portion
thereof cannot be used for any practical purpose;" or that it has "been bought merely for
speculation;" or that it "is about to be re-sold." On the contrary, the Court of Appeals
found that Lot No. 1 is a portion of a partially dried bed of Estero de San Miguel or
Sampaloc, which finding of fact is conclusive. The City of Manila did not acquire it by
purchase. The Court of Appeals likewise determined that said Lot No. 1 is also adjacent
to the lots of the defendant-appellee University, which determination is beyond review
by US. It is not disputed that the aforesaid lot in controversy consists of 221.50 square
meters, more or less, an area bigger than the average size of lots in Manila as found by
the trial court. Besides, it is alleged by respondent-appellee Arellano University that, as
an educational institution whose present site is not enough for its needs, it can devote
said parcel of land to serve public interest (Annex "B", p. 58, ROA), which intended use
entitles the University to preference under the last paragraph of Article 1622 aforecited.
These facts alone would be sufficient to negate any claim that the area of the
controverted urban lot is so small and so situated that a major portion thereof may not
be used for any practical purpose within a reasonable time. Respondent-appellee City of
Manila, as owner, exchanged the disputed lot and other lots belonging to it, with those
of respondent-appellee Arellano University, because the former needed portions of
properties of the latter for the Azcarraga (now Claro M. Recto) Street extension; and
such an exchange would not necessitate disbursements of funds by respondent-appellee
City of Manila. And it has not been alleged nor shown, either, that respondent-appellee
City of Manila had the intention then to sell the said property. 2Consequently, petitioner-
appellant is not entitled to the benefits of Article 1622
abovecited.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner-appellant contends that he is entitled to preempt or to redeem Lot No. 1 of

Psu-167195 under precedents and established policy of respondent-appellee City of
Manila. The latter, however, maintains that said alleged precedents and policy are at
most only recommendatory to its Municipal Board. At any rate, all that petitioner-
appellant presented on this point were communications between City of Manila officials
and his predecessor-in-interest, Enrique Lopez, regarding the latter's proposal to
exchange his lot which may be affected by the widening of Legarda Street with City
property, a part of the Estero de San Miguel which includes the controverted lot. If any
right, therefore were at all acquired by petitioner-appellant from Enrique Lopez, it was
but the right to pursue the latter's claim to its legitimate end. However, as stated in the
portion of appellate court's decision aforequoted, action on this matter was held in
abeyance, as the extension of Azcarraga Street was given priority over the widening of
Legarda Street. It, thus, becomes obvious that the basis of petitioner-appellant's claim
failed to materialize. On the other hand, negotiations between respondent-appellees,
which ante-dated the claims of Enrique Lopez and petitioner-appellant, were carried out
successfully and culminated in the passage of Resolution No. 442 of the Municipal Board
of respondent-appellee City of Manila followed by the execution of the contract of
exchange between respondents- appellees. As a necessary consequence, the nebulous
right of pre-emption or redemption of petitioner-appellant completely
vanished.chanroblesvirtualawlibrarychanrobles virtual law library

A person, who is not a party obliged principally or subsidiarily under a contract, may
exercise an action for nullity of the contract if he is prejudiced in his rights with respect
to one of the contracting parties, and can show detriment which would positively result
to him from the contract in which he had no intervention.  3chanrobles virtual law library

The said contract of exchange is not detrimental to the right or interest of petitioner-
appellant; because he has neither the right of pre-emption nor redemption over the
disputed lot. Petitioner-appellant, therefore, cannot legally seek the annulment of said
deed of exchange.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner-appellant contests the award of attorney's fees on the ground that it is not
sound policy to place a penalty on the right to litigate. However, the award of attorney's
fees is a matter essentially discretionary with the trial court. Paragraph 4 of Article 2208,
Civil Code, authorizes such an award, since the instant action is clearly unfounded, and
no abuse of discretion having been shown, the award should not be
disturbed. 4chanrobles virtual law library

WHEREFORE, the appealed decision is hereby affirmed, and the appeal is hereby
dismissed, with costs against petitioner-appellant. So ordered
 EN BANC

G.R. No. L-10712            August 10, 1916

ANSELMO FERRAZZINI, plaintiff-appellee, 
vs.
CARLOS GSELL, defendant-appellant.

William A. Kincaid and Thomas L. Hartigan for appellant.

Ramon Sotelo for appellee.

TRENT, J.:

This action was brought to recover damages for an alleged wrongful discharge of the plaintiff, who
had been employed by the defendant for an indefinite time to work in the latter's industrial enterprises
in the city of Manila. The defendant admitted that he discharged the plaintiff without giving him the
"written advice of six months in advance" as provided in the contract, but alleged that the discharge
was lawful on account of absence, unfaithfulness, and disobedience of orders. The defendant sought
affirmative relief for a further alleged breach of the contract by the plaintiff after his discharge. From a
judgment in favor of the plaintiff the defendant appealed and now urges that the trial court erred (1) in
finding that the plaintiff's discharge was not justified and (2) in declining to consider the counterclaim
and enter judgment in accordance therewith.

1. The plaintiff engaged his "skilled service" to the defendant for the entire existence "of this
agreement" at a fixed monthly salary and agreed "to devote his entire time and efforts to the best of
his knowledge and skill exclusively in carrying out in the most satisfactory manner possible all of the
work which may be entrusted to him during the existence of this contract and undertaking,
furthermore, to exercise a strict discretion in all matters pertaining to the work so entrusted to him and
the whole thereof, . . . ."

The relation of master and servant, which was created by the contract, cast certain duties and
obligations upon the parties, which they were bound to discharge and fulfill; the foremost, on the part
of the master, were those of furnishing the servant with a reasonably safe place to work, to pay him
for his services, and not to discharge him until the expiration of six months after notice; and the
foremost, on the part of the servant, were those of loyalty, faithfulness, and obedience to all
reasonable orders not inconsistent with the contract. Consequently, if the plaintiff's discharge were
without just cause, it was in violation of the contract of service and he is entitled to recover.
Otherwise, he is not, because the breach on his part must necessarily have occurred before his
discharge. Hence, the defendant must prove justification for his act for the reason that it was in
contravention of the six-months clause in the contract. In order to justify the dismissal of the plaintiff,
the defendant must show that the plaintiff was guilty of conduct which can be construed to be a
breach of some express or implied provision in the contract of service. If it has been shown that the
plaintiff's conduct was inconsistent with the relation of master and servant or incompatible with the
due and faithful performance of his duties, his discharge was justified. In view of the fact that the
determination of these questions necessarily requires a careful review of the evidence and in view of
the further fact that we cannot accept the trial court's findings upon these important points, we think it
advisable to set forth briefly the substance of all of the material testimony submitted by both parties.

ANSELMO FERRAZZINI: On Friday evening at supper there was some talk about Mr. Gsell
measuring the goods for the umbrellas. Then I said that if Mr. Gsell does this, it is my idea that
he has no confidence in his employees. I was talking to everybody in general. There were
present Mr. Specht, Mr. Alberto Ferrazzini and Mr. Inhelder. Mr. Specht was an employee of
the defendant at the time. I do not remember telling Specht that he was not receiving sufficient
salary. The only thing I remember distinctly is that i said `that Mr. Gsell does not seem to have
any confidence in us.'

Q.       Is it not a fact that shortly, or sometime before your discharge, you have been in the
habit of leaving the factory for considerable periods in the morning to go outside for the
purpose of taking a drink? —

A.       As long as I have been with the firm of Carlos Gsell I was allowed in the morning ten or
fifteen minutes during the hot season to absent myself to have a drink of beer or whisky and
soda; and the same in the afternoon.

Q.       Is it not a fact that Mr. Bender, the manager of the factory, had repeated spoken to you,
or had several times spoken to you about your habit of leaving the factory for the purpose of
taking a drink, and had prohibited you from doing it, forbade you to do it? —

A.       He merely told me not to do it in such an ostentatious manner. Mr. Bender told me that
Mr. Gsell did not like to see me go out in the forenoon and afternoon; I told him that Mr. Gsell
himself had told me on one occasion that if I had to have a drink I could go out for it and it
would be all right; this was in the presence of Mr. Landvatter.

Q.       Then, am I to understand that when you went out to take a drink it was because you
must have one? —

A.       Yes, of course.

Q.       Is it not a fact that Mr. Bender had conversations with you, at least once in the month of
March, regarding this matter? —

A.       I don't remember it.

Q.       Were not you frequently spoken to about it? —

A.       No, sir.

CARLOS GSELL: The first reason that led to his dismissal was because several months,
through April and May, he had the habit of going out in the morning and afternoon for having a
drink; not one but many drinks, because he was out sometimes an hour and an hour and a
half; and as I have a factory with 400 working people I have to see that certain discipline is
maintained in the factory. I gave instructions to the manager. Mr. Bender, to see that this habit
would be dropped, but he (the plaintiff) would not do so. Now what made me pleased to
dismiss him was because on a certain night at the mess where he ate with other employees of
my house, he provoked one of my employees, a new arrival, and said that all the control I had
in the factory was one of mistrust; he said I was suspicious; that I measured the cloth in my
office for the umbrellas and that he would not support such treatment from my side; at the
same time he said to this newly arrived employee that the salary that he, the new man, got
under the contract was not sufficient to live on and that he should not continue to work for me. I
asked the plaintiff about the conversation which he had at the mess and he did not deny it. He
said that he did not mean it to be so bad. The factory was prejudiced on account of the plaintiff
absenting himself, because sometimes I wanted to speak to him, tell him something, and he
was not there. I had to wait for him, and then when he came back it was noon perhaps, and it
 could not be done. I gave instructions to Mr. Bender, the manager, to stop the plaintiff's going
out without permission. I did not exactly authorized the plaintiff to go out to drink. I always
wanted to stop this. The plaintiff was the older of those who have gone out to drink. The
plaintiff held a responsible position. In the first place it was his duty to make repairs to the
machinery in all the departments; later he was entrusted with the various departments — not at
the same time; once he had the bleaching department; once he had to help out in the umbrella
factory; and then he was in charge of the hat factory. The plaintiff had other employees under
him.

CARL BENDER: I came to the Philippine Islands in the middle of March as the defendant's
manager. I saw that the plaintiff was frequently out of the factory. I told him that we was not
allowed to leave the factory without my permission. HE kept up the habit of going out in the
morning and afternoon for an hour or more and I told him the second time. He told me that he
had permission from the former manager to go out and take a drink. I again told him he must
not go out without my permission. Notwithstanding these orders, he was out one whole
Saturday afternoon and I reported him to the defendant. The plaintiff went out without
permission some thirty-five times after I ordered him not to do so. I had the other employees
search for him, but they could not find him. He would go out four or five times a week.

HERMAN INHELDER: I was present at the mess in June when that conversation took place.
We were discussing several things, including the business and the way the umbrella factory
was run. The plaintiff spoke in a manner that indicated that Mr. Gsell did not trust Mr. Specht. I
did not want to have this kind of a conversation going on there and I told the plaintiff he had
better leave the house.

Q.       Did the plaintiff say anything with respect to the amount of salary, which Mr. Specht was
receiving? — If so, what? —

A.       I won't pretend that Mr. Ferrazzini said it that night, about the salary, but he said it on
several occasions before, and — well — what he did say was that Mr. Specht ought not to
work so much for such a small salary.

ALBERTO FERRAZZINI: I was present when the conversation took place in the mess one
evening of June last. A discussion arose about Mr. Gsell exercising control over the
merchandise or goods. Then the plaintiff said that this seemed to show that Gsell had no
confidence in Mr. Specht. Mr. Specht was in charge of the umbrella department. The
conversation was then carried on in German and I could not understand what they said.

HANS SPECHT: I am foreman of the umbrella factor of the defendant. During the conversation
at the mass the plaintiff told me that the defendant had no confidence in me. I protested and
then the plaintiff tried to prove it by stating that the defendant was investigating things in the
umbrella factory, verifying the goods for the umbrellas. The plaintiff said nothing about my
salary at that time, but on a previous occasion he told me that I was foolish at my age to work
for such a small salary. I reported the matter to the defendant.

The plaintiff admits that he stated to those present at the mess that if the defendant measured the
cloth for the umbrellas, "It is my idea that he has no confidence in his employees." Mr. Specht, the
foreman f the umbrella factory, says that "During the conversation at the mess, the plaintiff told me
that the defendant had no confidence in me." The plaintiff testified that he did not remember telling
Specht that he (Specht) was not receiving sufficient salary, while Inhelder testified positively that the
plaintiff stated on several occasions that Specht ought not to work so much for such a small salary,
and Specht also testified positively that "he (the plaintiff) told me that I was foolish at my age to work
for such a small salary." As to the plaintiff's absenting himself during working hours for the purpose of
drinking, we have, on the one hand, the plaintiff's testimony to the effect that as long as he had been
with the firm of Gsell he had been "allowed in the morning ten or fifteen minutes during the hot
season to absent himself to have a drink of beer or whiskey, and the same in the afternoon," and that
"the manager merely told me not to do it in such an ostentatious manner." While, on the other hand,
we have the testimony of the defendant wherein he states that he instructed his manager, Mr.
Bender, to direct the plaintiff to discontinue his habit of drinking during working hours, and the
testimony of the manager (Bender) to the effect that he expressly directed the plaintiff not to go out
without permission. But the plaintiff violated his express order some thirty-five times, keeping up the
habit of going out (for the purpose of drinking) in the morning and afternoon for an hour or more at a
time. All of the foregoing show a course of conduct on the part of the plaintiff inconsistent with the due
and faithful performance of his duties as an employee of the defendant. He sought to create a feeling
of unrest among the employees by inducing them to believe that the defendant had no confidence in
them and that at least one employee was not receiving sufficiently salary. If it were true that the
defendant was measuring the cloth for the umbrellas, he had a right to do so and this fact would not
justify the plaintiff in saying that the defendant had no confidence in the employees. Likewise, if it be
true that the defendant or his manager did at first authorize the plaintiff to absent himself during
working hours for the purpose of drinking, the defendant had a perfect right to withdraw this
permission at anytime he saw fit to do so. In fact, the defendant, through his manager, expressly
directed the plaintiff to cease leaving the factory for that purpose, but the plaintiff violated this order
numerous times. The plaintiff, being at times foreman and at other times in charge of important
departments of the factory wherein some four hundred employees were at work, it cannot be
questioned but that the defendant not only had a right to prohibit drinking during working hours, but it
was his duty to do so for his own interests and the safety of his other employees. But it is intimated in
the record that the defendant discharged the plaintiff on account of the conversation at the mess. If it
be true that the defendant gave this as his sole reason for so acting at the time he discharged the
plaintiff, yet he would not be prevented from setting up at the trial the fact that the plaintiff continued
to disobey his orders with reference to absenting himself for the purpose of drinking. The defendant
was, at the time he discharged the plaintiff, authorized to take into consideration the latter's whole
course of conduct in determining whether the contract of employment should be terminated. We are,
therefore, convinced that real errors was committed by the trial court in its findings of fact and that the
record fully justifies a reversal of such findings, and a declaration to the effect that the defendant was
justified in terminating the contract of employment.

2. At the opening of the trial in the court below and before any testimony had been taken, counsel for
the defendant stated:

I desire to amend my answer at this time by the addition of the following paragraph:

The defendant further alleges for a second and further defense to the complaint herein, and for
a counterclaim thereto, that the plaintiff has engaged in business in the Philippine Islands since
leaving the service of the defendant and without the defendant's request or consent, in
violation of his contract with the defendant; wherefore, the defendant demands judgment
against the plaintiff for the sum of ten thousand pesos.

By the COURT: If the plaintiff does not claim any time to answer the new pleadings, the
court will grant the amendment as asked for.

By Mr. SOTELO: I note my exception to the admission of a counterclaim at this time; I

have no time to prepare myself to meet it.
 By the COURT: The court has stated that if counsel for the plaintiff requires time to
answer or meet this counterclaim he will be granted time to do so.

By Mr. SOTELO: The attorney for the plaintiff answers to the court that much time has
been lost already since the filing of the complaint and the trial, and he wants to go to
trial in order that the plaintiff may get what he is justly entitled to.

Testimony in support of the counterclaim was duly introduced before the close of the trial. In the final
decision the court said:

The court is of the opinion that the defendant's so-called amendment to his answer, dictated by
counsel to the official stenographer, and not `upon motion filed in court, and after notice to the
adverse party and an opportunity to be heard,' must be disregarded in the consideration of this
case.

This is manifest error. The verbal petition was expressly granted and the proferred amendment
accepted by the court. Plaintiff's counsel noted his exception to this ruling and signified his willingness
to proceed with the trial. All thereafter considered the answer as thus amended. We must, therefore,
dispose of the defendant's counterclaim upon the merits.

That portion of the contract upon which the defendant's counterclaimed is based reads as follows:

That during the term of this contract, and for the period of five years after the termination of the
employment of the said party of the second part, whether this contract continue in force for the
period of one, two, three or more years, or be sooner terminated, the said party of the second
party shall not engage or interest himself in any business enterprises similar to or in
competition with those conducted, maintained or operated by the said party of the first day in
the Philippines, and shall not assist, aid or encourage any such enterprise by the furnishing of
information, advice or suggestions of any kind, and shall not enter into the employ of any
enterprises in the Philippine Islands, whatever, save and except after obtaining special written
permission therefor from the said party of the first part. It is further stipulated and agreed that
the said party of the second part is hereby obligated and bound to pay unto the party of the
first part the sum of ten thousand pesos, Philippine currency (P10,000) as liquidated damages
for each and every breach of the present clause of this contract, whether such breach occurred
during the employment of the said party of the second part or at any time during the period of
five years from and after the termination of said employment, and without regard to the cause
of the termination of said employment.

The plaintiff admits that he entered the employment of Mr. Whalen in the Philippine Islands as a
foreman on some construction work for a cement factory within a few days after his discharge and
without the consent, either written or verbal, of the defendant. This work was entirely different and
disassociated from that engaged in by the defendant Gsell, yet this act of the plaintiff was a technical
violation of the above-quoted provisions of the contract wherein he expressly agreed and obligated
himself "not to enter into the employment of any enterprise in the Philippine Islands, whatever, save
and except after obtaining special written permission therefor" from the defendant. The question now
arises whether these provisions of the contract are valid and binding upon the plaintiff.

Counsel for the defendant in their printed brief say:

There is no doubt as to the validity of the contract, Gsell vs. Koch (16 Phil. Rep., 1) has settled
that question in a similar contract and that decision has never been criticised, but is cited as
recently as 1914 with approved. (Lambert vs. Fox, 26 Phil. Rep., 588).
An examination of these cases, as well as others in point, is necessary in order to determine whether
or not the question has been settled, and if we find that it is still an open one in this jurisdiction, we
must proceed with the case. In pursuing this inquiry it is well to bear in mind (1) that the case under
consideration has been tried in both courts exclusively upon the theory that the local law alone is
applicable to the contract and (2) that the business in which the plaintiff became engaged was entirely
different and distinct from that conducted, maintained or operated by the defendant.

In Gsell vs. Koch, supra, a demurrer was sustained upon the ground that the allegations in the
complaint did not constitute a cause of action, and after defendant declined to amend, judgment was
entered dismissing the action. On appeal this order was reversed and the record returned with
instructions to direct the defendant to answer. The paragraph in the written contract, upon which the
judgment of this court rests, reads:

Third. The said Pedro Koch binds himself to pay in cash to Mr. Gsell the sum of ten thousand
pesos if, after leaving the firm of C. Gsell, and against the latter's will, he shall engage directly
or indirectly in carrying on any business in which the said Carlos Gsell is at present engaged,
or within the two and one-half years fixed for the duration of the present contract in these
Islands, either as an employee or member of a firm or company, or on his own account; and he
furthermore binds himself to pay in cash to Mr. Gsell an equal sum of ten thousand pesos for
each violation of any secret of the business entrusted him.

The plaintiff in that case was engaged solely and exclusively in the manufacture of umbrellas,
matches, and hats. The secret process for making straw hats had cost the plaintiff some P20,000 and
the defendant Koch, after having entered the hat factory under a contract of employment and after
having learned the secret process employed by the plaintiff, left the plaintiff's service and engaged in
the manufacture of straw hats in violation of the above-quoted provisions of the contract, using the
trade secrets which he had thus learned. The provisions in the contract against the engaging in the
manufacturing of straw hats in the Philippine Islands were held to be reasonably necessary for the
protection of the plaintiff and not oppressive in so far as the defendant was concerned. In the case
under consideration the contract goes far beyond that which formed the basis of the action in the
case just cited. Here the plaintiff Ferrazzini was prohibited from engaging in any business or
occupation whatever in the Philippine Islands for a period of five years after the termination of this
contract of employment without special written permission from the defendant. This plaintiff became
engaged, as we have said, as a foreman in a cement factory, while the defendant in the other case
became engaged in identically the same business which his employer was carrying on, that is, the
manufacture of straw hats. Consequently, the reasons which support the validity of the contract in the
one case are not applicable to the other. The same is true of the case of Fornow vs. Hoffmeister (6
Phil. Rep., 33), wherein the decision rests solely upon the question whether the contract was in
violation of the contract labor laws. No other question was submitted or decided in that case.
Therefore, whether the clause under consideration is valid and enforcible is still an open question.

Articles 1091 and 1255 of the Civil Code read:

ART. 1091. Obligations arising from contracts have legal force between the contracting parties,
and must be fulfilled in accordance with their stipulations."

ART. 1255. The contracting parties may make the agreement and establish the clauses and
conditions which they may deem advisable, provided they are not in contravention of law,
morals, or public order.

Hence, the policy of the law requires that the freedom of persons to enter into contracts shall not be
lightly interfered with, but if a contract be not founded upon a legal consideration (causa) or if it
conflicts with the morals of the times or contravenes some established interest of society, the courts
will not aid in its enforcement.

Passing over the question whether "consideration" of the American law and the "causa" of the civil
law are equivalent and whether there was adequate or legal consideration or "causa" on which the
contract was founded, we will limit our further inquiry to the determination of the question whether that
part of the contract under consideration is against public policy (orden publico).

Manresa, Vol. 8 p. 606, says:

Public policy (orden publico) — which does not here signify the material keeping of public
order — represents in the law of persons the public, social and legal interest, that which is
permanent and essential of the institutions, that which, even if favoring an individual in whom
the right lies, cannot be left to his own will. It is an idea which, in cases of the waiver of any
right, is manifested with clearness and force. Thus the jurisprudence on the subject of
mortgages contains an interesting declarations on this point in a resolution of January 24,
1898, wherein it was held that: `The power of the husband to give marital permission cannot
be validly conferred upon any attorney-in-fact, as the legislator has willed that, for reasons of
the interest of society and of family government and discipline it should be vested only in the
husband, being personal to him in the highest sense and therefore not capable of being
transmitted.'

Mucius Scaevola's (vol. 20, p., 505) conclusion is that:

Agreements in violation of orden publico must be considered as those which conflict with law,
whether properly, strictly and wholly a public law (derecho) or whether a law of the person, but
law which in certain respects affects the interest of society.

Articles 1893 and 1895 of Merrick's Revised Civil Code of Louisiana, a civil law state, read:

ART. 1893. An obligation without a cause, or with a false or unlawful cause, can have no
effect.

ART. 1895. Illegal or immoral cause. — The cause is unlawful, when it is forbidden by law,
when it is contra bonos mores or to public order.

In Fabacher vs. Bryant & Mather (46 La. Ann., 820), the plaintiff and one Thomas Egan were
engaged in the business of hauling cotton for the presses in the city of New Orleans. Both of these
men were members of the Draymen's Association which had adopted a tariff of charges and
undertook to distribute among the members the hauling of the various presses. The owners of the
press were not consulted either as to the prices to be paid or as to those who should do the hauling.
They could not obtain draymen outside of the union. They had to engage those designated by the
union. The defendants employed Egan on the latter's representation that he had been so designated.
Later the defendants employed the plaintiff upon the same representations. Finally, after
investigation, the defendants declined to permit the plaintiff to do the work and carried out their
contract with Egan. The plaintiff thereupon instituted this action for damages based upon the breach
of his contract by the defendants. On the setting aside of a verdict in favor of the plaintiff by the trial
court and an appeal having been duly entered, the Supreme Court affirmed the judgment, directing
the dismissal of the case, holding that the plaintiff's contract was plainly repugnant to public policy,
citing articles 1893 and 1895 supra. (India Bagging Association vs. Kock, 14 La. ann., 168; Gravier
vs. Carraby, 17 La., 118, 142, and cases collected in 20 Hennen's Digest, p. 1007, No. 1.)
In India Bagging Association vs. Kock, supra, an association of eight commercial firms in New
Orleans, holders of 7,410 bales of India cotton bagging, was formed, the members binding
themselves for the term of three months not to sell any bagging, nor offer to sell any, except with the
consent of the majority of them expressed at a meeting; under the penalty of ten dollars for every bale
sold or offered for sale. This action was brought against one of the members by the manager of the
association for the recovery of a penalty of $7,400 for having sold 740 bales of bagging in
contravention of the articles of the association. From a judgment in favor of the association the
defendant member appealed and the Supreme Court reversed the judgment saying:

The agreement between the parties was palpably and unequivocably a combination in restraint
of trade, and to enhance the price in the market of an article of primary necessity to cotton
planters. Such combination are contrary to public order, and cannot be enforced in a court of
justice.

By "public policy," as defined by the courts in the United States and England, is intended that
principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to
be injurious to the public or against the public good, which may be termed the "policy of the law," or
"public policy in relation to the administration of the law." (Words & Phrases Judicially Defined, vol. 6,
p. 5813, and cases cited.) Public policy is the principle under which freedom of contract or private
dealing is restricted by law for the good of the public. (Id., Id.) In determining whether a contract is
contrary to public policy the nature of the subject matter determines the source from which such
question is to be solved. (Hartford Fire Ins. Co. vs. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)

The foregoing is sufficient to show that there is no difference in principle between the public policy
(orden publico) in the two jurisdictions (the United States and the Philippine Islands) as determined by
the Constitution, laws, and judicial decisions.

In the United States it is well settled that contracts in undue or unreasonable restraint of trade are
unenforcible because they are repugnant to the established public policy in that country. Such
contracts are illegal in the sense that the law will not enforce them. The Supreme Court of the United
States, in Oregon Steam Navigation Co. vs. Winsor (20 Wall., 64), quoted with approval in Gibbs vs.
Consolidated Gas Co. of Baltimore (130 U. S., 396), said:

Cases must be judged according to their circumstances, and can only be rightly judged when
the reason and grounds of the rule as carefully considered. There are two principal grounds on
which the doctrine is founded that a contract in restraint of trade is void as against public
policy. One is, the injury to the public by being deprived of the restricted party's industry; and
the other is, the injury to the party himself by being precluded from pursuing his occupation,
and thus being prevented from supporting himself and his family.

And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:

Pubic welfare is first considered, and if it be not involved, and the restraint upon one party is
not greater than protection to the other party requires, that contract may be sustained. The
question is, whether, under the particular circumstances of the case and the nature of the
particular contract involved in it, the contract is, or is not, unreasonable.

Chapter 5, title 13, book 2, of our Penal Code makes it a crime for a person to solicit any gift or
promise as a consideration for agreeing to refrain from taking part in any public, auction, or
attempting to cause bidders to stay away from such auction by means of threats, gifts, promises or
any other artifice, with intent to affect the price of the thing auctioned (Art. 542), or to combine for the
purpose of lowering or raising wages to an abusive extent, or to regulate the conditions of labor (Art.
543), or by spreading false rumors, or by making use of any other artifice, succeeds in altering the
prices which would naturally be obtained in free competition for merchandise, stocks, public and
private securities, or any other thing which may be the object of trade and commerce (Art. 544). And
Act No. 98, as amended, of the Philippine Commission likewise makes it a crime for any person or
corporation, engaged as a common carrier, to subject any particular person, firm, company,
corporation, or locality, or any particular kind of traffic to any undue or unreasonable prejudice or
discrimination. To this extent the Legislature has expressly covered the subject and left to the courts
to determine in each case whether any other particular agreement or contract is contrary to public
policy.

It needs no argument to show that an agreement or contract entered into for the purpose of
accomplishing any of the prohibited acts mentioned in the above cited provisions of the Penal Code
or in Act No. 98 would be unenforcible as being in violation of positive law. Those falling within the
provisions of articles 542 and 544 of the Penal Code and Act No. 98 would clearly be agreements or
contracts in undue or unreasonable restraint of trade. The meaning given to the word "trade" would
determine the question whether those coming within the provisions of article 543 would or would not
be the same. If the commercial meaning of the word should govern, and in this sense t has reference
to the business of selling or exchanging some tangible substance or commodity for money, or the
business of dealing by way of sale in commodities, it would appear that such would not be contract in
restraint of trade. This may be the most common significance of the word "trade." but it is not the only
one, nor the most comprehensive meaning in which the word is properly used. In the broader sense,
it is any occupation or business carried on for subsistence or profit. Anderson's Dictionary of Law
gives the following definition: "Generally equivalent to occupation, employment, or business, whether
manual or mercantile; any occupation, employment or business carried on for profit, gain, or
livelihood, not in the liberal arts or in the learned professions." In Abbott's Law Dictionary the word is
defined as "an occupation, employment or business carried on for gain or profit." Among the
definitions given in the Encyclopaedic Dictionary is the following: "The business which a person has
learnt, and which he carries on for subsistence or profit; occupation; particularly employment, whether
manual or mercantile, as distinguished from the liberal arts or the learned professions and
agriculture." Bouvier limits the meaning to commerce and traffic and the handicraft of mechanics. (In
re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the broader meaning given by the
lexicographers.

The contract under consideration, tested by the law, rules and principles above set forth, is clearly
one in undue or unreasonable restraint of trade and therefore against public policy. It is limited as to
time and space but not as to trade. It is not necessary for the protection of the defendant, as this is
provided for in another part of the clause. It would force the plaintiff to leave the Philippine Islands in
order to obtain a livelihood in case the defendant declined to give him the written permission to work
elsewhere in this country.

The foregoing are our reasons upon which the short decision and order for judgment, heretofore
filed,1 were based.
 EN BANC

[G.R. No. 47806. April 14, 1941.]

LEONCIO GABRIEL, Petitioner, v. MONTE DE PIEDAD Y CAJA DE AHORROS and

THE COURT OF APPEALS, Respondents. 

Vicente J. Francisco and Rody M. Jalandoni, for Petitioner. 

Cavanna, Jazmines & Tianco, for Respondent. 

SYLLABUS

1. CONTRACTS, FREEDOM OF CONTRACT. — A contract is to be judged by its character,

and courts will look to the substance and not to the mere form of the transaction. The
freedom of contract is both a constitutional and statutory right and to uphold this right,
courts should move with all the necessary caution and prudence in holding contracts
void. (People v. Pomar, 46 Phil., 440; Ferrazzini v. Gsell, 34 Phil., 697.) 

2. ID.; PUBLIC POLICY. — Courts should not rashly extend the rule which holds that a
contract is void as against public policy. The term "public policy" is vague and uncertain
in meaning, floating and changeable in connotation. It may be said, however, that, in
general, a contract which is neither prohibited by law nor condemned by judicial
decision, nor contrary to public morals, contravenes no public policy. In the absence of
express legislation or constitutional prohibition, a court, in order to declare a contract
void as against public policy, must and that the contract as to the consideration or thing
to be done, has a tendency to injure the public, is against the public good, or
contravenes some established interests of society, or is inconsistent with sound policy
and good morals, or tends clearly to undermine the security of individual rights, whether
of personal liability or of private property. Examining the contract at bar, we are of the
opinion that it does not in anyway militate against the public good. Neither does it
contravene the policy of the law nor the established interests of society. 

3. ID.; CONSIDERATION. — A consideration, in the legal sense of the word, is some

right, interest, benefit, or advantage conferred upon the primrose, to which he is
otherwise not lawfully entitled, or any detriment, prejudice, loss, or disadvantage
suffered or undertaken by the promises other than to such as he is at the time of
consent bound to suffer. We think that there is sufficient consideration in this contract,
for, according to the Court of Appeals, "it has been satisfactorily established that it was
executed voluntarily by the latter to grantee the deficiencies resulting from his
erroneous appraisals of the jewelry." A preexisting admitted liability is a good
consideration for a promise. The fact that the bargain is a hard one will not deprive it of
validity. The exception to this rule in modern legislation is where the inadequacy is so
gross as to amount to fraud, oppression or undue influence, or when statutes require the
consideration to be adequate. We are not convinced that the instant case falls within the
exception. 

4. ID.; CHATTEL MORTGAGE; AFFIDAVIT. — Statutory requirements as to forms or

words of the affidavits in chattel mortgage contracts must be substantially, but need not
be literally, complied with.

DECISION

LAUREL, J.:

The herein petitioner was employed as appraiser of jewels in the pawnshop of the Monte
de Piedad from 1913 up to May, 1933. On December 13, 1932, he executed a chattel
mortgage to secure the payment of the deficiencies which resulted from his erroneous
appraisal of the jewels pawned to the appellee, amounting to P14,679.07, with six per
cent (6 %) interest from said date. In this chattel mortgage, the appellant promised to
pay to the appellee the sum of P300 a month until the sum of P14,679.07, with interest
is fully paid. The document was registered on December 22, 1932 (statement, decision
of Court of Appeals). To recover the aforementioned sum less what had been paid,
amounting to P3,333.25 or the balance of P11,346.75, and in case of default to
effectuate the chattel mortgage, an action was instituted against the petitioner by the
respondent Monte de Piedad in the Court of First Instance of Manila (civil case No.
50847). The petitioner answered, denying generally and specifically all the specifications
therein, and also denied under oath the geniuses of the execution of the alleged chattel
mortgage attached thereto. By way of special defense, he alleged (1) that the chattel
mortgage was a part of a scheme on the part of the management of the Monte de
Piedad to cover up supposed losses incurred in its pawnshop department; (2) that a
criminal action had been instituted at the instance of the plaintiff against him wherein
said chattel mortgage was presented by the prosecution with regard to his supposed
responsibility as expert appraiser of jewels of the plaintiff entity but he was therein
acquitted; and (3) that said acquittal constituted a bar to the civil case. By way of cross-
complaint, the petitioner alleged (1) that the chattel mortgage was entered into by E.
Marco for and in behalf of the Monte de Piedad without being duly authorized to do so by
the latter; (2) that the defendant was induced, through false representation, to sign said
chattel mortgage against his will; (3) that the chattel mortgage was based upon all
nonexisting subject matter and nonexisting consideration; and (4) that the chattel
mortgage was null and void ab initio. By way of counterclaim, the petitioner alleged (1)
that the payments made by him for the account of the chattel mortgage amounting to
P3,333.25 were made through deceit and without his consent and consisted of P300
monthly deductions from his salary, printing job for plaintiff done by him in his printing
press, and reimbursement made from the pocket of E. Marco; (2) that he has received
P356.25 a month as expert appraiser of the plaintiff and that he was separated
arbitrarily at the end of the month of May 1933, from the plaintiff entity without lawful
cause and one month notice and plaintiff failed to pay him his salary for the month of
May, 1933 and the month of June, 1933, in accordance with law; and (3) that due to the
malicious and systematic prosecution brought in criminal case No. 49078 and in the
present case, he suffered damages and losses both materially and in his reputation in
the amount of at least P15,000. Wherefore, Petitioner, among others, prayed that the
Monte de Piedad be ordered to return the unlawful deductions from his monthly
remuneration, to pay his salary for the months of May and June, 1933, and damages
and losses he suffered amounting to P15,000. 

The lower court rendered judgment in favor of the Monte de Piedad against the herein
petitioner. Petitioner brought the case on appeal to the Court of Appeals, which affirmed
the judgment of the lower court in a decision rendered May 29, 1940. Hence, this
petition for review by certiorari. 

Petitioner contends that the provisions of the chattel mortgage contract by which he
guaranteed to pay the deficiencies amounting to P14,679.07 are contrary to law, morals
and public policy, and hence, the chattel mortgage contract is ineffective and the
principal obligation secured by it is void. A contract is to be judged by its character, and
courts will look to the substance and not to the mere form of the transaction. The
freedom of contract is both a constitutional and statutory right and to uphold this right,
courts should move with all the necessary caution and prudence in holding contracts
void. (People v. Pomar, 46 Phil., 440; Ferrazzini v. Gsell, 34 Phil., 697.) At any rate,
courts should not rashly extend the rule which holds that a contract is void as against
public policy. The term "public policy" is vague and uncertain in meaning, floating and
changeable in connotation. It may be said, however, that, in general, a contract which is
neither prohibited by law nor condemned by judicial decision, nor contrary to public
morals, contravenes no public policy. In the absence of express legislation or
constitutional prohibition, a court, in order to declare a contract void as against public
policy, must find that the contract as to the consideration or thing to be done, has a
tendency to injure the public, is against the public good, or contravenes some
established interests of society. or is inconsistent with sound policy and good morals, or
tends clearly to undermine the security of individual rights, whether of personal liability
or of private property. Examining the contract at bar, we are of the opinion that it does
not in anyway militate against the public good. Neither does it contravene the policy of
the law nor the established interests of society. 

Petitioner also contends that the chattel mortgage in question is void because it lacks
consideration. A consideration, in the legal sense of the word, is some right, interest,
benefit, or advantage conferred upon the promissory, to which he is otherwise not
lawfully entitled, or any detriment, prejudice, loss, or disadvantage suffered or
undertaken by the promise other than to such as he is at the time of consent bound to
suffer. We think that there is sufficient consideration in this contract, for, according to
the Court of Appeals, "it has been satisfactorily established that it was executed
voluntarily by the latter to guarantee the deficiencies resulting from his erroneous
appraisals of the jewels." A preexisting admitted liability is a good consideration for a
promise. The fact that the bargain is a hard one will not deprive it of validity. The
exception to this rule in modern legislation is where the inadequacy is so gross as to
amount to fraud, oppression or undue influence, or when statutes require the
consideration to be adequate. We are not convinced that the instant case falls within the
exception. 

Another objection raised is that the requirement of section 5 of Act No. 1508 has not
been complied with. We think that there is substantial compliance with the requirements
of the Chattel Mortgage Law on this point. The wording of the affidavit under discussion,
as it appears from the record, is almost in the same language of the statute. Likewise, it
appears that it was signed by E. Marco, who was Director-General of the Monte de
Piedad at the time of the execution of the contract of chattel mortgage. The Court of
Appeals found that "the contention that director Marco had no authority to enter into the
agreement is without merit. It appears that there was confirmation of Exhibit A by the
Consejo de administracion of the Monte de Piedad." Statutory requirements as to forms
or words of the affidavits in chattel mortgage contracts must be substantially, but need
not be literally, complied with. 

The second assignment of error made by the petitioner ix that the Court of Appeals
erred in not holding that the acquittal of the petitioner in criminal case No. 49078 of the
Court of First Instance of Manila bars the action to enforce any civil liability under said
chattel mortgage. We do not need to dwell at length on this assignment of error, for we
find no reason for disturbing the conclusion reached by the Court of Appeals on this
point:jgc:chanrobles.com.ph

"The appellant claims that his acquittal in criminal case No. 49078 of the Court of First
Instance of Manila is a bar to the institution of the present case. The evidence of record
does not bear out this contention. There is no identity of subject matter between the two
cases; nor is the instant case dependent upon the said criminal action. We agree with
the trial court that the transactions involved in this case are different from those
involved in criminal case No. 49078. The court’s finding that the transactions involved in
the case at bar commenced in August, 1932, can not be considered erroneous simply
because Exhibit F-32 of the plaintiff is allegedly dated August 20, 1931. Exhibit F-22 can
not be given any probative value, it was undated during the hearing of the case."cralaw
virtua1aw library

We do not find it necessary to discuss the last assignment of error. 

The petition is hereby dismissed and the judgment sought to be reviewed is affirmed,
with costs against the petitioner. So ordered. 
 FIRST DIVISION

G.R. No. L-41795 August 29, 1980

PHILIPPINE BANK OF COMMUNICATIONS, Petitioner, vs. HON. JUAN F.

ECHIVERRI, in his capacity as Presiding Judge of Branch XIV of the Court of
First Instance of Manila, ENRIQUE LORENZO y JIONGCO, CONRADO GALVEZ y
CERVANTES, FAUSTINO CARLOS y RAMOS, ARSENIO LORENZO y VILLALUZ,
ILDEFONSO CARIÑO y MARASIGAN, FELIZARDO ALBAIRA and RICARDO
CARLOS. respondents.

TEEHANKEE, J.:

The Court sets aside the decision of respondent court insofar as it modifies and alters
the compromise agreement freely entered into between petitioner bank and private
respondents by deleting the concessions made by respondents. The validity of the
compromise agreement in toto is upheld, since its provisions are not prohibited by law
nor condemned by judicial decision nor contrary to morals, good customs and public
policy. By virtue of the fundamental precept that a compromise agreement is a contract
between the parties and has upon them the effect and authority of res judicata, the
courts cannot impose upon them a judgment different from their real agreement or
against the very terms and conditions thereof.chanroblesvirtualawlibrary chanrobles
virtual law library

On May 29, 1974, the Philippine Bank of Communications (PBCOM for short), a banking
corporation duly organized and existing under the laws of the Philippines that has been
engaged in normal commercial banking transactions since 1939, filed a complaint for the
recovery, jointly and severally from therein defendants, of over P25 million allegedly
embezzled from it over a period of 16 years by its said employees defendants, Yu Chiao
Chin, alias Nelson Yu, assistant manager, in-charge of the Auditing Department; Paulino
How, manager of the Business Development Department; Faustino Carlos, Ildefonso
Carino, Conrado Galvez, Arsenic Lorenzo, Enrique Lorenzo, Ricardo Carlos, Victoriano
Salvador and Felizardo Albaira, bookkeepers. 1 chanrobles virtual law library

PBCOM prayed for full restitution of the amount embezzled, and payment of attorney's
fees and exemplary damages. Upon its application, the trial court issued writs of
attachment and, through the City Sheriff of Manila, attached various real and personal
properties of the. defendants.chanroblesvirtualawlibrary chanrobles virtual law library

Separately, each of the defendants, except Victoriano Salvador who died in the
meantime, filed responsive pleadings, either an answer or a motion to dismiss, the last
of which was filed on August 15, 1974.chanroblesvirtualawlibrary chanrobles virtual law
library

Months later, or on March 10, 1975, the parties executed a compromise agreement, the
substantial provisions of which read: chanrobles virtual law library
WHEREAS, in said civil action, plaintiff BANK has asserted a claim against the PARTIES
OF THE SECOND PART in the total

posting "phony" or non-existing deposits on accounts opened with PBCOM under various
names and later withdrawing the amounts represented b), such phony deposits, thereby
creating unauthorized and unapproved overdrafts which were, through the concerted
action of the defendants, concealed from the management of PBCOM; and b) making
withdrawals on uncollected deposits. Defendants' schemes are more particularly
described by them in their sworn statements attached as annexes to this
complaint.chanroblesvirtualawlibrarychanrobles virtual law library

5. It was only on April 7, 1974 that this embezzlement was discovered by PBCOM when
defendant Yu Chiao Chin confessed the fraud to the officials of the bank and at the same
Lime made an offer to restore the amount embezzled provided that he and the other
herein defendants would not be prosecuted by the
bank.chanroblesvirtualawlibrary chanrobles virtual law library

6. On various dates also, all the herein defendants gave sworn statements to the
Philippine Constabulary ...chanroblesvirtualawlibrary chanrobles virtual law library

7. PBCOM's own investigation disclosed the loss of P25,278,780.93 and the evidence on
hand established the accountability of the herein defendants for the said
amount.chanroblesvirtualawlibrary chanrobles virtual law library

8. PBCOM demanded from the herein defendants full restitution of the amount of
P25,278,780.93 but defendants failed and continue to fail to comply with such demands
of PBCOM, to the damage and prejudice of PBCOM.chanroblesvirtualawlibrary chanrobles
virtual law library

xxx xxx xxxchanrobles virtual law library

(Record, pp. 60-61; Emphasis supplied) amount of P25,278,780.93, exclusive of

interests, attorney's fees and costs of suit; chanrobles virtual law library

WHEREAS, the parties hereto are most desirous and interested that the aforesaid
litigations be terminated and by this Agreement it is their intention that all claims
therein and au disputes and differences between the parties thereto be settled and
compromised to their mutual satisfaction; chanrobles virtual law library

WHEREAS, in consideration of the agreement on the part of the BANK to dismiss with
prejudice the above-mentioned civil action and to waive all its rights and causes of
action against all the defendants therein, the PARTIES OF THE SECOND PART are willing
to acknowledge and assume certain obligations, make certain concessions and
undertake to perform certain acts for the benefit of the BANK under such terms and
conditions as hereafter specified.chanroblesvirtualawlibrarychanrobles virtual law library

NOW, THEREFORE. for and in consideration of the foregoing premises and the mutual
covenants and agreements to be performed, one for the other, as hereinafter set forth,
the parties hereto do hereby stipulate and agree as follows: chanrobles virtual law
library

1. Yu Chiao Chin, one of the PARTIES OF THE SECOND PART, hereby acknowledges that
he is indebted and liable to the BANK in the total sum of
P6,610,000.00.chanroblesvirtualawlibrary chanrobles virtual law library

2. Paulino L. How, also one of the PARTIES OF THE SECOND PART, likewise hereby
acknowledges that he is indebted and liable to the BANK in the total amount of
P600,000.00.chanroblesvirtualawlibrary chanrobles virtual law library

3. Yu Chiao Chin hereby binds himself to pay to the BANK, without need of further
demand, the aforesaid sum of P6,610,000.00 under the following terms and
conditions: chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

4. Paulino L. How hereby binds himself to pay to the BANK, without reed of further
demand, the aforesaid sum of P600,000.00 under the following terms and
conditions: chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

5. Yu Chiao Chin and Paulino L. How agree to nominate and submit to the satisfaction of
the Bank such persons of reputable name and character who shall, together with them
and upon the execution of this Agreement, jointly and severally, execute and sign, such
promissory notes, deeds, documents or instruments as may be necessary to insure
and/or secure the payment of the remaining balance of their obligation to the BANK as
hereinabove set forth and thus give effect to and fully implement the terms and
conditions of this Agreement.chanroblesvirtualawlibrary chanrobles virtual law library

6. The parties hereto agree that all such promissory notes, deeds, documents or
instruments which shall be executed under and by virtue of the preceding paragraph
shall form part of this Compromise Agreement and that whatever Judgment which may
be rendered by the CFI of Manila on the basis of the Compromise Agreement shall be
deemed to extend to and include any and all undertakings and commitments made by
the signatories thereto as part of the judgment, it being expressly understood and
agreed by the parties hereto, that the undertaking to be done and the promises to be
made by the third persons referred to above constitute an essential consideration for the
promises, covenants and undertaking by the BANK under and by virtue of this
Agreement.chanroblesvirtualawlibrary chanrobles virtual law library

7. THE PARTIES OF THE SECOND PART, namely, Yu Chiao Chin alias Nelson Yu, Enrique
Lorenzo y Jiongco, Conrado Galvez y Cervantes, Faustino Carlos y Ramos, Arsenio
Lorenzo y Villaluz, Ildefonso Carino y Marasigan, Felizardo Albaira, Ricardo Carlos,
Paulino L. How, hereby agree to voluntarily resign from the BANK and to execute the
corresponding quitclaims waiving whatever rights they may have against the BANK
arising from their employment and/or in connection with the case and criminal charge
hereinabove mentioned Said quitclaims shall include a waiver of all the benefits,
interests, participation, contributions and any other rights that they may have under
both the Staff Provident Fund and the Retirement Plan of the PARTY OF THE FIRST
PART.chanroblesvirtualawlibrary chanrobles virtual law library

8. In consideration of the foregoing undertaking assumed by the PARTIES OF THE

SECOND PART, the BANK hereby discharges forever the defendants from any and all
obligations and liabilities arising from the aforementioned civil
case.chanroblesvirtualawlibrary chanrobles virtual law library

9. The parties shall file the appropriate motions in Court praying for the rendition of a
judgment in the aforementioned civil case based on the terms and conditions of this
Agreement.

10. The PARTIES OF THE SECOND PART hereby represent and warrant that they have

not participated, singly or collectively, in any transaction or dealings which may be
prejudicial to the BANK other than those related to or included in the afore-mentioned
civil case andcriminal charge and which have already been disclosed or are already
known to the BANK. It is expressly agreed that this 'Compromise Agreement' shall not in
any manner bar or preclude the BANK from asserting its rights against the PARTIES OF
THE SECOND PART in the event that the BANK subsequently discovers such other
transactions or dealings in which any or all the PARTIES OF THE SECOND PART are
directly or indirectly involved and which are prejudicial to the BANK's interest." 2

The Agreement was signed by the PBCOM represented by its president, Edward S. Go,
as PARTY OF THE FIRST PART and each of the defendants in his own behalf as PARTIES
OF THE SECOND PART.chanroblesvirtualawlibrary chanrobles virtual law library

On March 17, 1975, the counsel for the PBCOM on one hand, and the counsels for each
of the defendants on the other, jointly filed a "Motion for Judgment on the Basis of
Attached Compromise Agreement." chanrobles virtual law library

On April 17, 1975, respondent judge issued an order resetting the hearing or the motion
for judgment on the basis of the compromise agreement and at the same time making
the observation motu proprio that "there are certain objectionable features concerning
the compromise agreement, as submitted, such as matters pertaining to a proposed
compromise involving the criminal aspect of the case, 'Which is contrary to law.
Therefore, the parties who have already signed the said compromise agreement are
hereby instructed to go over the same and see how it could be properly approved by the
Court, taking into consideration the provisions of law as well as public morals and
policy." chanrobles virtual law library

On April 26, 1975, tile parties - the PBCOM, thru its president, and the defendants in
their own behalf and each assisted by counsel 3 submitted a manifestation and motion in
order to have the phrase "and criminal charge hereinabove mentioned" (contained in
paragraph 7 of the Compromise Agreement) and "and criminal charge" (contained in
paragraph 10 of the Compromise Agreement), supra, deleted and - praying that
judgment be rendered on the basis of the Compromise Agreement as thus
modified.chanroblesvirtualawlibrary chanrobles virtual law library
On May 12, 1975, the defendant Conrado Galvez thru his counsel filed a Manifestation
pointing out two alleged objectionable features in the compromise agreement signed by
him, which he claimed to be "contrary to law, public policy and decency," namely, the
provision thereof to the effect that said agreement even after its approval by the court
shall be without prejudice to charging anew the same defendants on the basis of other
anomalies which might be discovered in the bank thereafter, contrary to his expectation
that the dismissal of the present criminal and civil cases would terminate with finality
any and all litigations between the parties; and the provision regarding quitclaim where
said defendant would be considered as having voluntarily resigned, waiving his right to
reinstatement in the service, his right to retirement with the corresponding gratuity or
compensation and his right to receive the benefits under the Staff Provident Fund. But
said defendant made no claim that he did not voluntarily sign the compromise or that
Ws consent had been obtained through mistake, violence or fraud. 4 In fact, he based
his objection on his claim that "it was the plaintiff, from the outset, who persuaded
Galvez to turn state witness and promised him reciprocal benefits should he agree to
become such, and to which Galvez agreed and had done his part, but plaintiff had
reneged on its promise and commitment. ... 5chanrobles virtual law library

Countering the manifestation of Conrado Galvez, PBCOM thru counsel maintained the
legality and validity of' the quitclaim duly signed by said Galvez. As to the terms of the,
Agreement, viz. that it "shall not in any manner bar or preclude the Bank from asserting
the rights against the PARTIES OF THE SECOND PART in the event that the Bank
subsequently discovers such other transactions on, dealings ill which any or all the
PARTIES OF THE SECOND PART are directly or indirectly involved and which are
prejudicial to the Bank's interest," said counsel explained that the agreement was
intended by the bank to cover only such matters of transactions which were known or
disclosed to it by the defendants and not those of which it had no knowledge at the time
of execution thereof.chanroblesvirtualawlibrary chanrobles virtual law library

On July 3, 1975, respondent judge issued an order setting the case for hearing "at which
all the parties will be afforded the opportunity to individually show whether or not there
is sufficient basis for the quitclaims in question viewed from the standpoint of law, public
policy and morals vis-a-vis employer-employee relations ...", citing as grounds therefor
the following.chanroblesvirtualawlibrarychanrobles virtual law library

We note the laudable objectives of the parties herein in entering into the Compromise
Agreement under consideration: i.e., to terminate the above- captioned case and by this
agreement to settle and compromise to their mutual satisfaction, all claims therein, and
all disputes and differences between the parties. (Par. 3, page 2, Compromise
Agreement) chanrobles virtual law library

We observe, however, that aside from the foregoing latent infirmities of the Compromise
Agreement, there obviously was an imbalance of the treatment of the defendants,
Faustino Carlos, Ildefonso Carino, Conrado Galvez, Ricardo Carlos and Arsenio Lorenzo,
in contrast to principal defendants Yu Chiao Chin alias Nelson Yu, who had reiterated his
admission made in his sworn statement taken at Camp Crame, Quezon City that he was
responsible and liable to the plaintiff-bank for the loss/defraudation of at least
P5,610,000.00, or a portion only of the P14 million he admitted in his Sworn Statement
at Camp Crame, Quezon City. In the same manner, defendant Paulino How, admitted
responsibility for P600,000.00.chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

While Compromises are encouraged and normally courts approve compromise

agreements as a matter of course, nonetheless, courts are not rubber stamps
mechanically approving whatever litigants submit to them labelled as a' compromise
agreement'. They must examine if it is not contrary to law, public order, public policy,
morals and good customs.

Respondent judge further advanced his own appraisal that the compromise agreement
was "unfair" and "one-sided", and directed the parties once more to "reconsider ... and
reform" the waiver and quitclaim provisions of paragraph 7 thereof, as
follows: chanrobles virtual law library

It will be noted that of the several defendants, Yu Chiao Chin and Paulino L. How both
acknowledged their liability to plaintiff, the former in the sum of P5,610,000.00 and the
latter in the sum of P600,000.00. (Paragraphs I to 6 of the compromise agreement) As
to them, there would appear to be sufficient basis for the
waiver.chanroblesvirtualawlibrary chanrobles virtual law library

There is no such acknowledgment on the part of the other defendants. On the other
hand, defendants Yu Chiao Chin and Paulino L. How admitted sole and exclusive liability
for the misdeeds, and absolved the other defendants (all minor employees then under
them) of any responsibility thereon. There is no reason on the basis of the record why
the benefits owing to such other defendants-employees should be waived under
paragraph 7 of the Compromise Agreement.chanroblesvirtualawlibrary chanrobles virtual
law library

The Court cannot close its eyes either to the fact that there is no concession at all
appearing to move to the defendants. An examination of the record, including the
numerous statements attached to the complaint, shows how unfair the one-sided
compromise agreement is to the defendants specially to those who appear to have a
very tenuous to the irregularities in question.chanroblesvirtualawlibrary chanrobles
virtual law library

xxx xxx xxxchanrobles virtual law library

Dropping the complaint is not enough, at least in this case, for all compromises are
supposed to terminate litigation; it is only when the parties make reciprocal concessions
that a litigation already commenced can be put to an end by means of a compromise.
Here there is no premise satisfactorily articulated to justify the compromise from the
standpoint of the defendants-employees save possibly Yu Chiao Chin alias Nelson Yu and
Paulino How.chanroblesvirtualawlibrary chanrobles virtual law library

The Court shall endeavor to persuade the litigants in a civil case to agree upon
some fair compromise.' Article 2029, Civil Code. (emphasis supplied.) It is hard to see
how the subject compromise can be considered fair. The Court has given the parties
time to re-examine the agreement but is not persuaded that the agreement is indeed
fair insofar as paragraph 7 thereof is concerned, said clause not having been affected in
said reexamination. Unfortunately, only the objectionable feature on compounding a
criminal offense was addressed by the parties in response to the court's directives of
April 17, 1975 and May 8, 1975. The portion on waiver of the employees' benefits
remains in its unsatisfactory and troubling
condition.chanroblesvirtualawlibrary chanrobles virtual law library

The parties must be directed once more to reconsider said paragraph 7 of the
compromise agreement and reform or supplement it, for, as it is written, it is hard to
see how the court can approve it. A compromise agreement 'will not be set aside where
the rights of the parties may be protected by a reformation,' 15 C.J.S. 243.

Thereafter, PBCOM filed its written comments on July 24, 1975, reiterating its stand on
the validity of the compromise agreement. Only two of the defendants, Ricardo Carlos
and Conrado Galvez, filed their replies. Ricardo Carlos manifested that he signed the
compromise "so as to show pakikisama to his co-defendants and to get the matter over
and done with. He is by no means repudiating his signature ..." and while admitting that
he received certain small amounts from Mr. How and Mr. Yu. that he was leaving the
matter to the discretion of the court, as summarized by respondent judge himself in his
appealed decision. 6 The position of Conrado Galvez who had agreed to be a state
witness has already been stated hereinabove.chanroblesvirtualawlibrary chanrobles
virtual law library

On July 25, 1975, respondent court handed down its "partial decision" approving in
toto (without modification and alteration) the compromise agreement as to defendant
Paulino L. How and finding therein "nothing contrary to law, morals and public policy, as
follows: chanrobles virtual law library

In the light of all the foregoing, the Court finds nothing in the above-quoted provisions
of the Compromise Agreement pertaining to defendant Paulino L. How, to be contrary to
law, morals, and public policy, hence, same is hereby granted and
approved.chanroblesvirtualawlibrary chanrobles virtual law library

Judgment is hereby rendered approving the above-quoted Compromise Agreement

between the plaintiff and defendant Paulino L. How and ordering the parties to comply
strictly with the terms and conditions thereof without pronouncement as to
costs.chanroblesvirtualawlibrary chanrobles virtual law library

The attachment on the properties of defendant Paulino L. How is hereby lifted. 7

On September 30, 1975, respondent judge rendered a 68 page decision as to au the

other defendants, repeating the observations he made in his earlier order dated July 3,
1975, although along a more lengthy and ramified vein. 7-a chanrobles virtual law library

Although the issues had not been completely joined, and without any trial or reception of
evidence, respondent judge made in his decision extensive "findings" and conclusions of
fact on the basis of the controverted allegations in the parties' pleadings. Nevertheless,
respondent judge could not avoid stating in his decision that "(T)he findings of the
independent auditors, SYCIP, GORRES, VELAYO & CO. indicated the defrauded loss was
about P25 million The admissions of the several defendants-bookkeepers approximated
this finding, i.e. P21 million alone by Nelson Yu," 8 after recounting the defraudation
schemes of those who he called the "principal defendants" who connived with herein
respondents-defendants who as bookkeepers covered up in their respective books the
amounts defrauded.chanroblesvirtualawlibrary chanrobles virtual law library

Invoking his earlier Order of July 3, 1975 wherein he had prejudged the compromise
agreement to be "unfair" and "one-sided", despite which the parties had not heeded his
directive therein "to reconsider and reform" the waiver and quitclaim provisions in
paragraph 7 thereof, respondent judge ordered the deleting and striking out of said
provisions insofar as herein respondents-defendants were concerned declaring them to
be "contrary to law, morals, good customs, public policy and public order" and
"considered inexistent and void from the beginning," yet approving the very same
compromise agreement in toto without any deletion or modification as to the defendant
Yu Chiao Chin alias Nelson Yu (in the same manner that he had approved in toto the
same compromise agreement as to the defendant Paulino How in his earlier "partial
decision" of July 25, 1975, as follows: chanrobles virtual law library

After a careful study of the records, as well as the oral and written manifestations made
by the parties, thru their respective counsel, the Court is of the opinion that paragraph 7
of the Compromise Agreement, insofar as it refers and includes the names of
defendants-bookkeepers, Enrique Lorenzo y Jiongco, Conrado Galvez y Cervantes,
Faustino Carlos y Ramos, Arsenio Lorenzo Villaluz, Ildefonso Carino y Marasigan,
Felizardo Albaira, and Ricardo Carlos, transgresses the law, its cause, object and
purpose is contrary to law, morals good customs public policy and public order and,
therefore, is considered inexistent and void from the beginning.

Except, therefore, with this modification, which even if included in said Compromise
Agreement, but being considered inexistent and void from the beginning, the
Compromise Agreement could be approved and made the basis of judgment of the
above-entitled case. being, as thus modified, not contrary to law, morals, good customs,
public policy and public order.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, judgment is hereby, rendered approving the above- quoted Compromise

Agreement, as modified thusly, to wit: chanrobles virtual law library

(a) delete the phrase 'and criminal charge herein abovementioned' found in paragraph
7, page 5 and the phrase land criminal charge' found in paragraph 10, page 6,
and chanrobles virtual law library

(b) delete the names of all the defendants-bookkeepers appearing in paragraph 7, page
5 of the Compromise Agreement, namely, Enrique Lorenzo y Jiongco, Conrado Galvez y
Cervantes, Faustino Carlos y Ramos, Arsenio Lorenzo y Villaluz, Ildefonso Carino y
Marasigan, Felizardo Albairra, and Ricardo Carlos,

as entered into between the plaintiff-bank and the defendants hereto. (with the
exception of principal defendant Paulino L. How, whose case had been disposed of in a
separate partial decision previously) and ordering the parties to comply strictly with the
terms and conditions thereof without pronouncement as to
costs.chanroblesvirtualawlibrary chanrobles virtual law library

The attachments on the properties of all the defendants are hereby dissolved,
discharged and lifted. 9chanrobles virtual law library

Hence, the present petition which we find to be

meritorious.chanroblesvirtualawlibrary chanrobles virtual law library

1. Contrary to the bare conclusion of respondent judge ordering the deletion of the
names of herein respondents-defendants from the above-quoted Paragraph 7 of the
compromise agreement, whereby he would free them from their agreement of
voluntarily resigning from petitioner bank and waiving whatever rights they may have
against petitioner arising from their employment or the case, including all benefits and
rights under petitioner's Staff Provident Fund and retirement plan in consideration of
petitioner's agreement to dismiss the P25 million case against them and discharging
them from all obligations and liabilities thereunder, there is nothing in said resignation
and waiver undertakings of respondents that "transgresses the law" or is "contrary to
law, morals, good customs, public policy and public order and, therefore is considered
inexistent and void from the beginning" - and no such law or authority was cited by
respondent judge or respondents to justify or support his erroneous
assertion.chanroblesvirtualawlibrary chanrobles virtual law library

Respondent judge's "finding" that herein respondents-bookkeepers "all occupied an

inferior position in the negotiations on the Compromise Agreement in question, with
respect to the plaintiff-bank and/or together with principal defendants Yu Chiao Chin
alias Nelson Yu and Paulino L. How. Be it remembered that these principal defendants as
early- as the year 1970, long before the Complaint herein was filed, had admitted in
writing and 'assumed full responsibility for whatever consequences may arise and that
we declare the bookkeepers free from all responsibility, 10 or even his pre-judged
subjective perception in his earlier Order of July 3, 1975 hereinabove quoted that "there
was obviously an imbalance in [their] treatment" in the "unfair" and "one-sided
compromise agreement" do not at all warrant his rash deletion of the respondents'
reciprocal undertaking in exchange of petitioner's dismissal of the case and waiver of its
claims as "contrary to law, morals, good customs, public policy and public order." This is
so, particularly considering that respondent judge approved the very same compromise
agreement in toto without any deletion of the provisions in question as to defendants
How and Yu, who were charged in the complaint below together with herein
respondents-defendants as having connived and acted in concert with each other to
defraud petitioner of some P25 million and respondent judge in his above-quoted
"findings" found that "the admissions of the several defendants-bookkeepers I herein
respondents] approximated this finding [of P25 million defrauded loss found by Sycip,
Gorres, Velayo & Co., the independent auditors]; i.e. P21 million alone by Nelson Yu." All
of them being similarly situated and having been charged with connivance and
conspiracy .n carrying out through the years the huge defraudation of petitioner,
respondent judge could not arbitrarily declare the provisions in question void as to the
herein seven respondents-conspirators and valid as t6 the two others above
named.chanroblesvirtualawlibrary chanrobles virtual law library
2. Far from being "one-sided" and "unfair", it thus appears that in exchange of herein
respondents' voluntary resignation (which employment they could not have clung to
anyway considering the huge defraudation of over P25 million carried out with their
connivance and covered by their admissions, as per respondent judge's own "findings" in
his decision, supra, 11 which certainly would warrant their dismissal even on the mere
ground of total loss of trust and confidence) and waiver of any dubious rights arising
from their employment and the case below, including all benefits and rights under
petitioner's Staff Provident Fund and retirement plan (which they would nevertheless
have lost and forfeited upon separation from the service 12 all of which involved petty
amounts compared to the over P25 million sought to be recovered by petitioner, herein
respondents got a pretty good deal. Petitioner in consideration thereof and probably
realizing the futility of collecting any amount from them, agreed to dismiss the case
against them and discharge them from all liability and required no assumption of
monetary liability from them contenting itself with the much lesser amounts of
P600,000.00 and P6,610,000.00 undertaken to be paid it by the defendants Paulino How
and Yu Chiao Chin alias Nelson Yu, respectively. This is the whole essence of a
compromise as provided in Article 2028 of the Civil Code whereby the parties, by making
reciprocal concessions, whether of greater benefit or not to one or the other party, avoid
a litigation or put an end to one already commenced. 13 chanrobles virtual law library

3. The parties therefore have every freedom to enter into a compromise agreement, as
in any other contract, the only exceptions being certain prohibited subjects of
compromise such as the civil status of persons as provided in Article 2035 of the Civil
Code (none of which is applicable here) 14 and the general restriction in Article 1306 of
the Civil Code that 'The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public
policy.chanroblesvirtualawlibrarychanrobles virtual law library

The law and the precepts of morals or good customs need no definition. They need only
to be cited and none has or can be cited as being transgressed by the cited provisions in
question. As to the remaining fields of public order and public policy, the Court has since
the early case of Ferrazzini vs. Gsell  15 pointed out that the two terms are practically
equivalent, citing Manresa that "Public policy (order publico) - which does not here
signify the material keeping of public order - represents in the law of persons the public,
social and legal interest, that which is permanent and essential of the institutions, that
which. even in favoring an individual in whom the right lies, cannot be left to his own
will." The Code Commission however in drafting our present Code included the two
terms, stating ill its report that "Public order, which is found in the Spanish Civil Code, is
not as broad as public policy, as the latter may refer not only to public safety but also,
to considerations which are moved by the common good. 16 chanrobles virtual law
library

In Gabriel vs. Monte de Piedad 17, the Court enjoined that "courts should not rashly
extend the rule which holds that a contract is void as against public policy" and laid
down the following criteria: "The term 'public policy' is vague and uncertain in meaning,
floating and changeable in connotation. It may be said, however, that, in general, a
contract which is neither prohibited by law nor condemned by judicial decision, nor
contrary to public morals, contravenes no public policy. In the absence of express
legislation or constitutional prohibition, a court, in order to declare a contract void as
against public policy, must find that the contract as to the consideration or thing to be
done, has a tendency to injure the public, is against the public good, or contravenes
some established interests of society, or is inconsistent with sound policy and good
morals, or tends clearly to undermine the security of individual rights, whether of
personal liability or of private property. Examining the contract at bar, we are of the
opinion that it does not in any way militate against the public good. Neither does it
contravene the policy of the law nor the established interests of
society.chanroblesvirtualawlibrary chanrobles virtual law library

Thus, the provisions in question which are neither prohibited by law nor condemned by
judicial decision nor contrary to morals and good customs cannot be said to contravene
any public policy or to militate against the public
good.chanroblesvirtualawlibrary chanrobles virtual law library

4. The Civil Code in fact contains salutary provisions that encourage and favor
compromises and does not even require judicial approval. As the Court held
in Cochingyan vs. Cloribel 18"Pursuant to Article 2037 of the Civil Code, 'A compromise
has upon the parties the effect and authority of res judicata ...' and this is true even if
the compromise is not judicially approved." Article 2032 of the Civil Code provides only
that "the court's approval is necessary in compromises entered into by guardians,
parents, absentee's representatives, and administrators or executors of decedents'
estates," and in no other case. Thus, parties-litigants who have arrived at a compromise
have many times simply asked for and obtained the courts' dismissal of their suit
without submitting their compromise agreement for judicial approval. Procedurally, it is
preferable that such approval be obtained, since as was held in Piano vs.
Cayanong, 19 "The agreement ha(s) upon the parties the effect and authority of res
judicata (Art. 2037, New Civil Code; Yboleon v. Sison, 59 Phil. 281, 290; Hernandez vs.
Barcelon, 23 Phil. 599, 607; De Jesus v. Go Quiolay, 65 Phil. 476, 482; Meneses v. De la
Rosa, 77 Phil. 34, 38; Salazar v. Jarabe, 48 O.G. 2708, 2712; Morales v. Fontanos, 64
Phil. 19, 21), and the judgment rendered thereon ha(s) the authority of res
judicata from the moment it (is) rendered ... and such judgment is more than a mere
contract binding the parties because having the sanction of the court, and entered as its
determination of the controversy, it has all the force and effect of any other judgment, it
being conclusive upon the parties and their privies (Marquez vs. Marquez, 73 Phil. 74)"
and as provided by Article 2037, execution lies to exact compliance only with a judicial
compromise. Article 2029 of the Civil Code provides further that "The court shall
endeavor to persuade the litigants in a civil case to agree upon some fair compromise,"
and Articles 2039 and 2031 thereof provide for the suspension of pending actions and
mitigation of damages to the losing party who has shown a sincere desire for a
Compromise, in line with the Code's policy of encouraging amicable
settlements.chanroblesvirtualawlibrary chanrobles virtual law library

5. It is settled jurisprudence that neither the courts nor quasi-judicial bodies can impose
upon the parties a judgment different from their compromise agreement (which as a
valid contract is the law between the parties themselves) or against the very terms and
conditions of their agreement.chanroblesvirtualawlibrary chanrobles virtual law library
We thus held in Municipal Board of Cabanatuan City vs. Samahang Magsasaka,
Inc. 20 that "a judicial or quasi-judicial body cannot impose upon the parties a
judgment different from their real agreement or against the very terms and conditions of
the amicable settlement entered into by them, without running the risk of contravening
the universally established principle that a contract is the law between the
parties." chanrobles virtual law library

We stressed therein that "(T)his Court, time and again, has ruled that a compromise
agreement entered into by party-litigants, when not contrary to law, public order, public
policy, morals, or good custom is a valid contract which is the law between the
parties themselves. (Juan-Marcelo, et al. vs. Go Kim Pah, et al., 22 SCRA 309). It
follows, therefore, that a compromise agreement, not tainted with infirmity, irregularity,
fraud or illegality, is the law between the parties who are duty bound to abide by
it and observe strictly its terms and conditions. It is incumbent upon the courts of justice
to help develop and inculcate in the minds of the parties- litigants proper respect for,
and obedience to, the terms and conditions of this kind of mutual agreement whenever
it does not exhibit any feature or taint of illegality or fraud. Thus we would be enhancing
the salutary provisions of Section 1, Rule 20, of the

Revised Rules of Court and Article 2029, New Civil Code, which entrust to the courts the
function of enabling party-litigants in a civil suit to reach an amicable settlement of their
disputes," and cited our previous ruling in Castro vs Castro 21 that chanrobles virtual law
library

... Es principio universalmente establecido que el convenio es ley entre las partes. No
debe imponerse un criterio por mas acertado que fuese sobre el verdadero contrato de
las Partes. Que utilidad puede proporcionar la disposicion del articulo 2029 del nuevo
codigo civil que encomienda al Juzgado la funcion de persuader a los litigantes en un
asunto civil a que procuren illegar a un arreglo si, despues de todo, el criterio del
tribunal se ha de imponer sobre su convenio?

The only case where the court may validly intervene is "ff the parties and their counsel
are to do it ... to assist them in attaining precision and accuracy of language that would
more or less make it certain that any dispute as to the matters being settled would not
recur, much less give rise to a new controversy. 22 chanrobles virtual law library

6. As held in the case of Gonzales vs Gonzales, 23 the court cannot deny their approval
to a compromise agreement, voluntarily entered into by the parties, where there is no
valid serious objection, since "(T)he agreement, therefore, partaking of the nature of a
contract, is subject to the same legal provision providing for the validity, enforcement,
rescission or annulment of ordinary contracts. In entering in said compromise, the
parties were free to make any stipulation not contrary to law, public interest, or
principles of morality, as much as in any other contract." chanrobles virtual law library

As stated above, supra, 24 only two of herein respondent's, namely, Conrado Galvez and

Ricardo Carlos, had presented manifestations as to the "objectionable features" of the
compromise agreement signed by them both following respondent judge's telegraphed
but baseless observations in his Orders of April 17, 1975 and July 3, 1975 as to the
waiver and quitclaim provisions being "contrary to law, morals and public policy," with
Galvez complaining about petitioner having reneged on its alleged promise to give him
reciprocal benefits in exchange of his agreement to turn state
witness.chanroblesvirtualawlibrary chanrobles virtual law library

Aside from the totally untenable position in which respondent judge placed himself by
declaring the provisions of paragraph 7 of the compromise agreement void as to herein
respondents but valid in toto as to the defendants Paulino How and Yu Chiao Chin alias
Nelson Yu, his decision would arbitrarily substitute his own terms for that agreed upon
by the parties to the compromise agreement and baselessly free herein respondents
from their undertaking thereunder. With their names ordered deleted from paragraph 7
of the compromise, they would be bound to no concession nor obligation
(notwithstanding that pursuant thereto they had in fact executed the corresponding
waiver and quitclaim therein provided), while petitioner had complied with its part and
discharged them from all obligations and liabilities, despite their admission of complicity,
pursuant to paragraph 8 of the same agreement (subject only to the express exception
that petitioner was not waiving its rights as to any other anomalies which might
subsequently be discovered, notwithstanding respondents' warranty that they had not
participated in any such prejudicial transactions other than those related to or included
in the civil case and criminal charge).chanroblesvirtualawlibrarychanrobles virtual law
library

7. There can be no question that the parties voluntarily executed and entered into the
compromise agreement. The record shows that all of the parties personally signed the
agreement. 25 Respondents' voluntary consent to said agreement and its due execution
with assistance of counsel was confirmed when a week thereafter, their respective-
counsels all signed the "Motion for Judgment on the Basis of the Attached Compromise
Agreement. 26The signatures of the parties, petitioner and respondents, and those of
their respective counsels, were again affixed on the Manifestation and Motion dated April
26, 1975, reiterating their prayer for approval of the compromise agreement as modified
pursuant to respondent judge's Order of April 17, 1978. 27 Thus, not one of herein
respondents had ever assailed the compromise agreement as not having been freely or
voluntarily entered into.chanroblesvirtualawlibrarychanrobles virtual law library

When respondent judge issued his Order for hearing of April 26, 1975 advancing his own
observation as to "certain objectionable features" and mentioning that the compromise
referred to compounding a felony, which is contrary to law and directing the parties to
go over the same again so that he could approve the same "taking into consideration the
provisions of law, as well as public morals and policy," supra, 28 the parties deferred
thereto by filing their said Manifestation and Motion of April 26, 1975, wherein they
prayed that "The phrase 'and criminal charge herein above mentioned' found in
paragraph 7, page 5 and the phrase land criminal charge' found in paragraph 10, page 6
of the Compromise Agreement be deleted from the said Compromise Agreement dated
March 10, 1975," and reiterated the prayer for judgment on the basis of the compromise
agreement, as thus modified. They made of record, though, that respondent judge's
view was in error, thus: chanrobles virtual law library

5. The parties wish to state that the reference to a criminal charge in the said
paragraphs is pure oversight on inadvertence inasmuch as there is no criminal charge
mentioned in the paragraphs preceding paragraphs 7 and 10 of the Compromise
Agreement and consequently the phrase 'criminal charge hereinabove mentioned' is
meaningless. Besides, it has not been the intention of the parties to compromise 'the
criminal aspect of the case', not only because it would be contrary to law to do so but
principally because the defendants are fully aware that such a compromise may be
taken as an admission of guilt and the defendants entered into the 'Compromise
Agreement' dated March 10, 1975 with the clear understanding that by so entering into
such agreement, they are not admitting nor are they deemed to admit the commission
of any criminal act.chanroblesvirtualawlibrary chanrobles virtual law library

Notwithstanding respondent judge's said Order and subsequent Order of July 3, 1975
setting the case anew for hearing and directing the parties once more "to reconsider ...
and reform" the waiver and quitclaim provisions of paragraph 7 of the compromise
agreement and flatly announcing that the modification deleting all reference to the
criminal charge was "unsatisfactory" and that "dropping the complaint is not enough"
concession for herein respondents, the stark fact remains that not one of respondents
ever repudiated the compromise agreement nor moved to set aside or annul the same
because of alleged fraud, violence or vitiated consent - which is the remedy available in
such cases under Article 2038 of the Civil Code. 29 chanrobles virtual law library

All that respondents ever asserted, following respondent judge's line, was that the
waiver and quitclaim provisions constituting their reciprocal concession was "contrary to
law, morals, good customs, public policy and public order" - which we have held to be
totally untenable.chanroblesvirtualawlibrary chanrobles virtual law library

ACCORDINGLY, the modification of and deletions from the compromise agreement

ordered in respondent judge's decision are hereby set aside as null and void, and in lieu
thereof, judgment is hereby rendered approving the compromise agreement in toto.
Without pronouncement as to costs.chanroblesvirtualawlibrary chanrobles virtual law
library

SO ORDERED.
PDF 6

THIRD DIVISION

G.R. No. L-59266 February 29, 1988

SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,

vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.

BIDIN, J.:

This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division,
Court of Appeals dated July 31,1981, affirming with modification the Decision, dated August 25, 1972
of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T.
Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano
Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying
defendant-appellant's (Petitioner's) motion for reconsideration, for lack of merit.

The undisputed facts as found by the Court of Appeals are as follows:

The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the
cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners)
Dignos spouses sold the said parcel of land to plaintiff-appellant (respondent Atilano J.
Jabil) for the sum of P28,000.00, payable in two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was
paid and acknowledged by the vendors in the deed of sale (Exh. C) executed in favor of
plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or
before September 15, 1965.

On November 25, 1965, the Dignos spouses sold the same land in favor of defendants
spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for
the price of P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was
executed by the Dignos spouses in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds pursuant to the provisions of Act No.
3344.

As the Dignos spouses refused to accept from plaintiff-appellant the balance of the
purchase price of the land, and as plaintiff- appellant discovered the second sale made
by defendants-appellants to the Cabigas spouses, plaintiff-appellant brought the present
suit. (Rollo, pp. 27-28)

After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the
decretal portion of which reads:

WHEREFORE, the Court hereby declares the deed of sale executed on November 25,
1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a
citizen of the United States of America, null and void ab initio, and the deed of sale
 executed by defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not
rescinded. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum,
of Sixteen Thousand Pesos (P16,000.00) to the defendants-spouses upon the
execution of the Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the
decision of this case becomes final and executory.

The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas
and Jovita L. de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable
amount corresponding to the expenses or costs of the hollow block fence, so far
constructed.

It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela

Lumungsod de Dignos should return to defendants-spouses Luciano Cabigas and
Jovita L. de Cabigas the sum of P35,000.00, as equity demands that nobody shall
enrich himself at the expense of another.

The writ of preliminary injunction issued on September 23, 1966, automatically becomes
permanent in virtue of this decision.

With costs against the defendants.

From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein)
appealed to the Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393-R,
"Atilano G. Jabil v. Silvestre T. Dignos, et al."

On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the
portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a
fence upon the land in question. The disposive portion of said decision of the Court of Appeals reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of

the judgment as pertains to plaintiff-appellant above indicated, the judgment appealed
from is hereby AFFIRMED in all other respects.

With costs against defendants-appellants.

SO ORDERED.

Judgment MODIFIED.

A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners)
Dignos spouses, but on December 16, 1981, a resolution was issued by the Court of Appeals denying
the motion for lack of merit.

Hence, this petition.

In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of
merit. A motion for reconsideration of said resolution was filed on March 16, 1982. In the resolution
dated April 26,1982, respondents were required to comment thereon, which comment was filed on
May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the resolution of June
16,1 982. On August 9,1982, acting on the motion for reconsideration and on all subsequent
pleadings filed, this Court resolved to reconsider its resolution of February 10, 1982 and to give due
course to the instant petition. On September 6, 1982, respondents filed a rejoinder to reply of
petitioners which was noted on the resolution of September 20, 1982.

Petitioners raised the following assignment of errors:

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY,

INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS
AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN
QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE
TO SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING
READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE
CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL.

II

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND

OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE
ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE
SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT.

III

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE

APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND
ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES AND
ATTORNEY'S FEES TO PETITIONERS.

IV

PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED,

HE HAVING COME TO COURT WITH UNCLEAN HANDS.

BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH

MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION,
MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE QUESTIONED
CONTRACT AND THE LAW APPLICABLE THERETO.

The foregoing assignment of errors may be synthesized into two main issues, to wit:

I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell.

II. Whether or not there was a valid rescission thereof.

There is no merit in this petition.

It is significant to note that this petition was denied by the Second Division of this Court in its
Resolution dated February 1 0, 1 982 for lack of merit, but on motion for reconsideration and on the
basis of all subsequent pleadings filed, the petition was given due course.

I.

The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00)
Phil. Philippine Currency as advance payment;

2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos

(P12,000.00) Loan from the First Insular Bank of Cebu;

3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos
(P4,000.00) on or before September 15,1965;

4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on
the said property;

5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G.
Jabil over the above-mentioned property upon the payment of the balance of Four
Thousand Pesos. (Original Record, pp. 10-11)

In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit
"C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2) positive
suspensive conditions, namely: the payment of the balance of P4,000.00 on or before September
15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of
Cebu. It is further contended that in said contract, title or ownership over the property was expressly
reserved in the vendor, the Dignos spouses until the suspensive condition of full and punctual
payment of the balance of the purchase price shall have been met. So that there is no actual sale
until full payment is made (Rollo, pp. 51-52).

In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is
absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their
ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and
the absence of a formal deed of conveyance is a very strong indication that the parties did not intend
"transfer of ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover,
petitioners anchored their contention on the very terms and conditions of the contract, more
particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned
property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to
sign a final deed of absolute sale over the mentioned property upon the payment of the balance of
four thousand pesos."

Such contention is untenable.

By and large, the issues in this case have already been settled by this Court in analogous cases.

Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of
Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect
that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the
vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage
Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).

A careful examination of the contract shows that there is no such stipulation reserving the title of the
property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-
payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The
ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery
thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this
Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to
the vendee upon actual or constructive delivery thereof.

While it may be conceded that there was no constructive delivery of the land sold in the case at bar,
as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery
thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in
question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's Beach
Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on January
15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner
spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).

Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of
petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was
intended by the parties and not a contract to sell.

Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were
no longer owners of the same and the sale is null and void.

II.

Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was
already rescinded.

Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the
case at bar, the contract of sale being absolute in nature is governed by Article 1592 of the Civil
Code. It is undisputed that petitioners never notified private respondents Jabil by notarial act that they
were rescinding the contract, and neither did they file a suit in court to rescind the sale. The most that
they were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil,
informed the Dignos spouses not to go to the house of Jabil because the latter had no money and
further advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As
correctly found by the Court of Appeals, there is no showing that Amistad was properly authorized by
Jabil to make such extra-judicial rescission for the latter who, on the contrary, vigorously denied
having sent Amistad to tell petitioners that he was already waiving his rights to the land in question.
Under Article 1358 of the Civil Code, it is required that acts and contracts which have for their object
the extinguishment of real rights over immovable property must appear in a public document.

Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the
stipulated date of payment on September 15,1965 and was able to raise the necessary amount only
by mid-October 1965.
It has been ruled, however, that "where time is not of the essence of the agreement, a slight delay on
the part of one party in the performance of his obligation is not a sufficient ground for the rescission of
the agreement" (Taguba v. Vda. de Leon, supra). Considering that private respondent has only a
balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as
in the aforecited case that Jabil be given an additional period within which to complete payment of the
purchase price.

WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the
Court of Appeals is Affirmed in toto.

SO ORDERED.
 EN BANC

G.R. No. 23769           September 16, 1925

SONG FO & COMPANY, plaintiff-appellee,

vs.
HAWAIIAN PHILIPPINE CO., defendant-appellant.

Hilado and Hilado, Ross, Lawrence and Selph and Antonio T. Carrascoso, Jr., for appellant.
Arroyo, Gurrea and Muller for appellee.

MALCOLM, J.:

In the court of First Instance of Iloilo, Song Fo & Company, plaintiff, presented a complaint with two
causes of action for breach of contract against the Hawaiian-Philippine Co., defendant, in which
judgment was asked for P70,369.50, with legal interest, and costs. In an amended answer and cross-
complaint, the defendant set up the special defense that since the plaintiff had defaulted in the
payment for the molasses delivered to it by the defendant under the contract between the parties, the
latter was compelled to cancel and rescind the said contract. The case was submitted for decision on
a stipulation of facts and the exhibits therein mentioned. The judgment of the trial court condemned
the defendant to pay to the plaintiff a total of P35,317.93, with legal interest from the date of the
presentation of the complaint, and with costs.

From the judgment of the Court of First Instance the defendant only has appealed. In this court it has
made the following assignment of errors: "I. The lower court erred in finding that appellant had agreed
to sell to the appellee 400,000, and not only 300,000, gallons of molasses. II. The lower court erred in
finding that the appellant rescinded without sufficient cause the contract for the sale of molasses
executed by it and the appellee. III. The lower court erred in rendering judgment in favor of the
appellee and not in favor of the appellant in accordance with the prayer of its answer and cross-
complaint. IV. The lower court erred in denying appellant's motion for a new trial." The specified
errors raise three questions which we will consider in the order suggested by the appellant.

1. Did the defendant agree to sell to the plaintiff 400,000 gallons of molasses or 300,000
gallons of molasses? The trial court found the former amount to be correct. The appellant
contends that the smaller amount was the basis of the agreement.

The contract of the parties is in writing. It is found principally in the documents, Exhibits F and
G. The First mentioned exhibit is a letter addressed by the administrator of the Hawaiian-
Philippine Co. to Song Fo & Company on December 13, 1922. It reads:

SILAY, OCC. NEGROS, P.I.

            December 13, 1922

Messrs. SONG FO AND CO.

Iloilo, Iloilo.

DEAR SIRS: Confirming our conversation we had today with your Mr. Song Fo, who visited
this Central, we wish to state as follows:
 He agreed to the delivery of 300,000 gallons of molasses at the same price as last year under
the same condition, and the same to start after the completion of our grinding season. He
requested if possible to let you have molasses during January, February and March or in other
words, while we are grinding, and we agreed with him that we would to the best of our ability,
altho we are somewhat handicapped. But we believe we can let you have 25,000 gallons
during each of the milling months, altho it interfere with the shipping of our own and planters
sugars to Iloilo. Mr. Song Fo also asked if we could supply him with another 100,000 gallons of
molasses, and we stated we believe that this is possible and will do our best to let you have
these extra 100,000 gallons during the next year the same to be taken by you before
November 1st, 1923, along with the 300,000, making 400,000 gallons in all.

Regarding the payment for our molasses, Mr. Song Fo gave us to understand that you would
pay us at the end of each month for molasses delivered to you.

Hoping that this is satisfactory and awaiting your answer regarding this matter, we remain.

Yours very truly,

HAWAIIAN-PHILIPPINE COMPANY
      BY R. C. PITCAIRN
      Administrator.

Exhibit G is the answer of the manager of Song Fo & Company to the Hawaiian-Philippine Co. on
December 16, 1922. This letter reads:

December 16th, 1922.

Messrs. HAWAIIAN-PHILIPPINE CO.,

            Silay, Neg. Occ., P.I.

DEAR SIRS: We are in receipt of your favours dated the 9th and the 13th inst. and understood
all their contents.

In connection to yours of the 13th inst. we regret to hear that you mentioned Mr. Song Fo the
one who visited your Central, but it was not for he was Mr. Song Heng, the representative and
the manager of Messrs. Song Fo & Co.

With reference to the contents of your letter dated the 13th inst. we confirm all the
arrangements you have stated and in order to make the contract clear, we hereby quote below
our old contract as amended, as per our new arrangements.

(a) Price, at 2 cents per gallon delivered at the central.

(b) All handling charges and expenses at the central and at the dock at Mambaguid for our
account.

(c) For services of one locomotive and flat cars necessary for our six tanks at the rate of P48
for the round trip dock to central and central to dock. This service to be restricted to one trip for
the six tanks.
 Yours very truly,

      SONG FO & COMPANY

By __________________________
                        Manager.

We agree with appellant that the above quoted correspondence is susceptible of but one
interpretation. The Hawaiian-Philippine Co. agreed to deliver to Song Fo & Company 300,000 gallons
of molasses. The Hawaiian-Philippine Co. also believed it possible to accommodate Song Fo &
Company by supplying the latter company with an extra 100,000 gallons. But the language used with
reference to the additional 100,000 gallons was not a definite promise. Still less did it constitute an
obligation.

If Exhibit T relied upon by the trial court shows anything, it is simply that the defendant did not
consider itself obliged to deliver to the plaintiff molasses in any amount. On the other hand, Exhibit A,
a letter written by the manager of Song Fo & Company on October 17, 1922, expressly mentions an
understanding between the parties of a contract for P300,000 gallons of molasses.

We sustain appellant's point of view on the first question and rule that the contract between the
parties provided for the delivery by the Hawaiian-Philippine Co. to song Fo & Company of 300,000
gallons of molasses.

2. Had the Hawaiian-Philippine Co. the right to rescind the contract of sale made with Song Fo &
Company? The trial judge answers No, the appellant Yes.

Turning to Exhibit F, we note this sentence: "Regarding the payment for our molasses, Mr. Song Fo
(Mr. Song Heng) gave us to understand that you would pay us at the end of each month for molasses
delivered to you." In Exhibit G, we find Song Fo & Company stating that they understand the contents
of Exhibit F, and that they confirm all the arrangements you have stated, and in order to make the
contract clear, we hereby quote below our old contract as amended, as per our new arrangements.
(a) Price, at 2 cents per gallon delivered at the central." In connection with the portion of the contract
having reference to the payment for the molasses, the parties have agree on a table showing the date
of delivery of the molasses, the amount and date thereof, the date of receipt of account by plaintiff,
and date of payment. The table mentioned is as follows:

Date of
Date of receipt of Date of
Account and date thereof
delivery account by payment
plaintiff
1922 1923 1923
Dec. 18 P206.16 Dec. 26/22 Jan. 5 Feb. 20
Dec. 29 206.16 Jan. 3/23 do Do
1923
Jan. 5 206.16 Jan. 9/23 Mar. 7 or 8 Mar. 31
Feb. 12 206.16 Mar. 12/23 do Do
Feb. 27 206.16 do do Do
 Mar. 5 206.16 do do Do
Mar. 16 206.16 Mar. 20/23 Apr. 2/23 Apr. 19
Mar. 24 206.16 Mar. 31/23 do Do
Mar. 29 206.16 do do Do

Some doubt has risen as to when Song Fo & Company was expected to make payments for the
molasses delivered. Exhibit F speaks of payments "at the end of each month." Exhibit G is silent on
the point. Exhibit M, a letter of March 28, 1923, from Warner, Barnes & Co., Ltd., the agent of the
Hawaiian-Philippine Co. to Song Fo & Company, mentions "payment on presentation of bills for each
delivery." Exhibit O, another letter from Warner, Barnes & Co., Ltd. to Song Fo & Company dated
April 2, 1923, is of a similar tenor. Exhibit P, a communication sent direct by the Hawaiian-Philippine
Co. to Song Fo & Company on April 2, 1923, by which the Hawaiian-Philippine Co. gave notice of the
termination of the contract, gave as the reason for the rescission, the breach by Song Fo & Company
of this condition: "You will recall that under the arrangements made for taking our molasses, you were
to meet our accounts upon presentation and at each delivery." Not far removed from this statement, is
the allegation of plaintiff in its complaint that "plaintiff agreed to pay defendant, at the end of each
month upon presentation accounts."

Resolving such ambiguity as exists and having in mind ordinary business practice, a reasonable
deduction is that Song Fo & Company was to pay the Hawaiian-Philippine Co. upon presentation of
accounts at the end of each month. Under this hypothesis, Song Fo & Company should have paid for
the molasses delivered in December, 1922, and for which accounts were received by it on January 5,
1923, not later than January 31 of that year. Instead, payment was not made until February 20, 1923.
All the rest of the molasses was paid for either on time or ahead of time.

The terms of payment fixed by the parties are controlling. The time of payment stipulated for in the
contract should be treated as of the essence of the contract. Theoretically, agreeable to certain
conditions which could easily be imagined, the Hawaiian-Philippine Co. would have had the right to
rescind the contract because of the breach of Song Fo & Company. But actually, there is here
present no outstanding fact which would legally sanction the rescission of the contract by the
Hawaiian-Philippine Co.

The general rule is that rescission will not be permitted for a slight or casual breach of the contract,
but only for such breaches as are so substantial and fundamental as to defeat the object of the
parties in making the agreement. A delay in payment for a small quantity of molasses for some twenty
days is not such a violation of an essential condition of the contract was warrants rescission for non-
performance. Not only this, but the Hawaiian-Philippine Co. waived this condition when it arose by
accepting payment of the overdue accounts and continuing with the contract. Thereafter, Song Fo &
Company was not in default in payment so that the Hawaiian-Philippine co. had in reality no excuse
for writing its letter of April 2, 1923, cancelling the contract. (Warner, Barnes & Co. vs. Inza [1922], 43
Phil., 505.)

We rule that the appellant had no legal right to rescind the contract of sale because of the failure of
Song Fo & Company to pay for the molasses within the time agreed upon by the parties. We sustain
the finding of the trial judge in this respect.

3. On the basis first, of a contract for 300,000 gallons of molasses, and second, of a contract
imprudently breached by the Hawaiian-Philippine Co., what is the measure of damages? We again
turn to the facts as agreed upon by the parties.
The first cause of action of the plaintiff is based on the greater expense to which it was put in being
compelled to secure molasses from other sources. Three hundred thousand gallons of molasses was
the total of the agreement, as we have seen. As conceded by the plaintiff, 55,006 gallons of molasses
were delivered by the defendant to the plaintiff before the breach. This leaves 244,994 gallons of
molasses undelivered which the plaintiff had to purchase in the open market. As expressly conceded
by the plaintiff at page 25 of its brief, 100,000 gallons of molasses were secured from the Central
North Negros Sugar Co., Inc., at two centavos a gallon. As this is the same price specified in the
contract between the plaintiff and the defendant, the plaintiff accordingly suffered no material loss in
having to make this purchase. So 244,994 gallons minus the 100,000 gallons just mentioned leaves
as a result 144,994 gallons. As to this amount, the plaintiff admits that it could have secured it and
more from the Central Victorias Milling Company, at three and one-half centavos per gallon. In other
words, the plaintiff had to pay the Central Victorias Milling company one and one-half centavos a
gallon more for the molasses than it would have had to pay the Hawaiian-Philippine Co. Translated
into pesos and centavos, this meant a loss to the plaintiff of approximately P2,174.91. As the
conditions existing at the central of the Hawaiian-Philippine Co. may have been different than those
found at the Central North Negros Sugar Co., Inc., and the Central Victorias Milling Company, and as
not alone through the delay but through expenses of transportation and incidental expenses, the
plaintiff may have been put to greater cost in making the purchase of the molasses in the open
market, we would concede under the first cause of action in round figures P3,000.

The second cause of action relates to lost profits on account of the breach of the contract. The only
evidence in the record on this question is the stipulation of counsel to the effect that had Mr. Song
Heng, the manager of Song Fo & Company, been called as a witness, he would have testified that
the plaintiff would have realized a profit of P14,948.43, if the contract of December 13, 1922, had
been fulfilled by the defendant. Indisputably, this statement falls far short of presenting proof on which
to make a finding as to damages.

In the first place, the testimony which Mr. Song Heng would have given undoubtedly would follow the
same line of thought as found in the decision of the trial court, which we have found to be
unsustainable. In the second place, had Mr. Song Heng taken the witness-stand and made the
statement attributed to him, it would have been insufficient proof of the allegations of the complaint,
and the fact that it is a part of the stipulation by counsel does not change this result. And lastly, the
testimony of the witness Song Heng, it we may dignify it as such, is a mere conclusion, not a proven
fact. As to what items up the more than P14,000 of alleged lost profits, whether loss of sales or loss
of customers, or what not, we have no means of knowing.

We rule that the plaintiff is entitled to recover damages from the defendant for breach of contract on
the first cause of action in the amount of P3,000 and on the second cause of action in no amount.
Appellant's assignments of error are accordingly found to be well taken in part and not well taken in
part.

Agreeable to the foregoing, the judgment appealed from shall be modified and the plaintiff shall have
and recover from the defendant the sum of P3,000, with legal interest form October 2, 1923, until
payment. Without special finding as to costs in either instance, it is so ordered.
 EN BANC

G.R. No. L-21876             September 29, 1967

PHILIPPINE AMUSEMENT ENTERPRISES, INC., plaintiff-appellant,

vs.
SOLEDAD NATIVIDAD and MARIANO NATIVIDAD, defendants-appellees.

Disini and Arnobit for plaintiff-appellant.

Isidoro Crisostomo for defendants-appellees.

CASTRO, J.:

This is an appeal from the decision of the Court of First Instance of Davao dated May 31, 1962,
rescinding, in favor of the defendants, the lease agreement entered into by the plaintiff Philippine
Amusement Enterprises, Inc. and the defendant Soledad Natividad relative to an automatic
phonograph, ordering the latter to restore the phonograph to the former, denying the plaintiff's claim
for liquidated and exemplary damages, attorney's fees and costs of suit, and dismissing the
defendants' counterclaim. The plaintiff took the appeal to the Court of Appeals which, however,
certified it to this Court because the questions involved are of law.

On January 6, 1961 the plaintiff, a domestic corporation with main office in Quezon City and a branch
office in Davao City, entered into a contract with the defendant Soledad Natividad, owner of the
Irene's Refreshment Parlor in Davao City, whereby the former leased to the latter an automatic
phonograph (Seeburg Selectomatic 100-R), more popularly known as "jukebox". The pertinent
provisions of the contract are as follows:

2. The OPERATOR1 agrees to supply and replace parts that may have been damaged as a
result of ordinary wear and tear without any cost to the PROPRIETOR; 2

xxx     xxx     xxx

5. The PROPRIETOR shall pay to the OPERATOR, by way of rental for the use of the
aforesaid automatic phonograph, an amount equal to 75% of the Gross Receipts for the period
of one week, but in no case shall the amount be less than P50.00 a week;

xxx     xxx     xxx

9. The PROPRIETOR agrees that during the term of this agreement, the OPERATOR shall
have the exclusive right to maintain an automatic phonograph in the premises, and the
PROPRIETOR shall not permit anyone to install or maintain any phonograph or any other
devices for the reproduction or the transmission of music in any part of the premises;

xxx     xxx     xxx
 11. It is mutually agreed that the duration of this agreement shall be for the period of three (3)
years from the date hereof and shall renew itself automatically for a like period under the same
terms and conditions, unless either of the parties hereto gives to the other written notice of his
intention to cancel this agreement by registered mail within thirty (30) days before the
expiration of this agreement or any renewal thereof.

12. In the event that the PROPRIETOR shall fail to comply with any of the terms and
conditions of this contract, the OPERATOR, at any time during the existence of the agreement,
shall be entitled as a matter of right to immediately repossess, and the PROPRIETOR binds
himself to voluntarily surrender the said phonograph; and hereby expressly grants permission
to representatives of the OPERATOR any time for such purposes thereby waiving any action
for trespass or damages.

xxx     xxx     xxx

15. In the event of a breach of this agreement by the PROPRIETOR, the parties hereto agree
that the OPERATOR shall be entitled to recover as liquidated damages and not as a penalty or
forfeiture, a sum equal to P50.00 per week for each week remaining of the unexpired term of
this agreement; AND IN THE EVENT OF JUDICIAL PROCEEDINGS TO ENFORCE ANY OF
THE PROVISIONS OF THIS CONTRACT, the OPERATOR shall be entitled to attorney's fees
of not less than P200.00, costs of the action, premiums for bonds, and other expenses and
damages which OPERATOR may suffer or incur by reason thereof, as well as to the
immediate issuance of preliminary writ of mandatory injunction.1awphîl.nèt

On July 17, 1961, Mariano Natividad, husband of the defendant Soledad Natividad, wrote the
following letter to the plaintiff's branch office in Davao City:

For two (2) weeks ago, I had advised your representative here in Davao to get back your
jukebox, but until today said representative did not mind us.

So upon receipt of this letter, you are hereby again advised to get the said Jukebox and failure
on your part to get it, we shall not be responsible anymore for the said Jukebox.

On July 27, 1961 Mariano Natividad wrote another letter to the plaintiff, this time addressed to its
main office in Quezon City, informing it of his letter of July 17 and of the reasons for requesting the
return of the jukebox to the company. This letter reads as follows:

Please may you hear our revelations or relations prior to the advice we had made to your
company regarding our slight difference from your agent, stationed here in Davao City.

1. We requested your agent that the said Jukebox should be inspected once in a while
there are times when the said Jukebox stock up and the coins which will be dropped will
just be confiscated due to the selected record which will not give our selected music.

2. About a year ago, we asked your agent here in Davao City if we could buy your
Jukebox. He replied, "yes" and he will inform the Manila office. From that time, we made
always an inquiry if said matter was already referred to. But we were surprised why until
last May we did not hear any word from your agent. So we decided to order one from
the United States.

3. On July 3rd, we advised personally your agent that the said Jukebox should be taken
from our establishment. He answered us that he will report the matter to your Central
 Office. From July 3rd until July 16th, we had not met your agent. On the following day,
July 17th, we met your agent because he accounted the income of the said Jukebox
and we again told him that the Jukebox should be taken. He replied that he could not
act because there is no letter from us for the Manila office advising the return of the said
Jukebox. So we made a discussion why he did not tell us if our letter was necessary; so
we wrote a letter on July 17th. At that time when he received our letter, he requested for
an extension of one (1) week for he would forward our letter to Manila. But according to
my wife, your agent told her that he forwarded our letter last July 22nd. On July 24th, we
finally decided to return the said Jukebox and even have ready laborers to help us load
the Jukebox on your pick-up. Your agent, Mr. Gonzales, remarked angrily that he would
not accept the said Jukebox but will just deposit it in our establishment until the Manila
office will act on it. According to him, your agent, Mr. Gonzales, we could not remove
the said Jukebox from the place because there was a contract. Later on, Mr. Gonzales
calmly requested us again to have an additional extension of one (1) more week. In this
situation we were very embarrassed because there were many customers and other
persons present during our discussions. Right on that day, we transferred your Jukebox
inside our airconditioned room without any business because Mr. Gonzales told us that
the said Jukebox should be deposited only in our establishment. Your agent, Mr.
Gonzales, is a good agent on the other world but not in this world where we are living.
Beginning July 24th until the time you will get the Jukebox, we are going to collect a
monthly rental of Fifty Pesos (P50.00) for the space occupying the Jukebox.

In its reply of August 4, 1961 the plaintiff stated that —

the stocking up of coins is quite normal in any coin-operated phonograph, as well as failure to
get the desired selection. It has been the policy of our company, however, to give top priority to
the complaints of our customers. It is not clear from your letter whether our Branch Manager
for Davao City has been remiss in his duties. We are willing to give the benefit of the doubt by
concluding that he might have failed to respond to your calls in time and I assure you that
immediate instructions will be issued from this office directing him to give personal attention to
any service that you might wish in connection with the said Jukebox.

It as well denied knowledge of the defendants' desire to buy a jukebox and deplored the fact that the
defendants ordered one from the United States without first sending the request to buy directly to it
since the plaintiff was anyway willing to sell a jukebox to any interested person. Calling attention to
paragraph 9 of the lease contract which gave it the exclusive right to maintain an automatic
phonograph in the defendants' premises, the plaintiff asked the defendants to re-install its jukebox
and remove the other one which the defendants had installed in their premises.

On August 4 and October 16, 1961, the plaintiff, through counsel, wrote the defendant spouses,
demanding anew compliance with the lease contract and the payment of damages, and warning them
that it would file the corresponding action in court if they did not comply with its demand. As the
defendants refused the demand, the plaintiff brought action in the Court of First Instance of Davao on
November 21, 1961, praying for the return to it of the automatic phonograph, subject of the contract of
lease and the payment of P5,850 as liquidated damages, P5,000 as exemplary damages, P500 as
attorney's fees and P400 as expenses of litigation.

Upon the parties' stipulation of facts, their pleadings and the documentary evidence submitted by
them as annexes to the stipulation of facts and pleadings, the lower court rendered the decision
hereinbefore adverted to.
The plaintiff imputes four errors to the lower court, the vital one being the court's holding that the facts
fully warrant a rescission of the contract of lease in favor of the defendants by reason of the plaintiff's
failure to perform its obligation to render the automatic phonograph suitable for the purpose for which
it was intended.

It is our view that the decision of the lower court should be reversed on three grounds.

First. The power to rescind obligations is implied in reciprocal ones in case one of the obligors should
not comply with what is incumbent upon him. So the Civil Code provides. 3 But it is equally settled that,
in the absence of a stipulation to the contrary, this power must be invoked judicially; it cannot be
exercised solely on a party's own judgment that the other has committed a breach of the
obligation.4 Hence, as there is nothing in the contract of lease empowering the defendants to rescind
it without resort to the courts, the defendants' action in unilaterally terminating the contract is
unjustified. As this Court said in Escueta v. Pando:5

The defendant could not, by himself alone and without judicial intervention, resolve or annul
the agreement. Under article 1124 [now art. 1191] of the Civil Code, the right to resolve
reciprocal obligations, in case one of the obligors shall fail to comply with that which is
incumbent upon him, is deemed to be implied. But that right must be invoked judicially for the
same article also provides: "The court shall decree the resolution demanded, unless there
should be grounds which justify the allowance of a term for the performance of the obligation."

Second. Rescission will be ordered only where the breach complained of is substantial as to defeat
the object of the parties in entering into the agreement. It will not be granted where the breach is
slight or casual.6 The defendants asked the plaintiff to retrieve its phonograph, claiming that there
were times when the coins dropped into the slot would get stuck, resulting in its failure to play the
desired music. But apart from this bare statement, there is nothing in the evidence which shows the
frequency with which the jukebox failed to function properly. The expression "there are times"
connotes occasional failure of the phonograph to operate, not frequent enough to render it unsuitable
and unserviceable. As a matter of fact, there is not even a claim that, as a result of unsatisfactory
performance thereof, the income therefrom dropped to such a level that the defendants could not
even pay the plaintiff its guaranteed share of P50 a week. On the contrary, the evidence (Stipulation
of Facts, Annexes J, K, L, M, N, and O) shows that, during the period complained of, the operation of
the jukebox was quite profitable to both parties. 7

Third. We believe that the defendants actually bought a jukebox only in 1961 after they had signed
the lease contract in question, although they might have expressed a desire to buy one the year
before, for otherwise they would not have entered into a three-year lease. But certainly their decision
to buy a jukebox and operate it themselves was made long before they ever complained in July, 1961
of any defect in the rented jukebox. To be sure, it is not shown when the rented phonograph
supposedly developed trouble; presumably it was early in July, 1961, since the defendants' first letter
of complaint was written on July 17. But if, as defendants admit, they began operating their own
jukebox "sometime in July, 1961" (presumably on July 24, 1961 when they removed the rented
jukebox from where it was installed), then the defendants' pretense that they decided to buy their own
jukebox only after the rented one had failed to function properly becomes highly improbable. The
jukebox which they ordered from the United States could not have arrived in so short a time as to
enable them to operate it on July 24.

We are rather inclined to believe that the decision to buy a jukebox was made because the
defendants found it more profitable to operate one themselves. Their letter of July 17, 1961, in which
they demanded the removal of the rented jukebox from their premises, with the warning that they
would not be "responsible anymore" for it, and their other letter of July 27 of like tenor, betray the
haste with which they wanted to get out of their contractual obligations to the plaintiff. We note that
they did not even ask the plaintiff to service the rented jukebox; they asked the plaintiff to remove the
jukebox or they would charge rental for the use of the space occupied by it. The conviction cannot be
avoided that the jukebox which the defendants had ordered from the United States had arrived and
the latter thereafter conjured up a reason for operating it without being charged with violation of the
lease contract. The defendants' pretenses cannot excuse their culpable violation of the lease
contract; their conduct fully justifies the award of liquidated damages to the plaintiff.

ACCORDINGLY, the judgment a quo is reversed, and the contract of lease between the plaintiff and
the defendant Soledad Natividad is hereby rescinded in favor of the plaintiff. The defendants are
ordered to return to the plaintiff the automatic phonograph subject of the contract, and to pay the
plaintiff liquidated damages in the total amount of P5,850, plus 6 per cent interest from the date of the
filing of the complaint until the amount shall have been fully paid, and attorney's fees in the amount of
P200. Costs against the defendants.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Angeles and Fernando, J.J.,
concur.
Bengzon, J.P., J., took no part
 EN BANC

G.R. No. L-6060             September 30, 1954

FERNANDO A. FROILAN, plaintiff-appellee,
vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

Quisumbing, Sycip, Quisumbing and Salazar, for appellant.

Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.

PARAS, C.J.:

The factual antecedents of this case are sufficiently recited in the brief filed by the intervenor-appellee
as follows:

1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint against the

defendant-appellant, Pan Oriental Shipping Co., alleging that he purchased from the Shipping
Commission the vessel FS-197 for P200,000, paying P50,000 down and agreeing to pay the
balance in installments; that to secure the payment of the balance of the purchase price, he
executed a chattel mortgage of said vessel in favor of the Shipping Commission; that for
various reason, among them the non-payment of the installments, the Shipping Commission
took possession of said vessel and considered the contract of sale cancelled; that the Shipping
Commission chartered and delivered said vessel to the defendant-appellant Pan Oriental
Shipping Co. subject to the approval of the President of the Philippines; that he appealed the
action of the Shipping Commission to the President of the Philippines and, in its meeting on
August 25, 1950, the Cabinet restored him to all his rights under his original contract with the
Shipping Commission; that he had repeatedly demanded from the Pan Oriental Shipping Co.
the possession of the vessel in question but the latter refused to do so. He, therefore, prayed
that, upon the approval of the bond accompanying his complaint, a writ of replevin be issued
for the seizure of said vessel with all its equipment and appurtenances, and that after hearing,
he be adjudged to have the rightful possession thereof (Rec. on App. pp. 2-8).

2. On February 3, 1951, the lower court issued the writ of replevin prayed for by Froilan and by
virtue thereof the Pan Oriental Shipping Co. was divested of its possession of said vessel
(Rec. on App. p. 47).

3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right of Froilan to
the possession of the said vessel; it alleged that the action of the Cabinet on August 25, 1950,
restoring Froilan to his rights under his original contract with the Shipping Commission was null
and void; that, in any event, Froilan had not complied with the conditions precedent imposed
by the Cabinet for the restoration of his rights to the vessel under the original contract; that it
suffered damages in the amount of P22,764.59 for wrongful replevin in the month of February,
1951, and the sum of P17,651.84 a month as damages suffered for wrongful replevin from
March 1, 1951; it alleged that it had incurred necessary and useful expenses on the vessel
amounting to P127,057.31 and claimed the right to retain said vessel until its useful and
necessary expenses had been reimbursed (Rec. on App. pp. 8-53).
4. On November 10, 1951, after the leave of the lower court had been obtained, the intervenor-
appellee, Government of the Republic of the Philippines, filed a complaint in intervention
alleging that Froilan had failed to pay to the Shipping Commission (which name was later
changed to Shipping Administration) the balance due on the purchase price of the vessel in
question, the interest thereon, and its advances on insurance premium totalling P162,142.95,
excluding the dry-docking expenses incurred on said vessel by the Pan Oriental Shipping Co.;
that intervenor was entitled to the possession of the said vessel either under the terms of the
original contract as supplemented by Froilan's letter dated January 28, 1949, or in order that it
may cause the extrajudicial sale thereof under the Chattel Mortgage Law. It, therefore, prayed
that Froilan be ordered to deliver the vessel in question to its authorized representative, the
Board of Liquidators; that Froilan be declared to be without any rights on said vessel and the
amounts he paid thereon forfeited or alternately, that the said vessel be delivered to the Board
of Liquidators in order that the intervenor may have its chattel mortgage extrajudicially
foreclosed in accordance with the provisions of the Chattel Mortgage Law; and that pending
the hearing on the merits, the said vessel be delivered to it (Rec. on App. pp. 54-66).

5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the complaint in
intervention alleging that the Government of the Republic of the Philippines was obligated to
deliver the vessel in question to it by virtue of a contract of bare-boat charter with option to
purchase executed on June 16, 1949, by the latter in favor of the former; it also alleged that it
had made necessary and useful expenses on the vessel and claimed the right of retention of
the vessel. It, therefore, prayed that, if the Republic of the Philippines succeeded in obtaining
possession of the said vessel, to comply with its obligations of delivering to it (Pan Oriental
Shipping co.) or causing its delivery by recovering it from Froilan (Rec. on App. pp. 69-81).

6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which was liquidating
the affairs of the Shipping Administration, a check in the amount of P162,576.96 in payment of
his obligation to the Shipping Administration for the said vessel as claimed in the complaint in
intervention of the Government of the Republic of the Philippines. The Board of Liquidators
issued an official report therefor stating that it was a 'deposit pending the issuance of an order
of the Court of First Instance of Manila' (Rec. on App. pp. 92-93).

7. On December 7, 1951, the Government of the Republic of the Philippines brought the matter
of said payment and the circumstance surrounding it to the attention of the lower court "in
order that they may be taken into account by this Honorable Court in connection with the
questions that are not pending before it for determination" (Rec. on App. pp. 82-86).

8. On February 3, 1952, the lower court held that the payment by Froilan of the amount of
P162,576.96 on November 29, 1951, to the Board of Liquidators constituted a payment and a
discharge of Froilan's obligation to the Government of the Republic of the Philippines and
ordered the dismissal of the latter's complaint in intervention. In the same order, the lower
court made it very clear that said order did not pre-judge the question involved between Froilan
and the Oriental Shipping Co. which was also pending determination in said court (Rec. on
App. pp. 92-93). This order dismissing the complaint in intervention, but reserving for future
adjudication the controversy between Froilan and the Pan Oriental Shipping Co. has already
become final since neither the Government of the Republic of the Philippines nor the Pan
Oriental Shipping Co. had appealed therefrom.

9. On May 10, 1952, the Government of the Republic of the Philippines filed a motion to
dismiss the counterclaim of the Pan Oriental Shipping Co. against it on the ground that the
purpose of said counterclaim was to compel the Government of the Republic of the Philippines
to deliver the vessel to it (Pan Oriental Shipping Co.) in the event that the Government of the
 Republic of the Philippines recovers the vessel in question from Froilan. In view, however, of
the order of the lower court dated February 3, holding that the payment made by Froilan to the
Board of Liquidators constituted full payment of Froilan's obligation to the Shipping
Administration, which order had already become final, the claim of the Pan Oriental Shipping
Co. against the Republic of the Philippines was no longer feasible, said counterclaim was
barred by prior judgment and stated no cause of action. It was also alleged that movant was
not subject to the jurisdiction of the court in connection with the counterclaim. (Rec. on App.
pp. 94-97). This motion was opposed by the Pan Oriental Shipping Co. in its written opposition
dated June 4, 1952 (Rec. on app. pp. 19-104).

10. In an order dated July 1, 1952, the lower court dismissed the counterclaim of the Pan
Oriental Shipping Co. as prayed for by the Republic of the Philippines (Rec. on App. pp. 104-
106).

11. It if from this order of the lower court dismissing its counterclaim against the Government of
the Republic of the Philippines that Pan Oriental Shipping Co. has perfected the present
appeal (Rec. on App. p. 107).

The order of the Court of First Instance of Manila, dismissing the counterclaim of the defendant Pan
Oriental Shipping Co., from which the latter has appealed, reads as follows:

This is a motion to dismiss the counterclaim interposed by the defendant in its answer to the
complaint in intervention.

"The counterclaim states as follows:

"COUNTERCLAIM

"As counterclaim against the intervenor Republic of the Philippines, the defendant alleges:

"1. That the defendant reproduces herein all the pertinent allegations of the foregoing answer
to the complaint in intervention

"2. That, as shown by the allegations of the foregoing answer to the complaint in intervention,
the defendant Pan Oriental Shipping Company is entitled to the possession of the vessel and
the intervenor Republic of the Philippines is bound under the contract of charter with option to
purchase it entered into with the defendant to deliver that possession to the defendant —
whether it actually has the said possession or it does not have that possession from the
plaintiff Fernando A. Froilan and deliver the same to the defendant;

"3. That, notwithstanding demand, the intervenor Republic of the Philippines has not to date
complied with its obligation of delivering or causing the delivery of the vessel to the defendant
Pan Oriental Shipping Company.1âwphïl.nêt

"RELIEF

"WHEREFORE, the defendant respectfully prays that judgment be rendered ordering the
intervenor Republic of the Philippines alternatively to deliver to the defendants the possession
of the said vessel, or to comply with its obligation to the defendant or causing the delivery to
the latter of the said vessel by recovering the same from plaintiff, with costs.
 "The defendant prays for such other remedy as the Court may deem just and
equitable in the premises."

The ground of the motion to dismiss are (a) That the cause of action is barred by prior
judgment; (b) That the counterclaim states no cause of action; and (c) That this Honorable
Court has no jurisdiction over the intervenor government of the Republic of the Philippines in
connection with the counterclaim of the defendant Pan Oriental Shipping Co.

The intervenor contends that the complaint in intervention having been dismissed and no
appeal having been taken, the dismissal of said complaint is tantamount to a judgment.

The complaint in intervention did not contain any claim whatsoever against the defendant Pan
Oriental Shipping Co.; hence, the counterclaim has no foundation.

The question as to whether the Court has jurisdiction over the intervenor with regard to the
counterclaim, the Court is of the opinion that it has no jurisdiction over said intervenor.

It appearing, therefore, that the grounds of the motion to dismiss are well taken, the
counterclaim of the defendant is dismissed, without pronouncement as to costs.

The defendant's appeal is predicated upon the following assignments of error:

I. The lower court erred in dismissing the counterclaim on the ground of prior judgment.

II. The lower court erred in dismissing the counterclaim on the ground that the counterclaim
had no foundation because made to a complaint in intervention that contained no claim against
the defendant.

III. The lower court erred in dismissing the counterclaim on the ground of alleged lack of
jurisdiction over the intervenor Republic of the Philippines.

We agree with appellant's contention that its counterclaim is not barred by prior judgment (order of
February 8, 1952, dismissing the complaint in intervention), first, because said counterclaim was filed
on November 29, 1951, before the issuance of the order invoked; and, secondly, because in said
order of February 8, the court dismissed the complaint in intervention, "without, of course, precluding
the determination of the right of the defendant in the instant case," and subject to the condition that
the "release and cancellation of the chattel mortgage does not, however, prejudge the question
involved between the plaintiff and the defendant which is still the subject of determination in this
case." It is to be noted that the first condition referred to the right of the defendant, as distinguished
from the second condition that expressly specified the controversy between the plaintiff and the
defendant. That the first condition reserved the right of the defendant as against the intervenor, is
clearly to be deduced from the fact that the order of February 8 mentioned the circumstance that "the
question of the expenses of drydocking incurred by the defendant has been included in its
counterclaim against the plaintiff," apparently as one of the grounds for granting the motion to dismiss
the complaint in intervention.

The defendant's failure to appeal from the order of February 8 cannot, therefore, be held as barring
the defendant from proceeding with its counterclaim, since, as already stated, said order preserved its
right as against the intervenor. Indeed, the maintenance of said right is in consonance with Rule 30,
section 2, of the Rules of Court providing that "if a counterclaim has been pleaded by a defendant
prior to the service upon him of the plaintiff's motion to dismiss, the action shall not be dismissed
against the defendant's objection unless the counterclaim can remain pending for independent
adjudication by the court."

The lower court also erred in holding that, as the intervenor had not made any claim against the
defendant, the latter's counterclaim had no foundation. The complaint in intervention sought to
recover possession of the vessel in question from the plaintiff, and this claim is logically adverse to
the position assumed by the defendant that it has a better right to said possession than the plaintiff
who alleges in his complaint that he is entitled to recover the vessel from the defendant. At any rate a
counterclaim should be judged by its own allegations, and not by the averments of the adverse party.
It should be recalled that the defendant's theory is that the plaintiff had already lost his rights under
the contract with the Shipping Administration and that, on the other hand, the defendant is relying on
the charter contract executed in its favor by the intervenor which is bound to protect the defendant in
its possession of the vessel. In other words, the counterclaim calls for specific performance on the
part of the intervenor. As to whether this counterclaim is meritorious is another question which is not
now before us.

The other ground for dismissing the defendant's counterclaim is that the State is immune from suit.
This is untenable, because by filing its complaint in intervention the Government in effect waived its
right of nonsuability.

The immunity of the state from suits does not deprive it of the right to sue private parties in its
own courts. The state as plaintiff may avail itself of the different forms of actions open to
private litigants. In short, by taking the initiative in an action against a private party, the state
surrenders its privileged position and comes down to the level of the defendant. The latter
automatically acquires, within certain limits, the right to set up whatever claims and other
defenses he might have against the state. The United States Supreme Court thus explains:

"No direct suit can be maintained against the United States. But when an action is
brought by the United States to recover money in the hands of a party who has a legal
claim against them, it would be a very rigid principle to deny to him the right of setting
up such claim in a court of justice, and turn him around to an application to Congress."
(Sinco, Philippine Political Law, Tenth Ed., pp. 36-37, citing U. S. vs. Ringgold, 8 Pet.
150, 8 L. ed. 899.)

It is however, contended for the intervenor that, if there was at all any waiver, it was in favor of the
plaintiff against whom the complaint in intervention was directed. This contention is untenable. As
already stated, the complaint in intervention was in a sense in derogation of the defendant's claim
over the possession of the vessel in question.

Wherefore, the appealed order is hereby reversed and set aside and the case remanded to the lower
court for further proceedings. So ordered, without costs.
 EN BANC

G.R. No. L-28602 September 29, 1970

UNIVERSITY OF THE PHILIPPINES, petitioner,

vs.
WALFRIDO DE LOS ANGELES, in his capacity as JUDGE of the COURT OF FIRST INSTANCE
IN QUEZON CITY, et al., respondents.

Office of the Solicitor General Antonio P. Barredo, Solicitor Augusto M. Amores and Special Counsel
Perfecto V. Fernandez for petitioner.

Norberto J. Quisumbing for private respondents.

REYES, J.B.L., J.:

Three (3) orders of the Court of First Instance of Rizal (Quezon City), issued in its Civil Case No.
9435, are sought to be annulled in this petition for certiorari and prohibition, filed by herein petitioner
University of the Philippines (or UP) against the above-named respondent judge and the Associated
Lumber Manufacturing Company, Inc. (or ALUMCO). The first order, dated 25 February 1966,
enjoined UP from awarding logging rights over its timber concession (or Land Grant), situated at the
Lubayat areas in the provinces of Laguna and Quezon; the second order, dated 14 January 1967,
adjudged UP in contempt of court, and directed Sta. Clara Lumber Company, Inc. to refrain from
exercising logging rights or conducting logging operations on the concession; and the third order,
dated 12 December 1967, denied reconsideration of the order of contempt.

As prayed for in the petition, a writ of preliminary injunction against the enforcement or
implementation of the three (3) questioned orders was issued by this Court, per its resolution on 9
February 1968.

The petition alleged the following:

That the above-mentioned Land Grant was segregated from the public domain and given as an
endowment to UP, an institution of higher learning, to be operated and developed for the purpose of
raising additional income for its support, pursuant to Act 3608;

That on or about 2 November 1960, UP and ALUMCO entered into a logging agreement under which
the latter was granted exclusive authority, for a period starting from the date of the agreement to 31
December 1965, extendible for a further period of five (5) years by mutual agreement, to cut, collect
and remove timber from the Land Grant, in consideration of payment to UP of royalties, forest fees,
etc.; that ALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had incurred an
unpaid account of P219,362.94, which, despite repeated demands, it had failed to pay; that after it
had received notice that UP would rescind or terminate the logging agreement, ALUMCO executed
an instrument, entitled "Acknowledgment of Debt and Proposed Manner of Payments," dated 9
December 1964, which was approved by the president of UP, and which stipulated the following:
 3. In the event that the payments called for in Nos. 1 and 2 of this paragraph are not
sufficient to liquidate the foregoing indebtedness of the DEBTOR in favor of the
CREDITOR, the balance outstanding after the said payments have been applied shall
be paid by the DEBTOR in full no later than June 30, 1965;

xxx xxx xxx

5. In the event that the DEBTOR fails to comply with any of its promises or undertakings
in this document, the DEBTOR agrees without reservation that the CREDITOR shall
have the right and the power to consider the Logging Agreement dated December 2,
1960 as rescinded without the necessity of any judicial suit, and the CREDITOR shall
be entitled as a matter of right to Fifty Thousand Pesos (P50,000.00) by way of and for
liquidated damages;

ALUMCO continued its logging operations, but again incurred an unpaid account, for the period from
9 December 1964 to 15 July 1965, in the amount of P61,133.74, in addition to the indebtedness that it
had previously acknowledged.

That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as of that date,
considered as rescinded and of no further legal effect the logging agreement that they had entered in
1960; and on 7 September 1965, UP filed a complaint against ALUMCO, which was docketed as Civil
Case No. 9435 of the Court of First Instance of Rizal (Quezon City), for the collection or payment of
the herein before stated sums of money and alleging the facts hereinbefore specified, together with
other allegations; it prayed for and obtained an order, dated 30 September 1965, for preliminary
attachment and preliminary injunction restraining ALUMCO from continuing its logging operations in
the Land Grant.

That before the issuance of the aforesaid preliminary injunction UP had taken steps to have another
concessionaire take over the logging operation, by advertising an invitation to bid; that bidding was
conducted, and the concession was awarded to Sta. Clara Lumber Company, Inc.; the logging
contract was signed on 16 February 1966.

That, meantime, ALUMCO had filed several motions to discharge the writs of attachment and
preliminary injunction but were denied by the court;

That on 12 November 1965, ALUMCO filed a petition to enjoin petitioner University from conducting
the bidding; on 27 November 1965, it filed a second petition for preliminary injunction; and, on 25
February 1966, respondent judge issued the first of the questioned orders, enjoining UP from
awarding logging rights over the concession to any other party.

That UP received the order of 25 February 1966 after it had concluded its contract with Sta. Clara
Lumber Company, Inc., and said company had started logging operations.

That, on motion dated 12 April 1966 by ALUMCO and one Jose Rico, the court, in an order dated 14
January 1967, declared petitioner UP in contempt of court and, in the same order, directed Sta. Clara
Lumber Company, Inc., to refrain from exercising logging rights or conducting logging operations in
the concession.

The UP moved for reconsideration of the aforesaid order, but the motion was denied on 12 December
1967.
Except that it denied knowledge of the purpose of the Land Grant, which purpose, anyway, is
embodied in Act 3608 and, therefore, conclusively known, respondent ALUMCO did not deny the
foregoing allegations in the petition. In its answer, respondent corrected itself by stating that the
period of the logging agreement is five (5) years - not seven (7) years, as it had alleged in its second
amended answer to the complaint in Civil Case No. 9435. It reiterated, however, its defenses in the
court below, which maybe boiled down to: blaming its former general manager, Cesar Guy, in not
turning over management of ALUMCO, thereby rendering it unable to pay the sum of P219,382.94;
that it failed to pursue the manner of payments, as stipulated in the "Acknowledgment of Debt and
Proposed Manner of Payments" because the logs that it had cut turned out to be rotten and could not
be sold to Sta. Clara Lumber Company, Inc., under its contract "to buy and sell" with said firm, and
which contract was referred and annexed to the "Acknowledgment of Debt and Proposed Manner of
Payments"; that UP's unilateral rescission of the logging contract, without a court order, was invalid;
that petitioner's supervisor refused to allow respondent to cut new logs unless the logs previously cut
during the management of Cesar Guy be first sold; that respondent was permitted to cut logs in the
middle of June 1965 but petitioner's supervisor stopped all logging operations on 15 July 1965; that it
had made several offers to petitioner for respondent to resume logging operations but respondent
received no reply.

The basic issue in this case is whether petitioner U.P. can treat its contract with ALUMCO rescinded,
and may disregard the same before any judicial pronouncement to that effect. Respondent ALUMCO
contended, and the lower court, in issuing the injunction order of 25 February 1966, apparently
sustained it (although the order expresses no specific findings in this regard), that it is only after a
final court decree declaring the contract rescinded for violation of its terms that U.P. could disregard
ALUMCO's rights under the contract and treat the agreement as breached and of no force or effect.

We find that position untenable.

In the first place, UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt and
Proposed Manner of Payments" that, upon default by the debtor ALUMCO, the creditor (UP) has "the
right and the power to consider, the Logging Agreement dated 2 December 1960 as rescinded
without the necessity of any judicial suit." As to such special stipulation, and in connection with Article
1191 of the Civil Code, this Court stated in Froilan vs. Pan Oriental Shipping Co., et al., L-11897, 31
October 1964, 12 SCRA 276:

there is nothing in the law that prohibits the parties from entering into agreement that
violation of the terms of the contract would cause cancellation thereof, even without
court intervention. In other words, it is not always necessary for the injured party to
resort to court for rescission of the contract.

Of course, it must be understood that the act of party in treating a contract as cancelled or resolved
on account of infractions by the other contracting party must be made known to the other and is
always provisional, being ever subject to scrutiny and review by the proper court. If the other party
denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the
matter to court. Then, should the court, after due hearing, decide that the resolution of the contract
was not warranted, the responsible party will be sentenced to damages; in the contrary case, the
resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced.

In other words, the party who deems the contract violated may consider it resolved or rescinded, and
act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final
judgment of the corresponding court that will conclusively and finally settle whether the action taken
was or was not correct in law. But the law definitely does not require that the contracting party who
believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to
protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and
watch its damages accumulate during the pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203).

We see no conflict between this ruling and the previous jurisprudence of this Court invoked by
respondent declaring that judicial action is necessary for the resolution of a reciprocal
obligation,1 since in every case where the extrajudicial resolution is contested only the final award of
the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. It
is in this sense that judicial action will be necessary, as without it, the extrajudicial resolution will
remain contestable and subject to judicial invalidation, unless attack thereon should become barred
by acquiescence, estoppel or prescription.

Fears have been expressed that a stipulation providing for a unilateral rescission in case of breach of
contract may render nugatory the general rule requiring judicial action (v. Footnote, Padilla, Civil Law,
Civil Code Anno., 1967 ed. Vol. IV, page 140) but, as already observed, in case of abuse or error by
the rescinder the other party is not barred from questioning in court such abuse or error, the practical
effect of the stipulation being merely to transfer to the defaulter the initiative of instituting suit, instead
of the rescinder.

In fact, even without express provision conferring the power of cancellation upon one contracting
party, the Supreme Court of Spain, in construing the effect of Article 1124 of the Spanish Civil Code
(of which Article 1191 of our own Civil; Code is practically a reproduction), has repeatedly held that, a
resolution of reciprocal or synallagmatic contracts may be made extrajudicially unless successfully
impugned in court.

El articulo 1124 del Codigo Civil establece la facultad de resolver las obligaciones
reciprocas para el caso de que uno de los obligados no cumpliese lo que le
incumbe, facultad que, segun jurisprudencia de este Tribunal, surge
immediatamente despuesque la otra parte incumplio su deber, sin necesidad de una
declaracion previa de los Tribunales. (Sent. of the Tr. Sup. of Spain, of 10 April 1929;
106 Jur. Civ. 897).

Segun reiterada doctrina de esta Sala, el Art. 1124 regula la resolucioncomo una

"facultad" atribuida a la parte perjudicada por el incumplimiento del contrato, la cual
tiene derecho do opcion entre exigir el cumplimientoo la resolucion de lo
convenido, que puede ejercitarse, ya en la via judicial, ya fuera de ella, por declaracion
del acreedor, a reserva, claro es, que si la declaracion de resolucion hecha por una de
las partes se impugna por la otra, queda aquella sometida el examen y sancion de los
Tribunale, que habran de declarar, en definitiva, bien hecha la resolucion o por el
contrario, no ajustada a Derecho. (Sent. TS of Spain, 16 November 1956; Jurisp.
Aranzadi, 3, 447).

La resolucion de los contratos sinalagmaticos, fundada en el incumplimiento por una de

las partes de su respectiva prestacion, puedetener lugar con eficacia" 1. o Por la
declaracion de voluntad de la otra hecha extraprocesalmente, si no es impugnada en
juicio luego con exito. y 2. 0 Por la demanda de la perjudicada, cuando no opta por el
cumplimientocon la indemnizacion de danos y perjuicios realmente causados, siempre
quese acredite, ademas, una actitud o conducta persistente y rebelde de laadversa o la
satisfaccion de lo pactado, a un hecho obstativo que de un modoabsoluto, definitivo o
irreformable lo impida, segun el art. 1.124, interpretado por la jurisprudencia de esta
Sala, contenida en las Ss. de 12 mayo 1955 y 16 Nov. 1956, entre otras, inspiradas por
 el principio del Derecho intermedio, recogido del Canonico, por el cual fragenti fidem,
fides non est servanda. (Ss. de 4 Nov. 1958 y 22 Jun. 1959.) (Emphasis supplied).

In the light of the foregoing principles, and considering that the complaint of petitioner University
made out a prima facie case of breach of contract and defaults in payment by respondent ALUMCO,
to the extent that the court below issued a writ of preliminary injunction stopping ALUMCO's logging
operations, and repeatedly denied its motions to lift the injunction; that it is not denied that the
respondent company had profited from its operations previous to the agreement of 5 December 1964
("Acknowledgment of Debt and Proposed Manner of Payment"); that the excuses offered in the
second amended answer, such as the misconduct of its former manager Cesar Guy, and the rotten
condition of the logs in private respondent's pond, which said respondent was in a better position to
know when it executed the acknowledgment of indebtedness, do not constitute on their face sufficient
excuse for non-payment; and considering that whatever prejudice may be suffered by respondent
ALUMCO is susceptibility of compensation in damages, it becomes plain that the acts of the court a
quo in enjoining petitioner's measures to protect its interest without first receiving evidence on the
issues tendered by the parties, and in subsequently refusing to dissolve the injunction, were in grave
abuse of discretion, correctible by certiorari, since appeal was not available or adequate. Such
injunction, therefore, must be set aside.

For the reason that the order finding the petitioner UP in contempt of court has open appealed to the
Court of Appeals, and the case is pending therein, this Court abstains from making any
pronouncement thereon.

WHEREFORE, the writ of certiorari applied for is granted, and the order of the respondent court of 25
February 1966, granting the Associated Lumber Company's petition for injunction, is hereby set
aside. Let the records be remanded for further proceedings conformably to this opinion.

Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ.,
concur.

Reyes, J.B.L., Actg. C.J., is on leave

 FIRST DIVISION

G.R. No. L-27674 May 12, 1975

SOLEDAD T. CONSING, assisted by her husband, ANTONIO M. CONSING, plaintiffs-petitioners,

vs.
JOSE T. JAMANDRE, personally, and as Judicial Administrator of the Estate of Cirilo
Jamandre, defendant-respondent.

Agustin T. Locsin for plaintiffs-petitioners.

Januario L. Sison, Sr. for defendant-respondent.

ESGUERRA, J.:ñé+.£ªwph!1

Petition for review on certiorari of the decision of the Court of Appeals in its CA-G.R. No. 36711-R
reversing that of the Court of First Instance of Negros Occidental and dismissing the complaint of the
plaintiffs-petitioners, besides ordering them to pay the defendant-respondent the amount of
P19,000.00.

The factual background of the case is as follows:

Plaintiffs (now petitioners) filed in the Municipal Court of Sagay, Negros Occidental, a Complaint for
Forcible Entry and Detainer against defendant (now respondent) for taking possession of Haciendas
"Aida" and "Fe" through force, intimidation, stealth and strategy despite the contract of sublease
(Annex "A" of the Complaint) executed on October 19, 1962, (the date plaintiffs-petitioners took
possession and management of the leased premises) by and between the former, as sub-lessee, and
the father of the latter, Cirilo Jamandre, as sub-lessor.

Defendant-respondent filed his answer and averred that he took-over the haciendas in question on
September 11, 1963, seven (7) months after the death of his father, Cirilo Jamandre, on February 11,
1963, because of the failure of plaintiffs-petitioners to comply with the terms and conditions of
paragraphs 3 and 4 of the contract of sub-lease which read as follows: têñ.£îhqwâ£

3. That the SUB-LESSEE Soledad T. Consing shall pay the SUB-LESSOR Cirilo
Jamandre 1,000 piculs of "C" sugar every crop year and to effectuate said payment the
Lopez Sugar Central is hereby authorized to register in the name of the SUB-LESSOR
Cirilo Jamandre a proportion of 10% of the weekly sugar milled by the SUB-LESSEE
properly quendaned until the full amount of 1,000 piculs of "C" sugar shall have been
fully paid and satisfied not later than the month of February of every year.

4. That the SUB-LESSEE Soledad T. Consing shall pay the SUB-LESSOR the amount
of TWENTY THOUSAND PESOS (P20,000.00) by way of advance payment every crop
year until the duration of the lease. For the payment therefore, the amount of 1,000
piculs of "C" sugar referred in par. No. 3 shall be assigned and/or endorsed to the SUB-
LESSEE Soledad T. Consing and after proper liquidation of the same the surplus from
 the proceeds of 1,000 piculs of C sugar shall be paid to the SUB-LESSOR Cirilo
Jamandre not later than the month of February of each crop year.

As justification for the take-over of the leased premises, defendant-respondent cited paragraph 9 of
said contract of sublease as his authority, the text of which will be quoted hereafter.

After the issues had been joined, the Municipal Court of Sagay, Negros Occidental, rendered
judgment on June 5, 1964, in favor of plaintiffs-petitioners, the dispositive portion of which is as
follows: têñ.£îhqwâ£

WHEREFORE, in view of all the foregoing, the Court renders judgment for the plaintiff
and against the defendant Jose T. Jamandre, personally and in his capacity as Judicial
Administrator of the estate of the late Cirilo Jamandre, to vacate from and restore to
plaintiff, Soledad Tumbokon Consing, the possession of Hdas. "Aida" and "Fe" covered
by Lots Nos. 1257, 1258, 806 and 694 all of Sagay Cadastre, and with costs against the
defendant.

Defendant-respondent appealed to the Court of First Instance of Negros Occidental where the appeal
was docketed as Civil Case No. 246 on July 25, 1964.

On August 5, 1964, defendant-respondent filed his amended answer with the Court of First Instance
of Negros Occidental.

On August 18, 1964, plaintiffs-petitioners filed their Motion To Strike And For Summary Judgment,
attaching thereto as Annex "A" the affidavit of Soledad Tumbokon Consing in support of the motion
for summary judgment.

Defendant-respondent objected to the motion to strike out the amended answer and for summary
judgment.

On August 29, 1964, the Court of First Instance of Negros Occidental admitted the amended answer
of defendant-respondent and denied the motion to strike out and for judgment on the pleadings.

The plaintiffs-petitioners moved for the reconsideration of the Order of August 29, 1964, and on
September 15, 1964, they filed their Supplement To Motion For Reconsideration to which the
defendant-respondent objected.

On October 9, 1964, the Court of First Instance denied the motion for reconsideration, as follows:têñ.
£îhqwâ£

After considering the pleadings in the present case and the provisions of Rule 19 in
connection with the Rule 34 of the Rules of Court, the Court is of the opinion and so
holds that the plaintiff is not entitled to summary judgment..

IN VIEW OF THE FOREGOING, the Court denies the motion for reconsideration dated
September 11, 1964. The Clerk of Court is directed to set the trial of this case on the
merits in the November calendar at San Carlos City.

After the plaintiffs-petitioners had filed their Reply With Answer to Counterclaims, the case was set for
pre-trial. On March 31, 1965, the Court of First Instance issued its Pre-Trial Order, to wit:têñ.£îhqwâ£
 After hearing the manifestations of both counsel, the Court finds that there is no
possibility of an amicable settlement. According to the theory of the plaintiffs,
considering that the prior possession of the plaintiffs is admitted by the defendant, the
acts of the defendant in taking the possession of the property are illegal, and that the
only question to be resolved in this case insofar as the plaintiffs are concerned is the
determination of damages. The defendant, however, contends that according to the
stipulations of the contract which is attached to the complaint and admitted by the
defendant, the plaintiffs have violated the terms of the stipulations and conditions
therein, and by virtue of the stipulations of that contract the defendant is authorized to
take possession of the property. The issue, therefore, to be resolved by this Court are:

First: Whether the stipulations in the contract authorize the defendant in the taking of
the possession of the property subject of the litigation; and

Second: The damages that may be adjudicated to either of the parties in the event that
a judgment is rendered.

Therefore, the trial now will be confined to the interpretation of the contract and the
determination of damages. There is no need of evidence with reference to the fact of
prior possession because that is admitted in the pleadings and in the open
manifestation of the parties.

On August 4, 1965, the Court of First Instance of Negros Occidental, in the exercise of its appellate
jurisdiction over Forcible Entry and Detainer cases, rendered judgment, the dispositive portion of
which reads as follows:têñ.£îhqwâ£

IN VIEW OF the foregoing, judgment is hereby rendered as follows:

1. The defendant is ordered to vacate the premises of Lots Nos. 1257, 1258, 806 and
694 of the cadastral survey of Sagay, known as Hdas. "Aida" and "Fe" and to deliver the
possession thereof to the plaintiffs;

2. The defendant is ordered to make an accounting of his expenses and income from
the leased property from September 11, 1963 up to the date when the plaintiffs shall
have been restored to the possession thereof and the profit or net income shall be paid
the plaintiffs;

3. The defendant shall pay the costs; and

4. No award for attorney's fees as there is no evidence that the acts of the defendant
were inspired by fraud, malice or evident bad faith.

The defendant-respondent appealed to the Court of Appeals which rendered judgment reversing that
of the court a quo, the dispositive portion of which reads as follows:têñ.£îhqwâ£

WHEREFORE, the judgment appealed from is reversed and another one entered
dismissing the complaint of the plaintiffs, and ordering said plaintiffs to pay the
defendant, on the counter-claim, the amount of P19,000.00, which however, should be
deducted from the proceeds of the sugarcane harvested by the appellant, who is
ordered to render an accounting of the sugar cane he harvested for the crop year 1962-
63, the excess thereof, if any, after such accounting is made, is ordered to be delivered
to the appellees.
 On equitable considerations, without special pronouncement as to costs.

The plaintiffs-petitioners' motion for reconsideration and Addendum to Motion For Reconsideration
having been denied, the herein petition for review on certiorari was filed.

Plaintiffs-petitioners maintain that summary judgment should have been rendered by the court a
quo in view of the failure of the defendant-respondent to file a counter affidavit or verified opposition.
Besides, defendant-respondent admits having taken possession of the leased premises. Plaintiffs-
petitioners likewise maintain that the original case being one of forcible entry, reception of evidence
should have been limited only to that of possession de facto, and that the contractual stipulation no. 9
of the Contract of Sublease (Annex "A" of the Complaint and submitted as Exhibit "A") authorizing
defendant-respondent to take possession of the leased premises without the need of a court action is
illegal.

Petitioners further contend that the only issue in forcible entry case is the physical possession of the
property involved which is only possession de facto and not possession de jure; that what is needed
to be proved only in forcible entry case is prior possession, and that if one could prove prior
possession of the property under litigation, he is entitled to stay thereon until he is lawfully ejected by
a person having a better right either by accion publiciana or accion reivindicatoria.

Petitioners argue that the contractual stipulation in the contract of sub-lease with the herein
respondent, authorizing the latter to take possession of the leased premises even without resorting to
court action is illegal and violative of due process. They maintain that this is tantamount to a
renunciation of one's day in Court and, therefore, null and void. Besides, this might open the
floodgates to violence which our law seek to suppress.

Respondent on the other hand maintains that he took possession of the leased property because he
is authorized to do so under the contract (Annex "A" of the Complaint; Exh. "A"). Respondent further
maintains that the appellate court did not err in proceeding with its interpretation of the contract of
sub-lease of the parties and in determining the amount of damages because the parties so agreed
during the pre-trial of the case. Respondent also claims that the stipulation "without necessity of
resorting to any court action", in the contract of sub-lease (stipulation no. 9, Annex "A" of the
Complaint; Exh. "A") is not tainted with illegality because it does not provide for the use of force in the
taking of possession by the sub-lessor(respondent in the present case) and, therefore, the same is
not offensive to the law against forcible entry or to public policy which, for the preservation of the
public peace, does not allow taking the law into one's own hands.

The principal issue, therefore, to be resolved is whether or not the stipulation in the contract of sub-
lease between the parties authorizing the herein respondent, as sub-lessor, to take possession of the
leased premises including all its improvements thereon without compensation to the sub-lessee
(herein petitioners) and without the need of judicial action is valid and binding.

For a better understanding of the controversy, the contractual stipulation is hereunder quoted:têñ.
£îhqwâ£

9. That in case of the failure on the part of the SUB-LESSEE to comply with any of the
terms and conditions thereof, the SUB-LESSEE hereby gives an authority to the SUB-
LESSOR or to any of his authorized representative to take possession of the leased
premises including all its improvements thereon without compensation to the SUB-
LESSEE and without necessity of resorting to any court action but in which case the
 SUB-LESSEE shall be duly advised in writing of her failure to comply with the terms and
conditions of the contract by way of reminder before the take-over.

This stipulation is in the nature of a resolutely condition, for upon the exercise by the Sub-lessor of his
right to take possession of the leased property, the contract is deemed terminated. This kind of
contractual stipulation is not illegal, there being nothing in the law proscribing such kind of agreement.
As held by this Court in Froilan vs. Pan Oriental Shipping Co., G.R. No. L-11897, October 31, 1964;
12 SCRA 276, 286:têñ.£îhqwâ£

Under Article 1191 of the Civil Code, in case of reciprocal obligations, the power to
rescind the contract where a party incurs in default, is impliedly given to the injured
party. Appellee maintains, however, that the law contemplates of rescission of contract
by judicial action and not a unilateral act by the injured party; consequently, the action of
the Shipping Administration contravenes said provision of the law. This is not entirely
correct, because there is also nothing in the law that prohibits the parties from entering
into agreement that violation of the terms of the contract would cause cancellation
thereof, even without court intervention.In other words, it is not always necessary for the
injured party to resort to court for rescission of the contract. As already held, judicial
action is needed where there is absence of special provision in the contract granting to
a party the right of rescission.

Judicial permission to cancel the agreement was not, therefore, necessary because of the express
stipulation in the contract of sub-lease that the sub-lessor, in case of failure of the sub-lessee to
comply with the terms and conditions thereof, can take over the possession of the leased premises,
thereby cancelling the contract of sub-lease. Resort to judicial action is necessary only in the absence
of a special provision granting the power of cancellation. (De la Rama Steamship Co., vs. Tan, G.R.
No. L-8784, May 21, 1956; 99 Phil. 1034).

II

On the question that the reception of evidence should have been limited to possession de facto only,
We rule that the court a quo did not err in going further by interpreting the contract sub-lease. While it
is true that the only issue in forcible entry or unlawful detainer action is the physical possession of the
leased property, that is possession de facto — not possession de jure, yet the court may go beyond
that if only to prove the nature of the possession. (Pitargue vs. Sorilla, L-4302, September 17,1952;
48 O.G. 3849). The court may receive evidence upon the question of the title, or for that matter
possession de jure, solely for the purpose of determining the character and extent of possession and
damages for the detention. (Sec. 88, Judiciary Act of 1948, as amended by R.A. Nos. 2613 and 3828,
approved June 22, 1963).

III

As to the legal question that summary judgment should have been rendered by the court a quo, We
rule that plaintiffs-petitioners are not entitled, as a matter of right, thereto. Summary judgment can
only be granted where there are no questions of fact in issue or where the material allegations of the
pleadings are not disputed. Such is not true in the case at bar. Firstly, defendant-respondent
maintains that plaintiffs-petitioners failed to comply with the terms and conditions of their agreement.
Secondly, in view of such failure on the part of plaintiffs-petitioners, the defendant-respondent
maintains that under their contract of sub-lease he is authorized to take-over the possession of the
leased premises.

WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed.
Costs against petitioners.

SO ORDERED.
 FIRST DIVISION

G.R. No. L-56076 September 21, 1983

PALAY, INC. and ALBERT ONSTOTT, petitioner,

vs.
JACOBO C. CLAVE, Presidential Executive Assistant NATIONAL HOUSING AUTHORITY and
NAZARIO DUMPIT respondents.

Santos, Calcetas-Santos & Geronimo Law Office for petitioner.

Wilfredo E. Dizon for private respondent.

MELENCIO-HERRERA, J.:

The Resolution, dated May 2, 1980, issued by Presidential Executive Assistant Jacobo Clave in O.P.
Case No. 1459, directing petitioners Palay, Inc. and Alberto Onstott jointly and severally, to refund to
private respondent, Nazario Dumpit, the amount of P13,722.50 with 12% interest per annum, as
resolved by the National Housing Authority in its Resolution of July 10, 1979 in Case No. 2167, as
well as the Resolution of October 28, 1980 denying petitioners' Motion for Reconsideration of said
Resolution of May 2, 1980, are being assailed in this petition.

On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott executed in favor of
private respondent, Nazario Dumpit, a Contract to Sell a parcel of Land (Lot No. 8, Block IV) of the
Crestview Heights Subdivision in Antipolo, Rizal, with an area of 1,165 square meters, - covered by
TCT No. 90454, and owned by said corporation. The sale price was P23,300.00 with 9% interest per
annum, payable with a downpayment of P4,660.00 and monthly installments of P246.42 until fully
paid. Paragraph 6 of the contract provided for automatic extrajudicial rescission upon default in
payment of any monthly installment after the lapse of 90 days from the expiration of the grace period
of one month, without need of notice and with forfeiture of all installments paid.

Respondent Dumpit paid the downpayment and several installments amounting to P13,722.50. The
last payment was made on December 5, 1967 for installments up to September 1967.

On May 10, 1973, or almost six (6) years later, private respondent wrote petitioner offering to update
all his overdue accounts with interest, and seeking its written consent to the assignment of his rights
to a certain Lourdes Dizon. He followed this up with another letter dated June 20, 1973 reiterating the
same request. Replying petitioners informed respondent that his Contract to Sell had long been
rescinded pursuant to paragraph 6 of the contract, and that the lot had already been resold.

Questioning the validity of the rescission of the contract, respondent filed a letter complaint with the
National Housing Authority (NHA) for reconveyance with an altenative prayer for refund (Case No.
2167). In a Resolution, dated July 10, 1979, the NHA, finding the rescission void in the absence of
either judicial or notarial demand, ordered Palay, Inc. and Alberto Onstott in his capacity as President
of the corporation, jointly and severally, to refund immediately to Nazario Dumpit the amount of
P13,722.50 with 12% interest from the filing of the complaint on November 8, 1974. Petitioners'
Motion for Reconsideration of said Resolution was denied by the NHA in its Order dated October 23,
1979. 1
On appeal to the Office of the President, upon the allegation that the NHA Resolution was contrary to
law (O.P. Case No. 1459), respondent Presidential Executive Assistant, on May 2, 1980, affirmed the
Resolution of the NHA. Reconsideration sought by petitioners was denied for lack of merit. Thus, the
present petition wherein the following issues are raised:

Whether notice or demand is not mandatory under the circumstances and, therefore,
may be dispensed with by stipulation in a contract to sell.

II

Whether petitioners may be held liable for the refund of the installment payments made
by respondent Nazario M. Dumpit.

III

Whether the doctrine of piercing the veil of corporate fiction has application to the case
at bar.

IV

Whether respondent Presidential Executive Assistant committed grave abuse of

discretion in upholding the decision of respondent NHA holding petitioners solidarily
liable for the refund of the installment payments made by respondent Nazario M. Dumpit
thereby denying substantial justice to the petitioners, particularly petitioner Onstott

We issued a Temporary Restraining Order on Feb 11, 1981 enjoining the enforcement of the
questioned Resolutions and of the Writ of Execution that had been issued on December 2, 1980. On
October 28, 1981, we dismissed the petition but upon petitioners' motion, reconsidered the dismissal
and gave due course to the petition on March 15, 1982.

On the first issue, petitioners maintain that it was justified in cancelling the contract to sell without
prior notice or demand upon respondent in view of paragraph 6 thereof which provides-

6. That in case the BUYER falls to satisfy any monthly installment or any other
payments herein agreed upon, the BUYER shall be granted a month of grace within
which to make the payment of the t in arrears together with the one corresponding to
the said month of grace. -It shall be understood, however, that should the month of
grace herein granted to the BUYER expire, without the payment & corresponding to
both months having been satisfied, an interest of ten (10%) per cent per annum shall be
charged on the amounts the BUYER should have paid; it is understood further, that
should a period of NINETY (90) DAYS elapse to begin from the expiration of the month
of grace hereinbefore mentioned, and the BUYER shall not have paid all the amounts
that the BUYER should have paid with the corresponding interest up to the date, the
SELLER shall have the right to declare this contract cancelled and of no effect without
notice, and as a consequence thereof, the SELLER may dispose of the lot/lots covered
by this Contract in favor of other persons, as if this contract had never been entered
into. In case of such cancellation of this Contract, all the amounts which may have been
paid by the BUYER in accordance with the agreement, together with all the
improvements made on the premises, shall be considered as rents paid for the use and
occupation of the above mentioned premises and for liquidated damages suffered by
 virtue of the failure of the BUYER to fulfill his part of this agreement : and the BUYER
hereby renounces his right to demand or reclaim the return of the same and further
obligates peacefully to vacate the premises and deliver the same to the SELLER.

Well settled is the rule, as held in previous jurisprudence, 2 that judicial action for the rescission of a
contract is not necessary where the contract provides that it may be revoked and cancelled for
violation of any of its terms and conditions. However, even in the cited cases, there was at least a
written notice sent to the defaulter informing him of the rescission. As stressed in University of the
Philippines vs. Walfrido de los Angeles 3 the act of a party in treating a contract as cancelled should
be made known to the other. We quote the pertinent excerpt:

Of course, it must be understood that the act of a party in treating a contract as

cancelled or resolved in account of infractions by the other contracting party must be
made known to the other and is always provisional being ever subject to scrutiny and
review by the proper court. If the other party denies that rescission is justified it is free to
resort to judicial action in its own behalf, and bring the matter to court. Then, should the
court, after due hearing, decide that the resolution of the contract was not warranted,
the responsible party will be sentenced to damages; in the contrary case, the resolution
will be affirmed, and the consequent indemnity awarded to the party prejudiced.

In other words, the party who deems the contract violated may consider it resolved or
rescinded, and act accordingly, without previous court action, but it proceeds at its own
risk. For it is only the final judgment of the corresponding court that will conclusively and
finally settle whether the action taken was or was not correct in law. But the law
definitely does not require that the contracting party who believes itself injured must first
file suit and wait for a judgment before taking extrajudicial steps to protect its interest.
Otherwise, the party injured by the other's breach will have to passively sit and watch its
damages accumulate during the pendency of the suit until the final judgment of
rescission is rendered when the law itself requires that he should exercise due diligence
to minimize its own damages (Civil Code, Article 2203).

We see no conflict between this ruling and the previous jurisprudence of this Court
invoked by respondent declaring that judicial action is necessary for the resolution of a
reciprocal obligation (Ocejo Perez & Co., vs. International Banking Corp., 37 Phil. 631;
Republic vs. Hospital de San Juan De Dios, et al., 84 Phil 820) since in every case
where the extrajudicial resolution is contested only the final award of the court of
competent jurisdiction can conclusively settle whether the resolution was proper or not.
It is in this sense that judicial action win be necessary, as without it, the extrajudicial
resolution will remain contestable and subject to judicial invalidation unless attack
thereon should become barred by acquiescense, estoppel or prescription.

Fears have been expressed that a stipulation providing for a unilateral rescission in
case of breach of contract may render nugatory the general rule requiring judicial action
(v. Footnote, Padilla Civil Law, Civil Code Anno., 1967 ed. Vol. IV, page 140) but, as
already observed, in case of abuse or error by the rescinder the other party is not
barred from questioning in court such abuse or error, the practical effect of the
stipulation being merely to transfer to the defaulter the initiative of instituting suit,
instead of the rescinder (Emphasis supplied).

Of similar import is the ruling in Nera vs. Vacante 4 , reading:

 A stipulation entitling one party to take possession of the land and building if the other
party violates the contract does not ex propio vigore confer upon the former the right to
take possession thereof if objected to without judicial intervention and determination.

This was reiterated in Zulueta vs. Mariano  5 where we held that extrajudicial rescission has legal
effect where the other party does not oppose it. 6 Where it is objected to, a judicial determination of the
issue is still necessary.

In other words, resolution of reciprocal contracts may be made extrajudicially unless successfully
impugned in Court. If the debtor impugns the declaration, it shall be subject to judicial determination. 7

In this case, private respondent has denied that rescission is justified and has resorted to judicial
action. It is now for the Court to determine whether resolution of the contract by petitioners was
warranted.

We hold that resolution by petitioners of the contract was ineffective and inoperative against private
respondent for lack of notice of resolution, as held in the U.P. vs. Angeles case, supra

Petitioner relies on Torralba vs. De los Angeles  8 where it was held that "there was no contract to
rescind in court because from the moment the petitioner defaulted in the timely payment of the
installments, the contract between the parties was deemed ipso facto rescinded." However, it should
be noted that even in that case notice in writing was made to the vendee of the cancellation and
annulment of the contract although the contract entitled the seller to immediate repossessing of the
land upon default by the buyer.

The indispensability of notice of cancellation to the buyer was to be later underscored in Republic Act
No. 6551 entitled "An Act to Provide Protection to Buyers of Real Estate on Installment Payments."
which took effect on September 14, 1972, when it specifically provided:

Sec. 3(b) ... the actual cancellation of the contract shall take place after thirty days from
receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash surrender value to the
buyer. (Emphasis supplied).

The contention that private respondent had waived his right to be notified under paragraph 6 of the
contract is neither meritorious because it was a contract of adhesion, a standard form of petitioner
corporation, and private respondent had no freedom to stipulate. A waiver must be certain and
unequivocal, and intelligently made; such waiver follows only where liberty of choice has been fully
accorded. 9 Moreover, it is a matter of public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions. Waiver of notice is one such onerous and
oppressive condition to buyers of real estate on installment payments.

Regarding the second issue on refund of the installment payments made by private
respondent. Article 1385 of the Civil Code provides:

ART. 1385. Rescission creates the obligation to return the things which were the object
of the contract, together with their fruits, and the price with its interest; consequently, it
can be carried out only when he who demands rescission can return whatever he may
be obliged to restore.

Neither sham rescission take place when the things which are the object of the contract
are legally in the possession of third persons who did not act in bad faith.
 In this case, indemnity for damages may be demanded from the person causing the
loss.

As a consequence of the resolution by petitioners, rights to the lot should be restored to private
respondent or the same should be replaced by another acceptable lot. However, considering that the
property had already been sold to a third person and there is no evidence on record that other lots
are still available, private respondent is entitled to the refund of installments paid plus interest at the
legal rate of 12% computed from the date of the institution of the action. 10 It would be most
inequitable if petitioners were to be allowed to retain private respondent's payments and at the same
time appropriate the proceeds of the second sale to another.

We come now to the third and fourth issues regarding the personal liability of petitioner Onstott who
was made jointly and severally liable with petitioner corporation for refund to private respondent of the
total amount the latter had paid to petitioner company. It is basic that a corporation is invested by law
with a personality separate and distinct from those of the persons composing it as wen as from that of
any other legal entity to which it may be related. 11 As a general rule, a corporation may not be made
to answer for acts or liabilities of its stockholders or those of the legal entities to which it may be
connected and vice versa. However, the veil of corporate fiction may be pierced when it is used as a
shield to further an end subversive of justice 12 ; or for purposes that could not have been intended by
the law that created it 13 ; or to defeat public convenience, justify wrong, protect fraud, or defend
crime. 14 ; or to perpetuate fraud or confuse legitimate issues 15 ; or to circumvent the law or
perpetuate deception 16 ; or as an alter ego, adjunct or business conduit for the sole benefit of the
stockholders. 17

We find no badges of fraud on petitioners' part. They had literally relied, albeit mistakenly, on
paragraph 6 (supra) of its contract with private respondent when it rescinded the contract to sell
extrajudicially and had sold it to a third person.

In this case, petitioner Onstott was made liable because he was then the President of the corporation
and he a to be the controlling stockholder. No sufficient proof exists on record that said petitioner
used the corporation to defraud private respondent. He cannot, therefore, be made personally liable
just because he "appears to be the controlling stockholder". Mere ownership by a single stockholder
or by another corporation is not of itself sufficient ground for disregarding the separate corporate
personality. 18 In this respect then, a modification of the Resolution under review is called for.

WHEREFORE, the questioned Resolution of respondent public official, dated May 2, 1980, is hereby
modified. Petitioner Palay, Inc. is directed to refund to respondent Nazario M. Dumpit the amount of
P13,722.50, with interest at twelve (12%) percent per annum from November 8, 1974, the date of the
filing of the Complaint. The temporary Restraining Order heretofore issued is hereby lifted.

No costs.

SO ORDERED.
 EN BANC

[G.R. No. 47231. December 19, 1940.]

THE CARIDAD ESTATES, INC., Plaintiff-Appellee, v. PABLO

SANTERO, Defendant-Appellant.

Pablo de Guia and Francisco Reyes Alino for Appellant.

Demetrio B. Encarnacion for Appellee.

SYLLABUS

1. CONTRACTS; "PACTUM COMMISSORIUM" ; PENAL CLAUSE. — Taking up the

argument that the stipulations outlined in paragraphs 3 and 4 of the contract have
resulted in a pactum commissorium, we are of the opinion that the objection is without
legal basis. Historically and in point of strict law, pactum commissorium, referred to in
Law 41, title 5, and Law 12, title 12 of the Fifth Partida, and included in articles 1859
and 1884 of the Civil Code, presupposes the existence of mortgage or pledge or that of
antichresis. (Alcantara v. Alinea, 8 Phil., 111.) Upon this account, it becomes hardly
conceivable, although the argument has been employed here rather extravagantly, that
the idea of pactum commissorium should occur in the present contract of sale,
considering that, it is admitted, the person to whom the property is forfeited is the real
and equitable owner of the same because title would not pass until the payment of the
last installment. At most, the provisions in point, as the parties themselves have
indicated in the contract, is a penal clause which carries the express waiver of the
vendee to any and all sums he had paid when the vendor, upon his inability to comply
with his duty, seeks to recover possession of the property, a conclusive recognition of
the right of the vendor to said sums, and avoid unnecessary litigation designed to
enforce fulfillment of the terms and conditions agreed upon. Said provision are not
unjust or inequitable and does not, appellant contends, make the vendor unduly rich at
his cost and expense.

2. EJECTMENT; JURISDICTION OF JUSTICE OF THE PEACE. — In conformity with the

provisions of section 80 of the Code of Civil Procedure, it is clear that any vendor against
whom the possession of any land is unlawfully withheld after the expiration of the right
to hold the same by virtue of an express contract, shall be en-titled to restitution
together with damages and costs, and when the action arising therefrom is commenced
within one year from the time the acts of deprivation took place, the justice of the peace
court of the place where the land is situated has exclusive jurisdiction to try the case.
(Monteblanco VS. Hinigaran Plantation, Inc. and Coruna, G. R. No. 43550, promulgated
November 27, 1936.) This, in our opinion, is the precise position of the parties, and a
review of the environmental circumstances leads to the conclusion that the essential
requirements of section 80 are here present.

3. ID.; ID.; ATTACHMENT. — With reference to the last question relative to the denial of
the motion of the defendant for the dissolution of the order of attachment issued by the
justice of the peace court, it is sufficient to state that the same was proper and legal
under the circumstances, because the failure or neglect of the appellant to raise the
question of the correctness of the decision of the justice of the peace court of June 18,
1937, disallowing the petition for annulment of the said order of attachment, on appeal
limited or confined the jurisdiction of the court below to deciding~ the merits of the
ejectment proceeding.

DECISION

LAUREL, J.:

On November 28,1934, the Caridad Estates, Inc., through its manager, Hammon H.
Buck, leased to Pablo Santero cadastral lots Nos. 1080 B-1, 1080 B-2 and 1116 in the
municipality of Cavite, Cavite, for one year for P2,200. Said lands were used for fishpond
and salt bed purposes. About three months prior to the expiration of the contract of
lease, or on August 24, 1935, the lessor sold the same lots to the lessee for P30,000,
payable as follows: P1,500 on the execution of the agreement; P4,000 on or before
December, 1935; P4,500 on or before March, 1936; and the remaining balance of
P20,000 in ten years, each annual installment to be paid on or before the month of
August of each year beginning 1937. In said contract (Exhibit A), the parties stipulated
that should the vendee fail to make the payments agreed upon within sixty days of the
date they fall due, the total balance shall become due and payable and recoverable by
an action at law, or the vendor may recover possession of the property and consider any
and all sums paid by the vendee forfeited.

On account of the purchase price of P30,000, the vendee, Defendant-Appellant here,

made the following payments: P1,500 on August 12, 1935 (Exhibit 7), P435 on
December 28, 1935 (Exhibit 8), P225 on December 31, 1935 (Exhibit 9), P,460 on
January 3, 1936 (Exhibits 10 and 11), P1,500 on May 1, 1936 (Exhibit 12), and P1,470
on May 3, 1936 (Exhibits 13 and 14). (As things thus stood, the amount outstanding in
vendee’s account as of March, 1936, was P2,446.20. The defendant-appellant claims
that he offered to pay this amount on September 21, 1936, with check No. C-65060, but
that plaintiff refused to accept payment on the ground that the contract of sale had been
definitely cancelled since September 15, 1936, when the same lands were conveyed by
sale to Triston Sison. On the other hand, it is alleged by plaintiff-appellee that on August
31, 1936, its general manager by formal communication (Exhibit B), advised the
defendant of the revocation of the contract of sale and asked the latter to vacate the
premises immediately thereafter.

As the defendant-appellant would not surrender possession of the lands in question, the
Caridad Estates, Inc., on October 2, 1936, filed a complaint for illegal detainer and
recovery of rentals against Pablo Santero in the justice of the peace court of Cavite. The
defendant, on January 27, 1937, submitted his answer, the principal argument of which
being that the justice of the peace court was without jurisdiction to entertain the action
as it involved, besides the question of ownership, a contract of P30,000. On May 28,
1937, the court rendered its decision ordering the defendant to surrender the property
in question, and to pay the plaintiff, for its use and occupation, a monthly rental of
P200, beginning September 16, 1936, until actual delivery, with legal interest from the
commencement of the suit.

Defendant-appellant brought the case on appeal to the Court of First Instance which
affirmed the ruling of the justice of the peace court, in its decision of December 29,
1937. The dispositive part of the decision reads:jgc:chanrobles.com.ph

"En virtud de todo lo expuesto, el Juzgado condena al demandado Pablo Santero a

restituir la posesion de las pro-piedades descritas en la demanda a la demandante
Caridad Estates of Cavite, Inc., manteniendo asi su derecho de posesion sobre las
referidas propiedades adquirido desde el 13 de septiembre de 1937, en virtud de la
orden de ejecucion dictada por este Juzgado por falta de pago de las mensualidades
especificadas en la sentencia apelada del Juzgado de Paz Se condena tambien a dicho
demandado a pagar a dicha demandante la cantidad de doscientos pesos (P200)
mensuales por el uso y ocupacion de las propiedades detentadas ilegalmente, a contar
desde el dia 16 de septiembre de 1936 y hasta el dia 13 de septiembre de 1937, en que
se hizo la entrega de su posesion a la demandante, con sus intereses legales y las
costas del juicio."cralaw virtua1aw library

His exception and motion for a new trial having been denied, Defendant-Appellant, on
February 2, 1938, moved to declare the provincial sheriff in contempt of court for the
reasons stated in his petition, and, on February 11, 1938, presented another motion
praying for the dissolution of the order of execution issued by the justice of the peace
court of Cavite on June 2, 1937. On March 22, 1938, the Court of First Instance
disallowed the two motions of the defendant. From this judgment, the defendant
appealed assigning the following alleged errors as committed by the trial court a quo in
its decision, to wit:jgc:chanrobles.com.ph

"1. The lower court erred in holding that the contract of purchase and sale of the real
property in question may be rescinded by the vendor-plaintiff on the mere failure of the
vendee-defendant to complete the payment of the installment due during the month of
March, 1936.

"2. The lower court erred in sustaining that the vendor-plaintiff could forfeit to his own
benefit the whole sum of P7,590 paid by the defendant on account of the purchase price
and apply it all to the rental of the land involved for the period from December, 1935 to
August 31, 1936, or nine months.

"3. The lower court erred in holding that the plaintiff can institute this ejectment
proceedings in the justice of the peace court before demand has been made by suit in
the Court of First Instance for the rescission of the contract of purchase and sale of this
real estate, or for the payment of what is due from the defendant.

"4. The lower court erred in holding that it has appellate jurisdiction over the case of
ejectment, and that the justice of the peace court had original jurisdiction over this case.

"5. The lower court erred in holding that no extension of time has been granted to
defendant to pay the balance of P2,445.20 of the installment of P4,500 due in the month
of March, 1936, and that payment of this P2,445.20 may be refused by plaintiff after the
term specified in the contract expired.
"6. The lower court erred in not giving to the defendant a new trial to enable him to
prove damages sustained by him on account of the execution in January 28, 1938, of
the order of attachment of June 2, 1937.

"7. The lower court erred in holding that it had no jurisdiction to discharge the order of
attachment of June 2, 1937, issued by the justice of the peace court.

"8. The lower court erred in not discharging the order of attachment, in not absolving
the defendant of this complaint and in not requiring the plaintiff to accept the payment
of P2,445.20 tendered by defendant and in not assessing damages against the plaintiff,
and in not crediting the defendant of the sum of P550 over payment of rental."cralaw
virtua1aw library

Notwithstanding that, as afore-transcribed, appellant pointed out eight errors as having

been committed by the court below, there are, to our mind, only three important
questions of law that stand to be resolved: (1) whether or not the provisions of the
contract of sale (Exhibit A), more specifically paragraphs 3 and 4 thereof, violate those
legal principles which condemn pacto commissorio; (2) whether or not the justice of the
peace court of Cavite had jurisdiction to entertain the ejectment suit filed by the
plaintiff; and (3) whether or not the Court of First Instance had legal authority to decree
the discharge of the order of attachment issued by the justice of the peace court on June
1937.

The first question to be decided is raised in the first and second assignments of errors.
The attack of nullity is centered around paragraphs 3 and 4 of the contract of sale which
as appellant contends, ordain a procedure or mode of action basically and fundamentally
pactum commissorium.

The pertinent portion of paragraph 4 provides as follows:jgc:chanrobles.com.ph

". . . But if the said party of the second part should fail to make the payments above
specified within sixty days ~f the date or dates stipulated in this agreement or neglect to
repair any damage caused to the above described property within sixty days of formal
notification of such damages by the party of the first part, then the total remaining
purchase price shall become due and payable and recoverable by action at law, or the
party of the first part, may, at its option, recover possession of the above described
property in which case any and all sums paid by the party of the second part under the
provisions of this contract shall be considered as rental for the use and occupancy of the
property."cralaw virtua1aw library

Paragraph 3 recites:jgc:chanrobles.com.ph

"The party of the second part acknowledges that he has received the above described
property and all the improvements thereon in good condition and engages during the
Period of this contract to repair at his own expense any damage that may be caused to
the said property or improvements through storm, fire or deterioration and in the event
of failure to fulfill the terms of payment as above stated to faithfully comply with the
penal clause here appended and in the event that the party of the first part should
demand the return of the property on account of noncompliance with the terms of
payment, to deliver possession of the said property and improvements thereon in good
condition and repair."cralaw virtua1aw library

As may be seen, paragraph 4 gives the vendor, if the vendee fails to make the specified
payments, the option of (1) considering the total remaining purchase price due and
payable and recoverable by an action at law or (2) recovering the possession of the
property in which case any and all sums paid by the vendee shall be regarded as rental
for the use and occupancy of the property. On the other hand, paragraph 3 obligates the
vendee to deliver the possession of the property and the improvements thereon in good
condition and repair in the event that the vendor should demand the return of the same
on account of noncompliance with the terms and conditions of payment. It is quite plain,
therefore, that the course followed by the vendor in cancelling the contract and
demanding the repossession of the property was well supported by, and employed in
consonance with, the covenants embodied in their agreement. As the stipulations in
question do not violate the prohibitive provisions of the land or defeat morals and public
order, they constitute the law between the parties, binding and effectual upon them.
(Arts. 1255 and 1278, Civil Code; Jimeno v. Gacilago, 12 Phil., 16.)

Appellant, however, gives full reliance on article 1504 of the Civil Code, and vigorously
argues that whatever be the provision of the contract, resolution may not be declared in
the absence of a demand upon the vendee "either judicially or by a notarial act." A
cursory reading of the provision would be the best refutation of the appellant’s
argument, as it leaves no doubt as to its inapplicability in the present instance. The
contract (Exhibit A) is a sale in installment, in which the parties have laid down the
procedure to be followed in the event the vendee failed to fulfill his obligation. There is,
consequently, no occasion for the application of the requirements of article 1504.

Taking up the argument that the stipulations outlined in paragraphs 3 and 4 of the
contract have resulted in a pactum commissorium we are of the opinion that the
objection is without legal basis. Historically and in point of strict law, pactum
commissorium referred to in Law 41, title 5, and Law 12, title 12 of the Fifth Partida, and
included in articles 1859 and 1884 of the Civil Code, presupposes the existence of
mortgage or pledge or that of antichresis. (Alcantara v. Alinea Et. Al., 8 Phil., 111.) Upon
this account, it becomes hardly conceivable, although the argument has been employed
here rather extravagantly, that the idea of pactum commissorium should occur in the
present contract of sale, considering that, it is admitted, the person to whom the
property is forfeited is the real and equitable owner of the same because title would not
pass until the payment of the last installment. At most, the provisions in point, as the
parties themselves have indicated in the contract, is a penal clause which carries the
express waiver of the vendee to any and all sums he had paid when the vendor, upon
his inability to comply with his duty, seeks to recover posses~ion of the property, a
conclusive recognition of the right of the vendor to said sums, and avoids unnecessary
litigation designed to enforce fulfillment of the terms and conditions agreed upon. Said
provisions are not unjust or inequitable and does not, as appellant contends, make the
vendor unduly rich at his cost and expense. The charge that the amount forfeited greatly
exceeded that which should be paid had the contract been one of lease loses its eight
when we consider that during the years 1935 and 1936, when the agreement was in full
force and effect, the piece of salt rose high to bring big profits and returns.
The factual background of this case is not lacking in point of authority. In The Manila
Racing Club, Inc. v. The Manila Jockey Club, Et Al., G. R. No. 46533, promulgated
October 28, 1939, the condition of the contract was that "si el comprador no paga en su
debido tiempo la cantidad correspondiente a cualquiera de los plazos, la vendedora
podria declarar resuelto el contrato y confiscadas en su lavor la cantidades pagadas." In
deciding the main question raised on appeal, similar in all respects to the one which now
confronts us, the court said: "Esta clausula de confiscacion de lo pagado parcialmente es
valida. Tiene el caracter de clausula penal, que puede ser establecida legalmente por las
partes (arts. 1152 y 1255 del Codigo Civil) En su doble objeto de asegurar el
cumplimiento, no es contraria a la ley, ni a la moral, ni al orden publico, habiendo sido
pactada voluntaria y conscientemente por las partes."cralaw virtua1aw library

For all the foregoing reasons, we find no merit in the first, second, and third assignment
of errors.

The next question raised in the fourth assignment of error is whether or not the justice
of the peace court of Cavite had jurisdiction to entertain the ejectment suit filed by the
plaintiff. The controversy is reduced to interpretation of section 80 of the Code of Civil
Procedure.

Section 80 provides:jgc:chanrobles.com.ph

"Anyone deprived of the possession of any land or building by force, intimidation, threat,
strategy, or stealth, and any landlord, vendor, vendee, or other person against whom
the possession of any land or building is unlawfully withheld after the expiration or
determination of the right to hold possession, by virtue of any contract, express or
implied, and the legal representative or assigns of any such landlord, vendor, vendee, or
other person, shall at any time within one year after such unlawful deprivation or
withholding of possession be entitled, as against the person or persons unlawfully
withholding or depriving of possession, or against any person or persons claiming under
them, to restitution of the land, building, and premises possession of which is unlawfully
withheld, together with damages and costs: . . ." (Cf. sec. 1, Rule 72.)

In conformity with the above-copied provision, it is clear that any vendor against whom
the possession of any land is unlawfully withheld after the expiration of the right to t
hold the same by virtue of an express contract, shall be entitled to restitution together
with damages and costs, and when the action arising therefrom is commenced within
one l year from the time the acts of deprivation took place, the justice of the peace court
of the place where the land is situated has exclusive jurisdiction to try the case.
(Monteblanco v. Hinigaran Plantation, Inc., and Coruna, G. R. No. 43550, promulgated
November 27, 1936.) This, in our opinion, is the precise position of the parties, and a
review of the environmental circumstances leads to the conclusion that the essential
requirements of section 80 are here present.

In violation of the provisions of the contract (Exhibit A), the vendor-appellant failed to
complete his payment of the installment due in March, 1936. Subsequently, or on
August 31, 1936, he received the notification letter of Manager H. H. Buck of the Caridad
Estates, Inc. cancelling the contract and asking him to vacate the premises. After his
receipt of the letter, therefore, his right to remain in possession of the property by virtue
of the contract of sale expired, and his retention of the same became, to all intents and
purposes, illegal and violative of the proprietary rights of the appellee. As the action for
ejectment was filed on October 2, 1936, it is clear that more than fifteen days had
elapsed from the receipt of the notification letter and that the same was brought within
the one-year period contemplated under section 80. It follows that the Court of First
Instance acted properly in overruling the objection to the original jurisdiction of the
justice of the peace court, and in taking cognizance of the case in its appellate
jurisdiction.

With reference to the last question relative to the denial of the motion of the defendant
for the dissolution of the order of attachment issued by the justice of the peace court, it
is sufficient to state that the same was proper and legal under the circumstances,
because the failure or neglect of the appellant to raise the question of the correctness of
the decision of the justice of the peace court of June 18, 1937, disallowing the petition
for annulment of the said order of attachment on appeal limited or confined the
jurisdiction of the court below to deciding the merits of the ejectment proceedings.

The other assignment of errors deals strictly with bare questions of fact and the findings
of the court below should not be disturbed.

The judgment appealed from should be, as it is hereby affirmed, with costs against
the Appellant.

In view of the result, the deposit of P2,400 which appears to have been made by the
defendant-appellant at his own instance with the clerk of this court is ordered returned
to him. So ordered.
 FIRST DIVISION
[G.R. No. L-6423.  January 31, 1956.]
AYALA Y COMPAÑIA, Plaintiff-Appellee, vs. JOSEPH ARCACHE, Defendant-Appellant.
 
DECISION
CONCEPCION, J.:
This is an appeal, taken by Defendant Joseph Arcache, from a decision of the Court of First Instance of Rizal.
The facts are:chanroblesvirtuallawlibrary
On July 1, 1948, Plaintiff, Ayala y Compañia, a commercial partnership organized in conformity with the
Philippine laws, and Defendant Joseph Arcache, executed the deed Exhibit B, whereby Plaintiff agreed to sell
to Defendant, and the latter agreed to purchase from the former, four (4) lots situated in the municipality of
Makati, Province of Rizal, more particularly described in Annexes A-1 to A-4 of said document, at the rate of P6
per square meter, or the aggregate sum of P447,972, payable as follows:chanroblesvirtuallawlibrary P100,000
by promissory note (Exhibit C), executed and delivered simultaneously with said Exhibit B, and payable on or
before August 9, 1948, and the balance of P347,972 in annual installments of P100,000 each, payable on
August 9 of the subsequent years, except the last installment, which shall be P47,972, with interest, at the rate
of 6 per cent per annum on the outstanding balances. Exhibit B provided, also, among other things that, upon
payment of the first annual installment, with interests on the outstanding balances, title to the property would
be transferred to the Defendant, who, simultaneously, would secure and guarantee the payment of the
balance due and the interests thereon with a first mortgage on said lots and the improvements thereon; chan
roblesvirtualawlibrarythat Defendant could not sell or dispose of any portion thereof without the Plaintiff’s
written consent, which would not be withheld upon payment of an additional sum of P6.00 per square meter
sought to be released; chan roblesvirtualawlibrarythat Defendant would expedite to the best of his ability, the
paving of the Buendia Avenue — which adjoins the lots in question — by the National Government, in
accordance with the terms of certain deeds of donation executed by the Plaintiff in favor of the Government
on February 2, 1948; chan roblesvirtualawlibrarythat, should the Government decide to pave Buendia Avenue
with concrete, Defendant shall pay Plaintiff’s share in “the difference between the cost of paving the road with
concrete and that with asphalt”; chan roblesvirtualawlibrarythat real estate taxes and special assessments on
said lots shall be paid by the Defendant; chan roblesvirtualawlibrarythat the latter may take immediate
possession of said lots, but, until title thereto is transferred to him as above stated, his possession shall be that
of a tenant, with option to purchase; chan roblesvirtualawlibrarythat the ejectment of any occupant or
intruder, after the ouster of the present occupants by the Plaintiff, shall be made by the Defendant and for his
account; chan roblesvirtualawlibraryand that the Defendant shall have, within one year from August 9, 1948,
an option to purchase eight (8) additional parcels of land described in a sketch annexed to said deed, under
the terms and conditions therein set forth.
On August 9, 1948, when Defendant’s promissory note for P100,000 fell due, he did not pay said sum.
However, on August 10, 1948, he delivered, and Plaintiff accepted, the sum of P1,000 as interest on said note,
from August 9 to October 8, 1948, to which last date the due date of said promissory note was thereupon
extended (Exhibit D). On August 30, 1948, Defendant paid to Plaintiff the sum of P50,000 “as earnest money to
guarantee the fulfillment of all his obligations” under Exhibit B, as well as on account of said promissory note
for P100,000, subject to the following conditions.
1.  “That the due date of said promissory note of July 1, 1948 is hereby extended to January 31, 1949,
Provided, however, That should on or before such date the said Mr. Joseph Arcache pays or causes to be paid
the sum of FIFTY THOUSAND (50,000) PESOS together with interest thereon at the rate of SIX (6%) PERCENT
per annum from date hereof to date of payment, then this earnest money shall be considered as partial
payment of the said promissory note of July 1, 1948;
2.  “On the other hand, should the said Mr. Joseph Arcache fail to pay the additional sum of FIFTY THOUSAND
(P50,000) PESOS mentioned in the preceding subparagraph, then this earnest money of FIFTY THOUSAND
(P50,000) PESOS shall be automatically forfeited in favor of this Company, by way of liquidated damages under
the ‘Agreement to Purchase and Sell’ of July 1, 1948, and the latter shall, by the mere fact of such
nonpayment, be automatically rescinded as though it had never been entered into.” (Exhibit 1.)
 
Although the date of maturity of said promissory note was thereby extended, once more, to January 31,
1949, Defendant did not seasonably honor it. On March 7, 1949, both parties executed the “amended
agreement to purchase and sell” Exhibit E, in which it was stipulated that upon subdivision survey, the lots
above referred to appear to have an area of 76,234 square meters, instead of 74,662 square meters, as stated
in the annexes to Exhibit B; chan roblesvirtualawlibrarythat the stipulated price was, therefore, increased from
P447,972 to P457,404; chan roblesvirtualawlibrarythat Plaintiff had received from the Defendant on August
30,1948, the sum of P50,000, by way of “earnest money”; chan roblesvirtualawlibrarythat Defendant bound
himself to pay, on or about April 4, 1949, the additional sum of P50,000 (balance of his promissory note of July
1, 1948); chan roblesvirtualawlibrarythat should he comply with this obligation, the earnest money of P50,000
“shall be considered as part of the purchase price”; chan roblesvirtualawlibrarythat, otherwise, said earnest
money would be “automatically forfeited” to the Plaintiff “by way of liquidated damages” and the amended
agreement Exhibit E automatically annulled and cancelled, “except as to such portions of the property sold to
third parties and duly released” by the Plaintiff “in the form of absolute sales”; chan roblesvirtualawlibrarythat
upon payment of the balance of P50,000 due on Defendant’s promissory note (Exhibit C), title to the lots in
question would be transferred to him, and he would simultaneously secure and guarantee, with a first
mortgage on said lots, the payment of the balance of the purchase price thereof; chan
roblesvirtualawlibraryand that Defendant renounced his option under Exhibit B to purchase the additional
parcels of land therein mentioned. In all other respects, Exhibit E is substantially identical to Exhibit B.
On March 16, 1949, Defendant paid to Plaintiff the sum of P50,000 with interests thereon. When the first
annual installment of P100,000 fell due, on August 9, 1949, said amount was not paid by the Defendant.
Instead, both parties executed the deed Exhibit F, entitled “Amendment to the Amended Agreement to
Purchase and Sell of March 7, 1949”, which provided, among other things, that payment of said annual
installment of P100,000, including interest, was extended to February 9, 1950; chan
roblesvirtualawlibrarythat Plaintiff was relieved of its obligation to eject the “remaining squatters” on the lots
in question; chan roblesvirtualawlibraryand that, in all other respects, the amended agreement Exhibit E shall
remain in full force and effect.
It is not disputed that the first annual installment of P100,000 was not paid within the extended period,
expiring on February 9, 1950. Soon thereafter, or on May 13, 1950, Plaintiff instituted the present case, for the
rescission of the contracts, Exhibits B, E and F, and the recovery of the following sums (1) P47,000,
representing Plaintiff’s share in the difference between the cost of paying Buendia Avenue with concrete and
that of asphalt; chan roblesvirtualawlibrary(2) P10,000, allegedly spent by the Plaintiff to eject its tenants, so
as to be in a position to deliver the lots in question to the Defendants; chan roblesvirtualawlibrary(3)
P1,680.35 paid by the Plaintiff, on account of the Defendant, by way of real estate taxes; chan
roblesvirtualawlibraryand (4) P1,000 as attorney’s fees, in addition to costs.
Defendants answered alleging that his obligation was not fulfilled owing to the prior failure of the Plaintiff to
comply with its own part of their contract; chan roblesvirtualawlibrarythat the sum of P47,000 is not, as yet,
due and demandable; chan roblesvirtualawlibrarythat he has no sufficient knowledge of the facts upon
which Plaintiff relies in support of its claim for reimbursement of P10,000, which at any rate, should not be
entertained because of Plaintiff’s default in the performance of its own obligations; chan
roblesvirtualawlibraryand that such default, on the part of the Plaintiff, rendered it “iniquituous and
burdensome” for the Defendant to comply with his part of their agreement.
In due course, the Court of First Instance of Rizal rendered judgment, the dispositive part of which reads as
follows:chanroblesvirtuallawlibrary
“POR LAS CONSIDERACIONES EXPUESTAS, el Juzgado dicta decision a favor de la demandante Ayala y
Compañia, ordenando la resolucion del contrato de compra y venta de fecha 7 de marzo de 1949 (Exhibito ‘E’),
tal como ha sido ultimamente enmendado el 9 de agosto del mismo año, 1949 (Exhibito ‘F’), y otros convenios
posteriores; chan roblesvirtualawlibrarydeclarando a la demandante ser dueña de todos los lotes o parcelas
de terreno envueltas en este litigio, con derecho a su posesion, y con derecho a cobrar y deducir de la suma de
P50,000 la de P8,520.54 y otra de P3,000 en concepto de daños y honorarios de abogado,
respectivamente; chan roblesvirtualawlibraryy ordena a la demandante a devolver al demandado cualquiera
otra suma remanente a balance de los P50,000, despues de deducidas las sumas aqui autorizadas, con las
costas del juicio contra el demandado.” (Record on Appeal, pp. 98-99.)
The main issue in this case is whether or not Defendant did not pay the first installment of P100,000, originally
due on August 9, 1949, and subsequently extended to February 9, 1950, due to the alleged prior default
of Plaintiff herein. In this connection, Defendant maintains that upon payment of the sum of P100,000 due on
his promissory note (Exhibit C), which amount was fully paid on March 16, 1949, Plaintiff was bound, under
Exhibit E, to convey the lots in question to him; chan roblesvirtualawlibrarythat, having failed to do
so, Plaintiff was in default in the performance of said obligation; chan roblesvirtualawlibraryand that,
consequently, Defendant cannot be compelled to pay the first annual installment, which became due on
February 9, 1950.
Upon the other hand, Plaintiff tried to prove that it had caused the deed of conveyance in favor of
the Defendant to be prepared; chan roblesvirtualawlibrarythat said instrument was ready for signature
sometime after March 16, 1949; chan roblesvirtualawlibrarythat, this notwithstanding, the deed was not
executed, upon the request of the Defendant, inasmuch as his creditors had filed several suits against him. In
support of this pretense, Plaintiff introduced the testimony of its counsel, Messrs. McVittie, Tellechea, and
Lorayes, which the lower court found more worthy of credence than that of Defendant Joseph Arcache, not
only because the latter’s testimony is uncorroborated, but also, because the testimony of said witnesses for
the Plaintiff is borne out by documentary evidence.
Indeed, it appears that the following cases and proceedings against the Defendant were filed and took place,
to wit:chanroblesvirtuallawlibrary
1.  On or about August 5, 1948, the Philippine Relief and Trade Rehabilitation Administration instituted civil
case No. 6058 of the Court of First Instance of Manila, for the recovery of P58,118.06, with interests and costs.
A writ of garnishment was issued therein on August 30, 1948 (Exhibit P);
2.  On or about August 17, 1948, Dr. Simplicio Ocampo commenced civil case No. 6120 of the same court, for
the recovery of P8,000, with interests and costs. The case was, later, settled amicably and then dismissed, by
an order dated March 4, 1949 (Exhibit Q);
3.  On or about October 16, 1948, Brias Roxas, Inc., began civil case No. 6867 of the same court, for the
recovery of $6,000, plus $3,000 monthly, from November 1, 1948, in addition to attorney’s fees and costs. On
March 3, 1949, judgment was rendered for said Plaintiff, in the sum of P24,000, plus P2,400 by way of
attorney’s fees, and costs. The corresponding writ of execution was issued on August 20, 1949 (Exhibits R and
R-1);
4.  On May 28, 1949, the Manila Surety and Fidelity Co., Inc., brought civil case No. 8179 of the same court of
Manila. On November 9, 1949, judgment was rendered therein for the sum of P2,860, plus attorney’s fees, in
the sum of P285, and costs. The corresponding writ of execution was issued on February 8, 1950, and returned
unsatisfied on April 27, 1950 (Exhibits S and S-1);
5.  On October 3, 1949, Hilaria Uy Isabelo initiated civil case No. 9046 of the municipal court of Manila for
unlawful detainer, plus damages and attorney’s fees. On appeal, the Court of First Instance of Manila — in
which it was docketed as case No. 9937 — rendered a decision on October 6, 1950, in conformity with a
compromise agreement between the parties, whereby Defendant acknowledged an indebtedness of P17,000,
which he promised to pay on or before April 6, 1951. Owing, evidently, to Defendant’s failure to comply with
this promise, a writ of execution was issued on May 1, 1951 (Exhibit T);
6.  On September 3, 1949, the South Sea Surety and Insurance Co., Inc., filed civil case No. 9106 of the Court of
First Instance of Manila, for the recovery of P10,000, plus attorney’s fees and costs. On March 3, 1950, said
court rendered judgment as prayed for and the corresponding writ of execution was issued on May 12, 1950
(Exhibits U and U-1);
7.  On December 22, 1949, the Central Surety and Insurance Co., commenced civil case No. 9301 of the same
court, for the recovery of P6,000, plus attorney’s fees, in the sum of P900, for which amounts judgment was
rendered on March 26, 1950, and a writ of execution issued on May 23, 1950 (Exhibit V);
8.  On December 22, 1949, the Central Surety and Insurance Co., brought civil case No. 9072 of said court, for
the recovery of P21,463.03, plus attorney’s fees, in the sum of P3,219, and costs. Decision was rendered,
substantially as prayed for, on June 21, 1951 (Exhibit W);
9.  On April 10, 1950, the Philippine Air Lines began civil case No. 10789 of the same court, to recover
P4,386.65, with interests and costs. On November 8, 1950, a decision was rendered in conformity with a
compromise agreement between the parties, whereby Arcache undertook to pay the aforesaid sum of
P4,386.65, in monthly installments of P200 each, beginning from November, 1950 (Exhibit X).
In other words, prior to March 16, 1949, three (3) civil actions for the recovery of sums of money, aggregating
P92,518.06, had been filed against the Defendant. Thereafter, or within the period from May 28, 1949 to April
10, 1950, six (6) additional civil actions, for the total sum of P94,113.68 more or less, were instituted. In every
one of these cases — except the first, the status of which has not been sufficiently established, and the second
which was settled amicably — judgment was eventually rendered against the Defendant. What is more, the
transactions from which the corresponding causes of action arose, and the acts, omissions and conflicts
leading to said litigations, took place sometime before the commencement of the corresponding suits.
Consequently, the Defendant must have anticipated, not only the institution of the cases filed subsequently to
March 16, 1949, but, also, the measures that the Plaintiffs therein, as well as the Plaintiffs in the actions begun
before said date, could, and, in all probability, would have taken, in connection with the lots in question if
conveyed by the Plaintiff to him, with a view to holding said lots responsible for the payment of their
respective credits.
It is also, important to note that — despite Defendant’s testimony to the contrary — during the period from
March 16 to August 9, 1949, and, subsequently thereto, Defendant did not have the money required to meet
his obligations in favor of the Plaintiff, and was trying to raise the funds necessary therefor, by enlisting the
help, assistance or support of other persons, whose interest in the lots in question he had been endeavoring
to prick. This he could not hope to achieve, if Plaintiff executed the corresponding deed of conveyance in his
favor and caused the title to said lots to be transferred to his name, for the same would require the
registration of said deed of conveyance, with the result that Defendant’s creditors would come to know about
it, and, hence, levy attachment upon said lots, in which event nobody would care to finance Defendant’s
venture in connection therewith.
Moreover, it clearly appears that the Plaintiff was well-meaning, considerate and accommodating in dealing
with the Defendant. Thus, although in his letter of May 11, 1948 (Exhibit A), offering to purchase said
property, Defendant undertook to pay P100,000 in cash, upon the signing of the agreement, Exhibit B, he did
not comply with this part of the offer. Plaintiff could have refused, therefore, to execute said deed and cancel
the deal. Yet, it did not do so. What is more, it allowed the Defendant to give a promissory note for P100,000,
payable on August 9, 1948. Plaintiff had another chance to demand a rescission of their contract
when Defendant failed to honor his promissory note on the date last mentioned, but, instead, it gave him up
to October 8, 1948, to pay said amount. Neither did Plaintiff take advantage of a similar opportunity,
as Defendant was unable to fulfill his obligation within the extension of time thus granted him. Upon payment
of one-half (1/2) of the amount of said promissory note on August 30, 1948, he got a third extension of time,
which expired on January 31, 1949, without full settlement of said obligation. Once again, Plaintiff refrained
from taking, against the Defendant, any drastic action, which would have been more justified than before not
only because of his repeated defaults, but also, because prior to January 31, 1948, he had secured no further
extension of time. As if this were not enough, over a month later, or on March 7, 1949, Plaintiff executed
Exhibit E, giving Defendant a fifth extension, to expire on April 4, 1949. It is true that, eventually, or on March
16, 1949, Defendant paid the balance of P50,000 due on his promissory note (Exhibit C). Soon, however, when
the first annual installment of P100,000 fell due on August 9, 1949, Defendant became delinquent. Instead of
availing of this development, to relieve itself of its obligations, Plaintiff gave him an extension up to February
9, 1950, within which to pay said installment.
After such display of a degree of morality higher than that which was absolutely demanded by the
circumstances, we find it difficult to conceive that Plaintiff would fail to comply with its legal obligation to
convey the lots in dispute to the Defendant and cause the title thereto to be issued in his name. In the light of
this conduct of the Plaintiff towards the Defendant, it would be unjust and unfair to assume and hold in the
absence of concrete, tangible, clear, unbiased and corroborated evidence to the contrary — and there is none
on record to this effect — that, realizing, all of a sudden (as if it were incapable of visualizing it before) that the
market value of the land in question would rise, or had, meanwhile, risen already, Plaintiff became, as
suggested by the Defendant, possessed of the desire to exclude him from the enjoyment of the corresponding
profits, and, hence, cast aside its moral scruples — to which it had consistently adhered in the near past — in
order, not only to dishonor its formal commitments in favor of the Defendant, but also, and this is worse, to
add insult to injury, by imputing to him a breach of his own contractual undertaking.
Any possible doubts on this point are dispelled by the fact that the deed, Exhibit F, executed on August 9, 1949
— granting the Defendant an extension up to February 9, 1950, for the payment of the first annual installment
of P100,000 — states that the reason therefor was that he “found himself in a position not to be able to pay
the obligation falling due on August 9, 1949” and had, accordingly, “requested” the Plaintiff “to grant him an
extension of six (6) months within which to pay the first annual installment of P100,000.” Had he felt
that Plaintiff was, then, in default in the performance of its obligation to execute the deed of assignment in his
favor, it would have been unnecessary for the Defendant to request said extension of time, for Plaintiff would
have had no right to demand payment of the first annual installment of P100,000 on said date. The express
acknowledgment made by the Defendant in Exhibit F of the fact that he was unable to pay said installment of
P100,000 on August 9, 1949, and his aforementioned request for an extension of time within which to settle
said obligation — which eventually was not satisfied — clearly show that he did not regard the Plaintiff in
default in the performance of any of its undertakings under Exhibits B, E and F and strongly corroborate the
evidence for the Plaintiff to the effect that, although it had prepared, and was ready to sign, the deed of
conveyance, in favor of the Defendant, the same was not executed upon the latter’s request, for fear that his
creditors may step in and deprive him of the lots in question.
Said evidence for the Plaintiff is further bolstered up by three (3) additional facts,
namely:chanroblesvirtuallawlibrary (a) the Defendant had never demanded, in writing, from the Plaintiff, the
performance of its aforesaid obligation; chan roblesvirtualawlibrary(b) on March 16 and 21,
1949, Plaintiff actually executed in favor of the Defendant the deeds of sale Exhibits G and H, whereby the
former conveyed to the latter, for the sums of P30,000 and P15,000 respectively, under the first instrument,
four (4) lots, with a total area of 4,992 square meters (which Defendant forthwith conveyed to Senator Jose C.
Zulueta for P60,000), and, under the second instrument, two (2) lots aggregating 2,500 square meters
(Exhibits G, H and 3); chan roblesvirtualawlibraryand (c) Plaintiff had disbursed the sum of P8,520.54 in order
to eject the occupants of the lots in question, so that possession thereof could be turned over
to Defendant herein.
It is next urged by the Defendant that Plaintiff was, also, in default in its duty to pave the Buendia Avenue in its
entirety. Upon ocular inspection made by His Honor the Trial Judge, it appeared, however, that said road is
completely paved with concrete, except a portion thereof forming part of the railroad track, which does not
belong to Plaintiff herein. We agree with the lower court that the contract between the parties should not be
construed — in the absence of explicit stipulation to the contrary — as imposing upon the Plaintiff the
obligation to attend to the paving of such portions of said avenue as were the property of others. Apart from
containing no such stipulation, Exhibits B, E and F indicate clearly the contrary, for, in these instruments,
the Defendant agreed “to expedite, to the best of his ability, the paving of the Buendia Avenue by the National
Government, in accordance with the terms of the donations of February 2, 1948, between the donors and the
Government.” Inasmuch as the deeds of donation have not been introduced in evidence, we must assume
that the paving therein contemplated referred to the portions donated by the Plaintiff to the Government,
and to no other property. At any rate it was the Defendant, not Plaintiff, who undertook to expedite the
paving by the National Government.
Insofar as the decision appealed from sentences him to pay the sum of P8,520.54 disbursed by the Plaintiff for
the ejectment of the tenants of the lots in question, Defendant herein assails it upon the ground
that Plaintiff was bound to incur in such expense, pursuant to the provisions of their contract. This fact does
not warrant the conclusion drawn therefrom by Appellant herein. To begin with, Plaintiff assumed said
obligation, in consideration of the obligations, in turn, contracted by the Defendant. In other
words, Plaintiff undertook to defray, and did defray, said expenses, because the Defendant had, on his part,
bound himself, among other things, to pay the annual installment of P100,000, at first, on August 9, 1949, and,
subsequently, on February 9, 1950. In view of Defendant’s delinquency in the payment of this sum, it is but fair
and just that the indemnity the Plaintiff for what the latter would not have disbursed had it not been for the
representations and promises made — and, subsequently, broken — by him. In other words, said
expenditures now represent damages sustained by the Plaintiff on account of the non-performance
of Defendant’s obligation.
Lastly, Defendant maintains, invoking Article 1592 of the Civil Code of the Philippines (which is substantially
identical to Article 1504 of the Civil Code of Spain) that rescission or resolution should not have been ordered
without giving him an opportunity to pay the first annual installment of P100,000, which, he claims, he is
ready, willing and able to pay and offered to pay in open court. There is no merit in this pretense. The cases
cited in support thereof refer to slight or casual violations of contractual obligations, whereas the breach of
contract in the present case is substantial. Besides, the records abundantly show that Defendant was neither
ready nor able to pay said sum of P100,000 either on August 9, 1949, or on February 9, 1950, or at any time
during the hearing of this case in the lower court. In fact, he never deposited, or made a formal offer to
deposit in court said amount. Lastly, said legal provision governs contracts of purchase and sale, but has no
application to a promise to sell (Caridad Estates Inc. vs. Santero, 71 Phil. 114; chan roblesvirtualawlibraryAlbea
vs. Inquimboy, 47 Off. Gaz., Supp. 131; chan roblesvirtualawlibraryDecision of the Supreme Court of Spain of
October 7, 1896) such as the one involved in the contract between the parties herein.
Wherefore, we find no merit in the appeal taken by Defendant- Appellant, and, accordingly, the decision
appealed from is, hereby, affirmed in toto, with costs against said Defendant-Appellant. It is SO ORDERED.
 FIRST DIVISION

G.R. No. L-32811 March 31, 1980

FELIPE C. ROQUE, petitioner,
vs.
NICANOR LAPUZ and THE COURT OF APPEALS, respondents.

Tañada, Sanchez, Tañada, Tañada for petitioner.

N.M. Lapuz for respondent.

GUERRERO, J.:

Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CA-G.R.
No. L-33998-R entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-
appellant" amending its original decision of April 23, 1970 which affirmed the decision of the Court of
First Instance of Rizal (Quezon City Branch) in Civil Case No. Q-4922 in favor of petitioner, and the
Resolution of the respondent court denying petitioner's motion for reconsideration.

The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed
by the Court of Appeals:

Sometime in 1964, prior to the approval by the National Planning Commission of the
consolidation and subdivision plan of plaintiff's property known as the Rockville
Subdivision, situated in Balintawak, Quezon City, plaintiff and defendant entered into an
agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, with an aggregate
area of 1,200 square meters, payable in 120 equal monthly installments at the rate of
P16.00, P15.00 per square meter, respectively. In accordance with said agreement,
defendant paid to plaintiff the sum of P150.00 as deposit and the further sum of
P740.56 to complete the payment of four monthly installments covering the months of
July, August, September, and October, 1954. (Exhs. A and B). When the document
Exhibit "A" was executed on June 25, 1954, the plan covering plaintiff's property was
merely tentative, and the plaintiff referred to the proposed lots appearing in the tentative
plan.

After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955,
defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and
9, the subject matter of their previous agreement, with Lots 4 and 12, Block 2 of the
approved subdivision plan, of the Rockville Subdivision, with a total area of 725 square
meters, which are corner lots, to which request plaintiff graciously acceded.

The evidence discloses that defendant proposed to plaintiff modification of their

previous contract to sell because he found it quite difficult to pay the monthly
installments on the three lots, and besides the two lots he had chosen were better lots,
being corner lots. In addition, it was agreed that the purchase price of these two lots
would be at the uniform rate of P17.00 per square (meter) payable in 120 equal monthly
installments, with interest at 8% annually on the balance unpaid. Pursuant to this new
 agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the approved
subdivision plan, and enclosed them, including the portion where his house now stands,
with barbed wires and adobe walls.

However, aside from the deposit of P150.00 and the amount of P740.56 which were
paid under their previous agreement, defendant failed to make any further payment on
account of the agreed monthly installments for the two lots in dispute, under the new
contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated
monthly installments in arrears, but also to make up-to-date his payments, but
defendant, instead of complying with the demands, kept on asking for extensions,
promising at first that he would pay not only the installments in arrears but also make
up-to-date his payment, but later on refused altogether to comply with plaintiff's
demands.

Defendant was likewise requested by the plaintiff to sign the corresponding contract to
sell in accordance with his previous commitment. Again, defendant promised that he
would sign the required contract to sell when he shall have made up-to-date the
stipulated monthly installments on the lots in question, but subsequently backed out of
his promise and refused to sign any contract in noncompliance with what he had
represented on several occasions. And plaintiff relied on the good faith of defendant to
make good his promise because defendant is a professional and had been rather good
to him (plaintiff).

On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to

vacate the lots in question and to pay the reasonable rentals thereon at the rate of
P60.00 per month from August, 1955. (Exh. "B"). Notwithstanding the receipt of said
letter, defendant did not deem it wise nor proper to answer the same.

In reference to the mode of payment, the Honorable Court of Appeals found —

Both parties are agreed that the period within which to pay the lots in question is ten
years. They however, disagree on the mode of payment. While the appellant claims that
he could pay the purchase price at any time within a period of ten years with a gradual
proportionate discount on the price, the appellee maintains that the appellant was
bound to pay monthly installments.

On this point, the trial court correctly held that —

It is further argued by defendant that under the agreement to sell in question, he has the
right or option to pay the purchase price at anytime within a period of ten years from
1954, he being entitled, at the same time, to a graduated reduction of the price. The
Court is constrained to reject this version not only because it is contradicted by the
weight of evidence but also because it is not consistent with what is reasonable,
plausible and credible. It is highly improbable to expect plaintiff, or any real estate
subdivision owner for that matter, to agree to a sale of his land which would be payable
anytime in ten years at the exclusive option of the purchaser. There is no showing that
defendant is a friend, a relative, or someone to whom plaintiff had to be grateful, as
would justify an assumption that he would have agreed to extend to defendant such an
extra- ordinary concession. Furthermore, the context of the document, Exhibit "B", not to
mention the other evidences on records is indicative that the real intention of the parties
is for the payment of the purchase price of the lot in question on an equal monthly
installment basis for a period of ten years (Exhibits "A", "II", "J" and "K").
On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against
defendant Nicanor Lapuz (private respondent herein) with the Court of First Instance of Rizal, Quezon
City Branch, for rescission and cancellation of the agreement of sale between them involving the two
lots in question and prayed that judgment be rendered ordering the rescission and cancellation of the
agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom
and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from August
1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as
attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and
equitable in the premises.

Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which
motion was denied by the court. Thereafter, defendant filed his Answer alleging that he bought three
lots from the plaintiff containing an aggregate area of 1,200 sq. meters and previously known as Lots
1, 2 and 9 of Block 1 of Rockville Subdivision at P16.00, P15.00 and P15.00, respectively, payable at
any time within ten years. Defendant admits having occupied the lots in question.

As affirmative and special defenses, defendant alleges that the complaint states no cause of action;
that the present action for rescission has prescribed; that no demand for payment of the balance was
ever made; and that the action being based on reciprocal obligations, before one party may compel
performance, he must first comply what is incumbent upon him.

As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing
an area of 800 sq. meters and as a consequence, he suffered moral damages in the amount of
P200.000.00; that due to the filing of the present action, he suffered moral damages amounting to
P100,000.00 and incurred expenses for attorney's fees in the sum of P5,000.00.

Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.

After due hearing, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the
defendant, as follows:

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in
question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville
Subdivision) rescinded, resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and
also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from
August, 1955 until he shall have actually vacated the premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as
well as the costs of the suit. (Record on Appeal, p. 118)

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in
question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville
Subdivision) rescinded, resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and
also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from
August, 1955 until he shall have actually vacated premises; and
 (c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as
well as the costs of the suit. (Record on Appeal. p. 118)

Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The
latter court, finding the judgment appealed from being in accordance with law and evidence, affirmed
the same.

In its decision, the appellate court, after holding that the findings of fact of the trial court are fully
supported by the evidence, found and held that the real intention of the parties is for the payment of
the purchase price of the lots in question on an equal monthly installment basis for the period of ten
years; that there was modification of the original agreement when defendant actually occupied Lots
Nos. 4 and 12 of Block 2 which were corner lots that commanded a better price instead of the original
Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare assertion that the
agreement is not rescindable because the appellee did not comply with his obligation to put up the
requisite facilities in the subdivision was insufficient to overcome the presumption that the law has
been obeyed by the appellee; that the present action has not prescribed since Article 1191 of the
New Civil Code authorizing rescission in reciprocal obligations upon noncompliance by one of the
obligors is the applicable provision in relation to Article 1149 of the New Civil Code; and that the
present action was filed within five years from the time the right of action accrued.

Defendant filed a Motion for Reconsideration of the appellate court's decision on the following
grounds:

First — Neither the pleadings nor the evidence, testimonial, documentary or

circumstantial, justify the conclusion as to the existence of an alleged subsequent
agreement novatory of the original contract admittedly entered into between the parties:

Second — There is nothing so unusual or extraordinary, as would render improbable

the fixing of ten ears as the period within which payment of the stipulated price was to
be payable by appellant;

Third — Appellee has no right, under the circumstances on the case at bar, to demand
and be entitled to the rescission of the contract had with appellant;

Fourth — Assuming that any action for rescission is availability to appellee, the same,
contrary to the findings of the decision herein, has prescribed;

Fifth — Assumming further that appellee's action for rescission, if any, has not yet
prescribed, the same is at least barred by laches;

Sixth — Assuming furthermore that a cause of action for rescission exists, appellant
should nevertheless be entitled to tile fixing of a period within which to comply with his
obligation; and

Seventh — At all events, the affirmance of the judgment for the payment of rentals on
the premises from August, 1955 and he taxing of attorney's fees against appellant are
not warranted b the circumstances at bar. (Rollo, pp. 87-88)

Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by
the appellant, that assuming that a cause of action for rescission exists, he should nevertheless be
entitled to the fixing of a period within which to comply with his obligation. The Court of Appeals,
therefore, amended its original decision in the following wise and manner:
 WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that
the defendant Nicanor Lapuz is hereby granted a period of ninety (90) days from entry
hereof within which to pay the balance of the purchase price in the amount of
P11,434,44 with interest thereon at the rate of 8% per annum from August 17, 1955
until fully paid. In the event that the defendant fails to comply with his obligation as
above stated within the period fixed herein, our original judgment stands.

Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals
denied it. He now comes and appeals to this Court on a writ of certiorari.

The respondent Court of Appeals rationalizes its amending decision by considering that the house
presently erected on the land subject of the contract is worth P45,000.00, which improvements
introduced by defendant on the lots subject of the contract are very substantial, and thus being the
case, "as a matter of justice and equity, considering that the removal of defendant's house would
amount to a virtual forfeiture of the value of the house, the defendant should be granted a period
within which to fulfill his obligations under the agreement." Cited as authorities are the cases
of Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the
discretionary power of the court to allow a period within which a person in default may be permitted to
perform the stipulation upon which the claim for resolution of the contract is based should be
exercised without hesitation in a case where a virtual forfeiture of valuable rights is sought to be
enforced as an act of mere reprisal for a refusal of the debtor to submit to a usurious charge, and the
case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant from the lots without
giving him a chance to recover what his father and he himself had spent may amount to a virtual
forfeiture of valuable rights.

As further reasons for allowing a period within which defendant could fulfill his obligation, the
respondent court held that there exists good reasons therefor, having in mind that which affords
greater reciprocity of rights (Ramos vs. Blas, 51 O.G. 1920); that after appellant had testified that
plaintiff failed to comply with his part of the contract to put up the requisite facilities in the subdivision,
plaintiff did not introduce any evidence to rebut defendant's testimony but simply relied. upon the
presumption that the law has been obeyed, thus said presumption had been successfully rebutted as
Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that
plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will
not deter him from asking fr the rescission of the agreement since this obligation is not correlative
with defendant's obligation to buy the property.

Petitioner assails the decision of the Court of Appeals for the following alleged errors:

I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the
Civil Code which refers to reciprocal obligations in general and, pursuant thereto, in
granting respondent Lapuz a period of ninety (90) days from entry of judgment within
which to pay the balance of the purchase price.

II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same
Code, which specifically covers sales of immovable property and which constitutes an
exception to the third paragraph of Article 1191 of said Code, is applicable to the
present case.

III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot
avail of the provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because
he did not raise in his answer or in any of the pleadings he filed in the trial court the
 question of whether or not he is entitled, by reason of a just cause, to a fixing of a new
period.

IV. Assuming arguendo that the agreement entered into by and between petitioner and
respondent Lapuz was a mere promise to sell or contract to sell, under which title to the
lots in question did not pass from petitioner to respondent, still the Honorable Court of
Appeals erred in not holding that aforesaid respondent is not entitled to a new period
within which to pay petitioner the balance of P11,434.44 interest due on the purchase
price of P12.325.00 of the lots.

V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and
may be availed of by respondent, the Honorable Court of Appeals nonetheless erred in
not declaring that aid respondent has not shown the existence of a just cause which
would authorize said Court to fix a new period within which to pay the balance
aforesaid.

VI. The Honorable Court of Appeals erred in reconsidering its original decision
promulgated on April 23, 1970 which affirmed the decision of the trial court.

The above errors may, however, be synthesized into one issue and that is, whether private
respondent is entitled to the Benefits of the third paragraph of Article 1191, New Civil Code, for the
fixing of period within which he should comply with what is incumbent upon him, and that is to pay the
balance of P11,434,44 with interest thereon at the rate of 8% 1et annum from August 17, 1955 until
fully paid since private respondent had paid only P150.00 as deposit and 4 months intallments
amounting to P740.46, or a total of P890.46, the total price of the two lots agreed upon being
P12,325.00.

For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article
1191, NCC and that instead, Article 1592 of the New Civil Code which specifically covers sales of
immovable property and which constitute an exception to the third paragraph of Art. 1191 of aid
Code, is the applicable law to the case at bar.

In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and
pertinent rulings of the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3
of the New Civil Code applies to the case at Bar as held by the appellate court and supported by the
private respondent, or Art. 1592 of the same Code which petitioner strongly argues in view of the
peculiar facts and circumstances attending this case. Article 1191, New Civil Code, provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one at
the obligors should not comply with hat is incumbent upon him

The injured partner may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

Article 1592 also provides:

 Art. 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant him a new term.

The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon
Brokerage Co., Inc. vs. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885,
January 31, 1972, 43 SCRA 93, originally decided in 1972, reiterated in the Resolution on Motion to
Reconsider dated August 18, 1972, 46 SCRA 381 and emphatically repeated in the Resolution on
Second Motion for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which once
more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In the original
decision, the Supreme Court speaking thru Justice J.B.L. Reyes said:

Under the circumstances, the action of Maritime in suspending payments to Myers

Corporation was a breach of contract tainted with fraud or malice (dolo), as
distinguished from mere negligence (culpa), "dolo" being succinctly defined as a
"conscious and intention design to evade the normal fulfillment of existing obligations"
(Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and therefore incompatible
with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria de
Obligaciones, Vol. 1, page 116).

Maritime having acted in bad faith, it was not entitled to ask the court to give it further
time to make payment and thereby erase the default or breach that it had deliberately
incurred. Thus the lower court committed no error in refusing to extend the periods for
payment. To do otherwise would be to sanction a deliberate and reiterated infringement
of the contractual obligations incurred by Maritime, an attitude repugnant to the stability
and obligatory force of contracts.

The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil.
1, p. 10, that:

In contracts to sell, where ownership is retained by the seller and is not to pass until the
fun 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 i 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." Continuing,
the Supreme Court declared:

... appellant overlooks that its contract with appellee Myers s 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 installments 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 promisors
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.

In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again
speaking thru Justice J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of the
price through the punctual performance of the monthly payments is a condition precedent to the
execution of the final sale 4nd to the transfer of the property from the owner to the proposed buyer; so
that there will be no actual sale until and unless full payment is made.

The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon,
Myers was not rescinding (or more properly, resolving) the contract but precisely enforcing it
according to its expressed terms. In its suit, Myers was not seeking restitution to it of the ownership of
the thing sold (since it was never disposed of), such restoration being the logical consequence of the
fulfillment of a resolutory condition, expressed or implied (Art. 1190); neither was it seeking a
declaration that its obligation to sell was extinguished. What is sought was a judicial declaration that
because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to
sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to
repossess the property object of the contract, possession being a mere incident to its right of
ownership.

The decision also stressed that "there can be no rescission or resolution of an obligation as yet non-
existent, because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art.
1504 of Old Civil Code) requiring demand by suit or notarial act in case the vendor of realty wants to
rescind does not apply to a contract to sell or promise to sell, where title remains with the vendor until
fulfillment to a positive condition, such as full payment of the price." (Manuel vs, Rodriguez, 109 Phil.
9)

Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated
November 16, 1978, 86 SCRA 305, where the governing law and precedents were briefly
summarized in the strong and emphatic language of Justice Teehankee, thus:

(a) The contract between the parties was a contract to sell or conditional sale with title
expressly reserved in the vendor Myers Building Co., Inc. Myers until the suspensive
condition of full and punctual payment of the full price shall have been met on pain of
automatic cancellation of the contract upon failure to pay any of the monthly
installments when due and retention of the sums theretofore paid as rentals. When the
vendee, appellant Maritime, willfully and in bad faith failed since March, 1961 to pay the
P5,000. — monthly installments notwithstanding that it was punctually collecting
P10,000. — monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled,
as it did in law and fact, to enforce the terms of the contract to sell and to declare the
same terminated and cancelled.

(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such
contracts to self or conditional sales and no error was committed by the trial court in
refusing to extend the periods for payment.

(c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's
infringement of its contract was casual or serious" for as pointed out in Manuel vs.
 Rodriguez, '(I)n contracts to self. whether 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 ...

(d) It should be noted, however, that Maritimes breach was far from casual but a most
serious breach of contract ...

(e) Even if the contract were considered an unconditional sale so that Article 1592 of the
Civil Code could be deemed applicable, Myers' answer to the complaint for interpleaded
in the court below constituted a judicial demand for rescission of the contract and by the
very provision of the cited codal article, 'after the demand, the court may not grant him a
new term for payment; and

(f) Assumming further that Article 1191 of the new Civil Code governing rescission of
reciprocal obligations could be applied (although Article 1592 of the same Code is
controlling since it deals specifically with sales of real property), said article provides
that '(T)he court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period' and there exists to "just cause" as shown above for the
fixing of a further period. ...

Under the first and second assignments of error which petitioner jointly discusses, he argues that the
agreement entered into between him and the respondent is a perfected contract of purchase and sale
within the meaning of Article 1475 of the New Civil Code which provides that "the contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price. From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contract."

Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of
the property remained with plaintiff for so long as the installments have not been fully paid. Which
yields the conclusion that, by the delivery of the lots to defendant, ownership likewise was transferred
to the latter." (Brief for the Petitioner, p. 15) And he concludes that the sale was consummated by the
delivery of the two lots, the subject thereof, by him to the respondent.

Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement
between the parties herein were delivered by the petitioner to the private respondent who took
possession thereof and occupied the same and thereafter built his house thereon, enclosing the lots
with adobe stone walls and barbed wires. But the property being registered under the Land
Registration Act, it is the act of registration of the Deed of Sale which could legally effect the transfer
of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs. Rodriguez, et
al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs.
Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and the respondent
was a contract to sell where the ownership or title is retained by the seller and is not to pass until the
full payment of the price, such payment being a positive suspensive condition and 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 the case at bar, there is no writing or document evidencing the agreement originally entered into
between petitioner and private respondent except the receipt showing the initial deposit of P150.00 as
shown in Exh. "A" and the payment of the 4- months installment made by respondent corresponding
to July, 1954 to October, 1954 in the sum of P740.56 as shown in Exh. "B". Neither is there any
writing or document evidencing the modified agreement when the 3 lots were changed to Lots 4 and
12 with a reduced area of 725 sq. meters, which are corner lots. This absence of a formal deed of
conveyance is a very strong indication that the parties did not intend immediate transfer of ownership
and title, but only a transfer after full payment of the price. Parenthetically, We must say that the
standard printed contracts for the sale of the lots in the Rockville Subdivision on a monthly installment
basis showing the terms and conditions thereof are immaterial to the case at bar since they have not
been signed by either of the parties to this case.

Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or
agreement between petitioner and respondent which We affirm and sustain to be a contract to sell,
the following resolutions of petitioner's assignment of errors necessarily arise, and so We hold that:

1. The first and second assignments of errors are without merit.

The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid
down the rule that Article 1592 of the New Civil Code does not apply to a contract to sell where title
remains with the vendor until full payment of the price as in the case at bar. This is the ruling
in Caridad Estates vs. Santero, 71 Phil. 120; Aldea vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol
Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs.
Caridad Estates, L-2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et al. 109 Phil. 1, L-
13435, July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the New Civil
Code is the applicable provision where the obligee, like petitioner herein, elects to rescind or cancel
his obligation to deliver the ownership of the two lots in question for failure of the respondent to pay in
fun the purchase price on the basis of 120 monthly equal installments, promptly and punctually for a
period of 10 years.

2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC
Having been in default, he is not entitled to the new period of 90 days from entry of judgment within
which to pay petitioner the balance of P11,434.44 with interest due on the purchase price of
P12,325.00 for the two lots.

Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments
corresponding to the months of July to October, 1954. The judgment of the lower court and the Court
of Appeals held that respondent was under the obligation to pay the purchase price of the lots m
question on an equal monthly installment basis for a period of ten years, or 120 equal monthly
installments. Beginning November, 1954, respondent began to default in complying with his obligation
and continued to do so for the remaining 116 monthly interest. His refusal to pay further installments
on the purchase price, his insistence that he had the option to pay the purchase price any time in ten
years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further
by the receipt, Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the
pretext that he will sign later when he shall have updated his monthly payments in arrears but which
he never attempted to update, and his failure to deposit or make available any amount since the
execution of Exh "B" on June 28, 1954 up to the present or a period of 26 years, are all unreasonable
and unjustified which altogether manifest clear bad faith and malice on the part of respondent puzzle
making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C. To allow and
grant respondent an additional period for him to pay the balance of the purchase price, which balance
is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the
deliberate infringement of a contractual obligation that is repugnant and contrary to the stability,
security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116
monthly installments after paying only 4 monthly installments is a substantial and material breach on
his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph
3, Art. 1191, N.C.C.
At any rate, the fact that respondent failed to comply with the suspensive condition which is the full
payment of the price through the punctual performance of the monthly payments rendered petitioner's
obligation to sell ineffective and, therefore, petitioner was entitled to repossess the property object of
the contract, possession being a mere incident to his right of ownership (Luzon Brokerage Co., Inc.
vs. Maritime Building Co., Inc., et al. 46 SCRA 381).

3. We further rule that there exists no just cause authorizing the fixing of a new period within which
private respondent may pay the balance of the purchase price. The equitable grounds or
considerations which are the basis of the respondent court in the fixing of an additional period
because respondent had constructed valuable improvements on the land, that he has built his house
on the property worth P45,000.00 and placed adobe stone walls with barbed wires around, do not
warrant the fixing of an additional period. We cannot sanction this claim for equity of the respondent
for to grant the same would place the vendor at the mercy of the vendee who can easily construct
substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he
elects to rescind the contract by reason of the vendee's default or deliberate refusal to pay or
continue paying the purchase price of the land. Under this design, strategem or scheme, the vendee
can cleverly and easily "improve out" the vendor of his land.

More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would
not be fair and reasonable to the petitioner to apply a solution that affords greater reciprocity of rights
which the appealed decision tried to effect between the parties. As matters stand, respondent has
been enjoying the possession and occupancy of the land without paying the other 116 monthly
installments as they fall due. The scales of justice are already tipped in respondent,s favor under the
amended decision of the respondent court. It is only right that We strive and search for the application
of the law whereby every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New Civil
Code)

In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has
twisted the clear import of his agreement with the petitioner in order to suit his ends and delay the
fulfillment of his obligation to pay the land he had enjoyed for the last 26 years, more than twice the
period of ten years that he obliged himself to complete payment of the price.

4. Respondent's contention that petitioner has not complied with his obligation to put up the
necessary facilities in the Rockville Subdivision is not sufficient nor does it constitute good reason to
justify the grant of an additional period of 90 days from entry of judgment within which respondent
may pay the balance of the purchase price agreed upon. The Judgment of the appellate court
concedes that petitioner's failure to comply with his obligation to put up the necessary facilities in the
subdivision will not deter him from asking for the rescission of the agreement since his obligation is
not correlative with respondent's obligation to buy the property. Since this is so conceded, then the
right of the petitioner to rescind the agreement upon the happening or in the event that respondent
fails or defaults in any of the monthly installments would be rendered nugatory and ineffective. The
right of rescission would then depend upon an extraneous consideration which the law does not
contemplate.

Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at
the uniform price of P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not
improbable that aside from his obligation to deliver title and transfer ownership to the respondent as a
reciprocal obligation to that of the respondent in paying the price in full and promptly as the
installments fall due, petitioner would have assumed the additional obligation "to provide the
subdivision with streets ... provide said streets with street pavements concrete curbs and gutters,
fillings as required by regulations, adequate drainage facilities, tree plantings, adequate water
facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer
of Defendant, Record on Appeal, pp. 35-36) which was two years after the agreement in question
was entered into June, 1y54.

The fact remains, however, that respondent has not protested to the petitioner nor to the authorities
concerned the alleged failure of petitioner to put up and provide such facilities in the subdivision
because he knew too well that he has paid only the aggregate sum of P890.56 which represents
more or less 7% of the agreed price of P12,325.00 and that he has not paid the real estate taxes
assessed by the government on his house erected on the property under litigation. Neither has
respondent made any allegation in his Answer and in all his pleadings before the court up to the
promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he
was entitled to a new period within which to comply with his obligation, hence the Court could not
proceed to do so unless the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar
Estates Development Co., Ltd., G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite clear
that it is already too late in the day for respondent to claim an additional period within which to comply
with his obligation.

Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real
property additional period within which to complete payment of the purchase price on grounds of
equity and justice as in (1) J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA 829 where the vendee
religiously satisfied the monthly installments for eight years and paid a total of P4,134.08 including
interests on the principal obligation of only P3,691.20, the price of the land; after default, the vendee
was willing to pay all arrears, in fact offered the same to the vendor; the court granted an additional
period of 60 days -from receipt of judgment for the vendee to make all installment in arrears plus
interest; (2) in Legarda Hermanos vs. Saldaña, 55 SCRA 324, the Court ruled that where one
purchase, from a subdivision owner two lots and has paid more than the value of one lot, the former
is entitled to a certificate of title to one lot in case of default.

On the other hand there are also cases where rescission was not granted and no new or additional
period was authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling
P7,590.00 or about 25% of the purchase price of P30,000.00 for the three lots involved and when the
vendor demanded revocation upon the vendee's default two years after, the vendee offered to pay
the arears in check which the vendor refused; and the Court sustained the revocation and ordered the
vendee ousted from the possession of the land. In Ayala y Cia vs. Arcache, 98 Phil. 273, the total
price of the land was P457,404.00 payable in installments; the buyer initially paid P100,000.00 or
about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and
granted no extension to the vendee to comply with his obligation.

The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must
be so substantial and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs.
Tuazon de Paterno, L-2886, August 22, 1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that
"where time is not of the essence of t agreement, a slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for the rescission of the agreement"( Biando
vs. Embestro L-11919, July 27, 1959; cases cited in Notes appended to Universal Foods Corporation
vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar where the
breach, delay or default was committed as early as in the payment of the fifth monthly installment for
November, 1954, that such failure continued and persisted the next month and every month
thereafter in 1955, 1956, 1957 and year after year to the end of the ten-year period in 1964 (10 years
is respondent's contention) and even to this time, now more than twice as long a time as the original
period without respondent adding, or even offering to add a single centavo to the sum he had
originally paid in 1954 which represents a mere 7% of the total price agreed upon, equity and justice
may not be invoked and applied. One who seeks equity and justice must come to court with clean
hands, which can hardly be said of the private respondent.

One final point, on the supposed substantial improvements erected on the land, respondent's house.
To grant the period to the respondent because of the substantial value of his house is to make the
land an accessory to the house. This is unjust and unconscionable since it is a rule in Our Law that
buildings and constructions are regarded as mere accessories to the land which is the principal,
following the Roman maxim "omne quod solo inadeficatur solo cedit" (Everything that is built on the
soil yields to the soil).

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages
which the trial court and the appellate court, in the latter's original decision, granted in the form of
rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually vacated
the premises, plus P2,000.00 as attorney's fees. We affirm the same to be fair and reasonable. We
also sustain the right of the petitioner to the possession of the land, ordering thereby respondent to
vacate the same and remove his house therefrom.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12,
1970 is hereby REVERSED. The decision of the respondent court dated April 23, 1970 is hereby
REINSTATED and AFFIRMED, with costs against private respondent.

SO ORDERED.
 SECOND DIVISION

[G.R. No. L-28569. February 27, 1970.]

J. M. TUASON & Co. INC., Plaintiff-Appellant, v. LIGAYA JAVIER, Defendant-

Appellee.

SYLLABUS

1. CIVIL LAW; CONTRACTS; SALE OF REAL PROPERTY; REMEDY OF RESCISSION NOT

AVAILABLE IN INSTANT CASE FOR FAILURE TO PAY PRICE AT THE TIME AGREED UPON.
— A contract was entered into between the plaintiff and defendant-appellee the former
agreed to sell to the latter a parcel of land for the total sum of P3,691.20, with interest
thereon, payable in ten (10) years. Apart from the initial installment of P396.12, paid
upon the execution of the contract, the defendant religiously satisfied the monthly
installments accruing thereafter, for a period of almost eight (8) years. The total
payments made by the defendant up to January 5, 1962, including stipulated interest,
aggregated P4,134.08. When the defendant defaulted in the payment of monthly
installments, plaintiff rescinded the contract pursuant to the provisions thereof.
Defendant offered to pay all the installment payments in arrears, the interest thereon
from the time of default of payment, reasonable attorney’s fees, and the costs of suit.
The lower court, applying Art. 1592 of the Civil Code, declared that the contract to sell
had not yet been rescinded and ordered the defendant to pay all the amounts due the
plaintiff and the latter, upon payment, to execute in favor of the defendant the
necessary deed to transfer to the defendant the title to the said parcel of land. Held :
Plaintiff has not been denied substantial justice, for, according to Art. 1234 of the Civil
Code: "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."

DECISION

CONCEPCION, C.J.:

This appeal, taken by plaintiff J.M. Tuason & Co., Inc., from a decision of the Court of
First Instance of Rizal, has been certified to Us by the Court of Appeals, only questions
of law being raised therein.

The record shows that, on September 7, 1954, a contract was entered into between the
plaintiff, on the one hand, and defendant-appellee, Ligaya Javier, on the other, whereby
plaintiff agreed to sell, transfer and convey to the defendant a parcel of land known as
Lot No. 28, Block No. 356, PSD 30328, of the Sta. Mesa Heights Subdivision, for the
total sum of P3,691.20, with interest thereon at the rate of ten (10) per centum a year,
payable as follows: P896.12 upon the execution of the contract and P43.92 every month
thereafter, for a period of ten (10) years. The sixth paragraph of said contract provided
that:jgc:chanrobles.com.ph

". . . In case the party of the SECOND PART fails to satisfy any monthly installments, or
any other payments herein agreed upon, he is granted a month of grace within which to
make the retarded payment, together with the one corresponding to the said month of
grace; it is understood, however, that should the month of grace herein granted to the
party of the SECOND PART expire without the payments corresponding to both months
having been satisfied, an interest of 10% per annum will be charged on the amount he
should have paid it is understood further, that should a period of 90 days elapse, to
begin from the expiration of the month of grace herein mentioned, and the party of the
SECOND PART has not paid all the amounts he should have paid with the corresponding
interest up to that date, the party of the FIRST PART has the right to declare this
contract cancelled and of no effect, and as consequence thereof, the party of the FIRST
PART may dispose of the parcel or parcels of land covered by this contract in favor of
other persons, as if this contract had never been entered into. In case of such
cancellation of this contract, all the amounts paid in accordance with this agreement
together with all the improvements made on the premises, shall be considered as rents
paid for the use and occupation of the above mentioned premises, and as payment for
the damages suffered by failure of the party of the SECOND PART to fulfill his part of the
agreement; and the party of the SECOND PART hereby renounces all his right to
demand or reclaim the return of the same and obliges himself to peacefully vacate the
premises and deliver the same to the party of the FIRST PART."cralaw virtua1aw library

Upon the execution of the contract and the payment of the first installment of P396.12,
the defendant was placed in possession of the land. Thereafter and until January 5,
1962, she paid the stipulated monthly installments which, including the initial payment
of P396.12, aggregated P1,134.08. Subsequently, however, she defaulted in the
payment of said installments, in view of which, on May 22, 1964, plaintiff informed her
by letter that their contract had been rescinded. Defendant having thereafter failed or
refused to vacate said land, on July 9, 1964, plaintiff commenced the present action
against her, in the Court of First Instance of Rizal. After alleging substantially the
foregoing fact, plaintiff prayed in its complaint that the aforementioned contract be
declared validly rescinded and that the defendant and all persons claiming under her be
ordered to deliver to the plaintiff the lot in question, with all the improvements thereon,
and to pay a monthly rental of P40.00, from January 5, 1962, until the property shall
have been surrendered to the plaintiff, as well as all costs. Admitting that she had
defaulted in the payment of the stipulated monthly installments, from January 5, 1962,
defendant alleged in her answer that this fact "was due to unforeseen circumstances" ;
that she is "willing to pay all arrears in installments under the contract" and had "in fact
offered the same to the plaintiff" ; and that said contract "can not be rescinded upon the
unilateral act of the plaintiff." At a pre-trial conference held before said court, the
following facts were — in the language of the decision appealed from — agreed upon
between the parties:jgc:chanrobles.com.ph

". . . that since January 5, 1962, up to the present, the defendant has failed to pay the
monthly installments called for in the contract to sell; that in view of the failure of the
defendant to pay her installment payments since January 5, 1962, the plaintiff rescinded
the contract pursuant to the provision thereof; that after the filing of the complaint,
defendant in an attempt to arrive at a compromise agreement with the plaintiff, offered
to pay all the installment payments in arrears, the interest thereon from the time of
default of payment, reasonable attorney’s fees, and the costs of suit; that said offer was
repeated by the defendant in writing on December 1, 1964, and also during the pre-trial
conference of this case, but said offer was turned down by the plaintiff."cralaw
virtua1aw library

The case having been submitted for decision upon the foregoing stipulation, said courts,
applying Art. 1592 of our Civil Code, rendered its aforementioned decision, the
dispositive part of which reads:jgc:chanrobles.com.ph

"WHEREFORE, judgment is hereby rendered, declaring that the contract to sell has not
yet been rescinded, and ordering the defendant to pay to the plaintiff within sixty (60)
days from receipt hereof all the installment payments in arrears together with interest
thereon at 10% per annum from January 5, 1962, the date of default, attorney’s fees in
the sum of P1,000.00, and the costs of suit. Upon payment of same, the plaintiff in
ordered to execute in favor of the defendant the necessary deed to transfer to the
defendant the title to the parcel of land in question, free from all liens and
encumbrances except those provided for in the contract, all expenses which may be
incurred in said transfer of title to be paid by the defendant."cralaw virtua1aw library

Hence, this appeal by plaintiff, based mainly upon the alleged erroneous application to
the case at bar of said Art. 1592, pursuant to which:jgc:chanrobles.com.ph

"In the sale of immovable property, even though it may have been stipulated that upon
the failure to pay the price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of the period, as long as
no demand for rescission of the contract has been made upon him either judicially or by
a notarial act. After the demand, the court may not grant him a new term."cralaw
virtua1aw library

Plaintiff maintains that this provision governs contracts of sale, not contracts to sell,
such as the one entered into by the parties in this case. Regardless, however, of the
propriety of applying said Art. 1592 thereto, We find that plaintiff herein has not been
denied substantial justice, for, according to Art. 1234 of said
Code:jgc:chanrobles.com.ph

"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."cralaw virtua1aw library

In this connection, it should be noted that, apart from the initial installment of P396.12,
paid upon the execution of the contract, on September 7, 1954, the defendant
religiously satisfied the monthly installments accruing thereafter, for a period of almost
eight (8) years, or up to January 5, 1962; that, although the principal obligation under
the contract was P3,691.20, the total payments made by the defendant up to January 5,
1962, including stipulated interest, aggregated P4,134.08; that the defendant has
offered to pay all of the installments overdue including the stipulated interest, apart
from reasonable attorney’s fees and the costs; and that, accordingly, the trial court
sentenced the defendant to pay all such installments, interest, fees and costs. Thus,
plaintiff will thereby recover everything due thereto, pursuant to its contract with the
defendant, including such damages as the former may have suffered in consequence of
the latter’s default. Under these circumstances, We feel that, in the interest of justice
and equity, the decision appealed from may be upheld upon the authority of Art. 1234 of
the Civil Code. 1

WHEREFORE, said decision is hereby affirmed, with out special pronouncement as to

costs in this instance. It is so ordered.
 FIRST DIVISION

G.R. No. L-26578 January 28, 1974

LEGARDA HERMANOS and JOSE LEGARDA, petitioners,

vs.
FELIPE SALDAÑA and COURT OF APPEALS (FIFTH DIVISION) * respondents.

Manuel Y. Macias for petitioners.

Mario E. Ongkiko for private respondent.

TEEHANKEE, J.:1äwphï1.ñët

The Court, in affirming the decision under review of the Court of Appeals, which holds that the
respondent buyer of two small residential lots on installment contracts on a ten-year basis
who has faithfully paid for eight continuous years on the principal alone already more than the
value of one lot, besides the larger stipulated interests on both lots, is entitled to the
conveyance of one fully paid lot of his choice, rules that the judgment is fair and just and in
accordance with law and equity.

The action originated as a complaint for delivery of two parcels of land in Sampaloc, Manila
and for execution of the corresponding deed of conveyance after payment of the balance still
due on their purchase price. Private respondent as plaintiff had entered into two written
contracts with petitioner Legarda Hermanos as defendant subdivision owner, whereby the
latter agreed to sell to him Lots Nos. 7 and 8 of block No. 5N of the subdivision with an area of
150 square meters each, for the sum of P1,500.00 per lot, payable over the span of ten years
divided into 120 equal monthly installments of P19.83 with 10% interest per annum, to
commence on May 26, 1948, date of execution of the contracts. Subsequently, Legarda
Hermanos partitioned the subdivision among the brothers and sisters, and the two lots were
among those allotted to co-petitioner Jose Legarda who was then included as co-defendant in
the action.

It is undisputed that respondent faithfully paid for eight continuous years about 95 (of the
stipulated 120) monthly installments totalling P3,582.06 up to the month of February, 1956,
which as per petitioners' own statement of account, Exhibit "1", was applied to respondent's
account (without distinguishing the two lots), as follows:

To interests P1,889.78

To principal 1,682.28

Total P3,582.061

It is equally undisputed that after February, 1956 up to the filing of respondent's complaint in the
Manila court of first instance in 1961, respondent did not make further payments. The account thus
shows that he owed petitioners the sum of P1,317.72 on account of the balance of the purchase price
(principal) of the two lots (in the total sum of P3,000.00), although he had paid more than the
stipulated purchase price of P1,500.00 for one lot.

Almost five years later, on February 2, 1961 just before the filing of the action, respondent wrote
petitioners stating that his desire to build a house on the lots was prevented by their failure to
introduce improvements on the subdivision as "there is still no road to these lots," and requesting
information of the amount owing to update his account as "I intend to continue paying the balance
due on said lots."

Petitioners replied in their letter of February 11, 1961 that as respondent had failed to complete total
payment of the 120 installments by May, 1958 as stipulated in the contracts to sell, "pursuant to the
provisions of both contracts all the amounts paid in accordance with the agreement together with the
improvements on the premises have been considered as rents paid and as payment for damages
suffered by your failure,"2 and "Said cancellation being in order, is hereby confirmed."

From the adverse decision of July 17, 1963 of the trial court sustaining petitioners' cancellation of the
contracts and dismissing respondent's complaint, respondent appellate court on appeal rendered its
judgment of July 27, 1966 reversing the lower court's judgment and ordering petitioners "to deliver to
the plaintiff possession of one of the two lots, at the choice of defendants, and to execute the
corresponding deed of conveyance to the plaintiff for the said lot," 3 ruling as follows: —

During the hearing, plaintiff testified that he suspended payments because the lots were
not actually delivered to him, or could not be, due to the fact that they were completely
under water; and also because the defendants-owners failed to make improvements on
the premises, such as roads, filling of the submerged areas, etc., despite repeated
promises of their representative, the said Mr. Cenon. As regards the supposed
cancellation of the contracts, plaintiff averred that no demand has been made upon him
regarding the unpaid installments, and for this reason he could not be declared in
default so as to entitle the defendants to cancel the said contracts.

The issue, therefore, is: Under the above facts, may defendants be compelled, or not, to
allow plaintiff to complete payment of the purchase price of the two lots in dispute and
thereafter to execute the final deeds of conveyance thereof in his favor?

xxx xxx xxx

Whether or not plaintiffs explanation for his failure to pay the remaining installments is
true, considering the circumstances obtaining in this case, we elect to apply the broad
principles of equity and justice. In the case at bar, we find that the plaintiff has paid
the total sum of P3,582.06 including interests, which is even more than the value of
the two lots. And even if the sum applied to the principal alone were to be considered,
which was of the total of P1,682.28, the same was already more than the value
of one lot, which is P1,500.00. The only balance due on both lots was P1,317.72, which
was even less than the value of one lot. We will consider as fully paid by the plaintiff at
least one of the two lots, at the choice of the defendants. This is more in line with good
conscience than a total denial to the plaintiff of a little token of what he has paid the
defendant Legarda Hermanos.4

Hence, the present petition for review, wherein petitioners insist on their right of cancellation under
the "plainly valid written agreements which constitute the law between the parties" as against "the
broad principles of equity and justice" applied by the appellate court. Respondent on the other hand
while adhering to the validity of the doctrine of the Caridad Estates cases 5 which recognizes the right
of a vendor of land under a contract to sell to cancel the contract upon default, with forfeiture of the
installments paid as rentals, disputes its applicability herein contending that here petitioners-sellers
were equally in default as the lots were "completely under water" and "there is neither evidence nor a
finding that the petitioners in fact cancelled the contracts previous to receipt of respondent's letter." 6

The Court finds that the appellate court's judgment finding that of the total sum of P3,582.06
(including interests of P1,889.78) already paid by respondent (which was more than the value of two
lots), the sum applied by petitioners to the principal alone in the amount of P1,682.28 was already
more than the value of one lot of P1,500.00 and hence one of the two lots as chosen by respondent
would be considered as fully paid, is fair and just and in accordance with law and equity.

As already stated, the monthly payments for eight years made by respondent were applied to his
account without specifying or distinguishing between the two lots subject of the two agreements
under petitioners' own statement of account, Exhibit "1". 7 Even considering respondent as having
defaulted after February 1956, when he suspended payments after the 95th installment, he had as of
the already paid by way of principal (P1,682.28) more than the full value of one lot (P1,500.00). The
judgment recognizing this fact and ordering the conveyance to him of one lot of his choice while also
recognizing petitioners' right to retain the interests of P1,889.78 paid by him for eight years
on both lots, besides the cancellation of the contract for one lot which thus reverts to petitioners,
cannot be deemed to deny substantial justice to petitioners nor to defeat their rights under the letter
and spirit of the contracts in question.

The Court's doctrine in the analogous case of J.M. Tuason & Co. Inc. vs. Javier8 is fully applicable to
the present case, with the respondent at bar being granted lesser benefits, since no rescission of
contract was therein permitted. There, where the therein buyer-appellee identically situated as herein
respondent buyer had likewise defaulted in completing the payments after having religiously paid the
stipulated monthly installments for almost eight years and notwithstanding that the seller-appellant
had duly notified the buyer of the rescission of the contract to sell, the Court upheld the lower court's
judgment denying judicial confirmation of the rescission and instead granting the buyer an
additional grace period of sixty days from notice of judgment to pay all the installment payments in
arrears together with the stipulated 10% interest per annum from the date of default, apart from
reasonable attorney's fees and costs, which payments, the Court observed, would have the plaintiff-
seller "recover everything due thereto, pursuant to its contract with the defendant, including such
damages as the former may have suffered in consequence of the latter's default."

In affirming, the Court held that "Regardless, however, of the propriety of applying said Art. 1592
thereto, We find that plaintiff herein has not been denied substantial justice, for, according to Art.
1234 of said Code: '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,'" and "that in the interest of justice and equity, the decision appealed from may be upheld
upon the authority of Article 1234 of the Civil Code." 9

ACCORDINGLY, the appealed judgment of the appellate court is hereby affirmed. Without
pronouncement as to costs.
PDF 7

FIRST DIVISION

G.R. Nos. 105199-200 March 28, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
JESUS DEUNIDA Y ENRIQUEZ, accused-appellant.

The Solicitor General for plaintiff-appellee.

Dumlao, Farolan, Ignacio & Associates Law Office for accused-appellant.

DAVIDE, JR., J.:

Following his arrest six months after the fatal shooting of Felipe Ramos, Jr. in the evening of 31
December 1990, accused Jesus Deunida was charged before the Regional Trial Court of Manila with
murder and illegal possession of firearms under P.D. No. 1866 in two separate informations, dated 26
June 1991, which were docketed as Criminal Case Nos. 91-95987 and 91-95988, respectively, 1 and
consolidated with and raffled to Branch 49 of the said court.

However, after a reinvestigation which the court ordered upon motion 2 of the accused and for lack of
the requisite prior preliminary investigation, the prosecution, in a Manifestation filed on 18 September
1991,3 moved for the withdrawal of the information for murder and the amendment of the information
for illegal possession of firearms on the ground stated in the resolution of the investigating
prosecutor4 that the filing of two separate informations was erroneous since what the accused had
committed is only one offense, viz., the violation of the second paragraph of Section 1 of P.D. No.
1866 or "Qualified Illegal Possession of Firearm." The amended information 5 attached to the
manifestation bears the docket number for the case for murder, viz., Criminal Case No. 91-95987.
However, the body thereof is for violation of P.D.
No. 1866, which is the offense charged in Criminal Case No. 91-95988, and reads as follows:

The undersigned accuses JESUS DEUNIDA Y ENRIQUEZ of violation of Presidential

Decree No. 1866, committed as follows:

That on or about December 31, 1990, in the City of Manila, Philippines,

the said accused did then and there wilfully, unlawfully and knowingly
have in his possession and under his custody and control the following, to
wit: one (1) caliber .38 revolver (Paltik) marked Smith and Wesson,
without first having secured the necessary license or permit therefor from
the corresponding authorities, which described firearm was used by the
accused in the commission of the crime of homicide.
Although the original records transmitted to this Court by the trial court do not show that the latter
formally acted on the manifestation, the challenged decision states that the withdrawal and
amendment were both granted.6 From the certificate of arraignment,7 it likewise appears that the
accused was arraigned in Criminal Case No. 91-95987, evidently on the amended information for
illegal possession of firearms.8

During the testimony of Dr. Marcial Cenido, the first witness for the prosecution, the trial court
discerned,9 and the defense counsel confirmed,10 that the theory of the accused was self-defense.
The parties then stipulated that:
(1) the amount of actual damages (funeral expenses) incurred by the private complainant was
P50,000.00;11 (2) the gun used in the fatal shooting was the "paltik" .38 caliber revolver ("Exhibit "P")
turned over by the accused to
P/Cpl. Meneleo Renon after the shooting, and the copper slug (Exhibit "E") was the one recovered
from the body of the victim;12 and (3) at the time the gun was fired, the accused has no license or
permit to possess the gun and the recovered live bullets (Exhibit "P-1") as certified to by the Firearms
and Explosives Unit of the Philippine National Police (PNP). 13 The parties then agreed to have the
"reverse trial" method to expedite the disposition of the case and the prosecution marked and
submitted its evidence consisting of the post-mortem findings of
Dr. Cenido, the human sketch prepared by him, the certificate of death, the recovered slug, sworn
statements of Marlon Comia, Joel Baltazar, Cpl. Meneleo Renon, advance information on the case,
progress report, certification of the Firearms and Explosives Unit, booking sheet and arrest report,
the paltik revolver, and the bullets.14 The defense then presented as its witnesses the accused
himself and his two friends, Aurelio Sta. Cruz and Agustin Arigore. The prosecution presented as
rebuttal witnesses Mrs. Belen Fortes, an eyewitness to the shooting, and P/Cpl. Meneleo Renon, an
off-duty traffic policeman who had placed the accused under arrest shortly after the shooting. These
witnesses are neighbors of the accused. Thereafter, the defense recalled the accused as a
surrebuttal witness.

The inculpatory evidence adduced by the prosecution is faithfully summarized by the appellee as
follows:

On December 31, 1990, New Year's Eve, at about 10:30 o'clock in the evening, Belen
Fortes of 2347-A Amatista St., San Andres Bukid, Manila, went to the store of her
neighbor, accused Jesus Deunida, at 2323 Amatista St., San Andres Bukid, Manila
(TSN, Nov. 13, 1991, p. 8), to buy some things in preparation for the midnight
celebration to welcome the New Year. As she approached the store, she saw ahead of
her Felipe Ramos, Jr. who was about two feet away to her left (TSN, Feb. 4, 1992, p. 8)
also approaching the store. Ramos was about two feet away from the store and he
addressed appellant Deunida who was inside the store, "Hinahanap mo raw ako?"
(Ibid., pp. 2 and 4).

Despite the screen covering the front of the store, Fortes could clearly see the face of
appellant inside the store because the screen had an opening of about 10 by 12 inches
and the street light overhead illuminated the store (Ibid., pp. 1-13). Fortes heard
appellant reply but could not make out the words after which she saw appellant aim a
gun at Ramos, the muzzle of the gun jutting through the opening in the screen (Ibid., pp.
4-5, 13-14).

When Ramos saw the gun aimed at him, he turned around and was about to run away
when the gun fired hitting Ramos at the back and causing him to be thrown to the other
side of the street (Ibid., p. 5).
Appellant came out of his store, approached Ramos and again aimed the gun at him.
But neighbor pleaded with appellant not to shoot again, shouting "Mang Jess, huwag, si
Ato yan" (Ibid., pp. 5-6).

Appellant relented and Ramos stood up to look for help. Fortes ran home to tell her
husband what happened and then returned to the scene and helped the other neighbors
bring Ramos to the Philippine General Hospital where he would expire later (page 5 of
the Amended Decision, as annexed in the Appellant's Brief).

The autopsy conducted by Dr. Marcial Cenido on January 1, 1991 revealed that Ramos
suffered a gunshot entry wound in the back, specifically at the left posterior thorax
below the level of the armpit with a copper slug found inside the body. According to Dr.
Cenido, the entry wound and slug are consistent with a handgun as the firearm used in
killing the victim (TSN, Nov. 5, 1991, pp. 10-11) and in the absence of powder burns
that the muzzle of the gun was about 24 inches from the body when it fired. The
trajectory of the bullet is forward or from back to front, very slightly downward and
slightly towards the left lateral line penetrating the posterior thorax and left side of the
liver. He concludes from the foregoing findings that the assailant was at the back of the
victim, that the position of the assailant was possibly standing and the victim could have
been seated. He also explained that the abrasions in the right forearm could have been
due to a fall (TSN, Nov. 5, 1991, pp. 24, 17).

Appellant was placed under arrest by Cpl. Meneleo Renon who was at home watching
television when the incident happened. He was called to the scene right after the
shooting by his daughter and niece who called him; telling him "Papa, papa, si Mang
Jess binaril si Ato" (TSN,
Jan. 28, 1992, pp. 49-50).

Renon immediately went to the crime scene. He saw appellant holding a gun and about
to leave and he called appellant. Appellant handed to him the gun and said "Pasensiya
na kayo nabaril ko si Ato" (Ibid., pp. 51-52, 54, 56). Renon opened the gun and
discovered one (1) empty shell and four (4) live bullets (Ibid., p. 53).

Renon told appellant that he was under arrest and made him sit in front of his house to
wait for the policemen from homicide section (Ibid.,
p. 54).

While waiting for the policemen, appellant asked Renon if he could go inside his house
to drink water. Since appellant was his neighbor, Renon allowed him to enter his house
to drink (Ibid.).

When the policemen from the homicide section arrived, Renon called appellant but
discovered that the latter had escaped to the roof top by using a long ladder (Ibid., p.
55).

Renon and the homicide operatives tried to locate the appellant at a place called Texas
Anakbayan where the appellant was known to have many friends but they failed to find
him (Ibid.).

Appellant was finally arrested on June 12, 1991 in Sta. Maria, Bulacan. 15
On the other hand, the accused denied both the possession of the fatal gun and the responsibility for
shooting the victim, and offered a different version of the incident which he summed up in his brief,
citing the testimonies of Aurelio Sta. Cruz and Agustin Arigore:

[A]t about 11:00 o'clock in the evening of December 31, 1990, both of them [Sta. Cruz
and Arigore] went to the house of the Accused-Appellant to invite him to join the
celebration of their [barkada] in the house of Chairman Alfredo Tan. While he was
outside the store and at the gate with his two (2) friends, the victim arrived, approached
him, saying "Mang Jess, babarilin mo raw ako," then poked a gun at him. It was parried
by the Accused-Appellant, but when it was poked again, the latter tried to get it by
grappling with the victim. It was at the [sic] point when Accused-Appellant was twisting
the victim's arm with the gun, and the latter almost on his knees, that the gun fired. The
victim disengaged himself by running to the other side of the street. He was pursued by
Accused-Appellant, poked the gun at him but he was prevented by his friend.

When Cpl. Meneleo (Pandong) Renon arrived, the Accused-Appellant handed him the
gun saying "Pandong, baril ito ni Ato, naagaw ko" to which the policeman responded,
"Sige Jess, ako na ang bahala dito." With his two (2 ) friends, they proceeded to the
drinking party, stayed there overnight. When in the morning he was informed that Ato
died and that he was being hunted by the victim's relatives, he went to his in-laws in
Bulacan, stayed there until arrest.16

This version is of course not absolutely consistent with the accused's earlier stand that he acted in
self-defense, which resulted in an agreement for the holding of a "reverse trial" method. This
prompted the trial court to remark that by the evidence he offered in court, the accused:

evolved an alternative defense, to wit, (a) that at the time the gun,
Exhibit "P", was fired, the first right finger of the deceased was on the trigger and that
the accused was merely holding the handle of the gun and implied that it was not the
Accused who shot the deceased; and
(b) assuming, gratia arguendo, that it was the Accused who shot the deceased, while
they were wrestling for the possession of the gun, he did so only in self-defense. 17

In its Decision18 promulgated on 3 April 1992, the trial court found the accused guilty beyond
reasonable doubt of the crime of "qualified violation of Section 1 of Presidential Decree No. 1866" and
sentenced him to suffer the penalty of reclusion perpetua and to pay the heirs of the deceased the
amount of P50,000.00 by way of actual damages and P5,000.00 by way of indemnity. It further
ordered the confiscation in favor of the government of the gun and the four live bullets and one empty
cartridge and directed the branch clerk of court to cause the delivery thereof to the Firearms and
Explosives Unit of the PNP for disposition in accordance with law upon the finality of the decision.

On 10 April 1992, the trial court amended its decision, 19 a copy of which was received by the
accused's counsel on 14 April 1992. The trial court rejected the accused's claim of self-defense in
view of the "cogent facts and circumstances spread in the records, not to mention the testimony of the
[a]ccused himself, belying and discrediting his claim." It gave more credence to the prosecution
witnesses' accounts of the incident and the medical findings and opinion of Dr. Cenido, held that the
accused's flight after the incident as an indication of guilt, and considered his statement to Cpl. Renon
admitting the shooting as part of the res gestae.

It also disregarded for lack of substantial basis the accused's allegations of bias and ill-motive against
witnesses Mrs. Belen Fortes and Cpl. Renon, ruling instead that the accused's self-serving claim that
the victim was a "protege" or "bata" of Renon was belied by the latter's leniency and lack of
vindictiveness towards the accused after the shooting, such as allowing the accused to go inside his
house to drink water without being handcuffed, enabling him to escape.

The Court stated that Renon satisfactorily explained why he made his sworn statement only on 22
June 1991; moreover, he had promptly reported the incident to the Homicide Section, turned over the
gun, the four live bullets and the empty cartridge, and informed the police of the accused's escape.
The Court explained that Fortes did not report the incident to the police and give a sworn statement
because she helped bring the victim to the hospital and thereafter the accused's relatives brokered
for an amicable settlement of the case which would render her sworn statement useless. It also said
that the accused's allegations that the relatives of the victim threatened to kidnap her daughter and
that Fortes went on television to denounce him were unsubstantiated and pure hearsay since the
same were only relayed to him by his wife who did not testify. 20

On 21 April 1992, the accused filed his notice of appeal. 21

In his Appellant's Brief,22 the accused prays that we reverse the amended decision of the trial court
and acquit him because the trial court erred: (1) in finding the testimonies of Fortes and Renon
credible and free from ill-motive or vindictiveness, fabrication, and collusion; (2) in relying on the said
testimonies as basis for his conviction; (3) in finding that the victim, Felipe Ramos, Jr., was not the
aggressor; (4) in convicting him on the basis of contradicting testimonies, assumptions, and
conclusions; (5) in considering his "alleged flight" as evidence of his guilt; (5) in "misappreciating and
ignoring" his evidence of self-defense; and (7) in not applying the "equipoise rule" in his favor. 23 In
further amplification thereof, he asserts that the testimonies of Fortes and Renon are inconsistent and
improbable; that Dr. Cenido was not a qualified forensic expert to testify on the distance at which the
victim was shot based on the absence of gunpowder burns at the victim's wound, which absence can
be explained; that Dr. Cenido's findings also support his claim that the victim was shot from the back
while seated; that his evidence amply proves self-defense; and that his flight was due to the threats to
his life and his family and cannot be taken as evidence of guilt. 24

At the outset, it must be stressed that, contrary to the prosecution's legal position in withdrawing the
information for murder, the offense defined in the second paragraph of Section 1 of P.D. No. 1866
does not absorb the crime of homicide or murder under the Revised Penal Code and, therefore, does
not bar the simultaneous or subsequent prosecution of the latter crime. The 1982 decision in Lazaro
vs. People25 involving a violation of P.D. No. 9, which the investigating prosecutor invokes to justify
the withdrawal, is no longer controlling in view of our decisions in People vs. Tac-an,26 People
vs. Tiozon,27 and People vs. Caling.28

In Tac-an, we ruled that the accused who had been charged with illegal possession of a firearm and
ammunition under the second paragraph of Section 1 of P.D. No. 1866 was not placed in double
jeopardy when he was also charged in another case with murder because the former offense is a
different offense punished by a special law while the latter offense is defined and penalized under the
Revised Penal Code. We reiterated that the constitutional right against double jeopardy protects one
against a second or later prosecution for the same offense and that when the subsequent information
charges another and different offense, although arising from the same act or set of acts, there is no
double jeopardy. In Tiozon, we explicitly stated that the killing of a person with the use of an
unlicensed firearm may give rise to two separate prosecutions: one for the violation of Section 1 of
P.D. No. 1866 and another for murder or homicide under Article 248 or Article 249 of the Revised
Penal Code. And in Caling, we also ruled that the use of an unlicensed firearm in the commission of
homicide or murder gives rise to two distinct crimes, viz., unlawful possession of firearms, which may
be either simple or aggravated as defined and punished respectively by the first and second
paragraphs of Section 1 P.D. 1866; and homicide or murder, committed with the use of an unlicensed
firearm. The killing is obviously distinct from the act of possession and is separately defined and
punished under the Revised Penal Code. Therefore, in the instant case, the information for murder
was erroneously withdrawn.

Let us now draw our attention to the merits of the appeal.

After a careful review and consideration of the records, the evidence, and the arguments of the
parties, we find the appeal to be without merit.

In the first place, having pleaded self-defense, the accused necessarily admitted having shot and
killed the victim with an unlicensed firearm (Exhibit "P"). It was then incumbent upon him, to avoid
criminal liability, to prove that justifying circumstance to the satisfaction of the court. To do so, he
must rely on the strength of his evidence and not on the weakness of that of the prosecution, for even
if that were weak it could not be disbelieved after he had admitted the killing. 29 Being an affirmative
allegation, its elements, namely
(a) unlawful aggression on the part of the victim, (b) reasonable necessity of the means employed to
repel the aggression, and (c) lack of sufficient provocation on the part of the accused, must be proved
with certainty by sufficient and convincing evidence which excludes any vestige of criminal
aggression on the part of the person invoking it. 30

The accused failed to discharge the burden which was shifted to him by his plea of self-defense. He
was not able to show unlawful aggression on the part of the victim. On the other hand, the
prosecution, through the testimony of Belen Fortes, successfully proved that it was the accused who
assaulted the victim with a gun and shot the latter at his back, 31 which facts she elaborated in detail
on cross-examination.32 Cpl. Renon, to whom the accused surrendered the gun and the live bullets
after the incident, testified that the accused told him that he shot Felipe Renon. 33

The allegation that the testimonies of Belen Fortes and Cpl. Renon are not credible does not
convince us. The trial court gave them full faith and credit thus:

More, the Court belabored to monitor and keenly observe the conduct and demeanor of
Belen Fortes and Cpl. Meneleo Renon when they testified before the Court, and the
Court is fully convinced, without equivocation that they testified before the Court
spontaneously, in a candid and straightforward manner, their testimonies bereft of tell-
tale signs and the affectations and artificialities of perjured or rehearsed witnesses. 34

The rule in the appellate process is that the trial court's determination on the issue of the credibility of
witnesses must be given great weight and respect, unless it has plainly overlooked certain facts of
substance and value that, if considered, might affect the result of the case. The rationale for this is
that the trial court is in a much better position to decide the question, having heard the witnesses
themselves and observed their deportment and manner of testifying during the trial. It can thus easily
detect whether a witness is telling the truth or not. 35 In the instant case, we find no cogent reason to
depart from this rule. The alleged ill-motive or vindictiveness on the part of prosecution witnesses
Fortes and Renon were not proved. They are thus presumed not to have been actuated by any
improper motive.36

Since unlawful aggression on the part of the victim was absent, the second requisite for self-defense,
which presupposes the presence of the first, cannot logically exist.

The accused further failed to prove the third requisite of self-defense. On the contrary, his own
evidence discloses that minutes before the shooting incident, the accused's daughter reminded the
victim of the two empty beer bottles which he borrowed from the accused's store, but the victim, who
appeared drunk as shown by his bloodshot eyes and "broken voice", arrogantly told her that no one
had yet shouted at him. Because of the victim's attitude, the accused told him to return the empty
bottles. The victim came back with the bottles which he dropped on top of the table in the store
shouting at the same time, "Eto na ang bote. Wala na akong utang sa inyo na bote," which "irritated"
the accused.37 When the victim left, the accused even remarked, "Pag hindi mo hahabaan ang
pasensiya mo dito kay Ato, mababaril mo."38

Finally, his own version of how the shooting took place further befuddled his belated claim that the
victim himself pressed the trigger of the gun, thereby suggesting that the latter accidentally fired the
gun and killed himself. This is belied by the physical evidence showing that the victim was shot from
behind at a distance since there were no contusions or gunpowder burns on the skin at the point of
entry of the bullet. The demonstration made by the accused in court 39 further showed that it was
physically impossible for the victim to have shot himself, if indeed he was positioned in the manner
demonstrated. The following findings and observations of the trial court are well taken:

The vacillating and chamelonic stance of the Accused bespoke of the unreliability of his
testimony. It must be borne in mind that when he testified before the Court, and as
borne by his Necropsy Report, Exhibit "B", Dr. Marcial Cenido averred that the
trajectory of the bullet which hit the back of the deceased was obliquely forward, slightly
downward and very slightly towards the lateral, grazing the left lateral side of the 8th
thoracic vertebra of the deceased. If the muzzle of the gun was directed to the left side
of the body of the deceased when it fired, the deceased could not have been hit or that
if he was hit by the bullet from the gun, the trajectory should have been directed towards
well the left side of the body of the deceased, and not obliquely forward, slightly
downward only and very slightly towards the lateral side.

On the other hand, if, as claimed by the Accused, his left palm held the right palm of the
deceased and pressed it against the back of the deceased, the muzzle of the gun could
not have been directed towards the back of the deceased, but towards the left side of
the deceased. More, the deceased would have to move his right hand outward from his
back and from the waist and bended his hand from his wrist towards his back which it
would have been extremely difficult if not impossible for the deceased to do so
considering that the right arm of the Accused was holding the right arm of the deceased
between the elbow and the wrist.

The scenario evolved by the Accused could not have happened for another reason.
According to Marcial Cenido, infra, he found no contusion collar or gunpowder burns on
the skin of the point of entry of the bullet on the body of the deceased which meant that
the deceased must have twenty-four (24) inches away from the muzzle of the gun thus
belied the claim of the Accused that the gun which was pressed against the back of the
deceased when the latter was shot and, on the other hand, corroborated the testimony
of Belen Fortes that the Accused shot the deceased at a distance of about two (2) feet
from the store. 40

The accused's contention that Dr. Cenido's testimony should not be considered "as he is not a
forensic expert on the matter" is untenable for before Dr. Cenido gave his testimony, the accused's
counsel admitted in open court "the competency of the of witness as an expert witness." 41 Also, when
the questioned testimony was given, the defense did not make any objection thereto.

Finally, the accused's flight after the incident removes any remaining shred of doubt on his guilt. His
flight is fully established and his allegation of threats to his life and to his family, rightly brushed aside
by the trial court as unsubstantiated, dubious, and hearsay, is simply a fabricated tale to cover up the
naked fact of his flight. Undeniably, his flight evidenced guilt. 42
Consequently, there is no room for the accused's plea for the application of the "equipoise rule,"
invoking "Cruz [should be Corpuz] vs. People." 43 As Mr. Justice Isagani A. Cruz emphasized in the
said case, the equipoise rule is applicable only where the evidence of the parties is evenly balanced;
there is no such equipoise if the evidence of the prosecution is overwhelming and has not been
overcome by the evidence of the defense.

The gravamen of the offense under the second paragraph of Section 1 of P.D. No. 1866 is the
possession of a firearm without a license and the use of such unlicensed firearm in the commission of
homicide or murder, which were alleged in the amended information in this case. The evidence
established beyond reasonable doubt that the accused who had in his custody and possession the
firearm (Exhibit "P") had no license or permit to possess it and that he used it in shooting to death
Felipe Ramos, Jr.

The trial court thus correctly convicted the accused and imposed the penalty of reclusion
perpetua only, instead of the prescribed death penalty under the second paragraph of Section 1 of
P.D. No. 1866. At the time the offense was committed, the death penalty could not be imposed
pursuant to Section 19 (1), Article III of the 1987 Constitution.

However, the awards for actual damages in the amounts of P50,000.00, representing funeral
expenses, although stipulated by the parties, and P50,000.00 as moral damages, which the parties
left to the discretion of the trial court, are improper and should be deleted for, although death had
taken place, the offense charged is illegal possession of firearm and the killing merely aggravated it.
No private interest is therefore involved. The civil liability arising from death may be the subject of a
separate civil action or impliedly instituted with the criminal action for murder or homicide.

WHEREFORE, judgment is hereby rendered AFFIRMING, with the above modification consisting of
the deletion of the awards for actual and moral damages, the challenged amended Decision of the
Regional Trial Court of Manila, Branch 45 dated 10 April 1992, in Criminal Case No. 91-95987.

Costs against accused Jesus Deunida y Enriquez.

SO ORDERED.
 FIRST DIVISION

[G.R. No. L-9609. March 9, 1956.]

OTILLO R. GOROSPE and VITALIANO GOROSPE, Petitioners, v. MAGNO S.

GATMAITAN, as Judge of the Court of First Instance of Manila, CEFERINA SAMU,
FRANCISCO DE LA FUENTE, ET AL., Respondents.

Tirona, Gorospe & Formoso for petitioners.

Alberto R. de Joya for respondents.

SYLLABUS

CRIMINAL PROCEDURE; WHEN MAY THE OFFENDED PARTY LOSE HIS RIGHT TO
INTERVENE IN THE PROSECUTION OF THE CASE. — An offended party loses his right to
intervene in the prosecution of a criminal case, not only when he has waived the civil
action or expressly reserved his right to institute it, but also when he has actually
instituted the civil action. The reason of the law in not permitting the offended party to
intervene in the prosecution of the offense if he has waived or reserved his right to
institute the civil action is that by such action his interest in the criminal case has
disappeared. Its prosecution becomes the sole function of the public prosecutor. This
ruling is further strengthened by article 33 of the new Civil Coded which provides that
"In cases of defamation, fraud, and physical, a civil action for damages, entirely
separate and distinct from the criminal action, may be brought by the injured party",
and that such action may proceed independently of the criminal prosecution and for its
determination preponderance of evidence would suffice.

DECISION

BAUTISTA ANGELO, J.:

This is a petition for certiorari which seeks to set aside an order of respondent judge

rendered on August 2, 1955 in criminal case No. 29736 entitled People of the Philippines
v. Ceferina Samu, et al., pending in the Court of First Instance of Manila, granting the
motion of defendants to disqualify the counsel for the private prosecution to intervene in
behalf of the offended party.

On October 6, 1954, petitioners filed an action in the Court of First Instance of

Pangasinan against respondents Ceferina Samu, Ester Campus alias Rosa Lopez,
Carmelita de la Cruz alias Josefina Dizon, and the General Indemnity Co., Inc., to annul
certain contracts entered into by the latter and to recover the damages they suffered as
a consequence thereof. Upon the initiative of petitioners, an action for estafa through
falsification of a private document was filed in the Court of First Instance of Manila
against the same respondents, with the exception of the insurance company, who, upon
arraignment, pleaded not guilty to the charge.
Ester Campus filed a petition in the criminal case praying that the counsel for the
offended parties be prevented from intervening on the ground that the latter have
already filed a civil action for the annulment of the same documents involved in the
criminal case and for the recovery of damages resulting therefrom, and as such they
have no right nor authority to assist the fiscal in the prosecution of the case. The trial
court found the petition meritorious and disauthorized the private prosecutor to
intervene in behalf of the offended parties. A motion to reconsider the order was filed
which was denied in an order entered on August 2, 1955. To set aside this order, the
present petition for certiorari has been interposed.

It appears that, upon the instance of petitioners, an action for estafa through
falsification of a private document was filed by the city fiscal of Manila against
respondents Ceferina Samu, Ester Campus, Carmelita de la Cruz and Francisco de la
Fuente who, upon arraignment, pleaded not guilty to the charge. It likewise appears that
before the institution of the criminal case petitioners filed an action against the same
respondents for annulment of the same documents involved in the criminal case for
damages resulting from their execution. The attorneys for the offended parties entered
their appearance in the criminal case but, upon petition of respondent Ester Campus,
they were prevented from doing so on the ground that, the offended parties having
already instituted a civil action, they have no right nor authority to be represented in the
criminal case. Has respondent judge abused his discretion in issuing the order of
disqualification?

Section 15, Rule 106 provides that "Unless the offended party has waived the civil action
or expressly reserved the right to institute it after the termination of the criminal case . .
. he may intervene, personally or by attorney, in the prosecution of the offense." The
wording of the law is clear. It states that an offended party may intervene, personally or
by attorney, in the prosecution of the offense if he has not waived the civil action or
expressly reserved his right to institute it. The reason of the law in not permitting the
offended party to intervene in the prosecution of the offense if he has waived or
reserved his right to institute the civil action is that by such action his interest in the
criminal case has disappeared. Its prosecution becomes the sole function of the public
prosecutor. This is our ruling in the decisions hitherto rendered in this jurisdiction
interpreting the above provision of our rules of court.

In People v. Maceda, 73 Phil, 676, this court said that "the offended party may, as of
right, intervene in the prosecution of a criminal action, but then only when, from the
nature of the offense, he is entitled to indemnity and his action thereof has not by him
been waived or expressly reserved." (Italics supplied.) The same ruling was reiterated in
People v. Velez, 77 Phil., 1026 and People v. Capistrano, 90 Phil., 823. In the former
case, we said, "The reason of the law in not permitting the offended party to intervene
in the prosecution of a criminal case if he has waived his right to institute a civil action
arising from the criminal act, or has reserved or, a fortiori, already instituted the said
civil action, is that he has no special interest in the prosecution of the criminal action."
(Italics supplied.) And in another case we likewise said that since the offended party has
already filed a civil action arising from the criminal act, "he has no right to intervene in
the prosecution of the case" (People v. Olavides, 80 Phil., 280; 45 Off. Gaz., 3834).
It therefore appears from the foregoing that an offended party losses his right to
intervene in the prosecution of a criminal case, not only when he has waived the civil
action or expressly reserved his right to institute it, but also when he has actually
instituted the civil action even if he has not made the waiver or reservation above
adverted to. This ruling is further strengthened by Article 33 of the new Civil Code which
provides that "In cases of defamation, fraud, and physical injuries, a civil action for
damages, entirely separate and distinct from the criminal action, may be brought by the
injured party", and that such action may proceed independently of the criminal and for
its determination preponderance of evidence would suffice. The present case comes
within the purview of this provision.

Petition is denied, with costs against petitioners.

 EN BANC

G.R. No. L-45431 June 30, 1938

THE PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs. VIVENCIO ORAIS and

DAMIAN JIMENEZ, defendants.
FORTUNATO N. SUAREZ, complaint-appellant.

Godofredo Reyes for appellant.

Office of the Solicitor-General Tuason for appellee.
Emiliano A. Gala as amicus curiae.

VILLA-REAL, J.: chanrobles virtual law library

This case is now before us on appeal by the complainant Fortunato N. Suarez, from the
order issued by the Court of First Instance of Tayabas, on motion of the prosecuting,
attorney, dismissing the complaint filed by the aforementioned complainant and
offended party against Vivencio Orais and Damian Jimenez for arbitrary
detention.chanroblesvirtualawlibrary chanrobles virtual law library

In support of his appeal, appellant raises the following questions of law: First, whether
the dismissal is erroneous and constitutes a glaring abuse of discretion; and, second,
whether the offended party may appeal from the order of
dismissal.chanroblesvirtualawlibrary chanrobles virtual law library

As the determination of the first question depends upon that of the second, we shall now
proceed to consider and resolve the latter, that is, whether the offended party may
appeal from the order of dismissal.chanroblesvirtualawlibrary chanrobles virtual law
library

In the case of Gonzalez vs. Court of First Instance of Bulacan (36 Off. Gaz., 2059), this
court said:

The person injured by the commission of an offense may choose between bringing the
civil action independently of the criminal action (article 111, in connection with article
117, Spanish Code of Criminal Procedure of September 14, 1882), to recover through
the courts damages arising from the criminal liability of the author of the crime of which
he was the victim, in view of the provision of article 100 of the Revised Penal code to the
effect that every person criminally liable is also civilly liable, or appear as a party in the
criminal action instituted by the promoter fiscal at the initiative of either the injured
person or said promotor fiscal (article 112, Spanish Code of Criminal Procedure of
September 14, 1882). In this latter case the position occupied by the offended party is
subordinate to that of the promotor fiscal because, as the promotor fiscal alone is
authorized to represent the public prosecution, or the People of the Philippine Islands, in
the prosecution of offenders, and to control the proceeding, and as it is discretionary
with him to institute and prosecute a criminal proceeding, being at liberty to commence
it or not or to refrain from prosecuting it or not, depending upon whether or not there is,
in his opinion, sufficient evidence to establish the guilt of the accused beyond a
reasonable doubt, except when the case is pending in the Court of First Instance, the
continuation of the offended party's intervention depends upon the continuation of the
proceeding. Consequently, if the promotor fiscal desists from pressing the charge or
asks the competent Court of First Instance in which the case is pending for the dismissal
thereof, and said curt grants the petition, the intervention of the person injured by the
commission of the offense ceases by virtue of the principle that the accessory follows the
principal. Consequently, as the offended party is not entitled to represent the People of
the Philippine Islands in the prosecution of a public offense, or to control the proceeding
once it is commenced, and as his right to intervene therein is subject to the promotor
fiscal's right of control, it can not be stated that an order of dismissal decreed upon
petition of the promotor fiscal himself deprives the offended party of his right to appeal
from an order overruling a complaint or information, which right belongs exclusively to
the promotor fiscal by virtue of the provisions of section 44 of General Orders, No. 58.
To permit a person injured by the commission of an offense to appeal from an order
dismissing a criminal case issued by a Court of First Instance upon petition of the
promotor fiscal, would be tantamount to giving said offended party the direction and
control of a criminal proceeding in violation of the provisions of the above-cited section
107 of General Orders, No. 58.

We cannot find any reason or cause for altering the doctrine enunciated in the said case
of Gonzalez vs. Court of First Instance of Bulacan concerning the right of the offended
party, who does to seek restitution, reparation or indemnity, to appeal from an order of
dismissal issued by a court of First Instance on motion of the prosecuting
attorney.chanroblesvirtualawlibrary chanrobles virtual law library

With regard to the second assignment of alleged error consisting in that "the dismissal
ordered is erroneous and constitutes a glaring abuse of discretion," we have already
pointed out in the oft-repeated case of Gonzalez vs. Court of First Instance of Bulacan
that if the provincial fiscal and the Court of First Instance have committed a grave abuse
of discretion, the first by refusing to file an information and proceed wit the case, and
the latter by granting the motion for dismissal of the case filed by the fiscal, the
offended party has the extraordinary legal remedy of mandamus to compel the fiscal to
file the information and prosecute the case, and the judge, who dismissed the same on
motion of the said fiscal, to restore the case and decide it on its
merits.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the foregoing considerations, the appeal interposed by the complainant

Fortunato N. Suarez, because improperly allowed, is hereby dismissed with costs. So
ordered.
 SECOND DIVISION

G.R. No. 215136, August 28, 2019

EDWIN D. VELEZ, PETITIONER, v. PEOPLE OF THE PHILIPPINES, RESPONDENT.

DECISION

REYES, J. JR., J.:

Assailed in this Petition for Review on Certiorari are the Decision1 dated August 30, 2013
and the Resolution2 dated September 30, 2014 of the Court of Appeals-Cebu City (CA) in
CA-G.R. CR No. 01051 affirming in toto the Decision3 dated October 4, 2006, of the
Regional Trial Court (RTC), Branch 69, Silay City in Criminal Cases Nos. 4430-69, 4431-
69 and 4432-69.

In three Informations,4 Edwin D. Velez (petitioner), then Mayor of Silay City, was

charged with violation of Section 261(v)(2) of the Omnibus Election Code (OEC) for
releasing loan proceeds to three organizations for the implementation of the city's
livelihood development program within 45 days before the 1998 elections. Also charged
were Eli G. Alminaza (Alminaza), former City Accountant, Arturo J. Siason (Siason),
former acting City Treasurer and Salvador G. Ascalon, Jr. (Ascalon), former City Budget
Officer.

The facts are as follows:

On April 8, 1998, petitioner entered into separate loan agreements with Hacienda
Guinsang-an II Credit Cooperative and Barangay E. Lopez Credit Cooperative involving
an amount of P50,000.00 each as part of the city government's livelihood program. 5

On April 22, 1998, petitioner entered again into a memorandum of agreement with Silay
City Consolidated Union of Market Vendors Association, Inc. for the purpose of extending
a loan to market vendors in the amount of P300,000.00 to market vendors to aid them
in their business activities.6

In these instances, Alminaza, Siason, and Ascalon participated in the release of the
funds by certifying the Request of Allotment and the availability of the funds pursuant to
the memoranda. Petitioner, meanwhile, initiated the release and disbursement of public
funds by entering into several memoranda of agreement with the three organizations
and thereafter signing Disbursement Vouchers Nos. 1439 dated April 12, 1998, 1440
dated April 13, 1998 and 1626 dated April 23, 1998 for the release of the loan proceeds
in their favor.7

On April 24, 1998, Hacienda Guinsang-an II Credit Cooperative, Barangay E. Lopez

Credit Cooperative, and Silay City Consolidated Union of Market Vendors Association,
Inc. received the loan proceeds as evidenced by the acknowledgement receipts duly
signed by their authorized representatives. 8
Petitioner postulated that the release of public funds is exempted from the ban during
the election period since the loan proceeds were intended to finance programs already
existing prior to the 1998 elections. He stressed that upon his assumption to office as
City Mayor in 1992, 20% of the city's development fund had been allotted to various
livelihood programs implemented by recognized organizations and cooperatives. He
maintained that these livelihood programs are continuing in nature and are, thus,
exempted from the coverage of Section 261(v) of the OEC.

On October 4, 2006, the RTC rendered a Decision finding petitioner, Siason, and Ascalon
guilty beyond reasonable doubt of violation of Section 261(v) of the OEC. In Criminal
Cases Nos. 4430-69 and 4432-69, petitioner Siason and Ascalon were sentenced to
suffer the penalty of imprisonment of two years with accessory penalties of perpetual
disqualification to hold public office and deprivation of the right to suffrage. In Criminal
Case No. 4431-69, petitioner and Ascalon were likewise sentenced to suffer the penalty
of imprisonment of two years with accessory penalties of perpetual disqualification to
hold public office and deprivation of the right to suffrage while Siason was acquitted of
the offense charged. The death of Alminaza prior to the finality of the judgment totally
extinguished his criminal liability pursuant to Article 89 9 of the Revised Penal Code.

The RTC ratiocinated that the release of loans to cooperatives as part of the city's
livelihood program is among the social welfare services undertaken by the local
government pursuant to Section 17 of the Local Government Code of the Philippines and
is thus explicitly prohibited under Section 261(v). It also noted that while the City
Government of Silay requested for exemption from the prohibition, the Commission on
Elections did not act on the request. Hence, the release and disbursement of the public
funds to the cooperatives was clearly in violation of Section 261(v).

On appeal, the CA affirmed in toto the October 4, 2006 RTC Decision. The CA agreed
with the court a quo that the release of the loan proceeds in favor of the cooperatives
was a disbursement of public funds for social services and development and therefore,
prohibited under Section 261. It stressed that Section 261 did not make any reference
to any continuing project on social services which may be exempted from the 45-day
prohibition.

Petitioner moved for reconsideration but the same was denied in a Resolution dated
September 30, 2014.

Hence, this petition raising the following issues:

FIRST ISSUE

THE HONORABLE CA COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE

SPECIOUS RULING OF THE TRIAL COURT THAT THE LGU OF SILAY CITY AS AMONG
THOSE OFFICES OR MINISTRIES PROHIBITED BY SECTION 261 (V)(2) FROM
RELEASING, DISBURSING OR EXPENDING PUBLIC FUNDS DURING THE PROHIBITED
PERIOD.

SECOND ISSUE
THE HONORABLE CA COMMITTED ANOTHER REVERSIBLE ERROR WHEN IT AFFIRMED
THE SPECIOUS RULING OF THE TRIAL COURT THAT FUND RELEASES BY THE CITY TO
THE COOPERATIVES/ASSOCIATIONS AS AN IMPLEMENT OF THE CITY'S LIVELIHOOD
DEVELOPMENT PROGRAM WERE COVERED BY THE PROHIBITION IN SECTION 261 (V)(2)
OF THE OEC.
Petitioner contends that the prohibition under Section 261(v)(2) applies only to public
officials and employees of the Ministry of Social Services and Development (now
Department of Social Welfare and Development [DSWD]) and not to public officials of a
local government unit (LGU). He posits that the law does not disallow all disbursements
intended for social welfare services but only those made by the DSWD and other
offices/departments performing similar functions. He states that the fact that a
government office, agency, or instrumentality provide social welfare services and
projects does not automatically place it within the coverage of the prohibition.

The People, through the Office of the Solicitor General, on the other hand argues that
Section 261(v) covers "any public official or employee" and even "barangay officials" and
"those of government-owned or controlled corporations." It rejects petitioner's defense
of denial and emphasizes that the loan proceeds could not have been released to the
cooperatives if petitioner did not sign the memoranda of agreement and approve the
vouchers for the loan.

The petition is devoid of merit.

Section 261(v) of the Omnibus Election Code provides:

ARTICLE XXII.

ELECTION OFFENSES

SEC. 261. Prohibited Acts. - The following shall be guilty of an election offense:

xxxx

(v) Prohibition against release, disbursement or expenditure of public funds. - Any public
official or employee including barangay officials and those of government-owned or
controlled corporations and their subsidiaries, who, during forty-five days before a
regular election and thirty days before a special election, releases, disburses or expends
any public funds for:

1) Any and all kinds of public works, except the following:

(a) Maintenance of existing and/or completed public works project: Provided, That not
more than the average number of laborers or employees already employed therein
during the six- month period immediately prior to the beginning of the forty-five day
period before election day shall be permitted to work during such time: Provided,
further, That no additional laborers shall be employed for maintenance work within the
said period of forty-five days;
(b) Work undertaken by contract through public bidding held, or by negotiated contract
awarded, before the forty-five day period before election: Provided, That work for the
purpose of this section undertaken under the so-called "takay" or "paquiao" system shall
not be considered as work by contract;
(c) Payment for the usual cost of preparation for working drawings, specifications, bills
of materials, estimates, and other procedures preparatory to actual construction
including the purchase of materials and equipment, and all incidental expenses for
wages of watchmen and other laborers employed for such work in the central office and
field storehouses before the beginning of such period: Provided, That the number of
such laborers shall not be increased over the number hired when the project or projects
were commenced; and
(d) Emergency work necessitated by the occurrence of a public calamity, but such work
shall be limited to the restoration of the damaged facility.
No payment shall be made within five days before the date of election to laborers who
have rendered services in projects or works except those falling under subparagraphs
(a), (b), (c), and (d), of this paragraph.
This prohibition shall not apply to ongoing public works projects commenced before the
campaign period or similar projects under foreign agreements. For purposes of this
provision, it shall be the duty of the government officials or agencies concerned to report
to the Commission the list of all such projects being undertaken by them.
(2) The Ministry of Social Services and Development and any other office in
other ministries of the government performing functions similar to said
ministry, except for salaries of personnel, and for such other routine and
normal expenses, and for such other expenses as the Commission may
authorize after due notice and hearing. Should a calamity or disaster occur, all
releases normally or usually coursed through the said ministries and offices of other
ministries shall be turned over to, and administered and disbursed by, the Philippine
National Red Cross, subject to the supervision of the Commission on Audit or its
representatives, and no candidate or his or her spouse or member of his family within
the second civil degree of affinity or consanguinity shall participate, directly or indirectly,
in the distribution of any relief or other goods to the victims of the calamity or disaster;
and (Emphasis supplied)

(3) The Ministry of Human Settlements and any other office in any other ministry of the
government performing functions similar to said ministry, except for salaries of
personnel and for such other necessary administrative or other expenses as the
Commission may authorize after due notice and hearing.

xxxx
As the above provision clearly states, the OEC penalizes as an election offense the act of
releasing, disbursing, or expending public funds:

by a public official or
1)
employee;
 
2) within 45 days before a
regular election or 30
days before a special
 election; and
 
for the following
3)
activities:
 
Infrastructure projects or any and all kinds of public works subject to the
exceptions set forth in Section 261 (v) (1) subparagraphs (a), (b), (c), and (d)
a.
including ongoing public works projects commenced before the campaign
period or similar projects under foreign agreements (Section 261 [v][1]);
 
Social development projects undertaken by the DSWD and other agencies
performing similar functions except salaries of personnel, routine and normal
b.
expenses and such other expenses as may be authorized by the COMELEC
after due notice and hearing (Section 261 [v][2]); and
 
Housing-related projects undertaken by the National Housing Authority and
other government agencies performing similar functions except salaries of
c. personnel, administrative expenses, and such other expenses as may be
authorized by the COMELEC after due notice and hearing (Section 261 [v]
[3]).

It is undisputed that petitioner, in his capacity as Mayor of Silay City, entered into
memoranda of agreement on April 8, 1998, and April 22, 1998, with the authorized
representatives of Hacienda Guinsang-an II Credit Cooperative, Barangay E. Lopez
Credit Cooperative, and Silay City Consolidated Union of Market Vendors Association,
Inc., for the grant of loans to be used for the implementation of the city's livelihood
projects. Thereafter, he signed the disbursement vouchers on April 12, 1998 (29 days
before the May 11, 1998 elections), April 13, 1998 (28 days before said elections), and
April 23, 1998 (18 days before the elections), to process the release of the loan in the
amounts of P50,000.00 each to the two credit cooperatives and P300,000.00 to the
market vendors' association. Petitioner's approval and signature are vital to the release
and disbursement of government funds without which the loan proceeds could not have
been issued. Clearly, petitioner facilitated the release and disbursement of public funds
as livelihood loan assistance to Hacienda Guinsang-an II Credit Cooperative, Barangay
E. Lopez Credit Cooperative, and Silay City Consolidated Union of Market Vendors
Association, Inc., during the 45-day election ban period.

Petitioner, however, insists that the LGUs are not barred from releasing, disbursing and
expending public funds because the proscription under Section 261(v)(2 ) applies only to
the "Ministry of Social Services and Development and any other ministries of the
government performing functions similar to said ministry." He claims that what the law
prohibits is the release, disbursement and expenditure of public funds by the DSWD and
other government agencies that also provide social welfare services.

The Court disagrees.

The law imposes the prohibition against the release, disbursement and expenditure of
public funds to prevent public officials and employees from utilizing government
resources to influence the voters in their choice of candidates for the forthcoming
elections. It ensures that public funds and properties are insulated from political partisan
activities and that government works shall not be used for electioneering purposes. It
also seeks to prevent incumbent public officials from enjoying undue advantage of
government resources over which they have easy and convenient access to bolster their
campaign. Thus, it would be more in keeping with the object and purpose of the
prohibition to disallow the release, disbursement and expenditure of public funds for all
social welfare and development projects and activities1 regardless of whether the
activity is undertaken by the DSWD itself or the, LGU concerned.

It also bears stressing that while the DSWD is the lead national government agency
mandated to provide comprehensive social welfare programs, the LGUs act as its
frontline service providers pursuant to the devolution of powers under Section 17 of
Republic Act (R.A.) No. 7160, otherwise known as the Local Government Code of 1991.
It states:
SEC. 17. Basic Services and Facilities. —

(a) Local government units shall endeavor to be self-reliant and shall continue exercising
the powers and discharging the duties and functions currently vested upon them. They
shall also discharge the functions and responsibilities of national agencies and
offices devolved to them pursuant to this Code. Local government units shall
likewise exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective
provision of the basic services and facilities enumerated herein.

(b) Such basic services and facilities include, but are not limited to, the following:

    (1) For a barangay:

        x x x x
(ii) Health and social welfare services which include maintenance of barangay health
center and day-care center;
xxxx
    (2) For a Municipality:
xxxx
(iv) Social welfare services which include programs and projects on child and youth
welfare, family and community welfare, women's welfare, welfare of the elderly and
disabled persons; community-based rehabilitation programs for vagrants, beggars,
street children, scavengers, juvenile delinquents, and victims of drug abuse; livelihood
and other pro-poor projects; nutrition services; and family planning services;
xxxx
(3) For a Province:
xxxx
(v) Social welfare services which include programs and projects on rebel returnees
and evacuees; relief operations; and population development services;
xxxx
(4) For a City:
All the services and facilities of the municipality and province[.] x x x (Emphases
supplied)
R.A. No. 7160 defines devolution as the act by which the national government confers
power and authority upon LGUs to perform specific functions and responsibilities. 10 It
includes the transfer to LGUs of the records, equipment, and other assets and personnel
of national agencies and offices corresponding to the devolved powers, functions, and
responsibilities.11

Indubitably, social welfare and development projects, which include the grant of loan
assistance as part of a livelihood program, undertaken by the LGUs are covered by the
prohibition against the release, disbursement and expenditure of public funds during the
election ban period.

The Court cannot even concede to petitioner's unfounded assertion that the loan
assistance is exempted from the prohibition since it is a "continuing" livelihood project.
Nowhere in the law does it state that ongoing social development projects are excluded
from the prohibition. As aptly held by the CA, the exemption from the prohibition as
regards continuing programs/projects only applies to public works as expressly declared
in the last paragraph of Section 261(v)(1) but not to social services and development.

Finally, it does not escape the attention of the Court that petitioner signed a letter dated
April 29, 1998 requesting Atty. Vicente Zaragoza, the Election Officer of Silay City, to
allow them to continue with the implementation of the city's livelihood program. This
fact implies that, at the very outset, petitioner knew that its loan assistance project was
among the prohibited activities enumerated in Section 261(v), hence the need for a
request for exemption. It is likewise interesting to note that when the defense presented
the letter-request before the court, the RTC found that the letter-request was not acted
upon by the election officers authorized to grant the exemption. Certainly, the inaction
of the authorized election officers to grant the letter-request for exemption cannot be
considered as their tacit consent or approval to the release and disbursement of
government funds for the said loan assistance. Petitioner, however, proceeded with the
approval and signing of the disbursement vouchers despite knowledge that the loan
transactions were covered by the election ban. For these reasons, the Court finds no
compelling reason to warrant the reversal of the August 30, 2013 CA Decision convicting
petitioner of violation of Section 261(v)(2) of the OEC.

WHEREFORE, the petition is DENIED. The August 30, 2013 Decision and the
September 30, 2014 Resolution of the Court of Appeals-Cebu City in CA-G.R. CR No.
01051 are AFFIRMED.

SO ORDERED.
 FIRST DIVISION

G.R. No. 188315               August 25, 2010

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
ISIDRO FLORES y LAGUA, Accused-Appellant.

DECISION

PEREZ, J.

On appeal is the 29 January 2009 Decision 1 of the Court of Appeals in CA-G.R. CR-H.C. No. 00726
finding appellant Isidro Flores y Lagua guilty beyond reasonable doubt of two (2) counts of rape.

In 181 Informations, which are similarly worded except for the dates of the commission of the crime
and the age of the complainant, filed before the Regional Trial Court (RTC) of Makati City, Branch
140, docketed as Criminal Cases Nos. 03-081 to 03-261, appellant was accused of raping
AAA,2 allegedly committed as follows:

That in or about and sometime during the month of _________, in the City of Makati, Metro Manila,
Philippines, a place within the jurisdiction of this Honorable Court, the above-named accused, being
the adopting father of complainant who was then _________ years of age, did then and there willfully,
unlawfully and feloniously had carnal knowledge with [AAA] by means of force and intimidation and
against the will of the complainant.3

Upon arraignment, appellant pleaded not guilty. During the pre-trial conference, the parties stipulated
on the following facts:

1. AAA is below fifteen (15) years of age;

2. Appellant is the guardian of AAA; and

3. AAA has been under the care and custody of appellant and his wife since AAA was one and
a half years old.4

Thereafter, trial on the merits ensued.

The following facts are undisputed:

AAA lived with her adoptive mother, BBB,5 since she was just a few months old.6 BBB is married to
appellant, who was working abroad for six (6) years. Appellant came home in 1997 and lived with
AAA and BBB. BBB was working as a restaurant supervisor from 4:00 p.m. to 2:00 a.m. for six (6)
days a week.

Five (5) witnesses testified for the prosecution. They are the victim herself, Marvin Suello (Marvin),
PO1 Evangeline Babor (PO1 Babor), P/Sr Insp. Paul Ed Ortiz (P/Sr Insp. Ortiz), and Maximo Duran
(Duran).

The prosecution’s version of the facts follows—

In February 1999 at around 9:30 p.m., AAA, then 11 years old, was sleeping inside the house when
she felt and saw appellant touch her thighs. AAA could see appellant’s face as there was a light
coming from the altar. AAA was naturally surprised and she asked appellant why the latter did such a
thing. Appellant did not answer but told her not to mention the incident to anybody. AAA then saw
appellant went back to his bed and touch his private part. AAA immediately went back to sleep.

The following day, at around the same time, and while BBB was at work, appellant again touched
AAA from her legs up to her breast. AAA tried to resist but appellant threatened that he will kill her
and BBB.

Two (2) weeks after the incident, AAA was already asleep when she suddenly woke up and saw
appellant holding a knife. While pointing the knife at AAA’s neck, appellant removed his shorts, as
well as AAA’s pajamas. He slowly parted AAA’s legs and inserted his penis into AAA’s vagina.
Meanwhile, AAA struggled and hit appellant’s shoulders. Appellant was able to penetrate her twice
before he got out of the house. Two (2) days after, appellant again raped her by inserting his organ
into AAA’s vagina. AAA recounted that appellant raped her at least three (3) times a week at around
the same time until 15 October 2002, when she was 14 years old. After the last rape incident, AAA
did not go home after school and instead went to the house of her friend, Marvin. 7

On 16 October 2002, Marvin watched television with AAA from 5:00 p.m. to 8:00 p.m. Afterwards,
AAA refused to go home. She told Marvin that appellant would spank her for going home late. Marvin
asked AAA if there were other things that appellant might have done to her, aside from spanking. At
that point, AAA finally cried and divulged that she has been raped by appellant. Marvin told AAA to
file a complaint.8

AAA stayed at her mother’s friend’s house and came back on 18 October 2002. She, together with
Marvin, went to Kagawad Ramon Espena to seek assistance. Marvin went with the Barangay Tanod
in apprehending appellant, who at that time, was trying to escape. 9

PO1 Babor was the duty investigator at the Women’s and Children Desk of Makati Police Station on
18 October 2002. She took down the statements of AAA and her friend, Marvin. She then referred
AAA to the PNP Crime Laboratory to undergo medico-legal examination. 10

P/Sr. Insp. Ortiz confirmed that she conducted the medico-legal examination on AAA. Results of the
examination, as indicated in the medico-legal report, show that the "hymen is with presence of deep
healed laceration at 1 o’clock and shallow healed laceration at 2 o’clock positions at the time of
examination." Said report concluded that AAA is in a "non-virgin state physically." 11 P/Sr. Insp. Ortiz
opined that the lacerations could have been caused by any solid object, like the penis inserted at
the genitalia.12

Duran and another Bantay Bayan member were at the barangay outpost at 2:10 p.m. on 18 October
2002 when they were summoned by Barangay Kagawad Ramon Espena. Acting on the complaint of
AAA, they were directed to proceed to the house of appellant to invite him for questioning. Duran saw
appellant about to board a jeep. They stopped the jeep and asked appellant to alight therefrom and
invited him to the Bantay Bayan outpost. Appellant voluntarily went with them. Appellant was then
brought to the police station.13

Only appellant testified in his defense. While appellant admitted that he was a strict father to AAA in
that he would scold and spank her whenever the latter would ran away, he denied raping AAA. 14 He
alleged that AAA has the propensity to make up stories and was even once caught stealing money
from her grandmother. Appellant recalled that on 16 October 2002, AAA asked permission to go out
to buy a "project." She never came home. 15
On 27 August 2004, the RTC rendered judgment finding appellant guilty beyond reasonable doubt of
181 counts of rape. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in Criminal Cases Nos. 03-081 to
03-261, finding accused ISIDRO FLORES y LAGUA, GUILTY BEYOND REASONABLE DOUBT of
ONE HUNDRED AND EIGHTY-ONE (181) counts of RAPE penalized by RA 8353, Chapter 3, Article
266-A, par. 1(a) in relation to Article 266-B par. 1. Taking into account the minority of [AAA], adopted
daughter of the accused, at the time of rape, and the fact the offender is the adoptive father of the
minor complainant, accused, is hereby sentenced to suffer the penalty of DEATH for each count of
rape, and to pay [AAA] the amount of ONE HUNDRED FIFTY THOUSAND PESOS (PHP
150,000.00) for moral damages and FIFTY THOUSAND PESOS (PHP 50,000.00) for exemplary
damages for each count of rape.16

The trial court found that force and intimidation attended the commission of the crime of rape through
the testimony of the victim, which the trial court deemed "straightforward, consistent and credible."
The trial court also established that appellant is the adoptive father of AAA since 1989 and that AAA
was then a minor, as proven by the birth certificate, testimonies of witnesses, and admission made by
AAA.17 Finally, the trial court dismissed appellant’s defense of denial as self-serving and which cannot
prevail over AAA’s positive testimony.18

Upon denial of appellant’s motion for reconsideration, the case was initially elevated to the Court of
Appeals for its review pursuant to People v. Mateo. 19 However, the Court of Appeals dismissed the
case in 23 August 2005 for failure of appellant to file his appellant’s brief. 20 When the case was
brought before us on automatic review, we set aside the Resolution of the Court of Appeals and
remanded it back for appropriate action and disposition on the ground that review by the Court of
Appeals of the trial court’s judgment imposing the death penalty is automatic and mandatory. 21

On 29 January 2009, the Court of Appeals affirmed the finding that AAA was raped by appellant, but
it did so only on two (2) counts.

The fallo of the Decision reads:

IN LIGHT OF ALL THE FOREGOING, the decision is hereby rendered as follows:

1. Accused-appellant Isidro Flores y Lagua in Criminal Cases Nos. 03-082 to 03-260, inclusive,
is found not guilty on the ground of reasonable doubt and is hereby acquitted;

2. Accused-appellant Isidro Flores y Lagua in Criminal Cases Nos. 03-081 and 03-261 is
hereby found guilty beyond reasonable doubt of two (2) counts of rape and is sentenced to
suffer the penalty of reclusion perpetua for each count without eligibility for parole and to pay
the victim AAA (to be identified through the Information in this case), the amount of P75,000.00
as civil indemnity, P75,000.00 as moral damages and P25,000.00 as exemplary damages for
each count.22

The appellate court found that the guilt of appellant on the first and last incidents of rape in Criminal
Cases Nos. 03-081 and 03-261, respectively, was proven by the prosecution beyond reasonable
doubt.23 With respect to the other incidents, according to the appellate court, the testimony of AAA
was merely based on general allegations that she was raped on the average of three (3) times a
week from February 1999 to 15 October 2002. Therefore, the appellate court concluded that her
statement is inadequate and insufficient to prove the other charges of rape. 24
On 17 February 2009, appellant filed a Notice of Appeal of the Court of Appeals’ Decision. In a
Resolution dated 26 October 2009, this Court required the parties to simultaneously submit their
respective Supplemental Briefs. Appellant and the Office of the Solicitor General (OSG) both filed
their Manifestations stating that they will no longer file any Supplemental Briefs, but instead, they will
merely adopt their Appellant’s and Appellee's Briefs, respectively. 25

Appellant harps on the failure of AAA to actively defend herself or resist the alleged assaults.
Moreover, considering that the relatives of AAA live only meters away from her and the frequency of
the alleged molestation, appellant proffers that it was impossible for them not to notice the abuses.
Appellant also questions the appreciation of the circumstances of minority and relationship as basis
for the imposition of the death penalty. He contends that an adopting parent is not included within the
purview of qualifying relationships under Article 266-B of the Revised Penal Code. Assuming
arguendo that an adopting parent may be construed as similar to a parent, appellant argues that the
term "adopting parent" must be given a definite and technical meaning in that the process of adoption
must first be undertaken and a judicial decree to that matter must have been issued. 26

The OSG, on the other hand, avers that the positive and categorical testimony of AAA that appellant
sexually abused her, in tandem with the medico-legal report, are more than sufficient to establish
appellant’s guilt beyond reasonable doubt. Moreover, appellant failed to impute any ill motive on the
part of AAA to falsely accuse him of rape.27

The OSG insists that AAA’s failure to report promptly the previous incidents of rape does not dent her
credibility. Appellant’s exercise of moral ascendancy over AAA and that fact that she was under
physical threat during those times, could have instilled fear on AAA from reporting said incidents. 28

The OSG moved for modification of the penalty from death to reclusion perpetua without eligibility for
parole in light of Republic Act No. 9346.29

After an extensive review of the records, we find no cogent reason to overturn the decision of the
Court of Appeals.

Appellant was charged with 181 counts of rape, all of which were committed within the span of three
(3) years or from February 1999 until 15 October 2002. We are in full accord with the acquittal of
appellant in the 179 counts of rape. Stated otherwise, we agree with appellant’s conviction for two (2)
counts of rape.

In rape cases, "the victim’s credibility becomes the single most important issue. For when a woman
says she was raped, she says in effect all that is necessary to show that rape was committed; thus, if
her testimony meets the test of credibility, the accused may be convicted on the basis thereof." 30

Both the trial court and the appellate court found AAA’s testimony credible. The RTC considered it
"straightforward and consistent on material points," while the Court of Appeals described it as
"spontaneous, forthright, clear and free-from-serious contradictions." Well-entrenched is the legal
precept that when the "culpability or innocence of an accused hinges on the issue of the credibility of
witnesses, the findings of fact of the Court of Appeals affirming those of the trial court, when duly
supported by sufficient and convincing evidence, must be accorded the highest respect, even finality,
by this Court and are not to be disturbed on appeal." 31 We see no reason in this case to depart from
the principle. Moreover, we give due deference to the trial court’s assessment of AAA’s credibility,
having had the opportunity to witnesses firsthand and note her demeanor, conduct, and attitude
under grilling examination.32
Worthy of reiteration is the doctrine that "when the offended party is of tender age and immature,
courts are inclined to give credit to her account of what transpired, considering not only her relative
vulnerability but also the shame to which she would be exposed if the matter to which she testified is
not true. When a girl, especially a minor, says that she has been defiled, she says in effect all that is
necessary to show that rape was inflicted on her." 33

Out of the 181 counts of rape charged against appellant, the prosecution was only able to prove two
counts. Applying the ruling in People v. Garcia, 34 the Court of Appeals correctly declared, thus:

As to the other counts of rape (Criminal Cases Nos. 03-082 to 03-260) imputed against accused-
appellant, We find him not guilty beyond reasonable doubt as the testimony of AAA was merely
based on general allegations that she was raped by the accused-appellant on the average of three
(3) times a week from February 1999 to 15 October 2002. AAA’s bare statement is evidently
inadequate and insufficient to prove the other charges of rape as each and every charge of rape is a
separate and distinct crime and that each of them must be proven beyond reasonable doubt. On that
score alone, the indefinite testimonial evidence that the victim was raped three times a week is
decidedly inadequate and grossly insufficient to establish the guilt of accused-appellant therefore with
the required quantum of evidence. 35

As regards to the first incident of rape in 1999, AAA recounted how appellant forced her to have
sexual intercourse with him, thus:

Q: What happened after two (2) weeks?

A: I was sleeping when somebody went on top of my head.

Q: Tell us about what time was this when this happened, when you said you noticed somebody
climbing up your bed?

A: 9:30 in the evening.

Q: At that time again, where was your [BBB]?

A: At work, sir.

Q: What happened after you noticed somebody climbing up your bed?

A: I woke up and I saw him holding a bread knife.

xxxx

Q: Did you know who was this person who climbed your bed and who was holding a knife?

A: Yes, sir.

Q: Who was that person?

A: "Papa"

Q: When you said "Papa," you are referring to the accused?

 A: Yes, sir.

Q: What happened next?

A: "Tinusok nya yong kutsilyo sa leeg ko" and he removed his shorts.

Q: At that time, what were you then wearing?

A: Pajama, sir.

Q: What if any did the accused do to what you were wearing then?

A: He undressed me.

Q: Which one did he remove?

A: My pajama.

Q: What about your upper garments?

A: He did not remove.

Q: After you said the accused remove his shorts and removed your pajama, what happened?

A: He slowly parted my legs.

Q: And then?

A: He inserted his penis into my vagina.

Q: What were you doing, were you resisting when he was doing that?

A: I was resisting but my strength is no match to him. He was strong.

Q: What sort of resistance were you putting up that time?

A: "Hinampas ko po siya sa braso."

Q: What was his response to your act of hitting his arms?

A: "Wag daw po akong papalag at bubutasin nya ang leeg ko."36

Under Article 266-A(d) of the Revised Penal Code, rape is committed by a man having carnal
knowledge of a woman who is below 12 years of age. At that time of the commission of the first
incident of rape, AAA was only 11 years old, as evidenced by her birth certificate. 37

As regards the final incident of rape in 15 October 2002, AAA narrated:

Q: You said this happened always, approximately three (3) times a week, until when?

A: The last time was in October 15, 2002.

 Q: This last incident, describe to us where did it happen again?

A: In our house.

Q: At about what time?

A: 9:30 in the evening.

Q: Narrate to us how did this incident happen?

A: The same. He went to my bed, holding a bread knife, pointing it to me and he removed my
shorts and he also undressed himself.

Q: Then?

A: And he inserted his sexual organ into my vagina and after the incident, he left the house. 38

Since AAA was already 13 years old at the time of the commission of the last incident of rape, the
applicable rule is Article 266-A(a) which states that rape is committed by a man having carnal
knowledge of a woman through force, threat, or intimidation.

AAA’s testimony that she was defiled by appellant was corroborated by the medical findings of the
medico-legal expert. The presence of deep healed and shallow healed laceration only confirms AAA’s
claim of rape.

In both rape incidents, the trial court applied Article 266-B of the Revised Penal Code in imposing the
penalty of death, which was later modified by the Court of Appeals to reclusion perpetua pursuant to
Republic Act No. 9346. Article 266-B provides:

The death penalty shall also be imposed if the crime of rape is committed with any of the following
aggravating/qualifying circumstances:

"l) When the victim is under eighteen (18) years of age and the offender is a parent, ascendant, step-
parent, guardian, relative by consanguinity or affinity within the third civil degree, or the common-law
spouse of the parent of the victim;

xxxx

The Court of Appeals appreciated the qualifying circumstances of minority and relationship in
imposing the penalty of reclusion perpetua. It relied on the established fact that AAA was still a minor
when she was raped and on the stipulated fact that appellant is her guardian. One of the instances
wherein the crime of rape may be qualified is when the victim is a minor AND the accused is her
guardian. At this point, we cannot subscribe to this interpretation and hence, we hold that the Court of
Appeals erred in considering the qualifying circumstance of relationship.

Indeed, it was stipulated during the pre-trial conference that appellant is the guardian of AAA.
However, we cannot simply invoke this admission to consider guardianship as a qualifying
circumstance in the crime of rape. "Circumstances that qualify a crime and increase its penalty to
death cannot be subject of stipulation. The accused cannot be condemned to suffer the extreme
penalty of death on the basis of stipulations or admissions. This strict rule is warranted by the gravity
and irreversibility of capital punishment. To justify the death penalty, the prosecution must specifically
allege in the information and prove during the trial the qualifying circumstances of minority of the
victim and her relationship to the offender."39

Jurisprudence dictates that the guardian must be a person who has legal relationship with his ward.
The theory that a guardian must be legally appointed was first enunciated in the early case of People
v. De la Cruz.40 The issue in said case was whether the aunt of a rape victim could file a criminal
complaint on behalf of her niece, when the victim’s father was still living and residing in the
Philippines. The Solicitor-General contended that the aunt was the legal guardian of the victim, thus,
was competent to sign the information. The Court rejected this contention and ruled as follow:

Article 344 of the Revised Penal Code, paragraph 3, is as follows:

"Tampoco puede procederse por causa de estupro, rapto, violacion o abusos deshonestos, sino en
virtud de denuncia de la parte agraviada, o de sus padres, o abuelos o tutor, ni despues de haberse
otorgado al ofensor, perdon expreso por dichas partes, segun los casos." Without passing at this time
on the question whether the tutor (legal guardian) may file a complaint in the temporary absence of
the parents or grandparents of the offended party, it suffices to say that we cannot accept the view of
the Government that an aunt who has the temporary custody of a minor in the absence of her father
occupies the position of a tutor (legal guardian). The word "tutor" (guardian) appearing in article 344,
supra, must be given the same meaning as in section 551 of the Code of Civil Procedure, that is to
say, a guardian legally appointed in accordance with the provisions of Chapter XXVII of the Code of
Civil Procedure.41

Garcia was more direct in addressing the issue of when the accused will be considered a "guardian"
as a qualifying circumstance in the crime of rape. In said case, appellant therein raped a 12-year-old
girl. The victim was left to the care of appellant, who is the live-in partner of the victim’s aunt. The
issue of whether appellant is considered a guardian in the contemplation of the amendment to the law
on rape such that, the victim being a minor, he should be punished with the higher penalty of death
for the nine (9) crimes of rape was answered in the negative by the Court. The underlying reason
behind its ruling was explained in this discourse:

In the law on rape, the role of a guardian is provided for in Article 344 of the Revised Penal Code,
specifically as one who, aside from the offended party, her parents or grandparents, is authorized to
file the sworn written complaint to commence the prosecution for that crime. In People vs. De la
Cruz, it was held that the guardian referred to in the law is either a legal or judicial guardian as
understood in the rules on civil procedure.

xxxx

It would not be logical to say that the word "guardian" in the third paragraph of Article 344 which is
mentioned together with parents and grandparents of the offended party would have a concept
different from the "guardian" in the recent amendments of Article 335 where he is also mentioned in
the company of parents and ascendants of the victim. In Article 344, the inclusion of the guardian is
only to invest him with the power to sign a sworn written complaint to initiate the prosecution of four
crimes against chastity, while his inclusion in the enumeration of the offenders in Article 335 is to
authorize the imposition of the death penalty on him. With much more reason, therefore, should the
restrictive concept announced in De la Cruz, that is, that he be a legal or judicial guardian, be
required in the latter article.

The Court notes from the transcripts of the proceedings in Congress on this particular point  that the
formulators were not definitive on the concept of "guardian" as it now appears in the attendant
circumstances added to the original provisions of Article 335 of the Code. They took note of the status
of a guardian as contemplated in the law on rape but, apparently on pragmatic considerations to be
determined by the courts on an ad hoc basis, they agreed to just state "guardian" without the
qualification that he should be a legal or judicial guardian.1âwphi1 It was assumed, however, that he
should at the very least be a de facto guardian. Indeed, they must have been aware of jurisprudence
that the guardian envisaged in Article 335 of the Code, even after its amendment by Republic Act No.
4111, would either be a natural guardian, sometimes referred to as a legal or statutory guardian, or a
judicial guardian appointed by the court over the person of the ward.

They did agree, however, that the additional attendant circumstances introduced by Republic Act No.
7659 should be considered as special qualifying circumstances specifically applicable to the crime of
rape and, accordingly, cannot be offset by mitigating circumstances. The obvious ratiocination is that,
just like the effect of the attendant circumstances therefore added by Republic Act No. 4111, although
the crime is still denominated as rape such circumstances have changed the nature of simple rape by
producing a qualified form thereof punishable by the higher penalty of death.

xxxx

The law requires a legal or judicial guardian since it is the consanguineous relation or the solemnity of
judicial appointment which impresses upon the guardian the lofty purpose of his office and normally
deters him from violating its objectives. Such considerations do not obtain in appellant's case or, for
that matter, any person similarly circumstanced as a mere custodian of a ward or another's property.
The fiduciary powers granted to a real guardian warrant the exacting sanctions should he betray the
trust.

In results, therefore, that appellant cannot be considered as the guardian falling within the ambit of
the amendatory provision introduced by Republic Act No. 7659. He would not fall either in the
category of the "common-law spouse of the parent of the victim" in the same enumeration, since his
liaison is with respect to the aunt of [AAA]. Since both logic and fact conjointly demonstrate that he is
actually only a custodian, that is, a mere caretaker of the children over whom he exercises a limited
degree of authority for a temporary period, we cannot impose the death penalty contemplated for a
real guardian under the amendments introduced by Republic Act No. 7659, since he does not fit into
that category.42

People v. De la Cuesta43 adhered to Garcia when it ruled that the mere fact that the mother asked the
accused to look after her child while she was away did not constitute the relationship of guardian-
ward as contemplated by law.44

Garcia was further applied by analogy in People v. Delantar 45 where it was held that the "guardian"
envisioned in Section 31(c) of Republic Act No. 7610 is a person who has a legal relationship with a
ward. In said case, accused was charged for violation of Section 5, Article III of Republic Act No.
7610 when he pimped an 11 year old child to at least two clients. The Court held that the prosecution
failed to establish filiation albeit it considered accused as a de facto guardian. However, this was not
sufficient to justify the imposition of the higher penalty pursuant to the ruling in Garcia. In addition, the
Court construed the term "guardian" in this manner:

Further, according to the maxim noscitur a sociis, the correct construction of a word or phrase
susceptible of various meanings may be made clear and specific by considering the company of
words in which it is found or with which it is associated. 87 Section 31(c) of R.A. No. 7610 contains a
listing of the circumstances of relationship between the perpetrator and the victim which will justify the
imposition of the maximum penalty, namely when the perpetrator is an "ascendant, parent, guardian,
stepparent or collateral relative within the second degree of consanguinity or affinity." It should be
noted that the words with which "guardian" is associated in the provision all denote a legal
relationship. From this description we may safely deduce that the guardian envisioned by law is a
person who has a legal relationship with a ward. This relationship may be established either by being
the ward’s biological parent (natural guardian) or by adoption (legal guardian). Appellant is neither
AAA’s biological parent nor is he AAA’s adoptive father. Clearly, appellant is not the "guardian"
contemplated by law.46

Be that as it may, this qualifying circumstance of being a guardian was not even mentioned in the
Informations. What was clearly stated was that appellant was the "adopting father" of AAA, which the
prosecution nonetheless failed to establish.

For failure of the prosecution to prove the qualifying circumstance of relationship, appellant could only
be convicted for two (2) counts of simple rape, and not qualified rape.

We likewise reduce the Court of Appeals’ award of civil indemnity from P75,000.00 to P50,000.00 and
moral damages from P75,000.00 to P50,000.00 in line with current jurisprudence. 47 The award of
exemplary damages in the amount of P25,000.00 should be increased to P30,000.00 pursuant
to People v. Guillermo.48 While no aggravating circumstance attended the commission of rapes, it
was established during trial that appellant used a deadly weapon to perpetrate the crime. Hence, the
award of exemplary damages is proper.

WHEREFORE, the decision dated 29 January 2009 convicting Isidro Flores y Lagua of the crime of
rape in Criminal Cases Nos. 03-081 and 03-261 is hereby AFFIRMED with the MODIFICATION in
that he is held guilty beyond reasonable doubt of two counts of simple rape only and sentenced to
suffer the penalty of reclusion perpetua for each count. He is also ordered, for each count of rape, to
pay the victim civil indemnity in the amount of P50,000.00, moral damages in the amount of
P50,000.00, and exemplary damages in the amount of P30,000.00.

SO ORDERED.
 FIRST DIVISION

[G.R. No. 506. February 16, 1903. ]

THE UNITED STATES, Complainant-Appellant, v. THE MUNICIPAL COUNCIL OF

SANTA CRUZ DE MALABON, Defendant-Appellee.

Solicitor-General Araneta, for Appellant.

Manuel M. de Hazañas, for Private Prosecutor.

Felipe G. Calderon, for Appellee.

SYLLABUS

1. CRIMINAL LAW; PRIVATE PROSECUTIONS. — Under the criminal procedure

established by General Orders, No. 58, the right to commence criminal prosecutions is
confined to the representatives of the Government and to the persons injured by the
crime complained of.

2. ID.; ID. — A complaint accusing a person of a crime which does not show that the
person filing the same has been injured will be dismissed.

DECISION

ARELLANO, C.J.  :

The Philippine Sugar Estates Development Company, Limited, a corporation, domiciled in

Manila, Calle Anloague No. 89, as stated by one of its representatives (record, p. 18), in
a petition filed in a voluntary jurisdiction proceeding instituted with respect to judicial
possession, by a supplementary prayer asked that the transcript of certain minutes be
sent to the provincial fiscal in order that he might file the corresponding information.
According to the statement contained in this supplementary prayer the attached copy of
the minutes of a meeting of the municipal council of Santa Cruz, Cavite, "shows the
resolution adopted by the said council to impose upon landholders on the hacienda a tax
of three pesos on each cavan of seed produced by the lands cultivated by them, for the
purpose of paying the expenses of the suit, and the appointment of a collector and
treasurer of this tax." This supplementary petition and the attached copy of the minutes
were made the basis of a separate proceeding in the nature of a preliminary
investigation. The provincial fiscal did not think proper to file an information, as he did
not regard the facts set forth in the paper referred to as constituting the offense covered
by the articles of the Penal Code cited by the representative of the corporation. The
judge dismissed the complaint in the preliminary investigation. On the 23d of
September, 1901, when the representative of the corporation appeared in court to file
the formal complaint prepared by him, notice was served upon him of the order
dismissing the proceeding. On the same day he appealed against this order, relying
upon articles 43 and 44 of General Orders, No. 58.

Under the American system the prosecution of public offenses is reserved to the
representative of the Government to such an extent that the individual citizen can not
bring an action for that purpose. He is protected by his right to bring a personal action
for the damage which the commission of a crime may occasion him. As to him the crime
is but the source of a civil obligation. General orders, No. 58, series of 1900, which has
established the principles and rules of criminal procedure peculiar to that system of
legislation, as a concession to the period of transition from one system of legislation to
another, has compromised only with the private penal action of the injured party, but
with that of the latter alone — not with the action which under the former law on the
subject of criminal procedure might be brought by any citizen who might desire to aid
the action of the Government. It was necessary to maintain the private penal action of
the injured party himself, in consequence of the continued operation of the Penal Code,
for two reasons: First, because, on principle, the declaration of the criminal liability
carries with it the declaration of the resulting civil obligation; second, because there are
crimes which can not be prosecuted other than at the formal instance of the person
injured.

For this reason, under the heading "rights of the person injured by the offense," article
107 was drawn, according to which, "the privilege now secured by law to the person
claiming to be injured by the commission of an offense to take part in the prosecution of
the offense and recover damages for the injury sustained by reason of the same shall
not be abridged by the provisions of this order." It is evident that the special and
accentuated inclusion of the right of the person injured, not recognized in the general
principles which form the basis of this procedural system, is the most express exclusion
of any other right, such as that arising from the popular penal action, not recognized in
the American system. Until it is made to appear that the complainant corporation,
domiciled in Manila, forms part of the inhabitants of Santa Cruz, Cavite, upon whom
might fall the burden of this so-called illegal exaction, it has not been shown that the
corporation has been or might be injured by the commission of the act denounced as a
crime; consequently it has no right to bring a prosecution for such an act, nor to appeal
against the denial of such a right, or the refusal to regard as a crime an act which in its
opinion constitutes such an offense.

The appeal taken is therefore dismissed, with costs. So ordered.

 FIRST DIVISION

[G.R. No. 8634. October 22, 1913. ]

THE UNITED STATES, Plaintiff-Appellee, v. JOSEPH N. HEERY, Defendant-

Appellant.

O’Brien & DeWitt for Appellant.

Solicitor-General Harvey for Appellee.

SYLLABUS

1. CRIMINAL PRACTICE AND PROCEDURE; ALLOWANCE OF CIVIL DAMAGES. — Case

reviewed and Held: It is well settled that the civil liability of the accused is determined in
the criminal action unless the injured party expressly waives such liability or reserves his
right to have the civil damages determined in a separate action. It is therefore error for
the court to refuse a request of the injured party during the course of the criminal
prosecution to submit evidence of his damages.

2. ID.; ID.; DOUBLE JEOPARDY. — The elements of civil liability of a criminal as defined
in article 119 of the Penal Code compared with the civil liability of criminals in the United
States, and held to be the same in all essential aspects. Consequently, the assessment
of damages in favor of the injured person cannot be considered as punishment for the
crime, even though determined in the criminal action.

3. ID.; ID.; ID.; REMANDING THE CAUSE FOR DETERMINATION OF CIVIL DAMAGES. —
The trial court erroneously refused to permit the injured party to submit evidence during
the course of the criminal proceedings of the damages he had sustained as a
consequence of the crime. For the reasons stated the accused was not subject to double
jeopardy by the action of this court in affirming the judgment of guilt and remanding the
cause for the sole purpose of determining his civil liability.

Per MORELAND, J., concurring and dissenting:chanrob1es virtual 1aw library

4. APPEAL FROM JUDGMENT ENTERED IN ACCORDANCE WITH MANDATE OF THE

SUPREME COURT. — The trial court in the proceeding before us did nothing but carry out
the mandate of this court issued in connection with the first judgment in this case, which
ordered that court to determine the amount of damages sustained by the complaining
witness. Therefore, no question settled by the former judgment of this court is
reviewable on this appeal or can be questioned or discussed.

5. ID. — An appeal will not be entertained by this court from a judgment entered in an
inferior court in exact accordance with a mandate issued on judgment of this court. Such
a judgment, when entered in the court below, is, in effect, a judgment of the Supreme
Court, and the appeal would be from this court to this court. If such an appeal is taken,
however, we will, upon the application of the appellee, examine the decree entered and,
if it conforms to the mandate, dismiss the case with costs. If it does not, the case will be
remanded, with proper directions for the correction of the order.
6. ID. — If the progress of the execution of the decree of this court, after its entry in the
court below, either party is aggrieved, he may appeal from the final act of the trial court
executing that decree, but such an appeal will bring up for reexamination only the
proceedings subsequent to the mandate of this court. The rights of the parties in the
subject matter of the suit were finally determined upon the original appeal in this case
and all that remained for the trial court to do was to ascertain the amount of civil
damages in accordance with our instructions and to enter judgment therefor. No other
question was open.

7. ID. — On this appeal no question can properly be raised or discussed which was
settled by the original decree of this court made on the first appeal. That decree settled
conclusively and finally the civil liability of the accused. It settled also the question of
former conviction and former jeopardy. It settled also that the civil liability is not a part
of the criminal punishment. It settled also that the civil incident could be separated from
the criminal action and be carried on independently thereof. Therefore, the only
questions open for discussion or decision in the court below, or which can be open for
discussion or decision on this appeal, are the amount of damages and exceptions taken
in connection therewith in the trial court.

8. CRIMINAL PRACTICE AND PROCEDURE; DOUBLE JEOPARDY. — The question of

double jeopardy; the question of whether the civil liability is a part of the criminal
punishment; the question of what is the nature of the civil liability; and kindred
questions, were not before the court below, are not before this court, and are improperly
discussed and decided.

9. COURTS OF FIRST INSTANCE; JURISDICTION. — Every act of the trial court in

carrying out a mandate of this court, which act fairly tends to the end in view, whether
absolutely necessary or not for that purpose, is not void and without jurisdiction but is a
lawful act performed within the power of the trial court and within the mandate of the
Supreme Court.

DECISION

TRENT, J.  :

This was a case of assault attended with lesiones graves. Upon the first appeal the
sentence of the lower court condemning the appellant-defendant to one year and three
months of prision correccional was affirmed. (U. S. v. Heery, 10 Off. Gaz., 2102.) At the
same time the appeal of the injured party against the ruling of the court refusing to
allow him to submit evidence as to the damages suffered by him was sustained and the
case was returned with the following instructions:jgc:chanrobles.com.ph

"It is therefore ordered that the record be returned to the court whence it came for the
execution of the criminal judgment herein affirmed, and for the further purpose of
completing the civil branch of the case."cralaw virtua1aw library
The lower court duly proceeded to take evidence as to the civil damages sustained by
the injured person and then entered the following judgment:jgc:chanrobles.com.ph

"I therefore restate the judgment heretofore entered herein and affirmed by the
Supreme Court, by finding the defendant, Joseph N. Heery, not guilty of frustrated
murder as alleged in the complaint, but find him guilty of a lesser offense included
within the charge made in the complaint, that of maliciously inflicting serious injury upon
Alex Sternberg, causing him an illness and disability from the performance of any kind of
manual labor for more than thirty days, and sentence him to one year and three months
of prision correccional at Bilibid Prison, and, having found the amount of the indemnity
which the defendant should pay, in accordance with the instructions contained in the
judgment of the Supreme Court made herein, sentence the defendant to indemnify the
complainant, Alex Sternberg, in the sum of P50,500 and in case of insolvency to suffer
subsidiary imprisonment, and to pay the costs of the action."cralaw virtua1aw library

The defendant appealed from this judgment, and his first, third, and fourth assignments
of error, raises the question of double jeopardy.

It will noted that the trial court, in its judgment for civil damages says that it restates
the judgment by finding the defendant guilty. The judicial procedure involved in finding
a defendant guilty by restating a final judgment is not well understood. No exercise of
judicial discretion is involved in the mere repetition of a final judgment, whether it be
restated once or a dozen times. From the ambiguity of the language used, it cannot be
determined whether the lower court merely intended to restate the penalty imposed for
the sake of convenience or clearness, or whether it actually reconsidered the guilt of the
appellant and found that its previous decision was correct. Both were unnecessary and
beyond the instructions contained in the judgment of this court, and as the only addition
to the judgment was the civil damages which the accused should pay, no attempt being
made to change in any manner the punishment imposed upon the defendant, the
question does not arise as to the effect such action would have upon the defendant’s
constitutional rights. In passing, however, it may be remarked that such action would be
entirely beyond the jurisdiction of the lower court and absolutely void.

The basis for the plea of double jeopardy must be the same, therefore, as though the
lower court had strictly confined its judgment to the limits set by the instructions of this
court, above quoted. The question is reduced to the determination of whether
remanding the case for determination of civil damages and their assessment against the
defendant are to be considered as a modification of the punishment, by increasing the
penalty or otherwise, meted out to the defendant for the commission of the crime.

In this jurisdiction it is well settled that the civil liability of the accused must be
determined in the criminal action, unless the injured party expressly waives such liability
or reserves his right to have the civil damages determined in a separate action. Section
107 of General Orders No. 58 reads:jgc:chanrobles.com.ph

"The privileges now secured by law to the person claiming to be injured by the
commission of an offense to take part in the prosecution of the offense and to recover
damages for the injury sustained by reason of the same shall not be held to be abridged
by the provisions of this order; but such person may appear and shall be heard either
individually or by attorney at all stages of the case, and the court upon conviction of the
accused may enter judgment against him for the damages occasioned by his wrongful
act. It shall, however, be the duty of the promotor fiscal to direct the prosecution,
subject to the right of the person injured to appeal from any decision of the court
denying him a legal right."cralaw virtua1aw library

The procedure under the Spanish Code of Criminal Procedure for determining the civil
liability of persons accused of crime, referred to in above quoted section, has been
discussed by this court a number of times.

In Springer v. Odlin (3 Phil. Rep., 344), it was said: "By General Orders, No. 58, section
107, the privileges secured by the Spanish law to persons claiming to be injured by the
commission of an offense to take part in the prosecution of the offense and to recover
damages for the injury sustained by reason of the same, are preserved and remain in
force, and it is therein expressly provided that the court, upon conviction of the accused,
may enter judgment in favor of the injured person, against the defendant in the criminal
case for the damage occasioned by the wrongful act."cralaw virtua1aw library

In Finnick v. Peterson (6 Phil. Rep., 172), it was said: "This provision (art. 120, Penal
Code) makes it the duty of the court, when the right to personal property is in question
in a criminal cause, to order its return to the proper person, after giving all persons
interested a hearing, and the Code of Criminal Procedure provided a method for an
examination into the question of the right of the property."cralaw virtua1aw library

In Rakes v. Atlantic, Gulf & Pacific Co. (7 Phil. Rep., 359, 364), it was said: "According
to article 112 (of the Spanish Code of Criminal Procedure) the penal action once started,
the civil remedy should be sought therewith, unless it had been waived by the party
injured or been expressly reserve by him for civil proceedings for the future. If the civil
action alone was prosecuted, arising out of a crime that could be enforced only on
private complaint, the penal action thereunder should be extinguished."cralaw virtua1aw
library

Almeida v. Abaroa (8 Phil. Rep., 178), was a civil action for damages brought the
plaintiff against a person who had been previously acquitted on a criminal charge. It was
held that his acquittal in the criminal action was a complete bar to a civil action for
damages based upon the alleged criminal act of which the defendant had been accused.
In the course of this decision it was said:jgc:chanrobles.com.ph

"Instituting a criminal action only, it will be understood, brings the civil action as well,
unless the damaged or prejudiced person waives the same or expressly reserves the
right to institute the civil action after the termination of the criminal case, if there be any
reason therefor. (Art. 112 of the said Law of Criminal Procedure.)

"The right to bring the civil action, as reserved by the person damaged or prejudiced,
after the termination of the criminal case, is only permitted, if there be any reason
therefore, and so says the law, in the event that the judgment rendered in the criminal
cause is a finding of guilt against the accused; but if the accused be acquitted, then the
compliant in the civil action must be based on some fact and or cause distinct and
separate from the criminal act itself."cralaw virtua1aw library

The court then quotes from article 114 of the Spanish Code of Criminal Procedure which
provides:jgc:chanrobles.com.ph

"When a criminal proceeding is instituted for the judicial investigation of a crime or

misdemeanor, no civil action arising from the same act can be prosecuted; but the same
shall be suspended, if there be one, in whatever stage or state it may be found, until
final sentence in the criminal proceeding is pronounced.

"To prosecute a penal action it shall not be necessary that a civil action arising from the
same crime or misdemeanor be previously instituted."cralaw virtua1aw library

In United States v. Guy-Sayco (13 Phil. Rep., 292), it was said: "As to the penalty of
indemnity contained in the judgment appealed from and impugned by the defense,
article 17 of the Code reads: ’. . .;’ and according to the established rules of the courts,
in order that an accused person may be declared to have incurred civil liability, it is
sufficient that said liability shall proceed from, or be the consequence of the criminal
liability, and in addition thereto, article 122 of the said Code provides that the courts
shall regulate the amount of indemnity for damages under said civil liability, upon the
same terms as prescribed for the reparation of damage in article 121 of the Code, and a
finding on the matter should be contained in the judgment."cralaw virtua1aw library

As a further illustration of the procedure under the Spanish law of determining the civil
liability of the accused person, it may not be out of place to revert to the decision of the
supreme court of Spain of November 14, 1889. In this case the defendant was indicated
for robbery. During the trial, his civil liability was raised by the state’s prosecution
attorney, but in rendering judgment of conviction the trial court made no finding on this
issue. the state appealed, and the supreme court of Spain held that the court’s failure to
resolve the civil liability of the defendant was reversible error, and remanded the case
with instructions to determine this issue. It will be noted that this was precisely the
procedure outlined by this court in the case at bar.

Under the Spanish criminal law, an injured person had the right to intervene in the
prosecution of the accused for the purpose of having his damages ascertained. The trial
court was required to include the amount of these damages in the judgment of
conviction. The plain provisions of section 107 of our criminal procedure, quoted supra,
expressly preserves this right to the injured person. The refusal of the trial court to allow
the injured person to introduce evidence as to his damages is, therefore, clearly
prejudicial error.

We will first determine the soundness of the plea of double jeopardy had the lower court
not erred in the criminal proceedings by refusing to consider the civil liability of the of
the defendant. Had a finding of civil liability been made upon relevant evidence duly
taken, and stated in the judgment of conviction, would there have been double
jeopardy?

It is true that the connotation of the "twice in jeopardy" clause in the Philippine Bill must
be found in American jurisprudence. (Kepner v. U. S., 195 U. S., 100; 11 Phil. Rep.,
669.) It is also true that this clause refers exclusively to punishment by the state and
rendered to the state; that civil liability, as that term is used in the United States,
attaches to most crimes and misdemeanors; that, as a general rule, the civil liability of a
criminal can not be made an issue in the criminal proceedings, but must be adjudicated
and determined in a separate, civil action; that civil liability is due to the person injured
and criminal liability to the sovereign; that the criminal proceeding is not a bar to the
civil action, or vice versa; and that the twice in jeopardy clause refers only to criminal
prosecutions. We take these statements to be axiomatic, and therefore unnecessary of
annotation. But we quote from one well considered case which practically covers all of
these propositions:jgc:chanrobles.com.ph

"The cases generally hold that the rule in criminal cases, that one shall not twice be put
in jeopardy, implies more than the bar of a judgment to an action for the same cause.
But no case is known where a conviction upon an indictment has been held a bar to a
civil action for damages growing out of the same act; a fortiori, none in which a recovery
in a civil action has been held a bar to an indictment for the same act. And the whole
purview of section 8 plainly shows that the putting in jeopardy prohibited is confined to
criminal prosecutions. Indeed, this is manifest in the clause itself, which is confined to
the same offense, used in the same sense as criminal offense in the first clause of the
section. Of course the same act may be an offense (in the sense of crime) against the
State, and an offense (in the sense of tort) against a private person. It is manifest that
judgment for the one is not a bar to the other. And it might be difficult, in principle, to
hold a criminal conviction as a bar to the recovery of punitory damages; in a civil action,
and not a bar to the recovery of compensatory damages; not a bar to any civil action.
See Jacks v. Bell, 3 C. & P., 316." (Brown v. Swineford, 44 Wis., 282; 28 Am. Rep., 582,
per Ryan, C.J. )

What is the nature of the civil liability imposed upon criminals by the provisions of the
Penal Code? If it be the same as the civil liability known to American authorities, then it
has nothing to do with criminal liability, and a fortiori, can the defense of "twice in
jeopardy" ever be utilized to prevent its imposition?

By article 17 of the Penal Code it is provided that "Every person criminally liable for a
felony or misdemeanor is also civilly liable."cralaw virtua1aw library

If it be urged that this is not true under American law, it may be said with equal
accuracy that it is not literally true under the Penal Code. As stated by both Groizard
(vol. 1, p. 697) and Viada (vol. 1, p. 391), there are a number of crimes, such as
contempt of court, attempts against the authorities, some of the offenses against
religious cults, etc., which are not usually attended with damages to third persons. As
stated by the first named commentator, this article must be understood to mean that
there is civil liability in those cases where private persons have suffered damages. And
this will be found to be substantially true in the United States.

Under the early common law, damages to a person injured by a crime were merged in
the punishment thereof. Later, it was held that there was no merger except in cases of
homicide, but that the remedy for the private wrong and injury must be suspended until
public justice had been vindicated by the confession or acquittal of the wrongdoer in a
criminal prosecution. (1 Cyc., 681.) But by statutory enactments are never merged.
(See for instance, N. Y. Ann. Code, sec. 1899, and Mairs v. B. & O. R. Co., 175 N. Y.,
409; La. Stat., 1904, sec. 985.) For specific crimes where civil liability attaches, see 33
Cyc., 1520, rape; 19 Cyc., 980, arson; 30 Cyc., 1578, abortion; 24 Cyc., 802,
kidnapping; 3 Cyc., 1066, assault and battery; 19 Cyc., 319, false imprisonment; 26
Cyc., 6, malicious prosecution. Although at common law there was no civil liability for
seduction, it has been created by statute in most jurisdictions: 35 Cyc., 1294. Wrongful
death, by statute, now carries with it civil liability: 13 Cyc., 310. Larcency and robbery:
25 Cyc., 55. Generally, in the United States, the owner of stolen property is entitled to
have it back irrespective of the conviction of the thief. Identified stolen goods may be
recovered even from a bona fide purchaser. Civil actions for debt, replevin, trover and
conversion, etc., lie in this class of cases. Malicious prosecution, under the common law
only a civil liability, is now by statute, a criminal offense also: 26 Cyc., 120. But aside
from these specific references, it would be sufficient to refer to the subject of torts,
which occupies a large field in Anglo-Saxon jurisprudence. In this branch of law,
pecuniary damages to the individual for injuries suffered by him are the controlling
question, and one of its cardinal principles is that there is no wrong without a remedy.
We may safely say, therefore, that civil liability coexist with criminal liability in the
United States, the same as it does here.

Now, are the elements of civil liability the same in the two countries? Article 119 of the
Penal Code reads:jgc:chanrobles.com.ph

"The civil liability established in Chapter II, Title II, of this book
comprises:jgc:chanrobles.com.ph

"1. Restitution;

"2. Reparation of the damage caused;

"3. Indemnification for consequential damages."cralaw virtua1aw library

What are restitution, reparation, and indemnification under this article? Of restitution,
there can be no doubt that it exists also in American law. Where property is taken from
its rightful owner, it must be restored if found, even though in possession of a bona fide
purchaser. Reparation is not so easily recognized. It is treated by both Groizard and
Viada as referring to damage caused to property in the commission of crimes such as
robbery, as opposed to damages suffered by injuries to the person, as in assaults and
homicide. It would appear that Groizard’s comment upon this provisions is justified when
he says that these two elements of civil liability could well have been expressed in a
single term. (Vol. 2, 621.) Taken together they are both allowable under the American
law of civil liability, and are usually designated without distinction as damages.

Does the fact that in this country civil liability is, as a rule, determined in the criminal
action transform it into criminal liability and thus make it a part of the punishment for
the crime? Certainly the mere form of a remedy should no affect its substance. And
there are many indications in the Penal Code that the civil liability therein imposed for
the commission of crimes was not intended to be merged into the punishment for the
crime. Article 71, 119-126, which provide for civil liability of offenders, are confined
strictly to that subject. Article 23 sharply defines one distinction between the criminal
and civil liability, in that the former can not be waived by a pardon of the party injured,
while the latter may be waived. The chapters of the Penal Code dealing with the
classification and duration of penalties (articles 25 to 62 inclusive), nowhere list the civil
liability attached to a crime. And article 133 provides that "Civil liability arising out of
crimes or misdemeanors shall be extinguished in the same manner as other obligations,
in accordance with the rules of civil law."cralaw virtua1aw library

In commenting upon this article, Groizard (vol. 2, p. 717), says:jgc:chanrobles.com.ph

"From crimes arise, as we know, two liabilities: criminal and civil. The first is
extinguished by the methods to which we have just adverted. The method of
terminating the second is not a subject of criminal law, but of civil law. . . .

"The character of this work does not permit us to tarry for further explanations. We
would not be commenting upon subjects included within the Penal Code but laws of a
purely civil character."cralaw virtua1aw library

And, as a complement of this article, article 1813 of the Civil Code provides that civil
liability attached to crimes may be compromised but that the criminal liability is not
thereby extinguished. Other distinctions might be noticed which show that there is no
merger of the two kinds of liability from the mere fact that they are tried together. But
these are, we think, sufficient to sustain the point.

There is, therefore, no new or foreign element in civil liability under the Penal Code of
this country as compared with civil liability under the American law. We do not consider
the practice in the United States of allowing punitive or exemplary damages as affecting
the question we are discussing. Here as there, civil damages are no part of the
punishment for the crime; here as there, they are rendered to the citizen and not to the
State.

As the civil liability is no part of the punishment for the crime, there would have been no
question of double jeopardy, and counsel for the defendant in effect so admits, had the
lower court not erred in refusing to consider the question of civil damages during the
course of the criminal proceedings. What was the effect of the action of this court in
affirming that judgment as to the guilt and punishment of the accused and of reversing
it as to the question of civil damage, with instructions to execute the punishment
imposed and to try the civil branch of the case? Bearing in mind the broad line of
demarkation between the civil liability of the accused and his criminal liability, the bare
fact that his civil liability was determined and fixed had nothing whatever to do with the
punishment imposed. The latter was not thereby affected. This being true, by what
reasoning could it be held that its determination prior or subsequent to the finding of
guilt was merged into and became a part of the punishment? If two lines are parallel,
they can not converge. This time intervening between the judgment of guilt and the
judgment of civil damages could in no way give to the latter the character of the former.

It is urged that in such a case as the present, the defendant might serve the term of
imprisonment fixed by the court as the punishment for his crime, and after the sentence
for civil damages and in case of his insolvency, he would have to return to prison to
serve the subsidiary imprisonment by reason of his insolvency, being argued that this
would constitute double jeopardy. Even so it is well settled that execution against the
person will issue in civil actions in case of personal injuries, and that this is not
imprisonment for debt or punishment for crime. It is in lieu of the payment of the
indemnity and is considered as a discharge thereof. If the payment of the indemnity is
not punishment for the crime, the imprisonment in lieu thereof is not punishment for the
crime.

The practice, in civil cases, of partially affirming and partially reversing judgment
appealed from, is well settled.

"Where a judgment appealed from consists of distinct and independent matters, so that
an erroneous portion thereof can be segregated from the parts that are correct, the
court will not set aside the entire judgment, but only so much as is erroneous, leaving
the residue undisturbed." (3 Cyc., 447.)

This rule is often applied to cases of tortious wrongs, where the culpability of the tort
feasor is established but there has been error in the assessment of damages. (Smith v.
Whittlesey, 79 Conn., 189; George v. Railroad, 214 Mo., 551; Austin & McCargar v.
Langlois, 83 Vt., 104.) In the present case, the civil liability of the defendant was
established, and the sole question determined upon the second trial was the amount of
civil damages. The plea of double jeopardy can not be allowed.

By their second assignment of error, counsel for the defendant urge that the amount of
damages, P50,500 awarded is excessive, and not supported by the evidence. There can
be no objection to allowing the physicians’ fees of P500 and P1,300 for the three
months’ salary, being the time the injured party was incapacitated from performing the
work in which he was then engaged. The remainder, P48,700, appears to have been
allowed on account of the permanent diminution of Sternberg’s ability to earn money.
The evidence of record does not establish such disability with that degree of certainly
which will justify an award for that purpose. We have reached this conclusion after a
most careful examination of all the testimony upon this point.

The award of damages is therefore reduced to P1,800, the defendant to suffer subsidiary
imprisonment, which in no event can exceed one-third of the principal penalty, in case of
insolvency. Costs in the instance de oficio. So ordered.
 EN BANC

[G.R. No. 10690. August 17, 1915. ]

THE UNITED STATES, Plaintiff-Appellee, v. REGINO NORIEGA and GORGONIA

TOBIAS, Defendants. REGINO NORIEGA, Appellant.

G. E. Campbell for Appellant.

Attorney-General Avanceña for Appellee.

SYLLABUS

1. ADULTERY; CIVIL DAMAGES IN CRIMINAL ACTION. — Held: That the offended person
in a criminal action for adultery is not entitled to recover indemnity. The Penal Code
contains no provision for indemnity in cases of adultery in a criminal action. There is no
law which permits the allowance oœ civil damages, an indemnity, as a part of the
criminal procedure in cases of adultery. Act No. 1773 provides for a civil action for
damages in cases of adultery, but the civil action is a separate and independent action
from the criminal action. The aggrieved person, or such person’s parents, grandparents,
or guardian, may bring a civil action and recover civil damages from the guilty person in
cases of adultery. The civil action must be a separate and distinct action from the
criminal action.

2. CRIMINAL LAW; REVIEW; QUESTIONS PASSED "SUB SILENTIO." — Generally

speaking, it may be said that passing a point or question sub silentio may be evidence of
consent or conformity yet, nevertheless, the fact that the courts have passed unnoticed
particular questions not raised or discussed by the parties does not thereby ipso facto
become binding on the court; neither should such questions decided in that manner be
considered as a precedent, until the question has been squarely presented to the court
and passed upon.

DECISION

JOHNSON, J.  :

The present criminal proceedings were commenced by the presentation of a complaint

by Gaudencio Tesoro, the husband of the said Gorgonia Tobias, in the court of the
justice of the peace of the municipality of Santa Cruz. A preliminary examination was
held by said justice of the peace and the defendants were held for trial by the Court of
First Instance. Later the cause was brought on for trial in the Court of First Instance. The
defendants were duly arraigned. Upon arraignment each plead not guilty. Later the
defendant, Gorgonia Tobias, asked for and obtained permission from the court to
withdraw her plea of not guilty and to substitute therefor the plea of guilty. The trial
proceeded against the defendant, Regino Noriega, at the close of which the Honorable
Pedro Concepcion, judge, found each of the defendants guilty of the crime charged and
sentenced the defendant, Regino Noriega, to be imprisoned for a period of five years of
prision correccional, with the accessory penalties provided for by law, to indemnify the
offended person in the sum of P500, and in case of insolvency to suffer subsidiary
imprisonment in accordance with the provisions of the law, and to pay one-half the
costs. Gorgonia Tobias was sentenced to be imprisoned for a period of one year and six
months of prision correccional with the accessory penalties provided for by the law, and
to pay one-half the costs. From that sentence the defendant Regino Noriega appealed to
this court and made several assignments of error. All of the assignments of error
relating to the appellant present questions of fact only.

An examination of the record brought to this court shows, beyond a reasonable doubt,
that the defendant and appellant is guilty of the crime charged in the complaint. In view
of the very careful analysis of the proof made by the lower court we find no reason now
for analyzing the same again. The defendant and appellant has been informed of the
facts upon which the lower court relied for its conclusions. A restatement of the facts, in
our judgment, can serve no good purpose.

There is one question, however, presented by the decision of the lower court which
neither the appellant nor the appellee has discussed. The lower court imposed a fine of
indemnity against the appellant in the sum of P500. We are unable to find any provision
of law justifying a judgment of indemnity in cases like the present. There was no
foundation laid in the complaint for indemnity neither was there any proof adduced
during the trial of the cause supporting the conclusion of the lower court in that respect
That part of the sentence of the lower court must therefore be revoked.

After a careful examination of the evidence brought to this court and considering the fact
that the defendant had been treated with special confidence by the offended person, by
taking him into his house and furnishing him with food and lodging, we are of the
opinion that that fact should be treated as a special aggravating circumstance, and that
the defendant should be punished with the maximum penalty provided for by the law.
The sentence of five years of imprisonment fixed by the lower court is within the
maximum grade. It is, therefore, hereby ordered and decreed that a judgment be
entered sentencing the defendant to be imprisoned for a period of five years of prision
correccional, with the accessory penalties of the law, and to pay the costs of this action
and one-half the costs in the lower court. So ordered.

Arellano, C.J., Torres, Carson, Trent and Araullo, JJ., concur.

DECISION ON MOTION FOR REHEARING. OCTOBER 14, 1915.

JOHNSON, J. :

The defendants were charged with the crime of adultery. They were each found guilty
and sentenced. The defendant Regino Noriega appealed to this court. The lower court
found him guilty of the crime charged and sentenced him to be imprisoned for a period
of five years of prision correccional, with the accessory penalties provided for by the law,
and to indemnify the offended person in the sum of P500, and to pay the costs. The said
offended person was the husband of Gorgonia Tobias. This court, upon a consideration
of the appeal, modified the sentence of the lower court, relieving the appellant of the
necessity of paying the indemnity of P500 for the following reasons: first, that there is
no law justifying a judgment for indemnity in favor of offended persons in criminal action
for adultery; and second, that there was no foundation laid in the complaint for
indemnity neither was there any proof adduced during the trial of the cause supporting a
judgment for the sale.

Later the offended person, Gaudencio Tesoro, the husband of Gorgonia Tobias,
presented a motion for a rehearing, basing the same upon two grounds: first, that no
objection had been made by the appellant to that part of the sentence of the lower court
imposing the said indemnity of P500; that no assignment of error had been made by the
appellant; and that this court, by virtue of Rule 20, had inhibited itself from considering
said alleged error by providing that no errors except those affecting the jurisdiction
would be considered, unless stated in the assignments of error relied upon in the brief;
and second, that the Supreme Court had already established the doctrine in the case of
United States v. Destrito (23 Phil. Rep., 28) that indemnity in cases like the present
might be imposed in favor of the offended person.

With reference to the first ground of the motion it may be said that Rule 20 does not
apply to criminal cases. The appellants in criminal cases are not required to make
assignments of error. Criminal cases, in fact, are tried de novo in the Supreme Court,
that is to say, while the evidence is not taken again in the Supreme Court, all of the
evidence adduced during the trial of the cause is again examined. (U. S. v. Kepner, 1
Phil. Rep., 519; 195 U. S., 100; 11 Phil. Rep., 669.) It would follow therefore that the
Supreme Court has a right to take notice of every error in fact or in law committed by
the lower court, even though the same is not set out in an assignment of error by
the Appellant.

With reference to the second ground of the motion for a rehearing it may be said, first,
that the only authority cited by the appellant in support of his motion is the said case of
United States v. Destrito (supra). While in that case the lower court did impose
indemnity against the convicted persons and in favor of the offended person, it will be
noted upon reading the decision of this court that that question was not discussed.
Inasmuch as the question was not discussed we do not consider that decision as
constituting a precedent in favor of the doctrine contended for here by the offended
person. Where a question passes the court sub silentio, the case in which the question is
so passed is not binding on the court and should not be considered a precedent. (McGirr
v. Hamilton and Abreu, 30 Phil. Rep 563; U. S. v. More, 3 Cranch, 159, 172; Cannon v.
U S 116 U. S., 55; Snow v. U. S., 118 U. S., 346, 354; U. S v. Sanges, 144 U. S., 310,
317; Louisville Trust Co. v. Knott, 191 U. S., 225; Cross v. Burke, 146 U. S., 82.)

Having reached the conclusion that the case of United States v. Destrito does not
constitute a precedent upon the question which we are now discussing, we shall examine
the provisions of the law for the purpose of ascertaining whether or not there is any law
justifying indemnity in favor of the offended person in the crime of adultery.

Title IX of the Penal Code treats of "crimes against chastity." Chapter I of said title treats
of the crime of adultery. Chapter II treats of the crime of rape and unnatural crimes.
Chapter III treats of crimes of public scandal. Chapter IV treats of the crimes of
seduction and corruption of minors. Chapter V treats of the crime of abduction. The last
chapter of said title contains "provisions common to the preceding chapters" and of
course of the chapters of title IX.

From an examination of each of the chapters relating to the different crimes against
chastity, we find no provision justifying the courts in imposing indemnity in favor of the
offended person. In chapter VI, under the provisions common to the other chapters of
title IX, we find that article 449 provides for indemnity against the persons found guilty
of rape, seduction, or abduction. Nowhere is there any provision in the Penal Code for
indemnity in case of adultery. Neither have we found any decisions of the supreme court
of Spain allowing indemnity in cases like the present.

Act No. 1773 of the United States Philippine Commission however provides for indemnity
or damages in cases like the present. Said Act however provides that the persons
injured may bring a civil action and recover therein civil damages from the guilty person.
Said Act further provides that the action for civil damages shall be deemed to be an
additional remedy, apart from any other remedies which the existing law may afford.
(Act No. 1773, sec. 3.) It is clear that said Act provides that the civil damages provided
for therein shall be recovered in a separate and distinct civil action and not as an
incident to the criminal action, for the reason that said Act provides that: "Nothing
herein contained shall be so construed as to revoke, repeal, or modify any other civil
remedy which the existing law, in such cases, affords." In other words, in each of the
crimes provided for in title IX of the Penal Code in which there existed a civil remedy,
the same is not affected by the additional civil action provided for by section 3 of Act No.
1773.

After a careful consideration of the law and the facts, we have reached the following
conclusions: first, that there is no law applicable here which permits the allowance of
civil damages, as indemnity, as a part of the criminal procedure in case of adultery;
second, that Act No. 1773 provides for a civil action for damages in a case of adultery,
which civil action is a separate and independent action from the criminal action. Said Act
provides that the aggrieved person, or such person’s parents, grandparents, or
guardian, may also bring a civil action and recover therein civil damages from the guilty
person.

This provision, in our judgment, clearly contemplates that an action for damages in a
case of adultery must be a separate and distinct action from the criminal action, the
same as in a case of libel. (Ocampo v. Jenkins, 14 Phil. Rep., 681.)

For all of the foregoing reasons the motion for a rehearing is denied.
 EN BANC

G.R. No. L-39999 May 31, 1984

ROY PADILLA, FILOMENO GALDONES, ISMAEL GONZALGO and JOSE FARLEY

BEDENIA, petitioners,
vs.
COURT OF APPEALS, respondent.

Sisenando Villaluz, Sr. for petitioners.

The Solicitor General for respondent.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari of a Court of Appeals' decision which reversed the trial court's
judgment of conviction and acquitted the petitioners of the crime of grave coercion on the ground of
reasonable doubt but inspite of the acquittal ordered them to pay jointly and severally the amount of
P9,000.00 to the complainants as actual damages.

The petitioners were charged under the following information:

The undersigned Fiscal accused ROY PADILLA, FILOMENO GALDONES, PEPITO

BEDENIA, YOLLY RICO, DAVID BERMUNDO, VILLANOAC, ROBERTO ROSALES,
VILLANIA, ROMEO GARRIDO, JOSE ORTEGA, JR., RICARDO CELESTINO,
REALINGO alias "KAMLON", JOHN DOE alias TATO, and FOURTEEN (14) RICARDO
DOES of the crime of GRAVE COERCION, committed as follows:

That on or about February 8, 1964 at around 9:00 o'clock in the morning, in the
municipality of Jose Panganiban, province of Camarines Norte, Philippines, and within
the jurisdiction of this Honorable Court, the above- named accused, Roy Padilla,
Filomeno Galdones, Pepito Bedenia, Yolly Rico, David Bermundo, Villanoac, Roberto
Rosales, Villania, Romeo Garrido, Jose Ortega, Jr., Ricardo Celestino, Realingo alias
Kamlon, John Doe alias Tato, and Fourteen Richard Does, by confederating and
mutually helping one another, and acting without any authority of law, did then and there
wilfully, unlawfully, and feloniously, by means of threats, force and violence prevent
Antonio Vergara and his family to close their stall located at the Public Market, Building
No. 3, Jose Panganiban, Camarines Norte, and by subsequently forcibly opening the
door of said stall and thereafter brutally demolishing and destroying said stall and the
furnitures therein by axes and other massive instruments, and carrying away the goods,
wares and merchandise, to the damage and prejudice of the said Antonio Vergara and
his family in the amount of P30,000.00 in concept of actual or compensatory and moral
damages, and further the sum of P20,000.00 as exemplary damages.

That in committing the offense, the accused took advantage of their public positions:
Roy Padilla, being the incumbent municipal mayor, and the rest of the accused being
policemen, except Ricardo Celestino who is a civilian, all of Jose Panganiban,
Camarines Norte, and that it was committed with evident premeditation.
The Court of First Instance of Camarines Norte, Tenth Judicial District rendered a decision, the
dispositive portion of which states that:

IN VIEW OF THE FOREGOING, the Court finds the accused Roy Padilla, Filomeno Galdonez, Ismael
Gonzalgo and Jose Parley Bedenia guilty beyond reasonable doubt of the crime of grave coercion,
and hereby imposes upon them to suffer an imprisonment of FIVE (5) months and One (1) day; to
pay a fine of P500.00 each; to pay actual and compensatory damages in the amount of P10,000.00;
moral damages in the amount of P30,000.00; and another P10,000.00 for exemplary damages, jointly
and severally, and all the accessory penalties provided for by law; and to pay the proportionate costs
of this proceedings.

The accused Federico Realingo alias 'Kamlon', David Bermundo, Christopher Villanoac,
Godofredo Villania, Romeo Garrido, Roberto Rosales, Ricardo Celestino and Jose
Ortega, are hereby ordered acquitted on grounds of reasonable doubt for their criminal
participation in the crime charged.

The petitioners appealed the judgment of conviction to the Court of Appeals. They contended that the
trial court's finding of grave coercion was not supported by the evidence. According to the petitioners,
the town mayor had the power to order the clearance of market premises and the removal of the
complainants' stall because the municipality had enacted municipal ordinances pursuant to which the
market stall was a nuisance per se. The petitioners stated that the lower court erred in finding that the
demolition of the complainants' stall was a violation of the very directive of the petitioner Mayor which
gave the stall owners seventy two (72) hours to vacate the market premises. The petitioners
questioned the imposition of prison terms of five months and one day and of accessory penalties
provided by law. They also challenged the order to pay fines of P500.00 each, P10,000.00 actual and
compensatory damages, P30,000.00 moral damages, P10,000.00 exemplary damages, and the costs
of the suit.

The dispositive portion of the decision of the respondent Court of Appeals states:

WHEREFORE, we hereby modify the judgment appealed from in the sense that the
appellants are acquitted on ground of reasonable doubt. but they are ordered to pay
jointly and severally to complainants the amount of P9,600.00, as actual damages.

The petitioners filed a motion for reconsideration contending that the acquittal of the defendants-
appellants as to criminal liability results in the extinction of their civil liability. The Court of Appeals
denied the motion holding that:

xxx xxx xxx

... appellants' acquittal was based on reasonable doubt whether the crime of coercion
was committed, not on facts that no unlawful act was committed; as their taking the law
into their hands, destructing (sic) complainants' properties is unlawful, and, as evidence
on record established that complainants suffered actual damages, the imposition of
actual damages is correct.

Consequently, the petitioners filed this special civil action, contending that:

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW OR GRAVELY

ABUSED ITS DISCRETION IN IMPOSING UPON PETITIONERS PAYMENT OF
 DAMAGES TO COMPLAINANTS AFTER ACQUITTING PETITIONERS OF THE
CRIME CHARGED FROM WHICH SAID LIABILITY AROSE.

II

THE COURT OF APPEALS ERRED IN HOLDING IN ITS RESOLUTION DATED

DECEMBER 26, 1974 THAT SINCE APPELLANTS' ACQUITTAL WAS BASED ON
REASONABLE DOUBT, NOT ON FACTS THAT NO UNLAWFUL ACT WAS
COMMITTED, THE IMPOSITION OF ACTUAL DAMAGES IS CORRECT.

III

THE COURT OF APPEALS COMMITTED A LEGAL INCONSISTENCY, IF NOT PLAIN

JUDICIAL ERROR, IN HOLDING IN ITS APPEALED RESOLUTION THAT
PETITIONERS COMMITTED AN UNLAWFUL ACT, THAT IS TAKING THE LAW INTO
THEIR HANDS, DESTRUCTING (sic) 'COMPLAINANTS' PROPERTIES', AFTER
HOLDING IN ITS MAIN DECISION OF NOVEMBER 6,1974 THAT THE ACTS FOR
WHICH THEY WERE CHARGED DID NOT CONSTITUTE GRAVE COERCION AND
THEY WERE NOT CHARGED OF ANY OTHER CRIME.

IV

THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONERS HEREIN,

APPELLANTS IN CA-G.R. NO. 13456CR, JOINTLY AND SEVERALLY, TO PAY
COMPLAINANTS P9,600.00 IN SUPPOSED ACTUAL DAMAGES.

The issue posed in the instant proceeding is whether or not the respondent court committed a
reversible error in requiring the petitioners to pay civil indemnity to the complainants after acquitting
them from the criminal charge.

Petitioners maintain the view that where the civil liability which is included in the criminal action is that
arising from and as a consequence of the criminal act, and the defendant was acquitted in the
criminal case, (no civil liability arising from the criminal case), no civil liability arising from the criminal
charge could be imposed upon him. They cite precedents to the effect that the liability of the
defendant for the return of the amount received by him may not be enforced in the criminal case but
must be raised in a separate civil action for the recovery of the said amount (People v. Pantig, 97
Phil. 748; following the doctrine laid down in Manila Railroad Co. v. Honorable Rodolfo Baltazar, 49
O.G. 3874; Pueblo contra Abellera, 69 Phil. 623; People v. Maniago 69 Phil. 496; People v. Miranda,
5 SCRA 1067; Aldaba v. Elepafio 116 Phil. 457). In the case before us, the petitioners were acquitted
not because they did not commit the acts stated in the charge against them. There is no dispute over
the forcible opening of the market stall, its demolition with axes and other instruments, and the carting
away of the merchandize. The petitioners were acquitted because these acts were denominated
coercion when they properly constituted some other offense such as threat or malicious mischief.

The respondent Court of Appeals stated in its decision:

For a complaint to prosper under the foregoing provision, the violence must be
employed against the person, not against property as what happened in the case at bar.
...

xxx xxx xxx

 The next problem is: May the accused be convicted of an offense other than coercion?

From all appearances, they should have been prosecuted either for threats or malicious
mischief. But the law does not allow us to render judgment of conviction for either of
these offenses for the reason that they were not indicted for, these offenses. The
information under which they were prosecuted does not allege the elements of either
threats or malicious mischief. Although the information mentions that the act was by
means of threats', it does not allege the particular threat made. An accused person is
entitled to be informed of the nature of the acts imputed to him before he can be made
to enter into trial upon a valid information.

We rule that the crime of grave coercion has not been proved in accordance with law.

While appellants are entitled to acquittal they nevertheless are liable for the actual
damages suffered by the complainants by reason of the demolition of the stall and loss
of some of their properties. The extinction of the penal action does not carry with it that
of the civil, unless the extinction proceeds from a declaration in a final judgment that the
fact from which the civil might arise did not exist. (Rule 111, Sec. 3 (c), Rev. Rules of
Court; Laperal v. Aliza, 51 OG.R. 1311, People v. Velez, 44 OG. 1811). In the instant
case, the fact from which the civil might arise, namely, the demolition of the stall and
loss of the properties contained therein; exists, and this is not denied by the accused.
And since there is no showing that the complainants have reserved or waived their right
to institute a separate civil action, the civil aspect therein is deemed instituted with the
criminal action. (Rule 111, Sec. 1, Rev. Rules of Court).

xxx xxx xxx

Section 1 of Rule 111 of the Rules of Court states the fundamental proposition that when a criminal
action is instituted, the civil action for recovery of civil liability arising from the offense charged is
impliedly instituted with it. There is no implied institution when the offended party expressly waives
the civil action or reserves his right to institute it separately. (Morte Sr. v. Alvizo, Jr., 101 SCRA 221).

The extinction of the civil action by reason of acquittal in the criminal case refers exclusively to civil
liability ex delicto founded on Article 100 of the Revised Penal Code. (Elcano v. Hill, 77 SCRA 98;
Virata v. Ochoa, 81 SCRA 472). In other words, the civil liability which is also extinguished upon
acquittal of the accused is the civil liability arising from the act as a crime.

As easily as 1942, the Supreme Court speaking through Justice Jorge Bocobo in Barredo v. Garcia,
et at. 73 Phil. 607 laid down the rule that the same punishable act or omission can create two kinds of
civil liabilities against the accused and, where provided by law, his employer. 'There is the civil liability
arising from the act as a crime and the liability arising from the same act as a quasi-delict. Either one
of these two types of civil liability may be enforced against the accused, However, the offended party
cannot recover damages under both types of liability. For instance, in cases of criminal negligence or
crimes due to reckless imprudence, Article 2177 of the Civil Code provides:

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

Section 3 (c) of Rule 111 specifically provides that:

 Sec. 3. Other civil actions arising from offenses. — In all cases not included in the
preceding section the following rules shall be observed:

xxx xxx xxx

xxx xxx xxx

(c) Extinction of the penal action does not carry with it extinction of the civil, unless the
extinction proceeds from a declaration in a final judgment that the fact from which the
civil might arise did not exist. In other cases, the person entitled to the civil action may
institute it in the Jurisdiction and in the manner provided by law against the person who
may be liable for restitution of the thing and reparation or indemnity for the damage
suffered.

The judgment of acquittal extinguishes the liability of the accused for damages only when it includes a
declaration that the facts from which the civil might arise did not exist. Thus, the civil liability is not
extinguished by acquittal where the acquittal is based on reasonable doubt (PNB v. Catipon, 98 Phil.
286) as only preponderance of evidence is required in civil cases; where the court expressly declares
that the liability of the accused is not criminal but only civil in nature (De Guzman v. Alvia, 96 Phil.
558; People v. Pantig, supra) as, for instance, in the felonies of estafa, theft, and malicious mischief
committed by certain relatives who thereby incur only civil liability (See Art. 332, Revised Penal
Code); and, where the civil liability does not arise from or is not based upon the criminal act of which
the accused was acquitted (Castro v. Collector of Internal Revenue, 4 SCRA 1093; See Regalado,
Remedial Law Compendium, 1983 ed., p. 623). Article 29 of the Civil Code also provides that:

When the accused in a criminal prosecution is acquitted on the ground that his guilt has
not been proved beyond reasonable doubt, a civil action for damages for the same act
or omission may be instituted. Such action requires only a preponderance of evidence.
Upon motion of the defendant, the court may require the plaintiff to file a bond to answer
for damages in case the complaint should be found to be malicious.

If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court
shall so declare. In the absence of any declaration to that effect, it may be inferred from
the text of the decision whether or not the acquittal is due to that ground.

More recently, we held that the acquittal of the defendant in the criminal case would not constitute an
obstacle to the filing of a civil case based on the same acts which led to the criminal prosecution:

... The finding by the respondent court that he spent said sum for and in the interest of
the Capiz Agricultural and Fishery School and for his personal benefit is not a
declaration that the fact upon which Civil Case No. V-3339 is based does not exist. The
civil action barred by such a declaration is the civil liability arising from the offense
charged, which is the one impliedly instituted with the criminal action. (Section 1, Rule
III, Rules of Court.) Such a declaration would not bar a civil action filed against an
accused who had been acquitted in the criminal case if the criminal action is predicated
on factual or legal considerations other than the commission of the offense charged. A
person may be acquitted of malversation where, as in the case at bar, he could show
that he did not misappropriate the public funds in his possession, but he could be
rendered liable to restore said funds or at least to make a proper accounting thereof if
he shall spend the same for purposes which are not authorized nor intended, and in a
manner not permitted by applicable rules and regulations. (Republic v. Bello, 120 SCRA
203)
There appear to be no sound reasons to require a separate civil action to still be filed considering that
the facts to be proved in the civil case have already been established in the criminal proceedings
where the accused was acquitted. Due process has been accorded the accused. He was, in fact,
exonerated of the criminal charged. The constitutional presumption of innocence called for more
vigilant efforts on the part of prosecuting attorneys and defense counsel, a keener awareness by all
witnesses of the serious implications of perjury, and a more studied consideration by the judge of the
entire records and of applicable statutes and precedents. To require a separate civil action simply
because the accused was acquitted would mean needless clogging of court dockets and
unnecessary duplication of litigation with all its attendant loss of time, effort, and money on the part of
all concerned.

The trial court found the following facts clearly established by the evidence adduced by both the
prosecution and the defense:

xxx xxx xxx

(9) In the morning of February 8, 1964, then Chief Galdones, complying with the
instructions contained in said Memorandum No. 32 of the Mayor, and upon seeing that
Antonio Vergara had not vacated the premises in question, with the aid of his
policemen, forced upon the store or stall and ordered the removal of the goods inside
the store of Vergara, at the same time taking inventory of the goods taken out, piled
them outside in front of the store and had it cordoned with a rope, and after all the
goods were taken out from the store, ordered the demolition of said stall of Antonio
Vergara. Since then up to the trial of this case, the whereabouts of the goods taken out
from the store nor the materials of the demolished stall have not been made known.

The respondent Court of Appeals made a similar finding that:

On the morning of February 8th, because the said Vergaras had not up to that time
complied with the order to vacate, the co-accused Chief of Police Galdones and some
members of his police force, went to the market and, using ax, crowbars and hammers,
demolished the stall of the Vergaras who were not present or around, and after having
first inventoried the goods and merchandise found therein, they had them brought to the
municipal building for safekeeping. Inspite of notice served upon the Vergaras to take
possession of the goods and merchandise thus taken away, the latter refused to do so.

The loss and damage to the Vergaras as they evaluated them were:

Cost of stall construction P1,300.00

Value of furniture and equipment

judgment destroyed 300.00

Value of goods and equipment taken 8,000.00

P9,600.00

It is not disputed that the accused demolished the grocery stall of the complainants
Vergaras and carted away its contents. The defense that they did so in order to abate
what they considered a nuisance per se is untenable, This finds no support in law and in
fact. The couple has been paying rentals for the premises to the government which
 allowed them to lease the stall. It is, therefore, farfetched to say that the stall was a
nuisance per se which could be summarily abated.

The petitioners, themselves, do not deny the fact that they caused the destruction of the
complainant's market stall and had its contents carted away. They state:

On February 8, 1964, despite personal pleas on Vergaras by the Mayor to vacate the
passageways of Market Building No. 3, the Vergaras were still in the premises, so the
petitioners Chief of Police and members of the Police Force of Jose Panganiban,
pursuant to the Mayor' 6 directives, demolished the store of the Vergaras, made an
inventory of the goods found in said store, and brought these goods to the municipal
building under the custody of the Municipal Treasurer, ...

The only supposed obstacle is the provision of Article 29 of the Civil Code, earlier cited, that "when
the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved
beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted."
According to some scholars, this provision of substantive law calls for a separate civil action and
cannot be modified by a rule of remedial law even in the interests of economy and simplicity and
following the dictates of logic and common sense.

As stated by retired Judge J. Cezar Sangco:

... if the Court finds the evidence sufficient to sustain the civil action but inadequate to
justify a conviction in the criminal action, may it render judgment acquitting the accused
on reasonable doubt, but hold him civilly liable nonetheless? An affirmative answer to
this question would be consistent with the doctrine that the two are distinct and separate
actions, and win (a) dispense with the reinstituting of the same civil action, or one based
on quasi-delict or other independent civil action, and of presenting the same evidence:
(b) save the injured party unnecessary expenses in the prosecution of the civil action or
enable him to take advantage of the free services of the fiscal; and (c) otherwise resolve
the unsettling implications of permitting the reinstitution of a separate civil action
whether based on delict, or quasi-delict, or other independent civil actions.

... But for the court to be able to adjudicate in the manner here suggested, Art. 29 of the
Civil Code should be amended because it clearly and expressly provides that the civil
action based on the same act or omission may only be instituted in a separate action,
and therefore, may not inferentially be resolved in the same criminal action. To dismiss
the civil action upon acquittal of the accused and disallow the reinstitution of any other
civil action, would likewise render, unjustifiably, the acquittal on reasonable doubt
without any significance, and would violate the doctrine that the two actions are distinct
and separate.

In the light of the foregoing exposition, it seems evident that there is much sophistry and
no pragmatism in the doctrine that it is inconsistent to award in the same proceedings
damages against the accused after acquitting him on reasonable doubt. Such doctrine
must recognize the distinct and separate character of the two actions, the nature of an
acquittal on reasonable doubt, the vexatious and oppressive effects of a reservation or
institution of a separate civil action, and that the injured party is entitled to damages not
because the act or omission is punishable but because he was damaged or injured
thereby (Sangco, Philippine Law on Torts and Damages, pp. 288-289).
We see no need to amend Article 29 of the Civil Code in order to allow a court to grant damages
despite a judgment of acquittal based on reasonable doubt. What Article 29 clearly and expressly
provides is a remedy for the plaintiff in case the defendant has been acquitted in a criminal
prosecution on the ground that his guilt has not been proved beyond reasonable doubt. It merely
emphasizes that a civil action for damages is not precluded by an acquittal for the same criminal act
or omission. The Civil Code provision does not state that the remedy can be availed of only in a
separate civil action. A separate civil case may be filed but there is no statement that such separate
filing is the only and exclusive permissible mode of recovering damages.

There is nothing contrary to the Civil Code provision in the rendition of a judgment of acquittal and a
judgment awarding damages in the same criminal action. The two can stand side by side. A judgment
of acquittal operates to extinguish the criminal liability. It does not, however, extinguish the civil
liability unless there is clear showing that the act from which civil liability might arise did not exist.

A different conclusion would be attributing to the Civil Code a trivial requirement, a provision which
imposes an uncalled for burden before one who has already been the victim of a condemnable, yet
non-criminal, act may be accorded the justice which he seeks.

We further note the rationale behind Art. 29 of the Civil Code in arriving at the intent of the legislator
that they could not possibly have intended to make it more difficult for the aggrieved party to recover
just compensation by making a separate civil action mandatory and exclusive:

The old rule that the acquittal of the accused in a criminal case also releases him from
civil liability is one of the most serious flaws in the Philippine legal system. It has given
rise to numberless instances of miscarriage of justice, where the acquittal was due to a
reasonable doubt in the mind of the court as to the guilt of the accused. The reasoning
followed is that inasmuch as the civil responsibility is derived from the the criminal
offense, when the latter is not proved, civil liability cannot be demanded.

This is one of those cases where confused thinking leads to unfortunate and deplorable
consequences. Such reasoning fails to draw a clear line of demarcation between
criminal liability and civil responsibility, and to determine the logical result of the
distinction. The two liabilities are separate and distinct from each other. One affects the
social order and the other, private rights. One is for the punishment or correction of the
offender while the other is for reparation of damages suffered by the aggrieved party... it
is just and proper that, for the purposes of the imprisonment of or fine upon the
accused, the offense should be proved beyond reasonable doubt. But for the purpose of
indemnifying the complaining party, why should the offense also be proved beyond
reasonable doubt? Is not the invasion or violation of every private right to be proved
only by preponderance of evidence? Is the right of the aggrieved person any less
private because the wrongful act is also punishable by the criminal law? (Code
Commission, pp. 45-46).

A separate civil action may be warranted where additional facts have to be established or more
evidence must be adduced or where the criminal case has been fully terminated and a separate
complaint would be just as efficacious or even more expedient than a timely remand to the trial court
where the criminal action was decided for further hearings on the civil aspects of the case. The
offended party may, of course, choose to file a separate action. These do not exist in this case.
Considering moreover the delays suffered by the case in the trial, appellate, and review stages, it
would be unjust to the complainants in this case to require at this time a separate civil action to be
filed.
With this in mind, we therefore hold that the respondent Court of Appeals did not err in awarding
damages despite a judgment of acquittal.

WHEREFORE, we hereby AFFIRM the decision of the respondent Court of Appeals and dismiss the
petition for lack of merit.

SO ORDERED.
 THIRD DIVISION

G.R. No. 78911-25 December 11, 1987

CHARMINA B. BANAL, petitioner,
vs.
THE HON. TOMAS V. TADEO, JR., Presiding Judge, RTC-Quezon City, Branch 105 and Rosario
Claudia respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari to review and set aside the orders of the respondent Regional Trial
Court, Branch 105, Quezon City dated (1) 8 January 1987 which rejected the appearance of Atty.
Nicolito L. Bustos as private prosecutor in Criminal Cases Nos. Q-40909 to Q-40913 where
respondent Rosario Claudio is the accused for violation of Batas Pambansa Blg. 22; and (2) 31
March 1987 which denied the petitioner's motion for reconsideration of the order dated 8 January
1987; and for mandamus to allow Atty. Bustos to enter his appearance as private prosecutor in the
aforestated criminal cases.

It appears that fifteen (15) separate informations for violation of Batas Pambansa Blg. 22 or the
Bouncing Checks Law, docketed as Criminal Cases Nos. 40909-40913, were filed against
respondent Claudio before the Regional Trial Court of Quezon City and originally assigned to Branch
84.

The presiding judge of Branch 84 inhibited himself when respondent Claudio, through counsel, filed a
petition for recuse dated May 19,1986.

The cases were re-raffled and consequently assigned on June 25, 1986 to Branch 105 which was
then presided over by Judge Johnico G. Serquina

During these proceedings, respondent Claudio was finally arraigned on November 20, 1986 where
she pleaded not guilty to the charges. Pre-trial was then set on January 8, 1987.

In the meantime Judge Tomas V. Tadeo, Jr. replaced Judge Serquina as presiding judge of Branch
105.

On January 8, 1987, the respondent court issued an order rejecting the appearance of Atty. Nicolito
L. Bustos as private prosecutor on the ground that the charge is for the violation of Batas Pambansa
Blg. 22 which does not provide for any civil liability or indemnity and hence, "it is not a crime against
property but public order."

The petitioner, through counsel filed a motion for reconsideration of the order dated 8 January 1987
on March 10, 1987.

Respondent Claudio filed her opposition to the motion for reconsideration on March 25, 1987.

In an order dated 31 March 1987, the respondent court denied petitioner's motion for reconsideration.
Hence, this petition questioning the orders of the respondent Court.

The issue to be resolved is whether or not the respondent Court acted with grave abuse of discretion
or in excess of its jurisdiction in rejecting the appearance of a private prosecutor.

The respondents make capital of the fact that Batas Pambansa Blg. 22 punishes the act of knowingly
issuing worthless checks as an offense against public order. As such, it is argued that it is the State
and the public that are the principal complainants and, therefore, no civil indemnity is provided for by
Batas Pambansa Blg. 22 for which a private party or prosecutor may intervene.

On the other hand, the petitioner, relying on the legal axiom that "Every man criminally liable is also
civilly liable," contends that indemnity may be recovered from the offender regardless of whether or
not Batas Pambansa Blg. 22 so provides.

A careful study of the concept of civil liability allows a solution to the issue in the case at bar.

Generally, the basis of civil liability arising from crime is the fundamental postulate of our law that
"Every man criminally liable is also civilly liable" (Art. 100, The Revised Penal Code). Underlying this
legal principle is the traditional theory that when a person commits a crime he offends two entities
namely ( 1) the society in which he lives in or the political entity called the State whose law he had
violated; and (2) the individual member of that society whose person, right, honor, chastity or property
was actually or directly injured or damaged by the same punishable act or omission. However, this
rather broad and general provision is among the most complex and controversial topics in criminal
procedure. It can be misleading in its implications especially where the same act or omission may be
treated as a crime in one instance and as a tort in another or where the law allows a separate civil
action to proceed independently of the course of the criminal prosecution with which it is intimately
intertwined. Many legal scholars treat as a misconception or fallacy the generally accepted notion
that, the civil liability actually arises from the crime when, in the ultimate analysis, it does not. While
an act or omission is felonious because it is punishable by law, it gives rise to civil liability not so
much because it is a crime but because it caused damage to another. Viewing things pragmatically,
we can readily see that what gives rise to the civil liability is really the obligation and the moral duty of
everyone to repair or make whole the damage caused to another by reason of his own act or
omission, done intentionally or negligently, whether or not the same be punishable by law. In other
words, criminal liability will give rise to civil liability only if the same felonious act or omission results in
damage or injury to another and is the direct and proximate cause thereof. Damage or injury to
another is evidently the foundation of the civil action. Such is not the case in criminal actions for, to be
criminally liable, it is enough that the act or omission complained of is punishable, regardless of
whether or not it also causes material damage to another. (See Sangco, Philippine Law on Torts and
Damages, 1978, Revised Edition, pp. 246-247).

Article 20 of the New Civil Code provides:

Every person who, contrary to law, wilfully or negligently causes damage to another,
shall indemnify the latter for the same.

Regardless, therefore, of whether or not a special law so provides, indemnification of the offended
party may be had on account of the damage, loss or injury directly suffered as a consequence of the
wrongful act of another. The indemnity which a person is sentenced to pay forms an integral part of
the penalty imposed by law for the commission of a crime (Quemel v. Court of Appeals, 22 SCRA 44,
citing Bagtas v. Director of Prisons, 84 Phil. 692). Every crime gives rise to a penal or criminal action
for the punishment of the guilty party, and also to civil action for the restitution of the thing, repair of
the damage, and indemnification for the losses. (United States v. Bernardo, 19 Phil. 265).
Indeed one cannot disregard the private party in the case at bar who suffered the offenses committed
against her. Not only the State but the petitioner too is entitled to relief as a member of the public
which the law seeks to protect. She was assured that the checks were good when she parted with
money, property or services. She suffered with the State when the checks bounced.

In Lozano v. Hon. Martinez (G.R. No. 63419, December 18, 1986) and the cases consolidated
therewith, we held that "The effects of a worthless check transcend the private interests of the parties
directly involved in the transaction and touch the interests of the community at large." Yet, we too
recognized the wrong done to the private party defrauded when we stated therein that "The mischief it
creates is not only a wrong to the payee or the holder, but also an injury to the public."

Civil liability to the offended private party cannot thus be denied, The payee of the check is entitled to
receive the payment of money for which the worthless check was issued. Having been caused the
damage, she is entitled to recompense.

Surely, it could not have been the intendment of the framers of Batas Pambansa Big. 22 to leave the
offended private party defrauded and empty- handed by excluding the civil liability of the offender,
giving her only the remedy, which in many cases results in a Pyrrhic victory, of having to file a
separate civil suit. To do so, may leave the offended party unable to recover even the face value of
the check due her, thereby unjustly enriching the errant drawer at the expense of the payee. The
protection which the law seeks to provide would, therefore, be brought to naught.

The petitioner's intervention in the prosecution of Criminal Cases 40909 to 40913 is justified not only
for the protection of her interests but also in the interest of the speedy and inexpensive administration
of justice mandated by the Constitution (Section 16, Article III, Bill of Rights, Constitution of 1987). A
separate civil action for the purpose would only prove to be costly, burdensome, and time-consuming
for both parties and further delay the final disposition of the case. This multiplicity of suits must be
avoided. Where petitioner's rights may be fulIy adjudicated in the proceedings before the trial court,
resort t o a separate action to recover civil liability is clearly unwarranted.

WHEREFORE the petition is hereby GRANTED. The respondent court is ordered to permit the
intervention of a private prosecutor in behalf of petitioner Charmina B. Banal, in the prosecution of the
civil aspect of Criminasl Cases Nos. 40909 to 40913. The temporary restraining order issued by this
court a quo for further proceedings. This decision is immediately executory.

SO ORDERED.
 FIRST DIVISION

[G.R. No. L-4288. November 20, 1952.]

THE PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. JEAN L.

ARNAULT, Defendant-Appellant.

Estanislao Fernandez for Appellant.

Solicitor General Pompeyo Diaz and Solicitor Jesus A. Avanceña for Appellee.

SYLLABUS

1. CRIMINAL PROCEDURE; INFORMATION; ERRONEOUS SPECIFICATION OF THE LAW

VIOLATED. — The real nature of the crime charged in an information or complaint is
determined, not by the title of the complaint nor by the specification of the provision of
law alleged to have been violated, but by the facts alleged in the complaint or
information. So, an error in specifying a wrong provision of law applicable does not
vitiate the information if it clearly mentions the crime charged and recites the facts
constituting it.

2. TAXATION; INCOME TAX; INTERNAL REVENUE CODE, SECTION 55; PERSON HAVING
THE RECEIPT, CUSTODY, CONTROL OR DISPOSAL OF THE INCOME MAY BE MADE
LIABLE. — What is important in section 55 of the Revised Internal Revenue Code, and
which is the intent of the law particularly Title II of the code under which said section
falls, is that all gains, profits or income of a taxable class shall be charged and assessed
with the corresponding tax prescribed by said title, and that said tax should be paid
either by the owner of such profit or income of the proper person having the receipt,
custody, control or disposal of the same under it.

3. ID.; ID.; CONSTITUTIONAL LAW; DELEGATION OF LEGISLATIVE POWERS. — It is the

Legislature that declares who is, or who are, responsible for the payment of income tax
under a given set of facts or circumstances. The Collector of Internal Revenue merely
executes the law and under the circumstances, determines which of the two - the owner
or the agent - should and could have paid the income tax because he had the receipt,
custody, control or disposal of the income or profit. Where the alleged owner was not in
the Philippines, nor did he give the receipt, custody, control or disposal of the profit, nor
is it known whether he ever received any part of the same, but the accused had the
profit in his hands, under the law the accused was charged with the duty of making a
return of said income and pay the corresponding income tax for the owner of the income
or profit. In selecting the accused as the person criminally responsible, and to be
prosecuted, the Collector of Internal Revenue was merely enforcing and carrying out and
executing the law on income tax enacted by the Legislature, and it does not constitute a
delegation of legislative powers.

4. CRIMINAL PROCEDURE; INFORMATION; SPECIFICATION OF DATE OF YEAR WHEN

CRIME WAS COMMITTED. — The purpose of an information is to inform the accused of
the facts and acts constituting the offense charged, and as long as from the allegation of
the whole information the accused is apprised of said facts and acts, the information is
 complete and not defective. Where the information, in a criminal case of evasion of
payment of income tax, alleges that on or about the 29th day of May, 1950 and for
sometime prior thereto, the Rural Progress Administration paid P3,500,000 for two
estates, from which the accused received for another person a net profit of P1,480,000,
thereby subjecting him to the payment of the corresponding income tax which he
refused and neglected to pay despite repeated demands made upon him, it may fairly be
inferred that the two estates were sold before May 29, 1950, and so was the profit on
the sale received by the accused on or before that date, and therefore, the information
is substantially complete.

5. ID.; ID.; ID.; PERSON LIABLE FOR INCOME TAX MAY BE MADE TO PAY THE TAX FOR
PREVIOUS YEARS. — Even if the sale and the receipt of the income had taken place in
another year, say 1948 or 1947, the accused could still be held liable under section 73 of
the same Code, and if he had any doubt as to the exact time and year within which said
income was received, he could have asked that the information be made clear. But
where with the aid of counsel and after five witnesses for the prosecution had testified,
he pleaded guilty to the information, this is the best proof that he understood the
allegations of the information.

6. CRIMINAL LAW; PAYMENT OF INDEMNITY; INCOME TAX. — As the income tax and
the obligation to pay the same are created by statute, as well as its collection and
payment, and the Internal Revenue Code fails to provide for the collection of said tax in
criminal proceedings, conviction for failure or neglect to pay such tax does not include
payment of indemnity to the State in the amount of the tax not paid, nor can subsidiary
imprisonment be imposed in case of insolvency in the payment of such indemnity. The
government is free to avail itself of the civil remedies provided by the Internal Revenue
Code to collect the tax involved.

7. CRIMINAL LAW; PENALTY; TAX DELINQUENCY, OF RELATIVELY BIG AMOUNT. —

Where the tax delinquency is of a relatively large amount a higher penalty which should
include both fine and imprisonment may be imposed. In this case where the tax
delinquency is in the amount of P1,089,270, the accused is sentenced to three months
imprisonment, with the accessories of the law, in addition to the fine of P1,000 with
subsidiary imprisonment in case of insolvency.

DECISION

MONTEMAYOR, J.:

In the Court of First Instance of Manila appellant Jean L. Arnault was accused of a
violation of section 55 of the National Internal Revenue Code as amplified by section 206
of Revenue Regulations No. 2, in relation to section 121, of the same Code, committed
as follows:jgc:chanrobles.com.ph

"That on or about the 29th day of May, 1950, and for sometime prior thereto, in the City
of Manila, Philippines, the said accused, being then the Vice-President of the ’North
Manila Development Company, Inc.’ and of the ’Associated Estates, Inc.’, and duly
authorized by resolutions adopted by the respective Boards of Directors of the said two
corporations, to act for and represent the same as attorney-in-fact of Ernest H. Burt, a
non-resident alien, in the re-sale of the ’Hacienda de San Juan de Buenavista’, in the
province of Bulacan, and the ’Hacienda de Tambobong’, in the province of Rizal in favor
of the Rural Progress Administration, which paid the total sum of P3,500,000 for the said
two estates and from which the said accused received for said Ernest H. Burt a total net
profit of P1,480,000, the said accused being, therefore, the proper person having the
receipt, custody and control or disposal of the said net profit of P1,480,000, subject to
income tax, and as such, has the duty under the law to make payment of the
corresponding income tax, did then and there wilfully, and unlawfully fail, neglect and
refuse, despite repeated demands, to make such payment of the income tax in the
amount of P1,089,270 on the said net profit realized by said non- resident Ernest H.
Burt in the aforesaid transactions."cralaw virtua1aw library

In the course of the trial and after five witnesses for the prosecution had testified, the
defendant thru counsel asked that he be allowed to withdraw his plea of not guilty and
to enter a plea of guilty provided that all previous proceedings had be cancelled and
stricken from the record. With the consent of the prosecution, the court granted the
request and upon re-arraignment appellant entered a plea of guilty. Thereafter, he was
sentenced thus:jgc:chanrobles.com.ph

"WHEREFORE, the Court hereby sentences the accused, Jean L. Arnault, to pay a fine of
ONE THOUSAND PESOS (P1,000) with subsidiary imprisonment in case of insolvency, to
indemnify the Government of the Republic of the Philippines in the sum of ONE MILLION
EIGHTY-NINE THOUSAND TWO HUNDRED SEVENTY PESOS (P1,089,270), with
subsidiary imprisonment in case of insolvency, and to pay the costs."cralaw virtua1aw
library

From the record of the case we find that the only noncomformity of appellant and his
counsel with the above judgment was the indemnity of P1,089,270 with subsidiary
imprisonment in case of insolvency. That was to be expected because with defendant’s
plea of guilty, he must have known that imposition of a penalty was forthcoming, and
the penalty of a fine with no prison sentence, excluding of course the indemnity, was
relatively light.

However, in the brief for the appellant in support of his appeal, besides assailing the
payment of indemnity imposed by the trial court, he also attacks the sufficiency of the
information and the applicability of the provisions of law therein cited. Despite this
inconsistency of appellant, we shall proceed to discuss the legal points raised by him.

It is contended that section 121 of the National Internal Revenue Code mentioned in the
information is not applicable because it obviously refers to gift taxes, and that what is
applicable is section 73 of the same code regarding income tax. We agree to this
contention. However, the error in specifying the wrong provision of law applicable does
not vitiate the information. It is a well-settled rule that the real nature of the crime
charged in an information or complaint is determined not by the title of the complaint,
nor by the specification of the provision of law alleged to have been violated, but by the
facts alleged in the complaint or information. (People v. Oliveria, 67 Phil. 427 and the
authorities therein cited). The information here clearly mentions and recites the profit
realized in the sale of the two estates or haciendas, the income tax due on said profit or
income and the failure to pay said income tax. The defendant was therefore sufficiently
apprised of the provision of law that he had violated, which violation he admitted in his
plea of guilty.

Counsel for the appellant next argues that section 55 of the National Internal Revenue
Code mentioned in the information is not applicable. It is true that the first part of said
section is not entirely clear, but a careful examination of the whole section particularly
the last part shows that what is important in said section and which is applicable in the
present case is that the intent of the law particularly Title II of the code under which
falls section 55 is that all gains, profits or income of a taxable class shall be charged and
assessed with the corresponding tax prescribed by said title, and that said tax may be
paid either by the owner of such profit or income or the proper person having the
receipt, custody, control or disposal of the same under it which in the present case is
the Appellant.

It is next contended by appellant that the information describes appellant’s role as a

mere vice-president of the two corporations — North Manila Development Company, Inc.
and the Associated Estates, Inc. — which are the attorneys-in-fact of Burt in the sale of
the two estates, and that in holding appellant criminally responsible for failure to pay the
corresponding income tax the trial court failed to distinguish between the personality of
the two corporations and that of its officers. To dispose of this contention it is sufficient
to say that the information clearly alleges that appellant Arnault received the
P1,480,000 net profit for Ernest H. Burt. Arnault may have been the vice-president of
the two corporations in question but the fact is that he personally received the profit for
Burt and under section 55 of the National Internal Revenue Code the income tax on said
profit shall be paid by its owner or the person having the receipt, custody, control or
disposal of the same. Arnault had such receipt, custody, control or disposal of the money
received by him for Burt. That he received this money for Burt but not for the two
corporations he clearly admitted in his plea of guilty.

Then appellant argues that since the Internal Revenue Code provides that either the
owner of the profit or his agent who receives such profit or gain are liable for the
payment of the income tax and inasmuch as the Collector of Internal Revenue is given
the choice and discretion to hold criminally responsible and prosecute either one of them
for the evasion of the payment of the income tax, this constitutes a delegation of
legislative powers which is against the Constitution. We are unable to agree to this
contention. It is the Legislature that declares who is or who are responsible for the
payment of the income tax under a given set of facts or circumstances. The Collector of
Internal Revenue merely executes the law and under the circumstances, determines
which of the two — the owner or the agent — should and could have paid the income tax
because he had the receipt, custody, control or disposal of the income or profit. In the
present case, Burt was not in the Philippines. He did not have the receipt, custody,
control or disposal of the profit of P1,480,000. It is not known if he ever received any
part of this amount; but the appellant had that amount in his hands and under the law
he was charged with the duty of making a return of said income and pay the
corresponding income tax for the owner of the income or profit in whose behalf
according to the information he received the same. In selecting appellant Arnault as the
person criminally responsible, and to be prosecuted, the Collector of Internal Revenue
was merely enforcing and carrying out and executing the law on income tax
promulgated by the Legislature. As was said by this court in the case of Rubi v.
Provincial Board of Mindoro, 39 Phil., 660:jgc:chanrobles.com.ph

"The rule has nowhere been better stated in the early Ohio case decided by Judge
Ranney, and since followed in a multitude of cases, namely: ’The true distinction
therefore is between the delegation of power to make the law, which necessarily
involves a discretion as to what it shall be, and conferring an authority or discretion as
to its execution, to be exercised under and in pursuance of the law. The first cannot be
done; to the latter no valid objection can be made.’ (Cincinnati, W. & Z. R. Co. v.
Comm’rs, Clinton County [1852], 1 Ohio St., 88.) Discretion, as held by Chief Justice
Marshall in Wayman v. Southard [1825], 10 Wheat., 1) may be committed by the
Legislature to an executive department or official. The Legislature may make decisions
of executive departments or subordinate officials thereof, to whom it has committed the
execution of certain acts, final on questions of fact. (U. S. v. Kinkead [1918], 248 Fed.,
141.) The following tendency in the decisions is to give prominence to the ’necessity’ of
the case."cralaw virtua1aw library

It is next contended in behalf of the appellant that the information in this case is fatally
defective in that it does not allege or state the date and year when the profit was
earned; neither does it state when the two haciendas were sold by appellant or Burt.
The basis of this argument is that according to sections 45 and 51 of the National
Internal Revenue Code, the return for and payment of income tax for the income of the
preceding calendar year should be made on or before March 1st and on or before the
15th day of May, respectively, following the close of the calendar year, and that the
income for whose tax appellant is being charged in 1950 should have been earned the
preceding year of 1949, a statement and allegation absent in the information. This
objection by appellant is too technical. The purpose of an information is to inform
defendant of the facts and acts constituting the offense charged, and as long as from the
allegations of the whole information the defendant is apprised of said facts and acts, the
information is complete and not defective. Section 45 of the National Internal Revenue
Code provides that the income tax return shall be filed on or before the first day of
March of each year covering the income of the preceding calendar year and section 51 of
the same code provides that payment of income tax shall be made on or before the 15th
day of May following the close of the calendar year. The information alleges that on or
about the 29th day of May, 1950 and for sometime prior thereto, the Rural Progress
Administration paid P3,500,000 from which the defendant received for Burt a net profit
of P1,480,000, thereby subjecting him to the payment of the corresponding income tax
which he refused and neglected to pay despite repeated demands made upon him. From
all this, it may fairly be inferred that the two estates were sold before May 29, 1950; so
was the profit on the sale received by defendant on or before that date. The demand for
payment of the income tax was also made before that date. The sale of the two estates
and the receipt of the profit or income by defendant could not have been for any other
year except 1949 for the reason that as already stated, the return and payment of
income tax is required to be made on or before the first day of March and on or before
the 15th day of May, following the close of the calendar year within which the income
was received. But even if the sale and receipt of the income had taken place in another
year, say 1948 or 1947, defendant could still be held liable under section 73 of the same
code and if defendant had any doubt as to the exact time and year within which said
income was received, he could have asked that the information be made clear. The best
proof that he understood the allegations of the information is that with the aid of his
counsel and after five witnesses for the prosecution had testified, he pleaded guilty to
the charge.

Lastly, counsel for appellant contends that the trial court erred in sentencing him to
indemnify the Government in the amount of the tax due, namely, P1,089,270, with
subsidiary imprisonment in case of insolvency. We have carefully studied this phase of
the appeal and we agree with the appellant’s counsel as well as the Solicitor General
who agrees with him that there is no legal sanction for the imposition of payment of this
indemnity. It should be borne in mind that the tax and the obligation to pay the same
are all created by statute; so are its collection and payment governed by statute. While
section 73 of the National Internal Revenue Code provides for the imposition of the
penalty for refusal or neglect to pay income tax or to make a return thereof, by
imprisonment or fine, or both, it fails to provide for the collection of said tax in criminal
proceedings. As well contended by counsel for appellant, Chapters I and II of Title IX of
the National Internal Revenue Code provide only for civil remedies for the collection of
the income tax, and under section 316, the civil remedy is either by distraint of goods,
chattels, etc. or by judicial action. It is a commonly accepted principle of law that the
method prescribed by statute for the collection of taxes is generally exclusive, and
unless a contrary intent can be gathered from the statute, it shall be followed strictly. (3
Cooley, Law on Taxation, section 1326, pp. 621-623).

"SEC. 985. Exclusiveness of Statutory Remedy. — The rule as frequently stated is that
since taxes are not debts, but obligations imposed by statute, when the status provide a
remedy for the collection of taxes under given circumstances, payment of taxes must be
enforced in the manner thus provided, and the courts will not lend their aid to the
collection of taxes in any other form of action. In other words, where the statute which
creates the tax provides a special remedy for its collection, that remedy is exclusive."
(15 Am. Jur., 836).

Moreover, section 353 of our Internal Revenue Code throws some light on the intention
of the Legislature on this point. It reads thus:jgc:chanrobles.com.ph

"SEC. 353. Subsidiary penalty. — If the person convicted for violation of any of the
provisions of this Code has no property with which to meet the fine imposed upon him
by the court, or is unable to pay such fine, he shall be subject to a subsidiary personal
liability at the rate of one day for each two pesos and fifty centavos, subject to the rules
established in article 39 of the Revised Penal Code." (Italics supplied.)

If the law really contemplated the inclusion of indemnity in a conviction for violation of
the provisions of the code, particularly the income tax law, the above cited section 353
could have easily provided for subsidiary imprisonment for failure to pay any indemnity
included in the decision of conviction. The absence of such provision is clearly indicative
of the desire of the Legislature to exclude the collection and payment of a tax from the
criminal prosecution; and leave it to the civil remedies provided in the code, which are
quite adequate and effective, particularly that by distraint.
Article 100 of the Revised Penal Code provides that every person criminally liable for a
felony is also civilly liable. Article 10 of the same Code although providing that offenses
punishable under special laws are not subject to the provisions of said code, equally says
that the Revised Penal Code shall be supplementary to such laws, unless the latter
should specially provide the contrary. Under said article 10, this court in some cases like
homicide thru reckless negligence committed in violation of the Revised Motor Vehicle
Law (Act No. 3932) which is a special law, has applied the provisions of the Penal Code
particularly article 100 as regards the payment of indemnity and subsidiary
imprisonment in case of nonpayment of said indemnity. 1 However, the principle and the
philosophy underlying the civil liability of one violating a punishable act under the Penal
Code are wholly different from one incurring criminal liability under the Internal Revenue
Code. Under the Penal Code the offender incurs civil liability because of his criminal act.
In other words, the civil obligation flows from and is created by the criminal liability.
Under the Income Tax Law, however, it is the reverse. A person convicted incurs
criminal obligation because of failure to fulfill his civil obligation. The civil obligation to
pay tax precedes the criminal liability. This lack of similarity or analogy between criminal
liability under the Revised Penal Code and the criminal liability under the Income Tax
Law is another reason for not imposing the payment of civil indemnity in case of a
violation of the Income Tax Law.

We therefore hold that unless expressly provided by law, conviction for failure or neglect
to pay a tax does not include payment of indemnity to the State in the amount of the
tax not paid. So, it was grave error on the part of the trial court to sentence appellant to
pay this indemnity; so was that part of the decision imposing subsidiary imprisonment in
case of insolvency in the payment of the indemnity. In this connection, and to avoid any
doubt, we may say that the Government is free to avail itself of the civil remedies
provided by the Internal Revenue Code to collect the tax herein involved.

In his conclusion and recommendation, the Solicitor General holds that considering the
large amount of the tax delinquency involved, appellant should have been sentenced to
a higher penalty which should include both fine and imprisonment. We have given
considerable thought to his recommendation. That the tax delinquency is enormous,
there is no question. That the penalty should be proportionate is also reasonable. In our
deliberations, someone suggested that in imposing only a fine, without imprisonment,
the trial court exercised its discretion, which discretion should not be disturbed unless it
be found that there had been abuse thereof. Others however believe that it is highly
possible that the trial court may have thought that by sentencing appellant to pay the
indemnity of P1,089,270 with subsidiary imprisonment in case of insolvency, the offense
has been sufficiently punished, which indemnity and subsidiary imprisonment we are
now excluding from the decision. After more or less extensive deliberations the great
majority believe that because of the relatively large amount of the tax delinquency, the
penalty should be increased as recommended by the Solicitor General. In addition to the
fine of P1,000 with subsidiary imprisonment in case of insolvency, we hereby sentence
appellant to three (3) months imprisonment, with the accessories of the law.

With the modification of the decision appealed from by suppressing that portion
regarding the payment of indemnity in the amount of P1,089,270 and subsidiary
imprisonment in case of insolvency in the payment thereof, and the imposition of three
months imprisonment, said decision is hereby affirmed, with costs.
PDF 8

THIRD DIVISION

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.

GONZALES (for herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as attorney-in-fact, respondents.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of
land with its improvements located along Roosevelt Avenue in Quezon City entered into by the
parties sometime in January 1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter

referred to as Coronels) executed a document entitled "Receipt of Down Payment"
(Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
P1,190,000.00 — Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT
No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the
down payment above-stated.

On our presentation of the TCT already in or name, We will immediately execute the
deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of the P1,190,000.00.
 Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon
execution of the document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand
(P50,000.00) Pesos down payment;

3. Upon the transfer in their names of the subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.

On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz

(hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").

On February 6, 1985, the property originally registered in the name of the Coronels'
father was transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One
Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")

For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona
by depositing the down payment paid by Concepcion in the bank in trust for Ramona
Patricia Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back of
TCT No. 327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering
the same property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of
Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs
therein (now private respondents) proffered their documentary evidence accordingly marked as
Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting these same exhibits
as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits "1"
through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the
trial court gave them thirty (30) days within which to simultaneously submit their respective
memoranda, and an additional 15 days within which to submit their corresponding comment or reply
thereof, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was
then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989,
judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the
Quezon City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering

defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of
land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements
existing thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the
said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to
pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in
cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City
in the name of intervenor is hereby canceled and declared to be without force and
effect. Defendants and intervenor and all other persons claiming under them are hereby
ordered to vacate the subject property and deliver possession thereof to plaintiffs.
Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.

No pronouncement as to costs.

So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City
RTC but the same was denied by Judge Estrella T. Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render
anew decision by the undersigned Presiding Judge should be denied for the following
reasons: (1) The instant case became submitted for decision as of April 14, 1988 when
the parties terminated the presentation of their respective documentary evidence and
when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they
were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same should
be submitted to him for decision; (2) When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the
decision, when they met for the first time before the undersigned Presiding Judge at the
hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they
were deemed to have acquiesced thereto and they are now estopped from questioning
said authority of Judge Roura after they received the decision in question which
happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was
merely a Judge-on-detail at this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any pending incident submitted before this
Court during his incumbency. When he returned to his Official Station at Macabebe,
 Pampanga, he did not lose his authority to decide or resolve such cases submitted to
him for decision or resolution because he continued as Judge of the Regional Trial
Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule
and supported by jurisprudence is that a Judge to whom a case is submitted for
decision has the authority to decide the case notwithstanding his transfer to another
branch or region of the same court (Sec. 9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned
Presiding Judge, after a meticulous examination of the documentary evidence
presented by the parties, she is convinced that the Decision of March 1, 1989 is
supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul

Decision and Render Anew Decision by the Incumbent Presiding Judge" dated March
20, 1989 is hereby DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena,
Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents'
Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom
the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in
the affirmance of the trial court's decision, we definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case
at bar is the precise determination of the legal significance of the document entitled "Receipt of Down
Payment" which was offered in evidence by both parties. There is no dispute as to the fact that said
document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the
heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT
No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a
perfected contract of sale, which perforce, they seek to enforce by means of an action for specific
performance, petitioners on their part insist that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P.
Alcaraz, who left for the United States of America, said contract could not possibly ripen into a
contract absolute sale.
Plainly, such variance in the contending parties' contentions is brought about by the way each
interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever
relevant and admissible evidence may be available on record, this, Court, as were the courts below,
is now called upon to adjudge what the real intent of the parties was at the time the said document
was executed.

The Civil Code defines a contract of sale, thus:

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

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange
for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first
essential element is lacking. In a contract to sell, the prospective seller explicity reserves the transfer
of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the happening of an event, which
for present purposes we shall take as the full payment of the purchase price. What the seller agrees
or obliges himself to do is to fulfill is promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by the prospective buyer.
In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive condition
and 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.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective seller's obligation to sell the subject property by entering into a
contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the
Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment
of a suspensive condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely
abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed
by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with, but
to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfillment of the suspensive condition such
as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in
such case. Title to the property will transfer to the buyer after registration because there is no defect
in the owner-seller's title per se, but the latter, of course, may be used for damages by the intending
buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been
previous delivery of the subject property, the seller's ownership or title to the property is automatically
transferred to the buyer such that, the seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the seller's title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot
defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of
the contract entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural
and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212
SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down Payment" that they
—

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT
 No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and
ordinary idea conveyed is that they sold their property.

When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that
there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer
certificate of title was still in the name of petitioner's father, they could not fully effect such transfer
although the buyer was then willing and able to immediately pay the purchase price. Therefore,
petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after
which, they promised to present said title, now in their names, to the latter and to execute the deed of
absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale pertained to the sellers
themselves (the certificate of title was not in their names) and not the full payment of the purchase
price. Under the established facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that time, there would have been
no reason why an absolute contract of sale could not have been executed and consummated right
there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the
properly to private respondent upon the fulfillment of the suspensive condition. On the contrary,
having already agreed to sell the subject property, they undertook to have the certificate of title
changed to their names and immediately thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the
buyer with certain terms and conditions, promised to sell the property to the latter. What may be
perceived from the respective undertakings of the parties to the contract is that petitioners had
already agreed to sell the house and lot they inherited from their father, completely willing to transfer
full ownership of the subject house and lot to the buyer if the documents were then in order. It just
happened, however, that the transfer certificate of title was then still in the name of their father. It was
more expedient to first effect the change in the certificate of title so as to bear their names. That is
why they undertook to cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title
is issued in their names, petitioners were committed to immediately execute the deed of absolute
sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to
protect the seller against a buyer who intends to buy the property in installment by withholding
ownership over the property until the buyer effects full payment therefor, in the contract entered into
in the case at bar, the sellers were the one who were unable to enter into a contract of absolute sale
by reason of the fact that the certificate of title to the property was still in the name of their father. It
was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the
execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said
"Receipt of Down Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the
parties had agreed to a conditional contract of sale, consummation of which is subject only to the
successful transfer of the certificate of title from the name of petitioners' father, Constancio P.
Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh.
"D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation
thereof being the delivery of the property by means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally committed themselves to do as evidenced by the
"Receipt of Down Payment."

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at
bench. Thus,

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.

From the moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under
the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to
present the transfer certificate of title already in their names to private respondent Ramona P.
Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part,
was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
conclusively admitted that:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names
from our deceased father Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the downpayment above-stated". The sale was still subject
to this suspensive condition. (Emphasis supplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title to

the property under their names, there could be no perfected contract of sale. (Emphasis
supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code
expressly provides that:
 Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by
TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated
as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject
only to the suspensive condition that the sellers shall effect the issuance of new certificate title from
that of their father's name to their names and that, on February 6, 1985, this condition was fulfilled
(Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides —

Art. 1187. The effects of conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation . . .

In obligation to do or not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became
mutually due and demandable as of the time of fulfillment or occurrence of the suspensive
condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they
were then not yet the absolute owners of the inherited property.

We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to be extent and value of the inheritance of a person are transmitted through
his death to another or others by his will or by operation of law.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio
P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at
the point their father drew his last breath, petitioners stepped into his shoes insofar as the
subject property is concerned, such that any rights or obligations pertaining thereto became
binding and enforceable upon them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs.
Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have
been paid is rendered moot by the fact that they were able to effect the transfer of the title to the
property from the decedent's name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an
agreement at that time and they cannot be allowed to now take a posture contrary to that which they
took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil
Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive

upon the person making it, and cannot be denied or disproved as against the person
relying thereon.

Having represented themselves as the true owners of the subject property at the time of sale,
petitioners cannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them
and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible
the consummation thereof by going to the United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners
conclude, they were correct in unilaterally rescinding rescinding the contract of sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant
case. We note that these supposed grounds for petitioners' rescission, are mere allegations found
only in their responsive pleadings, which by express provision of the rules, are deemed controverted
even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are
absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We have
stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng
Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February
6, 1985, we cannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the contract
of sale, there being no express stipulation authorizing the sellers to extarjudicially rescind the contract
of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because
although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the
buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for
and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona
P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to
represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any
objection as regards payment being effected by a third person. Accordingly, as far as petitioners are
concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of
sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to
pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of
the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show
that they actually presented the new transfer certificate of title in their names and signified their
willingness and readiness to execute the deed of absolute sale in accordance with their agreement.
Ramona's corresponding obligation to pay the balance of the purchase price in the amount of
P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed
to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may
be considered in default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

xxx xxx xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis
supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a
case of double sale where Article 1544 of the Civil Code will apply, to wit:

Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.

Should if be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof to the person who presents
the oldest title, provided there is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer,
and (b) should there be no inscription by either of the two buyers, when the second buyer, in good
faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies
these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished
member of the Court, Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right).

Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights
except when the second buyer first registers in good faith the second sale (Olivares vs.
Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26
December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656),
it has held that it is essential, to merit the protection of Art. 1544, second paragraph,
 that the second realty buyer must act in good faith in registering his deed of sale (citing
Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02
September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the
subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels
and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean
title, she was unaware of any adverse claim or previous sale, for which reason she is buyer in good
faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer
was a buyer in good faith but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a
notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of
registration, therefore, petitioner Mabanag knew that the same property had already been previously
sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners' title to the property at the time of the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that
there was a previous sale of the same property to a third party or that another person
claims said property in a pervious sale, the registration will constitute a registration in
bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil.
554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985,
was correctly upheld by both the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned,
the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not
squarely raised in the instant petition, nor in such assumption disputed between mother and
daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this
point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.

SO ORDERED
 SECOND DIVISION

[G.R. No. 81100-01. February 7, 1990.]

BACOLOD-MURCIA MILLING CO., INC., Petitioner, v. HON. COURT OF APPEALS

AND ALONSO GATUSLAO, Respondents.

BACOLOD-MURCIA MILLING CO., INC., Petitioner, v. HON. COURT OF APPEALS,

ALONSO GATUSLAO, AGRO-INDUSTRIAL DEVELOPMENT OF SILAY-SARAVIA
(AIDSISA) AND BACOLOD-MURCIA AGRICULTURAL COOPERATIVE MARKETING
ASSOCIATION (BM-ACMA), Respondents.

Jalandoni, Herrera, Del Castillo & Associates for Petitioner.

Tañada, Vico & Tan for respondent AIDSISA.

San Juan, Gonzalez, San Agustin & Sinense for respondents Alfonso Gatuslao
and BM-ACMA.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS; FORCE MAJEURE; ELEMENTS. — This Court has

consistently ruled that when an obligor is exempted from liability under the aforecited
provision of the Civil Code for a breach of an obligation due to an act of God, the
following elements must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; (b) the debtor must be free from any
participation in, or aggravation of the injury to the creditor (Vasquez v. Court of
Appeals, 138 SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA
596 [1986]).

2. ID.; ID.; ID.; ID.; EVENT MUST BE IMPOSSIBLE TO FORESEE; CASE AT BAR. — In
the language of the law, the event must have been impossible to foresee, or if it could
be foreseen, must have been impossible to avoid. There must be an entire exclusion of
human agency from the cause of the injury or loss (Vasquez v. Court of Appeals, supra).
In the case at bar, despite its awareness that the conventional contract of lease would
expire in Crop Year 1964-1965 and that refusal on the part of any one of the landowners
to renew their milling contracts and the corresponding use of the right of way on their
lands would render impossible compliance of its commitments, petitioner took a
calculated risk that all the landowners would renew their contracts. Unfortunately, the
sugar plantation of Angela Estate, Inc. which is located at the entrance of the mill was
the one which refused to renew its milling contract. As a result, the closure of the
railway located inside said plantation paralyzed the entire transportation system. Thus,
the closure of the railway lines was not an act of God nor does it constitute force
majeure.
3. ID.; ID.; RECIPROCAL OBLIGATIONS; POWER TO RESCIND IS IMPLIED IN CASE
OBLIGOR FAILED TO COMPLY WITH OBLIGATION. — Under Article 1191 of the Civil
Code, the power to rescind obligations is implied in reciprocal ones in case one of the
obligors should not comply with what is incumbent upon him. In fact, it is well
established that the party who deems the contract violated may consider it revoked or
rescinded pursuant to their agreement and act accordingly, even without previous court
action (U.P. v. de los Angeles, 35 SCRA 102 [1970]; Luzon Brokerage Co., Inc. v.
Maritime Building Co., Inc., 43 SCRA 94 [1972]).

4. ID.; ID.; ID.; ID.; RESCISSION NOT PERMITTED FOR A SLIGHT OR CASUAL BREACH.
— It is the general rule, however, that rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental breach as would
defeat the very object of the parties in making the agreement. The question of whether
a breach of a contract is substantial depends upon the attendant circumstances
(Universal Food Corporation v. Court of Appeals, Et Al., 33 SCRA 1 [1970]).

5. ID.; ID.; ID.; OFFENDING PARTY HAS FORFEITED RIGHT TO ENFORCEMENT OF

TERMS OF CONTRACT. — BMMC cannot claim enforcement of the contract. As ruled by
this Court, by virtue of the violations of the terms of the contract, the offending party
has forfeited any right to its enforcement (Boysaw v. Interphil Promotions, Inc., 148
SCRA 645 [1987]).

DECISION

PARAS, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-
G.R. CV Nos. 59716-59717 promulgated on September 11, 1987 affirming in toto the
decision of the Court of First Instance of Negros Occidental in two consolidated civil
cases, the dispositive portion of which reads as follows:jgc:chanrobles.com.ph

"PREMISES CONSIDERED, the decision appealed from is hereby affirmed in toto."cralaw

virtua1aw library

The uncontroverted facts of the case 1 are as follows:jgc:chanrobles.com.ph

"1. . . .

"2. BMMC is the owner and operator of the sugar central in Bacolod City, Philippines;

"3. ALONSO GATUSLAO is a registered planter of the Bacolod-Murcia Mill District with
Plantation Audit No. 3-79, being a registered owner of Lot Nos. 310, 140, 141 and 101-A
of the Cadastral Survey of Murcia, Negros Occidental, otherwise known as Hda. San
Roque;

"4. On May 24, 1957 BMMC and Alonso Gatuslao executed an ‘Extension and
Modification of Milling Contract’ (Annex ‘A’ of the complaint in both cases) which was
registered on September 17, 1962 in the Office of the Register of Deeds of Negros
Occidental, and annotated on Transfer Certificates of Title Nos. T-24207, RT-2252, RT-
12035, and RT-12036 covering said Lot Nos. 310, 140, 141 and 101-A;

"5. That since the crop year 1957-1953 up to crop year 1967-1968, inclusive, Alonso
Gatuslao has been milling all the sugarcane grown and produced on said Lot Nos. 310,
140, 141 and 101-A with the Mill of BMMC;

"6. Since the crop year 1920-21 to crop year 1967-1963, inclusive, the canes of planters
adhered to the mill of BMMC were transported from the plantation to the mill by means
of cane cars and through railway system operated by BMMC;

"7. The loading points at which planters Alonso Gatuslao was and should deliver and
load all his canes produced in his plantation, Hda. San Roque, were at the Arimas Line,
Switch 2, and from which loading stations, BMMC had been hauling planter Gatuslao’s
sugar cane to its mill or factory continuously until the crop year 1967-68;

"8. BMMC had not been able to use its came cars and railway system for the cargo crop
year 1968-1969;

"9. Planter Alonso Gatuslao on various dates requested transportation facilities of BMMC
to be sent to his loading stations or switches for purposes of hauling and milling his
sugarcane crops of crop year 1968-1969;

"10. The estimated gross production of Hda. San Roque for the crop year 1968-1969 is
4,500 piculs."cralaw virtua1aw library

The records show that since the crop year 1920-1921 to the crop year 1967-1968, the
canes of the adhered planters were transported from the plantation to the mill of BMMC
by means of cane cars and through a railway system operated by BMMC which traversed
the land of the adherent planters, corresponding to the rights of way on their lands
granted by the planters to the Central for the duration of the milling contracts which is
for "un periodo de cuarenta y cinco anos o cosechas, a contar desde la cosecha de 1920-
1921" 2 (a period of 45 years or harvests, beginning with a harvest of 1920-1921).

BMMC constructed the railroad tracks in 1920 and the adherent planters granted the
BMMC a right of way over their lands as provided for in the milling contracts. The owners
of the hacienda Helvetia were among the signatories of the milling contracts. When their
milling contracts with petitioner BMMC expired at the end of the 1964-1965 crop year,
the corresponding right of way of the owners of the hacienda Helvetia granted to the
Central also expired.chanrobles lawlibrary : rednad

Thus, the BMMC was unable to use its railroad facilities during the crop year 1968-1969
due to the closure in 1968 of the portion of the railway traversing the hacienda Helvetia
as per decision of the Court in Angela Estate, Inc. and Fernando F. Gonzaga, Inc. v.
Court of First Instance of Negros Occidental, G.R. No. L-27084, (24 SCRA 500 [1968]).
In the same case the Court ruled that the Central’s conventional right of way over the
hacienda Helvetia ceased with the expiration of its amended milling contracts with the
landowners of the hacienda at the end of the 1964-1965 crop year and that in the
absence of a renewal contract or the establishment of a compulsory servitude of right of
way on the same spot and route which must be predicated on the satisfaction of the
preconditions required by law, there subsists no right of way to be protected.

Consequently, the owners of the hacienda Helvetia required the Central to remove the
railway tracks in the hacienda occupying at least 3,245 lineal meters with a width of 7
meters or a total of 22,715 square meters, more or less. That was the natural
consequence of the expiration of the milling contracts with the landowners of the
hacienda Helvetia (Angela Estate, Inc. and Fernando Gonzaga, Inc. v. Court of First
Instance of Negros Occidental, ibid). BMMC filed a complaint for legal easement against
the owners of the hacienda, with the Court of First Instance of Negros Occidental which
issued on October 4, 1965 an ex parte writ of preliminary injunction restraining the
landowners from reversing and/or destroying the railroad tracks in question and from
impeding, obstructing or in any way preventing the passage and operation of plaintiff’s
locomotives and cane cars over defendants’ property during the pendency of the
litigation and maintained the same in its subsequent orders of May 31, and November
26, 1966. The outcome of the case, however, was not favorable to the plaintiff BMMC. In
the same case the landowners asked this Court to restrain the lower court from
enforcing the writ of preliminary injunction it issued, praying that after the hearing on
the merits, the restraining order be made permanent and the orders complained of be
annulled and set aside. The Court gave due course to the landowner’s petition and on
August 10, 1967 issued the writ of preliminary injunction enjoining the lower court from
enforcing the writ of preliminary injunction issued by the latter on October 4, 1965.

The writ of preliminary injunction issued by the Court was lifted temporarily on motion
that through the mediation of the President of the Philippines the Angela Estate and the
Gonzaga Estate agreed with the Central to allow the use of the railroad tracks passing
through the hacienda Helvetia during the 1967-1968 milling season only, for the same
purpose for which they had been previously used, but it was understood that the lifting
of the writ was without prejudice to the respective rights and positions of the parties in
the case and not deemed a waiver of any of their respective claims and allegations in
G.R. No. L-27084 or in any other case between the same parties, future or pending. The
Court resolved to approve the motion only up to and including June 30, 1968 to give
effect to the agreement but to be deemed automatically reinstated beginning July 1,
1968 (Angela Estate, Inc. and Fernando F. Gonzaga, Inc. v. Court of First Instance of
Negros Occidental, ibid.)

The temporary lifting of the writ of preliminary injunction assured the milling of the
1967-1968 crop but not the produce of the succeeding crop years which situation was
duly communicated by the President and General Manager of the BMMC to the President
of Bacolod-Murcia Sugar Farmers Corporation (BMSFC) on January 2, 1968. 3

On October 30, 1968, Alonso Gatuslao, one of private respondents herein, and his wife,
Maria H. Gatuslao, filed Civil Case No. 8719 in the Court of First Instance of Negros
Occidental, against petitioner herein, Bacolod-Murcia Milling Co., Inc. (BMMC), for
breach of contract, praying among others, for the issuance of a writ of preliminary
mandatory injunction ordering defendant to immediately send transportation facilities
and haul the already cut sugarcane to the mill site and principally praying after hearing,
that judgment be rendered declaring the rescission of the milling contract executed by
plaintiffs and defendant in 1957 for seventeen (17) years or up to crop year 1973-74,
invoking as ground the alleged failure and/or inability of defendant to comply with its
specific obligation of providing the necessary transportation facilities to haul the
sugarcane of Gatuslao from plaintiff’s plantation specifically for the crop year 1967-
1968. Plaintiffs further prayed for the recovery of actual and compensatory damages as
well as moral and exemplary damages and attorney’s fees. 4

In answer, defendant BMMC claimed that despite its inability to use its railways system
for its locomotives and cane cars to haul the sugarcanes of all its adhered planters
including plaintiffs for the 1968-69 crop year allegedly due to force majeure, in order to
comply with its obligation, defendant hired at tremendous expense, private trucks as
prime movers for its trailers to be used for hauling of the canes, especially for those who
applied for and requested transportation facilities. Plaintiffs, being one of said planters,
instead of loading their cut canes for the 1968-69 crop on the cargo trucks of defendant,
loaded their cut canes on trucks provided by the Bacolod-Murcia Agricultural Cooperative
Marketing Association, Inc. (B-M ACMA) which transported plaintiffs’ canes of the 1968-
69 sugarcanes crop. Defendant prayed in its counterclaim for the dismissal of Civil Case
No. 8719 for the recovery of actual damages, moral and exemplary damages and for
attorney’s fees. 5

On November 21, 1968, BMMC filed in the same court Civil Case No. 8745 against
Alonso Gatuslao, the Agro-Industrial Development of Silay-Saravia (AIDSISA) and the
Bacolod-Murcia Agricultural Cooperative Marketing Associations, Inc. (B-M ACMA),
seeking specific performance under the mining contract executed on May 24, 1957
between plaintiff and defendant Alonso Gatuslao praying for the issuance of writs of
preliminary mandatory injunction to stop the alleged violation of the contract by
defendant Alonso Gatuslao in confederation, collaboration and connivance with
defendant BM-ACMA, AIDSISA, and for the recovery of actual, moral and exemplary
damages and attorney’s fees. 6

Defendant Alonso Gatuslao and the Bacolod-Murcia Agricultural Cooperative Marketing

Association, Inc. filed their answer on January 27, 1969 with compulsory counter-claims,
stating by way of special and affirmative defense, among others, that the case is barred
by another action pending between the same parties for the same cause of action. 7

Defendant Agro-Industrial Development Corporation of Silay-Saravia, Inc. filed its

answer on February 8, 1969, alleging among others by way of affirmative defense that
before it agreed to mill the sugarcane of its co-defendant Alonso Gatuslao, it carefully
ascertained and believed in good faith that: (a) plaintiff was incapable of milling the
sugarcane of AIDSISA’s co-defendant planters as well as the sugarcane of other planters
formerly adherent to plaintiff; (b) plaintiff had in effect agreed to a rescission of its
milling contracts with its adhered planters, including the defendant planter, because of
inadequate means of transportation and had warned and advised them to mill their
sugarcane elsewhere, and had thus induced them to believe, and act on the belief, that
it could not mill their sugarcane and that it would not object to their milling with other
centrals; and (c) up to now plaintiff is incapable of hauling the sugarcane of AlDSISA’s
co-defendants to plaintiff’s mill site for milling purposes.chanrobles virtual lawlibrary
The two cases, Civil Cases Nos. 8719 and 8745 were consolidated for joint trial before
Branch II of the Court of First Instance of Negros Occidental. 8 On September 8, 1969,
the parties in both civil cases filed their partial stipulation of facts which included a
statement of the issues raised by the parties. 9

On February 6, 1976, the lower court rendered judgment declaring the milling contract
dated May 24, 1957 rescinded. The dispositive portion of the decision 10
reads:jgc:chanrobles.com.ph

"WHEREFORE, judgment is hereby rendered as follows:chanrob1es virtual 1aw library

(1) In Civil Case No. 8719 the milling contract (Exh. "121") dated May 24, 1957 is
hereby declared rescinded or resolved and the defendant Bacolod-Murcia Company, Inc.
is hereby ordered to pay plaintiffs Alonso Gatuslao and Maria H. Gatuslao the amount of
P2,625.00 with legal interest from the time of the filing of the complaint by way of actual
damages; P5,000.00 as attorney’s fees and the costs of the suit; defendant’s
counterclaim is dismissed; and

(2) The complaint in Civil Case No. 8745 as well as the counterclaims therein are
ordered dismissed, without costs."cralaw virtua1aw library

Bacolod-Murcia Milling Co., Inc. defendant in Civil Case No. 8719 and plaintiff in Civil
Case No. 8745 appealed the case to respondent Court of Appeals which affirmed in toto
(Rollo, p. 81) the decision of the lower court. The motion for reconsideration filed by
defendant-appellant Bacolod-Murcia Milling Company, petitioner herein, was denied by
the appellate court for lack of merit. 11 Hence, this petition.

The issues 12 raised by petitioner are as follows:chanrob1es virtual 1aw library

WHETHER OR NOT THE CLOSURE OF PETITIONER’S RAILROAD LINES CONSTITUTE

FORCE MAJEURE.

II

WHETHER OR NOT PRIVATE RESPONDENT GATUSLAO HAS THE RIGHT TO RESCIND THE
MILLING CONTRACT WITH PETITIONER UNDER ARTICLE 1191 OF THE CIVIL CODE.

III

WHETHER OR NOT PRIVATE RESPONDENT GATUSLAO WAS JUSTIFIED IN VIOLATING

HIS MILLING CONTRACT WITH PETITIONER.

IV
WHETHER OR NOT PRIVATE RESPONDENTS GATUSLAO AND B-M ACMA ARE GUILTY OF
BAD FAITH IN THE EXERCISE OF THEIR DUTIES AND ARE IN ESTOPPEL TO QUESTION
THE ADEQUACY OF THE TRANSPORTATION FACILITIES OF PETITIONER AND ITS
CAPACITY TO MILL AND HAUL THE CANES OF ITS ADHERENT PLANTERS.

The crux of the issue is whether or not the termination of petitioner’s right of way over
the hacienda Helvetia caused by the expiration of its amended milling contracts with the
landowners of the lands in question is a fortuitous event or force majeure which will
exempt petitioner BMMC from fulfillment of its contractual obligations.

It is the position of petitioner Bacolod-Murcia Milling Co., Inc. (BMMC) that the closure of
its railroad lines constitute force majeure, citing Article 1174 of the Civil Code,
exempting a person from liability for events which could not be foreseen or which
though foreseen were inevitable.

This Court has consistently ruled that when an obligor is exempted from liability under
the aforecited provision of the Civil Code for a breach of an obligation due to an act of
God, the following elements must concur: (a) the cause of the breach of the obligation
must be independent of the will of the debtor; (b) the event must be either unforseeable
or unavoidable; (c) the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; (b) the debtor must be free from any
participation in, or aggravation of the injury to the creditor (Vasquez v. Court of
Appeals, 138 SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA
596 [1986]). Applying the criteria to the instant case, there can be no other conclusion
than that the closure of the railroad tracks does not constitute force majeure.

The terms of the milling contracts were clear and undoubtedly there was no reason for
BMMC to expect otherwise. The closure of any portion of the railroad track, not
necessarily in the hacienda Helvetia but in any of the properties whose owners decided
not to renew their milling contracts with the Central upon their expiration, was
forseeable and inevitable.chanrobles.com:cralaw:red

Petitioner Central should have anticipated and should have provided for the eventuality
before committing itself. Under the circumstances it has no one to blame but itself and
cannot now claim exemption from liability.

In the language of the law, the event must have been impossible to foresee, or if it
could be foreseen, must have been impossible to avoid. There must be an entire
exclusion of human agency from the cause of the injury or loss (Vasquez v. Court of
Appeals, supra). In the case at bar, despite its awareness that the conventional contract
of lease would expire in Crop Year 1964-1965 and that refusal on the part of any one of
the landowners to renew their milling contracts and the corresponding use of the right of
way on their lands would render impossible compliance of its commitments, petitioner
took a calculated risk that all the landowners would renew their contracts. Unfortunately,
the sugar plantation of Angela Estate, Inc. which is located at the entrance of the mill
was the one which refused to renew its milling contract. As a result, the closure of the
railway located inside said plantation paralyzed the entire transportation system. Thus,
the closure of the railway lines was not an act of God nor does it constitute force
majeure. It was due to the termination of the contractual relationships of the parties, for
which petitioner is charged with knowledge. Verily, the lower court found that the Angela
Estate, Inc. notified BMMC as far back as August or September 1965 of its intention not
to allow the passage of the railway system thru its land after the aforesaid crop year.
Adequate measures should have been adopted by BMMC to forestall such paralyzation
but the records show none. All its efforts were geared toward the outcome of the court
litigation but provided no solutions to the transport problem early enough in case of an
adverse decision.

The last three issues being inter-related will be treated as one. Private respondent
Gatuslao filed an action for rescission while BMMC filed in the same court an action
against Gatuslao, the Agro Industrial Development Silay Saravia (AIDSISA) and the
Bacolod-Murcia Agricultural Cooperative Marketing Association, Inc. (B-M ACMA) for
specific performance under the milling contract.

There is no question that the contract in question involves reciprocal obligations; as such
party is a debtor and creditor of the other, such that the obligation of one is dependent
upon the obligation of the other. They are to be performed simultaneously so that the
performance of one is conditioned upon the simultaneous fulfillment of the other
(Boysaw v. Interphil Promotions, Inc., 148 SCRA 643 [1987]).chanrobles virtual
lawlibrary

Under Article 1191 of the Civil Code, the power to rescind obligations is implied in
reciprocal ones in case one of the obligors should not comply with what is incumbent
upon him. In fact, it is well established that the party who deems the contract violated
may consider it revoked or rescinded pursuant to their agreement and act accordingly,
even without previous court action (U.P. v. de los Angeles, 35 SCRA 102 [1970]; Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 94 [1972]).

It is the general rule, however, that rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental breach as would
defeat the very object of the parties in making the agreement. The question of whether
a breach of a contract is substantial depends upon the attendant circumstances
(Universal Food Corporation v. Court of Appeals, Et Al., 33 SCRA 1 [1970]).

The issue therefore, hinges on who is guilty of the breach of the milling
contract.chanroblesvirtualawlibrary

Both parties are agreed that time is of the essence in the sugar industry; so that the
sugarcanes have to be milled at the right time, not too early or too late, if the quantity
and quality of the juice are to be assured. As found by the trial court, upon the
execution of the amended milling contract on May 24, 1957 for a period of 17 crop
years, BMMC undertook expressly among its principal prestations not only to mill
Gatuslao’s canes but to haul them by railway from the loading stations to the mill. Atty.
Solidum, Chief Legal Counsel and in Charge of the Legal-Crop Loan Department of the
BMMC Bacolod City admits that the mode of transportation of canes from the fields to
the mill is a vital factor in the sugar industry; precisely for this reason the mode of
transportation or hauling the canes is embodied in the milling contract. 13 But BMMC is
now unable to haul the canes by railways as stipulated because of the closure of the
railway lines; so that resolution of this issue ultimately rests on whether or not BMMC
was able to provide adequate and efficient transportation facilities of the canes of
Gatuslao and the other planters milling with BMMC during the crop year 1968-1969. As
found by both the trial court and the Court of Appeals, the answer is in the negative.

Armando Guanzon, Dispatcher of the Transportation Department of BMMC testified that

when the Central was still using the railway lines, it had between 900 to 1,000 cane cars
and 10 locomotives, each locomotive pulling from 30 to 50 cane cars with maximum
capacity of 8 tons each. 14 This testimony was corroborated by Rodolfo Javelosa,
Assistant Crop Loan Inspector in the Crop Loan Department of petitioner. 15 After the
closure of the railway lines, petitioner on February 5, 1968 through its President and
General Manager, informed the National Committee of the National Federation of
Sugarcane Planters that the trucking requirement for hauling adherent planters produce
with a milling average of 3,500 tons of canes daily at an average load of 5 tons per truck
is not less than 700 trucks daily plus another 700 empty trucks to be shuttled back to
the plantations to be available for loading the same day. 16 Guanzon, however, testified
that petitioner had only 280 units of trailers, 20 tractors and 3 trucks plus 20 trucks
more or less hired by the Central and given as repartos (allotments) to the different
planters. 17 The 180 trailers that the Central initially had were permanently leased to
some planters who had their own cargo trucks while out of the 250 BMMC trailers
existing during the entire milling season only 70 were left available to the rest of the
planters pulled by 3 trucks. 18

It is true that BMMC purchased 20 units John Deere Tractors (prime movers) and 230
units, Vanguard Trailers with land capacity of 3 tons each but that was only on October
1968 as registered in the Land Transportation Commission, Bacolod City. 19

The evidence shows that great efforts had been exerted by the planters to enter into
some concrete understanding with BMMC with a view of obtaining a reasonable
assurance that the latter would be able to haul and mill their canes for the 1968-1969
crop year, but to no avail. 20

As admitted by BMMC itself, in its communications with the planters, it is not in a

position to provide adequate transportation for the canes in compliance with its
commitment under the milling contract. Said communications 21 were quoted by the
Court of Appeals as follows:jgc:chanrobles.com.ph

"We are sorry to inform you that unless we can work out a fair and equitable solution to
this problem of closure of our railroad lines, the milling of your canes for the crop year
1968-69 would be greatly hampered to the great detriment of our economy and the near
elimination of the means of livelihood of most planters and the possible starvation of
thousands of laborers working in the sugar District of Bacolod-Murcia Milling Co."cralaw
virtua1aw library

and

"We are fully conscious of our contractual obligations to our existing Milling Contract.
But, if prevented by judicial order we will find ourselves unable to serve you in the
hauling of the canes through our railroad lines. It is for this reason that we suggest you
explore other solutions to the problem in the face of such an eventuality so that you
may be able to proceed with the planting of your canes with absolute peace of mind and
the certainty that the same will be properly milled and not left to rot in the fields.

also,

"In the meantime, and before July 1, 1968, the end of the temporary arrangement we
have with Fernando Gonzaga, Inc. and the Angela Estate, Inc. for the use of the rights
of ways, our lawyers are studying the possibility of getting a new injunction from the
Supreme Court or the Court of First Instance of Negros Occidental based on the new
grounds interposed in said memorandum not heretofore raised previously nor in the
Capitol Subdivision case. And if we are doing this, it is principally to prevent any injury
to your crops or foreclosure of you property, which is just in line with the object of your
plans."cralaw virtua1aw library

On March 26, 1968 the President of the Bacolod-Murcia Sugar Farmer’s Corporation
writing on behalf of its planter-members demanded to know the plans of the Central for
the crop year 1968-1969, stating that if they fail to hear from the Central on or before
the 15th of April they will feel free to make their own plans in order to save their crops
and the possibility of foreclosure of their properties. 22

In its letter dated April 1, 1968, the president of BMMC simply informed the Bacolod-
Murcia Sugar Farmer’s Corporation that they were studying the possibility of getting a
new injunction from the court before expiration of their temporary arrangement with
Fernando Gonzaga, Inc. and the Angela Estate, Inc. 23

Pressing for a more definite commitment (not a mere hope or expectation), on May 30,
1968 the Bacolod-Murcia Sugar Farmer’s Corporation requested the Central to put up a
performance bond in the amount of P13 million within a 5-day period to allay the fears
of the planters that their sugar canes can not be milled at the Central in the coming
milling season. 24

BMMC’s reply was only to express optimism over the final outcome of its pending cases
in court.

Hence, what actually happened afterwards is that petitioner failed to provide adequate
transportation facilities to Gatuslao and other adherent
planters.chanroblesvirtualawlibrary

As found by the trial court, the experience of Alfonso Gatuslao at the start of the 1968-
1969 milling season is reflective of the inadequacies of the reparto or trailer allotment as
well as the state of unpreparedness on the part of BMMC to meet the problem posed by
the closure of the railway lines.

It was established that after Gatuslao had cut his sugarcanes for hauling, no trailers
arrived and when two trailers finally arrived on October 20, 1968 after several unheeded
requests, they were left on the national highway about one (1) kilometer away from the
loading station. Such fact was confirmed by Carlos But-og, the driver of the truck that
hauled the trailers.25cralaw:red
Still further, Javelosa, Assistant Crop Loan Inspector, testified that the estimated
production of Gatuslao for the crop year 1968-1969 was 4,400 piculs hauled by 10 cane
cars a week with a maximum capacity of 8 tons. 26 Compared with his later schedule of
only one trailer a week with a maximum capacity of only 3 to 4 tons, 27 there appears
to be no question that the means of transportation provided by BMMC is very inadequate
to answer the needs of Gatuslao.

Undoubtedly, BMMC is guilty of breach of the conditions of the milling contract and that
Gatuslao is the injured party. Under the same Article 1191 of the Civil Code, the injured
party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. In fact, he may also seek rescission even after he
had chosen fulfillment if the latter should become impossible.

Under the foregoing, Gatuslao has the right to rescind the milling contract and neither
the court a quo erred in decreeing the rescission claimed nor the Court of Appeals in
affirming the same.

Conversely, BMMC cannot claim enforcement of the contract. As ruled by this Court, by
virtue of the violations of the terms of the contract, the offending party has forfeited any
right to its enforcement (Boysaw v. Interphil Promotions, Inc., 148 SCRA 645 [1987]).

Likewise, the Bacolod-Murcia Agricultural Cooperative Marketing Association, Inc. (B-M

ACMA) cannot be faulted for organizing itself to take care of the needs of its members.
Definitely, it was organized at that time when petitioner could not assure the planters
that it could definitely haul and mill their canes. More importantly, as mentioned earlier
in a letter dated January 12, 1968, J. Araneta, President & General Manager of the
Central itself suggested to the Bacolod-Murcia Sugar Farmer’s Corporation that it explore
solutions to the problem of hauling the canes to the milling station in the face of the
eventuality of a judicial order permanently closing the railroad lines so that the planters
may be able to proceed with their planting of the canes with absolute peace of mind and
the certainty that they will be properly milled and not left to rot in the fields. As a result,
the signing of the milling contract between private respondents AIDSISA and B-M ACMA
on June 19, 1968 28 was a matter of self-preservation inasmuch as the sugarcanes were
already matured and the planters had crop loans to pay. Further delay would mean
tremendous losses. 29

In its defense AIDSISA stressed as earlier stated, that it agreed to mill the sugarcanes of
Gatuslao only after it had carefully ascertained and believed in good faith that BMMC
was incapable of milling the sugarcanes of the adherent planters because of inadequate
transportation and in fact up to now said Central is incapable of hauling the sugarcanes
of the said planters to its mill site for milling purposes.chanrobles virtual lawlibrary

As an extra precaution, AIDSISA provided in paragraph 15 30 of its milling contract that

—

"If any member of the planter has an existing milling contract with other sugar central,
then this milling contract with the Central shall be of no force and effect with respect to
that member or those members having such contract, if that other sugar central is able,
ready and willing, to mill said member or members’ canes in accordance with their said
milling contract." (Emphasis supplied)

The President of BMMC himself induced the planters to believe and to act on the belief
that said Central would not object to the milling of their canes with other centrals.

Under the circumstances, no evidence of bad faith on the part of private respondents
could be found much less any plausible reason to disturb the findings and conclusions of
the trial court and the Court of Appeals.

PREMISES CONSIDERED, the petition is hereby DENIED for lack of merit and the
decision of the Court of Appeals is hereby AFFIRMED in toto.

SO ORDERED.
 SECOND DIVISION

G. R. No. 116285 - October 19, 2001

ANTONIO TAN, petitioner, v. COURT OF APPEALS and the CULTURAL CENTER OF THE

PHILIPPINES, Respondents.

DE LEON, JR., J.:

Before us is a petition for review of the Decision1 dated August 31, 1993 and
Resolution2 dated July 13, 1994 of the Court of Appeals affirming the Decision 3 dated
May 8, 1991 of the Regional Trial Court (RTC) of Manila, Branch 27.

The facts are as follows:

On May 14, 1978 and July 6, 1978, petitioner Antonio Tan obtained two (2) loans each
in the principal amount of Two Million Pesos (P2,000,000.00), or in the total principal
amount of Four Million Pesos (P4,000,000.00) from respondent Cultural Center of the
Philippines (CCP, for brevity) evidenced by two (2) promissory notes with maturity dates
on May 14, 1979 and July 6, 1979, respectively. Petitioner defaulted but after a few
partial payments he had the loans restructured by respondent CCP, and petitioner
accordingly executed a promissory note (Exhibit "A") on August 31, 1979 in the amount
of Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and
Thirty-Two Centavos (P3,411,421.32) payable in five (5) installments. Petitioner Tan
failed to pay any installment on the said restructured loan of Three Million Four Hundred
Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos
(P3,411,421.32), the last installment falling due on December 31, 1980. In a letter
dated January 26, 1982, petitioner requested and proposed to respondent CCP a mode
of paying the restructured loan, i.e., (a) twenty percent (20%) of the principal amount
of the loan upon the respondent giving its conformity to his proposal; and (b) the
balance on the principal obligation payable in thirty-six (36) equal monthly installments
until fully paid. On October 20, 1983, petitioner again sent a letter to respondent CCP
requesting for a moratorium on his loan obligation until the following year allegedly due
to a substantial deduction in the volume of his business and on account of the peso
devaluation. No favorable response was made to said letters. Instead, respondent CCP,
through counsel, wrote a letter dated May 30, 1984 to the petitioner demanding full
payment, within ten (10) days from receipt of said letter, of the petitioners restructured
loan which as of April 30, 1984 amounted to Six Million Eighty-Eight Thousand Seven
Hundred Thirty-Five Pesos and Three Centavos (P6,088,735.03).

On August 29, 1984, respondent CCP filed in the RTC of Manila a complaint for collection
of a sum of money, docketed as Civil Case No. 84-26363, against the petitioner after the
latter failed to settle his said restructured loan obligation. The petitioner interposed the
defense that he merely accommodated a friend, Wilson Lucmen, who allegedly asked for
his help to obtain a loan from respondent CCP. Petitioner claimed that he has not been
able to locate Wilson Lucmen. While the case was pending in the trial court, the
petitioner filed a Manifestation wherein he proposed to settle his indebtedness to
respondent CCP by proposing to make a down payment of One Hundred Forty Thousand
Pesos (P140,000.00) and to issue twelve (12) checks every beginning of the year to
cover installment payments for one year, and every year thereafter until the balance is
fully paid. However, respondent CCP did not agree to the petitioners proposals and so
the trial of the case ensued.

On May 8, 1991, the trial court rendered a decision, the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant,

ordering defendant to pay plaintiff, the amount of P7,996,314.67, representing
defendants outstanding account as of August 28, 1986, with the corresponding
stipulated interest and charges thereof, until fully paid, plus attorneys fees in an amount
equivalent to 25% of said outstanding account, plus P50,000.00, as exemplary
damages, plus costs.

Defendants counterclaims are ordered dismissed, for lack of merit.

SO ORDERED.4

The trial court gave five (5) reasons in ruling in favor of respondent CCP. First, it gave
little weight to the petitioners contention that the loan was merely for the
accommodation of Wilson Lucmen for the reason that the defense propounded was not
credible in itself. Second, assuming, arguendo, that the petitioner did not personally
benefit from the said loan, he should have filed a third party complaint against Wilson
Lucmen, the alleged accommodated party but he did not. Third, for three (3) times the
petitioner offered to settle his loan obligation with respondent CCP. Fourth, petitioner
may not avoid his liability to pay his obligation under the promissory note (Exh. "A")
which he must comply with in good faith pursuant to Article 1159 of the New Civil Code.
Fifth, petitioner is estopped from denying his liability or loan obligation to the private
respondent.

The petitioner appealed the decision of the trial court to the Court of Appeals insofar as
it charged interest, surcharges, attorneys fees and exemplary damages against the
petitioner. In his appeal, the petitioner asked for the reduction of the penalties and
charges on his loan obligation. He abandoned his alleged defense in the trial court that
he merely accommodated his friend, Wilson Lucmen, in obtaining the loan, and instead
admitted the validity of the same. On August 31, 1993, the appellate court rendered a
decision, the dispositive portion of which reads:

WHEREFORE, with the foregoing modification, the judgment appealed from is hereby
AFFIRMED.

SO ORDERED.5

In affirming the decision of the trial court imposing surcharges and interest, the
appellate court held that:

We are unable to accept appellants (petitioners) claim for modification on the basis of
alleged partial or irregular performance, there being none. Appellants offer or tender of
payment cannot be deemed as a partial or irregular performance of the contract, not a
single centavo appears to have been paid by the defendant.

However, the appellate court modified the decision of the trial court by deleting the
award for exemplary damages and reducing the amount of awarded attorneys fees to
five percent (5%), by ratiocinating as follows:

Given the circumstances of the case, plus the fact that plaintiff was represented by a
government lawyer, We believe the award of 25% as attorneys fees and P500,000.00 as
exemplary damages is out of proportion to the actual damage caused by the non-
performance of the contract and is excessive, unconscionable and iniquitous.

In a Resolution dated July 13, 1994, the appellate court denied the petitioners motion
for reconsideration of the said decision.

Hence, this petition anchored on the following assigned errors:

THE HONORABLE COURT OF APPEALS COMMITTED A MISTAKE IN GIVING ITS

IMPRIMATUR TO THE DECISION OF THE TRIAL COURT WHICH COMPOUNDED INTEREST
ON SURCHARGES.

II

THE HONORABLE COURT OF APPEALS ERRED IN NOT SUSPENDING IMPOSITION OF

INTEREST FOR THE PERIOD OF TIME THAT PRIVATE RESPONDENT HAS FAILED TO
ASSIST PETITIONER IN APPLYING FOR RELIEF OF LIABILITY THROUGH THE
COMMISSION ON AUDIT AND THE OFFICE OF THE PRESIDENT.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT DELETING AWARD OF ATTORNEYS

FEES AND IN REDUCING PENALTIES.

Significantly, the petitioner does not question his liability for his restructured loan under
the promissory note marked Exhibit "A". The first question to be resolved in the case at
bar is whether there are contractual and legal bases for the imposition of the penalty,
interest on the penalty and attorneys fees.

The petitioner imputes error on the part of the appellate court in not totally eliminating
the award of attorneys fees and in not reducing the penalties considering that the
petitioner, contrary to the appellate courts findings, has allegedly made partial payments
on the loan. And if penalty is to be awarded, the petitioner is asking for the non-
imposition of interest on the surcharges inasmuch as the compounding of interest on
surcharges is not provided in the promissory note marked Exhibit "A". The petitioner
takes exception to the computation of the private respondent whereby the interest,
surcharge and the principal were added together and that on the total sum interest was
imposed. Petitioner also claims that there is no basis in law for the charging of interest
on the surcharges for the reason that the New Civil Code is devoid of any provision
allowing the imposition of interest on surcharges.

We find no merit in the petitioners contention. Article 1226 of the New Civil Code
provides that:

In obligations with a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of non-compliance, if there is no
stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to
pay the penalty or is guilty of fraud in the fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code.

In the case at bar, the promissory note (Exhibit "A") expressly provides for the
imposition of both interest and penalties in case of default on the part of the petitioner
in the payment of the subject restructured loan. The pertinent 6 portion of the promissory
note (Exhibit "A") imposing interest and penalties provides that:

For value received, I/We jointly and severally promise to pay to the CULTURAL CENTER
OF THE PHILIPPINES at its office in Manila, the sum of THREE MILLION FOUR HUNDRED
ELEVEN THOUSAND FOUR HUNDRED + PESOS (P3,411,421.32) Philippine Currency,
xxx.

xxx - xxx - xxx

With interest at the rate of FOURTEEN per cent (14%) per annum from the date hereof
until paid. PLUS THREE PERCENT (3%) SERVICE CHARGE.

In case of non-payment of this note at maturity/on demand or upon default of payment

of any portion of it when due, I/We jointly and severally agree to pay additional penalty
charges at the rate of TWO per cent (2%) per month on the total amount due until paid,
payable and computed monthly. Default of payment of this note or any portion thereof
when due shall render all other installments and all existing promissory notes made by
us in favor of the CULTURAL CENTER OF THE PHILIPPINES immediately due and
demandable. (Underscoring supplied)

xxx - xxx - xxx

The stipulated fourteen percent (14%) per annum interest charge until full payment of
the loan constitutes the monetary interest on the note and is allowed under Article 1956
of the New Civil Code.7 On the other hand, the stipulated two percent (2%) per month
penalty is in the form of penalty charge which is separate and distinct from the
monetary interest on the principal of the loan.

Penalty on delinquent loans may take different forms. In Government Service Insurance
System v. Court of Appeals,8 this Court has ruled that the New Civil Code permits an
agreement upon a penalty apart from the monetary interest. If the parties stipulate this
kind of agreement, the penalty does not include the monetary interest, and as such the
two are different and distinct from each other and may be demanded separately.
Quoting Equitable Banking Corp. v. Liwanag,9 the GSIS case went on to state that such a
stipulation about payment of an additional interest rate partakes of the nature of a
penalty clause which is sanctioned by law, more particularly under Article 2209 of the
New Civil Code which provides that:

If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be
the payment of the interest agreed upon, and in the absence of stipulation, the legal
interest, which is six per cent per annum.

The penalty charge of two percent (2%) per month in the case at bar began to accrue
from the time of default by the petitioner. There is no doubt that the petitioner is liable
for both the stipulated monetary interest and the stipulated penalty charge. The penalty
charge is also called penalty or compensatory interest. Having clarified the same, the
next issue to be resolved is whether interest may accrue on the penalty or
compensatory interest without violating the provisions of Article 1959 of the New Civil
Code, which provides that:

Without prejudice to the provisions of Article 2212, interest due and unpaid shall not
earn interest. However, the contracting parties may by stipulation capitalize the interest
due and unpaid, which as added principal, shall earn new interest.

According to the petitioner, there is no legal basis for the imposition of interest on the
penalty charge for the reason that the law only allows imposition of interest on monetary
interest but not the charging of interest on penalty. He claims that since there is no law
that allows imposition of interest on penalties, the penalties should not earn interest. But
as we have already explained, penalty clauses can be in the form of penalty or
compensatory interest. Thus, the compounding of the penalty or compensatory interest
is sanctioned by and allowed pursuant to the above-quoted provision of Article 1959 of
the New Civil Code considering that:

First, there is an express stipulation in the promissory note (Exhibit "A") permitting the
compounding of interest. The fifth paragraph of the said promissory note provides that:
"Any interest which may be due if not paid shall be added to the total amount when due
and shall become part thereof, the whole amount to bear interest at the maximum rate
allowed by law."10 Therefore, any penalty interest not paid, when due, shall earn the
legal interest of twelve percent (12%) per annum,11 in the absence of express stipulation
on the specific rate of interest, as in the case at bar.

Second, Article 2212 of the New Civil Code provides that "Interest due shall earn legal
interest from the time it is judicially demanded, although the obligation may be silent
upon this point." In the instant case, interest likewise began to run on the penalty
interest upon the filing of the complaint in court by respondent CCP on August 29, 1984.
Hence, the courts a quo did not err in ruling that the petitioner is bound to pay the
interest on the total amount of the principal, the monetary interest and the penalty
interest.
The petitioner seeks the elimination of the compounded interest imposed on the total
amount based allegedly on the case of National Power Corporation v. National
Merchandising Corporation,12 wherein we ruled that the imposition of interest on the
damages from the filing of the complaint is unjust where the litigation was prolonged for
twenty-five (25) years through no fault of the defendant. However, the ruling in the
said National Power Corporation (NPC) case is not applicable to the case at bar inasmuch
as our ruling on the issue of interest in that NPC case was based on equitable
considerations and on the fact that the said case lasted for twenty-five (25) years
"through no fault of the defendant." In the case at bar, however, equity cannot be
considered inasmuch as there is a contractual stipulation in the promissory note
whereby the petitioner expressly agreed to the compounding of interest in case of failure
on his part to pay the loan at maturity. Inasmuch as the said stipulation on the
compounding of interest has the force of law between the parties and does not appear to
be inequitable or unjust, the said written stipulation should be respected.

The private respondents Statement of Account (marked Exhibits "C" to "C-2") 13 shows
the following breakdown of the petitioners indebtedness as of August 28, 1986:

Principal P2,838,454.68
Interest P 576,167.89
Surcharge P4,581,692.10
P7,996,314.67

The said statement of account also shows that the above amounts stated therein are net
of the partial payments amounting to a total of Four Hundred Fifty-Two Thousand Five
Hundred Sixty-One Pesos and Forty-Three Centavos (P452,561.43) which were made
during the period from May 13, 1983 to September 30, 1983. 14 The petitioner now seeks
the reduction of the penalty due to the said partial payments. The principal amount of
the promissory note (Exhibit "A") was Three Million Four Hundred Eleven Thousand Four
Hundred Twenty-One Pesos and Thirty-Two Centavos (P3,411,421.32) when the loan
was restructured on August 31, 1979. As of August 28, 1986, the principal amount of
the said restructured loan has been reduced to Two Million Eight Hundred Thirty-Eight
Thousand Four Hundred Fifty-Four Pesos and Sixty-Eight Centavos (P2,838,454.68).
Thus, petitioner contends that reduction of the penalty is justifiable pursuant to Article
1229 of the New Civil Code which provides that: "The judge shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also be reduced by the
courts if it is iniquitous or unconscionable." Petitioner insists that the penalty should be
reduced to ten percent (10%) of the unpaid debt in accordance with Bachrach Motor
Company v. Espiritu.15

There appears to be a justification for a reduction of the penalty charge but not
necessarily to ten percent (10%) of the unpaid balance of the loan as suggested by
petitioner. Inasmuch as petitioner has made partial payments which showed his good
faith, a reduction of the penalty charge from two percent (2%) per month on the total
amount due, compounded monthly, until paid can indeed be justified under the said
provision of Article 1229 of the New Civil Code.
In other words, we find the continued monthly accrual of the two percent (2%) penalty
charge on the total amount due to be unconscionable inasmuch as the same appeared to
have been compounded monthly.

Considering petitioners several partial payments and the fact he is liable under the note
for the two percent (2%) penalty charge per month on the total amount due,
compounded monthly, for twenty-one (21) years since his default in 1980, we find it fair
and equitable to reduce the penalty charge to a straight twelve percent (12%) per
annum on the total amount due starting August 28, 1986, the date of the last Statement
of Account (Exhibits "C" to "C-2"). We also took into consideration the offers of the
petitioner to enter into a compromise for the settlement of his debt by presenting
proposed payment schemes to respondent CCP. The said offers at compromise also
showed his good faith despite difficulty in complying with his loan obligation due to his
financial problems. However, we are not unmindful of the respondents long overdue
deprivation of the use of its money collectible from the petitioner.

The petitioner also imputes error on the part of the appellate court for not declaring the
suspension of the running of the interest during that period when the respondent
allegedly failed to assist the petitioner in applying for relief from liability. In this
connection, the petitioner referred to the private respondents letter 16 dated September
28, 1988 addressed to petitioner which partially reads:

Dear Mr. Tan:

xxx - xxx - xxx

With reference to your appeal for condonation of interest and surcharge, we wish to
inform you that the center will assist you in applying for relief of liability through the
Commission on Audit and Office of the President xxx.

While your application is being processed and awaiting approval, the center will be
accepting your proposed payment scheme with the downpayment of P160,000.00 and
monthly remittances of P60,000.00 xxx.

xxx - xxx - xxx

The petitioner alleges that his obligation to pay the interest and surcharge should have
been suspended because the obligation to pay such interest and surcharge has become
conditional, that is dependent on a future and uncertain event which consists of whether
the petitioners request for condonation of interest and surcharge would be
recommended by the Commission on Audit and the Office of the President to the House
of Representatives for approval as required under Section 36 of Presidential Decree No.
1445. Since the condition has not happened allegedly due to the private respondents
reneging on its promise, his liability to pay the interest and surcharge on the loan has
not arisen. This is the petitioners contention.

It is our view, however, that the running of the interest and surcharge was not
suspended by the private respondents promise to assist the petitioners in applying for
relief therefrom through the Commission on Audit and the Office of the President.
First, the letter dated September 28, 1988 alleged to have been sent by the respondent
CCP to the petitioner is not part of the formally offered documentary evidence of either
party in the trial court. That letter cannot be considered evidence pursuant to Rule 132,
Section 34 of the Rules of Court which provides that: "The court shall consider no
evidence which has not been formally offered xxx." Besides, the said letter does not
contain any categorical agreement on the part of respondent CCP that the payment of
the interest and surcharge on the loan is deemed suspended while his appeal for
condonation of the interest and surcharge was being processed.

Second, the private respondent correctly asserted that it was the primary responsibility
of petitioner to inform the Commission on Audit and the Office of the President of his
application for condonation of interest and surcharge. It was incumbent upon the
petitioner to bring his administrative appeal for condonation of interest and penalty
charges to the attention of the said government offices.

On the issue of attorneys fees, the appellate court ruled correctly and justly in reducing
the trial courts award of twenty-five percent (25%) attorneys fees to five percent (5%)
of the total amount due.

WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED with
MODIFICATION in that the penalty charge of two percent (2%) per month on the total
amount due, compounded monthly, is hereby reduced to a straight twelve percent
(12%) per annum starting from August 28, 1986. With costs against the petitioner.

SO ORDERED.
 SECOND DIVISION

G.R. No. 125347 June 19, 1997

EMILIANO RILLO, petitioner,
vs.
COURT OF APPEALS and CORB REALTY INVESTMENT, CORP., respondents.

PUNO, J.:

This is an appeal under Rule 45 of the Rules of Court to set aside the decision 1 of the Court of
Appeals in CA G.R. CV No. 39108 cancelling the "Contract to Sell" between petitioner Emiliano Rillo
and private respondent Corb Realty Investment Corporation. It also ordered Rillo to vacate the
premises subject of the contract and Corb Realty to return 50% of P158,184.00 or P79,092.00 to
Rillo.

The facts of the case are the following:

On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium Unit" with private
respondent Corb Realty Investment Corporation. Under the contract, CORB REALTY agreed to sell
to RILLO a 61.5 square meter condominium unit located in Mandaluyong, Metro Manila. The contract
price was P150,000.00, one half of which was paid upon its execution, while the balance of
P75,000.00 was to be paid in twelve (12) equal monthly installments of P7,092.00 beginning July 18,
1985. It was also stipulated that all outstanding balance would bear an interest of 24% per annum;
the installment in arrears would be subject to liquidated penalty of 1.5% for every month of default
from due date. It was further agreed that should petitioner default in the payment of three (3) or four
(4) monthly installments, forfeiture proceedings would be governed by existing laws, particularly the
Condominium Act. 2

On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again
defaulted in his payment. On September 20, 1985, he paid the first monthly installment of P7,092.00.
On October 2, 1985, he paid the second monthly installment of P7,092.00. His third payment was on
February 2, 1986 but he paid only P5,000.00 instead of the stipulated P7,092.00. 3

On July 20, 1987 or seventeen (17) months after RILLO's last payment, CORB REALTY informed him
by letter that it is cancelling their contract due to his failure to settle his accounts on time. CORB
REALTY also expressed its willingness to refund RILLO's money. 4

CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received
P60,000.00 from petitioner. 5

RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed
RILLO through letter that it was proceeding to rescind their contract. 6 In a letter dated August 29,
1988, it requested RILLO to come to its office and withdraw P102,459.35 less the rentals of the unit
from July 1, 1985 to February 28, 1989. 7 Again the threatened rescission did not materialize. A
"compromise" was entered into by the parties on March 12, 1989, which stipulated the following:
 1. Restructure Outstanding Balance Down to P50,000.00

2. Payment @ P2,000.00/Month @
18% (Eighteen Percent)
— Monthly — To Compute No. of
Installments

3. To Pay Titling Plus Any Real Estate Tax Due

4. Installments to start April 15, 1989. 8

Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00 on April 25, 1989
and P2,000.00 on May 15, 1989. 9

On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed his total arrears,
including interests and penalties, to P155,129.00. When RILLO failed to pay this amount, CORE
REALTY filed a complaint 10 for cancellation of the contract to sell with the Regional Trial Court of
Pasig.

In his answer to the complaint, RILLO averred, among others, that while he had already paid a total of
P149,000.00, CORB REALTY could not deliver to him his individual title to the subject property; that
CORB REALTY could not claim any right under their previous agreement as the same was already
novated by their new agreement for him to pay P50,000.00 representing interest charges and other
penalties spread through twenty-five (25) months beginning April 1989; and that CORB REALTY's
claim of P155,129.99 over and above the amount he already paid has no legal basis. 11

At the pre-trial, the parties stipulated that RILLO's principal outstanding obligation as of March 12,
1989 was P50,000.00 and he has paid only P4,000.00 thereof and that the monthly amortization of
P2,000.00 was to bear 18% interest per annum based on the unpaid balance. The issues were
defined as: (1) whether or not CORB REALTY was entitled to a rescission of the contract; and (2) if
not, whether or not RILLO's current obligation to CORB REALTY amounts to P62,000.00 only
inclusive of accrued interests. 12

The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to Sell" because
petitioner did not commit a substantial breach of its terms. It found that RILLO substantially complied
with the "Contract to Sell" by paying a total of P154,184.00. It ruled that the remedy of CORB
REALTY is to file a case for specific performance to collect the outstanding balance of the purchase
price.

CORB REALTY appealed the aforesaid decision to public respondent Court of Appeals assigning the
following errors, to wit:

THE TRIAL COURT ERRED IN DISREGARDING OTHER FACTS OF THE CASE,

INCLUDING THE FACT THAT THE CONTRACT TO SELL, AS NOVATED, CREATED
RECIPROCAL OBLIGATIONS ON BOTH PARTIES;

THE TRIAL COURT ERRED IN DISREGARDING ARTICLE 1191 OF THE CIVIL

CODE;

THE TRIAL COURT ERRED IN RENDERING JUDGMENT BY SIMPLY

DISREGARDING THE CASE OF ROQUE V. LAPUZ, 96 SCRA 744, AND WITHOUT
INDICATING THE APPLICABLE LAW ON THE CASE.
 THE TRIAL COURT ERRED IN RENDERING A DECISION WHICH DID NOT
COMPLETELY DISPOSE OF THE CASE.

The respondent Court of Appeals reversed the decision. It ruled: (1) that rescission does not apply as
the contract between the parties is not an absolute conveyance of real property but is a contract to
sell; (2) that the Condominium Act (Republic Act No. 4726, as amended by R.A. 7899) does not
provide anything on forfeiture proceedings in cases involving installment sales of condominium units,
hence, it is Presidential Decree No. 957 (Subdivision and Condominium Buyers Protective Decree)
which should be applied to the case at bar. Under Presidential Decree No. 957, the rights of a buyer
in the event of failure to pay installment due, other than the failure of the owner or developer to
develop the project, shall be governed by Republic Act No. 6552 or the REALTY INSTALLMENT
BUYER PROTECTION ACT also known as the Maceda Law (enacted on September 14, 1972). The
dispositive portion of its Decision states:

WHEREFORE, the decision appealed from is hereby SET ASIDE. The Contract to Sell
is hereby declared cancelled and rendered ineffective. Plaintiff-Appellant is hereby
ordered to return 50% of P158,184.00 or P79,092.00 to appellee who is hereby ordered
to vacate the subject premises.

SO ORDERED. 13

Hence, this appeal with the following assignment of errors:

THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN

HOLDING AND DECIDING THAT RESCISSION IS THE PROPER REMEDY ON A
PERFECTED AND CONSUMMATED CONTRACT;

THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN

NOT HOLDING AND DECIDING THAT THE OLD CONSUMMATED CONTRACT HAS
BEEN SUPERSEDED BY A NEW, SEPARATE, INDEPENDENT AND SUBSEQUENT
CONTRACT BY NOVATION.

The petition is without merit.

The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on
rescission to the case at bar. The contract between the parties is not an absolute conveyance of real
property but a contract to sell. In a contract to sell real property on installments, the full payment of
the purchase price is a positive suspensive condition, the failure of which is not considered a breach,
casual or serious, but simply an event which prevented the obligation of the vendor to convey title
from acquiring any obligatory force." 14 The transfer of ownership and title would occur after full
payment of the purchase price. We held in Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc. 15 that there can be no rescission of an obligation that is still non-existent, the suspensive
condition not having happened.

Given the nature of the contract of the parties, the respondent court correctly applied Republic Act
No. 6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of
real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is simply an event that prevents the obligation of the
vendor to convey title from acquiring binding force. 16 It also provides the right of the buyer on
installments in case he defaults in the payment of succeeding installments, viz:

(1) Where he has paid at least two years of installments,

 (a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him, which is hereby fixed at the rate of one month grace period for
every one year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty per cent of the total payments
made and, after five years of installments, an additional five per cent every year but not
to exceed ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installments made.

(2) Where he has paid less than two years in installments,

Sec. 4. . . . the seller shall give the buyer a grace period of not less than sixty days from
the date the installment became due. If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the contract after thirty days from
receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.

Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a
grace period of not less than sixty (60) days from the due date within which to make his installment
payment. CORB REALTY, on the otherhand, has the right to cancel the contract after thirty (30) days
from receipt by RILLO of the notice of cancellation. Hence, the respondent court did not err when it
upheld CORB REALTY's right to cancel the subject contract upon repeated defaults in payment by
RILLO.

Petitioner further contends that the contract to sell has been novated by the parties agreement of
March 12, 1989. The contention cannot be sustained. Article 1292 of the Civil Code provides that "In
order that an obligation may be extinguished by another which substitutes the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be on every point
incompatible with each other." Novation is never presumed. 17 Parties to a contract must expressly
agree that they are abrogating their old contract in favor of a new one. 18 In the absence of an express
agreement, novation takes place only when the old and the new obligations are incompatible on
every point. 19 In the case at bar, the parties executed their May 12, 1989 "compromise agreement"
precisely to give life to their "Contract to Sell". It merely clarified the total sum owed by petitioner
RILLO to private respondent CORB REALTY with the view that the former would find it easier to
comply with his obligations under the Contract to Sell. In fine, the "compromise agreement" can stand
together with the Contract to Sell.

Nevertheless, we do not agree with the respondent Court so far as it ordered private respondent
CORB REALTY to refund 50% of P158,184.00 or P79,092.00 to petitioner RILLO. Under Republic
Act No. 6552, the right of the buyer to a refund accrues only when he has paid at least two (2) years
of installments. In the case at bar, RILLO has paid less than two (2) years in installments, hence, he
is not entitled to a refund.
IN VIEW WHEREOF, the decision appealed from is AFFIRMED with the MODIFICATION that the
refund of 50% P158,184.00 or P79,092.00 made in favor of petitioner Emiliano Rillo is deleted. No
costs.

SO ORDERED.
 THIRD DIVISION

[G.R. No. 107846. April 18, 1997.]

LEOVILLO C. AGUSTIN, Petitioner, v. COURT OF APPEALS and FILINVEST

FINANCE CORP., Respondents.

Leovillo C. Agustin Law Offices, for Petitioners.

Nelson A. Loyola for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; FINAL JUDGMENT; APPLICABILITY OF "LAW OF

THE CASE" DOCTRINE IN CASE AT BENCH. — The appellate court had already settled
the propriety of awarding repossession expenses in favor of private Respondent. The
remand of the case to RTC Branch 40 was for the sole purpose of threshing out the
correct amount of expenses and not relitigating the accuracy of the award. Thus, the
findings of RTC Branch 40, as affirmed by the appellate court in CA-G.R. No. 24684,
were confined to the appreciation of evidence relative to the repossession expenses for
the query or issue passed upon by the respondent court in CA-G.R. No. 56718-R
(propriety of the award for repossession expenses) has become the "law of the case."
This principle is defined as "a term applied to an established rule that when an appellate
court passes on a question and remands the case to the lower court for further
proceedings, the question there settled becomes the law of the case upon subsequent
appeal." Having exactly the same parties and issues, the decision in the former appeal
(CA-G.R. No. 106718-R is now the established and controlling rule. Petitioner may not
therefore be allowed in a subsequent appeal (CA- G.B. No. 24684) and in this petition to
resuscitate and revive formerly settled issues. Judgment of courts should attain finality
at some point in time, as in this case otherwise there will be no end to litigation.

2. CIVIL LAW; CIVIL CODE; ARTICLE 1484(3) THEREOF; RECOVERABLE EXPENSES

ABOVE VALUE RECEIVED FROM FORECLOSURE SALE; CASE AT BENCH. — At any rate,
even if we were to brush aside the "law of the case" doctrine we find the award for
repossession expenses still proper. In Filipinas Investment & Finance Corporation v.
Ridad, the Court recognized an exception to the rule stated under Article 1484(8) upon
which petitioner relies. "Recoverable expenses would, in our view, include expenses
properly incurred in effecting seizure of the chattel and reasonable attorney’s fees in
prosecuting the action for replevin."cralaw virtua1aw library

3. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF TRIAL COURT GENERALLY

BINDING ON APPEAL; CASE AT BENCH. — Anent the denial of the award for attorney’s
fees, we find the same in order. The trial court, as well as respondent court, found no
evidence to support the claim for attorney’s fees which factual finding is binding on us.
We find no compelling reason and none was presented, to set aside this ruling.
 RESOLUTION

FRANCISCO, J.:

This is an appeal by certiorari from the decision of respondent Court of Appeals in CA-

G.R. No. 24684 1 which affirmed the order of Regional Trial Court, Branch 40, Manila, in
Civil Case No. 84804. 2

The dispute stemmed from an unpaid promissory note dated October 28, 1970,
executed by petitioner Leovillo C. Agustin in favor of ERM Commercial for the amount of
P43,480.80. The note was payable in monthly installments 3 and secured by a chattel
mortgage over an Isuzu diesel truck, 4 both of which were subsequently assigned to
private respondent Filinvest Finance Corporation. 5 When petitioner defaulted in paying
the installments, private respondent demanded from him the payment of the entire
balance or, in lieu thereof, the possession of the mortgaged vehicle. Neither payment
nor surrender was made. Aggrieved, private respondent filed a complaint with the
Regional Trial Court of Manila, Branch 26 (RTC Branch 26) against petitioner praying for
the issuance of a writ of replevin or, in the alternative, for the payment of P32,723.97
plus interest at the rate of 14% per annum from due date until fully paid. 6 Trial ensued
and, thereafter, a writ of replevin was issued by RTC Branch 26. By virtue thereof,
private respondent acquired possession of the vehicle. Upon repossession, the latter
discovered that the vehicle was no longer in running condition and that several parts
were missing which private respondent replaced. The vehicle was then foreclosed and
sold at public auction.

Private respondent subsequently filed a "supplemental complaint" claiming additional

reimbursement worth P8,852.76 as value of replacement parts 7 and for expenses
incurred in transporting the mortgaged vehicle from Cagayan to Manila. In response,
petitioner moved to dismiss the supplemental complaint arguing that RTC Branch 26 had
already lost jurisdiction over the case because of the earlier extra-judicial foreclosure of
the mortgage. The lower court granted the motion and the case was dismissed. 8 Private
respondent elevated the matter to the appellate court, docketed as CA-G.R. No. 56718-
R, which set aside the order of dismissal and ruled that repossession expenses incurred
by private respondent should be reimbursed. 9 This decision became final and
executory, hence the case was accordingly remanded to the Regional Trial Court of
Manila, Branch 40 (RTC Branch 40) for reception of evidence to determine the amount
due from petitioner. 10 After trial, RTC Branch 40 found petitioner liable for the
repossession expenses, attorney’s fees, liquidated damages, bonding fees and other
expenses in the seizure of the vehicle in the aggregate sum of P18,547.38. Petitioner
moved for reconsideration. Acting thereon, RTC Branch 40 modified its decision by
lowering the monetary award to P8,852.76, the amount originally prayed for in the
supplemental complaint. 11 Private respondent appealed the case with respect to the
reduction of the amount awarded. Petitioner, likewise, appealed impugning the trial
court’s order for him to pay private respondent P8,852.76, an amount over and above
the value received from the foreclosure sale. Both appeals were consolidated and in CA-
G.R. No. 24684, the modified order of RTC Branch 40 was affirmed. Petitioner filed a
motion for reconsideration, but to no avail. 12 Hence, this petition for review
on certiorari.

Petitioner contends that the award of repossession expenses to private respondent as

mortgagee is "contrary to the letter, intent and spirit of Article 1484 13 of the Civil
Code." 14 He asserts that private respondent’s repossession expenses have been amply
covered by the foreclosure of the chattel mortgage, hence he could no longer be held
liable. The arguments are devoid of merit.

Petitioner’s contentions, we note, were previously rejected by respondent court in its

decision in CA-G.R. No. 56718-R the dispositive portion of which provides as
follows:jgc:chanrobles.com.ph

"WHEREFORE, the order dismissing the case is hereby set aside and the case is
remanded to the lower court for reception of evidence of ‘expenses properly incurred in
effecting seizure of the chattel (and) of recoverable attorney’s fees in prosecuting the
action for replevin’ as ‘repossession expenses’ prayed for in the supplemental complaint,
without pronouncement as to costs." 15

which ruling has long acquired finality. It is clear, therefore, that the appellate court had
already settled the propriety of awarding repossession expenses in favor of
private Respondent. The remand of the case to RTC Branch 40 was for the sole purpose
of threshing out the correct amount of expenses and not for relitigating the accuracy of
the award. Thus, the findings of RTC Branch 40, as affirmed by the appellate court in
CA-G.R. No. 24684, were confined to the appreciation of evidence relative to the
repossession expenses for the query or issue passed upon by the respondent court in
CA-G.R. No. 56718-R (propriety of the award for repossession expenses) has become
the "law of the case." This principle is defined as "a term applied to an established rule
that when an appellate court passes on a question and remands the cause to the lower
court for further proceedings, the question there settled becomes the law of the case
upon subsequent appeal." 16 Having exactly the same parties and issues, the decision in
the former appeal (CA-G.R. No. 56718-R) is now the established and controlling rule.
Petitioner may not therefore be allowed in a subsequent appeal (CA-G.R. No. 24684)
and in this petition to resuscitate and revive formerly settled issues. Judgment of courts
should attain finality at some point in time, as in this case, otherwise, there will be no
end to litigation.

At any rate, even if we were to brush aside the "law of the case" doctrine we find the
award for repossession expenses still proper. In Filipinas Investment & Finance
Corporation v. Ridad, 17 the Court recognized an exception to the rule stated under
Article 1484(3) upon which petitioner relies. Thus:jgc:chanrobles.com.ph

". . . Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage
upon his failure to pay two or more installments, or if he conceals the chattel to place it
beyond the reach of the mortgagee, what then is the mortgagee expected to do? . . . It
logically follows as a matter of common sense, that the necessary expenses incurred in
the prosecution by the mortgagee of the action for replevin so that he can regain
possession of the chattel, should be borne by the mortgagor. Recoverable expenses
would, in our view, include expenses properly incurred in effecting seizure of the chattel
and reasonable attorney’s fees in prosecuting the action for replevin." 18
Anent the denial of the award for attorney’s fees, we find the same in order. The trial
court, as well as respondent court, found no evidence to support the claim for attorney’s
fees which factual finding is binding on us. 19 We find no compelling reason, and none
was presented, to set aside this ruling.

ACCORDINGLY, the petition is DENIED for lack of merit, and the decision of the Court of
Appeals is hereby AFFIRMED in toto.chanrobles.com : virtual law library

SO ORDERED.
 EN BANC

G.R. No. L-4216 February 19, 1909

KUENZLE and STREIFF,Plaintiffs-Appellees, v.A. S. WATSON & CO., ET

AL.,Defendants-Appellants.

Gibbs and Gale for appellants.

Hartigan and Rohde, and Roman Lacson for appellees.

WILLARD, J. :chanrobles virtual law library

On the 11th day of October, 1905, William H. Fifer made a contract in writing with the
plaintiffs which stated that he on that day sold and transferred to the plaintiffs for the
sum of P4,000 in cash, the furniture and appurtenances of the three drinking saloons in
the city of Manila, and other personal property therein described. The contract contained
the following conditions:

It is further stipulated and agreed by and between the parties hereto that the said
William H. Fifer shall remain in possession of the said property hereinabove sold to the
said Kuenzle & Streiff, and the said William H. Fifer agrees with the said Kuenzle &
Streiff to repurchase the property hereinabove mentioned and to pay therefor the sum
of four thousand pesos (P4,000), payable in consecutive monthly installments of five
hundred pesos (P500) each, beginning with the 1st day of November, 1905, together
with the interest thereon at the rate of 10 per centum per annum; interest payable
monthly. It being expressly understood by said Fifer that the title to the ownership of
the said property shall remain in the said Kuenzle & Streiff until the said four thousand
pesos (P4,000) shall have been fully paid.chanroblesvirtualawlibrary chanrobles virtual
law library

The said William H. Fifer agrees to keep the property known as the 'Luzon Cafe' insured
during all the time of this contract in the sum of four thousand pesos, and to transfer
the said insurance policy, premiums fully paid up, to the said premises in a good
condition.

Should the said William H. Fifer fail to pay any of the said monthly installments as
hereinabove provided for, or the interest upon the principal, then the said Kuenzle &
Streiff shall have the right immediately upon such default to take possession without
judicial process of all the property hereinabove
mentioned.chanroblesvirtualawlibrary chanrobles virtual law library

Fifer had formerly been the owner of the personal property mentioned in this contract.
The P4,000 mentioned therein were actually paid on the day named by the plaintiff to
Fifer. He remained in possession of the property until the 2nd day of January, 1906. On
that day, he not having made the monthly payments provided for, the plaintiff took
possession of the property. They on that day appointed Fifer, by a written document,
manager of the establishment. Every day thereafter an agent of the plaintiff went to the
"Luzon Cafe" and took charge of the cash which had been received. From that day the
plaintiffs paid all the bills for goods bought by Fifer as their agent and collected all the
debts due to the establishment. On the 27th day of April, 1906, the defendants caused a
preliminary attachment to be levied upon two billiard tables which were in the "Luzon
Cafe" and which were included in the property described in the contract of the 11th of
October, 1905. While the sheriff was making this attachment, an agent of the plaintiffs
came to the place with the contract in question and claimed that the plaintiffs were in
possession of the establishment. Notwithstanding this notice, the sheriff proceeded with
the attachment. The public license granted for the sale of the liquors in this place was at
the time of the attachment in the name of Fifer, as was also the license for the
maintenance of a billiard saloon. The plaintiffs, on the 1st day of May, 1906, brought
this action to recover of the defendants and the sheriff the possession of the billiard
tables. Judgment was rendered in the court below in favor of the plaintiffs and the
defendants have appealed.chanroblesvirtualawlibrary chanrobles virtual law library

The defendants claim that the contract of October 11, 1905, is a contract of pledge and
that the possession of the property pledged not having been taken by the pledgee, the
pledge is void. The document itself, however, shows that it was not a pledge but a sale
with the right to repurchase. In this respect the case differs from that of the United
States vs. Terrell (2 Phil Rep., 222), where it appeared from the face of the document
that the contract was one of pledge.chanroblesvirtualawlibrary chanrobles virtual law
library

A contract such as this, for the sale of personal property on condition that the title
should remain in the vendor until the purchase price has been paid is valid, although the
possession of the property is at the time of making the contract delivered to the
purchaser. (Judgment of the supreme court of Spain, 16th of February, 1894; Bachrach
vs. Peterson, 7 Phil. Rep., 571.) In the particular that the property here involved once
belonged to the debtor, was resold to the creditor, and then again sold to the debtor,
the case is similar to Bierce vs. Hutchins (205 U. S.,
340).chanroblesvirtualawlibrary chanrobles virtual law library

It seems to be claimed by the appellants that there was never any delivery of the
property by Fifer to the plaintiffs, and consequently that the original sale of Fifer to the
plaintiffs was never perfected. Whatever might be said of the case as it stood on the
11th day of October, 1905, upon this question of a delivery then made, it is apparent
that the claim, as far as the parties to the transaction are concerned, can not be
sustained in view of what took place on and after the 2nd day of January, 1906. The
parties then agreed that the possession should be transferred to the plaintiffs and it was
thus transferred, Fifer becoming from that time the agent of the plaintiffs in the
management of the business. After that time, as has been seen, he plaintiffs were the
persons really in charge. They paid all the current obligations, took possession daily of
all the cash received, and collected all the bills due. As between the parties, this was a
sufficient compliance with the provisions of the law which require a delivery upon the
sale of an article. In the case of The Fidelity and Deposit Company vs. Wilson (8 Phil.
Rep., 51), there was no such evidence of delivery as appears in this
case.chanroblesvirtualawlibrary chanrobles virtual law library

If the appellants could prove that the whole transaction between Fifer and the plaintiffs
was fraudulent as to the creditors of Fifer, they might, by complying with the provisions
of article 1290 and following articles of the Civil Code, relating to the rescission of
contracts, perhaps, be entitled to some relief. But in the first place they have not proved
that the contract was fraudulent as to the creditors of Fifer. The evidence establishes a
bona fide sale by Fifer of the property in question and the actual payment by the
plaintiffs to him of P4,000 in cash.chanroblesvirtualawlibrary chanrobles virtual law
library

Nor have the appellants brought themselves within the other requirements of the articles
above cited. There is no sufficient proof in the case to show that they are even creditors
of Fifer. The mere fact that they commenced a suit against Fifer and procured a writ of
attachment to be issued thereon is not evidence that Fifer owed them anything. Nor did
they prove that, could not collect their debt in any other way. (Arts. 1290 [1291], par.
3, and 1294, Civil Code.) chanrobles virtual law library

Even on the theory that the appellants were creditors of Fifer, it is settled by the
decisions of this court that the attachment gave them no right to the property itself.
(Fabian vs. Smith, Bell & Co., 8 Phil. Rep., 496; Martinez vs. Holliday, Wise & Co., 1 Phil.
Rep., 194.) chanrobles virtual law library

The judgment of the court below is affirmed, with the costs of this instance against the
appellants.chanroblesvirtualawl
 FIRST DIVISION

[G.R. No. L-18336. May 15, 1922. ]

SIKATUNA, Plaintiff-Appellant, v. POTENCIANA GUEVARA and FLORENCIO

FRANCISCO, Defendants-Appellees.

Moreno & Moreno for Appellant.

Vicente Sotto for Appellees.

SYLLABUS

1. RESCISSION OF CONTRACTS; WHEN IT TAKES PLACE; THIRD PERSONS; BAD FAITH.

— The rescission of a contract shall not take place when the things which are the
subject-matter thereof are lawfully in the possession of third persons who have not
acted in bad faith. (Article 1295, par. 2, Civil Code.)

2. ID.; ID.; ID.; ID.; ACTIONS CONCERNING PROPERTIES REGISTERED UNDER ACT No.
496. — The transfer of the title of registered property cannot be declared rescinded
when the same was made in accordance with all the requirements of Act No. 496; and
unless a notice of the commencement of the action concerning said property is recorded
in the registry where the same is registered, such an action shall affect only the parties
litigant.

DECISION

ROMUALDEZ, J.  :

Judgment was rendered by the trial court in this case upon an agreed statement of facts
of the parties, to wit:jgc:chanrobles.com.ph

"1st. That the defendants admit paragraphs 1, 2, 5, and 6 of the amended complaint.

"2d. That the plaintiff bought from Jacinto, Palma y Hermanos a parcel of land with a
building thereon known as the Solomon Temple, a part of which land is that described in
the third paragraph of the amended complaint, and the whole land is described in the
transfer certificate of title No. 8651, vol. T-19 of the Book of Transfers, page 436, issued
by the register of deeds of the city of Manila to the plaintiff.

"3d. That the plaintiff admits each and every paragraph of the special defense and
counterclaim of the defendants as set forth in their answer to the amended complaint.

"4th. That the defendants, on January 28,1920, were notified to vacate the building in
question, but up to the present time they still continue in possession of the same.
"5th. That from the month of February, 1920, the reasonable rent of the building in
question is P20 per month.

"6th. That after the issuance of the said transfer certificate of title to the herein plaintiff
the defendant Potenciana Guevara, in civil case No. 16060 of this court, obtained a final
judgment against Jacinto, Palma y Hermanos whereby the said Jacinto, Palma y
Hermanos was ordered to execute in favor of the said Potenciana Guevara a deed of sale
of the land here in question.

"7th. That for whatever it may be worth in this case, under this agreed statement of
facts, the decision of the Supreme Court rendered in case No. 16060 of this court which
was a contempt proceeding instituted by the defendant Potenciana Guevara against
Jacinto, Palma y Hermanos, as well as the transfer certificate of title No. 8651, page
436, Transfer Book No. T-19, issued by the register of deeds of the city of Manila in
favor of the herein plaintiff, is hereto attached and made a part hereof by counsel for
plaintiff as plaintiff’s evidence.

"8th. That for whatever it may be worth in the present proceedings, under this agreed
statement of facts, the record of civil cause No. 16060 of the Court of First Instance of
Manila is hereto attached, and made a part hereof by counsel for defendants as their
evidence."cralaw virtua1aw library

The decision of the court contains the following order:jgc:chanrobles.com.ph

"The contract entered into between Sikatuna and Messrs. Jacinto, Palma y Hermanos is
hereby declared rescinded insofar as it refers to the land described in paragraph 5 of the
amended complaint dated November 16, 1920, in relation with paragraph 3 of the
agreed statement of facts, and:jgc:chanrobles.com.ph

"The corporation known as Sikatuna, by its agent, is hereby ordered to execute the
required deed of transfer of the land aforesaid to the defendant upon payment of the
sum of P1,000 to the said corporation.

"The defendant Potenciana Guevara is sentenced to pay the plaintiff corporation a

monthly rental of P6 from April, 1918, to the date when the deed of sale of said land is
executed."cralaw virtua1aw library

Not satisfied with this decision, the plaintiff appeals to this court and assigns as errors
committed by the court a quo the following: (a) Its decree rescinding the contract in
question; (b) its order directing the transfer of the land in controversy by the plaintiff to
the defendant Potenciana Guevara; and (c) its failure to sentence the defendants to pay
the plaintiff the sum of P20 from February, 1920, until the termination of this litigation.

The following statement of facts contained in the appellant’s brief is

correct:jgc:chanrobles.com.ph

"A contract of lease of a portion of land situated on Calle Bilbao of the city of Manila of
about 100 square meters’ area, was entered into between the partnership Jacinto, Palma
y Hermanos, as lessor, and Potenciana Guevara, as lessee, which land is a part of the
land belonging to the said partnership covered by certificate of title No. 8651 issued by
the register of deeds of the city of Manila and which was presented as evidence in this
proceeding.

"The said contract contained an option in favor of the partnership Jacinto, Palma y
Hermanos by which the latter, within one year from the date of the execution thereof,
could purchase the house of Potenciana Guevara built on the land so leased; however if,
within said time, the said partnership did not exercise such option, Potenciana Guevara
would have the right to purchase the land leased to her.

"This contract was never noted on the original certificate of title of the land, of which the
portion occupied by Guevara is a part.

"The time for the option having expired, without the partnership having exercised its
right, the defendant attempted to purchase the said land, to which the former objected;
in view of which Potenciana Guevara in April, 1918, brought an action against the said
partnership, which was registered as civil cause No. 16060, to compel it to sell the land
to her.

"Neither was any notice of the commencement of that action filed with the office of the
register of deeds.

"While case No. 16060 was pending, the aforesaid partnership sold to the Sikatuna
corporation all the land, including the portion which was leased to Potenciana Guevara,
which corporation recorded the transfer in the registry, under the provisions of Act No.
496, as a result of which, transfer certificate of title No. 8651 was issued to the said
corporation on May 25, 1918.

"On July 15, 1918, judgment was rendered in case No. 16060 whereby Jacinto, Palma y
Hermanos was ordered to sell to Potenciana Guevara the portion of land leased to her,
which judgment was affirmed by this Court.

"This judgment, however, was not executed for the reason that, as already stated, the
land had been sold to the Sikatuna corporation.

"In the original certificate of title of the partnership Jacinto, Palma y Hermanos, just as
in transfer certificate of title No. 8651, issued to the Sikatuna corporation, there is no
record of any encumbrance whatsoever upon the land except a mortgage in favor of the
National Bank.

"From the time the said land was transferred to the Sikatuna corporation, Potenciana
Guevara has been in possession of the portion leased to her until, in view of the fact that
the said corporation needed that portion of land for its own purposes, and of the further
fact that Potenciana Guevara had not paid the rentals for the land to the new owner, she
was notified in January, 1920, to vacate the premises and a demand was made upon her
to pay the corresponding rents. Having declined to do so the Sikatuna corporation
commenced these proceedings against her for unlawful entry and detainer and for the
payment of rents."cralaw virtua1aw library
The first assignment of error has to do with the recession of the sale of the property in
question, made by the partnership Jacinto, Palma y Hermanos to the herein plaintiff. The
court ordered the rescission under the provisions of the fourth paragraph of article 1291
of the Civil Code, referring to things in litigation. But as the appellant rightfully contends,
the rescission of the said sale does not lie in the present case because the property is
now in the legal possession of a third person who has not acted in bad faith. The second
paragraph of article 1295 of the Civil Code provides as follows:jgc:chanrobles.com.ph

"Neither shall rescission take place when the things which are the subject-matter of the
contract are lawfully in the possession of third persons who have not acted in bad
faith."cralaw virtua1aw library

There is no doubt but that in this case the plaintiff corporation has the character of a
third person, and it has not been shown that it had acted in bad faith.

This case has a special circumstance in that it deals with property registered under the
Land Registration Act, No. 496, section 79 of which provides that actions concerning
properties registered under the law shall affect only the parties litigant, unless a notice
of the commencement of the action is recorded, which does not appear to have been
done in the case before us. There was, therefore, no legal obstacle to the transfer of the
title of the said property, and for this special reason the said transfer cannot be
rescinded.

The second and third assignments of error are the result of the first.

We hold that the errors assigned by the appellant to the judgment appealed from have
been committed.

Wherefore, the said judgment is reversed and the defendants ordered to vacate the land
in controversy and to pay the plaintiff the sum of P132 as rents, corresponding to the
period from April, 1918, to January, 1920, inclusive, and the further sum of P20 per
month from February, 1920, until the property is actually vacated, and to pay the costs
of this instance. So ordered
 THIRD DIVISION

G.R. No. L-55665 February 8, 1989

DELTA MOTOR CORPORATION, petitioner,

vs.
EDUARDA SAMSON GENUINO, JACINTO S. GENUINO, Jr., VICTOR S. GENUINO, HECTOR S.
GENUINO, EVELYN S. GENUINO, and The COURT OF APPEALS, respondents.

Alcasid, Villanueva & Associates for petitioner.

Luna, Puruganan, Sison & Ongkiko for respondents.

CORTES, J.:

Petitioner, through this petition for review by certiorari, appeals from the decision of respondent
appellate court in CA-G.R. No. 59848-R entitled "Eduarda Samson Genuino, et al. v. Delta Motor
Corporation" promulgated on October 27, 1980.

The facts are as follows:

Petitioner Delta Motor Corporation (hereinafter referred to as Delta) is a corporation duly organized
and existing under Philippine laws.

On the other hand, private respondents are the owners of an iceplant and cold storage located at
1879 E. Rodriguez Sr. Avenue, Quezon City doing business under the name "España Extension
Iceplant and Cold Storage."

In July 1972, two letter-quotations were submitted by Delta to Hector Genuino offering to sell black
iron pipes. T

The letter dated July 3, 1972 quoted Delta's selling price for 1,200 length of black iron pipes schedule
40, 2" x 20' including delivery at P66,000.00 with the following terms of payment:

a. 20% of the net contract price or P13,200.00 will be due and payable upon signing of
the contract papers.

b. 20% of the net contract price or P13,200.00 will be due and payable before
commencement of delivery.

c. The balance of 60% of the net contract price or P39,600.00 with 8% financing charge
per annum will be covered by a Promissory Note bearing interest at the rate of 14% per
annum and payable in TWELVE (12) equal monthly installment (sic), the first of which
will become due thirty (30) days after the completion of delivery. Additional 14% will be
charged for all delayed payments. [Exh. "A"; Exh. 1.]
The second letter-quotation dated July 18, 1972 provides for the selling price of 150 lengths of black
iron pipes schedule 40, 1 1/4" x 20' including delivery at P5,400.00 with the following terms of
payment:

a. 50% of the net contract price or P 2,700.00 will be due and payable upon signing of
the contract papers.

b. 50% of the net contract price or P 2,700.00 will be due and payable before
commencement of delivery. [Exh. "C"; Exh. "2".]

Both letter-quotations also contain the following stipulations as to delivery and price offer:

DELIVERY

Ex-stock subject to prior sales.

xxx xxx xxx

Our price offer indicated herein shall remain firm within a period of thirty (30) days from
the date hereof. Any order placed after said period will be subject to our review and
confirmation. [Exh. "A" and "C"; Exhs. "l" and "2".]

Hector Genuino was agreeable to the offers of Delta hence, he manifested his conformity thereto by
signing his name in the space provided on July 17, 1972 and July 24, 1972 for the first and second
letter-quotations, respectively.

It is undisputed that private respondents made initial payments on both contracts — for the first
contract, P13,200.00 and, for the second, P2,700.00 — for a total sum of P15,900.00 on July 28,
1972 (Exhs. "B" and "D"].

Likewise unquestionable are the following. the non-delivery of the iron pipes by Delta; the non-
payment of the subsequent installments by the Genuinos; and the non-execution by the Genuinos of
the promissory note called for by the first contract.

The evidence presented in the trial court also showed that sometime in July 1972 Delta offered to
deliver the iron pipes but the Genuinos did not accept the offer because the construction of the ice
plant building where the pipes were to be installed was not yet finished.

Almost three years later, on April 15, 1975, Hector Genuino, in behalf of España Extension Ice Plant
and Cold Storage, asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the
request. At the same time private respondents manifested their preparedness to pay the second
installment on both contracts upon notice of Delta's readiness to deliver.

Delta countered that the black iron pipes cannot be delivered on the prices quoted as of July 1972.
The company called the attention of the Genuinos to the stipulation in their two (2) contracts that the
quoted prices were good only within thirty (30) days from date of offer. Whereupon Delta sent new
price quotations to the Genuinos based on its current price of black iron pipes, as follows:

P241,800.00 for 1,200 lengths of black iron pjpes schedule 40, 2" x 20' [Exh. "G-1".]

P17,550.00 for 150 lengths of black iron pipes schedule 40, 1 1/4" x 20' [Exh. "G-2".]
The Genuinos rejected the new quoted prices and instead filed a complaint for specific performance
with damages seeking to compel Delta to deliver the pipes. Delta, in its answer prayed for rescission
of the contracts pursuant to Art. 1191 of the New Civil Code. The case was docketed as Civil Case
No. Q-20120 of the then Court of First Instance of Rizal, Branch XVIII, Quezon City.

After trial the Court of First Instance ruled in favor of Delta,the dispositive portion of its decision
reading as follows:

WHEREFORE, premises considered, judgment is rendered:

1. Declaring the contracts, Annexes "A" and "C" of the complaint rescinded;

2. Ordering defendant to refund to plaintiffs the sum of P15,900.00 delivered by the

latter as downpayments on the aforesaid contracts;

3. Ordering plaintiffs to pay defendant the sum of P10,000.00 as attorney's fees; and,

4. To pay the costs of suit. [CFI Decision, pp. 13-14; Rollo, pp. 53-54.]

On appeal, the Court of Appeals reversed and ordered private respondents to make the payments
specified in "Terms of Payment — (b)" of the contracts and to execute the promissory note required in
the first contract and thereafter, Delta should immediately commence delivery of the black iron pipes.*
[CA Decision, p. 20; Rollo, p. 75.]

The Court of Appeals cited two main reasons why it reversed the trial court, namely:

1. As Delta was the one who prepared the contracts and admittedly, it had knowledge of
the fact that the black iron pipes would be used by the Genuinos in their cold storage
plant which was then undergoing construction and therefore, would require sometime
before the Genuinos would require delivery, Delta should have included in said
contracts a deadline for delivery but it did not. As a matter of fact neither did it insist on
delivery when the Genuinos refused to accept its offer of delivery. [CA Decision, pp. 16-
17; Rollo, pp. 71-72.]

2. Delta's refusal to make delivery in 1975 unless the Genuinos pay a price very much
higher than the prices it previously quoted would mean an amendment of the contracts.
It would be too unfair for the plaintiffs if they will be made to bear the increase in prices
of the black iron pipes when they had already paid quite an amount for said items and
defendant had made use of the advance payments. That would be unjust enrichment on
the part of the defendant at the expense of the plaintiffs and is considered an
abominable business practice. [CA Decision, pp. 18-19; Rollo, pp. 73-74.]

Respondent court denied Delta's motion for reconsideration hence this petition for review praying for
the reversal of the Court of Appeals decision and affirmance of that of the trial court.

Petitioner argues that its obligation to deliver the goods under both contracts is subject to conditions
required of private respondents as vendees. These conditions are: payment of 20% of the net
contract price or P13,200.00 and execution of a promissory note called for by the first contract; and
payment of 50% of the net contract price or P2,700.00 under the second contract. These, Delta
posits, are suspensive conditions and only upon their performance or compliance would its obligation
to deliver the pipes arise [Petition, pp. 9-12; Rollo, pp. 1720.] Thus, when private respondents did not
perform their obligations; when they refused to accept petitioner's offer to deliver the goods; and,
when it took them three (3) long years before they demanded delivery of the iron pipes that in the
meantime, great and sudden fluctuation in market prices have occurred; Delta is entitled to rescind
the two (2) contracts.

Delta relies on the following provision of law on rescission:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

In construing Art. 1191, the Supreme Court has stated that, "[r]escission will be ordered only where
the breach complained of is substantial as to defeat the object of the parties in entering into the
agreement. It will not be granted where the breach is slight or casual." [Phil. Amusement Enterprises,
Inc. v. Natividad, G.R. No. L-21876, September 29, 1967, 21 SCRA 284, 290.] Further, "[t]he question
of whether a breach of a contract is substantial depends upon the attendant circumstances."
[Universal Food Corporation v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1, 18].

In the case at bar, the conduct of Delta indicates that the Genuinos' non-performance of its
obligations was not a substantial breach, let alone a breach of contract, as would warrant rescission.

Firstly, it is undisputed that a month after the execution of the two (2) contracts, Delta's offer to deliver
the black iron pipes was rejected by the Genuinos who were "not ready to accept delivery because
the cold storage rooms have not been constructed yet. Plaintiffs (private respondents herein) were
short-funded, and did not have the space to accommodate the pipes they ordered" [CFI Decision, p.
9; Rollo, p. 49].

Given this answer to its offer, Delta did not do anything. As testified by Crispin Villanueva, manager of
the Technical Service department of petitioner:

Q You stated that you sent a certain Evangelista to the España Extension
and Cold Storage to offer the delivery subject matter of the contract and
then you said that Mr. Evangelista reported (sic) to you that plaintiff would
not accept delivery, is that correct, as a summary of your statement?

A A Yes, sir.

Q Now, what did you do in the premises (sic)?

A Yes, well, we take the word of Mr. Evangelista. We could not deliver the
said black iron pipes, because as per information the Ice Plant is not yet
finished.
 Q Did you not report that fact to ... any other defendant-officials of the
Delta Motor Corporation?

A No.

Q And you did not do anything after that?

A Because taking the word of my Engineer we did not do anything. [TSN,

December 8, 1975, pp. 18-19.]

xxx xxx xxx

And secondly, three (3) years later when the Genuinos offered to make payment Delta did not raise
any argument but merely demanded that the quoted prices be increased. Thus, in its answer to
private respondents' request for delivery of the pipes, Delta countered:

Thank you for your letter dated April 15, 1975, requesting for delivery of Black Iron
pipes;.

We regret to say, however, that we cannot base our price on our proposals dated July 3
and July 18, 1972 as per the following paragraph quoted on said proposal:

Our price offer indicated herein shall remain firm within a period of thirty
(30) days from the date hereof. Any order placed after said period will be
subject to our review and confirmation.

We are, therefore, enclosing our re-quoted proposal based on our current price. [Exh.
"G".]

Moreover, the power to rescind under Art. 1191 is not absolute. "[T]he act of a party in treating a
contract as cancelled or resolved on account of infractions by the other contracting party must be
made known to the other and is always provisional, being ever subject to scrutiny and review by the
proper court." [University of the Phils. v. De los Angeles, G. R. No. L-28602, September 29, 1970, 35
SCRA 102, 107; Emphasis supplied.]

In the instant case, Delta made no manifestation whatsoever that it had opted to rescind its contracts
with f-he Genuinos. It only raised rescission as a defense when it was sued for specific performance
by private respondents.

Further, it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering
the fact that not only does it have in its possession and ownership the black iron pipes, but also the
P15,900.00 down payments private respondents have paid. And if petitioner Delta claims the right to
rescission, at the very least, it should have offered to return the P15,900.00 down payments [See Art.
1385, Civil Code and Hodges v. Granada, 59 Phil. 429 (1934)].

It is for these same reasons that while there is merit in Delta's claim that the sale is subject to
suspensive conditions, the Court finds that it has, nevertheless, waived performance of these
conditions and opted to go on with the contracts although at a much higher price. Art. 1545 of the
Civil Code provides:
 Art. 1545. Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract or
he may waived performance of the condition. . . . [Emphasis supplied.]

Finally, Delta cannot ask for increased prices based on the price offer stipulation in the contracts and
in the increase in the cost of goods. Reliance by Delta on the price offer stipulation is misplaced. Said
stipulation makes reference to Delta's price offer as remaining firm for thirty (30) days and thereafter,
will be subject to its review and confirmation. The offers of Delta, however, were accepted by the
private respondents within the thirty (30)-day period. And as stipulated in the two (2) letter-quotations,
acceptance of the offer gives rise to a contract between the parties:

In the event that this proposal is acceptable to you, please indicate your conformity by
signing the space provided herein below which also serves as a contract of this
proposal. [Exhs. "A" and "C"; Exhs. "1" and "2".]

And as further provided by the Civil Code:

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract.

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon thing which is the object of the contract and upon the price.

Thus, the moment private respondents accepted the offer of Delta, the contract of sale between them
was perfected and neither party could change the terms thereof.

Neither could petitioner Delta rely on the fluctuation in the market price of goods to support its claim
for rescission. As testified to by petitioner's Vice-President of Marketing for the Electronics,
Airconditioning and Refrigeration division, Marcelino Caja, the stipulation in the two (2) contracts as to
delivery, ex-stock subject to prior sales, means that "the goods have not been delivered and
that there are no prior commitments other than the sale covered by the contracts.. . once the offer is
accepted, the company has no more option to change the price." [CFI Decision, p. 5; Rollo, p. 45;
Emphasis supplied.] Thus, petitioner cannot claim for higher prices for the black iron pipes due to the
increase in the cost of goods. Based on the foregoing, petitioner Delta and private respondents
Genuinos should comply with the original terms of their contracts.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.
 SECOND DIVISION

G.R. No. L-59980 October 23, 1984

BERLIN TAGUBA AND SEBASTIANA DOMINGO, SPOUSES PEDRO ASUNCION AND MARING
ASUNCION, petitioners,
vs.
MARIA PERALTA VDA. DE DE LEON AND THE HONORABLE COURT OF
APPEALS, respondents.

Eligio A. Labog for petitioners.

Romeo B. Calixto for respondents.

CUEVAS, J.:ñé+.£ªwph!1

This is a Petition to Review on Certiorari, the decision of the defunct Court of Appeals in its CA-G.R.
No. 65357-R which reversed on appeal the decision of the then Court of First Instance of Isabela in
Civil Case No. Br. II-1215, entitled "Maria Peralta Vda. de De Leon, versus Berlin Taguba and
Sebastiana Domingo" for "Specific Performance with Preliminary Mandatory Injunction with
Damages".

Berlin Taguba married to Sebastiana Domingo (now petitioner) is the owner of a residential lot with an
area of 3,129 square meters located at Cauayan, Isabela. Spouses Pedro Asuncion and Marita
Lungab, (also petitioners) and herein private respondent Maria Peralta Vda. de De Leon, were
separately occupying portions of the aforementioned lot as lessees.

On August 27, 1972, Berlin Taguba sold a portion of the said lot consisting of 400 square meters to
private respondent Maria Peralta Vda de De Leon. The portion sold comprises the area occupied by
the Asuncions and private respondent Vda de De Leon. The deed evidencing said sale was
denominated as "Deed of Conditional Sale", 1 the only salient terms and conditions of which reads
— têñ.£îhqwâ£

NOW THEREFORE, for and in consideration of the sum of Eighteen Thousand

(P18,000.00) Pesos, Philippine Currency, (P45.00 per sq. m.) to be paid in the manner
herein below specified, the VENDOR hereby SELL, CEDE, TRANSFER, and CONVEY
unto and in favor of the VENDEE, her heirs, executors, administrators or assigns the
above-described portion. The aforesaid sum of P18,000.00 shall be paid at the
residence of the VENDOR as follows:

a) P3,500.00 Philippine Currency upon the signing and executed petition of this
contract;

b) To pay the amount of at least One Thousand (P1,000.00) Pesos, Philippine Currency
MONTHLY to commence September 1972, until the whole amount would have been
paid on or before December 3, 1972;

c) That failure to pay the VENDOR the whole balance on December 31, 1972, the
VENDEE shall be given an extension of Six (6) months with interest (legal rate) after
 which VENDOR may INCREASE the purchase price to P50.00 per sq. m. which the
VENDEE agrees should she fail to pay within said period of time.

Alleging that she (private respondent) had already paid the sum of P12,500.00 and had tendered
payment of the balance of P5,500.00 to complete the stipulated purchase price of P18,000.00 to
petitioner Berlin Taguba in May 1973 within the grace period but the latter refused to receive
payment; and that since negotiations for settlement with the intervention of Governor Dy failed,
private respondent instituted on April 29, 1976 a complaint for Specific Performance with Preliminary
Mandatory Injunction with Damages against Spouses Berlin Taguba and Sebastiana Domingo, in the
then Court of First Instance of Isabela (Civil Case No. II-1215.)

In their Answer, Spouses Taguba admitted the sale of the property, but claimed that private
respondent failed to comply with her obligation under the Deed of Conditional Sale despite the
several extensions granted her, by reason of which petitioner was compelled but with the express
knowledge and consent and even upon the proposal of private respondent, to negotiate the sale of a
portion of the property sold, to the Spouses Asuncion who were actually in possession thereof.
Petitioner further alleged that the parties had appeared before Governor Dy, who mediated to settle
the dispute between them and that in the said conference, they had agreed that private respondent
and the Asuncion spouses will buy only the portions which they respectively and actually as lessees.

The Asuncion spouses intervened and filed their Answer in Intervention alleging that they bought in
good faith that portion of the land they actually occupy after private respondent defaulted in her
undertaking in their contract with petitioner Berlin Taguba and after a confrontation in the house of
Governor Faustino N. Dy.

After trial, the lower court rendered judgment, the dispositive portion of which reads as follows — têñ.
£îhqwâ£

1) Ordering a cadastral survey by a competent Geodetic Engineer of the actual area

occupied by the plaintiff and the intervenors;

2) Ordering the defendant Berlin Taguba to execute a deed of absolute sale in favor of
the plaintiff of the actual area actually occupied by her;

3) Ordering Berlin Taguba to reimburse the plaintiff of whatever amount he received

from the plaintiff in excess of the costs of the area actually occupied by plaintiff at
P45.00 per square meter;

4) The cost of survey shag be borne by the plaintiff and intervenor share and share
alike;

5) The order granting preliminary injunction against plaintiff dated July 13, 1978 is
hereby declared permanent.

Without special pronouncement as to costs.

SO ORDERED.1äwphï1.ñët

On appeal under CA-G.R. No. 65357-R, the then Court of Appeals reversed the decision of the lower
court in a decision promulgated on October 22, 1981, the dispositive portion of which reads as follows
— têñ.£îhqwâ£
 WHEREFORE, the decision of the lower court is hereby SET ASIDE and a new
judgment rendered as follows:

1) Ordering defendant Berlin Taguba to execute a deed of absolute sale in favor of

plaintiff over the 400 square meter portion of his property described in Exhibit "A" upon
the payment by plaintiff of the sum of P7,500.00 within thirty (30) days from receipt of
notice from the Clerk of Court of the lower court of receipt of the records of the case
from the Court of Appeals as provided for in the last paragraph of Section 1, Rule 39 in
relation to Section 11, Rule 51 of the Rules of Court;

2) Declaring the deed of sale executed by defendant Taguba in favor of defendant

Asuncion in April 19, 1974, Exhibit '3' and void or of no force and effect in view of the
prior sale of the property covered under said deed to plaintiff on August 27, 1972 Exhibit
"A",

3) Ordering defendant Berlin Taguba to reimburse defendant Pedro Asuncion the

purchase price received by him under the deed of sale of April 19, 1974, Exhibit "3"; and

4) Ordering defendants jointly and severally to deliver to plaintiff possession of the

property described in Exhibit "A" with an area of 400 square meters, the portion sold by
defendant Taguba to plaintiff.

With costs against defendants-appellees.

SO ORDERED.1äwphï1.ñët

The motion for reconsideration of the aforesaid decision filed by petitioner Spouses Taguba and
Spouses Asuncion having been denied, they now come before this Court through the instant petition
praying that the decision of the then Court of Appeals be set aside and the decision of the lower court
be affirmed in toto.

The petition is without merit.

We agree with respondent Court of Appeals (now Intermediate Appellate Court) that the contract of
sale between petitioner Berlin Taguba and private respondent Maria Peralta Vda. de De Leon 2 was
absolute in nature. Despite the denomination of the deed as a "Deed of Conditional Sale" a reading of
the conditions (earlier quoted in this decision) therein set forth reveals the contrary. Nowhere in the
said contract in question could we find a proviso or stipulation to the effect that title to the property
sold is reserved in the vendor 3 until full payment of the purchase price. There is also no stipulation
giving the vendor (petitioner Taguba) the right to unilaterally rescind the contract the moment the
vendee (private respondent de Leon) fails to pay within a fixed period. 4 Indeed, a reading of the
contract in its entirety would show that the only right of petitioner Taguba as vendor was to collect
interest at the legal rate if private respondent-vendee fails to pay the full purchase price of
P18,000.00 up to December 31, 1972 and to increase the price from P45.00 to P50.00 per square
meter if vendee still fails to pay within the six months grace period from December 31, 1972. Thus
Par. C of the deed provides- têñ.£îhqwâ£

c) That failure to pay the VENDOR the whole balance on December 31, 1972, the
VENDEE shall be given an extension of six (6) months with interest (legal rate) after
which VENDOR may INCREASE the purchase price to P50.00 per sq. m. which the
VENDEE agrees should she fail to pay within said period of time.
Considering, therefore, the nature of the transaction between petitioner Taguba and private
respondent, which We affirm and sustain to be a contract of sale, absolute in nature 5 the applicable
provision is Article 1592 of the New Civil Code, which states — têñ.£îhqwâ£

Art. 1592. In the sale of immovable property,eventhough may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall
of right take place, the vendee may pay, even after the expiration of the period, as long
as no demand for rescission of the contract has been made upon him either judicially or
by notarial act. After the demand the court may not grant him a new term. (Emphasis
supplied)

In the case at bar, it is undisputed that petitioner Taguba never notified private respondent by notarial
act that he was rescinding the contract, and neither had he filed a suit in court to rescind the sale.

Finally, it has been ruled that "where time is not of the essence of the agreement, a slight delay on
the part of one party in the performance of his obligation is not a sufficient ground for the rescission of
the agreement. 6 Considering that in the instant case, private respondent had already actually paid
the sum of P12,500.00 of the total stipulated purchase price of P18,000.00 and had tendered
payment of the balance of P5,500.00 within the grace period of six months from December 31, 1972,
equity and justice mandate that she be given additional period within which to complete payment of
the purchase price. 7

With the respect to the sale executed by petitioner Taguba in favor of the other petitioners, the
Asuncion spouses, on April 19, 1974 of 233 square meters portion of his property which is a part of
the 400 square meters previously sold to private respondent de Leon, We find that said sale cannot
prevail over the previous sale in favor of private respondent. The Asuncion spouses cannot be
considered buyers in good faith because they were aware of the earlier sale to private respondent. 8

WHEREFORE, the judgment of respondent Appellate Court is hereby AFFIRMED with costs against
petitioners.

SO ORDERED.
 FIRST DIVISION

G.R. No. 77648 August 7, 1989

CETUS DEVELOPMENT, INC., petitioner,

vs.
COURT OF APPEALS and ONG TENG, respondents.

G.R. No. 77647 August 7, 1989

CETUS DEVELOPMENT, INC., petitioner,

vs.
COURT OF APPEALS and EDERLINA NAVALTA, respondents.

G.R. No. 77649 August 7, 1989

CETUS DEVELOPMENT, INC., petitioner,

vs.
COURT OF APPEALS and JOSE LIWANAG, respondents.

G.R. No. 77650 August 7, 1989

CETUS DEVELOPMENT, INC., petitioner,

vs.
COURT OF APPEALS and LEANDRO CANLAS, respondents.

G.R. No. 77651 August 7, 1989

CETUS DEVELOPMENT, INC., petitioner,

vs.
COURT OF APPEALS and VICTORIA SUDARIO respondents.

G.R. No.77652 August 7, 1989

CETUS DEVELOPMENT, INC., petitioner,

vs.
COURT OF APPEALS and FLORA NAGBUYA respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision dated January 30, 1987 of the Court of
Appeals in CA-GR Nos. SP-07945-50 entitled, "Cetus Development, Inc., Petitioner vs. Hon. Conrado
T. Limcaoco, Presiding Judge, Regional Trial Court of Manila, Branch Ederlina Navalta, et. al.,
respondents.

The following facts appear in the records:

The private respondents, Ederlina Navalta, Ong Teng, Jose Liwanag, Leandro Canlas, Victoria
Sudario, and Flora Nagbuya were the lessees of the premises located at No. 512 Quezon Boulevard,
Quiapo, Manila, originally owned by the Susana Realty. These individual verbal leases were on a
month-to month basis at the following rates: Ederlina Navalta at the rate of P80.50; Ong Teng at the
rate of P96.10; Jose Liwanag at the rate of P40.35; Leandro Canlas at the rate of P80.55; Victoria
Sudario at the rate of P50.45 and Flora Nagbuya at the rate of P80.55. The payments of the rentals
were paid by the lessees to a collector of the Susana Realty who went to the premises monthly.

Sometime in March, 1984, the Susana Realty sold the leased premises to the petitioner, Cetus
Development, Inc., a corporation duly organized and existing under the laws of the Philippines. From
April to June, 1984, the private respondents continued to pay their monthly rentals to a collector sent
by the petitioner. In the succeeding months of July, August and September 1984, the respondents
failed to pay their monthly individual rentals as no collector came.

On October 9, 1984, the petitioner sent a letter to each of the private respondents demanding that
they vacate the subject premises and to pay the back rentals for the months of July, August and
September, 1984, within fifteen (15) days from the receipt thereof. Immediately upon the receipt of
the said demand letters on October 10, 1984, the private respondents paid their respective
arrearages in rent which were accepted by the petitioner subject to the unilateral condition that the
acceptance was without prejudice to the filing of an ejectment suit. Subsequent monthly rental
payments were likewise accepted by the petitioner under the same condition.

For failure of the private respondents to vacate the premises as demanded in the letter dated October
9, 1984, the petitioner filed with the Metropolitan Trial Court of Manila complaints for ejectment
against the manner, as follows: (1) 105972-CV, against Ederlina Navalta (2) 105973-CV, against
Jose Liwanag; (3) 105974-CV, against Flora Nagbuya; (4) 105975-CV, against Leandro Canlas; (5)
105976-CV, against Victoria Sudario and (6) 105977-CV, against Ong Teng.

In their respective answers, the six (6) private respondents interposed a common defense. They
claimed that since the occupancy of the premises they paid their monthly rental regularly through a
collector of the lessor; that their non-payment of the rentals for the months of July, August and
September, 1984, was due to the failure of the petitioner (as the new owner) to send its collector; that
they were at a loss as to where they should pay their rentals; that sometime later, one of the
respondents called the office of the petitioner to inquire as to where they would make such payments
and he was told that a collector would be sent to receive the same; that no collector was ever sent by
the petitioner; and that instead they received a uniform demand letter dated October 9, 1984.

The private respondents, thru counsel, later filed a motion for consolidation of the six cases and as a
result thereof, the said cases were consolidated in the Metropolitan Trial Court of Manila, Branch XII,
presided over by Judge Eduardo S. Quintos, Jr. On June 4, 1985, the trial court rendered its decision
dismissing the six cases, a pertinent portion of which reads, as follows:

The records of this case show that at the time of the filing of this complaint, the rentals
had all been paid. Hence, the plaintiff cannot eject the defendants from the leased
premises, because at the time these cases were instituted, there are no rentals in
arrears.

The acceptance of the back rental by the plaintiff before the filing of the complaint, as in
these case, the alleged rental arrearages were paid immediately after receipt of the
demand letter, removes its cause of action in an unlawful detainer case, even if the
acceptance was without prejudice.
 x x x.

Furthermore, the court has observed that the account involved which constitutes the
rentals of the tenants are relatively small to which the ejectment may not lie on grounds
of equity and for humanitarian reasons.

Defendants' counterclaim for litigation expenses has no legal and factual basis for
assessing the same against plaintiff.

WHEREFORE, judgment is hereby rendered dismissing these cases, without

pronouncement as to costs.

Defendants' counterclaim is likewise dismissed.

SO ORDERED. (pp. 32-33, Rollo, G.R. No. 77647)

Not satisfied with the decision of the Metropolitan Trial Court, the petitioner appealed to the Regional
Trial Court of Manila and the same was assigned to Branch IX thereof presided over by Judge
Conrado T. Limcaoco (now Associate Justice of the Court of Appeals).lâwphî1.ñèt In its decision
dated November 19, 1985, the Regional Trial Court dismissed the appeal for lack of merit.

In due time, a petition for review of the decision of the Regional Trial Court was filed by the petitioner
with the Court of Appeals. Said petition was dismissed on January 30, 1987, for lack of merit.

Aggrieved by the decision of the Court of Appeals, petitioner now comes to Us in this petition,
assigning the following errors:

ASSIGNMENT OF ERRORS

RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ABUSE OF

DISCRETION, AMOUNTING TO LACK OF JURISDICTION, WHEN IT ERRED IN
HOLDING THAT THE CAUSE OF ACTION FOR UNLAWFUL DETAINER IN THESE
CASES DID NOT EXIST WHEN THE COMPLAINTS WERE FILED BECAUSE
PRIVATE RESPONDENTS TENDERED, AND PETITIONER ACCEPTED, THE
PAYMENT OF THE THREE (3) MONTHS RENTAL IN ARREARS WITHIN THE
FIFTEEN (15) DAY PERIOD FROM PRIVATE RESPONDENTS' RECEIPT OF
PETITIONER'S DEMAND LETTERS TO VACATE THE SUBJECT PREMISES AND TO
PAY THE RENTALS IN ARREARS.

II

RESPONDENT COURT OF APPEALS COMMITTED A GRAVEABUSE OF

DISCRETION, AMOUNTING TO LACK OF JURISDICTION COMMITTED A GRAVE
WHEN IT ERRED IN AFFIRMING THE DISMISSAL OF THE COMPLAINTS IN THESE
CASES NOTWITHSTANDING THE EXISTENCE OF VALID GROUNDS FOR THE
JUDICIAL EJECTMENT OF PRIVATE RESPONDENT.

III
 RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK OF JURISDICTION, WHEN IT ERRED IN
HOLDING THAT THESE CASES ARE CLASSIC EXAMPLES TO CIRCUMVENT THE
RENT CONTROL LAW. (pp. 164-165, Rollo, G.R. No. 77647)

The Court of Appeals defined the basic issue in this case as follows: whether or not there exists a
cause of action when the complaints for unlawful detainer were filed considering the fact that upon
demand by petitioner from private respondents for payment of their back rentals, the latter
immediately tendered payment which was accepted by petitioner.

In holding that there was no cause of action, the respondent Court relied on Section 2, Rule 70 of the
Rules of Court, which provides:

Sec. 2. Landlord to proceed against tenant only after demand. — No landlord or his
legal representative or assign, shall be such action against a tenant for failure to pay
rent due or to comply with the conditions of his lease, unless the tenant shall have failed
to pay such rent or comply with such conditions for a period of fifteen (15) days or five
(5) days in case of building, after demand therefor, made upon qqqm personally, or by
serving written notice of such demand upon the person found on the premises, or by
posting such notice on the premises if no persons be found thereon.

It interpreted the said provision as follows:

.....the right to bring an action of ejectment or unlawful detainer must be counted from
the time the defendants failed to pay rent after the demand therefor. It is not the failure
per se to pay rent as agreed in the contract, but the failure to pay the rent after a
demand therefor is made, that entitles the lessor to bring an action for unlawful detainer.
In other words, the demand contemplated by the above-quoted provision is not a
demand to vacate, but a demand made by the landlord upon his tenant for the latter to
pay the rent due if the tenant fails to comply with the said demand with the period
provided, his possession becomes unlawful and the landlord may then bring the action
for ejectment. (p. 28, , G.R. No. 77647)

We hold that the demand required and contemplated in Section 2, aforequoted, is a jurisdictional
requirement for the purpose of bringing an unlawful detainer suit for failure to pay rent or comply with
the conditions of lease. It partakes of an extrajudicial remedy that must be pursued before resorting
for judicial action so much so that when there is full compliance with the demand, there arises no
necessity for court action.

As to whether this demand is merely a demand to pay rent or comply with the conditions of the lease
or also a demand to vacate, the answer can be gleaned from said Section 2. This section
presupposes the existence of a cause of action for unlawful detainer as it speaks of "failure to pay
rent due or comply with the conditions of the lease." The existence of said cause of action gives the
lessor the right under Article 1659 of the New Civil Code to ask for the rescission of the contract of
lease and indemnification for damages, or only the latter, allowing the contract to remain in force.
Accordingly, if the option chosen is for specific performance, then the demand referred to is obviously
to pay rent or to comply with the conditions of the lease violated. However, if rescission is the option
chosen, the demand must be for the lessee to pay rents or to comply with the conditions of the lease
and to vacate. Accordingly, the rule that has been followed in our jurisprudence where rescission is
clearly the option taken, is that both demands to pay rent and to vacate are necessary to make a
lessee a deforciant in order that an ejectment suit may be filed (Casilan et al. vs. Tomassi, L-16574,
February 28,1964, 10 SCRA 261; Rickards vs. Gonzales, 109 Phil. 423, Dikit vs. Icasiano, 89 Phil.
44).lâwphî1.ñèt

Thus, for the purpose of bringing an ejectment suit, two requisites must concur, namely: (1) there
must be failure to pay rent or comply with the conditions of the lease and (2) there must be demand
both to pay or to comply and vacate within the periods specified in Section 2, Rule 70, namely 15
days in case of lands and 5 days in case of buildings. The first requisite refers to the existence of the
cause of action for unlawful detainer while the second refers to the jurisdictional requirement of
demand in order that said cause of action may be pursued.

It is very clear that in the case at bar, no cause of action for ejectment has accrued. There was no
failure yet on the part of private respondents to pay rents for three consecutive months. As the terms
of the individual verbal leases which were on a month-to-month basis were not alleged and proved,
the general rule on necessity of demand applies, to wit: there is default in the fulfillment of an
obligation when the creditor demands payment at the maturity of the obligation or at anytime
thereafter. This is explicit in Article 1169, New Civil Code which provides that "(t)hose obliged to
deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation." Petitioner has not shown that its case falls on any of the
following exceptions where demand is not required: (a) when the obligation or the law so declares; (b)
when from the nature and circumstances of the obligation it can be inferred that time is of the
essence of the contract; and (c) when demand would be useless, as when the obligor has rendered it
beyond his power to perform.

The demand required in Article 1169 of the Civil Code may be in any form, provided that it can be
proved. The proof of this demand lies upon the creditor. Without such demand, oral or written, the
effects of default do not arise. This demand is different from the demand required under Section 2,
Rule 70, which is merely a jurisdictional requirement before an existing cause of action may be
pursued.

The facts on record fail to show proof that petitioner demanded the payment of the rentals when the
obligation matured. Coupled with the fact that no collector was sent as previously done in the past,
the private respondents cannot be held guilty of mora solvendi or delay in the payment of rentals.
Thus, when petitioner first demanded the payment of the 3-month arrearages and private
respondents lost no time in making tender and payment, which petitioner accepted, no cause of
action for ejectment accrued. Hence, its demand to vacate was premature as it was an exercise of a
non-existing right to rescind.

In contradistinction, where the right of rescission exists, payment of the arrearages in rental after the
demand to pay and to vacate under Section 2, Rule 70 does not extinguish the cause of action for
ejectment as the lessor is not only entitled to recover the unpaid rents but also to eject the lessee.

Petitioner correctly argues that acceptance of tendered payment does not constitute a waiver of the
cause of action for ejectment especially when accepted with the written condition that it was "without
prejudice to the filing of an ejectment suit". Indeed, it is illogical or ridiculous not to accept the tender
of payment of rentals merely to preserve the right to file an action for unlawful detainer. However, this
line of argument presupposes that a cause of action for ejectment has already accrued, which is not
true in the instant case.

Petitioner likewise claims that its failure to send a collector to collect the rentals cannot be considered
a valid defense for the reason that sending a collector is not one of the obligations of the lessor under
Article 1654. While it is true that a lessor is not obligated to send a collector, it has been duly
established that it has been customary for private respondents to pay the rentals through a collector.
Besides Article 1257, New Civil Code provides that where no agreement has been designated for the
payment of the rentals, the place of payment is at the domicile of the defendants. Hence, it could not
be said that they were in default in the payment of their rentals as the delay in paying the same was
not imputable to them. Rather, it was attributable to petitioner's omission or neglect to collect.

Petitioner also argues that neither is its refused to accept the rentals a defense for non-payment as
Article 1256 provides that "[i]f the creditor to whom the tender of payment has been made refuses
without just cause to accept it, the debtor shall be released from responsibility by the consignation of
the thing due." It bears emphasis that in this case there was no unjustified refusal on the part of
petitioner or non-acceptance without reason that would constitute mora accipiendi and warrant
consignation. There was simply lack of demand for payment of the rentals.

In sum, We hold that respondent Court of Appeals did not commit grave abuse of discretion
amounting to lack of jurisdiction in its conclusion affirming the trial court's decision dismissing
petitioner's complaint for lack of cause of action. We do not agree, however, with the reasons relied
upon.

ACCORDINGLY, the petition for review on certiorari is hereby DENIED for lack of merit and the
decision dated January 30, 1987 of respondent Court of Appeals is hereby AFFIRMED.

SO ORDERED.
 THIRD DIVISION

G.R. No. 118883 January 16, 1998

SANGGUNIANG BAYAN OF SAN ANDRES, CATANDUANES, Represented by VICE

MAYOR NENITO AQUINO and MAYOR LYDIA T. ROMANO, Petitioner, vs. COURT
OF APPEALS and AUGUSTO T. ANTONIO, Respondents.

PANGANIBAN, J.:

Although a resignation is not complete without an acceptance thereof by the proper

authority, an office may still be deemed relinquished through voluntary abandonment
which needs no acceptance.

Statement of the Case

Before us is a petition for review under Rule 45 of the Rules of Court seeking a reversal
of the Decision 1 of the Court of Appeals 2 promulgated on January 31, 1995 in CA-G.R.
SP No. 34158, which modified the Decision dated February 18, 1994 of the Regional
Trial Court 3 of Virac, Catanduanes, Branch 42, in Sp. Civil Case No. 1654.

The dispositive portion of the assailed Decision of the appellate court reads:

WHEREFORE, the judgment appealed from is hereby MODIFIED such that paragraphs 1,
2 and 4 thereof are deleted. Paragraph 3 is AFFIRMED. No pronouncement as to costs.  4

Antecedent Facts

Private Respondent Augusto T. Antonio was elected barangay captain of Sapang Palay,
San Andres, Catanduanes in March 1989. He was later elected president of the
Association of Barangay Councils (ABC) 5 for the Municipality of San Andres,
Catanduanes. In that capacity and pursuant to the Local Government Code of 1983, he
was appointed by the President as member of the Sangguniang Bayan of the
Municipality of San Andres.

Meanwhile, then Secretary Luis T. Santos of the Department of Interior and Local
Government (DILG) declared the election for the president of the Federation of the
Association of Barangay Councils (FABC) of the same province, in which private
respondent was a voting member, void for want of a quorum. Hence, a reorganization of
the provincial council became necessary. Conformably, the DILG secretary designated
private respondent as a temporary member of the Sangguniang Panlalawigan of the
Province of Catanduanes, effective June 15, 1990.

In view of his designation, private respondent resigned as a member of

the Sangguniang Bayan. He tendered his resignation 6 dated June 14, 1990 to Mayor
Lydia T. Romano of San Andres, Catanduanes, with copies furnished to the provincial
governor, the DILG and the municipal treasurer. Pursuant to Section 50 of the 1983
Local Government Code 7 (B.P. Blg. 337), Nenito F. Aquino, then vice president of the
ABC, was subsequently appointed by the provincial governor as member of
the Sangguniang Bayan 8 in place of private respondent. Aquino assumed office on July
18, 1990 after taking his oath. 9

Subsequently, the ruling of DILG Secretary Santos annulling the election of the FABC
president was reversed by the Supreme Court in Taule vs. Santos. 10 In the same case,
the appointment of Private Respondent Antonio as sectoral representative to
the Sangguniang Panlalawigan was declared void, because he did not possess the basic
qualification that he should be president of the federation of barangay councils.  11 This
ruling of the Court became final and executory on December 9, 1991.

On March 31, 1992, private respondent wrote to the members of the Sangguniang

Bayan of San Andres, advising them of his re-assumption of his "original position, duties
and responsibilities as sectoral representative"  12 therein. In response thereto,
the Sanggunian issued Resolution No. 6, Series of 1992, declaring that Antonio had no
legal basis to resume office as a member of the Sangguniang Bayan. 13

On August 13, 1992, private respondent sought from the DILG a definite ruling relative
to his right to resume his office as member of the Sangguniang Bayan. 14 Director Jacob
F. Montesa, department legal counsel of the DILG, clarified Antonio's status in this wise:

Having been elected President of the ABC in accordance with the Department's
Memorandum Circular No. 89-09, 15 you became an ex-officio member in
the sanggunian. Such position has not been vacated inasmuch as you did not resign nor
abandon said office when you were designated as temporary representative of the
Federation to the Sangguniang Panlalawigan of Catanduanes on June 7, 1990. The
Supreme Court in Triste vs. Leyte State College Board of Trustees (192 SCRA 327),
declared that: "designation implies temporariness. Thus, to "designate" a public officer
to another position may mean to vest him with additional duties while he performs the
functions of his permanent office. In some cases, a public officer may be "designated" to
a position in an acting capacity as when an undersecretary is designated to discharge
the functions of the Secretary pending the appointment of a permanent Secretary."

Furthermore, incumbent ABC presidents are mandated by the Rules and Regulations
Implementing the 1991 Local Government Code to continue to act as president of the
association and to serve as ex-officio members of the sangguniang bayan, to wit:

Article 210 (d) (3), Rule XXIX of the Implementing Rules and Regulations of Rep. Act
No. 7160, provides that:

The incumbent presidents of the municipal, city and provincial chapters of the liga shall
continue to serve as ex-officio members of the sanggunian concerned until the
expiration of their term of office, unless sooner removed for cause.

(f) . . . Pending election of the presidents of the municipal, city, provincial and
metropolitan chapters of the liga, the incumbent presidents of the association of
barangay councils in the municipality, city, province and Metropolitan Manila, shall
continue to act as president of the corresponding liga chapters under this Rule.

In view of the foregoing, considering that the annulled designation is only an additional
duty to your primary function, which is the ABC President, we find no legal obstacle if
you re-assume your representation in the sanggunian bayan as ex-officio member. 16

Despite this clarification, the local legislative body issued another resolution  17 reiterating
its previous stand.

In response to private respondent's request, 18 Director Montesa opined that Antonio did

not relinquish or abandon his office; and that since he was the duly elected ABC
president, he could re-assume his position in the Sanggunian. 19 A copy of said reply was
sent to the members of the local legislative body.

Notwithstanding, the Sanggunian refused to acknowledge the right of private respondent

to re-assume office as sectoral representative.

On December 10, 1992, private respondent filed a petition

for certiorari and mandamus with preliminary mandatory injunction and/or restraining
order before the RTC. On February 18, 1994, the trial court rendered its decision holding
that Augusto T. Antonio's resignation from the Sangguniang Bayan was ineffective and
inoperative, since there was no acceptance thereof by the proper authorities. The
decretal portion of the decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the

petitioner and against the respondents and ordering the latter:

(1) to pay the petitioner jointly and severally the amount of P10,000.00 as attorney's
fees and the cost of the suit;

(2) to allow petitioner to assume his position as sectoral representative of

the Sangguniang Bayan of San Andres, Catanduanes;

(3) to pay the petitioner jointly and severally his uncollected salaries similar to those
received by the other members of the Sangguniang Bayan of San Andres, Catanduanes
as certified to by the Municipal Budget Officer and Municipal Treasurer of the same
municipality from April 8, 1992 up to the date of this judgment; and

(4) declaring Resolution No[s]. 7 & 28 series of 1992 null and void and to have no
effect. 20

Petitioners appealed this judgment to the Court of Appeals.

Appellate Court's Ruling

Respondent Court of Appeals affirmed the trial court's ruling but deleted the first, second
and fourth paragraphs of its dispositive portion. It held that private respondent's
resignation was not accepted by the proper authority, who is the President of the
Philippines. While the old Local Government Code is silent as to who should accept and
act on the resignation of any member of the Sanggunian, the law vests in the President
the power to appoint members of the local legislative unit. Thus, resignations must be
addressed to and accepted by him. It added that, though the secretary of the DILG is
the alter ego of the President and notice to him may be considered notice to the
President, the records are bereft of any evidence showing that the DILG secretary
received and accepted the resignation letter of Antonio.

Moreover, granting that there was complete and effective resignation, private
respondent was still the president of the ABC and, as such, he was qualified to sit in
the Sangguniang Bayan in an ex officio capacity by virtue of Section 494 21 of R.A.
7160 22 and Memorandum Circular No. 92-38.  23 In view, however, of the May 1994
elections in which a new set of barangay officials was elected, Antonio's reassumption of
office as barangay representative to the Sangguniang Bayan was no longer legally
feasible.

The appellate court added that private respondent could not be considered to have
abandoned his office. His designation as member of the Sangguniang Panlalawigan was
merely temporary and not incompatible with his position as president of the ABC of San
Andres, Catanduanes.

Finally, Respondent Court deleted the award of attorney's fees for being without basis,
and held that Resolution Nos. 6 and 28 of the Sangguniang Bayan of San Andres
involved a valid exercise of the powers of said local body. It thus modified the trial
court's judgment by affirming paragraph 3 and deleting the other items. Unsatisfied,
petitioners brought the present recourse. 24

Issues

The petitioner, in its memorandum, 25 submits before this Court the following issues:

I. Whether or not respondent's resignation as ex-officio member of Petitioner

Sangguniang Bayan ng San Andres, Catanduanes is deemed complete so as to terminate
his official relation thereto;

II. Whether or not respondent had totally abandoned his ex-officio membership in

Petitioner Sangguniang Bayan;

III. Whether or not respondent is entitled to collect salaries similar to those received by
other members of Petitioner Sangguniang Bayan from April 8, 1992 up to date of
judgment in this case by the Regional Trial Court of Virac, Catanduanes.  26

In sum, was there a complete and effective resignation? If not, was there an
abandonment of office?

This Court's Ruling

The petition is meritorious. Although the terms of office of barangay captains, including
private respondent, elected in March 1989 have expired, the Court deemed it necessary
to resolve this case, as the Court of Appeals had ordered the payment of the uncollected
salaries allegedly due prior to the expiration of Respondent Antonio's term.

First Issue: Validity of Resignation

The petitioner submits that the resignation of private respondent was valid and effective
despite the absence of an express acceptance by the President of the Philippines. The
letter of resignation was submitted to the secretary of the DILG, an alter ego of the
President, the appointing authority. The acceptance of respondent's resignation may be
inferred from the fact that the DILG secretary himself appointed him a member of
the Sangguniang Panlalawigan of Catanduanes. 27

In Ortiz vs. COMELEC, 28 we defined resignation as the "act of giving up or the act of an

officer by which he declines his office and renounces the further right to use it. It is an
expression of the incumbent in some form, express or implied, of the intention to
surrender, renounce, and relinquish the office and the acceptance by competent and
lawful authority." To constitute a complete and operative resignation from public office,
there must be: (a) an intention to relinquish a part of the term; (b) an act of
relinquishment; and (c) an acceptance by the proper authority.  29 The last one is
required by reason of Article 238 of the Revised Penal Code. 30

The records are bereft of any evidence that private respondent's resignation was
accepted by the proper authority. From the time that he was elected as punong
barangay up to the time he resigned as a member of Sangguniang Bayan, the governing
law was B.P. 337 or the Local Government Code of 1983. While said law was silent as to
who specifically should accept the resignation of an appointive member of
the Sangguniang Bayan, Sec. 6 of Rule XIX of its implementing rules states that the
"[r]esignation of sanggunian members shall be acted upon by
the sanggunian concerned, and a copy of the action taken shall be furnished the official
responsible for appointing a replacement and the Ministry of Local Government. The
position shall be deemed vacated only upon acceptance of the resignation."

It is not disputed that private respondent's resignation letter was addressed only to the
municipal mayor of San Andres, Catanduanes. It is indicated thereon that copies were
furnished the provincial governor, the municipal treasurer and the DILG. Neither the
mayor nor the officers who had been furnished copies of said letter expressly acted on
it. On hindsight, and assuming arguendo that the aforecited Sec. 6 of Rule XIX is valid
and applicable, the mayor should have referred or endorsed the latter to
the Sangguniang Bayan for proper action. In any event, there is no evidence that the
resignation was accepted by any government functionary or office.

Parenthetically, Section 146 of B.P. Blg. 337 states:

Sec. 146. Composition. - (1) The sangguniang bayan shall be the legislative body of the

municipality and shall be composed of the municipal mayor, who shall be the presiding
officer, the vice-mayor, who shall be the presiding officer pro tempore, eight members
elected at large, and the members appointed by the President consisting of the resident
of the katipunang bayan and the president of the kabataang barangay municipal
federation. . . . (Emphasis supplied.)
Under established jurisprudence, resignations, in the absence of statutory provisions as
to whom they should be submitted, should be tendered to the appointing person or
body. 31 Private respondent, therefore, should have submitted his letter of resignation to
the President or to his alter ego, the DILG secretary. Although he supposedly furnished
the latter a copy of his letter, there is no showing that it was duly received, much less,
that it was acted upon. The third requisite being absent, there was therefore no valid
and complete resignation.

Second Issue: Abandonment of Office

While we agree with Respondent Court that the resignation was not valid absent any
acceptance thereof by the proper authority, we nonetheless hold that Private
Respondent Antonio has effectively relinquished his membership in the Sangguniang
Bayan due to his voluntary abandonment of said post.

Abandonment of an office has been defined as the voluntary relinquishment of an office

by the holder, with the intention of terminating his possession and control
thereof. 32 Indeed, abandonment of office is a species of resignation; while resignation in
general is a formal relinquishment, abandonment is a voluntary relinquishment through
nonuser. 33 Nonuser refers to a neglect to use a privilege or a right (Cyclopedic Law
Dictionary, 3rd ed.) or to exercise an easement or an office (Black's Law Dictionary, 6th
ed.).

Abandonment springs from and is accompanied by deliberation and freedom of

choice. 34 Its concomitant effect is that the former holder of an office can no longer
legally repossess it even by forcible reoccupancy. 35

Clear intention to abandon should be manifested by the officer concerned. Such

intention may be express or inferred from his own conduct.  36 Thus, the failure to
perform the duties pertaining to the office must be with the officer's actual or imputed
intention to abandon and relinquish the office.  37 Abandonment of an office is not wholly
a matter of intention; it results from a complete abandonment of duties of such a
continuance that the law will infer a relinquishment.  38 Therefore, there are two essential
elements of abandonment: first, an intention to abandon and, second, an overt or
"external" act by which the intention is carried into effect.  39

Petitioner argues that the following clearly demonstrate private respondent's

abandonment of his post in the Sangguniang Bayan:

Admittedly, the designation of respondent as member of the Sangguniang Panlalawigan

of Catanduanes was worded "temporary," but his acts more than clearly established his
intention to totally abandon his office, indicating an absolute relinquishment thereof. It
bears to emphasize that respondent actually tendered his resignation and subsequently
accepted an ex-officio membership in the Sangguniang Panlalawigan of
Catanduanes. He performed his duties and functions of said office for almost two (2)
years, and was completely aware of the appointment and assumption on July 18, 1990
of Nenito F. Aquino, who was then Vice-President of the Association of Barangay
Councils (ABC) of San Andres, Catanduanes, as ex-officio member of petitioner
Sangguniang Bayan representing the ABC.
 xxx xxx xxx

Moreover, it may be well-noted that ABC Vice President Nenito Aquino assumed
respondent's former position for twenty (20) months, without him questioning the term
of office of the former if indeed respondent's designation as ex-officio member of the
Sangguniang Panlalawigan was only temporary. Likewise, for almost eight (8) months
after knowledge of the decision in Taule vs. Santos, et al., Ibid., nullifying his
designation as representative to the Sangguniang Panlalawigan, respondent opted to
remain silent, and in fact failed to seasonably act for the purpose of reassuming his
former position. Evidently, respondent had clearly abandoned his former position by
voluntary relinquishment of his office through non-user.  40 [Emphasis supplied.]

We agree with petitioner. Indeed, the following clearly manifest the intention of private
respondent to abandon his position: (1) his failure to perform his function as member of
the Sangguniang Bayan, (2) his failure to collect the corresponding remuneration for the
position, (3) his failure to object to the appointment of Aquino as his replacement in
the Sangguniang Bayan, (4) his prolonged failure to initiate any act to reassume his post
in the Sangguniang Bayan after the Supreme Court had nullified his designation to
the Sangguniang Panlalawigan.

On the other hand, the following overt acts demonstrate that he had effected his
intention: (1) his letter of resignation from the Sangguniang
Bayan, 41 (2) his assumption of office as member of the Sangguniang Panlalawigan, (3)
his faithful discharge of his duties and functions as member of said Sanggunian, and (4)
his receipt of the remuneration for such post.

It must be stressed that when an officer is "designated" to another post, he is usually

called upon to discharge duties in addition to his regular responsibilities. Indeed, his
additional responsibilities are prescribed by law to inhere, as it were, to his original
position. A Supreme Court justice, for instance, may be designated member of the
House of Representatives Electoral Tribunal. In some cases, a public officer may be
"designated" to a position in an acting capacity, as when an undersecretary is tasked to
discharge the functions of a secretary for a temporary period.  42 In all cases, however,
the law does not require the public servant to resign from his original post. Rather, the
law allows him to concurrently discharge the functions of both offices.

Private respondent, however, did not simultaneously discharge the duties and
obligations of both positions. Neither did he, at that time, express an intention to
resume his office as member of the Sangguniang Bayan. His overt acts, silence, inaction
and acquiescence, when Aquino succeeded him to his original position, show that
Antonio had abandoned the contested office. His immediate and natural reaction upon
Aquino's appointment should have been to object or, failing to do that, to file
appropriate legal action or proceeding. But he did neither. It is significant that he
expressed his intention to resume office only on March 31, 1992, after Aquino had been
deemed resigned on March 23, 1992, and months after this Court had nullified his
"designation" on August 12, 1991. From his passivity, he is deemed to have recognized
the validity of Aquino's appointment and the latter's discharge of his duties as a member
of the Sangguniang Bayan.
In all, private respondent's failure to promptly assert his alleged right implies his loss of
interest in the position. His overt acts plainly show that he really meant his resignation
and understood its effects. As pointed out by the eminent American commentator,
Mechem. 43

Public offices are held upon the implied condition that the officer will diligently and
faithfully execute the duties belonging to them, and while a temporary or accidental
failure to perform them in a single instance or during a short period will not operate as
an abandonment, yet if the officer refuses or neglects to exercise the functions of the
office for so long a period as to reasonably warrant the presumption that he does not
desire or intend to perform the duties of the office at all, he will be held to have
abandoned it, not only when his refusal to perform was willful, but also where, while he
intended to vacate the office, it was because he in good faith but mistakenly supposed
he had no right to hold it.

Lastly, private respondent, who remained ABC president, claims the legal right to be a
member of the Sangguniang Bayan by virtue of Section 146 of B.P. Blg. 337. However,
his right thereto is not self-executory, for the law itself requires another positive act - an
appointment by the President or the secretary of local government per E.O. 342.  44 What
private respondent could have done in order to be able to reassume his post after
Aquino's resignation was to seek a reappointment from the President or the secretary of
local government. By and large, private respondent cannot claim an absolute right to the
office which, by his own actuations, he is deemed to have relinquished.  45

We reiterate our ruling in Aparri vs. Court of Appeals: 46

A public office is the right, authority, and duty created and conferred by law, by which
for a given period, either fixed by law or enduring at the pleasure of the creating power,
an individual is invested with some portion of the sovereign functions of the
government, to be exercised by him for the benefit of the public . . . The right to hold a
public office under our political system is therefore not a natural right. It exists, when it
exists at all, only because and by virtue of some law expressly or impliedly creating and
conferring it . . . There is no such thing as a vested interest or an estate in an office, or
even an absolute right to hold office. Excepting constitutional offices which provide for
special immunity as regards salary and tenure, no one can be said to have any vested
right in an office or its salary . . .

Third Issue: Salary

Having ruled that private respondent had voluntarily abandoned his post at
the Sangguniang Bayan, he cannot be entitled to any back salaries. Basic is the "no
work, no pay" 47 rule. A public officer is entitled to receive compensation for services
actually rendered for as long as he has the right to the office being claimed.  48 When the
act or conduct of a public servant constitutes a relinquishment of his office, he has no
right to receive any salary incident to the office he had abandoned.  49

WHEREFORE, the petition is GRANTED and the Assailed Decision is REVERSED and SET
ASIDE. No costs.
SO ORDERED.
PDF 9

THIRD DIVISION

G.R. No. 109941           August 17, 1999

PACIONARIA C. BAYLON, petitioner,
vs.
THE HONORABLE COURT OF APPEALS (Former Ninth Division) and LEONILA
TOMACRUZ, respondents.

GONZAGA-REYES, J.:

This is a petition for review by way of certiorari under Rule 45 of the Revised Rules of Court of the
decision of the Court of Appeals1 dated November 29, 1991 in CA-G.R. CV No. 27779 affirming the
decision2 of the Regional Trial Court of Quezon City, Branch 88, dated June 14, 1990 in Civil Case
No. Q-89-2483 and the Resolution of the Court of Appeals dated April 27, 1993 denying petitioner's
Motion for Reconsideration.1âwphi1.nêt

The pertinent facts, as found by the trial court and affirmed by respondent court, are briefly narrated
as follows:

Sometime in 1986, petitioner Pacionaria C. Baylon introduced private respondent Leonila Tomacruz,
the co-manager of her husband at PLDT, to Rosita B. Luanzon. 3 Petitioner told private respondent
that Luanzon has been engaged in business as a contractor for twenty years and she invited private
respondent to lend Luanzon money at a monthly interest rate of five percent (5%), to be used as
capital for the latter's business. Private respondent, persuaded by the assurances of petitioner that
Luanzon's business was stable and by the high interest rate, agreed to lend Luanzon money in the
amount of P150,000. On June 22, 1987, Luanzon issued and signed a promissory note
acknowledging receipt of the P150,000 from private respondent and obliging herself to pay the former
the said amount on or before August 22, 1987. 4 Petitioner signed the promissory note, affixing her
signature under the word "guarantor." Luanzon also issued a postdated Solidbank check no.
CA418437 dated August 22, 1987 payable to Leonila Tomacruz in the amount of
P150,000.00.5 Subsequently, Luanzon replaced this check with another postdated Solidbank check
no. 432945 dated December 22, 1987, in favor of the same payee and covering the same
amount.6 Several check in the amount of P7,500 each were also issued by Luanzon and made
payable to private respondent.7

Private respondent made a written demand upon petitioner for payment, which petitioner did not
heed. Thus, on May 8, 1989, private respondent filed a case for the collection of a sum of money with
the Regional Trial Court (RTC) of Quezon City, Branch 88, against Luanzon and petitioner herein,
impleading Mariano Baylon, husband of petitioner, as an additional defendant. However, summons
was never served upon Luanzon.

In her answer, petitioner denied having guaranteed the payment of the promissory note issued by
Luanzon. She claimed that private respondent gave Luanzon the money, not as loan, but rather as an
investment in Art Enterprises and Construction, Inc. — the construction business of Luanzon.
Furthermore, petitioner avers that, granting arguendo that there was a loan and petitioner guaranteed
the same, private respondent has not exhausted the property of the principal debtor nor has she
resorted to all the legal remedies against the principal debtor as required by law. Finally, petitioner
claims that there was an extension of the maturity date of the loan without her consent, thus releasing
from her obligation.8

After trial on the merits, the lower court ruled in favor of private respondent. In its Decision dated June
14, 1990, it stated that —

The evidence and the testimonies on record clearly established a (sic) fact that the transaction
between the plaintiff and defendants was a loan with five percent (5%) monthly interest and not
an investment. In fact they all admitted in their testimonies that they are not given any stock
certificate but only promissory notes similar to Exhibit "B" wherein it was clearly stated that
defendant Luanzon would pay the amount of indebtedness on the date due. Postdated checks
were issued simultaneously with the promissory notes to enable the plaintiff and others to
withdraw their money on a certain fixed time. This shows that they were never participants in
the business transaction of defendant Luanzon but were creditors.

The evidences presented likewise show that plaintiff and others loan their money to defendant
Luanzon because of the assurance of the monthly income of five percent (5%) of their money
and that they could withdraw it anytime after the due date add to it the fact that their friend,
Pacionaria Baylon, expresses her unequivocal gurarantee to the payment of the amount
loaned.

xxx     xxx     xxx

WHEREFORE, premises considered, judgment is hereby rendered against the defendants

Pacionaria C. Baylon and Mariano Baylon, to pay the plaintiff the sum of P150,000.00, with
interest at the legal rate from the filing of this complaint until full payment thereof, to pay the
total sum of P21,000.00 as attorney's fees and costs of suit. 9

On appeal, the trial court's decision was affirmed by the Court of Appeals. Hence, this present case
wherein petitioner makes the following assignment of errors —

I. RESPONDENT COURT ERRED IN HOLDING THAT THE PRIVATE RESPONDENT

TOMACRUZ WAS A CREDITOR OF DEFENDANT LUANZON AND NOT AN INVESTOR IN
THE CONSTRUCTION BUSINESS OF ART ENTERPRISES & CONSTRUCTION, INC.

II. GRANTING, WITHOUT ADMITTING, THAT PETITIONER-APPELLANT BAYLON WAS A

"GUARANTOR" AS APPEARING IN THE NOTE (EXH. "A") THE RESPONDENT COURT
ERRED IN RULING THAT PETITIONER-APPELLANT BAYLON IS LIABLE TO THE PRIVATE
RESPONDENT BECAUSE THE LATTER HAS NOT TAKEN STEPS TO EXHAUST THE
PROPERTY OF THE PRINCIPAL DEBTOR AND HAS NOT RESORTED TO ALL THE LEGAL
REMEDIES PROVIDED BY LAW AGAINST THE DEBTOR, DEFENDANT LUANZON.

III. GRANTING, WITHOUT ADMITTING THAT PETITIONER-APPELLANT BAYLON WAS A

GUARANTOR UNDER THAT NOTE (EXHIBIT "A") DATED JUNE 22, 1987, THE LOWER
COURT ERRED IN RESOLVING THAT SHE WAS NOT RELEASED FROM HER GUARANTY
BY THE SUBSEQUENT TRANSACTIONS BETWEEN THE RESPONDENT-APPELLANT
AND DEFENDANT LUANZON.

At the outset, we note that petitioner's claim that the factual findings of the lower court, which were
affirmed by the Court of Appeals, were based on a misapprehension of facts and contradicted by the
evidence on records10 is a bare allegation and devoid of merit. As a rule, the conclusions of fact of the
trial court, especially when affirmed by the Court of Appeals, are final and conclusive and cannot be
reviewed on appeal by the Supreme Court. 11 Although this rule admits of several exceptions,12 none
of the exceptions are in point in the present case. The factual findings of the respondent court are
borne out by the record and are based on substantial evidence.

Petitioner claims that there is no loan to begin with; that private respondent gave Luanzon the amount
of P150,000, not as a loan, but rather as an investment in the construction project of the latter. 13 In
support of her claim, petitioner cites the use by private respondent of the words "investment,"
"dividends," and "commission" in her testimony before the lower court; the fact that private
respondent received monthly checks from Luanzon in the amount of P7,500 from July to December,
1987, representing dividends on her investment; and the fact that other employees of the
Development Bank of the Philippines made similar investments in Luanzon's construction business. 14

However, all the circumstances mentioned by petitioner cannot override the clear and unequivocal
terms of the June 22, 1987 promissory note whereby Luanzon promised to pay private respondent
the amount of P150,000 on or before August 22, 1987. The promissory note states as follows:

June 22, 1987

To Whom It May Concern:

For value received, I hereby promise to pay Mrs. LEONILA TOMACRUZ the amount of ONE
HUNDRED FIFTY THOUSAND PESOS ONLY (P150,000.00) on or before August 22, 1987.

The above amount is covered by __________ Check No. _______ dated August 22, 1987.

(signed)
ROSITA B. LUANZON
GURARANTOR:

(signed)
PACIONARIA O. BAYLON
Tel. No. 801-28-00
18 P. Mapa St., DBP Village
Almanza, Las Pinas, M.M.15

If the terms of a contract are clear and leave no doubt as to the intention of the contracting parties,
the literal meaning of its stipulation shall control. 16 Resort to extrinsic aids and other extraneous
sources are not necessary in order to ascertain the parties' intent when there is no ambiguity in the
terms of the agreement.17 Both petitioner and private respondent do not deny the due execution and
authenticity of the June 22, 1987 promissory note. All of petitioner's arguments are directed at
uncovering the real intention of the parties in executing the promissory note, but no amount of
argumentation will change the plain import of the terms thereof, and accordingly, no attempt to read
into it any alleged intention of the parties thereto may be justified. 18 The clear terms of the promissory
note establish a creditor-debtor relationship between Luanzon and private respondent. The
transaction at bench is therefore a loan, not an investment.

It is petitioner's contention that, even though she is held to be a guarantor under the terms of the
promissory note, she is not liable because private respondent did not exhaust the property of the
principal debtor and has not resorted to all the legal remedies provided by the law against the
debtor.19 Petitioner is invoking the benefit of excussion pursuant to article 2058 of the Civil Code,
which provides that —
 The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the
property of the debtor, and has resorted to all the legal remedies against the debtor.

It is axiomatic that the liability of the guarantor is only subsidiary. 20 All the properties of the principal
debtor must first be exhausted before his own is levied upon. Thus, the creditor may hold the
guarantor liable only after judgment has been obtained against the principal debtor and the latter is
unable to pay, "for obviously the 'exhaustion of the principal's property' — the benefit of which the
guarantor claims — cannot even begin to take place before judgment has been obtained." 21 This rule
is embodied in article 2062 of the Civil Code which provides that the action brought by the creditor
must be filed against the principal debtor alone, except in some instances when the action may be
brought against both the debtor and the principal debtor. 22

Under the circumstances availing in the present case, we hold that it is premature for this Court to
even determine whether or not petitioner is liable as a guarantor and whether she is entitled to the
concomitant rights as such, like the benefit of excussion, since the most basic prerequisite is wanting
— that is, no judgment was first obtained against the principal debtor Rosita B. Luanzon. It is useless
to speak of a guarantor when no debtor has been held liable for the obligation which is allegedly
secured by such guarantee. Although the principal debtor Luanzon was impleaded as defendant,
there is nothing in the records to show that summons was served upon her. Thus, the trial court never
even acquired jurisdiction over the principal debtor. We hold that private respondent must first obtain
a judgment against the principal debtor before assuming to run after the alleged guarantor.

IN VIEW OF THE FOREGOING, the petition is granted and the questioned Decision of the Court of
Appeals dated November 29, 1991 and Resolution dated April 27, 1993 are SET ASIDE. No
pronouncement as to costs.1âwphi1.nêt

SO ORDERED.
 SECOND DIVISION

G.R. No. 113931 May 6, 1998

E. ZOBEL, INC., Petitioner, vs. THE COURT OF APPEALS, CONSOLIDATED BANK

AND TRUST CORPORATION, and SPOUSES RAUL and ELEA R.
CLAVERIA, Respondents.

MARTINEZ, J.:

This petition for review on certiorari seeks the reversal of the decision 1 of the Court of
Appeals dated July 13, 1993 which affirmed the Order of the Regional Trial Court of
Manila, Branch 51, denying petitioner's Motion to Dismiss the complaint, as well as the
Resolution 2 dated February 15, 1994 denying the motion for reconsideration thereto.

The facts are as follows:

Respondent spouses Raul and Elea Claveria, doing business under the name "Agro
Brokers," applied for a loan with respondent Consolidated Bank and Trust Corporation
(now SOLIDBANK) in the amount of Two Million Eight Hundred Seventy Five Thousand
Pesos (P2,875,000.00) to finance the purchase of two (2) maritime barges and one
tugboat 3 which would be used in their molasses business. The loan was granted subject
to the condition that respondent spouses execute a chattel mortgage over the three (3)
vessels to be acquired and that a continuing guarantee be executed by Ayala
International Philippines, Inc., now herein petitioner E. Zobel, Inc., in favor of
SOLIDBANK. The respondent spouses agreed to the arrangement. Consequently, a
chattel mortgage and a Continuing Guaranty 4 were executed.

Respondent spouses defaulted in the payment of the entire obligation upon maturity.
Hence, on January 31, 1991, SOLIDBANK filed a complaint for sum of money with a
prayer for a writ of preliminary attachment, against respondents spouses and petitioner.
The case was docketed as Civil Case No. 91-55909 in the Regional Trial Court of Manila.

Petitioner moved to dismiss the complaint on the ground that its liability as guarantor of
the loan was extinguished pursuant to Article 2080 of the Civil Code of the Philippines. It
argued that it has lost its right to be subrogated to the first chattel mortgage in view of
SOLIDBANK's failure to register the chattel mortgage with the appropriate government
agency.

SOLIDBANK opposed the motion contending that Article 2080 is not applicable because
petitioner is not a guarantor but a surety.

On February 18, 1993, the trial court issued an Order, portions of which reads:
After a careful consideration of the matter on hand, the Court finds the ground of the
motion to dismiss without merit. The document referred to as "Continuing Guaranty"
dated August 21, 1985 (Exh. 7) states as follows:

For and in consideration of any existing indebtedness to you of Agro Brokers, a single
proprietorship owned by Mr. Raul Claveria for the payment of which the undersigned is
now obligated to you as surety and in order to induce you, in your discretion, at any
other manner, to, or at the request or for the account of the borrower, . . .

The provisions of the document are clear, plain and explicit.

Clearly therefore, defendant E. Zobel, Inc. signed as surety. Even though the title of the
document is "Continuing Guaranty", the Court's interpretation is not limited to the title
alone but to the contents and intention of the parties more specifically if the language is
clear and positive. The obligation of the defendant Zobel being that of a surety, Art.
2080 New Civil Code will not apply as it is only for those acting as guarantor. In fact, in
the letter of January 31, 1986 of the defendants (spouses and Zobel) to the plaintiff it is
requesting that the chattel mortgage on the vessels and tugboat be waived and/or
rescinded by the bank inasmuch as the said loan is covered by the Continuing Guaranty
by Zobel in favor of the plaintiff thus thwarting the claim of the defendant now that the
chattel mortgage is an essential condition of the guaranty. In its letter, it said that
because of the Continuing Guaranty in favor of the plaintiff the chattel mortgage is
rendered unnecessary and redundant.

With regard to the claim that the failure of the plaintiff to register the chattel mortgage
with the proper government agency, i.e. with the Office of the Collector of Customs or
with the Register of Deeds makes the obligation a guaranty, the same merits a scant
consideration and could not be taken by this Court as the basis of the extinguishment of
the obligation of the defendant corporation to the plaintiff as surety. The chattel
mortgage is an additional security and should not be considered as payment of the debt
in case of failure of payment. The same is true with the failure to register, extinction of
the liability would not lie.

WHEREFORE, the Motion to Dismiss is hereby denied and defendant E. Zobel, Inc., is
ordered to file its answer to the complaint within ten (10) days from receipt of a copy of
this Order. 5

Petitioner moved for reconsideration but was denied on April 26, 1993. 6

Thereafter, petitioner questioned said Orders before the respondent Court of Appeals,
through a petition for certiorari, alleging that the trial court committed grave abuse of
discretion in denying the motion to dismiss.

On July 13, 1993, the Court of Appeals rendered the assailed decision the dispositive
portion of which reads:

WHEREFORE, finding that respondent Judge has not committed any grave abuse of
discretion in issuing the herein assailed orders, We hereby DISMISS the petition.
A motion for reconsideration filed by petitioner was denied for lack of merit on February
15, 1994.

Petitioner now comes to us via this petition arguing that the respondent Court of Appeals
erred in its finding: (1) that Article 2080 of the New Civil Code which provides: "The
guarantors, even though they be solidary, are released from their obligation whenever
by some act of the creditor they cannot be subrogated to the rights, mortgages, and
preferences of the latter," is not applicable to petitioner; (2) that petitioner's obligation
to respondent SOLIDBANK under the continuing guaranty is that of a surety; and (3)
that the failure of respondent SOLIDBANK to register the chattel mortgage did not
extinguish petitioner's liability to respondent SOLIDBANK.

We shall first resolve the issue of whether or not petitioner under the "Continuing
Guaranty" obligated itself to SOLIDBANK as a guarantor or a surety.

A contract of surety is an accessory promise by which a person binds himself for another
already bound, and agrees with the creditor to satisfy the obligation if the debtor does
not. 7 A contract of guaranty, on the other hand, is a collateral undertaking to pay the
debt of another in case the latter does not pay the debt. 8

Strictly speaking, guaranty and surety are nearly related, and many of the principles are
common to both. However, under our civil law, they may be distinguished thus: A surety
is usually bound with his principal by the same instrument, executed at the same time,
and on the same consideration. He is an original promissor and debtor from the
beginning, and is held, ordinarily, to know every default of his principal. Usually, he will
not be discharged, either by the mere indulgence of the creditor to the principal, or by
want of notice of the default of the principal, no matter how much he may be injured
thereby. On the other hand, the contract of guaranty is the guarantor's own separate
undertaking, in which the principal does not join. It is usually entered into before or
after that of the principal, and is often supported on a separate consideration from that
supporting the contract of the principal. The original contract of his principal is not his
contract, and he is not bound to take notice of its non-performance. He is often
discharged by the mere indulgence of the creditor to the principal, and is usually not
liable unless notified of the default of the principal. 9

Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer
of the solvency of the debtor and thus binds himself to pay if the principal is unable to
pay while a surety is the insurer of the debt, and he obligates himself to pay if the
principal does not pay. 10

Based on the aforementioned definitions, it appears that the contract executed by

petitioner in favor of SOLIDBANK, albeit denominated as a "Continuing Guaranty," is a
contract of surety. The terms of the contract categorically obligates petitioner as
"surety" to induce SOLIDBANK to extend credit to respondent spouses. This can be seen
in the following stipulations.

For and in consideration of any existing indebtedness to you of AGRO BROKERS, a single
proprietorship owned by MR. RAUL P. CLAVERIA, of legal age, married and with business
address . . . (hereinafter called the Borrower), for the payment of which the undersigned
is now obligated to you as surety and in order to induce you, in your discretion, at any
time or from time to time hereafter, to make loans or advances or to extend credit in
any other manner to, or at the request or for the account of the Borrower, either with or
without purchase or discount, or to make any loans or advances evidenced or secured
by any notes, bills receivable, drafts, acceptances, checks or other instruments or
evidences of indebtedness . . . upon which the Borrower is or may become liable as
maker, endorser, acceptor, or otherwise, the undersigned agrees to guarantee, and
does hereby guarantee, the punctual payment, at maturity or upon demand, to you of
any and all such instruments, loans, advances, credits and/or other obligations herein
before referred to, and also any and all other indebtedness of every kind which is now or
may hereafter become due or owing to you by the Borrower, together with any and all
expenses which may be incurred by you in collecting all or any such instruments or
other indebtedness or obligations hereinbefore referred to, and or in enforcing any rights
hereunder, and also to make or cause any and all such payments to be made strictly in
accordance with the terms and provisions of any agreement (g), express or implied,
which has (have) been or may hereafter be made or entered into by the Borrower in
reference thereto, regardless of any law, regulation or decree, now or hereafter in effect
which might in any manner affect any of the terms or provisions of any such
agreements(s) or your right with respect thereto as against the Borrower, or cause or
permit to be invoked any alteration in the time, amount or manner of payment by the
Borrower of any such instruments, obligations or indebtedness; . . . (Emphasis Ours)

One need not look too deeply at the contract to determine the nature of the undertaking
and the intention of the parties. The contract clearly disclose that petitioner assumed
liability to SOLIDBANK, as a regular party to the undertaking and obligated itself as an
original promissor. It bound itself jointly and severally to the obligation with the
respondent spouses. In fact, SOLIDBANK need not resort to all other legal remedies or
exhaust respondent spouses' properties before it can hold petitioner liable for the
obligation. This can be gleaned from a reading of the stipulations in the contract, to wit:

. . . If default be made in the payment of any of the instruments, indebtedness or other

obligation hereby guaranteed by the undersigned, or if the Borrower, or the undersigned
should die, dissolve, fail in business, or become insolvent, . . ., or if any funds or other
property of the Borrower, or of the undersigned which may be or come into your
possession or control or that of any third party acting in your behalf as aforesaid should
be attached of distrained, or should be or become subject to any mandatory order of
court or other legal process, then, or any time after the happening of any such event
any or all of the instruments of indebtedness or other obligations hereby guaranteed
shall, at your option become (for the purpose of this guaranty) due and payable by the
undersigned forthwith without demand of notice, and full power and authority are
hereby given you, in your discretion, to sell, assign and deliver all or any part of the
property upon which you may then have a lien hereunder at any broker's board, or at
public or private sale at your option, either for cash or for credit or for future delivery
without assumption by you of credit risk, and without either the demand, advertisement
or notice of any kind, all of which are hereby expressly waived. At any sale hereunder,
you may, at your option, purchase the whole or any part of the property so sold, free
from any right of redemption on the part of the undersigned, all such rights being also
hereby waived and released. In case of any sale and other disposition of any of the
property aforesaid, after deducting all costs and expenses of every kind for care,
safekeeping, collection, sale, delivery or otherwise, you may apply the residue of the
proceeds of the sale and other disposition thereof, to the payment or reduction, either in
whole or in part, of any one or more of the obligations or liabilities hereunder of the
undersigned whether or not except for disagreement such liabilities or obligations would
then be due, making proper allowance or interest on the obligations and liabilities not
otherwise then due, and returning the overplus, if any, to the undersigned; all without
prejudice to your rights as against the undersigned with respect to any and all amounts
which may be or remain unpaid on any of the obligations or liabilities aforesaid at any
time (s).

xxx xxx xxx

Should the Borrower at this or at any future time furnish, or should be heretofore have
furnished, another surety or sureties to guarantee the payment of his obligations to you,
the undersigned hereby expressly waives all benefits to which the undersigned might be
entitled under the provisions of Article 1837 of the Civil Code (beneficio division), the
liability of the undersigned under any and all circumstances being joint and several;
(Emphasis Ours)

The use of the term "guarantee" does not ipso facto mean that the contract is one of
guaranty. Authorities recognize that the word "guarantee" is frequently employed in
business transactions to describe not the security of the debt but an intention to be
bound by a primary or independent obligation. 11 As aptly observed by the trial court,
the interpretation of a contract is not limited to the title alone but to the contents and
intention of the parties.

Having thus established that petitioner is a surety, Article 2080 of the Civil Code, relied
upon by petitioner, finds no application to the case at bar. In Bicol Savings and Loan
Association vs. Guinhawa, 12 we have ruled that Article 2080 of the New Civil Code does
not apply where the liability is as a surety, not as a guarantor.

But even assuming that Article 2080 is applicable, SOLIDBANK's failure to register the
chattel mortgage did not release petitioner from the obligation. In the Continuing
Guaranty executed in favor of SOLIDBANK, petitioner bound itself to the contract
irrespective of the existence of any collateral. It even released SOLIDBANK from any
fault or negligence that may impair the contract. The pertinent portions of the contract
so provides:

. . . the undersigned (petitioner) who hereby agrees to be and remain bound upon this
guaranty, irrespective of the existence, value or condition of any collateral, and
notwithstanding any such change, exchange, settlement, compromise, surrender,
release, sale, application, renewal or extension, and notwithstanding also that all
obligations of the Borrower to you outstanding and unpaid at any time(s) may exceed
the aggregate principal sum herein above prescribed.

This is a Continuing Guaranty and shall remain in full force and effect until written notice
shall have been received by you that it has been revoked by the undersigned, but any
such notice shall not be released the undersigned from any liability as to any
instruments, loans, advances or other obligations hereby guaranteed, which may be held
by you, or in which you may have any interest, at the time of the receipt of such
notice. No act or omission of any kind on your part in the premises shall in any event
affect or impair this guaranty, nor shall same be affected by any change which may arise
by reason of the death of the undersigned, of any partner (s) of the undersigned, or of
the Borrower, or of the accession to any such partnership of any one or more new
partners. (Emphasis supplied)

In fine, we find the petition to be without merit as no reversible error was committed by
respondent Court of Appeals in rendering the assailed decision.

WHEREFORE, the decision of the respondent Court of Appeals is hereby AFFIRMED.

Costs against the petitioner.

SO ORDERED.
 FIRST DIVISION

[G.R. No. 16483. December 7, 1921. ]

PHILIPPINE TRUST COMPANY, as assignee of Salvador Hermanos,

insolvent, Plaintiff-Appellant, v. PHILIPPINE NATIONAL BANK, Defendant-
Appellee.

Ross & Lawrence and Ewald E. Selph for Appellant.

Roman J. Lacson for Appellee.

SYLLABUS

1. INSOLVENT CANNOT MAKE PREFERENCE. — Where a person files a petition in the

Court of First Instance to be adjudged insolvent under Act No. 1956 of the Philippine
Legislature, pending the final adjudication, the filing of the petition ipso facto takes away
from, and deprives the petitioner of the right to, do or commit any act of preference as
to creditors.

2. TITLE OF ASSIGNEE RELATES BACK. — Where an insolvency petition is filed in the

proper court, and, in the ordinary course of business, the petitioner is adjudged
insolvent and an assignee is duly elected, the title of the assignee to the property of the
insolvent relates back and becomes vested as of the date the insolvency petition was
filed.

3. TITLE CARRIES POSSESSION. — Where in January, 1919, a firm borrowed money

from a bank and executed its promissory notes and delivered to the bank negotiable
quedans as collateral to secure their payment, the indorsement and delivery of the
quedans and the pledging of the collateral ipso facto carries with it the title to the
property described in the quedans, together with the constructive possession of it, and
legally the owner and holder of the quedans becomes the owner of the property
described in the quedans, and is entitled to its possession.

4. OWNER OF NEGOTIABLE QUEDANS IS OWNER OF PROPERTY. — Where quedans were

endorsed and delivered in January, 1919, to secure a preexisting debt, and the
insolvency petition was filed on April 21, 1919, the holder of such quedans is the owner
of the property therein described, as against the assignee or any creditor of the
insolvent.

5. STATEMENTS AND REPRESENTATIONS DO NOT CONVEY TITLE. — Where on February

10, 1919, a firm received certain quedans under a promise to return them on or before
February 27th, to which was attached a certificate of the firm dated February 8, 1919,
that certain described property was in its bodegas which it promised would not be
removed without first consulting its creditor, construed together, such instruments do
not constitute a negotiable quedan, and are nothing more than a representation and a
promise and do not convey title to the property.

6. ASSIGNEE ENTITLED TO POSSESSION. — Where it appears that on February 8, 1919,

 on behalf of one of its creditors, a firm made a representation, and on February 10th,
made a certificate at to certain property, and filed its insolvency petition on April 21,
1919, and the property was left and remained in possession of the insolvent firm, and
was not delivered to the creditor until May 3, 1919, the assignee of the insolvent firm,
as against such creditor, is entitled to the possession of the property or its value.

7 DECLARED VALUE MAY BECOME MARKET VALUE. — Where there is no evidence of the
actual market value of the property, but the parties themselves placed a declared value
on the property at the time of delivery, in the absence of other testimony, the declared
value will be considered and treated as the market value.

DECISION

JOHNS, J.  :

The plaintiff and defendant are corporations organized under the laws of the Philippine
Islands and domiciled in the city of Manila.

Salvador Hermanos was a copartnership and during the month of January, 1919,
executed to the defendant eight promissory notes aggregating P156,000, payable on
demand, and each secured by a quedan, or warehouse receipt, issued by the firm of
Nieva, Ruiz & Company. Each note recites that it is payable on demand after date, for
value received, and that the firm has deposited "with the said bank as collateral security
for the payment of this note, or any note given in extension or renewal thereof, as well
as for the payment of any other liability or liabilities of the undersigned to the said bank,
due or to become due, whether now existing or hereafter arising, the following property
owned by the undersigned." The note then specifies the number of the quedan and the
amount of copra in piculs, and states that the quedan was issued by Nieva, Ruiz &
Company. The note for P8,000, dated January 18, 1919, was secured by warehouse
receipt No. 30; for P20,000, dated January 22, 1919, was secured by receipt No. 35; for
P20,000, dated January 24, 1919, was secured by receipt No. 38; for P20,000, dated
January 27, 1919, was secured by receipt No. 41; for P14,000, dated January 28, 1919,
was secured by receipt No. 42; for P18,000, dated January 21, 1919, was secured by
receipt No. 33; for P18,000, dated January 23, 1919, was secured by receipt No. 36;
and for P18,000, dated January 25, 1919, was secured by receipt No. 39, making a total
of 16,051.10 piculs of copra, covered by the warehouse receipts of the firm of Nieva,
Ruiz & Company issued to the firm of Salvador Hermanos, and by that firm pledged as
collateral to the defendant to secure the payment of the eight above-described notes.
Each of them further recites that "on the nonperformance of this promise, or upon the
non-payment of any of the liabilities above-mentioned, or upon the failure of the
undersigned forthwith, with or without notice, to furnish satisfactory additional securities
in case of decline, as aforesaid, then and in either such case, this note and all liabilities
of the undersigned, or any of them, shall forthwith become due and payable, without
demand or notice, and full power and authority are hereby given to said bank to sell,
assign transfer and deliver the whole of the said securities, or any part thereof, or any
substitutes therefor or any additions thereto, or any other securities or property given
unto or left in the possession of or hereafter given unto or left in the possession of the
said bank by the undersigned for safe keeping or otherwise, at any brokers’ board or at
public or private sale, at the option of said bank or of its president or secretary, without
either demand, advertise mentor notice of any kind, which are hereby expressly waived.
At any such sale, the said bank may itself purchase the whole or any part of the
property sold, free from any right of redemption on the part of the undersigned, which is
hereby waived and released." Stamped in red ink across the face of each quedan are the
words "Negotiable Warrant," and each of them was in the usual form of warehouse
receipts.

On February 10, 1919, the firm of Salvador Hermanos withdrew from the defendant
bank, by and with its consent, warehouse receipts Nos. 33, 36, and 39 above described,
which the bank was holding as collateral security for each of the three 18,000-peso
notes amounting to P54,000. The total amount of copra evidenced by the receipts
withdrawn was 6,024.55 piculs, the declared value of which, shown on the face of such
receipts, was P90,368.25. At the time of the withdrawal, the firm executed the following
writing:jgc:chanrobles.com.ph

"We received from the Philippine National Bank the warehouse receipts issued by
Messrs. Nieva, Ruiz & Company, the contents of which are as follow:chanrob1es virtual
1aw library

No. Date Sacks Piculs Declared

value

33 January 21/19 2,325 2,040.55 P30,608.25

36 January 23/19 2,175 1,992.00 29,880.00

39 January 25/19 2,335 1,992.00 29,880.00

_____ ______ ________

Total 6,835 6,024.55 90,368.25

"We promise to return to this bank the warehouse receipts above cited on or before the
27th instant. These warehouse receipts are guaranteed by the attached certificate of
existence of the effects of the 8th of February, 1919, issued by us.

"Manila, P. I., February 10, 1919.

"SALVADOR HERMANOS.

"Per (Sgd.) G. SALVADOR."cralaw virtua1aw library

to which was attached this writing:jgc:chanrobles.com.ph

"MANILA, P. I., February 8, 1919.

"We hereby certify that there exist the following articles in our bodegas as
follows:jgc:chanrobles.com.ph

"Soler Bodega.

100 tons kapok @ 200.00 P20,000.00

100 piculs hemp @ 60.00 6,000.00

20,000 sacks (empty) @ 0.30 6,000.00

1 lot gum copal 1,900.00

1 lot gum elemi 1,700.00

500,000 rattan @ 12.00 6,000.00

Aceites y grasas 800.00

9,000 sacks common salt @ 2.00 18,000.00

________

60,400.00

"Wise & Co. — Gagalañgin Bodega.

905 cas. Gs. in case @ 12.75 P11,538.75

77 cas. Gs. in drums

54 gals. 64.80 4,989.60

________

16,528.35

_________

P76,928.35

========

and promise that none of the above articles would be removed without consulting first
with the Philippine National Bank.

"SALVADOR HERMANOS.
"Per (Sgd.) G. SALVADOR."cralaw virtua1aw library

Neither writing was in any manner authenticated by a notary or by a competent public

official. The writing of February 10 is in form a receipt from the firm of Salvador
Hermanos to the Philippine National Bank of the quedans, or warehouse receipts, for the
copra therein described. The one of February 8 is, in legal effect, the certificate of
Salvador Hermanos "that there exist the following articles in our bodegas as follows:"
(Here follows the described property.) That is to say, that the firm certifies that the
property described is in the warehouse of the firm.

Act No. 1956 of the Philippine Legislature provides for the suspension of payments, the
relief of insolvent debtors, the protection of creditors, and the punishment of fraudulent
debtors. The Act provides:jgc:chanrobles.com.ph

"SECTION 1. This Act shall be known and may be cited as The Insolvency Law, and in
accordance with its provisions every insolvent debtor may be permitted to suspend
payments or be discharged from his debts and liabilities."cralaw virtua1aw library

Section 2 provides that debtor who possesses sufficient property to cover the debts, be
it an individual, firm or corporation, and who is unable to meet them at maturity, "may
petition that he be declared in the state of suspension of payments by the court, or the
judge thereof in vacation."cralaw virtua1aw library

Section 3 enacts that upon the filing of the petition, the court shall make an order calling
a meeting of creditors specifying the time and place; that notice thereof shall be
published in a newspaper, and that "said order shall further contain an absolute
injunction forbidding the petitioning debtor from disposing in any manner of his
property, except in so far as concerns the ordinary operations of commerce or of
industry in which the petitioner is engaged, and, furthermore, from making any
payments outside of the necessary or legitimate expenses of his business or industry, so
long as the proceedings relative to the suspension of payments are pending, and said
proceedings for the purposes of this Act shall be considered to have been instituted from
the date of the filing of the petition."cralaw virtua1aw library

Section 14, chapter 3, provides that any person owing debts exceeding P1,000 may
apply to be discharged from his debts and liabilities by petition to the Court of First
Instance in which he has resided for six months preceding the filing of the petition.

Section 18 enacts that upon receiving and filing of the petition, schedule, and inventory,
the court, or the judge, shall make an order declaring the petitioner insolvent, and "shall
further forbid the payment to the debtor of any debts due to him and the delivery to the
debtor, or to any person for him, of any property belonging to him, and the transfer of
any property by him, and shall further appoint a time and place for a meeting of the
creditors to choose an assignee of the estate."cralaw virtua1aw library

On April 21, 1919, Salvador Hermanos filed a petition of insolvency in the Court of First
Instance of the city of Manila. Article 5 of the petition recites:jgc:chanrobles.com.ph

"That the following property and merchandise are being pledged in favor of the
Philippine National Bank, as shown by a written document, on account of its credit which
amounts to P175,563.19, which are described as follows:chanrob1es virtual 1aw library

81,904 kilos kapok @ 0.20 ko 16,380.80

521,600 pieces rattan split 11.00 m 5,737.60

93.94 piculs almaciga value 2,300.00

80 drums Union gasoline @ 53 gls. each

@ 1.485 gal 6,415.20

100 cases gasoline 14.00 cs 1,400.00

8 drums gasoline @ 54 gals. ea. 1.485 gl 641.52

10,000 piculs copra p. picul 14.50 145,000.00

35 bales cardboard value 1,451.52

___________

P179,326.64"

The testimony is undisputed and conclusive that about May 3, 1919, Gregorio Salvador,
a member of the firm of Salvador Hermanos, delivered certain goods, wares, and
merchandise to and in the warehouse of Nieva, Ruiz & Company, and requested that
firm to issue its receipt therefor to and in favor of the Philippine National Bank, and that,
pursuant to such request, that firm did issue eight quedans to the bank as
follows:chanrob1es virtual 1aw library

No. 161 for 32 bales of hemp;

No. 162 for 953 bundles of rattan;

No. 165 for 72 bundles of empty sacks;

No. 167 for 136 sacks of gum;

No. 168 for 1,461 bales of kapok;

No. 175 for 288 packages of Talcum Powder;

No. 176 for 35 packages of cardboard; and

No. 185 for 134 bundles of empty sacks.

On and between May 6, 1919 and August 7, 1919, acting under the terms and
provisions of its respective notes, the defendant bank sold all of the personal property
for which it held warehouse receipts, or which had been surrendered to it by the
Hermanos firm, save and except the property described in the three warehouse receipts,
which were released and surrendered to that firm on February 10, 1919.

Based upon its insolvency petition, and in the ordinary course of business, the firm of
Salvador Hermanos was adjudged insolvent, and on July 19, 1919, the Philippine Trust
Company was elected assignee of said firm and duly qualified. September 13, 1919, as
such assignee, it made a demand upon the bank for the surrender and delivery of the
property described in all of the above receipts, and, upon the bank’s refusal,
commenced this action to recover its value alleged to be P242,579.61, claiming that on
April 21, 1919, the firm of Salvador Hermanos was the sole and exclusive owner of the
property, and that, as to the copra, about June 28, 1919, and after the filing of the
insolvency petition, the bank unlawfully seized and converted the copra to its own use,
the value of which was P192,260. For a second cause of action, the plaintiff alleges that,
as such assignee, it was the owner of the remaining personal property, and that, after
the insolvency petition was filed, the defendant unlawfully seized and converted such
property to its own use, and that it was of the value of P50,319.61.

For answer, the bank makes a general denial, as to each cause of action, of all of the
material allegations of the complaint This presents the question as to who is the owner
and entitled to possession of the property. There is but little, if any, dispute as to the
facts.

It is conceded that in January, 1919, the firm of Salvador Hermanos executed to the
Philippine National Bank the eight promissory notes above described, and that each note
was secured by the quedan, or warehouse receipt, of Nieva, Ruiz & Company, issued to
the firm of Salvador Hermanos for so many piculs of copra. that the notes are of the
same form, the only difference being the date and the amount of the note, and the
number of the quedan, or warehouse receipt, and the amount of copra in piculs. Each
warehouse receipt was duly numbered, dated and signed by Nieva, Ruiz & Company,
and recites "received from Salvador Hermanos the following packages of copra as
specified below, which are stored in warehouse No. 2, situated at_____________,
subject to the terms and conditions stated on the face and back hereof, to be delivered
unto Salvador Hermanos, or order," giving the number of the warehouse where located,
and the number of sacks, gross weight and the declared value; across the face of each
receipt is stamped in red ink the words "Negotiable Warrant." Among the conditions
printed on the back of the receipt is paragraph 4, as follows:jgc:chanrobles.com.ph

"4. This Company will deliver the packages noted hereon, on surrender to the Company
of this warrant endorsed by the party who shall be for the time registered in the books
of the Company as the owner of the packages described hereon; and the production by
the Company of this warrant shall at all times be conclusive proof that the Packages
hereon noted have been properly delivered by the Company and shall exempt the
Company from all responsibility in connection with the said packages or goods."cralaw
virtua1aw library

Also the following:jgc:chanrobles.com.ph

"Delivery is hereby authorized unto________________," opposite which some of the
receipts were signed by the firm of Salvador Hermanos, and others were not signed by
any one.

The fact remains that at the time the eight promissory notes were executed, a given
quedan, or warehouse receipt, was described and incorporated in the note as to its
number, when and by whom issued, and the property it represented, and each receipt
was then delivered by the firm to the defendant bank, all of which was during the month
of January, 1919. The bank never had the manual possession or the physical control of
any of this property until after the insolvency petition was filed, and it is for such reason
that the plaintiff claims that it was the property of the firm, and that the defendant
should account to the assignee.

Each quedan, or warehouse receipt, was specifically described in a given note, and was
made a part of it, and the note recites that, for any breach of its terms or conditions, the
bank has full power and authority "to sell, assign, transfer and deliver the whole of the
said security, or any part thereof, etc.," and that "at any such sale, the said bank may
itself purchase the whole or any part of the property sold, free from any right of
redemption on the part of the undersigned, which is hereby waived and released."cralaw
virtua1aw library

In addition, the quedan itself was delivered to and held by the bank, and the
warehouseman recognized the bank as the owner of the property. Legally speaking, the
owner of the quedans, or warehouse receipts, was the owner of the property described
in them, and the quedans were given as collateral to secure promissory notes, which, for
value received, were executed to the bank.

The execution of the notes, the physical possession of the negotiable quedan, or
warehouse receipt, and the recognition of ownership by the warehouseman, legally
carries with it both the title to, and the possession of, the property. In such a case, title
is not founded on a public instrument which should be authenticated by a notary or by a
competent public official. Legally speaking, the execution of the promissory notes and
the pledging of the quedans, or warehouse receipts, as collateral, and the describing of
them in the notes, and the manual delivery of the quedan, or warehouse receipt itself,
carries with it not only the title, but the legal possession of the property. In other words,
as to the property described in the quedans, or warehouse receipts, which were pledged,
as collateral, in January, 1919, to secure the eight respective promissory notes, both the
title and the possession of that property were delivered to and vested in the defendant
bank in January, 1919. Three of those quedans, or warehouse receipts, were returned to
the firm by the bank on February 10, 1919, but the bank still owned and held the notes,
which were secured but those warehouse receipts, and no part of the debt itself was
paid by or through the surrender of the receipts. For such reasons as to the first cause
of action, the plaintiff cannot recover, and, as to it, the judgment of the lower court
should be affirmed.

The second cause of action presents another and different question.

February 10, 1919, for some unexplained reason, the bank surrendered and returned to
Salvador Hermanos the three quedans, or warehouse receipts, Nos. 33, 36, and 39,
which the firm had pledged to it as collateral on January 21, 23, and 25, 1919, to secure
the payment of the three notes of P18,000 each, executed on those respective dates. In
its receipt for them, the firm promised to return the quedans to the bank "on or before
the 27th instant;" meaning January 27, 1919, and it was therein stated that such
warehouse receipts "are guaranteed by the attached certificate of existence of the
effects of the 8th of February, 1919, issued by us." The legal effect of this receipt is a
promise on the part of the firm to return the three quedans on or before January 27,
1919, and a statement that such receipts are guaranteed by the attached certificate of
the existence in the warehouse of the property described in the certificate. The
statement of February 8, recites "we hereby certify that there exist the following articles
in our bodegas." Then follows a description of the property. This is nothing but a
statement or representation to the effect that the firm has the property in its warehouse
Nothing more. After describing the property, the certificate then says: "And promise that
none of the above articles would be removed without consulting first with the Philippine
National Bank." There is no statement or representation of any kind showing when or
from whom the property was received, or how it was held, or who was the owner, or
when or to whom it would be delivered When analyzed, this writing is nothing more than
a certificate of the firm that the described property was then in its warehouse, and a
promise that none of the "articles would be removed without consulting first with the
Philippine National Bank." Such a writing would not transfer the title of the property to
the bank, or give it possession, either actual or constructive. It will be noted that both
the receipt of February 10 and the certificate and promise of February 8, are signed by
the firm of Salvador Hermanos, and that the certificate says that the property was then
in the firm’s warehouse, and that neither instrument was in any manner authenticated
by a notary or a competent public official, as provided by article 1216 of the Civil Code,
and that the property was in the warehouse of the firm.

Article 1863 of the Civil Code provides:jgc:chanrobles.com.ph

"In addition to the requisites mentioned in article 1857, it shall be necessary, in order to
constitute the contract of pledge, that the pledge be placed in the possession of the
creditor or of a third person appointed by common consent."cralaw virtua1aw library

But here, it appears from the certificate that the property was then in the possession of
the firm, who made the certificate, and that it was in the possession of that firm when
its insolvency petition was filed on April 21, 1919. It further appears that on May 3,
1919, Gregorio Salvador, a member of the firm, appeared at the offices of Nieva, Ruiz &
Company, and requested that firm to issue its warehouse receipts to the Philippine
National Bank for certain goods, which on that date he placed in the warehouse of that
company, and, in accord with his request, Nieva, Ruiz & Company did issue to and in
favor of the Philippine National Bank the following quedans, or warehouse
receipts:chanrob1es virtual 1aw library

No. 161 for 32 bales of hemp, in warehouse No. 2, of the declared value of P880;

No. 162 for 953 bundles of rattan, in warehouse No. 2, of the declared value of
P3,700.40;

No. 165 for empty sacks, in warehouse No. 2, of the declared value of P450;
No. 167 for 136 sacks of almaciga, in warehouse No. 1, of the declared value of P2,300;

No. 168 for 1,461 bales of kapok, in warehouse No. 1, of the declared value of
P14,571.48;

No. 175 for 288 packages of talcum powder, in warehouse No. 5, of the declared value
of P15,582.26;

No. 176 for 35 packages of cartulina, in warehouse No. 5, of the declared value of
P2,588.48; and

No. 185 for 134 bundles of empty sacks, in warehouse No. 2, of the declared value of
P670, making a total declared value of the property evidenced by such receipts of
P40,742.62.

In the second cause of action, the complaint alleges that the defendant took and
converted 88 drums of gasoline and 100 cases of gasoline; none of which is included in
the above receipts. Otherwise the property described in quedans Nos. 161 to 185,
inclusive, correspond and are identical with the property described in the second cause
of action.

The bank founds its right to claim the property described in the quedans Nos. 161 to
185, inclusive, upon the firm’s certificate of February 8, 1919, above quoted. By
comparison, it will be found that the property described in such quedans, or warehouse
receipts, does not correspond with the property described in the firm’s certificate of
February 8. In the certificate of February 8, there are aceites y grasas, or oil and grease,
valued at P800, and 9,000 sacks of common salt valued at P18,000 in the bodegas of
the firm, and 905 cases of gasoline valued at P11,538.75 and 77 cases of gasoline in
drums, 64 gallons, valued at P4,989.60, in the warehouse of Wise & Company, that are
not described in the quedans Nos. 161 to 185, inclusive It also appears that Talcum
Powder in receipt No. 175 of the value of P17,140, and cartulina in receipt No. 176 of
the value of P2,847 are not included in the property described in the certificate of
February 8, making a total value of the property described in those two receipts, and
which is not included in the certificate of February 8, of P19,987.

There is not any evidence of the actual market value of the property, but it does appear
that at the time quedans Nos. 161 to 185, inclusive, were issued, the bank itself placed
a declared value upon that property of P40,742.62. Those quedans do not include the
gasoline which the bank admits it sold on May 24, 1919, for P4,989.60, and the gasoline
which it sold on May 28, 1919, for the sum of P2,641.80, or P7,631.40 which it received
for gasoline. It is true that it appears from the sales report that the bank sold the
property described in quedans Nos. 161 to 185, inclusive, for much less money than the
valuation which it placed upon the property, but, in legal effect, when the quedans were
issued, the conversion of that property took place at the time they were issued to and
accepted by the bank, and it should be charged with the value of the property at the
time of its conversion, and in the absence of any testimony as to the market value, it
should be charged with the amount which it actually received from the sale of the
gasoline.
It will be noted that the promissory notes executed by the firm to the bank
recite:jgc:chanrobles.com.ph

"Full power and authority are hereby given to said bank to sell, assign, transfer and
deliver the whole of the said securities, or any part thereof, or any substitutes therefor
or any additions thereto, or any other securities or property given unto or left in the
possession of or hereafter given unto or left in the possession of the said Bank by the
undersigned."cralaw virtua1aw library

Hence, the power and authority of the bank to sell, assign, or transfer is confined to
property which was given unto or left in its possession.

As we have pointed out none of the property described in the certificate of February 8
was ever given unto or left in the possession of the bank.

The insolvency petition was filed April 21, 1919, and the plaintiff was duly elected and
qualified, as assignee, on July 19, 1919, and, as such, it represents both the creditors
and the firm. Although it was not appointed until July, 1919, yet when it did qualify its
right and title to all the property of the firm related back and became vested as of April
21, 1919, when the insolvency petition was filed, and from that time it alone had the
power and authority to act for and represent the firm. Under the terms and provisions of
Act No. 1956 of the Philippine Legislature, after it was filed, the power of the firm or any
member of it to deliver possession of the property to secure a preexisting debt was
suspended pending final adjudication. That is to say, if the debt was not legally secured
before the insolvency petition was filed, no member of the firm had any legal right to
secure it after the petition was filed, and any attempt to do so would be null and void.

As to the first cause of action, we hold that in January, 1919, the bank became and
remained the owner of the five quedans Nos. 30, 35, 38, 41, and 42; that they were in
form negotiable, and that, as such owner, it was legally entitled to the possession and
control of the property therein described at the time the insolvency petition was filed
and had a right to sell it and apply the proceeds of the sale to its promissory notes,
including the three notes of P18,000 each, which were formerly secured by the three
quedans Nos. 33, 36, and 39, which the bank surrendered to the firm. That is to say,
the bank had a legal right to apply the Proceeds from the property described in the five
remaining quedans to the payment of its eight promissory notes.

As to the second cause of action, the judgment of the lower court is reversed, and one
will be entered here in favor of the Philippine Trust Company, the plaintiff, and against
the Philippine National Bank, the defendant, for P40,742.62, the declared value of the
property described in quedans Nos. 161 to 185, inclusive, and for the further sum of
P7,631.40, the value of the gasoline sold in May, 1919, or a total of P48,374.02, with
interest thereon from September 22, 1919, at the rate of 6 per cent per annum, and for
the costs and disbursements in this and the lower court. So ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor and Romualdez, JJ., concur.

 FIRST DIVISION

[G.R. No. 74231. April 10, 1987.]

CORAZON J. VIZCONDE, Petitioner, v. INTERMEDIATE APPELLATE COURT &

PEOPLE OF THE PHILIPPINES, Respondents.

SYLLABUS

1. CRIMINAL LAW; CRIMINAL RESPONSIBILITY; PERSONAL IN NATURE; IN THE

ABSENCE OF CONSPIRACY, ONE CANNOT BE CRIMINALLY LIABLE FOR THE ACT OF
ANOTHER; CASE AT BAR. — As the Solicitor General correctly puts it, the joint and
several undertaking assumed by Vizconde in a separate writing below the main body of
the receipt, Exhibit "A", merely guaranteed the civil obligation of Pagulayan to pay Perlas
the value of the ring in the event of her (Pagulayan’s) failure to return said article. It
cannot, in any sense, be construed as assuming any criminal responsibility consequent
upon the failure of Pagulayan to return the ring or deliver its value. It is fundamental
that criminal responsibility is personal and that in the absence of conspiracy, one cannot
be held criminally liable for the act or default of another. "A person to be guilty of crime,
must commit the crime himself or he must, in some manner, participate in its
commission or in the fruits thereof. . . ." [U.S. v. Acebedo, 18 Phil. 428] Thus, the
theory that by standing as surety for Pagulayan, Vizconde assumed an obligation more
than merely civil in character, and staked her very liberty on Pagulayan’s fidelity to her
trust is utterly unacceptable; it strikes at the very essence of guaranty (or suretyship) as
creating purely civil obligations on the part of the guarantor or surety. To render
Vizconde criminally liable for the misappropriation of the ring, more than her mere
guarantee written on Exhibit "A" is necessary. At the least, she must be shown to have
acted in concert and conspiracy with Pagulayan, either in obtaining possession of the
ring, or in undertaking to return the same or delivery its value, or in the
misappropriation or conversion of the same.

2. REMEDIAL LAW; EVIDENCE; CONSPIRACY; NO ADEQUATE PROOF THEREOF IN THE

CASE AT BAR. — The information charges conspiracy between Vizconde and Pagulayan,
but no adequate proof thereof has been presented. It is of course true that direct proof
of conspiracy is not essential to convict an alleged conspirator, and that conspiracy may
be established by evidence of acts done in pursuance of a common unlawful purpose.
[People v. Cadag, 2 SCRA 388; People v. Cruz, 4 SCRA 1114; People v. Belen, 9 SCRA
39; People v. Capito 22 SCRA 1130; People v. Alcantara, 33 SCRA 812] The
circumstances from which a reasonable inference of conspiracy might arise, such as the
fact that Vizconde and the complainant were friends of long standing and former
classmates, that it was Vizconde who introduced Pagulayan to Perlas, that Vizconde was
present on the two occasions when the ring was entrusted to Pagulayan and when part
payment of P5,000.00 was made, and that she signed the receipts, Exhibits "A" and "D,"
on those occasions are, at best, inconclusive. They are not inconsistent with what
Vizconde has asserted to be an innocent desire to help her friend dispose of the ring;
nor do they exclude every reasonable hypothesis other than complicity in a
premeditated swindle. [People v. Macatanaw, 62 SCRA 516, 527; People v. Aniel, 96
SCRA 199, 208-209; People v. Sosing, 111 SCRA 368, 377; see Duran v. CA, 71 SCRA
68, 84 and Borromeo v. CA, 131 SCRA 318, 326]

3. CRIMINAL LAW; ESTAFA, NOT A CASE OF; LIABILITY OF APPELLANT BEING MERELY A
GUARANTOR, NOT CRIMINAL IN NATURE. — Upon the evidence, appellant Corazon J.
Vizconde was a mere guarantor, a solidary one to be sure, of the obligation assumed by
Pilar A. Pagulayan to complainant Marylou J. Perlas for the return of the latter’s ring or
the delivery of its value. Whatever liability was incurred by Pagulayan for defaulting on
such obligation — and this is not inquired into — that of Vizconde consequent upon such
default was merely civil, not criminal. It was, therefore, error to convict her of estafa. As
already stated, the Solicitor General however maintains, on the authority of People v.
Padilla, (129 scra 558) that the appellant should be held liable to pay the complainant
the amount of P55,000.00, or whatever part of such amount remains unpaid, for the
value of the ring. Again, this is a correct proposition, there being no question — as in
fact admitted by her — that the appellant executed the guarantee already referred to.

DECISION

NARVASA, J.:

Corazon J. Vizconde has appealed as contrary to law and the evidence, the Decision of
the Court of Appeals 1 affirming her conviction of the crime of estafa by the Court of
First Instance of Rizal, Quezon City Branch, in Criminal Case No. Q-5476.

Vizconde and Pilar A. Pagulayan were charged in the Trial Court with misappropriation
and conversion of an 8-carat diamond ring belonging to Dr. Marylou J. Perlas in an
information which avers that they:jgc:chanrobles.com.ph

". . . wilfully, unlawfully and feloniously, with intent of gain and with unfaithfulness
and/or abuse of confidence, defraud(ed) DRA. MARYLOU J. PERLAS in the following
manner, to wit: the said accused received from the offended party one (1) 8-karat solo
diamond ring, white, double cut, brilliant cut with multiple brilliantitos, valued at
P85,000.00, to be sold by them on commission basis, with the obligation to turn over
the proceeds of the sale to the offended party, or to return the said ring if unsold, but
the said accused, once in possession thereof, contrary to their obligation, misapplied,
misappropriated and converted the same to their own personal use and benefit, and in
spite of repeated demands made upon them, both accused failed, omitted and refused,
and still fail, omit and refuse up to the present, to comply with their aforesaid obligation,
to the damage and prejudice of the offended party, in the aforementioned amount of
P85,000.00, Philippine currency." 2

After trial, both accused were convicted and each sentenced to serve an indeterminate
prison term of from eight (8) years, four (4) months and one (1) day to ten (10) years
and two (2) months of prision mayor, with the accessory penalties provided by law, and
jointly and severally to indemnify the offended party in the sum of P55,000.00 for the
unaccounted balance of the value of the ring with legal interest from April 22, 1975, the
further sum of P30,000.00 as and for moral damages and the sum of P10,000.00 for
attorney’s fees. 3

Both accused appealed to the Court of Appeals, but as Pilar A. Pagulayan had evaded
promulgation of sentence in the Trial Court and had appealed only through counsel, the
Appellate Court vacated her appeal as ineffectual. 4 On Vizconde’s part, the Court of
Appeals affirmed the judgment of the Trial Court in all respects except the penalty of
imprisonment, which it increased to a term of from ten (10) years and one (1) day of
prision mayor to twelve (12) years ten (10) months and twenty-one (21) days of
reclusion temporal. A motion for reconsideration was denied. Vizconde thereafter filed
the present petition for review on certiorari. 5

Required to comment on the petition, the Solicitor General, despite having argued for
affirmance of Vizconde’s conviction in the Court of Appeals, now recommends that she
be acquitted, but nonetheless held civilly liable to the complainant in the sum of
P55,000.00 (the unaccounted balance of the value of the ring as found by the Trial
Court)." . . or whatever portion thereof which remains unpaid. . . ." 6

From the record and the findings of the courts below, it appears that sometime in the
first week of April, 1975, the complainant, Dr. Marylou J. Perlas, called up the appellant
Vizconde, a long-time friend and former high school classmate, asking her to sell Perlas’
8-carat diamond ring. Shortly afterwards, Perlas delivered the ring to Vizconde to be
sold on commission for P85,000.00. Vizconde signed a receipt for the ring. 7

About a week and a half later, Vizconde returned the ring to Perlas, who had asked for it
because she needed to show it to a cousin. However, Vizconde afterwards called on
Perlas at the latter’s home, with another lady, Pilar A. Pagulayan, who claimed to have a
"sure buyer" for the ring. 8 Perlas was initially hesitant to do so, but she eventually
parted with the ring so that it could be examined privately by Pagulayan’s buyer when
the latter gave her a postdated check for the price (P85,000.00) and, together with
Vizconde, signed a receipt prepared by Perlas. This receipt — People’s Exhibit "A" —
reads as follows:jgc:chanrobles.com.ph

"RECEIPT

Received from Dra. Marylou Javier-Perlas one (1) solo 8 karat diamond ring, white,
double cut, brilliant cut with multiple brilliantitos, which I agree to sell for P85,000.00
(eighty-five thousand pesos) on commission basis and pay her in the following
manner:chanrob1es virtual 1aw library

P85,000.00 — postdated check

PNB check 730297

dated April 26, 1975

for P85,000.00

It is understood that in the event the above postdated check is dishonored for any
reason whatsoever on its due date, the total payment of the above item, shall become
immediately due and demandable without awaiting further demand.

I guarantee that the above check will be sufficiently funded on the respective due date.

Quezon City, Philippines

22 April 1975

(SGD.) PILAR A. PAGULAYAN

PILAR A. PAGULAYAN

16 Rd. 8 Project 6

I guarantee jointly and severally —

(SGD.) CORAZON J. VIZCONDE

CORAZON J. VIZCONDE" 9

After Pagulayan’s postdated check matured, Perlas deposited it to her account at Manila
Bank. It was dishonored for the reason, "No arrangement," stated in the debit advice.
Perlas then called up Vizconde to inform her about the dishonor of the check. The latter
suggested that Perlas redeposit the check while she (Vizconde) followed up the sale of
the ring. Perlas re-deposited the check, but again it was dishonored because drawn
against insufficient funds. 10 So Perlas took the matter to counsel, who sent separate
letters of demand to Vizconde and Pagulayan for return of the ring or payment of
P85,000.00. 11

After nine days, Vizconde and Pagulayan called on Perlas. Pagulayan paid Perlas
P5,000.00 against the value of the ring. She also gave into Perlas’ keeping three
certificates of title to real estate to guarantee delivery of the balance of such value. A
receipt for the money and the titles was typed and signed by Perlas, which she also
made the two sign. 12 The receipt — Exhibit "D" of the prosecution —
reads:jgc:chanrobles.com.ph

"Received from Mrs. Pilar Pagulayan the sum of FIVE THOUSAND PESOS ONLY
(P5,000.00) representing part of the proceeds of the sale of one (1) solo 8 carat
diamond ring, white, double cut, brilliant cut w/multiple brilliantitos, given to Mrs. Pilar
Pagulayan and Mrs. Corazon de Jesus Vizconde on 22 April 1975, to be sold on
commission basis for eighty-five thousand pesos (P85,000.00).

Received also owner’s duplicate copies of TCT Nos. 434907, 434909, 434910, which will
be returned upon delivery of the remaining balance of the proceeds of the sale of said
diamond ring for eighty five thousand pesos (P85,000.00).

This receipt is being issued without prejudice to legal action.

Quezon City, Philippines

7 May 1975

(Sgd.) Marylou J. Perlas

Dra. Marylou J. Perlas

Conforme:chanrob1es virtual 1aw library

(Sgd.) Pilar A. Pagulayan

Pilar Pagulayan

(Sgd.) Corazon J. Vizconde

Corazon Vizconde" 13

Vizconde and Pagulayan having allegedly reneged on a promise to complete payment for
the ring on the very next day, Perlas filed with the Quezon City Fiscal’s office a
complaint against them for estafa. This notwithstanding, Pagulayan still paid Perlas
various sums totalling P25,000.00 which together with the P5,000.00 earlier paid, left a
balance of P55,000.00 still owing. 14

Both the Trial Court and the Court of Appeals found in these facts sufficient showing that
Vizconde and Pagulayan had assumed a joint agency in favor of Perlas for the sale of the
latter’s ring, which rendered them criminally liable, upon failure to return the ring or
deliver its agreed value, under Art. 315, par. 1(b), of the Revised Penal Code, for
defraudation committed." . . with unfaithfulness or abuse of confidence . . . by
misappropriating or converting, to the prejudice of another, . . . personal property
received in trust or on commission, or under any other obligation involving the duty to
make delivery of or to return the same, . . ." The Solicitor General, falling back, as
already stated, from an earlier stance, disagrees and submits in his Comment that the
appellant cannot be convicted of estafa under a correct interpretation of the two
principal exhibits of the prosecution, the receipts Exhibits "A" and "D." 15 He is correct.

Nothing in the language of the receipt, Exhibit "A", or in the proven circumstances
attending its execution can logically be considered as evidencing the creation of an
agency between Perlas, as principal, and Vizconde, as agent, for the sale of the former’s
ring. True, reference to what may be taken for an agency agreement appears in the
clause." . . which I agree to sell . . . on commission basis" in the main text of that
document. But it is clear that if any agency was established, it was one between Perlas
and Pagulayan only, this being the only logical conclusion from the use of the singular
"I" in said clause, in conjunction with the fact that the part of the receipt in which the
clause appears bears only the signature of Pagulayan. To warrant anything more than a
mere conjecture that the receipt also constituted Vizconde the agent of Perlas for the
same purpose of selling the ring, the cited clause should at least have used the plural
"we," or the text of the receipt containing that clause should also have carried
Vizconde’s signature.
As the Solicitor General correctly puts it, the joint and several undertaking assumed by
Vizconde in a separate writing below the main body of the receipt, Exhibit "A", merely
guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the
event of her (Pagulayan’s) failure to return said article. It cannot, in any sense, be
construed as assuming any criminal responsibility consequent upon the failure of
Pagulayan to return the ring or deliver its value. It is fundamental that criminal
responsibility is personal and that in the absence of conspiracy, one cannot be held
criminally liable for the act or default of another.

"A person to be guilty of crime, must commit the crime himself or he must, in some
manner, participate in its commission or in the fruits thereof. . . ." 16

Thus, the theory that by standing as surety for Pagulayan, Vizconde assumed an
obligation more than merely civil in character, and staked her very liberty on
Pagulayan’s fidelity to her trust is utterly unacceptable; it strikes at the very essence of
guaranty (or suretyship) as creating purely civil obligations on the part of the guarantor
or surety. To render Vizconde criminally liable for the misappropriation of the ring, more
than her mere guarantee written on Exhibit "A" is necessary. At the least, she must be
shown to have acted in concert and conspiracy with Pagulayan, either in obtaining
possession of the ring, or in undertaking to return the same or delivery its value, or in
the misappropriation or conversion of the same.

Now, the information charges conspiracy between Vizconde and Pagulayan, but no
adequate proof thereof has been presented. It is of course true that direct proof of
conspiracy is not essential to convict an alleged conspirator, and that conspiracy may be
established by evidence of acts done in pursuance of a common unlawful purpose. 17
Here, however, the circumstances from which a reasonable inference of conspiracy
might arise, such as the fact that Vizconde and the complainant were friends of long
standing and former classmates, that it was Vizconde who introduced Pagulayan to
Perlas, that Vizconde was present on the two occasions when the ring was entrusted to
Pagulayan and when part payment of P5,000.00 was made, and that she signed the
receipts, Exhibits "A" and "D," on those occasions are, at best, inconclusive. They are
not inconsistent with what Vizconde has asserted to be an innocent desire to help her
friend dispose of the ring; nor do they exclude every reasonable hypothesis other than
complicity in a premeditated swindle. 18

The foregoing conclusion in nowise suffers from the fact that the second receipt, Exhibit
"D", appears to confirm that the ring." . . was given to Mrs. Pilar Pagulayan and Mrs.
Corazon de Jesus Vizconde on 22 April 1975, to be sold on commission basis for eighty
five thousand pesos (P85,000.00)." 19 The implications and probative value of this
writing must be considered in the context of what had already transpired at the time of
its making. The ring had already been given to Pagulayan, and the check that she had
issued in payment therefor (or to secure payment, as the complainant would have it)
had already been dishonored twice. That the complainant then already entertained
serious apprehensions about the fate of the ring is evident in her having had her lawyers
send Vizconde and Pagulayan demands for restitution or payment, with threat of legal
action. Given that situation, Exhibit "D", insofar as it purports to confirm that Vizconde
had also received the ring in trust, cannot be considered as anything other than an
attempt to "cure" the lack of mention of such an entrustment in the first receipt, Exhibit
"A", and thereby bind Vizconde to a commitment far stronger and more compelling than
a mere civil guarantee for the value of the ring. There is otherwise no explanation for
requiring Vizconde and Pagulayan to sign the receipt, which needed only the signature of
Perlas as an acknowledgment of the P5,000.00 given in part payment, and the delivery
of the land titles to secure the balance.

The conflict in the recitals of the two receipts insofar as concerns Vizconde’s part in the
transaction involving Perlas’ ring is obvious and cannot be ignored. Neither, as the Court
sees it, should these writings be read together in an attempt to reconcile what they
contain, since, as already pointed out, the later receipt was made under circumstances
which leave no little doubt of its truth and integrity. What is clear from Exhibit "A" is that
the ring was entrusted to Pilar A. Pagulayan to be sold on commission; there is no
mention therein that it was simultaneously delivered to and received by Vizconde for the
same purpose or, therefore, that Vizconde was constituted, or agreed to act as, agent
jointly with Pagulayan for the sale of the ring. What Vizconde solely undertook was to
guarantee the obligation of Pagulayan to return the ring or deliver its value; and that
guarantee created only a civil obligation, without more, upon default of the principal.
Exhibit "D", on the other hand, would make out Vizconde an agent for the sale of the
ring. The undisputed fact that Exhibit "A" was executed simultaneously with the delivery
of the ring to Pagulayan compellingly argues for accepting it as a more trustworthy
memorial of the real agreement and transaction of the parties than Exhibit "D" which
was executed at a later date and after the supervention of events rendering it expedient
or desirable to vary the terms of that agreement or transaction.

In view of the conclusions already reached, consideration of the Solicitor General’s

argument — also quite persuasive — that Exhibit "D" in fact evidences a consummated
sale of the ring for an agreed price not fully paid for, which yields the same result, is no
longer necessary. It is, however, at least another factor reinforcing the hypothesis of
Vizconde’s innocence.

Upon the evidence, appellant Corazon J. Vizconde was a mere guarantor, a solidary one
to be sure, of the obligation assumed by Pilar A. Pagulayan to complainant Marylou J.
Perlas for the return of the latter’s ring or the delivery of its value. Whatever liability was
incurred by Pagulayan for defaulting on such obligation — and this is not inquired into —
that of Vizconde consequent upon such default was merely civil, not criminal. It was,
therefore, error to convict her of estafa.

As already stated, the Solicitor General however maintains, on the authority of People v.
Padilla, 20 that the appellant should be held liable to pay the complainant the amount of
P55,000.00, or whatever part of such amount remains unpaid, for the value of the ring.
Again, this is a correct proposition, there being no question — as in fact admitted by her
— that the appellant executed the guarantee already referred to.

WHEREFORE, except insofar as it affirms the judgment of the Trial Court ordering
appellant Corazon J. Vizconde, solidarily with Pilar A. Pagulayan, to indemnify the
complainant Marylou J. Perlas in the amount of P55,000.00 for the unaccounted balance
of the value of the latter’s ring, the appealed Decision of the Court of Appeals is
reversed and set aside, and said appellant is acquitted, with costs de oficio. As the
record indicates that levies on preliminary attachment and on execution pending appeal
have been made on behalf of the complainant, 21 which may have resulted in further
reducing the abovestated balance, the appellant may, upon remand of this case to the
Trial Court, prove any reductions, by the operation of said levies or otherwise, to which
the amount of the indemnity adjudged may be justly subject.

SO ORDERED.
 EN BANC

G.R. No. L-47495             August 14, 1941

THE TEXAS COMPANY (PHIL.), INC., petitioner,

vs.
TOMAS ALONSO, respondent.

C. D. Johnston & A. P. Deen for petitioner.

Tomas Alonso in his own behalf.

LAUREL, J.:

On November 5, 1935 Leonor S. Bantug and Tomas Alonso were sued by the Texas Company (P.I.),
Inc. in the Court of First Instance of Cebu for the recovery of the sum of P629, unpaid balance of the
account of Leonora S. Bantug in connection with the agency contract with the Texas Company for the
faithful performance of which Tomas Alonso signed the following:

For value received, we jointly and severally do hereby bind ourselves and each of us, in
solidum, with Leonor S. Bantug the agent named in the within and foregoing agreement, for full
and complete performance of same hereby waiving notice of non-performance by or demand
upon said agent, and the consent to any and all extensions of time for performance. Liability
under this undertaking, however, shall not exceed the sum of P2,000, Philippine currency.

Witness the hand and seal of the undersigned affixed in the presence of two witness, this 12th
day of August, 1929.

Leonor S. Bantug was declared in default as a result of her failure to appear or answer, but Tomas
Alonso filed an answer setting up a general denial and the special defenses that Leonor S. Bantug
made him believe that he was merely a co-security of one Vicente Palanca and he was never notified
of the acceptance of his bond by the Texas Company. After trial, the Court of First Instance of Cebu
rendered judgment on July 10, 1973, which was amended on February 1, 1938, sentencing Leonor S.
Bantug and Tomas Alonso to pay jointly and severally to the Texas Company the sum of P629, with
interest at the rate of six per cent (6%) from the date of filing of the complaint, and with proportional
costs. Upon appeal by Tomas Alonso, the Court of Appeals modified the judgment of the Court of
First Instance of Cebu in the sense that Leonor S. Bantug was held solely liable for the payment of
the aforesaid sum of P629 to the Texas Company, with the consequent absolution of Tomas Alonso.
This case is now before us on petition for review by certiorari of the decision of the Court of Appeals.
It is contended by the petitioner that the Court of Appeals erred in holding that there was merely an
offer of guaranty on the part of the respondent, Tomas Alonso, and that the latter cannot be held
liable thereunder because he was never notified by the Texas Company of its acceptance.

The Court of Appeals has placed reliance upon our decision in National Bank vs. Garcia (47 Phil.,
662), while the petitioner invokes the case of National Bank vs. Escueta, (50 Phil., 991). In the first
case, it was held that there was merely an offer to give bond and, as there was no acceptance of the
offer, this court refused to give effect to the bond. In the second case, the sureties were held liable
under their surety agreement which was found to have been accepted by the creditor, and it was
therein ruled that an acceptance need not always be express or in writing. For the purpose of this
decision, it is not indispensable for us to invoke one or the other case above cited. The Court of
Appeals found as a fact, and this is conclusive in this instance, that the bond in question was
executed at the request of the petitioner by virtue of the following clause of the agency contract:
 Additional Security. — The Agent shall whenever requested by the Company in addition to the
guaranty herewith provided, furnish further guaranty or bond, conditioned upon the Agent's
faithful performance of this contract, in such individuals of firms as joint and several sureties as
shall be satisfactory to the Company.

In view of the foregoing clause which should be the law between the parties, it is obvious that, before
a bond is accepted by the petitioner, it has to be in such form and amount and with such sureties as
shall be satisfactory hereto; in other words, the bond is subject to petitioner's approval. The logical
implication arising from this requirement is that, if the petitioner is satisfied with any such bond, notice
of its acceptance or approval should necessarily be given to the property party in interest, namely, the
surety or guarantor. In this connection, we are likewise bound by the finding of the Court of Appeals
that there is no evidence in this case tending to show that the respondent, Tomas Alonso, ever had
knowledge of any act on the part of petitioner amounting to an implied acceptance, so as to justify the
application of our decision in National Bank vs. Escueta (50 Phil., 991).

While unnecessary to this decision, we choose to add a few words explanatory of the rule regarding
the necessity of acceptance in case of bonds. Where there is merely an offer of, or proposition for, a
guaranty, or merely a conditional guaranty in the sense that it requires action by the creditor before
the obligation becomes fixed, it does not become a binding obligation until it is accepted and, unless
there is a waiver of notice of such acceptance is given to, or acquired by, the guarantor, or until he
has notice or knowledge that the creditor has performed the conditions and intends to act upon the
guaranty. (National Bank vs. Garcia, 47 Phil., 662; C. J., sec. 21, p. 901; 24 Am. Jur., sec. 37, p.
899.) The acceptance need not necessarily be express or in writing, but may be indicated by acts
amounting to acceptance. (National Bank vs. Escueta, 50 Phil., 991.) Where, upon the other hand,
the transaction is not merely an offer of guaranty but amounts to direct or unconditional promise of
guaranty, unless notice of acceptance is made a condition of the guaranty, all that is necessary to
make the promise binding is that the promise should act upon it, and notice of acceptance is not
necessary (28 C. J., sec. 25, p. 904; 24 Am. Jur., sec 37, p. 899), the reason being that the contract
of guaranty is unilateral (Visayan Surety and Insurance Corporation vs. Laperal, G.R. No. 46515,
promulgated June 14, 1940).

The decision appealed from will be, as the same is hereby, affirmed, with costs of this instance
against the petitioner. So ordered.

Avanceña, C.J., Abad Santos, and Diaz, JJ., concur.

Separate Opinions

OZAETA, J., with whom concur MORAN and HORRILENO, JJ., dissenting:

We concede that the statement of fact made by the Court of Appeals is conclusive upon this Court in
a petition for review on certiorari. But when it appears from the decision of the Court of Appeals itself
that such a statement is but a conclusion drawn by that Court from the facts found by it, and that such
conclusion is patently erroneous, we hold that this Court should disregard it.

Of the nature, we believe, is the following statement made by the Court of Appeals in the course of its
ratiocination:
 La fianza prestada por el apelante se otorgo a requerimiento de la demandante en virtud de la
siguiente clausula (15) del contrato de agencia Exhibit A, que dice asi:

"ADDITIONAL SECURITY. — The Agent shall, whenever requested by the Company in

addition to the guaranty herewith provided, furnish further guaranty or bond, conditioned
upon the agent's faithful performance of this contract, in such form and amount and with
such bank as surety or with such individuals or firms as joint and several sureties as
shall be satisfactory to the Company." (Pages 8-9, appendix to petitioner's brief.)

It is important to note that the above-quoted statement forms part of the court's ratio decidendi and
not of its findings of fact. Its findings of fact appear in the first three paragraphs of its decision, which
we quote as follows:

El 12 de agosto de 1929 la demandante y el demandado Leonor S. Bantug celebraron un

contrato, (Exhibit A) por virtud del cual aquella nombro a este Agente vendedor de sus
productos petroliferos en el Municipio de Maasin, Provincia de Leyte, mediante pago de una
comision sobre el valor de todos los efectos que llegase a vender, obligandose por su parte
Leonor S. Bantug como Agente, a ingresar y pagar a la compañia el importe neto de las
ventas realizadas, despues de deducir su comision y los demas gastos de agencia que se
estipularon en el referido contrato.

En el mismo documento Exhibit A, el otro demandado Tomas Alonso suscribio una fianza,
obligandose mancomunada y solidariamente con el Agente Leonor S. Bantug a cumplir
fielmente las condiciones del contrato de Agencia hasta la suma de P2,000.

El estado de cuentas de la agencia que se presento en el juicio como Exhibit B, demuestra

que la ultima liquidacion arroja un balance contra el Agente Leonor S. Bantug por la cantidad
de P629; y como esta suma no ha sido pagado ni por Leonor S. Bantug ni por su fiador Tomas
Alonso, a pesar de los requerimientos que se les ha hecho, de ahi que la demandante, el 18
de noviembre de 1938, dedujo accion en el Juzgado de Primera Instancia de Cebu para el
cobro de dicha suma y sus intereses legales desde la presentacion de la demanda. (Pages 1-
3, appendix to petitioner's brief.)

Now if, as found by the Court of Appeals itself, the agency contract between the petitioner and Leonor
S. Bantug was Exhibit A, dated August 12, 1929, and that very same document was on the same
date signed by the respondent Tomas Alonso as bondsman or surety of the agent, how could the
bond in question, which formed part of Exhibit A, be held to have been executed by virtue of clause
15 of said document providing for additional security? Indeed, that very clause says that the agent
shall furnish further guaranty or bond "in addition to the guaranty herewith provided," whenever
requested by the company. The "guaranty herewith provided" was obviously the bond or guaranty
given by the respondent on the same date and in the same document. It appears clear to us,
therefore, that the bond Exhibit A, being the original guaranty, could not be the "additional guaranty"
mentioned in clause 15 of said Exhibit A. Moreover, it does not appear that any bond or guaranty,
other than that of the respondent, to secure the performance of the agency contract in question was
in force on and after August 12, 1929.

Another illogical conclusion drawn by the Court of Appeals is this:

"Por el requerimiento que contiene la clausula preinserta, de que el Agente puede prestar una
garantia adicional a satisfaccion de la compañia, debe entenderse que la fianza prestada por el
apelante era una oferta o proposicion de garantia, cuya efectividad dependia de la acceptacion de la
compañia, comunicada al garante." (Page 9, appendix to petitioner's brief.) .
If, as previously found by the Court of Appeals, the herein respondent executed the bond in question
"a requerimiento de la demandante," how could said bond be understood as an "offer or proposition
of guaranty" from Alonso to the plaintiff? .

Yet the judgment of the Court of Appeals, as well as the affirming decision of the majority of this
court, is based on the conclusion that the bond sued upon was an additional guaranty; that it
constituted a mere offer of guaranty and, therefore, had to be accepted by the petitioner; and that, not
having been accepted, it is inefficacious. We have shown that such conclusion is unwarranted.

Our vote is to reverse the decision of the Court of Appeals and to affirm that of Judge Felix Martinez
of the Court of First Instance of Cebu, who tried this case.
 EN BANC

G.R. No. L-45571             June 30, 1939

FLORENTINA DE GUZMAN, as administratrix of the intestate estate of the deceased Santiago

Lucero, plaintiff-appellee,
vs.
ANASTACIO R. SANTOS, defendant-appellant.

E.V. Filamor appellant.

Antonio G. Lucero for appellee.

IMPERIAL, J.:

This is an appeal taken by the defendant from the decision of the Court of First Instance of Nueva
Ecija which sentenced him to pay the plaintiff the sum of P3,665.55, plus legal interest thereon from
February 10, 1932, until fully paid, and the costs.

On October 28, 1924, Jerry O. Toole, Antonio K. Abad and Anastacio R. Santos, the defendant,
formed a general mercantile partnership under the style Philippine-American Construction Company,
with a capital of P14,000, P10,000 of which were taken by way of loan from Paulino Candelaria. The
partnership and the co-partners undertook and bound themselves to pay, jointly and severally, the
said indebtedness in or before June, 1925. Having violated the conditions of the contract executed for
the purpose, Paulino Candelaria brought civil case No. 3838 of the Court of First Instance of Nueva
Ecija on May 15, 1925, against the Philippine-American Construction Company and its co-partners,
for the recovery of the loan, plus interest thereon and stipulated attorney's fees. On January 25, 1926,
the said court rendered judgment therein sentencing all the defendants to pay the plaintiff, jointly and
severally, the sum of P9,317, with legal interest thereon from the filing of the complaint, plus P500 as
liquidated damages and P1,000 as attorney's fees. On appeal this judgment was affirmed by this
court on December 17, 1926 (G.R. No. 26131). A writ of execution of the affirmed judgment having
been issued, the herein plaintiff, in her capacity as judicial administratrix of the deceased Santiago
Lucero, on February 10, 1932, paid to be creditor Paulino Candelaria the sum of P5,665.55 on
account of the judgment.

Upon filing of the complaint in civil case No. 3838, Paulino Candeleria obtained a writ of attachment
against the then defendants by virtue of which the sheriff attached properties of Jerry O. Toole valued
at P50; of Antonio K. Abad valued at P12,150; and of Anastacio R. Santos valued at P2,733. No
property of the partnership Philippine-American Construction Company was attached. In view of
these attachments, the Philippine-American Construction Company moved for the discharge of the
attached properties and offered to post a bond for P10,000. The court granted the motion and fixed
the bond at the amount offered. On May 29, 1925, the Philippine-American Construction Company,
as principal, then represented by the partner Antonio K. Abad, and Santiago Lucero and Meliton
Carlos, as guarantors, executed a bond for P10,000 in favor of Paulino Candelaria for the lifting of the
attachment under section 440 of the Code of Civil Procedure. In the bond thus executed, the
defendant Anastacio R. Santos neither intervened nor signed individually, but Abad testified that the
former was the one who induced him to get the signature of Lucero by taking advantage of his good
relations with him. Upon the approval of the bond, the attachment was discharged and the attached
properties were returned to their owners.

After the issuance of the writ for the execution of the judgment rendered in civil case No. 3838, the
sheriff returned the same with the statement that the writ could not be executed as he found no
property of the judgment debtors. In view of this, Paulino Candelaria moved for the issuance of a writ
of execution against the guarantors of the defendants. The court granted the motion and issued a writ
of execution against the plaintiff, as judicial administratrix of the deceased Santiago Lucero, and the
other guarantor Meliton Carlos. The plaintiff tenaciously refused to pay the judgment obtained by
Paulino Candelaria, but after all her efforts had failed, she was eventually compelled to pay to said
creditor the sum of P5,565.55, the co-guarantor Meliton Carlos also paid upon the bond signed by
him the sum of P5,135. The plaintiff and Carlos later recovered from Antonio K. Abad, one of the
defendants in the said civil case, the sum of P3,800 which they divided equally. It thus appears that
the payment made by the plaintiff to Candelaria was reduced to the sum of P3,665.55. The plaintiff, in
her said capacity, demanded of the defendant Anastacio R. Santos the return of the aforesaid sum
and, upon the latter's refusal, she brought the action which culminated in the appealed judgment.

The four errors assigned by the appellant raise only one legal question, namely, whether under the
proven facts admitted by the parties, he is bound to pay to the plaintiff what the latter had advanced
to Paulino Candelaria upon the bond which the deceased Santiago Lucero had executed. The
appellant vigorously insists that he is not so bound under the law, because he neither applied for nor
intervened in the bond in any capacity. It is beyond question that the appellant neither intervened nor
signed the bond which was filed to discharge the attachment of the properties of the judgment
debtors, but it is clear, and this is admitted, that the bond was filed to release the attached properties,
it was approved by the court and it resulted in the discharge of the attachment and the return of the
attached properties to their respective owners. When the sheriff attempted to execute judgment and
looked for the discharged properties, he found that they had disappeared, for which reason the court
subsequently issued a writ of execution against the guarantors. As a result of this last execution, the
plaintiff was forced to pay and in fact paid the said sum to the creditor Candelaria. Now, then, under
article 1822 of the Civil Code, by guaranty one person binds himself to pay or perform for a third
person in case the latter should fail to do so; and the article 1838 provides that any guarantor who
pays for the debtor shall be indemnified by the latter even should the guaranty have been undertaken
without the knowledge of the debtor. In the present case, the guarantor was the deceased Santiago
Lucero, now represented by the plaintiff in her capacity as judicial administratrix, and the debtor is the
defendant-appellant. Applying the provision of the last cited article, it is obvious that the appellant is
legally bound to pay what the plaintiff had advanced to the creditor upon the judgment,
notwithstanding the fact that the bond had given without his knowledge.

The obligation of the appellant to pay the plaintiff what the latter had advanced is further sanctioned
by the general provisions of the Civil Code regarding obligations. Article 1158 provides that "payment
may be made by any person, whether he has an interest in the performance of the obligation or not,
and whether the payment is known and approved by the debtor or whether he is unaware of it. Any
person who makes a payment for the account of another may recover from the debtor the amount of
the payment, unless it was made against the express will of the latter. In the latter case he can only
recover from the debtor in so far as the payment has been beneficial to the latter." According to this
legal provision, it is evident that the plaintiff-appellant is bound to pay to the plaintiff what the latter
had advanced to the creditor upon the judgment, and this is the more so because it appears that
although Lucero executed the bond without his knowledge, nevertheless he did not object thereto or
repudiate the same at any time. From the proven facts it cannot logically be deduced that the
appellant did not have knowledge of the bond, first, because his properties were attached and the
attachment could not have been levied without his knowledge, and, secondly, because the said
properties were returned to him and in receiving them he was necessarily apprized of the fact that a
bond had been filed to discharge the attachment.

The appellant questions the application by the court of article 127 of the Code of Commerce,
overlooking article 128. This assignment of error is of no consequence and does not affect the result
of the case. As already stated, the rights of the parties must be governed by the aforesaid articles of
the Civil Code. Assuming the inapplicability of article 127 of the Code of Commerce, in view of the
fact that the action is not addressed to the appellant as general partner of the Philippine-American
Construction Company, it nevertheless appears that his liability to the plaintiff, as debtor in solidum of
Paulino Candelaria, is recognized and countenanced by articles 1158 and 1838 of the Civil Code.

In view of the foregoing, the appealed judgment is affirmed, with costs of this instance to the
defendant appellant. So ordered.
 SECOND DIVISION

G.R. No. 113931 May 6, 1998

E. ZOBEL, INC., petitioner,
vs.
THE COURT OF APPEALS, CONSOLIDATED BANK AND TRUST CORPORATION, and
SPOUSES RAUL and ELEA R. CLAVERIA, respondents.

MARTINEZ, J.:

This petition for review on certiorari seeks the reversal of the decision 1 of the Court of Appeals dated
July 13, 1993 which affirmed the Order of the Regional Trial Court of Manila, Branch 51, denying
petitioner's Motion to Dismiss the complaint, as well as the Resolution 2 dated February 15, 1994
denying the motion for reconsideration thereto.

The facts are as follows:

Respondent spouses Raul and Elea Claveria, doing business under the name "Agro Brokers,"
applied for a loan with respondent Consolidated Bank and Trust Corporation (now SOLIDBANK) in
the amount of Two Million Eight Hundred Seventy Five Thousand Pesos (P2,875,000.00) to finance
the purchase of two (2) maritime barges and one tugboat 3 which would be used in their molasses
business. The loan was granted subject to the condition that respondent spouses execute a chattel
mortgage over the three (3) vessels to be acquired and that a continuing guarantee be executed by
Ayala International Philippines, Inc., now herein petitioner E. Zobel, Inc., in favor of SOLIDBANK. The
respondent spouses agreed to the arrangement. Consequently, a chattel mortgage and a Continuing
Guaranty 4 were executed.

Respondent spouses defaulted in the payment of the entire obligation upon maturity. Hence, on
January 31, 1991, SOLIDBANK filed a complaint for sum of money with a prayer for a writ of
preliminary attachment, against respondents spouses and petitioner. The case was docketed as Civil
Case No. 91-55909 in the Regional Trial Court of Manila.

Petitioner moved to dismiss the complaint on the ground that its liability as guarantor of the loan was
extinguished pursuant to Article 2080 of the Civil Code of the Philippines. It argued that it has lost its
right to be subrogated to the first chattel mortgage in view of SOLIDBANK's failure to register the
chattel mortgage with the appropriate government agency.

SOLIDBANK opposed the motion contending that Article 2080 is not applicable because petitioner is
not a guarantor but a surety.

On February 18, 1993, the trial court issued an Order, portions of which reads:
 After a careful consideration of the matter on hand, the Court finds the ground of the
motion to dismiss without merit. The document referred to as "Continuing Guaranty"
dated August 21, 1985 (Exh. 7) states as follows:

For and in consideration of any existing indebtedness to you of Agro

Brokers, a single proprietorship owned by Mr. Raul Claveria for the
payment of which the undersigned is now obligated to you as surety and
in order to induce you, in your discretion, at any other manner, to, or at the
request or for the account of the borrower, . . .

The provisions of the document are clear, plain and explicit.

Clearly therefore, defendant E. Zobel, Inc. signed as surety. Even though the title of the
document is "Continuing Guaranty", the Court's interpretation is not limited to the title
alone but to the contents and intention of the parties more specifically if the language is
clear and positive. The obligation of the defendant Zobel being that of a surety, Art.
2080 New Civil Code will not apply as it is only for those acting as guarantor. In fact, in
the letter of January 31, 1986 of the defendants (spouses and Zobel) to the plaintiff it is
requesting that the chattel mortgage on the vessels and tugboat be waived and/or
rescinded by the bank inasmuch as the said loan is covered by the Continuing Guaranty
by Zobel in favor of the plaintiff thus thwarting the claim of the defendant now that the
chattel mortgage is an essential condition of the guaranty. In its letter, it said that
because of the Continuing Guaranty in favor of the plaintiff the chattel mortgage is
rendered unnecessary and redundant.

With regard to the claim that the failure of the plaintiff to register the chattel mortgage
with the proper government agency, i.e. with the Office of the Collector of Customs or
with the Register of Deeds makes the obligation a guaranty, the same merits a scant
consideration and could not be taken by this Court as the basis of the extinguishment of
the obligation of the defendant corporation to the plaintiff as surety. The chattel
mortgage is an additional security and should not be considered as payment of the debt
in case of failure of payment. The same is true with the failure to register, extinction of
the liability would not lie.

WHEREFORE, the Motion to Dismiss is hereby denied and defendant E. Zobel, Inc., is
ordered to file its answer to the complaint within ten (10) days from receipt of a copy of
this Order. 5

Petitioner moved for reconsideration but was denied on April 26, 1993. 6

Thereafter, petitioner questioned said Orders before the respondent Court of Appeals, through a
petition for certiorari, alleging that the trial court committed grave abuse of discretion in denying the
motion to dismiss.

On July 13, 1993, the Court of Appeals rendered the assailed decision the dispositive portion of which
reads:

WHEREFORE, finding that respondent Judge has not committed any grave abuse of
discretion in issuing the herein assailed orders, We hereby DISMISS the petition.

A motion for reconsideration filed by petitioner was denied for lack of merit on February 15, 1994.
Petitioner now comes to us via this petition arguing that the respondent Court of Appeals erred in its
finding: (1) that Article 2080 of the New Civil Code which provides: "The guarantors, even though they
be solidary, are released from their obligation whenever by some act of the creditor they cannot be
subrogated to the rights, mortgages, and preferences of the latter," is not applicable to petitioner; (2)
that petitioner's obligation to respondent SOLIDBANK under the continuing guaranty is that of a
surety; and (3) that the failure of respondent SOLIDBANK to register the chattel mortgage did not
extinguish petitioner's liability to respondent SOLIDBANK.

We shall first resolve the issue of whether or not petitioner under the "Continuing Guaranty" obligated
itself to SOLIDBANK as a guarantor or a surety.

A contract of surety is an accessory promise by which a person binds himself for another already
bound, and agrees with the creditor to satisfy the obligation if the debtor does not. 7 A contract of
guaranty, on the other hand, is a collateral undertaking to pay the debt of another in case the latter
does not pay the debt. 8

Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to
both. However, under our civil law, they may be distinguished thus: A surety is usually bound with his
principal by the same instrument, executed at the same time, and on the same consideration. He is
an original promissor and debtor from the beginning, and is held, ordinarily, to know every default of
his principal. Usually, he will not be discharged, either by the mere indulgence of the creditor to the
principal, or by want of notice of the default of the principal, no matter how much he may be injured
thereby. On the other hand, the contract of guaranty is the guarantor's own separate undertaking, in
which the principal does not join. It is usually entered into before or after that of the principal, and is
often supported on a separate consideration from that supporting the contract of the principal. The
original contract of his principal is not his contract, and he is not bound to take notice of its non-
performance. He is often discharged by the mere indulgence of the creditor to the principal, and is
usually not liable unless notified of the default of the principal. 9

Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of the solvency
of the debtor and thus binds himself to pay if the principal is unable to pay while a surety is the insurer
of the debt, and he obligates himself to pay if the principal does not pay. 10

Based on the aforementioned definitions, it appears that the contract executed by petitioner in favor
of SOLIDBANK, albeit denominated as a "Continuing Guaranty," is a contract of surety. The terms of
the contract categorically obligates petitioner as "surety" to induce SOLIDBANK to extend credit to
respondent spouses. This can be seen in the following stipulations.

For and in consideration of any existing indebtedness to you of AGRO BROKERS, a

single proprietorship owned by MR. RAUL P. CLAVERIA, of legal age, married and with
business address . . . (hereinafter called the Borrower), for the payment of which
the undersigned is now obligated to you as surety and in order to induce you, in your
discretion, at any time or from time to time hereafter, to make loans or advances or to
extend credit in any other manner to, or at the request or for the account of the
Borrower, either with or without purchase or discount, or to make any loans or advances
evidenced or secured by any notes, bills receivable, drafts, acceptances, checks or
other instruments or evidences of indebtedness . . . upon which the Borrower is or may
become liable as maker, endorser, acceptor, or otherwise, the undersigned agrees to
guarantee, and does hereby guarantee, the punctual payment, at maturity or upon
demand, to you of any and all such instruments, loans, advances, credits and/or other
obligations herein before referred to, and also any and all other indebtedness of every
kind which is now or may hereafter become due or owing to you by the Borrower,
 together with any and all expenses which may be incurred by you in collecting all or any
such instruments or other indebtedness or obligations hereinbefore referred to, and or in
enforcing any rights hereunder, and also to make or cause any and all such payments
to be made strictly in accordance with the terms and provisions of any agreement (g),
express or implied, which has (have) been or may hereafter be made or entered into by
the Borrower in reference thereto, regardless of any law, regulation or decree, now or
hereafter in effect which might in any manner affect any of the terms or provisions of
any such agreements(s) or your right with respect thereto as against the Borrower, or
cause or permit to be invoked any alteration in the time, amount or manner of payment
by the Borrower of any such instruments, obligations or indebtedness; . . . (Emphasis
Ours)

One need not look too deeply at the contract to determine the nature of the undertaking and the
intention of the parties. The contract clearly disclose that petitioner assumed liability to SOLIDBANK,
as a regular party to the undertaking and obligated itself as an original promissor. It bound itself jointly
and severally to the obligation with the respondent spouses. In fact, SOLIDBANK need not resort to
all other legal remedies or exhaust respondent spouses' properties before it can hold petitioner liable
for the obligation. This can be gleaned from a reading of the stipulations in the contract, to wit:

. . . If default be made in the payment of any of the instruments, indebtedness or other

obligation hereby guaranteed by the undersigned, or if the Borrower, or the undersigned
should die, dissolve, fail in business, or become insolvent, . . ., or if any funds or other
property of the Borrower, or of the undersigned which may be or come into your
possession or control or that of any third party acting in your behalf as aforesaid should
be attached of distrained, or should be or become subject to any mandatory order of
court or other legal process, then, or any time after the happening of any such event
any or all of the instruments of indebtedness or other obligations hereby guaranteed
shall, at your option become (for the purpose of this guaranty) due and payable by the
undersigned forthwith without demand of notice, and full power and authority are hereby
given you, in your discretion, to sell, assign and deliver all or any part of the property
upon which you may then have a lien hereunder at any broker's board, or at public or
private sale at your option, either for cash or for credit or for future delivery without
assumption by you of credit risk, and without either the demand, advertisement or notice
of any kind, all of which are hereby expressly waived. At any sale hereunder, you may,
at your option, purchase the whole or any part of the property so sold, free from any
right of redemption on the part of the undersigned, all such rights being also hereby
waived and released. In case of any sale and other disposition of any of the property
aforesaid, after deducting all costs and expenses of every kind for care, safekeeping,
collection, sale, delivery or otherwise, you may apply the residue of the proceeds of the
sale and other disposition thereof, to the payment or reduction, either in whole or in part,
of any one or more of the obligations or liabilities hereunder of the undersigned whether
or not except for disagreement such liabilities or obligations would then be due, making
proper allowance or interest on the obligations and liabilities not otherwise then due,
and returning the overplus, if any, to the undersigned; all without prejudice to your rights
as against the undersigned with respect to any and all amounts which may be or remain
unpaid on any of the obligations or liabilities aforesaid at any time (s).

x x x           x x x          x x x

Should the Borrower at this or at any future time furnish, or should be heretofore have
furnished, another surety or sureties to guarantee the payment of his obligations to you,
the undersigned hereby expressly waives all benefits to which the undersigned might
 be entitled under the provisions of Article 1837 of the Civil Code (beneficio division), the
liability of the undersigned under any and all circumstances being joint and several;
(Emphasis Ours)

The use of the term "guarantee" does not ipso facto mean that the contract is one of guaranty.
Authorities recognize that the word "guarantee" is frequently employed in business transactions to
describe not the security of the debt but an intention to be bound by a primary or independent
obligation. 11 As aptly observed by the trial court, the interpretation of a contract is not limited to the
title alone but to the contents and intention of the parties.

Having thus established that petitioner is a surety, Article 2080 of the Civil Code, relied upon by
petitioner, finds no application to the case at bar. In Bicol Savings and Loan Association
vs. Guinhawa, 12 we have ruled that Article 2080 of the New Civil Code does not apply where the
liability is as a surety, not as a guarantor.

But even assuming that Article 2080 is applicable, SOLIDBANK's failure to register the chattel
mortgage did not release petitioner from the obligation. In the Continuing Guaranty executed in favor
of SOLIDBANK, petitioner bound itself to the contract irrespective of the existence of any collateral. It
even released SOLIDBANK from any fault or negligence that may impair the contract. The pertinent
portions of the contract so provides:

. . . the undersigned (petitioner) who hereby agrees to be and remain bound upon this
guaranty, irrespective of the existence, value or condition of any collateral, and
notwithstanding any such change, exchange, settlement, compromise, surrender,
release, sale, application, renewal or extension, and notwithstanding also that all
obligations of the Borrower to you outstanding and unpaid at any time(s) may exceed
the aggregate principal sum herein above prescribed.

This is a Continuing Guaranty and shall remain in full force and effect until written notice
shall have been received by you that it has been revoked by the undersigned, but any
such notice shall not be released the undersigned from any liability as to any
instruments, loans, advances or other obligations hereby guaranteed, which may be
held by you, or in which you may have any interest, at the time of the receipt of such
notice. No act or omission of any kind on your part in the premises shall in any event
affect or impair this guaranty, nor shall same be affected by any change which may
arise by reason of the death of the undersigned, of any partner (s) of the undersigned,
or of the Borrower, or of the accession to any such partnership of any one or more new
partners. (Emphasis supplied)

In fine, we find the petition to be without merit as no reversible error was committed by respondent
Court of Appeals in rendering the assailed decision.

WHEREFORE, the decision of the respondent Court of Appeals is hereby AFFIRMED. Costs against
the petitioner.

SO ORDERED.
 EN BANC

G.R. No. L-158025             November 5, 1920

CARMEN CASTELLVI DE HIGGINS and HORACE L. HIGGINS, plaintiffs-appellants,

vs.
GEORGE C. SELLNER, defendant-appellee.

Wolfson, Wolfson and Schwarzkopf for appellants.

William and Ferrier for appellee.

MALCOLM, J.:

This is an action brought by plaintiffs to recover from defendant the sum of P10,000. The brief
decision of the trial court held that the suit was premature, and absolved the defendant from the
complaint, with the costs against the plaintiffs.

The basis of plaintiff's action is a letter written by defendant George C. Sellner to John T. Macleod,
agent for Mrs. Horace L. Higgins, on May 31, 1915, of the following tenor:lawph!l.net

DEAR SIR: I hereby obligate and bind myself, my heirs, successors and assigns that if
the promissory note executed the 29th day of May, 1915 by the Keystone Mining Co.,
W.H. Clarke, and John Maye, jointly and severally, in your favor and due six months
after date for Pesos 10,000 is not fully paid at maturity with interest, I will, within fifteen
days after notice of such default, pay you in cash the sum of P10,000 and interest upon
your surrendering to me the three thousand shares of stock of the Keystone Mining Co.
held by you as security for the payment of said note.

Respectfully,

(Sgd.) GEO. C. SELLNER.         

Counsel for both parties agree that the only point at issue is the determination of defendant's status in
the transaction referred to. Plaintiffs contend that he is a surety; defendant contends that he is a
guarantor. Plaintiffs also admit that if defendant is a guarantor, articles 1830, 1831, and 1834 of the
Civil Code govern.

In the original Spanish of the Civil Code now in force in the Philippine Islands, Title XIV of Book IV is
entitled "De la Fianza." The Spanish word "fianza" is translated in the Washington and Walton
editions of the Civil Code as "security." "Fianza" appears in the Fisher translation as "suretyship." The
Spanish world "fiador" is found in all of the English translations of the Civil Code as "surety." The law
of guaranty is not related of by that name in the Civil Code, although indirect reference to the same is
made in the Code of Commerce. In terminology at least, no distinction is made in the Civil Code
between the obligation of a surety and that of a guarantor.
As has been done in the State of Louisiana, where, like in the Philippines, the substantive law has a
civil law origin, we feel free to supplement the statutory law by a reference to the precepts of the law
merchant.

The points of difference between a surety and a guarantor are familiar to American authorities. A
surety and a guarantor are alike in that each promises to answer for the debt or default of another. A
surety and a guarantor are unlike in that the surety assumes liability as a regular party to the
undertaking, while the liability as a regular party to upon an independent agreement to pay the
obligation if the primary pay or fails to do so. A surety is charged as an original promissory; the
engagement of the guarantor is a collateral undertaking. The obligation of the surety is primary; the
obligation of the guarantor is secondary. (See U.S. vs. Varadero de la Quinta [1919], 40 Phil., 48;
Lachman vs. Block [1894], 46 La. Ann., 649; Bedford vs. Kelley [1913], 173 Mich., 492; Brandt, on
Suretyship and Guaranty, sec. 1, cited approvingly by many authorities.)

Turning back again to our Civil Code, we first note that according to article 1822 "By fianza (security
or suretyship) one person binds himself to pay or perform for a third person in case the latter should
fail to do so." But "If the surety binds himself in solidum with the principal debtor, the provisions of
Section fourth, Chapter third, Title first, shall be applicable." What the first portion of the cited article
provides is, consequently, seen to be somewhat akin to the contract of guaranty, while what is last
provided is practically equivalent to the contract of suretyship. When in subsequent articles found in
section 1 of Chapter II of the title concerning fianza, the Code speaks of the effects of suretyship
between surety and creditor, it has, in comparison with the common law, the effect of guaranty
between guarantor and creditor. The civil law suretyship is, accordingly, nearly synonymous with the
common law guaranty; and the civil law relationship existing between codebtors liable in solidum is
similar to the common law suretyship.

It is perfectly clear that the obligation assumed by defendant was simply that of a guarantor, or, to be
more precise, of the fiador whose responsibility is fixed in the Civil Code. The letter of Mr. Sellner
recites that if the promissory note is not paid at maturity, then, within fifteen days after notice of such
default and upon surrender to him of the three thousand shares of Keystone Mining Company stock,
he will assume responsibility. Sellner is not bound with the principals by the same instrument
executed at the same time and on the same consideration, but his responsibility is a secondary one
found in an independent collateral agreement, Neither is Sellner jointly and severally liable with the
principal debtors.

With particular reference, therefore, to appellants assignments of error, we hold that defendant
Sellner is a guarantor within the meaning of the provisions of the Civil Code.

There is also an equitable aspect to the case which reenforces this conclusion. The note executed by
the Keystone Mining Company matured on November 29, 1915. Interest on the note was not
accepted by the makers until September 30, 1916. When the note became due, it is admitted that the
shares of stock used as collateral security were selling at par; that is, they were worth pesos 30,000.
Notice that the note had not been paid was not given to and when the Keyston Mining Company
stock was worthless. Defendant, consequently, through the laches of plaintiff, has lost possible
chance to recoup, through the sale of the stock, any amount which he might be compelled to pay as a
surety or guarantor. The "indulgence," as this word is used in the law of guaranty, of the creditors of
the principal, as evidenced by the acceptance of interest, and by failure promptly to notify the
guarantor, may thus have served to discharge the guarantor.

For quite different reasons, which, nevertheless, arrive at the same result, judgment is affirmed, with
costs of this instance against the appellants. So ordered.
 SECOND DIVISION

G.R. No. 96405 June 26, 1996

BALDOMERO INCIONG, JR., petitioner,

vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.

ROMERO, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals affirming that of the
Regional Trial Court of Misamis Oriental, Branch 18, 1 which disposed of Civil Case No. 10507 for
collection of a sum of money and damages, as follows:

WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily liable

and ordered to pay to the plaintiff Philippine Bank of Communications, Cagayan de Oro
City, the amount of FIFTY THOUSAND PESOS (P50,000.00), with interest thereon from
May 5, 1983 at 16% per annum until fully paid; and 6% per annum on the total amount
due, as liquidated damages or penalty from May 5, 1983 until fully paid; plus 10% of the
total amount due for expenses of litigation and attorney's fees; and to pay the costs.

The counterclaim, as well as the cross claim, are dismissed for lack of merit.

SO ORDERED.

Petitioner's liability resulted from the promissory note in the amount of P50,000.00 which he signed
with Rene C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly
and severally liable to private respondent Philippine Bank of Communications, Cagayan de Oro City
branch. The promissory note was due on May 5, 1983.

Said due date expired without the promissors having paid their obligation. Consequently, on
November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams demanding
payment thereof.2 On December 11, 1984 private respondent also sent by registered mail a final letter
of demand to Rene C. Naybe. Since both obligors did not respond to the demands made, private
respondent filed on January 24, 1986 a complaint for collection of the sum of P50,000.00 against the
three obligors.

On November 25, 1986, the complaint was dismissed for failure of the plaintiff to prosecute the case.
However, on January 9, 1987, the lower court reconsidered the dismissal order and required the
sheriff to serve the summonses. On January 27, 1987, the lower court dismissed the case against
defendant Pantanosas as prayed for by the private respondent herein. Meanwhile, only the summons
addressed to petitioner was served as the sheriff learned that defendant Naybe had gone to Saudi
Arabia.
In his answer, petitioner alleged that sometime in January 1983, he was approached by his friend,
Rudy Campos, who told him that he was a partner of Pio Tio, the branch manager of private
respondent in Cagayan de Oro City, in the falcata logs operation business. Campos also intimated to
him that Rene C. Naybe was interested in the business and would contribute a chainsaw to the
venture. He added that, although Naybe had no money to buy the equipment, Pio Tio had assured
Naybe of the approval of a loan he would make with private respondent. Campos then persuaded
petitioner to act as a "co-maker" in the said loan. Petitioner allegedly acceded but with the
understanding that he would only be a co-maker for the loan of P50,000.00.

Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by
Campos at his office. He affixed his signature thereto but in one copy, he indicated that he bound
himself only for the amount of P5,000.00. Thus, it was by trickery, fraud and misrepresentation that
he was made liable for the amount of P50,000.00.

In the aforementioned decision of the lower court, it noted that the typewritten figure "-- 50,000 --"
clearly appears directly below the admitted signature of the petitioner in the promissory note. 3 Hence,
the latter's uncorroborated testimony on his limited liability cannot prevail over the presumed
regularity and fairness of the transaction, under Sec. 5 (q) of Rule 131. The lower court added that it
was "rather odd" for petitioner to have indicated in a copy and not in the original, of the promissory
note, his supposed obligation in the amount of P5,000.00 only. Finally, the lower court held that, even
granting that said limited amount had actually been agreed upon, the same would have been merely
collateral between him and Naybe and, therefore, not binding upon the private respondent as
creditor-bank.

The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor
consultant who was supposed to take due care of his concerns, and that, on the witness stand, Pio
Tio denied having participated in the alleged business venture although he knew for a fact that the
falcata logs operation was encouraged by the bank for its export potential.

Petitioner appealed the said decision to the Court of Appeals which, in its decision of August 31,
1990, affirmed that of the lower court. His motion for reconsideration of the said decision having been
denied, he filed the instant petition for review on certiorari.

On February 6, 1991, the Court denied the petition for failure of petitioner to comply with the Rules of
Court and paragraph 2 of Circular
No. 1-88, and to sufficiently show that respondent court had committed any reversible error in its
questioned decision.4 His motion for the reconsideration of the denial of his petition was likewise
denied with finality in the Resolution of April 24, 1991. 5 Thereafter, petitioner filed a motion for leave
to file a second motion for reconsideration which, in the Resolution of May 27, 1991, the Court
denied. In the same Resolution, the Court ordered the entry of judgment in this case. 6

Unfazed, petitioner filed a notion for leave to file a motion for clarification. In the latter motion, he
asserted that he had attached Registry Receipt No. 3268 to page 14 of the petition in compliance with
Circular No. 1-88. Thus, on August 7, 1991, the Court granted his prayer that his petition be given
due course and reinstated the same.7

Nonetheless, we find the petition unmeritorious.

Annexed to the petition is a copy of an affidavit executed on May 3, 1988, or after the rendition of the
decision of the lower court, by Gregorio Pantanosas, Jr., an MTCC judge and petitioner's co-maker in
the promissory note. It supports petitioner's allegation that they were induced to sign the promissory
note on the belief that it was only for P5,000.00, adding that it was Campos who caused the amount
of the loan to be increased to P50,000.00.

The affidavit is clearly intended to buttress petitioner's contention in the instant petition that the Court
of Appeals should have declared the promissory note null and void on the following grounds: (a) the
promissory note was signed in the office of Judge Pantanosas, outside the premises of the bank; (b)
the loan was incurred for the purpose of buying a second-hand chainsaw which cost only P5,000.00;
(c) even a new chainsaw would cost only P27,500.00; (d) the loan was not approved by the board or
credit committee which was the practice, as it exceeded P5,000.00; (e) the loan had no collateral; (f)
petitioner and Judge Pantanosas were not present at the time the loan was released in contravention
of the bank practice, and (g) notices of default are sent simultaneously and separately but no notice
was validly sent to him.8 Finally, petitioner contends that in signing the promissory note, his consent
was vitiated by fraud as, contrary to their agreement that the loan was only for the amount of
P5,000.00, the promissory note stated the amount of P50,000.00.

The above-stated points are clearly factual. Petitioner is to be reminded of the basic rule that this
Court is not a trier of facts. Having lost the chance to fully ventilate his factual claims below, petitioner
may no longer be accorded the same opportunity in the absence of grave abuse of discretion on the
part of the court below. Had he presented Judge Pantanosas affidavit before the lower court, it would
have strengthened his claim that the promissory note did not reflect the correct amount of the loan.

Nor is there merit in petitioner's assertion that since the promissory note "is not a public deed with the
formalities prescribed by law but . . . a mere commercial paper which does not bear the signature
of . . . attesting witnesses," parol evidence may "overcome" the contents of the promissory note. 9 The
first paragraph of the parol evidence rule 10 states:

When the terms of an agreement have been reduced to writing, it is considered as

containing all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written
agreement.

Clearly, the rule does not specify that the written agreement be a public document.

What is required is that the agreement be in writing as the rule is in fact founded on "long experience
that written evidence is so much more certain and accurate than that which rests in fleeting memory
only, that it would be unsafe, when parties have expressed the terms of their contract in writing, to
admit weaker evidence to control and vary the stronger and to show that the
parties intended a different contract from that expressed in the writing signed by them." 11 Thus, for
the parol evidence rule to apply, a written contract need not be in any particular form, or be signed by
both parties. 12 As a general rule, bills, notes and other instruments of a similar nature are not subject
to be varied or contradicted by parol or extrinsic evidence. 13

By alleging fraud in his answer, 14 petitioner was actually in the right direction towards proving that he
and his co-makers agreed to a loan of P5,000.00 only considering that, where a parol
contemporaneous agreement was the inducing and moving cause of the written contract, it may be
shown by parol evidence. 15 However, fraud must be established by clear and convincing evidence,
mere preponderance of evidence, not even being adequate. 16 Petitioner's attempt to prove fraud
must, therefore, fail as it was evidenced only by his own uncorroborated and, expectedly, self-serving
testimony.

Petitioner also argues that the dismissal of the complaint against Naybe, the principal debtor, and
against Pantanosas, his co-maker, constituted a release of his obligation, especially because the
dismissal of the case against Pantanosas was upon the motion of private respondent itself. He cites
as basis for his argument, Article 2080 of the Civil Code which provides that:

The guarantors, even though they be solidary, are released from their obligation
whenever by some act of the creditor, they cannot be subrogated to the rights,
mortgages, and preferences of the latter.

It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not
as a guarantor. This is patent even from the first sentence of the promissory note which states as
follows:

Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY
promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the
City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00)
Pesos, Philippine Currency, together with interest . . . at the rate of SIXTEEN (16) per
cent per annum until fully paid.

A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation,
and each creditor is entitled to demand the whole obligation. 17 on the other hand, Article 2047 of the
Civil Code states:

By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In such a case the contract is called a
suretyship. (Emphasis supplied.)

While a guarantor may bind himself solidarily with the principal debtor, the liability of a
guarantor is different from that of a solidary debtor. Thus, Tolentino explains:

A guarantor who binds himself in solidum with the principal debtor under the provisions
of the second paragraph does not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-debtor and a fiador in
solidum (surety). The latter, outside of the liability he assumes to pay the debt before
the property of the principal debtor has been exhausted, retains all the other rights,
actions and benefits which pertain to him by reason of the fiansa; while a solidary co-
debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, Title
I, Book IV of the Civil Code. 18

Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations.
Under Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the
presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate
part of the debt. There is a solidary liability only when the obligation expressly so states, when the law
so provides or when the nature of the obligation so requires. 19

Because the promissory note involved in this case expressly states that the three signatories therein
are jointly and severally liable, any one, some or all of them may be proceeded against for the entire
obligation. 20 The choice is left to the solidary creditor to determine against whom he will enforce
collection. 21 Consequently, the dismissal of the case against Judge Pontanosas may not be deemed
as having discharged petitioner from liability as well. As regards Naybe, suffice it to say that the court
never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-
makers, as provided by law.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned
decision of the Court of Appeals is AFFIRMED. Costs against petitioner.

SO ORDERED.
 EN BANC

[G.R. No. L-3331. September 28, 1951.]

FRANCISCO AGCAOILI, Plaintiff-Appellant, v. JOSEFA LUENGO VDA. DE AGCAOLLI,

MELQUIADES IBAÑEZ, CESAR L. AGCAOILI and OSCAR L. AGCAOILI, Defendants-Appellees.

Santos & Rabago, for plaintiff and Appellant.

Pablo L. Meer, for defendant Melquiades Ibañez.

Simon Samaniego, for defendant Josefa L. Vda. de Agcaoili.

Ernesto C. Hidalgo, for defendants Oscar and Cesar L. Agcaoili.

SYLLABUS

1. GUARANTY AND SURETYSHIP; BENEFIT OF EXHAUSTION. — Where the promissory note states
that" Me constituyo fiador de que estos deudores pagaran la deuda arriba mencionada." The signer thereof is
only a guarantor or fiador (Article 1822, Civil Code); his liability is secondary so that all the properties of the
principals should first be exhausted before his own could be levied upon.

2. OBLIGATIONS AND CONTRACTS; JOINT AND SOLIDARY OBLIGATIONS. — When the obligations
is a solidary one, the creditor may bring his action in toto against any of the debtors obligated in solidum. If
husband and wife bound themselves jointly and severally, in case of his death her liability is independent of and
separate from her husband’s; she may be sued for he whole debt and it would be error to hold that the claim
against her as well as the claim against her husband should be made in the decedent’s estate under section 2 of
Rule 75.

3. ID.; EVIDENCE; JUDICIAL NOTICE; INTERNATIONAL LAW; SIGNING OF THE TREATY OF

PEACE. — The promissory note provided that it was to fall due "dentro de 90 dias desde que se firme el tratado
de paz de la presente guerra en el Extremo Oriente." Held: Without deciding whether this clause contemplates
the signing of the treaty of peace by the representatives of the signatory nations or the ratification thereof by
their Governments, it is a fact of which the courts may take notice that neither one nor the other had taken place
when the present suit was commenced; the plaintiff then had no cause of action. The Japanese surrender to the
allied nations on the Battleship Missouri in September 1945, which terminated the hostilities, was not a peace
treaty.

DECISION

TUASON, J.:

Josefa Luengo Vda. de Agcaoili and her husband, Romarico Agcaoili, now deceased,
executed the promissory note attached to the complaint as Annex "A", whereby they
acknowledged that they owed Francisco Agcaoili, plaintiff and Romarico’s brother,
P6,050. Melquiades Ibañez signed the instrument to guarantee that the debtors should
pay. ("Me constituyo fiador de que los esposos Romarico Agcaoili y Josefa Luengo de
Agcaoili, pagaran la deuda arriba mencionada.") The date of the instrument was
November 30, 1943 but there were allegations in the complaint that the amount was the
total of smaller sums, all of which had been obtained from the plaintiff before the
outbreak of the war.

Romarico Agcaoili having died, Cesar L. Agcaoili and Oscar L. Agcaoili as well as Josefa
Luengo Vda. de Agcaoili and Melquiades Ibañez were made defendants in this action,
filed to collect the above-mentioned sum of money. Romarico Agcaoili’s sons filed a joint
answer and Josefa Luengo Vda. de Agcaoili and Melquiades Ibañez each a separate one.

Josefa L. Vda. de Agcaoili alleged that the action was premature, in that the debt in
question was payable 90 days after the treaty of peace in the Far East was signed, and
only in the event that Romarico Agcaoili could collect his back pay from the Government
as engineer of the Budget Commission. She also pleaded the moratorium law.

Melquiades Ibañez also invoked the moratorium law, and alleged, besides, that as shown
in the document, he was only a guarantor and, as such, "his liability, at most, is
secondary, in the sense that all properties of the spouses aforenamed should be first
exhausted before he could be held liable for the said indebtedness."cralaw virtua1aw
library

Cesar L. Agcaoili and Oscar L. Agcaoili protested that they were not liable for their
father’s debt, as they had not inherited, nor did they have in their possession, any
property of the deceased. As an alternative defense, they alleged that the obligation was
not yet due "for the reason that World War II has not yet been officially terminated and
thus peace and order have not yet been fully restored."cralaw virtua1aw library

In an amended answer, Josefa L. Vda. de Agcaoili made allegations regarding the nature
of the transaction between her husband and the plaintiff, and the amount her husband
had actually received, which she said was only P1,000.00. The conclusions we have
reached on the main averments in the answers make it unnecessary, if not inexpedient,
to consider these supplementary allegations in this decision.

The Honorable Antonio Belmonte, trial Judge, found and ruled as follows:chanrob1es
virtual 1aw library

The defense regarding the moratorium law was untenable because the debt was a pre-
war obligation, and the defendants had failed to prove that they had filed war damage
claims.

The defense that the action was premature because a treaty of peace had not been
formally concluded was upheld.

Melquiades Ibañez’ plea that he was a mere guarantor was also sustained. And so was
the defense put up by Romarico’s children that they were not liable for the payment of
their father’s debt.

There was no express pronouncement as to the nature or extent of the widow’s liability
on the promissory note. But it would seem that the court below was of the opinion that
the action against her was abated by the death of her husband, as may be gathered
from the dispositive paragraph of the decision ordering the dismissal of the case and
directing the plaintiff to proceed according to Section 2 of Rule 75 of the Rules of Court.

Only the plaintiff has appealed. Not having appealed, the defendants are presumed to
have abided by the judgment which declared that the moratorium law was inapplicable
to the facts of this case.

On the character of Melquiades Ibañez’ status, the appellant contends that this
defendant is a surety. It is enough to read the contract in order to arrive at the
conclusion reached by the lower court, that Ibanez was only a guarantor. This is obvious
from the word "fiador" in and the context of Annex "A."

Fiador is defined in the Real Academia Castellana as "persona que fia a otra para la
seguridad de aquello a que esta obligada." And according to Article 1822 of the Civil
Code, "By guaranty (fianza in the Spanish text) one person binds himself to pay or
perform for a third person in case the latter should fail to do so," unless, according to
the second paragraph of the same article and Article 1137, the guarantor (fiador)
expressly binds himself in solidum with the principal debtor. (Machetti v. Hospicio de
San Jose and Fidelity & Surety Co., 43 Phil. 298; Castellvi de Higgins and Higgins v.
Sellner, 41 Phil., 142.) By the terms of the agreement, Ibañez, so far from obligating
himself primarily, stated that the debtors would pay. This being the case, Ibañez’,
liability as contended by this defendant, is secondary, so that all the properties of the
principals should first be exhausted before his own could be levied upon, not to say that
there should be a judgment against them.

With reference to the deceased’s children’s plea we gather from the appellant’s brief that
he does not question the judgment absolving these two defendants. Thus his counsel
says: "As to whether the action against the heirs of Romarico Agcaoili is premature or
not, we will not argue with the trial court, for as the heirs alleged that they did not
inherit anything, it is useless to proceed against them, and it would be just a waste of
money and added expense on the part of the plaintiff to proceed against the estate or
heirs of an insolvent."cralaw virtua1aw library

Coming to the liability of Josefa Luengo Vda. de Agcaoili we are of the opinion that the
trial court erred in holding that the claim against her as well as the claim against her
husband should be made in the decedent’s estate under section 2, Rule 75 of the Rules
of Court.

It is expressly stated in Annex "A" that the wife bound herself jointly and severally with
her husband. Her liability, then, is independent of and separate from her husband’s; and
under the law and well-established jurisprudence, when the obligation is a solidary one,
the creditor may bring his action in toto against any of the debtors obligated in solidum.
This rule is too familiar to practitioners to require citation of authorities.

The objection that the action was prematurely brought was well taken. The note
provided that it was to fall due "dentro de Noventa (90) dias desde que se firme el
tratado de Paz de la presente guerra en al Extremo Oriente." Without deciding whether
this clause contemplates the signing of the treaty of peace by the representatives of the
signatory nations or the ratification thereof by their governments, it is a fact of which
the courts may take notice that neither one nor the other had taken place when the
present suit was commenced, the plaintiff then had no cause of action. The Japanese
surrender to the allied nations on the Battleship Missouri in September, 1945, which
terminated the hostilities was not a peace treaty.

In summary, the appealed decision conforms to the law and the facts, except that the
remedy against Josefa Luengo is not by way of a claim in and against her husband’s
estate. She may be sued singly on the note Exhibit "A" in an ordinary action. This error
however does not affect the result of the decision.

With the modification and understanding above stated, the judgment will be affirmed in
all its parts, with costs against the Appellant.

Paras, C.J., Feria, Pablo, Bengzon, Padilla, Reyes, Jugo and Bautista Angelo, JJ., concur.
 SECOND DIVISION

G.R. No. 96405 June 26, 1996

BALDOMERO INCIONG, JR., petitioner,

vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.

ROMERO, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals affirming that of the
Regional Trial Court of Misamis Oriental, Branch 18, 1 which disposed of Civil Case No. 10507 for
collection of a sum of money and damages, as follows:

WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily liable

and ordered to pay to the plaintiff Philippine Bank of Communications, Cagayan de Oro
City, the amount of FIFTY THOUSAND PESOS (P50,000.00), with interest thereon from
May 5, 1983 at 16% per annum until fully paid; and 6% per annum on the total amount
due, as liquidated damages or penalty from May 5, 1983 until fully paid; plus 10% of the
total amount due for expenses of litigation and attorney's fees; and to pay the costs.

The counterclaim, as well as the cross claim, are dismissed for lack of merit.

SO ORDERED.

Petitioner's liability resulted from the promissory note in the amount of P50,000.00 which he signed
with Rene C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly
and severally liable to private respondent Philippine Bank of Communications, Cagayan de Oro City
branch. The promissory note was due on May 5, 1983.

Said due date expired without the promissors having paid their obligation. Consequently, on
November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams demanding
payment thereof.2 On December 11, 1984 private respondent also sent by registered mail a final letter
of demand to Rene C. Naybe. Since both obligors did not respond to the demands made, private
respondent filed on January 24, 1986 a complaint for collection of the sum of P50,000.00 against the
three obligors.

On November 25, 1986, the complaint was dismissed for failure of the plaintiff to prosecute the case.
However, on January 9, 1987, the lower court reconsidered the dismissal order and required the
sheriff to serve the summonses. On January 27, 1987, the lower court dismissed the case against
defendant Pantanosas as prayed for by the private respondent herein. Meanwhile, only the summons
addressed to petitioner was served as the sheriff learned that defendant Naybe had gone to Saudi
Arabia.

In his answer, petitioner alleged that sometime in January 1983, he was approached by his friend,
Rudy Campos, who told him that he was a partner of Pio Tio, the branch manager of private
respondent in Cagayan de Oro City, in the falcata logs operation business. Campos also intimated to
him that Rene C. Naybe was interested in the business and would contribute a chainsaw to the
venture. He added that, although Naybe had no money to buy the equipment, Pio Tio had assured
Naybe of the approval of a loan he would make with private respondent. Campos then persuaded
petitioner to act as a "co-maker" in the said loan. Petitioner allegedly acceded but with the
understanding that he would only be a co-maker for the loan of P50,000.00.

Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by
Campos at his office. He affixed his signature thereto but in one copy, he indicated that he bound
himself only for the amount of P5,000.00. Thus, it was by trickery, fraud and misrepresentation that
he was made liable for the amount of P50,000.00.

In the aforementioned decision of the lower court, it noted that the typewritten figure "-- 50,000 --"
clearly appears directly below the admitted signature of the petitioner in the promissory note. 3 Hence,
the latter's uncorroborated testimony on his limited liability cannot prevail over the presumed
regularity and fairness of the transaction, under Sec. 5 (q) of Rule 131. The lower court added that it
was "rather odd" for petitioner to have indicated in a copy and not in the original, of the promissory
note, his supposed obligation in the amount of P5,000.00 only. Finally, the lower court held that, even
granting that said limited amount had actually been agreed upon, the same would have been merely
collateral between him and Naybe and, therefore, not binding upon the private respondent as
creditor-bank.

The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor
consultant who was supposed to take due care of his concerns, and that, on the witness stand, Pio
Tio denied having participated in the alleged business venture although he knew for a fact that the
falcata logs operation was encouraged by the bank for its export potential.

Petitioner appealed the said decision to the Court of Appeals which, in its decision of August 31,
1990, affirmed that of the lower court. His motion for reconsideration of the said decision having been
denied, he filed the instant petition for review on certiorari.

On February 6, 1991, the Court denied the petition for failure of petitioner to comply with the Rules of
Court and paragraph 2 of Circular
No. 1-88, and to sufficiently show that respondent court had committed any reversible error in its
questioned decision.4 His motion for the reconsideration of the denial of his petition was likewise
denied with finality in the Resolution of April 24, 1991. 5 Thereafter, petitioner filed a motion for leave
to file a second motion for reconsideration which, in the Resolution of May 27, 1991, the Court
denied. In the same Resolution, the Court ordered the entry of judgment in this case. 6

Unfazed, petitioner filed a notion for leave to file a motion for clarification. In the latter motion, he
asserted that he had attached Registry Receipt No. 3268 to page 14 of the petition in compliance with
Circular No. 1-88. Thus, on August 7, 1991, the Court granted his prayer that his petition be given
due course and reinstated the same.7

Nonetheless, we find the petition unmeritorious.

Annexed to the petition is a copy of an affidavit executed on May 3, 1988, or after the rendition of the
decision of the lower court, by Gregorio Pantanosas, Jr., an MTCC judge and petitioner's co-maker in
the promissory note. It supports petitioner's allegation that they were induced to sign the promissory
note on the belief that it was only for P5,000.00, adding that it was Campos who caused the amount
of the loan to be increased to P50,000.00.
The affidavit is clearly intended to buttress petitioner's contention in the instant petition that the Court
of Appeals should have declared the promissory note null and void on the following grounds: (a) the
promissory note was signed in the office of Judge Pantanosas, outside the premises of the bank; (b)
the loan was incurred for the purpose of buying a second-hand chainsaw which cost only P5,000.00;
(c) even a new chainsaw would cost only P27,500.00; (d) the loan was not approved by the board or
credit committee which was the practice, as it exceeded P5,000.00; (e) the loan had no collateral; (f)
petitioner and Judge Pantanosas were not present at the time the loan was released in contravention
of the bank practice, and (g) notices of default are sent simultaneously and separately but no notice
was validly sent to him.8 Finally, petitioner contends that in signing the promissory note, his consent
was vitiated by fraud as, contrary to their agreement that the loan was only for the amount of
P5,000.00, the promissory note stated the amount of P50,000.00.

The above-stated points are clearly factual. Petitioner is to be reminded of the basic rule that this
Court is not a trier of facts. Having lost the chance to fully ventilate his factual claims below, petitioner
may no longer be accorded the same opportunity in the absence of grave abuse of discretion on the
part of the court below. Had he presented Judge Pantanosas affidavit before the lower court, it would
have strengthened his claim that the promissory note did not reflect the correct amount of the loan.

Nor is there merit in petitioner's assertion that since the promissory note "is not a public deed with the
formalities prescribed by law but . . . a mere commercial paper which does not bear the signature
of . . . attesting witnesses," parol evidence may "overcome" the contents of the promissory note. 9 The
first paragraph of the parol evidence rule 10 states:

When the terms of an agreement have been reduced to writing, it is considered as

containing all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written
agreement.

Clearly, the rule does not specify that the written agreement be a public document.

What is required is that the agreement be in writing as the rule is in fact founded on "long experience
that written evidence is so much more certain and accurate than that which rests in fleeting memory
only, that it would be unsafe, when parties have expressed the terms of their contract in writing, to
admit weaker evidence to control and vary the stronger and to show that the
parties intended a different contract from that expressed in the writing signed by them." 11 Thus, for
the parol evidence rule to apply, a written contract need not be in any particular form, or be signed by
both parties. 12 As a general rule, bills, notes and other instruments of a similar nature are not subject
to be varied or contradicted by parol or extrinsic evidence. 13

By alleging fraud in his answer, 14 petitioner was actually in the right direction towards proving that he
and his co-makers agreed to a loan of P5,000.00 only considering that, where a parol
contemporaneous agreement was the inducing and moving cause of the written contract, it may be
shown by parol evidence. 15 However, fraud must be established by clear and convincing evidence,
mere preponderance of evidence, not even being adequate. 16 Petitioner's attempt to prove fraud
must, therefore, fail as it was evidenced only by his own uncorroborated and, expectedly, self-serving
testimony.

Petitioner also argues that the dismissal of the complaint against Naybe, the principal debtor, and
against Pantanosas, his co-maker, constituted a release of his obligation, especially because the
dismissal of the case against Pantanosas was upon the motion of private respondent itself. He cites
as basis for his argument, Article 2080 of the Civil Code which provides that:
 The guarantors, even though they be solidary, are released from their obligation
whenever by some act of the creditor, they cannot be subrogated to the rights,
mortgages, and preferences of the latter.

It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not
as a guarantor. This is patent even from the first sentence of the promissory note which states as
follows:

Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY
promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the
City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00)
Pesos, Philippine Currency, together with interest . . . at the rate of SIXTEEN (16) per
cent per annum until fully paid.

A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation,
and each creditor is entitled to demand the whole obligation. 17 on the other hand, Article 2047 of the
Civil Code states:

By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In such a case the contract is called a
suretyship. (Emphasis supplied.)

While a guarantor may bind himself solidarily with the principal debtor, the liability of a
guarantor is different from that of a solidary debtor. Thus, Tolentino explains:

A guarantor who binds himself in solidum with the principal debtor under the provisions
of the second paragraph does not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-debtor and a fiador in
solidum (surety). The latter, outside of the liability he assumes to pay the debt before
the property of the principal debtor has been exhausted, retains all the other rights,
actions and benefits which pertain to him by reason of the fiansa; while a solidary co-
debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, Title
I, Book IV of the Civil Code. 18

Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations.
Under Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the
presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate
part of the debt. There is a solidary liability only when the obligation expressly so states, when the law
so provides or when the nature of the obligation so requires. 19

Because the promissory note involved in this case expressly states that the three signatories therein
are jointly and severally liable, any one, some or all of them may be proceeded against for the entire
obligation. 20 The choice is left to the solidary creditor to determine against whom he will enforce
collection. 21 Consequently, the dismissal of the case against Judge Pontanosas may not be deemed
as having discharged petitioner from liability as well. As regards Naybe, suffice it to say that the court
never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-
makers, as provided by law.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned
decision of the Court of Appeals is AFFIRMED. Costs against petitioner.

SO ORDERED
 EN BANC

G.R. No. L-29736             February 28, 1929

PHILIPPINE TRUST CO., plaintiff-appellee,

vs.
LUCIO ECHAUS TAN SIUA, defendant-appellant.

Soriano and Nepomuceno for appellant.

Block, Johnston and Greenbaum for appellee.

STREET, J.:

This action was instituted in the Court of First Instance of Occidental Negros by the Philippine Trust
Co., hereinafter called the bank, for the purpose of foreclosing a mortgage on five parcels of real
property belonging to the appellant, Lucio Echaus Tan Siua, given as security for a debt owing to the
bank by the Visayan General Supply Co., Inc., hereinafter referred to as the debtor. Upon hearing the
cause the trial judge entered judgment declaring the defendant herein to be indebted to the bank in
the amount of P53,741.82, with interest at the rate of P10 per cent per annum, to be capitalized
monthly, also declaring the defendant to be indebted to the bank in the sum of P4,000 for stipulated
attorney's fee, with the requirement that said sums be deposited in court within three months from the
date of the judgment, in default of which the mortagaged property to be sold in ordinary course of
foreclosure; and with further provision that execution should issue against the defendant for any
balance of the aforesaid indebtedness which should not be satisfied from the proceeds of the sale.
From this judgment the defendant, Lucio Echaus Tan Siua, appealed.

It appears that by agreement dated May 18, 1923, the plaintiff bank granted to the Visayan General
Supply Co., Inc., credit in current account to the extent of P40,000, which credit was, in ordinary
course, utilized by the debtor party. Among the stipulations of this contract material to be here noted,
we find the following, namely: First, that the Visayan General Supply Co., Inc., should pay interest on
the average daily debit balances of its said current account at the rate of 10 per cent annum, or at
such other time as the party of the second part might deem expedient, and the amount thereof
debited in said current account; secondly, it was agreed that the debit balance shown in said current
account by the books of the bank should be taken and held to be the true and correct amount owing
by the debtor; thirdly, the debtor party agreed to furnish for the payment of any sum advanced by the
bank to debtor.

Pursuant, apparently, to the agreement of the debtor to furnish security for said indebtedness, the
defendant, Lucio Echaus Tan Siua, on August 2, 1923, mortgaged to the bank the five parcels of land
which are the subject of this proceeding for the purpose of securing the aforesaid indebtedness.

From this mortgage we reproduce two provisions which are partinent to the present contoversy, as
follows:

This mortgage is given as security for the payment on demand of a credit in current accoount
in the sum of forty thousand pesos (P40,000), Philippine currency, granted by the mortgagee
to the Visayan General Supply Co., Inc., together with interest on the average daily debit
balances of said current account at the rate of ten per cent (10%) per annum, payable
quarterly, all in accordance with the terms and conditions of a certain agreement for the credit
in current account entered into by and between the said Visayan General Supply Company,
 Inc., under date of May 18, 1923, a copy of which said agreement is attached hereto, marked
A, and made a part hereof.

xxx     xxx     xxx

The conditions of this obligation are such that if the mortgagor shall well and truly pay, or
caused to be paid, any sum or sums that may be done to the mortgagee by the Visayan
General Supply Company, Inc., under and by virtue of the terms of that certain agreement for
credit in current account entered into by between the said Visayan General Supply Company,
Inc., and the Philippine Trust Company, under date of May 18, 1923, a copy of said agreement
is attached hereto, marked A, and made a part hereof; and shall comply with all terms and
conditions set forth in this mortgage, then this obligation shall be void; otherwise it shall remain
in full force and effect.

It will be observed that in the first of the two paragraphs above quoted the credit in current account
granted by the bank is described as bearing interest at the rate of 10 per centum per annum, payable
"quarterly;" and from this the appellant contends, with some plausibility, that the interest due to the
bank cannot be capitalized monthly but only quarterly. On the part of the appellee it is claimed that
the word "quarterly" was used in the mortgage by manifest error and that the word "quarterly" should
be read "montly," as stated in the contract of May 18, 1923.

We are of the opinion that the position taken by the appellee on this point is correct and that the error
is manifest and apparent from the mortgage itself in relation with the principal contract. The reasons
that conduct us to this conclusion are these: First, the mortgage was evidently given pursuant to that
clause of the original contract by which the debtor had agreed furnish security to the bank for any
sum for which the debtor might become obligated to the bank under the terms of the original
agreement; secondly, the paragraph of the mortgage in which the word "quarterly" is used explicitly
states that the terms and conditions" of the original agreement; thirdly, the same paragraph of the
mortgage makes express reference to the original agreement for the granting of credit in current
account by the bank to the debtor and said contract is incorporated in the mortgage by reference;
fourthly, in the defeasance clause of the mortgage, which is the second of the two paragraphs above
qouted from the mortgage, the debt secured is not described as being one for the payment of interest
quarterly, but the original contract is again referred to and incorporated in the said clause without
specifying how the interest should be paid.

From this accumulation of circumstances the conclusion is irresistible that a mistake was made in
using the word "quarterly" in the mortgage as descriptive of the oblihgation to pay interest on the
principal debt; and inasmuch as the original contract is incorporated to give effect to the mortgage in
the sense evidently intended by the parties, that is to say, that the interest on the principal debt must
be paid in accordance with the terms of the original contract. Under the original contract it is clear that
the interest was to be debited in current account and capitalized monthly.

Error is assigned to the action of the trial court in allowing the stipulated attorney's fee of P4,000. In
view of the fact that this fee continues less than 7 ½ per cent of the amount which the court found to
be due, we think that the stipulation was reasonable and that fee was properly incorporated in the
judgment.

The last error assigned is directed to that feature of the appealed decision in which the trial court
ordered that execution should issue personally against the defendant for any deficiency that might
result from the failure of the mortgaged property to bring the full amount of the indebtedness due to
the creditor. it is admitted by the appellee that this feature of the judgment must be eliminated, since
the defendant did not assume personal liability for the debt but only mortgaged his property in
security therefor.

From what has been said it follows that that portion of the dispositive part of the appealed judgment
which purports to make the defendant liable for any deficiency must be eliminated.

With this modification the judgment appealed from is affirmed, without costs. So ordered.
 EN BANC

[G.R. No. 30247. March 11, 1929.]

HOSPICIO DE SAN JOSE, represented by the Roman Catholic Archbishop of

Manila, Plaintiff-Appellee, v. THE FIDELITY AND SURETY COMPANY OF THE
PHILIPPINE ISLANDS, Defendant-Appellant.

Ross, Lawrence & Selph and Ohnick & McFie, for Appellant.

Feria & La O and Ramon R. San Jose, for Appellee.

SYLLABUS

1. PRINCIPAL. AND SURETY; LEASE OF SERVICES; LIABILITY OF SURETY. — Inasmuch

as the lessee did not offer to guarantee the fulfillment of his obligation to complete the
work within a certain period, and as the surety did not guarantee the fulfillment of said
obligation, the extension of said period by the owner of the work without the surety’s
consent, does not relieve the latter of the obligation contracted by it under its bond,
which refers to the plans and specifications of the work.

2. ID.; ID.; ID.; DEFENSE SET UP FOR FIRST TIME IN SECOND INSTANCE. — As the
defendant company did not allege in its answer to the complaint, as a special defense,
that it was discharged from the obligation contracted by it by virtue of the bond, by the
premature payment made by the plaintiff to the principal obligor, of the total price of the
work, the defendant cannot make use of such defense for the first time in this instance.

3. ID.; ID.; PRESCRIPTION OF ACTION. — The plaintiff having presented a cross-

complaint in due time for the recovery from the defendant company of the value of the
bond, and this court having reserved to it the right to bring the instant action when said
cross-complaint was dismissed as premature, the said plaintiff’s action has not
prescribed.

DECISION

VILLA-REAL, J.:

This appeal is taken by the defendant, the Fidelity and Surety Company of the Philippine
Islands from the judgment of the Court of First Instance of Manila ordering it to pay the
plaintiff Hospicio de San Jose, represented by the Roman Catholic Archbishop of Manila,
the amount of P12,800, with legal interest from December 23, 1927, the date on which
the complaint was filed, with the costs.

In support of the appeal, the appellant assigns the following alleged errors as committed
by the court below in its judgment, to wit:jgc:chanrobles.com.ph
"1. The lower court erred in awarding judgment upon the stipulated facts, in favor of
plaintiff and against defendant.

"2. The lower court erred in refusing to absolve defendant from plaintiff’s complaint in
accordance with the prayer of defendant’s answer.

"3. The lower court erred in holding and concluding as a matter of law, upon the
stipulated facts that the defendant was not relieved from its guaranty.

"4. The lower court erred in concluding that plaintiff’s action had not prescribed.

"5. The lower court erred in denying defendant’s motion for a new trial." When the case
came up for trial the parties thereto submitted it to the trial court for judgment upon the
following agreed statement of facts:jgc:chanrobles.com.ph

"AGREED STATEMENT OF FACTS

"Come now the parties, plaintiff and defendant, in the above entitled case, through their
respective counsel, and to this Honorable Court respectfully submit the following facts to
which they have agreed:jgc:chanrobles.com.ph

"I. That the plaintiff is a Catholic beneficent institution, duly organized and existing in
the City of Manila, Philippine Islands and represented by the Roman Catholic Archbishop
of Manila, a corporation sole duly organized and existing under and by virtue of the laws
of the Philippine Islands; and the defendant is a corporation also organized and existing
under and by authority of the laws of the Philippine Islands, with its principal place of
business situated in the said City of Manila, Philippine Islands, and engaged in surety
business therein:jgc:chanrobles.com.ph

"II. That one by the name of Romulo Machetti, who had been a building contractor in the
City of Manila, had agreed with the plaintiff by virtue of a written contract executed on
July 17, 1916, to build for the latter a concrete building composed of several ’accesorias’
to be designated by Nos. 97 and 121 on Calle Rosario, City of Manila, which building was
to be constructed in accordance with the plans and specifications set forth in the
contract above mentioned, and under the technical supervision of the deceased Don
Arcadio Arellano and Arellano Brothers, architects. The contract in question is attached
hereto and made a part hereof as Exhibit A.

"III. That it was stipulated in Exhibit A the following:jgc:chanrobles.com.ph

"‘III. Mr. Romulo Machetti guarantees the exact and faithful fulfillment of the obligations
contracted by him in the aforementioned "specifications" with the security of the
"Fidelity and Surety Co. of the Philippine Islands," up to the amount of twelve thousand
eight hundred Philippine pesos (P12,800); it being understood that if Mr. Romulo
Machetti well and faithfully fulfills the obligations contracted by him in the specifications
and plans attached hereto, the guarantees herein given shall become null and void;
otherwise, they shall continue in full force and effect.

‘ "IV. That the defendant guaranteed in manner following the faithful compliance by
Romulo Machetti with the terms, conditions and stipulations set forth in Exhibit A.

"‘MANILA, July 15, 1916

"‘For value received we hereby guarantee compliance with the terms and conditions as
outlined in the above contract.

"‘FIDELITY & SURETY Co. OF THE

PHILIPPINE ISLANDS

(Sgd.)" ’OTTO VORSTER

"‘Vice-President

"‘Attest:

(Sgd.)" ’WM. J. O’DONOVAN

"‘Secretary-Treasurer’

"Said guaranty which appears at the foot of Exhibit A is referred to and made a part
hereof as Exhibit A-l.

"V. That thereafter, and on or about the 19th day of October, 1916, plaintiff and said
Romulo Machetti entered into an additional contract in writing, which said contract is
hereto attached and made a part hereof as Exhibit B, by virtue of which the said
Machetti undertook and agreed to do and perform work and construction additional to
that specified in Exhibit A, which consisted of building in connection with said
’accesorias’ certain ’bodegas’ at the rear part of the ’accesorias’ to be erected or
constructed under the contract Exhibit A, the same to be under the same supervision of
the deceased Don Arcadio Arellano and Arellano Brothers, the architects
aforementioned; the defendant above named did not become a party to said additional
agreement Exhibit B as guarantor or otherwise.

"VI. That under the provisions of said contract Exhibit A, said Romulo Machetti had
undertaken and agreed to complete the construction of said ’accesorias’ and deliver the
same to plaintiff within the period of 150 working days, to be computed from the date of
the said contract, that is from July 17,1916, and under the provisions of said agreement
Exhibit B had undertaken to complete the said ’bodega’ and deliver the same to plaintiff
within one month after the date stipulated by the parties for the completion and delivery
of the ’accesorias’ as provided in Exhibit A.

"VII. That subsequent to the execution of said Exhibit B and during the course of the
construction of said ’accesorias’ and ’bodega’ by said Machetti, he, the said Machetti,
demanded of plaintiff an extension of 25 days within which to complete and deliver the
said ’accesorias’ and ’bodegas’ in accordance with the terms and provisions of said
contracts, on account of delay encountered in transporting and delivering sand and
gravel to the construction premises, by reason of repair work being conducted by the
Manila Electric Company on Calle Rosario in front of the ’accesoria’ and ’bodega’
premises; that although plaintiff considered that said Machetti could not be delayed
thereby for more than ten or twelve days, nevertheless acceded to the demand of said
Machetti and agreed to said extension, in so far as the same pertained to the
’accesorias’ under the terms, conditions and provisions of said Exhibit A; that said
’accesorias’ were not completed in accordance with the plans and specifications of
Exhibit A or delivered to plaintiff so completed on the 16th day of February 1917, in
accordance with the provisions of said contract Exhibit A as extended; that the ’bodegas’
were not completed in accordance with the plans and specifications of said contract
Exhibit B or delivered to plaintiff on the 16th day of March, 1917, in accordance with the
provisions of said Exhibit B; that in truth and in fact, as was discovered by plaintiff
during the month of April, 1917, when the City Engineer went to inspect the work, prior
to the issuance of his final certificate, said ’accesorias’ and said ’bodegas’ were defective
and not in accordance with the plans and specifications of said Exhibits A and B, and
said Romulo Machetti in neglecting to complete and deliver said ’accesorias’ and
’bodegas’ in accordance with said contracts Exhibit A as extended and Exhibit B, acted in
bad faith; that the construction works were so faulty that the City Engineer thereafter
ordered the destruction of those parts thereon in contravention of the plans and
specifications, and ordered the reconstruction of same in accordance with said plans and
specifications.

"VIII. That said extension of 25 days’ time granted by plaintiff to said Romulo Machetti
to perform the conditions and obligations of Exhibit A on his part to be done and
performed was without the consent of defendant.

"IX. That during the month of April, 1917, the plaintiff herein secured the services of one
William Odom, a contractor, to complete the reconstruction of said ’accesorias’ and
’bodegas’ in accordance with the plans and specifications of said contracts; that said
’accesorias’ were finally completed and delivered unto plaintiff by said contractor,
William Odom, 475 days from February 16, 1917, the last day as stipulated in Exhibit A
as extended, that is to say, on the 8th day of June, 1918; that the ’bodegas’ were
completed and delivered by said William Odom unto plaintiff 475 days from March 16,
1917, the last day stipulated in Exhibit B, that is to say, on July 8th, 1918.

"X. That from time to time during the course of construction under the provisions of said
contract Exhibit A as extended, plaintiff made payments to said Romulo Machetti
thereunder, and prior to the expiration of the period for the completion of said contract
Exhibit A as extended, plaintiff, without the knowledge of defendant, paid unto said
Romulo Machetti the full construction price; that from time to time during the
construction under the provisions of Exhibit B, plaintiff made various payments unto
Romulo Machetti, and on the 16th day of March 1917, had completed all payments to be
made by said plaintiff, except the sum of P4,976.08; That all of said payments were
made by plaintiff under the impression and belief that the construction works were done
in accordance with the plans and specifications set forth in Exhibits A and B on account
of the certificates issued by the supervising architects.

"XI. That on February 27, 1918, Romulo Machetti was declared insolvent by this
Honorable Court in the matter of the Insolvency of Romulo Machetti, Case No. 15867.
"XII. That on November 18, 1922, the plaintiff filed a claim in the above mentioned
Insolvency case No. 15867, to recover the following sums, to wit:

1. For damages suffered by the plaintiff due to

expenses incurred in correcting the faulty

work done by Romulo Machetti on the

‘accesorias’ described in contract Exhibit A,

the correction having been done by Mr. Odom

another contractor, and which correction was

necessary on account of the negligence, malice

and bad faith of said Romulo Machetti whose

workmanship was not of the standard required P52,669.98

For damages suffered by the plaintiff due to

expenses incurred in correcting the faulty work

done by Romulo Machetti on the ’bodegas’

described in Exhibit B, the correction having

been done by Mr. Odom, another contractor,

and which correction was necessary on account

of the negligence, malice and bad faith of said

Romulo Machetti whose workmanship was not

of the standard required 4,672.39

————

Total 57, 342.37

========

2. For penalties for the number of days delayed in

accordance with the conditions set forth in

Exhibits A and B, as follows:chanrob1es virtual 1aw library

For 475 days from February 16, 1917, to June 8,

1918, at the rate of P150 a day 71,250.00

For 475 days from March 16, 1917, to July 8,

1918, at the rate of P50 a day 23,750.00

————

95,000.00

Minus P28,000 received as part rental 28,000.00

————

67,000.00

"XIII. That on July 1, 1926, this Honorable Court rendered judgment approving or
allowing the above claim, the dispositive part of which reads thus:jgc:chanrobles.com.ph

"‘Therefore the claim filed by the Hospicio de San Jose is allowed as an ordinary claim
against the insolvent estate of Romulo Machetti for the sum of P57,342.37 as damages
suffered by said claimant by reason of the necessity for reconstructing and completing
the faulty work done by said Romulo Machetti on the "accesorias" and "bodegas" of the
claimant, and for the sum of P67,000 as the net amount due the claimant under penalty
clauses of the contracts, Exhibits A and B with legal interest on said sums from the filing
of the claim and for costs.’

"XIV. That the opponents to the above claim appealed to the Supreme Court, but on
March 31, 1927, the said Supreme Court affirmed the above quoted judgment rendered
by this Honorable Court.

"XV. That on September 1, 1927, the assignee of the said Insolvency case No. 15867,
submitted his final account and project of distribution wherein the sum corresponding to
the claim of the plaintiff amounted to P4,391.37 only, thereby leaving an unpaid balance
of P155,428.56.

"XVI. That on September 27,1927, this Honorable Court approved the said final account
and project of distribution, and the plaintiff acknowledges the receipt from the assignee
in the insolvency case No. 15867, of the said sum of P4,391.37.

"XVII. That the plaintiff was and is unable to recover from the insolvent Romulo Machetti
the unpaid balance of P155,428.56, in view of the inability to pay by said Romulo
Machetti, who has no visible property in the Philippine Islands subject to execution.

"XVIII. That prior to the filing by the plaintiff of its claim hereinabove referred to, in the
insolvency case No. 15867 that is, on May 28, 1917, the said Romulo Machetti brought
an action in this Honorable Court against the herein plaintiff and defendant, entitled
’Romulo Machetti v. Hospicio de San Jose etc. and Fidelity & Surety Co. of the Philippine
Islands,’ civil case No. 15150, and in said action the herein plaintiff filed a cross-
complaint on February 7, 1920, against the herein defendant.

"XIX. That on April 30, 1920, this Honorable Court rendered judgment in said case No.
15150 in favor of the herein plaintiff and against the herein defendant, but on appeal the
Supreme Court reversed said judgment decreeing, among other things, the
following:jgc:chanrobles.com.ph

"‘The Fidelity and Surety Company having bound itself to pay only in the event its
principal, Machetti, cannot pay it follows that it cannot be compelled to pay until it is
shown that Machetti is unable to pay. Such inability may be proven by the return of a
writ of execution unsatisfied or by other means, but is not sufficiently established by the
mere fact that he has been declared insolvent in insolvency proceedings under our
statutes, in which the extent of the insolvent’s inability to pay is not determined until the
final liquidation of his estate.

"‘The judgment appealed from is therefore reversed without costs and without prejudice
to such right of action as the cross-complainant, the Hospicio de San Jose, may have
after exhausting its remedy against the plaintiff Machetti. So ordered.’ (See 43 Phil.,
297, 301.)

"XX. That this action was instituted by plaintiff against defendant on the 23rd day of
December 1927 to recover the sum of P12,800, the amount specified as the bond of
defendant, in view of said defendant’s refusal and failure to pay the said sum, despite
the repeated demands made therefor by the plaintiff.

"XXI. That while plaintiff concedes the truth of the statements set forth in paragraph X
hereinabove, it objects to the same as evidence in this case, upon the ground and for
the reason that the same are immaterial and irrelevant to the issues of this case as well
as the same have already been discussed and decided by the court in the insolvency
case No. 15867, wherein the court ruled that, although payments were made by the
plaintiff to said Machetti for the work done under the contracts Exhibits A and B, said
payments did not relieve said Machetti from responsibility, due to his failure to comply
with the plans and specifications of Exhibits A and B and refusal to complete the
construction work on time, and as a consequence of which plaintiff maintains that such
payments cannot be considered in so far as the liability of defendant under Exhibit A-I is
concerned; that plaintiff sustains that the statements set forth in paragraph X
hereinabove can no longer be the object of discussion in this case because the
responsibility of said Machetti is already established and determined by the court in its
judgment rendered in Case No. 15867; that plaintiff further objects to the materiality
and relevancy of the statements set forth in paragraph X hereinabove because
defendant did not set up the same as special defense in its answer; that an exception
may be reserved to either party affected by an adverse ruling of the court upon
plaintiff’s objection, and in case said objection be overruled, it is agreed that this court
may consider the findings of the Supreme Court in connection with the claim of the
plaintiff filed in the insolvency case No. 16867, as the issues are raised by the briefs and
memoranda of the parties.

"That while defendant concedes the truth of the statements set forth in paragraphs
eighteen and nineteen hereinabove, it objects to the same as evidence in this case, upon
the ground and for the reason that the same are immaterial and irrelevant to the issues
of this case; that an exception may be reserved to either party affected by an adverse
ruling of the court upon said objection.

"Wherefore, the parties hereto, having agreed to the above statement of facts, now
respectfully request this Honorable Court to decide upon the questions of law arising
from said agreed statement of facts, without the introduction of further evidence.

"Manila, May 18, 1928.

FERIA & LA O

"By: (Sgd.) RAMON SAN JOSE

"Attorneys for plaintiff

"Ross, LAWRENCE & SELPH and-

OHNICK & McFIE

"By: (Sgd.) BENJ. S. OHNICK

"Attorneys for the defendant"

The questions to decide in this appeal are as follows: 1. Did the 25 days’ extension of
the period fixed for the completion of the work granted by the Hospicio de San Jose (St.
Joseph’s Asylum) to Romulo Machetti without the consent of the latter’s surety, the
Fidelity and Surety Company of the Philippine Islands, extinguish said surety’s
responsibility? 2. Did the payment made by the Hospicio de San Jose to the contractor
Romulo Machetti, of the total price of the work before the expiration of the term fixed for
the completion thereof, without the knowledge of the surety, the Fidelity and Surety
Company of the Philippine Islands, relieve the latter from all liability? 3. Has plaintiff’s
action to recover the amount of the bond from the defendant prescribed?

With respect to the first question, the relevant portion of the contract of lease of
services, Exhibit A, reads as follows:chanrob1es virtual 1aw library

x       x       x

"III. Mr. Romulo Machetti guarantees the exact and faithful fulfillment of the obligations
contracted by him in the aforementioned ’specifications’ with the security of the ’Fidelity
and Surety Co. of the Philippine Islands,’ up to the amount of twelve thousand eight
hundred Philippine pesos (P12,800); it being understood that if Mr. Romulo Machetti well
and faithfully fulfills the obligations contracted by him in the specifications and plans
attached hereto, the guarantees herein given shall become null and void; otherwise,
they shall continue in full force and effect."cralaw virtua1aw library

At the foot of said contract, the following guarantee appears:jgc:chanrobles.com.ph

"MANILA, July 15, 1916

"For value received we hereby guarantee compliance with the terms and conditions as
outlined in the above contract.

"FIDELITY & SURETY Co. OF ,THE

PHILIPPINE ISLANDS

(Sgd.) "OTTO VORSTER

"Vice-President

"Attest:chanrob1es virtual 1aw library

(Sgd.) "WM. J. O’DONOVAN

"Secretary-Treasurer"

It will be seen that the contractor Romulo Machetti only guaranteed in contract Exhibit
A, the exact and faithful performance of the obligations contracted by him in accordance
with the plans and specifications, offering the security of the Fidelity and Surety
Company of the Philippine Islands. The plans and sheet of conditions or specifications do
not state the term within which the work must be completed. Inasmuch as suretyship is
an accessory contract, and the surety cannot bind himself for more than the principal
debtor (art. 1826, Civil Code), and as Romulo Machetti did not offer to give a bond for
the exact and faithful fulfillment of the obligation to complete the work within 150
working days, the Fidelity and Surety Company of the Philippine Islands, in consenting
to be surety for him, did not bind, and could not have bound itself, to the exact and
faithful fulfillment of said obligation.

Therefore, the 25 days’ extension granted by the Hospicio de San Jose to Romulo
Machetti within which to complete the work, without the consent of the Fidelity and
Surety Company of the Philippine Islands, did not extinguish the latter’s liability,
inasmuch as the obligation it assumed did not extend to answering for the completion of
the work within the period stipulated in the contract of lease of services.

With respect to the second question, the surety company not having alleged as a special
defence, in its answer to the complaint, the fact of the premature payment, and the
plaintiff company having objected in the agreed statement of facts to the admission of
the allegation of said premature payment as evidence, the defendant company cannot
make use of said defence in this instance.

"As a general rule, the surety must specially plead that he has been discharged by . . .
the relinquishment or loss of securities by plaintiff, . . . . If the surety sets up a
discharge by reason of some act of plaintiff which injured him, he must allege the facts
which caused such injury, and show the consequent damage. . . . and a plea that the
principal has been released must be certain and definite. . . ." (32 Cyc., 130-131.)

As to the third question, while it is true that the plaintiff’s right of action against the
defendant arose from the time the principal obligor failed to fulfill the obligation
guaranteed by said surety, which non-fulfillment took place on February 16,1917, said
surety having presented a cross-complaint demanding the payment of the value of the
bond in the case of Machetti v. Hospicio de San Jose and Fidelity and Surety Company of
the Philippine Islands (43 Phil., 297), dated February 7, 1920, that is, within the 10
years fixed by section 43 of the Code of Civil Procedure for the prescription of actions
arising from a written contract, and this court having, in reversing the lower court’s
judgment which adjudicated said sum to the Hospicio de San Jose, reserved to the latter
the right to bring the proper action after having exhausted all the remedies against the
principal obligor, Romulo Machetti, then the action of the plaintiff against the defendant
for the execution of the bond given by the latter in favor of the former, has not
prescribed.

For the foregoing considerations, we are of opinion and so hold: 1. That as the lessee of
services, Romulo Machetti, did not offer to guarantee the fulfillment of his obligation to
complete the work within the 150 working days, and as the Fidelity and Surety Company
of the Philippine Islands did not guarantee the fulfillment of said obligation, the
extension of said period by the owner of the work, the Hospicio de San Jose, without the
surety’s consent, does not relieve the latter of the obligation contracted by it under its
bond, which refers to the plans and specifications of the work; 2. As the defendant did
not allege in its answer to the complaint, as a special defence, that it was discharged
from the obligation contracted by it by virtue of the bond, by the premature payment
made by the Hospicio de San Jose to the principal obligor, Romulo Machetti, of the total
price of the work, the defendant cannot set up such defense for the first time in this
instance; and 3. The plaintiff having presented a cross-complaint in due time for the
recovery from the defendant company, of the value of the bond, and this court having
reserved to it the right to bring the instant action, when said cross-complaint was
dismissed as premature, the said plaintiff’s action has not prescribed.

By virtue whereof, and not finding any error in the dispositive portion of the judgment,
the latter is hereby affirmed in all its parts, with costs against the appellant. So ordered.
 EN BANC

G.R. No. L-25553             January 31, 1969

NATIONAL MARKETING CORPORATION, plaintiff-appellee,

vs.
GABINO MARQUEZ, ET AL., defendants,
PLARIDEL SURETY & INSURANCE COMPANY, defendant-appellant.

Benjamin M. Tan and Jose S. Valencia for plaintiff-appellee.

Carlos, Madarang, Carballo and Valdez for defendant-appellant.
Gabino Marquez for and in his own behalf as defendant.

REYES, J.B.L., J.:

  This Court is prayed by appellant, Plaridel Surety & Insurance Company, to reverse the decision of
the Court of First Instance of Manila condemning it to pay to the appellee, National Marketing
Corporation, the principal sum of P10,000.00, plus P9,990.91 in accrued interest up to 1 November
1964, and interest thereafter at 7% per annum on the principal and 6% on the accrued interest,
together with 10% on the total amount due by way of attorney's fees and costs.

  The appeal being made directly to this Supreme Court, the facts found by the court below must be
held binding upon this appellant. Such facts are stated in the appealed decision to be as follows
(Record on Appeal, pages 18-21):

  From the evidence thus presented, it appears that under the provisions of Executive Order
No. 350, Series of 1950, all the properties, rights, obligations, and contracts of the Philippine
Relief and Trade Rehabilitation Administration (PRATRA) had been transferred to the Price
Stabilization Corporation (PRISCO). Also by virtue of Republic Act No. 1345, as amended, all
rights and contracts of the PRISCO involving real estate, fixed assets and stock in trade had
been assumed by herein plaintiff, the NAMARCO.

  It also appears that on June 24, 1950, defendant Marquez secured from the PRATRA one (1)
tractor and one (1) rice thresher, with a total value of P20,000.00 for which the said defendant
paid thereon the sum of P8,000.00 as down payment, thereby leaving a balance of
P12,000.00, as evidenced by an invoice marked as Exhibit A.

  On the same date, defendant Marquez executed a promissory note in the amount of
P12,000.00 payable in installments commencing from June 24, 1951 to June 25, 1952, with
interest thereon at the rate of 7% per annum from June 24, 1950 until finally paid, which
promissory note is marked in this case as Exhibit B.

  It is further stipulated in the aforesaid promissory note that in the event of failure of the said
defendant to pay the principal obligation or interest thereon when due and payable, an
additional sum equivalent to 10% of the total amount due shall be paid as attorney's fees.

  To guarantee full compliance with the aforementioned obligation, defendant Marquez, as

principal, and defendant Plaridel Surety & Insurance Company, as surety, executed Guaranty
Bond P. S. & I. No. 4220 in favor of the PRATRA, wherein they bound themselves, jointly and
severally, to pay the said amount of P12,000.00 (Exhibit C).
   In this guaranty bond, the surety expressly waives its right to demand payment and notice of
non-payment and agrees that the liabilities of this guaranty shall be direct and immediate and
not contingent upon the exhaustion by the PRATRA of whatever remedies it may have against
the principal, and that the same shall be valid and continuous until the obligation so
guaranteed is paid in full (Exhibit C-1).

  After making partial payments in the sums of P2,870.19 and P326.77 on July 7, 1951 and
February 23, 1952, respectively, defendant Marquez defaulted in the payment of the other
installments, so that the total amount due NAMARCO as of October 31, 1964 is P19,990.91,
representing principal and accrued interest, as shown in a statement of account marked as
Exhibit D.1awphil.ñêt

  On March 22, 1956, February 16, 1963, June 10, 1964, September 18, 1964 and October 13,
1964, plaintiff demanded from defendants Marquez and Plaridel Surety & Insurance Company,
payment of their outstanding obligation, as shown in Exhibits E, E- 2, E-3, E-4, E-6, E-8, E-10,
and E-12. The claim, therefore, of defendant Plaridel Surety & Insurance Company that they
never received a demand for payment from plaintiff must necessarily fail, considering that it is
clearly shown in registry return receipts marked as Exhibits E-5, E-9, E-11, and E-13 that the
same had been received by the addressee.

  As the said amount was not paid despite the aforementioned demands therefor upon the said
defendants, the present action was instituted on December 16, 1964, to enforce collection.

  The appellant surety company poses three questions for our resolution:

(1) Whether the Court of First Instance had original jurisdiction to take cognizance of the suit;

(2) Whether the plaintiff-appellee's action is barred by prescription;

(3) Whether the surety's liability can exceed the sum of P12,000.00.

  On the first question tendered, appellant surety company argues that since the balance due on the
principal of the promissory note guaranteed by it is only P10,000.00, in view of the debtor's payment
of P2,000.00 on account of the principal of the loan, jurisdiction lay with the Municipal Court, and not
on the Court of First Instance, pursuant to section 44 (c) of the Judiciary Act, as amended by
Republic Act No. 3828.

  The contention is without merit, for it ignores the fact that upon the terms of the promissory note,
Exhibit "B", copy of which was attached to the guaranty bond, as its annex "A", default upon the
principal or interest entitled the creditor to an additional ten per centum of the total amount due for
attorneys' fees and costs of collection. Even disregarding interest overdue and payable, when the
complaint was filed the creditor-appellee was entitled to collect no less than P10,000.00 on the loan
plus P1,000.00 attorneys' fees, or a total of P11,000.00. The initial limit of the original jurisdiction of
the Court of First Instance under Republic Act No. 3828 being —

  all cases in which the demand, exclusive of interest, or the value of the property in
controversy, amounts to more than ten thousand pesos.

  the court below did not incur in this error.

  The contention that plaintiff-appellee's cause of action against the surety was barred by the statute
of limitations in 1964, because the face value of the promissory note fell due on 25 June 1962, is
likewise untenable. The course of extinctive prescription was interrupted by the written demands for
payment made upon the principal debtor on 22 March 1956, 16 February 1963, and June, September
and October of 1964, copies of which were furnished the surety. Article 1115 of the Civil Code of the
Philippines prescribes that "the prescription of actions is interrupted — when there is a written
extrajudicial demand by the creditor".

  The surety avers that a demand upon the debtor is no demand upon the surety, and that the copies
of the letters of demand upon the former do not constitute a demand upon the guarantor. This thesis
is worthless because (a) the liability of the appellant was expressly made joint and several by the
terms of the guaranty bond, and (b) for the reason that, in the latter document, "the surety also waives
its right to demand payment and notice of non-payment" (Bond, paragraph 3). The words "demand
payment" vis-a-vis the creditor can only refer to "demand for payment".

  Laches not having been invoked as a defense in the court below, the same can not be gone into at
this stage of the proceedings. At any rate, the established jurisprudence is that mere delay of the
creditor in proceeding against the principal debtor does not release the guarantor (Lavides vs.
Eleazar, 106 Phil. 576, 579, and cases therein cited), and much less will it relieve a surety, who is
solidarily liable with the main debtor.

  On the third and last issue, it is enough to remark that while the guarantee was for the original
amount of the debt of Gabino Marquez, the amount of the judgment by the trial court in no way
violates the rights of the surety. The judgment on the principal was only for P10,000.00, while the
remaining P9,990.91 represent the moratory interest due on account of the failure to pay the principal
obligation from and after the same had fallen due, and default had taken place. Appellant surety was
fully aware that the obligation earned interest, since the note was annexed to its contract, Exhibit "C".
The contract of guaranty executed by the appellant Company nowhere excludes this interest, and
Article 2055, paragraph 2, of the Civil Code of the Philippines is clearly applicable.

  If it (the guaranty) be simple or indefinite, it shall comprise not only the principal obligation but
also all its accessories, including judicial costs, provided with respect to the latter, that the
guarantor shall only be liable for those costs incurred after he has been judicially required to
pay. (Emphasis supplied)

  Explaining the provisions of Article 1827 of the Civil Code of 1889, couched in terms similar to the
one quoted, Manresa, in his Commentaries (Volume 12. Fifth Edition, page 241), says:

  Para dicho caso dispone el Codigo que la extension de esa clase especial de fianzas
comprendera, no solo la obligacion principal, sino tambien todos sus accesorios, incluso, los
gastos del juicio, con la limitacion establecida en el mismo. Cierto es que con ello se amplian
los terminos de la fianza a mas de los limites de la obligacion principal, objeto y motivo de
aquella, pero esto depende de los actos del fiador, pues pudiendo este precisar y determinar
al constituir la fianza los limites de la misma, restringiendo su responsabilidad unica y
exclusivamente a los terminos estrictos de la obligacion principal, si no lo hizo asi dejando de
utilizar esa restriccion, potestativa en el, debe presumirse que quiso quedar obligado en la
forma amplia que en el articulo se establece.

  La responsabilidad del fiador, conforme a este precepto, se extiende incluso a los intereses
por razon de mora del deudor. Asi lo ha reconocido la jurisprudencia, declarando que
subrogado el fiador en el lugar del deudor para hacer efectiva la obligacion principal contraida,
cuando este no la cumple, responde no solo de aquella, sino tambien de sus consecuencias
legales, una de ellas, en concepto de indemnizacion de perjuicios, al abono de intereses por
razon de mora del citado deudor en el pago de cantidad liquida, segun determinan los
 articulos 1.101 y 1.108 del Codigo civil, sin que pueda sostenerse que no naciendo la
obligacion del fiador hasta que se hace la exclusion de bienes del deudor, no puede aquel
incurrir en mora (sentencia de 22 de noviembre de 1916).

  And we have previously ruled that compensated sureties are not entitled to have their contracts
interrupted strictissimi juris in their favor (Leyson vs. Rizal Surety [1966] 16 SCRA 555; Pacific
Tobacco Corp. vs. Lorenzana, 102 Phil. 234, 241-242).

  WHEREFORE, finding no error in the judgment appealed from, the same is affirmed, with costs
against appellant Plaridel Surety and Insurance Company.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Capistrano, Teehankee
and Barredo, JJ., concur.
 EN BANC

G.R. No. L-23871        December 7, 1925

THE MUNICIPALITY OF LEMERY, plaintiff-appellee,

vs.
ANDRES MENDOZA and SIMEON BLAS, defendants-appellants.

Rafael Palma for appellants.

Provincial Fiscal de la Costa for appellee.

STREET, J.:

This action was instituted in the Court of First Instance of Batangas by the municipality of Lemery for
the purpose of recovering jointly and severally of the defendants, Andres Mendoza, as principal, and
of Simeon Blas and Mariano Napa, as sureties, the sum of P22,999.99, plus a further penal sum of
P4,599.99, with costs. Upon hearing the cause the trial judge gave judgment for the plaintiff in the
amounts stated, with costs, and the defendants Mendoza and Blas appealed.

It appears that on September 1, 1920, the municipal council of Lemery, Batangas, adopted a
resolution, No. 53, authorizing the letting of the privilege of fishing for bañgus in the sea waters within
the limits of the municipality for the period of two years, extending from January 1, 1921, to December
31, 1922, inclusive. As the resolution contemplated the letting of this privilege for a longer period than
one year it was necessary to obtain the previous approval of the provincial board, in conformity with
section 2319 in relation with section 2323 of the Administrative Code; and on October 1, 1920, said
provincial board adopted its resolution, No. 740, of the following tenor:

On motion by member Muñoz,

The provincial board unanimously approved the resolution No. 53, current series, of the
municipal council of Lemery, authorizing the sale on public auction of bañgus fishery privilege,
said privilege to take effect from January 1, to December 31, 1921, inclusive.

The circumstance that the resolution of the provincial board, in describing the contents of the lease,
as embodied in resolution No. 53 of the municipal council of Lemery, used the date "1921," as the
terminal, instead of "1922," seems to have passed unnoticed; and the municipal authorities of
Lemery, considering resolution No. 53 as approved, proceeded to make public announcement,
inviting the submission of bids for the lease of the fishery for the period of two years. When the bids
were opened nine offers were found forthcoming. Of these eight were in amounts around P8,000 per
year, while the other, the one submitted by Andres Mendoza, was in the amount of P22,999.99 per
year. As this bid was by far the most advantageous to the municipality, it was of course accepted.

A formal contract was therefore executed by Zacarias Marasigan, as municipal president, and Andres
Mendoza, by which the privilege of fishing for bañgus in all the salt waters of the municipality was let
to the said Mendoza for the period of two years beginning with January 1, 1921, and ending with
December 31, 1922, for the sum of P22,999.99 for each year. This contract (Exhibit D) is dated
November 11, 1920.lawphi1.net
It appears in a provincial circular No. 153, series of 1917, of the Executive Bureau, it is declared that
in letting the privilege of fishery the municipal council shall require the successful bidder to supply a
bond in a sum double the amount of his liability under his contract, to be executed by two or more
persons possessing real property assessed at not less than the amount stated in the bond.
Accordingly on December 7, 1920, Mendoza undertook in writing to supply to the municipal president
"a bond of P46,000 in favor of the municipality of Lemery" in conformity with the requirement of the
above-mentioned circular; and on December 4, 1920, a document was executed by Simeon Blas and
Mariano Napa, as bondsmen (Exhibit E). This document is of the following tenor:

Whereas, Andres Mendoza, resident of the municipality of Lemery, Province of Batangas,

Philippine Islands, has leased the privilege of fishing for bañgus in the seas comprised in the
jurisdictional limits of the municipality of Lemery, Batangas, by virtue of an auction held
November 10, 1920, for the value of P23,000, Philippine currency, for the term of two years
from the first day of January, 1921, to the 31st of December, 1922;

Whereas, one of the conditions of the bid approved by the municipal council is (for the bidder)
to give bond for double the amount for which said privilege was let, to answer for compliance
with the terms of the bid;

Whereas, said privilege has been awarded for the sum of P23,000, Philippine currency,

Now, therefore, we Simeon Blas, resident of the municipality of Malabon, Rizal, and Mariano
Napa, resident of the municipality of Lemery, Batangas, and property owners, do hereby
obligate ourselves jointly and severally for the payment, to the municipality of Lemery,
Batangas, of the sum of P46,000, Philippine currency, in case Andres Mendoza, as grantee of
the aforesaid privilege, shall fail to comply with the conditions of the bid, of which we are
informed; and we agree moreover not to recede from this undertaking before the expiration of
the period of the lease.

We also state under oath that we are solvent to the said amount of P46,000, Philippine
currency, over and above our debts and other obligations.lawphi1.net

In testimony whereof we hereunto set our hands in Malabon, Province of Rizal, this 4th day of
December, 1920.

As might have been expected from the disparity between Mendoza's bid and those of his competitors,
the privilege which was the subject of the lease was unprofitable to the lessee, and before the first
year of the lease had expired he and his sureties were anxious to be rid of the contract. Mendoza
apparently thought that he saw a way out in the circumstance that in the resolution No. 740 of the
provincial board, approving resolution No. 53 of the municipal council of Lemery, the lease was
described as ending December 31, 1921. Mendoza therefore communicated to the municipal council
his desire to abandon the lease, on the ground that authority for making the lease for two years had
been lacking. Simeon Blas, one of the sureties, also addressed a letter to the council informing it that
he would no longer be bound by his contract of suretyship. The municipal council rejected these
proposals and announced its intention to insist on the fulfillment of the contract for the full period of
two years. But attention having been called to the fact that the period of one year was apparently
prescribed in provincial resolution No. 740, the municipal president addressed a letter on the subject
to the provincial board; and an examination of the record was made with the result that the provincial
board came to the conclusion that the date 1921, had been written by clerical error in resolution No.
740 instead of the date 1922. A resolution was therefore adopted by the municipal board declaring
that the date December 31, 1921, has been inserted in resolution No. 740 by clerical error, and in
order to rectify this error the secretary was instructed to make a correction of resolution No. 740 by
changing the date 1921 to 1922.

It should be stated that the terms of the lease were fully complied with by Mendoza for the year 1921,
and the sum of P23,000 was paid by him in satisfaction of the lease for that year. The privilege,
however, covered by the lease was abandoned by the lessee for the year 1922, and it is for the
stipulated rental of P22,999.99, with penalty and costs, that the present action was instituted.

In behalf of the defendant-appellants certain contentions are made which are common to the defense
of both the principal and the sureties, but the sureties have one ground of defense with which the
principal is not connected. We shall therefore first discuss the defenses common to all the appellants.

It is first suggested that the contract is not binding for the reason that the subject of the lease
comprises all salt waters within the limits of the municipality; and attention is directed to the first
paragraph of section 2321 of the Administrative Code where authority is given to the municipal
council to grant the exclusive privilege of fishery "within any definite portion, or area, of the municipal
waters." The contention of the appellants on this point is manifestly not well founded. Where the
subject of the lease is described as comprising all of the salt waters pertaining to the municipality, this
defines the extent of the lease with precision, and that is all that is necessary to make the lease valid
so far as description is concerned. It was not intended by section 2321 to prohibit the municipal
council from letting all waters suitable for fishing in its limits in a single lease.

In the second place it is insisted that the lease is invalid as to all excess over the period of one year
for the reason that the provincial board approved the lease for one year only. We are unable to agree
with this contention. We are of the opinion that by its resolution No. 740 the provincial board approved
resolution No. 53 of the municipal council of Lemery, which provided for a two-year lease. It is true
that in stating the tenor of the lease it is described "as taking effect from January 1, to December 31,
1921, inclusive." The use of the date 1921 in this connection was evidently an error, which has misled
nobody, and cannot affect the validity of the lease for two years. In this connection it is well to
remember that the provincial board does not legislate directly for the municipalities; nor does it have
the power of amending their resolutions. Its function is to approve or disapprove; and there could not
have been any intention on the part of the provincial board to amend the resolution of the council by
substituting the date 1921 for 1922. Besides, the approval of the provincial board is not necessary for
a lease for one year, and if the intention of the provincial board had been to cancel the resolution of
the municipal council to let the fishery for only one year, the proper procedure would have been to
disapprove resolution No. 53, as involving a lease for a longer period that was advisable. We do not
overlook the point that the law requires the previous approval of the provincial board when the lease
is to be made for more than one year, and if the error in resolution No. 740 had been vital, the
curative resolution adopted later would probably had been without effect. But we consider the
situation to be that the provincial board in substance approved resolution No. 53, and the error as to
the date did not in our opinion affect the validity of the lease.

Lastly, it is contended that the lease was invalid as lacking the approval of the department head. In
this connection reliance is placed upon section 2319 of the Administrative Code where it is said that
the leases for a period of greater duration than one year shall be let upon the previous approval of the
provincial board, under such conditions as shall be prescribed by the department head. It is supposed
that the last expression, "under such conditions as shall be prescribed by the department head,"
requires the submission to him of each particular lease in order that he may make the conditions
which shall be embodied in it. This is a mistake. The words quoted were merely intended to authorize
the department head to make general regulations for the governance of municipal authorities in
making the lease.
We now come to consider the defense interposed for the sureties arising from the form in which the
contract of suretyship is expressed, and particular attention is directed to the words of the first
paragraph where it is stated that the principal, Andres Mendoza, had leased the privilege of fishery in
question "for the value of P23,000 for the term of two years, to count from the first day of January,
1921, the thirty-first of December, 1922." These words are relied upon as showing that the principal
liability, the subject of the contract of suretyship, was limited to P23,000. This contention is, in our
opinion, well founded. It is true that in the obligating clause farther down the sureties declared
themselves bound in the sum of P46,000; but this was because the bond was required to be made in
double the amount of the principal liability. The language is quite clear to the effect that the rent to be
paid for the privilege of fishery was P23,000 for the full term of two years.

But it is insisted for the plaintiff that the contract is to be read as if the rental had been expressed to
be at the rate of P23,000 per annum for a period of two years. We are of the opinion that the words
"per annum" cannot be inserted by judicial construction; and no attempt has been made to obtain a
judicial reformation of the contract.

As we have previously stated Mendoza has paid to the municipality the full sum of P23,000. In our
opinion this discharged the sureties from all further liability. The circumstance that the sum of
P23,000 which Mendoza paid may have been applied by the municipality to Mendoza's indebtedness
for the first year of the lease is without significance as against the sureties, since the sureties were
not parties to the contract of lease (Exhibit D) and are liable only upon the contract of suretyship
(Exhibit E), which calls for the payment of only P23,000 by the principal. It is a just rule of
jurisprudence, recognized in article 1827 of the Civil Code, that the obligation of a surety must be
express and cannot be extended by implication beyond its specified limits.

We do not overlook the fact that the obligating clause in Exhibit E binds the sureties in the amount of
P46,000, but, as in all bonds, that obligation was intended as an assurance of the performance of the
principal obligation and when the principal obligation was discharged, the larger obligation expressed
in the contract of suretyship ceased to have any vitality.

From what has been said it results that while no error was committed by the trial judge in giving
judgment against the principal, the sureties should have been absolved.

The judgment appealed from will therefore be affirmed as against Andres Mendoza and reversed as
against Simeon Blas, who will be absolved from the complaint, without costs. So ordered.
 EN BANC

G.R. No. L-13873             January 31, 1963

GENERAL INSURANCE and SURETY CORPORATION, petitioner,

vs.
REPUBLIC OF THE PHILIPPINES and CENTRAL LUZON EDUCATIONAL FOUNDATION,
INC., respondents.

Guido Advincula for petitioner.

Office of the Solicitor General for respondents.

REGALA, J.:

On May 15, 1954, the Central Luzon Educational Foundation, Inc. and the General Insurance and
Surety Corporation posted in favor of the Department of Education a bond, the terms of which read as
follows:

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the Department of Education has required the Central Luzon Educational
Foundation, Inc., operating the Sison & Aruego Colleges, of Urdaneta, Pangasinan,
Philippines, an institution of learning to file a bond to guarantee the adequate and
efficient administration of said school or college and the observance of all regulations
prescribed by the Secretary of Education and compliance with all obligations, including
the payment of the salaries of all its teachers and employees, past, present, and future,
and the payment of all other obligations incurred by, or in behalf of said school.

NOW, THEREFORE, in compliance with said requirement, we, CENTRAL LUZON

EDUCATIONAL FOUNDATION, INC., operating the Sison and Aruego Colleges,
represented Dr. Jose Aruego, its Vice-Chairman, as principal, and the GENERAL
INSURANCE AND SURETY CORPORATION, a corporation duly organized and
existing under and by virtue the laws of the Philippines, as surety, are held and firmly
bound, jointly and firmly, unto the Department of Education of the Republic of the
Philippines in the sum of TEN THOUSAND PESOS (P10,000.00) Philippine currency,
for the payment thereof we bind ourselves, our heirs, executors, administrators,
successors, and assigns, jointly and severally firmly by these presents;

WHEN the Secretary of Education is satisfied that said institution of learning had
defaulted in any of the foregoing particulars, this bond may immediately thereafter be
declared forfeited and for the payment of the amount above-specified, we bind
ourselves, our heirs, executors, successors, administrators, and assigns, jointly and
severally.

We further bind ourselves, by these presents, to give the Department of Education at

least sixty (60) days notice of the intended withdrawal or cancellation of this bond, in
order that the Department can take such action as may be necessary to protect the
interests of such teachers, employees or creditors of the school and of the Government.

LIABILITY of Surety under this bond will expire on June 15, 1955, unless sooner
revoked.
 IN WITNESS WHEREOF, we signed this present guarranty at the City of Manila,
Philippines, this 15th day of May, 1954.

On the same day, May 15, 1954, the Central Luzon Educational Foundation, Inc., Teofilo Sison and
Jose M. Aruego executed an indemnity agreement binding themselves jointly and severally to
indemnify the surety of "any damages, prejudices, loss, costs, payments, advances and expenses of
whatever kind and nature, including attorney's fees and legal costs, which the COMPANY may, at any
time sustain or incur, as well as to reimburse to said COMPANY all sums and amounts of money
which the COMPANY or its representatives shall or may pay or cause to be paid or become liable to
pay, on account of or arising from the execution of the above mentioned Bond."

On June 25, 1954, the surety advised the Secretary of Education that it was withdrawing and
cancelling its bond. Copies of the letter were sent to the Bureau of Private Schools and to the Central
Luzon Educational Foundation, Inc.

It appears that on the date of execution of the bond, the Foundation was indebted to two of its
teachers for salaries, to wit: to Remedios Laoag, in the sum of P685.64, and to H.B. Arandia, in the
sum of P820.00, or a total of P1,505.64.

Demand for the above amount having been refused, the Solicitor General, in behalf of the Republic of
the Philippines, filed a complaint for the forfeiture of the bond, in the Court of First Instance of Manila
on July 11, 1956.

In due time, the surety filed its answer in which it set up special defenses and a cross-claim against
the Foundation and prayed that the complaint be dismissed and that it be indemnified by the
Foundation of any amount it might be required to pay the Government, plus attorney's fees.

For its part, the Foundation denied the cross-claim and contended that, because Remedios Laoag
owed Fr. Cinense the amount of P820.65, there was no basis for the action; that the bond is illegal
and that the Government has no capacity to sue.

The surety also filed a third-party complaint against Teofilo Sison and Jose M. Aruego on the basis of
the indemnity agreement. While admitting the allegations of the third-party complaint, Sison and
Aruego claimed that because of the cancellation and withdrawal of the bond, the indemnity
agreement ceased to be of force and effect.

Hearing was held and on December 18, 1956, the Court of First Instance rendered judgment holding
the principal and the surety jointly and severally liable to the Government in the sum of P10,000.00
with legal interest from the date of filing of the complaint, until the sum is fully paid and ordering the
principal to reimburse the surety whatever amount it may be compelled to pay to the Government by
reason of the judgment, with costs against both principal and the surety.

The surety filed a motion for reconsideration and a request to decide the third-party complaint which
the trial court denied.

On appeal, the Court of Appeals rendered a decision, the dispositive portion of which reads:

WHEREFORE, the appealed judgment is hereby modified in the following manner:

(a) Ordering Central Luzon Educational Foundation, Inc., and General Insurance and Surety
Corporation to pay jointly and severally the Republic of the Philippines the sum of P10,000.00,
plus costs and legal interests from July 11, 1956 until fully paid; and
 (b) Ordering Central Luzon Educational Foundation, Inc., Teofilo Sison and Jose M. Aruego to
reimburse, jointly an severally, the General Insurance and Surety Corporation of all amounts it
may be forced to pay the Republic of the Philippines by virtue of this judgment, plus costs and
P2,000.00 for counsel's fees.

From this decision, the surety appealed to this Court by way of certiorari, raising questions of law.1

In its first four assignments of error, the surety contends that it was no longer liable on its bond after
August 24, 1954 (when the 60-day notice of cancellation and withdrawal ended), or, at the latest, after
June 15, 1955. For support, the surety invokes the following provisions of the bond:

WE, further bind ourselves, by these presents to give the Department of Education at least
sixty (60) days notice of the intended withdrawal or cancellation of this bond, in order that the
Department can take such action as may be necessary to protect the interest of such teachers,
employees, Creditors to the government.

LIABILITY of the Surety under this bond will expire on June 15, 1955, unless sooner revoked.

On the other hand, the Government contends that since the salaries of the teachers were due and
payable when the bond was still in force, the surety has become liable on its bond from the moment
of its execution on May 15,1954.

We agree with this contention of the Government.

It must be remembered that, by the terms of the bond the surety guaranteed to the Government
"compliance (by the Foundation) with all obligations, including the payment of the salaries of its
teachers and employees, past, present and future, and the payment of all other obligations incurred
by, or in behalf of said school." Now, it is not disputed that even before the execution of the bond the
Foundation was already indebted to two of its teachers for past salaries. From the moment, therefore,
the bond was executed, the right of the Government to proceed against the bond accrued because
since then, there has been violation of the terms of the bond regarding payment of past salaries of
teachers at the Sison and Aruego Colleges. The fact that the action was filed only on July 11, 1956
does not militate against this position because actions based on written contracts prescribe in ten
years. (Art. 1144, par. 1, Civil Code). The surety also cites our decision in the case of Jollye v.
Barcelon and Luzon Surety Co., Inc., 68 Phil. 164 and National Rice & Corn Corp. (NARIC) v. Rivera,
et al., G.R. No. L-4023, February 29, 1952. But there is nothing in these cases that supports the
proposition that the liability of a surety for obligations arising during the life of a bond ceases upon the
expiration of the bond.

In the Jollye case, the bond provided:

Whereas, the above bounded principal, on 13th day of February, 1933 entered into an
agreement with H. P. L. Jollye of Manila, P. I., to fully and faithfully refund to said Mr. H. P. L.
Jollye the above stated sum of P7,500 representing the purchase price of the 74 shares of the
capital stock of the North Electric Company (certificate No. 38) paid by said Mr. H. P. L. Jollye
to the undersigned principal, Mr. Emeterio Barcelon, in the event ofthe title thereto of said Mr.
Barcelon is invalidated by any judgement which may be rendered by the court of Cavite
against Vicente Diosomito or in the event that any of the warranties contained in that certain
deed of sale executed by the undersigned principal on this 13th day of February, 1933,be
invalidated, a copy of which is hereto attached and made an integralpart hereof, market Exhibit
A.
 Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1äwphï1.ñët

According to the bond, "the liability of Luzon Surety Company, Inc. under this bond will expire (12)
months from date hereof." The date referred to was February 13, 1933. This Court absolved the
surety of liability because the acts for which the bond was posted happened after its expiration. Thus,
We held in that case:

... The acts provided therein by reason of which the contract of suretyship was executed could
have taken place within the stipulated period twelve months. Hence, the parties fixed that
period exactly at twelve months, limiting thereby the obligation of the appellee to answer for
the payment to the appellant of the aforesaid sum of P7,500.00 to not more than the stipulated
period. . . .

Here, on the other hand, the right of the Government to collect on the bond arose while the bond was
in force, because, as earlier noted, even before the execution of the bond, the principal had already
been indebted to its teachers.

Neither does the NARIC case support the surety's position. In that case, the bond provided that —

This bond expires on March 20th, 1949 and will be cancelled TEN DAYS after the expiration,
unless the surety is notified of any existing obligation thereunder, or unless the surety renews
or extends it in writing for another term.

and We held that giving notice of existing obligation was a condition precedent to further liability of the
surety and that in default of such notice, liability on the bond automatically ceased.

Similarly, in the case of Santos, et. al. v. Mejia, et al., G.R. No. L-6383, December 29, 1953, the bond
provided that —

Liability of the surety on this bond will expire in THIRTEEN DAYS and said bond will be
cancelled 10 DAYS after its expiration unless surety is notified of any existing obligation
thereunder.

and We held that the surety could not be held liable because the bond was cancelled when no notice
of existing obligations was given within ten days.

In the present case, there is no provision that the bond will be cancelled unless the surety is notified
of any claim and so no condition precedent has to be complied with by the Government before it can
bring an action. Indeed, the provision of the bond in the NARIC and Santos cases that it would be
cancelled ten days after its expiration unless notice of claim was given was inserted precisely
because, without such a provision, the surety's liability for obligations arising while the bond was in
force would subsist even after its expiration.

Thus, in Pao Chuan Wek v. Nomorosa, 54 O.G. No. 11, 3490, We held that under a provision that the
surety "will not be liable for any claim not discovered and presented to the company within three
months from the expiration of this bond and that the obligee hereby waives his right to file any court
action against the surety after the termination of the period of three months above mentioned," the
giving of notice is a condition precedent to be complied with.
And suppose this action were filed while the bond was in force, as the surety would have the
Government do, but the same remained pending after June 15, 1955, would the surety suggest that
the judgment that may be rendered in such action could no longer be enforced against it because the
bond says that its liability under it has expired?

And what of the provision on 60-day notice? The surety urges that all actions on the bond must be
brought within that period or they would all be barred. The surety misread the provision. The 60-day
notice is not a period of prescription of action. The provision merely means that the surety can
withdraw — as in fact it did in this case — even before June 15, 1955 provided it gave notice of its
intention to do so at least 60 days in advance. If at all, the condition is a limitation on the right of the
surety to withdraw rather than a limitation of action on the bond. This is clear also from the Manual of
Information for Private Schools2 which states that "The bond furnished by a school may not be
withdrawn by either or both the bondsmen except by giving the Director of Private Schools sixty days
notice."

In its fifth assignment of error, the surety contends:

1. That the bond is void for being contrary to public policy insofar as it requires the surety to pay
P10,000.00 regardless of the amount of the salaries of the teachers. 3 It is claimed that to enforce
forfeiture of the bond for the full amount would be to allow the Government to enrich itself since the
unpaid salaries of the teachers amount to P1,318.84 only.

2. That, under Article 1311 of the Civil Code, 4 since teachers of Sison and Aruego Colleges are not
parties to the bond, "the bond is not effective, and binding upon the obligors (principal and surety) as
far as it guarantees payment of the 'past salaries' of the teachers of said school." This is the same as
saying that the surety is not liable to teachers of Sison and Aruego Colleges because the latter are
not parties to the bond nor are they beneficiaries of a stipulation pour autrui. But this argument is
based on the false premise that the teachers are trying to enforce the obligation of the bond, which is
not the case here. This is not an action filed by the teachers against the surety. This is an action
brought by the Government, of which the Department of Education is an instrumentality, to hold the
surety liable on its bond for the same has been violated when the principal failed to comply "with all
obligations, including the payment of salaries of its teachers, past, present and future."

There is nothing against public policy in forfeiting the bond for the amount. The bond is penal in
nature. Article 1226 of the Code states that in obligation with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case of non-compliance, if there
is no stipulation to the contrary, and the party to whom payment is to be made is entitled to recover
the sum stipulated without need of proving damages because one of the primary purposes of a
penalty clause is to avoid such necessity. (Art. 1228, Civil Code; Lambert v. Fox, 26 Phil. 588;
Palacios v. Municipality of Cavite, 12 Phil. 140; Manila Racing Club v. Manila Jockey Club, 69 Phil.
55). The mere non-performance of the principal obligation gives rise to the right to the penalty, (IV
Tolentino, Civil Code of the Philippines, p. 247.)

In its first and second "alternative assignments of error," the surety contends that it was released from
its obligation under the bond when on February 4, 1955, Remedios Laoag and the Foundation agreed
that the latter would pay the former's salaries, which were then already due, on March 1, 1955. In
support of this proposition, the surety cites Article 2079 of the Code which provides as follows:

An extension granted to the debtor by the creditor without the consent of the guarantor
extinguishes the guaranty. . . .
But the above provision does not apply to this case. The supposed extension of time was granted not
by the Department of Education or the Government but by the teachers. As already stated, the
creditors on the bond are not the teachers but the Department of Education or the Government.

Even granting that an extension of time was granted without the consent of the surety, still that fact
would not help the surety, because as earlier pointed out, the Foundation was also arrears in the
payment of the salaries of H. B. Arandia. The case of Arandia alone would be enough basis for the
Government to proceed against the bond.

Lastly, in its third and fourth "alternative assignments of error," the surety contends that it cannot be
made answer for more than the unpaid salaries of H. B. Arandia, which it claimed amounted to
P720.00 only, because Article 2054 states that —

A guarantor may bind himself for less, but not for more than the principal debtor, both as
regards the amount and the onerous nature of the conditions.

Should he have bound himself for more, his obligations shall be reduced to the limits of that of
the debtor.

What We said about the penal nature of the bond would suffice to dispose of this claim. For whatever
may be the amount of salaries due the teachers, the fact remains that the condition of the bond was
violated and so the surety became liable for the penalty provided for therein.

WHEREFORE, the decision of the Court of Appeals is hereby affirmed, with costs against the surety.

Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, Barrera, Parades, Dizon and Makalintal, JJ.,
concur.
Bengzon, C.J., took no part.
 FIRST DIVISION

[G.R. No. 8785. March 30, 1914. ]

UY ALOC ET AL., Plaintiffs-Appellants, v. CHO JAN LING ET AL., Defendants.

SIMEON BLAS, Defendant-Appellee.

William A. Kincaid and Thos. L. Hartigan for Appellants.

Haussermann, Cohn, & Fisher for Appellee.

SYLLABUS

1. APPEAL BOND; EXTENT OF LIABILITY OF SURETIES. — The appeal bond set forth in
the opinion interpreted and construed in the light of the Civil Code provision that:
"Security is not presumed; it must be express and cannot be extended further than that
specified therein."cralaw virtua1aw library

2. ID.; ID. — The measure of the surety’s liability on an appeal bond is ordinarily the
amount of the final judgment rendered in the case in the course of which the appeal
arose.

3. ID.; ID. — Held: however, that upon the facts disclosed in this record and set out in
the opinion, the sureties on the appeal bond neither expressly nor impliedly undertook
to guarantee compliance with any other judgment than that already entered when the
instrument was executed, in case the same should be affirmed wholly or in part.

DECISION

CARSON, J.  :

This is an appeal from an order sustaining a motion to quash an execution sued out by
the plaintiffs against Simeon Blas, a surety upon one of the appeal bonds furnished by
the defendants and appellants in the course of a former appeal from a judgment entered
in this cause. The motion is based upon the ground that execution was issued for an
amount in excess of that for which the surety is liable upon his bond.

It appears that on November 28, 1906, plaintiffs instituted this action and that on
November 30, 1908, the Court of First Instance of Manila rendered a decree ordering
substantially:chanrob1es virtual 1aw library

1. That the real property involved in the action be transferred by Cho Jan Ling to the
person therein found to be the owners.

2. That Cho Jan Ling render unto his coowners account of his administration of the
property from May, 1905, until the appointment of a receiver in this action.
3. That Cho Jan Ling pay over the sum of P24,155.95 in his possession as rents prior to
May, 1905.

4. That the receiver render his final accounts.

The decree terminates with the words: "And when said final account shall have been
rendered the court will make the necessary orders (resolvera lo que proceda) in
accordance with the determinations of this decree."cralaw virtua1aw library

From this decree an appeal was prosecuted to the Supreme Court of the Philippine
Islands, and for the purposes of the appeal the defendants furnished bond in the
following terms:jgc:chanrobles.com.ph

"Whereas in the above-entitled cause the plaintiffs have filed a complaint against the
defendants for the recovery of certain property and of the rents accruing therefrom;

"Whereas judgment was rendered in said cause ordering the defendant Cho Jan Ling to
pay the plaintiffs the sum of twenty-four thousand, one hundred fifty-five pesos and
ninety-five centavos (P24,155.95) and to transfer said property to the association
formed by said plaintiffs and defendants, with the exception of the Cho Chun Chac, and
to pay the costs of suit, and furthermore to render accounts of his administration of said
property;

"Whereas said defendant interposed an appeal from said judgment to the Supreme
Court of these Islands, which was admitted by said court, upon condition that execution
of said judgment might be issued unless bond, sufficient in the opinion of the court, be
given to assure the fulfillment of said judgment in case the same should be affirmed,
wholly or in part;

"Therefore we, Cho Jan Ling, as principal, and Doña Severina Lerma, with the assent of
her spouse Don Manuel Almeda, and Don Simeon Blas, as sureties, hereby jointly and
severally obligate ourselves to pay to the plaintiffs the sum of sixty thousands pesos
(P60,000) to guarantee that said defendants will comply with said judgment in case the
same be wholly or partially affirmed by the Supreme Court and the costs which may be
taxed by reason of the appeal interposed.

"Signed and sealed at Manila, January 18, 1909. — CHO JAN LING. — SIMEON BLAS. —
S. L. DE ALMEDA. — MANUEL ALMEDA."cralaw virtua1aw library

Upon appeal the judgment was affirmed. 1 Thereafter, in the Court of First Instance
further proceedings were had in the cause in which the defendant Cho Jan Ling was
required to render, and did render, accounts of his administration of the properties in
question, all in compliance with the terms of the decree of November 30, 1908, thus
affirmed on appeal. At the close of these further proceedings it was found and decided
that Cho Jan Ling was indebted to the plaintiffs to the amount of P18,313.34.

Plaintiffs then sued out execution against Simeon Blas, one of the sureties upon the
bond of January 18, 1909, and included in their execution the full amount of the liability
of Cho Jan Ling to the plaintiffs — that is to say, not only the P24,155.95, interest and
costs which Simeon Blas guaranteed as surety on said bond, but also the further amount
of P18,313.34 and interest which Cho Jan Ling was long subsequently condemned to
pay. The motion to quash the execution as to the excess over the contractual obligation
of the surety, Blas, was granted, and plaintiffs have appealed.

Upon this statement of the facts of the case we agree with the trial judge, who held as
follows:jgc:chanrobles.com.ph

"I am of the opinion that the sureties upon the appeal bond of Cho Jan Ling, conditioned
that the defendant should comply with the judgment entered if it was confirmed, can not
be called upon as sureties to satisfy any judgment subsequently entered. The conditions
of the bond were that he should pay a sum of money, transfer some property and
render an accounting. This does not include the condition that the sureties would pay
any amount which might be found due upon the accounting. The liability of the sureties
is limited to that which is specifically stated in the bond, and their contract has been
complied with, with the exception of the payment of the sum of P24,155.95, as stated.

"It was error to issue the execution against the sureties for the amount of the
subsequent judgment."cralaw virtua1aw library

The real question involved in this appeal is one of interpretation of the terms of the
bond, which must be construed in the light of the Civil Code provision that: "Security is
not presumed; it must be express and cannot be extended further than that specified
therein." (Art. 1827.)

Appeal bonds are ordinarily given to secure the fulfillment of final judgments, and the
measure of the surety’s liability is ordinarily the amount of the final judgment rendered
in the case in the course of which the appeal arose. But the appeal in this case appears
to have been taken, without objection from any of the parties, from a judgment which
by its very terms was not final, in that it did not dispose of all the issues raised by the
pleadings. It may well be that had the plaintiff stood upon his rights, the former appeal
would not have been allowed until a final judgment had been entered; or, if allowed,
that an appeal bond would have been required which would have secured the payment
of any amount which might be found due under the accounting. But since plaintiff went
forward at that time without insisting upon his rights, and accepted without objection an
appeal bond which did not in express terms or by necessary implication secure to him all
that he might have demanded, he will not now be permitted to read into the bond a
provision which he did not then insist upon.

Of course the liability of Cho Jan Ling was not terminated be merely rendering the
accounts on which, under the terms of the original decree, judgment for P18,813.34 was
thereafter entered against him. But the question here is not as to the liability of Cho Jan
Ling. The question before us is as to the liability assumed by the sureties on the bond.
Cho Jan Ling’s liability is wholly independent of the bond, while theirs is strictly limited
by its terms. Hence, while we agree with counsel for appellants, and the cases cited by
him, that the duty of guardians, trustees, administrators and the like to account for the
funds which come into their hands is not finally fulfilled by the mere preparation of a
statement of the amount of their receipts and disbursements, so long as any funds
remain in their hands, we by no means agree with him that because this duty rested
upon Cho Jan Ling it necessarily rested on the sureties on his appeal bond.

The sureties on the appeal bond guaranteed merely that Cho Jan Ling would comply with
the judgment requiring him "to render his final accounts;" not that he would do what he
was and is morally bound to do, that is, to account for and turn over all the funds of
plaintiff in his possession. The judgment, compliance with which was guaranteed by the
sureties, did not in itself provide for the turning over of the balance due as a result of
the accounting. For that purpose the entry of a new decree was necessary. The sureties
on the appeal bond neither expressly nor impliedly undertook to guarantee compliance
with any other judgment than that already entered when the instrument was executed.

The order entered in the court below should be affirmed, with the costs of this instance
against the appellants. So ordered.
 EN BANC

G.R. No. L-11992 August 5, 1918

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, Plaintiff-Appellee, vs. ANTONIO

V. HERRERO, Defendant-Appellant.

Isidro Santiago for appellant.

Attorney-General Avanceña for appellee.

FISHER, J.:

On the 25th of January, 1910, the appellant, and one Jose Robles Lahesa executed to
the Government of the Philippine Islands a joint and several bond in the penal sum of
P200, the conditions of which bond were that -

Whereas the Director of Constabulary has on the 30th day of June, 1908, issued to the
above-bounded Jose Robles Lahesa a license to purchase and keep the following
firearms, viz: One revolver - Garland - Cal. 22, No. 4152, and 100 cartridges and the
above-bounded Jose Robles Lahesa has covenanted and agreed and does hereby
covenant and agree, that he will safely keep the said firearms, or any of them, and will
deliver the same to the Government of the Philippine Islands on demand, and that he
will not sell or dispose of these firearms without permission of the Director of
Constabulary.chanroblesvirtualawlibrary chanrobles virtual law library

Now therefore, if the above-bounded Jose Robles Lahesa shall and will in all respects
duly and truly observe and perform all and singular the aforesaid covenant, conditions,
and agreements by the said Jose Robles Lahesa to be observed and performed,
according to the true intent and meaning thereof, then the above obligation shall be void
and of no effect; otherwise to remain in full force and virtue.

It is averred in the complaint, and was admitted by appellant in open court, that in
consideration of the execution of the bond Robles was given a license to keep a
revolver; that he later left the Philippine Islands without informing the authorities of his
intention to change his residence; that his present whereabouts are not known; that
thereafter the Director of Constabulary in May, 1912, November, 1913, and January,
1914, made written demands upon Robles to bring the revolver and his license "to the
office of the Chief of Police of Manila for due inspection," which demands were delivered
to the appellant, as one of Robles' bondsmen, that notwithstanding these demands,
neither the license nor the revolver has been taken to the office of the Chief of Police of
Manila.chanroblesvirtualawlibrary chanrobles virtual law library

Upon these facts the court below held that he conditions of the bond have been broken,
and gave judgment against defendant for the payment to the Government of Philippine
Islands of the sum of P200. From this judgment defendant has appealed, and contends
that the failure of his principal to produce the revolver and firearms license for
inspection is not a breach of the conditions of the bond for which he may be held
liable.chanroblesvirtualawlibrary chanrobles virtual law library
The only question is whether the failure of Robles to take the revolver and his license to
the office of the Chief of Police for inspection constitutes a breach of the conditions that
he would "deliver the same to the Government of the Philippine Islands on
demand . . . ."chanrobles virtual law library

Section 14 of The Firearms Act, in force when the bond in question was executed, makes
it the duty of any person holding a license to possess firearms to exhibit them, whenever
called upon do to do so, to the Chief of Police of Manila, or any of other officials therein
named, and provides that a violation of the provisions of this section may, in the
discretion of the Governor-General, be punished by revocation of the license. Section 15
of the same Act requires the Chief of Police to make an annual verification of all arms in
the possession of residents of Manila to whom licenses have been issued, and to indorse
the fact of such verification, together with a note of the date of thereof, upon the
license.chanroblesvirtualawlibrary chanrobles virtual law library

It is admitted that Robles has failed to produce his license for verification as required by
section 14 of The Firearms Act, and his license, immediately upon that failure, became
subject to revocation, in the discretion of the Governor-General. Had the license been
revoked and demand thereafter made upon Robles for the delivery of the firearm for
surrender thereof to the Government, failure to make such delivery would no doubt have
constituted a breach of terms of the bond her in suit, but it does not appear that the
license was ever revoked or that after revocation a demand was ever made upon Robles
for the surrender of the revolver. It is obvious that Robles has violated two of the
conditions upon which the license was issued, and that it might be revoked for either of
those reasons, but then liability of his bondsmen is to be measured by the terms of the
contract alone and does not include any obligation imposed upon their principal by the
general terms of The Firearms Act but which is not embodied in the bond. With respect
to Robles, his obligations arising from the permission granted him to keep a revolver are
to be measured by The Firearms Act in general, and by the terms of his contract in
particular, but with respect to his sureties, their liabilities are to be measured solely to
the terms of the contract subscribed by them. The forfeiture of the license for failure to
Produce it for inspection under section 14, or for failure to give notice of change of
address under section 13, would not constitute a breach of obligation of the sureties.
They are only liable in the vent that Robles does or fails to do one more of the specific
things required by the bond. It does not appear that he has failed on demand to deliver
his revolver to the Government of the Philippine Islands. The demand that he produce it
for inspection is not a demand for its delivery.chanroblesvirtualawlibrary chanrobles
virtual law library

The purpose of this action is to enforce the payment of a penalty. Obligations imposing
penalties and forfeitures must be strictly construed, for its is well-settled that sureties
are only chargeable according to the strict terms of the bond. The terms of their contract
are those which measure the extent of their liability. (5 Cyc., 758.) While it is quite
probable, upon the facts disclosed by the evidence, that had Robles' license been
revoked and demand made upon him for the surrender of the revolver, it would not have
been produced, that does not alter the fact so far it has only been made to appear that
he has failed to comply with the demand that his license and the revolver be produced
for verification and inspection. The sureties have not agreed that for Robles' failure to do
either or both of these things they would pay the penalty of P200 demanded of
them.chanroblesvirtualawlibrary chanrobles virtual law library

We are, therefore, of the opinion that the judgment should be reversed, absolving the
defendant from the complaint. So ordered.cha
 EN BANC

G.R. No. L-25811        December 31, 1926

BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellant,

vs.
ULRICH FORESTER, as administrator of the intestate of the deceased Francisco
Echevarria, defendant-appellee.

Montinola and Montinola for appellant

Jose Lopez Vito for appellee

OSTRAND, J.:

On January 30, 1920, the board of directors of the corporation Arrocera de la Pototan authorized its
treasurer, the now deceased Francisco Echevarria, to obtain for the corporation a credit on current
account for the sum of P100,000 from the Bank of the Philippine Islands. The credit was granted and
though no formal document to that effect was executed until March 27, 1920, it appears from the
testimony of the witness Eugenio Rocha, then cashier of the Iloilo branch of the bank that the
defendant corporation began to draw against the credit as early as February 9, 1920. The document
of March 27, 1920, reads as follows:

BANK OF THE PHILIPPINE ISLANDS

AGREEMENT FOR CREDIT IN CURRENT ACCOUNT

This Agreement, made this 27th day of March of 1920, between Mr. Francisco
Echevarria, as Director-Treasurer of the Arrocera de Pototan of Iloilo, Philippine
Islands, of the first part and the Bank of the Philippine Islands, of Iloilo, Philippine
Islands, of the second part.

WITNESSETH

That whereas the party of the second part agrees to grant and hereby does grant
to the party of the first part of a loan by way of a credit in current account of not
to exceed the sum of one hundred thousand pesos (P100,000) which said sum,
or so much as may be desired by the first party, is to be advanced to the said
first party upon his/its checks drawn upon the said second party.

Now therefore, said first party for herself hereby agrees to pay, to said second
party, interest upon all sums so taken, computed upon average daily balances
and payable upon the last day of each quarter of the calendar year, at the rate of
eight percent per annum.

Said first party further agrees to furnish security for said loan by pledge of
mortgage of real estate or chattels or assignments of securities, as may be
desired by said second party, to an amount sufficient at all times amply to secure
 said second party for the principal and interest of said loan, and in case said first
party fails to furnish the amount of security or additional security deemed
necessary and demanded by said second party, said second party may declare
the whole principal and interest immediately due and payable, anything in these
presents to the contrary notwithstanding.

It is hereby further agreed that the principal and interest of said loan shall in any
event be and become due and payable on sixty days from demand.

For the ARROCERA DE POTOTAN

(Sgd.) FRANCISCO ECHEVARRIA

Director-Treasurer

THE BANK OF THE PHILIPPINE ISLANDS

By (Sgd.)Illegible

Witnesses:

(Sgd.) Illegible MIGUEL GARGOLLO

Simultaneously with the execution of the document quoted, Echevarria gave the following bond:

BANK OF THE PHILIPPINE ISLANDS

BOND

Know all men by these presents, that we Mr. Francisco Echevarria, Director-Treasurer of the Arrocera
de Pototan in the name of the latter as well as in his own name as surety are hereby held and bound
unto the Bank of the Philippine islands, of Iloilo, Philippine Islands, in the sum of one hundred
thousand pesos (P100,000), Philippine currency, for the payment of which, well and truly to be made,
we hereby jointly and severally, bind ourselves, our heirs, executors, administrators and assigns,
firmly by these presents.

The conditions of this obligation are such, that;

Whereas, the said Bank of the Philippine Islands has advanced to the said Arrocera de Pototan by
way of a credit on current account the sum of one hundred thousand pesos (P100,000).

Now therefore, if the said Arrocera de Pototan shall duly pay, or cause to be paid, to the said Bank of
the Philippine Islands, on demand, at sixty days from demand, the said sum of one hundred thousand
pesos (P100,000), and shall duly pay, or cause to be paid, quarterly, on the last days of March, June,
September, and December of each year, until the principal and interest are paid in full, interest on
said sum and on all sums from time to time remaining unpaid at the rate of eight per cent (8%) per
annum, then this obligation shall be void, otherwise it shall remain in full force and effect.1awphil.net
In witness whereof, we have hereunto set our hands at Iloilo, Philippine Islands, this 27th day of
March of 1920.

For the ARROCERA DE POTOTAN

(Sgd.) FRANCISCO ECHEVARRIA

Director-Treasurer

FRANCISCO ECHEVARRIA
Surety

Witnesses:

(Sgd.)Illegible

Illegible

The Arrocera de Pototan continued to draw against its credit with the plaintiff Bank until December 8,
1921, when its overdraft amounted to P77,944.40, of which amount the plaintiff then demanded
payment within sixty days. The Arrocera was able to pay only P1,000 and on the 30th of November,
1923, the amount due with interest up to September 30, 1923, reached the sum of P84,922.98. The
plaintiff thereupon brought an action against the Corporation as a result of which it was able on
January 26, 1925, to collect the sum of P43,100, leaving a balance of P45,751.37 due and unpaid. In
the meantime and while the action against the Arrocera de Pototan was pending, the plaintiff by virtue
of the bonds above quoted presented a claim to the committee of claims against the estate of then
deceased Francisco Echevarria for the full amount of the debt of the Arrocera de Pototan to the bank.
The committee allowed the claim and the administrator of the estate appealed to the Court of First
Instance, which on January 30, 1926, rendered a decision in which it was held that the bond given on
March 27, 1920, had no retroactive effect and did not cover the amounts received from the Bank prior
to the date of the instrument; that the amount received subsequent to that date was only P25,429.15
that the money collected by the aforesaid action against the Arrocera de Pototan should first be
applied to the payment of the debt incurred subsequent to March 27, 1920, and that by so applying
the money collected the amount due upon the bond was more than covered. The court therefore
dismissed the case and thereupon the present appeal was taken by the plaintiff.

In our opinion, the appealed judgment is erroneous. It is very true that bonds or other contracts or
suretyship are ordinarily not to be construed as retrospective, but that rule must yield to the intention
of the contracting parties as revealed by the evidence, and does not interfere with the use of the
ordinary tests and canons of interpretation which apply in regard to other contracts. (21 R. C. L., 977.)

In the present case the circumstances so clearly indicate that the bond given by Echevarria was
intended to cover all of the indebtedness of the Arrocera upon its current account with the plaintiff
Bank that we cannot possibly adopt the view of the court below in regard to the effect of the bond.

Echevarria was director-treasurer of the Arrocera corporation and was familiar with its financial
affairs. The corporation had only one current credit account, a fact which was known to Echevarria,
and there can be no doubt whatever that the bond was intended by all parties to cover the entire
account. The Arrocera's credit on current account was limited to P100,000 — not to that amount plus
previous overdrafts — and Echevarria bound himself to respond for the full amount of that credit, well
knowing that at the time the bond executed a large portion of the credit secured by the bond had
already been exhausted. In such circumstances, the defendant can hardly be heard to say that the
bond was executed merely to cover future advances and was not intended to cover the entire credit.
The situation would have been different if Echevarria at the time of the execution of the bond had
been ignorant of the fact that a part of the credit had already been utilized; in that case we should
have been justified in regarding the bond as merely prospective.

For the reasons stated, and it appearing that all of the assets of the Arrocera de Pototan are
exhausted, the appealed judgment is reversed and it is so ordered that the plaintiff have and recover
judgment against the defendant for the sum of P45,751.37, with interest at the rate of 8 per cent per
annum from January 26, 1925, but without costs. So ordered.
 EN BANC

G.R. No. L-6383-84        December 29, 1953

FILEMON SANTOS and FRANCISCO FRIAS, Petitioner, vs. HON. M. M. MEJIA, as

Judge of the Court of First Instance of Nueva Ecija, LIBERATO AVECILLA and
THE CAPITAL INSURANCE & SURETY CO., INC. represented by ENRIQUE
MELENCIO, Branch Manager in Cabanatuan City, Respondents.

Isidoro Gonzales for petitioners.

Sotelo Law Office for respondents.

PADILLA, J.:

Civil Case No. 702 of the Court of First Instance of Nueva Ecija is an action brought by
Liberato Avecilla against Francisco Frias and Filemon Santos to annul Torrens certificate
of title No. 459 issued upon a homestead patent, while civil case No. 756 of the same
court is an appeal from a judgment by the justice of the peace court of Bongabon in an
action for unlawful entry brought by Francisco Frias against Liberato Avecilla. While the
two cases were pending, Francisco Frias and Filemon Santos, Defendants in civil case
No. 702, filed a petition for contempt against Liberato Avecilla, on the ground that
pursuant to the order of the court of 25 May 1951 Liberato Avecilla was to vacate the
land involved in the litigation after the expiration of fifteen days from the date of the
order which were granted to give the parties an opportunity to come to an amicable
settlement, and that Liberato Avecilla and his laborers despite the lapse of the fifteen-
day period and without the parties having come to an amicable settlement within the
said period, continued to occupy the land. On 25 June, upon agreement of the parties
the court ordered Liberato Avecilla to file a bond in the sum of P4,000 in favor of
Francisco Frias and Filemon Santos within ten days from the date of the order, withheld
action on the motion for contempt. On 5 July, Liberato Avecilla and the Capital Insurance
& Surety Co., Inc. executed and filed a bond which in words and figures is as follows:

That we Liberato Avecilla as principal, and THE CAPITAL INSURANCE & SURETY CO.,
INC., a corporation duly organized and existing under and by virtue of the laws of the
Philippines, as surety, are held and firmly bound unto Filemon Santos et al., Defendants
in civil case No. 702, CFI (N.E.) in the sum of FOUR THOUSAND PESOS (P4,000
Philippine currency), for the payment of which, well and truly to be made, we bind
ourselves, our heirs, executors, administrators, successors and assigns, jointly and
severally, firmly by these presents.chanroblesvirtualawlibrary chanrobles virtual law
library

THE CONDITIONS OF THESE OBLIGATIONS ARE AS FOLLOWS:chanrobles virtual law

library

Upon agreement of the parties, the plaintiff is hereby ordered to file a bond of FOUR
THOUSAND PESOS (P4,000) in favor of the Defendants within ten (10) days from today,
otherwise he will be ordered to leave the land; and action on the motion filed by the
Defendants for contempt against the plaintiff is hereby held in
abeyance.chanroblesvirtualawlibrary chanrobles virtual law library

chanrobles virtual law library

City of Cabanatuan, June 25, 1951.

ENRIQUE MAGLANOC
Judge chanrobles virtual law library

WHEREAS, the Court of First Instance requires said principal to give a good and
sufficient bond in the above stated sum to secure the full and faithful performance on his
part of said obligation.chanroblesvirtualawlibrary chanrobles virtual law library

NOW, THEREFORE, if the above bounden principal shall in all respect duly and fully
observe and perform all and singular the aforesaid covenants, conditions and agreement
to the true intent and meaning thereof, then this obligation shall be null and void,
otherwise to remain in full force and effect.chanroblesvirtualawlibrary chanrobles virtual
law library

Liability of surety on this bond will expire on THIRTY DAYS and said bond will be
cancelled 10 DAYS after its expiration, unless surety is notified of any existing
obligations thereunder.chanroblesvirtualawlibrary chanrobles virtual law library

IN WITNESS WHEREOF, we have set our hands and signed our names on the 5th day of
July, 1951.

LIBERATO AVECILLA
(Principal)

IN THE PRESENCE OF :
SOFRONIO OLIVEROS
MAMERTO M. MACAPAGAL

THE CAPITAL INSURANCE & SURETY CO., INC.

DR. ENRIQUE M. MELENCIO
In Charge, Cabanatuan Branchchanrobles virtual law library

(The acknowledgments before the notary public, jurat and approval by the presiding
judge follow)chanrobles virtual law library

(Exhibit D)

The two cases were heard and judgment was rendered on 27 March 1952, amended by
another dated 13 May, dismissing the complaint in civil case No. 702 with costs against
Liberato Avecilla and ordering him to pay yearly to Filemon Santos the sum of P1,633.80
and to Francisco Frias the sum of P1,529.52 beginning from the agricultural year 1950-
1951 until Liberato Avecilla vacates of returns the possession of the parts of the parcel
of land involved in the litigation. On 19 May, the parties were notified of the amended
judgment of 13 May and as none of them appealed therefrom, the same became final
and executory. The writ of execution issued on 25 June 1952 against Liberato Avecilla
having been returned unsatisfied, on 1 September, Francisco Frias and Filemon Santos
moved for an alias writ of execution of the judgment against Liberato Avecilla and the
Capital Insurance & Surety Co., Inc. The motion was objected to by the Capital
Insurance & Surety Co., Inc., in so far as it concerned the surety, on the ground that the
bond was for one year only and was to be cancelled ten days after its expiration unless
the surety was notified of any existing obligation thereunder. The court denied the
petition for execution against the surety company. Hence this petition to compel the
respondent court to issue a writ of execution against the Capital Insurance & Surety Co.,
Inc.chanroblesvirtualawlibrary chanrobles virtual law library

In the surety bond it is stipulated that the "Liability of (the) surety on this bond will
expire on THIRTY DAYS and said bond will be cancelled 10 DAYS after its expiration,
unless (the) surety is notified of any existing obligations thereunder." The bond
executed on 5 July 1951 was extended to 4 July 1952 "and to be cancelled 10 days
thereafter unless notified of any obligation."chanrobles virtual law library

It is contended that being a judicial bond it must answer for the principal's liability that
may be adjudged by the court in the case where it is filed and that the time limitation of
the surety's obligation under the bond is unauthorized and illegal. The bond was
executed and filed to forestall the issuance of a mandatory injunction against Liberato
Avecilla and it was sort of a counter bond filed by him conditioned that he would pay all
damages which the adverse parties might suffer by reason of the continuance during the
action of the acts complained of. 1 The bond executed and filed in these cases is not as
that described and provided for in the rule referred to but merely one for the sum of
P4,000 and for a limited time. The surety was not bound to execute a bond if it did not
wish to. If the bond executed and filed was defective, the parties in whose favor it was
executed should have objected to it. This the obligees failed to do. There is no rule of
court which requires a surety to execute a bond which would answer for the principal's
liability that might be adjudged by the court in the case where it was filed, if the surety
did not wish to execute such bond. It is a settled rule in this jurisdiction that a surety or
a guarantor is not responsible beyond the terms of his undertaking. And it appearing
that the bond filed in this case expired on 4 July 1952, the surety cannot be held liable
under the bond beyond 4 July 1952, and it could cancel the bond ten days thereafter if
the obligees failed to notify it of the principal's obligation under the
bond.chanroblesvirtualawlibrary chanrobles virtual law library

The petition for a writ of mandamus is denied, without costs.

 FIRST DIVISION

[G.R. No. 14989. January 30, 1920. ]

MARIA SETON DONNA, Plaintiff-Appellee, v. M. INOUYE, as administrator of the

estate of K. S. Ohta, Defendant-Appellant.

Hartigan & Welch for Appellant.

Hartford Beaumont for Appellee.

SYLLABUS

1. PRINCIPAL AND SURETY; EXHAUSTION OF PROPERTY OF PRINCIPAL DEBTOR. —

Where judgment upon a contract for the payment of money is rendered against a person
who is subsidiary liable in an action wherein he is sued separately and not in conjunction
with his principal, it is proper for the court, in order to secure the defendant the benefit
of the exhaustion of the property of the principal debtor, to direct that execution shall
not issue until an execution against the principal is returned unsatisfied in whole or in
part.

2. EVIDENCE; JUDICIAL NOTICE; NON-PREJUDICIAL ERROR. — Where a trial court takes

judicial notice of a certain fact without legal authority, the error is not available upon
appeal if it appears that the fact of which notice was taken is immaterial.

3. INTEREST; STIPULATION FOR PAYMENT OF EXPENSES OF COLLECTION. — Where the

promissory note contains a stipulation to the effect that if the obligation should become
the subject of judicial action a certain per centum of the principal should be added to
cover expenses of collection, interest upon this item well not be allowed prior to the date
of the judgment in the lower court.

DECISION

STREET, J.  :

The complaint in this case was presented on June 10 1918, in the Court of First Instance
of the city of Manila by the plaintiff, Maria Seton Donna, against M. Inouye, as
administrator of the estate of K. S. Ohta, to recover upon five promissory notes,
aggregating P30,000, together with the stipulated attorney’s fee, interest, and costs.
Judgment having been rendered in favor of the plaintiff, the defendant appealed.

The notes in question had their origin in a sale of real property and were executed and
delivered on or about August 3, 1916, by I. Ihara, as vendee, to one A. A. Addison, the
vendor, representing the deferred payments upon the purchase price of said property.
The name of K. S. Ohta, signed to each of said notes, is placed at the left of the
signature of Ihara; and just below the name of Ohta is added the word
"guarantor."cralaw virtua1aw library

It is not pretended that anything has ever been paid upon the principal amount of either
of the notes in question, and interest on the same has only been paid down to October
3, 1917. By reason of the nonpayment of the interest accruing since the latter date, the
maturity of the notes has been accelerated under a special stipulation contained in the
notes; and for this reason all of the notes were past due when proceedings were begun
in this case.

Since the notes were executed the guarantor Ohta has died, and a claim founded on the
notes was duly presented to the committee appointed to pass on the claims against his
estate. It was apparently there contended by the attorney representing Ohta’s
administrator that, inasmuch as Ohta had signed in the character of guarantor only, the
liability against his estate was contingent and that consequently the claim should not be
allowed against the estate for payment unconditionally but should be dealt with as
provided in sections 746-749 of the Code of Civil Procedure. The commissioners,
however, allowed the claim unconditionally, and the administrator appealed to the Court
of First Instance, where the complaint in this case was presently filed by the plaintiff in
due form.

The trial judge found that all the conditions necessary to a recovery upon the notes by
the plaintiff had been fulfilled and he further more took judicial notice of the fact that the
principal debtor, Ihara, had already been sued in his court on the same notes and that
judgment had been rendered therein against Ihara in favor of the plaintiff. Judgment
was accordingly rendered in the present action to the effect that the plaintiff should
recover of the defendant M. Inouye, as administrator of the estate of K. S. Ohta, the
sum of P30,000, with interest thereon at the agreed rate of 8 per cent per annum from
the 4th day of October, 1917, and for the further sum of P30,000, as stipulated
expenses of collection, with interest thereon at the rate of 6 per cent per annum from
December, 5, 1917, (supposedly the date when the claim was first presented against the
estate) or for such parts of said amounts as should remain unpaid after the execution of
the property of Ihara, the principal debtor Furthermore, in order to secure to the
defendant administrator the benefit of the exhaustion of the property of Ihara, as
contemplated in article 1830 of the Civil Code, it was ordered that execution should not
issue against the administrator until a return should be made by the sheriff upon
execution against Ihara, showing that the judgment against him remained unsatisfied in
whole or in part. The defendant, as already stated, appealed from this judgment.

So far as we can see there is no merit in the appeal. On the part of the appellant it
seems to be supposed that the order of the lower court. to the effect that the writ of
execution should not issue until execution against the principal debtor should be
returned unsatisfied in whole or in part, was not in proper form to secure to the
defendant the full benefit of the right of exhaustion of the property of the debtor secured
by article 1830 of the Civil Code. On the contrary we think that the order of the lower
court is in exactly the form in which it should have been expressed, especially in view of
article 1832 of the same Code which shows that it is the duty of a surety, or guarantor,
entitled to the benefit of the exhaustion of the principal’s property to point out to the
creditor property of the principal which .may be taken to satisfy the debt.
The circumstance that the trial court took judicial knowledge of the fact that the
principal debtor has been sued in another action pending in the same court and that
judgment had been entered against him in that action is in our view quite immaterial to
the determination of the present case, for even supposing that no action had as yet
been brought against Ihara, it would have been proper for the lower court to stay the
execution in this case until the principal debtor should have been sued and his assets
exhausted. The lower court, therefore, could have closed its eyes to the existence of the
earlier judgment against Ihara and yet its judgment in the present case would have
been the same in substance as it actually is.

Nor is there anything in the suggestion of the appellant that the amount of the judgment
is uncertain or indefinite. This contention is based on the circumstance that the trial
court, after awarding judgment for the sum of P30,000, with interest at 8 per cent, and
for P3,000 with interest at 6 per cent, added the words "or for such parts of said
amounts as may remain unpaid after the execution in Civil Case No. 15671 of this court
(i. e., the action against Ihara) is returned by this sheriff." This was merely equivalent to
saying that the judgment against the administrator should be credited with whatever
should be made out of the property of the principal debtor; and it would have been the
duty of the sheriff to allow such credit in this case even in the absence of directions to
that effect. The addition of these words to the judgment certainly could not have the
effect of rendering the judgment indefinite in its amount.

The notes sued upon in this case are executed upon a type-written form and begin with
the words: "We will; jointly and severally pay (Pagaremos en mancomun et solidum);
and it is questionable whether, in view of subsection 2 of article 18331 of the Civil Code,
Ohta was entitled to the benefit of the exhaustion of Ihara’s property. The trial judge
evidently thought that the written word "guarantor," placed below the name of Ohta,
was used in the English sense to indicate a strictly subsidiary liability and that this
indication of the character in which Ohta signed had the effect of destroying the
solidarity of the contract as regards him. Whether the trial judge was correct in this view
need not be considered by us, because the judgment of the court upon this point was
favorable to the defendant Ohta and the plaintiff did not see fit to appeal.

As will be seen by reference to the judgment of the trial court, interest was allowed from
December 5, 1917, at the rate of six per centum per annum upon the stipulated sum of
P3,000, as expenses of collection in case of litigation We are unable to see the propriety
of allowing interest upon this item prior to the date when judgment was rendered in the
lower court, Which was on November 22, 1918. The stipulation in question was of
Course intended to include the attorney’s fee, among other expenses; and the
agreement contemplated that liability should not exist until the services should be
rendered and expenses incurred.

From what has been said it is manifest that the judgment must be modified by proving
that interest on the said sum of P3,000 shall only be computed from November 22,
1918, instead of from December 5, 1917. With this modification the judgment appealed
from is affirmed, with costs against the appellant. So ordered.
 EN BANC

[GR No. 46515. June 14, 1940.]

VISAYAN SURETY AND INSURANCE CORPORATION, appellant, against

VICTORINA G. DE LAPERAL, assisted by her husband, Roberto Laperal,
appealed.

Messrs. Duran and Lim on behalf of the appellant.

Mr. PA Remigio on behalf of the respondents.

SYLLABUS

1. BOND AGREEMENT; SUBSIDIARY AND NOT PRIMARY LIABILITY OF THE

GUARANTOR. - The surety that binds the contracting parties is Exhibit 1 without the
amendment or intercalacionell. Said bond was accepted by the defendants; if it was
pleaded to the appellant's lawyer by RL, it was only so that the amendment that he
required could be introduced, an amendment that cannot be considered as legally
introduced because the appellant has not given her consent. In the guarantee, the
appellant did not bind jointly and severally with the main debtor ASV; nor was it bound
jointly with him as a debtor. By virtue of its clear and precise terms, the appellant
undertook, as guarantor, to comply with V's obligation in the event that it fails to pay
the amount of the jewels or to return these if they are not sold.

2. ID .; ID .; ARTICLE 1822 OF THE CIVIL CODE. - According to article 1822 of the Civil
Code, the bond is an accessory contract and the responsibility contracted by the
guarantor is subsidiary. For it, the guarantor is obliged to pay or fulfill for a third party,
only in the case of not doing so.

3. ID .; ID .; ID .; UNILATERAL CONTRACT. - The surety granted by the appellant is a

unilateral contract and for participating of this nature it did not require acceptance on
the part of the appellants. However, the facts declared as proven by the Court of
Appeals show conclusively that the bond, Exhibit 1, has been accepted by the
defendants. Manresa, Volume XII of his comments to the Civil Code, page 141, when
indicating the unilaterality of the surety contract as one of its characteristics that
distinguishes it from other contracts, says: "The surety contract is also unilateral,
because from it only obligations are derived by the guarantor in relation to the creditor,
although its fulfillment or consummation gives rise to obligations of the guarantor with
respect to the guarantor,cralaw virtua1aw library

4. ID .; ID .; ID .; ID. - The respondents cannot insist that the appellant pay them
jointly with ASV the sum of P1,000 that it owes and the interest, and the reason is, as
already indicated, that the appellant has not assumed in solidum the obligation of the
principal debtor has not promised to pay jointly and severally the debt that resulted in
favor of the respondents. As a simple guarantor that it is, its obligation is subsidiary and
because it has not been constituted as a joint guarantor, it is entitled to the benefits of
the excursion in accordance with articles 1830, 1831 and 1832 of the Civil Code.
 DECISION

IMPERIAL, M .:

By resolution of February 19, 1940, and as a result of the second motion for
reconsideration presented by the defendants' attorney, the decision that was
promulgated in the matter on October 7, 1939 was left without effect in accordance with
Rule 39 of the Regulations of this Court.

The defendants brought the action in the Manila Court of First Instance to collect from
Artemio S. Vega, as principal obligee, and from the appellant Visayan; Surety and
Insurance Corporation, as guarantor, the sum of P1,000, its legal interests and
costs. The Court issued a judgment condemning Vega to pay the appellants the sum of
P1,000, with his legal interests from the filing of the claim, and the costs, and acquitted
the appellant. The respondents appealed to the Court of Appeals from said
judgment. This last Court reversed the decision of the Court and ordered Artemio S.
Vega and the appellant Visayan Surety and Insurance Corporation to pay jointly and
severally to the defendants the amount of P1,000, their legal interests from the filing of
the claim, and the costs of the trial.certiorari .

The motive for action of the respondents is based on the fact not discussed and
admitted by the parties that on December 11, 1934 Artemio S. Vega received jewelry
worth P1,000 from them, with the obligation to sell them in cash to said price and
deliver this to the respondents, or return the jewelry to them in the event that they
were not sold. Vega did not pay the price or return the jewelry. To guarantee the
obligation that Vega thus contracted, the appellant signed the surety contract that is
drawn up in these terms: jgc: chanrobles.com.ph

"SURETY BOND

" Know all Men by These Presents: jgc: chanrobles.com.ph

"That we, Artemio S. Vega of San Fernando, Pampanga, as principal, and the Visayan
Surety & Insurance Corporation of Cebu, Cebu, with a branch office at the City of Manila,
a corporation duly organized and existing under and by virtue of the laws of the
Philippine Islands, as surety, are held and firmly bound unto Victorina G. Laperal of 851-
855 Rizal Avenue, Manila, in the sum of ONE THOUSAND (P1,000) Pesos, Philippine
currency, for the payment whereof we bound ourselves, our heirs, executor,
administrators and assigns firmly by these presents: jgc: chanrobles.com.ph

"WHEREAS, the above named principal will be appointed agent and is actually appointed
agent for Victorina G. Laperal for the sale of jewelry;

"Now, therefore, the conditions of this obligation are such that if the above-named
Artemio S. Vega shall duly and punctually pay or cause to be paid any and all amounts
that may be or become due and payable in connection with the sale of jewelry entrusted
to him, then this became null and void; otherwise it shall remain in full force and effect.

"This bond will expire after one (1) year from date. "In witness whereof, we have
hereunto signed our names this 11th day of December, 1934, in the City of Manila,
Philippine Islands.

"(Sgd.) ARTEMIO S. VEGA, principal

" VISAYAN SURETY & INSURANCE CORPORATION

"By: (Sgd.) TIN YAN

" Manager, Manila Branch. "

(Follow the notarial ratification before the Notary Public of Manila Mr. Romualdo
Constantino, doc. 48; page 11, Book 7, Series of 1934).

The bail was prepared by the appellant in her office and two copies were taken from her:
the original that was marked at the trial as Exhibit 1, and the carbon copy that was
identified as Exhibit A. Exhibit 1 was delivered by Vega to the Roberto Laperal appealed,
and Exhibit A was retained by the appellant. As Roberto Laperal noticed that in the bail
the appellant had not jointly and severally assumed the obligation that Vega had
imposed on himself, he went with him to the appellant's office and asked his lawyer to
amend the bail so that the appellant appeared as jointly and severally liable. with
Vega. Later, Vega returned the original, Exhibit 1, with intercalations that consisted of
the addition of the English word jointly and he was satisfied with the amendment
because he believed that the appellant was jointly and severally liable at the same time
as Vega. But it turned out that the collations had been made by the appellant's officials,
without the latter's knowledge or feeling, nor the intervention of Tin Yan, who signed the
bond on behalf of the appellant.

The Court did not give any value to the bond, Exhibit 1 because in their opinion the
respondents did not accept it from the moment the document was returned to the
appellant's attorney for amendment and, furthermore, because the intercalations were
made without knowledge or consent of the appellant. The Court of Appeals revoked the
judgment of the Court because it understood that the bond, without the amendment,
was joint and several and the appellant was forced in solidum with Vega to pay the
defendants the obligation that the latter had contracted. We believe that both
conclusions are wrong and untenable. The bond that binds the contracting parties is
Exhibit 1 without amendment or collations. Said bond was accepted by the
defendants; if it was returned to the appellant's attorney by Roberto Laperal, it was only
to introduce the amendment that he required, an amendment that cannot be considered
as legally introduced because the appellant did not consent to it. In the bond, the
appellant did not bind himself jointly and severally with the main debtor Artemio S.
Vega; nor was he jointly obligated with this as a debtor. By virtue of its clear and precise
terms, the appellant undertook, as guarantor, to fulfill Vega's obligation in the event that
Vega fails to pay the amount of the jewels or to return these if they are not sold. The
responsibility, therefore, of the appellant was subsidiary and not primary. In the bond,
the appellant did not bind himself jointly and severally with the main debtor Artemio S.
Vega; nor was he jointly obligated with this as a debtor. By virtue of its clear and precise
terms, the appellant undertook, as guarantor, to fulfill Vega's obligation in the event that
Vega fails to pay the amount of the jewels or to return these if they are not sold. The
responsibility, therefore, of the appellant was subsidiary and not primary. In the bond,
the appellant did not bind himself jointly and severally with the main debtor Artemio S.
Vega; nor was he jointly obligated with this as a debtor. By virtue of its clear and precise
terms, the appellant undertook, as guarantor, to fulfill Vega's obligation in the event that
Vega fails to pay the amount of the jewels or to return these if they are not sold. The
responsibility, therefore, of the appellant was subsidiary and not primary.

According to article 1822 of the Civil Code, the surety is an accessory contract and the
responsibility contracted by the guarantor is subsidiary. For it, the guarantor is obliged
to pay or fulfill for a third party, only in the case of not doing so. Explaining the nature
and effects of the bond, Manresa in his comments to the Civil Code, Volume XII, pages
137, 138 and 140, says: jgc: chanrobles.com.ph

"There are two meanings that in the legal technicality the word bond has: one, broad,
broad and extensive, which includes, within its terms, all guarantee contracts; and
another, restricted and strict, which is what constitutes the guarantee itself. In both
senses, it denotes the assurance by subsidiary means of a main obligation, which is the
characteristic of its essence, since without said main obligation the existence of the
guarantee is not conceived, and that is why it is always a contract accessory, dependent
on another, for whose security it is constituted. " cralaw virtua1aw library

xxx

"In this concept, the guarantee can be defined, saying that it is a contract by which one
of the contracting parties gives his personal guarantee to ensure the fulfillment of an
obligation contracted by another person, committing to fulfill it for her, if he does not do
so in the time and the way he forced himself to carry it out. " cralaw virtua1aw library

xxx

"Recalling the indications given in the introduction to this title, it is easy to specify the
nature and even the extent of the surety in the concept in which it is to be the object of
our study. As for the first, there are three characters that They distinguish and
differentiate it, determining the reason for its specialty, derived from the object of said
contract itself. Those characteristics are: 1st, the accessory and subsidiary quality of the
contracted obligation; 2nd, the unilateral condition thereof, and 3 ° the circumstance of
having to be the guarantor a person other than the principal obligated.

"The obligation contracted is accessory, because it would lack an object without another
principal whose fulfillment ensures and guarantees, to the point that without it its
existence is not conceived. It must live, therefore, united to the convention to which it
owes its birth and not can assume the characteristics of a principal obligation,
independent and with a life of its own. That is why, according to Ricce quite rightly, the
joint and several debtor cannot be considered as a guarantor of the co-debtor with
respect to the part owed by him, since in that case there is no two different obligations,
one main, existing by itself, and another accessory or attached to it, but as many main
obligations with a life of their own as there are co-debtors by virtue of which each of
them is fully responsible for the amount owed.

"But the surety is not only an accessory obligation dependent on the principal,
guaranteed by it, but it is also distinguished by its subsidiary and conditional quality,
since its effectiveness does not begin until the fulfillment of the condition or the
realization of the future and uncertain fact of failing to satisfy its debit, the principal
obligated, in the time and in the way in which it was committed to do so. " cralaw
virtua1aw library

By declaring that the bond signed by the appellant, Exhibit 1, implies a joint and several
obligation on her part, the Court of Appeals cites what was resolved in the cases of
Jaucian v Querol, 38 Jur. Fil., 750; EU against Varadero de la Quinta, 40 Jur. Fil.,
50; Castellvi de Higgins v. Sellner, 41 Jur. Fil., 151, and Machetti v. Hospicio de San
Jose, 43 Jur. Fil., 310. It will be noted, however, that in none of these cases has it been
established that the bond that defines the first paragraph of article 1822 of the Civil
Code implies in all cases a joint and several obligation on the part of the
guarantor. What was felt in these matters, mainly in Castellvi's, is that the suretyship
and guaranty contract under American common law bears a lot of resemblance to the
bond that defines the first paragraph of article 1822 of the Civil Code and the joint and
several bond mentioned in the second paragraph of the same article. Reading carefully
what was said in the Castellvi matter, it will be observed that it was established that the
guarantor, according to American common law, imposes a collateral and secondary
obligation equivalent to that contracted by the guarantor under our Civil Code that does
not jointly assume the obligation of the principal debtor, and that the obligation of the
surety under the American common law is paramount and joint and several indentical to
that of our joint guarantor.

The appellant insists that the bond granted by her is void because she has not been
notified of its acceptance by the respondents. The error thus made in the judgment of
the Court of Appeals is untenable. The surety granted by the appellant is a unilateral
contract and for participating of this nature did not require acceptance by the appealed
parties. However, the facts declared as proven by the Court of Appeals conclusively
demonstrate that the bond, Exhibit 1, has been accepted by the respondents. Manresa,
Volume XII of his comments to the Civil Code, page 141, when indicating the
unilaterality of the surety contract as one of its characteristics that distinguish it from
the other contracts, says: jgc: chanrobles.com.ph

"The bond contract is also unilateral, because it only derives obligations on the part of
the guarantor in relation to the creditor, although its fulfillment or consummation gives
rise to obligations of the guarantor with respect to the guarantor, and also because it
can take place without intervention of the debtor, and even of the creditor, in whose
favor it is constituted. " cralaw virtua1aw library

The statements in the preceding paragraphs resolve, in our view, all the appellant's
error reports, so we are relieved of the need to consider them separately.
Before concluding, it should be repeated that the respondents cannot insist that the
appellant pay them jointly and severally with Artemio S. Vega the sum of P1,000 that he
owes and his interests, and the reason is, as has already been indicated, that the
recurente has not assumed in solidum the obligation of the principal debtor nor has it
promised to pay jointly and severally the debt that resulted in favor of the appealed
parties. As a simple guarantor that it is, its obligation is subsidiary and because it has
not been constituted as a joint guarantor, it is entitled to the benefits of the excursion in
accordance with articles 1830, 1831 and 1832 of the Civil Code.

The appeal is granted and with the modification of the judgment of the Court of Appeals,
Artemio S. Vega is sentenced to pay the defendants the sum of P1,000, with their legal
interest per year as of December 17, 1935, date the claim was filed; The appellant
Visayan Surety and Insurance Corporation is also condemned to pay the respondents
any part of said amount and their interests that Artemio S. Vega fails to satisfy. No
order of execution of this sentence will be expected against the appellant until the one
that is released against Artemio S. Vega has been returned and it turns out that the
amount of the sentence has not been satisfied in whole or in part. Nobody will recover
costs of any instance. It is so ordered.
 EN BANC

G.R. No. L-42518             August 29, 1936

WISE & CO., INC., plaintiff-appellee,

vs.
DIONISIO P. TANGLAO, defendant-appellant.

The appellant in his own behalf.

Franco and Reinoso for appellee.

AVANCEÑA, C. J.:

In the Court of First Instance of Manila, Wise & Co. instituted civil case No. 41129 against Cornelio C.
David for the recovery of a certain sum of money David was an agent of Wise & Co. and the amount
claimed from him was the result of a liquidation of accounts showing that he was indebted in said
amount. In said case Wise & Co. asked and obtained a preliminary attachment of David's property.
To avoid the execution of said attachment, David succeeded in having his Attorney Tanglao execute
on January 16, 1932, a power of attorney (Exhibit A) in his favor, with the following clause:

To sign for me as guarantor for himself in his indebtedness to Wise & Company of Manila,
which indebtedness appears in civil case No. 41129, of the Court of First Instance of Manila,
and to mortgage my lot (No. 517-F of the subdivision plan Psd-20, being a portion of lot No.
517 of the cadastral survey of Angeles, G. L. R. O. Cad. Rec. No. 124), to guarantee the said
obligations to the Wise & Company, Inc., of Manila.

On the 18th of said month David subscribed and on the 23d thereof, filed in court, the following
document (Exhibit B):

COMPROMISE

Come now the parties, plaintiff by the undersigned attorneys and defendants in his own behalf
and respectfully state:

I. That the defendant confesses judgment for the sum of six hundred forty pesos (P640),
payable at the rate of eighty pesos (P80) per month, the first payment to be made on
February 15, 1932 and successively thereafter until the full amount is paid; the plaintiff
accepts this stipulation.

II. That as security for the payment of said sum of P640, defendant binds in favor of,
and pledges to the plaintiff, the following real properties:

1. House of light materials described under tax declaration No. 9650 of the
municipality of Angeles, Province of Pampanga, assessed at P320.

2. Accesoria apartments with a ground floor of 180 sq. m. with the first story of
cement and galvanized of iron roofing located on the lot belonging to Mariano
Tablante Geronimo, said accesoria is described under tax declaration No. 11164
of the municipality of Angeles, Province of Pampanga, assessed at P800.
 3. Parcel of land described under Transfer Certificate of Title No. 2307 of the
Province of Pampanga recorded in the name of Dionisio Tanglao of which
defendant herein holds a special power of attorney to pledge the same in favor of
Wise & Co., Inc., as a guarantee for the payment of the claim against him in the
above entitled cause. The said parcel of land is bounded as follows: NE. lot No.
517 "Part" de Narciso Garcia; SE. Calle Rizal; SW. lot No. 517 "Part" de
Bernardino Tiongco; NW. lot No. 508 de Clemente Dayrit; containing 431 sq. m.
and described in tax declaration No. 11977 of the municipality of Angeles,
Pampanga, assessed at P423.

That this guaranty is attached to the properties above mentioned as first lien and for this
reason the parties agree to register this compromise with the Register of Deeds of Pampanga,
said lien to be cancelled only on the payment of the full amount of the judgment in this case.

Wherefore, the parties pray that the above compromise be admitted and that an order issue
requiring the register of Deeds of Pampanga to register this compromise previous to the filing
of the legal fees.

David paid the sum of P343.47 to Wise & Co., on account of the P640 which he bound himself to pay
under Exhibit B, leaving an unpaid balance of P296.53.

Wise & Co. now institutes this case against Tanglao for the recovery of said balance of P296.53.

There is no doubt that under Exhibit, A, Tanglao empowered David, in his name, to enter into a
contract of suretyship and a contract of mortgage of the property described in the document, with
Wise & Co. However, David used said power of attorney only to mortgage the property and did not
enter into contract of suretyship. Nothing is stated in Exhibit B to the effect that Tanglao became
David's surety for the payment of the sum in question. Neither is this inferable from any of the clauses
thereof, and even if this inference might be made, it would be insufficient to create an obligation of
suretyship which, under the law, must be express and cannot be presumed.

It appears from the foregoing that defendant, Tanglao could not have contracted any personal
responsibility for the payment of the sum of P640. The only obligation which Exhibit B, in connection
with Exhibit A, has created on the part of Tanglao, is that resulting from the mortgage of a property
belonging to him to secure the payment of said P640. However, a foreclosure suit is not instituted in
this case against Tanglao, but a purely personal action for the recovery of the amount still owed by
David.

At any rate, even granting that defendant Tanglao may be considered as a surety under Exhibit B, the
action does not yet lie against him on the ground that all the legal remedies against the debtor have
not previously been exhausted (art. 1830 of the Civil Code, and decision of the Supreme Court of
Spain of March 2, 1891). The plaintiff has in its favor a judgment against debtor David for the
payment of debt. It does not appear that the execution of this judgment has been asked for and
Exhibit B, on the other hand, shows that David has two pieces of property the value of which is in
excess of the balance of the debt the payment of which is sought of Tanglao in his alleged capacity
as surety.

For the foregoing considerations, the appealed judgment is reversed and the defendant is absolved
from the complaint, with the costs to the plaintiff. So ordered.
 EN BANC

G.R. No. L-11307             October 5, 1918

ROMAN JAUCIAN, plaintiff-appellant,
vs.
FRANCISCO QUEROL, administrator of the intestate estate of the deceased Hermenegildo
Rogero, defendant-appellee.

Manly, Goddard & Lockwood for appellant.

Albert E. Somersille for appellee.

STREET, J.:

This appeal by bill of exceptions was brought to reverse a judgment of the Court of First Instance of
the Province of Albay whereby said court has refused to allow a claim in favor of the plaintiff, Roman
Jaucian, against the state of Hermenegilda Rogero upon the facts hereinbelow stated.

In October, 1908, Lino Dayandante and Hermenegilda Rogero executed a private writing in which
they acknowledged themselves to be indebted to Roman Jaucian in the sum of P13,332.33. The
terms of this obligation are fully set out at page 38 of the bill of exceptions. Its first clause is in the
following words:

We jointly and severally acknowledge our indebtedness in the sum of P13,332.23 Philippine
currency (a balance made October 23, 1908) bearing interest at the rate of 10 per cent per
annum to Roman Jaucian, of age, a resident of the municipality of Ligao, Province of Albay,
Philippine Islands and married to Pilar Tell.

Hermenegilda Rogero signed this document in the capacity of surety for Lino Dayandante; but as
clearly appears from the instrument itself both debtors bound themselves jointly and severally to the
creditor, and there is nothing in the terms of the obligation itself to show that the relation between the
two debtors was that of principal and surety.

In November, 1909, Hermenegilda Rogero brought an action in the Court of First Instance of Albay
against Jaucian, asking that the document in question be canceled as to her upon the ground that her
signature was obtained by means of fraud. In his answer to the complaint, Jaucian, by was of cross-
complaint, asked for judgment against the plaintiff for the amount due upon the obligation, which
appears to have matured at that time. Judgment was rendered in the Court of First Instance in favor
of the plaintiff, from which judgment the defendant appealed to the Supreme Court.

In his appeal to this court, Jaucian did not assign as error the failure of the lower court to give him
judgment on his cross-demand, and therefore the decision upon the appeal was limited to the issues
concerning the validity of the document.

While the case was pending in the Supreme Court, Hermenegilda Rogero died and the administrator
of her estate was substituted as the party plaintiff and appellee. On November 25, 1913, the Supreme
Court rendered in its decision reversing the judgment of the trial court and holding that the disputed
claim was valid. 1
During the pendency of the appeal, proceedings were had in the Court of First Instance of Albay for
the administration of the estate of Hermenegilda Rogero; Francisco Querol was named administrator;
and a committee was appointed to pass upon claims against the estate. This committee made its
report on September 3, 1912. On March 24, 1914, or about a year and half after the filing of the report
of the committee on claims against the Rogero estate, Jaucian entered an appearance in the estate
proceedings, and filed with the court a petition in which he averred the execution of the document of
October, 1908, by the deceased, the failure of her co-obligor Dayandante, to pay any part of the debt,
except P100 received from him in March, 1914, and the complete insolvency of Dayandante. Upon
these facts Jaucian prayed the court for an order directing the administrator of the Rogero estate to
pay him the principal sum of P13,332.33, plus P7,221.66, as interest thereon from October 24, 1908,
to March 24, 1914, with interest on the principal sum of P13,332.33, plus P7,221.66, as interest
thereon from October 24, 1908, to March 24, 1914, with interest on the principal sum from March 24,
1914, at 10 per cent per annum, until paid.

A copy of this petition was served upon the administrator of the estate, who, on March 30, 1914,
appeared by his attorney and opposed the granting of the petition upon the grounds that the claim
had never been presented to the committee on claims for allowance; that more than eighteen months
had passed since the filing of the report of the committee, and that the court was therefore without
jurisdiction to entertain the demand of the claimant. A hearing was had upon the petition before the
Honorable P.M. Moir, then sitting in the Court of First Instance of Albay. On April 13, 1914, he
rendered his decision, in which, after reciting the facts substantially as above set forth, he said:

During the pendency of that action (the cancellation suit) in the Supreme Court Hermenegilda
Rogero died, and Francisco Querol was named administrator of the estate, and he was made
a party defendant to the action then pending in the Supreme Court. As such he had full
knowledge of the claim presented and was given an opportunity to make his defense. It is
presumed that defense was made in the Supreme Court.

No contingent claim was filed before the commissioners by Roman Jaucian, who seems to
have rested content with the action pending. Section 746 et seq. of the Code of Civil
Procedure provides for the presentation of contingent claims, against the estate. This claim is
a contingent claim, because, according to the decision of the Supreme Court, Hermenegilda
Rogero was a surety of Lino Dayandante. The object of presenting the claim to the
commissioners is simply to allow them to pass on the claim and to give the administrator an
opportunity to defend the estate against the claim. This having been given by the administrator
defending the suit in the Supreme Court, the court considers this a substantial compliance with
the law, and the said defense having been made by the administrator, he cannot now come
into court and hide behind a technicality and say that the claim had not been presented to the
commissioners and that, the commissioners having long since made report, the claim cannot
be referred to the commissioners and therefore the claim of Roman Jaucian is barred. The
court considers that paragraph (e) of the opposition is well-taken and that there must be legal
action taken against Lino Dayandante to determine whether or not he is insolvent, and that
declaration under oath to the effect that he has no property except P100 worth of property,
which he has ceded to Roman Jaucian, is not sufficient.

Hermenegilda Rogero having been simply surety for Lino Dayandante, the administrator has a
right to require that Roman Jaucian produce a judgment for his claim against Lino Dayandante,
in order that the said administrator may be subrogated to the rights of Jaucian against
Dayandante. The simple affidavit of the principal debtor that he had no property except P100
worth of property which he has ceded to the creditor is not sufficient for the court to order the
surety to pay the debt of the principal. When this action shall have been taken against Lino
 Dayandante and an execution returned "no effects," then the claim of Jaucian against the
estate will be ordered paid or any balance that may be due to him.

Acting upon the suggestions contained in this order Jaucian brought an action against Dayandante
and recovered a judgment against him for the full amount of the obligation evidenced by the
document of October 24, 1908. Execution was issued upon this judgment, but was returned by the
sheriff wholly unsatisfied, no property of the judgment debtor having been found.

On October 28, 1914, counsel for Jaucian filed another petition in the proceedings upon the estate of
Hermenegilda Rogero, in which they averred, upon the grounds last stated, that Dayandante was
insolvent, and renewed the prayer of the original petition. It was contended that the court, by its order
of April 13, 1914, had "admitted the claim."

The petition was again opposed by the administrator of the estate upon the grounds (a) that the claim
was not admitted by the order of April 13, 1914, and that "the statement of the court with regard to the
admissibility of the claim was mere dictum," and (b) "that the said claim during the life and after the
death of Hermenegilda Rogero, which occurred on August 2, 1911, was a mere contingent claim
against the property of the said Hermenegilda Rogero, was not reduced to judgment during the
lifetime of said Hermenegilda Rogero, and was not presented to the commissioners on claims during
the period of six months from which they were appointed in this estate, said commissioner having
given due and lawful notice of their sessions and more than one year having expired since the report
of the said commissioners; and this credit is outlawed or prescribed, and that this court has no
jurisdiction to consider this claim."

On November 24, 1914, the Honorable J. C. Jenkins, then sitting in the Court of First Instance of
Albay, after hearing argument, entered an order refusing to grant Jaucian's petition. To this ruling the
appellant excepted and moved for a rehearing. On December 11, 1914, the judge a quo entered an
order denying the rehearing and setting forth at length, the reasons upon which he based his denial of
the petition. These grounds were briefly, that as the claim had never been presented to the committee
on claims, it was barred; that the court had no jurisdiction to entertain it; that the decision of the
Supreme Court in the action brought by the deceased against Jaucian did not decide anything except
that the document therein disputed was a valid instrument.

In this court the appellant contends that the trial judge erred (a) in refusing to give effect to the order
made by the Honorable P.M. Moir, dated April 13, 1914; and (b) in refusing to order the administrator
of the estate of Hermenegilda Rogero to pay the appellant the amount demanded by him. The
contention with regard to the order of April 13, 1914, is that no appeal from it having been taken, it
became final.

An examination of the order in question, however, leads us to conclude that it was not a final order,
and therefore it was not appealable. In effect, it held that whatever rights Jaucian might have against
the estate of Rogero were subject to the performance of a condition precedent, namely, that he
should first exhaust this remedy against Dayandante. The court regarded Dayandante. The court
regarded Dayandante as the principal debtor, and the deceased as a surety only liable for such
deficiency as might result after the exhaustion of the assets of the principal co-obligor. The pivotal
fact upon which the order was based was the failure of appellant to show that he had exhausted his
remedy against Dayandante, and this failure the court regarded as a complete bar to the granting of
the petition at that time. The court made no order requiring the appellee to make any payment
whatever, and that part of the opinion, upon which the order was based, which contained statements
of what the court intended to do when the petition should be renewed, was not binding upon him or
any other judge by whom he might be succeeded. Regardless of what may be our views with respect
to the jurisdiction of the court to have granted the relief demanded by appellant in any event, it is quite
clear from what we have stated that the order of April 13, 1914, required no action by the
administrator at that time, was not final, and therefore was not appealable. We therefore conclude
that no rights were conferred by the said order of April 13, 1914, and that it did not preclude the
administrator from making opposition to the petition of the appellant when it was renewed.

Appellant contends that his claim against the deceased was contingent. His theory is that the
deceased was merely a surety of Dayandante. His argument is that as section 746 of the Code of
Civil Procedure provides that contingent claims "may be presented with the proof to the committee," it
follows that such presentation is optional. Appellant, furthermore, contends that if a creditor holding a
contingent claim does not see fit to avail himself of the privilege thus provided, there is nothing in the
law which says that his claim is barred or prescribed, and that such creditor, under section 748 of the
Code of Civil Procedure, at any time within two years from the time allowed other creditors to present
their claims, may, if his claim becomes absolute within that period present it to the court for
allowance. On the other hand counsel for appellee contends (1) that contingent claims like absolute
claims are barred for non-presentation to the committee but (2) that the claim in question was in
reality an absolute claim and therefore indisputably barred.

The second contention takes logical precedence over the first and our view of its conclusiveness
renders any consideration of the first point entirely unnecessary to a determination of the case.
Bearing in mind that the deceased Hermenegilda Rogero, though surety for Lino Dayandante, was
nevertheless bound jointly and severally with him in the obligation, the following provisions of law are
here pertinent.

Article 1822 of the Civil Code provides:

By security a person binds himself to pay or perform for a third person in case the latter should
fail to do so.

"If the surety binds himself jointly with the principal debtor, the provisions of section fourth,
chapter third, title first, of this book shall be observed.

Article 1144 of the same code provides:

A creditor may sue any of the joint and several (solidarios) debtors or all of them
simultaneously. The claims instituted against one shall not be an obstacle for those that may
be later presented against the others, as long as it does not appear that the debt has been
collected in full.

Article 1830 of the same code provides:

The surety can not be compelled to pay a creditor until application has been previously made
of all the property of the debtor.

Article 1831 provides:

This application can not take place —

(1) . . . (2) If he has jointly bound himself with the debtor . . . .

The foregoing articles of the Civil Code make it clear that Hermenegilda Rogero was liable absolutely
and unconditionally for the full amount of the obligation without any right to demand the exhaustion of
the property of the principal debtor previous to its payment. Her position so far as the creditor was
concerned was exactly the same as if she had been the principal debtor.

The absolute character of the claim and the duty of the committee to have allowed it is full as such
against the estate of Hermenegilda Rogero had it been opportunely presented and found to be a valid
claim is further established by section 698 of the Code of Civil Procedure, which provides:

When two or more persons are indebted on a joint contract, or upon a judgment founded on a
joint contract, and either of them dies, his estate shall be liable therefor, and it shall be allowed
by the committee as if the contract had been with him alone or the judgment against him alone.
But the estate shall have the right to recover contribution from the other joint debtor.

In the official Spanish translation of the Code of Civil Procedure, the sense of the English word "joint,"
as used in two places in the section above quoted, is rendered by the Spanish word
"mancomunadamente." This is incorrect. The sense of the word "joint," as here used, would be more
properly translated in Spanish by the word "solidaria," though even this word does not express the
meaning of the English with entire fidelity.

The section quoted, it should be explained, was originally taken by the author, or compiler, of our
Code of Civil Procedure from the statutes of the State of Vermont; and the word "joint" is, therefore,
here used in the sense which attaches to it in the common law. Now, in the common law system there
is no conception of obligation corresponding to the divisible joint obligation contemplated in article
1138 of the Civil Code. This article declares in effect that, if not otherwise expressly determined,
every obligation in which there is no conception of obligation corresponding to the divisible joint
obligation contemplated in article 1138 of the Civil Code. This article declares in effect that, if not
otherwise expressly determined, every obligation in which there are numerous debtors — we here
ignore plurality of creditors — shall be considered divided into as many parts as there are debtors,
and each part shall be deemed to be the distinct obligation of one of the respective debtors. In other
words, the obligation is apportionable among the debtors; and in case of the simple joint contract
neither debtor can be required to satisfy more than his aliquot part.

In the common law system every debtor in a joint obligation is liable in solidum for the whole; and the
only legal peculiarity worthy of remark concerning the "joint" contract at common law is that the
creditor is required to sue all the debtors at once. To avoid the inconvenience of this procedural
requirement and to permit the creditor in a joint contract to do what the creditor in a solidary obligation
can do under article 1144 of the Civil Code, it is not unusual for the parties to a common law contract
to stipulate that the debtors shall be "jointly and severally" liable. The force of this expression is to
enable the creditor to sue any one of the debtors or all together at pleasure.

It will thus be seen that the purpose of section 698 of the Code of Civil Procedure, considered as a
product of common law ideas, is not to convert an apportionable joint obligation into a solidary joint
obligation — for the idea of the benefit of division is totally foreign to the common law system — but
to permit the creditor to proceed at once separately against the estate of the deceased debtor,
without attempting to draw the other debtors into intestate or testamentary proceedings. The joint
contract of the common law is and always has been a solidary obligation so far as the extent of the
debtor's liability is concerned.

In Spanish law the comprehensive and generic term by which to indicate multiplicity of obligation,
arising from plurality of debtors or creditors, is mancomunidad, which term includes
(1) mancomunidad simple, or mancomunidad properly such, and (2) mancomunidad solidaria. In
other words the Spanish system recognizes two species of multiple obligation, namely, the
apportionable joint obligation and the solidary joint obligation. The solidary obligation is, therefore,
merely a form of joint obligation.

The idea of the benefit of division as a feature of the simple joint obligation appears to be a peculiar
creation of Spanish jurisprudence. No such idea prevailed in the Roman law, and it is not recognized
either in the French or in the Italian system.

This conception is a badge of honor to Spanish legislation, honorably shared with the Spanish
— American, since French and Italian codes do not recognize the distinction of difference, just
expounded, between the two sorts of multiple obligation. . . . (Giorgi, Theory of Obligations,
Span. ed., vol. I, p. 77, note.)

Considered with reference to comparative jurisprudence, liability in solidum appears to be the normal
characteristic of the multiple obligation, while the benefit of division in the Spanish system is an
illustration of the abnormal, evidently resulting from the operation of a positive rule created by the
lawgiver. This exceptional feature of the simple joint obligation in Spanish law dates from an early
period; and the rule in question is expressed with simplicity and precision in a passage transcribed
into the Novisima Recopilacion as follows:

If two persons bind themselves by contract, simply and not otherwise, to do or accomplish
something, it is thereby to be understood that each is bound for one-half, unless it is specified
in the contract that each is bound in solidum, or it is agreed among themselves that they shall
be bound in some other manner, and this notwithstanding any customary law to the
contrary; . . . (Law X, tit. I, book X, Novisima Recopilacion, copied from law promulgated at
Madrid in 1488 by Henry IV.)

The foregoing exposition of the conflict between the juridical conceptions of liability incident to the
multiple obligation, as embodied respectively in the common law system and the Spanish Civil Code,
prepares us for a few words of comment upon the problem of translating the terms which we have
been considering from English into Spanish or from Spanish into English.

The Spanish expression to be chosen as the equivalent of the English word "joint" must, of course,
depend upon the idea to be conveyed; and it must be remembered that the matter to be translated
may be an enunciation either of a common law conception or of a civil law idea. In
Sharruf vs. Tayabas Land Co. and Ginainati (37 Phil. Rep., 655), a judge of one of the Courts of First
Instance in these Islands rendered judgment in English declaring the defendants to be "jointly" liable.
It was held that he meant "jointly" in the sense of "mancomunadamente," because the obligation upon
which the judgment was based was apportionable under article 1138 of the Civil Code. This mode of
translation does not, however, hold good where the word to be translated has reference to a multiple
common law obligation, as in article 698 of the Code of Civil Procedure. Here it is necessary to render
the word "joint" by the Spanish word "solidaria."

In translating the Spanish word "mancomunada" into English a similar difficulty is presented. In the
Philippine Islands at least we must probably continue to tolerate the use of the English word "joint" as
an approximate English equivalent, ambiguous as it may be to a reader indoctrinated with the ideas
of the common law. The Latin phrase pro rata is a make shift, the use of which is not to be
commended. The Spanish word "solidary," though it is not inaccurate here to use the compound
expression "joint obligation," as conveying the full juridical sense of "obligacion mancomunada" and
"obligacion solidaria," respectively.

From what has been said it is clear that Hermenegilda Rogero, and her estate after her death, was
liable absolutely for the whole obligation, under section 698 of the Code of Civil Procedure; and if the
claim had been duly presented to the committee for allowance it should have been allowed, just as if
the contact had been with her alone.

It is thus apparent that by the express and incontrovertible provisions both of the Civil Code and the
Code of Civil Procedure, this claim was an absolute claim. Applying section 695 of the Code of Civil
Procedure, this court has frequently decided that such claims are barred if not presented to the
committee in time (In re estate of Garcia Pascual, 11 Phil. Rep., 34; Ortiga Bros. & Co. vs. Enage
and Yap Tico, 18 Phil. Rep., 345, 351; Santos vs. Manarang, 27 Phil. Rep., 209, 213); and we are of
the opinion that, for this reason, the claim was properly rejected by Judge Jenkins.

There is no force, in our judgment, in the contention that the pendency of the suit instituted by the
deceased for the cancellation of the document in which the obligation in question was recorded was a
bar to the presentation of the claim against the estate. The fact that the lower court had declared the
document void was not conclusive, as its judgment was not final, and even assuming that if the claim
had been presented to the committee for allowance, it would have been rejected and that the decision
of the committee would have been sustained by the Court of First Instance, the rights of the creditor
could have been protected by an appeal from that decision.

Appellant apparently takes the position that had his claim been filed during the pendency of the
cancellation suit, it would have been met with the plea of another suit pending and that this plea
would have been successful. This view of the law is contrary to the doctrine of the decision in the
case of Hongkong & Shanghai Banking Corporation vs. Aldecoa & Co. ([1915], 30 Phil. Rep., 255.)

Furthermore, even had Jaucian, in his appeal from the decision in the cancellation suit, endeavored
to obtain judgment on his cross-complaint, the death of the debtor would probably have required the
discontinuance of the action presented by the cross-complaint or counterclaim, under section 703.

As already observed the case is such as not to require the court to apply sections 746-749, inclusive,
of the Code of Civil Procedure, nor to determine the conditions under which contingent claims are
barred. But a few words of comment may be added to show further that the solidary obligation upon
which this proceeding is based is not a contingent claim, such as is contemplated in those sections. Š
The only concrete illustration of a contingent claim given is section 746 is the case where a person is
liable as surety for the deceased, that is, where the principal debtor is dead. This is a very different
situation from that presented in the concrete case now before us, where the surety is the person who
is dead. In the illustration put in section 746 — where the principal debtor is dead and the surety is
the party preferring the claim against the estate of the deceased — it is obvious that the surety has no
claim against the estate of the principal debtor, unless he himself satisfies the obligation in whole or in
part upon which both are bound. It is at this moment, and not before, that the obligation of the
principal to indemnify the surety arises (art. 1838, Civil Code); and by virtue of such payment the
surety is subrogated in all the rights which the creditor had against the debtor (art. 1839, same code).

Another simple illustration of a contingent liability is found in the case of the indorser of a contingent
liability is found in the case of the indorser of a negotiable instrument, who is not liable until his liability
is fixed by dishonor and notice, or protest an notice, in conformity with the requirements of law. Until
this event happens there is a mere possibility of a liability is fixed by dishonor and notice, or protest
and notice, in conformity with the requirements of law. Until this event happens there is a mere
possibility of a liability, which is fact may never become fixed at all. The claims of all persons who
assume the responsibility of a liability, which in fact may never become fixed at all. The claims of all
persons who assume the responsibility of mere guarantors in — as against their principles — of the
same contingent character.
It is possible that "contingency," in the cases contemplated in section 746, may depend upon other
facts than those which relate to the creation or inception of liability. It may be, for instance, that the
circumstance that a liability is subsidiary, and the execution has to be postponed after judgment is
obtained until the exhaustion of the assets of the person or entity primarily liable, makes a claim
contingent within the meaning of said section; but upon this point it is unnecessary to express an
opinion. It is enough to say that where, as in the case now before us, liability extends unconditionally
to the entire amount stated in the obligation, or, in other words, where the debtor is liable in solidum
and without postponement of execution, the liability is not contingent but absolute.

For the reasons stated, the decision of the trial court denying appellant's petition and his motion for a
new trial was correct and must be affirmed. No costs will be allowed on this appeal. So ordered.
 SECOND DIVISION

[G.R. No. 23977. July 22, 1925. ]

CRISTETA ALMARZA, with her husband LUIS DALISAY, and ESTEBAN

MORALDA, Petitioners, v. FERNANDO SALAS, Judge of the Court of First
Instance of Iloilo, ENCARNACION NELLAMA and RUPERTO MONTINOLA, Sheriff
of the Province of Iloilo, Respondents.

Pio Sian Melliza, for Petitioners.

Nicolas P. Nonato for Respondents.

SYLLABUS

1. BONDS; "SUPERSEDEAS" BONDS; LIABILITY OF PRINCIPAL AND SURETIES ON

"SUPERSEDEAS" BONDS. — The rule is well established that the sureties on a
supersedeas bond are jointly and severally liable with the principal debtor, and that an
execution may issue against their property concurrently with the execution against the
property of the principal.

2. ACTIONS; FORCIBLE ENTRY AND DETAINER; RIGHT TO CHANGE AMOUNT OF

DAMAGES IN AN ACTION OF FORCIBLE ENTRY AND DETAINER ON APPEAL; "QUAERE."
— The question not having been squarely presented, we express no opinion thereon,
whether or not the plaintiff in an action of forcible entry and detainer can change the
amount of his prayer for damages on the appeal.

DECISION

JOHNSON, J.  :

This is a petition for the extraordinary writ of prohibition. Its purpose is to prevent the
respondents from executing a judgment rendered by the Court of First Instance of the
Province of Iloilo in an action for the detention of a certain piece or parcel of land, and
damages.

It appears from the record that on or about the 14th day of April, 1923, the respondent
Encarnacion Nellama commenced an action in the court of the justice of the peace of the
municipality of Miagao, of the Province of Iloilo, to recover of the therein defendants,
Esteban Moralda and Petra Moralda, the possession of a certain piece or parcel of land
located in the barrio De Valencia, of said municipality, composed of about one cavan de
semilla de palay, more or less, and prayed for damages in the sum of P25 for the
unlawful detention of said parcel of land. On the 12th day of May, 1923, the justice of
the peace of said municipality rendered a judgment in favor of said plaintiff and against
said defendants, ordering and directing the latter to deliver to the former the possession
of said parcel of land and to pay damages in the sum of P25 and the costs. From that
judgment of the justice of the peace the defendants appealed to the Court of First
Instance. To perfect said appeal the defendants executed and delivered the usual bond
required by law, with the petitioners herein as bondsmen.

The record contains some confusion concerning the amount of said bond. In one part of
the petition it is alleged that the bond was for the sum of P50, or double the amount of
the judgment for damages of the justice of the peace, while in another part of the
petition it appears that the bond was for the sum of P500, and in addition thereto the
sum of P9 for costs. In the Court of First Instance the original plaintiff instead of
renewing the complaint presented in the court of the justice of the peace, presented
practically a new complaint in which he prayed for the possession of said parcel of land
together with damages for the sum of P100 instead of P25, and costs. The record does
not disclose what was the defense of the original defendants in the Court of First
Instance.

Upon the trial of the issue presented in the Court of First Instance the respondent judge
rendered a judgment in favor of the original plaintiff and against the original defendants,
ordering and directing the said defendants to deliver to the plaintiff the said parcel of
land and to pay P100 as damages together with costs. The original defendants having
failed to satisfy said judgment, an execution was issued thereon and placed in the hands
of the sheriff, directing and ordering him to collect of the defendants, including the
bondsmen on appeal, the sum of P500 and costs. The lower court justified the issuance
of said execution for the sum of P500 as the amount of the bond, instead of P50, upon
the ground that the said bond was in truth and in fact a bond for the sum of P500. After
repeated motions for reconsiderations of the order directing the execution, and many
delays, the present petition was presented.

Upon the presentation of the petition the respondents were required to show cause why
the prayer thereof should not be granted. In answer to that order the respondents
demurred, alleging, first, that the facts stated in the petition were not sufficient to
constitute a cause of action justifying the granting of the writ of prohibition and, second,
that the petition was ambiguous, unintelligible and vague. Upon the issue thus
presented, the cause was submitted to this court without argument.

It is argued pro and con by the respective parties, that the respondent judge was
without jurisdiction to issue a writ of execution upon said judgment against said
bondsmen without a further hearing, contending at the same time that the bond was for
p50 and not or P500. The question of the amount of the bond was fixed by the lower
court, and the record contains no fact or facts justifying us in arriving at a different
conclusion. it has been held in numerous decisions by this court, that the sureties on a
supersedeas bond were jointly and severally liable with the principal debtor, and that an
execution might issue against their property, concurrently with the execution against the
property of the principal. (Molina v. De la Riva, 7 Phil., 345; Chinese Chamber of
Commerce v. Pua Te Ching, 16 Phi., 406; and many other cases which might be cited
articles 1144, 1822, 1831 and 1856, Civil Code.)

Upon the question whether or not the plaintiff in an action of forcible entry and detainer
can change the character of his action on appeal in the Court of First Instance, by
increasing the amount of his damages, is one upon which there is a difference of
opinions in different jurisdictions. Inasmuch as the question has not been squarely
presented to us, we express no opinion.

The entire record in fact presents but two questions, and they are: First, Did the
respondent judge exceed his jurisdiction? And, second, Did the petitioners have another
adequate and speedy remedy? The first question must be answered in the negative, for
the reason that the judgment had become final and the respondent had full jurisdiction
to issue an execution thereon. The defendants had another speedy and adequate
remedy by an appeal. If they were not satisfied with the judgment of the respondent
judge, they might have appealed. They did not avail themselves of that remedy. The
mere fact that the time has elapsed for the perfection of the appeal does not create a
right to the remedy prayed for. if the finding of the respondent judge was that the
appeal bond was for P500 instead of P50, then the petitioners had suffered no damages
and they are simply being required to comply with the contract which they voluntarily
entered into.

We find no reason nor foundation whatever for granting the remedy prayed for. The
same is, therefore, hereby denied, with costs against the petitioners. So ordered.
EN BANC

[G.R. No. 46193. October 10, 1938. ]

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, Plaintiff-Appellee, v. THE

VISAYAN SURETY & INSURANCE CORPORATION, Defendant-Appellant.

Jose S. Leyson, for Appellant.

C. D. Johnston, Gabino Veloso, and Gullas, Lopez & Leuterio, for Appellee.

SYLLABUS

1. PUBLIC WORKS; CONTRACTS OF BUILDING AND CONSTRUCTION; COMPLAINT IN

THE NAME OF THE GOVERNMENT AGAINST CONTRACTORS AND SURETIES, IN
ACCORDANCE WITH THE PROVISIONS OF ACT NO. 3688. — More than six months
having elapsed with excess from the date of acceptance by the Government of the work
involving construction of a causeway and landing at the Port of Santa Fe, Bantayan
Island, Province of Cebu, up to the time the decision in this case was rendered, without
the Government having filed any claim against the defendant-appellant, with preference
over the claimants-appellees. That is the preference preserved by law in favor of the
Government, and that is the reason behind the provision that nobody, without the
express authority of the Government, may bring an action in the name of the
Government against a contractor and his sureties.

2. ID.; ID.; JURISDICTION; NOTICE TO THE CREDITORS OF THE CONTRACTOR. — The

order of the court notifying the contractor’s creditors for materials furnished or for labor
employed, that they could intervene in this case in order to claim their respective
credits, is immaterial to determine the jurisdiction of the court in this case, because in
fact the claim of the creditor Y. S. H. Co. was admitted, although it had been presented
outside the period fixed by the court; and any extension of said period granted by the
court, provided it did not exceed that of one year prescribed by law, was not
jurisdictional, once the court had already acquired jurisdiction by the publication of said
order and notice.

3. ID.; ID.; ID.; LIABILITY OF THE SURETY OF THE CONTRACTOR. — According to the
surety bond filed in this case, the contractor and the defendant bound themselves jointly
and severally in favor of the Government and of any other person, partnership or
corporation, who might furnish labor and materials to the contractor; and according to
the provisions of articles 1830 and 1831 of the Civil Code, the defendant, as surety,
could be compelled to pay to the claimants without the necessity of having the latter
exhaust all the property of the principal debtor, because the defendant bound itself
jointly and severally with contractor.

4. ID.; ID.; ID.; CONSTITUTIONALITY OF ACT NO. 3688. — The Government, by means
of said Act No. 3688, compels all those entering into a contract with it for the
prosecution of public works, to execute a bond under certain terms and conditions,
without exempting from this obligation any contractor, whatever his class and rank in
society, if he has to undertake some work for the Government. The Government is
protecting itself when, pursuant to said law, it requires the execution of the bond to
secure faithful compliance with the obligations of the contractor in the performance of
the works, and is also protecting itself when, in accordance with the same law, it
extends the bond in favor of third persons who might have some claim by reason of the
labor and materials used in the building or work of the same Government. The same
privilege is not made to extend to contractors of private works because said contractors
should know how to protect themselves in the most appropriate manner they deem
convenient for their interests.

5. ID.; ID.; ID.; ACT NO. 3688 DOES NOT IMPAIR CONTRACTUAL OBLIGATIONS. — It
cannot be said that Act No. 3688 impairs contractual obligations by favoring persons
who are not parties to the contract of suretyship, because the law doe not produce that
effect of changing or altering the terms of an obligation so contracted, but has for its
object to determine beforehand the effects of the bond with respect to third persons who
may later have some interest in the works by reason of the labor or materials furnished.

DECISION

CONCEPCION, J.:

Judgment having been rendered by the Court of First Instance of Cebu in civil case No.
10433, ordering the Visayan Surety and Insurance Corporation to pay certain sums of
money to the Pacific Commercial Company and to the claimants to be enumerated
hereinbelow, said defendant appealed from the judgment and assigns in its brief six
alleged errors claimed by it to have been committed by the court, of which the third
involves the supposed unconstitutionality of Act No. 3688 and the fourth raises the
question of lack of jurisdiction of the court over the person and the subject matter of the
litigation.

Said case was commenced through a complaint filed on October 23, 1934, by the Pacific
Commercial Company in the name of the Government of the Philippine Islands, pursuant
to the provisions of Act No. 3688, for the recovery of a certain sum of money from the
defendant, upon a bond filed by the latter in favor of the Government of the Philippine
Islands to answer for the full and faithful performance of the contract executed by M. de
los Reyes for the construction of a causeway and landing at the Port of Santa Fe,
Bantayan Island, Province of Cebu, and to answer for the payment of all obligations for
materials used and labor employed in said construction. Upon the filing of the complaint,
the court ordered, in compliance with the provisions of said Act, that all the creditors of
the contractor for labor employed and materials used by him in the construction of said
causeway and landing be notified of their right to intervene in this action on or before
February 13, 1935, for the recovery of their credits, directing to that effect the
publication of the order in the newspaper "The Advertiser", of general circulation in
Cebu, once a week for three successive weeks, the last publication to be made not less
than three months before the date above-indicated.

On December 17, 1934, the Luzon Lumber Company entered its appearance, seeking
payment of the sum of the P629.10 plus interest thereon at 12 per cent per annum from
September 30, 1933, for materials furnished to said contractor. On January 23, 1935,
Jose Ibañez also entered his appearance in the case, seeking payment of the sum of
P243, likewise for materials furnished. On May 10, 1935, Yutivo Sons Hardware
Company entered its appearance to claim the sum of P1,320 also for materials. This
claim was later reduced to the sum of P996.32, plus interest thereon at 12 per cent and
an additional 20 per cent attorney’s fees and costs. After the evidence for the claimants
had been presented, the attorney for the defendant filed a motion asking for the
dismissal of the case on the ground that there was no cause of action and that the court
had no jurisdiction over the same. Said motion having been denied and the defendant
having been ordered to present its evidence within five (5) days, its attorney gave notice
of his refusal to present said evidence. On January 30, 1936, the court rendered the
judgment appealed from, ordering the defendant to pay to the Pacific Commercial
Company the sum of P681.37 with legal interest thereon from December 21, 1934; to
the Luzon Lumber Company, the sum of P526.39 with legal interest thereon from
December 18, 1934; to Jose Ibañez, the sum of P203.32, with legal interest thereon
from January 23, 1935; and to Yutivo Sons Hardware Company, the sum of P946.32,
with legal interest thereon from May 11, 1935, plus the additional sum of P189.26 for
attorney’s fees and costs.

The alleged lack of jurisdiction of the court is rather a consequence deduced by the
appellant from the first alleged error attributed to the court, which error is made to
consist in the alleged failure of the court to dismiss the complaint on the ground that the
claimants did not follow the procedure prescribed by Act No. 3688 in bringing the action
against the defendant in the name of the Government of the Philippine Islands. This
alleged error is based on the following reasons:chanrob1es virtual 1aw library

(a) That the filing of the action is premature.

(b) That the proper procedure for using the name of the Government of the Philippine
Islands in bringing the action has not been followed.

(c) That personal notice has not been given to the creditors.

(d) That the notice has not been published in some newspaper.

(e) That the order of October 23, 1934, is illegal, and

(f) That the contractor M. de los Reyes has not been joined as party defendant.

(a) As to the premature filing of the complaint, the appellant contends that, the work
under said contract having been completed on May 19, 1934, and accepted on July 8,
1934, when the complaint was filed on October 23, 1934, the period of six months had
not yet elapsed and the Government, in accordance with the provisions of Act No. 3688,
had not yet brought an action or expressly waived its right to bring an action upon the
penal bond of the defendant, nor had the claimants applied to the Department of Public
Works for a copy of the contract and of the bond in order to be authorized to bring the
action in the name of the Government of the Philippine Islands.
It is a fact, however, that on September 10, 1934, the district engineer of Cebu, Alejo
Aquino, addressed a letter (Exhibit C) to the Pacific Commercial Company at Cebu,
stating that, with reference to its unpaid claim against the contractor Marciano de los
Reyes, and at the request of the Director of Public Works, it was advised to bring its civil
action in court upon the penal bond executed by the Visayan Surety and Insurance
Corporation as security of the contract entered by Reyes with the Government. Even
without having to decide whether or not said letter in fact amounts to an express waiver
on the part of the Government of its right to bring an action for damages against the
contractor within the period of six months, under the provisions of said Act No. 3688,
there is, however, a fact which completely overcomes the defendant’s objection, and it is
that, more than six months having elapsed with excess from the acceptance of the work
on July 8, 1934, up to the time the decision in this case was rendered on January 30,
1936, without the Government having filed any claim against the appellant during all
that time or later, up to this date, it is evident that the Government, by reason of the
long time that elapsed, has lost its right to claim damages against the contractor or his
surety, the Visayan Surety and Insurance Corporation, with preference over the herein
claimants-appellees. It is that preferred right which the law attempts to preserve in
favor of the Government within the period of six months following the acceptance of the
completed work, and that is the reason behind the provision that nobody, without an
express waiver of the Government, may bring an action in the name of the Government
against the contractor and his sureties.

(b) This court is of the opinion that the foregoing refutes the second ground alleged to
the effect that due procedure for using the name of the Government of the Philippine
Islands in the filing of the complaint had not been followed. The only thing to be added
is that the office of the district engineer of Cebu is the representative at Cebu of the
Government Bureau of Public Works, and it was said office that had the construction of
the Santa Fe causeway and landing at Bantayan under its charge, direction and
supervision, as proven by the uncontradicted testimony of Pedro Principe, chief clerk of
the office of the engineer of Cebu, who has charge and supervision over the records and
files of said office. The above-stated communication, Exhibit C, of the district engineer of
Cebu, Alejo Aquino, should therefore be considered as a communication backed up by
the authority of the Director of Public Works.

(c) The appellant argues in the third ground of its first assignment of alleged error that
personal notice has not been given to all the creditors. With respect to this point, as the
court very well stated, any objection in this respect cannot be of benefit to the
defendant. The legal provision requiring such notice is for the protection of the creditors
of the contractor. The true parties who may arise such objection would only be the
creditors adversely affected.

(d) The appellant further contends that, according to Act No. 3688, the notice should be
published in some newspaper of general circulation, and the order of the court according
to it, was published in only one newspaper "The Advertiser." This court is of the opinion
that this is sufficient because, although there may be more than one newspaper in Cebu,
the law does not require the publication to paper in Cebu, the law does not require the
publication to be made in more than one newspaper but only in some newspaper.

(e) The court’s order of October 23, 1934, whereby notice was given to the contractor’s
creditors for materials furnished or for labor employed that they could intervene in order
to claim their respective credits, is alleged to be illegal for having fixed February 13,
1935, as the last day for the presentation of the claims, while Act No. 3688 provides
that the claims may be presented at any time within one year from the acceptance of
the work. If there were any anomaly in the order in question, it would not be the
defendant who would be entitled to allege the same in its favor, because it has not all
been prejudiced by said order, and the only one who might complain against it would be
some creditor who was unable to present his claim by reason of the shortening of the
period fixed by law.

It is contended that the publication of the order in question is something that vests the
court with jurisdiction to try the present case, and said order being null and void ab
initio, the court has not acquired jurisdiction in this case. The order of the court having
been published in the manner prescribed by law, this court is of the opinion that the law
has been substantially complied with, although the period fixed for the presentation of
claims has been reduced by some months. The objection of the defendant should all the
more be considered without merit because no creditor has been excluded. The claim of
Yutivo Sons Hardware Company was presented after February 13, 1935, but it was,
however, admitted by the court, in spite of the opposition filed by the appellant. It is
argued that the period for the presentation of claims has not been extended after
February 13, 1935, and that the extension of said period without publication of the order
extension destroys the jurisdiction of the court over the subject matter of the litigation.
This court is of the opinion that once the jurisdiction of the order of October 13, 1934,
any extension of the period, provided it be within the same period of one year fixed by
law for the presentation of the claims, is no longer jurisdiction.

(f) Another alleged ground for the first error is that the contractor M. de los Reyes has
not been joined as party defendant. The allegation of this supposed defect is without
merit and to refute it suffice it to call attention to the de los Reyes and the defendant
bound themselves jointly and severally in favor of the Government and of any other
person, partnership or corporation, who might furnish labor and materials to the
contractor, in the sum of P7,270, and according to the provisions of articles 1830 and
1831 of the Civil Code, the defendant, as surety, may be compelled to pay to the
claimants without first having all the property of the principal debtor exhausted when, as
it happens in this case, the defendant has bound itself jointly and severally with the
contractor (Chinese Chamber of Commerce v. Pua Te Ching, 16 Phil., 406; Inchausti &
Co. v. Yulo, 34 Phil., 978; Jaucian v. Querol, 38 Phil., 707; Ferrer v. Lopez and Santos,
56 Phil., 592).

The case of Uy Tam and Uy Yet v. Leonard (30 Phil., 471) is cited by the appellant for
the purpose of showing, as may be inferred from that part of the decision in said case
underlined by said appellant, that as the persons who furnished materials to the
contractor were not parties to the contract of suretyship, they have no right of action
against the surety. If this is the appellant’s contention, attention is invited to the
provisions of Act No. 3688, under which the penal bond in question was executed by the
appellant, which expressly provide that "any person, company or corporation who has
furnished labor or materials used in the construction or repair of any public building or
public work, and payment for which has not been made, shall have the right to intervene
and be made a party to any action instituted by the Government of the Philippine
Islands on the bond of the contractor, and to have their rights and claims adjudicated in
such action and judgment rendered thereon, . . . ."cralaw virtua1aw library

And according to the same surety bond, the appellant, as hereinbefore stated, bound
itself to pay to the Government and to any person, partnership, or corporation that has
supplied the contractor with labor or materials, their credits to the extent of the amount
stated in said bond.

Another of the supposed errors assigned by the appellants consists, as contended by it,
in the alleged failure of the court to hold that Act No. 3688 is unconstitutional and that
the penal bond executed by it is null and void. The appellant, arguing on this alleged
error, contends that Act NO. 3688 compels the contractor to file a penal bond not only in
favor of the Government but also in favor of the persons supplying the contractor with
labor and materials in cases of public works. This, according to it, constitutes class
legislation on the ground that it does not afford the same privilege to persons furnishing
labor and materials to contractors in private works. It also contends that said law
impairs the obligations of contracts inasmuch as it grants favors to persons who are not
parties to the contract, as are the ones furnishing labor and materials to the contractor.

This court is of the opinion that both contentions are untenable. The Government, by
means of said law, compels all those entering into a contract with it for the prosecution
of public works, to execute a bond under certain terms and conditions, without
exempting from this obligation any contractor, whatever his class and rank in society, if
he has to undertake some work for the Government. The Government is protecting itself
when, pursuant to said law, it requires the execution of the bond to secure faithful
compliance with obligations of the contractor in the performance of the works, and is
also protecting itself when, in accordance with the same law, it extends the bond in
favor of third persons who might have some claim by reason of the labor and materials
used in the building or work of the same Government. The same privilege is not made to
extend to contractors of private works because said contractors should know how to
protect themselves in the most appropriate manner they deem convenient for their
interests. And it cannot be said that the law in question impairs contractual obligations
by favoring persons who are not parties to the contract of suretyship, because the law
does not produce the effect of changing or altering the terms of an obligation so
contracted, but has for its object to determine before hand the effects of the bond with
respect to third persons who may later have some interest in the works by reason of the
labor or materials furnished. And in this respect, the law is not unconstitutional.

"Impairment of Obligation. — a. In General. — Any enactment of a legislative character

is said to ’impair’ the obligation of a contract which attempts to take from a party a right
to which he is entitled by its terms, or which deprives him of the means of enforcing
such a right. But it may be said in general that a law which does not strike at the vitality
of a contract either by altering its terms or preventing its preservation and enforcement
does not impair its obligation. . . ." (12 C. J., 1056.)

"A law does not impair the obligation of a contract within the meaning of the
Constitution, if neither party is relieved thereby from performing anything of that which
he obligated himself to do. But if either party is absolved from performing any of these
things, such obligation is impaired, whether absolution is affected directly and expressly
or indirectly, and only as the result of some modification of the legal proceedings for
enforcement." (State ex rel. National Bond & Security Co. v. Krahmer, 105 Minn., 422;
117 N. W., 780; 21 L. R. A. [N. S. ], 157. Footnote, I Cooley’s constitutional Limitations,
p. 583, 8th ed.) .

In the light of the above-quoted doctrines, this court does not see how the appellant can
contend that Act No. 3688 impairs the obligation of a contract, when said law does not
take from it any right derived from the bond nor deprive it of the means of enforcing
some of its right.

Another alleged error attributed to the court by the appellant is that, according to it, it
has not been proven that the materials taken from the claimants were used in the
contract secured by it. The court found it to have been proven satisfactorily that the
materials furnished by the claimants to the contractor were used by the latter in the
construction of the work contracted. This court is of the opinion that this conclusion is
warranted by the evidence.

Finding no merit either in the other errors assigned by the appellant, the judgment
appealed from is affirmed, with costs to said appellant. So ordered.
 EN BANC
[G.R. No. L-9306.  May 25, 1956.]
SOUTHERN MOTORS, INC., Plaintiff-Appellee, vs. ELISEO BARBOSA, Defendant-Appellant.
 
DECISION
CONCEPCION, J.:
This is an appeal from a decision of the Court of First Instance of Iloilo:chanroblesvirtuallawlibrary
“(a)  Ordering the Defendant Eliseo Barbosa to pay to the Court, for the benefit of the Plaintiff within a period
of ninety (90) days from receipt by the Defendant hereof, the sum of P2,889.53, with interest at the rate of
12% per annum computed on the basis of the amounts of the installments mentioned in the mortgage and of
the dates they respectively fell due, until fully paid; chan roblesvirtualawlibrarythe sum of P200 by way of
attorney’s fees, plus costs; chan roblesvirtualawlibraryand (b) Upon failure of the Defendant to pay as
aforesaid, ordering the land described in the complaint and subject of the mortgage to be sold at public
auction in accordance with law in order to realize the amount of the judgment debt and costs.”
Although originally forwarded to the Court of Appeals, the same has certified the record to this Court in view
of the fact that the issues raised in the appeal involve merely questions of law.
Plaintiff, Southern Motors, Inc., brought this action against Eliseo Barbosa, to foreclose a real estate mortgage,
constituted by the latter in favor of the former, as security for the payment of the sum of P2,889.53 due to
said Plaintiff from one Alfredo Brillantes, who had failed to settle his obligation in accordance with the terms
and conditions of the corresponding deed of mortgage. Defendant Eliseo Barbosa filed an answer admitting
the allegations of the complaint and alleging, by way of “special and affirmative”
defense:chanroblesvirtuallawlibrary
“That the Defendant herein has executed the deed of mortgage Annex A for the only purpose of guaranteeing
— as surety and/or guarantor — the payment of the above mentioned debt of Mr. Alfredo Brillantes in favor
of the Plaintiff.
“That the Plaintiff until now has no right action against the herein Defendant on the ground that said Plaintiff,
without motive whatsoever, did not intent or intent to exhaust all recourses to collect from the true debtor
Mr. Alfredo Brillantes the debt contracted by the latter in favor of said Plaintiff, and did not resort nor intends
to resort all the legal remedies against the true debtor Mr. Alfredo Brillantes, notwithstanding the fact that
said Mr. Alfredo Brillantes is solvent and has many properties within the Province of Iloilo.”
Thereupon, Plaintiff moved for summary judgment which a branch of the Court of First Instance of Iloilo,
presided over by Hon. Roman Ibañez, Judge, denied upon the ground that it “is premature”. Plaintiff moved
for a reconsideration of the order to this effect. Soon later, he filed, also, another motion praying that the case
be transferred to another branch of said court, because that of Judge Ibañez would be busy trying cadastral
cases, and had adopted the “policy of refraining from entertaining any other civil cases and all incidents
related thereto, until after said cadastral cases shall have been finally disposed of.” With the express authority
of Judge Ibañez, the case was referred to the branch of said court, presided over by Hon. Querube C.
Makalintal, Judge, for action, upon said motion for reconsideration. Thereafter, Judge Makalintal rendered the
aforementioned decision, from which the Defendant has appealed. He maintains, in his brief,
that:chanroblesvirtuallawlibrary
“1.  The trial court erred in hearing Plaintiff-Appellee’s ‘motion for reconsideration’ dated June 9, 1951,
notwithstanding the fact that Defendant-Appellant was not served with a copy thereof nor served with notice
of the hearing thereof.
2.  “The trial court erred in rendering a ‘judgment on the pleadings’ in Appellee’s favor when no issue was at
all submitted to it for resolution, to the prejudice of the substantial rights of Appellant.
3.  “The court a quo erred in depriving Defendant-Appellant of his property rights without due process of law.”
The first assignment of error is based upon an erroneous predicate, for, contrary to Defendant’s assertion, his
counsel in the lower court, Atty. Manuel F. Zamora, through an employee of his office, by the name of
Agripino Aguilar, was actually served on June 9, 1951, with copy of Plaintiff’s motion for reconsideration, with
notice to the effect that said motion would be submitted for the consideration and approval of the lower
court, on Saturday, June 16, 1951, at 8:chanroblesvirtuallawlibrary00 a.m., or soon thereafter as counsel may
be heard.
The second assignment of error is, likewise, untenable. It is not true that there was no issue submitted for
determination by the lower court when it rendered the decision appealed from.
It will be recalled that each one of the allegations made in Plaintiff’s complaint were expressly admitted
in Defendant’s answer, in which he merely alleged, as “special and affirmative” defense, that Plaintiff is not
entitled to foreclose the mortgage constituted in its favor by the Defendant, because the property of Alfredo
Brillantes, the principal debtors, had not been exhausted as yet, and were not sought to be exhausted, for the
satisfaction of Plaintiff’s credit. Thus, there was no question of fact left for determination. The only issue set
up by the pleadings was the sufficiency of said affirmative defense. And such was the only point discussed by
the Defendant in his opposition to Plaintiff’s motion for a summary judgment, referring, evidently, to a
judgment on the pleadings.
Plaintiff’s motion for reconsideration of the order of Judge Roman Ibañez refusing to render said judgment,
upon the ground that it was premature, revived said issue of sufficiency of the aforementioned affirmative
defense, apart from calling for a reexamination of the question posed by said order of Judge Ibañez, namely,
whether it was proper, under the circumstances, to render a judgment on the pleadings. In other words, said
motion for reconsideration had the effect of placing before then Judge Makalintal, for resolution, the following
issues, to wit:chanroblesvirtuallawlibrary (1) whether a summary judgment or a judgment on the pleadings
was in order, considering the allegations of Plaintiff’s complaint and those of Defendant’s answer; chan
roblesvirtualawlibraryand (2) whether the mortgage in question could be foreclosed although Plaintiff had not
exhausted, and did not intend to exhaust, the properties of his principal debtor, Alfredo Brillantes.
The third assignment of error is predicated upon the alleged lack of notice of the hearing of Plaintiff’s motion
for reconsideration. As stated in our discussion of the first assignment of error, this pretense is refuted by the
record. Moreover, it is obvious that Defendant’s affirmative defense is devoid of merit
for:chanroblesvirtuallawlibrary
1.  The deed of mortgage executed by him specifically provides:chanroblesvirtuallawlibrary
“That if said Mr. Alfredo Brillantes or herein mortgagor, his heirs, executors, administrators and assigns shall
well and truly perform the full obligations above-stated according to the terms thereof, then this mortgage
shall be null and void, otherwise it shall remain in full force and effect, in which event herein mortgagor
authorizes and empowers herein mortgagee-company to take any of the following actions to enforce said
payment;.
“(a)  Foreclose, judicially or extrajudicially, the chattel mortgage above referred to and/or also this mortgage,
applying the proceeds of the purchase price at public sale of the real property herein mortgaged to any
deficiency or difference between the purchase price of said chattel at public auction and the amount of
P2,889.53, together with its interest hereby secured; chan roblesvirtualawlibraryor
“(b)  Simply foreclose this mortgage judicially in accordance with the provisions of section 2, Rule 70, Rules of
Court, or extra- judicially under the provisions of Act No. 3135 and Act No. 4118, to satisfy the full amount of
P2,889.53, together with its interest of 12 per cent per annum.”
2.  The right of guarantors, under Article 2058 of the Civil Code of the Philippines, to demand exhaustion of the
property of the principal debtor, exists only when a pledge or a mortgage has not been given as special
security for the payment of the principal obligation. Guarantees, without any such pledge or mortgage, are
governed by Title XV of said Code, whereas pledges and mortgages fall under Title XVI of the same Code, in
which the following provisions, among others, are found:chanroblesvirtuallawlibrary
ART. 2087.  “It is also of the essence of these contracts that when the principal obligation becomes due, the
things in which the pledge or mortgage consists may be alienated for the payment to the creditor.”
ART. 2126.  “The mortgage directly and immediately subjects the property upon which it is imposed, whoever
the possessor may be, to the fulfillment of the obligation for whose security it was constituted.”
3.  It has been held already (Saavedra vs. Price, 68 Phil., 688), that a mortgagor is not entitled to the
exhaustion of the property of the principal debtor.
4.  Although an ordinary personal guarantor — not a mortgagor or pledgor — may demand the
aforementioned exhaustion, the creditor may, prior thereto, secure a judgment against said guarantor, who
shall be entitled, however, to a deferment of the execution of said judgment against him until after the
properties of the principal debtor shall have been exhausted to satisfy the obligation involved in the case.
Wherefore, the decision appealed from is hereby affirmed, with costs against the Defendant-Appellant. It is SO
ORDERED.
 EN BANC

G.R. No. L-10168 July 22, 1916

JOSE M. A. ARROYO, guardian of Tito Jocsing, an imbecile, Plaintiff-Appellee,

vs. FLORENTINO HILARIO JUNGSAY, ET AL., Defendants-Appellants.

Perfecto J. Salas Rodriguez for appellants.

TRENT, J.:

The plaintiff in this case is the guardian of one Tito Jocsing, an imbecile, appointed by
the court to succeed Jungsay, the former guardian, who absconded with the funds of his
ward. The defendants are the absconding guardian and his bondsmen. From a judgment
in favor of the plaintiff and against the defendants for the sum of P6,000, together with
interest and costs, the bondsmen appealed.chanroblesvirtualawlibrary chanrobles virtual
law library

The principal question presented for our consideration is whether the appellants should
be credited with P4,400, the alleged value of certain property attached as that of the
absconding guardian, all of which is in the exclusive possession of third parties under
claim of ownership.chanroblesvirtualawlibrary chanrobles virtual law library

The appellants in contending for the credit, rely upon article 1834 of the Civil Code,
which gives to the surety the benefit of a levy ( excusion), even when a judgment is
rendered against both the surety and the principal. But, according t article 1832, before
the surety is entitled to this benefit, he must point out to the creditor property of the
principal debtor which can be sold and which is sufficient to cover the amount of the
debt. Upon this point Manresa, in vol. 12, pp. 263-265, says:

As explicitly stated in the article under consideration, it is not sufficient that the surety
claim the benefit of discussion in time, nor that is so doing he designate property of the
debtor wherein to satisfy the debt. It is also necessary that another condition be fulfilled,
to wit, that such property be realizable and that it be situated in Spanish territory. This
is not only logical, but just, because the attachment of property situated a great
distance away would be a lengthy and extremely difficult proceeding and one that, if
actually not opposed to, yet does not very well accord with the purpose of the bond, that
is, to insure the fulfillment of the obligation and at the same time furnish the creditor
with the means of obtaining its fulfillment without hindrance or delays. The same may
be said of property that is not readily realizable, and as the surety is the sole person
who benefits by the discussion and the one most interested in avoiding difficulties in its
execution, it is he, therefore, who should designate the property out of which the
recovery is to be made, it being unquestionably convenient for him that the property he
designates unite the conditions indicated in order to facilitate the payment of the debt,
whereby he will be freed from the subsidiary obligation inherent in the bond.

In Hill & Co. vs. Bourcier and Pond (29 La. Ann., 841), where provisions similar to our
Civil Code were under consideration, the court said:
The surety has the right, under certain circumstances, to demand the discussion of the
property of the principal debtor. Where suit is brought against the surety alone, he may
interpose the plea, and compel the creditor to discuss the principal debtor. The effect of
this is to stay proceedings against the surety until judgment has been obtained against
the principal debtor, and execution against his property has proved insufficient. When
the suit is brought against the surety and the principal debtor the plea of discussion
does not require or authorize any suspension of the proceedings; but the judgment will
be so modified as to require the creditor to proceed by execution against the property of
the principal, and to exhaust it before resorting to the property of the surety. (Bernard
vs. Custis, 4 Martin, 215; Banks vs. Brander, 13 La., 276.) chanrobles virtual law library

In either case, the surety who desires to avail himself of this right must demand it in
limine, `on the institution of proceedings against him.' He must, moreover, point out to
the creditor property of the principal debtor, not incumbered, subject to seizure; and
must furnish a sufficient sum to have the discussion carried into effect. (R. C. C., 3045,
3046, 3047.) A plea which does not meet these requirements must be disregarded.
(Robechot vs. Folse, 11 La., 136; Banks vs. Brander, 13 La., 276.)

The property pointed out by the sureties is not sufficient to pay the indebtedness; it is
not salable; it is so incumbered that third parties have, as we have indicated, full
possession under claim of ownership without leaving to the absconding guardian a
fractional or reversionary interest without determining first whether the claim of one or
more of the occupants is well founded. In all these respects the sureties have failed to
meet the requirements of article 1832 of the Civil
Code.chanroblesvirtualawlibrary chanrobles virtual law library

Where a guardian absconds or is beyond the jurisdiction of the court, the proper
method, under article 1834 of the Civil Code and section 577 of the Code of Civil
Procedure, in order to ascertain whether such guardian is liable and to what extent, in
order to bind the sureties on his official bond, is by a proceeding in the nature of a civil
action wherein the sureties are made parties and given an opportunity to be heard. All
this was done in the instant case.chanroblesvirtualawlibrary chanrobles virtual law
library

The judgment appealed from, being in accordance with the law, the same is hereby
affirmed, with costs against the appellants. So ordered.ch
 EN BANC

G.R. No. L-41320             November 9, 1934

CONCEPCION J. VIUDA DE SYQUIA, in her capacity as administratrix of the state of the

deceased Gregorio Syquia, plaintiff-appellee,
vs.
PERFECTO JACINTO, ET AL., defendants.
RAFAEL PALMA, appellants.

Francisco Dominguez for appellant.

Cardenas and Casal for appellee.

BUTTE, J.:

On December 15, 1924, the Bank of the Philippine Islands obtained a judgment against Perfecto and
Felipe Jacinto and Rafael Palma on a promissory note in its favor executed by the defendants on May
27, 1922, for the sum of P22,000 with interest at the rate of 9 per cent per annum plus 10 per cent of
the principal as costs and attorney's fees. The dispositive part of this judgment is as follows:

Se condena a los Sres. P. y F. Jacinto y Rafael Palma a que paguen a la parte demandante,
los primeros como obligados principales y el ultimo como fiador, la suma de veinticuatro mil
pesos (P24,000) al interes de 9 por ciento al año desde el 27 de mayo de 1923, mas el uno
por ciento sobre el principal en concepto de honorarios de abogado y costas.

No debe expedirse ejecucion contra el demandado Sr. Rafael Palma, sino despues de
haberse hecho excusion de los bienes de los senores P. y F. Jacinto.

On August 16, 1928, the Bank of the Philippine Islands "in consideration of the sum of P1 and other
valuable considerations" assigned and transferred said judgment to Gregorio Syquia.

On July 12, 1932, the widow of Gregorio Syquia, as administratrix of his estate, filed suit in the Court
of First Instance of Manila against Perfecto and Felipe Jacinto and Rafael Palma reciting the
aforementioned judgment and assignment and alleging that since the date of said judgment none of
the defendants had paid anything thereon and there remains still due the sum of P24,000 with
interest at 9 per cent since May 27, 1923. The plaintiff prayed that the judgment be revived and that
defendants Perfecto and Felipe Jacinto as principal and Rafael Palma as guarantor be adjudged to
pay the sum of P24,000 with interest since May 27, 1923, and costs. To this petition were attached a
copy of the judgment of December 15, 1924, Exhibit A, and a copy of the assignment thereof to the
plaintiff, Exhibit B.

The defendants filed a joint amended answer in which they admitted the judgment, Exhibit A, and that
said judgment had lapsed and it was necessary to revive the same; but they denied the assignment
to Syquia and the allegation that nothing had been paid on said judgment and that the full amount
thereof was still due. They set up as a special defense that the judgment which the plaintiff was
attempting to revive has been fully paid; that at the time of making the assignment to Gregorio
Syquia, the bank had no right or interest under said judgment, the same having been fully paid, and
that the partition does not state facts sufficient to constitute a cause of action.
In the same answer they set up a counter-demand to the following effect: that in the month of April,
925, the Bank of the Philippine Islands caused an execution to be issued under said judgment and
the sheriff on the request of the bank sold at public sale three properties belonging to the defendants
Jacinto which had been previously attached; that at said public sale three properties belonging to the
defendants Jacinto which had been previously attached; that at said public sale the bank was the
highest bidder crediting the amount of its bid on the said judgment; that said parcels of land with their
improvements consisting of four houses yielded a monthly revenue of P880 or P10,560 a year; that
during the year allowed the judgment debtors for redemption the said bank took control and
possession of the said parcels of land and collected and retained the revenues thereof as aforesaid
and that Gregorio Syquia has been receiving the same since that time, though without any right
whatever; that the said revenues during the year of redemption in the sum of P10,560 were never
applied by the bank as a credit on said judgment. The defendants prayed that they be absolved from
the demand of the petitioner and that the estate of Gregorio Syquia be condemned to pay the sum of
P10,560 with costs. The answer concludes with a prayer for general relief.

On the trial of this cause it was shown that at the execution sale held on April 18, 1925, the bank
bought two of the properties of the defendants Jacinto for the sum of P15,045. The third property was
sold to Rufino Reyes for P1,000 which was not credited on the judgment debt pending the
determination of Reyes' claim of priority. The trial court stated the judgment debt as of April 18, 1925,
as follows:

Loan ........................................................................ P24,000.

...................... 00
Interest from May 27, 1923 to April 1, 1925 at 9 per
4,083.29
cent ...
Cost including sheriff's
657.95
sale .....................................................

P28,741.
Total obligation ......................................... 24

from which is to be deducted P15,045 the value of the two parcels sold to the bank on April 18, 1925,
leaving a balance due of P13,696.24. On September 2, 1925, the defendant Palma paid the bank
P100 leaving thus a net balance due of P13,596.24. The trial court entered the following judgment:

Dictese sentencia condenando a los demandados, Perfecto Jacinto y Felipe Jacinto, como
obligados principales, y Rafael Palma como fiador, a pagar a la demandante la cantidad de
trece mil quinientos noventa y seis pesos con veinte y cuatro centimos (P13,596.24), mas las
costas del juicio.

Se sobresee la reconvencion de los demandados.

Asi se ordena.

Manila, I.F., 25 de septiembre de 1933.

From this judgment only defendant Palma appeals. He submits the following assignments of error:

1. El Juzgado erro al no apreciar que la cuenta de los deudores P. y F. Jacinto quedo

liquidada con el banco al efectuarse la venta de las fincas embargadas por este a favor de
 Gregorio Syquia por la suma de P45,000 y que, por consiguiente, la sentencia firme de
diciembre 14, 1924, quedo ipso facto saldada y con creces, en virtud de aquella venta.

2. El Juzgado erro al no apreciar que el banco no transmitio ningun derecho, interes o

participacion en la sentencia referida al tiempo de hacerse el traspaso de los mismos a
Gregorio Syquia.

3. Aun suponiendo que la sentencia firme era subsistente contra los deudores y su fiador al
tiempo de hacerse el traspaso por el banco de cualquier titulo, derecho, interes o participacion
en dicha sentencia, el Juzgado erro al no apreciar que se ha constituido una novacion de la
obligacion del fiador sin su conocimiento ni consentimiento, y, por tanto, sin eficacia juridica
contra el.

4. El Juzgado erro al no apreciar que el demandado Rafael Palma, como fiador, ha quedado
eximido de su obligacion no solo por efecto de la novacion hecha sin su conocimiento ni
consentimiento, sino tambien por efecto de la aceptacion por el banco de los bienes
inmuebles de los deudores P. y F. Jacinto, en pago de deuda.

It is to be noted that Palma filed no separate answer nor special defenses available to him as
guarantor but merely joined in the answer of his codefendants pleading that the bank had been fully
paid. It should be noted too that the execution which was issued under the judgment of December 15,
1924, and under which said parcels of land were sold on April 18, 1925, was directed solely against
the principal debtors, Perfecto and Felipe Jacinto, Palma not being mentioned therein.

Under his first and second assignments of error, the appellant argues that when the bank acquired
said properties at the sheriff's sale on April 18, 1925, for the sum of P15,045, it paid much less than
they were worth, in view of the fact that they yielded an annual revenue of P10,560; and this is further
established by the fact that the bank on August 16, 1928, sold and conveyed said parcels to Gregorio
Syquia for the sum of P45,000. Exhibits 2-A and 2-Bare copies of pages of the "libro de diversas
cuentas" of the bank, upon which appears the account of Perfecto and Felipe Jacinto and Rafael
Palma. From these it appears that after the sale by the bank to Syquia, said account was marked as
balanced and closed. From these facts the appellant contends that the principal debtors, and
therefore the guarantor, were discharged from further liability on the judgment; and that being true,
Syquia acquired nothing by the assignment of the judgment to him by the bank. In strict law, it is
obvious that the plea that the defendants has paid their debt cannot be sustained. Indeed the
appellant himself in arguing his first and second assignments of error invokes the equitable principle
that no person should enrich himself unjustly at the expense of another. Clearly this equitable
principle has no application to a legally conducted sheriff's sale. The appellant does not question the
regularity of the sale. A purchaser at a sheriff's sale, when his title has once become vested, may
dispose of the property for such consideration as he sees fit or as he can obtain. The rule which the
appellant asks us to introduce into our jurisprudence with regard to sheriff's sales would cast such a
doubt upon such sales that bidders would abstain therefrom and even judgment creditors would offer
less, all to the prejudice of judgment debtors. The Code of Civil Procedure goes far in protecting the
judgment debtor. He may prevent the sale of the property on execution (sec. 456); or he may redeem
it from the purchaser at any time within twelve months after the sale(sec. 465). In the instant case,
although it was alleged the property was sold for greatly below its value, the defendants did not
exercise any right of redemption. We hold, therefore, that the judgment debt in its entirety was not
discharged before the action for the revival of the judgment was brought.

However, the majority of the court are of the opinion that there should be credited upon the judgment
for the benefit of the guarantor alone the sum of P10,560, being the revenues collected and retained
during the year of redemption by Gregorio Syquia from said properties, according to the testimony of
Perfecto Jacinto (t.s.n., 19, 20,22). This conclusion is based on the interpretation given to the
provisions of the Code of Civil Procedure by this court in the cases of Pabico vs. Ong Pauco (43 Phil.,
572); Flores vs. Lim (50 Phil. 738); Powell vs. National Bank (54 Phil., 54). It is view of the writer that
this defense so far as the guarantor is concerned is premature.

In his brief and upon the oral argument the appellant has pressed upon our attention several
defenses available to guarantors under our law which, he claims, entitle him to a reversal of the
judgment. With reference to all these defences, it suffices to say that it is conceded that Palma as
guarantor is still entitled to the benefits of articles 1830,1832 and 1852 of the Civil Code. Up to the
present, the judgment creditor has made no demand on Palma. Joining him in the suit against the
principal debtor is not the demand intended articles 1832 of the Civil Code. That demand can be
made only after judgment on the debt, for obviously the "exhaustion of the principal's property" — the
benefit of which the guarantor claims — cannot even begin to take place before judgment has been
obtained. Only then can the creditor "levy upon the property of the principal" — only then can the
liability of the creditor begin under article 1833 of the Civil Code. It would be absurd and futile to point
out "saleable property of the debtor" at the inception of the suit, when it cannot be seized or sold, and
require the creditor to make a "levy" upon it.

There is no competent evidence that the principal debtors, Perfecto and Felipe Jacinto, are insolvent
— even if they were now, there can be no certainty that they may not be in funds when an exemption
on the revived judgment is issued. So far as this record shows, the judgment creditor has not
exhausted his remedies against the principal debtors and he is still looking to them for payment. It is
not for the guarantor to anticipate that there will be a return of nulla bona on the execution, when and
if issued. Nor is it for him to anticipate a demand on him under article 1832 and to offer defences
thereto which have not matured. The occasion for these defences may never arise. The present
revived judgment could not therefore be res judicata as to such future defences. The revived
judgment does not foreclose any defence which the guarantor may raise when "demand for payment"
is made on him. Indeed, he cannot claim the benefits of articles 1830, 1832, 1834 and 1852 of the
Civil Code before demand is made on him; they are all available to him only after "demand for
payment" (art. 1832).

The appellant's defences may be all be considered when they are property presented at the proper
time. The case which he now presents, in anticipation of a demand which has not yet been made, is
purely hypothetical. The courts do not undertake to decide hypothetical cases.

It results that the judgment appealed from must be modified in the sense that Rafael Palma as
guarantor maybe held contingently liable only in the sum of P3,034.24 under said judgment, which is
in all other respects affirmed, without special pronouncement as to costs in this instance.
 SECOND DIVISION

[GR No. L-6295. October 27, 1954.]

WORLD WIDE INSURANCE AND SURETY CO., INC., Appellant against the Hon. FRANCISCO E.
JOSE, ETC., AND ANOTHER, appealed.

D. Bortolome I. Viola on behalf of the appellant.

Mr. Francisco Lavides on behalf of the respondents.

SYLLABUS

1. FORENSIC PRACTICE; PARTS; DEATH OF ONE OF THE PARTIES; PROCEDURE TO BE

FOLLOWED. - The defendant died before the hearing but after he has presented his answer with a
counterclaim. The lawsuit was for the collection of amounts of money as damages suffered by the defendant's
alleged breach of his obligation to deliver to the plaintiff one million cubic feet of pieces of wood. The action
against the deceased defendant has been dismissed. Your guarantor requests the reinstatement of the claim. It is
declared: That in accordance with art. 17 of Rule 3 and with other regulatory provisions, the Court should not
have dismissed the claim; but as he had already done so, he should have revoked the dismissal order and
ordered the replacement of the deceased by his heirs, as requested by the guarantor in his motion for
reinstatement. By dismissing the claim, the Court has not followed the provisions of the regulation; therefore, it
exceeded its power or jurisdiction.

2. ID .; OVERREST OF SHARES; COUNTERCLAIM; A MATTER SHOULD NOT BE MADE IF A CLAIM

HAS BEEN FILED. - The power of the Court to dismiss an action at the request of the plaintiff is not purely
discretionary because it is regulated by Article 2 of Rule 30. "If a counterclaim had been filed by a defendant
before a copy of the plaintiff's motion had been served requesting the dismissal, the action will not be dismissed
against the objection of the defendant,... " If the claim has been dismissed and when requesting its
reinstatement, the Court's attention was drawn to the fact that a counterclaim had been presented by the
defendant, it was the appropriate time to correct that damaging error.

3. OBLIGATIONS AND CONTRACTS; JOINT OBLIGATIONS; EXCUSION BENEFIT. - If the bond is

joint and several, either of the two - the surety house or the defendant - may be legally obliged to pay. But joint
and several liability is not presumed: it must be express (art. 1207, New Civil Code). The bond that gave rise to
the matter is not joint and several: it only provides that if the principal obligee does not comply with the terms
of the contract, the guarantor will be liable for damages that do not exceed P30,000. How can the plaintiff
present evidence that the defendant did not comply with the terms of the contract if the claim against him has
already been dismissed? the defendant and his heirs must take part in the case to enable the Court to make a
pronouncement on the breach of the contract and consequent liability.

DECISION

PABLO, M .:

The appellant, a domestic corporation, duly organized in accordance with the laws of the
Philippines, with its main office in Manila, has filed the present appeal alleging
that: chanrob1es virtual 1aw library

1. On May 29, 1951, the General Lumber Co., Inc. filed a claim in the Manila Court of
First Instance (civil case No. 13907), against the appellant and Rafael P. Belleza,
alleging that it had granted in February 26, 1951 a contract to sell one million cubic feet
of scraps to General Lumber Co., Inc.; that upon signing the contract (whose
performance was guaranteed by the appellant World Wide Insurance and Surety Co.,
Inc.), General Lumber Co., Inc. gave Rafael P. Belleza a cash advance of P20,000 and,
to At the request of this and on several occasions, P23,000 was also advanced to him,
having been given a total of P43,000; that when on May 7, 1951 the ship Malay Maru II
(Yamashita Lines) arrived at Capalonga, Camarines Norte, to load, Rafael P. Belleza had
no wood available; that,

2. On June 18, 1951, the appellant presented her answer to the claim, alleging: (a) that
the period of 45 days from the granting of the contract for the sale of one million cubic
feet of chunks had already expired. between the plaintiff General Lumber Co., Inc., as
the buyer, and Rafael P. Belleza, as the seller, without either party having complied with
the terms of the contract and that, after said period has elapsed without having been
made, the Obligation to which the bond responded was ipso facto canceled; (b) that
General Lumber Co., Inc. did not fulfill its obligation to send its ship within 45 days after
signing the contract of sale to load chunks, because the Malay Maru II (Yamashita Lines)
arrived 52 days later. to sign the contract;

3. On June 30, 1951, Rafael P. Belleza presented his answer, alleging (a) that the
General Lumber Co., Inc. did not fulfill the sales contract by refusing to send him the
necessary amount for the forest tax; (b) that for breach by General Lumber Co., Inc. of
the terms and conditions of the contract, Belleza notified you of the termination of the
contract; (c) that General Lumber Co., Inc. did not pay the price of the 600,000 cubic
feet of chunks, in breach of the contract, causing difficulties for Belleza to continue
cutting another 400,000 cubic feet; (d) that the ship Malay Maru II (Yamashita Lines)
refused to load the 600,000 cubic feet; (e) that by default of the General Lumber Co.,
Inc., Belleza suffered damages in the amount of P75,000, and requested, in
counterclaim, the payment of said amount;

4. Before the hearing of said cause was held, Rafael P. Belleza died. At the hearing, the
plaintiff General Lumber Co., Inc. requested the dismissal of the case regarding Rafael P.
Belleza, based on Rule 3, Article 21, to which the Court agreed on December 13, leaving
it as the sole defendant. the World Wide Insurance and Surety Co., Inc .;

5. On June 11, 1952, the appellant filed a motion requesting that the lawsuit against
Rafael P. Belleza be reinstated, having to replace the deceased, his widow Paz de Belleza
and children, in accordance with Article 17 of Rule 3. Against said Petition, the General
Lumber Co., Inc. opposed, and the Judge denied it in his order of July 24. On August 4,
1952, the Complainant filed a motion for reconsideration, which was also denied on
September 9;

6. The appellant contends that the Court, when issuing its orders of December 13, 1951,
July 24 and September 9, 1952, had acted without jurisdiction or in excess of it or with
serious abuse of discretion; that there is no easy and expeditious remedy in the course
of the proceedings. He asks that the aforementioned orders of the appealed judge be
declared null and void.

In their answer, the respondents do not deny the facts alleged in the appeal but
maintain that the Judge did not abuse his discretion when issuing his challenged
orders; that Rafael P. Beauty is not an indispensable part; for which they ask that
the certiorari appeal be denied.

Article 2 of Rule 30 provides that "an action shall not be dismissed at the request of the
plaintiff, except by order of the court and in such terms and conditions as the Court
deems appropriate. If a counterclaim had been filed by a defendant before it was served
a copy of the plaintiff's motion requesting dismissal, the action will not be dismissed
against the defendant's objection,... " cralaw virtua1aw library

The power of the court to dismiss is not purely discretionary because it is regulated by
the cited article. In the case in which the contested orders had been issued, Belleza had
already presented her counterclaim of P70,000. It could be argued that there is no
record that the court was imposed on the counterclaim when the claim was
dismissed; But this argument loses its force when the appellant, when requesting the
reinstatement of the claim, drew the attention of the court that a counterclaim had been
presented by Belleza: it was at the right time to correct a damaging error.

On the other hand, Beauty had already passed away. Rule 3, Article 17, provides that
"When one of the parties dies without the claim having been extinguished, the court will
order after due notification, that the legal representative of the deceased appear, to
replace him, within the term of thirty days or the one that the court agrees to grant.If
the legal representative fails to appear within said time, the court may order the adverse
party to obtain the appointment of a legal representative of the deceased, within the
period of time that the court indicates to this effect, and said representative will appear
immediately for and in representation of the interests of the deceased.The legal
expenses incurred to obtain said appointment, if they are borne by the adverse
party, may be recovered as costs. The deceased's heirs may be allowed to substitute for
the deceased, without requiring the appointment of an executor or administrator, and
the court may appoint a conservator ad litem for minor heirs. "cralaw virtua1aw library

The judge, therefore, according to the cited rules, should not have dismissed the
claim; but since it had already done so, it should have revoked the dismissal order and
ordered the replacement of the deceased by his heirs, as requested by the appellant in
its motion for reinstatement. By dismissing the claim, the court has not followed the
provisions of the regulation; therefore, it exceeded its power or jurisdiction.

Once the lawsuit regarding Beauty is dismissed, could the appellant already be
sentenced, as guarantor, to pay the amount of the deposit? Certainly not. The action of
the plaintiff is truncated. If the principal is not declared legally liable, how should the
guarantor respond? The responsibility for this is subsidiary: it only responds if the
principal obligor was convicted in a final judgment and that it is proven by the Sheriff
that he is insolvent. It is not enough that in the course of the arguments for the
reinstatement of the lawsuit against Beauty it is said that he is insolvent: you have to
prove it. The guarantor does not respond unless there is a judicial declaration that the
principal has breached the contract.

The General Lumber Co., Inc. claims the termination of the contract, return of the
amounts anticipated to Beauty and payment of damages for breach of the contract. How
can the plaintiff prove these facts if Beauty is no longer a party to the case? In the event
that Belleza was convicted of having breached the contract, that is not a sufficient basis
for the appellant, the surety, to respond for the amount of the deposit, because she has
the right to excuse. (Art. 2058, Civil Code of the Philippines and art. 1830 of the old Civil
Code.)

"But the surety is not only an accessory obligation dependent on the principal,
guaranteed by it, but it is also distinguished by its subsidiary and conditional quality,
since its effectiveness does not begin until the fulfillment of the condition or the
realization of the future and uncertain fact of failing to satisfy its debit the obligatory
principle,... " (12 Manresa, 4th ed., 140.)

"It is undoubted that the guarantor, as guarantor of the obligation secured with the
surety, is the second debtor of it, and is in the same condition as the first with respect to
the creditor; but, this notwithstanding, because his obligation is subsidiary. , It can only
be obliged to comply in the case of absolute impossibility on the part of the debtor to
comply with it. From this principle, the basis of the precept consigned in the article that
we examine, the aforementioned benefit is deduced, which consists of the right of the
guarantor to elude payment until the principal debtor's assets have been excused.

xxx

"This was also declared by the Supreme Court, in a judgment of March 2, 1891, which
established the doctrine that it is not appropriate for the creditor to sue the guarantor,
without first rushing all legal resources with respect to the debtor, and among them that
of requesting the rescission of the fraudulent alienation that it had carried out, and that,
by reducing it to insolvency, would make it impossible for it to pay the debit.

"This sentence and some others that could be cited and that established the same
doctrine, before and after the new legal body was published, determine the extension of
the aforementioned benefit, and, therefore, it is not enough to estimate the procedure
exhausted, and therefore once the excuse is over, the practice of certain investigative
procedures carried out to search for the debtor's assets or to justify his insolvency, but
rather that the legal remedies against the principal obligated must be exhausted, as
stated in the cited sentence, this being the true intelligence of this article. ' (12 Manresa,
4th ed., 227.)

If the bond is joint and several, either of the two, the surety house or Beauty, may be
legally obliged to pay. But joint and several liability is not presumed: it must be
express. (Art. 1207, new Civil Code.) The bond that gave rise to the matter is not joint
and several: it only provides that if the principal party does not comply with the terms of
the contract, the guarantor will be liable for damages that do not exceed P30,000. How
can General Lumber Co., Inc. present evidence that Beauty did not comply with the
terms of the contract if the lawsuit against it has already been dismissed? Beauty or her
heirs must take part in the case to enable the Court to make a pronouncement on the
breach of contract and consequent liability.

"... the surety is an accessory contract and the responsibility contracted by the
guarantor is subsidiary. For it the guarantor is obliged to pay or fulfill by a third party,
only in the case of not doing so." cralaw virtua1aw library

. " and another, 40 Off. Gaz., (7th Supp.), 82.)

The appellant could not exercise her right of excuse unless there was a judicial ruling on
the responsibility of Beauty, nor could she repeat (Art. 2066 Civil Code of the Philippines
and Article 1838 Old Civil Code) against his assets unless he promotes his intestacy . To
avoid the multiplicity of actions that is the purpose of the current Regulation, it is
imperative to reinstate the lawsuit against Beauty.

"ART. 7. Mandatory inclusion of indispensable parties. Interested parties without whom

there can be no final determination of an action, must be included either as plaintiffs or
as demands" (Regulation 3).

The requested remedy with costs is granted against General Lumber Co., Inc.

Paras, Pres., Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo, Concepcion, and
Reyes, JBL, MM., Conforming.
PDF 10

FIRST DIVISION

G.R. No. 131013      December 14, 2001

BLADE INTERNATIONAL MARKETING CORPORATION, EVAN J. BORBON, EDGAR J. BORBON,

and MARCIAL GERONIMO, petitioners,
vs.
COURT OF APPEALS and METROPOLITAN BANK & TRUST COMPANY, respondents.

BELLOSILLO, J.:

The Case

The case under consideration is a petition to annul the decision 1 of the Court of Appeals that ordered
petitioners Blade International Marketing Corporation, Evan J. Borbon, Edgar J. Borbon, and Marcial
Geronimo to pay, jointly and severally, the total amount of their obligation to respondent Metropolitan
Bank and Trust Company, including interest, penalty charge and attorney's fees.1âwphi1.nêt

The Facts

The facts, as state in the petition, are as follows:

"1. The instant complaint for a "Sum of Money" was instituted by the Metropolitan Bank & Trust
Co. with an application for issuance of a Writ of Preliminary Attachment against the petitioners
Blade International Marketing Corporation, Evan J. Borbon, Edgar J. Borbon, Marcial
Geronimo and Elenito G. Santos. The complaint consisted of eight (8) causes of actions
involving the delivery, shipment of merchandise, and tools. Private Respondent alleged, that it
paid the suppliers thereof by way of letters of credit against bills of exchange and that said
merchandise or shipment were delivered in trust and/or accepted by the petitioner/s under the
conditions of the trust receipt which required the said petitioner/s as entrustee/s to hold the
goods, merchandise, documents and/or instrument as well as the proceeds thereof, for the
payment of petitioner/s obligations acceptances, indebtedness and liabilities and that without
justifiable reason, they allegedly failed and refused to account for and turn over to the private
respondent the proceeds of sale of the above mentioned goods or merchandise, documents
and instruments subject matter of the trust, the details of which are as follows:

"x      x      x.

"2. On 20 November 1987, petitioners BLADE, Evan J. Borbon, Edgar J. Borbon and Marcial
Geronimo filed a "Joint Answer with Counterclaim," and which answer was anchored on the
following grounds:

"1. That defendant corporation thru its authorized officers applied for and in its own
behalf for several commercial letters of credit with the plaintiff in blank form;

"2. That defendants further denied the material and ultimate facts of the eight (8) causes
of actions in the complaint and interposed Special and Affirmative Defenses, to wit:
 "x      x      x.

"3. By way of "Special and Affirmative Defenses," defendants also maintained, that individual
defendants Evan J. Borbon, Marcial Geronimo and Edgar J. Borbon never signed the letters of
credit and related documents in their personal capacities nor agreed to be bound thereon in
anyway or as sureties or as entrustees to the plaintiff, since they merely acted for and in behalf
of defendant corporation in the execution of the documents in question and therefore not liable
thereon in their personal capacities; that defendants and/or individual defendants never
received the subject merchandise/goods in concept of a trust or as entrustees to account or to
hold and/or turn over the goods/merchandise, instruments or the proceeds of sale thereof to
the plaintiff and that they have not misused or converted the merchandise or proceeds thereof
and that plaintiff has not made any demand nor given any notice to defendants to account for
or hold or turn over of the merchandise, instruments, documents, as well as the proceeds
thereof to the plaintiff, and further the plaintiff has no causes of actions and that the trust
receipts being simulated contracts are void and unenforceable;

"4. Defendant by way of counterclaim further maintained, that the suit was premature and filed
maliciously and in bad faith by making it appear that the defendant corporation and individual
defendants committed breaches of trust which are non-existent, since the documents
supposedly the 'trust receipts' were prepared and executed for convenience purposes but not
in concept of trust and therefore simulated contracts or void ab initio. However, the plaintiff with
full knowledge thereof maliciously instituted this suit, as a consequence plaintiff unduly
prejudiced and/or damaged defendants corporation as well as the individual defendants
business reputation and/or credit standing and further caused the individual defendants to
suffer unnecessary damages for which defendants are entitled moral damages in the sum of
P100,000.00 and for having dragged the defendants before to court, who were compelled and
to protect their rights and interest in the premises for which they agreed to pay counsel the
sum of P25,000.00 as and for attorney's fees;

"5. After due hearing, the Trial Court rendered a decision on 10 February 1992 dismissing both
the complaint and counterclaim, the dispositive portion of which provides, as follows:

"x      x      x

"WHEREFORE, judgment is hereby rendered dismissing the complaint of plaintiff Metropolitan

Bank and Trust Company against defendants Blade International Marketing Corporation, Evan
J. Borbon, Edgar J. Borbon and Marcial Geronimo, as well as the counter claim of the latter
against the former, without pronouncement as to costs."

"6. On 24 February 1992, the private respondent not satisfied with the said Decision filed a
"Notice of Appeal" before the Honorable Court of Appeals, upon the 'ground that said decision
is contrary to the evidence adduced by the parties and to the applicable laws and
jurisprudence;

"7. On 13 June 1997, the Honorable Court of Appeals (Third Division) rendered a Decision,
which reversed and set-aside the assailed decision and a new one was entered, copy of which
was received by the petitioners thru counsel on 20 June 1997, the dispositive portion of which
are as follows:

"WHEREFORE, finding reversible error in the assailed decision, the same is hereby
REVERSED and SET ASIDE and a new one is ENTERED finding the appellees liable,
jointly and severally, with each other and ordering them to pay the appellant the sum of
 P2,118,841.20 representing the total amount of the obligation as of May 31, 1997,
inclusive of 18% interest and 2% penalty charge until their obligation is fully paid, and
the payment of P50,000.00 as attorney's fees. No pronouncement as to costs.

"SO ORDERED.

"8. On 04 July 1997, petitioners filed a "Motion for Reconsideration" thereof, and the Honorable
Court of Appeals DENIED the same in its Resolution dated 24 October 1997, copy of which
was received on 30 October 1997, the dispositive portion of which reads as follows:

"WHEREFORE, the instant motion for reconsideration is hereby DENIED for lack of
merit.

"SO ORDERED."2

Hence, this appeal.3

The Issue

The issue raised is whether the petitioners Evan J. Borbon, Edgar J. Borbon, and Marcial Geronimo
are personally liable jointly and severally with Blade International for fulfillment of its obligations under
the letters of credit opened with Metrobank.

Petitioners Evan J. Borbon, Edgar J. Borbon, and Marcial Geronimo disclaim liability because they
never signed the letters of credit and related documents in their personal capacities.

The Court's Ruling

We hold petitioners liable solidarily.

In this case, petitioners admit that they signed the letters of credit and related documents pertaining
to the transactions with Metrobank. However, petitioners claimed that they signed the forms in blank.
The documents show that the petitioners agreed to jointly and severally undertake payment of the
obligations and also consented to each and all of the stipulated conditions on the documents. "An
experienced businessman who signs important legal papers cannot disclaim the consequent liabilities
therefor after being a signatory thereon." 4

Thus, the Court of Appeals was correct in finding that petitioners contractually agreed to hold
themselves personally solidarily liable with the corporation in the fulfillment of its obligations to
Metrobank.1âwphi1.nêt

The Fallo

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals in toto.5

No costs.

SO ORDERED.
 THIRD DIVISION

G.R. No. 107132 October 8, 1999

MAXIMA HEMEDES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND CONSTRUCTION
CORPORATION, ENRIQUE D. HEMEDES and R & B INSURANCE CORPORATION, respondents.

G.R. No. 108472 October 8, 1999

R & B INSURANCE CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND CONSTRUCTION
CORPORATION, ENRIQUE D. HEMEDES and MAXIMA HEMEDES, respondents.

GONZAGA-REYES, J.:

Assailed in these petitions for review on certiorari is the decision 1 of the eleventh division of the
Court of Appeals in CA-G.R. CV No. 22010 promulgated on September 11, 1992 affirming in toto the
decision of Branch 24 of the Regional Trial Court of Laguna in Civil Case No. B-1766 dated February
22, 1989, 2 and the resolution dated December 29, 1992 denying petitioner R & B Insurance
Corporation's (R & B Insurance) motion for reconsideration. As the factual antecedents and issues
are the same, we shall decide the petitions jointly.

The instant controversy involves a question of ownership over an unregistered parcel of land,
identified as Lot No. 6, plan Psu-111331, with an area of 21,773 square meters, situated in Sala,
Cabuyao, Laguna. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes and
Enrique D. Hemedes. On March 22, 1947 Jose Hemedes executed a document entitled "Donation
Inter Vivos With Resolutory Conditions" 3 whereby he conveyed ownership over the subject land,
together with all its improvements, in favor of his third wife, Justa Kauapin, subject to the following
resolutory conditions:

(a) Upon the death or remarriage of the DONEE, the title to the property donated shall
revert to any of the children, or their heirs, of the DONOR expressly designated by the
DONEE in a public document conveying the property to the latter; or

(b) In absence of such an express designation made by the DONEE before her death or
remarriage contained in a public instrument as above provided, the title to the property
shall automatically revert to the legal heirs of the DONOR in common.

Pursuant to the first condition above mentioned, Justa Kausapin executed on September 27, 1960 a
"Deed of Conveyance of Unregistered Real Property by Reversion" 4 conveying to Maxima Hemedes
the subject property under the following terms —

That the said parcel of land was donated unto me by the said Jose Hemedes, my
deceased husband, in a deed of "DONATION INTER VIVOS WITH RESOLUTORY
 CONDITIONS" executed by the donor in my favor, and duly accepted by me on March
22, 1947, before Notary Public Luis Bella in Cabuyao, Laguna;

That the donation is subject to the resolutory conditions appearing in the said deed of
"DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS," as follows:

(a) Upon the death or remarriage of the DONEE, the title to the property
donated shall revert to any of the children, or their heirs, of the DONOR
expressly designated by the DONEE in a public document conveying the
property to the latter; or

(b) In absence of such an express designation made by the DONEE

before her death or remarriage contained in a public instrument as above
provided, the title to the property shall automatically revert to the legal
heirs of the DONOR in common.

That, wherefore, in virtue of the deed of donation above mentioned and in the exercise
of my right and privilege under the terms of the first resolutory condition therein
contained and hereinabove reproduced, and for and in consideration of my love and
affection, I do hereby by these presents convey, transfer, and deed unto my designee,
MAXIMA HEMEDES, of legal age, married to RAUL RODRIGUEZ, Filipino and resident
of No. 15 Acacia Road, Quezon City, who is one of the children and heirs of my donor,
JOSE HEMEDES, the ownership of, and title to the property hereinabove described,
and all rights and interests therein by reversion under the first resolutory condition in the
above deed of donation; Except the possession and enjoyment of the said property
which shall remain vested in me during my lifetime, or widowhood and which upon my
death or remarriage shall also automatically revert to, and be transferred to my
designee, Maxima Hemedes.

Maxima Hemedes, through her counsel, filed an application for registration and confirmation of title
over the subject unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-941) 0-
198 5 was issued in the name of Maxima Hemedes married to Raul Rodriguez by the Registry of
Deeds of Laguna on June 8, 1962, with the annotation that "Justa Kausapin shall have the
usufructuary rights over the parcel of land herein described during her lifetime or widowhood."

It is claimed by R & B Insurance that on June 2, 1964, Maxima Hemedes and her husband Raul
Rodriguez constituted a real estate mortgage over the subject property in its favor to serve as security
for a loan which they obtained in the amount of P6,000.00. On February 22, 1968, R & B Insurance
extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan even after it
became due on August 2, 1964. The land was sold at a public auction on May 3, 1968 with R & B
Insurance as the highest bidder and a certificate of sale was issued by the sheriff in its favor. Since
Maxima Hemedes failed to redeem the property within the redemption period, R & B Insurance
executed an Affidavit of Consolidation dated March 29, 1974 and on May 21, 1975 the Register of
Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of Title (TCT) No.
41985 in the name of R & B Insurance. The annotation of usufruct in favor of Justa Kausapin was
maintained in the new title. 6

Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin
executed a "Kasunduan" on May 27, 1971 whereby she transferred the same land to her stepson
Enrique D. Hemedes, pursuant to the resolutory condition in the deed of donation executed in her
favor by her late husband Jose Hemedes. Enrique D. Hemedes obtained two declarations of real
property — in 1972, and again, in 1974, when the assessed value of the property was raised. Also,
he has been paying the realty taxes on the property from the time Justa Kausapin conveyed the
property to him in 1971 until 1979. In the cadastral survey of Cabuyao, Laguna conducted from
September 8, 1974 to October 10, 1974, the property was assigned Cadastral No. 2990, Cad. 455-D,
Cabuyao Cadastre, in the name of Enrique Hemedes. Enrique Hemedes is also the named owner of
the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna.

On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and Construction
Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit affirming the
conveyance of the subject property in favor of Enrique D. Hemedes as embodied in the "Kasunduan"
dated May 27, 1971, and at the same time denying the conveyance made to Maxima Hemedes.

On May 14, 1981, Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia
Brewery) who, even before the signing of the contract of lease, constructed two warehouses made of
steel and asbestos costing about P10,000,000.00 each. Upon learning of Asia Brewery's
constructions upon the subject property, R & B Insurance sent it a letter on March 16, 1981 informing
the former of its ownership of the property as evidenced by TCT No. 41985 issued in its favor and of
its right to appropriate the constructions since Asia Brewery is a builder in bad faith. On March 27,
1981, a conference was held between R & B Insurance and Asia Brewery but they failed to arrive at
an amicable settlement.1âwphi1.nêt

On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she
asserted that she is the rightful owner of the subject property by virtue of OCT No. (0-941) 0-198 and
that, as such, she has the right to appropriate Asia Brewery's constructions, to demand its demolition,
or to compel Asia Brewery to purchase the land. In another letter of the same date addressed to R &
B Insurance, Maxima Hemedes denied the execution of any real estate mortgage in favor of the
latter.

On August 27, 1981, Dominium and Enrique D. Hemedes filed a

complaint 7 with the Court of First Instance of Binan, Laguna for the annulment of TCT No. 41985
issued in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property.
Specifically, the complaint alleged that Dominium was the absolute owner of the subject property by
virtue of the February 28, 1979 deed of sale executed by Enrique D. Hemedes, who in turn obtained
ownership of the land from Justa Kausapin, as evidenced by the "Kasunduan" dated May 27, 1971.
The plaintiffs asserted that Justa Kausapin never transferred the land to Maxima Hemedes and that
Enrique D. Hemedes had no knowledge of the registration proceedings initiated by Maxima
Hemedes.

After considering the merits of the case, the trial court rendered judgment on February 22, 1989 in
favor of plaintiffs Dominium and Enrique D. Hemedes, the dispositive portion of which states —

WHEREFORE, judgment is hereby rendered:

(a) Declaring Transfer Certificate of Title No. 41985 of the Register of

Deeds of Laguna null and void and ineffective;

(b) Declaring Dominium Realty and Construction Corporation the absolute

owner and possessor of the parcel of land described in paragraph 3 of the
complaint;

(c) Ordering the defendants and all persons acting for and/or under them
to respect such ownership and possession of Dominium Realty and
 Construction Corporation and to forever desist from asserting adverse
claims thereon nor disturbing such ownership and possession; and

(d) Directing the Register of Deeds of Laguna to cancel said Transfer

Certificate of Title No. 41985 in the name of R & B Insurance Corporation,
and in lieu thereof, issue a new transfer certificate of title in the name of
Dominium Realty and Construction Corporation. No pronouncement as to
costs and attorney's fees. 8

Both R & B Insurance and Maxima Hemedes appealed from the trial court's decision. On September
11, 1992 the Court of Appeals affirmed the assailed decision in toto and on December 29, 1992, it
denied R & B Insurance's motion for reconsideration. Thus, Maxima Hemedes and R & B Insurance
filed their respective petitions for review with this Court on November 3, 1992 and February 22, 1993,
respectively.

In G.R. No. 107132 9, petitioner Maxima Hemedes makes the following assignment of errors as
regards public respondent's ruling —

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN APPLYING ARTICLE

1332 OF THE NEW CIVIL CODE IN DECLARING AS SPURIOUS THE DEED OF
CONVEYANCE OF UNREGISTERED REAL PROPERTY BY REVERSION
EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF PETITIONER MAXIMA HEMEDES.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AS VOID

AND OF NO LEGAL EFFECT THE "KASUNDUAN" DATED 27 MAY 1971 EXECUTED
BY JUSTA KAUSAPIN IN FAVOR OF RESPONDENT ENRIQUE HEMEDES AND THE
SALE OF THE SUBJECT PROPERTY BY RESPONDENT ENRIQUE HEMEDES IN
FAVOR OF RESPONDENT DOMINIUM REALTY AND CONSTRUCTION
CORPORATION.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

RESPONDENTS ENRIQUE AND DOMINIUM IN BAD FAITH.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT

ORIGINAL CERTIFICATE OF TITLE NO. (0-941) 0-198 ISSUED IN THE NAME OF
PETITIONER MAXIMA HEMEDES NULL AND VOID.

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO LOAN

WAS OBTAINED BY PETITIONER MAXIMA HEMEDES FROM RESPONDENT R & B
INSURANCE CORPORATION.
 VI

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO REAL

ESTATE MORTGAGE OVER THE SUBJECT PROPERTY WAS EXECUTED BY
PETITIONER MAXIMA HEMEDES IN FAVOR OF RESPONDENT R & B INSURANCE
CORPORATION.

VII

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE VALID

TITLE COVERING THE SUBJECT PROPERTY IS THE ORIGINAL CERTIFICATE OF
TITLE NO. (0-941) 0-198 IN THE NAME OF PETITIONER MAXIMA HEMEDES AND
NOT THE TRANSFER CERTIFICATE OF TITLE (TCT) NO. 41985 IN THE NAME OF R
& B INSURANCE CORPORATION. 10

Meanwhile, in G.R. No. 108472 11, petitioner R & B Insurance assigns almost the same errors, except
with regards to the real estate mortgage allegedly executed by Maxima Hemedes in its favor.
Specifically, R & B Insurance alleges that:

RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE 1332 OF

THE CIVIL CODE.

II

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE

KASUNDUAN BY AND BETWEEN JUSTA KAUSAPIN AND ENRIQUE
NOTWITHSTANDING THE FACT THAT JUSTA KAUSAPIN BY WAY OF A DEED OF
CONVEYANCE OF UNREGISTERED REAL PROPERTY BY REVERSION CEDED
THE SUBJECT PROPERTY TO MAXIMA SOME ELEVEN (11) YEARS EARLIER.

III

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE

AFFIDAVIT OF REPUDIATION OF JUSTA KAUSAPIN NOTWITHSTANDING THE
FACT THAT SHE IS A BIAS (sic) WITNESS AND EXECUTED THE SAME SOME
TWENTY-ONE (21) YEARS AFTER THE EXECUTION OF THE DEED OF
CONVEYANCE IN FAVOR OF MAXIMA.

IV

RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE

COMPLAINT OF ENRIQUE AND DOMINIUM HAS PRESCRIBED AND/OR THAT
ENRIQUE AND DOMINIUM WERE GUILTY OF LACHES.

RESPONDENT COURT SERIOUSLY ERRED IN FINDING

R & B AS A MORTGAGEE NOT IN GOOD FAITH.
 VI

RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE DAMAGES

PRAYED FOR BY R & B IN ITS COUNTERCLAIM AND CROSSCLAIM. 12

The primary issue to be resolved in these consolidated petitions is which of the two conveyances by
Justa Kausapin, the first in favor of Maxima Hemedes and the second in favor of Enrique D.
Hemedes, effectively transferred ownership over the subject land.

The Register of Deeds of Laguna issued OCT No. (0-941) 0-198 in favor of Maxima Hemedes on the
strength of the "Deed of Conveyance of Unregistered Real Property by Reversion" executed by Justa
Kausapin. Public respondent upheld the trial court's finding that such deed is sham and spurious and
has "no evidentiary value under the law upon which claimant Maxima Hemedes may anchor a valid
claim of ownership over the property." In ruling thus, it gave credence to the April 10, 1981 affidavit
executed by Justa Kausapin repudiating such deed of conveyance in favor of Maxima Hemedes and
affirming the authenticity of the "Kasunduan" in favor of Enrique D. Hemedes. Also, it considered as
pivotal the fact that the deed of conveyance in favor of Maxima Hemedes was in English and that it
was not explained to Justa Kausapin, although she could not read nor understand English; thus,
Maxima Hemedes failed to discharge her burden, pursuant to Article 1332 of the Civil Code, to show
that the terms thereof were fully explained to Justa Kausapin. Public respondent concluded by
holding that the registration of the property on the strength of the spurious deed of conveyance is null
and void and does not confer any right of ownership upon Maxima Hemedes. 13

Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence since she
is obviously a biased witness as it has been shown that she is dependent upon Enrique D. Hemedes
for her daily subsistence, and she was most probably influenced by Enrique D. Hemedes to execute
the "Kasunduan" in his favor. She also refutes the applicability of article 1332. It is her contention that
for such a provision to be applicable, there must be a party seeking to enforce a contract; however,
she is not enforcing the "Deed of Conveyance of Unregistered Real Property by Reversion" as her
basis in claiming ownership, but rather her claim is anchored upon OCT No. (0-941) 0-198 issued in
her name, which document can stand independently from the deed of conveyance. Also, there exist
various circumstances which show that Justa Kausapin did in fact execute and understand the deed
of conveyance in favor of Maxima Hemedes. First, the "Donation Intervivos With Resolutory
Conditions" executed by Jose Hemedes in favor of Justa Kausapin was also in English, but she never
alleged that she did not understand such document. Secondly, Justa Kausapin failed to prove that it
was not her thumbmark on the deed of conveyance in favor of Maxima Hemedes and in fact, both
Enrique D. Hemedes and Dominium objected to the request of Maxima Hemedes' counsel to obtain a
specimen thumbmark of Justa Kausapin. 14

Public respondent's finding that the "Deed of Conveyance of Unregistered Real Property By
Reversion" executed by Justa Kausapin in favor of Maxima Hemedes is spurious is not supported by
the factual findings in this case. It is grounded upon the mere denial of the same by Justa Kausapin.
A party to a contract cannot just evade compliance with his contractual obligations by the simple
expedient of denying the execution of such contract. If, after a perfect and binding contract has been
executed between the parties, it occurs to one of them to allege some defect therein as a reason for
annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of
contracts cannot be left to the will of one of the contracting parties. 15

Although a comparison of Justa Kausapin's thumbmark with the thumbmark affixed upon the deed of
conveyance would have easily cleared any doubts as to whether or not the deed was forged, the
records do not show that such evidence was introduced by private respondents and the lower court
decisions do not make mention of any comparison having been made. 16 It is a legal presumption that
evidence willfully suppressed would be adverse if produced. 17 The failure of private respondents to
refute the due execution of the deed of conveyance by making a comparison with Justa Kausapin's
thumbmark necessarily leads one to conclude that she did in fact affix her thumbmark upon the deed
of donation in favor of her stepdaughter.

Moreover, public respondent's reliance upon Justa Kausapin's repudiation of the deed of conveyance
is misplaced for there are strong indications that she is a biased witness. The trial court found that
Justa Kausapin was dependent upon Enrique D. Hemedes for financial assistance. 18 Justa
Kausapin's own testimony attests to this fact —

Atty. Conchu:

Q: Aling Justa, can you tell the Honorable Court why you donated this
particular property to Enrique Hemedes?

A: Because I was in serious condition and he was the one supporting me

financially.

Q: As of today, Aling Justa are you continuing to receive any assistance

from Enrique Hemedes?

A: Yes Sir.

(TSN pp. 19 and 23, November 17, 1981) 19

Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for financial
support. The transcripts state as follows:

Atty. Mora:

Now you said that Justa Kausapin has been receiving from you advances
for food, medicine & other personal or family needs?

E. Hemedes:

A: Yes.

Q: Was this already the practice at the time this "Kasunduan" was
executed?

A: No that was increased, no, no, after this document.

x x x           x x x          x x x

Q: And because of these accommodations that you have given to Justa

Kausapin; Justa Kausapin has in turn treated you very well because she's
very grateful for that, is it not?

A: I think that's human nature.

Q: Answer me categorically, Mr. Hemedes she's very grateful?

 A: Yes she might be grateful but not very grateful.

(TSN, p. 34, June 15, 1984) 20

A witness is said to be biased when his relation to the cause or to the parties is such that he has an
incentive to exaggerate or give false color to his statements, or to suppress or to pervert the truth, or
to state what is false. 21 At the time the present case was filed in the trial court in 1981, Justa
Kausapin was already 80 years old, suffering from worsening physical infirmities and completely
dependent upon her stepson Enrique D. Hemedes for support. It is apparent that Enrique D.
Hemedes could easily have influenced his aging stepmother to donate the subject property to him.
Public respondent should not have given credence to a witness that was obviously biased and partial
to the cause of private respondents. Although it is a well-established rule that the matter of credibility
lies within the province of the trial court, such rule does not apply when the witness' credibility has
been put in serious doubt, such as when there appears on the record some fact or circumstance of
weight and influence, which has been overlooked or the significance of which has been
misinterpreted. 22

Finally, public respondent was in error when it sustained the trial court's decision to nullify the "Deed
of Conveyance of Unregistered Real Property by Reversion" for failure of Maxima Hemedes to
comply with article 1332 of the Civil Code, which states:

When one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract
must show that the terms thereof have been fully explained to the former.

Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his
illiteracy, ignorance, mental weakness or other handicap. 23 This article contemplates a situation
wherein a contract has been entered into, but the consent of one of the parties is vitiated by mistake
or fraud committed by the other contracting party. 24 This is apparent from the ordering of the
provisions under Book IV, Title II, Chapter 2, section 1 of the Civil Code, from which article 1332 is
taken. Article 1330 states that —

A contract where consent is given through mistake, violence, intimidation, undue

influence, or fraud is voidable.

This is immediately followed by provisions explaining what constitutes mistake, violence, intimidation,
undue influence, or fraud sufficient to vitiate consent. 25 In order that mistake may invalidate consent,
it should refer to the substance of the thing which is the object of the contract, or to those conditions
which have principally moved one or both parties to enter into the contract. 26 Fraud, on the other
hand, is present when, through insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without them, he would not have agreed to. 27 Clearly,
article 1332 assumes that the consent of the contracting party imputing the mistake or fraud was
given, although vitiated, and does not cover a situation where there is a complete absence of
consent.1âwphi1.nêt

In this case, Justa Kausapin disclaims any knowledge of the "Deed of Conveyance of Unregistered
Real Property by Reversion" in favor of Maxima Hemedes. In fact, she asserts that it was only during
the hearing conducted on December 7, 1981 before the trial court that she first caught a glimpse of
the deed of conveyance and thus, she could not have possibly affixed her thumbmark thereto. 28 It is
private respondents' own allegations which render article 1332 inapplicable for it is useless to
determine whether or not Justa Kausapin was induced to execute said deed of conveyance by means
of fraud employed by Maxima Hemedes, who allegedly took advantage of the fact that the former
could not understand English, when Justa Kausapin denies even having seen the document before
the present case was initiated in 1981.

It has been held by this Court that ". . . mere preponderance of evidence is not sufficient to overthrow
a certificate of a notary public to the effect that the grantor executed a certain document and
acknowledged the fact of its execution before him. To accomplish this result, the evidence must be so
clear, strong and convincing as to exclude all reasonable controversy as to the falsity of the
certificate, and when the evidence is conflicting, the certificate will be
upheld." 29 In the present case, we hold that private respondents have failed to produce clear, strong,
and convincing evidence to overcome the positive value of the "Deed Conveyance of Unregistered
Real Property by Reversion" — a notarized document. The mere denial of its execution by the donor
will not suffice for the purpose.

In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly rule that
Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over the subject
property. Justa Kausapin sought to transfer to her stepson exactly what she had earlier transferred to
Maxima Hemedes — the ownership of the subject property pursuant to the first condition stipulated in
the deed of donation executed by her husband. Thus, the donation in favor of Enrique D. Hemedes is
null and void for the purported object thereof did not exist at the time of the transfer, having already
been transferred to his sister. 30 Similarly, the sale of the subject property by Enrique D. Hemedes to
Dominium is also a nullity for the latter cannot acquire more rights than its predecessor-in-interest and
is definitely not an innocent purchaser for value since Enrique D. Hemedes did not present any
certificate of title upon which it relied.

The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his being
designated as owner of the subject property in the cadastral survey of Cabuyao, Laguna and in the
records of the Ministry of Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of
title, which is an absolute and indefeasible evidence of ownership of the property in favor of the
person whose name appears therein. 31 Particularly, with regard to tax declarations and tax receipts,
this Court has held on several occasions that the same do not by themselves conclusively prove title
to land. 32

We come now to the question of whether or not R & B Insurance should be considered an innocent
purchaser of the land in question. At the outset, we note that both the trial court and appellate court
found that Maxima Hemedes did in fact execute a mortgage over the subject property in favor of R &
B Insurance. This finding shall not be disturbed because, as we stated earlier, it is a rule that the
factual findings of the trial court, especially when affirmed by the Court of Appeals, are entitled to
respect, and should not be disturbed on
appeal. 33

In holding that R & B Insurance is not a mortgagee in good faith, public respondent stated that the
fact that the certificate of title of the subject property indicates upon its face that the same is subject to
an encumbrance, i.e. usufructuary rights in favor of Justa Kausapin during her lifetime or widowhood,
should have prompted R & B Insurance to ". . . investigate further the circumstances behind this
encumbrance on the land in dispute," but which it failed to do. Also, public respondent considered
against R & B Insurance the fact that it made it appear in the mortgage contract that the land was free
from all liens, charges, taxes and encumbrances. 34

R & B Insurance alleges that, contrary to public respondent's ruling, the presence of an encumbrance
on the certificate of title is not reason for the purchaser or a prospective mortgagee to look beyond
the face of the certificate of title. The owner of a parcel of land may still sell the same even though
such land is subject to a usufruct; the buyer's title over the property will simply be restricted by the
rights of the usufructuary. Thus, R & B Insurance accepted the mortgage subject to the usufructuary
rights of Justa Kausapin. Furthermore, even assuming that R & B Insurance was legally obliged to go
beyond the title and search for any hidden defect or inchoate right which could defeat its right thereto,
it would not have discovered anything since the mortgage was entered into in 1964, while the
"Kasunduan" conveying the land to Enrique D. Hemedes was only entered into in 1971 and the
affidavit repudiating the deed of conveyance in favor of Maxima Hemedes was executed by Justa
Kausapin in 1981. 35

We sustain petitioner R & B Insurance's claim that it is entitled to the protection of a mortgagee in
good faith.

It is a well-established principle that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. 36 An innocent purchaser for value 37 is one who
buys the property of another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same at the time of such purchase or before he has
notice of the claim of another person. 38

The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes' OCT dose
not impose upon R & B Insurance the obligation to investigate the validity of its mortgagor's title.
Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and
substance. 39 The usufructuary is entitled to all the natural, industrial and civil fruits of the
property 40 and may personally enjoy the thing in usufruct, lease it to another, or alienate his right of
usufruct, even by a gratuitous title, but all the contracts he may enter into as such usufructuary shall
terminate upon the expiration of the usufruct. 41

Clearly, only the jus utendi and jus fruendi over the property is transferred to the usufructuary. 42 The
owner of the property maintains the jus disponendi or the power to alienate, encumber, transform,
and even destroy the same. 43 This right is embodied in the Civil Code, which provides that the owner
of property the usufruct of which is held by another, may alienate it, although he cannot alter the
property's form or substance, or do anything which may be prejudicial to the usufructuary. 44

There is no doubt that the owner may validly mortgage the property in favor of a third person and the
law provides that, in such a case, the usufructuary shall not be obliged to pay the debt of the
mortgagor, and should the immovable be attached or sold judicially for the payment of the debt, the
owner shall be liable to the usufructuary for whatever the latter may lose by reason thereof. 45

Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is not
sufficient cause to require R & B Insurance to investigate Maxima Hemedes' title, contrary to public
respondent's ruling, for the reason that Maxima Hemedes' ownership over the property remained
unimpaired despite such encumbrance. R & B Insurance had a right to rely on the certificate of title
and was not in bad faith in accepting the property as a security for the loan it extended to Maxima
Hemedes.

Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate
of title and investigate the title of its mortgagor, still, it would not have discovered any better rights in
favor of private respondents. Enrique D. Hemedes and Dominium base their claims to the property
upon the "Kasunduan" allegedly executed by Justa Kausapin in favor of Enrique Hemedes. As we
have already stated earlier, such contract is a nullity as its subject matter was inexistent. Also, the
land was mortgaged to R & B Insurance as early as 1964, while the "Kasunduan" was executed only
in 1971 and the affidavit of Justa Kausapin affirming the conveyance in favor of Enrique D. Hemedes
was executed in 1981. Thus, even if R & B Insurance investigated the title of Maxima Hemedes, it
would not have discovered any adverse claim to the land in derogation of its mortgagor's title. We
reiterate that at no point in time could private respondents establish any rights or maintain any claim
over the land.

It is a well-settled principle that where innocent third persons rely upon the correctness of a certificate
of title and acquire rights over the property, the court cannot just disregard such rights. Otherwise,
public confidence in the certificate of title, and ultimately, the Torrens system, would be impaired for
everyone dealing with registered property would still have to inquire at every instance whether the title
has been regularly or irregularly issued. 46 Being an innocent mortgagee for value, R & B Insurance
validly acquired ownership over the property, subject only to the usufructuary rights of Justa Kausapin
thereto, as this encumbrance was properly annotated upon its certificate of title.

The factual findings of the trial court, particularly when affirmed by the appellate court, carry great
weight and are entitled to respect on appeal, except under certain circumstances. 47 One such
circumstance that would compel the Court to review the factual findings of the lower courts is where
the lower courts manifestly overlooked certain relevant facts not disputed by the parties and which, if
properly considered, would justify a different conclusion. 48 Also, it is axiomatic that the drawing of the
proper legal conclusions from such factual findings are within the peculiar province of this Court. 49

As regards R & B Insurance's prayer that Dominium be ordered to demolish the warehouses or that it
be declared the owner thereof since the same were built in bad faith, we note that such warehouses
were constructed by Asia Brewery, not by Dominium. However, despite its being a necessary party in
the present case, the lower courts never acquired jurisdiction over Asia Brewery, whether as a
plaintiff or defendant, and their respective decisions did not pass upon the constructions made upon
the subject property. Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint,
while jurisdiction over the person of a party defendant is acquired upon the service of summons in the
manner required by law or by his voluntary appearance. As a rule, if a defendant has not been
summoned, the court acquires no jurisdiction over his person, and any personal judgment rendered
against such defendant is null and void. 50 In the present case, since Asia Brewery is a necessary
party that was not joined in the action, any judgment rendered in this case shall be without prejudice
to its rights. 51

As to its claim for moral damages, we hold that R & B Insurance is not entitled to the same for it has
not alleged nor proven the factual basis for the same. Neither is it entitled to exemplary damages,
which may only be awarded if the claimant is entitled to moral, temperate, liquidated or compensatory
damages. 52 R & B Insurance's claim for attorney's fees must also fail. The award of attorney's fees is
the exception rather than the rule and counsel's fees are not to be awarded every time a party wins a
suit. Its award pursuant to article 2208 of the Civil Code demands factual, legal and equitable
justification and cannot be left to speculation and conjecture. 53 Under the circumstances prevailing in
the instant case, there is no factual or legal basis for an award of attorney's fees.

WHEREFORE, the assailed decision of public respondent and its resolution dated February 22, 1989
are REVERSED. We uphold petitioner R & B Insurance's assertion of ownership over the property in
dispute, as evidenced by TCT No. 41985, subject to the usufructuary rights of Justa Kausapin, which
encumbrance has been properly annotated upon the said certificate of title. No pronouncement as to
costs.

SO ORDERED.

Panganiban and Purisima, JJ., concur.

Melo, J., please see dissenting opinion.

Vitug, J., please see separate (concurring) opinion.

Separate Opinions

VITUG, J., separate opinion;

I share the opinion expressed by my esteemed colleague, Mme. Justice Minerva P. Gonzaga-Reyes,
in her ponencia.

I just would like to add that a donation would not be legally feasible if the donor has neither ownership
nor real right that he can transmit to the donee. Unlike an ordinary contract, a donation, under Article
712, in relation to Article 725, of the Civil Code is also a mode of acquiring and transmitting ownership
and other real rights by an act of liberality whereby a person disposes gratuitously that ownership or
real right in favor of another who accepts it. It would be an inefficacious process if the donor would
have nothing to convey at the time it is made.

Art. 744 of the Civil Code states that the "donation of the same thing to two or more different donees
shall be governed by the provisions concerning the sale of the same thing to two or more
persons," i.e., by Article 1544 of the same Code, as if so saying that there can be a case of "double
donations" to different donees with opposing interest. Article 744 is a new provision, having no
counterpart in the old Civil Code, that must have been added unguardedly. Being a mode of acquiring
and transmitting ownership or other real rights, a donation once perfected would deny the valid
execution of a subsequent inconsistent donation (unless perhaps if the prior donation has provided a
suspensive condition which still pends when the later donation is made).

In sales, Article 1544, providing for the rules to resolve the conflicting rights of two or more buyers, is
appropriate since the law does not prohibit but, in fact, sanctions the perfection of a sale by a non-
owner, such as the sale of future things or a short sale, for it is only at the consummation stage of the
sale, i.e., delivery of the thing sold, that ownership would be deemed transmitted to the buyer. In the
meanwhile, a subsequent sale to another of the same thing by the same seller can still be a legal
possibility. This rule on double sales finds no relevance in an ordinary donation where the law
requires the donor to have ownership of the thing or the real right he donates at the time of its
perfection (see Article 750, Civil Code) since a donation constitutes a mode, not just a title, in an
acquisition and transmission of ownership.

MELO, J., dissenting opinion;

I find myself unable to join the majority. The opinion written by my esteemed colleague, Madame
Justice Minerva Gonzaga-Reyes, will have far-reaching ramifications on settled doctrines concerning
the finality and conclusiveness of the factual findings of the trial court in view of its unique advantage
of being able to observe at first-hand the demeanor and deportment of witnesses, and especially
when such findings of facts are affirmed by the Court of Appeals, which is the final arbiter of
questions of fact (People vs. Edaño, 64 SCRA 675 [1975]; People vs. Tala, 141 SCRA 240; People
vs. Canada and Dondoy, 144 SCRA 121 [1986]; People vs. Clore, 184 SCRA 638 [1990]; Binalay vs.
Manalo, 195 SCRA 374 [1991]; People vs. Miscala, 202 SCRA 26 [1991]; People vs. Lagrosa, 230
SCRA. 298 [1994]). All these conditions are present in the case at bar, and I have grave reservations
about the propriety of setting aside time-tested principles in favor of a finding that hinges principally
on the credibility of a single witness, whom we are asked to disbelieve on the basis merely of her
recorded testimony without the benefit of the advantage that the trial court had, disregarding in the
process another long-established rule — that mere relationship of a witness to a party does not
discredit his testimony in court (U.S. vs. Mante, 27 Phil 124; People vs. Pagaduan, 37 Phil 90; People
vs. Reyes, 69 SCRA 474 [1976]; People vs. Padiernos, 69 SCRA 484 [1976]; Borromeo vs. Court of
Appeals, 70 SCRA 329 [1976]; People vs. Estocada, 75 SCRA 295 [1977]; People vs. Ciria, 106
SCRA 381 [1981]; People vs. Ramo, 132 SCRA 174 [1984]; People vs. Atencio, 156 SCRA 242
[1987]; People vs. Gutierrez. Jr., 158 SCRA 614 [1988]; People vs. Bandoquillo, 167 SCRA 549
[1988]; People vs. Suitos, 220 SCRA 419 [1993]).

The primordial issue is whether or not the "Deed of Conveyance of Unregistered Real Property by
Reversion" dated September 27, 1960 conveying the subject property to Maxima Hemedes is valid. If
the transfer is not valid, no title passed to her successor-in-interest, R & B Insurance Corporation.

The Court of Appeals, confirming and summarizing the findings of fact and law made by the trial
court, declared:

We sustain the findings of the trial court.

To begin with, the "Deed of Conveyance of Unregistered Real Property by Reversion"

was nullified by the trial court on two (2) grounds:

First, MAXIMA failed to comply with the requirements laid down by Article 1332 of the
Civil Code. Said provision reads:

Art. 1332. When one of the parties is unable to read, or if the contract is in
a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been
fully explained to the former.

In her testimony, MAXIMA admitted the entire document was written in English, a
language not known to Justa Kausapin (TSN, 17 November 1981, pp. 7-8; Deposition of
Justa Kausapin). Yet, MAXIMA failed to introduce sufficient evidence that would
purportedly show that the deed of conveyance was explained to Justa Kausapin before
the latter allegedly affixed her thumbmark. On the contrary, she admitted having failed
to translate the deed of conveyance to Justa Kausapin because according to her, the
latter has "no voice" anyway insofar as the property is concerned. Her testimony reads:

Q — In connection with this deed of conveyance which has been marked

as Exh. "2-Maxima," we note that this is written in English, do you know,
Mrs. Hernandez (MAXIMA), whether this document was ever translated to
Justa Kausapin?

A — Justa Kausapin has no voice because that's the order of my father,

so anyway. . .

Court — Answer the question, you were only asked whether that was
translated.

A — No. (TSN 26 November, 1984, pp. 36-37, Maxima Hemedes).

Second, MAXIMA failed to repudiate the allegation of Justa Kausapin disclaiming

knowledge of her having executed such a deed. As a matter of fact, Justa Kausapin
claimed that it was only during the hearing conducted on 07 December 1981 that she
first caught glimpse of the deed of conveyance (TSN, 07 December 1981, pp. 22-
23, ibid.) She therefore could not have possibly affixed her thumbmark therein. In the
 light of such a denial, the burden of proving that the deed of conveyance was indeed
genuine laid on MAXIMA. After all, any party who asserts the affirmative of the issue
has the burden of presenting evidence required to obtain a favorable judgment
(Republic v. Court of Appeals, 182 SCRA 290).1âwphi1.nêt

Instead, what was clearly established from the deposition of Justa Kausapin is the fact
that she never executed any document donating the property to anybody else except
ENRIQUE. This can be readily gleaned from her testimony, reading:

Q — From the time, Aling Justa, that your husband Jose Hemedes
donated the property to you up to the time you in turn donated the same to
Enrique Hemedes in 1971, do you recall having executed any document
donating this particular property to anybody else?

A — None, Sir. (TSN, 17 November 1981, p. 21)

(pp.
63-64, 
Rollo.)

There is no dispute that Justa Kausapin twice repudiated the conveyance in favor of Maxima
Hemedes. As found by the trial court:

In an Affidavit dated April 10, 1981 executed by Justa Kausapin before three witnesses
(Exh. D-Dominium), said affiant disowned the alleged "Deed of Conveyance of
Unregistered Real Property by Reversion" invoked by defendant Maxima Hemedes, and
expressly stated that she never granted any right over the property to Maxima
Hemedes, whether as owner or mortgagor, that she never allowed her to use the land
as security or collateral for a loan. In the same affidavit, Justa Kausapin affirmed the
authenticity of the "Kasunduan" whereby she transferred ownership of the disputed land
to Enrique Hemedes, her stepson and reliable source of assistance throughout the
years that she was in need of help. The testimony of Justa Kausapin was also taken by
deposition on November 17, December 7 and 14, 1981 and on January 14, 1982,
wherein all the contending parties were represented and had the opportunity to cross-
examine her. In her testimony (the entire transcript of which has been submitted as Exh.
K-Enrique), Justa Kausapin reiterated her repudiation of the Deed of Conveyance in
favor of Maxima Hemedes and re-affirmed the validity of the "Kasunduan" in favor of
Enrique Hemedes, as well as the subsequent sale of the land by Enrique Hemedes to
Dominium.

(pp. 83-84, Rollo.)

The majority would hold that the twin repudiations cannot be given credence because the witness is
biased in favor of Enrique Hemedes, who, by providing support and financial assistance to the
witness before, during and after the execution of the "Kasunduan," is said to have influenced her into
signing the same. This issue refers to the credibility of witnesses which, as stated earlier, is best left
for determination by the trial court (People vs. Oliano, 287 SCRA 158 [1998], citing People vs.
Pontillar, Jr., 275 SCRA 338 [1997]; People vs. Rubio, 257 SCRA 528 [1996]; People vs. Del Prado,
253 SCRA 731 [1996]). I am not prepared to substitute my judgment for that of the trial court on the
credibility of Justa Kausapin on the basis alone of the relationship between her and Enrique
Hemedes. To reiterate, the rule is: "Mere relationship of a witness to a party does not discredit his
testimony in court." (U.S. vs. Mante, supra; Aznar vs. Court of Appeals, 70 SCRA 329 [1976]; People
vs. Letigio, 268 SCRA 227, 243 [1997]).

I cannot infer from the mere circumstance that Justa Kausapin was receiving support and sustenance
from Enrique Hemedes that she had any improper motives to testify in favor of Enrique and against
Maxima. It must be remembered that Justa Kausapin had a legal right to such financial assistance,
not only from respondent Enrique Hemedes, but also from Maxima Hemedes, who are both her
stepchildren. If one must impute improper motives in favor of Enrique, one could just as easily ascribe
these to Maxima. Furthermore, it must be noted that Justa Kausapin's entitlement to support flowed
from her usufructuary rights contained in the "Donation Inter Vivos with Resolutory Conditions"
executed by her late husband, Jose Hemedes, the common father of petitioner Maxima and
respondent Enrique Hemedes. In supporting his stepmother, Enrique was, therefore, merely
performing a legal or contractual duty in favor of Justa Kausapin. There was nothing improper in
Justa Kausapin's repudiation of the conveyance in favor of Maxima, especially so if one considers the
fact that the latter did not adduce any other evidence to defeat the presumption that Justa Kausapin
was stating the truth when she said that she never conveyed the property to Justa Maxima. As the
trial court found:

. . . The actuation of Enrique Hemedes towards Justa Kausapin is legally and morally
justified. It must be remembered that Justa Kausapin is the stepmother of Enrique
Hemedes; she was also the usufructuary of the property in dispute. It is only natural and
in keeping with law and custom, or Filipino tradition, for a son to support his mother
(even if she happens to be a stepmother); and form a legal standpoint, the naked owner
Enrique Hemedes was bound to support Justa Kausapin by way of giving her what she
was entitled to as usufructuary.

(p. 104, Rollo.)

The trial court's ruling on the invalidity of the title of Maxima is not based solely on Justa Kausapin's
repudiation of the deed of conveyance, but likewise on the very acts of Maxima and her transferee R
& B Surety and Insurance. The factual findings of the trial court are to the effect that despite the
alleged transfer of ownership from Justa Kausapin to Maxima Hemedes on September 27, 1960 and
the subsequent transfer to R & B Insurance on May 3, 1968 by way of foreclosure and public auction
sale, neither do these petitioners exercised their rights of ownership over the disputed property, never
even asserting their supposed ownership rights until it was too late. The following findings of the trial
court stand unassailed:

There are other indications which led this Court to believe that neither defendant
Maxima Hemedes nor defendant R & B INSURANCE consider themselves the owner of
the property in question. Both of these claimants never declared themselves as owners
of the property for tax purposes; much less did they pay a single centavo in real estate
taxes. The argument that since Justa Kausapin was in possession of the property as
usufructuary she should pay the taxes contravenes the clear provision of the Civil Code
that the taxes which may be imposed directly on the capital during the usufruct, in this
case the realty taxes, shall be at the expense of the owner (Article 597, Civil Code). If
Maxima Hemedes and R & B INSURANCE were convinced that they were the owners
of the property, why did they not pay taxes for the same? This attitude is not consistent
with that of an owner in good faith. The Court has noted that the very owner of R & B
INSURANCE has admitted in her testimony that they declared the property as one of
the assets of R & B INSURANCE only in 1976, which is eight years after they
supposedly bought it at public auction in 1968 (TSN, July 6, 1987, pp. 22-23) (Decision,
pp. 32-33).
 (pp.
101-
102, 
Rollo.)

Faced with the categorical and straightforward repudiations of the conveyance supposedly made in
her favor, Maxima Hemedes could only gratuitously assert otherwise, as no other testimonial or
documentary evidence was adduced in support thereof. Maxima's self-serving assertions, however,
are legally infirm in view of her admission that the deed of conveyance in her favor was written in a
language unknown to the person who supposedly executed the same and the terms thereof were not
fully explained to the person who executed the same. These are the facts as found by the trial court:

Questioned about the execution of the "Deed of Conveyance of Unregistered Real

Property by Reversion" which is the basis of her claim, defendant Maxima Hemedes
admitted that the document which is in English was not translated or explained to Justa
Kausapin before the latter supposedly affixed her thumbmark to the document (TSN,
November 26, 1984, p. 34; TSN, December 10, 1984, p. 9). The Court has noted from
the records that the Notary Public before whom the said document was notarized was
not presented as a wittiness by defendant Maxima Hemedes, if only to attest to the
execution of said document by Justa Kausapin, considering that the latter is an illiterate
when it comes to documents written in English. Maxima explained the non-translation of
the Deed of Conveyance into a language understood by Justa Kausapin with the
statement that the latter (Justa Kausapin) "has no voice" anyway in so far as the
property is concerned (TSN, November 26, 1984, p. 36) . . . the Notary Public before
whom the said document was supposed to have been axknowledged was also not
presented as a witness, and there was no explanation as to why he was not also
presented. In the face of such an admission and failure on the part of defendant Maxima
Hemedes, coupled with the straightforward repudiation by Justa Kausapin herself of the
document relied upon by said defendant the Court finds and so concludes that the
"Deed of Conveyance of Unregistered Real Property by Reversion" is not a credible and
convincing evidence and is of no evidentiary value under the law upon which claimant
Maxima Hemedes may anchor a valid claim of ownership over the property subject of
this action.

(pp.
91-93, 
Rollo.)

It is argued that private respondents failed to have the thumbmarks of Justa Kausapin appearing on
the deeds executed in favor of Maxima and Enrique compared and this failure may be taken as wilful
suppression of evidence that is presumed to be adverse if produced (Rules of Court, Rule 131, Sec.
3(e). The applicability of this rule presupposes that the suppressed evidence is not available to the
other party for production in court (People vs. Padiernos, 69 SCRA 484 [1976]; People vs. Silvestre,
279 SCRA 474, 495 [1997]). This is not the case here for the same documents were available to
petitioners. In fact, the records show that counsel for Maxima Hemedes pledged to submit the
document which will be compared with the specimen thumbmark to be obtained from Justa Kausapin
(TSN, December 7, 1981, p. 28). The records, however, do not show that said counsel persisted in
his request for comparison of Kausapin's thumbmarks. If petitioners were convinced that the
specimen thumbprint of Justa Kausapin was of crucial importance to their cause, they should have
insisted on presenting her as a witness and, thereupon, obtaining her thumbprint. Their own failure to
pursue the production of the specimen thumbprint of Justa Kausapin negated any belated claim that
the said specimen was suppressed (People vs. Tulop, citing People vs. Pagal, 272 SCRA 443 [1998];
Commissioner of Internal Revenue vs. Tokyo Shipping Company, Ltd., 244 SCRA 332
[1995]; citing Nicolas vs. Nicolas, 52 Phil 265 [1928] and Ang Seng Quiem vs. Te Chico, 7 Phil 541
[1907]).1âwphi1.nêt

The two courts below were, to my mind, most perceptive when they held that proof of authenticity of
the thumbprint of Justa Kausapin would not render valid an otherwise void document in light of the
admission of Maxima Hemedes that she did not explain the English contents thereof to Justa
Kausapin in a language understood by her.

On the other hand, the validity of the conveyance to Enrique Hemedes is amply proven by the
evidence on record. Thus, largely uncontested are the following findings of fact of the trial court:

Enough has already been said hereinabove concerning the claim of ownership of
plaintiff Enrique. From an overall evaluation of the facts found by the Court to be
substantiated by the evidence on record, the Court is convinced and so holds that the
three conflicting claimants, it is party plaintiffs, Enrique Hemedes and now DOMINIUM,
who have both law and equity on their side. Plaintiff Enrique Hemedes' title to the
property in question by virtue of the "Kasunduan" dated May 27, 1971 was confirmed
twice by his grantor, Justa Kausapin; he complied with his obligations as naked owner
by giving Justa Kausapin her usufructuary rights in the form of financial and other
assistance; he declared his ownership of the property openly and adversely to other
claimants by recording the same in the appropriate government agencies, namely, the
Municipal and Provincial Assessor's Office, the Ministry of Agrarian Reform and the
Bureau of Lands; he was openly known in the community where the property is located
as the owner thereof; he paid the taxes on the property conscientiously from the time he
acquired the same to the time he sold the same to co-plaintiff DOMINIUM; he was in
continuous possession of the property during the said period; he paid the tenant,
Nemesio Marquez, the disturbance fee required under the Land Reform Law.

(pp.,
102-
103, 
Rollo.)

The Court of Appeals, therefore, did not err in holding that since the deed of conveyance to Maxima
was found to be spurious, it necessarily follows that OCT No. (0-941) 0-198 issued in her name is null
and void. This is because the registration will not invalidate a forged or invalid document.

I, therefore, vote to dismiss the petition and to affirm the decision appealed from.

PDF 12

EN BANC

G.R. No. L-23491           July 31, 1968

TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET AL., plaintiffs-appellees,

vs.
THE CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.
Vergara and Dayot for plaintiffs-appellees.
Achacoso, Nera and Ocampo for defendant-appellant.

FERNANDO, J.:

The principal legal question in this appeal from a lower court decision, ordering defendant-appellant
The Capital Insurance & Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi Co., Inc. as well as
plaintiffs-appellees, widow and children of the deceased Alfredo Monje, who, in his lifetime, was
employed as a taxi driver of such plaintiff-appellee, "the sum of P5,000.00 with interest thereon at the
legal rate from the filing of the complaint until fully paid," with P500.00 as attorney's fees and the
costs of the suit, is whether or not a provision in the insurance contract that defendant-appellant will
indemnify any authorized driver provided that [he] is not entitled to any indemnity under any other
policy, it being shown that the deceased was paid his workman's compensation from another
insurance policy, should defeat such a right to recover under the insurance contract subject of this
suit. The lower court answered in the negative. Its holding cannot be successfully impugned.

The appealed decision stated at the outset that the motion for judgment on the pleadings filed by the
plaintiffs was granted, the defendant having no objection and the issue presented being capable of
resolution without the need of presenting any evidence. Then the decision continues: "Alfredo Monje,
according to the complaint, was employed as taxi driver by the plaintiff Taurus Taxi Co., Inc. On
December 6, 1962, the taxi he was driving collided with a Transport Taxicab at the intersection of Old
Sta. Mesa and V. Mapa Streets, Manila, resulting in his death. At the time of the accident, there was
subsisting and in force Commercial Vehicle Comprehensive Policy No. 101, 737 ... issued by the
defendant to the Taurus Taxi Co., Inc. The amount for which each passenger, including the driver, is
insured is P5,000.00. After the issuance of policy No. 101, 737, the defendant issued the Taurus Taxi
Co., Inc. Indorsement No. 1 which forms part of the policy ... "  1 Reference was then made to plaintiff-
appellee Felicitas Monje being the widow of the taxi driver, the other plaintiffs-appellees with the
exception of the Taurus Taxi Co., Inc., being the children of the couple. After which it was noted that
plaintiff Taurus Taxi Co., Inc. made representations "for the payment of the insurance benefit
corresponding to her and her children since it was issued in its name, benefit corresponding to her
and her children, ... but despite demands ... the defendant refused and still refuses to pay them."  2

On the above facts, the liability apparently clear, the defenses interposed by defendant insurance
company being in the opinion of the lower court without merit, the aforesaid judgment was rendered.
This being a direct appeal, to us on questions of law, the facts as found by the lower court cannot be
controverted.

Defendant-appellant Capital Insurance & Surety Co. Inc. alleged as the first error of the lower court its
failure to hold "that in view of the fact that the deceased Alfredo Monje was entitled to indemnity
under another insurance policy issued by Ed. A. Keller Co., Ltd., the heirs of the said deceased are
not entitled to indemnity under the insurance policy issued by appellant for the reason that the latter
policy contains a stipulation that "the company will indemnify any authorized driver provided that such
authorized driver is not entitled to indemnity under any other policy." "  3 In the discussion of the above
error, defendant-appellant stated the following: "The facts show that at the time of his death, the
deceased Alfredo Monje, as authorized driver and employee of plaintiff Taurus Taxi Co., Inc., was
entitled to indemnity under another insurance policy, then subsisting, which was Policy No. 50PH-
1605 issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi Co., Inc. As a matter of fact, the
indemnity to which the deceased Alfredo Monje was entitled under the said Policy No. 50PH-1605
was paid by Ed. A. Keller Co., Ltd. to the heirs of Alfredo Monje on December 28, 1962, as evidenced
by the records of W.C.C. Case No. A88637 entitled "Felicitas V. Monje, et al. vs. Taurus Taxi Co.,
Inc.", Regional Office No. 4, Department of Labor, Manila ... "  4
The above defense, based on a fact which was not disputed, was raised and rightfully rejected by the
lower court. From its own version, defendant-appellant would seek to escape liability on the plea that
the workman's compensation to which the deceased driver was rightfully entitled was settled by the
employer through a policy issued by another insurance firm. What was paid therefore was not
indemnity but compensation.

Since what is prohibited by the insurance policy in question is that any "authorized driver of plaintiff
Taurus Taxi Co., Inc." should not be "entitled to any indemnity under any policy", it would appear
indisputable that the obligation of defendant-appellant under the policy had not in any wise been
extinguished. It is too well-settled to need the citation of authorities that what the law requires enters
into and forms part of every contract. The Workmen's Compensation Act, explicitly requires that an
employee suffering any injury or death arising out of or in the course of employment be compensated.
The fulfillment of such statutory obligation cannot be the basis for evading the clear, explicit and
mandatory terms of a policy.

In the same way as was held in Benguet Consolidated, Inc. v. Social Security System  5 that sickness
benefits under the Social Security Act may be recovered simultaneously with disability benefits under
the Workmen's Compensation Act, the previous payment made of the compensation under such
legislation is no obstacle by virtue of a clause like that invoked by defendant-appellant to the payment
of indemnity under the insurance policy.

Assuming however that there is a doubt concerning the liability of defendant-appellant insurance firm,
nonetheless, it should be resolved against its pretense and in favor of the insured. It was the holding
in Eagle Star Insurance, Ltd. v. Chia Yu 6 that courts are to regard "with extreme jealousy" limitations
of liability found in insurance policies and to construe them in such a way as to preclude the insurer
from non-compliance with his obligation. In other words, to quote a noted authority on the subject, "a
contract of insurance couched in language chosen by the insurer is, if open to the construction
contended for by the insured, to be construed most strongly, or strictly, against the insurer and
liberally in favor of the contention of the insured, which means in accordance with the rule contra
proferentem." 7 Enough has been said therefore to dispose of the first assigned error.

The point is made in the second alleged error that the lower court ought to have held "that by joining
the heirs of Alfredo Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc. committed a breach of
policy condition and thus forfeited whatever benefits, if any, to which it might be entitled under
appellant's policy." 8 The basis for such an allegation is one of the conditions set forth in the policy.
Thus: " "5. No admission, offer, promise or payment shall be made by or on behalf of the insured
without the written consent of the Company which shall be entitled if it so desires to take over and
conduct in his name the defense or settlement of any claim or to prosecute in his name for its own
benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct
of any proceedings and in the settlement of any claim and the Insured shall give all such information
and assistance as the Company may require ... " 9

Such a plea is even less persuasive. It is understandable then why the lower court refused to be
swayed by it. The plaintiff Taurus Taxi Co., inc. had to join the suit on behalf of the real beneficiaries,
the heirs of the deceased driver, who are the other plaintiffs as it was a party to the policy.

Moreover, as noted in the decision appealed from: "The institution of the action cannot possibly be
construed as an admission, offer, promise, or payment by the company, for it merely seeks to
enforce, by court action, the only legal remedy available to it, its rights under the contract of insurance
to which it is a party. To consider, furthermore, the commencement of an action by the insured, alone
or with others, as a breach of the policy, resulting in forfeiture of the benefits thereunder, to place in
the hands of the insurer the power to nullify at will the whole contract of insurance by the simple
expedient of refusing to make payment and compelling the insured to bring a suit to enforce the
policy." 10

To so construe the policy to yield a contrary result is to put a premium on technicality. If such a
defense is not frowned upon and rejected, the time will come when the confidence on the part of the
public in the good faith of insurance firms would be minimized, if not altogether lost. Such a
deplorable consequence ought to be avoided and a construction of any stipulation that would be
fraught with such a risk repudiated. What the lower court did then cannot be characterized as error.

The third error assigned, namely, that the lower court should have considered the filing of the
complaint against defendant-appellant as unjust and unwarranted, is, in the light of the above, clearly
without merit.

WHEREFORE, the appealed decision of the lower court ordering defendant-appellant "to pay the
plaintiffs the sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint
until fully paid, P500.00 as attorney's fees," 11 with costs is affirmed. Costs against defendant-
appellant.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and Angeles, JJ., concur.
Castro, J., took no part.
PDF 13

FIRST DIVISION

G.R. No. L-38268 May 31, 1979

EMPIRE INSURANCE COMPANY, plaintiff-petitioner,

vs.
REMEDIOS S. RUFINO, MERCEDES RUFINO ROXAS, MARIA PAZ RUFINO LAUREL, MARIA
AUXILIO RUFINO PRIETO, MARIA SOCORRO RUFINO CARPO, MACARIO S. RUFINO, CARLOS
S. RUFINO and SUNVAR INC., defendants-respondents.

Ferrer & Ranada for petitioner.

Perfecto S. Reyes and M.M. Roxas for respondents.

MELENCIO HERRERA, J.:

This is a Petition for Review on Certiorari of the Order of the Court of First Instance of Rizal (Branch
XXI, Pasig) in Civil Case No. 17660, dated October 26, 1973, ordering the dismissal of the case and
the cancellation of the notice of lis pendens annotated on Transfer Certificates of Title Nos. 348739,
348742, 348738, 397876, 397877 and 397878 of the Registry of the Province of Rizal.

The factual background to this controversy is as follows:

On April 20, 1970, Vicente A. Rufino died intestate, survived by herein respondents, namely: his
widow, Remedios S. Rufino, and children Mercedes Rufino Roxas, Maria Paz Rufino Laurel, Maria
Auxilio Rufino Prieto, Maria Socorro Rufino Carpo, Macario S. Rufino and Carlos S. Rufino. On May
29, 1970, respondents instituted Special Proceedings No. 59-M (5934), entitled "Intestate Estate of
the late Vicente A. Rufino," before the Court of First Instance of Rizal (Branch XV, Makati). A period
of six months, counted from September 18, 1970, date of the first publication of notice to creditors,
was fixed within which creditors of the deceased could file their claims against the estate. The six
month period expired without any creditor having filed any claim against the estate.

On April 12, 1971, respondents executed a Partition Agreement, to which was attached an Inventory
of Properties and Estate Liabilities and/or Obligations, the pertinent provisions of which read:

4. That although no claim against the decedent's estate have been formally filed in
these proceedings, the undersigned heirs are fully aware that the decedent left
obligations and liabilities which are mentioned in the Inventory, the payment of which is
assumed by the decedent's heirs in the manner hereinafter stated.

5. That pursuant to pertinent provisions of the Civil Code, the decedent's legal heirs
have agreed, and do hereby agree, that the entire estate left by the decedent be
distributed among, and adjudicated to, his above-named legal heirs on the following
bases:

xxx xxx xxx

 (c) All the liabilities or obligations of the decedent, which were incurred during his
marriage and redounded to the benefit of the family, shall be borne and paid by the said
heirs in proportion to their shares in the conjugal partnership properties.

xxx xxx xxx

7. That in accordance with the bases of distribution set forth in paragraph 5 hereof, the
properties left by the decedent, and listed in the Inventory, Annex 'A', are hereby
adjudicated and distributed as follows:

xxx xxx xxx

(d) All the outstanding liabilities or obligations of the decedent, except the one assumed
by the heirs Macario S. Rufino and Carlos S. Rufino are hereby assumed by all the legal
heirs of the decedent in the proportion of their shares in the conjugal partnership
properties established in sub-paragraph (b) hereof.

The Inventory of Estate Liabilities and/or Obligations attached to the Partition Agreement listed the
following

CLAIMS AGAINST THE ESTATE

Security Bank & Trust Company, P1,563,485.29

Merchants Banking Corporation, 100,000.00
Investments Marketing Associates, 220,000.00
Inc.,
Sunvar, Incorporated, 485,880.00
Heirs of M. Rufino, Inc., 360,000.00
Luzon Theatres, Inc., 7,500.00
Mrs. Mercedez R. Roxas, 300,000.00
Dr. Panfilo Castro, 33,000.00
Lincoln National Life Insurance Co.  
($17,000.00 at P6.20). 105,400.00
Philippine Banking Corporation, 2,300,000.00
 

TOTAL CLAIMS AGAINST THE

ESTATE,
APRIL 29,1970, P5,475,265.29 1

The Partition Agreement was approved by the trial Court in Order dated April 19, 1971.

On May 14, 1971, respondents filed a Petition to Declare Proceedings Terminated alleging that the
estate and inheritance taxes had already been fully paid and that they had received their respective
shares in the estate of the late Vicente A. Rufino in accordance with the Partition Agreement. In an
Order issued on the same date, the trial Court declared the proceedings closed and terminated.

On April 17, 1973, petitioner filed Civil Case No. 17660 against respondents based allegedly on the
latter's undertaking in the Partition Agreement to assume and pay all the outstanding liabilities and
obligations of the late Vicente A. Rufino. Petitioner claimed that sometime in January, 1965,
Commercial Metals, Inc., a domestic corporation of which the late Vicente A. Rufino was a director,
imported machinery for a "one way system hot dip tinning plant;" that it (petitioner) issued a surety
bond on June 28, 1965, on behalf of Commercial Metals, Inc. in the sum of P505,816.50 in favor of
the Republic of the Philippines; that it issued the surety bond on the strength of an indemnity
agreement signed by the late Vicente A. Rufino, jointly and severally with Arsenio Laurel; that
Commercial Metals, Inc. then withdrew its imported machinery from the Bureau of Customs under
said surety bond without payment of taxes, duties and fees pending action by the Board of Industries
on the corporation's application for tax exemption and privilege under Republic Act No. 3127; that on
March 7, 1973, it received formal notice from the Bureau of Customs that the petition of Commercial
Metals, Inc. for tax exemption was denied and demanding payment of the full face amount of the
surety bond; and that it wrote Commercial Metals, Inc. and the estate of the late Vicente A. Rufino
concerning the demand against its surety bond. Respondent Sunvar, Inc. was impleaded as party
defendant in said case allegedly because some of the properties received by respondents from the
estate of the late Vicente A. Rufino had been transferred to said corporation. Petitioner then prayed
for the payment by respondents, to the full extent of their respective shares in the estate of the late
Vicente A. Rufino, of the sums of P505,816.50 representing the demand of the Government against
its surety bond with interest thereon at 12% per annum from March 9, 1973; P21,803.61 as accrued
or accumulated premiums and stamps on the surety bond plus further accruing premiums and stamps
of P3,127.83 annually from June 28, 1973; and P100,000.00 as and for attorney's fees.

In their Answer to the Complaint, respondents raised the affirmative defenses that the trial Court had
no jurisdiction on the ground that petitioner's claim should have been submitted and prosecuted in the
intestate proceedings of the late Vicente A. Rufino, and that petitioner had no cause of action against
them as whatever claim it had was against the estate of the decedent. Respondents likewise sought
the cancellation of the notice of lis pendens caused to be annotated by petitioner on the certificates of
title covering the properties received by them from the estate of the late Vicente A. Rufino.

On October 26, 1973, the trial Court issued an Order dismissing the case on the grounds that the
Court that took cognizance of the settlement of the estate of the late Vicente A. Rufino was the one
that had jurisdiction over the case and that petitioner's claim was barred, pursuant to Section 5, Rule
86 of the Rules of Court, not having been filed within the time limited in the notice to creditors in the
intestate proceedings. The trial Court likewise ordered the cancellation of the notice of lis
pendens annotated on Transfer Certificates of Title Nos. 348739, 348742, 348738, 397876, 397877
and 397878 of the Registry of the Province of Rizal.

Its Motion for Reconsideration of the above Order having been denied, petitioner filed the instant
Petition, which was given due course in a Resolution dated May 5, 1974,

Petitioner argues that the trial Court erred in concluding that its claim is purely a money claim against
the estate of the late Vicente A. Rufino, which should have been presented in the intestate
proceedings. It urges that its cause of action is to hold respondents to their undertaking in the
Partition Agreement to assume and pay for all the obligations and liabilities of the late Vicente A.
Rufino, which may be prosecuted in an ordinary suit.

On this point, we agree with petitioner that its cause of action is not a money claim against the estate
of the late Vicente A. Rufino. It is clear from the allegations of the Complaint that petitioner's cause of
action is based on what it believed was respondents' undertaking in the Partition Agreement to
assume and pay for all the outstanding liabilities and obligations of the decedent, whether listed in the
Inventory of Estate Liabilities or not, in proportion to their respective shares in the estate. In other
words, petitioner's claim is not against the estate of the late Vicente A. Rufino but against
respondents themselves in their personal capacity. In which case, it was properly prosecuted in an
ordinary action and was within the jurisdiction of the Court a quo.

The next issue to resolve is whether the indemnity agreement executed in favor of petitioner by the
late Vicente A. Rufino, jointly and severally with his son-in-law, Arsenio Laurel, who predeceased him,
is one of those obligations and liabilities of the decedent assumed by respondents under their
Partition Agreement.

Admittedly, petitioner's claim is not listed in the Inventory of Properties and Estate Liabilities and
Obligations of the late Vicente A. Rufino, attached to the Partition Agreement, as one of the
obligations acknowledged by respondents to have been left by the decedent and the payment of
which had been assumed by them. However, petitioner argues that inasmuch as paragraphs 5(c) and
7(d) of the Partition Agreement, hereinabove quoted, providing for the assumption by respondents of
all liabilities or obligations of the late Vicente A. Rufino, omitted any reference to the Inventory in
paragraph 4 thereof, those paragraphs were meant to include all other liabilities and obligations of the
decedent although not so listed in said Inventory. Respondents, on the other hand, counter that the
liabilities and obligations mentioned in paragraphs 5(c) and 7(d) of the Partition Agreement should be
restricted only to those liabilities or obligations of the decedent listed in the Inventory, as adverted to
in paragraph 4 of said Agreement, and that said paragraphs 5(c) and 7(d) merely define the extent
and proportion by which they assumed the decedent's obligations.

Section 10, Rule 130 of the Rules of Court provides as follows:

Interpretation according to intention; general and particular provisions — In the

construction of an instrument, the intention of the parties is to be pursued; and when a
general and a particular provision are inconsistent, the latter is paramount to the former.
So a particular intent will control a general one that is inconsistent with it.

Likewise, Article 1372 of the Civil Code stipulates that however general the terms of a contract may
be, they shall not be understood to comprehend things that are distinct and cases that are different
from those upon which the parties intended to agree. " Similarly, Article 1374 of the same Code
provides that "the various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly."

There is no dispute that no claims were filed in the intestate proceedings of the late Vicente A. Rufino
within the period fixed in the notice of creditors. Petitioner failed to file its claim even as a contingent
claim in consonance with Section 9, Rule 86 of the Rules of Court. Legally speaking, therefore, all
creditors of the late Vicente A. Rufino are forever barred from prosecuting any claim against the
estate of the decedent, pursuant to Section 5, Rule 86 of the Rules of Court. Nevertheless,
respondents, aware that the decedent did leave obligations and liabilities, the existence of which they
acknowledged and enumerated in the Inventory attached to the Partition Agreement, personally
assumed payment of the same in proportion to their shares in the estate of the decedent. It is thus
clear that respondents intended to assume only those obligations of the late Vicente A. Rufino which
they acknowledged and enumerated in the Inventory. Thus, they specified:

4. That although no claim against the decedent's estate have been formally filed in
these proceedings, the undersigned heirs are fully aware that the decedent left
 obligations and liabilities which are mentioned in the Inventory, the payment of which is
assumed by the decedent's heirs in the manner hereinafter stated.

Consequently, the phrase "all liabilities or obligations of the decedent" used in paragraphs 5(c) and
7(d) should be then restricted only to those listed in the Inventory and should not be construed as to
comprehend all other obligations of the decedent. The rule that "particularization followed by a
general expression will ordinarily be restricted to the former" is based on the fact in human
experience that usually the minds of parties are addressed specially to the particularization, and that
the generalities, though broad enough to comprehend other fields if they stood alone , are used in
contemplation of that upon which the minds of the parties are centered. 2

In other words, the enumeration in the Inventory of the liabilities or obligations of the late Vicente A.
Rufino, expressly acknowledged by respondents and the payment of which had been assumed by
them, implied the exclusion of all others. Expressio unius est exclusion alterius.

Under the maxim' expressio unius est exclusion alterius which, although more
frequently applied in the construction of statutes, ... is also applicable in the construction
of contracts, the expression in a contract of one or more things of a class implies the
exclusion of all not expressed, even though all would have been implied had none been
expressed. 3

Moreover, considering that the respondents themselves had assumed the obligation of answering to
creditors for the debts and obligations of the late Vicente A. Rufino, it is but just that they should be
bound only by the exact terms of their premise.

It is evident that in no contract may a contracting party be obligated to more than what
he has really bound himself and that the contract should not be construed as including
things and cases different from those with respect to which the persons interested
intended to contract. (Art 1. 1283, now Art. 1372, Civil Code) 4

Petitioner's claim not having been expressly included among the obligations of the late Vicente A.
Rufino expressly assumed by respondents, as listed in the Inventory, it may not, therefore, hold
respondents personally liable on their undertaking in the Partition Agreement.

WHEREFORE. the instant Petition is hereby dismissed for lack of merit.

Costs against petitioner.

SO ORDERED.
 FIRST DIVISION

[G.R. No. 7180. March 30, 1912. ]

RAFAEL ENRIQUEZ ET AL., Plaintiffs-Appellants, v. A. S. WATSON & CO.

LTD., Defendant-Appellee.

Rohde & Wright, for Appellants.

W. A. Kincaid and Thomas L. Hartigan, for Appellee.

SYLLABUS

1. LANDLORD AND TENANT; LEASE; CHANGES IN THE FORM AND SUBSTANCE OF THE
THING LEASED. — The lessee under an 18-year lease had the right to make such
changes as the business established therein required, provided that neither the value
nor the solidity of the building was impaired. Said lessee undertook to remove a thick
masonry wall and substitute therefor a reinforced concrete wall, which would add
materially to the floor space, which he needed in his business, and at the same time
strengthen the building and add materially to the value of the building. The lessors
claimed the lease should be rescinded because the form and substance of the leased
premises had been changed. Held: Not such a change, under the circumstances, as to
warrant rescission of the lease.

2. ID.; ID.; ID.; CIVIL CODE. — The provisions of the Civil Code applicable to the case
which prohibit a change of form or substance of the thing leased and obligate its return
in the same condition in which it was received, provide a general rule of law, and, like
most general propositions, cannot be accepted without limitation and reservation under
all conditions. They must be interpreted in the light of the growth of civilization and
varying conditions.

3. ID.; ID.; ID.; SHORT TERM LEASE. — A lessee under a short term lease does not,
however, receive the benefit of a very liberal interpretation of these rules. If the lessor
has fitted up his premises for a certain purpose, such a lessee cannot make changes on
the plea that they will be somewhat beneficial to the property.

4. ID.; ID.; ID.; LONG TERM LEASE. — Under a long term lease, the lessee should be
allowed to make the changes which industrial development or varying conditions may
require, provided the interests of the lessor are clearly benefited thereby.

5. ID.; ID.; SUBTENANTS. — A subtenant is bound to the original lessor by all the
conditions of the original lease in so far as the use and preservation of the thing leased
is concerned.

6. ID.; ID.; ASSIGNMENT OF LEASE. — The power of assignment is incidental to the

state of every lease of things unless expressly forbidden in the lease.

7. CONTRACTS; CONSTRUCTION. — When it is not shown that words or phrases have a

technical or special use, and they are susceptible of two interpretations, that
 interpretation most favorable to the party in whose favor they are used must be given.

8. ID.; COMMUNITY PROPERTY; LEASE; RIGHTS OF MINOR. — Article 1548 of the Civil
Code prohibiting the lease of property of a minor for more than six years, does not
necessarily apply when the property is communal.

9. ID.; ID.; ID.; SUBSERVIENT TO INTERESTS OF MAJORITY OWNERS. — The supreme

court of Spain has held that in such a case the interests of the majority govern the
minor, the latter always having the right to appeal to the court when the decision of the
majority is gravely prejudicial to him.

10. ID.; ID.; ID.; ACTS OF LEGAL GUARDIAN. — The minor in the case at bar having
been represented by his legally appointed guardian and the action of the latter in signing
the lease having been formally approved by the court, makes the contract of lease
binding upon the minor.

DECISION

TRENT, J.  :

This action was brought on April 12, 1911, by Rafael, Antonio, Trinidad, Cayetano,
Rosario, Gertrudis, and Carmen Enriquez, and Antonio Gascon (the latter being a minor,
was represented by his guardian ad litem), as owners and lessors of the property Nos.
72, 74, and 76 Escolta, city of Manila, against A. S. Watson & Company, Ltd., as lessee
of said property. The plaintiffs allege that on June 22, 1906, Rafael, Carmen, Antonio,
and Trinidad Enriquez and Antonio Gascon executed to the defendant a contract of
mortgage and lease upon their participation in that property; that on January 19, 1907,
the other plaintiffs executed the same mortgage and lease in favor of the defendant
upon their interest in the same property; that the said contract of lease has been
terminated by the payment by the plaintiffs to the defendant of the principal and
interest of the mortgage; that the said contract of lease is null and of no effect by
reason of the minority of the plaintiff Antonio Gascon, who is still a minor; that the
defendant, after June 22, 1906, made all the repairs necessary to its business with the
approval of the plaintiffs.

The plaintiffs further allege that there exists in that building a principal wall about one
meter in thickness and five meters in height, which extends from the front of the
building on the Escolta to the rear of the same; that upon this wall rests the second floor
of the building and that it is necessary to safely maintain the building against
earthquakes and typhoons; that on the 11th of April, 1911, the defendant commenced
to destroy and remove the said wall and was on the date of the filing of this complaint
actually engaged in the destruction and removal of the same; and unless restrained,
would continue such destruction and removal, to the irreparable injury of the plaintiffs;
and that the defendant has varied the form and substance of the leased premises. The
plaintiffs therefore prayed that the defendant be prohibited from destroying and
removing said wall; that it be ordered to rebuild or replace that part which it had
removed or destroyed; and that the contract of lease be declared terminated and
rescinded.

On the 12th day of April, 1911, a preliminary injunction was issued by the Court of First
Instance, prohibiting and restraining the defendant from continuing the removal and
destruction of the wall in question, and requiring it to appear in court on the 17th of that
month to show cause why such preliminary injunction should not be continued in force
during the pendency of this action.

On the 21st of that month, the defendant company answered, admitting the allegations
as to the ownership, mortgage, and lease, contained in paragraphs 1, 2, and 3 of the
complaint, and denying all the other allegations therein. The defendant set up by way of
special defense that the wall in question was not a principal wall and did not extend the
entire length of the building; that said wall consisted of two shells filled with mortar;
that it was very old, deteriorated, and weak; that it was necessary, in order to conserve
the property, to remove said wall and to substitute it with other material; that the wall
in question is so located that it and its subtenant are deprived of the use of a large part
of the ground floor fronting on the Escolta; that under Clause M of the contract of lease,
the defendant has the right to remove this wall, substituting in lieu thereof other
material, this being required by the business established in said building.

As a second special defense, the defendant admits the payment of the mortgage by the
plaintiffs, but alleges that the contract of lease is independent of the mortgage contract,
and that in satisfying the mortgage of the defendant, the leasehold was specifically
continued in force by all parties.

As a third special defense, the defendant alleges that under the provisions of Paragraph
M of the contract of lease, it has expended the sum of over sixty thousand pesos in
improving the leased premises, and that on making such expenditure it believed that it
would be reimbursed by enjoying the occupancy and subrenting of the premises.

On the 24th day of May, 1911, the Philippines Drug Company, a corporation organized
under the laws of the Philippine Islands, appeared and asked leave to intervene as an
interested party. This leave being granted, it alleged that it is the actual owner of the
pharmacy situated in the leased premises, which formerly belonged to the defendant A.
S. Watson & Company, Ltd.; and that the defendant sublet to it the ground floor of the
leased property under the same conditions as are expressed in the original contract of
lease. The intervener further alleged, as did the defendant, the necessity for the removal
of the wall in question in order to give it more space as required by its business. and
that the removal of this wall was authorized in Paragraph M of the original lease.

The trial court, after considering the evidence presented, making a personal inspection
of the leased premises, and hearing the arguments of counsel for both parties, and after
making its findings of facts and conclusions of law, entered the following decree, to
wit:jgc:chanrobles.com.ph

"The court denies the rescission and declaration of nullity of the contract of lease
demanded by the plaintiffs. declaring such contract of lease to be valid and subsisting
and binding upon the parties thereto, and upon the sublessee and intervener, the
Philippines Drug Company, and continues and declares final the preliminary writ of
injunction issued herein on the 12th day of April, 1911, but modifying the same by
permitting the defendant, A S. Watson & Co. Ltd., or the intervener, the Philippines Drug
Company, to remove the wall in question on the condition that they substitute it with
properly constructed concrete pillars and arches and such other work as may be
necessary as specified in Finding No. 17 of this judgment using such temporary shoring
and bracing as shall be necessary to insure the safety of the building while such change
is being made, which work of removal and substitution may be commenced and carried
out upon the defendant or intervener, or both, filing herein an undertaking in the sum of
P10,000 with sureties approved by the court, conditioned that it or they will reimburse
the plaintiff lessors for any and all damage that may be caused the leased premises by a
failure to take proper precautions and employ proper means to safeguard and protect
the building while such work of removal and substitution is being accomplished."cralaw
virtua1aw library

From this judgment the plaintiffs appealed and make the following assignment of
errors:jgc:chanrobles.com.ph

"1. The judgment is erroneous in not having declared rescinded the contract of lease.

"2. The judgment is erroneous in finding that the lessee and sublessee have the right to
change the form and substance of the property leased.

"3. The judgment is erroneous in finding that the lessee acted in good faith in beginning
the destruction of the wall, believing that under the contract of lease it had the right to
do this.

"4. The judgment is erroneous in not finding that the building is weakened by the
destruction of the wall.

"5. The judgment is erroneous is so far as it modifies the preliminary injunction.

"6. The judgment is erroneous in not declaring perpetual the preliminary injunction.

"7. The judgment is erroneous in the dispositive part thereof relating to the form and
manner of making the modifications in the property because it does not relate to
anything at issue in the case.

"8. The judgment is erroneous in the part relating to the form and manner of making the
modifications in the property because it does not dispose of anything judicially, but, on
the contrary, gives permission to the opposing parties without commanding them to do
anything.

"9. The judgment is erroneous because it does not order the repair of the destruction
made in the wall.

"10. The judgment is erroneous because it declares valid the contract of lease.

"11. The court erred in denying the motion for a new trial."cralaw virtua1aw library
All questions in this case may be merged into one, and that is: Did the trial court err in
failing to declare the contract of lease voidable or rescinded for one of two reasons: first,
because of the minority of one of the lessors; and second, because neither the
defendant nor intervener had authority under the contract of lease to remove the wall in
question? Plaintiffs do not now insist that the contract of lease was terminated on the
payment of the mortgage.

The eight plaintiffs each have a one-eighth undivided interest in the leased premises.
The property was leased to the defendant for a period of twelve years with permission to
renew the lease for a further period of six years. Seven of these plaintiffs were of age
when they executed this contract of lease. The other, Antonio Gascon, was a minor. At
the time this contract of lease was executed, the minor was represented by his judicial
guardian. The guardian having obtained authority or permission of the court to enter
into this contract of lease for and on behalf of his ward, the action of the guardian in
executing said contract was approved by the probate court.

Article 1548 of the Civil Code reads:jgc:chanrobles.com.ph

"ART. 1548. The husband can not give in lease the property of the wife, the father and
guardian, that of the son or minor, and the administrator of property, not having a
special power, for a period exceeding six years."cralaw virtua1aw library

Article 398 of the same code provides:jgc:chanrobles.com.ph

"ART. 398. The decision of a majority of the coowners as to the management and better
enjoyment of the thing owned in common shall be obligatory.

"There shall be no majority, unless the resolution has been adopted by the coowners
representing a majority of the interests which constitute the object of the community.

"Should there be no majority, or the resolution of the latter is seriously prejudicial to the
parties interested in the thing owned in common, the judge, at the instance of a party,
shall decree what may be proper, including the appointment of an administrator."cralaw
virtua1aw library

x       x       x

Counsel for the plaintiffs do not claim that the contract of lease which was made for a
period of more than six years is seriously prejudicial to the interests of the minor, nor do
they claim that said contract, of itself, prejudices in any way the minor’s interest.

The supreme court of Spain had under consideration this very question in its resolution
of April 26, 1907 (vol. 15 Jurisprudencia referente al Codigo Civil, p. 194). In this case,
a contract of lease for twelve years, executed by one of the coowners of a certain
property, one of whom was a minor, had been presented for registry. Registry was
refused for the reason, among others, that the majority of the coowners lacked authority
to execute said contract of lease. It was argued that the majority of the coowners, in
their enjoyment of the control of the management and administration of the thing, acted
in a representative or an administrative capacity in regard to the minority. In
determining the questions presented in this case, the court said:jgc:chanrobles.com.ph

"That for the administration and better enjoyment of the thing, the decision of the
majority of the coowners is obligatory, and that there is no majority, unless the decision
is made by the coowners, that represent the majority of the interests that constitute the
object of the community, are general rules laid down in article 398 of the Civil Code,
governing community of property.

"The contract of lease is by its nature and purpose one of the means of enjoyment or
development of non-fungible property, and, in this concept, may be agreed upon by the
coowners of a thing, provided always that they represent a majority of the interests of
the community, the decision being obligatory for all by virtue of the powers that are
expressly conferred upon them by virtue of said provisions.

"If, indeed, the contract of lease of real property for a period exceeding six years, or in
which the rents are advanced for more than three years, constitutes a real right
inasmuch as it is subject to registry, according to the decision of this court in various
resolutions, this principle of law, which has been applied in the sense of not permitting
the execution of such a contract to those who administer the goods of others, and
especially to prevent agents from executing such a contract without special authority for
the same, in accordance with the provisions of article 1713 of the said code, is not
opposed to the principle of law laid down in said article 398; taking into consideration
the legal character and peculiar attributes of community of property, which makes it
convenient and necessary that those who have less interest therein should submit to
those who have a greater participation therein, in all that refers to the exploitation and
ordinary enjoyment of the same, the rule is established that the enjoyment of the
common thing must be subject to the will of the majority, without distinguishing and
limiting the period or the form of the enjoyment; therefore, the contract of lease being
the same in essence whatever the term for which it is constituted, such a contract must
be considered as an act of mere administration, and subject to contract by the decision
of the majority of coowners, the other interested parties always having the right to
appeal to the court when the decision is gravely prejudicial to them according to the
provisions of the same article 398.

"This doctrine was recognized by the supreme court in its decision of June 30, 1897, and
of the 8th of July, 1902, and by this court in its resolution of May 29, 1906, considering
as included in the powers conferred in said article, leases exceeding a period of six
years, decided upon by a majority of the coowners of a property possessed in common.

"The contract of lease of the property referred to in these proceedings, having been
agreed upon by the coowners representing the majority of the interests in the same,
they were possessed of sufficient legal capacity by virtue of what is already said, and it
is, therefore, subject to registry."cralaw virtua1aw library

In the execution of the contract of lease under consideration, the minor was, as we have
said, represented by his judicial guardian, who not only asked the court for and obtained
authority to execute this contract of lease on behalf of his ward, but his act, after the
execution, was approved by the court. The interest of the minor has not been prejudiced
by reason of the fact that this contract of lease was executed for a term of more than six
years. Under the doctrine laid down by the supreme court of Spain, it would appear that
this contract of lease would be valid if the minor had not been represented by his
guardian. The minor having been represented by his duly appointed guardian, there can
be no question about the validity of this contract of lease.

The principal question is whether or not the appellees have violated the terms of the
contract of lease and thereby entitle the appellants to have said contract of lease
rescinded.

Before considering the contract in question, it might be well to examine the right of the
lessee to make changes in the property leased, if there were no express stipulation
therefor in the contract.

Article 1573 of the Civil Code provides:jgc:chanrobles.com.ph

"A lessee shall have, with regard to the useful and voluntary improvements, the same
rights which are granted the usufructuary."cralaw virtua1aw library

Article 487 of the same code reads:jgc:chanrobles.com.ph

"The usufructuary may make on the property which is the object of the usufruct any
improvements, useful or for recreation, which he may deem proper, provided he does
not change its form or substance; but he shall have no right to be indemnified therefor.
He may, however, remove said improvements, should it be possible to do so without
injury to the property."cralaw virtua1aw library

The result is that the lessee may make any improvements, useful or for recreation, in
the property leased that he may deem proper, provided that he does not change its
form or substance. The same obligation is expressed in articles 487 and 489, and in so
far as the form of the thing is concerned, in article 1557. According to articles 487 and
1557, the obligations of the lessee and the lessor are the same in the absence of any
agreement to the contrary, in so far as the conservation of the form of the thing leased
is concerned. This question of conserving the form and substance of the thing leased or
the object of the usufruct has been passed upon at various times by the courts.

In the case of the Manila Building and Loan Association and Peñalosa (13 Phil. Rep.,
575), this court said:jgc:chanrobles.com.ph

"If the object leased were a house, it is evident that the lessee might effect such
improvements for use, recreation or comfort as would not change its form or substance
as he deemed fit; he could build a tower or luxurious pavilion more expensive than the
house itself, to which, at the expiration of the lease, the owner of the house would have
no right whatever, unless the lessee could not remove the same without injury to the
house to which it was attached as an improvement, excepting of course the right to
cause the same to be demolished so that the house might be returned to him in the
same condition that the lessee received it; . . ."cralaw virtua1aw library
The supreme court of Spain, in its judgment of June 24, 1905, volume 14 of the
Jurisprudencia referente al Codigo Civil, page 38, had under consideration the
interpretation of this phrase in a case in which the lessee asked for the rescission of the
lease because the lessor had altered the form of the thing leased. The facts were that
the lessee had leased the house for the period of ten years, and at the time of the
execution of the contract of lease, there was a vacant lot next to the house and 13
windows of the house leased overlooked this lot. Thereafter the owner of the adjacent
lot constructed an edifice thereon which gave rise to litigation between the lessor and
the owner of the adjacent lot, which litigation was settled by the lessor and the owner of
the said lot, the latter being permitted to cover the windows of the leased property, and
the former allowed to open in the partition wall of the latter’s garden two large and two
small windows of specified dimensions, under certain conditions. The construction was
continued, with the result that such construction effectually closed and covered the 13
windows and the balcony, depriving the property leased of the light previously received
by the same. For the purpose of obtaining better light, many changes were made and
much work done in the interior of the leased house, the final result being that some of
the rooms of the house were darkened completely, others receiving poor and indirect
ventilation. The court, in refusing to rescind the contract of lease,
said:jgc:chanrobles.com.ph

"It does not appear that there is error committed by the trial court in its decision as set
out in the first assignment of error, because, even though the noncompliance by the
lessor of his obligations, among which was that of maintaining the lessee in the
peaceable enjoyment of the lease during the period of the contract, and the prohibition
to change the form of the thing leased, confers upon the lessee the right to ask for the
rescission of the contract, such circumstances are not found in the present case since
the trial court says that the appellant was not disturbed in the possession of the house,
the object of the lease, nor was he impeded from using the premises as a tavern, for
which use he had intended the same, and these findings of fact have not been legally
impugned.

"The decision also states that the changes made in the property did not change the form
of the same in the sense and concept covered by article 1557 of the Civil Code.
Notwithstanding that the findings on the point contain legal reasoning now
corresponding to this court, the interpretation of this article can not be made in general
and absolute terms not defined by law, because as a circumstantial fact depending in
each case on the peculiar conditions of the thing leased, there exists no reason in the
case at bar upon which to base the conclusion that the trial court erred, having in mind
that the particular use of the same as a tavern was not interfered with, as held in its
decision, and also the fact set out in its decision, and not contradicted in any manner,
namely, that the changes and alterations made were beneficial, tolerated by Sabay, and
consented to by the person to whom Sabay transferred his rights under the contract of
sublease.

"The last two reasons given for the rescission of the contract lack force and weight,
because, in accordance with the sense and concept of article 1561 of the said Civil Code,
the property must be returned at the expiration of the term of lease with the changes
made in the same, and these do not involve, as has already been said, any variation or
change of form or any interruption of the peaceable enjoyment of the lease and because
it does not appear from the facts that the trial court accepted as proven that the
appellant suffered disturbance of his rights for which he had been compelled to become
responsible to the lessor, and he, not having done so, there is no legal reason to apply,
as is attempted, the provisions of article 1560 of the code referred to."cralaw virtua1aw
library

Manresa, in volume 10 of his commentaries on the Civil Code, pages 534, 535, [488,
489] says:jgc:chanrobles.com.ph

"The question was discussed very energetically as to whether the lessee of a city
property leased for a stated industrial purpose, could install machinery propelled by
steam in substitution for the utilities, implements, and contrivances which were used
before the general adoption of such machinery. The installation of modern machinery
and its ordinary operation, at once caused a deterioration to the estate much greater
than the use of the former apparatus, besides the accidents which might occur and
which produce very great damage to the thing leased. Therefore, based upon this
consideration, it was said that the lessee could not make this substitution because it
implied a bad and prejudicial use of the thing and therefore very different from that
diligence of a good father in its use to which he had obligated himself.

"As Laurent says, there arise here two contrary interests and two diverse tendencies.
The owner has in view the stability of the structure and fears every innovation which
may compromise its preservation. The manufacturer finds himself obliged to keep
abreast of the development of his industry, to make changes, if he does not wish to
perish, and his interests demand that he put into practice the inventions which increase
his profits, even though the edifice may suffer. The owner commences to resist, adds
this writer, but competition forces the manufacturer, and the owner ends by yielding, if
he does not wish to remain unproductive.

"This is the essence of the policy pursued by foreign decisions, where the question has
been so much more important than in our own country. Until the year 1860, judicial
decisions were inclined to favor the owner of the property. But from that year the rights
of industry have been recognized with ever increasing clearness. It has been considered
that from the moment the lease is drawn up, in which is stated the industrial use to
which the lessee desires to put the thing leased, the claims of the industry to which the
object of the lease is to be devoted have been determined, and the lessee can not be
condemned to a stagnation which would be uneconomical, and, these facts admitted, the
logical consequences must necessarily follow: the lessor can not prevent the lessee from
adopting the improvements of his industry; the acts of the parties in making the
stipulations in the lease will do the rest."cralaw virtua1aw library

The lessee may make on the property which is the object of the lease any
improvements, useful or for recreation, which he may deem proper, provided he does
not change its form or substance. He is obligated to use the thing leased as a diligent
father of a family would, and to return the thing leased at the expiration of the lease in
the same condition in which he received it, except what may have been destroyed or
impaired by time or unavoidable reasons. (Arts. 1573, 487, 1555, and 1561, Civil Code.)

The supreme court of Spain recognizes the fact that no ironclad rules for the
interpretation of these articles can be laid down which would govern all cases. These
provisions must be applied according to the facts and circumstances of each case.
Manresa is inclined to the view that industrial development should be taken into
consideration in the determination of questions involved in the application of said
articles. The provisions of these articles are general rules of law, and, like most general
propositions, are not to be accepted without limitation or reserve. under any and all
circumstances. They must be interpreted in the light of the growth of civilization and
varying conditions. Certain obligations are placed upon the lessee to prevent lawless
acts which would result in waste or destruction. The importance of these obligations to
the lessor cannot be denied. Especially are they valuable and essential to the protection
of a landlord who rents his premises for a short time. Suppose he has fitted his premises
for certain uses and leases them for such uses for a short term. He would then be
entitled to receive them back at the end of the term still fitted for those same uses, and
he may well say that he does not choose to have a different property returned to him
from that which he leased, even if it be found to be of greater value by reason of the
change. But suppose that a usufructuary who has a life interest in an estate should
receive as such a hemp hacienda, and that in a short time this hacienda should become
permanently unproductive through disease or death of the plants, or by change of the
market conditions, and the land to have become far more valuable, by reason of new
conditions, as rice or sugar land. Is the usufructuary to be compelled to preserve or
renew the useless hemp fields and forego the advantages to be derived from a different
use? Or, suppose a life tenant should change warehouses into dwelling houses on the
ground that by change of conditions the demand for warehouses had ceased and the
property had become worthless, whereas it would be very valuable when fitted for
dwelling houses. Would this be such a change in the form or substance of the thing
leased as to forfeit the interest of the tenant? Again, a lessee for a long term received,
during very prosperous times, a hemp hacienda upon which were constructed large and
valuable storehouses in which were the old style hand-presses, but new. Later, on
account of a complete change in conditions due to the market and the method of
pressing hemp by steam, the lessee allowed the buildings and presses, which had
become useless, to fall into decay rather than incur the expense of repair. Would a
prudent owner of the fee, if in possession, have done the same? These questions
naturally suggest their own answer. The radical and permanent changes of surrounding
conditions must always be an important consideration in the determination of such
questions. The interpretation that "if the man is too long for the bed his head should be
chopped off rather than enlarge the old bed or purchase a new one" should not be given
those provisions of the Civil Code regarding the obligations of lessees.

Let us now turn to the contract of lease and the evidence presented. In this contract of
lease there are two clauses which deserve careful consideration.

Clause K:jgc:chanrobles.com.ph

"All the expenditures for cleaning, painting, and repairs which the building may require
and all that is ordered done by the Board of Health, will be at the expense of the lessee
A. S. Watson and Company, Limited.

Clause M:jgc:chanrobles.com.ph
"The lessee may make such works on the building as the business which it has
established therein requires, provided always that neither the strength nor the value of
the said building is impaired."cralaw virtua1aw library

It will be noted that the word "reparaciones" is used in Clause K, and the word "obras" in
Clause M. Counsel for the appellants insist that the word "obras" as thus used means the
same as "reparaciones." The Encyclopedic Dictionary of the Castilian Language
(Diccionario Enciclopedico de la Lengua Castellana) defines these words as
follows:chanrob1es virtual 1aw library

OBRA:jgc:chanrobles.com.ph

"1. A thing made or produced by an agent.

x       x       x

"4. A building in course of construction.

"REPARACION:jgc:chanrobles.com.ph

"1. The action and effect of repair. (Reparar — verb: To mend, to straighten, or to
correct the damage suffered by something.)"

The New Dictionary of the Castilian Language (Nuevo Diccionario de la Lengua

Castellana) defines the same words as follows:jgc:chanrobles.com.ph

"OBRA:jgc:chanrobles.com.ph

"Anything made, created, or produced by some power or agent. Any construction of

architecture, masonry, or carpentry, applied especially to buildings in course of
construction or repair, as: ’There are three jobs in Calle Hortaleza. Everything in my
house is disordered and topsy turvy because of the work.’

"REPARACION:jgc:chanrobles.com.ph

"The act or effect of repairing or of being repaired. The fact of repairing, in the sense of
renewing or improving something."cralaw virtua1aw library

The only synonym given in this work for "obra" is "produccion."cralaw virtua1aw library

It may be that repairs are included in the definition of "obras." Nevertheless, it cannot
be denied that the word "obras," used in its general sense, has a far more
comprehensive meaning than just simple repairs. Sections 290 and 293 of the Code of
Civil Procedure, provide:jgc:chanrobles.com.ph

"SEC. 290. Terms of a writing presumed to be in their ordinary sense. — The terms of a
writing are presumed to have been used in their primary and general acceptation, but
evidence is nevertheless admissible that they have a local, technical or otherwise
peculiar signification, and were so used and understood in the particular instance, in
which case the agreement must be construed accordingly."cralaw virtua1aw library

"SEC. 293. Where intention of different parties to instrument not the same. — When the
terms of an agreement have been intended in a different sense by the different parties
to it, that sense is to prevail against either party in which he supposed the other
understood it; and when different constructions of a provision are otherwise equally
proper, that is to be taken which is the most favorable to the party in whose favor the
provision was made."cralaw virtua1aw library

In the case at bar no proof has been presented tending to show that the word "obras"
was used in a technical or special sense, or that it has a local signification, and
therefore, it must be considered as used in its ordinary and general sense. If there
exists any ambiguity and if the meaning that the appellants give to the word "obras" is
proper, the meaning given by the appellees is likewise proper, consequently, we must
apply the rule laid down in section 293, above quoted, for the reason that the stipulation
contained in Clause M of the contract is a stipulation in favor of the lessee.

Counsel for appellants insist that in order to define the meaning of the word "obras" we
should refer to the articles of the Civil Code that deal with contracts of lease. This might
be done in those cases where the intention of the parties could not be ascertained from
either the contract itself or from the conduct of the parties in executing and carrying out
the same. In the case at bar, all that is necessary is to give a fair and reasonable
interpretation to the meaning of Clause M of the contract of lease. This clause contains
certain limitations on the exercise of the right to make alterations (obras): first, the
alterations (obras) proposed to be made must be required by the business; second, such
alterations must not injure the solidity of the building; and third, the same must not
prejudice the value of the building. But it is insisted, as we have said, that the word
"obras" in Clause M must be interpreted to mean "reparaciones" as used in Clause K.
Clause K imposes upon the lessee the obligation to make the repairs required by the
building for its conservation. If the words have exactly the same meaning and were
intended by the parties to mean the same thing, then the insertion of Clause M would
only have had the effect of giving to the lessee the right to keep the building in repair,
when, as a matter of fact. Clause K made it its duty to repair the building. As we
understand the contract, in Clause K a duty is imposed upon the lessee, while in Clause
M a right is given to it. In Clause K the word "reparaciones" is used in connection with
the duty, and in Clause M the word "obras" is used in connection with the right. If the
contracting parties had intended that the two words be used in the same sense they
would have so stated, or they would have eliminated Clause M entirely as being useless,
as it is meaningless to say that when a duty is imposed upon a person it is necessary to
expressly give him a right to perform that duty. If he did not have the right to perform
that duty, the same would not have been imposed upon him. The stipulations in Clause
M are expressed as clearly and explicitly as they could have been under the
circumstances. At the time of the execution of this contract of lease, it was impossible to
know what would be the requirements of the business during its term of eighteen years.
It was likewise impossible for the parties to have then agreed in detail as to the changes
that might be necessary. The lessee wished to reserve to itself the right to make the
changes in the property required by its business, and none of the parties could
anticipate what might be required during this long period of time. This right was
conferred upon the lessee by the lessors, but the right, as we have said, had its
limitations: that is, the lessee could not prejudice the solidity or the value of the building
without breaking the contract.

The question was raised as to whether the conduct of the parties in carrying out the
terms of this lease has been such as to show or indicate their intention or understanding
of the meaning of the word "obras" when they inserted this word in Clause M. Upon this
point the trial court said:jgc:chanrobles.com.ph

"That under and by virtue of the said contract of lease, the defendant company entered
into possession of the leased premises, making therein alterations and repairs at a cost
of some P60,000, including the removal of the whole front of the building facing upon
the Escolta and replacing the same upon the new street line, established by the city of
Manila, with a modern and decorative commercial front; the removal of the heavy tiled
roof and the replacing of the same with a light galvanized roof; the removal of various
walls and replacing the same with steel columns and girders; the tearing down and
rebuilding of a part of the building and the adding thereto of a camarin upon the Pasig
River; and the building of a river wall and reclamation of a considerable amount of
ground; and which alteration included the removal of that part of the wall in question
which extended from Point A to Point G on the plan of the premises introduced in
evidence as defendant’s Exhibit No. 9, all of which repairs, alterations, and
improvements, were made with the final approval of the plaintiffs, although after much
controversy and many disagreements, and to which alterations and improvements the
plaintiffs contributed the sum of about eighteen hundred pesos paid by the city of Manila
for the expropriation for street purposes of the small strip along the front of the building
heretofore mentioned."cralaw virtua1aw library

These findings of fact are, we think, fully supported by the evidence. The result is that
these important and material changes, which include the removal of a great portion of
the very wall in question, were made by virtue of the contract of lease itself. It is true
that the owners objected at first, but afterwards consented in accordance with the
provisions of Clause M, and not by reason of any subsequent specific agreement. After
all, that the defendants have the right under the law and the provisions of Clause M of
the contract of lease to remove the wall in question, cannot be seriously doubted,
provided always that neither the solidity of the building nor its value be impaired.

Let us now determine whether or not a removal of the wall in question (1) will prejudice
either the solidity of the building or its value, and (2) if it is required by the business of
the defendants.

The wall which the defendants and interveners propose to remove and substitute in lieu
thereof other material is composed of two outer shells of Guadalupe or Meycauayan
stone, filled with lime, plaster and rubber, the two shells being bound together by stones
laid transversely, the whole wall so formed being about one meter thick and extending
from the front of the building a distance of about 38 meters toward the Pasig River. This
wall is about four meters high, extending from the ground floor to the second floor. The
joists and girders supporting the second floor are embedded in said wall. There are two
actual openings in this wall, with three doors and an arch, which have been walled up.
The wall is in good condition, except that part removed by the defendants before the
commencement of this action, and said wall is one of four longitudinal walls, all being
approximately of the same thickness. The wall in question divides the east half of the
ground floor of the building approximately in its center and sustains a part of the weight
of the second floor of this east half, together with a partition forming one of the divisions
of the second floor. But it does not sustain any of the weight of the roof, this weight
being distributed by means of trusses to the outer walls of the building. About one-third
of this wall, or that part nearest the Pasig, has already been removed, and the removal
of the same was approved by the owners. The interveners now propose to remove the
remaining two-thirds and substitute in lieu thereof other material, using the material of
the old wall for filling up certain openings in other walls of the building. This old wall,
according to the experts, offers very little resistance to lateral shocks or motions.
Practically all of the resistance of lateral shocks or motions is furnished by the cross-
walls. Again, according to the opinion of the experts the building will be greatly
strengthened against earthquakes or unusual shocks or force, and its durability
increased by the removal of the remaining part of the wall in question and the
substitution in lieu thereof of reinforced concrete posts or pillars and arches, taking the
material and filling, as the interveners propose to do, the openings in some of the other
walls. Such proposed removal, if carried out, will practically double the floor space of the
drug store and greatly increase its rental value, and also greatly increase the actual
value of the building. This extra floor space is absolutely essential to the business
carried on in this part of the building. The foregoing are substantially the findings of the
trial court, based upon the testimony of expert witnesses, and an ocular inspection of
the premises. These facts show clearly and beyond a question that the removal of the
remainder of this old wall will not only not prejudice the solidity of the building, but
greatly increase its solidity and durability, as, according to the opinion of the experts,
the reinforced concrete posts and arches will offer greater resistance to earthquakes or
baguios than the old wall; that both the intrinsic and rental value of the building will be
increased; and that this removal is required by the business.

Lastly, counsel for the appellants say:jgc:chanrobles.com.ph

"The plaintiffs contend that a contract is only binding on the parties thereto as provided
in article 1257 of the Civil Code and that, although a sublessee is bound to the lessor as
provided in articles 1551 and 1552 yet this is not an obligation arising out of contract
but one founded in law and the relation of the parties to property, and that the lessor
has no obligation towards the sublessee as such at all either legal or of contract and that
therefore even if by clause (m) of the lease the plaintiffs had the obligation to permit the
defendant to take out the wall to suit the convenience of its own business, that such an
obligation was purely personal between the parties to the lease and since the contract of
lease is not assignable this right could not be transferred by defendant or made use of
by defendant for the benefit of other persons."cralaw virtua1aw library

A lease may be of things, works, or services. (Art. 1542, Civil Code.) In a lease of
things, one of the parties thereto binds himself to give to the other the enjoyment or use
of a thing for a specified time and for a fixed price. (Art. 1543, idem.)

Article 1550 of the Civil Code reads:jgc:chanrobles.com.ph

"Should it not be expressly forbidden in the contract of lease of things, the lessee may
sublet the whole or a part of the things leased without prejudice to his liability for the
fulfillment of the contract executed with the lessor."cralaw virtua1aw library

There is nothing in the contract of lease in the case at bar which even tends to prohibit
the lessee from subletting the whole or any part of the leased premises. The lessee’s
right to do this cannot be questioned, and his subtenant is not only obligated to carry
out his part of the contract with the sublessor, but he is also bound to the lessors for all
of the acts which refer to the use and preservation of the premises, in the manner
agreed upon between the lessors and the lessee. The lessors can compel the subtenant
to comply with these conditions. This sets up the privity between the lessors and the
subtenant. But it is said that the contract of lease in question is not assignable. This
contract is an ordinary one, under which the lessee as we have said, has a perfect right
to sublet the whole of the premises for the entire time. Should the lessee do this, would
it not amount to an assignment of the contract of lease? The power of assignment is
incident to the state of every lessee of things, unless he has been restrained by the
terms of his lease. In the contract of lease in question, the lessors, by Clause M, agree
that the lessee may make such changes as its business requires, provided that neither
the solidity nor the value of the building is prejudiced. This is a specific right granted to
the lessee. This right is a part of the lease itself and affects directly the thing leased. It
is not, therefore, a personal obligation between the lessors and the lessee.

We are, therefore, of the opinion that the judgment appealed from should be affirmed
with costs against the Appellant.

Johnson, Carson, and Moreland, JJ., concur.

 FIRST DIVISION

[G.R. No. L-3833. January 18, 1908. ]

JUAN AZARRAGA, Plaintiff-Appellee, v. JOSE RODRIGUEZ, Defendant-Appellant.

J. Altavas, for Appellant.

L. Azarraga, for Appellee.

SYLLABUS

1. INTERPRETATION OF CONTRACTS. — When the terms of an obligation stated in a

written contract are clear and leave no room for doubt, the plain meaning of the wording
thereof should be observed, it not being lawful to include therein things and cases
different from those which the interested parties intended to contract for.

2. RIGHT OF ACTION; STATUTE OF LIMITATIONS. — The right of action to demand the

compliance with an obligation which is subject to the provision of the Civil Code, not
arising from acts of commerce and for mercantile purposes, does not prescribe within
the short term fixed by article 950 of the Code of Commerce, but by the long one
established by article 1964 of the Civil Code.

3. ASSIGNMENTS OR TRANSFERS BY ENDORSEMENT. — In the assignment or transfer

of a credit made by means of an indorsement on the document, the existence of a lawful
cause or consideration therefor should be presumed, unless the contrary be proved by
the debtor.

4. DOCUMENTARY STAMPS. — The lack of the documentary stamp on a document of

indebtedness, prescribed by the decree of May 16, 1886, does not invalidate such a
document.

DECISION

TORRES, J.  :

Under the date of June 19, 1905, Juan Azarraga filed a complaint against Jose Rodriguez
with the Court of First Instance of Capiz asking that the judgment appealed from
entered in his favor by the justice of the peace, whereby the defendant was sentenced
to pay the sum of 400 pesos and 25 centimos and legal interest thereon, together with
the costs of both instances, be affirmed, and alleged that on or about December 31,
1898, the defendant, Rodriguez, executed in favor of Regino Ramirez a document
whereby he bound himself to pay the latter on the 15th of May, 1899, the above-named
sum, which Fray Lesmes Perez owed the said Ramirez, who, in payment of a debt to the
plaintiff, Azarraga, indorsed or assigned to the latter the said document from the
defendant, Rodriguez, for the above-stated sum, for account of his indebtedness; said
indorsement was made at Iloilo on the 15th of June, 1900, and the defendant, who
consented thereto, was notified of the same; that some time in 1901 the plaintiff wrote
a letter to the defendant informing him that the aforesaid document of indebtedness
executed by him to Ramirez had been indorsed by the latter to him (the plaintiff), and
that in consequence thereof he requested him to pay the said debt of 400 pesos and 25
centimos; in answer to said request the defendant wrote a letter acknowledging his
indebtedness and obligation, and engaging to pay the same.

Since that time, however, and notwithstanding having been requested several times, it
is further alleged that the defendant instead of making payment has sought to evade it,
asking for extensions and further extensions, and for this reason the creditor was
obliged to file a complaint against him in the court of the justice of the peace of the
provincial capital, and that, as the result of such action, judgment was rendered therein
sentencing the defendant, Rodriguez, to pay the amount due by him; from said
judgment he appealed to the Court of First Instance before which the former complaint
was reproduced.

Upon the overruling of the demurrer filed by the defendant, to which he excepted, he, in
answer to the complaint, stated in writing, on the 30th of January, 1906, that as a
matter of fact he had executed the document in question to the amount of 400 pesos
and 25 centimos in favor of Regino Ramirez, but denied all and every one of the
allegations contained in paragraphs 2, 3, and 4 of the complaint, and in his defense
alleged that said document was executed by the defendant as security for the accounts
which said Fray Lesmes Perez had with the aforesaid Ramirez, who indorsed them upon
the agreed condition to return such moneys as should be collected from said Fray
Lesmes on the 15th of May, 1899, or to return the accounts if uncollected in order to
exchange them for the document in question signed by the defendant, which exchange
was not carried out notwithstanding the fact that the accounts were not collected, on
account of reasons for which he was not to blame; and that at the time when the
supposed obligation was executed, and when it became due and was indorsed, both the
plaintiff and the defendant were merchants, such as they are now, as is also the
supposed original creditor, Regino Ramirez; that the aforesaid document was issued by
reason of a mercantile transaction and intended for mercantile purposes also; hence,
that the subject thereof is a mercantile transaction, and that the right of the plaintiff, if
any, had prescribed prior to the time when the original complaint was filed with the
court of the justice of the peace; therefore, in conclusion he asked that the complaint be
dismissed and the plaintiff sentenced to pay the costs, and prayed for such further relief
as might be considered just and equitable.

Upon the trial of the case evidence was adduced by both parties, the document exhibited
were made of record, and on the 16th of November, 1906, judgment was entered
sentencing Jose Rodriguez to pay Juan Azarraga the sum of 400 pesos and 25 centimos
in local currency at the rate ruling on the day of payment, with legal interest thereon
from May 15, 1899, and to pay the costs of the proceeding. To said judgment the
defendant excepted and moved for a new trial on the ground that the findings of fact
were openly and manifestly contrary to the weight of the evidence, and because the
sentence was contrary to law; the motion being overruled, the petitioner excepted, and
upon proper bill of exceptions having been presented, the case was submitted to this
court on appeal.
The document marked "A," signed by the defendant, and which states the obligation
contracted by him reads as follows:jgc:chanrobles.com.ph

"The undersigned hereby engages to pay Sr. Regino Ramirez, a merchant of this place,
on the 15th day of May of the coming year 1899, the 400.25 pesos, four hundred pesos
and twenty-five centimos, which Fr. Lesmes Perez appears to owe him under the
document indorsed in my favor on this date. Capiz, December 31, 1898. — Jose
Rodriguez." Rubricated.

On the back of the foregoing document appears a note which reads

thus:jgc:chanrobles.com.ph

"I hereby indorse in favor of Sr. D. Juan Azarraga the above-stated amount. Iloilo, June
15, 1901. — Regino Ramirez." Rubricated.

The obligation constituted by the aforementioned document in favor of Regino Ramirez

and transferred, according to the note indorsed thereon, to Juan Azarraga, is what the
law classifies as due on a day certain, referred to in article 1125 of the Civil Code, which
reads as follows:jgc:chanrobles.com.ph

"Obligations, the fulfillment of which has been fixed for a day certain, shall only be
demandable when the proper day arrives.

"A day certain is understood to be one which must necessarily arrive, even though its
date be unknown.

"If the uncertainty should consist in the arrival or nonarrival of the day, the obligation is
conditional and shall be governed by the rules of the preceding Section."cralaw
virtua1aw library

At the time when the complaint was filed with the court of the justice of the peace, the
date fixed for the fulfillment of the obligation, namely, the 15th of May, 1899, had long
since passed without the obligated party, Rodriguez, having paid Azarraga, the
transferee, the 400.25 pesos which, under the said document of indebtedness, he had
engaged to pay, notwithstanding the fact that he was informed of the cession or transfer
thereof, and demand had been made upon him therefor. And, furthermore, as alleged,
after the defendant had been sentenced by the justice of the peace to pay the said
amount, he, without legal reasons, and with excessive temerity, still ventured to appeal
in a second and third instance, with the evident intent to evade the fulfillment of a valid
obligation, the date for the payment of which was overdue and payment therefore
demandable, inasmuch as the defendant can be compelled to pay the said amount.

Of the two exceptions taken by the defendant to the claim of the creditor the first
consists in that, according to his own opinion, said obligation is a conditional one. Such
an allegation can not be admitted under the law because in the said document of
indebtedness accepted by Rodriguez, no condition whatever is present, not even that
which is pretended in the answer, and since the terms of the obligation due on a fixed
date are clear, the plain meaning of the wording of said document must be abided by, as
it would not be lawful to consider as included therein things and conditions other than
such as were intended by the parties concerned when executing the contract, and which
appear therein. (Arts. 1281, 1283, Civil Code.)

Neither does the condition alleged by the defendant appear in the letter which the
original creditor, Ramirez, addressed to the plaintiff, inclosing the said document of
indebtedness with the indorsement thereon; and upon the defendant debtor having been
notified of the transfer by Ramirez, as advised by the latter in his letter to Azarraga, the
transferee, and when the said debtor wrote to the latter stating his willingness to pay
and acknowledging that, owing to the delay, the transferee was subjected to heavy loss,
he makes no mention of any condition whatever as having been agreed to when the
document of indebtedness was executed.

In the aforesaid document marked "A" reference is made to the documents exhibited by
the defendant under Nos. 1, 2, 3, 4, 5, 6, 7, and 8, in the first of which there is a
statement of the account of Fr. Lesmes Perez with Regino Ramirez, the creditor, where
the total amount is the same as that stated in the document marked "A," and in which
appears a note of "pay to the order of Rodriguez," the defendant, as he himself affirms
in said document "A" executed by Rodriguez on the 31st of December, 1898, at which
time the indorsement was drawn up on said account No. 1 by Ramirez, the creditor.

The transaction carried out is logical and perfectly legal; if by reason of the transfer
Rodriguez became the owner of the credit of 400.25 pesos held by Ramirez against Fr.
Lesmes, it is proper that he should in turn execute in favor of the assigning creditor a
document whereby he bound himself to pay the amount transferred on a certain date;
said credit was subsequently transferred to the plaintiff, a transfer of rights authorized
by article 1112 of the Civil Code, and furthermore involving a novation of the original
obligation, Rodriguez substituting the debtor, Fr. Lesmes Perez, and subrogating
Azarraga to Ramirez, the original creditor. (Arts. 1203, 1205, 1212, Civil Code.)

The mere declaration of the defendant, lacking as it does the least justification, does not
constitute any proof tending to show the existence of the alleged condition, nor can it
lessen the value of the document of indebtedness signed by him in favor of Ramirez,
whose indorsement or transfer to the plaintiff he was unable to deny; on the contrary,
he had to admit it as a fact and that it was in accordance with the law.

If we were to seek for the reason why Rodriguez executed said obligation to pay the
debt of Fr. Lesmes Perez, it will be seen that the same is explained in the document
marked "D," signed by the defendant, Rodriguez: said document shows in a conclusive
manner that accounts were pending between Fr. Lesmes Perez and Jose Rodriguez, or,
as said document states, the latter owed the former 1,983.75 pesos, and on this
supposition it is not strange that Rodriguez engaged to pay Ramirez what Fr. Lesmes
owed him, in order to afterwards deduct whatever was paid to Ramirez from the larger
claim which Fr. Lesmes Perez had against him.

The other exception of the defendant consist in that the document marked "A" is of a
mercantile nature; therefore, that the action commenced by the plaintiff, based on the
obligation stated therein, had prescribed even before the filling of the complaint for the
enforcement thereof with the court of the justice of the peace of Capiz, because the
transaction referred to in said document between the parties appearing in the same,
who were merchants, was a mercantile transaction.

It has not been proved that the claimed of Ramirez against Fr, Lesmes arose from the
mercantile operations, nor that the obligation contracted by Rodriguez, in favor of the
first named, originated from an act of commerce and for mercantile purposes; neither
does the said document appear as having been issued payable to order as required by
articles 311 and 532 of the Code of Commerce; for said reason the document marked
"A" is not a mercantile character, and its nature and conditions are subject to the
provisions of the Civil Code.

On this supposition, and touching the validity of the action brought for the enforcement
of the obligation contracted by Rodriguez in said document, the law applicable to the
question as to whether or not the same had prescribed is not article 950 of the Code of
Commerce, which fixes the short term of three years, but article 1964 of the Civil Code,
which grants the long period of fifteen years from the time when the obligation became
due, which was on the 15th of May, 1899. And even though section 43 of the Code of
Civil Procedure were applicable herein, the action taken by the plaintiff for the recovery
of his credit could not be considered to have prescribed for the reason that ten years
have not transpired.

As for the rest, the assignment or transfer of the credit in question, made by Ramirez,
the creditor, is perfectly valid, and notwithstanding the fact that the cause or
consideration for the transfer is not stated in the indorsement, it must be presumed that
one exists and that it is a lawful one, unless the debtor should prove the contrary, which
he has not done in this case. (Arts. 1274, 1277, Civil Code.)

With reference to the lack of a documentary stamp on the document of indebtedness,

the decree of May, 16, 1886, and the instructions for its application do not declare the
nullity of any document unprovided with such stamp; it limits itself, by article 82
thereof, to imposing a fine on whoever should violate the decree by executing and
issuing a document without a proper stamp.

In view of the foregoing, and adopting the conclusions stated in the judgment appealed
from, it is our opinion that the same should be affirmed with costs against the appellant,
provided, however, that the defendant, Jose Rodriguez, shall pay legal interest from the
time when the complaint was filed with the court of the justice of the peace, and it is so
ordered.
 IN BANK

[GR No. L-238. March 13, 1947.]

DOMINGO ORDOÑEZ, plaintiff-appellant, against ARTURO VILLAROMAN,

defendant-appellant.

Mr. Teodoro P. Santiago on behalf of the appellant.

Mr. Vivencio M. Ruiz on behalf of the appellee.

SYLLABUS

1. SALE WITH RETRO PACT; LOAN; AWARDS; PORDBUDOR OR THIRD

PAYMENT; RETRACT, WHO HAS THE RIGHT TO. - It is not difficult to discern the loan
agreement from the sale agreement with a retrograde agreement. In the first, the
creditor delivers money to the debtor, committing himself to pay it within the agreed
time. In the second, (1) there is delivery of money, which is the purchase price, by the
buyer to the seller, (2) there is a transfer of ownership or ownership of the land sold and
(3) the seller's reservation to buy it back within the term agreed. In the first case, the
debtor has no alternative: his only obligation is to pay. In the second case, the seller has
a real alternative: to exercise the right of withdrawal or not, according to the
request; He has no obligation, but a right - he can renounce it: that of withdrawal. In
the first case, the debtor can pay the debt personally or a third party, for him, "whether
or not he has an interest in complying with the obligation, whether he knows it and
approves it, or he already ignores it." (Article 1158, C6d. Civ.) In the second case, only
the seller is the one who has the right to exercise the withdrawal in accordance with the
agreement. "When several, jointly and in a single contract, sell an undivided estate with
a retrograde agreement, none of them will be able to exercise this right other than on
their respective part. The same will be observed if the one who has sold by himself one
estate has left several heirs, in which case each of these may only redeem the part they
have acquired. " (Article 1514, Cod. Civ.) or I already ignore it. "(Article 1158, C6d.
Civ.) In the second case, only the seller is the one who has the right to exercise the
withdrawal in accordance with the agreement." When several, jointly and in a single
contract, sell a Undivided estate with retrograde agreement, none of them will be able to
exercise this right more than for their respective part. The same will be observed if the
one who has sold by himself a farm has left several heirs, in which case each one of
these will only be able to redeem the part he had acquired. "(Article 1514, Civil
Code). or I already ignore it. "(Article 1158, C6d. Civ.) In the second case, only the
seller is the one who has the right to exercise the withdrawal in accordance with the
agreement." When several, jointly and in a single contract, sell a Undivided estate with
retrograde agreement, none of them will be able to exercise this right more than for
their respective part. The same will be observed if the one who has sold by himself a
farm has left several heirs, in which case each one of these will only be able to redeem
the part he had acquired. "(Article 1514, Civil Code). none of them will be able to
exercise this right more than for their respective part. The same will be observed if the
one who has sold by himself a farm has left several heirs, in which case each one of
these will only be able to redeem the part he had acquired. "(Article 1514, Civil
Code). none of them will be able to exercise this right more than for their respective
 part. The same will be observed if the one who has sold by himself a farm has left
several heirs, in which case each one of these will only be able to redeem the part he
had acquired. "(Article 1514, Civil Code).

2. ID .; ID .; ID .; ID .; CAR CASE. - In the Exhibit A deed, the seller reserves that right
to himself (reserved for himself) and to his heirs or assignees. The plaintiff is not the
seller's heir, agent or assignee. Therefore, you cannot exercise a right that is exclusive
to the seller. The conventional retraction is not a right created by operation of a law, but
by virtue of an express contract, which is a private law between the parties (article
1281, C6d. Civ.). If its terms are clear and its authenticity is not claimed as false or
contested, it will be in the literal sense of its clauses.

DECISION

PABLO, M .:

Florentino Ordoñez, brother of the plaintiff, on March 26, 1941 sold for P1,300 to Arturo
Villaroman the land described in paragraph 2 of the lawsuit, reserving the right to buy it
back within a period of three years from the date of granting of the deed. . On several
occasions the plaintiff - brother of the seller tried to buy back the land for P1,200 and as
the defendant did not comply, the plaintiff consigned in the Clerk of the Court of First
Instance of Nueva Ecija the amount of P1,200 "as full payment and satisfaction of all
obligation owed to the defendant, "as I allege in his lawsuit filed in March, 1944.

Considering the plaintiff's brother as a simple debtor, the lower court condemned the
defendant, in accordance with the provisions of article 1158 of the Civil Code, to
withdraw from the Clerk of the Court the amount assigned of P1,200 and to grant a
resale deed in favor of the plaintiff . Against this decision the defendant appealed.

It is not difficult to discern the loan agreement from the sale agreement with a retro
agreement. In the first, the creditor delivers money to the debtor, committing himself to
pay it within the agreed time. In the second, (1) there is delivery of money, which is the
purchase price, by the buyer to the seller, (2) there is transfer of ownership or
ownership of the land sold and (3) reservation of the seller to buy it back within the
agreed period. In the former case, the debtor has no alternative: his only obligation is to
pay. In the second case, the seller has a real alternative: to exercise the right of
withdrawal or not, as he pleases; He has no obligation, but a right that can be waived:
that of withdrawal. In the first case, the debtor can pay the debt personally or a third
party, for him, "whether or not he has an interest in complying with the
obligation, already knows it and approves it, or already ignores it. "(Article 1158, C6d.
Civ.) In the second case, only the seller is the one who has the right to exercise the
withdrawal according to the agreement." When several, jointly and in a Only contract,
they sell an undivided farm with a retro agreement, none of them can exercise this right
more than for their respective part. The same will be observed if the one who has sold
by himself a farm has left several heirs in which case each of these will only be able to
redeem the part that he had acquired. "(Article 1514, Civil Code). sell an undivided
estate with a retro agreement, none of them could exercise this right more than for their
respective part. The same will be observed if the one who has sold by himself a farm has
left several heirs in which case each of these will only be able to redeem the part that he
had acquired. "(Article 1514, Civil Code). sell an undivided estate with a retro
agreement, none of them could exercise this right more than for their respective
part. The same will be observed if the one who has sold by himself a farm has left
several heirs in which case each of these will only be able to redeem the part that he
had acquired. "(Article 1514, Civil Code).

In the Exhibit A deed, the seller reserves that right to himself (reserved for himself) and
to his heirs or assignees. The plaintiff is not the seller's heir, agent, or owner. Therefore,
you cannot exercise a right that is exclusive to the seller.

It is true that in some cases, the lender under the subterfuge of a sale with a retrograde
agreement grants a loan at usurious interest. Other times, under the cover of a
generous loan, some obtain the granting of a deed of a sale with a right to right. Such
cases are the product of bad faith, of the fraud of the excessive ambition to get rich.

The lower court erred when considering a loan what was actually a sale with a retro
agreement.

In support of this decision, the appellee invokes the case of Guinto against Lim Bonfing
(48 Jur. Phil., 933), which is inapplicable because in this case the buyer did not oppose
the repurchase, on the contrary he allowed it. At that point, it was not decided whether
a stranger could buy back a lot in the burned-out area of Cebu sold under a retro
contract. What was resolved was: if the widow who, with Lim Bonfing's money, rescued
the lot that belonged to her husband's primitive property before marrying her, she
adduced everything "as well in her own and absolute right." This Court ruled that no: I
declare that the children of Abendan's husband are owners of four-fifths and the bare
ownership of the last fifth of the lot and only the widow acquired in the repurchase the
usufruct right over a fifth,

The withdrawal exercised by the special administrator is not conventional, but

legal. Article 465, of the Code of Civil Procedure clearly provides that the property sold
in public auction can be withdrawn by the "debtor by judgment or his successors in
title." Leodegario Azarraga's action to consign the amount of P141.12 one day before
being appointed administrator is in accordance with the law (1) because it was about
redeeming the goods sold in public auction with the occasion of an execution order for
debt, and (2) because Leodegario Azarraga acted on behalf of his nephews, successors
of the late debtor.

The case of Gonzaga v. Garcia (27 Jur. Fil., 8). Is completely adverse to the appellee's
theory. This Court said verbatim: "Del Rosario was not a debtor. He had no obligation to
withdraw the territory of Martin's power. He had the right to do so, but whether he
exercised this right or not depended on his own will. Article 1158 does not result, for
these reasons, applicable." cralaw virtua1aw library

The case of Cristobal v. Gomez (50 Jur. Fil., 846), does not support the plaintiff's theory
either. In this case, the brothers Marcelino and Telesfora Gomez repurchased from Luis
R. Yangco the land expired with a right agreement by Epifanio Gomez with the capital
provided by Bibiano Bailas, on the understanding that the lands thus repurchased were
to be administered by Marcelino Gomez and After paying all the capital anticipated by
Bibiano Bañas, the goods would be delivered to the seller. This case is not applicable
because Luis R. Yangco did not oppose the sale of the goods; on the contrary, it resold
them, and this Court, as in the case of Martinez v. Graño (42 Jur. Fil., 37), declared that
"a person who, before the domain in the buyer is consolidated by virtue of a contract of
sale with retro pact, agrees with the sellers to buy the property and administer it until all
debts have been paid, which constitute a lien on it, after which the goods will be
returned to the original owner, is bound by such agreement; and, by purchasing the
goods in these circumstances, such person becomes, in effect, a trustee, and is obliged
to administer the goods in this regard. The same principle is applicable to the present
case. "The plaintiff in the present case did not buy back the land on behalf of his seller
brother: he requested in his claim that the defendant be sentenced to grant a deed of
sale in his favor. after which the goods will be returned to the original owner, it is bound
by such agreement; and, by purchasing the goods in these circumstances, such person
becomes, in effect, a trustee, and is obliged to administer the goods in this regard. The
same principle is applicable to the present case. "The plaintiff in the present case did not
buy back the land on behalf of his seller brother: he requested in his claim that the
defendant be sentenced to grant a deed of sale in his favor. after which the goods will
be returned to the original owner, it is bound by such agreement; and, by purchasing
the goods in these circumstances, such person becomes, in effect, a trustee, and is
obliged to administer the goods in this regard. The same principle is applicable to the
present case. "The plaintiff in the present case did not buy back the land on behalf of his
seller brother: he requested in his claim that the defendant be sentenced to grant a
deed of sale in his favor.

The conventional retraction is not a right created by the ministry of a law, but by virtue
of an express contract, which is a private law between the parties (article 1281, Civil
Code). If its terms are clear and its authenticity is not convicted of false or contested, it
will be in the literal sense of its clauses. (Feliciano v. Limjuco, 41 Jur. Fil., 156;
Masongsong v. Kalaw, 55 Jur. Fil., 845.)

On the other hand, the plaintiff only consigned in the Notary Public the amount of
P1,200 and the sale price with a retro contract was P1,300. The amount consigned,
therefore. it was not enough to compel the defendant to resell the land. Article 1507 of
the Civil Code provides that whoever reserves the right to buy back the thing sold has
the "obligation to comply with the provisions of article 1518," which expressly provides
that "the seller may not make use of the right of withdrawal without reimburse the
buyer for the sale price. " For breach, therefore, of the provisions of the aforementioned
articles, the plaintiff, even in the event that he had the right to exercise the conventional
retraction, could not oblige the defendant to grant the resale deed.

The crusted judgment against the plaintiff is reversed.

Moran, Pres., Paras, Feria, Perfecto, Hilado, Bengzon, and Briones, MM., Are satisfied.

Tuasan, J. , concurs in the result.

 EN BANC

[G.R. No. 31832. March 14, 1930.]

INTESTATE ESTATE AND HEIRS OF INOCENTES DE LA RAMA,

deceased, Plaintiffs-Appellants, v. TALISAY-SILAY MILLING CO. and
PHILIPPINE NATIONAL BANK, Defendants-Appellees.

Enrique C. Locsin and Araneta & Zaragoza, for Appellants.

Ricardo Nolan and Jose Yulo, for appellee Talisay-Silay Milling Co.

Roman J. Lacson, for appellee Philippine National Bank.

SYLLABUS

1. INTERPRETATION OF CONTRACTS; TESTIMONY ON. — When the intent of the

contracting parties is very clearly stated by a witness who not only took part in the
discussion which led up to the execution of the contract, but actually drew it up himself,
such parol evidence is admissible under article 1282 of the Civil Code and section 285 of
the Code of Civil Procedure, inasmuch as the point expounded by said testimony was
one of the questions raised in the pleadings.

2. ID.; CONTRACTUAL OBLIGATION NOT RIGHT. — What in a contract was plainly an

obligation cannot be treated as a right. If the reasons which gave rise to the contract
have ceased to exist, this will have produce the extinction of the obligation, but will
never create a new right, unless a new contract has been entered into.

DECISION

ROMUALDEZ, J.:

In the month of May, 1922, the sugar central known as the Talisay-Silay Milling Co.,
owed the National Bank some five and a half million pesos, secured by a mortgage of
the property of its planter- shareholders.

For the purpose of avoiding the impending foreclosure of that mortgage, the central, the
creditor the Philippine National Bank, and the aforementioned planter-shareholders
entered into the following readjustment contract at that time, that is, in May,
1922:jgc:chanrobles.com.ph

"This agreement made and entered into this . . . . . . . . . day of May, 1922, by and
between the persons signing this document as the planters; the Philippine National
Bank, of Manila, herein referred to as bank; and the Talisay-Silay Milling Co., Inc.,
herein referred to as the central, bears witness that:jgc:chanrobles.com.ph
"Whereas, on December 21, 1920, the planters, by their attorney- in-fact and for the
purpose of securing the payment of the sum of P4,500,000 and other indebtedness due
or which might become due from the central to the bank, executed in favor of the bank,
its successors and assigns, a mortgage on the parcels of land, with all the buildings,
improvements and machinery thereon, situated in the Philippine Islands, and more
particularly described in Schedule A attached to the said mortgage; and

"Whereas, the actual indebtedness of the central to the bank, secured by the said
mortgage, amounts approximately to five million four hundred nineteen thousand seven
hundred fifty-five pesos (P5,419,755), and the parties hereto have agreed upon a plan
whereby the said amount is to be gradually liquidated by the central with the aid of the
planters;

"Now, therefore, in consideration of the bank’s or its assigns’ giving yearly financial
assistance to the planters on their sugar-cane crops, with interest on the money
advanced at the current rate, on the basis of P3 per picul, as estimated by the bank,
advances to begin in the month of May and continue through the season at monthly
intervals or oftener at the discretion of the bank, the planters bind themselves to the
following:jgc:chanrobles.com.ph

"1. To purchase from the central, annually, at par, a number of shares of the central
equal to 25 per cent of the net proceeds of the sale of the sugar belonging to the
planters in accordance with the terms of their respective milling contract with the
central, after deducting therefrom the cost of production, that is to say, the amount
advanced by the bank on the crop at the rate of P3 per picul and the interest thereon.

"2. The bank shall not retain from any planter more than 15 per cent in addition to the
25 per cent mentioned in paragraph 1 to apply to the payment of any other obligations
that the planter might have pending unless by express consent of the planter.

"3. The obligation imposed upon the planters by paragraph 1 shall be binding on each
and every planter signing this document regardless of the fact that he or they have not
asked for financial assistance from the bank for raising and harvesting their crops.

"4. In order to determine the percentage mentioned in paragraph 1, in case of planter

does not apply to the bank for financial assistance to raise and harvest his crops, the
cost of production of his sugar shall be understood to be P3 a picul.

"5. The obligation contracted by each and every planter in paragraph 1 hereof shall
continue as long as the bank or its assigns are ready and willing to lend financial
assistance to the planters for raising and harvesting their crops, or until the total
obligation of the central is liquidated.

"6. The total amount of the central’s shares which each of the planters binds himself to
purchase shall be equal to the total indebtedness of the central to the bank divided into
as many portions as there are hectares of land mortgaged in the indenture of December
21, 1920, and multiplied by the number of hectares as in the said indenture appear as
the property of the individual planter. In addition to the manner provided for in
paragraph 1 for the payment of these shares the planter may purchase them for cash or
under such terms as shall be acceptable both to the central and the bank.

"7. The planter also may at any time, if he so desires, purchase from the central, for
cash, the amount of the central’s share s specified in the preceding paragraph, and in
such event, as well as in the event of his having purchased the whole of the said
amount, he shall have the right to require from the bank the release of the mortgage on
his property.

"8. The bank by these presents binds itself and its assigns to renew from year to year
the obligations of the central until they are totally liquidated as long as the planters who
subscribe this document comply with the conditions herein contained, and to reduce the
interest charged on the central’s obligations to the bank to 6 per cent per annum,
effective January 1, 1922.

"In witness wherefore, the parties hereto have signed this document at Bacolod on
the . . . . . . . day of May, 1922." (Pages 3, 4, 5, 6, and 7, Bill of Exceptions.)

Relying mainly upon the foregoing contract, the plaintiffs, which are, the estate and the
heirs of the decedent Inocentes de la Rama, one of the signers of said contract, bring
this action against said central and bank, to compel them to accept the sum of
P68,107,7976 for 6,810 shares in the name of the plaintiffs, with the dividends thereon
from the date of the complaint.

It is alleged in support of the complaint:jgc:chanrobles.com.ph

"4. That the area of the property mortgaged by said instrument dated December 21,
1920, in 9,099 hectares, 53 ares, and .03 centares; that the debt of the Talisay-Silay
Milling Co. to its codefendant when the foregoing ’Modification of Mortgage and
Readjustment of the Central’s Plan of Financing’ was signed, amounted to P5,419,755;
that on the 30th of June this year, said debt was reduced to P1,387,353. Dividing the
debt of P5,419,755 by the number of hectares mortgaged, namely, 9,099,5303, we
have a quotient of P595,6082. Multiplying the latter amount by the number of hectares
of the property mortgaged by the deceased Inocentes de la Rama by the aforesaid
instrument of December 21, 1920, or 114 hectares and 35 ares, yields a sum of
P68,107.7976. But upon the basis of P1,387,353.60 which was the Talisay-Silay Milling
Co.’s debt to the Philippine National Bank on June 30, 1928, although the debt has a
tendency to increase, and, in fact, is increasing every month, the amount should be only
P17,433.80. The par value of the shares of the Talisay-Silay Milling Co. is P10.

"5. That the Talisay-Silay Milling Co. refuses to issue the shares to the plaintiffs by virtue
of the foregoing so-called Modification of Mortgage and Readjustment of Central’s Plan of
Financing.

"6. that the plaintiffs do hereby tender to the defendants the sum of P68,107.7976 in
payment of 6,810 shares of the Talisay-Silay Milling Co., at the rate of P10 per
share."cralaw virtua1aw library

The Philippine National Bank answers with a denial of the facts alleged in the complaint
and contends that they do not constitute a cause of action against itself.
The Talisay-Silay Milling Co., set up several special defences, to wit:chanrob1es virtual
1aw library

First. That the true purpose of paragraphs VI and VII of the contract referred to, and
which are ambiguous, was to provide the planters with a means of obtaining the
cancellation of their mortgages, and, in fact, the executed upon the property of
Inocentes de la Rama, the plaintiffs’ predecessor-in-interest, have been cancelled long
before this action was commenced.

Second. That paragraphs 7 and 8 of said contract of readjustment are null and void for
lack of reciprocity.

Third. That at the time said contract was executed, the market value of the stock of said
defendant central was about half of its par value, in view of the large debts of the
corporation, and for several years after the execution of said contract, said deceased
Inocentes de la Rama never revealed any intention to purchase stock in said central;
and it was only after his death, when the stock of said central was quoted at about
twenty pesos a share, and the debt to the Philippine National Bank could doubtless be
paid, that the plaintiff administrator decided to compel the central to sell him 6,810
shares at a par value of P10 a share.

Fourth. That said readjustment contract was not entered into by the central with
Inocentes de la Rama individually, but with all the planters therein named, conjointly,
many of whom refused to purchase stock, and the greater majority were, at their own
request, relieved from doing so.

Fifth. That to grant the plaintiffs’ contention would place the central under the necessity
of conceding a similar right to the other planters who signed said contract, and would
thus be under obligation to violate the law by issuing stock in excess of the authorized
capital, which is two million pesos, divided into shares with a par value of ten pesos
each.

Sixth. That the deceased Inocentes de la Rama held 550 shares of the stock of the
defendant central, and when in December, 1923, the capital stock of said central was
increased, he, among other shareholders, was granted a month’s time within which to
subscribe for his proportional number of shares of the increased capital stock, with
notice that if he failed to do so within the period mentioned, he would be deemed to
have waived his right thereto, and said Inocentes de la Rama neither purchased nor
subscribed to any share of said increased capital stock.

Seventh. That the number of shares which the plaintiffs now seek to purchase is less
than the total number of shares purchased by any of the other planters whose property
was also mortgaged, but greater than that of Inocentes de la Rama, whose successors-
in-interest, the plaintiffs herein, now ask that 6,810 shares be sold to them at par, which
would prejudice the central and its stockholders, for, up to the date of the answer, no
dividends has been distributed.

Eighth. That the facts alleged in the complaint do not constitute a cause of action.
The plaintiffs then added to their complaint a tender of P16,500 to the defendants for
1,650 shares at par value, as a result of the defendant central’s contention set forth in
the sixth special defence.

The Court of First Instance of Occidental Negros heard the case and found: That the
most logical interpretation of the readjustment contract was given by the witness Seva;
that said contract was impliedly revoked or abandoned by the parties thereto when they
executed contact Exhibit A-2 attached to the auditor’s report, Exhibit I; that with the
cancellation (Exhibit 5) of the mortgage upon Inocentes de la Rama’s property on
January 31, 1928, the central’s obligation to sell stock ceased; and that a Inocentes de
la Rama did not subscribe for any stock, he acquired no right to pay for any by
installments, under article 9 of the by-laws of the central. In view of all these findings,
the complaint was dismissed, with costs against the plaintiffs.

The latter appeal, and assign the following alleged errors as committed by the trial
court:jgc:chanrobles.com.ph

"1. In finding that the readjustment contract had been modified with respect to the
plaintiffs, and in not holding that it cannot be repudiated and is still valid and binding as
between the parties to this suit.

"2. In holding that the defendant central is estopped from repudiating the plaintiffs’
action.

"3. In not holding that the readjustment contract still subsists between the parties to
this case, and in failing to order the defendant central to accept from the plaintiffs the
tender of P84,600 as contained in the plaintiffs’ pleadings, and in not ordering it to issue
stock at the par value of P10 a share and to pay to the plaintiffs the dividends earned by
said stock.

"4. In admitting parol evidence tending to explain and alter the terms of the
readjustment contract.

"5. In not rendering judgment ordering the defendant to accept the sum of P16,500
from the plaintiffs, and to issue stock at a par value of P10 a share therefor, and to pay
the corresponding dividends.

"6. In not having ordered that the testimony of President Lizares, quoted below, be
stricken from the record.

"7. In admitting Exhibits 1 to 6, inclusive.

"8. In not granting a new trial and the reopening of the case on the ground that it is
contrary to the law and the evidence."cralaw virtua1aw library

The first point to be considered is the nature of the readjustment contract referred to
above: Counsel for plaintiffs contends that it is a contract of subscription or purchase of
stock; while counsel for the defendant central contend that it is not, in the usual sense
that such contracts of subscription or purchase of stock are understood in connection
with corporations.

According to the second paragraph of their exposition, said contract is "a plan for the
gradual liquidation of the central’s indebtedness to the bank with the aid of the planters"
and it may be gathered from the terms of said instrument that the purpose and motive
of this plan gradual amortization of the debt was to rescue the central from the critical
situation that, according to the evidence, at that time threatened it, since its original
indebtedness to the bank of four and a half million pesos (P4,500,000) contracted on
December 21, 1920 was not only unpaid, but that it had, at the time of the
readjustment (May, 1922), increased to p5,419,755 as stated in the preliminary
paragraphs of said contract.

The purpose, then, was not merely to increase the capital stock for an expansion of the
enterprise, but rather to stave off the danger that threatened the central and the
planters. This must have been the purpose that moved those who signed the contract
referred to when the same was executed in May, 1922.

The aim, then, was the amortization of the central’s debt, and one of the means
employed to that end was the subscription of stock.

And a consideration of the terms of the contract will show that it cannot be a mere
contract of subscription of stock, whether absolute or conditional, because there was no
authorized capital stock for that purpose at the time, the limit of the value of the stock
which the planters bound themselves to purchase being them in excess of the authorized
capital stock, which had already been fully subscribed. The increase in the capital stock
was only agreed upon in December, 1923, over a year after said contract Exhibit H was
executed. This element of a pre-existing authorized capital stock is essential to the
validity of the corporation’s acceptance of an agreement for the subscription of stock.

"Subscription for shares of stock which the corporation has no power to issue at all, as in
the case of a contract calling for an issue of stock in excess of the authorized capital
stock, or for an unauthorized or illegal increase of capital stock, are void on the ground
both of illegality and of want of consideration. Even thought the president and directors
may have power to authorize an additional issue, yet, until they exercise this power, any
issue after the original limit has been filled will be void, and a subscription therefor
unenforceable." (14 C. J., 530.)

And as a mere agreement for the purchase of stock, not governed by the special rules
applicable to the subscription of stock, the contract in question cannot serve as the basis
of the plaintiffs’ action, if any notice is to be taken of the real intent of the parties
signing the same.

This intent is very clearly stated by Attorney Seva who not only witnessed and took part
in the discussion which led to the execution of the contract, but actually drew it up
himself. And such parol evidence is admissible under article 1282 of the Civil Code and
section 285 of the Code of Civil Procedure, inasmuch as the point dealt with in said
testimony was one of the questions raised in the pleadings.
And, according to the intent of the parties in executing the contract in question, it was
agreed in paragraphs 6 and 7 of Exhibit H that, upon the cancellation of the obligation
secured by the mortgage upon the property of the planters, the latter’s aid through the
purchase of stock in the central was no longer necessary, and therefore, the obligation
to purchase stock ceased.

It must be noted that so critical was the financial situation of the central at the time the
contract was entered into, that the stock was valued way below par, and the purchase of
stock by the planters could not then be looked upon as a desirable right, but rather as
an obligation assumed only to help out the central. Hence the language of the contract
which reads: "The planters bind themselves as follows, to wit: (1) To purchase from the
central annually, at par, a number of shares . . ." (preliminary statement and paragraph
1); "The obligation imposed upon the planters by paragraph 1 . . ." (paragraph 3); "The
obligation contracted by each and every planter in paragraph 1 hereof, . . ." (paragraph
5); "The total amount of the central’s shares which each of the planters binds himself to
purchase . . ." (Paragraph 6.) (Emphasis ours.)

And that obligation could not have been binding on the planters unconditionally, and
perpetually; justice and equity demanded that restrictions and limitations be placed
commensurate with the cause of consideration which gave rise to the obligation. Thus it
was agreed in paragraph 5 that said obligation to purchase the stock should subsist "as
long as the bank or its assignee is ready and willing to lend financial assistance to the
planters for raising or harvesting their crops, or until the total debt of the central is
liquidated." These restrictions placed upon the obligation imposed on the planters to
purchase stock are not affected by paragraph 7 of the contract, which, according to
witness Seva, was intended to give such of the planters as had the means, an
opportunity to relieve their property from the mortgage without having to wait till it was
gradually paid off by the 25 per cent annual surplus provided for. The phrase "at any
time" used in said paragraph 7, cannot be understood to mean that said obligation to
purchase stock (which the plaintiffs now allege as a right) was permanent, for, neither
the nature of the obligation, nor the purpose of the contract, nor paragraph 5 thereof,
admit of such an interpretation. The phrase "at any time" must be interpreted to mean
at any time while the obligation to purchase stock subsists, in accordance with
paragraph 5 of the contract.

Now, when, according to the evidence, the financial status of the central has
considerably improved, it is not permissible, without the prior consent of all the
contracting parties, and merely at the will of one of them, to hold as a "right" what,
according to said contract, was plainly an "obligation." If the reasons which gave rise to
the contract have ceased to exist, the result is that the obligation, too, has ceased to
exist, but not that a new right has arisen without a new contract.

The parties to this contract of readjustment must have so understood it, when in view of
the financial improvement of the central, they executed the following contract Exhibit A-
2 in 1925:jgc:chanrobles.com.ph

"This agreement made and entered into this . . . . . . . . . day of . . . . . . . . . . . . .,

1925, by and between the Philippine National Bank, of Manila, herein referred to as the
bank and the Talisay-Silay Milling Co., Inc., herein referred to as the central and the
persons signing this document herein referred to as planters bears witness
that:jgc:chanrobles.com.ph

"Whereas, in . . . . . . . . . . . . . . . . . . the above named parties entered into an

agreement known as ’Modification of Mortgage and rearrangement of Central’s Plan of
Financing’ and more commonly known as ’Readjustment Contract’ by which plan was
adopted for the gradual liquidation of the central’s indebtedness to the bank with the aid
of the planters;

"Whereas, by said agreement the planters obligated themselves individually ’to purchase
from the central annually, at par, a number of shares of the central equal to 25 per cent,
of the net proceeds of the sale of the sugar belonging to the planters in accordance with
the terms of their respective milling contract with the central;’

"Whereas, some of the planters signing said agreement are individually indebted to the
bank or to the central or both;

"Whereas, it is for the advantage of the bank, the central and those individual planters
who are owing either the bank, the central or both that the purchase of shares of the
central by said planters, be suspended and the 25 per cent of the net proceeds of the
sale of the sugar belonging to said planters be applied to liquidate the said planters’
indebtedness to the bank, to the central or to both;

"Now, therefore, the bank, the central and the planters herein signing hereby agree to
the following:jgc:chanrobles.com.ph

"1. That the bank and the central are hereby authorized, when to their judgment it is
necessary or convenient to do so and in the case of any individual planter, to suspend
the effect of the stipulation contained in the agreement commonly known as the
’Readjustment contract,’ requiring the planters to buy central’s shares equal to 25 per
cent of the net proceeds of the sale of the sugar belonging to any individual planter to
the liquidation of the said planters’ indebtedness first to the bank, and second to the
central.

"2. That for the above-mentioned purpose the bank and the central are hereby
authorized to suspend the buying of central’s shares by an individual planter for the
number of years which to their judgment is necessary and convenient.

"3. Nothing herein contained shall be construed as in any way changing or altering the
stipulation and conditions contained in the ’readjustment contract’ of . . . . . . . . . . . . . .
. . . ., except as to the stipulation above referred to.

"In witness whereof, the parties hereto have signed this document at . . . . . . . . . . . . . .
. . . . of this . . . . . . . . . day of . . . . . . . . . . . ., 1925." (Pages 36-39, Bill of
Exceptions.)

It is contended by the appellant that neither the deceased Inocentes de la Rama, nor his
heirs consented to the modification of the contract of readjustment, for which reason
none of them signed the subsequent contract Exhibit A-2, quoted above. In point of fact,
however, said document Exhibit A-2, at the bottom of which appears the name of the
deceased Inocentes de la Rama as one of the parties, is evidence adduced by said party
appellant itself, as a document attached to the report of its witness Auditor Borromeo,
which witness was examined and testified upon said document attached to the report of
its witness Auditor Borromeo, which witness was examined and testified upon said
document Exhibit A-2, considering it as a copy of the original, and as a good and valid
contract, put into effect and respected by the parties who signed it. Furthermore, under
these circumstances, the appellant cannot attack the genuineness of Exhibit A-2 as a
true copy of the original.

Now, then, the power which this latter contract Exhibit A-2 granted to the bank and to
the central, to suspend the effect of the stipulation contained in the contract of
readjustment, by virtue whereof the planters were bound to purchase stock in the
central in an amount equivalent to 25 per cent of the respective yearly surplus, was,
according to said Auditor Borromeo, actually exercised. From which it follows that if
Inocentes de la Rama, among others who signed said Exhibit A-2, granted that power to
the bank and to the central, and if, according to the testimony of said auditor, the bank,
making use of said power, "at first took from the surplus of those who had signed the
contract of readjustment, that is, Annex A-2 of report Exhibit I, and applied it to the
debt owed to the bank and to the central, and thereafter, if anything remained, returned
it to them (those who signed the readjustment contract) no longer applying it to any
further payment," then that must be understood to mean that when Inocentes de la
Rama signed said amendatory contract Exhibit A-2 and respected its effect, he waived
the right (if right it were, and not an obligation) to purchase stock in said central, and
his successors- in-interest cannot now be heard to claim that which their predecessor
renounced during his life time and which he therefore no longer had at his death.

This waiver by Inocentes de la Rama was evident in his conduct with respect to the
readjustment contract so often referred to herein. He failed to till his lands, and
therefore was not obliged to purchase stock; for, not having cultivated his land he could
not have had any surplus product of the crop, pursuant to paragraph 1 of said
readjustment contract, for it was impossible, under the terms of said contract, to
determine the number of shares which he should have to purchase, on the supposition
that, although he failed to sow his fields, he was still under the obligation to purchase.
And, the increase in the capital stock of the central, having been decided upon,
Inocentes de la Rama failed to purchase stock, although invited to do so in January,
1924 (Exhibit 9).

At any rate, the mortgage on Inocentes de la Rama’s property having been cancelled in
January, 1928 (Exhibit 5), neither he nor his successors after his death, even supposing
that for other reasons they were entitled to purchase stock in the defendant central
under said readjustment contract, could have done so, since, without mortgaged land,
one of the grounds provided in paragraph 7 of said contract for the computation of the
number of shares to be purchased, is already lacking.

The record inclines us to the belief that Inocentes de la Rama never meant nor intended
to purchase stock under the readjustment contract here invoked by his successors-in-
interest.
We find no merit in the assignments of error, and affirm the judgment appealed from,
with the costs of both instances against the appellants. So ordered.
 EN BANC

G.R. No. L-17825             June 26, 1922

In the matter of the Involuntary insolvency of U. DE POLI.

FELISA ROMAN, claimant-appellee,
vs.
ASIA BANKING CORPORATION, claimant-appellant.

Wolfson, Wolfson and Schwarzkopf and Gibbs, McDonough & Johnson for appellant.
Antonio V. Herrero for appellee.

OSTRAND, J.:

This is an appeal from an order entered by the Court of First Instance of Manila in civil No. 19240, the
insolvency of Umberto de Poli, and declaring the lien claimed by the appellee Felisa Roman upon a
lot of leaf tobacco, consisting of 576 bales, and found in the possession of said insolvent, superior to
that claimed by the appellant, the Asia Banking Corporation.

The order appealed from is based upon the following stipulation of facts:

It is hereby stipulated and agreed by and between Felisa Roman and Asia Banking
Corporation, and on their behalf by their undersigned attorneys, that their respective rights, in
relation to the 576 bultos of tobacco mentioned in the order of this court dated April 25, 1921,
be, and hereby are, submitted to the court for decision upon the following:

I. Felisa Roman claims the 576 bultos of tobacco under and by virtue of the instrument, a copy
of which is hereto attached and made a part hereof and marked Exhibit A.

II. That on November 25, 1920, said Felisa Roman notified the said Asia Banking Corporation
of her contention, a copy of which notification is hereto attached and made a part hereof and
marked Exhibit B.

III. That on November 29, 1920, said Asia Banking Corporation replied as per copy hereto
attached and marked Exhibit C.

IV. That at the time the above entitled insolvency proceedings were filed the 576 bultos of
tobacco were in possession of U. de Poli and now are in possession of the assignee.

V. That on November 18, 1920, U. de Poli, for value received, issued a quedan, covering
aforesaid 576 bultos of tobacco, to the Asia Banking Corporation as per copy of quedan
attached and marked Exhibit D.

VI. That aforesaid 576 bultos of tobacco are part and parcel of the 2,777 bultos purchased by
U. de Poli from Felisa Roman.

VII. The parties further stipulate and agree that any further evidence that either of the parties
desire to submit shall be taken into consideration together with this stipulation.

Manila, P. I., April 28, 1921.

 (Sgd.) ANTONIO V. HERRERO
Attorney for Felisa Roman

(Sgd.) WOLFSON, WOLFSON & SCHWARZKOPF

Attorney for Asia Banking Corp.

Exhibit A referred to in the foregoing stipulation reads:

1.º Que la primera parte es dueña de unos dos mil quinientos a tres mil quintales de tacabo de
distintas clases, producidos en los municipios de San Isidro, Kabiaw y Gapan adquiridos por
compra con dinero perteneciente a sus bienes parafernales, de los cuales es ella
administradora.

2.º Que ha convenido la venta de dichos dos mil quinientos a tres mil quintales de tabaco
mencionada con la Segunda Parte, cuya compraventa se regira por las condiciones
siguientes:

(a) La Primera Parte remitira a la Segunda debidamente enfardado el tabaco de que ella es
propietaria en bultos no menores de cincuenta kilos, siendo de cuenta de dicha Primera Parte
todos los gastos que origine dicha mercancja hasta la estacion de ferrocarril de Tutuban, en
cuyo lugar se hara cargo la Segunda y desde cuyo instante seran de cuenta de esta los
riesgos de la mercancia.

(b) El precio en que la Primera Parte vende a la Segunda el tabaco mencionada es el de

veintiseis pesos (P26), moneda filipina, por quintal, pagaderos en la forma que despues se
establece.

(c) La Segunda Parte sera la consignataria del tabaco en esta Ciudad de Manila quien se hara
cargo de el cuando reciba la factura de embarque y la guia de Rentas Internas, trasladandolo
a su bodega quedando en la misma en calidad de deposito hasta la fecha en que dicha
Segunda Parte pague el precio del mismo, siendo de cuenta de dicha Segunda Parte el pago
de almacenaje y seguro.

(d) LLegada la ultima expedicion del tabaco, se procedera a pesar el mismo con intervencion
de la Primera Parte o de un agente de ella, y conocido el numero total de quintales remitidos,
se hara liquidacion del precio a cuenta del cual se pagaran quince mil pesos (P15,000), y el
resto se dividira en cuatro pagares vencederos cada uno de ellos treinta dias despues del
anterior pago; esto es, el primer pagare vencera a los treinta dias de la fecha en que se hayan
pagado los quince mil pesos, el segundo a igual tiempo del anterior pago, y asi
sucesivamente; conviniendose que el capital debido como precio del tabaco devengara un
interes del diez por ciento anual.

Los plazos concedidos al comprador para el pago del precio quedan sujetos a la condicion
resolutoria de que si antes del vencimiento de cualquier plazo, el comprador vendiese parte
del tabaco en proporcion al importe de cualquiera de los pagares que restasen por vencer, o
caso de que vendiese, pues se conviene para este caso que desde el momento en que la
Segunda Parte venda el tabaco, el deposito del mismo, como garantia del pago del precio,
queda cancelado y simultaneamente es exigible el importe de la parte por pagar.

Leido este documento por los otorgantes y encontrandolo conforme con lo por ellos
convenido, lo firman la Primera Parte en el lugar de su residencia, San Isidro de Nueva Ecija,
 y la Segunda en esta Ciudad de Manila, en las fechas que respectivamente al pie de este
documento aparecen.

(Fdos.) FELISA ROMAN VDA. DE MORENO

U. DE POLI

Firmado en presencia de:

(Fdos.) ANTONIO V. HERRERO

T. BARRETTO

("Acknowledged before Notary")

Exhibit D is a warehouse receipt issued by the warehouse of U. de Poli for 576 bales of tobacco. The
first paragraph of the receipt reads as follows:

Quedan depositados en estos almacenes por orden del Sr. U. de Poli la cantidad de
quinientos setenta y seis fardos de tabaco en rama segun marcas detalladas al margen, y con
arreglo a las condiciones siguientes:

In the left margin of the face of the receipts, U. de Poli certifies that he is the sole owner of the
merchandise therein described. The receipt is endorced in blank "Umberto de Poli;" it is not marked
"non-negotiable" or "not negotiable."

Exhibit B and C referred to in the stipulation are not material to the issues and do not appear in the
printed record.

Though Exhibit A in its paragraph (c) states that the tobacco should remain in the warehouse of U. de
Poli as a deposit until the price was paid, it appears clearly from the language of the exhibit as a
whole that it evidences a contract of sale and the recitals in order of the Court of First Instance, dated
January 18, 1921, which form part of the printed record, show that De Poli received from Felisa
Roman, under this contract, 2,777 bales of tobacco of the total value of P78,815.69, of which he paid
P15,000 in cash and executed four notes of P15,953.92 each for the balance. The sale having been
thus consummated, the only lien upon the tobacco which Felisa Roman can claim is a vendor's lien.

The order appealed from is based upon the theory that the tobacco was transferred to the Asia
Banking Corporation as security for a loan and that as the transfer neither fulfilled the requirements of
the Civil Code for a pledge nor constituted a chattel mortgage under Act No. 1508, the vendor's lien
of Felisa Roman should be accorded preference over it.

It is quite evident that the court below failed to take into consideration the provisions of section 49 of
Act No. 2137 which reads:

Where a negotiable receipts has been issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the rights of any purchaser for value in good faith to whom such receipt
has been negotiated, whether such negotiation be prior or subsequent to the notification to the
warehouseman who issued such receipt of the seller's claim to a lien or right of stoppage in
transitu. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods
to an unpaid seller unless the receipt is first surrendered for cancellation.
The term "purchaser" as used in the section quoted, includes mortgagee and pledgee. (See section
58 (a) of the same Act.)

In view of the foregoing provisions, there can be no doubt whatever that if the warehouse receipt in
question is negotiable, the vendor's lien of Felisa Roman cannot prevail against the rights of the Asia
Banking Corporation as the indorse of the receipt. The only question of importance to be determined
in this case is, therefore, whether the receipt before us is negotiable.

The matter is not entirely free from doubt. The receipt is not perfect: It recites that the merchandise is
deposited in the warehouse "por orden" instead of "a la orden" or "sujeto a la orden" of the depositor
and it contain no other direct statement showing whether the goods received are to be delivered to
the bearer, to a specified person, or to a specified person or his order.

We think, however, that it must be considered a negotiable receipt. A warehouse receipt, like any
other document, must be interpreted according to its evident intent (Civil Code, arts. 1281 et seq.)
and it is quite obvious that the deposit evidenced by the receipt in this case was intended to be made
subject to the order of the depositor and therefore negotiable. That the words "por orden" are used
instead of "a la orden" is very evidently merely a clerical or grammatical error. If any intelligent
meaning is to be attacked to the phrase "Quedan depositados en estos almacenes por orden del Sr.
U. de Poli" it must be held to mean "Quedan depositados en estos almacenes a la orden del Sr. U. de
Poli." The phrase must be construed to mean that U. de Poli was the person authorized to endorse
and deliver the receipts; any other interpretation would mean that no one had such power and the
clause, as well as the entire receipts, would be rendered nugatory.

Moreover, the endorsement in blank of the receipt in controversy together with its delivery by U. de
Poli to the appellant bank took place on the very of the issuance of the warehouse receipt, thereby
immediately demonstrating the intention of U. de Poli and of the appellant bank, by the employment
of the phrase "por orden del Sr. U. de Poli" to make the receipt negotiable and subject to the very
transfer which he then and there made by such endorsement in blank and delivery of the receipt to
the blank.

As hereinbefore stated, the receipt was not marked "non-negotiable." Under modern statutes the
negotiability of warehouse receipts has been enlarged, the statutes having the effect of making such
receipts negotiable unless marked "non-negotiable." (27 R. C. L., 967 and cases cited.)

Section 7 of the Uniform Warehouse Receipts Act, says:

A non-negotiable receipt shall have plainly placed upon its face by the warehouseman issuing
it 'non-negotiable,' or 'not negotiable.' In case of the warehouseman's failure so to do, a holder
of the receipt who purchased it for value supposing it to be negotiable may, at his option, treat
such receipt as imposing upon the warehouseman the same liabilities he would have incurred
had the receipt been negotiable.

This section shall not apply, however, to letters, memoranda, or written acknowledgments of
an informal character.

This section appears to give any warehouse receipt not marked "non-negotiable" or "not negotiable"
practically the same effect as a receipt which, by its terms, is negotiable provided the holder of such
unmarked receipt acquired it for value supposing it to be negotiable, circumstances which admittedly
exist in the present case.
We therefore hold that the warehouse receipts in controversy was negotiable and that the rights of
the endorsee thereof, the appellant, are superior to the vendor's lien of the appellee and should be
given preference over the latter.

The order appealed from is therefore reversed without costs. So ordered.

 EN BANC

G.R. No. L-39037             October 30, 1933

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
PAZ AGUDELO Y GONZAGA, ET AL., defendants.
PAZ AGUDELO Y GONZAGA, appellant.

Hilado and Hilado and Norberto Romualdez for appellant.

Roman J. Lacson for appellee.

VILLA-REAL, J.:

The defendant Paz Agudelo y Gonzaga appeals to this court from the judgment rendered by the
Court of First Instance of Occidental Negros, the dispositive part of which reads as follows:

Wherefore, judgment is rendered herein absolving the defendant Mauro A. Garrucho from the
complaint and ordering the defendant Paz Agudelo y Gonzaga to pay to the plaintiff the sum of
P31,091.55, Philippine currency, together with the interest on the balance of P20,774.73 at 8
per cent per annum of P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500
as attorney's fees, and the costs of this suit.

It is hereby ordered that in case the above sums adjudged in favor of the defendant by virtue of
this judgment are not paid to the Philippine National Bank or deposited in the office of the clerk
of this court, for delivery to the plaintiff, within three months from the date of this decision, the
provincial sheriff of Occidental Negros shall set at public auction the mortgaged properties
described in annex E of the second amended complaint, and apply the proceeds thereof to the
payment of the sums in question.

It is further ordered that in case the proceeds of the mortgaged properties are not sufficient to
cover the amount of this judgment, a writ of execution be issued against any other property
belonging to the defendant Paz Agudelo y Gonzaga, not otherwise exempt from execution, to
cover the balance resulting therefrom.

In support of her appeal, the appellant assigns six alleged errors as committed by the trial court,
which we shall discuss in the course of this decision.

The following pertinent facts, which have been proven without dispute during the trial, are necessary
for the decision of the questions raised in the present appeal, to wit:

On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her
nephew, Mauro A. Garrucho, the document Exhibit K conferring upon him a special power of attorney
sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he
might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod,
Occidental Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental
Negros, together with the improvement thereon.
On December 22, 1920, Amparo A. Garrucho executed the document Exhibit H whereby she
conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope
to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might
deem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental
Negros.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any
loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure
his obligations.

On December 23, 1920, Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine
National bank, the document Exhibit G, whereby he constituted a mortgage on lot No. 878 of the
cadastral survey of Murcia, Occidental Negros, with all the improvements thereon, described in
transfer certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to secure the payment
of credits, loans, commercial overdrafts, etc., not exceeding P6,000, together with interest thereon,
which he might obtain from the aforesaid plaintiff entity, issuing the corresponding promissory note to
that effect.

During certain months of the year 1921 and 1922, Mauro A. Garrucho maintained a personal current
account with the plaintiff bank in the form of a commercial credit withdrawable through checks
(Exhibits S, 1 and T).

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the plaintiff entity, the
Philippine National Bank, the document Exhibit J whereby he constituted a mortgage on lots Nos. 61
and 207 of the cadastral survey of Bacolod together with the buildings and improvements thereon,
described in original certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz
Agudelo y Gonzaga, to secure the payment of credits, loans and commercial overdrafts which the
said bank might furnish him to the amount of P16,00, payable on August 24, 1922, executing the
corresponding promissory note to that effect.

The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for P6,000 and
P16,000, respectively, were executed in Mauro A. Garrucho's own name and signed by him in his
personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to take possession
of the mortgaged properties, by means of force if necessary, in case he failed to comply with any of
the conditions stipulated therein.

On January 4, 1922, the manager of the Iloilo branch of the Philippine National Bank notified Mauro
A. Garrucho that his promissory note for P6,000 of 10 days within which to make payment thereof
(Exhibit O).1awphil.net

On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed
from that date (Exhibit S).

Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiff-appellee, the said
manager thereof, in a letter dated June 27, 1922 (Exhibit T), requested him to liquidate his account
amounting to P15,148.15, at the same time notifying him that his promissory note for P16,000 giving
as security for the commercial overdraft in question, had fallen due some time since.

On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed Exhibit C
whereby he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod,
together with the improvements thereon, described in transfer certificates of title Nos. 2216 and 1148,
respectively, issued in the name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral
survey of Murcia, described in transfer certificate of title No. 2415, issued in the name of Amparo A.
Garrucho.

In connection of the credits, loans, and commercial overdrafts amounting to P21,000 which had been
granted him, Mauro A. Garrucho, on the said date July 15, 1922, executed the promissory note,
Exhibit B, for P21,000 as a novation of the former promissory notes for P6,000 and P16,000,
respectively.

In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine National Bank, on the said
date of July 15, 1922, cancelled the mortgages constituted on lots Nos. 61, 207 and 878 described in
Torrens titles Nos. 2216, 1148 and 2415, respectively.

On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of title No.
2415, to Paz Agudelo y Gonzaga (Exhibit M).

On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N,
which reads as follows:

Know all men by these presents: That I, Paz Agudelo y Gonzaga, single, of age, and
resident of the City of Manila, P. I., by these present do hereby agree and consent to
the transfer in my favor of lot No. 878 of the Cadastre of Murcia, Occidental Negros, P.
I., by Miss Amparo A. Garrucho, as evidenced by the public instrument dated November
25, 1925, executed before the notary public Mr. Genaro B. Benedicto, and do hereby
further agree to the amount of the lien thereon stated in the mortgage deed executed by
Miss Amparo A. Garrucho in favor of the Philippine National Bank.

In testimony whereof, I hereunto affix my signature in the City of Manila, P.I., this 15th of
January, 1926.

(Sgd.) PAZ AGUDELO Y GONZAGA.          

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y Gonzaga, of lot No. 878
of the cadastral survey of Murcia, described in certificate of title No. 2145 issued in the name of said
Amparo A. Garrucho, and to the affidavit, Exhibit N, transfer certificate of title No. 5369 was issued in
the name of Paz Agudelo y Gonzaga.

Without discussing and passing upon whether or not the powers of attorney issued in favor of Mauro
A. Garrucho by his sister, Amparo A. Garrucho, and by his aunt, Paz Agudelo y Gonzaga,
respectively, to mortgage their respective real estate, authorized him to obtain loans secured by
mortgage in the properties in question, we shall consider the question of whether or not Paz Agudelo
y Gonzaga is liable for the payment of the loans obtained by Mauro A. Garrucho from the Philippine
National Bank for the security of which he constituted a mortgage on the aforesaid real estate
belonging to the defendant-appellant Paz Agudelo y Gonzaga.

Article 1709 of the Civil Code provides the following:

ART. 1709. By the contract of agency, one person binds himself to render some service, or to
do something for the account or at the request of another.

And article 1717 of the same Code provides as follows:

 ART. 1717. When an agent acts in his own name, the principal shall have no right of action
against the persons with whom the agent has contracted, or such persons against the
principal.

In such case, the agent is directly liable to the person with whom he has contracted, as if the
transaction were his own. Cases involving things belonging to the principal are excepted.

The provisions of this article shall be understood to be without prejudice to actions between
principal and agent.

Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as evidenced by the power
of attorney attached hereto" and "attorney in fact of Paz Agudelo y Gonzaga" written after the name
of Mauro A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively, there is nothing in the
said mortgage deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and
of Paz Agudelo y Gonzaga, and that he obtained the loans mentioned in the aforesaid mortgage
deeds and constituted said mortgages as security for the payment of said loans, for the account and
at the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases
which simply described his legal personality, did not mean that Mauro A. Garrucho obtained the said
loans and constituted the mortgages in question for the account, and at the request, of his principals.
From the titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in
his personal capacity. In the aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as
mortgage debtor, appointed the mortgage creditor Philippine National Bank as his attorney in fact so
that it might take actual and full possession of the mortgaged properties by means of force in case of
violation of any of the conditions stipulated in the respective mortgage contracts. If Mauro A.
Garrucho acted in his capacity as mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y
Gonzaga, he could not delegate his power, in view of the legal principle of "delegata potestas
delegare non potest" (a delegated power cannot be delegated), inasmuch as there is nothing in the
records to show that he has been expressly authorized to do so.

He executed the promissory notes evidencing the aforesaid loans, under his own signature, without
authority from his principal and, therefore, were not binding upon the latter (2 Corpus Juris, pp. 630-
637, par. 280). Neither is there anything to show that he executed the promissory notes in question
for the account, and at the request, of his respective principals (8 Corpus Juris, pp. 157-158).

Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents,
Exhibits I and L, on July 15, 1922, and in their stead the mortgage deed, Exhibit C, was executed, in
which there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and
which shows that he obtained such credit fro himself in his personal capacity and secured the
payment thereof by mortgage constituted by him in his personal capacity, although on properties
belonging to his principal Paz Agudelo y Gonzaga.

Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National
Bank, evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for
P21,000 (Exhibit B) executed by Mauro A. Garrucho, not only without express authority from his
principal Paz Agudelo y Gonzaga but also under his own signature.

In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:

A promissory note and two mortgages executed by the agent for and on behalf of his principal,
in accordance with a power of attorney executed by the principal in favor of the agent, are
valid, and as provided by article 1727 of contracted by the agent; but a mortgage on real
 property of the principal not made and signed in the name of the principal is not valid as to the
principal.

It has been intimated, and the trial judge so stated. that it was the intention of the parties that Mauro
A. Garrucho would execute the promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his
capacity as attorney in facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid
documents appear to be contrary to the intention of the parties, such intention should prevail in
accordance with article 1281 of the Civil Code.

Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says
the following:

IV. Intention of the contracting parties; its appreciation. — In order that the intention may
prevail, it is necessary that the question of interpretation be raised, either because the words
used appear to be contrary thereto, or by the existence of overt acts opposed to such words, in
which the intention of the contracting parties is made manifest. Furthermore, in order that it
may prevail against the terms of the contract, it must be clear or, in other words, besides the
fact that such intention should be proven by admissible evidence, the latter must be of such
charter as to carry in the mind of the judge an unequivocal conviction. This requisite as to the
kind of evidence is laid down in the decision relative to the Mortgage Law of September 30,
1891, declaring that article 1281 of the Civil Code gives preference to intention only when it is
clear. When the aforesaid circumstances is not present in a document, the only thing left for
the register of deeds to do is to suspend the registration thereof, leaving the solution of the
problem to the free will of the parties or to the decision of the courts.

However, the evident intention which prevails against the defective wording thereof is not that
of one of the parties, but the general intent, which, being so, is to a certain extent equivalent to
mutual consent, inasmuch as it was the result desired and intended by the contracting parties.
(8 Manresa, 3d edition, pp. 726 and 727.)

Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the
promissory note, Exhibit B, was for his principal Paz Agudelo y Gonzaga. The special power of
attorney, Exhibit K, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate
of his principal to secure his personal obligations. Therefore, in doing so by virtue of the document,
Exhibit C, he exceeded the scope if his authority and his principal is not liable for his acts. (2 Corpus
Juris, p. 651; article 1714, Civil Code.)

It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz
Agudelo y Gonzaga, the latter is responsible for the acts of the former although he acted in his own
name, in accordance with the exception contained in article 1717 of the Civil Code. It would be an
exception with the properties of his own name in connection with the properties of his principal, does
so within the scope of his authority. It is noted that Mauro A. Garrucho was not authorized to execute
promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute a
mortgage on her real properties to secure such promissory notes. The plaintiff Philippine National
Bank should know this inasmuch as it is in duty bound to ascertain the extent of the agent's authority
before dealing with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally
liable for the amount of the promissory note Exhibit B. (2 Corpus Juris, pp. 563-564.)

However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 (Exhibit AA), and in a letter
dated January 16, 1926 (Exhibit Z), gave her consent to the lien on lot No. 878 of the cadastre of
Murcia, Occidental Negros, described in Torrens title No. 5369, the ownership of which was
transferred to her by her niece Amparo A. Garrucho. This acknowledgment, however, does not
extend to lots Nos. 207 and 61 of the cadastral survey of Bacolod, described in transfer certificates of
title Nos. 1148 and 2216, respectively, inasmuch as, although it is true that a mortgage is indivisible
as to the contracting parties and as top their successors in interest (article 1860, Civil Code), it is not
so with respect to a third person who did not take part in the constitution thereof either personally or
through an agent, inasmuch as he can make the acknowledgment thereof in the form and to the
extent he may deem convenient, on the ground that he is not in duty bound to acknowledge the said
mortgage. Therefore, the only liability of the defendant-appellant Paz Agudelo y Gonzaga is that
which arises from the aforesaid acknowledgment, but only with respect to the lien and not to the
principal obligation secured by the mortgage acknowledged by her to have been constituted on said
lot No. 878 of the cadastral survey of Murcia, Occidental Negros. Such liability is not direct but a
subsidiary one.

Having reach this contention, it is unnecessary to pass upon the other questions of law raised by the
defendant- appellant in her brief and upon the law cited therein.

In view of the foregoing consideration, we are of the opinion and so hold that when an agent
negotiates a loan in his personal capacity and executes a promissory note under his own signature,
without express authority from his principal, giving as security therefor real estate belonging to the
letter, also in his own name and not in the name and representation of the said principal, the
obligation do constructed by him is personal and does not bind his aforesaid principal.

Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz
Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the
cadastral survey of Murcia, Occidental Negros, described in Torrens title No. 2415. However,
inasmuch as the principal obligator, Mauro A. Garrucho, has been absolved from the complaint and
the plaintiff- appellee has not appealed from the judgment absolving him, the law does not afford any
remedy whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiary
obligation in view of the legal maxim that the accessory follows the principal. Wherefore, the
defendant herein should also be absolved from the complaint which is hereby dismissed, with the
costs against the appellee. So ordered.
 EN BANC

G.R. No. L-19030 October 20, 1922

E. V. KIDWELL, executrix of the last will and testament of L. B. Kidwell,

deceased plaintiff-appellee, vs. C. B. CARTER, Defendant-Appellant.
PORT LEBAK LUMBER COMPANY, cross-defendant and cross-claimant.

Perkins and Kincaid for appellant.

Fisher and De Witt for appellee and for cross-defendant and cross-claimant.

STATEMENT chanrobles virtual law library

L. B. Kidwell was formerly in the lumber business at and a resident of, Cotabato, of the
Province of Cotabato. The defendant Carter came to the Philippine Islands as a solider in
the United States Army, and afterwards became a lieutenant and later a major in the
Constabulary, and at one time was governor of the Province of Cotabato. Through their
personal dealings and intimate relations, the two became warm, personal friends. The
defendant understood and spoke native language of the province, and at various times
rendered Kidwell valuable and important services which were appreciated by Kidwell and
largely compensated in one form or another. Their friendship there covered a period of
about eight years. Later KIdwell constructed a saw mill at Port Lebak, and organized the
defendant company of which he became the president and owned all of its corporate
stock, with the exception of a few shares that were distributed among the directors. This
corporation was a financial success, and was making good money on the investment.
Later Kidwell developed a cancer and became a very sick man and realized that in short
time he would not be able to manage the business, and that sooner or later he would die
from the effects of the cancer. In this conditions her began to look around and figure out
what to do with his business. Having absolute trust and confidence in Carter, he
discussed the matter with him, and in the end a contract was drawn between them and
in the end a contract was drawn between them in and by which the defendant was given
an option on 270 shares of the capital stock of the corporation, out of the 587 of which
the plaintiff was the owner, at an agreed price of P80,000. The capital stock of the
corporation was P60,000 divided into 600 shares of the par value of the P100 per share.
The actual value of the stock, as it then corresponded to its par value, shows the
financial condition of the company. At the time the contract was drawn, the defendant
Carter did not invest any money in the business. It provided that one-third of the
P80,000 was payable each year. By its term it recited that Kidwell was desirous of
returning to the United States on or before June 30, 1920, and the turning over of the
general management of the corporation to Carter for a period of three years from the
time that Kidwell left. That at the time of his leaving he would give Carter full and
complete management of the company with sufficient funds, merchandise, buildings,
tools, supplies and equipment for the proper and efficient administration of the
company's business, and that Carter should have all the powers of a general manager,
and that among other things, he should "thereafter devote his entire time and attention
to the company's business and to the furtherance of its interest and shall in no way
engage in outside business or business transactions," and that a meeting for the board
of directors should be held at which he should be vested with such
powers.chanroblesvirtualawlibrary chanrobles virtual law library

The contract was dated February 26, 1919, and among other things, recites that should
Kidwell desire Carter to take over the property prior to June, 30, 1920, he should give
him at least four months' notice, and that Carter "shall thereupon resign his then
employment and enter upon his duties as general manager as herein specified." It
further recites that the defendant should receive a monthly salary P500, and should be
reimbursed "for any money expended by him for his actual and necessary travelling
expenses, incurred buy him in or upon the company's business, provided, however, that
said second party shall not be entitled to a cash advance of more than one month's
salary." That he should render "written reports every three months, which said reports
shall contain a statement of all business transactions of the company, a statement of the
received and expended," and of the corporate business in general. That upon Carter's
assuming the duties as "general manager, Kidwell shall cause 270 shares of the capital
stock, of said company, to be issued to said first party and by him endorsed in favor of
the second party, said stock to be deposited in escrow together with a copy of this
agreement, in a sealed envelope with Bank of the Philippine Islands in Zamboanga until
such time as said stock shall be paid for as hereinafter stipulated and agreed." Section
10 of the contract then further provides:

( a) The day said second party assumes the management of said company a full and
complete inventory shall be made of all property, assets and liabilities of said company,
including the mill, machinery, logs logging equipment tools and equipment, logging
accounts, supplies, goods, wares and merchandise lumber on hand and in transit, and
bills payable and bills receivable.chanroblesvirtualawlibrary chanrobles virtual law library

( b) Thereupon as between the parties hereto, the mill machinery, logs, logging
equipment, logging accounts, tools and equipment and mill supplies on hand shall be
considered as the property of the company but the lumber on hand and in transit, and
the goods wares and merchandise on hand and in the company stores taken at their
invoice price plus any launches now owned by said company or subsequently acquired
shall as between the parties hereto be considered the individual property of said first
party.chanroblesvirtualawlibrary chanrobles virtual law library

( c) As the purchase price of the stock above mentioned said second party shall pay said
first party the said eighty thousand pesos (P80,000) plus the inventory value of the
property listed as the individual property of said party as set forth in the preceding
paragraph with the understanding that said payments shall be made from the profits of
the company's business without individual liability on second party and provided further
that any payments made to said first party shall be considered as dividends from said
company and shall not be considered as an advance to nor a liability from said party of
said company.

Section 11 says:

In the event that the amount so to be paid first party are not so paid as they become
due, then any and all amounts so paid from time to time shall, at the option of said first
party, become his absolute property and the present agreement shall become null and
void and the stock so deposited in escrow shall be returned to said first party and all
further rights or liabilities between the parties hereto shall be terminated.

It was agreed during the period of the contract that neither party would mortgage or
encumber his stock or interest in the company. That should Carter die or become
physically unable within the three-year period without having fully paid the stipulated
price of the stock, Kidwell would fully compensate him or his heirs for any money earned
under his contract.chanroblesvirtualawlibrary chanrobles virtual law library

Carter assumed his duties as general manager about the 8th of September, 1919, at
which time Kidwell with his family went to the United States where he died in a very
short time, and later his widow returned to the Philippines Islands, and was duly
appointed and qualified as executrix of his last will and testament. Claiming that he had
made full payment for his stock and complied with all the terms and conditions, of the
contract, Carter wrote the widow a letter asking her consent that the 270 shares of
stock should be transferred to, and issued in, his name. Relying upon his statements and
representations, the widow gave her consent, and that stock was issued to Carter. Later
on the books of the corporation were examined by an expert accountant who found and
reported that Carter had not paid the purchase price of the stock or any part of it, and
that he had neglected the affairs of the company. This led to the present action in which
the plaintiff, as executrix, alleges that on the 3d day of August, 1920, the defendant
"wrongfully contriving and maliciously intending to defraud the estate of the said
deceased and acting as the president of said corporation had the aforesaid 270 shares of
stock transferred on the books of the corporation in his name and a stock certificate
therefor issued to himself." That he had not complied with any of the terms of his
contract, and that he had devoted any of his time to the corporate business, and that he
was then on a pleasure trip to America, and that since the 8th day of September, 1919,
he had fraudulently appropriated to his own use more than P150,000 of the corporate
funds. That the 270 shares of the capital stock were then of the value of P100,000 and
are liable to loss unless a receiver is appointed, and prays for a judgment defendant has
not complied with any of the terms of the contract; that he had embezzled the funds of
said corporation; that he has no right to the 270 shares of stock; and that the defendant
be enjoined from disposing of or using it in any
manner.chanroblesvirtualawlibrary chanrobles virtual law library

The defendant Carter denied all of the material allegations of the complaint, and, as a
further and separate answer, and by way of cross-complaint, pleads the inducements
which led up and entered into the making of the contract, and the payment to the widow
under the contract of P130,000, and the further sum of P90,00 under her instructions to
satisfy a mortgage on the property. That he had devoted all of his time and attention to
the business, and that a correct accounting between the defendant and the corporation
will show that there is a large sum due and owing to the defendant. That he was
unlawfully removed as president of the corporation by the board of directors, and pleads
a letter of the deceased to him written October 13, 1919, "on Board the Penn. Limited."
That the widow is wholly incompetent to manage the affairs of the corporation, and that
he is entitled to a salary of P3,000 per annum, and "earned profits on the shares of
stock held by defendant, and prays that the Port Lebak Lumber Company be made a
party, and that the proceedings of the boards of directors, removing him as manager
and president of the corporation be declared null and void. That an accounting be had,
and that defendant have judgment for any sum which may be found due him, together
with the damages which he has sustained.chanroblesvirtualawlibrary chanrobles virtual
law library

Based upon the order of the court, the Port Lebak Lumber Company appeared and filed
an answer, denying all the material allegations of defendant's cross-complaint, and,
among other things, alleges that the defendant Carter had taken and appropriated to his
own use P188,614.16 "in excess of the money to his credit in his personal account,
which said drawing was not authorized by the directors of the corporation," for which
amount it prays judgment against the defendant
Carter.chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff also filed a general denial to defendant Carter's cross-

complaint.chanroblesvirtualawlibrary chanrobles virtual law library

The Philippine Trust Company was appointed receiver of the 270 shares of stock of the
corporation of which it took possession.chanroblesvirtualawlibrary chanrobles virtual law
library

Upon such issues a large amount of testimony was taken. There was a stipulation as to
many of the material facts. In a very able and exhaustive opinion, the trial court found
that plaintiff should have and recover judgment from the defendant Carter for the 270
shares of the capital stock of the corporation transferred to him on August 3, 1920, free
of any claim or interest thereon of the defendant; that the certificate for said shares
should be delivered to the corporation by the receiver for cancellation; and that a new
certificate for said shares should be delivered to the corporation by the receiver for
cancellation; and that a new certificate should be issued to the plaintiff, as executrix and
that the corporation should have and recover from defendant Carter the sum of
P57,620.70, with interest; and that defendant take nothing by his cross-complaint,
which is dismissed, and for the costs of the action, from which the defendant Carter
appeals claiming that the lower court erred in sustaining an objection to the testimony of
the witness Tillet as to the circumstances under which the contract was executed, and
the negotiations, between the parties which culminated in the contract, and in rejecting
the testimony of the witness Tillet, and in striking portions of his testimony from the
record, and in finding that the defendant made trips to Manila or Hongkong on his
personal business, and in disallowing P8,885.22 expended by him as manager in charge
of the company. In finding that P68,155.22 should be charged to his personal account,
and that the sum of P381,778.05 credited to the account of Kidwell on the books of the
company was composed of dividends earned by Kidwells shares of stock prior to
September 1, 1919, and in finding that Carter was addicted to excess of drinking of
liquor, and that plaintiff was ignorant of defendant's account in the company and in its
interpretation of the contract between them. In holding that the defendant was not
entitled to credit or to recover for the payments made to Kidwell and his estate on
account of the purchase price of the 270 shares, and that the company was justified in
removing him as general manager, or that he ever had breached his contract, or that
plaintiff was entitled to treat it as a breach of the contract, or to rescind it, and in
entering the respective judgments, and in refusing to enter judgment for the defendant
Carter, and in denying his motion for a new trial.
  chanrobles virtual law library

JOHNS, J.:

It is very apparent that the contract was made between personal friends. That it was
designed to equally protect both parties, and that neither sought an undue advantage
over the other, and that it was not hastily signed or prepared. It was dated February 25,
1919, and by its terms a previous contract between them, of January 30, 1919, was
"declared of no further force or effect." Carter was to become manager June 30, 1920,
and should Kidwell desire him to assume his duties prior to that time, he was to give
him at least four months notice. He assumed his duties September 8, 1919, nearly six
months after the contract was signed. Hence, if there was any doubt as to the meaning
or construction of the contract them, there was ample time for discussion and
settlement before Carter resigned his old and assumed his new
position.chanroblesvirtualawlibrary chanrobles virtual law library

Clause ( a) of section 10 provides the full and complete inventory of all property of the
corporation should be made on the day Carter assumed his duties as manager. As
between the parties, clause ( b) specifically defines what shall be deemed the property
of the corporation, which includes "mill machinery, log, logging equipment, logging
accounts, tools, and equipment and mill supplies on hand," and it then says that "the
lumber on hand and in transit, and the goods, was, and merchandise on hand and in the
company's stores taken at their invoice price plus any launches now owned by said
company or subsequently acquired shall as between the parties hereto be considered the
individual property of said first party." It specifies and defines the rights of both parties,
and is the basis for the purchase price of the 270 shares of stock. Carter did not invest
any money. It is very apparent that he knew all about the business of the corporation,
and was familiar with its assets, revenues, and profits. Also, that in the natural course of
events, both parties fully expected that on or before three years Carter could and would
fully pay for his stock out of his pro rata share of the profits. It was for such reason that
the three-year limitation was placed on the contract. By its terms, in addition to his
salary of P500 per month, he was made the manager of the corporation, the profits of
which, in the ordinary course of business, it was thought would be sufficient in three
years to pay for the 270 shares of stock.chanroblesvirtualawlibrary chanrobles virtual
law library

In his letter of October 13, 1919, when he knew his sickness would be fatal, plaintiff
says:

I have also explained to her to have every confidence in you which she has and not to
bother you in regards to your plans in carrying out the
business.chanroblesvirtualawlibrary chanrobles virtual law library

By all means see that the mortgage I gave Staples on the plantation amounting to thirty
thousand pesos is liquidated as soon as possible and advise Mrs.
Kidwell.chanroblesvirtualawlibrary chanrobles virtual law library
I hope you have the statement showing just how things stood at the time you took over
the business, mailed to me if not please mail same as soon as
possible.chanroblesvirtualawlibrary chanrobles virtual law library

It serves me much pleasure to know I have two men like you and Wheeler at the head
of my business in the conditions I am in.

This was the last letter of a dying man to his trusted and confidential
friend.chanroblesvirtualawlibrary chanrobles virtual law library

Carter contention that the contract creates a partnership between them is not tenable.
The word partner is not used anywhere in it, and the contract itself does not have any of
the elements or essentials of partnership. It is true that the widow gave him a letter of
introduction which she referred to him as pa partner, and that the offered and excluded
testimony tends to show that Kidwell himself to Carter as his partner. The average
person know but little, if anything, about the subtle, legal distinction between a
partnership and the stockholders of a corporation, and as used by them, the word
partner meant nothing more than that Carter was or would become manager of the
corporation with valuable rights as a stockholder. It did not mean that the corporation
had been destroyed or dissolved. Carter's rights were based upon the value of the stock,
and he could not become a stockholder unless the corporation continued to exist. This
construction is further sustained by the fact that a meeting of the board of directors of
the corporation was called at which the contract was ratified, and Carter was elected
,manager and later president of the corporation and that the same board, with Carter as
president, declared the dividend and issued direct to him the 270 shares of stock. By his
own conduct he is estopped to claim or assert that the contract was
partnership.chanroblesvirtualawlibrary chanrobles virtual law library

In its final analysis, it was a three-year contract for the employment of Carter as
manager at an agreed salary of P500 per month upon specified terms and conditions
defining his powers and duties with a right and option to acquire 270 shares of stock and
pay for them out of the profits of the corporation during the period of his contract. At
the time of its signing Carter was receiving a salary of P750 per month with allowances
for travelling expenses, a residential house, and an entertainment fund of P2,000 per
annum as Provincial Governor, and the contract provides that he should have four
months' notice in which to arrange his personal business and resign his old position
before assuming the duties of the new. Hence, we must assume that the intended and
expected to better his position, and that his right to acquire the 270 shares of stock out
of the profits of the corporation was one of the main considerations and inducements for
hi signing of the contract, the value of which to him largely depended upon his abilities
and the way in which he discharged his duties as manager. It provides that upon Carter
assuming his duties, a full and complete inventory should be taken, and as between
them, what property shall belong to the corporation and what shall belong to Kidwell.
That Kidwell shall give Carter full management, "together with sufficient funds and
merchandise buildings, tools, supplies and equipment", as may be necessary to the
efficient administration of the corporate business. That Carter shall devote all of his time
to the corporate business and receive a salary of P500 per month and render written
reports every three months, and that he shall remain as general manager for three
years. That upon assuming his duties Kidwell shall cause 270 shares of the capital stock
to be issued in his name and endorsed to Carter to be placed in escrow in the bank
which he agreed to sell to Carter upon the terms and conditions provided in the
contract.chanroblesvirtualawlibrary chanrobles virtual law library

The important question is the construction of the contract. It recites that the capital
stock of the corporation is P60,000 and that Kidwell is the sole owner of the 587 shares
of stock in the company of the pa value of P58,700; that, subject to terms, Kidwell
desires to sell and that Carter desires to buy 45 per cent of the stock of the corporation
for the price of P80,000. Section 10 says that, subject of the provisions of the contract,
Kidwell agrees to sell and Carter agrees to buy "270" shares of the capital stock of the
said Port Lebak Lumber Company for the sum of eighty thousand pesos (P80,000)."
Clause ( a) of section 10 provides that, when Carter assumes his duties as manager, a
full and complete inventory shall be taken of all of the assets of the corporation. Clause
( b) provides, in effect, that, as between them, all of its liquid assets shall be deemed
and treated as the individual property of Kidwell, and that the mill, logs, logging
equipment, loggin accounts, tools and equipment and mill supplies should be deemed
and treated as the property of the corporation. On assuming his duties an inventory of
all of the property was taken from which it was found that the assets of the corporation
known and designated "as the individual property of Kidwell" was of the value of
P134,610.13.chanroblesvirtualawlibrary chanrobles virtual law library

Clause ( c) of section 10 says:

As the purchase price of the stock above-mentioned said second party shall pay said
first party the said eighty thousand pesos (P80,000) plus the inventory value of the
property listed as the individual property of the said first party as set forth in the
preceding paragraph, etc.

The plaintiff contends and the trial court found that, under his clause, the P134,610.13
should be added to the P80,000 and that the purchase price of the stock was
P214,610.13. That ruling is assigned as error, and is the important question in this case.
The language used is somewhat awkward, and its meaning is not definite or certain, and
hence, its proper construction must depend upon the relative situation and the purpose
and intent of the parties.chanroblesvirtualawlibrary chanrobles virtual law library

It is stipulated that the value of the lumber on hand and in transit, the goods, wares,
and merchandise in the company's stores, at the invoice price, and of the launches
specified in clause ( b) of section 10 of the contract was P134,610.13. As to Carter, this
became the individual property of Kidwell, and was not an asset of the
corporation.chanroblesvirtualawlibrary chanrobles virtual law library

It appears from the balance sheet of date of August 31, 1919, as certified by the public
accountants, that the gross value of all of the assets of the corporation was then
P449,486.46, in which the liabilities are as follows:

Capital Stock .................................................................... P60,000.00

Forestry dues ................................................................... 3,114.20
Notes payable ................................................................... 15,000.00
Accounts payable .............................................................. 13,115.52
Undivided profit from December 31 ................................. 199,364.18
Profit for eight months ending August 31, 1919, as per profit and loss
account .......................................... 158,892.56

Making a total of ................................................... 449,486.46

In its accounts receivables is claim against L. B. Kidwell amounting to P182,508.24

which, with other claims and cash on hand, amount of P231,980.90, exclusive of the
items constituting the P134,610.13 specified in the contract as Kidwell's individual
property." It will be noted that none of such items are specifically mentioned or specified
in the contract. But assuming that Kidwell's personal debt to the corporation of
P182,508.24 is wiped out, and that in addition thereto he receives the inventory value of
the lumber and merchandise and launches of P134,610.13, it would make a total of
P317,118.37. Deducting this from the gross liabilities of P449,486.46, which includes the
capital stock of P60,000, the remaining assets of the corporation at the time that Carter
became its manager would amount to P132,368.09, for which in any event Carter was to
pay P214,610.13, and yet they were warm, personal friends, and the contract was
intended to be fair to both parties. There is no claim or pretense that Kidwell ever paid
the P182,508.24 which he owed the company on August 31, 19191, or that he ever will.
Hence, that item should be deducted from the undivided profits as they appear on
August 31, 1919.chanroblesvirtualawlibrary chanrobles virtual law library

Although its appears from the balance sheet that there were other liquid assets
amounting to P49,472 it is also shown that the company was in debt over P31,000, and
the contract recites that when Carter becomes manager, that Kidwell will turn over
"sufficient funds and merchandise, buildings, tools supplies and equipment, and in
general such property and properties as shall be essential to the proper and efficient
administration of the corporate business. The floating debt of the company had to be
paid and the new manager of the company needed the ready money with which to pay
monthly bills. Hence, we have a right to assume that the parties intended that Carter, as
manager, should have the use of the cash on hand and accounts receivable with which
to pay the floating debt of the company and its monthly operating expense, and that all
of such liquid assets were turned over and delivered to Carter as manager to be used in
the future operations of the company. Including the cash on hand and bills receivable,
and, excluding Kidwell's debt of P182,508.24, the assets of the corporation would then
amount to P172,000, which is substantially the basis of value upon which Carter was to
pay P80,000, for the 270 shares, or 45 per cent of the 600 shares of stock, which would
amount to P77,400.chanroblesvirtualawlibrary chanrobles virtual law library

The contract must be construed as a whole and as its different provisions relate to each
other. As thus construed the amount which Carter was to personally pay for the 270
shares of stock out of its own future profits under his management was P80,000, not
less than one-third of which was to be paid each year. In addition thereto, and as
manager, he was to pay Kidwell from and out of the present or future profits of the
company P134,610.13 for his "individual property" as it is mentioned and defined in
clauses ( a) and ( b) of section 10 of the contract. In other words, personally and out of
future profits on the 270 shares of stock, Carter was to pay Kidwell P80,000 as the
purchase price for his stock, and in addition thereto and as a part thereof, and as
manager of and for, and on behalf of the corporation, he was to pay Kidwell the
inventory value of the property listed as his "individual property", or P134,610.13. Under
the financial conditions of the company then existing, to require Carter to personally pay
P214,610.13 for the 270 shares of stock out of its future profits would be
unconscionable, and, in effect, would require him to pay at least three times its book
value, as shown by the balance sheet when he became its manager. That was never the
intention of the parties. Under this construction it remains to be seen how much was
paid Kidwell or his estate, by whom it was paid, from what fund how it should be
applied.chanroblesvirtualawlibrary chanrobles virtual law library

We agree with the lower court and the attorneys for the plaintiff that the purchase price
of the 270 shares of stock was to be paid by Carter out of the future profits of the
corporation to be earned after he became its manager. The parties have stipulated that
the total profits of the company from September 1, 1919, to December 31, 1920, was
P350,693.90 from which should be deducted P15,717.41 "to cover the depreciation and
obsolescence." "The remainder, three hundred thirty five thousand two hundred forty-six
and 49/100 (P335,246.49) pesos, upon a declaration of a dividend, would be
distributable among the shareholders of the corporation entitled hereto." But, as
between Carter and Kidwell, the contract expressly provides that the P134,610.13
should be construed to mean that the P134,610.13 should be paid out of the profits of
the corporation, and it should be construed to mean that the P134,610.13 should be
paid out of the such profits before either Carter or Kidwell would be entitled to receive
any dividend on their respective stock. As between them this would leave a net dividend
of P200,636.26 forty-five per cent of which would be P90,285 to which should be added
the dividend upon the ten shares of stock which Carter acquired through his wife or
P3,344, making a total of P93,629 of which P80,000, under the terms of the contract,
would automatically and ipso facto become the property of the Kidwell estate as the
amount of the purchase price of the 270 shares of stock, subject to any charge or lien
against the fund in favor of the company.chanroblesvirtualawlibrary chanrobles virtual
law library

Applying this rule of construction to clause 18 of the stipulation of facts, plaintiff would
be entitled, as between it and Carter, first to P134,610.13 and second, to a dividend on
its remaining 317 shares of stock in round number of P104,329 making a total of
P238,939. The testimony is conclusive that after Carter became manager, the Kidwell
estate at different times and for different purposes received out of the assets of the
company P2493.46.chanroblesvirtualawlibrary chanrobles virtual law library

The trial court found, and we approve that finding, that there was a total amount of
expenses of P9,493.46 which were improperly charged by Carter to the company and
with which Carter should be personally charged.chanroblesvirtualawlibrary chanrobles
virtual law library

Turning now to Carter's private account as it appears in the corporate books, we find
that on and between the first of August, 1919, and the 31st of December, 1920 that he
drew out P215,672.03 from which should be conducted the check for P120,000 which he
received from Findlay, Richardson and Company and endorsed to the plaintiff. In the
same account he has total credits of P27,059.87. Deducting the amount of credits and
the charge of P120,000, we have a net balance on the books against Carter of
P68,614.16 to which should be added the sum of P9,493.46, the money of the company
which Carter wrongfully spent, as above stated, we have a total of net charges against
Carter of P78,107.62.chanroblesvirtualawlibrary chanrobles virtual law library

Deducting this form the 45 per cent dividend on the 270 shares of stock, we have a
balance of P15,521.38.chanroblesvirtualawlibrary chanrobles virtual law library

Defendant's cross-complaint was filed January 24,

1921.chanroblesvirtualawlibrary chanrobles virtual law library

It must be conceded that conditions were abnormal, and that Carter did not give the
company the business, care and attention which Kidwell had a right to expect, and which
it was his duty to give the contract. Be that as it may, the stubborn fact remains, which
the stipulation between the parties admits, that during the period Carter was manager
the company made a net profit of P335,246.49 upon a capital stock of
P60,000.chanroblesvirtualawlibrary chanrobles virtual law library

Plaintiff cites and relies upon section 11 of the contract as follows:

In the event that the amounts so to be paid first party are not so paid as they become
due, then any and all amounts so paid from time to time shall, at the option of said first
party, become his absolute property and the present agreement shall become null and
void and the stock so deposited in escrow shall be returned to said first party and all
further rights or liabilities between the parties shall be terminated.

It was a three-year contract, sixteen months of which had expired at the time of Carter's
removal. The effect of plaintiff's contention would be to keep and appropriate to its own
use all of the moneys which were earned during the period that Carter was manager and
leave him with nothing but his salary of P500 per month. In other words, to take all of
the P335,246.49 and to deny Carter any right to share in the profits. Under such a state
of facts, it might be well contended that clause 11 is unconscionable, and, for such
reason, equity would not enforce it.chanroblesvirtualawlibrary chanrobles virtual law
library

Article 1154 of the Civil Code provides:

The judge shall equitably mitigate the penalty if the principal obligation should have
been partly or irregularly performed by the debtor.

That section applies with peculiar force to this

case.chanroblesvirtualawlibrary chanrobles virtual law library

Section 13 of the contract provides that in case of death or disability of Carter before the
termination of the contract without having fully paid the purchase price of the stock that
KIdwell is bound at his option to either pay in cash or to deliver stock to Carter for the
value of all moneys which he has received as payments upon the Carter stock. It is true
that Carter did not die and was not disabled, but in common with other provisions of the
contract, section 13 provides for an equitable settlement between the parties of their
heirs.chanroblesvirtualawlibrary chanrobles virtual law library
The purpose of plaintiff's complaint is to cancel the contract and to become reinvested
with title to the Carter stock, and it is very apparent that the company removed him as
manager at the instance and request of the plaintiff. To all intents and purposes the
plaintiff controls and is the owner of, the corporation, which upon motion of Carter, was
made a party in the action. In this cross-complaint he prays for an accounting and
judgment for whatever may be found due to him, including damages sustained, and for
such other and further relief, general and special as he may be entitled to under the
facts. In its amended answer the corporation prays for a judgment dismissing Carter's
cross-complaint and in favor of the company and against him for P12,053.99 upon its
first counterclaim, and P188,614.16 upon the second with interests and
costs.chanroblesvirtualawlibrary chanrobles virtual law library

We have given this case the careful thought and study which its importance demands.
All of the parties are before the court, and, through the issues made in their respective
pleadings, all of the facts pro and con are fully presented. In legal effect, the plaintiff
cancelled the contract and caused the removal of Carter as manager. As we construe the
contract and analyze the evidence, there was due Carter at that time from accrued
profits on the 270 shares of stock, over and above all set-offs and counterclaims, the
sum of P15,521.38, with interest.chanroblesvirtualawlibrary chanrobles virtual law
library

The judgment of the lower court that the plaintiff have and recover from the defendant
Carter the 270 shares of stock of the corporation free of any claim or interest is
affirmed, and the certificates of stock standing in his name are cancelled, for which new
certificates for a like number of shares shall be issued to the plaintiff. The judgment of
the lower court in favor of the Lumber Company for P57,620.70 with interest is
reversed, and one will be entered here in favor of the defendant Carter and against the
Port Lebak Lumber Company for the sum of P15,521.38 with legal interest form the date
of the filing of the cross-complaint, and, subject to, and under the provisions of, section
510 of the Code of Civil Procedure, such judgments to be and operate as a full and final
settlement of all maters between the parties to this date. As between the plaintiff and
Carter, neither party will recover costs in this court. As between Carter and the Lumber
Company, Carter will have and recover costs against it in this and lower court. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library
 EN BANC

G.R. No. L-21178 March 18, 1924

EMILIANO J. VALDEZ, Plaintiff-Appellee, vs. LEON SIBAL 1.�, Defendant-Appellant.

Jos. N. Wolfson for appellant.

Felix B. Bautista for appellee.

ROMUALDEZ, J.:

In his last amended complaint the plaintiff prays for judgment against the defendant for
the sum of P14,464.61, with interest thereon at the rate of 12 � per cent per annum
from August 1, 1921, and P2,703.72 as penalty and damages, with the
costs.chanroblesvirtualawlibrary chanrobles virtual law library

In his answer the defendant sets up a special defense, cross-complaint and counterclaim
and prays that he be absolved from the complaint, that certain documents signed by
him be declared void and no effect, and the plaintiff be sentenced to pay him P4,000, as
damages on account of the attachment levied upon his property, with the
costs.chanroblesvirtualawlibrary chanrobles virtual law library

The lower court rendered judgment against the defendant and in favor of the plaintiff for
the sum of P15,187.12 with interest thereon at the rate of 12 � per cent per annum for
August 1, 1921, plus P3,839.12 as liquidated damages with the
costs.chanroblesvirtualawlibrary chanrobles virtual law library

This judgment is attacked and assailed in this court as erroneous: (1) In that it does not
declare Exhibits U, B, and B-1 to be usurious contracts and therefore void; (2) in that it
finds the defendant to be indebted to plaintiff in the sum of P15,187.12 and sentences
him to pay interest thereon at the rate of 12 � per cent annum plus the sum of
P3,839.12 as damages, with the costs; and (3) in that the motion of new trial was
overruled.chanroblesvirtualawlibrary chanrobles virtual law library

The evidence shows that the defendant Leon Sibal 1.� has, on different occasion,
received several amount of money from the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library

On September 14, 1920, a document was executed by and between the plaintiff and the
defendant which is marked Exhibit U (fol. 110, original record), and is literally as
follows:

UNITED STATES OF AMERICA

PHILIPPINE ISLANDS

I, Leon Sibal 1.�, married with Victoria Dayrit, of age, agriculturist and resident of
Bamban, Tarlac, P. I., do hereby freely and spontaneously state and declare:chanrobles
virtual law library
First. - That in consideration of the sum of P 12,833.30 to me paid by Mr. Emiliano J.
Valdez, merchant, and doing business in Angeles, Pampanga, P. I., do hereby declare
that I have sold to said Mr. Valdez all such sugar as I may obtain during the agricultural
year 1920-1921 from my sugar-cane in my estate situated in Pascuala, barrio of Sto.
Rosario, Capas, Tarlac, P. I., and in the land I have leased from Francisco Talavera, the
owner thereon, situated in the barrio of Sto Rosario, Capas, Tarlac, P. I., at such current
price in the month of November of this year, 1920, as may be quoted by the firm of W.
F. Stevenson & Co. Ltd., of Manila, the same to be placed in Manila, all the expenses for
loading, freight charges, repacking, etc., being for my account, a tare of 7 pounds to be
allowed if the weighing is made in the station of Capas, every fraction of a kilo to be
disregarded for every four bayones (sacks).chanroblesvirtualawlibrary chanrobles virtual
law library

Second. - That I agree to deliver to Mr. Valdez all the sugar above-mentioned which is
estimated at not less than 1,500 piculs as soon as I begin to mill, which will be in or
before the month of November of this year and to make weekly deliveries from such
date until the end of March, 1921; and in case of my breaking this contract, I agree to
pay Mr. Valdez all such damages as may be caused him, the same not to be less than P4
for each picul I may fail to deliver, and in addition thereto the sum of P2,000 in case of
litigation.chanroblesvirtualawlibrary chanrobles virtual law library

Third. - That I, Emiliano J. Valdez, having read and known the contents of the contract
hereinbefore executed in my favor, I do hereby accept the same in all its
parts.chanroblesvirtualawlibrary chanrobles virtual law library

In testimony whereof we have hereunto set our hands in Angeles, Pampanga, P. I., this
14th day of September, 1920.

(Sgd.) LEON SIBAL 1.�

EMILIANO J. VALDEZ

In the presence of:

(Sgd.) PEDRO GUILAS

ELISEO VILLA DEL REY

On the same date said parties executed two documents, Exhibits B and B-1 (fols. 62-64,
respectively, original record), wherein to secure the payment of P12,883.30 payable on
December 31, 1920, with interest at the rate of 12 � per cent per annum, plus 25 per
cent on the principal for attorney's fees and expenses of collection, there were
mortgaged by the defendant in the first document (Exhibit B) all the sugar-cane growing
in his estate in Pascuala, barrio of Sto. Rosario, Capas, Tarlac, and in a land leased by
him, situated in said barrio, together with a steam-engine boiler with its machinery and
accessories, and in the second document (Exhibit B-1), a parcel of land situated in
the sitio of Pascual of the aforesaid barrio. The first of these documents is registered as
a chattel mortgage.chanroblesvirtualawlibrary chanrobles virtual law library

The principal sum appearing on these there documents is the same, - P12,833.30. The
defendant asserts that he did not received it entirely, but only P12,000 on two
occasions, and that the P833.30 is interest included by the plaintiff in the first amount
without his knowledge or consent. The parole evidence introduced on this point is not,
however, sufficient to overthrow, with regard to the amount received, the probative
force of these three documents, which the defendant admits having
signed.chanroblesvirtualawlibrary chanrobles virtual law library

While the first documents, that is to say Exhibit U, says that the defendant, in
consideration of the aforesaid sum, has sold to the plaintiff all the crop of sugar of the
agricultural year, 1920-1921, which was to be gathered from the lands therein
mentioned, yet the other two documents, Exhibits B and B-1, in referring to the same
amount of money, do not consider it as an advance payment on account of the sale, but
a debt.chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff testified (fol. 49, st. n.) that the amounts paid by him to the defendant
were not precisely for the crop sold, but as advance payment on account of the sale of
the sugar, and that it was an error of the one who prepared the document that a
promissory note was inserted in Exhibits B and B-1 (folios 53, 55, st. n.). The defendant,
in turn, testified that the P12,000 received by him were as advance payment on account
of the crop aforementioned (fols. 93, 94, st. n.).chanroblesvirtualawlibrary chanrobles
virtual law library

Both parties, therefore, agree in substance that the amount received by the defendant
from the plaintiff were not a loan but in consideration of the crop mentioned, converted
into sugar, which the former had agreed to deliver to the latter in the document Exhibit
U.chanroblesvirtualawlibrary chanrobles virtual law library

While the evidence oral and documentary as a whole tends to show that the contract
was of a mere loan, yet in view of the unanimous interpretation given thereto by the
parties, which interpretation is the one to be followed, being authentic and the sense in
which both parties, according to their own testimony, understood the contract, we
cannot construe it otherwise. It was, therefore, according to this, a contract of sale in
which the price was to be that of the sugar to be obtained from the aforesaid crop of the
defendant, at such price as might be quoted by the firm of W. F. Stevenson Co., Ltd., in
November, 1920, which crop was to be not less than 1,500 piculs, all in accordance with
the document Exhibit U.chanroblesvirtualawlibrary chanrobles virtual law library

The first assignment of error made by the defendant cannot therefore be held to be of
any merit, in which said defendant considers such a contract as a loan, when he himself
testified (fols. 93, 94, st. n.) that it was not a loan.chanroblesvirtualawlibrary chanrobles
virtual law library

According to the evidence, the defendant received from the plaintiff the following
amounts: chanrobles virtual law library

Twelve thousand eight hundred thirty-three pesos and thirty centavos as stated in
Exhibit U; chanrobles virtual law library
Two thousand three hundred fifty pesos received on several occasions, as evidenced by
the receipts C to LL, both inclusive.chanroblesvirtualawlibrary chanrobles virtual law
library

One thousand six hundred seventy-four pesos, P384.81, and P64.69 admitted at the trial
(fol. 6, st. n.). To these sums there must be added that of P14.25 (Exhibit O) paid by
the plaintiff for the recording of one of the mortgages
aforementioned.chanroblesvirtualawlibrary chanrobles virtual law library

These amounts make a total of P17,321.05, which, as appears from the record, were
paid by the plaintiff to the defendant on account of the price of the sugar to be obtained
from the crop covered by the agreement.chanroblesvirtualawlibrary chanrobles virtual
law library

Now we turn to consider whether or not the defendant fulfilled his obligations under the
contract Exhibit U.chanroblesvirtualawlibrary chanrobles virtual law library

According to this contract the defendant agreed to deliver not less than 1,500 piculs of
sugar.chanroblesvirtualawlibrary chanrobles virtual law library

The evidence shows that he did not deliver but 1,079.04 piculs (fol. 11, st. n.), having,
therefore, failed to deliver 420.96 piculs of the 1,500 he had agreed to deliver. We
cannot, however, abide by this result because in paragraphs III and V of the complaint
(fol. 179, original record, and p. 18, B. of E.), it is alleged that the defendant failed to
deliver 175.93 piculs. In alleging this smaller amount, the plaintiff may have his reasons
which do not, however, appear in the evidence. We take this amount as the correct one,
being the number of piculs alleged and contained in the number established in the
record.chanroblesvirtualawlibrary chanrobles virtual law library

The sugar delivered by the defendant was classified, as shown by Exhibits T to T-7, and
quoted according to the stipulations made by the plaintiff and the defendant, stated in
the documents Exhibits P and Q (fols. 80 and 81, original
record).chanroblesvirtualawlibrary chanrobles virtual law library

The defendant questions the validity of these stipulations, alleging that he signed them
in the belief that they were only to be used with the other customers of the plaintiff. The
evidence as a whole does not support such a contention of the defendant. It appears
that the firm of W. F. Stevenson Co., Ltd., had not made any quotation of sugar in
November, 1920, such as is referred to in the contract Exhibit U. It appears, at any
event, that the plaintiff and the defendant agreed afterwards not to be governed by such
quotations of November, 1920. At any rate, even supposing that the stipulation Exhibits
P and Q were knowingly fraudulent, as between the plaintiff and the defendant, neither
of them can now repudiate such stipulations made by both of them in bad faith. In order
that fraud may be a ground for nullity of a contract it is necessary, among other things,
that it was not employed by the two contracting parties (art. 1270, Civil Code).
Furthermore, the market price at which sugar was quoted at the time was not
sufficiently proven.chanroblesvirtualawlibrary chanrobles virtual law library
The defendant, therefore, stands bound by the stipulation contained in Exhibits P and Q
and cannot go against the agreement therein set forth as to the price of sugar. Bearing
these prices in mind, and the sugar delivered by the defendant, according to the weights
and classifications stated in Exhibits T to T-7, we have that the total value of the sugar
delivered by the defendant to the plaintiff amount to P3,869.76. But the plaintiff himself
admits in paragraphs IV and VI of his last amended complaint that it is P3,913.44. We
must, therefore, abide by this express admission of the plaintiff and declare the latter
amount as the true one.chanroblesvirtualawlibrary chanrobles virtual law library

The amounts advanced by the plaintiff to the defendant on account of this sale of the
sugar of the latter amounting to P17,321.05 and the value of the sugar delivered by the
defendant not amounting but to P3,913.44, the latter is under the obligation to return to
the plaintiff the difference between these two amounts, that is to say,
P13,407.61.chanroblesvirtualawlibrary chanrobles virtual law library

There appears in the note inserted in Exhibits B and B-1 a stipulated interest of 12 � per
cent. But the plaintiff himself testified that it was an error of the one who prepared said
documents to have made the aforesaid note to appear therein. Such an interest, or any
other, does not appear in the contract Exhibit U, where the damages that might be
cause by the breach of the contract were fixed at P4 for each picul of sugar that may not
be delivered and P2,000 in case of litigation. The damages having thus been foreseen
and liquidated, which, after all, are the ground for charging interest upon the principal,
and it not sufficiently appearing that the parties had in fact stipulated such interest, as
claimed by the plaintiff, we find that the latter has no right to recover any such
interest.chanroblesvirtualawlibrary chanrobles virtual law library

He has, however, the right to recover P4 for each picul of sugar not delivered and the
P2,000 stipulated in the contract Exhibit U, inasmuch as it does not appear from the
record that there was any sufficient justification for not delivering the 1,500 piculs of
sugar promised.chanroblesvirtualawlibrary chanrobles virtual law library

As we have seen, and as stated in the plaintiff's complaint, the defendant failed to
deliver 175.93 piculs, which at the rate of P4 per picul make
P703.72.chanroblesvirtualawlibrary chanrobles virtual law library

As to the last error assigned by the defendant-appellant, the latter argues under the
theory that the contract in question is one of loan. We have already seen that the
defendant himself did not considered it so in his testimony and therefore the provisions
of section 8 of Act No. 2655 are not applicable to this
case.chanroblesvirtualawlibrary chanrobles virtual law library

For all of the foregoing reasons, the judgment appealed from is modified, and the
defendant is sentenced to pay the plaintiff the sum of P13,407.61 with legal interest
thereon from the date of the publication of this decision, plus the sum of P703.72 for his
failure to deliver 175.93 piculs of sugar and in addition thereto the sum of P2,000, which
was stipulated to be paid in case of litigation, as is there present
action.chanroblesvirtualawlibrary chanrobles virtual law library

Without special finding as to costs. So ordered.

 IN BANK

GR No. 46640 June 27, 1940

MARIA AVES with her husband SEGISMUNDO ALZONA ( alias TAN

SIAMCO), recurring, vs. HUGO ORILLENEDA, appealed.

Messrs. Azada and Veluz on behalf of the appellants.

Mr. Mariano P. Duldulao on behalf of the respondent.

IMPERIAL, J .: chanrobles virtual law library

Dismiss the appeal in the form of certiorari filed by the plaintiffs-appellants against the
decision of the Third Division of the Court of Appeals that revoked the sentence of the
Court of First Instance of Tayabas and declared the defendant-appealed and his wife
Irene Lucero owners of everything the lot, object of the litigation, together with its
majoras and buildings in the existing one, and that has the right to retain their
possession; and I order the defendant-appealed to pay the plaintiffs-appellants the sum
of P269.81 with his legal interests from the date he signs the aforementioned decision,
without costs. chanroblesvirtualawlibrary chanrobles virtual law library

The appellants brought the action to recover from the defendant the possession of a
land destined for construction, located in the town of Macalelon, Province of Tayabas, of
458 square meters of surface, bordering to the North with Unson Street, to the East not
the atrium of the Roman Catholic Church, to the South with Tirso Esclanda and Heirs of
the late Gregorio Javier and to the West with McKinley Street, declared for the purposes
of taxation in the name of Maria Aves, the appellant's wife, with the value of P320; and
for the aforementioned respondent to wash the house of cana and nipa that he built in
the northern portion of the site. The respondent alleged in his answer that his wife Irene
Lucero are the exclusive owners of the land and its improvements and that the
appellants do not have the right to the remedy they have
requested.chanroblesvirtualawlibrary chanrobles virtual law library

The Court of Appeals, after reviewing the evidence presented by the parties in the Court
of origin, made the following conclusions:

The pertinent facts necessary for the resolution of the issue involved are that from 1927
and the subsequent years until 1931 the appellant had been taking merchandise on
credit from the store of the appellee, Segismundo Alzona, alias Tan Siamco, and
borrowed from the latter on different occasions during the specified period certain
amounts in cash. In order to secure the payment of the accumulated debt the
aforementioned appellee was given a special power of attorney, Exhibit 1, executed on
June 19, 1929, to lease in favor of the municipality of Macalelon, Tayabas, for school
purpose a house standing on a lot belonging to the said appellant and his wife, Irene
Lucero, at the rate of at least P25 per month authorizing him to collect the monthly
rental to be credited on the outstanding debts of the latter.In pursuance thereof Alzona
conveyed by way of lease the said house to the above mentioned municipality at the
rate of P25 per month as rent and collected therefrom the total sum of P86.66 covering
the period from June 17 to September 30, 1929.chanroblesvirtualawlibrary chanrobles
virtual law library

On January 30, 1939 Alzona caused the appellant to execute a notarial document,
Exhibit C, by which the latter and his wife conveyed the entire lot described therein
including the same house which was transferred under lease in favor of the municipality
of Macalelon as above stated to the other appellee, Maria Aves, wife of Alzona, in
consideration of the sum of P560 which represents the accumulated debt of P440 owed
by the appellant to Alzona and the sum of P120 charged by the latter as accumulated
interest thereon subject to the right of redemption for a term of one year, and that in
case of failure to redeem the property at the expiration of that period the same shall be
transferred in absolute sale in favor of the said Maria Aves upon payment by the latter of
the additional sum of P640 to the debtor.chanroblesvirtualawlibrary chanrobles virtual
law library

Subsequently, the appellant and his wife continued taking from time to time
merchandise on credit from Alzona and again as before additional amounts in cash until
the value of the goods taken on credit and the cash thus accumulated amounted to the
aggregate sum of P320. In the meantime Alzona likewise continued collecting under the
aforementioned power of attorney previously issued to him the monthly rental of the
house under lease amounting to the total sum of P150 which covers the period from
October 1, 1929 to March 31, 1930. chanroblesvirtualawlibrary chanrobles virtual law
library

On February 13, 1931, Alzona again caused the appellant and his wife to execute the
document, Exhibit D, by which the mortgage deed or alleged conditional sale, Exhibit C,
was novated (1) by adding to the amount of P560 the sum of P440 representing the
newly accumulated debt of the said appellant and his wife in the sum of (320 plus (120
as accumulated interest thereon, making a total of P1,000 for which the same property
mortgage under Exhibit C was encumbered under the document, Exhibit D, and (2) by
extending the period of redemption to January 20, 1932, subject to the condition that if
the property would not be redeemed at the expiration of the extended period, the same
should be conveyed in absolute sale to the alleged purchaser , Maria Aves, who should
have to pay the additional sum of P200 to the
debtor.chanroblesvirtualawlibrary chanrobles virtual law library

On May 23, 1932, in view of the fact that the appellant had not been able to pay his
indebtedness, Alzona caused the appellant and his wife to execute the document, Exhibit
B - appellees, by which the said appellant and his wife waived their right of redemption
secured under Exhibit D, and in consideration of the additional sum of P350, alleged to
have been paid by Maria Aves to the aforesaid appellant and his wife the same property
was transferred in absolute sale to the said Maria
Aves. chanroblesvirtualawlibrary chanrobles virtual law library

The evidence further reveals, however, that neither the appellant nor his wife ever
received from neither one of the appellees the amounts set forth in the documents,
Exhibits C, D and B at the time of their execution and that the aforesaid appellant was
made to understand when these documents were executed that they constituted a mere
security to guarantee the payment of his accumulated debts to the appellee,
Segismundo Alzona, in the aggregate sum of
P760. chanroblesvirtualawlibrary chanrobles virtual law library

There is no doubt in our mind that the deed, Exhibit C, was a mere mortgage. That such
was the intention of the contracting parties when the same was executed is clearly
expressed by the use therein of the word 'mortgage' to secure the payment of the debt.
Even in the deed, Exhibit D, the same intention was expressed when it recited that the
property in question was encumbered in the total sum of P1,000. We believe that the
use of phrases in those documents conveying the idea of conditional or absolute sale is a
cloak to cover the excessive interest charged by the appellant, Alzona, on the debt of
the appellant.In fact Alzona practically admitted that the appellant never received any
amount of money from Maria Aves the alleged grantee or creditor mentioned in those
documents when he declared that the amounts stated in those documents were taken
from him; and notwithstanding the fact that the real contract was entered into between
him and the appellant his name was not mentioned at all in those three documents but
only that of the appellee, Maria Aves, for the reason, according to him, that he was not
yet married to her at the time. Such facts and circumstances strongly indicate that the
appellee, Alzona, obtained the documents in question through fraud and
misrepresentation from the appellant who appears to be ignorant man, not knowing the
Spanish language in which these documents were written.and notwithstanding the fact
that the real contract was entered into between him and the appellant his name was not
mentioned at all in those three documents but only that of the appellee, Maria Aves, for
the reason, according to him, that he was not yet married to her at the time. Such facts
and circumstances strongly indicate that the appellee, Alzona, obtained the documents
in question through fraud and misrepresentation from the appellant who appears to be
ignorant man, not knowing the Spanish language in which these documents were
written.and notwithstanding the fact that the real contract was entered into between him
and the appellant his name was not mentioned at all in those three documents but only
that of the appellee, Maria Aves, for the reason, according to him, that he was not yet
married to her at the time. Such facts and circumstances strongly indicate that the
appellee, Alzona, obtained the documents in question through fraud and
misrepresentation from the appellant who appears to be ignorant man, not knowing the
Spanish language in which these documents were written.Alzona, obtained the
documents in question through fraud and misrepresentation from the appellant who
appears to be ignorant man, not knowing the Spanish language in which these
documents were written.Alzona, obtained the documents in question through fraud and
misrepresentation from the appellant who appears to be ignorant man, not knowing the
Spanish language in which these documents were
written.chanroblesvirtualawlibrary chanrobles virtual law library

Furthermore, it has been fully established that the appellant and his wife have been in
actual possession of the entire lot in question since 1908 as exclusive owner without
interruption up to the present time, having declared the said property for tax purposes,
and have been paying the taxes except in the years 1930, 1931, 1932, 1934, and 1935
when the taxes were paid by the appellee, Alzona, in the name of the appellant
amounting to P27,15 as per official tax receipts appearing on record; but the taxes
corresponding to the year 1933 was paid by the appellant himself in his own name. It
has been fully established, further, that the appellant built another house on the portion
claimed by the appellees in which he and his family have been living up to the present
time since 1929,when his other house standing in the other portion of the land in
question was leased to the municipality of Macalelon for school purposes. Consequently,
the appellees' contention that they allowed the appellant to occupy the portion in
question and authorized him to build a temporary structure for his residence and family
for the period of one year and a half as they attempted to show by means of a private
document . Exhibit A, can not be sustained. Such an allegation was not only denied by
the appellant, but it was completely destroyed by the fact that the house to be
constructed in accordance with the document, Exhibit A, was already standing on the
portion in question since 1929 while the said document, Exhibit A, was executed in
1932. Besides, the testimony of the appellant with respect to the execution of the
documents, Exhibit A and B,is strongly corroborated by the declaration of the witness,
Francisco Abarques, one of the instrumental witnesses who signed the said document
Exhibit A and B. Abarques testified that these documents were prepared and signed at
the same time and on the same occasion, on May 23 , 1932, and at the same place after
the appellant was given to understand that the document B, was a mere mortgage, and
that no money was delivered at that time. Considering the fact that the witness
Abarques, was requested by the appellee, Alzona, to sign as a witness the documents,
Exhibit A and B, and that there was no showing that this witness had some motive
testifying falsely against the appellee, Alzona; and considering the further fact that he is
not related in any way to either one of the interested parties herein and that he is,
therefore, absolutely impartial,we are of the opinion that his testimony deserve full faith
and credit and that it is amply sufficient to overcome that of the notary public, Pe alosa,
who prepared those documents and asserted that he has informed the appellant of the
contents thereof, for it is admitted by the said notary public that he is thecompadre of
the appellee, Alzona, and that he used to prepare many documents for the said
Alzona. chanroblesvirtualawlibrary chanrobles virtual law library

Considering the facts and circumstances surrounding the execution of the three
documents in question, Exhibits C, D and B, in relation to the conduct of the appellee,
Alzona, prior to and after their execution we are forced to the conclusion that all these
documents constituted a mere mortgage on the property in question to secure the
payment of the accumulated debts of the appellant to the appellee, Segismundo Alzona,
in the total sum of P760 and that all the additional amounts in excess thereof as set
forth in those documents were charged by the appellee as interest. But as this interest is
quite excessive he is not entitled to recover except the actual amount of indebtedness
above stated. chanroblesvirtualawlibrary chanrobles virtual law library

With respect to the rents of the house leased to the municipality amounting to P255.83
as shown by the official vouchers presented in evidence, we think the allegation of the
appellee Alzona, to the effect that he had turned over the said amount to the appellant
sounds incredible. The appellant positively denied this allegation. No. receipt was
presented to prove the delivery of such amount to the appellant. In fact the appellant
demanded an accounting of the rents collected by the appellee, Alzona, but the latter
refused to do so and for this reason he brought the matter before the anti-usury board
which caused an investigation of the appellee in connection therewith; and this is what
prompted the said appellee to institute the present suit against the appellant. The
amount of P255.83 collected and kept by the appellee, Alzona,must therefore be
deducted from the indebtedness of the appellant in the sum of P760, so that there is a
balance of P504.17. But there should be added to this amount the reimbursement for
the realty taxes paid by appellee Alzona for the property in question amounting to
P27.15; hence, the total amount of the outstanding indebtedness to which the appellees
are entitled to recover from the appellant is P531.32.

When resolving the motion for reconsideration presented by the respondent's attorney,
the Court of Appeals, in its resolution promulgated on March 18, 1939, rectified the facts
related to the money that the appellants must return to the respondent and made the
following pronouncement:

According to the vouchers, Exhibit 2, 3, 4, 5, 6, 7, 8, 9, 19, and 11 the total amount

received and collected by the appellee as rent of one building belonging to the appellant
for school purposes is P1, 016.96. By deducting from this amount the sum of P726,
which is the aggregate amount of the original debt due from the appellant and the sum
of P27.15 for realty taxes paid by the appellee on the property in question, there is a
balance in favor of the said appellant of P269.81, which should be reimbursed by the
appellee to the latter.

In the first error, the appellants maintain that the Court of Appeals violated the law by
ignoring the content of Exhibits A and D and by giving greater credence to the statement
presented by the instrumental witness Francisco Abarques. The indication of error
implies rather a question of fact and an appreciation of evidence that this Court cannot
alter in this certiorari proceeding . As a general rule, documents are interpreted by the
precise terms in which they are drawn up, but the courts, in the exercise of their sound
discretion, are called upon to admit direct and contemporary circumstantial evidence,
necessary for their correct interpretation in order to prevail the true intention of the
parties (arts. 1281 and 1282, Civil Code).chanroblesvirtualawlibrary chanrobles virtual
law library

Flags of error II, III, IV and V refer to Exhibit I that, according to the appellants, the
Court of Appeals failed to consider when issuing the appealed judgment. The appellants
allege that if it had been given the probative value that the Court of Appeals has, it
would have declared Exhibit B necessarily valid and would have established the right
conclusion that the respondent waived his right of withdrawal and recognized the
domain of the land in favor. from them. And they conclude that the Court of Appeals
would have also deducted from the sum of P269.81 the amount of P150 referred to in
Exhibit I. chanroblesvirtualawlibrary chanrobles virtual law library

Exhibit I is a document by which the appellant Segismundo Alzona sold with a

retroactive agreement to the respondent, in the amount of P150, a plot of land that a
certain Luis Manago had mortgaged to him, and that the named Huipotec Manago
instead appealed. Considering the agreements contained in the document, it is evident
that it is fictitious and lacks any probative value. If the yerreno had recurring Alzona as
a mere guarantee or mortgage, it is clear that he would not transfer his domain, for sale
with a retro agreement, to the appealed party. Nor could Luis Manago put a mortgage
on the defendant because for this he had to redeem it first, paying the P150 to Alzona;
but even if this had been done, it is obvious that Alzona could not transfer the land for
sale with a retrograde agreement in favor of the defendant.Taking these considerations
into account, it must be concluded that the Court of Appeals did not err in failing to
appreciate Exhibit I and in the non-amount of P150 of the other sum of money that the
appellants have to pay to the respondent.chanroblesvirtualawlibrary chanrobles virtual
law library

The last signaling of error is equally without merit because, accepting the conclusions of
fact established by the Court of Appeals, it turns out that the law has been applied
correctly and the decision appealed is in accordance with the law. The appeal is denied,
with the costs to the appellants. It is so ordered.
 EN BANC

G.R. No. L-8170 August 27, 1913

L. O. HIBBERD, Plaintiff-Appellant, vs. ESTATE OF JAMES P. MCELROY, Defendant-

Appellee.

Gibbs, McDonough and Blanco for appellant.

Cyrus J. Francis for appellee.

TRENT, J. :chanrobles virtual law library

An appeal from a judgment of the Court of First Instance disallowing the claim of the
plaintiff for P1,000 against the estate of the deceased James P.
McElroy.chanroblesvirtualawlibrary chanrobles virtual law library

The case was submitted on agreed statement of facts and the contract entered into on
November 25, 1910, by and between the plaintiff and the deceased. The pertinent parts
of these document are as follows:

It is further stipulated that the assessment work mentioned in said claims has been
performed and salary of the watchman therein mentioned has been paid; that the
mining property mentioned in the contract was operated for the first year under the
terms of the contract, and as a result of such operation the claimant, Mr. Hibberd,
suffered a loss, and that it is impossible to operate the property at a profit; that after
the expiration of the first year's operation and after ceasing the further development of
the property the claimant gave notice to the administrator requesting that they
performed their share of the assessment work; but that the administrator refused to
perform his share of the assessment work and that no part of the claim for his share of
such assessment work has been paid. (Stipulation of facts.)chanrobles virtual law library

It is further agreed by and between the parties hereto that the said L. O. Hibberd shall
have the exclusive right to the possession of the said mining claims during the period of
one year to commence from date of this instrument and shall have the sole and
exclusive right to exploit the same and take all the profits of such exploitation unto
himself as his own and exclusive individual property, and for that purpose shall have the
right to make use of all the improvements now in and upon any of the above mentioned
mining claims. (Contract.)chanrobles virtual law library

It is further agreed by and between the parties hereto that if the said J.P. McElroy at the
expiration of one year from the date of this instrument should not be in sufficiently good
health to be himself upon said claims and assume co-management thereof with the said
L. O. Hibberd, then the said L. O. Hibberd shall continue in the exclusive possession,
occupation, management and exploitation of the said mining claims and their
improvements and after paying all expenses of the exploitation shall pay one-half of the
net proceeds monthly to the said J.P. McElroy. (Contract.)chanrobles virtual law library
The said L. O. Hibberd does hereby bind and obligate himself to do and perform all the
assessment work on the said mining claims required under the laws of the Philippine
Islands. (Contract.)

The only question raised on the appeal is the interpretation of the contract. Counsel for
the administrator contends, and the Court of First Instance has decided, in effect, that
the plaintiff is bound to do all of the annual assessment work upon the mining claims
mentioned in the contract necessary to secure patents therefor, while counsel for the
appellant contends that under the terms of the contract the plaintiff was obligated to
perform on his own account only the annual assessment work required for the period of
one year.chanroblesvirtualawlibrary chanrobles virtual law library

Under the terms of the third paragraph of the contract, McElroy was to assume the
comanagement of the property at the end of the first year if the condition of his health
permitted, and if not, the plaintiff was to continue in the exclusive possession and
management and, after deducting all expenses of the exploitation, to pay over monthly
to the said McElroy one-half of the net profits.chanroblesvirtualawlibrary chanrobles
virtual law library

It is perfectly apparent from the terms of paragraph 3 of the contract that if McElroy had
lived and had been in good health, he would have had to go upon the property himself
at the end of the first year, and assume the comanagement of the same, thus sharing
with the plaintiff the work of the administration and exploitation thereof, which
necessarily included the annual assessment work, and it is unreasonable and inequitable
to construe the sixth clause of the contract so as to require Hibberd to contribute twice
as much labor and money while assuming the burden of the administration on account
of the death of McElroy as he would have had to contribute had McElroy been able to
perform his share of the labor and management.chanroblesvirtualawlibrary chanrobles
virtual law library

The only reasonable interpretation that can be placed upon the contract is that it was
intended to obligate plaintiff to perform the annual assessment work for the first year
unconditionally, and that for any exclusive possession and management of the property
due to the illness or incapacity of his partner, he was to do such annual assessment
work as manager without assistance from the coowner only in the event of there being
sufficient proceeds from the operation of the property to defray the expenses thereof. If
counsel for the appellee and the trial court are correct in their interpretation of the
contract to the effect that it obligates the plaintiff to do all of the assessment work on
his own account and for an indefinite period of time, then by the same logic the plaintiff
would be obligated to continue the exploitation of the mining claims under the terms of
the third paragraph of the contract even though the property should not produce a dollar
in return for the heavy expenditures necessary to continue its
operation.chanroblesvirtualawlibrary chanrobles virtual law library

Article 1283, 1284, and 1285 of the Civil Code provide:

However general the term of the contract maybe, there should not be understood as
included therein things and cases different from those with regard to which the persons
interested intended to contract.chanroblesvirtualawlibrary chanrobles virtual law library
If any stipulation of a contract should admit of different meanings, it should be
understood in the sense most suitable to give it
effect.chanroblesvirtualawlibrary chanrobles virtual law library

The stipulations of a contract should be interpreted in relation to one another, giving to

those that are doubtful the meaning which may appear from the consideration fall of
them together.

Under section 36 of the Act of Congress of July 1, 1902, in order to retain possession of
a mining claim the locator or possessor must do assessment work to the value of P200
per annum each year. Under section 37 of the same Act, labor or improvements of the
value of P1,000 must be done upon each claim before patent can be obtained therefor.
If the judgment of the trial court is correct, then the plaintiff would be obligated to make
an outlay in labor or improvements of P10,000 upon the ten claims covered by the
contract before he would be relieved from the obligations
thereof.chanroblesvirtualawlibrary chanrobles virtual law library

It is a principle of law well established that where a specific provision in a contract is

followed by a general provision covering the same subject matter, the special provision
will be held to prevail over the general provision when the two cannot stand together,
but if reasonable effect can be given to both, each is to be
retained.chanroblesvirtualawlibrary chanrobles virtual law library

In the case of Calvo vs. Olives (6 Phil Rep., 88), the question was one as to the
construction of a contract the third paragraph of which was in question. Under the terms
of the will of one De la Fuente, all of his property was given to the defendants Angeles,
Paz, and Gabriel Olives, subject to a life interest in the usufruct thereof in favor of his
widow, Concepcion Calvo, the plaintiff in the case. In the settlement of the estate
differences arose between the plaintiff and defendants, and with a view to the
adjustment of these differences the contract in question was entered into, the third
paragraph of which was as follows:

The remainder shall be turned over to Concepcion Calvo to be used by her as

usufructuary heiress after she has given a mortgage bond.

The court, in interpreting this clause, says: "Article 1283 of the Civil Code provides: . . .
and we are of the opinion that although the word 'remainder' as used in the third
paragraph of the said agreement might, in the broadest acceptation of the term, refer to
the total balance resulting from the sale of the Escolta property, nevertheless, under the
provisions of the foregoing paragraph it should be limited to the subject matter of the
agreement and thus limited it must be taken to refer to the remainder of the share of
the inheritance in which Concepcion Calvo had a usufructuary life interest.

That this is the correct interpretation of the language used in confirmed by the fact that
the paragraph itself expressly provides that the "remainder" to be turned over to
Concepcion Calvo was to be used by her "as usufructuary heiress," and it is not
contended that she had an interests as usufructuary heiress in more than an undivided
one-half interest in this particular property.
In the case at bar, although the words a used in the sixth paragraph of the contract
require Hibberd to do all the assessment work required by the laws of the Philippine
Islands, it will be seen from the first alternative in paragraph 3 that after the first year,
McElroy was to assume comanagement, possession, and exploitation of the claims. The
words "possession, management, and exploitation" are certainly broad enough in
meaning to include all and every requisite and thing necessary in connection with the
operation and enjoyment of the possession of said claims, and the assessment work
required by law to be done on said claims being necessary for the retention by both
parties of the possession of the claims, the use of such words by the parties in the
contract in fixing their obligations after the first year must naturally include the
obligation of performing such work thereafter as a joint one, the claims being held by
them in common. Under he second alternative, Hibberd was authorized to deduct from
the income of the property the expenses of such management and exploitation, the
profits remaining to be divided equally between the parties. The assessment work being
a necessary requisite to such possession, management, and exploitation as above
pointed out, it follows that an expenditure for that purpose is a proper charge to the
expenses of such management. Therefore, under either alternative open to McElroy, it is
plain that the intention of the parties was that Hibberd was to do no his own account the
assessment work for the year and that thereafter such work was to be a joint obligation
of the parties. This, then, would have the effect of limiting the provision of the sixth
clause so as to make it applicable only to the first year after the date of the
contract.chanroblesvirtualawlibrary chanrobles virtual law library

It appears from the stipulation between the parties that the operation of the claims for
the first year by Hibberd, exclusively, resulted in a loss and that said claims cannot be
operated at a point. While it is true the contract does not provide for the liability of the
coowners in case of loss in the operation of the property, still, in accordance with article
1689 of the Civil Code, the losses must be shared in the same proportion as the profits.
Hibberd has paid the expenses of the assessment work of the second year and there
having been no income from the property to reimburse him, he has a right to look to the
estate of McElroy for such reimbursement.chanroblesvirtualawlibrary chanrobles virtual
law library

Article 395 of the Civil Code provides: "Every coowner shall have the right to oblige the
participants to contribute to the cost of keeping the thing or right held in common. Only
the party renouncing his share in the ownership can exempt himself from this
obligation."chanrobles virtual law library

The property mentioned in the contract is listed and claimed as one of the assets of the
estate of McElroy and there can, therefore, be no contention that his share in the
ownership of the same has been renounced. Before performing the assessment work
upon the property after the first year, Hibberd demanded of the administrator of McElroy
that he perform his share of such work and the administrator refused. Hibberd was then
compelled to do the work in order to retain the property held in common by him and
said estate.chanroblesvirtualawlibrary chanrobles virtual law library

Section 36 of the Act of Congress of July 1, 1902, providing for the forfeiture of the
interest of the coowner who fails to contribute his share of the assessment work is not in
conflict with article 395 of the Civil Code, above quoted, and would perhaps not be
construed as an exclusive remedy in cases of ordinary coownership resulting from joint
location of mining claims, but it is unnecessary to determine that point in this
controversy because the contract imposes the duty upon Hibberd to manage and
administer the property in the event of McElroy's being unable to assist him and such
administration necessarily includes the assessment work. This was clearly intended to be
paid out of the proceeds of the operation of the property whether managed by the
partners jointly or by Hibberd alone on account of McElroy's inability to participate in the
management by reason of illness or death. In default of any proceeds of operation the
language of the contract and the law imply a joint obligation to do the annual
assessment work as coowners and managers or in the event of the disability or death of
McElroy an obligation on his part or that of his administrator to contribute one-half of
the expense which the plaintiff was bound to incur to protect his possession held for the
joint benefit of himself and his cotenant in accordance with the terms of article
396, supra.chanroblesvirtualawlibrary chanrobles virtual law library

The defendant does not contend that section 36 of the Act of Congress of July 1, 1902,
is applicable to this case because such a defense would amount in effect to a
renunciation of any interest in the claims. The administrator should have renounced all
interest in the property at the time demand was made upon him to contribute his share
of the assessment work in order to have escaped the absolute obligation imposed upon
him by the terms of the contract and the law to reimburse the plaintiff for the estate's
share of the expense incurred for the joint benefit of the
coowner.chanroblesvirtualawlibrary chanrobles virtual law library

For the foregoing reasons, the judgment appealed from, in so far as it disallows the
claim of the plaintiff for P1,000 for assessment work on the claims in question, done in
behalf of the defendant, is reversed; and it is hereby ordered that this claim against the
estate be allowed in full. Otherwise, the judgment is
affirmed.chanroblesvirtualawlibrary chanrobles virtual law library
 EN BANC

G.R. No. L-5396 March 12, 1910

CANUTO REYES, petitioner-appellee, vs. JACINTO LIMJAP, opponent-appellant.

Ramon Fernandez, for appellant.

Perfecto Gabriel, for appellee.

TORRES, J.:

By a writing presented on the 3d of January, 1906, the representative of Ireneo Felix

requested the registration of a parcel of land belonging to the latter, situated in the town
of Antipolo, Rizal Province, bounded on the north by Calle Real; on the east by lots
owned by Braulia Cuepangco and Engracia Loalhati; on the south by Calle Martinez; and
on the west by lots belonging to Gregorio Lim and Braulia Cuepangco; it has an area of
815.98 square meters and its description and boundaries are stated in the plan attached
to the petition; the said property, as alleged, was acquired by purchase from the owner
of the same, Vicente Francisco Ayco, was assessed at the last assessment at $110
United States currency, and is free from all incumbrances, no one having any right or
interest therein; it is now occupied by the applicant who, after the hearing of this case
and before judgment was rendered in the premises, conveyed the said land by means of
an absolute sale to Canuto Reyes for the sum of P600, according to the notarial
instrument appearing at folio 78.chanroblesvirtualawlibrary chanrobles virtual law library

On the 4th of April, 1907, the representative of Jacinto Limjap made written opposition
to the foregoing application, requesting that the same be dismissed and that the
registration of the said property in favor of Irineo Felix with cost be denied; he alleged
that the opponent is the owner and present possessor of the land and denied that the
applicant or his predecessors or principals had ever been in legal or material possession
of the same, and also denied all the other allegations not expressly or implicitly denied
in the previous paragraphs.chanroblesvirtualawlibrary chanrobles virtual law library

The case came up for trial and evidence was adduced by both parties to the suit, the
documents exhibited by them being made of record. On the 3d of March, 1909, the trial
court overruled the opposition of Limjap and decreed the adjudication and registration of
the aforesaid property in favor of Canuto Reyes, after declaring a General default. The
opponent excepted to the foregoing decision and moved for a new trial, on the ground
that the judgment was contrary to law and not sustained by the evidence; the motion
was overruled; the petitioner excepted and gave notice of his intention to appeal by the
corresponding bill of exceptions which was presented, approved, and submitted to this
court.chanroblesvirtualawlibrary chanrobles virtual law library

From the record of the case forwarded by the Court of Land Registration upon this
appeal, it is fully proven by means of documents and by the testimony of competent
witnesses: (1) That Crisostomo Marero possessed the land in question under title of
ownership and sold it under pacto de retro to Vicente Francisco Ayco on the 25th of
May, 1874, for the sum of 60 pesos, on condition that the vendor and the purchaser
would both receive as partners the rent that the house erected on said land should
produce, according to document marked with the letter "B"; (2) that in view of the fact
that the vendor did not redeem the property within the period fixed by article 1508 of
the Civil Code, as no term whatever was stipulated in the contract sale with the right of
repurchase, Vicente Francisco sold it on the 7th of December, 1906, to Irineo Felix under
public instrument, folio 7, and the latter, after having applied for the registration of his
title in the registry of property, also sold the said lot to Canuto Reyes, in whose favor
the registration was decreed.chanroblesvirtualawlibrary chanrobles virtual law library

It appears to have been admitted by the opponent, who did not impugn in due course
the document marked as Exhibit B of the applicant, that Crisostomo Marero was the
original owner and possessor of said land, and, as it does not appear that Marero had
transferred his control over the property to Braulia Cuepangco, no possible reason exists
under the law for considering the latter to be the lawful owner of the land; therefore,
she could neither have disposed of it nor sold it to the opponent
Limjap.chanroblesvirtualawlibrary chanrobles virtual law library

As a matter of fact Cuepangco, as stated by her son-in-law and attorney-in-fact or

representative, Dalmacio Guidote, in his affidavit, folio 99 of the record, never possessed
nor pretended to own the said parcel of land situated between two lots belonging to his
mother-in-law, and when he sold them in her behalf he did not include the intermediate
lot, which was the property of one Marero, who subsequently sold it to the Chinaman
Vicente Francisco, and the latter to Irineo Felix, and this fact was stated to the notary
Manikis; and even though at first he refused to subscribed the instrument of sale drawn
up by the said notary, because it referred to lands of larger area, he afterwards did so
because after consulting with Attorney Sotelo, the notary assured him that as the writing
contained no clause providing for the protection of purchaser from interference, nothing
serious could happen.chanroblesvirtualawlibrary chanrobles virtual law library

Article 430 of the Civil Code provides that "Natural possession is the holding of a thing or
the enjoyment of a right by a person. Civil possession is the same holding or enjoyment,
together with the intention of acquiring ownership of the thing or right." chanrobles
virtual law library

If Braulia Cuepangco was never inn material nor civil possession of the land in question,
and did not even have the intention to possess it, and if her representative and son-in-
law, Dalmacio Guidote, being well aware that the said land situated between the two
parcels owned by his mother-in-law belonged to a third person, Irineo Felix, the last
purchaser, and for this reason he did not include the same in the sale of the two parcels
to Limjap, the latter could never have acquired any right to the land of the applicant,
because none was transferred to him by the vendor Cuepangco, under the instrument
marked with the letter A, folio 66, who was not the owner of the intermediate land or lot
owned by Vicente Francisco, and finally sold to Canuto
Reyes.chanroblesvirtualawlibrary chanrobles virtual law library

With reference to the rights in the said land acquired by Vicente Francisco by virtue of
the contract of sale contained in document marked "B," executed in his favor by the
owner Crisostomo Marero, more than thirty years ago, in the presence of
the gobernadorcillo accidental of Antipolo, notwithstanding the fact that it is not a
transfer by a public instrument recorded in the registry of property, the transfer arose
from a valid contract, and is legal and efficient; for this reason Vicente Francisco was the
owner and possessor with just title and in good faith, and the right that he transmitted
to the applicant must be sustained and protected by the courts while no better title
under the law has been presented: nor has it been shown that the property was
redeemed in due course. Therefore, the applicant has an unquestionable right to have
his title recorded in the registry of property.chanroblesvirtualawlibrary chanrobles virtual
law library

With respect to the identity of the land, it has been sufficiently shown by the documents
offered in evidence, among which is the plan that was presented and which the witness
Guidote had before him when testifying in the presence of the opponent, and also by the
testimony of the witnesses examined at the trial. The opponent has not prove that the
land, the registration of which has been applied for, is not the land described in the
application, in the public instrument, and by the plan above referred to, or that it was
larger than it should really be; for which reason, in the absence of proof to the contrary,
it must be acknowledged and admitted that said facts so proven are
true.chanroblesvirtualawlibrary chanrobles virtual law library

The mere fact that in the instrument of sale of the lands of Cuepangco to Limjap a
greater extension was stated than the actual area, including a parcel which belonged to
another and not the property of the vendors, and not have conferred any right whatever
to the purchase over the land improperly included, eventhough he consented to have
the clause of eviction and warranty suppresed in the document, because the inclusion
was made without the knowledge or consent of the real owner of the land, and
Cuepangco, who did not own the property, could not disposed of it or sell it; and the
pretension of the opponent is all the more unsustainable inasmuch as the representative
of the vendor, who acted in her behalf in negotiating and closing the sale, franckly and
spontaneously acknowledged that an error had been committed by including in the
document the land of the applicant which has not been, and could not be included in the
sale, that he had endeavored to correct the error, and that if he subsequently subscribed
the instrument it was through the advice of the lawyer, who assured him that nothing
could happen if said clause of eviction and warranty were
supressed.chanroblesvirtualawlibrary chanrobles virtual law library

Article 1281, paragraph 2 of the Civil Code provides that "If the words should appear
contrary to the evident intention of the contracting parties, the intention shall
prevail." chanrobles virtual law library

Article 1283 of said code prescribes that "However general the terms of a contract may
be, there should not be understood as included therein things and cases different from
those with regard to which the persons interested intended to contract." chanrobles
virtual law library

Hence, considering that the land of the applicant was not the subject of the contract,
and that it could not so be for the reason that it did not belong to the vendor, it can no
wise be understood as included in the instrument of sale which appears at folio 66, no
matter what may be the terms of the document.chanroblesvirtualawlibrary chanrobles
virtual law library
For the foregoing reasons, by which are refuted the errors assigned to the judgment
appealed from, wherein the deposition of witness Vicente Francisco is entirely
disregarded, it is our opinion that the said judgment should be and is hereby affirms,
with the costs against the appellant. So ordered.
 EN BANC

G.R. No. L-48403             October 28, 1942

AGUSTIN DE LUNA, ET AL., petitioners-appellants,

vs.
JOSE LINATOC, respondent-appellee.

Clara M. Recto for petitioners.

Jose Mayo Librea for respondent.

BOCOBO, J.:

1. APPEAL AND ERROR; INQUIRY BY SUPREME COURT INTO CONCLUSION OF FACT

MADE BY COURT OF APPEALS. — The Court of Appeals found that no deceit had been
committed by appellee upon appellants. This conclusion of fact is drawn from certain facts
which are either undisputed of have been clearly established by the evidence. When may the
Supreme Court review or question such deduction of fact based on uncotroverted or plain
evidence? Only when reasonable men readily agree that the inference is manifestly mistaken,
absurd or impossible. If, however, fairminded men may differ on whether or not the main
conclusion of fact is rightly drawn from the undisputed evidence, the Supreme Court should
not, as a rule, inquire into the discretion exercised by the Court of Appeals. The instant case is
of the latter category, because the findings of the Court of Appeals that there has been no
deceit may or may not be persuasive, according to one's own reasoning after reading the
decision and resolution of that court. It cannot be said that fair-minded men will not differ in this
case on the existence of fraud. Held: That the Supreme Court cannot examine the question of
whether or not the Court of Appeals was right when that tribunal concluded from the
uncontroverted evidence that there had been deceit.

2. CONFIRMATION, RATIFICATION AND RECOGNITION DISTINGUISHED; AUTHORITY

OF WIFE TO SELL PROPERTY OF THE CONJUGAL PARTNERSHIP. — A careful analysis
of Exhibit I reveals that the same is neither a confirmation nor a ratification of the sale made by
the wife, but is what Spanish jurists call a "reconocimiento" or recognition. Confirmation tends
to cure a vice of nullity, and ratification is for the purpose of giving authority to a person who
previously acted in the name of another without authority. Recognition, on the other hand, is
merely to cure a defect of proof. In recognition, there is no vice to be remedied, such as fraud,
violence or mistake, as the case is distinguished from confirmation. In recognition, the person
acting on behalf of another is duly authorized to do so, so the situation is different from
ratification. The instant case is one of recognition because the husband was not trying to
cleanse the sales of all taint, such as fraud, violence or mistake, nor was it his purpose to
confer authority to his wife, because he stated in Exhibit I: "when my wife sold said lands to J.
L. she did so with my knowledge and consent. Thus the requirement in the statute of frauds
that in a sale of real property the authority of the agent should be in writing, has been complied
with. Therefore, she was only acting as his agent.

3. ID.; ID.; ILLEGALITY OF PARTITION BETWEEN SPOUSES MADE DURING MARRIAGE.

— However, as such agent, the wife could not sell her portions of those lands in the name of
her husband, because the partition was illegal and void, as it was made during the marriage
and there was no judicial order authorizing separation of property between the husband and
the wife (art. 1432, Civil Code). Consequently, the character of these portions of lands as
conjugal partnership assests. And the wife may bind the conjugal partnership with the consent
of the husband, according to article 1614 of the Civil Code.

4. ID.; ID.; MISTAKE OF LAW DOES NOT RENDER CONTRACT VOIDABLE. — Mistake of
law does not make a contract voidable, because ignorance of the law does not excuse anyone
from its compliance (art. 2, Civil Code; 8 Manresa, 646, 2d ed.). That the petitioners did not
know the prohibition against partition of the conjugal partnership property during marriage (art.
1432, Civil Code) is no valid reason why they should ask for the annulment of the sales made
Exhibits C and D and recognized in Exhibit I.

5. ID.; ID.; NO MAN CAN TAKE ADVANTAGE OF HIS WRONG. — Moreover, there is the
time-honored legal maxim that no man can take advantage of his own wrong. To repudiate the
sales in question, petitioners are setting up their own wrongful act of partitioning their conjugal
property, which violated article 1432 of the Civil Code. The prohibition in said article affects
public policy, as it is designed to protect creditors of the conjugal partnership and other third
persons. Petitioners shall not, therefore, be allowed thus to rest their cause of action to recover
the lands sold, upon the illegality of the partition which they attempted to make. Otherwise,
they would profit by their own unlawful act.

6. ID.; ID.; ARTICLE 1248 OF THE CIVIL CODE. — Finally, the contracts of the sale in
Exhibits C and D and the deed of recognition Exhibit I are susceptible of two interpretations,
one of which leads to their invalidity and legality, and the other to their validity and legality. The
former construction is that these contracts refer to the separate property of the wife as a result
of the partition, and the latter interpretation is that these deeds have as their subject matter the
conjugal partnership property. This latter interpretation is not only proper as already indicated
but is also warranted by the rules of interpretation of contracts. This construction is, therefore,
adopted, which recognizes the binding character of these three deeds. The Civil Code in article
1284 provides: "If some clause of contracts admits of various meanings, is should be
understood as that which is most adequate to make it effective."

PETITION for review on certiorari.lawphil.net

 FIRST DIVISION

[G.R. No. 439. November 11, 1901. ]

GERMANN & CO., Plaintiffs-Appellees, v. DONALDSON, SIM & CO., Defendants-

Appellants.

Fernando de la Cantera, for Appellants.

Francisco Ortigas, for Appellees.

SYLLABUS

1. CONTRACT; CONFLICT OF LAWS. — The validity of a power of attorney executed in

Germany between German subjects should considered according to the laws of that
country.

2. AGENCY; POWER OF ATTORNEY. — The right to commence action for collection of

debts owing to principal is not an incident of strict ownership, which must be conferred
in express terms.

3. POWER OF ATTORNEY; RIGHT TO SUE. — The power to "legally compel" the payment
of debts owing to the principal is an express grant of the right to bring suit for the
collection of such debts.

DECISION

LADD, J.  :

This is an incident of want of personality of the plaintiff’s attorney. The action is to

recover a sum claimed to be due for freight under a charter party. It was brought by
virtue of a general power for suits, executed in Manila October 27, 1900, by Fernando
Kammerzell, and purporting to be a substitution in favor of several attorneys of powers
conferred upon Kammerzell in an instrument executed in Berlin, Germany, February 5,
1900, by Max Leonard Tornow, the sole owner of the business carried on in Berlin and
Manila under the name of Germann & Co. The first-named instrument was authenticated
by a notary with the formalities required by the domestic laws. The other was not so
authenticated. Both Tornow and Kammerzell are citizens of Germany. Tornow is a
resident of Berlin and Kammerzell of Manila.

The defendants claim that the original power is invalid under article 1280, No. 5, of the
Civil Code, which provides that powers for suits must be contained in a public
instrument. No claim is made that the document was not executed with the formalities
required by the German law in the case of such an instrument. We see no reason why
the general principle that the formal validity of contracts is to be tested by the laws of
the country where they are executed should not apply. (Civil Code, art. 11.)

The defendants also claim that the original power can not be construed as conferring
upon Kammerzell authority to institute or defend suits, from which contention, if correct,
it would of course follow that the delegated power is invalid. In support of this
contention reliance is placed upon article 1713 of the Civil Code, by which it is provided
that "an agency stated in general terms only includes acts of administration," and that
"in order to compromise, alienate, mortgage, or to execute any other act of strict
ownership an express commission is required."cralaw virtua1aw library

It has been argued by counsel for the plaintiffs that these provisions of the domestic law
are not applicable to the case of an agency conferred, as was that in question, by one
foreigner upon another in an instrument executed in the country of which both were
citizens. We shall not pass upon this question, since we are clearly of opinion that the
instrument contains an explicit grant of a power broad enough to authorize the bringing
of the present action, even assuming the applicability of the domestic law as claimed by
the defendants.

By this instrument Tornow constitutes Kammerzell his "true and lawful attorney with full
power to enter the firm name of Germann & Co. in the Commercial Registry of the city
of Manila as a branch of the house of Germann & Co. in Berlin, it being the purpose of
this power to invest said attorney with full legal powers and authorization to direct and
administer in the city of Manila for us and in our name a branch of our general
commercial business of importation and exportation, for which purpose he may make
contracts of lease and employ suitable assistants, as well as sign every kind of
documents, accounts, and obligations connected with the business which may be
necessary, take charge in general of the receipt and delivery of merchandise connected
with the business, sign all receipts for sums of money and collect them and exact their
payment by legal means, and in general execute all the acts and things necessary for
the perfect carrying on of the business committed to his charge in the same manner as
we could do ourselves if we were present in the same place."cralaw virtua1aw library

We should not be inclined to regard the institution of a suit like the present, which
appears to be brought to collect a claim accruing in the ordinary course of the plaintiff’s
business, as properly belonging to the class of acts described in article 1713 of the Civil
Code as acts "of strict ownership." It seems rather to be something which is necessarily
a part of the mere administration of such a business as that described in the instrument
in question and only incidentally, if at all, involving a power to dispose of the title to
property.

But whether regarded as an act of strict ownership or not, it appears to be expressly and
specially authorized by the clause conferring the power to "exact the payment" of sums
of money "by legal means." This must mean the power to exact the payment of debts
due the concern by means of the institution of suits for their recovery. If there could be
any doubt as to the meaning of this language taken by itself, it would be removed by a
consideration of the general scope and purpose of the instrument in which it occurs.
(See Civil Code, art. 1286.) The main object of the instrument is clearly to make
Kammerzell the manager of the Manila branch of the plaintiff’s business, with the same
general authority with reference to its conduct which his principal would himself possess
if he were personally directing it. It can not be reasonably supposed, in the absence of
very clear language to that effect, that it was the intention of the principal to withhold
from his agent a power so essential to the efficient management of the business
entrusted to his control as that to sue for the collection of debts.
 FIRST DIVISION

[CA No. 9320. April 13, 1946.]

TIMOTEO ARROYO, claimant-appellant, against ANDREA AZUR, administrator of

the intestacy of Eleuterio Dura, LEONCIA DURA AND OTHERS, opponents-
appealed.

D. Cosme G. Gonowon representing the complainant and appellant.

D. Luis N. de Leon in representation of the opponents and appealed.

Mr. Jose M. Penas on behalf of the administrator and appealed.

SYLLABUS

1. TESTS; LAW ON FRAUD; LEASE OF SERVICES FOR MORE THAN ONE

YEAR; CONTRACT CONSUMED; CAR CASE. - The lower court seems to have the idea that
the contract in question falls under the law on fraud only because the services alleged by
the plaintiff lasted more than a year. This is a mistake. The contract was precisely based
on a monthly payment and for immediate domestic and land tasks. Said necessities and
labors were of such a nature that they could be evacuated immediately within a
year. The mere fact that the Services have been repeated and prolonged for several
years and that the amount thereof has not been paid, it has not been able to have the
effect of converting the contract into one of those included under the law on fraud for
the purposes of enforceability of the obligations arising from this contract. More still:

2. FORENSIC PRACTICE; "DEMURRER" TO SUFFICIENT EVIDENCE; THE DEFENDANT'S

DESIRE TO RESERVE THE PRESENTATION OF THEIR EVIDENCE. - When the defendant
files what is called demurrer to the sufficiency of the plaintiff's evidence by filing a
motion for dismissal on the grounds that such evidence is insufficient or ineffective to
substantiate. The lawsuit does not have the right to reserve the presentation of its
evidence but must abide by the results of said demurrer for both the favorable and the
adverse. If the motion is successful and the decision is upheld on appeal, the matter
ends definitively; But it is also mine in the same way if the decision is reversed and the
Appeal Court finds that there is evidence and sufficient grounds to issue a judgment on
the merits in favor of the plaintiff.

3. CONTRACTS AND OBLIGATIONS; LEASING OF WORKS AND SERVICES; TRUE PRICE. -

Article 1544 of the Civil Code that says: "in the lease, or of works or services, one of the
parties is obliged to carry out a work or to provide the other a service for a certain
price," has been interpreted in the sense of that there is a certain price not only when its
certainty is fixedly determined but also when it can be known with reference to
something else certain, or that its designation is left to the discretion of a specific
person, in accordance with article 1447 of the Civil Code. There is also a certain price
when it can be indicated and determined under the uses and customs of the place.

4. ID .; UNNOMINATED CONTRACT OF FACIO UT DES "OR OF THE LEASE OF SERVICES

TACITALLY CONTRACTED; FAIR VALUE OF THE SERVICES. - From the contracts that are
 presumed to be entered into by tacit consent of the parties, obligations arise that may
give rise to an action to demand compliance before the courts; services accepted and
performed by one individual in favor of another, and not stating that they were free, the
latter is obliged to remunerate them by virtue of the implied de facio ut des contract or
the lease of services tacitly contracted , in which If the courts will set the fair value of
the services.

5. TESTS; WIFE'S TESTIMONY AGAINST HER HUSBAND, AFTER HIS DEATH. - The

objection against the widow's testimony is based on rule 123, article 26, subsection (d),
Regulations of the Courts, which reads as follows: "the husband cannot be examined in
favor or against his wife without her consent; the wife cannot be examined for or against
her husband without his consent. "Obviously, the rule is not applicable in the present
case, because once the husband has died, the marital relationship no longer exists," the
widow is not the wife and, therefore, she can testify like any other witness either in
favor or against the intestate of her husband. "(Williams v. Moore, Mo. App.; 203 SW,
824, 825.)

6. ID .; TESTIMONY OF ONE PARTY ON A QUESTION OF FACT THAT OCCURRED BEFORE

THE DEATH OF THE OTHER; WAIVER OF THE REGULATORY PROHITION. - It is argued
that under rule 123, article 26, subsection (c), the plaintiff could not be allowed to
testify about the verbal contract for the lease of services - a matter of fact that occurred
before ED's death "'If the death has sealed the lips of one of the parties, the law follows
the procedure of sealing them also to the other '"(Maxilom against Tabotabo, 9 Jur. Fil.,
399, 403). The objection would be valid and good if in the present case there is no
circumstance that the same widow, by herself and as a defendant in her concept of
administrator of the intestacy, expressly renounces the privilege, declaring in favor of
the plaintiff.

7. ACTIONS; APPEAL AGAINST THE RESOLUTION OF THE APPRAISAL

COMMISSION; DEADLINE FOR THE APPLICANT'S PRESENTATION TO THE COURT. -
According to the opponents, the claimant was notified of his appeal against the
resolution of the appraisal and claims commission on June 3, 1939, and the claim was
not reproduced in the form of a lawsuit before the Court of First Instance but the
September, 1939, or 93 days later. It is argued that the Court lost jurisdiction over the
matter for this. Nor is this claim sustainable because the law authorizes the Court to set
a period within which the claimant must present his claim and this is what happened in
the present case: the claim was filed within the period set by the Court.

DECISION

BRIONES, M .:

Eleuterio Dura died on December 31, 1932 leaving a widow, Andrea Azur, and some
collateral relatives as heirs. On the occasion of his death, proceedings were initiated on
his intestacy before the Court of First Instance of Camarines Sur, having been appointed
the widow administrator of the property. The corresponding appraisal and claims
commission was formed before which Timoteo Arroyo presented a claim for services
rendered as a domestic servant to the aforementioned spouses for a period of 12 years,
counted from 1921 until the aforementioned Eleuterio Dura died. According to Arroyo,
their services were contracted verbally at the rate of P10 per month without a fixed term
for payment, being the intelligence of the parties that such services could be paid later,
now in money, now in kind, in other words, a piece of arable land. Timothy ' s services
ranged from purely home-based to farming and gathering in the coconut and abaca
plantations and palayer lands of his masters. Timothy did not receive any payment while
Eleuterio was alive.

The appraisal and claims commission proceeded to consider Arroyo's claim in its session
of January 16, 1939, and after the hearing issued a payment order in favor of the
claimant in the amount of P1,200, rejecting the opposition presented by collateral
relatives of the deceased . The opponents, not in agreement with the ruling issued by
the appraisal and claims commission, appealed against it before the Camarines Sur
Court of First Instance. Once the claim before said Court was reproduced through the
initiation of the corresponding lawsuit, the opponents again raised their opposition,
asking, among other things, that said lawsuit be dismissed for having been filed out of
time. The widow, included as a defendant in her concept of judicial administrator of the
assets,

The Court rejected the motion for dismissal and proceeded to see the claim in its
merits. After articulating the plaintiff's evidence consisting mainly of his testimony and
that of his superstite spouse, Andrea Azur, - evidence that substantially established the
terms of the contract - the opponents and defendants requested the dismissal of the
lawsuit for the reason that the evidence did not sufficiently establish the plaintiff's right
of action. The Court favorably considered the motion dismissing the claim on the
grounds that there was no written contract between the parties and, therefore, no action
could be taken against the intestate in accordance with the statute to prevent fraud
(Article 335, Law No. 190, and article 21, rule 123, Rules of the Courts). Against the
ruling thus rendered, the plaintiff has filed the present appeal.

The first question that arises is whether or not the court was correct in dismissing the
plaintiff's claim only because the lease of services alleged by the plaintiff was not
formalized by means of a written contract between the parties. The lower court seems to
have the idea that the contract in question falls under the fraud law just because the
services claimed by the plaintiff lasted more than a year. This is a mistake. Article 21,
rule 123, Rules of the Courts, which is a reproduction of article 335 of the Code of Civil
Procedure, says the following: jgc: chanrobles.com.ph

"SEC. 21. Agreements which must be evidenced by writing. - The following agreements
cannot be proved except by writing, or by some note or memorandum thereof,
subscribed by the party sought to be charged, or by his agent, or by secondary evidence
of its contents: jgc: chanrobles.com.ph

"(a) An agreement that by its terms is not to be performed within a year from the
making thereof;"

xxx
There is no doubt that the contract we are dealing with is not of this kind. It is clear
from the record that the plaintiff entered the service of the spouses Eleuterio Dura and
Andrea Azur as a domestic servant through a monthly salary of P10 without a specified
term. There was nothing in this verbal contract on the lease of services to indicate that it
could not be fulfilled within one year of its execution. The contract was precisely based
on a monthly payment and for immediate domestic and land tasks. These duties and
tasks were of such a nature that they could be evacuated immediately within a year. The
mere fact that the services have been repeated and prolonged for several years and that
the amount thereof has not been paid, it has not been able to have the effect of
converting the contract into one of those included under the law on fraud for the
purposes of enforceability of the obligations arising from said contract. More still: it is a
well-established rule and doctrine that the law on fraud is only applicable to temporary
contracts (executory contracts) and not to those that have already been fully or partially
consummated (executed contracts). It is undoubted that in the present case the contract
had already been partially executed, since the servant or landlord had already rendered
the benefits and services to which he was obliged and the only thing missing was the
fulfillment of the obligation to pay the price by the owner or lessee, that is, Eleuterio
Dura or his successors in title (Almirol and Carino v. Monserlat 48 Jur. Fil., 70). It is a
well-established rule and doctrine that the law on fraud is only applicable to temporary
contracts (executory contracts) and not to those that have already been fully or partially
consummated (executed contracts). It is undoubted that in the present case the contract
had already been partially executed, since the servant or landlord had already rendered
the benefits and services to which he was obliged and the only thing missing was the
fulfillment of the obligation to pay the price by the owner or lessee, that is, Eleuterio
Dura or his successors in title (Almirol and Carino v. Monserlat 48 Jur. Fil., 70). It is a
well-established rule and doctrine that the law on fraud is only applicable to temporary
contracts (executory contracts) and not to those that have already been fully or partially
consummated (executed contracts).

Once the first question has been resolved, that is, the court a quo made an error when
dismissing the matter, the other question that we have to determine and resolve is
whether we must pass judgment on the merits adjudicating the rights of the parties, or
if we must order the return of this file to the Court of origin to give the defendant
opponents the opportunity to practice their evidence, having reserved the right to
present them when submitting their motion for dismissal. It is recorded in the record
that when the opposing attorney requested the dismissal of the matter for not having
proven the contract, I have stated the following: "We submitted the motion to dismiss
without renouncing our right to present evidence." The Court reserved its
decision. Some time later he issued his order estimating the motion for dismissal,

We have given this plocesal question the most careful consideration, taking into account
its transcendental importance and its derivations. We consider it imperative in the
interest of the administration of justice to establish a doctrine that does not give rise to
doubts or mistakes. Fortunately, our jurisprudence on this matter is well defined and all
we have to do in this matter is reaffirm it, or in any case implement it. In the case of
Moody, Aronson & Co. v Hotel Bilbao, in which a question similar to the one in question
was raised, we said the following: jgc: chanrobles.com.ph
"Taking everything into account, we believe that better results will be obtained if the
burden is imposed on the defendant who files a motion for dismissal. The defendant
who, after the plaintiff has presented his evidence, files a motion for dismissal, which
the Court lower esteem in his decision, and whoever, on appeal of the plaintiff, has his
sentence revoked, cannot be allowed to present evidence in his defense. of the plaintiff's
claims. Otherwise the result would be to invite unnecessary litigation. As a shining
example we have the case at hand in which it is about P400, raised on appeal in two
instances, and that, moreover, if ac - we yield to the defense's request, it should be
seen again with the possibility of yet another appeal.

"The courts' efforts should focus on establishing rules that avoid lengthy and costly
litigation and that aid in the prompt clearance of matters." (Moody, Aronson & Co. v.
Hotel Bilbao, 50 Jur. Fil., 208, 210.) The pre-inserted considerations were made by this
Court after a brief analysis of the turn of our jurisprudence on this procedural
point. From this analysis it follows that the rule was considered first in criminal
cases; later it was applied in electoral matters given its character of urgency; and for
the first time the principle was extended to ordinary civil matters in the aforementioned
judgment of Moody, Aronson & Co. against Hotel Bilbao, of March 30, 1927.

Later, the same question arose again in the case of Gonzalez Castro against Azaola (63
Jur. Fil., 890 [1936]). This Court then reaffirmed the doctrine established in the
aforementioned case of Moody, with the only difference that, in Instead of immediately
issuing a judgment on the merits, I chose to order the return of the file to the Court for
the practice of the defendant's evidence for the reason that, when presenting his motion
for dismissal in the lower court, he had reserved the right to present their evidence in
the event that the motion is unsuccessful in the first instance or on appeal. But it is
noteworthy that the Court did this with blatant disgust and so only to provide what
appeared to be a concrete and contingent case of equity.

"It is the feeling of this Court that in cases such as the one in this case, the Court should
require the defendant to present his evidence instead of issuing a decision on his motion
for dismissal, in order to avoid that later, if he found the Court erroneous the decision,
had to return the case to the Court of origin for further proceedings, by virtue of the
reservation made by the defendant, which should not have been allowed, when
presenting his motion for dismissal. " cralaw virtua1aw library

This doctrine does not admit more than an inference or interpretation and is that from
now on no reservation would be allowed, but that if it were allowed by mistake, it could
no longer be invoked as a legal reason for the matter to be returned to the lower court
for the effects of the articulation of the reserved tests. If the doctrine were not
interpreted in this way, it would never be applied with all rigor, because if a Court of
First Instance were to make a mistake again allowing the same reservation and we
would come to the conclusion, as in the present case, of having to revoke the decision of
said Court, it would always be possible to invoke equity for the return of the matter, and
so on, without any limitation of a final nature. Hence the need to put a ceiling, a
definitive, telling ceiling, in the application of the rule,

Perhaps it is said that the appellants in the present case could have proceeded
disoriented by the lack of a fixed and inflexible rule, but this excuse is worthless if one
takes into account that when the present file (1939) was initiated, the doctrine sitting in
the aforementioned case of Gonzalez C'astro against Azaola (1936) was in full
force. Even then, everyone was aware of what was the feeling of this Court in cases of
this nature, and what would be its procedure if an analogous situation arose. Therefore,
the defendants to present their motion for dismissal with the addition of the reservation
to articulate their evidence eventually, did so accepting the risk that said reservation
would be rejected on appeal as we do today. The intention of the Court was clear, final
and decisive: avoid the multiplication and prolongation of lawsuits, something always
odious not only because of the disturbance and anomaly that they cause in the life and
business of the individual, but also because of what they cost in money and in energy
both to the citizen and to the public. State. The words already transcribed by this Court
in the case of Moody when speaking of the calval; or of the litigant in a P400 lawsuit for
the clemency of the forwarding of the file to the court of origin, have perfect application
to the case at hand. The amount litigated here is a little more than P1,000. Plaintiff
served as a domestic servant for 12 consecutive years in order to establish his right to
this amount of money. His master or principal died in 1932 and since then the servant
has been trying to collect his due. In 1939 he presented his complaint to the commission
of appraisal and claims of the intestate and there he won; but the heirs of the deceased,
except the widow, did not conform to the verdict of the commission and the matter was
raised on appeal before the Court of First Instance. Here already, the claimant presented
all his evidence; The opponents, instead of refuting them, raise a motion for dismissal
under the allegation that the action was ineffective because a written contract had not
been entered into between the servant and his master, reserving, however, the right to
articulate their evidence for the case . that his motion did not succeed. The Court agrees
to the motion and dismisses the claim, making the presentation of evidence by the
defendants or opponents unnecessary. The matter is brought before us on appeal; we
found the court ' s decision to be wrong, But since this reservation is interposed, they
tell us that the matter should not yet be decided on its merits, but that the file must be
returned to the lower court to give the defendants an opportunity to present their
evidence, with the possibility that the matter returns. again to this Supreme Court in
ulla, new elevation. And in the meantime, valuable years have passed - since 1932 - and
probably some more time will pass, without the plaintiff seeing the end of his efforts, as
if in his case the torture of Tantalo was repeated to some extent, that is, when it seems
that the goal is at your fingertips, she vanishes like a mirage, like a deceptive illusion of
the eyes. Certainly a judicial procedure that can give rise to the anguish of this torment
should not be tolerated any longer. the file must be returned to the lower court to give
the defendants the opportunity to present their evidence, with the possibility that the
matter will return again to this Supreme Court in ulla, new appeal. And in the meantime,
valuable years have passed - since 1932 - and probably some more time will pass,
without the plaintiff seeing the end of his efforts, as if in his case the torture of Tantalo
was repeated to some extent, that is, when it seems that the goal is at your fingertips,
she vanishes like a mirage, like a deceptive illusion of the eyes. Certainly a judicial
procedure that can give rise to the anguish of this torment should not be tolerated any
longer.rather, the file must be returned to the lower court to give the defendants the
opportunity to present their evidence, with the possibility that the matter will return
again to this Supreme Court in ulla, new appeal. And in the meantime, valuable years
have passed - since 1932 - and probably some more time will pass, without the plaintiff
seeing the end of his efforts, as if in his case the torture of Tantalo was repeated to
some extent, that is, when it seems that the goal is at your fingertips, she vanishes like
a mirage, like a deceptive illusion of the eyes. Certainly a judicial procedure that can
give rise to the anguish of this torment should not be tolerated any longer. With the
possibility that the matter returns again to this Supreme Court in ulla, new appeal. And
in the meantime, valuable years have passed - since 1932 - and probably some more
time will pass, without the plaintiff seeing the end of his efforts, as if in his case the
torture of Tantalo was repeated to some extent, that is, when it seems that the goal is
at your fingertips, she vanishes like a mirage, like a deceptive illusion of the
eyes. Certainly a judicial procedure that can give rise to the anguish of this torment
should not be tolerated any longer. With the possibility that the matter returns again to
this Supreme Court in ulla, new appeal. And in the meantime, valuable years have
passed - since 1932 - and probably some more time will pass, without the plaintiff
seeing the end of his efforts, as if in his case the torture of Tantalo was repeated to
some extent, that is, when it seems that the goal is at your fingertips, she vanishes like
a mirage, like a deceptive illusion of the eyes. Certainly a judicial procedure that can
give rise to the anguish of this torment should not be tolerated any longer.as if in her
case the torture of Tantalo was repeated to a certain extent, that is, when it seems that
the goal is within reach of her hands, she vanishes like a mirage, like a deceptive illusion
of the eyes. Certainly a judicial procedure that can give rise to the anguish of this
torment should not be tolerated any longer.as if in her case the torture of Tantalo was
repeated to a certain extent, that is, when it seems that the goal is within reach of her
hands, she vanishes like a mirage, like a deceptive illusion of the eyes. Certainly a
judicial procedure that can give rise to the anguish of this torment should not be
tolerated any longer. as if in her case the torture of Tantalo was repeated to a certain
extent, that is, when it seems that the goal is within reach of her hands, she vanishes
like a mirage, like a deceptive illusion of the eyes. Certainly a judicial procedure that can
give rise to the anguish of this torment should not be tolerated any longer.as if in her
case the torture of Tantalo was repeated to a certain extent, that is, when it seems that
the goal is within reach of her hands, she vanishes like a mirage, like a deceptive illusion
of the eyes. Certainly a judicial procedure that can give rise to the anguish of this
torment should not be tolerated any longer. as if in her case the torture of Tantalo was
repeated to a certain extent, that is, when it seems that the goal is within reach of her
hands, she vanishes like a mirage, like a deceptive illusion of the eyes. Certainly a
judicial procedure that can give rise to the anguish of this torment should not be
tolerated any longer.as if in her case the torture of Tantalo was repeated to a certain
extent, that is, when it seems that the goal is within reach of her hands, she vanishes
like a mirage, like a deceptive illusion of the eyes. Certainly a judicial procedure that can
give rise to the anguish of this torment should not be tolerated any longer. Certainly a
judicial procedure that can give rise to the anguish of this torment should not be
tolerated any longer.as if in her case the torture of Tantalo was repeated to a certain
extent, that is, when it seems that the goal is within reach of her hands, she vanishes
like a mirage, like a deceptive illusion of the eyes. Certainly a judicial procedure that can
give rise to the anguish of this torment should not be tolerated any longer. Certainly a
judicial procedure that can give rise to the anguish of this torment should not be
tolerated any longer.as if in her case the torture of Tantalo was repeated to a certain
extent, that is, when it seems that the goal is within reach of her hands, she vanishes
like a mirage, like a deceptive illusion of the eyes. Certainly a judicial procedure that can
give rise to the anguish of this torment should not be tolerated any longer.
Our conclusion, then, is that the rule must be reaffirmed and rigorously
implemented. When the defendant files what is called demurrer to the sufficiency of the
plaintiff's evidence by filing a motion for dismissal on the grounds that such evidence is
insufficient or ineffective to substantiate the claim, he does not have the right to reserve
the presentation of his evidence but that he must abide by the results of said demurrer
for both the favorable and the adverse. If the motion is successful and the decision is
upheld on appeal, the matter ends definitively; But it also ends in the same way if the
decision is revoked and the Appeal Court finds that there is evidence and sufficient
grounds to issue a judgment on the merits in favor of the plaintiff.

Perhaps it is said that this makes it purely academic to demurrer the sufficiency of the
evidence allowed in our procedural rules and practices. We understand that no. Because
there will always be cases in which the party that chooses to use that resource trusts
and relies on it entirely, deeming it superfluous to articulate evidence. Except that it is
already known that under the rule that concerns us, the resource has no tactical value,
for trial and error purposes, but is direct and final.

Is there sufficient evidence on file for us to pass a judgment on the merits of the
matter? This question is asked because the rule presupposes that requirement: that in
the cars there is a basis for a decision in the background. And that base exists. We have
two uncontested testimonies in support of the claim: that of the plaintiff himself, and
that of Andrea Azur, widow of the principal and administrator of the intestacy. Here is
what was stated by the widow about the plaintiff's services-

"Q. Since when has the plaintiff Timoteo Arroyo served you as a farmer, you and your
husband Eleuterio Dura? - R. Since 1921.

" Q. Until your husband Eleuterio Dura died? - A. Yes, sir.

"Q. What was the nature of Plaintiff Timoteo Arroyo's job while he served you and your
husband? - A. When it was time to pick the fruits off the coconuts, he would pick them
up, then do coconut oil and other jobs. From home.

"P. During the time of sowing palay, what works towards Timoteo Arroyo? - R. During
tillage time he plowed the land, sowed it with palay and transported the seeds.

"Q. And during the time that the abaca was benefiting Ique to the plaintiff Timoteo
Arroyo? - R. He helped in the abaca processing and cleaned the abacales.

" Q. Do you mean to say that the plaintiff Timoteo Arroyo has worked from your and
your husband's service until his death? - A. Yes, sir.

"Q. Has the plaintiff TirAoteo Arroyo been paid for his work and services as your farmer?
- A. We had agreed to give him a salary of P10 per month, but in the event that we
could not give him or pay him P10 per month, we would give land in payment for your
services.

"Mr. DE LEON: We ask that the witness statement be discarded unless that alleged
agreement is established in a written contract.
'' JUDGED: There is no room.

"Mr. DE LEON: Exception.

Mr. CONOWON: jgc: chanrobles.com.ph

" P. During the life or during the lifetime of your late husband Eleuterio Dura, do you
remember if he has fixed any amount as payment or compensation for the services
rendered by the plaintiff Timoteo Arroyo, or not?

"Mr. DE LEON: Objection, unless that contract is in writing.

" COURT: You can answer.

"Mr. DE LEON: Exception.

" R. Yes sir; it has been set at P10 per month.

Mr. CONOWON: jgc: chanrobles.com.ph

"Q. Plaintiff Timoteo Arroyo has already been paid for the services rendered by him to
you and your husband during his lifetime? - A. Hasn't he paid you yet." (T. nt, pages 3-
5.)

It is highly doubtful that these tests could be passed, although defendants and
opponents were allowed to refute them. There is no evidence in the record of any reason
why the widow had to testify against the interests of the intestate, and naturally also
against her interests as widow and heir, except under the imperatives of truth and a
right conscience. We have reviewed the plaintiff's evidence with the greatest care and
we are perfectly convinced that the service lease in question has been well established,
as well as the fact that no payment has been made to date according to the terms of the
agreement. In fact, it can be presumed that the opponents did not have any serious
evidence to present against the plaintiff's right of action; so they chose to raise the
motion for dismissal without articulating any evidence.

In the appealed order, the assertion is made that the "compensation (of the appellant)
had not been previously agreed," and from this it seems that it is intended to deduce
that the contract in question was not perfected because there was no certain price , by
virtue of the provisions of article 1544 of the Civil Code that says: "in the leasing of
works or services, one of the parties is obliged to carry out a work or to provide the
other a service for a certain price." But this article has been interpreted in the sense that
there is a certain price not only when its certainty is fixedly determined but also when it
can be known with reference to something else certain, or that its designation is left to
the discretion of a determined person , according to the Article 1447 of the Civil
Code. There is also a certain price when it can be indicated and determined under the
uses and customs of the place. Moreover, it has been declared that "from the contracts
that are presumed to be concluded by tacit consent of the parties, obligations arise that
may give rise to an action to demand compliance before the courts," and that "services
are accepted and performed by a individual in favor of another, and not knowing that
they were free, the latter is obliged to remunerate them by virtue of the unnamed de
facio ut des contract or the tacitly contracted service lease, "in which case the courts will
set the reasonable value of the services. (Perez v. Pomar, 2 Jul. Fil., 713; Smith and
Reyes v. Lopez and Lopez de Pineda, 5 Jur. Fil., 80, citing the judgment of October 18,
1899 of the Supreme Court of Spain; Herrer against Cruz Herrera, 7 Jur. Fil.,
282; Majarabas against Leonardo, 11 Jur. Fil., 278; Imperial against Alejandre, 14 Jur.
Fil., 206; G. Urrutia y Compania v. Pasig Steamer & Lighter Co., 22 Jur. Fil.,
338; Sellner vs. Gonzalez, 27 Jur. Fil., O83). In the present case, it has been proven
that in the place where the services were provided, the customary wage for farm
servants was P0.50 per day. In any case, P10's monthly salary, which, according to the
evidence, was agreed upon between the parties, is clearly reasonable, even in the
absence of a prior express stipulation. It is the least that a domestic and farm servant
deserves to charge anywhere in this Archipelago.

However, the testimonies of the plaintiff and the widow are challenged for the reason
that they, according to the law, could not testify as witnesses against the intestate; and
it is argued that once both testimonies have been eliminated, there remains no reliable
evidence in favor of the lawsuit. Let's examine these challenges one by one.

The objection against the widow's testimony is based on rule 123, article 26, subsection
(d), Rules of the Courts, which reads as follows: "the husband cannot be examined for
or against his wife without the consent of the latter; the wife cannot be examined for or
against her husband without his consent. "Obviously the rule is not applicable in the
present case, because once the husband has died, the conjugal relationship no longer
exists," the widow is not the wife and, therefore, she can testify like any other witness
either in favor or against the her husband's intestate "(Williams v. Moore [Mo. App.],
203 SW, 824, 835.)

"(Sec. 151) (c) Death of one spouse. - As a general rule, after the death of one spouse,
the other is held a competent witrless either for or against decedent's interest in any
litigation eoncerning decedent's estate, except as his or her eompetency may be
affected by the rules against the disclosure of confidential communications, or testimony
as to communications or transactions with persons since deceased. "(Corpus Juris, Vol.
70, p. 124.)

Now remains the objection against the plaintiff's testimony, based on rule 123, article
26, subsection (c), previously article 383, par. 7, Code of Civil Procedure, which
stipulates the following: "the parties or those responsible for these in a trial or action, or
the people in whose favor said trial or action is followed against the executor or
administrator or representative of a deceased person or person mentally incapacitated,
about the claim or lawsuit against the assets of said deceased or mentally incapacitated
person, they cannot testify regarding a matter of fact that had occurred before the death
of said person or before the other was mentally incapacitated. " It is argued that under
this rule the plaintiff could not be allowed to testify about the verbal contract for the
lease of services - a matter of fact that occurred before Eleuterio Dura's death. "If death
has sealed the lips of one of the parties, the law follows the procedure of sealing them
also to the other" (Maxilom against Tabotabo, 9 Jur. Fil., 399, 403). The objection would
be valid and good if in the present case there is no circumstance that the same widow,
by herself and as a defendant in her concept of administrator of the intestacy, expressly
renounces the privilege, declaring in favor of the plaintiff. How to impose against the
actor that interdiction if the same party whom the law tries to protect under the mantle
of privilege, have you stated the benefits of dic has intel diction? As things are now, the
main advantage in favor of the petition is the testimony of the administrator or legal
representative of the deceased who is at the same time superstite spouse. In reality,
Timothy's testimony is nothing more than a corroboration and can be perfectly
suppressed, without suffering, in effect, the substantivity and effectiveness of the
plaintiff's right of action.

The last question raised by the appealed opponents refers to the expiration of the
plaintiff's right of action for having filed the claim out of time before the Court of First
Instance, under the terms of the Code of Civil Procedure as it has been amended by
law. No. 4229. According to the opponents, the claimant was notified of his appeal
against the resolution of the appraisal and claims commission on June 3, 1939, and the
claim was not reproduced in the form of a lawsuit before the Court of First Instance but
the or of September, 1939, that is 93 days later. It is argued that the Court thus gave
up jurisdiction over the matter. Nor is this claim sustainable because the aforementioned
article, as it has been amended,

On the merits of the foregoing, Eleuterio Dura's intestate is condemned to pay the
plaintiff and appellant the sum of P1,440 as compensation for his services for 12 years,
at a time of P10 per month, plus legal interest from the filing of the claim . , and the
costs of the judgment. If the intestate lacks funds to face said payment, the
administrator is authorized to assign an equivalent land to the plaintiff, granting the
corresponding deed with the approval of the Court. With the costs in charge of the
appealed ones. It is so ordered.
 EN BANC

[G.R. No. 31155. December 27, 1929. 1 ]

HIJOS DE I. DE LA RAMA, Plaintiff-Appellant, v. SALVADOR BETIA, ASTURIAS

SUGAR CENTRAL, INC., and THE PHILIPPINE NATIONAL BANK, Defendants-
Appellees.

Hervas & Concepcion, for Appellant.

Felipe Ysmael and Manuel Garcia, for appellee Asturias Sugar Central, Inc.

No appearance for other appellees

SYLLABUS

1. MORTGAGES; WHERE TERMS OF CONTRACT OBSCURE. — Inasmuch as the mortgage

deed is obscure on the point of the preferred lien claimed by the defendant central on
the property mortgaged to the plaintiff, for the payment of its credit, such obscurity
cannot be allowed to benefit the party responsible for it (art. 1288, Civil Code), which, in
this case is the central, whose assistant manager drew up the contract.

DECISION

AVANCEÑA, C.J.  :

On July 13, 1920, Salvador Betia mortgaged to plaintiff Hijos de Isidro de la Rama
several parcels of land described in the document drawn up for that purpose (Exhibit A),
in order to secure the payment of a P30,000 loan. The conditions of the mortgage,
among others, are that the money loaned shall be used exclusively for agricultural
purposes; that Betia shall produce at least 3,000 piculs of sugar at each crop; that all of
Betia’s plantations and all the sugar which he might produce from 1921 to 1922 are
likewise put under first mortgage to the plaintiff; that all the sugar that might be
produced by Betia during the seasons from 1920 to 1922 shall be deposited in the De la
Rama Warehouse Co., to the plaintiff being authorized to sell or purchase said sugar,
and to apply the proceeds to the P30,000 loaned until fully paid.

In 1921, as Betia, contrary to the agreement, only delivered 462.84 piculs of sugar, the
plaintiff brought suit against him on November 29th for the recovery of the loan and the
foreclosure of the mortgage.

While this action was pending Salvador Betia, desiring to remedy his condition, made
some propositions to the Asturias Sugar Central, and the latter, in turn, discussed the
matter with the plaintiff. The three parties having reached an agreement, the Asturias
Sugar Central set forth said agreement in a letter addressed to the plaintiff, and
requested his signature, thus indicating his acquiescence. The plaintiff acting through its
representative, Esteban de la Rama, signed the letter, which thereby became the
contract between the central and the plaintiff. This contract provided that the plaintiff
suspend the action for the recovery of the mortgage credit then pending against
Salvador Betia; that in order that Salvador Betia might continue cultivating the
plantation mortgaged to the plaintiff, the central would furnish him the necessary funds,
at the rate of P4 per picul, as expense, including the taxes to be paid the Government by
the plantation, to be based on the production as calculated by the central; the central
should have preference in the collection of any amount thus supplied to Salvador Betia.

In pursuance of this contract, the central from time to time gave Salvador Betia certain
different sums of money for the cultivation of the plantation, payment being made by
the production as fast as it was delivered. For some reason, however, Salvador Betia
finally became indebted to the central for the amount of P17,317.76.

On April 8, 1928, the plaintiff filed the complaint in the present case against Salvador
Betia, Asturias Sugar Central, Inc., and the Philippine National Bank. The action against
Salvador Betia seeks to recover the P30,000 credit, with interest in the amount of
P26,242.41, in default whereof, it is prayed that the mortgage be foreclosed. The action
against the Asturias Sugar Central, Inc., is for a rendition of accounts of the production
of the plantation for the period during which it had been furnishing Salvador Betia with
money, and for the delivery to the plaintiff, on account of their loan to Salvador Betia,
the difference between said products, after deducting expenses, and the amounts
supplied by the central. The Philippine National Bank has been included in this action as
defendant due to the fact that it holds second mortgage on the land mortgaged to the
plaintiff.

Defendant Salvador Betia has merely denied the allegations of the complaint.

The defendant Asturias Sugar Central, Inc., besides entering a general and specific
denial of the allegations of the complaint, filed a cross-complaint alleging that it has the
preference for the recovery of its credit against Salvador Betia not only with respect to
the sugar produced on the plantation, but also with regard to the plantation itself, which
is mortgaged to the plaintiff, and it prays that should the land be sold, the proceeds be
applied by preference to the payment of its credit against Salvador Betia.

The Philippine National Bank entered no appearance, and filed no answer to the
complaint.

The court below rendered judgment for the plaintiff against the defendant Salvador
Betia, ordering him to pay the former the sum of P56,242.41, plus 12 per cent on
P30,000 from March 31, 1928 until fully paid, plus another sum equivalent to 12 per
cent of P30,000 by way of penalty and as attorney’s fees; and, should Salvador Betia fail
to make this payment within ninety days, it is ordered that the mortgaged lands be sold.
The judgment contains other rulings which are of no importance in the decision of this
case.

With respect to the cross-complaint filed by the Asturias Sugar Central, Inc., the trial
court rendered judgment in its favor and against the plaintiff for the sum of P17,317, the
amount advanced to Salvador Betia by the central, together with legal interest from May
14, 1928 until fully paid, ordering that such payment be made from the proceeds of the
sale of the animals and the agricultural implements, railways, machinery and other
articles purchased by Salvador Betia with money furnished by the Asturias Sugar
Central, Inc., and that if the proceeds of such sale be not sufficient to pay off this debt,
the balance be paid out of the proceeds of the sale of the plantation, preference being
given to the plaintiff’s credit.

Exhibit F, the contract between the plaintiff and the central, reads as
follows:jgc:chanrobles.com.ph

"December 19, 1923. — Messrs. HIJOS DE I. DE LA RAMA, Iloilo. — GENTLEMEN: I wish

to have your consent to the agreement with respect to Salvador Betia, which we made
orally yesterday. — That this Central shall finance Mr. Salvador Betia during four
harvests, beginning with the 1924-1925 sugar crop, and ending with the 1927-1928
sugar crop. — That during said period this Central will furnish him the necessary funds
to prepare, plant, care for, and cultivate the sugar cane that said Mr. Betia may plant, as
well as for cutting and carting it, and any other expense directly related to the care and
cultivation of the said sugar cane, but the amount shall not exceed P4 per picul of the
crop calculated by this Central. — That while this Central is financing said Mr. Betia, the
firm Hijos de I. de la Rama, or D. Esteban de la Rama, shall not levy execution on the
property of Mr. Betia for non-fulfillment of any of the terms or conditions of the contract,
on his part, not even after the mortgage deed of Mr. Betia in favor of said Hijos de I. de
la Rama, or D. Esteban de la Rama, has become due. — That this Central shall have
preference for the collection of any amount advanced to Mr. Betia for the
aforementioned purposes, including any amount paid as land tax on the lands
mortgaged to you, always provided the amount expended does not exceed four pesos
per picul of the total crop that this Central may calculate Mr. Betia will have, but that
this sum does not include any payment for the land tax, and should we have paid
therefor, we shall have preference in its collection. — That whatever balance Mr. Betia
might have upon having sold his sugar, after deducting the amount due us, shall be
delivered to you to apply on the payment of Mr. Betia’s account with you. — Hoping that
this is what we agreed upon, I remain, Yours truly, — ASTURIAS SUGAR CENTRAL, INC.
By (Sgd.) THOMAS J. FORD, Manager. . . . Agreed. — HIJOS DE I. DE LA RAMA. By
(Sgd.) E. DE LA RAMA, Manager."cralaw virtua1aw library

The evidence supports the conclusion of the court below to the effect that the central’s
credit against Salvador Betia amounts to P17,317.

But, the trial court rendered judgment for this amount in favor of the central, against
the plaintiff. There is nothing in the terms of Exhibit F to justify this ruling. The credit
was given by the central to Salvador Betia, and it was the latter who received this
amount from the central. The terms of Exhibit F do not show that the plaintiff assumed
the responsibility for the amount which the central might furnish to Betia. In reality, not
even the central itself has sought to recover from the plaintiff what the court below has
awarded it. The only thing the central seeks in its cross-complaint is that its credit
against Salvador Betia be collected, in case of necessity, with the proceeds of the sale of
the land mortgaged to the plaintiff with preference of the latter’s credit.

Furthermore, there is nothing in Exhibit F to justify the decision of the court below to the
effect that the credit in favor of the central be collected from the proceeds of the sale of
the land mortgaged to the plaintiff, with preference of the latter’s credit. As may be seen
from Exhibit F, the agreement was to the effect that the collection of central’s credit
against Betia should have preference over the plaintiff’s credit, from the sugar produced
on the plantation. It is not stated that this preference should be extended to the
plantation itself. On the contrary, the document shows that such preference was limited
to the sugar to be produced. In order to determine how this preference was to be made,
Exhibit F concludes with the following clause: "That whatever balance Mr. Betia might
have upon, the sale of his sugar, and the deduction of the amount owed to us (central),
shall be delivered to you (plaintiff) in order to apply it on the payment of Mr. Betia’s
account with you (plaintiff)." In thus referring expressly to the sale of the sugar, for the
effects of the preference, the document gives us to understand that the parties only
intended such preference with respect to the sugar produced on the plantation. If the
parties had intended to extend this preference to the land itself, they would also have
expressed it as they expressed that relating to the sugar.

Moreover, according to Manuel Garcia, assistant manager of the central, who began
these negotiations with the plaintiff in the conversations had with it, preceding the
execution of Exhibit F, he discussed with Esteban de la Rama, who represented the
plaintiff, the matter as to the preference which the central expected to have in the
payment of its credit against Betia upon the said land mortgaged to the plaintiff. This
being so, the fact that this preference with respect to the mortgaged land was not
included in Exhibit F, is proof that they did not agree to extend the preference to this
point. It is true that Garcia stated that Esteban de la Rama agreed to the proposal, but
the latter not only denies that he agreed, but also states that what they did agree on is
that the central’s credit should be collected only from the crops. In view of this conflict in
their testimony, it is more reasonable to accept Esteban de la Rama’s, which is
supported by the terms of the contract, which makes special reference to the sugar
crops in determining how the preference is to be effectuated, rather than Garcia’s, which
is not corroborated by the contract, in so far as it makes no mention of how this
preference over the proceeds of the sale of the land is to be realized.

At all events, the most that can be said in favor of the central is that the contract is
obscure with respect to this point. In such a case, this obscurity cannot be made to
favor the party that caused it (art. 1288 of the Civil Code), which is the central, as the
party that, through its assistant manager Manuel Garcia, attorney, drew up the contract.

The central maintains that the fact that they agreed to the suspension of the action
brought by the plaintiff for the foreclosure of the mortgage against Salvador Betia,
indicates that the plaintiff waived it mortgage. We fail to see the logic of such a
deduction. The suspension was necessary to make the agreement between the plaintiff,
the central and Salvador Betia, inasmuch as, if the mortgage had been foreclosed in that
action, the plantation would have been sold, and it could not have been cultivated by
Salvador Betia.

It is also contended that if this preference had not been extended to the land, but
confined to the production, it would not have been necessary to agree upon it, inasmuch
as the central would, in any event, even without this agreement, have a preferred lien
for its credit on the crops, in accordance with article 1922 of the Civil Code. But it should
be noted that in the mortgage executed by Salvador Betia in favor of the plaintiff, the
crops were included, which made it necessary expressly to mention in Exhibit F the
preference in favor of the central for the collection of its credit from the crops, because
otherwise, the mortgage thereof in favor of the plaintiff would have been a bar to it.

It is held that the preference agreed upon by and between the central and the plaintiff
for the collection of the central’s credit, does not, according to the contract, extend to
the land mortgaged to the plaintiff. From this is excepted the central’s credit for the
disbursement made to pay the land tax, inasmuch as it was made for the benefit of the
land.

The judgment appealed from is modified, it being decreed that with the proceeds of the
sale of the land the central’s credit for the land tax be paid by preference, after which
the plaintiff’s credit, and with the balance, if any, the credit of the central, the remainder
if any, to be delivered to Salvador Betia, and, eliminating the judgment against the
plaintiff for the amount of P17,317.76, the appealed judgment in all other respects is
affirmed, without special pronouncement as to costs. So ordered.
 SECOND DIVISION

[G.R. No. 3821. February 16, 1910. ]

LUCIA PEREZ ET AL., Plaintiffs-Appellees, v. DOMINGO CORTES ET

AL., Defendants-Appellants.

Levering & Wood, for Appellants.

Andres Borromeo, and Buenaventura Reyes, for Appellees.

SYLLABUS

1. REALTY; UNLAWFUL SEIZURE OR POSSESSION. — One who usurps or takes

possession of realty on the ground that he has a right to do so, can not be protected by
the courts, whatever may be the right such person believes he has to the property
seized, inasmuch as said act is not permitted even to the lawful owner.

2. CONSTRUCTION OF CONTRACTS. — In the event of a doubt as to the nature and

conditions of a contract that can not be decided by the language of the document setting
forth such agreement, it should be held that the debtor assumed the lesser obligation
and that the liability contracted is that which permits the greatest reciprocity of interests
and rights. (Art. 1289, Civil Code.)

3. MORTGAGE; RIGHT TO FORECLOSE. — When an obligation secured by the mortgage

of real estate becomes due, the creditor is entitled to apply to the courts for the
foreclosure of the mortgage, but he is not authorized to appropriate or dispose of the
property in order to recover the amount due.

DECISION

TORRES, J.  :

On the 21st of September, 1905, Lucia, Eduvigis, and Inocenta Perez presented an
amended written complaint in the Court of First Instance of Oriental Negros, alleging
that the two first named were the owners of a parcel of land situated in the sitio of Looc,
in the town of Guiljungan of the said province, about 30 hectares in area, and bounded
on the north by the small river Nagcalhin, on the south by lands now owned by Ciriaco
Jambalos, formerly belonging to Victor Jambalos and Pelagio Villegas, on the east by the
sea and by land belonging to Pedro Olang, and on the west by the land of Dorotea
Malahay; that their predecessor, Liberato Perez, had recorded the possessory
information of the above-described land in the registry of property of Oriental Negros on
the 16th of April, 1895; that the plaintiffs Lucia and Eduvigis transferred one-half of the
said land to Dominga Bolado, the mother of Inocenta Perez, on January 21, 1902, which
half has a capacity of 20 gantas of corn seed, and is bounded on the north by the other
half, on the south by lands of Juan Palermo and Andrea Carampatana, on the east by
the beach and the said other half, and on the west by lands of Tomasa Planas and the
small river; that Dominga in turn transferred to Inocenta Perez the said half of the
estate on May 25 following, and the land described is a part of the said half; that in
January, 1903, the defendants, Domingo Cortes and his wife Dominga Ubaldo, usurped
and unlawfully retained the land last described, and still retain it without possessing any
right thereto, and that in consequence of said usurpation and retention by the
defendants of the aforesaid land of Inocenta Perez, the plaintiffs suffered damages to
the extent of P250 by reason of benefits and products not received, for which reason
they prayed that judgment be entered in their favor, declaring the plaintiffs Lucia and
Eduvigis, as heirs of the late Liberato Perez, to be the lawful owners of the whole of the
land described in the complaint; that the transfer made by said heirs of one half of the
land to Dominga Bolado and that effected by the latter to Inocenta Perez be ratified and
confirmed; that the defendants be ordered to restore the parcel of land described in
paragraph one of the complaint, usurped and unlawfully retained by them, and to pay
P250 as damages for the benefits and products not received, and to pay the costs.

The defendants, after demurring to the complaint, filed an answer thereto on the 8th of
February, 1906, denying all the allegations contained in each and every one of the
paragraphs therein, and asked to be absolved therefrom with the costs against the
plaintiffs.

By another written answer to the amended complaint the said defendants denied
paragraphs 1, 2, 4, 5, and 6, and admitted paragraph 3 of the complaint, alleging that
they were and still are in possession as owners of part of the land mentioned in the said
paragraph 3; that said land is bounded on the north by lands of Inocenta Perez, on the
south by that of Juan Palermo, on the east by that of Pelagio Villegas, and on the west
by land belonging to a non-Christian; that said portion of land was included in a false
possessory information in the name of Liberato Perez in 1895, and was fraudulently
recorded in the registry of property; that in 1895 Liberato Perez was not, nor had ever
been in possession of said land, and that the person who was in possession in said year
was Vicente Perez, the real owner; that Perez transferred his rights to Pedro Olang, and
upon the death of the latter, his widow, Dominga Ubaldo, inherited the said parcel; for
these reasons they asked that the entry made in the registry of property be canceled
and that the possessory information be declared null and void in so far as the land of the
defendants is referred to, and that the latter be absolved of the complaint with the costs
against the plaintiffs.

The case came up for trial and evidence was adduced by the parties, their exhibits being
made of record. On the 6th of March, 1906, judgment was rendered by the lower court
ordering that Inocenta Perez be restored in the possession of the usurped land which the
defendants who retain it must vacate, the same being the property of Lucia Perez and
Eduvigis Perez, and that Inocenta be indemnified by the defendants in the sum of P250
for losses and damages, with interest thereon at the rate of 6 per cent per annum from
the 21st of September, 1903, and that the said plaintiffs shall recover costs from the
defendants.

The latter excepted to the foregoing decision and moved for a new trial on the ground
that it was contrary to law, and that the findings were manifestly contrary to the weight
of the evidence; the motion was overruled, to which the petitioners excepted and
presented the corresponding bill of exceptions which was approved and submitted to this
court.

It has been fully proven in the case that Liberato Perez, the father of two of the
plaintiffs, by virtue of the possession he enjoyed as owner for more than sixty years,
without counting that of his ancestors, lawfully acquired by means of extraordinary
prescription, under the provisions of article 1959 of the Civil Code, the ownership of
about 30 hectares of land described in the complaint. There can be no question
therefore as to the right of his two daughters, plaintiffs herein, to recover possession of
the duly identified portion of said land from the defendants who, forcibly and without
any reason whatever, took possession of said land; the said daughters succeeded their
father in his rights and obligations from the moment of his death (art. 661, Civil Code),
and as actual proprietors of a portion of the estate retained at the time the complaint
was filed, they were entitled to bring an action against the holders and possessors
thereof to recover possession (art. 348, Civil Code), it appearing in the case that said
portion was forcibly taken possession of, and retained up to the present day; by the
express will of the owners of the said portion, Inocenta Perez, another of the plaintiffs,
enjoyed the possession and usufruct of the same.

Impugning the right of the plaintiffs, the defendants alleged that they were and still are
the owners of the part or portion of land claimed, for the reason that Pedro Olang had
acquired it in 1895 from its lawful owner and possessor, Vicente Perez, and that
Dominga Ubaldo inherited it upon the death of her husband, the said Olang; for said
reason they asked that the possessory information filed by Liberato Perez while living for
the ownership of the whole parcel of land be declared null, as well as its registration in
the registry of property, because the portion of land in controversy was fraudulently
included in said information and recorded in the registry in the said year.

It is nowhere shown that Vicente Perez was either the owner or in possession as such, in
1895, of the portion of land in controversy, nor that Pedro Olang had lawfully acquired
or had been in possession thereof; hence, the defendant Dominga Ubaldo could not have
succeeded to any right to that part of the land, notwithstanding the documentary
evidence and the testimony of the witnesses with which she attempted to show such
right.

It appears to be proven in the case that in January, 1903, Dominga Ubaldo and Domingo
Cortes, her second husband, took possession of the said portion of land and ejected
therefrom the laborers that Inocenta Perez employed to work thereon, and from the day
of the usurpation to the present day they have retained the estate, and in spite of this
act of spoliation, an actual transgression which is not permitted even to the lawful
owner, and without having presented any deed of transfer by which Olang might have
acquired the ownership of said portion of the land, his widow now claims to be the
owner of the same. Dominga Bolado, mother of the plaintiff Inocenta Perez and of
Vicente Perez, only received one-half of the 30 hectares of land to which the possessory
information refers, and took possession thereof in January, 1902; before the expiration
of said year, the actual date not appearing, the said Vicente Perez died; his mother was
still living, and the latter before her death transferred the possession of the said moiety
of the land to her only surviving daughter, Inocenta. From all of the foregoing it is
logically deduced that Vicente Perez was never in possession of the estate in 1902 under
title of ownership, from which date his mother took charge of the same in usufruct, for
the reason that he died a few months later, and much less in 1895, because Liberato
Perez, who possessed it in its entirety as the real owner, was still living.

It may be true that Vicente Perez owed Pedro Olang 100 pesos in the year 1895, but it
can not be admitted that he gave the said land as security; it did not belong to him, nor
could he in any manner dispose of it without the knowledge or consent of its lawful
owner, and, seeing that he died before his mother, he could not have succeeded her in
the enjoyment of the said portion of land.

Apart from the foregoing, Pedro Olang and Doroteo Malahay, when they were informed
of the petition presented by Liberato Perez asking for the possessory information already
referred to, stated that they, as adjoining owners, agreed to the facts stated in the said
petition, and that they had no objection or claim to make in the matter. After the above
statement made by Olang in April, 1895, it is not likely that he acquired from Vicente
Perez the land covered by said information; this document was attested by Malahay as
municipal captain, they know that it did not belong to the latter but to Liberato, and in
consequence Pedro Olang could not have transmitted any right to his widow since he
had not received any from Vicente Perez, his supposed predecessor in the possession of
the estate.

The record does not show that Vicente Perez was ever in possession of any portion of
the land covered by the possessory information, and consequently he could not transmit
any right to Pedro Olang, nor the right of possession to said portion of the land.

The widow of the creditor Pedro Olang claims to rest the right of the latter, and
therefore her own right, on the document marked "Exhibit A," dated January 15, 1895,
wherein it appears that Vicente Perez declared to have mortgaged to Pedro Olang for the
sum of 100 pesos a parcel of land owned by him situated in the barrio of Looc, with a
description of its boundaries, on the condition that he would continue to work it and
obtain the benefits therefrom, but if it were not redeemed within a period of three years,
that is to say on the 14th of January, 1898, the land would then become the property of
the creditor. The document is a private one, and could not therefore be entered in the
register, and although it has been attached to the record of the case it does not appear
that the signature of Vicente Perez at the foot of the same was offered in evidence or
was duly identified.

The contract entered into by means of the said document is one of loan with mortgage;
not one of sale under pacto de retro, because beyond the word rescate (redemption)
said document does not contain any word to show that the agreement was a sale a
retro.

However, even if there were a doubt as to whether the contract entered into by Vicente
Perez was one of mortgage or one of sale, on the hypothesis that he could dispose of the
property, while it is not possible to decide the question by the language of the
document, in justice it must be assumed that the debtor assumed a lesser obligation
and that in accord with the creditor he bound himself to execute a mortgage which
involves a greater reciprocity of interests than a contract of sale under pacto de retro, in
spite of the fact that both the latter and that of mortgage involve a valuable
consideration in accordance with the provisions of article 1289 of the Civil Code.

On this supposition, in the absence of payment, on the obligation becoming due the
creditor would be entitled to have the mortgaged property sold to satisfy the debt, but
not to appropriate or dispose of it. (Arts. 1857, 1858, and 1859, Civil Code.)

The land in question is comprised within a larger tract of 30 hectares, referred to in the
possessory information instituted at the request of Liberator Perez in the court of the
justice of the peace of Guiljuñgan and finally approved on the 7th of April, 1895, a date
posterior to that of the above-mentioned document of mortgage in favor of Pedro Olang;
this information was recorded in the registry of property on the 16th of the said month
of April; and if the contract of mortgage of the 13th of January were a true contract, it
can not be understood how Pedro Olang and Doroteo Malahay made statements in the
month of April following in conformity with the facts contained in said possessory
information, nor can the declaration given by Higino de la Serna in said information
agree with that made in this suit, as they are markedly opposed and contradictory. From
all of the foregoing it is deduced that the said document was prepared in order to
somehow legalize the right which the widow of Pedro Olang believes she has to the land
in question.

As was agreed to in the aforesaid document, although the same be contrary to law, in
the absence of payment of the 100 pesos the mortgaged land could not become the
property of the creditor until the 14th of January, 1898, that is, after the lapse of three
years, and in the meantime the debtor, Vicente Perez, was to continue in the possession
and enjoyment of the fruits of the land; yet the defendants sought to prove that Pedro
Olang or his widow had been in possession of the property, as owner of the same, for
the last nine or ten years, the result being that their witnesses testified to facts which
were not true, undoubtedly for the purpose of legalizing the forcible usurpation of the
land in 1903.

The certified copy of the said information duly recorded in the registry of property is a
public document, one which is protected by articles 390, 391, 393, and 394 of the
Mortgage Law, and by sections 299 and 331 of the Code of Civil Procedure, and unless it
be proved to be null or invalid, which has not been done by the defendants, it must be
sustained by the courts.

With respect to the legal capacity of the plaintiffs to bring this suit and appear therein,
their respective rights are based on the provisions of section 115 of the Code of Civil
Procedure, because it involves their own property, and their respective husbands have
no personal rights or interest therein.

For the reasons above set forth by which the errors assigned to the court below have
been refuted, it is our opinion that the judgment appealed from should be and is hereby
affirmed, and the defendants are ordered to vacate the land in question and deliver it to
the plaintiffs, and to pay to Inocenta Perez the sum of P250 for the reasons stated in
said judgment, with legal interest thereon, and to pay the costs of this instance. So
ordered.
 EN BANC

G.R. No. L-49217             October 21, 1948

EUTIQUIANO BUISER, Petitioner, vs. BASILIA CABRERA, ETC., Respondents.

Vicente Albert, Feliciano Leviste and Claudio Teehankee for petitioner.

Ramon Diokno for respondents

OZAETA, J.: chanrobles virtual law library

On November 26, 1930, Artemio Fule as principal and Nemesio Cabrera as surety
executed a mortgage in favor of the Philippine Education Co., to secure the payment of
any and all sums of money not to exceed P3,930 which Artemio Fule might be obligated
to pay to the said company. The mortgage encumbered four parcels of land and a house
of strong materials belonging to the surety Nemesio Cabrera with an aggregate assessed
value of P8,185.38.chanroblesvirtualawlibrary chanrobles virtual law library

In or before 1933 the Philippine Education Co., Inc., instituted civil case No. 6189 in the
Court of First Instance of Laguna against Artemio Fule and Nemesio Cabrera to foreclose
said mortgage. Judgement having been rendered in favor of the plaintiff in said case, the
sheriff sold the four parcels of land and the building described in the mortgage to the
Philippine Education Co., Inc., as the highest bidder for P5,342.10 and executed in its
favor a final certificate of sale on August 26, 1933, which was approved by the court on
September 9, 1933.chanroblesvirtualawlibrary chanrobles virtual law library

On June 21, 1934, the Philippine Education Co., Inc., instituted civil case No. 2432 in the
justice of the peace court of San Pablo, Laguna against Nemesio Cabrera and Artemio
Fule to oust them from the possession of the realities described in the mortgage. The
defendants confessed judgement in said case and the plaintiff succeeded in taking
possession of the said properties.chanroblesvirtualawlibrary chanrobles virtual law
library

Basilia Cabrera, in her capacity as judicial administratrix of the estate of Nemesio

Cabrera (the latter having died), made an unsuccessful attempt to repurchase the four
parcels of land described in the mortgage from the Philippine Education Co., Inc.
Subsequently she instituted civil case No. 6839 in the Court of First Instance of Laguna
against the Philippine Education Company to annul the judgement rendered in the
foreclosure proceeding and in the forcible entry and detainer case on the ground that the
defendant Nemesio Cabrera in said cases had not been legally summoned, nor notified
of any of the proceedings had therein, nor had he authorized anybody to represent him
therein. That case was decided in favor of the Philippine Education Co., Inc., and against
the plaintiff Basilia Cabrera.chanroblesvirtualawlibrary chanrobles virtual law library

On March 23, 1937, during the pendency of the action for the annulment of the
foreclosure proceedings, the Philippine Education Co., Inc., transferred and conveyed the
four parcels of land described in the mortgage to Eutiquiano Buiser in consideration of
the sum of P7,000, payable P2,000 down and the balance in quarterly installments of
P400 each.chanroblesvirtualawlibrary chanrobles virtual law library

On August 9, 1939 Basilia Cabrera, as judicial administratrix of the deceased Nemesio

Cabrera, instituted the present action in the Court of First Instance of Laguna against
Eutiquio Buiser to recover from the latter the possession of a parcel of land of P3,518
square meters situated in the City of San Pablo. The defendant Buiser and the Philippine
Education Co., Inc., (which was permitted to intervene herein to defend Buiser's title),
contended that the parcel of land sought to be recovered by the plaintiff formed part of
the fourth parcel described in the mortgage, in the sheriff's certificate of sale, and in the
mortgage, in the sheriff's certificate of sale, and in the deed of sale executed by the
Philippine Education Co., Inc., in favor of Buiser. the plaintiff on the other hand
contended that the fourth parcel of land above mentioned had an area of only 500
square meters, more or less, and did not include the portion of 3,518 square meters
which she was seeking to recover.chanroblesvirtualawlibrary chanrobles virtual law
library

The description of the fourth parcel of land contained in the mortgage, in the sheriff's
certificate of sale, and in the deed of sale from the Philippine Education Co., Inc., to
Eutiquiano Buiser was uniformly as follows:

4. A piece of residential land assessed at P750 and the house of strong materials built
thereon assessed at P3,500 under Tax No. 62904 for the year 1925 located in the
poblacion of San Pablo, Laguna, bounded on the north, by Avenida Rizal: on the east, by
property of Francisco Abrebias; on the south, by property of A. Fule; and on the west,
by property of Crispin Cordero, having an area of 500 square meters, more or less,
declared in the name of Nemesio Cabrera. The boundary lines are visible on the land by
means of monuments but by fences.

The Court of First Instance of Laguna (Judge Alejo Labrador presiding) rendered
judgement on February 10, 1941, the dispositive part of which reads as follows:

Wherefore, the Court renders judgement in favor of the plaintiff declaring that she is
entitled to the possession, as administratrix of the estate of Nemesio Cabrera, of the
undeclared residential lot object of the action, which lot is more specifically described in
the plan Psu-102771-And as lot No. 1-C, and ordering the defendant and intervenor to
deliver the possession thereof to her, with damage at the rate of P140 a year from the
filing of the action until delivery. Let there be no costs.

The then Court of Appeals (before it was reorganized into regional Courts of Appeals)
affirmed that judgement on September 24, 1943. The appellant filed a motion for
reconsideration which the newly organized Court of Appeals of Southern Luzon decided
adversely to him on June 3, 1944.chanroblesvirtualawlibrary chanrobles virtual law
library

The case is now before us on appeal by certiorari to review the decision of the Court of
Appeals.chanroblesvirtualawlibrary chanrobles virtual law library
The contention of the petitioner (defendant below) is that although teh area stated in
the description is only 500 square meters more or less the boundaries given embrace an
area of 4,000 square meters, more or less, and that in case of conflict between the
boundaries and the area the former should prevail.chanroblesvirtualawlibrary chanrobles
virtual law library

At this juncture it is pertinent to note that when the contract of mortgage but also of a
fourth parcel of land containing a total area of 4,008 square meters which he had
inherited from his father Valentin Cabrera and which originally formed part of a larger
parcel that subsequent to the death of his father was partitioned equally among four
heirs, as shown in the sketch Exhibit A. The portion that corresponded to Nemesio
Cabrera in the partition was the extreme eastern part of the whole parcel and was
bounded on the north by the provincial road and on the west by the lot that
corresponded to Petronila Cabrera.chanroblesvirtualawlibrary chanrobles virtual law
library

The question to decide is whether, in describing the fourth parcel of land, the parties to
the said contract of mortgage intended to include therein the entire lot of 4,008 square
meters which Nemesio Cabrera had inherited from his father or only that portion of 500
square meters on which his house was built.chanroblesvirtualawlibrary chanrobles virtual
law library

In support of his contention the petitioner Eutiquiano Buiser invokes article 1471 of the
Civil Code, which reads as follows:

ART. 1471. In case of the sale of real estate for a lump sum and at the rate of a
specified price for each unit of measure or number there shall be no increase or
decrease of the price even if the area or number be found to be more or less than that
stated in the contract.chanroblesvirtualawlibrary chanrobles virtual law library

The same rule shall apply when two or more real properties are sold for a single price;
but, if in addition to a statement of the boundaries, which is indispensable in every
conveyance of real estate, their area or number should be designated in the contract,
the vendor shall be obliged to deliver all that is included within such boundaries, even
should it exceed the area or number specified in the contract; and, should he not be
able to do so, he shall suffer a reduction of the price in proportion to what is lacking of
the area or number, unless the contract be annulled by reason of the vendee's refusal to
accept anything other than that which was stipulated.

And the decision of this court in Loyola vs. Bartolome, 39 Phil., 544, in which held
(quoting from the syllabus) as follows:

A judgement in an action to recover a parcel of land and to obtain a judicial declaration

of ownership in favor of the plaintiff is not vitiated by an erroneous statement relative to
the area of the questioned parcel, where it appears that the land is so described by
boundaries as to put its identification beyond doubt. That which really defines a piece of
ground is not the area, calculated with more or less certainty, mentioned in its
description, but the boundaries therein laid down, as enclosing the land and indicating
its limits.
Petitioner and appellant's contention upon the finding of the trial court which was quoted
by the Court of Appeals in its decision of September 24, 1943, to the effect that in the
tax declaration Exhibit 5-A the land assessed in only 500 square meters "although the
boundaries given are those of the whole residential lot" (The boundaries and the area of
the land given in the tax declaration Exhibit 5-A are the same as those given in the
mortgage.) That the finding or conclusion of fact, however, was qualified or rectified by
the same Court of Appeals when it said: "Upon comparing the boundaries in the deed of
mortgage Exhibit 1 with the actual boundaries of the lot Exhibit 5 we find a complete
discrepancy, excepts as to the northern boundary.' And the Court of Appeals of Southern
Luzon, in resolving the herein petitioner's motion for reconsideration by its resolution of
June 3, 1944, expressly deleted said conclusion of the trial court as erroneous. Said that
Court:

Teneindo a la vista estos linderos consignados en los exhibitos 1 y 5-a, se pregunta: Que
parcela de terreno se ha tratado de identificar con los mismos? Es el lote num 1-A del
exhibito 8? Es el lote compuesto de lotes 1-A y 1-C parcela total heredada de su padre
por los cuarto hermanos compuesta de cua rto lotes segun el exhibito A? La contestation
que tenemos que dar a estas preguntguntas en vista de todos los hechos expuestos mas
arriba, es: ningundo de ello. Para comprender mejor esta contestacion, tal vez fuera
conviente recu rrir a 'sketch' figura num. 5 que aparece en la contrareplica de la apelada
a la replica del demandado-apelante. Los linderos mencioados en la escritura de
hipoteca, son los mismos indicados en dicha figura. Lomas que se puede dedu cir de
esos linderos es que son algunos de los linderos de la parcela grande de los cuarto
hermanos de apellido Cabrera. Decimos algunos porque faltan en la ennmeracion los dos
terrenos colindantes de Rufino Alcantara al Este, el de Catalino Menes y Pedro
Calumpiano al Sur y el de Melecio Fule al Oeste (exhibitoA), y, por tanto, insuficientes
para identificar la parcela grande de los cuarto hermanos de apellido Cabrera. Pero de
ninguna manera pueden ajustarse linderos ni al lote num. 1-C ni al lote num. 1-A ni a
ambos juntos, del exhibito 8. De ahi que sea patente, que la conclusion de Primera
Instan cia de que los linderos que aparecen en las hojas de amillaramiento exhibitos 5 y
5-a son los de todo el lote de nemesio Cabrera ('although the boundaries given are
those of the whole residential lot' segun palabras textuales del Juzgado, p. de a., p.
21), no es correcta y, por tanto, en el uso de las facu ltades conferidas a este Tribunal
(articulo 5 de la Regla 53 de las Reglas de los Tribunales), la eliminos de la decision
anterior de este Tribunal.

We do not feel justified in revising the conclusion of the Court of Appeals that the
boundaries given in the mortgage as here in above quoted do not identify with certainty
the whole lot of about 4,000 square meters claimed to have been included in the
mortgage. An examination of the plan Exhibit A, which shows the configuration and
boundaries of the entire land inherited by the Cabrera brothers from their father, and of
the Exhibit 8, which shows the configuration and boundaries of the lot of 4,008 square
meters which corresponded to Nemesio Cabrera in the partition, demonstrates that the
western boundary given in the mortgage Exhibit 1 as well as in the tax declaration
Exhibit 5-A, namely, "property of Crispin Cordero," does not correspond to the western
boundary of the lot of 4,008 square meters of Nemesio Cabrera but to the western
boundary of the entire land of his father Valentin Cabrera. There is no question that the
western boundary of the lot of 4,008 square meters of Nemesio Cabrera is, and since
1915 has been, the lot of Petronila Cabrera. Thus, if we are to be guided by the
boundaries given in the mortgage Exhibit 5-A, we would have to conclude that Nemesio
Cabrera intended to mortgage not only his lot of 4,008 square meters but also those of
his co-heirs Petronila and Maria Cabrera-a fact which the petitioner himself does not
claim That only goes to show that the boundaries given in the mortgage are incorrect
and unreliable.chanroblesvirtualawlibrary chanrobles virtual law library

There is another relevant fact which the Court of Appeals of Southern Luzon found, and
which in our opinion shows even more patently that the boundaries given in the
mortgage Exhibit 1 and in the tax declaration Exhibit 5-A did not correspond to the
correct boundaries of Nemesio Cabrera's entire lot of 4,008 square meters, and that is
the following: In 1936 after the Philippines Education Co., Inc., had succeeded in taking
possession of the said entire lot, a new tax declaration for the year 1937 (Exhibit 5-B)
was prepared in the name of the "Philippine Education Co., Inc., owner, Eutiquiano
Buiser, administrator." In the tax declaration the property was classified as "residential,
class 1, 1,500 square meters, was P2,250 secano, 2,830 square meters value P 56.60,"
or a total area of 4,330 square meters with a total assessed value of P2,306.60. The
assessment of the house of strong materials remained the same-P3,500. The boundaries
of the land were given as follows: "north, Ave. Rizal; west Petronila Cabrera." Thus the
boundaries, the area and the assessed value of the land which in 1936 the Philippine
Education co., Inc., claimed to have acquired from Nemesio Cabrera thru the foreclosure
of the mortgage were entirely different from the boundaries, area, and assessed value of
the fourth parcel of land described in said mortgage. Nevertheless, when subsequently,
that is to say, on March 26, 1937, the Philippine Education Co., Inc., transferred and
conveyed supposedly that same land to Eutiquiano Buiser, area, and assessed value
given in the contract of sale were not those set `forth in the tax declaration Exhibit 5-B
but exactly those full knowledge that the fourth parcel of land which is claimed to have
acquired from Nemesio Cabrera contained an area of more than 4,000 square meters,
when the Philippine Education Co., Inc., agreed to transfer and convey to Eutiquiano
Buiser all the properties it had acquired from Nemesio Cabrera through foreclosure of
mortgage, it did not describe said fourth parcel of land as containing 4,330 square re
meters with an assessed value of P2,306.60 in accordance with the tax declaration for
1937, but only 500 square meters with an assessed value of
P750.chanroblesvirtualawlibrary chanrobles virtual law library

The jurisprudence cited by the petitioner to the effect that "where it appears that the
land is so described by boundaries as to put its identification beyond doubt," an
erroneous statement relative to the area of the questioned parcel may be disregarded
because what really defines a piece of ground is not the area but the boundaries therein
laid down, is not applicable for the reason that the boundaries herein relied upon do not
identify the land beyond doubt. Neither can article 1471 of the Civil Code cited by the
petitioner be of any avail to him. In the first place, said article found in Title IV of Book
IV, which regulates the contract of purchase and sale, does not apply to the contract of
mortgage, which governed by Title XV, articles 1857-1880; and in the second place, said
article 1471 applies to a transaction entirely different from that involved in the case.
There is no question here of any increase of the price or of an annulment of the contract
with which said article deals.chanroblesvirtualawlibrary chanrobles virtual law library

We think the applicable provisions are those found in articles 1283 and 1289 of the Civil
Code, which read as follows:
ART. 1283. However general the terms of a contract may, it shall not be construed as
including things and cases different from those with respect to which the persons
interested intended to contract.chanroblesvirtualawlibrary chanrobles virtual law library

ART. 1289. If it should be absolutely impossible to solve, by the rules established by the
preceding articles any doubts concerning the incidental details of a gratuitous contract
they should be settled in such a way as to effect the least possible transmission of rights
or interests. When such doubt arises in construing onerous contracts, it shall be resolved
in favor of the greatest reciprocity of interests.

xxx     xxx     xxx

There is no question that the parties intended to include in the mortgage the land
described in the tax declaration Exhibit 5-A The question is whether that the tax
declaration embraces a residential lot of 500 square meters or a lot of 4,008 square
meters. We have seen that the boundaries given as correctly found by the Court of
Appeals of Southern Luzon, do not identify with certainty either the lot of 500 square
meters or the larger lot of 4,008 square meters. Therefore, only the unequivocal
statement given in the mortgage and in said tax declaration identifying the property
mortgaged as "a piece of residential land assessed at P750 and the house of strong
materials built thereon assessed at 3,500 under Tax No. 62904 for the year 1925
located in the Poblacion of San Pablo, Laguna, . . . having an area of 500 square meters,
more or less," can be taken into consideration. On the identify the property thus
described and the intention of the parties to include only that property in the mortgage,
the trial court found and the Court of Appeals adopted that findings, as follows:

The configuration of the land in question confirms our belief that the deceased Nemesio
Cabrera did intend to declare for tax purposes only the land of 500 square meters area
on which the house is built. An ocular inspection shows that the bigger portion of the lot
is covered by many fruit trees. The 500 square meters area is separated on the east
side from the bigger portion for having been leveled at a plane lower than the rest of the
land. The eastern and bigger portion is from one foot to two feet higher in elevation than
the plane on which the house is built. It is not used as a garden either: it appears to be
an orchard where permanent fruit trees are sown without order or plan. It may have
been the intention of its owner to make a different tax declaration or not to declare it at
all; but certainly it could never have been his intention to include the whole area in the
tax declaration of the house and of the lot on which it stands.

The deed of mortgage Exhibit 1 was prepared in Manila by the attorney for the
mortgage, Philippine Education Co., Inc., apparently from the descriptions of the
properties mortgaged contained in their respective tax declarations. In this connection
the Court of Appeals noted "that there is no proof [it] had previously sent a
representative to view the premises." Under the circumstances, it is reasonable to
assume that when it signed and accepted the mortgage the mortgage. Philippine
Education Co., Inc., took into consideration the area and the assessed value of the
property rather than its boundaries gave no idea of the value furnished a concrete idea
of its extend and worth. When the Philippine Education Co., Inc., took a mortgage on a
residential lot of 500 square meters, it certainly could not and did not expect to receive
as security a lot more than eight times larger than that 4,008 square meters. Hence the
applicability of article 1283 of the Civil Code, which says that however general the terms
of a contract may be (in this case the boundaries are not only general but vague) it shall
not be construed as including things and cases different from those with respect to
which the persons interested intended to contract.chanroblesvirtualawlibrary chanrobles
virtual law library

Lastly, it is to noted that in so far as Nemesio Cabrera is concerned, the contract of

mortgage in question was purely gratuitous, he having merely consented to respond
with his properties for the obligations of his son-in- law Artemio Fule up to the amount
of P3,930. Therefore, in accordance with article 1289 of the Civil Code, said contract
should be so interpreted as "to the effect the least possible transmission of the rights or
interests."chanrobles virtual law library

In this case it appears that on account of an obligation of his son-in-law Artemio Fule to
the Philippine Education Co., Inc., he guaranteed up to the sum of P3,930, Nemesio
Cabrera forfeited four parcels of land together with a house of strong materials with a
total assessed value as of P8,185.38. The house of strong materials alone was assessed
in 1925 at P3,500, and the residential lot of 500 (it turns out to be 516) square meters
on which it is built, at P750. Under circumstances, to so construe the contract in
question as to include not only the residential lot of 516 square meters (lot 1-A) but also
the adjoining orchard of 3, 492 square meters now sought to be covered by the
respondent (lot 1-C Exhibit 8), would in our opinion de violence to equity and justice as
safe guarded by the two articles of the Civil Code last above
cited.chanroblesvirtualawlibrary chanrobles virtual law library

We find no merit no merit petitioner's contention that the present action is barred by the
case No. 6189 (the foreclosure proceedings) and the case No. 2432 (the unlawful
detainer case). There is no identify of subject matter between the present case and
either of said two cases. Neither is there any merit in petitioner's contention that the
respondent is guilty of laches. Aside from the fact that this defense was not presented in
the trial court, it is not supported by the facts.chanroblesvirtualawlibrary chanrobles
virtual law library

The petitioner also contends that the respondent was estopped from questioning his
right and title to the property in question because she had repeatedly attempted to
purchase said property from the Philippine Education Co., Inc., along with the others of
which it was and is a part and parcel, thereby recognizing the said company as the
owner thereof. We find this defense of estoppel equally untenable because it is based on
the erroneous assumption now in question was included in the mortgage. What the
respondent attempted to repurchase from the Philippine Education Co., Inc., was the for
parcels of land and building described in the mortgage. Since, as well have found. lot 1-
C in question was not included in the mortgage but only lot 1-A of 516 square meters
and the building constructed thereon, the theory of estoppel founded on the
respondent's offer to redeem or repurchase the mortgaged properties must fall for lack
of basis. At most, such an offer can only be considered as one of compromise to avoid
litigation. Such an offer, which is not admissible in evidence against the person making
the offer (section 9. Rule 123, Rules of Court), does not and cannot constitute
estoppel.chanroblesvirtualawlibrary chanrobles virtual law library
The judgment is affirmed, with costs. So ordered.
 EN BANC

G.R. No. L-4592             September 17, 1952

JULIA TUMANENG, petitioner,
vs.
FRANCISCO ABAD, respondent.

Amador T. Vallejos for petitioner.

Castor Raval for respondent.

LABRADOR, J.:

On January 8, 1935, petitioner Julia Tumaneng sold a parcel of land situated in Matayag, Solsona,
Ilocos Norte, to the respondent. The price was P995, and the vendor and her heirs were granted the
right to repurchase it from the vendee and his heirs. On March 19, 1944, the respondent received
from the petitioner the sum of P1,000 in Japanese war notes for the repurchase of the property.
Receipt of this amount by the respondent appears at the back of the private deed of sale. the
respondent continued in possession of the property even after the year 1944, so in 1946 petitioner
brought this action to recover the value of the harvest of the land from the date of the repurchase.
The Court of First Instance dismissed the action but gave the petitioner one year from notice of the
decision within which to repurchase the land for the sum of P995. Against this decision petitioner
appealed to the Court of Appeals. The court affirmed the judgment dismissing the case, but reversed
it in so far as it granted petitioner the right to redeem the property, declaring respondent absolute
owner of the property and its products from January 8, 1940, in accordance with the first paragraph of
article 1508 of the Spanish Civil Code. Against this judgment petitioner has presented an appeal to
this court by certiorari.

The disputed portion of the deed of sale executed between the parties contains the following
stipulation:

. . . . It is my agreement with Mr. Francisco Abad y Simon that after a year which he shall have
received the fruits of the said lands, I shall have the right to redeem the land with the same
amount of money that I received from him without any deduction. But if I will have yet no
money with which to repurchase, I shall nevertheless together with my heirs have the freedom
to repurchase the land and that he or his heirs will not be able to refuse the repurchase
provided, I could return the amount of one thousand pesos. It is also agreed with Mr. Francisco
Abad y Simon that I will not exercise my right to repurchase at a time when the rice seedlings
have already been prepared for the land but that I will wait until after the harvest.

Petitioner contends that there is an express agreement on the period of repurchase, within the
meaning of paragraph 2 of Article 1508 of the Civil Code. According to petitioner's contention, the
right of repurchase may be exercised at any time, or for an unlimited time. It is also argued that as the
contract expressly provides that if the land is planted to rice when the right to repurchase is to be
exercised, redemption can not be effected until after the harvest, every year the right to repurchase is
revived upon termination of the harvest, and as no particular year when the harvest or seedling
preparation is mentioned, the right must subsist from year to year. In reply, respondent contends that
no period has been fixed for redemption, arguing the grant of freedom to repurchase is only a
recognition of the right, whereas the use of the term "heirs" is to provide against the uncertainty of
human life.
There is no question that the terms of the contract are not clear on the period of redemption. But the
intent of the parties thereto is the law between them, and it must be ascertained and enforced. It must
be gleaned from the language of the contract, as well as from the conduct of the parties. The parties
expressly agreed that if the vendor could not repurchase the property after the expiration of one year
from the time that the vendee receives the fruits of the land because of lack of funds, she or her heirs
shall nevertheless have the freedom to repurchase the land from the vendee or his heirs, provided
the amount of P1,000 be returned. In the first place, freedom to repurchase is expressly granted,
which can be exercised only after one year from the time the vendee receives the fruits of the land,
without any other limitation whatsoever except as to the price and the existing rice crop on the land.
In the second place, the grant is made not to the vendor alone but also to her heirs, and against the
vendee and his heirs also. Our interference from these circumstances is that an indefinite or an
unlimited period of redemption was intended. The presence of the terms as "nevertheless" and "heir
can be explained only by an intent to extend the period for an indefinite time. We may not ignore such
terms and refuse to give them the effect that they naturally imply, which is an indefinite period. We
are expressly enjoined by law (Article 1289, Civil Code) to adopt this form of interpretation of the
contract, as it provides for at least transmission of rights and interest between the contracting parties.
The right to redeem is, furthermore, a natural right, and a construction of the contract favoring it
should be followed. (Section 66, Rule 123, Rules of Court.)

In the case of Rosales vs. Reyes and Ordovesa, 25 Phil. 495, the parties agreed "that the right to
repurchase could not be exercised within three years from the date of the contract". This Court held
that most logical and just construction is one which would terminate the contract in ten years from the
date of the execution. As grounds for this conclusion it explained that unless limited by the contract of
the parties, it was generally held that the right to repurchase was perpetual. There was no limitation of
the period either under the Partidas or under the Roman Law. In modern times, however, it has been
deemed advisable to limit the time within which the right to redemption can be exercised. This
limitation is contained in article 150 paragraph 2, of the Civil Code. (Ibid, p. 497.) In the case at bar,
redemption was prohibited in the first year, but thereafter the freedom to repurchase is given in favor
of and against the heirs of the contracting parties, subject to another limitation, i.e. that redemption
should not be exercised at a time when the seedlings for the land have already been prepared. The
express recognition of the right to repurchase subject to no limitation whatsoever except those
indicated necessarily implies that the period should be indefinite, under the principle inclusio unius
est exclusio alteruis.

Our attention has been invited also to the case of Bandong vs. Austria, 31 Phil., 480, wherein this
Court held that the statutory limitation four years upon the right of redemption was not applicable. In
that case the vendors stipulated "we will repurchase the land at the same price; neither of us to make
any stipulation as to the interest on the money or products of the land, but in the month of March of
any year, if we repurchase." This Court reasoned thus: "In the event that they could assert that right
in the month of March of any year after the date of the contract, it could not be said that there was no
express agreement authorizing them to do so. Similarly, if the vendor and her heirs in the case at bar
have the right to repurchase the land without any limitation, except during those periods when rice
seedlings have already been prepared for the land, it is evident that the parties intended that there be
no limit to the time for redemption, because the planting of the land takes place every year.

Article 1508 of the Civil Code provides:

El derecho de que trata el articulo anterior durara, a falta de pacto expreso, cuatro años
contados desde la fecha del contrato.

En caso de estipulacion, el plazo no podra exceder de diez años.

We have chosen the Spanish text because the translations do not reflect the exact shade of thought
conveyed by the two paragraphs of the article. Manresa explains the application of each of the
paragraphs of the article thus:

Viviendo ahora al precepto contenido en el art. 1.508, diremos que en el se provee a dos
supuestos distintos: primero, el de que, habiendose convenido el retro, no se haya estipulado
plazo para su duracion; y segundo, el de que se haya estipulado ese plazo. En el primer caso
se entendera que la accion dura cuatro años, contados desde la fecha del contrato; en el
segundo las partes habran fijado el que tengan por conveniente, aunque siempre dentro del
precepto de derecho necesario que determina que ese plazo no pudra exceder de diez años.
(10 Manresa 276, 4th ed.)

So that the first paragraph is applicable to a case where no period has been fixed for the redemption,
"cuando no se haya estipulado plazo para su duracion"; and the second, when a period has been
agreed upon.1âwphïl.nêt

We have examined the decisions upon which the Court of Appeals based its decision, and we find
that in all of them the contracts did not mention any period of redemption. In the last case cited (Aliño
vs, Adove, 42 Phil., 302) this Court said that there is always a period applicable, either conventional
or legal. The former is fixed by the parties and can not exceed ten years; the latter is fixed by law at
four years. (Ibid, p. 304.)

In the case at bar we find an agreement on the period. The agreement contains the following
provisions, namely, first, that redemption can not be effected within the first year counted from the
time the vendee receives the fruits of the land; second, that even if redemption can not be effected at
the end of the first year as specified above, the vendor and her heirs shall nevertheless have the right
to redeem it from the vendee and his heirs; and third, that redemption can not be effected at a time
when the seedlings for the land have already been prepared. The agreement, our opinion, fixes an
unlimited period, although this is not clear and unequivocal, due perhaps to faulty expression. When
the parties stipulated that the vendor and her heirs shall nevertheless have the right to make the
repurchase, they meant that they shall have the right to do so any time. We have here, therefore not
a case where no period at all has been agreed upon, but one with a period which shall start after the
first year the vendee receives the fruits of the land, and which shall, nevertheless, continue without
limitation. In order to be applicable, the law (paragraph 2 of article 1508) requires the existence of an
agreement, not a definite or clear agreement on the period. The mere fact that the agreement is
obtained by inference does not argue in favor of its non-existence. Lack of clearness in the language
of the agreement should not be confused with silence; in other words, not because the language
fixing the period is not clear, positive, and unequivocal, may we conclude that an express agreement
is absent.

In resume we hold that the parties in the case at bar intended that the right of redemption could be
exercised at any time after the first year, subject to the conditions established, but pursuant to
paragraph 2 of article 1508 of the Civil Code, the exercise of the right can be made only within ten
years from the date of the contract. It follows, therefore, that the redemption, which was made in the
year 1944 was effected within the period of time authorized by law (ten years), and the same is valid
and effective between the parties.

With respect to the claim of petitioner for damages for the refusal of respondent to return the land, we
find that petitioner should not be entitled thereto before he filed this action in May, 1946, because it
does not appear that he ever had demanded the return of the property prior thereto. We also take
judicial notice of the fact that the period of harvest in the Philippines is from November to January.
Petitioner should be entitled to the owner's share and the products from the agricultural year 1946-
1947. The respondent admitted that during the last year he harvested six uyones, one-half of which is
valued at P150. He should be sentenced to pay the sum, and to account for the owner's share in the
harvest therefrom until he returns the position of the land to petitioner.

For the foregoing considerations, we hereby reverse the judgment of the Court of Appeals, and we
declare petitioner owner of the land in question and sentenced the respondent to deliver the
possession thereof to her. Respondent is hereby likewise ordered to pay petitioner the sum of P150
for the harvest of the year 1946-1947, and render an accounting of and deliver the owner's share in
her harvests of all the years from the year 1947-1948, until he delivers the land to petitioner. Without
costs.
 EN BANC

[G.R. No. 2122. September 13, 1905. ]

PEDRO T. ACOSTA, Plaintiff-Appellant, v. DAVID FLOR, Defendant-Appellee.

W .A. Kincaid, for Appellant.

Hartigan, Marple, Solignac & Gutierrez, for Appellee.

SYLLABUS

1. ACTION TO REMOVE A PUBLIC OFFICER. — A private person can not maintain an

action for the removal of a public officer unless he alleges that he is entitled to the same
office. (Secs. 197 to 216, Code of Civil Procedure.)

2. ID — When such an allegation is made but not proven, the court is justified in
dismissing the case without inquiring into the right of the defendant to retain the office.

DECISION

MAPA, J.  :

It is alleged in the complaint that at the municipal elections held on the 1st day of
December, 1903, in the town of Laoag, Province of Ilocos Norte, the plaintiff and the
defendant were candidates for the office of municipal president of the said town; that as
a result of the said election the plaintiff was elected to the said office by a majority of
100 votes, and that notwithstanding this fact the defendant has usurped said office and
unlawfully held the same since the plaintiff was the person entitled to the exercise of
said office. The complaint further sets out other acts in regard to illigalities alleged to
have been committed during the election. The prayer of the complaint is to the effect
that judgment be entered against the defendant, excluding him from the exercise of
such office and that the plaintiff be declared to be entitled to the same and that he be
given possession thereof, and for such other and further relief as the facts in the case
would warrant in favor of the plaintiff.

The case having proceeded to trial, the plaintiff introduced various witnesses, all and
each of whom testified to facts which, if true, would more or less gravely affect the
legality of the election. Not a single witness, however, confirmed the allegations
contained in the complaint, to the effect that the plaintiff had obtained a majority of 100
votes at the said election, nor can it be inferred from the evidence introduced by the
plaintiff that he, as a result of the said election, or for any other reason, was entitled to
the office of municipal president of Laoag, now held by the defendant.

In view of the evidence introduced at the trial by the plaintiff, and before the defendant
had presented his, the court, on the latter’s motion, acquitted the defendant, imposing
the costs upon the plaintiff. The court based its action upon the following grounds: (1)
That the plaintiff could not maintain the action brought by him because he had failed to
establish his alleged right to the exercise of the office in question; and (2) that there
was no necessity to inquire into the right of the defendant to hold the said office for the
reason that this question had already been determined by the provincial board after a
consideration of the various protests presented to it in regard to irregularities committed
during the last election held at Laoag for the office of municipal president and other
municipal officials, and for the further reason that the presumption is that a person
holding a public office was duly appointed of elected thereto.

The plaintiff excepted to this ruling of the court, moved for a new trial, and thereafter
brought the case to this court for review. An examination of the evidence of record
supports the finding of the court below to the effect that the plaintiff has failed to prove
in any way, shape, or form that he was entitled to the office in question, as alleged by
him in his complaint. There is no dispute upon this question. The appellant, himself,
when the motion of the defendant to dismiss was argued, and from the decision of which
he appealed to this court, clearly admitted that he had failed to establish his right to the
exercise of the office in question. (Page 17 of the bill of exceptions.) And on page 52 of
his brief, he also assumes that he had been unable to establish his alleged right to the
office in question.

The question that we have to decide, therefore, is whether, notwithstanding what has
already been said, and notwithstanding the fact that the plaintiff has failed to show that
he had any right to the office of municipal president of Laoag, he can maintain an action
such as this for the purpose of excluding the defendant from the exercise of said office
on account of illegalities alleged to have been committed in the elections.

The right to maintain such an action is especially and expressly governed by the
provisions of sections 197 to 216 of the Code of Civil Procedure.

The code, after enumerating in sections 197 and 198 the cases in which such an action
may be brought and the persons against whom they may be brought, goes on to
determine with careful distinction those who have the right to maintain such action.

Section 199 provides that "the Attorney-General of the Islands, or the fiscal of any
province, when directed by the Chief Executive of the Islands, must commence any such
action; and when upon complaint or otherwise he has good reason to believe that any
case specified in the two preceding sections can be established by proof, he must
commence such action."cralaw virtua1aw library

Section 200 provides that "the Attorney-General of the Islands or the fiscal for a
province, may, at his own instance, bring such an action, or he may, on leave of the
court in which the action is to be commenced, or a judge thereof in vacation, bring the
action upon the relation of and at the request of another person; but, if the action is
brought at the request of and upon the relation of another person, the officer bringing it
may require an indemnity for expenses and costs of the action, to be given to him by
the party at whose request and upon whose relation the same is brought, before
commencing it."cralaw virtua1aw library
Finally, section 201, under the heading "An individual may commence such action,"
provides as follows: "A person claiming to be entitled to a public office, unlawfully held
and exercised by another, may bring an action therefor."cralaw virtua1aw library

If the legislator had intended to give to all citizens alike the right to maintain an action
for usurpation of public office, he would have plainly said so in order to avoid doubt on a
subject of such far-reaching importance. A simple provision would have sufficed for this
purpose. Far from it, the legislator has on the contrary especially and specifically
provided in sections 199, 200, and 201 who must and who may bring such actions; and
it is very clear that it was his intention to give such right to those expressly mentioned
in the above-cited sections and to no other, following the well- known rule of law
"inclusio unius est exclusio alterius." It has been noticed that the above referred to three
sections only mention the Attorney- General, the provincial fiscal, and the individual
claiming to be entitled to the office unlawfully held and exercised by another. It is to be
inferred from this last provision that the individual who does not claim to have such a
right can not bring an action for usurpation of public office.

This inference is supported by the provisions of section 202 which says that when the
action is against a person for usurping an office, the complaint shall set fort the name of
the person who claims to be entitled thereto, with an averment of his right to the same.
Why should this be required as an essential requisite if it were not necessary that the
individual bringing the action should claim the right to exercise the office in question?

Our opinion is that the law has reserved to the Attorney-General and to the provincial
fiscals, as the case may be, the right to bring such action, and in but one case does the
law authorize an individual to bring such an action, to wit, when that person claims to
have the right to the exercise of the office unlawfully held and exercised by another.
Aside from this case an individual can not maintain such action. The law, in our opinion,
does not allow of any other construction. If an individual, whether or not he has the
right to the office alleged to have been usurped by another were to be permitted to
maintain such an action, it would serve no purpose and section 201 would be evidently
superfluous. It would be a useless and redundant provision of the code.

As a consequence of what has been said no individual can bring a civil action relating to
the usurpation of a public office without averring that he has a right to the same; and at
any stage of the proceedings, if it be shown that such individual has no such right, the
action may be dismissed because there is no legal ground upon which it may proceed
when the fundamental basis of such action is destroyed as is the case here. This is what
actually happened in this case. After all of the evidence presented by the plaintiff had
been introduced, it was found, and he himself so admitted that he had failed to establish
in any way, shape, or form that he had any right to the office of municipal president of
the town of Laoag as he had alleged in his complaint without foundation for such
allegation. Consequently the judge very properly acquitted the defendant of the
complaint.

The appellant contends that the court below should have first inquired into the right of
the defendant to the office in question and that no other question can be raised or
investigated until this point has been determined, and alleges that the question of the
right of the plaintiff to the said office does not arise until it has been determined that the
defendant is not entitled to the exercise of such office. In support of his contention he
relies upon the provisions of section 202 of the Code of Civil Procedure.

This section provides as follows: "When the action is against a person for usurping an
office, the complaint shall set forth the name of the person who claims to be entitled
thereto, with an averment of his right to the same; and that the defendant is unlawfully
in possession of the same; and judgment may be rendered upon the right of the
defendant, and also upon the right of the person so averred to be entitled, or only upon
the right of the defendant, as justice requires."cralaw virtua1aw library

From the words above italicized the appellant infers that the court below should have
first passed upon the right of the defendant and afterwards upon the right of the
plaintiff. In our opinion this should be done at the same time and in the same judgment.
It is immaterial what method the court may follow in the statement and determination of
the questions in the rendition of his judgment because even though the court may pass
upon the right of the plaintiff first, and the right of the defendant afterwards, or vice
versa, this procedure would not vitiate the judgment, provided the court does not fail to
state therein what the rights of the contending parties to the office are. But all of this, of
course, presupposes that the action has been properly brought and duly prosecuted to a
judgment. This, at the same time, presupposes that the plaintiff had a right to maintain
his action upon the evidence submitted by him at the trial. It is impossible to prosecute
a suit without a cause of action. Therefore, whenever before judgment it is conclusively
proven that the plaintiff has no right to maintain the action since he has not the
essential conditions required by law in order to bring and maintain such action, his
complaint should be dismissed and it becomes unnecessary to pass upon the right of the
defendant who has a perfect right to the undisturbed possession of his office, unless the
action is brought by a person having a right to maintain the same under the law.

It may be said that under section 202 the court may only pass upon the right of the
defendant when the justice of the case so demands. This is true, but this only refers to
cases where the action is brought by the Attorney- General o* by the provincial fiscal, as
the case may be. In such cases it is not necessary that there be a person claiming to be
entitled to the office alleged to have been usurped, because although be no such person,
as in the case of a vacant office, for instance, the fiscal could and even should bring
such action against the person usurping the office in accordance with the provisions of
sections 200 and 199, respectively, as the case may be. The manner in which judgment
should be rendered according to section 202 perfectly meets the various cases provided
for in the three preceding sections; and it becomes the duty of the court to pass upon
the rights of the defendant only whenever it is not an essential requisite for the due
prosecution of the action that there be a person claiming to be entitled to the office thus
usurped, something which only happens where the Attorney-General or the fiscal of any
province brings the action against the usurper.

As a result of the foregoing, we can not here pass upon the validity or nullity of the
election of the defendant, for the reason, among others which it is not necessary to
state here, that the defendant has no right to maintain such an action as this.

The order of the court below appealed from, is hereby affirmed. After the expiration of
twenty days let judgment be entered in accordance herewith and let the case be
remanded to the court from whence it came for further proceedings in accordance with
the law. So ordered.
 EN BANC

G.R. No. L-4043 February 17, 1908

ROMAN DE LA ROSA,Plaintiff-Appellee, vs. GREGORIO REVITA SANTOS,Defendant-

Appellant.

Ramon Salinas for appellant.

Alberto Barretto for appellee.

MAPA, J. :chanrobles virtual law library

The defendant herein was the owner of property consisting of seven tenement houses in
Calle P. Herrera, district of Tondo, Manila. Under a writ of execution the said tenement
houses were sold by the sheriff of Manila on the 5th day of February, 1906, and were
bought by and adjudicated to the plaintiff, as the highest bidder, for the sum of P100. At
the time, the property was in the possession of the defendant, who occupied one of the
tenement houses. After the sale, the plaintiff requested the defendant to vacate the
property within the term of thirty days, or, in case he desired to continue occupying the
same, to pay him a gross rental of P175 per month, at the rate of P25 for each
apartment. The defendant however continued to occupy the building without paying any
rent to the plaintiff, and in consequence thereof the latter, on the 17th of July 1906,
filed a complaint asking the court to put him in possession of the tenement houses, and
that the defendant be required to pay the rent already accrued and to accrue, at the
rate above mentioned, until the close of this
action.chanroblesvirtualawlibrary chanrobles virtual law library

The judge in deciding the case ordered that the defendant should pay the sum of P540
as rent due, at the rate of P90 a month. To this ruling the defendant excepted. Nothing
is provided for in the decision with regard to the surrender of the possession demanded
in the complaint, but as the plaintiff has not objected we are not obliged to dwell upon
this question.chanroblesvirtualawlibrary chanrobles virtual law library

Where real estate is sold by virtue of a writ of execution, the judgment debtor is entitled
to redeem within the period of one year form the date of the sale. (Sec. 465, Code of
Civil Procedure.) During the period allowed for redemption, the purchaser is entitled to
recover rent from the tenants in accordance with section 469, which provides as follows:

The purchaser from the time of the sale until a redemption, ... is entitled to receive from
the tenant in possession, the rents of the property sold or the value of the use and
occupation thereof.

As may be seen, the provision of the law in cases where the property sold is occupied by
tenants is express and positive; in such cases, the purchaser is entitled to recover rent
from them until a redemption takes place. Would the same thing happen if the occupant
of the property, at the time of its sale, is the judgment debtor himself, as in the present
case? The law makes no provision on this point, and from its silence we infer that the
purchaser can not recover any rent during the time which the judgment debtor
continues to occupy the property within the period allowed for redemption. Otherwise, if
it were the intent of the legislator that the judgment debtor should pay rent for his
occupation of the property, it would have been so stated in the law, as has been done
with respect to tenants. From the fact that express mention is made of the latter alone,
and not of the judgment debtor, as being under obligation to pay rent to the purchaser,
the law clearly shows that this obligation is not imposed upon the judgment debtor. We
consider that the rule of law that inclusio unius est exclusio alterius is strictly applicable
herein, in view of the fact that section 469 cited above, is exclusively and solely devoted
to the establishment and definition of the right of the purchaser to recover rent during
the term fixed for redemption.chanroblesvirtualawlibrary chanrobles virtual law library

It certainly does not seem logical to consider that the judgment debtor is obliged to pay
rent to the purchaser, if we take into account the provisions of said section 469 with
regard to the application to be given to such rents as the purchaser may receive during
the redemption period. According to this section, the amounts of such rents shall be
considered as a credit to be applied on account of the redemption money to be paid.
Accordingly, the same section expressly grants to the judgment debtor the right to
compel the purchaser to render him an account of the rents and profits received from
the property sold before the same is redeemed. Hence, as a matter of fact, rents are
received by the purchaser for the benefit of the judgment debtor himself, and this being
the case, nothing practical would result from compelling him to pay such rent because,
looking at the question from one point of view, it would come to the same thing as if he
paid them to himself, because, at all events, they would be applied on account of the
redemption. The judgment so far as it requires the defendant to pay rent to the plaintiff,
should be reversed.chanroblesvirtualawlibrary chanrobles virtual law library

The defendant asked as a cross complaint that the plaintiff be compelled to accept the
price which he states he had offered for the redemption of the property sold. No mention
of this matter is made in the judgment, and this omission by the court is alleged as error
by the defendant.chanroblesvirtualawlibrary chanrobles virtual law library

With regard to this point, the plaintiff in his brief states the following:

It appears from the same record that at the time when the trial was being held, the right
of redemption had been exercised by Mr. Wolfson, successor to the same defendant,
Revita Santos; therefore, such a judicial declaration became unnecessary, inasmuch as
said right had already been transferred, and did not exist as one of the rights of the
defendant.

The record sustains the allegations of the plaintiff, therefore it is absolutely unnecessary
to decide the question set up by the defendant in his cross
complaint.chanroblesvirtualawlibrary chanrobles virtual law library

The judgment appealed from is hereby reversed, and the defendant absolved. As to the
demand of the latter in his cross complaint, the same is also dismissed. No special ruling
is made as to the costs in either instance. So ordered
 EN BANC

[G.R. No. 4275. March 23, 1909. ]

PAULA CONDE, Plaintiff-Appellee, v. ROMAN ABAYA, Defendant-Appellant.

C. Oben, for Appellant.

L. Joaquin, for Appellee.

SYLLABUS

1. ESTATES: ACTION AGAINST EXECUTION OR ADMINISTRATIONS. — While an estate is

in the course of settlement in a special proceeding, no ordinary action can be maintained
by a person claiming to be an heir, against the executor or administrator, for the
purpose of having his rights in the estate determined. (Pimentel v. Palanca, 5 Phil. Rep.,
436.)

2. DISTINCTION BETWEEN RIGHTS OF ACTION BY LEGITIMATE AND BY NATURAL

CHILDREN TO COMPEL RECOGNITION. — As a general rule, the right of action of a child
to enforce recognition of its legitimacy lasts during the lifetime of such child, but the
right of a natural child to compel acknowledgment of its status continues only during the
life of the alleged parents. The right of action for a declaration of legitimacy is
transmitted to the heirs of the child only when the latter dies during minority or while
insane, or in case the action has already been instituted. Action by a natural child can
only be brought against the heirs of the parents in the event of the death of the parents
during the minority of the child, or upon the discovery of a document, after the death of
the parents, expressly acknowledging such child. This right of action which the law
concedes to this natural child is not transmitted to his ascendants or descendants. (Arts.
18 and 137, Civil Code.)

Per Torres, J., dissenting:chanrob1es virtual 1aw library

3. NATURAL CHILDREN; SUCCESSION AND TRANSMISSION OF RIGHTS TO DEMAND

RECOGNITION. — Although article 137 of the Civil Code contains no disposition
authorizing the transfer, in favor of the natural mother in her capacity of heir of her
natural child, of the right to judicially demand the recognition of her child by the heirs of
his late natural father; yet there is no express provision therein that prohibits such
transfer or that declares such right to be nontransferable.

4. ID.; ID. — The relation of paternity and filiation between natural parents and children
is also of a natural character, and therefore, reciprocal intestate succession between
them is exclusively governed by articles 944 and 945 of the Civil Code.

5. ID.; ID. — If the right of succession granted by the law to the natural children
corresponds reciprocally to the natural father or mother in the same cases, and if the
estate includes all property, rights and obligations of a person which do not expire at the
latter’s death, it is certain that, among the rights transferred to the natural mother by
inheritance, at the time of the death of her natural child, is the right held by such child
 during his lifetime to demand his recognition as such by his natural father, should the
latter still live, or by his heirs.

6. ID.; ID. — There is no legal provision that declares the said right to demand the
recognition of a natural child to be nontransferable to the latter’s heirs, and specially to
his natural mother, nor is there any rule declaring such right extinguished at the death
of the natural child.

7. ID.; ID. — In the intestate succession of a natural child who dies during his minority,
recognized by the law in favor of his father or mother who have acknowledged him, no
limitation has been established excluding the said right from transferable rights, nor has
it been expressly declared that the above-mentioned right to demand the recognition of
the natural child is extinguished at the latter’s death, wherefore it is necessary to admit
that the mother inherits from the natural child at his death, and that she is entitled to
institute the corresponding action.

DECISION

ARELLANO, C.J.  :

From the hearing of the appeal interposed by Roman Abaya in the special proceedings
brought in the Court of First Instance of La Laguna for the settlement of the intestate
estate and the distribution of the property of Casiano Abaya it appears:chanrob1es
virtual 1aw library

I. As antecedents: that Casiano Abaya, unmarried, the son of Romualdo Abaya and
Sabina Labadia, died on the 6th of April 1899; that Paula Conde, as the mother of the
natural children Jose and Teopista Conde, whom she states she had by Casiano Abaya,
on the 6th of November, 1905, moved the settlement of the said intestate succession;
that an administrator having been appointed for the said estate on the 25th of
November, 1905, Roman Abaya, a son of the said Romualdo Abaya and Sabina Labadia,
the parents of the late Casiano Abaya, came forward and opposed said appointment and
claimed it for himself as being the nearest relative of the deceased; that this was
granted by the court below on the 9th of January, 1906; that on the 17th of November,
1906, Roman Abaya moved that, after due process of law, the court declare him to be
the sole heir of Casiano Abaya, to the exclusion of all other persons, especially of Paula
Conde, and to be therefore entitled to take possession of all the property of said estate,
and that it be adjudicated to him; and that on November 22, 1906, the court ordered
the publication of notices for the declaration of heirs and distribution of the property of
the estate.

II. That on the 28th of November, 1906, Paula Conde, in reply to the foregoing motion
of Roman Abaya, filed a petition wherein she stated that she acknowledged the
relationship alleged by Roman Abaya, but that she considered that her right was
superior to his and moved for a hearing of the matter, and, in consequence of the
evidence that she intended to present she prayed that she be declared to have
preferential rights to the property left by Casiano Abaya, and that the same be
adjudicated to her together with the corresponding products thereof.

III. That the trial was held, both parties presenting documentary and oral evidence, and
the court below entered the following judgment:jgc:chanrobles.com.ph

"That the administrator of the estate of Casiana Abaya should recognize Teopista and
Jose Conde as being natural children of Casiano Abaya; that the petitioner Paula Conde
should succeed to the hereditary rights of her children with respect to the inheritance of
their deceased natural father Casiano Abaya; and therefore, it is hereby declared that
she is the only heir to the property of the said intestate estate, to the exclusion of the
administrator, Roman Abaya."cralaw virtua1aw library

IV. That Roman Abaya excepted to the foregoing judgment, appealed to this court, and
presented the following statement of errors:chanrob1es virtual 1aw library

1. The fact that the court below found that an ordinary action for the acknowledgment of
natural children under articles 135 and 137 of the Civil Code, might be brought in special
probate proceedings.

2. The finding that after the death of a person claimed to be an unacknowledged natural
child, the mother of such presumed natural child, as heir to the latter, may bring an
action to enforce the acknowledgment of her deceased child in accordance with articles
135 and 137 of the Civil Code.

3. The finding in the judgment that the alleged continuous possession of the deceased
children of Paula Conde of the status of natural children of the late Casiano Abaya, has
been fully proven in these proceedings; and

4. On the hypothesis that it was proper to adjudicate the property of this intestate
estate to Paula Conde, as improperly found by the court below, the court erred in not
having declared that said property should be reserved in favor of relatives of Casiano
Abaya to the third degree, and in not having previously demanded securities from Paula
Conde to guarantee the transmission of the property to those who might fall within the
reservation.

As to the first error assigned, the question is set up as to whether in special proceedings
for the administration and distribution of an intestate estate, an action might be brought
to enforce the acknowledgment of the natural child of the person from whom the
inheritance is derived, that is to say, whether one might appear as heir on the ground
that he is a recognized natural child of the deceased, not having been so recognized by
the deceased either voluntarily or compulsory by reason of a preexisting judicial
decision, but asking at the same time that, in the special proceeding itself, he be
recognized by the presumed legitimate heirs of the deceased who claim to be entitled to
the succession opened in the special proceeding.

According to section 782 of the Code of Civil Procedure —

"If there shall be a controversy before the Court of First Instance as to who the lawful
heirs of the deceased person are, or as to the distributive share to which each person is
entitled under the law, the testimony as to such controversy shall be taken in writing by
the judge, under oath and signed by witness. Any party in interest whose distributive
share is affected by the determination of such controversy, may appeal from the
judgment of the Court of First Instance determining such controversy to the Supreme
Court, within the time and in the manner provided in the last preceding section."cralaw
virtua1aw library

This court has decided the present question in the manner shown in the case of Juana
Pimental v. Engracio Palanca (5 Phil. Rep. 436.)

The main question with regard to the second error assigned, is whether or not the
mother of a natural child now deceased, but who survived the person who, it is claimed,
was his natural father, also deceased, may bring an action for the acknowledgment of
the natural filiation in favor of such child in order to appear in his behalf to receive the
inheritance from the person who is supposed to be his natural father.

In order to decide in the affirmative the court below has assigned the following as the
only foundation:jgc:chanrobles.com.ph

"In resolving a similar question Manresa says: ’An acknowledgment can only be
demanded by the natural child and his descendants whom it shall benefit, and should
they be minors or otherwise incapacitated, such person as legally represents them; the
mother may ask it in behalf of her child so long as he is under her authority.’ On this
point no positive declaration has been made, undoubtedly because it was not considered
necessary. A private action is in question and the general rule must be followed.
Elsewhere the same author adds: ’It may so happen that the child dies before four years
have expired after attaining majority, or that the document supporting his petition for
acknowledgment is discovered after his death, such death perhaps occurring after his
parents had died, as is supposed by article 137, or during their lifetime. In any case
such right of action shall pertain to the descendants of the child whom the
acknowledgment may interest.’ (See Commentaries to arts. 135 and 137, Civil Code.
Vol. I.) ’

The above doctrine, advanced by one of the most eminent commentators of the Civil
Code, lacks legal and doctrinal foundation. The power to transmit the right of such
action by the natural child to his descendants can not be sustained under the law, and
still less to his mother.

It is without any support in law because the rule laid down in the code is most positive,
limiting in form, when establishing the exception for the exercise of such right of action
after the death of the presumed parents, as is shown hereafter. It is not supported by
any doctrine, because up to the present time no argument has been presented, upon
which even an approximate conclusion could be based.

Although the Civil Code considerably improved the condition of recognized natural
children, granting them rights and actions that they did not possess under the former
laws, they were not, however, placed upon the same plane as legitimate ones. The
difference that separates these two classes of children is still great, as proven by so
many articles dealing with the rights of the family and with succession in relation to the
members thereof. It may be laid down as a legal maxim, that whatever the code does
not grant to the legitimate children, or in connection with their rights, must still less be
understood as granted to recognized natural children or in connection with their rights.
There is not a single exception in its provisions.

If legitimacy is the attribute that constitutes the basis of the absolute family rights of the
child, the acknowledgment of the natural child is, among illegitimate ones, that which
unites him to the family of the father or the mother who recognizes him, and affords him
a participation in the rights of the family, relatively advantageous according to whether
they are alone or whether they concur with other individuals of the family of his purely
natural father or mother.

Thus, in order to consider the spirit of the Civil Code nothing is more logical than to
establish a comparison between an action to claim the legitimacy, and one to enforce
acknowledgment.

"Art. 118. The action to claim its legitimacy may be brought by the child at any time of
its lifetime and shall be transmitted to its heirs, should it die during minority or in a state
of insanity. In such cases the heirs shall be allowed a period of five years in which to
institute the action.

"The action already instituted by the child is transmitted by its death to the heirs, if it
has not lapsed before then.

"Art. 137. The actions for the acknowledgment of natural children can be instituted only
during the life of the presumed parents, except in the following
cases:jgc:chanrobles.com.ph

"1. If the father or mother died during the minority of the child, in which case the latter
may institute the action before the expiration of the first four years of its majority.

"2. If, after the death of the father or mother, some instrument, before unknown, should
be discovered in which the child is expressly acknowledged.

"In this case the action must be instituted within the six months following the discovery
of such instrument."cralaw virtua1aw library

On this supposition the first difference that results between one action and the other
consists in that the right of action for legitimacy lasts during the whole lifetime of the
child, that is, it can always be brought against the presumed parents or their heirs by
the child itself, while the right of action for the acknowledgment of a natural child does
not last his whole lifetime, and, as a general rule, it can not be instituted against the
heirs of the presumed parents, inasmuch as it can be exercised only during the life of
the presumed parents.

With regard to the question at issue, that is, the transmission to the heirs of the
presumed parents of the obligation to admit the legitimate filiation, or to recognize the
natural filiation, there exists the most radical difference in that the former continues
during the life of the child who claims to be legitimate, and he may demand it either
directly and primarily from the said presumed parents, or indirectly and secondarily from
the heirs of the latter; while the second does not endure for life; as a general rule, it
only lasts during the life of the presumed parents. Hence the other difference, derived as
a consequence, that an action for legitimacy is always brought against the heirs of the
presumed parents in case of the death of the latter, while the action for
acknowledgment is not brought against the heirs of such parents, with the exception of
the two cases prescribed by article 137 transcribed above.

So much for the passive transmission of the obligation to admit the legitimate filiation,
or to acknowledge the natural filiation.

As to the transmission to the heirs of the child of the latter’s action to claim his
legitimacy, or to obtain the acknowledgment of his natural filiation, it is seen that the
code grants it in the first case, but not the second. It contains provisions for the
transmission of the right of action which, for the purpose of claiming his legitimacy
inheres in the child, but it does not say a word with regard to the transmission of the
right to obtain the acknowledgment of the natural filiation.

Therefore, the respective corollary of each of the two above-cited articles is: (1) That
the right of action which devolves upon the child to claim his legitimacy under article
118, may be transmitted to his heirs in certain cases designated in the said article; (2)
That the right of action for the acknowledgment of natural children to which article 137
refers, can never be transmitted, for the reason that the code makes no mention of it in
any case, not even as an exception.

It is most illogical and contrary to every rule of correct interpretation, that the right of
action to secure acknowledgment by the natural child should be presumed to be
transmitted, independently, as a rule, to his heirs, while the right of action to claim
legitimacy from his predecessor is not expressly, independently, or, as a general rule,
conceded to the heirs of the legitimate child, but only relatively and as an exception.
Consequently, the pretension that the right of action on the part of the child to obtain
the acknowledgment of his natural filiation is transmitted to his descendants is
altogether unfounded. No legal provision exists to sustain such pretension, nor can an
argument of presumption be based on the lesser claim when there is no basis for the
greater one, and when it is only given as an exception in well-defined cases. It is placing
the heirs of the natural child on a better footing than the heirs of the legitimate one,
when, as a matter of fact, the position of a natural child is no better than, nor even
equal to, that of a legitimate child.

From the express and precise precepts of the code the following conclusions are
derived:chanrob1es virtual 1aw library

The right of action that devolves upon the child to claim his legitimacy lasts during his
whole life, while the right to claim the acknowledgment of a natural child lasts only
during the life of his presumed parents.

Inasmuch as the right of action accruing to the child to claim his legitimacy lasts during
his whole life, he may exercise it either against the presumed parents, or their heirs;
while the right of action to secure the acknowledgment of a natural child, since it does
not last during his whole life, but depends on that of the presumed parents, as a general
rule can only be exercised against the latter.

Usually the right of action for legitimacy devolving upon the child is of a personal
character and pertains exclusively to him, only the child may exercise it at any time
during his lifetime. As an exception, and in three cases only, it may be transmitted to
the heirs of the child, to wit, if he died during his minority, or while insane, or after
action had been already instituted.

An action for the acknowledgment of a natural child may, as an exception, be exercised

against the heirs of the presumed parents in two cases: first, in the event of the death
of the latter during the minority of the child, and second, upon the discovery of some
instrument of express acknowledgment of the child, executed by the father or mother,
the existence of which was unknown during the life of the latter.

But as such action for the acknowledgment of a natural child can only be exercised by
him. It can not be transmitted to his descendants, or to his ascendants.

In support of the foregoing the following authorities may be cited:chanrob1es virtual

1aw library

Sanchez Roman, in his Treatise on Civil Law, propounds the question as to whether said
action should be considered transmissive to the heirs or descendants of the natural
child, whether he had or had not exercised it up to the time of his death, and decides it
as follows;

"There is an entire absence of legal provisions, and at most, it might be deemed

admissible as a solution, that the right of action to claim the acknowledgment of a
natural child is transmitted by analogy to his heirs on the same conditions and terms
that it is transmitted to the descendants of a legitimate child, to claim his legitimacy,
under article 118, but nothing more; because on this point nothing warrants placing the
heirs of a natural child on a better footing than those of the legitimate child, and even to
compare them would not fail to be a strained and questionable matter, and one of great
difficulty for decision by the courts, for the simple reason that for the heirs of the
legitimate child, the said article 118 exists, while for those of the natural child, as we
have said, there is no provision in the code authorizing the same, although on the other
hand there is none that prohibits it." (Vol. V.)

Diaz Guijarro and Martinez Ruiz in their work on "The Civil Code as construed by the
supreme court of Spain," commenting upon article 137, say:jgc:chanrobles.com.ph

"Article 118, taking into account the privileges due to the legitimacy of children, grants
them the right to claim said legitimacy during their lifetime, and even authorizes the
transmission of said right for the space of five years to the heirs thereof, if the child die
during his minority or in a state of insanity. But as article 137 is based on the
consideration that in the case of a natural child, ties are less strong and sacred in the
eyes of the law, it does not fix such a long and indefinite period for the exercise of the
action; it limits it to the life of the parents, excepting in the two cases mentioned in said
article; and it does not allow, as does article 118, the action to pass on to the heirs,
inasmuch as, although it does not prohibit it, and for that reason it might be deemed on
general principles of law to consent to it, such a supposition is inadmissible for the
reason that a comparison of both articles shows that the silence of the law in the latter
case is not, nor can it be, an omission, but a deliberate intent to establish a wide
difference between the advantages granted to a legitimate child and to a natural
one."cralaw virtua1aw library

(Ibid., Vol. II, 171.)

Navarro Amandi (Cuestionario del Codigo Civil) raises the question: "Can the heirs of a
natural child claim the acknowledgment in those cases wherein the father or mother are
under obligation to acknowledge" ? And says:jgc:chanrobles.com.ph

"Opinions are widely divergent. The court of Rennes held (on April 13, 1844) that the
right of investigation forms a part of the estate of the child, and along with his
patrimony is transmitted to his heirs. The affirmation is altogether too categorical to be
admissible. If it were correct the same thing would happen as when the legitimacy of a
child is claimed, and as already seen, the right of action to demand the legitimacy is not
transmitted to the heirs in every case and as an absolute right, but under certain
limitations and circumstances. Now, were we to admit the doctrine of the court of
Rennes, the result would be that the claim for natural filiation would be more favored
than one for legitimate filiation. This would be absurd, because it can not be conceived
that the legislator should have granted a right of action to the heirs of the natural child,
which is only granted under great limitations and in very few cases to those of a
legitimate one. Some persons insist that the same rules that govern legitimate filiation
apply by analogy to natural filiation, and that in this conception the heirs of the natural
child are entitled to claim it in the cases prescribed by article 118. The majority,
however, are inclined to consider the right to claim acknowledgment as a personal right,
and consequently, not transmissive to the heirs. Really there are not legal grounds to
warrant the transmission." (Vol. 2, 229.)

In a decision like the present one it is impossible to bring forward the argument of
analogy for the purpose of considering that the heirs of the natural child are entitled to
the right of action which article 118 concedes to the heirs of the legitimate child. The
existence of a provision for the one case and the absence thereof for the other is a
conclusive argument that inclusio unius est exclusio alterius, and it can not be
understood that the provision of law should be the same when the same reason does not
hold in the one case as in the other.

The theory of the law of transmission is also entirely inapplicable in this case. This
theory, which in the Roman Law expressed the general rule that an heir who did not
accept an inheritance during his lifetime was incapacitated from transmitting it to his
own heirs, included at the same time the idea that if the inheritance was not transmitted
because the heir did not possess it, there were, however, certain things which the heir
held and could transmit. Such was the law and the right to accept the inheritance, for
the existing reason that all rights, both real and personal, shall pass to the heir; quia
haeres representat defunctum in omnibus et per omnia. According to article 659 of the
Civil Code, "the inheritance includes all the property, rights, and obligations of a person,
which are not extinguished by his death." If the mother is the heir of her natural child,
and the latter, among other rights during his lifetime was entitled to exercise an action
for his acknowledgment against his father, during the life of the latter, or after his death
in some of the excepting cases of article 137, such right, which is a portion of his
inheritance, is transmitted to his mother as being his heir, and it was so understood by
the court of Rennes when it considered the right in question, not as a personal and
exclusive right of the child which is extinguished by his death, but as any other right
which might be transmitted after his death. This right of supposed transmission is even
less tenable than that sought to be sustained by the argument of analogy.

The right of action pertaining to the child to claim his legitimacy is in all respects
superior to that of the child who claims acknowledgment as a natural child. And it is
evident that the right of action to claim his legitimacy is not one of those rights which
the legitimate child may transmit by inheritance to his heirs; it forms no part of the
component rights of his inheritance. If it were so, there would have been no necessity to
establish its transmissibility to heirs as an exception in the terms and conditions of
article 118 of the code. So that, in order that it may constitute a portion of the child’s
inheritance, it is necessary that the conditions and the terms contained in article 118
shall be present, since without them, the right that the child held during his lifetime,
being personal and exclusive in principle, and therefore, as a general rule not
susceptible of transmission, would and should have been extinguished by his death.
Therefore, where no express provision like that of article 118 exists, the right of action
for the acknowledgment of a natural child is, in principle and without exception,
extinguished by his death, and can not be transmitted as a portion of the inheritance of
the deceased child.

On the other hand, it said right of action formed a part of the child’s inheritance, it
would be necessary to establish the doctrine that the right to claim such an
acknowledgment from the presumed natural father and from his heirs is an absolute
right of the heirs of the child, not limited by certain circumstances as in the case of the
heirs of a legitimate child; and if it is unreasonable to compare a natural child with a
legitimate one to place the heirs of a natural child and his inheritance on a better footing
than those of a legitimate child would not only be unreasonable, but, as stated in one of
the above citations, most absurd and illegal in the present state of the law and in
accordance with the general principles thereof.

For all of the foregoing reasons we hereby reverse the judgment appealed from in all its
parts, without any special ruling as to the costs of this instance.
 FIRST DIVISION

[G.R. No. L-1257. October 30, 1947.]

NICANOR TAVORA, Petitioner, v. BONIFACIO N. GAVINA and PEDRO O.

ARCIAGA, Respondents.

Tavora & Zandueta for Petitioner.

Mon & Gavina for respondent Gavina.

Pedro O. Arciaga in his own behalf.

SYLLABUS

1. INTERNATIONAL LAW; GOVERNMENT ESTABLISHED DURING MILITARY OCCUPATION

NOT FOREIGN. — The government established in the Philippines during the Japanese
occupation was not a foreign government, but a government established by the military
occupant as an agency thereof to preserve order during the occupation.

2. CONSTITUTIONAL AND POLITICAL LAW; PUBLIC OFFICERS; RIGHTS OF OFFICERS

AND EMPLOYERS UNDER COMMONWEALTH TO CONTINUE IN OFFICE UPON
PROCLAMATION OF INDEPENDENCE. — As the framers of the Constitution were free to
provide therein for and employees under the Commonwealth, if it was their intention
that they should not continue after the proclamation of independence they could and
should have so expressly provided; but they did not do so. On the contrary, the
Constitution prescribes that "the members of the Supreme Court and all judges of
inferior courts shall hold office during good behavior, until they reach the age of seventy
years or become incapacitated to discharge the duties of their office" (section 9, Article
VIII); that "The Auditor General shall hold office for a term of ten years and may not be
reappointed" (section 1, Article XI); that "No officer or employee in the Civil Service
shall be removed or suspended except for cause as provided by law" (section 4, Article
XII). Held, That all appointive officers and employees under the proclamation of
independence until their respective terms of office shall have expired, unless sooner
legally removed or suspended for cause.

3. ID.; CONSTITUTION, FOR BOTH COMMONWEALTH AND REPUBLIC. — The

Constitution of the Philippines is a Constitution for the Commonwealth and the Republic.
Article XVIII thereof provides that "the government established by this Constitution shall
be known as the Commonwealth of the Philippines, Upon the final and complete
withdrawal of the sovereignty of the United States and the proclamation of the Philippine
independence, the Commonwealth of the Philippines shall thenceforth be known as the
Republic of the Philippines." The only provisions of the Constitutions not applicable to the
Commonwealth are those of Article XVII which became effective upon the declaration of
the independence of the Philippines; and the provisions of the Constitution not applicable
to the Republic of the Philippines are those of Article XVI, or the transitory provisions
from the former colonial or territorial to the Commonwealth Government.

4. ID.; COMMONWEALTH, A SOVEREIGN GOVERNMENT; SOVEREIGNTY, QUESTION OF.

 POLITICAL. — That the Commonwealth of the Philippines was a sovereign government,
though not absolute but subject to certain limitations imposed in the Independence Act
and incorporated as Ordinance appended to our Constitution, was recognized not only by
the Legislative Department or Congress of the United States in approving the
Independence Law and the Constitution of the Philippines, which contains the declaration
that "Sovereignty resides in the people and all government authority emanates from
them" (section 1, Article II), but also by the Executive Department of the United States.
The late President Roosevelt in one of his messages to Congress said, among others, "As
I stated on August 12, 1943, the United States in practice regards the Philippines as
having now the status as a government of other independent nations — in fact all the
attributes of complete and respected nationhood." (Congressional Record, Vol. 29, par.
6, page 8173.) And it is a principle upheld by the Supreme Court of the United States in
may cases, among them in the case of Jones v. United States (137 U.S., 202; 34 Law.
ed., 691, 696) that the question of sovereignty is "a purely political question, the
determination of which by the legislative and executive departments of any government
conclusively blinds the judges, as well as all other officers, citizens and subjects."cralaw
virtua1aw library

5. QUO WARRANTO; APPEARANCE OF, AND NOTICE TO, SOLICITOR GENERAL, WHEN
NOT REQUIRED; CASE AT BAR. — This court did not exercise its discretion to require the
appearance of the Solicitor General in this case under section 23, Rule 3, because the
action does not involve the validity of any treaty, law, ordinance, or executive order or
regulation; and did not notify him of the filing of this action, because it is not the duty of
the Solicitor General to represent respondent A under section 1661 (b) of the
Administrative Code, since this is a quo warranto proceeding instituted against the said
respondent, not in his official capacity as justice of the peace, but in his private capacity
as an alleged intruder or person alleged to be unlawfully holding the public office of
justice of the peace of San Fernando, La Union, to which the latter is entitled under the
Constitution.

6. STATUTORY CONSTRUCTION; "EXPRESSIO UNIUS EST EXCLUSIO ALTERIUS," WHEN

NOT APPEALABLE. — The legal maxim "expressio unius est exclusio alterius," which is
based upon the rules of logic and the natural working of the human mind, and serves as
a guide in determining the probable intention of the makers of laws and constitutions in
mentioning some and not others of the same class, is not appealable where a given
provision in a constitution or statute was not voluntarily and freely included or inserted.

DECISION

FERIA, J.:

There is no question about the fact alleged in the petition, that the petitioner was
appointed justice of the peace of San Fernando, La Union, and took possession of his
office on or about April 16, 1916, that he has not resigned nor has he been removed
therefrom, and that he has ceased to act as such justice of the peace on December
1941, but reassumed his office after liberation, that is, on April 27, 1945.
According to section 9 Article VIII of the Constitution of the Philippines, the members of
the Supreme Court and all judges of inferior courts shall hold office during good behavior
until they reach the age of seventy years, or become incapacitated to discharge the
duties of their office.

The fact that the petitioner has performed the duties of justice of the peace of the
municipality of San Fernando, La Union, during the Japanese occupation of the
Philippines, by virtue of appointment made by the Chairman of the Executive
Commission, did not constitute an abandonment of his office held under the
Commonwealth, because the government established in the Philippines during the
Japanese occupation was not a foreign government, but a government established by
the military occupant as an agency thereof to preserve order during the occupation. This
Court, in its resolution denying the motion for reconsideration in the case of Co Kim
Cham v. Valdez Tan Keh and Dizon (75 Phil., 113), held among others the
following:jgc:chanrobles.com.ph

"(5) It is argued with insistence that the courts of the Commonwealth continued in the
Philippines by the belligerent occupant became also courts of Japan, and their judgments
and proceedings being acts of foreign courts can not now be considered valid and
continued by the courts of the Commonwealth Government after the restoration of the
latter. As we have already stated in our decision the fundamental reasons why said
courts, while functioning during the Japanese regime, could not be considered as courts
of Japan, it is sufficient now to invite attention to the decision of the Supreme Court of
the United States in the case of The Admittance, Jecker v. Montgomery, 13 How., 498;
14 Law. ed., 240, which we did not deem necessary to quote in our decision, in which it
was held that ’the courts, established or sanctioned in Mexico during the war by the
commanders of the American forces, were nothing more than the agents of the military
power, to assist it in preserving order in the conquered territory, and to protect the
inhabitants in their persons and property while it was occupied by the American arms.
They were subject to the military power, and their decisions under its control, whenever
the commanding officer thought proper to interfere. They were not courts of the United
States, and had no right to adjudicate upon a question of prize or no prize.’ (The
Admittance, Jecker v. Montgomery, 13 How. 498; 14 Law. ed., 240.)"

The appointment by President Osmeña of the respondent Bonifacio N. Gavina as ad-

interim justice of the peace of San Fernando on February 18, 1946, did not oust the
petitioner from his office, not only because such appointment was disapproved by the
Commission on Appointments, but because the petitioner had the constitutional right to
continue in office until he has reached the age of seventy years, and the President of the
Commonwealth had no power to remove the petitioner from office without just cause
and previous investigation.

The appointment of the other respondent Pedro O. Arciaga as justice of the peace of the
same municipality made by the President of the Republic of the Philippines and approved
by the Commission on Appointments on July 27, 1946, did not remove the petitioner
from his office as justice of the peace of San Fernando, La Union, since the petitioner
had the constitutional right to continue as such justice of the peace until he has reached
70 years; and upon the cessation of the American sovereignty over these Islands and
the proclamation of the Philippine Independence, the petitioner did not cease to be
justice of the peace of said municipality of San Fernando, La Union. In this connection
the writer of this opinion in his concurring opinion in the case of Brodett v. De la Rosa
(77 Phil., 752), held the following:jgc:chanrobles.com.ph

"‘The petitioners impugn the validity of the judgment of the respondent judge on the
ground that, as said respondent was not reappointed by the President of the Republic of
the Philippines, he must have ceased to be judge upon the proclamation of the
Independence of the Philippines. Presumably the petitioners’ contention is based on the
legal maxim of statutory construction — expressio unius est exclusio alterius, and the
provision of our Constitution relating to the officers of the Commonwealth who should
continue in office after the proclamation of our Independence, which
says:jgc:chanrobles.com.ph

"The officials elected and serving under this Constitution shall be constitutional officers
of the free and independent Government of the Philippines and qualified to function in all
respects as if elected directly under such Government, and shall serve their full terms of
office as prescribed in this Constitution.’

"The Philippine Independence Act promulgated by the Congress of the United States on
March 24, 1944, provides in its section 2 (b) (2) as follows:jgc:chanrobles.com.ph

"‘(b) The constitution [of the Philippines] shall also contain the following provisions,
effective as of the date of the proclamation of the President recognizing the
independence of the Philippine Islands, as hereinafter provided:jgc:chanrobles.com.ph

"‘(2) That the officials elected and serving under the constitution adopted pursuant to
the provisions of the Act shall be constitutional officers of the free and independent
Government of the Philippine Islands and qualified to function in all respects as if elected
directly under such Government, and shall served their full terms of office as prescribed
in the Constitution.’

"The last quoted provision which is incorporated in paragraph or section 1 (2), Article
XVII, of the Constitution, constitutes a limitation on the power of the framers of our
Constitution to provide for the continuance or cessation of the officers therein
mentioned. As they were not at liberty to insert or not said provision, its inclusion in our
Constitution can not be considered as the expression of their intention that the officers
therein mentioned shall continue as officer of the free and independent government of
the Philippines. Consequently, the maxim expressio unius est exclusio alterius, which is
based upon the rules of logic and the natural working of the human mind and serve as a
guide in determining the probable intention of the makers of laws and constitutions
expressly mentioning some and not others, can not be applied or invoked in support of
the contention that, from the inclusion of said provision it may be inferred that it was
the intention of the delegates of the Constitutional Convention which drafted our
Constitution that appointive officers and employees and other elective officials should
cease or not continue in office upon the proclamation of our Independence.

"On the other hand, as the framers of our Constitution were free to provide in the
Constitution for the cessation or continuation in office of all appointive officers and
employees and all other elective officers under the Commonwealth, if it were their
intention that they should not continue or cease, they could and should have so
expressly provided; but they did not do so. On the contrary, the Constitution prescribes
that "The members of the Supreme Court and all Judges of inferior courts shall hold
office during good behavior, until they reach the age of seventy years or become
incapacitated to discharge the duties of their office,’ (section 9, Article VIII); that ’The
Auditor General shall hold office for a term of ten years and may not be reappointed’
(section 1, Article XI): that ’No officer or employee in the Civil Service shall be removed
or suspended except for cause as provided by law’ (section 4, Article XII).

"There is no doubt that the Constitution of the Philippines is a Constitution for the
Commonwealth and the Republic. Article XVIII thereof provides that ’The government
established by this Constitution shall be known as the Commonwealth of the Philippines.
Upon the final and complete withdrawal of the sovereignty of the United States and the
proclamation of the Philippine independence, the Commonwealth of the Philippines shall
thenceforth be known as the Republic of the Philippines.’ The only provisions of the
Constitution not applicable to the Commonwealth are those of Article XVII which became
effective upon the declaration of the Independence of the Philippines; and the provisions
of the Constitution not applicable to the Republic of the Philippines are those of Article
XVI, or the transitory provisions from the former colonial or territorial to the
Commonwealth Government.

"The Constitution, referring to the transition from the former Philippine Government to
the Commonwealth, provides in its section 4, Article XVI, that ’All officers and employees
of the Government of the Philippine Islands shall continue in office until the Congress
shall provide otherwise, but all officers whose appointments are by this Constitution
vested in the President shall vacate their respective offices upon the appointment and
qualification of their successors, if such appointment is made within a period of one year
from the date of the inauguration of the Commonwealth of the Philippines.’ Undoubtedly,
the framers of our Constitution deemed it necessary to so provide in order to avoid any
doubt about their authority to continue in office; because the said officers and
employees were appointed by authority of the People of the United States represented
by the Congress and the President of the United States, or the Jones Law; while the
officers and employees of the Commonwealth of the Philippines were to be appointed by
authority of the People of the Philippines in whom the sovereignty resides and from
whom all government authority emanates, according to section 1, Article II of the
Constitution of the Philippines.

"But there is no similar provision in the Constitution covering the transition from the
Commonwealth to the Republic. Evidently, it was not deemed necessary to provide
expressly in the Constitution for the continuation of all the officers and employees of the
Commonwealth Government, because they had to continue, in the absence of an
express provision to the contrary, for they are officers and employees appointed by
authority of the People of the Philippines, since the Commonwealth as well as the
Republic are government established by the same Filipino people in the exercise of their
sovereignty, limited under the Commonwealth and complete or absolute after the
proclamation of our independence.

"That the Commonwealth of the Philippines was a sovereign government, though not
absolute but subject to certain limitations imposed in the Independence Act and
incorporated as Ordinance appended to our Constitution, was recognized not only by the
Legislative Department or Congress of the United States in approving the Independence
Law quoted and the Constitution of the Philippines, which contains the declaration that
’Sovereignty resides in the people and all government authority emanates from them’
(section 1, Article II), but also by the Executive Department of the United States. The
late President Roosevelt in one of his messages to Congress said, among others, ’As I
stated on August 12, 1943, the United States in practice regards the Philippines as
having now the status as a government of other independent nations — in fact all the
attributes of complete and respected nationhood.’ (Congressional Record Vol. 29, part 6,
page 8173). And it is a principle upheld by the Supreme Court of the United States in
many cases, among them in the case of Jones v. United States (137 U. S., 202; 34 Law.
ed., 691, 696) that the question of sovereignty is ’a purely political question, the
determination of which by the legislative and executive departments of any government
conclusively binds the judges, as well as all other officers, citizens and subjects.’

"A contrary construction, that is, that all appointive officers and employees of the
Government of the Commonwealth, from the Chief Justice of the Supreme Court to an
office messenger, had ceased ipso facto or automatically upon the proclamation of the
Independence of the Philippines, would lead to enormous public inconvenience, a
complete paralization of all the functions of the government, since it would necessarily
require a considerable period of time to appoint the new officers and employees in their
place. And if they were to hold over or continue in office until their successors are
appointed, as there is no limitation provided in the Constitution as to the time within
which the appointing powers may or must appoint their successors, a sort of Damocles’
sword would be left hanging and ready to fall over the heads of said officers and
employees for an indefinite period of time, to the detriment of the proper discharge of
their functions and the independence that is to be expected from judges in the
performance of their duties, essential for a good and clean government.

"In view of all the foregoing, it is evident that the respondent judge had the
constitutional right to continue acting as judge after the proclamation of the Philippine
Independence, and that, therefore, the judgment rendered by him in the present case is
that of a judge de jure and valid."cralaw virtua1aw library

The fact that during the pendency of the present case before this Court, the petitioner
reached the age of seventy years, can not affect the question involved in the present
case, that is, whether or not the petitioner was the rightful justice of the peace of San
Fernando, La Union, at the time the respondent Arciaga was appointed on July, 1946,
justice of the peace in lieu of the petitioner, and afterwards until he has reached the age
of seventy years.

In view of the foregoing, we conclude and hold that the petitioner had the right to
continue in office until he has reached the age of seventy years, with all the privileges
and emoluments appurtenant to the office; and that the ad-interim appointment of
respondent Gavina disapproved, and of the respondent Arciaga approved, by the
Commission on Appointments, had no effect whatever on the status of the petitioner as
justice of the peace of San Fernando until he has reached the age of seventy years.
 EN BANC

G.R. No. 1435 September 28, 1908

G.S. WEIGALL,Plaintiff-Appellee, vs. W. MORGAN SHUSTER, Collector of Customs

of the Philippine Islands,Defendant-Appellant.

W. Morgan Shuster in his own behalf.

Kinney & Lawrence for appellee.

TRACEY, J.:

This is an old controversy recently revived by filing in this court the brief of the
appellant, the appellee having renounced his brief.chanroblesvirtualawlibrary chanrobles
virtual law library

On March 4, 1903, the defendant, who was collector of the port of Manila, and also
Collector of Customs of the Philippine Archipelago, officially imposed a fine of $200
United States money, upon the plaintiff, the captain of the British steamer Loonsang, for
a violation of the Chinese Exclusion Law, in permitting the escape of an immigrant from
his ship, and asserted a lien upon her, refusing clearance papers unless the master paid
the fine. Instead of paying it, the plaintiff brought this action on March 5, and presented
to Judge Ambler his complaint, together with other papers, upon which an injunction
was issued, ordering the defendant to "absolutely desist and refrain from further
proceeding in anyway to levy upon or collect from the plaintiff the fine of $200
mentioned in the plaintiff's complaint." This order having been duly served, the
defendant released the vessel, entering at the time, however, into agreement with her
owners, Smith, Bell and Co., to pay the fine if sustained, the Collector apparently
accepting this undertaking to do so in substitution for the vessel seized. He did not
appear in this action, but was in default therein on April 1, on which day an order was
entered making the injunction permanent, and ordering that a writ issue carrying it into
effect.chanroblesvirtualawlibrary chanrobles virtual law library

On May 1, 1903, the United Sates, at the instance of the defendant, began an action in
the Court of Customs Appeals against G.S. Weigall, Smith, Bell and Co., Limited, and the
steamer Loonsang, setting up the facts as to the importation and escaped of the
Chinaman from the Loonsang, and relating the action of the defendant in the premises
as follows:

8. That thereafter, to wit, on or about the 4th day of March 1903, as a penalty for said
breach of the Chinese Exclusion Acts, the said Collector of Customs did, duly, regularly,
and lawfully, in his official capacity, impose administratively upon the said defendant,
G.S. Weigall, a fine in the sum of $200, United States currency, which said fine did then
and there become a lien and upon the said
steamship Loonsang.chanroblesvirtualawlibrary chanrobles virtual law library

9. That thereafter, in consideration of the forbearance of the said Collector to seize the
said steamship, sell her and satisfy the said fine from the proceeds of such sale, the
defendants Smith Bell and Co. Limited, did promise to pay the said
fine.chanroblesvirtualawlibrary chanrobles virtual law library

10. That since the imposition of said fine the said steamship Loonsang has departed
from the Philippine Islands to foreign parts, and there is now no property within the
control of the said Collector of Customs upon which the said fine may be a lien, and that
the whole of said fine is to this day due, payable, and wholly unpaid. "Wherefore, the
plaintiff praised judgment against the defendant, G.S. Weigall, in the sum of $200,
together with the costs of this suit, and that this said defendant may be arrested and
held in the custody of this honorable court until the said fine and costs be paid or
otherwise satisfied.chanroblesvirtualawlibrary chanrobles virtual law library

And further, the said plaintiff prays judgment against the said firm of Smith, Bell, and
Co., in the sum of $200, together with the costs of this
suit.chanroblesvirtualawlibrary chanrobles virtual law library

And further the said plaintiff prays judgment against the said steamship Loonsang that
the said vessel may be arrested and sold, under the direction of this honorable court,
and the proceeds of such sale applied in satisfaction of the fine aforesaid.

At apparently about the same time, in his own name as Collector of Customs of the
Philippine Archipelago, he filed in the Court of Customs Appeals a petition in another
proceeding against Byron S. Ambler, who was the judge of First Instance by whom the
injunction had been granted, and against the plaintiff, G.S. Weigall, praying for a writ of
prohibition enjoining them from any further steps in this action. It seems that this writ
was granted and served upon Judge Ambler as he was about leaving the Islands, but the
defendant did not seek to further enforce against him any
way.chanroblesvirtualawlibrary chanrobles virtual law library

Thereafter proceedings were taken in this action against this defendant for contempt in
violating Judge Ambler's injunction order, in the course of which the following testimony
was given by him:

The Attorney-General did not advise me that I had no defense in regard to this
injunction. I never discussed that with him. He did not advise me that I had no defense;
He advised me that I had no jurisdiction the fine
administratively.chanroblesvirtualawlibrary chanrobles virtual law library

I consulted with the Attorney-General as to the propriety of my action in imposing this

fine on the Loonsang administratively. He stated that his opinion had been that I was
authorized and had been authorized to impose those fines; that had been the opinion of
Secretary Ide; that General Wright had a different opinion on the question, and that the
matter had never been settled between this members of the Commission except, that
he, Attorney-General Wilfley, had reached the conclusion that those fines could not be
administratively imposed and that they should be enforced in court. I did not argue with
him on the matter very long. I pointed out to him the fact that the Act of Congress of
April 29 had failed to provide machinery for the enforcement of the laws thereby
enacted, and I told him that my opinion was that those fines were enforceable
administratively. We separated with that difference of opinion. . . . I would like to make
a certain short statement to the effect that after the receipt of the preliminary injunction
in this case, I immediately gave orders to my subordinate to release the
vessel Loonsang from detention in which I was then holding her for the collection of this
fine, with strict orders not to hold her or in any way interfere with her on any of her
subsequent arrivals at this port, so far as the collection of this fine might be concerned. .
. . I will state that the steamer had been ordered detained by me some days prior to the
receipt of the preliminary injunction. . . . The act of seizure simply means that the vessel
can not leave this Islands without clearance. Upon receipt of the preliminary injunction
in this case, I consulted the Attorney-General as before stated, and I took other legal
advice, to wit, the honorable Acting Secretary of Finance and Justice, who advice me
that in his opinion the Court of First Instance, Judge Ambler in particular, was wholly
without jurisdiction to issue said order; that the question of reviewing my acts as
Collector of Customs lay solely with the Court of Customs Appeals, and he himself drew
up a bill of exceptions which I had presented to the Court of Customs Appeals in the
form of a petition for a writ of prohibition against the Hon. Judge Ambler, restraining him
from interfering with me in the collection of that
fine.chanroblesvirtualawlibrary chanrobles virtual law library

I have taken further advice in the matter of my duties under the Customs
Administratively Act and under Act No. 653 of the Commission, and have been advised
that this Honorable Court was without jurisdiction to issue the temporary or permanent
injunction which it did; that the court of Customs Appeals had and has sole and
exclusive jurisdiction over any exaction or attempted exaction by me as Collector of
Customs. . . . In pursuance in that advice, I instituted proceedings in the Court of
Customs Appeals, as suit under Act No. 653 of the Commission. . . . I understood the
judgment (in the present action) would go by default and it was upon the advice of the
Attorney-General that I should let it go by default and let the injunction become
permanent.

Upon this testimony, and all the proceedings in the case of Judge Sweeney, of the Court
of First Instance made an order on May 18, 1903, adjudging the defendant in contempt
of court, fining him the sum of 500 Mexican dollars, and directing him to dismiss the
aforesaid two suits pending in the court of Customs Appeals, or in the event of
noncompliance, to be committed to prison until the order should be
fulfilled.chanroblesvirtualawlibrary chanrobles virtual law library

The appellant challenges the validity of the order imposing the fine, claiming it to be
wholly void for lack of power in the Court of First Instance over the subject matter, so
that he can not be punished for refusing to obey it. That an order, void for want of
jurisdiction may be disobeyed without incurring contempt, appears to be settled by
decisions of the Supreme Court of the United States. In Ex parte Rowland (104 U.S.,
604), a case of disobedience of County commissioners to a mandamus of the United
States Circuit Court, a matter which lay within it general cognizance, Chief Justice Waite
said, at page 612:

. . . But if the command was in whole or in part beyond the power of the court, the
writ, or so much as was in excess of jurisdiction, was void, and the court had no right in
law to punish for any contempt of its unauthorized requirements. Such is the settled rule
of decisions of this court. Ex parte Lange, 18 Wall., 163; Ex parte Parks, 93 U.S. 18 Ex
parte Siebold, 100 id., 371; Ex parte Virginia, id., 339.

For more recent authorities see: Ex parte Fisk (113 U.S. 713); In re Ayers et al. (123
U.S., 443); In re Sawyer (124 U.S., 200); U.S. Shipp (203 U.S.,
563).chanroblesvirtualawlibrary chanrobles virtual law library

We have, therefore, to inquire whether the court had jurisdiction. Under section 9 of the
act of Congress of July 1, 1902, the courts of record of the Philippine Islands were
confirmed in such jurisdiction as they then possessed, together with such as might
thereafter be given them by the Philippine Commission. Section 56 of Act No. 136, which
was then in existence, read, in part, as follows:

Courts of First Instance shall have original jurisdiction -chanrobles virtual law library

1. In all civil actions in which the subject of litigations is not capable of pecuniary
estimation;chanrobles virtual law library

2. In all civil actions which involve the title to or possession of real property, or any
interest therein, or the legality of any tax, impost, or assessment, except actions of
forcible entry into, the detainer of lands or buildings, original jurisdiction of which is by
this Act conferred upon courts of justice of the peace;chanrobles virtual law library

3. In all cases in which the demand, exclusive of interest, or the value of the property in
controversy, amounts to one hundred dollars or more;

xxx xxx xxx

6. In all criminal cases in which a penalty of more than six months' imprisonment or a
fine exceeding one hundred dollars may be imposed.

Under this ample grant of jurisdiction in both general and specific terms, the Court of
First Instance may entertain this controversy unless its capacity to do so has since been
taken from it by statute.chanroblesvirtualawlibrary chanrobles virtual law library

The appellant contends that such is the effect of the Chinese Exclusion Acts of Congress,
as they stood in March, 1903, considered in connection with the laws of the Philippine
Commission providing for their local enforcement in the Islands by customs officials and
the late Court of Customs Appeals.chanroblesvirtualawlibrary chanrobles virtual law
library

By Act No. 355 of the Philippine Commission, known as the Philippine Customs
Administrative Act, passed February 6, 1902, it was provided that the general powers of
the customs service should embrace the execution of the laws relating to immigration.
(Sec. 3, subdivision 9.) The Congressional Exclusion Act of May, 6, 1882, amended in
1884, 1888, 1892, 1893, 1894, 1900, and 1901, and administered in the United States
successively by the customs officers, by the commissioner of Immigration, and by the
Secretary of Commerce and Labor, was, by the Act of April 22 [29], 1902, expressly
extended to the Island territory, section 2 providing that rules for its enforcement should
be made by the Secretary of the Treasury.chanroblesvirtualawlibrary chanrobles virtual
law library

In the absence of any such rules, the result of this legislation is that upon the Collector
of Customs is cast the duty of carrying out both immigration and exclusion laws. ( In
re Allen, 2 Phil. Rep., 630; U.S. vs. Almond, 6 Phil. Rep., 306.) And the construction
which the collector appears to have adopted and acted upon was that, while the
substantive law which he had to enforce was to be found in the Congressional Acts, his
procedure was to be regulated by the customs laws of the Commission. The
Congressional Act of May 6, 1882, as amended by the Act of July 5, 1884, reads in part
as follows;

SEC. 2. That the master of any vessel who shall knowingly bring within the United States
on such vessel, and land, or attempt to land or permit to be landed any Chinese laborer,
from any foreign port or place, shall be deemed guilty of a misdemeanor, and, on
conviction thereof, shall be punished by a fine of not more than five hundred dollars for
each and every such Chinese laborer so brought, and may also be imprisoned for a term
not exceeding one year.chanroblesvirtualawlibrary chanrobles virtual law library

SEC. 10. That every vessel whose master shall knowingly violate any of the provisions of
this act shall be liable to seizure and condemnation in any district of the United States
into which such vessel may enter or in which she may be
found.chanroblesvirtualawlibrary chanrobles virtual law library

SEC. 11. That any person who shall knowingly bring into a cause to be brought into the
United States by land, or who shall aid or abet the same, or aid or abet the landing in
the United States from any vessel, of any States, shall be deemed guilty of a
misdemeanor, and shall on conviction thereof, and imprisoned for a term not exceeding
one year.chanroblesvirtualawlibrary chanrobles virtual law library

SEC. 16. That any violation of any of the provisions of this act, or of the act of which is
amendatory, the punishment of which is not otherwise herein provided for, shall be
redeemed a misdemeanor, and shall be punishable by a fine nor exceeding one
thousand dollars, or by imprisonment for not more than one year, or both such fine and
imprisonment.

It must be noted that this Act remained in force, notwithstanding its conditional repeal in
the Act of September 13, 1888, for two reasons, first, the condition of that repeal, which
was the ratification of the treaty then pending, was never fulfilled because of the
nonacceptance of that treaty by China, and, second, it was expressly recognized and
continued by section 3 of the subsequent Act of October 1, 1888. In the other hand,
while certain sections of the intervening Act of September 13, 1888, have been
recognized and restored by the Act of April 22 [29], 1902, it has been authoritatively
held that section 12, making the decision of the Collector final as to certain matters,
never went into effect, (Li Sing vs. U.S., 180 U.S., 486.) Moreover, section 1 of the Act
of April 22 [29], recognizing the Act of September 13, 1888, also in terms reenacts and
continues the other Chinese exclusion laws then in force, which necessarily includes the
Act of July 5, 1884. But it is were not so and the latter was repealed by the Act of
September 13, 1888, we find in that Act provisions substantially equivalent to those in
the Act of 1884 for the prosecution of
misdemeanors.chanroblesvirtualawlibrary chanrobles virtual law library

From the Philippine Customs Administrative Act, upon which the defendant relies for his
justification, he cites numerous sections many of which it is unnecessary to consider for
the reason that they are incapable the present case, being by their terms restricted by
the subject-matter dealt with therein, chiefly relating to "imported merchandise" and the
"importers" thereof, or to "customs duties," or to fines, penalties and forefeitures"
prescribed in that Act. (Secs. 286, 287, 288, and 313.) Section 290, however, which is
more general terms, sufficing to fairly raise the question, reads as follows:

Whenever a collector of customs shall administratively impose any fine or penalty, or

decree any forefeiture or confiscation, the person against whom such fine, penalty, or
forfeiture of confiscation has been adjudged by the collector for the Philippine
Archipelago, and his decision, either as collector of the port of Manila, or on appeal, shall
be final, except in cases wherein the amount of the fine or penalty, or the value of the
property forefeited or confiscated, shall exceed five hundred dollars, in which case an
appeal may be taken therefrom to the Court of Customs Appeals in the manner provided
in the three preceding sections. In case of such appeal, the Court of Customs Appeals
shall proceed to determine the issue, as is provided in case of other appeals in the
preceeding sections.

Obviously, this section can have no application to the fine upon this plaintiff, and can
afford no defense or excuse to the defendant, unless that fine was one to be imposed
administratively.chanroblesvirtualawlibrary chanrobles virtual law library

In view we take of this case, it is unnecessary to go into the question of the

constitutionally of such fines to be imposed, enforced, and collected by an executive
officer without the intervention of the courts. But by passing over the point we do not
mean to be understood as intimating that such a procedure constitutes due process of
law. The Chinese exclusion acts afford and most extreme instances of final
administrative adjudication sustained as such process, and a number of apposite
examples may be found in the decisions cited in the case of the United States vs. Ju Toy
(198 U.S., 253).chanroblesvirtualawlibrary chanrobles virtual law library

The fine to be imposed upon the plaintiff and his vessel in the present instance was not
one for the administrative action because it had to be laid and enforced in accordance
with the law of Congress its being and which had authorized no such action. The error of
the defendant had root in the notion, expressed in his testimony "that the Act of
Congress of April 29, had omitted to provide machinery for the enforcement of the laws
thereby enacted." That notion overlooked that fact that the usual machinery for the
enforcement of the laws is found in regularly constituted courts and involved the strains
assumption that the status that the terms of the Acts of Congress adequate to the home
territory of the United States where not specific enough to be carried out in this Islands.
Those acts did, impliedly, if not explicitly, provide for the manner of their enforcement,
and in that respect were not open for amendment for the Philippine Commission, and we
assume that it was no part of intention of that Commission to amend them or
supplement them by any legislation at variance with
them.chanroblesvirtualawlibrary chanrobles virtual law library
It is impossible to read section 2 and 10 of the Acts of 1884, hereinbefore quoted of
section of the Act of September 13, 1888, and entertain a doubt that they contemplate
the action of the courts. The phrase "a conviction for dismeanor." In section 2, as well as
the words "a condemnation" in section 10 of the Acts of 1884, can have no other
application as there is no other way known to the law of securing a conviction for
dismeanor or a condemnation in a United States district. These provisions enter into the
nature of the offense declared by the Act, and our inseparable from it. They defined the
prohibited Acts as misdemeanor which always punishable in the courts, and refer to
conviction and condemnations therein. To qualify them by transferring the jurisdiction
under the statute from the courts in which they were vested to administrative officers,
would be to essentially change them, to affect the nature of their penalties, and in
varying, to contradict the terms of the statute. Our jurisprudence has not yet recognize
the jurisdiction of a collector or any other administrative officer, a punish for
misdemeanor.chanroblesvirtualawlibrary chanrobles virtual law library

The contention of the appellant requires that we should give in substance this effect to
the Customs Act of the Commission, that this we are unable to do. Misdemeanors under
the Congressional Act were punishable, and its forefeiture were enforcible, only in the
way therein directed, in the regularly constituted courts of law having jurisdiction in the
Islands, and it was not competent for the local legislature to change in this respect the
scheme of Congress. Consequently, the appellant had no power to impose the fine or
seize the vessel. His act in doing so was an illegal one which the Court of First Instance
had the right to restrain, and its injunction was binding upon
him.chanroblesvirtualawlibrary chanrobles virtual law library

It is contended, however, that the objectionable administrative feature of the scheme

was done away with by an Act No. 653 of the Commission, passed on the very of the
seizure of the Loonsang. Prior to its passage, sections 344 and 345 of the Philippine
Customs Administrative Act provided for a report by "the collector to the proper
prosecuting officer," all fines, penalties, and forefeitures. . . . not collectible by him by
reason of the nature of the statutory provision authorizing the same or by reason of
there being no property under the control of the collector". . . and for a prompt suit or
prosecution therefore by such officer.chanroblesvirtualawlibrary chanrobles virtual law
library

Act No. 653, in section 1, amending section 344, omitting the report of the prosecuting
officer, adds the words -

In such cases the decision of the collector upon the question of whether there is or is not
property under his control, upon which the lien for such liability can be enforced shall be
final.

Section 2 amends section 345 so as to read as follows:

SEC 345. The Collector of Customs for the Philippine Archipelago, upon receiving such
report of the Collector shall cause suit of prosecution to be commenced without delay for
the fines, penalties, and other forfeiture by law in such cases provided in the Court of
Customs Appeals, which court is hereby given jurisdiction to enforce the fines, penalties,
and forfeitures against the persons upon whom the same whether imposed by ordering
in prisonment at hard labor of the guilty person until such fines, penalties, or
forefeitures have been paid or otherwise lawfully satisfied. The sentence shall provide
that, if the fines, penalties, and forfeitures is not paid, the imprisonment shall continue a
sufficient number of days to pay the same, with lawful costs, at the rate of not less than
twenty cents, in money of the United States, per day, for its day's in prisonment. The
costs of prosecution shall be added to the fines, penalties, and forfeiture ordered. The
rate to be allowed for its day's imprisonment shall be fixed by the court in its judgment.

It is urged that, this amendment transferring from the Collector to the Court of Customs
Appeals final jurisdiction in such cases operated to restore them to the cognizance of the
courts, thus ridding the procedure of its administrative character and simply constituting
another court for their prosecution. Such have been the revised view of the defendant,
as shortly thereafter, instead of proceeding to administratively enforce his fines, seizure,
and forefeiture, he began an action, in his official character, for that purpose in the
newly constituted tribunal. This court, of unique constitution and power, has long since
passed out of existence. During its short life, however, it appears to have been endowed
with amptly authority, in general, so far as the same lay within the gift of the Philippine
Commission, to entertain such controversy as the defendant thus brought before it. (Act
No. 355, secs. 289 and 290 and Act No. 653.)chanrobles virtual law library

The defect of an argument is that it loses sight of the incident that the fine was not
imposed by the court, but in the first instance by the Collector, and it was to enforce his
fine, already laid, and his seizure, and that suit was brought in the Court of Customs
Appeals. The original administrative act imposing the fine having, as we have already
seen, been invalid, the proceeding based upon it can not stand. This customs court
might have given power to enforce the provisions of the Chinese Exclusion Act in
accordance with the law of Congress, but such was not the scope of the acts of the
Commission, nor such the procedure attempted in this
case.chanroblesvirtualawlibrary chanrobles virtual law library

In order to justify his contemptuous acts, it did not suffice for the defendant to show
jurisdiction in the Court of Customs Appeals over the subject matter, but in addition
thereto that the grant thereof was exclusive; otherwise, the Court of First Instance
would not have been deprive of its preexisting statutory power. It can not be denied that
such was the support of Act No. 653, which, if it could be sustained, would have ousted
courts of first instance in this islands of their jurisdiction over customs cases which they
possessed, of the time of the passage of the Act of Congress. That, however, it was not
competent for the Philippine Commission to do. The powers of the courts of record as
fixed by the Act of Congress lay beyond its reach. Under the law, the Philippine
Commission might increase, but it could not decrease them. The gift of Congress the
local legislature can not take away. Section 9 of the Act of July 1, 1902, above referred
to, reads, in part, as follows:

That the Supreme Court and the Courts of First Instance of the Philippine Islands, shall
possess and exercise jurisdiction as heretofore provided and such additional jurisdiction
as shall hereafter be prescribed by the government of said Islands, subject to the power
of said Government to change the practice and method of procedure.
It is too plain for argument that a law stripping the Supreme Court and Courts of First
Instance of their jurisdiction in particular class of cases goes far beyond a change in
practice and method of procedure.chanroblesvirtualawlibrary chanrobles virtual law
library

Therefore, so much of Act No. 653 of the Commission as attempts to confer upon the
Collector of Customs or the Court of Customs Appeals exclusive jurisdiction any cases
theretofore cognizable in the courts of record, was ineffective. As already pointed out,
preexisting Acts gave the Collector and Customs court no such exclusive jurisdiction in
Chinese exclusion cases which were cognizable in the ordinary tribunals of justice, and
for this reason, as well as because it was not competent for the Philippine Commission to
change the Act of Congress by substituting an administrative for a judicial procedure,
the Court of First Instance had power to impose to impose its order of May 18, 1903,
and the defendant is in contempt for his violation
thereof.chanroblesvirtualawlibrary chanrobles virtual law library

The order enjoined upon him to absolutely desist and refrain from further proceeding in
any way to levy upon or collect from the plaintiff a fine of $200 mentioned in the
plaintiff's complaint. Although the defendant testifies that after this order he directed the
vessel released, nevertheless, he thereafter instituted the two actions in the court of
Customs Appeals, in one of which the seizure and fine were made the basis of the relief
prayed for, and judgment was prayed against the firm Smith, Bell and Co., who could
have made liable only by virtue of their agreement, substituting their personal
responsibility for the vessel seized. Moreover, the testimony of the defendant shows that
he took his stand upon the validity of this fine, which he asserted and continued to
enforce.chanroblesvirtualawlibrary chanrobles virtual law library

The maintenance of public order and the existence of the commonwealth itself, depend
upon the enforcement of the mandates of the courts and require a prompt obedience to
them, not only by private citizens, but in a special manner of the Government officers
who are particularly charged with a knowledge of the law and with the duty of obeying
it. Were this a case of resent origin or of existing vitality, we should deem the fine
imposed by the lower court a scant vindication of the law. Controversy, however, has
lost its present interest. The Court of Customs Appeals has been abolished, the customs
laws have been amended and the trouble arose at the time when, in the organization of
the local government, great confusion existed as to the rights and duties officials under
the untried and sometimes conflicting statues of the new sovereignty. Taking this
circumstance into consideration, and also the fact that the defendant, in apparent good
faith and at the instance of the superior officer was endeavoring to carry out his duty as
he understood it, we reduced the fine imposed upon him to P200, to be paid within
twenty days. The Collector is also ordered within that time to do any acts necessary to
release his lien upon the vessel Loonsang, or his claims against the substitute sureties
therefore, and to discontinue any proceedings or action pending for the enforcement
thereof. So ordered.

ON MOTION FOR REHEARING

November 18, 1908,chanrobles virtual law library

TRACEY, J.:

The appellant presents a petition for a rehearing, supported a lengthy brief signed by
the Solicitor-General, now appearing for the first time in the case, in which the principal
ground of the motion is stated as follows:

The court erred in holding that the Court of First Instance of Manila had jurisdiction to
review in any form the official acts of the Insular Collector of Custom, in view of the
plain wording of act number 355 of the Philippine Commission and acted February 6,
1902, giving said jurisdiction exclusively to the Court of Customs Appeals created
thereby, which said Act. No. 355 was subsequently confirmed by Act of Congress of the
United States July 1,1902, known as the Philippine Bill.

First. The argument based upon the fact that in as much as the Philippine Customs
Administrative Act was already in existence when the Act of Congress of July 1, 1902,
was passed, the confirmation by that Act of the preexisting powers of Courts of First
Instance was subject to such qualification thereof as were already contained in the
Customs Act.chanroblesvirtualawlibrary chanrobles virtual law library

This argument entirely misses the point of this part of the decision, which was to the
effect that exclusive powers of review in Chinese exclusion cases were conferred upon
the Customs Appeals, not by the original Customs Act of February 6, 1902, but by the
amendatory Act No. 653, passed March 4, 1903. The contention of the appellant was to
the contrary rests upon the extension of the words "exactions other than duties,: and,
"all fees and exactions of whatever character," in sections 286 and 287 of the Customs
Administrative Act, so as to include exactions made by the Collector not only in customs
cases but in those arising under the exclusion law. This, decision held, was not an
admissible construction, for the reason that the general words quoted must, according to
the settled rules of statutory interpretation, be referred to the subject-matter of the
section in which they occur, and these sections were concerned with duties, charges,
and exactions upon imported merchandise only, and did not even touch upon
immigration or exclusion matters, nor refer to fines, penalties, and forfeitures. What the
collector imposed in this case comes under the head of fines, penalties, forfeitures,
which are regulated, not by sections 286 and 287, by section 344 of the
Act.chanroblesvirtualawlibrary chanrobles virtual law library

Under the original Act his procedure pursuant to this section was not exclusive either in
himself or in the Court of Customs Appeals, but, on the contrary, as pointed out in the
decision, the facts constituting an alleged offense were required to be referred by him
"to the proper prosecuting officer of the district in which such fine, penalties or
forfeitures were incurred or imposed," to be prosecuted by him in the courts. The extent
of the exclusive jurisdiction of the Court of Customs Appeals prior to the passage of Act
No. 653 is defined in section 288 as follows: "The remedy by the appeal to the Court of
Customs Appeals is exclusive of all relating to the customs outside duties, or the
administration thereof." Consequently, the jurisdiction of the Collector and Court of
Customs Appeals, to the exclusion of the Courts of First Instance in Chinese exclusion
case, was not the law of the Archipelago on the date of the passage of the Act of
Congress of July 1, 1902.chanroblesvirtualawlibrary chanrobles virtual law library
Second. The motion appears to overlook that ground of the decision which is therein
stated to be, "that it was not imposed by the court, but in the first instance by the
Collector and it was to enforce his fine, already laid, and his seizure, that suit was
brought in the Court of Customs Appeals. The original administrative act imposing the
finding having . . . been invalid, the proceeding based upon it can not stand."chanrobles
virtual law library

Third. The motion of the learned Solicitor-General assumes that Act No. 355 of the
Philippine Commission was subsequent by the Act of Congress of the United States of
July 1, 1902.chanroblesvirtualawlibrary chanrobles virtual law library

That Act of Congress confirms certain specified actions of the President of the United
States in relation to the Islands, and among them the adoption of the original tariff
under the order of July 12, 1898, with is amendments. To this added the clause, "and
the actions if the authorities of the Government of the Philippine Islands, taken in
accordance with the provisions of said order and subsequent amendments are hereby
approved: Provided, That nothing contained in this section shall be held to amend or
repeal an Act entitled "An act temporarily to provide revenue for the Philippine Islands,
and other purposes," approved March, eight, nineteen hundred and two."chanrobles
virtual law library

This approval of the actions of the authorities of the Islands, "taken in accordance with
the provisions of said order and subsequent amendments," falls far short of a ratification
of the legislative details of the independent Act known as "The Philippine Customs
Administrative Act." The specification of certain actions of local officers in compliance
therewith excludes any assumption of general approval of the legislative Acts of the
Commission by this Act of Congress upon the principle " inclusio unius est exclusio
alterius."chanrobles virtual law library

Fourth. As a partial justification for a reduction of the fine originally imposed upon the
appellant we adverted to the "apparent good faith" of the Collector and to the
circumstance that he was acting "at the instance of a superior officer."chanrobles virtual
law library

He now presents this in the light of a finding of fact, on the strength of which he claims
to be exonerated from all responsibility. Even if he viewed as a finding of fact, it must be
read in relation with the other facts recited in the decision as quoted therein from his
own testimony, from which it appears, among other thing, that in imposing and
enforcing this fine he deliberately rejected the advice of the Attorney-General, the
legally constituted counsel of State officers in such matters, and that he was aware of
the obligation of the injunction. It may be added that upon the hearing this additional
question was put to him:

Did the Attorney-General express the opinion to you that final order was binding upon
you?

To this he answered:
I do not recall that he expresses his opinion in those words. It was not discussed with
the Attorney-General, because I considered myself just as well as aware of the binding
in effect of an order as the Attorney-General is. I never doubted that it was binding upon
me, so I do not believe the question came up.

This statement leaves nothing to inference in respect of the knowledge and deliberation
with which Judge Sweeney's injunction was
violated.chanroblesvirtualawlibrary chanrobles virtual law library

The case fairly presents a Federal question and therefore may be carried to a higher
tribunal, but this court finds no reason for changing its opinion heretofore expressed.
The motion for a rehearing is denied, but without costs
 EN BANC

G.R. No. L-6765 May 12, 1954

FULGENCIO VEGA and LEON GELLADA, Plaintiffs-Appellees, v. THE MUNICIPAL

BOARD OF THE CITY OF ILOILO, ET AL., ETC., Defendants-Appellants.

Luis G. Hofile�a for appellees.

Filemon Resurecion for appellants.

CONCEPCION, J.:

This is an action for a declaratory relief (under Rule 66 of the Rules of Court) to test the
validity of Municipal Ordinance No. 35 of the City of Iloilo, enacted on July 13, 1951,
which provides:

SECTION 1. No motor vehicle, for public or private use, with the exception of those
owned and operated by the Republic of the Philippines, the Provinces of Iloilo, Capiz and
Antique, and the municipalities thereto appertaining, the City of Iloilo, and those new
motor vehicles offered for sale by dealers, but not used for transportation purposes by
such dealers, shall use any street, road or highway within the territorial limits of the City
of Iloilo without being provided with certificate issued by the Traffic Division of the Police
Department of this City, stating that said vehicle has been inspected by said Traffic
Division, and found to be provided with safe brakes and appurtenances making the use
of the same travel worthy and sale for passengers and pedestrians alike. The certificate
shall be attached or posted in a conspicuous place in the corresponding motor vehicle,
preferably on the windshield glass facing the front.chanroblesvirtualawlibrary chanrobles
virtual law library

SECTION 2. All owners and/or operators of the motor vehicles hereinabove mentioned
must submit his motor vehicles for inspection by the Traffic Division of the Police
Department of this City within ten days upon acquisition of the same from the original
owner, and within the period from January 1 to February 28, and from July 1 to August
30 of each year if the same has previously been inspected and certified to be travel
worthy by said Traffic Division.chanroblesvirtualawlibrary chanrobles virtual law library

SECTION 3. For the services rendered by the Traffic Division in the inspection and
certification of any motor vehicle the owner or operator of the same shall pay to the City
Treasurer a fee as follows:

For every automobile, jeep, jitney or station wagon for each semester P3.00
For every truck per semester 5.00
For every motorcycle per semester 1.00

Provided, however, That no more than two inspection fees shall be charged within one
year and all other inspections on the same vehicle shall be free of
charge.chanroblesvirtualawlibrary chanrobles virtual law library
SECTION 4. All motor vehicles coming from outside of the territorial limits of this City for
the first time shall immediately report for inspection to the Traffic Division, and the
permanent of the required fee may be made within ten days from the date of said
inspection, and the issuance of the certificate shall not be delayed for non-payment
when and if said motor vehicles are found to be travel worthy and a sufficient personal
bond for the payment of the required fee is filed with and accepted by the Chief of Police
or his authorized agent.chanroblesvirtualawlibrary chanrobles virtual law library

SECTION 5. Failure to comply with the provisions of this ordinance shall be punished
with a fine not less than ten pesos (10.00) but not more than two hundred (P200.00) or
an imprisonment not exceeding six (6) months, or both fine and imprisonment at the
discretion of the Court.chanroblesvirtualawlibrary chanrobles virtual law library

SECTION 6. This ordinance shall take effect upon approval. (Pp 12-15, Record on
Appeal.)

The case was commenced in the Court of First Instance of Iloilo by Fulgencio Vega and
Leon Cellada, who own motor vehicles and are affected by the enforcement of said
ordinance. They question the validity thereof upon the ground that the Municipal Board
of the City of Iloilo - which was made defendant, in addition to the City Mayor - has no
authority to promulgate it. On the motion of the plaintiffs, and without objection on the
part of the defendants, the case was submitted for decision on the pleadings, the only
issue raised therein being one purely of law. Thereafter, said court, presided over by
Honorable Querube Makalintal, then Judge, rendered judgment for the plaintiffs. Hence,
this appeal, taken by the defendants, who maintain that the Municipal Board of the City
of Iloilo is empowered to pass the ordinance in question, under section 21 of its charter,
Commonwealth Act No. 158. The provisions thereof relied upon by the appellants read:

SEC. 21. General powers and duties of the Board. - Except as otherwise provided by law,
and subject to the conditions and limitations thereof, the Municipal Board shall have the
following legislative powers:chanrobles virtual law library

(aa) To enact all ordinances it may deem necessary and proper for the sanitation and
safety, the furtherance of the prosperity and the promotion of the morality, peace, good
order, comfort, convenience, and general welfare of the city and its inhabitants, and
such others as may be necessary to carry into effect and discharge the powers and
duties conferred by this charter; and to fix penalties for the violation of ordinances,
which shall not exceed a fine of two hundred pesos or six months' imprisonment, or both
such fine and imprisonment, for each offense.chanroblesvirtualawlibrary chanrobles
virtual law library

(cc) To regulate any business or occupation and to require license from persons engaged
in the same or who exercise privileges in the city, by requiring them to secure a permit
for a license at the rate fixed by the Municipal Board, and to prescribe the conditions
under which said permits for licenses may be revoked.

The foregoing paragraph (cc) is limited, however, to the power to regulate "any business
or occupation" whereas, obviously, the use of a street, road or highway by a motor
vehicle is neither a business nor an occupation. Hence, it is clear that said paragraph
(cc) is not in point.chanroblesvirtualawlibrary chanrobles virtual law library

As regards paragraph (aa), the same is a counterpart of section 2238 of the Revised
Administrative Code, otherwise known as the "General Welfare Clause" for regularly
organized municipalities. In the case of People vs. Esguerra et al. * (45 Off. Gaz., 4949),
it was held that a municipal council may not validly enact an ordinance "prohibiting,"
among other things, the manufacture, production, sale, barter, giving possession of
intoxicating liquor, the power of said body being limited, by section 2242 (g) of the
Revised Administrative Code, to the "regulation" - which does not include the
"prohibition" - of said acts, and that the police power under the general welfare clause
does not amplify said authority or remove the limitation thus imposed by specific
provision of law. Under Commonwealth Act No. 158, the authority of the Municipal Board
of the City of Iloilo in relation to motor vehicles, is found in subdivision (m) of section 21
of said Act which grants said board the power:

(m) To tax motor and other vehicles, notwithstanding provisions to the contrary
contained in Act Numbered Thirty-nine hundred and ninety-two, and draft animals not
paying any national tax: Provided, however, That all automobiles and trucks belonging
to the National Government or to any provincial or municipal government, and also
automobiles or trucks not regularly kept in the City of Iloilo shall be exempt from such
tax.

This power of taxation is distinct and different from the police power, under which,
appellants claim, the ordinance in question was allegedly approved. Moreover, said
Commonwealth Act No. 158 explicitly empowers the Municipal Board of the City of Iloilo
to require inspection and to charge fees therefor in certain specified cases. Thus, said
section 21 authorizes said board:

(n) To regulate the method of using steam engines and boilers, other marine or
belonging to the Federal or National Government; to provide for the inspection thereof,
and a reasonable fee for such inspection, and to regulate and fix the fees for the licenses
of the engineers engaged in operating the same. (Emphasis supplied.)

x x x           x x x           x x xchanrobles virtual law library

(s) To regulate the inspection, weighing, and measuring of brick, coal, lumber, and other
articles of merchandise.chanroblesvirtualawlibrary chanrobles virtual law library

(t) . . . to provide for the inspection of, fix the license fees for and regulate the openings
in the same for the laying of gas, water, sewer, and other pipes, the building and repair
of tunnels, sewers, and drains, and all structures in and under the same, and the
erecting of poles and the stringing of wires therein; . . .

x x x           x x x           x x xchanrobles virtual law library

(w) To regulate, inspect, and provide measures preventing any discrimination or the

exclusion of any race or races in or from any institution, establishment, or service open
to the public within the city limits or in the sale and supply of gas or electricity, or in the
telephone and street-railway service; to fix and regulate charges therefor where the
same have not been fixed by laws of the National Assembly; to regulate and provide for
the inspection of all gas, electric, telephone, and street-railway conduits, mains, meters,
and other apparatus, and provide for the condemnation, substitution or removal of the
same when defective or dangerous.

Among these cases, the inspection of motor vehicles and the collection of fees therefor is
not included. Consequently, the power to authorize same must be considered denied
under the principle expressio unius est exclusio alterius. chanrobles virtual law library

Indeed, the powers enumerated in said section 21 of Commonwealth Act No. 158,
including, therefore, the police power under the general welfare clause therein
incorporated, are granted "except as otherwise provided by law and subject to the
conditions and limitations thereof." In this connection, section 70 (b) of Act No. 3992, as
amended by section 17 of Republic Act No. 587, positively ordains that:

No other taxes or fees than those prescribed in this Act shall be imposed for the
registration or operation or on the ownership of any motor vehicle, or for the exercise of
the profession of chauffeur, by any municipal corporation, the provisions of any city
charter to the contrary notwithstanding: Provided, however, That any provincial board,
city or municipal council or board, or other competent authority may exact and collect
such reasonable and equitable toll fees for the use of such bridges and ferries, within
their respective jurisdictions, as may be authorized and approved by the Secretary of
Public Works and Communications, and also for the use of such public roads, as may be
authorized by the President of the Philippines upon recommendation of the Secretary of
Public Works and Communications, but in none of these cases, shall any toll fees be
charged and collected until and unless the approved schedule of tolls shall have been
posted legibly in a conspicuous place at such toll station.

The qualification "the provisions of any city charter to the contrary notwithstanding"
leaves no room for doubt that the provisions of Commonwealth Act No. 158 and its
general welfare clause, under section 21 (aa), are subject to the limitations thus
imposed by Act No. 3992, as amended by Republic Act No. 587. This construction
becomes even more imperative when we consider that, pursuant to said Act No. 3992,

No motor vehicle shall be used or operated on, or upon any public highway of the
Philippine Islands unless the same is properly registered for the current year in
accordance with the provisions of this Act. (Sec. 5 [a]),

and that section 4 of the same Act places the Director of Public Works "in charge of the
administration" of its provisions, and grants him, among others, the power

(h) . . . at any time to examine and inspect any motor vehicle, in order to determine
whether the same is unsightly, unsafe, overloaded, improperly marked or equipped, or
otherwise unfit to be operated because of possible danger to the chauffeur, to the
passengers, or the public; or because of possible excessive damage to the highways,
bridges or culverts. (Sec. 5, Act No. 3992.)
Thus, the power to determine whether a motor vehicle is in such a condition as to be
safe for its passengers and the public in general, is vested by Act No. 3992 in the
Director of Public Works. Considering the general tenor of the provisions of said Act, as
well as those of the charter of the City of Iloilo, we are not prepared to hold that
Congress intended to clothe the latter with authority to impose certain requirements - in
addition to those provided in Act No. 3992, as amended - as a condition precedent to
the use of motor vehicles within the limits of the City of Iloilo. It is even harder to
believe that the latter was sought to be invested with authority to ordain that the police
department of Iloilo shall check whether an officer of the National Government, namely
the Director of Public Works, has complied with his duty to test the mechanical
proficiency of the safety devices of motor vehicles, on which the latter is supposed to be
better qualified.chanroblesvirtualawlibrary chanrobles virtual law library

Municipal corporations in the Philippines are mere creatures of Congress. As such, said
corporations have only such powers as the legislative department may have deemed fit
to grant them. By reason of the limited powers of local governments and the nature
thereof, said powers are to be construed strictly and "any doubt or ambiguity arising out
of the term used in granting" said powers "must be resolved against the municipality. . .
. (Cu Unjieng vs. Patstone, 42, Phil., pp. 818, 830; Pacific Commercial
Co. vs. Romualdez, 49 Phil., pp. 917, 924; Batangas Transportation Co. vs. Provincial
Treasurer of Batangas, 52 Phil., pp. 190, 196; Baldwin vs. City Council, 53 Ala., pp.
437; State vs. Smith, 31 Iowa, p. 493; 38 Am. Jur., pp. 68, 72 - 73)." (Icard vs. The
City Council of Baguio and the City of Baguio, 1 46 Off. Gaz., Supplement No. 11, pp.
320, 323.) Accordingly, the lower court did not err in declaring that the ordinance in
question is ultra vires. chanrobles virtual law library

Wherefore, the decision appealed from is hereby affirmed, without special

pronouncement as to costs.chanroblesvirtualawlibrary chanrobles virtual law library
 EN BANC

G.R. No. L-32441             March 29, 1930

DOMINADOR GOMEZ, plaintiff-appellant,
vs.
HONORIO VENTURA, Secretary of the Interior of the Government of the Philippine Islands,
and the
BOARD OF MEDICAL EXAMINERS OF THE PHILIPPINE ISLANDS, defendants-appellees.

Jose Varela Calderon for appellant.

Attorney-General Jaranilla for appellees.

ROMUALDEZ, J.:

In this cause, the plaintiff prays for judgment, as follows:

1. Annulling and setting aside the aforementioned investigation proceedings, and particularly
the decision of the Board of Medical Examiners of the Philippine Islands dated March 30,
1926, forever revoking the plaintiff's license to practice medicine and surgery.

2. Ordering the defendants to restore the plaintiff to his status before the investigation and the
decision of March 30, 1926, that is, as if there had never been an investigation and an adverse
decision.

3. Ordering said defendants to issue in favor of the plaintiff a license for the practice of
medicine and surgery in the Philippine Islands, such as he had prior to the investigation and
adverse decision.

4. Granting the plaintiff any proper legal remedy. (Pages 5 and 6, bill of exemptions.)

The defendants answered with a general denial and prayed that the complaint be dismissed.

After trial the Court of First Instance of Manila dismissed the complaint with costs against the plaintiff.

Counsel for plaintiff contends that the court below erred:

1. In holding that Assistant Fiscal Alfonso Felix of the City of Manila was authorized to appear
and institute administrative proceedings against Dr. Dominador Gomez before the Board of
Medical Examiners of the Philippines.

2. In not holding that Assistant Fiscal Alfonso Felix, of the City of Manila, had personality nor
power to institute administrative proceedings against Dr. Dominador Gomez before the Board
of Medical Examiners of the Philippines.

3. In admitting in its decision that section 9 of Act No. 2381, known as the Opium Law, is valid.

4. In not holding that section 9 of Act No. 2381, known as the Opium Law, is unconstitutional,
and therefore null and void.
 5. In holding that section 9 Act No. 2381, known as the Opium Law, is in force.

6. In not holding that section 9 Act No. 2381 has been repealed, even on the supposition that it
was valid.

7. In rendering the judgment appealed from.

8. In denying the motion for avoidance, and for a new trial, filed by appellant.

The first two assignments of error relate to the validity of the charges against the plaintiff, preferred by
Assistant Fiscal Alfonso Felix of the City of Manila, who, according to the plaintiff is not authorized by
law to file charges with the Board of Medical Examiners, which therefore acquired no jurisdiction over
the matter.

According to section 780 of Administrative Code, as amended by Act No. 3111, the procedure to be
observed in revoking a certificate of registration is the following:

Proceedings for revocation of a certificate of registration shall be begun by filing a written

charge or charges against the accused. These charges may be preferred by any person or
persons, firm or corporation, or the Board of Medical Examiners itself may direct its executive
officer to prepare said charges. Said charges shall be filed with the executive officer of the
Board of Medical Examiners and a copy thereof, together with written notice of the time and
place when they will be heared and determined, shall be served upon the accused or his
counsel, at least two weeks before the date actually fixed for said hearing. (Sec. 12, Act No.
3111.)

The law does not require that the charges be preferred by a public officer or by any specified person;
it even permits the Board of Medical Examiners itself to require its executive officer to prefer said
charges. From the wording of the law we infer that any person, including a public officer, may prefer
the charges referred to in the above-quoted provision. Wherefore, the fact that the charges were filed
by Assistant Fiscal Alfonso Felix of the City of Manila, does not deprive the Board of Medical
Examiners of jurisdiction to hear said charges and to take the proper action according to law.

The appellant contends in his third and fourth assignments of error that section 9 of Act No. 2381 is
null and void on the ground of unconstitutionality, since said section is foreign to the subject of said
Act, in violation of section 3 of the Jones Law prohibiting the enactment of any bill embracing more
than one subject and providing that the subject be expressed in the title of the bill.

Our opinion is that the matter contained in section 9 of Act No. 2381 is not foreign to the end pursued
in said Act, and that in view in the provision of said section it cannot be maintained that Act No. 2381
includes more than one subject. The penalty provided in said section for the physician or dentist who
prescribes opium for a patient whose physical condition does not require the use of said drug, is one
of the means employed by the Legislature to attain the purpose of Act No. 2381, which is, to prohibit
unnecessary use of opium; it is one of the details subordinate to the purpose in view. Such
punishment is not the end contemplated in Act No. 2381, but, as we have just said, it is a means
employed to regulate the use of opium.

In passing said Act No. 2381, the Legislature merely exercised the police power expressly granted by
the Act of Congress of March 3, 1905, for the protection of the health, comfort, and general welfare of
the people of the Philippine Islands.
 ID.; ID.; POWER OF PHILIPPINE LEGISLATURE TO LEGISLATE UPON THE SUBJECT. —
The Philippine Legislature is expressly authorized by the Act of Congress of March 3, 1905, to
adopt legislation upon the importation and sale of opium in the Philippine Islands. The purpose
of such legislation was to protect the health, comfort, and general welfare of the people of the
Philippine Islands. Such legislation was an exercise of the police power of the State. (United
States vs. Wayne Shoup, 35 Phil., 56.)

And, as we have stated, the provisions contained in section 9 of Act No. 2381 relative to the
physicians and dentist are simply detailes and means conducive to the ultimate purpose of said Act,
which details and means need not be stated in the title of the Act for the very reason that properly
speaking, they are not foreign matter.

The general purpose of these provisions is accomplished when a law has but one general
object, which is fairly indicated by its title. To require every end and means necessary or
convenient for the accomplishment of this general object to be provided for by a separate act
relating to that alone, would not only be unreasonable, but would actually render legislation
impossible. (Cooley on Constitutional Limitations, pp. 296-297.)

The constitutional requirement is addressed to the subject, not to the details of the act. The
subject must be single; the provisions, to accomplished the object involved in that subject, may
be multifarious. . . . None of the provisions of a statute will be held unconstitutional when they
all relate, directly or indirectly, to the same subject, have natural connection, and are not
foreign to the subject expressed in the title. As very frequently expressed by the courts, any
provisions that are germane to the subject expressed in the title may properly be included in
the act. (I Sutherland on Stat. Const., par. 118.)

In order to hold that section 9 of Act No. 2381 is unconstitutional on the ground alleged by the
plaintiff, the violation of the constitutional provision must be substantial and manifest. It is not so in the
case at bar.

2. To warrant the setting aside of statutes because their subjects are not expressed in the
titles, the violation of the rule must be substantial and plain. (Posadas vs. Menzi, Decision of
the United States Supreme Court, page 388, No. 11, May 15, 1929, United States Supreme
Court Advance Opinions.)

At all events the validity of this Opium Law, Act No. 2381, has already been upheld by this court, not
only in the above cited case, United States vs. Wayne Shoup, supra, but also in the subsequent case
of United States vs. Jao Li Sing (37 Phil., 211).

Passing to the fifth and sixth assignments of error, wherein counsel for appellant contends that even
granting that section 9 of Act No. 2381 is valid, it was repealed by Act No. 2493 and later by section
780 of the Administrative Code, we note, first, that there is no express repeal of section 9 of Act No.
2381. Secondly, it cannot be held that it has been impliedly repealed, for the reason that the
provisions of section 9, Act No. 2381, are neither contrary to, nor incompatible with, the provisions of
section 780 of the Administrative Code, as amended. Upon this point, we approve and adopt the
following statements made by the trial judge:

Counsel contends, in support of the above, that Act No. 2493 being complete, and "covering
the field" by implication repealed all laws relating to the practice of medicine, powers of the
Board of Medical Examiners and allied matters; hence, the said law, expressly providing the
causes for revocation of medical licenses, necessarily excluded all others, even though
embodied in prior enactments.
 Act No. 310 provided that the Board of medical Examiners could revoke licenses for
"unprofessional conduct," without defining the term. Act No. 1761 (the Opium Law) provided
that illegaly prescribing opium should be cause for revocation of medical licenses. Clearly, the
Opium Law did not repeal Act No. 310. Act No. 2381 — also an Opium Law — in its section 9,
repeated the provision as to doctors and dentists. The repetition did not repeal Act No. 310.
Act No. 2493, section 11 (Ad. Code, sec. 780), provided that certificates of physicians are
revocable for "unprofessional conduct," without defining the phrase. In other words, so far as
revocation of licenses is concerned, Act No. 2493 is mere reenactment of Act No. 310. The
reenactment of the said portion of Act No. 310 did not repeal section 9 of the Opium Law. If
said section 9 has been repealed, it must be by Act No. 3111, which amends Act No. 2493
(Ad. Code, sec. 780), by an addition after the words "unprofessional conduct" of the following:

"The words "unprofessional conduct, immoral, or dishonorable conduct" as used in this

chapter shall be construed to include the following acts: (1) Procuring, aiding or abeting
a criminal abortion; (2) advertising, either in his own name or in the name of any other
person, firm, association, or corporation, in any written or printed paper, or document, of
medical business in which untruthful or improbable promises are made, or being
employed by, or in the service of any person, firm, association or corporation so
advertising, or advertising in any obscene manner derogatory to good morals; (3)
habitual intemperance or addition to the use of morphine, opium, cocaine or other drugs
having a similar effect; (4) conviction of a crime or misdemeanor involving dishonorable
conduct; and (5) willfully betraying a professional secret."

It cannot be seriously contended that aside from the five examples specified there can be no
other conduct of a physician deemed "unprofessional" conduct theretofore deemed grounds for
revocation licenses. The maxim expressio unius est exclussio alterius should be applied only
as a means of discovering legislative intent and should not be permitted to defeat the plain
indicated purpose of the Legislature. It does not apply when words are mentioned by way of
example, or to remove doubts. (See Cyc., 1122.) If, therefore, there exists, "unprofessional
conduct" not specified in the laws, with more reason does the criminal use of opium remain a
specific cause for revocation of license. (Pages 11, 12 and 13, bill of exceptions.)

As to the seventh and eighth assignments of error, we find the judgment and appealed from correctly
rendered, and the motion of avoidance and new trial properly denied.

As the Attorney-General correctly observes, the powers vested in the Board of Medical Examiners to
suspend or revoke a physician's certificate of registration and the authority granted the Secretary of
the Interior of confirming or reversing the decision of said board of examiners, partake of a quasi-
judicial character, that is, involve the use of discretion. For this reason, the exercise thereof cannot be
reviewed by mandamus, which is the nature of this cause on its merits.

As in the case of courts and judicial officers, it is a rule of general application

that mandamus will not lie to review or control the acts of executive officers and boards of
state and federal governments in respect of matters as to which they are vested with
discretion. In other words, they cannot be compelled to act or render a decision in any
particular way, and this is so, even though the exercise of this discretion requires the
construction and interpretation of statutes. Where public officials exercise their discretion, it is
said that their conclusions, although disputable, are impregnable to mandamus. (38 C. J., 659-
660.)

That this action is really a mandamus proceeding, appears clearly from the terms of the complaint
filed herein.
Finding no merit in the assignments of error, the judgment appealed from is affirmed, with costs
against the appellant. So ordered.

EN BANC

G.R. No. L-17803             June 30, 1962

EMILIO MENDENILLA, petitioner-appellant,
vs.
JOSE MANUEL ONANDIA, respondent-appellee.

Somera, Baclig and Savella for petitioner-appellant.

Leandro I. Verceles for respondent-appellee.

BARRERA, J.:

From the decision of the Court of First Instance of Albay (in Civil Case No. 2224 for quo warranto)
declaring respondent Jose Manuel Onandia as the lawful and rightful holder of the office of Chief of
Police of Legaspi City, and entitled to the costs of the suit, petitioner Emilio Mendenilla, interposed
the present appeal.

The facts of the case, which are undisputed, are stated in the decision of the trial court, to wit:

Petitioner Emilio Mendenilla was appointed Chief of Police of the then Municipality of Legaspi,
Albay, on June 21, 1954 by the Municipal Mayor. He was and has always been a second
grade civil service eligible, and a veteran of World War II. The appointment was extended to
him, pursuant to the law then existing and applicable, more particularly under the Municipal
Law embodied in the Revised Administrative Code, by virtue of which, the appointment of the
Chief of Police of a municipality, of which Legaspi was then one at that time, is vested in the
Municipal Mayor. It was approved by the office of the President and by the Civil Service
Commission.

On June 12, 1959, Republic Act No. 2234, otherwise known as the charter of the City of
Legaspi, took effect, which law, converted the former Municipality of Legaspi (s) into the City of
Legaspi (z). Singling out one of the provisions of the aforesaid statute, Section 22, Article V
thereof, provides: "The President of the Philippines, with the consent of the Commission on
Appointments, shall appoint . . . the Chief of Police . . . and other heads of such city
departments as may be created." Thus, under the charter of the City of Legaspi the
appointment of the Chief of Police is now vested in the President of the Philippines.

The petitioner, even beyond the effectivity of Republic Act No. 2234 on June 12, 1959, held the
position of the Chief of Police. On February 5, 1960, the Acting City Treasurer, in a
communication to the petitioner (Exhibit "F"), informed the latter that the payment of his salary
as Chief of Police, was suspended until his duly approved appointment was submitted to his
office. What must have been meant by the "duly approved appointment" was the appointment
of the petitioner by the President of the Philippines, pursuant to the charter. On February 6,
1960, the petitioner, ostensibly acting upon the advice of the Acting City Treasurer addressed
a letter to the President (Exhibit "G"), wherein he applied and solicited the position of Chief of
Police of the City of Legaspi. On February 25, 1960, the petitioner again addressed a letter to
the President (Exhibit "6"), wherein he requested that he be extended the appointment as
Acting Chief of Police, to take effect retroactive to June 12, 1959, to enable him to collect his
salary. On February 26, 1960, the President, through the Executive Secretary, designated the
 petitioner as Acting Chief of Police of the City of Legaspi, which designation, was retroactive to
June 12, 1959, the date of the effectivity of Republic Act No. 2234. He then took his oath of
office as Acting Chief of Police, on March 11, 1960.

On March 15, 1960, respondent Jose Manuel Onandia was nominated Chief of Police of the
City of Legaspi, by the President, Congress then being in session. On March 18, 1960, the
designation of the petitioner as Acting Chief of Police was terminated by the President,
forthwith, the Executive Secretary sent the petitioner a notice of termination, by means of a
telegram and letter (Exhibits "2" and "3", respectively). On the same date March 18, 1960, the
respondent was designated by the President as Acting Chief of Police of the City of Legaspi,
vice the petitioner (Exhibit "1"). He took his oath of office, and assumed the duties of the
position on the same date.

On March 24, 1960, the petitioner filed the present petition for quo warranto, when he was still
supposed to be on official leave of absence. Upon representation of the petitioner, it is stated
in the stipulation of facts that he received the letter and telegram, requesting him to turn over
the office to the respondent, on March 25, 1960. This could not be true, for the reason that he
could not have filed his petition for quo warranto on March 24, 1960, one day before his
alleged receipt. As a matter of fact, the memorandum for the petitioner corrects this, and
admits that the petitioner received such advice on March 24, 1960.

On March 25, 1960, the petitioner turned over the office of Chief of Police to the respondent.
He collected his salary as Acting Chief of Police, from June 12, 1959 to March 30, 1960. On
May 11, 1960, the nomination of respondent Jose Manuel Onandia, as Chief of Police of the
City of Legaspi, was confirmed by the Commission on Appointments. By virtue of his
nomination and confirmation as such, the respondent took his oath of office as regular Chief of
Police, on May 25, 1960, and immediately thereafter, assumed the duties of the position.

On the basis of the above factual findings, the trial court, on October 3, 1960, rendered the decision
above adverted to.

As correctly stated by the trial court in its, decision, the main issue in this case is: who, between the
petitioner and the respondent, is legally entitled to the office of the Chief of Police of the City of
Legaspi. The resolution of said issue necessarily depends on the determination of the question of
what happened to the municipal offices existing at the time of the dissolution of the Municipality of
Legaspi and upon the creation of the City of Legaspi. Stated differently, what legal effect had the
conversion of Legaspi into a city on the municipal offices then existing?

Well-settled is the rule that "the power to create or establish municipal corporations, to enlarge or
diminish their area, to reorganize their governments, or to dissolve or abolish them altogether, is a
political function, which rests solely in the legislative branch of the government and, in the absence of
constitutional restrictions, the power is practically unlimited." (37 Am. Jur, 626; Mcquillin, Municipal
Corporations [3rd Ed] 509-512). In this country, the power to create or abolish municipal corporations
resides in Congress which, under the Constitution, is given general legislative powers (Tiaco v.
Forbes, 228 U.S. 549; Asuncion v. Yriarte, 28 Phil. 67). Municipal corporations are mere creatures of
Congress (Unson v. Lacson, et al., L-7909, January 18, 1957). Municipal corporations are here
created under a general law, i.e., pursuant to the Municipal Law embodied in the Revised
Administrative Code, in the case of municipalities proper, and, under special charters, in the case of
chartered cities. Pursuant to the aforementioned legislative power, Congress enacted Republic Act
No. 2234, otherwise known as the charter of the City of Legaspi, which became effective on June 12,
1959.
With the creation of the City of Legaspi on said date, the legal personality of the Municipality of
Legaspi was extinguished, and the city, which superseded the municipality came into being as a new
legal entity or municipal corporation. The consequent effect of said dissolution, was the abolition of all
municipal offices then existing under the superseded municipality, including that held by petitioner,
save those excepted in the charter itself. Petitioner's appointment of June 21, 1954 by the then
municipal mayor of the municipality of Legaspi, therefore, ceased to have legal force and effect. The
weight of authorities support this view:

The absolute and unconditioned repeal of a municipal corporation without any saving clause,
as to the right of officers under the former charter, abolishes all offices thereunder. The
adoption of a general law or charter abolishes all offices not excepted . . . . (62 C.J.S. Sec.
465.).

Statutory offices may be altered or abolished by the legislature. . . . The same general principle
applies to municipal offices. The may be abolished, extended or vacated by the municipal
authority by which the corporation itself was created . . . . (Mechem, Public Officers, Sec. 465.)

In the absence of a provision to the contrary, the superseding of the old charter by the new,
has the effect of abolishing the offices under the old charter. The general rule is, that the
repeal of a charter destroys all offices under it, and puts an end to the functions of the
incumbents. (People vs. Brown, 83 Ill. 95; People v. Chambers, 78 Ky. 140; Waterlist v.
Colonio, 27 App. Div. 394, 50 NYS 487; Wasloin v. Hillsboro, 48 N.D. 1113, 138 N.W. 738;
Adler v. Honkins, 53 Okla, 177, 124 Pac. 29, cited in McQuillin, Municipal Corporations [3rd
Ed.] 569.)

The only offices expressly excepted from said abolitions were those mentioned in Section 96, Article
XVII of the charter, which reads:

SEC. 96. Change of Government. — The incumbent Mayor, Vice-Mayor and members of the
Municipal Board shall continue in office as the Mayor, Vice-Mayor and members of the
Municipal Board of the City, respectively, until the expiration of their present terms of office.

Applying the principle of "expressio unius, est exclusio alterius" in statutory construction, all municipal
offices including that held by petitioner, in the then municipality of Legaspi not included in the above-
excepted offices were deemed abolished.

Petitioner contends that the office of chief of police of the municipality and that of the city are one and
the same. The argument is not legally tenable. If it were so, Congress would not have recreated and
provided for the office of the chief of police who shall have charge of the police department, under
Section 37 of Republic Act No. 2234.

Petitioner cites the case of Brillo v. Enage (L-7115, March 30, 1954) in support of his theory that there
was no abolition of the municipal offices upon the dissolution of the municipality of Legaspi. But the
cited case is inapplicable. As the trial court correctly observed:

In that case, the petitioner was a Justice of the Peace of the Municipality of Tacloban, having
been appointed by the Governor General (now equivalent to the President of the Philippines)
on November 7, 1921. On June 20, 1952, Republic Act No. 760, otherwise known as the
charter of the City of Tacloban, took effect. It is conceded that Republic Act No. 760, creating
the City of Tacloban, is substantially the same as Republic Act No. 2234, creating the City of
Legaspi. The Supreme Court in the aforecited case said in effect that the creation of the City of
 Tacloban did not have the consequence of abolishing the office of the Justice of the Peace of
the defunct Municipality of Tacloban.

There is no parallel between the office of the Justice of the Peace, which was the crux of the
controversy in the Brillo case, supra, and the position at bar. In the first place, according to the
Supreme Court, in the case herein invoked, the Justice of the Peace is not a municipal official,
he being paid with national funds and is appointed and acts under the supervision of the
national government. Besides, there is no necessity of including in the enumeration of those
officials who will continue to exercise their office, for the law provides that the exercise of said
office shall be until said judge reaches the age of 70 or is incapacitated and he is not affected
by changes in local government." Whereas, in contrast to the Justice of the Peace, the Chief of
Police is a municipal official; that he receives his salary from the municipal coffers; and that he
acts under the supervision of the municipal government. In the second place, the Justice of the
Peace of Tacloban was appointed an June 7, 1921 by the then Governor General (now
President of the Philippines), the Chief Executive of the Philippines at that time. Under the
charter of the City of Tacloban, and also under that of the City of Legaspi, the Municipal Judge
is appointed by the President of the Philippines with the consent of the Commission on
Appointments. There was, therefore, no change in the appointing power of the Municipal
Judge of the City of Tacloban. In the instant case, the petitioner was appointed Chief of Police
of the then Municipality of Legaspi Albay, on June 21, 1954, by the Municipal Mayor. Under the
charter of the City of Legaspi, the appointment of the Chief of Police is now vested in the
President of the Philippines, with the consent of the Commission on Appointments. Here
Congress changed the appointing power. The power of Congress to change the appointing
power of municipal officials, as in this case from the Municipal Mayor to the President, is
absolute for "the legislature has full power and control over municipal officers and the method
of their selection or appointment". (37 Am. Jur. 624). It may be said with telling effect that the
change of the appointing power in the instant case had the consequent result of abolishing the
position of the Chief of Police of the dissolved Municipality of Legaspi. In the third place, the
Supreme Court in the Brillo case, supra, impliedly announced the doctrine that there is
necessity of including in the enumeration of municipal officials who will continue to exercise
their office under a new charter, with the exception of the Justice of the Peace, who is a
national official. This further supports the considered view that, because the office of the Chief
of Police of the extinct municipality was not among those included in Section 96 of Article XVII
of the city charter, said office was perfunctorily abolished.

With further reference to the abolition of said office, Section 100 of Article XVII of Republic Act
No. 2234 provides that "All laws or part of laws inconsistent with this Act are hereby repealed."
Inasmuch as the Municipal Law embodied in the Revised Administrative Code, under which
the petitioner was appointed Chief of Police of the erstwhile Municipality of Legaspi, is
inconsistent with the charter of the City of Legaspi, the former was deemed repealed or
superseded by the latter, in so far as the City of Legaspi was concerned. Such repeal or
superseding necessarily carried with it the abolition of the office of the Chief of Police, which
the petitioner was holding on June 12, 1959. By such abolition, the right of the petitioner
thereto was inevitably terminated.1äwphï1.ñët

Petitioner asserts that he cannot be deprived of his office, because of the alleged fixed tenure of
office he enjoys as guaranteed by the Constitution and the Civil Service Law. The claim loses sight of
the fundamental rule in political law that no person has a vested right to an office, except those
holding constitutional offices. As a rule, all offices created by statutes are more or less temporary,
transitory, or precarious that they are subject to the power of the legislature to abolish them. (See
Busacay v. Buenaventura, L-5856, September 23, 1963) The Civil Service Law can not stand in the
way of the exercise by the legislature of its power to alter, abolish, or create a municipal corporation
or office. What is not countenanced is the abolition of an office in bad faith, to do away with a
particular incumbent and replacing him with a political favorite. In the charter of the City of Legaspi,
no office or officer was singled out. It was of general application to all appointive officials, of which
petitioner was one. In Manalang v. Quitoriano, et al., L-6898, April 30, 1954, we stated:

To remove an officer is to oust him from office before the expiration of his term. A removal
implies that the office exists after that ouster. So that, when an office has been abolished, the
officer thereof could not have been removed therefrom. Where the bureau of which the
petitioner is the director has been abolished, by implication the office of the director cannot
exist without said bureau. By the abolition of the latter and of said office, the right thereto of its
incumbent was necessarily extinguished thereby. The abolition of the office of the petitioner is
not against the prohibition of the Constitution against removal of a civil service officer or
employee except for cause, inasmuch as the petitioner has neither been removed nor
suspended from office.

Another case in point is that of Dominguez, et al. v. Pascual (L-10057, March 30, 1957) wherein the
Provincial Board of Rizal abolished the positions of the petitioners who were all civil service eligibles.
In resolving the question as to the legality of the abolition, we pointed out that:

Removal implies that the position exists while the officer is separated therefrom. When the
position is validly abolished, there is no removal of the incumbent. (See also the case of
Facundo v. Judge Babalon, L-17746, January 31, 1962, citing the cases of Rodriguez v.
Montinola, L-5689, May 14, 1954 and Castillo v. Pajo, L-11262, April 28, 1958.).

Petitioner avers that his employment status as regular Chief of Police may not be abridged except for
the causes and in the manner specified in Republic Act No. 557. This is predicated on the theory that
Republic Act No. 2234 did not abolish the position of Chief of Police of the superseded municipality,
because such abolition, if true, would mean removal of petitioner from his office, which removal would
be contrary to Republic Act No. 557. We find no merit in the contention. As the trial court pointed out:

There can be no removal of an incumbent from his position if his position is abolished by a
statute, for removal implies that the office exists after the ouster of the incumbent. Here, there
was no longer such office. Necessarily, the petitioner was not removed when his office was
abolished. This point was already squarely passed upon in the case of Manalang v.
Quitoriano, supra.

Moreover, in the case of Dominguez, et al. v. Pascual, et al., G.R. No. L-10057, prom. March
30, 1957, the Provincial Board of Rizal abolished the positions of the petitioners, who were civil
service eligibles. Subsequently, the positions were restored. The petitioners instituted an
action for mandamus to compel the members of the Provincial Board to appropriate the
amount necessary to cover their salaries for the fiscal year 1952-1953. The issue in this case
was whether the abolition of said positions was valid. In revolving this question, the Supreme
Court enunciated the following doctrine:

'Removal implies that the position exists while the officer is separated therefrom. When
a position is validly abolished, there is no removal of the incumbent. Considering that
the positions abolished were the very ones that the Provincial Board created, the
removal of such posts from the annual provincial budget is within the legal competence
of the Board. The power of creation implies the consequent power of suppression.'

And so, when the office of the Chief of Police of the dissolved municipality was abolished by
Republic Act No. 2234, the petitioner was not removed within legal contemplation from his
 position. Hence, Republic Act No. 557, which provides for the removal or suspension of
members of the Provincial Guards, City Police and Municipal Police, was not transgressed by
Republic Act No. 2234. Even assuming, arguendo, that it was so violated, yet it was within the
legal competence of Congress to enact Republic Act No. 2234, creating the City of Legaspi,
which had the consequent effect of abolishing the office of the Chief of Police, among others.

Petitioner assails the validity of respondent's appointment as Chief of Police of the City of Legaspi
and, impliedly, questions his designation as Acting Chief of Police. As already stated, the
appointment of the Chief of Police of the City of Legaspi, is, under its charter, lodged with the
President. Petitioner, it will be noted, solicited the position of regular Chief of Police of the City of
Legaspi (Exh. G). When he could not get it, he addressed another letter (Exh. 6) to the President,
requesting that he be extended the appointment of Acting Chief of Police of the City, to take effect
retroactively to June 12, 1959 (date of effectivity of Rep. Act No. 2234), to enable him to collect his
salary. Acting on his request, the President, on February 26, 1960, designated him as Acting Chief of
Police, retroactive to June 12, 1959. Petitioner then took his oath of office as Acting Chief of Police on
March 11, 1960. He acquired benefits under his said temporary appointment because he was able to
collect his salary from June 12, 1959 to March 30, 1960. By his very acts and conduct, petitioner is
now estopped to question the President's authority to appoint respondent as Chief of Police of the
City of Legaspi.

When a person has acted as a public officer, he is estopped to deny that he occupied such
office. Thus, one who has accepted the appointment of an office having at least a potential
existence, and he has received the emoluments of it, has been held to be estopped from
endeavoring to show his own advantage that the office has never been lawfully created
because it was not done in the proper mode as by ordinance. This is particularly true where
the incumbent has received public money by virtue of being the incumbent of a public office.
(22 Am. Jur. 907.)

Where the information is filed on the relation of a private individual to oust the incumbent and
install the relator, the Court will take into consideration the conduct of the latter and when he
has himself, concurred in the respondent's holding or where he has acquiesced or where he
has delayed for an unreasonable length of time in prosecuting his claims, the relief for quo
warranto will not be granted. (Mechem, Public Officers, Sec. 485.)

Petitioner may not complain that his designation as Acting Chief of Police of the City of Legaspi was
terminated by the President, because said designation was terminable at will. A designation in acting
capacity is at best temporary. In the case of Austria v. Amante (79 Phil. 780), we held:

An acting officer is one who acts in a given office until his successor has been duly appointed
or elected or qualified. It is more or less temporary in nature.

A corollary rule is that a designation to act in a position in an acting capacity may be terminated at the
pleasure of the appointing authority (Mendez v. Ganzon, L-10483, April 12, 1957). In the
Mendez case, appellant was, pursuant to the charter of the City of Iloilo, appointed by Mayor Ganzon
as acting assistant chief of police. Two years later, he was removed from office summarily. The trial
court dismissed appellant's petition to enjoin the City Mayor from removing him. He appealed to us.
The question posed in the appeal was whether appellant's removal from said position was valid.
Resolving the issue in the affirmative, we stated:

. . . this Court has already had occasion to consider and rule on the effect of appointments as
"acting" officers, and held that their essence lies in their temporary character and terminability
 at pleasure by the appointive power. Thus, in Austria v. Amante, 79 Phil. 780, this Court
stated:

'Lastly, the appointment of petitioner by the President of the Philippines was merely as
Acting Mayor. It is elementary in the law of public officers and in administrative practice
that such appointment is merely temporary, good until another permanent appointment
is issued, either in favor of the incumbent acting mayor or in favor or another. In the last
contingency, as in the case where the permanent appointment fell to the lost of
respondent, Jose L. Amante, the acting mayor must surrender the office to the lucky
appointee.'

Reiterating this doctrine, we held in Castro v. Solidum, G.R. No. L-7750, June 30, 1955, that:

'There is no dispute that petitioner has been merely designated by the President as
Acting Provincial Governor of Romblon on September 11, 1953. Such being the case,
his appointment is merely temporary or good until another one is appointed in his place.
This happened when the President appointed respondent Solidum on January 6, 1954
to take his place.'

. . . in the case of petitioner Mendez, the acting (i.e., temporary) character of his appointment is
beyond controversy; it was expressly so made, and he accepted it on that understanding. He
cannot, therefore, evade the legal consequences thereof. 1

In line with these rulings, it may be stated, therefore, that when the temporary designation of
petitioner as Acting Chief of Police of the City of Legaspi was terminated by the President, and
respondent was designated in his stead as Acting Chief of Police thereof on March 18, 1960, said
termination and designation was within the lawful authority of the appointing power. It appears that
petitioner's designation in an acting capacity was at his instance, and he accepted such designation
on that understanding. He cannot now, therefore, complain and evade the legal consequences of his
own act. And, petitioner cannot also seek refuge in the protective mantle of Republic Act 557,
because of his designation in an acting capacity. For said law applies only to permanent
appointments of members of the police force. Hence, a temporary appointee may be validly
dismissed without regard to Republic Act No. 557.

Neither do we perceive any legal flaw in respondent's nomination as Chief of Police of the City of
Legaspi on March 15, 1960,2 which was later confirmed by the Commission on Appointments on May
11, 1960. (He took his oath of office as permanent Chief of Police on May 25, 1960 and assumed the
duties of the position immediately thereafter.) Said nomination and confirmation were pursuant to
Section 22, Article V of Republic Act No. 2234, which, as already pointed out, was well within the
legal competence of Congress to enact. We have stated earlier that the office of Chief of Police of the
City of Legaspi is, in legal contemplation, a new and entirely different office from that of Chief of
Police of the abolished Municipality of Legaspi. This is the reason why petitioner's temporary
appointment as Acting Chief of Police of the City on February 26, 1960 had to be extended
retroactive to the date of effectivity of the city charter on June 12, 1959. In fine, petitioner had to be
appointed anew to the position of Chief of Police of the City, upon abolition of the office of Chief of
Police of the municipality. And, when the office of Chief of Police of said city became vacant on March
18, 1960 by virtue of the termination of the temporary appointment of petitioner, the President
designated respondent to occupy the position. Petitioner's contention, therefore, That the office of
Chief of Police of the city was not vacant, lacks merit.

Petitioner lastly argues that respondent's appointment in his stead was in violation of Republic Act
No. 1363, which gives preference to veterans in appointments to the public service. In view of our
conclusion that petitioner is not lawfully entitled to the position of Chief of Police, whatever flaw there
might exist in the appointment of his successor can not be raised by him. Moreover, it will be
observed that the President is, under Section 22 of Republic Act No. 2234, specifically empowered to
appoint the chief of police and other head of the city government of the City of Legaspi, and unlike the
City Mayor, the law does not require him to consider civil service and veteran qualifications of his
appointees.

WHEREFORE, finding no reversible error in the decision appealed from, the same is hereby affirmed
in all respects, with costs against the petitioner-appellant. So ordered.

Bengzon, C.J., Bautista Angelo, Labrador, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Padilla, Concepcion and Reyes, J.B.L., JJ., took no part.
 EN BANC

[G.R. No. L-11305. May 21, 1958.]

DOMINADOR P. CANLAS and THE MANILA PENCIL CO., as successor of the

PHILIPPINE CONSOLIDATED FREIGHT LINES, INC., Petitioners, v. THE
REPUBLIC OF THE PHILIPPINES and the HON. AUGUSTO P. LUCIANO and
ROMAN UMALI, Associate Judges of the Court of Tax Appeals, Respondents.

P. N. Evangelista, for Petitioners.

Solicitor General Ambrosio Padilla, Assistant Solicitor General José P. Alejandro

and Special Attorney Librada del Rosario Natividad for Respondents.

SYLLABUS

1. TAXATION; CONCESSIONAIRES EMBRACED WITHIN BASES AGREEMENT; EARNINGS

DERIVED FROM UNDERTAKING SUBJECT TO INCOME TAX. — The defendant Manila
Pencil Company, a corporation duly organized and existing under the laws of the
Philippines, was engaged in and duly licensed by the U.S. military authorities to operate
a freight and bus service within the Clark Field Air Base. And as such grantee of a
franchise, which this Court has held to be embraced within the meaning of the word
"concession" appearing in the bases agreement and was declared exempt from the
payment of the contractor’s tax (Araneta v. Manila Pencil Company, G. R. No. L-8182,
June 29, 1957), defendant corporation also claimed exemption from the payment of
income tax on earnings derived from such undertaking, relying on the provision of
Article XVIII of the Bases Agreement, providing, among others, that sales and services
within the bases are free from all taxes and duties. Held: While it may be argued that a
tax on the income derived from the operation of a concession falls under the term "other
taxes" included in the enumeration of the imposts from which a Government agency or
private concessioner (of which defendant corporation is considered as one) is exempted,
yet a careful perusal of the same would reveal that what is being exempted from the
payment of such exactions is the establishment of the agency or concession designed for
the exclusive use of the U.S. military forces and authorized civil personnel and their
families. Considering that the concession itself and the income accruing therefrom are
subject to different taxes, and taking into account the sentence following the
enumeration which specifies the "merchandise or services sold or dispensed by such
agencies" to be free from taxes or duties, it becomes all too obvious that the privilege is
intended merely to be confined to the latter and to no other. Inclusio unius exclusio est
alterius. Moreover, exemption from income tax is treated separately under Article XII of
the treaty which grants exemption from income taxes only to members of the U. S.
armed forces, nationals of said country, and their dependents and families to the
exclusion of Filipino citizens.

DECISION
 FELIX, J.:

The Manila Pencil Company, a corporation duly organized and existing under the laws of
the Philippines with Dominador P. Canlas for its president and general manager, appears
to be the successor in interest of the Philippine Consolidated Freight Lines, Inc.,
assuming all the obligations the latter had with third parties in connection with its past
operation. From 1947 to 1951, the Philippine Consolidated Freight Lines, Inc., ran a bus
and trucking service within the compound of the Clark Field Air Base in Pampanga
pursuant to a license issued in its favor by the Philippine Ryukyus Command
(PHILRYCOM). For income derived from said operation, the corporation filed its income
tax returns and was assessed as follows: P4,285.74 for the fiscal year ending August 31,
1947; P21,733.66, for the fiscal year ending August 31, 1948; P7,933.57 and
P3,332.00, for the fiscal years ending August 31, 1949, and August 31, 1951,
respectively. It appears on record that of these assessments said company paid the
amount of P4,000.00 as part payment of the income tax allegedly due for 1947.

On March 24, 1954, the Solicitor General filed a complaint with the Court of First
Instance of Manila (Civil Case No. 22366) against the Manila Pencil Company, as
successor-in-interest of the Philippine Consolidated Freight Lines, Inc., and Dominador
Canlas as president thereof, contending that despite repeated demands, they had failed
to pay the following amounts which were said to be due the Government as income
taxes, to wit:chanrob1es virtual 1aw library

(1) Deficiency income tax for fiscal

year ending August 31, 1947 P1,084.97

(2) Income tax for fiscal year ending

August 31, 1947 285.74

(3) Income tax for fiscal year ending

August 31,1948 21,733.66

(4) Income tax for fiscal year ending

August 31, 1949 7,933.57

(5) Income tax for fiscal year ending

August 31, 1951 3,332.00

It was thus prayed that defendants be ordered to pay the obligations so indicated plus
the corresponding delinquency penalties and for costs. To this complaint, defendants
filed a motion to dismiss based on prescription and for lack of jurisdiction, but before
said motion could be resolved, Republic Act No. 1125 creating the Court of Tax Appeals
was enacted and pursuant to Section 22 thereof, said case was elevated to the latter
Tribunal for adjudication.

As the motion for the dismissal of the action was denied, defendants filed their answer
claiming that the income on which plaintiff was trying to collect were received
exclusively from the operation of its freight and passenger bus service within the Clark
Field Air Base and therefore embraced within the exemption provided for by Article XVIII
of the Military Bases Agreement concluded between the governments of the Philippines
and the United States. Defendants prayed the Court that plaintiff be required to refund
to defendant Manila Pencil Company the sum of P2,350.74 illegally collected; that AISCO
Bond No. 4419 of the Associated Insurance & Surety Co., Inc., in favor of the Collector
of Internal Revenue, which defendants filed to prevent the distraint of their properties
pending the final disposition of the case, be cancelled; and in the event that the Court
would find a case against the Manila Pencil Company, defendant Dominador P. Canlas be
excluded therein.

The issues having been joined, the case was set for hearing and basing on the
stipulation of facts agreed upon by the parties, the Court of Tax Appeals rendered
judgment holding defendants liable for the payment of the deficiency income tax for
1947 and for income taxes for the years 1949 and 1951, although they were absolved of
the liability with respect to the income taxes for the years 1947 and 1948 on the ground
of prescription. Upon defendants’ motion for reconsideration, said decision was modified
so as to deduct from the amount said to be due the Government the sum of P3,526.47
secured by the AISCO Bond No. 4419 which was already received by the Collector of
Internal Revenue. But as defendants’ asseveration that they were totally exempted from
the payment of said taxes was denied, the matter was brought to this Court by way of a
petition for review, praying that the decision of the court a quo be declared erroneous
and the Collector of Internal Revenue be required to refund the amount of P2,350.74
allegedly collected illegally from them and for such other relief as may be proper in the
premises.

There is no dispute as to the fact that defendant Manila Pencil Company, as successor-
in-interest of the Philippine Consolidated Freight Lines, Inc., was engaged in and duly
licensed by the U. S. military authorities to operate a freight and bus service within the
Clark Field Air Base, a military reservation established in conformity with the agreement
concluded between the Governments of the Philippines and the United States on March
14, 1947 (43 Off. Gaz., No. 3, p. 1020). And as such granted of a franchise, which this
Court has held to be embraced within the meaning of the word "concession" appearing
in the treaty and was declared exempted from the payment of the contractor’s tax
(Araneta v. Manila Pencil Company, G. R. No. L- 8182, June 29, 1957), defendant
corporation also claimed exemption from the payment of income tax on earnings derived
from such undertaking. In advancing such contention, defendants relied on the
provisions of Article XVIII of the Bases Agreement the pertinent portion of which reads
as follows:jgc:chanrobles.com.ph

"ARTICLE XVIII. — SALES AND SERVICES WITHIN THE BASES

"1. It is mutually agreed that the United States shall have the right to establish on
bases, free of all licenses; fees; sales, excise or OTHER TAXES, or imposts; Government
agencies, including concessions, such as sales commissaries and posts exchanges,
messes and social clubs, for the exclusive use of the United States military forces and
authorized civilian personnel and their families. The merchandise or services sold or
dispensed by such agencies shall be free of all taxes, duties and inspection by the
Philippine authorities. . . . ."cralaw virtua1aw library

While it may be argued that a tax on the income derived from the operation of a
concession falls under the term "other taxes" included in the enumeration of the imposts
from which a Government agency or private concessioner (of which defendant
corporation is considered as one) is exempted, yet a careful perusal of the same would
reveal that what is being exempted from the payment of such exactions is the
establishment of the agency or concession designed for the exclusive use of the U.S.
military forces and authorized civil personnel and their families. Considering that the
concession itself and the income accruing therefrom are subject to different taxes, and
taking into account the sentence following the enumeration which specifies the
"merchandise or services sold or dispensed by such agencies" to be free from taxes or
duties, it becomes all too obvious that the privilege is intended merely to be confined to
the latter and to no other. Inclusio unius exclusio est alterius. Moreover, exemption from
income tax is treated separately under a different provision of the treaty which reads as
follows:jgc:chanrobles.com.ph

"ARTICLE XII. — INTERNAL REVENUE TAX EXEMPTION

"1. No member of the United States armed forces, EXCEPT Filipino citizens, serving in
the Philippines in connection with the bases and residing in the Philippines by reason
only of such service, or his dependents, shall be liable to pay income tax in the
Philippines except in respect of income derived from Philippines sources.

"2. No national of the United States serving in or employed in the Philippines in

connection with the construction, maintenance, operation or defense of the bases and
residing in the Philippines by reason only of such employment, or his spouse, shall be
liable to pay income tax in the Philippine except in respect of income derived from
Philippine sources or sources other than the United States sources.

3. . . .

4. . . .

It is clear from the foregoing that if ever the signatories to the said treaty intended to
grant exemption from income taxes collectible by the Philippine Government, said
privilege was allowed only to members of the United States armed forces, nationals of
said country, and their dependents and families, to the exclusion of Filipino citizens. And
it dispels the least doubt, if there may be any as to the merit of defendant’s claim, for
the insertion of the phrase "other taxes" is manifestly intended to cover imposts other
than sales or excise taxes on the undertaking itself and not taxes on income which is
specially taken care of by another provision of the same treaty.
Wherefore, the appealed decision of the lower Court, as corrected by its resolution of
September 10, 1956, is hereby affirmed, with costs against defendants. It is so ordered
 EN BANC

G.R. No. L-26979             April 1, 1927

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiffs,

vs.
MILTON E. SPINGER, DALAMACIO COSTAS, and ANSELMO HILARIO, defendants.

Attorney-General Jaranilla, F. C. Fisher, and Hugh C. Smith for plaintiff.

Jose Abad Santos; Ross, Lawrence and Selph; Paredes, Buencamino and Yulo;
Araneta and Zaragoza; Charles E. Tenney; Camus, Delgado and Recto and Mariano H. de Joya for
defendants.

MALCOLM, J.:

This is an original action of quo warranto brought in the name of the Government of the Philippine
Islands against three directors of the National Coal Company who were elected to their positions by
the legislative members of the committee created by Acts. Nos. 2705 and 2822. The purpose of the
proceeding is to test the validity of the part of section 4 of Act No. 2705, as amended by section 2 of
Act No. 2822, which provides that "The voting power of all such stock (in the National Coal Company)
owned by the Government of the Philippine Islands shall be vested exclusively in a committee
consisting of the Governor-General, the President of the Senate, and the Speaker of the House of
Representatives."

The material facts are averred in the complaint of the plaintiff and admitted in the demurrer of the
defendants.

The National Coal Company is a corporation organized and existing by virtue of Act No. 2705 of the
Philippine Legislature as amended by Act No. 2822, and of the Corporation law. By the terms of the
charter of the corporation, the Governor-General was directed to subscribe on behalf of the
Government of the Philippine Islands for at least fifty-one per cent of the capital of the corporation.
The government eventually became the owner of more than ninety-nine per cent of the thirty
thousand outstanding shares of stocks of the National Coal Company. Only nineteen shares stand in
the names of private individuals.

On November 9, 1926, the Government-General promulgated Executive Order No. 37. Reference
was made therein to opinions of the Judge Advocate General of the United States Army and of the
Acting Attorney-General of the United States wherein it was held that the provisions of the statutes
passed by the Philippine Legislature creating a voting committee or board of control, and enumerating
the duties and powers thereof with respect to certain corporations in which the Philippine Government
is the owner of stock, are nullities. Announcement was made that on account of the invalidity of the
portions of the Acts creating the voting committee or board of control, the Governor-General would,
thereafter, exercise exclusivelythe duties and powers theretofore assumed by the voting committee or
board of control. Notice of the contents of this executive order was given to the President of the
Senate and the Speaker of the House of Representatives. (24 Off. Gaz., 2419.)

A special meeting of the stockholders of the National Coal Company was called for December 6,
1926, at 3 o'clock in the afternoon, for the purpose of electing directors and the transaction of such
other business as migh properly come before the meeting. Prior thereto, on November 29, 1926, the
President of the Senate and the Speaker of the House of Representatives as members of the voting
committee, requested the Governor-General to convene the committee at 2:30 p. m., on December 6,
1926, to decide upon the manner in which the stock held by the Government in the National Coal
Company should be voted. TheGovernor-General acknowledged receipt of this communication but
declined to participate in the proposed meeting. The president of the Senate and the Speaker of the
House of Representatives did in fact meet at the time and place specified in their letter to the
Governor-General. It was then and there resolved by them that at the special meeting of the
stockholders, the votes represented by the stock of the Government in the National Coal Company,
should be cast in favor of five specified persons for directors of the company.

On December 6, 1926, at 3 o'clock in the afternoon, the special meeting of the stockholders of the
National Coal Company was held in accordance with the call. The Governor-General, through his
representative, asserted the sole power to vote the stock of the Government. The president of the
Senate and the Speaker of the House of Representatives attended the meeting and filed with the
secretary of the company a certified copy of the minutes of the meeting of the committee held at the
office of the company a half hour before. The Governor-General, through his representative,
thereupon objected to the asserted powers of the President of the Senate and the Speaker of the
House of Representatives, and the latter likewise objected to the assertion of the Governor-General.

The chair recognized the President of the Senate and the Speaker of the House of Representatives in
their capacity as majority members of the voting committee as the persons lawfully entitled to
represent and vote the Government stock. To this the representative of the Governor- General made
protest and demanded that it be entered of record in the minutes. The vote cast by the President of
the Senate and the Speaker of the House of Representatives was in favor of Alberto Barretto,Milton
E. Springer, Dalmacio Costas, Anselmo Hilario, and Frank B. Ingersoll. The Governor-General
through his represetative, alleging representation of the Government stock, cast his vote in favor of
Alberto Barreto, Romarico Agcaoili, Frank B. Ingersoll, H. L. Heath, and Salvador Lagdameo. The
chair declared the ballot cast by the President of the Senate and the Speaker of the House as
electing the names therein indicated, directors of the National Coal Company.

Immediately after the stockholder's meeting, the persons declared by the chairman to have been
elected, met and undertook to organized the board of directors of the National Coal Company by the
election of officers. All the directors for whom the President of the Senate and the Speaker of the
House of Representatives voted and who were declared elected at the meeting of the stockholders
participated in this meeting. Included among them, were the three defendants, Milton E. Springer,
Dalmacio Costas, and Anselmo Hilario.

The applicable legal doctrines are found in the Organic Law, particularly in the Organic Act, the Act of
Congress of August 29, 1916, and in statutes enacted under authority of that Act, and in decisions
interpretative of it.

The Government of the Philippine Islands is an agency of the Congress, the principal, has seen fit to
entrust to the Philippine Government, the agent, are distributed among three coordinate departments,
the executive, the legislative, and the judicial. It is true that the Organic Act contains no general
distributing clause. But the principle is clearly deducible from the grant of powers. It is expressly
incorporated in our Administrative Code. It has time and again been approvingly enforced by this
court.

No department of the Government of the Philippine Islands may legally exercise any of the powers
conferred by the Organic Law upon any of the others. Again it is true that the Organic Law contains
no such explicit prohibition. But it is fairly implied by the division of the Government into three
departments. The effect is the same whether the prohibition is expressed or not. It has repeatedly
been announced by this court that each of the branches of the Government is in the main
independent of the others. The doctrine is too firmly imbedded in Philippine institutions to be
debatable. (Administrative Code sec. 17; Barcelon vs. Baker and Thompson [1905], 5 Phil., 87; U.
S. vs. Bull [1910], 15 Phil., 7; Severino vs. Governor-General and Provincial Board of Occidental
Negros [1910], 16 Phil., 366; Forbes vs. Chuoco Tiaco vs. Crossfield [1910], 16 Phil., 534; Province
of Tarlac vs. Gale [1913], 26 Phil., 338; Concepcion vs. Paredes [1921], 42 Phil., 599; U. S. vs. Ang
Tang Ho [1922], 43 Phil., 1; Abueva vs. Wood [1924], 45 Phil., 612; Alejandrino vs. Quezon [1924],
46 Phil., 83.)

It is beyond the power of any branch of the Government of the Philippine Islands to exercise its
functions in any other way than that prescribed by the Organic Law or by local laws which conform to
the Organic Law. The Governor-General must find his powers and duties in the fundamental law. An
act of the Philippine Legislature must comply with the grant from Congress. The jurisdiction of this
court and other courts is derived from the constitutional provisions.

These canons of political science have more than ordinary significance in the Philippines. To the
Government of the Philippine Islands has been delegated a large degree of autonomy, and the chief
exponent of that autonomy in domestic affairs is the Philippine Legislature. TheGovernor-General on
the other hand of the Government and symbolizes American sovereignty. That under such a political
system, lines of demarcation between the legislative and the executive departments are difficult to fix,
and that attempted encroachments of one on the other may occur, should not dissuade the Supreme
Court, as the guardian of the constitution, from enforcing fundamental principles.

The Organic Act vests "the supreme executive power" in the Governor- General of the Philippine
Islands. In addition to specified functions,he is given "general supervision and control of all the
departments and bureaus of the government of the Philippine Islands as far as is not inconsistent with
the provisions of this act. "He is also made "responsible for the faithful execution of the laws of the
Philippine Islands and of the United States operative within Philippine Islands."The authority of the
Governor-General is made secure by the important proviso "that all executive functionsof
Government must be directly under the Governor-General or within one of the executive departments
under thesupervision and control of the Governor-General. "(Organic Act, secs. 21, 22.) By the
Administrative Code, "the Governor-General, as chief Executive of the Islands, is charged with the
executive control of the Philippine Government, to be exercised in person or through the Secretaries
of Departments, or other proper agency, according to law." (Se.58)

The Organic Act grants general legislative power except as otherwise provided therein to the
Philippine Legislature. (Organic Act, secs. 8, 12.) Even before the approval of the existing Organic
Act, it was held that the Philippine Legislature has practically the same powersin the Philippine
Islands within the sphere in which it may operate as the Congress of the United States.
(Chanco vs. Imperial [1916], 34 Phil., 329.) The rule judicially stated is now that an Act of the
Philippine Legislature which has not been expressly disapproved by Congress is valid, unless the
subject-matter has been covered by Congressional legislation, or its enactment forbidden by some
provision of the Organic Law. The legislative power of the Philippine Government is granted in
general terms subject to specific limitations. (Gaspar vs. Molina [1905], 5 Phil., 197; U.
S. vs. Bull, supra; In re Guarina [1913], 24 Phil., 37; U. S. vs. Limsiongco [1920],41 Phil., 94;
Concepcion vs. Paredes, supra.)

An independent judiciary completes the governmental system. Thejudicial power is conferred on the
Supreme Couts, Courts of FirstInstance, and inferior courts. (Organic Act, se. 26)

It is axiomatic that the Philippine Legislature was provided to make the law, the office of the
Governor-General to execute the law, and the judiciary to construe the law. What is legislative, an
executive, or a judicial act, as distinguished one from the other, is not alwayseasy to ascertain. A
precise classification is difficult. Negatively speaking, it has been well said that "The legislature has
no authority to execute or construe the law, the executive has no authority to make or construe the
law, and the judiciary has no power to make or execute the law." (U. S. vs. And Tang Ho, supra.)

It is legislative power which has been vested in the Philippine Legislature. What is legislative power?
Judge Cooley says he understands it "to be the authority, under the constitution, to make laws, and to
alter and repeal them." Those matters which the constitution specifically confides to the executive
"the legislature cannot directly or indirectly take from his control." (Cooley's Constitutional Limitations,
7th ed., pp. 126-131, 157-162.) President Wilson in his authoritative work, "The State", page 487,
emphasizes by italics that legislatures "are law making bodies acting within the gifts of charters, and
are by these charters in most cases very strictly circumscribed in their action." If this is true, the
converse that legislative power is not executive or judicial or governmental power needs no
demonstration. The Legislature essentially executive or judicial. The Legislature cannot make a law
and them take part in its execution or construction. So the Philippine Legislature is not a partaker in
either executive or judicial power, except as thePhilippine Senate participates in the executive power
through the Governor-General, and except as the Philippine Senate participates in the executive
power through having the right to confirm or reject nominations made by the Governor-General, and
except as the Legislature participates in the judicial power through being made the sole judge of the
elections, returns, and qualifications of its elective members and through having the right to try its
own members for disorderly behavior. The Philippine, Legislature may nevertheless exercise such
auxiliary powers as are necessary and appropriate to its indenpdence and to make its express
powers effective. (McGrain vs. Daugherty [1927], 273 U. S., 135; 71 Law. ed., 580.)

When one enters on a study of the abstract question, Where does the power to appoint to public
office reside?, one is nearly buried in a mass of conflicting authority. Yet we have been at pains to
review all of the cases cited by counsel and others which have not been cited. Shaking ourselves
loose from the encumbering details of the decisions, we discern through them a few elemental truths
which distiguish certain cases from others and which point the way for us in the Philippines.

The first principle which is noticed is that the particular wording of the constitution involved, and its
correct interpretation predetermines the result. Does the constitutions deny the legislative body the
right of exercising the appointing power. The legislature may not do so. (State vs. Kennon [1857], 7
O. St., 547; Clark vs. Stanley[1872], 66 N. C., 28.) Does the constitution confer upon the government
the power to prescribe the manner of appointment. The authorities are in conflict as to whether the
legislature the power to prescribe the manner of appointment. The authourities are in conflict as to
whether the legislature may itself make the appointment. Does the constitution merely contain the
usual clause distributing the powers of government and no clause regulating appointments. The
weight of judicial opinion seems to be that the power of appointing to office is not exclusively an
executive function and that the legislature may not only create offices but may also fill them itself, but
with a vigorous opposition in most respectable quarters. (Contrast Pratt vs. Breckinridge [1901], 112
Ky., 1, and State vs.Washburn [1901], 167 Mo., 680, with People vs. Freeman [1889], 80 Cal., 233,
and Richardson vs. Young [1909], 122 Tenn., 471.)

The second thought running through the decisions is that in the state governments, the selection of
persons to perform the functions of government is primarily a prerogative of the people. The general
powerto appoint officers is not inherent in any branch of the government. The people may exercise
their political rights directly or by delegation. Should the people grant the exclusive right of
appointment to the governor, he possesses that right; but if they should otherwise dispose of it, it
must be performed as the sovereign has indicated. Inasmuch, however, as the legislative body is the
repository of plenary power, except as otherwise restricted, and the chief executive of the State is not,
legislative bodies usually possess wide latitude in the premises. But this situation does not obtain in
the Philippines where the people are not sovereign, and where constitutional rights do not flow from
them but are granted by delegation from Congress.
It may finally be inferred from the books that the appointment of public officials is generally looked
upon as properly an executive function. The power of appointment can hardly be considered a
legislative power. Appointments may be made by the Legislature of the courts, but when so made be
taken as an incident to the discharge of functions properly within their respective spheres.
(State vs. Brill [1907], 100 Minn., 499; Stockman vs. Leddy [1912], 55 Colo., 24; Spartanburg
County vs. Miller [1924], 132 S. E., 673; Mechem on Public Officers, secs. 103-108; Mechem, The
power of Appoint to Office; Its Location and Limits, 1 Mich. Law Rev. [1903], 531.)

From the viewpoint of one outside looking in, it would seem that the State legislatures have all too
often been permitted to emasculate the powers properly belonging to the executive deparment, and
that the governor of the State has been placed with the responsibility of administering the government
without the means of doing so. The operations of the executive department have been fundamentally
variedby the legislative department. The legislature has absorbed strength, the executive has lost it.
This tendency has rather been tolerated than acquiesced in. The executive should be clothed with
sufficient power to administer efficiently the affairs of state. He should have complete control of the
instrumentalities through whom his responsibility is discharged. It is still true, as said by Hamilton, that
"A feeble executive implies a geeble execution of the government. A feeble execution is but another
phrase for a bad execution; and a government ill executed, whatever it may be intheory, must be in
practice a bad government." The mistakes of State governments need not be repeated here..

The history of the power of appointment and the stand taken by the judiciary on the question in the
State of Kentucky is of more than ordinary interest. Kentucky was permitted to become an
independent State by Virginia. The clause in the Kentucky constitution separating and guarding the
powers of government came from the pen of the author of the Declaration of Independence, Thomas
Jefferson. He it was who, in a letter to Samuel Kercheval, dated July 16, 1816, said: "Nomination to
office iss an executive function. To give it to thelegislature, as we do is Virginia, is a violation of the
principle of the separation of powers. It swerves the members from correctness by the temptation to
intrigue for office for themselves, and to a corrupt barter for votes, and destroys responsibility by
dividing it among a multitude." Possibly inspired to such action by the authorship of the portion of the
State constitution which was under consideration, in the early days of the Supreme Court of
Kentucky, Mr. Chief Justice Robertson in the case of Taylor vs. Commonwealth ([1830], 3 J.
J.Marshall, 4010) announced that "Appointmets to office are intrinsically executive," but that it might
be performed by a judicial officer when the duties of the office pertains strictly to the court. This
opinion was shaken in the case of Sinking Fund Commissioners vs. George ([1898], 104 Ky., 260)
only to be afterwards reaffirmed in Pratt vs. Breckinridge ([1901], 112 Ky., 1), and in Sibert vs.
Garrett ([1922], 246 S. W., 455). in the decision in the latter case, one of the most recent on the
subject, the Supreme Court of Kentucky after reviewing the authorities refused to be frightened by the
bugaboo that numerically a greater number of courts take a contrary view. It said: "We are convinced
that they by doing so are inviting destruction of the constitutional barriers separating the departments
of government, and that our interpretation is much the sounder one and is essential to the future
preservation of our constitutional form of government as originally intended by the forefathers who
conceived it. . . . Such power (of appointment) on the part of the Legislature, if a full exercise of it
should be persisted in, would, enable it to gradually absorb to itself the patronage and control of the
greater part of the functioning agencies of the state and county governments, and, thus endowed, it
would be little short of a legislative oligarhy."

It is of importance, therefore, not to be confused by Statedecisions, and invariably to return to the

exact provisions of the Philippine Organic Law which should be searched out and effectuated.

The right to appoint to office has been confided, with certain well defined exceptions, by the
Government of the United States to the executive branch of the government which it has set up in the
Philippines. Let the Organic Law speak upon this proposition.
The original government inaugurated in the Philippines after American occupation was military in
nature, and exercised all the powers of government, including, of course, the right to select officers.
The original civil authority with administrative functions establishedhere was the second Philippine
Commission. President Mckinley, in his Instructions to the Commisions of April 7, 1900, ever since
considered as the initial step taken to introduce a constitutional government, provided that until further
action should be taken by congress or otherwise, "The Commission will also have power . . . . to
appoint to office such officers under the judicial, educational, and civil- service systems, and in the
municipal and departmental goernments, as shall be provided for." When the first Civil Governor was
appointed on June 21, 1901, the President again took account of the power of appointment in the
following language: The power to appoint civil officers, hererofore Governor, will be exercised by the
Civil Governor with the advice and consent of the commission." The Congress when it came to make
legislative provision for the administration of the affairs of civil government in the Philippine Islands, in
the Act of Congress of July 1, 1902, the Philippine Bill, "approved, ratified and confirmed," the action
of the President, and in creating the office of Civil Governor and authorizing said Civil Governor to
exercise powers of government to the extent and in the manner set forth in the exectutive order date
June 21, 1901. (Philippine Bill, sec. 1.) Congress in the same law provided that the Islands "shall
continue to be governed as thereby and herein provided." (See opinion of Attorney-General Araneta
on the power of the Governor-General to appoint and remove civil officers, 3 Op. Atty.-Gen., 563.)

Thus stood the right to appoint to office for fourteen years.

The Organic Act of August 29, 1916, included what follows on the subject of appointments. The
governor-General "shall, unless otherwise herein provided, appoint, by and with the consent of the
Philippine Senate, such officers as may now be appointed by the Governor-General,or such as he is
authorized by law to appoint." (Organic Act, sec. 21.) The exception to the general grant is that the
Philippine Legislature "shall provide for the appointment and removal of the heads of the executive
departments by the Governor-General." (Organic Act, sec. 22.) Each House of the Philippine
Legislature may also elect a presiding officer, a clerk, a sergeant at arms, and such other officers and
assistants as may be required. (Organic Act, sec. 18.) The Philippine Legislature is authorized to
choose two Residentcommissioners to the United States. (Organic Act, sec. 20.) The prohibition on
the local Legislature, which has been thought of as referring to the Resident Commissioners, is that
"No Senator or Representative shall, during the time for which he may have been elected, be eligible
to any office the election to which is vested in the Legislature, nor shall be appointed to any office of
trust or profit which shall have been created or the emoluments of which shall have been increased
during such term." (Organic Act, sec. 18.)

The Administrative Code provides the following: "In addition to his general supervisory authority, the
Governor-General shall have such specific powers and duties as are expressly conferred or imposed
onhim by law and also, in particular, the powers and duties set forth," including th special powers and
duties "(a) To nominate and appointofficials, conformably to law, to positions in the service of the
Government of the Philippine Islands. (b) To remove officials from office conformably to law and to
declare vacant the offices held by such removed officials. For disloyalty to the Government of
theUnited States, the Governor-General may at any time remove a personfrom any position of trust or
authority under the Government of the Philippine Islands." (Sec. 64 [a], [b].) The Administrative Code
lists the officers appointable by the Governor-General. (Sec. 66.)

It will be noticed that the Governor-General, in addition to being empowered to appoint the officers
authorized by the Organic Act and officers who thereafter he might be authorized to appoint, was to
continue to possess the power to appoint such officers as could be appointed him when the Organic
Act wa approved. The careful phraseology of the law and the connection provided by the word "now"
with prior Organic laws is noteworthy. It would not be at all illogical to apply the same rule to the
Governor-General in his relations with the Legislature which the judiciary uniformly applies to the
courts in their relations with the Legislature, which is, that the Legislature may add to, byt may not
diminish, the jurisdiction of the courts — The Legislature may add to, but may not diminish, thepower
of the Governor-General. (Organic Act, sec. 26; Barrameda vs. Moir [1913], 25 Phil., 44; In
re Guarina, supra; U. S. vs. Limsiongco, supra.)

It will also not escape attention that the only reference made to appointments by the Legislature
relates to the selection of Secretaries of Departments, of officers and employees for the Legislature,
and of Resident Commissioners, from which it would naturally be inferred that no other officers and
employees may be chosen by it. The exceptions made in favor of the Legislature strengthen rather
than weaken the grant to the executive. The specific mention of the authority of the Legislature to
name certainofficers is indicative of a purpose to limit the legislative authority in the matter of
selecting officers. The expression of one things not expressed. Had it been intended to give to the
Philippine Legislature the power to name individuals to fill the offices which it has created, the grant
would have been included among the legislative powers and not among the executive powers. The
administrative controlof the Government of the Philippine Islands by the Governor-Generalto whom is
confided the responsibility of executing the laws excludes the idea of legislative control of
administration.

Possibly, the situation may better be visualized by approching the question by a process of
elimination. Is the power of appointment judicial? No one so contends. Is the power of appointment
legislative? Not so if the intention of the Organic Law be carried out and if the Legislature be confined
to its law-making function. Is the power of appointment executive? It is.

The exact question of where the power of appointment to office is lodged has never heretofore arisen
in this jurisdiction. But a decision of this court and a controlling decision of the United States Supreme
Court are in point.

In Concepcion vs. Parades, supra, this court had before it a law which attempted to require a drawing
of lots for judicial positionss in derogation of executive power. The case was exhaustively argued
andafter prolonged consideration, the questioned portion of the law was held invalid as in violation of
the provisions of the Organic Act. Following the lead of Kentucky, it was announced that
"Appointment to office is intrinsically an executive act involving the exercise of discretion."

In the case of Myers vs. United States ([1926], 272 U. S., 52; 71 Law. ed., 160), the United States
Supreme Court had presented the question whether, under the Constitution, the President has the
exclusive power of removing executive officers of the United States whom he has appointed by and
with the advice and consent of the Senate. The answer was that he has. The decision is ephocal. The
Chief Justice quoted from Madison the following:

If there is a principle in our Constitution, indeed in any free Constitution more sacred than
another, it is that which separates the legislative, executive and judicial powers. If there is any
point inwhich the separation of the legislative and executive powers ought to be maintained
with great caution, it is that which relates to officers and offices.

'The powers relative to offices are partly legislative and partly executive. The legislature
creates the office, defines the powers, limits its duration and annexes a compensation.
This done, the legislative power ceases. They ought to have nothing to do with
designating the man to fill the office. That I conceive to be of an executive nature.
Although it be qualified in the Constitution, I would not extend or stain that qualification
beyond the limits precisely fixed for it. We ought always to consider the Constitution with
an eye to the principles upon which it was founded. In this point of view, we shall readily
conclude that if the legislaturedetermines the powers, the honors, and emoluments of
 an office, we should be insecure if they were to designate the officer also. The nature of
things restrains and confines the legislative and executive authorities in this respect;
and hence it is that the Constitution stipulates for the independence of each branch of
the Government.' (1 Annals of Congress, 581, 582. Also see Madison in The Federalist,
Nos. 47, 46.).

The distinguished Chief Justice said:

"* * * The Constitution was so framed as to vest in the Congress all legislative powers therein
granted, to vest in the President the executive power, and to vest in one Supreme Court and
such inferior courts as Congress might establish, the judicial power. From this division on
principle, the reasonable construction of the Constitutionmust be that the branches should be
kept separate in all cases in which they were not expressly blended, and the Constitution
should be expounded to blend them no more than it affirmatively requires. Madison, 1 Annals
of Congress, 497.

xxx     xxx     xxx

The vesting of the executive power in the President was essentially a grant of the power to
execute the laws. But the President alone and unaided could not execute the laws. He must
execute them by the assistance of subordinates. This view has since been repeatedlyaffirmed
by this court. . . . As he is charged specifically to take care that they be faithfully executed, the
reasonable implication, even in the absence of express words, was that as part of his execute
power he should select those who werre to act for him under his direction in the execution of
the laws. The further implication must be, in the absence of any express limitation respecting
removals, that as his selection of administrative officers is essential to the execution of the
laws by him, so must be his power of removing those for whom he cannot continue to be
responsible. (Fisher Ames, 1 Annals of Congress, 474.) It was urged that the natural meaning
of the term "executive power" granted the President included the appointment and removal of
executive subordinates. If such appointments and removals were not an exercise of the
executive power, what were they? They cetainly were not the exercise of legislative or judicial
power in government as usually understood.

It is quite true that in state and colonial governments at the time of the Constitutional
Convention, power to make appointments and removals had sometimes been lodged in the
legislatures or in the courts, but such a disposition of it was really vesting part of the executive
power in another branch of the Government.

xxx     xxx     xxx

We come now to a period in the history of the Government when both Houses of Congress
attempted to removes this constitutionalconstruction and to subject the power of removing
executive officers appointed by the President and confirmed by the Senate to the control of the
Senate, indeed finally to the assumed power in Congress to place the removal of such officers
anywhere in the Government.

xxx     xxx     xxx

The extreme provisions of all this legislation were a full justification for the considerations so
strongly advanced by Mr. Madison and his associates in the First Congress, for insisting
thatthe power of removal of executive officers by the President alone wasessential in the
division of powers between the executive and the legislative bodies. It exhibited in a clear
 degree the paralysis to which a partisan Senate and Congress could subject the executive arm
and destroy the principle of executive responsibility, and separation of the powers sought for
by the framers of our Government, if the President fhad no power of removal save by consent
of the Senate. It was an attempt to redistribute the powers and minimized those of the
President.

xxx     xxx     xxx

For the reasons given, we must therefore hold that the provision of the law of 1876 by which
the unrestricted power of removal of first class postmasters is denied to the President is in
violation of the Constitution and invalid.

Membership in the Committee created by Acts Nos. 2705 and 2822 is an office. No attempt will be
made to accomplish the impossible, which is to formulate an exact judicial definitions of term "office."
The point is that the positions in question constitute an "office," whether within the meaning of that
word as used in the Code of Civil Procedure under the topic "Usurpation of Office," and in the
jurisprudence of Ohio from which these portions of the Code were taken; whether within the local
definitions of "office" found in the Administrative Code and the Penal Code; or whether within the
constitutional definitions approved by the United States Supreme Court. (Code of Civil Procedure,
secs. 197 et seq., 519; Act No. 136, sec. 17; State vs. Kennon, supra, cited approvingly in
Sheboygran co. vs. Parker [1865], 3 Wall., 93; Administrative Code, sec. 2; Penal Code, arts. 264,
401.) Paraphrasing the United States Supreme Court in alate decision, there is not lacking the
essential elements of a public station, permanent in character, created by law, whose incidents and
duties were prescribed by law. (Metcalf & Eddy vs. Mitchell [1926], 269 U. S., 514; U. S. vs. Maurice
[1823], 2 Brock., 96; U. S. vs.Hartwel [1867], 6 Wall., 385.) The Legislature did more than add
incidentalor occasional duties to existing executive offices for two of the members of the voting
committee are representatives of thelegislative branch. The Supreme Court of North Carolina has
held that the Act of the General Assembly giving to the President of the Senate and the Speaker of
the House of Representatives the power to appoint proxies and directors in all corporations in which
the State has an interest, creates a public office and fills the same by appointment of the Legislature.
(Clark vs. Stanley [1872], 66 N. C., 28;Howerton vs. Tate [1873], 68 N. C., 498; Shoemaker vs. U. S.
[1892], 147 U. S., 282; Advisory Opinion to Governor [1905], 49 Fla., 269; Mechem on Public
Officers, Ch. I.)

To tell the truth, it is possible that the earnestness of counsel has just led us to decide too much. Not
for a moment should there be dismissed from our minds the unusual and potently effective proviso of
section 22 of the Organic Act, "That all executive functions of the government must be directly under
the Governor-General or within one of the executive departments under the supervision and control
of the Governor-General." At the very least,the performance of duties appurtenant to membership in
the voting committee is an executive function on the Government, which the Organic Act requires
must be subject to the unhampered control of the Government-General. The administrative
domination of a governmentally organized and controlled corporation is clearly not a duty germane to
the law-makingpower.

The incorporation of the National Coal Company has not served to disconnect the Company or the
stock which the Government owns in it from the Government and executive control. The Philippine
Legislatureis empowered to create and control private corporations. (Martinez vs. La Asociacion de
Señoras Damas del Santo Asilo de Ponce [1909], 213 U. S., 20.) The National Coal Company is a
private corporation.(National Coal Company is a private corporation. (National Coal
Company vs. Collector of Internal Revenue [1924], 46 Phil., 583.) By becoming a stockholder in the
National Coal Company, the Goverment divested itself of its sovereign character so far as respects
the transactions of the corporation. (Bank of the U. S. vs. Planters' Bank of Georgia [1824], 9 Wheat.,
904.) Unlike the Government, the corporation may be sued without its consent, and is subject to
taxation. Yet the National Coal Company remains an agency or instrumentality of government. Mr.
Chief Justice Marshall in speaking of the Bank of the United States said, "It was not created for its
own sake, or for private purposes. It has never been supposed that Congress could create such a
corporation." (Osborn vs. Bank of the U. S. [1824], 9 Wheat., 738; National Bank vs. Commonwealth
[1869], 9 Wall., 353; Railroad Co. vs. Peniston [1873], 18 Wall., 5; Chesapeake & Delaware Canal
Co. vs. U. S. [1918], 250 U. S., 123.) Of the National Coal Company, it has been said by Mr. Justice
Johnson as the organ of the court in National Coal Company vs. Collector of Interanl Revenue, supra,
that "The Government of the Philippine Islands is made the majority stockholder, evidently in order to
insure proper governmental supervision and control, and thus to place the Government in a position
to render all possible encouragement, assistance and help in the prosecution and furtherance of the
company's business.' The analogy is closer in the companionNational Bank case, No. 27225.

It further is inconvertible that the Government, like any other stockholder, is justified in intervening in
the transactions in the corporation, and in protecting its property rights in the corporation. Public funds
were appropriated to create the National Coal Company. Those funds were used to purchase stock.
The voting of the government stock is the prerogative of the stockholder, not the prerogative of the
corporation. It is transaction in, but not of, the corporation. The stock is property. The Government,
the owner of the majority stock in the company, naturally dominates the management of its property.
The Government may enforce its policies and secure relief in and through the corporation and as
stockholder.

The situation will be better understood if it be recalled that, in addition to the National Coal company
(Acts Nos. 2705 and 2822), the Philippine Legislature has created the Philippine National Bank (Acts
Nos. 2612, 2747, 2938, and 3174), the National Petroleum Company (Act No. 2814), the National
Development Company (Act No. 2849), the National Cement Company (Act No. 2855), and the
NationalIron Company (Act No. 2862). The aggregate authorized capital stock of these companies is
P54,500,000. The Legislature has in each of these instances directed that a majority of the shares of
stock shall be purchased for the Government, and has appropriated money for this purpose. There
have likewise been authorized corporations for the promotion of the merchant marine (Act No. 2754).
The stock of the Manila Railroad Company has been purchased for the Government. (Acts Nos.
2574, 2752, and 2923.) All these are conspicuous instances of a paternally inclined government
investing large sums in business enterprises which after acquisition or organization have vitally
concerned the Government. In all of the companies mentioned, the stock is to be voted by a
committee or board of control, consisting of the Governor-General, the President of the Senate, and
the Speaker of the House of Representatives. The power of the majority stckholders to vote the
government stock in the corporation carries with it the right, under our Corporation Law, to elect all
the directors, to remove any or all of them, and to dissolve the corporation by voluntary proceedings.
(Corporation Law, secs. 31, 34, 62.) In the case of the Philippine National Bank, the law explicitly
enumerates variousfunctions of the bank which may not be performed without the express approval
of the Board of Control. (Act No. 2938.)

Very important property rights are involved in the transactions in the governmental directed
corporations. Just as surely as the duty of caring for government property is neither judicial nor
legislative in character is it as surely executive. Yet a majority of the voting committee or board of
control is made up of the presiding officers of the two houses of the Legislature and they are in a
position to dictate action to the directors and subordinate personel of these corporations.

Based on all the foregoing considerations, we deduce that the power of appointment in the
Philippines appertains, with minor exceptions, to the executive department; that membership in the
voting committee in question is an office or executive function; that the National Coal Company and
similar corporations are instrumentalities of the Government; that the duty to look after government
agencies and government property belongs to the executive department; that the placing of members
of the Philippine Legislature on the voting committee constitutes an invasion by the Legislative
Department of the provileges of the Executive Department. Under a system of government of
delegated powers, under which delagation legislative power vests in the Philippine Legislature and
executive power vests in the Governor-General, and under which Governor-General and a specified
power of appointment resides in the Philippine Legislature, the latter cannot directly or indirectly
perform functions of an executive nature through the designation of its presiding officers as majority
membersof a body which has executive functions. That is the meaning we gather from the tri-partite
theory of the division of powers. That is the purport of the provisions of the Organic Law. That has
been the decided trend of persuasive judicial opinion.

The intimation contained in the conclusions just reached does not necessarily mean that the plaintiff
will be privileged to substitute the directors designated by the Governor-General for those designated
by the two presiding officers in the Legislature. The burden has heretofore been on the defenfants.
From this point, it will be on the plaintiff. It is well established in quo warranto proceedingsthat the
failure of the defendant to prove his title does not established that of plaintiff. (People vs. Thacher
[1874], 10 N. Y., 525.)

The answer to the problem comes from two directions. The acting Attorney-General of the United
States finds the solutions in the supreme executive power entrusted to the Governor-General, while
cousel for the plaintiff advance the rule of statutory construction pertaining to partial invalidity. We are
frank to say that we experience difficulty in following the lead of the law officer of the Government of
the United States. The Governor-General since the approval of the last Organic Act has had no
prerogative powers. His powers are so clearly and distincly stated that there ought to be no doubt as
to what they are. Like the Legislature and the judiciary,like the most inconspicuous employee, the
Governor-General must find warrant for his every act in the law. At this stage of political development
in the Philippines, no vague residuum of power should be left to lurk in any of the provsions of the
Organic Law.

Counsel for the plaintiff rely on a decision of this court (U. S. vs. Rodriguez [1918], 38 Phil., 759) as
best expressing the local rule regarding statutes void in part. Counsel for the defendants cite an
earlier case (Barrameda vs. Moir [1913], 25 Phil., 44). As the principle announced in the last cited
case is the more comprehensive and is much fairer to the defendants, we give it preference. It was
there announce:

Where part of a statute is void, as repugnant to the Organic Law, while another part is valid,
the valid portion, if separable from the invalid, may stand and be enfored. But in order to do
this, the valid portion must be so far independent of the invalid portion that it is fair to presume
that the Legislature would have enacted it by itself if they had supposed that they could not
constitutionally enact the other. Enough must remain to make a complete, intelligible, and valid
statute, which carries out the legislative intent. The void provisions must be eliminated without
causing results affecting the main purpose of the Act in a manner contrary to the intention of
the Legislature. The language used in the invalid part of a statute can have no legal force or
efficacy for any purpose whatever, and what remains must express the legislative will
independently of the void part since the court has no power to legislate.

Omitting reference to the President of the Senate and the Speaker of the House of Representative in
section 4 of Act No. 2705, as amended by section 2 of Act No. 2822, it would then read: "The voting
powerof all such stock owned by the Government of the Philippine Islands shall be vested exclusively
in a committee consisting of the Governor- General." Would the court be justified in so enforcing the
law without itself intruding on the legislative field?
The Philippine Legislature, as we have seen is authourized to create corporations and offices. The
Legislature has lawfully provided for a National Coal Company, but has unlawfully provided for two of
its members to sit in the committee. Would this court be doing violence to the legislative will if the
votig power be continued solely in the hands of the Governor-General until different action is taken by
the Legislature? We conclude that we would not, for the reason that the primordial purpose of the
Legislature was "to promote the business of developing coal deposits . . . and of mining . . . and
selling the coal contained in said deposits." (Act No. 2705, sec 2; Act No.2822, sec.1.) The incidental
purpose of the Legislature was to provide a method to vote the stock owned by the Government in
the National Coal comapny. In the words of the United States Supreme Court, "The striking out is not
necessarily by erasing words, but it may be by disregarding the unconstitutional provision and reading
the statute as if that provision was not there." (Railroad companies vs. Schutte [1880], 103 U. S. 118;
State vs. Westerfield [1897], 23 Nev., 468; State vs. Washburn, supra; State vs. Wright [1913], 251
Mo., 325; State vs. Clausen [1919], 107 Wash.,667; 1 Lewis Sutherland, Statutory construction,
Second ed. Ch. IX.)

The decision of the United States Supreme Court in Clayton vs. People ([1890], 132 U. S., 632) is
particularly applicable on account of relating to the validity of an Act passed by a territorial legislature,
the question of partial invalidity, and the contention likewise here made, that since the law in question
had been on the statute books for a number of years, it must be considered as having been impliedly
ratified by the Congress. An Act of the Legislature of Utah of 1878 had declared that the auditor and
the treasurer shall be elected by the voters of the territory. In a decision handed down in 1886, the
Supreme Court of the territory of Utah held the act void because in conflict with the organic act
creating the territory, which provided that the governor, with the consent of the legislative council,
shall appoint such officers. It further held that a territorial statute invalid when enacted is not validated
by the failureof the congress expressly to disapprove it. (People vs. Clayton [1886], 4 Utah, 421.) The
United States Supreme Court on appeal affirmed the judgment. It said:

It can hardly be admitted as a general proposition that under the power of Congress reserved
in the Organic Acts of the territories to annul the Acts of their legislature the absence of any
action by Congress is to be construed to be a recognition of the power of the Legislature to
pass laws in conflict with the Act of Congress underwhich they were created. . . . We do not
think that the acquiescenceof the people, or of the Legislature of Utah, or of any of its officers,
in the mode for appointing the auditor of public accounts, is sufficient to do away with the clear
requirements of the organic Act on that subject. It is also, we think, very clear that only that
part of the Statute of Utah which is contrary to the Organic act, namely, that relating to the
mode of appointment of the officer, is invalid; that so much of it as creates the office of auditor
of public accounts and treasurer of the Territory is valid; and that it can successfully and
appropriately be carried into effect by an appointment made by the governor and the Council of
the Territory, as required in the Act of Congress.

On the assumption, however, that the entire provision authorizing the voting committee be considered
as wiped out, yet we think it would still devolve on the Governor-General to protect the public
interests and public property. He is made responsible for the execution of the laws, and he would be
unfaithful to that trust if, through inaction, instrumentalities of government should fail to function and
government property should be permitted to be dissipated.

Counsel for the dependants have injected the argument into the discussion that, as the President of
the Senate and the Speaker of the House of Representatives are at least de facto officers, their right
to act as members of the voting committee cannot be collaterally attacked, and that the defendants in
this suit are the de jure members of the board of directors of National Coal Company. Contentions
such as there are out of harmony with the avowed purpose to avoid technical obstruction, and to
secure a definite expression of opinion on the main issue. However, it remains to be said that this is a
direct proceeding to test the right of the defendants to the offices to which they consider themselves
entitled. The inquiry then may go, as is proper in quo warranto proceedings, to the extent of
determining the validity of the act authorizing the offices. The fallacy of the argument relating to the
de facto doctrine is that, although there may be a de facto officer in a de jure office, there cannot be
a de facto officer in a de fact office. There is no such thing as de facto office under an
unconstitutional law. (Norton vs. Shelby County [1886], 188 U. S., 425.)

Before terminating, a few general observations may be appropriate.The case has been carefully
prepared and elaborately argued. All parties appear to desire to have the matter at issue definitely
determined. We have endeavored to accomodate them. But in such a bitterly fought contest, the
ingenuity of counsel presses collateralpoints upon us which the court need not resolve. We thus find it
unnecessary to express any opinion on the propriety or legality of Executive Order No. 37, on that
portion of section 18 of the Organic Act which disqualifies Senators or Representatives for election or
appointment to office and no other subsidiary matters. Need it be added that the court is solely
concerned with arriving at a correct decision on a purely legal question.

Every other consideration to one side, this remains certain—The congress of the United States
clearly intended that the Governor- General's power should be commensurate with his responsibility.
The Congress never intended that the Governor-General should be saddled with the responsibility of
administering the government and of executing the laws but shorn of the power to do so. The
interests of the Philippines will be best served by strict adherence to the basic principles of
constitutional government.

We have no hesitancy in concluding that so much of section 4 of Act No. 2705, as amended by
section 2 of Act No. 2822, as purports to vest the voting power of the government-owned stock in the
National Coal Company in the President of the Senate and the Speaker of the House of
Representatives, is unconstitutional and void. It results, therefore, in the demurrer being overruled,
and as it would be impractible for the defendants to answer, judgment shall be rendered ousting and
excluding them from the offices of directors of the National Coalcompany. So ordered, without costs.

Street, Ostrand, Johns and Romualdez, JJ., concur.

 EN BANC

G.R. No. 14129             July 31, 1962

PEOPLE OF THE PHILIPPINES, plaintiff-appellant,

vs.
GUILLERMO MANANTAN, defendant-appellee.

Office of the Solicitor General for plaintiff-appellant.

Padilla Law Office for defendant-appellee.

REGALA, J.:

This is an appeal of the Solicitor General from the order of the Court of First Instance of Pangasinan
dismissing the information against the defendant.

The records show that the statement of the case and the facts, as recited in the brief of plaintiff-
appellant, is complete and accurate. The same is, consequently, here adopted, to wit:

In an information filed by the Provincial Fiscal of Pangasinan in the Court of First Instance of
that Province, defendant Guillermo Manantan was charged with a violation Section 54 of the
Revised Election Code. A preliminary investigation conducted by said court resulted in the
finding a probable cause that the crime charged as committed by defendant. Thereafter, the
trial started upon defendant's plea of not guilty, the defense moved to dismiss the information
on the ground that as justice of the peace the defendant is one of the officers enumerated in
Section 54 of the Revised Election Code. The lower court denied the motion to dismiss holding
that a justice of the peace is within the purview Section 54. A second motion was filed by
defense counsel who cited in support thereof the decision of the Court of Appeals in People vs.
Macaraeg, (CA-G.R. No. 15613-R, 54 Off. Gaz., pp. 1873-76) where it was held that a justice
of the peace is excluded from the prohibition of Section 54 of the Revised Election Code.
Acting on this second motion to dismiss, the answer of the prosecution, the reply of the
defense, and the opposition of the prosecution, the lower court dismissed the information
against the accused upon the authority of the ruling in the case cited by the defense.

Both parties are submitting this case upon the determination of this single question of law: Is a justice
the peace included in the prohibition of Section 54 of the Revised Election Code?

Section 54 of the said Code reads:

No justice, judge, fiscal, treasurer, or assessor of any province, no officer or employee of the
Army, no member of the national, provincial, city, municipal or rural police force and no
classified civil service officer or employee shall aid any candidate, or exert any influence in any
manner in a election or take part therein, except to vote, if entitled thereto, or to preserve
public peace, if he is a peace officer.

Defendant-appellee argues that a justice of the peace is not comprehended among the officers
enumerated in Section 54 of the Revised Election Code. He submits the aforecited section was taken
from Section 449 of the Revised Administrative Code, which provided the following:
 SEC. 449. Persons prohibited from influencing elections. — No judge of the First Instance,
justice of the peace, or treasurer, fiscal or assessor of any province and no officer or employee
of the Philippine Constabulary, or any Bureau or employee of the classified civil service, shall
aid any candidate or exert influence in any manner in any election or take part therein
otherwise than exercising the right to vote.

When, therefore, section 54 of the Revised Election Code omitted the words "justice of the peace,"
the omission revealed the intention of the Legislature to exclude justices of the peace from its
operation.

The above argument overlooks one fundamental fact. It is to be noted that under Section 449 of the
Revised Administrative Code, the word "judge" was modified or qualified by the phrase "of First
instance", while under Section 54 of the Revised Election Code, no such modification exists. In other
words, justices of the peace were expressly included in Section 449 of the Revised Administrative
Code because the kinds of judges therein were specified, i.e., judge of the First Instance and justice
of the peace. In Section 54, however, there was no necessity therefore to include justices of the
peace in the enumeration because the legislature had availed itself of the more generic and broader
term, "judge." It was a term not modified by any word or phrase and was intended to comprehend all
kinds of judges, like judges of the courts of First Instance, Judges of the courts of Agrarian Relations,
judges of the courts of Industrial Relations, and justices of the peace.

It is a well known fact that a justice of the peace is sometimes addressed as "judge" in this
jurisdiction. It is because a justice of the peace is indeed a judge. A "judge" is a public officer, who, by
virtue of his office, is clothed with judicial authority (U.S. v. Clark, 25 Fed. Cas. 441, 422). According
to Bouvier Law Dictionary, "a judge is a public officer lawfully appointed to decide litigated questions
according to law. In its most extensive sense the term includes all officers appointed to decide
litigated questions while acting in that capacity, including justices of the peace, and even jurors, it is
said, who are judges of facts."

A review of the history of the Revised Election Code will help to justify and clarify the above
conclusion.

The first election law in the Philippines was Act 1582 enacted by the Philippine Commission in 1907,
and which was later amended by Act. Nos. 1669, 1709, 1726 and 1768. (Of these 4 amendments,
however, only Act No. 1709 has a relation to the discussion of the instant case as shall be shown
later.) Act No. 1582, with its subsequent 4 amendments were later on incorporated Chapter 18 of the
Administrative Code. Under the Philippine Legislature, several amendments were made through the
passage of Acts Nos. 2310, 3336 and 3387. (Again, of these last 3 amendments, only Act No. 3587
has pertinent to the case at bar as shall be seen later.) During the time of the Commonwealth, the
National Assembly passed Commonwealth Act No. 23 and later on enacted Commonwealth Act No.
357, which was the law enforced until June 1947, when the Revised Election Code was approved.
Included as its basic provisions are the provisions of Commonwealth Acts Nos. 233, 357, 605, 666,
657. The present Code was further amended by Republic Acts Nos. 599, 867, 2242 and again, during
the session of Congress in 1960, amended by Rep. Acts Nos. 3036 and 3038. In the history of our
election law, the following should be noted:

Under Act 1582, Section 29, it was provided:

No public officer shall offer himself as a candidate for elections, nor shall he be eligible during
the time that he holds said public office to election at any municipal, provincial or Assembly
election, except for reelection to the position which he may be holding, and no judge of the
First Instance, justice of the peace, provincial fiscal, or officer or employee of the Philippine
 Constabulary or of the Bureau of Education shall aid any candidate or influence in any manner
or take part in any municipal, provincial, or Assembly election under the penalty of being
deprived of his office and being disqualified to hold any public office whatsoever for a term of 5
year: Provide, however, That the foregoing provisions shall not be construe to deprive any
person otherwise qualified of the right to vote it any election." (Enacted January 9, 1907; Took
effect on January 15, 1907.)

Then, in Act 1709, Sec. 6, it was likewise provided:

. . . No judge of the First Instance, Justice of the peace provincial fiscal or officer or employee
of the Bureau of Constabulary or of the Bureau of Education shall aid any candidate or
influence in any manner to take part in any municipal provincial or Assembly election. Any
person violating the provisions of this section shall be deprived of his office or employment and
shall be disqualified to hold any public office or employment whatever for a term of 5 years,
Provided, however, that the foregoing provisions shall not be construed to deprive any person
otherwise qualified of the right to vote at any election. (Enacted on August 31, 1907; Took
effect on September 15, 1907.)

Again, when the existing election laws were incorporated in the Administrative Code on March 10,
1917, the provisions in question read:

SEC. 449. Persons prohibited from influencing elections. — No judge of the First Instance,
justice of the peace, or treasurer, fiscal or assessor of any province and no officer or employee
of the Philippine Constabulary or any Bureau or employee of the classified civil service, shall
aid any candidate or exert influence in any manner in any election or take part therein
otherwise than exercising the right to vote. (Emphasis supplied)

After the Administrative Code, the next pertinent legislation was Act No. 3387. This Act reads:

SEC. 2636. Officers and employees meddling with the election. — Any judge of the First
Instance, justice of the peace, treasurer, fiscal or assessor of any province, any officer or
employee of the Philippine Constabulary or of the police of any municipality, or any officer or
employee of any Bureau of the classified civil service, who aids any candidate or violated in
any manner the provisions of this section or takes part in any election otherwise by exercising
the right to vote, shall be punished by a fine of not less than P100.00 nor more than P2,000.00,
or by imprisonment for not less than 2 months nor more than 2 years, and in all cases by
disqualification from public office and deprivation of the right of suffrage for a period of 5 years.
(Approved December 3, 1927.) (Emphasis supplied.)

Subsequently, however, Commonwealth Act No. 357 was enacted on August 22, 1938. This law
provided in Section 48:

SEC. 48. Active Interventation of Public Officers and Employees. — No justice, judge, fiscal,
treasurer or assessor of any province, no officer or employee of the Army, the Constabulary of
the national, provincial, municipal or rural police, and no classified civil service officer or
employee shall aid any candidate, nor exert influence in any manner in any election nor take
part therein, except to vote, if entitled thereto, or to preserve public peace, if he is a peace
officer.

This last law was the legislation from which Section 54 of the Revised Election Code was taken.
It will thus be observed from the foregoing narration of the legislative development or history of
Section 54 of the Revised Election Code that the first omission of the word "justice of the peace" was
effected in Section 48 of Commonwealth Act No. 357 and not in the present code as averred by
defendant-appellee. Note carefully, however, that in the two instances when the words "justice of the
peace" were omitted (in Com. Act No. 357 and Rep. Act No. 180), the word "judge" which preceded in
the enumeration did not carry the qualification "of the First Instance." In other words, whenever the
word "judge" was qualified by the phrase "of the First Instance", the words "justice of the peace"
would follow; however, if the law simply said "judge," the words "justice of the peace" were omitted.

The above-mentioned pattern of congressional phraseology would seem to justify the conclusion that
when the legislature omitted the words "justice of the peace" in Rep. Act No. 180, it did not intend to
exempt the said officer from its operation. Rather, it had considered the said officer as already
comprehended in the broader term "judge".

It is unfortunate and regrettable that the last World War had destroyed congressional records which
might have offered some explanation of the discussion of Com. Act No. 357 which legislation, as
indicated above, has eliminated for the first time the words "justice of the peace." Having been
completely destroyed, all efforts to seek deeper and additional clarifications from these records
proved futile. Nevertheless, the conclusions drawn from the historical background of Rep. Act No. 180
is sufficiently borne out by reason hid equity.

Defendant further argues that he cannot possibly be among the officers enumerated in Section 54
inasmuch as under that said section, the word "judge" is modified or qualified by the phrase "of any
province." The last mentioned phrase, defendant submits, cannot then refer to a justice of the peace
since the latter is not an officer of a province but of a municipality.

Defendant's argument in that respect is too strained. If it is true that the phrase "of any province"
necessarily removes justices of the peace from the enumeration for the reason that they are
municipal and not provincial officials, then the same thing may be said of the Justices of the Supreme
Court and of the Court of Appeals. They are national officials. Yet, can there be any doubt that
Justices of the Supreme Court and of the Court of Appeals are not included in the prohibition? The
more sensible and logical interpretation of the said phrase is that it qualifies fiscals, treasurers and
assessors who are generally known as provincial officers.

The rule of "casus omisus pro omisso habendus est" is likewise invoked by the defendant-appellee.
Under the said rule, a person, object or thing omitted from an enumeration must be held to have been
omitted intentionally. If that rule is applicable to the present, then indeed, justices of the peace must
be held to have been intentionally and deliberately exempted from the operation of Section 54 of the
Revised Election Code.

The rule has no applicability to the case at bar. The maxim "casus omisus" can operate and apply
only if and when the omission has been clearly established. In the case under consideration, it has
already been shown that the legislature did not exclude or omit justices of the peace from the
enumeration of officers precluded from engaging in partisan political activities. Rather, they were
merely called by another term. In the new law, or Section 54 of the Revised Election Code, justices of
the peace were just called "judges."

In insisting on the application of the rule of "casus omisus" to this case, defendant-appellee cites
authorities to the effect that the said rule, being restrictive in nature, has more particular application to
statutes that should be strictly construed. It is pointed out that Section 54 must be strictly construed
against the government since proceedings under it are criminal in nature and the jurisprudence is
settled that penal statutes should be strictly interpreted against the state.
Amplifying on the above argument regarding strict interpretation of penal statutes, defendant asserts
that the spirit of fair play and due process demand such strict construction in order to give "fair
warning of what the law intends to do, if a certain line is passed, in language that the common world
will understand." (Justice Holmes, in McBoyle v. U.S., 283 U.S. 25, L. Ed. 816).

The application of the rule of "casus omisus" does not proceed from the mere fact that a case is
criminal in nature, but rather from a reasonable certainty that a particular person, object or thing has
been omitted from a legislative enumeration. In the present case, and for reasons already mentioned,
there has been no such omission. There has only been a substitution of terms.

The rule that penal statutes are given a strict construction is not the only factor controlling the
interpretation of such laws; instead, the rule merely serves as an additional, single factor to be
considered as an aid in determining the meaning of penal laws. This has been recognized time and
again by decisions of various courts. (3 Sutherland, Statutory Construction, p. 56.) Thus, cases will
frequently be found enunciating the principle that the intent of the legislature will govern (U.S. vs.
Corbet, 215 U.S. 233). It is to be noted that a strict construction should not be permitted to defeat the
policy and purposes of the statute (Ash Sheep Co. v. U.S., 252 U.S. 159). The court may consider the
spirit and reason of a statute, as in this particular instance, where a literal meaning would lead to
absurdity, contradiction, injustice, or would defeat the clear purpose of the law makers (Crawford,
Interpretation of Laws, Sec. 78, p. 294). A Federal District court in the U.S. has well said:

The strict construction of a criminal statute does not mean such construction of it as to deprive
it of the meaning intended. Penal statutes must be construed in the sense which best
harmonizes with their intent and purpose. (U.S. v. Betteridge 43 F. Supp. 53, 56, cited in 3
Sutherland Statutory Construction 56.)

As well stated by the Supreme Court of the United States, the language of criminal statutes,
frequently, has been narrowed where the letter includes situations inconsistent with the legislative
plan (U.S. v. Katz, 271 U.S. 354; See also Ernest Brunchen, Interpretation of the Written Law (1915)
25 Yale L.J. 129.)

Another reason in support of the conclusion reached herein is the fact that the purpose of the statute
is to enlarge the officers within its purview. Justices of the Supreme Court, the Court of Appeals, and
various judges, such as the judges of the Court of Industrial Relations, judges of the Court of Agrarian
Relations, etc., who were not included in the prohibition under the old statute, are now within its
encompass. If such were the evident purpose, can the legislature intend to eliminate the justice of the
peace within its orbit? Certainly not. This point is fully explained in the brief of the Solicitor General, to
wit:

On the other hand, when the legislature eliminated the phrases "Judge of First Instance" and
justice of the peace", found in Section 449 of the Revised Administrative Code, and used
"judge" in lieu thereof, the obvious intention was to include in the scope of the term not just one
class of judges but all judges, whether of first Instance justices of the peace or special courts,
such as judges of the Court of Industrial Relations. . . . .

The weakest link in our judicial system is the justice of the peace court, and to so construe the
law as to allow a judge thereof to engage in partisan political activities would weaken rather
than strengthen the judiciary. On the other hand, there are cogent reasons found in the
Revised Election Code itself why justices of the peace should be prohibited from
electioneering. Along with Justices of the appellate courts and judges of the Court of First
Instance, they are given authority and jurisdiction over certain election cases (See Secs. 103,
104, 117-123). Justices of the peace are authorized to hear and decided inclusion and
 exclusion cases, and if they are permitted to campaign for candidates for an elective office the
impartiality of their decisions in election cases would be open to serious doubt. We do not
believe that the legislature had, in Section 54 of the Revised Election Code, intended to create
such an unfortunate situation. (pp. 708, Appellant's Brief.)

Another factor which fortifies the conclusion reached herein is the fact that the administrative or
executive department has regarded justices of the peace within the purview of Section 54 of the
Revised Election Code.

In Tranquilino O. Calo, Jr. v. The Executive Secretary, the Secretary of Justice, etc. (G.R. No. L-
12601), this Court did not give due course to the petition for certiorari and prohibition with preliminary
injunction against the respondents, for not setting aside, among others, Administrative Order No. 237,
dated March 31, 1957, of the President of the Philippines, dismissing the petitioner as justice of the
peace of Carmen, Agusan. It is worthy of note that one of the causes of the separation of the
petitioner was the fact that he was found guilty in engaging in electioneering, contrary to the
provisions of the Election Code.

Defendant-appellee calls the attention of this Court to House Bill No. 2676, which was filed on
January 25, 1955. In that proposed legislation, under Section 56, justices of the peace are already
expressly included among the officers enjoined from active political participation. The argument is that
with the filing of the said House Bill, Congress impliedly acknowledged that existing laws do not
prohibit justices of the peace from partisan political activities.

The argument is unacceptable. To begin with, House Bill No. 2676 was a proposed amendment to
Rep. Act No. 180 as a whole and not merely to section 54 of said Rep. Act No. 180. In other words,
House Bill No. 2676 was a proposed re-codification of the existing election laws at the time that it was
filed. Besides, the proposed amendment, until it has become a law, cannot be considered to contain
or manifest any legislative intent. If the motives, opinions, and the reasons expressed by the
individual members of the legislature even in debates, cannot be properly taken into consideration in
ascertaining the meaning of a statute (Crawford, Statutory Construction, Sec. 213, pp. 375-376),
a fortiori what weight can We give to a mere draft of a bill.

On law reason and public policy, defendant-appellee's contention that justices of the peace are not
covered by the injunction of Section 54 must be rejected. To accept it is to render ineffective a policy
so clearly and emphatically laid down by the legislature.

Our law-making body has consistently prohibited justices of the peace from participating in partisan
politics. They were prohibited under the old Election Law since 1907 (Act No. 1582 and Act No.
1709). Likewise, they were so enjoined by the Revised Administrative Code. Another which
expressed the prohibition to them was Act No. 3387, and later, Com. Act No. 357.

Lastly, it is observed that both the Court of Appeals and the trial court applied the rule of "expressio
unius, est exclusion alterius" in arriving at the conclusion that justices of the peace are not covered by
Section 54. Said the Court of Appeals: "Anyway, guided by the rule of exclusion, otherwise known
as expressio unius est exclusion alterius, it would not be beyond reason to infer that there was an
intention of omitting the term "justice of the peace from Section 54 of the Revised Election Code. . . ."

The rule has no application. If the legislature had intended to exclude a justice of the peace from the
purview of Section 54, neither the trial court nor the Court of Appeals has given the reason for the
exclusion. Indeed, there appears no reason for the alleged change. Hence, the rule of expressio
unius est exclusion alterius has been erroneously applied. (Appellant's Brief, p. 6.)
 Where a statute appears on its face to limit the operation of its provisions to particular persons
or things by enumerating them, but no reason exists why other persons or things not so
enumerated should not have been included, and manifest injustice will follow by not so
including them, the maxim expressio unius est exclusion alterius, should not be invoked.
(Blevins v. Mullally 135 p. 307, 22 Cal. App. 519.) .

FOR THE ABOVE REASONS, the order of dismissal entered by the trial court should be set aside
and this case is remanded for trial on the merits.
 EN BANC

G.R. No. L-5558             April 29, 1953

ENRIQUE D. MANABAT and RUFINA S. MANABAT, petitioners,

vs.
THE HON. BERNABE DE AQUINO, Judge of First Instance of Tarlac, and ALEJANDRA L. DE
ROXAS and CLAUDIO ROXAS, respondent.

Luciano V. Bonicilio for petitioners.

Ruben L. Roxas for respondents.
Bernabe de Aquino in his own behalf.

BENGZON, J.:

The case: This is a petition for mandamus to require the respondent judge of first instance to give
due course to, and hear the petitioners' appeal from the decision of a justice of the peace which he
dismissed believing it had not been perfected in due time.

The facts: Sued on a promissory note in the peace court of Tarlac, Tarlac, Enrique S. Manabat and
his wife, denied liability, alleging usury. Having failed to appear and present evidence at the hearing,
they were ordered to pay the amount of P1,261.74 plus interest, upon the proofs and introduced by
the plaintiffs, Alejandra L. de Roxas and her husband Claudio Roxas.

Notified of the decision on September 7, 1951, the Manabats sent on September 22, 1951 their notice
of appeal by registered mail together with a postal money order payable to the justice of the peace for
P16 as docket fees and a surety bond in the sum of P30 as appeal bond. These papers were actually
received at the peace court of Tarlac, Tarlac, on September 24, 1951.

Forwarded to the court of instance, the appeal was docketed as civil case No. 638. Subsequently,
however, the Roxas couple submitted a motion to dismiss the appeal of the Manabats on the
grounds: (a) that the appeal documents had been received by the inferior court of Tarlac, on
September 24, i.e., two days after the expiration of the time prescribed by law for appeals from that
court and (b) because the appeal was frivolous, interposed obviously for delay.

Noting that the 15-day period expired on September 22, and that the appeal papers were actually
received on September 24, the judge of first instance declared the appeal was late and dismissed it
for lack of jurisdiction. He expressly refused to apply section 1 Rule 27 of the Rules of Court on which
the Manabats relied to sustain the timeliness of their move. That section provides that "the date of the
mailing" of the court papers "as shown by the post-office registry receipt shall be considered as the
date of their filing" in court. His honor opined that this section does not regulate inferior courts, since it
is found only among rules governing courts of first instance, and, unlike other rules, it is not extended
to inferior courts — and therefore excluded — by section 19 Rule 4, which for convenience is quoted
hereunder:

SEC. 19. Application of certain rules. — Rules 10, 12, 13, 14, 18, 28, 29, 30, and 39 are
applicable in inferior courts in cases falling within their jurisdictions and in so far as they are not
inconsistent with the provisions of this rule.

Hence this petition for mandamus, appeal being inadequate, because the defendants in the case,
(petitioners herein) have not introduced evidence.
The question is whether the appeal had been perfected within fifteen days as required by section 2
Rule 40 of the Rules of Court. If it was, this petition should be granted. 1 Otherwise it will be denied.
That question, in turn, depends upon the issue whether the appeal papers are deemed filed in court
on September 22 when they were deposited in the mails by registered mail, or on September 24
when they were actually received. If the first, the appeal was timely; otherwise it was belated.

Discussion: If section 1 Rule 27 is applied, the appeal papers would be deemed filed on September
22, and therefore the appeal would have been seasonably perfected. His Honor, however, and the
other respondents, maintain that Rule 27 is not applicable because it is not mentioned in section 19
Rule 4 hereinbefore quoted, and inclusio unius est exclusio alterius, enumeration of certain rules,
excludes others.

That legal maxim is well-known, and respondents' position seems at first blush tenable. But the
maxim is not more than an auxiliary rule of interpretation to be ignored where other circumstances
indicate the enumeration was not intended to be exclusive.

Now, if section 19 Rule 4 is exclusive, justices of the peace may disregard, (a) the principles of
evidence prescribed in Rule 123, (b) Rule 131 as to costs and (c) the fundamental principles about
splitting or joinder of causes of action in Rule 2, and the theories about parties in interest, necessary
parties, married women etc. in Rule 3.

These undesirable consequences could not have been overlooked by the framers of the Rules. They
could not have intended, therefore, to make the enumeration in section 19 Rule 4 as all-inclusive and
exclusive.

As a matter of fact this Court applied to litigations in inferior courts Rules other than those
enumerated in Rule 4, section 19. Thus in Viola Fernando vs. Aragon,* 43 Off. Gaz., 145 we applied
Rule 17 to a municipal court saying "Although Rule 17 has not been made applicable to justice of the
peace courts, such omission (from the enumeration in section 19 Rule 4), can not be interpreted as a
prohibition to apply it."

In Beltran vs. Cabrera (73 Phil., 666), Rule 124 was considered applicable to the Manila municipal
court.

In Co Tiamco vs. Diaz (75 Phil., 672), Rules 8, 16, 17, 20, 21, 22, and the appendix of forms after
Rule 133 were deemed binding on inferior courts, over the objection that they were excluded by
section 19 Rule 4.

Consequently, there can be no legal obstacle to the application of Rule 27 section 1 to the justice of
the peace court of Tarlac. And it should be applied, to uphold the uniform principle that "the date of
deposit in the post-office by registered mail" of court papers is "the date of filing" not only in the
Supreme Court, the appellate court, and the superior courts but also in inferior courts. Uniformity of
rules is to be desired to simplify procedure (Cf. Henning vs. Western Equipment, 62 Phil., 886).

Conclusion: Hence, this Court's opinion is that the Manabats appealed on time.

The Roxas spouses interpose here two other points: (a) instead of delivering a certificate of the
municipal treasurer showing deposit of the docket fees, the Manabats sent only a postal money order
payable to the justice of the peace; and (b) the appeal was unmeritorious and merely for delay.

The first objection was not raised in the court of first instance, wherein the time of the appeal — not
the form — was discussed. Any way there was substantial compliance of the deposit requirement. 2
The second point was ignored by the respondent judge. Rightly, we believe, because at this stage we
are not prepared to deprive the Manabats of their day in court, usury being contrary to the policies of
our system of legislation.

Judgment: Wherefore, the writ will be issued for the respondent judge to hear and thereafter decide
the appeal interposed by herein petitioners. Costs against the Roxases. So ordered.

Paras, C.J., Pablo, Tuason, Montemayor, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.
PDF 14

EN BANC

G.R. No. L-26371             September 30, 1969

MOBIL OIL PHILIPPINES, INC., plaintiff-appellant,

vs.
RUTH R. DIOCARES, ET AL., defendants-appellees.

Faylona, Berroya, Norte and Associates for plaintiff-appellant.

Vivencio G. Ibrado Jr. for defendants-appellees.

FERNANDO, J.:

It may very well be, as noted by jurists of repute, that to stress the element of a promise as the basis
of contracts is to acknowledge the influence of natural law.  1 Nonetheless, it does not admit of doubt
that whether under the civil law or the common law, the existence of a contract is unthinkable without
one's word being plighted. So the New Civil Code provides: "A contract is a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give something or to
render some service." 2 So it is likewise under American law. Thus: "A contract is a promise or a set of
promises for the breach of which the law gives a remedy, or the performance of which the law in
some way recognizes as a duty."  3

The law may go further and require that certain formalities be executed. Thus, for a mortgage to be
validly constituted, "it is indispensable, ..., that the document in which it appears be recorded in the
Registry of Property." The same codal provision goes on: "If the instrument is not recorded, the
mortgage is nevertheless binding between the parties."  4

The question before us in this appeal from a lower court decision, one we have to pass upon for the
first time, is the effect, if any, to be given to a mortgage contract admittedly not registered, only the
parties being involved in the suit. The lower court was of the opinion that while it "created a personal
obligation [it] did not establish a real estate mortgage."  5 It did not decree foreclosure therefor.
Plaintiff-appellant appealed. We view the matter differently and reverse the lower court.

The case for the plaintiff, Mobil Oil Philippines, Inc., now appellant, was summarized in the lower
court order of February 25, 1966, subject of this appeal. Thus: "In its complaint plaintiff alleged that on
Feb. 9, 1965 defendants Ruth R. Diocares and Lope T. Diocares entered into a contract of loan and
real estate mortgage wherein the plaintiff extended to the said defendants a loan of P45,000.00; that
said defendants also agreed to buy from the plaintiff on cash basis their petroleum requirements in an
amount of not less than 50,000 liters per month; that the said defendants will pay to the plaintiff 9-
1/2% per annum on the diminishing balance of the amount of their loan; that the defendants will repay
the said loan in monthly installments of P950.88 for a period of five (5) years from February 9, 1965;
that to secure the performance of the foregoing obligation they executed a first mortgage on two
parcels of land covered by Transfer Certificates of Title Nos. T-27136 and T-27946, both issued by
the Register of Deeds of Bacolod City. The agreement further provided that in case of failure of the
defendants to pay any of the installments due and purchase their petroleum requirements in the
minimum amount of 50,000 liters per month from the plaintiff, the latter has the right to foreclose the
mortgage or recover the payment of the entire obligation or its remaining unpaid balance; that in case
of foreclosure the plaintiff shall be entitled to 12% of the indebtedness as damages and attorney's
fees. A copy of the loan and real estate mortgage contract executed between the plaintiff and the
defendants is attached to the complaint and made a part thereof. The complaint further alleges that
the defendant paid only the amount of P1,901.76 to the plaintiff, thus leaving a balance of
P43,098.24, excluding interest, on their indebtedness. The said defendants also failed to buy on cash
basis the minimum amount of petroleum which they agreed to purchase from the plaintiff. The
plaintiff, therefore, prayed that the defendants be ordered to pay the amount of P43,098.24, with
interest at 9-1/2% per annum from the date it fell due, and in default of such payment that the
mortgaged properties be sold and the proceeds applied to the payment of defendants' obligation."  6

Defendants, Ruth R. Diocares and Lope T. Diocares, now appellees, admitted their indebtedness as
set forth above, denying merely the alleged refusal to pay, the truth, according to them, being that
they sought for an extension of time to do so, inasmuch as they were not in a position to comply with
their obligation. They further set forth that they did request plaintiff to furnish them with the statement
of accounts with the view of paying the same on installment basis, which request was, however,
turned down by the plaintiff.

Then came a motion from the plaintiff for a judgment on the pleadings, which motion was favorably
acted on by the lower court. As was stated in the order appealed from: "The answer of the defendants
dated October 21, 1965 did not raise any issue. On the contrary, said answer admitted the material
allegations of the complaint. The plaintiff is entitled to a judgment on the pleadings."  7

As to why the foreclosure sought by plaintiff was denied, the lower court order on appeal reads thus:
"The Court cannot, however, order the foreclosure of the mortgage of properties, as prayed for,
because there is no allegation in the complaint nor does it appear from the copy of the loan and real
estate mortgage contract attached to the complaint that the mortgage had been registered. The said
loan agreement although binding among the parties merely created a personal obligation but did not
establish a real estate mortgage. The document should have been registered. (Art. 2125, Civil Code
of the Phil.)" 8 The dispositive portion is thus limited to ordering defendants "to pay the plaintiff the
account of P43,098.24, with interest at the rate of 9-1/2% per annum from the date of the filing of the
complaint until fully paid, plus the amount of P2,000.00 as attorneys' fees, and the costs of the suit."  9

Hence this appeal, plaintiff-appellant assigning as errors the holding of the lower court that no real
estate mortgage was established and its consequent refusal to order the foreclosure of the
mortgaged properties. As set forth at the outset, we find the appeal meritorious. The lower court
should not have held that no real estate mortgage was established and should have ordered its
foreclosure.

The lower court predicated its inability to order the foreclosure in view of the categorical nature of the
opening sentence of the governing article 10 that it is indispensable, "in order that a mortgage may be
validly constituted, that the document in which it appears be recorded in the Registry of Property."
Note that it ignored the succeeding sentence: "If the instrument is not recorded, the mortgage is
nevertheless binding between the parties." Its conclusion, however, is that what was thus created was
merely "a personal obligation but did not establish a real estate mortgage."

Such a conclusion does not commend itself for approval. The codal provision is clear and explicit.
Even if the instrument were not recorded, "the mortgage is nevertheless binding between the parties."
The law cannot be any clearer. Effect must be given to it as written. The mortgage subsists; the
parties are bound. As between them, the mere fact that there is as yet no compliance with the
requirement that it be recorded cannot be a bar to foreclosure.1awphîl.nèt
A contrary conclusion would manifest less than full respect to what the codal provision ordains. The
liability of the mortgagor is therein explicitly recognized. To hold, as the lower court did, that no
foreclosure would lie under the circumstances would be to render the provision in question nugatory.
That we are not allowed to do. What the law requires in unambiguous language must be lived up to.
No interpretation is needed, only its application, the undisputed facts calling for it. 11

Moreover to rule as the lower court did would be to show less than fealty to the purpose that
animated the legislators in giving expression to their will that the failure of the instrument to be
recorded does not result in the mortgage being any the less "binding between the parties." In the
language of the Report of the Code Commission: "In article [2125] an additional provision is made
that if the instrument of mortgage is not recorded, the mortgage is nevertheless binding between the
parties." 12 We are not free to adopt then an interpretation, even assuming that the codal provision
lacks the forthrightness and clarity that this particular norm does and, therefore, requires construction,
that would frustrate or nullify such legislative objective.

Nor is the reason difficult to discern why such an exception should be made to the rule that is
indispensable for a mortgage to be validly constituted that it be recorded. Equity so demands, and
justice is served. There is thus full acknowledgment of the binding effect of a promise, which must be
lived up to, otherwise the freedom a contracting party is supposed to possess becomes meaningless.
It could be said of course that to allow foreclosure in the absence of such a formality is to offend
against the demands of jural symmetry. What is "indispensable" may be dispense with. Such an
objection is far from fatal. This would not be the first time when logic yields to what is fair and what is
just. To such an overmastering requirement, law is not immune.

WHEREFORE, the lower court order of February 25, 1966 is affirmed with the modification that in
default of the payment of the above amount of P43,028.94 with interests at the rate of 9-1/2% per
annum from the date of the filing of the complaint, that the mortgage be foreclosed with the properties
subject thereof being sold and the proceeds of the sale applied to the payment of the amounts due
the plaintiff in accordance with law. With costs against defendants-appellees.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Capistrano, Teehankee and Barredo,
JJ., concur.
Reyes, J.B.L., J., is on leave.
 EN BANC

G.R. No. L-48384             October 11, 1943

SEVERO AMOR, petitioner,
vs.
GABRIEL FLORENTINO, ET AL., respondents.

BOCOBO, J.:

The petitioner asks for the setting aside of the decision of the Court of Appeals which affirmed the
judgment of the Court of First Instance of Ilocos Sur. The trial court declared that an easement of light
and view had been established in favor of the property of the plaintiffs (respondents herein) and
ordered the petitioner to remove within 30 days all obstruction to the windows of respondents' house,
to abstain from constructing within three meters from the boundary line, and to pay P200.00
damages.

It appears that over 50 years ago, Maria Florentino owned a house and a camarin or warehouse in
Vigan, Ilocos Sur. The house had and still has, on the north side, three windows on the upper story,
and a fourth one on the ground floor. Through these windows the house receives light and air from
the lot where the camarin stands. On September 6, 1885, Maria Florentino made a will, devising the
house and the land on which it is situated to Gabriel Florentino, one of the respondents herein, and to
Jose Florentino, father of the other respondents. In said will, the testatrix also devised the warehouse
and the lot where it is situated to Maria Encarnancion Florentino. Upon the death of the testatrix in
1882, nothing was said or done by the devisees in regard to the windows in question. On July 14,
1911, Maria Encarnacion Florentino sold her lot and the warehouse thereon to the petitioner, Severo
Amor, the deed of sale stating that the vendor had inherited the property from her aunt, Maria
Florentino. In January, 1938, petitioner destroyed the old warehouse and started to build instead a
two-story house. On March 1st of that year, respondents filed an action to prohibit petitioner herein
from building higher than the original structure and from executing any work which would shut off the
light and air that had for many years been received through the four windows referred to. The Court of
First Instance found on the 15th of the same month that the construction of the new house had almost
been completed, so the court denied the writ of preliminary injunction.

I.

Inasmuch as Maria Florentino died in 1892, according to the finding of fact of the Court of Appeals,
Articles 541 of the Civil Code governs this case. The facts above recited created the very situation
provided for in said article, which reads as follows:

(Spanish - page 406)

Art. 551. La existencia de un signo aparente de servidumbre entre dos fincas, establecido por
el propietario de ambas, se considerara, si se enjenare una, como titulo para que la
servidumbre continue activa y pasivamente, a no ser que, al tiempo de separarse la propiedad
de las dos fincas, se exprese lo contrario en el titulo de enajenacion de cualquiera de ellas, o
se haga desaparecer acquel signo antes del otorgamiento de la escritura.
 Art. 541. The existence of an apparent sign of easement between two estates, established by
the proprietor of both, shall be considered, if one of them is alienated, as a title so that the
easement will continue actively and passively, unless at the time the ownership of the two
estates is divided, the contrary is stated in the deed of alienation of either of them, or the sign
is made to disappear before the instrument is executed.

When the original owner, Maria Florentino, died in 1892, the ownership of the house and its lot
passed to respondents while the dominion over the camarin and its lot was vested in Maria
Encarnancion Florentino, from whom said property was later bought by petitioner. At the time the
devisees took possession of their respective portions of the inheritance, neither the respondents nor
Maria Encarnacion Florentino said or did anything with respect to the four windows of the
respondents' house. The respondents did not renounce the use of the windows, either by stipulation
or by actually closing them permanently. On the contrary, they exercised the right of receiving light
and air through those windows. Neither did the petitioner's predecessor in interest, Maria Encarnacion
Florentino, object to them or demand that they be close. The easement was therefore created from
the time of the death of the original owner of both estates, so when petitioner bought the land and
the camarin thereon from Maria Encarnancion Florentino, the burden of this easement continued on
the real property so acquired because according to Article 534, "easements are inseparable from the
estate to which they actively or passively pertain."

An incidental question that arises at this juncture is whether or not Article 541 applies to a division of
property by succession. The affirmative has been authoritatively declared. (Manresa, "Comentarios al
Codigo Civil Espanol," vol. 4, p. 619; Sentence of the Supreme Tribunal of Spain, November 17,
1911).

Petitioner assigns as an error of the Court of Appeals the supposed failure of that tribunal to pass
upon his motion to consider certain allegedly new evidence to prove that Maria Florentino, the original
owner of the properties, died in 1885. Petitioner alleges that Maria Florentino died in 1885 and,
therefore, the Law of the Partidas should be followed in this case and not the Civil Code. However,
the petitioner's contention cannot be upheld without rejecting the finding of fact made by the Court of
Appeals, as follows:

Hebiendo pasado la propiedad de la casa de manposteria a los demandantes, a la muerte de

Maria Florentino, ocurrida en 1892, (el demandado sostiene que fue con anterioridad a 1889)
no hay duda ninguna de que los demandantes adquirieron la servidumbre mediante titulo y por
prescripcion (Art. 537).

We cannot review the above finding of fact by the Court of Appeals that Maria Florentino die in 1892.
The evidentiary fact from which the Court of Appeals drew the above finding is that Gregorio
Florentino during the trial in 1938 testified to facts of his own personal knowledge, and he was then
58 years old, having been born in 1880. If Maria Florentino, as claimed by petitioner, had died in
1885, Gregorio Florentino would have been only 5 years of age at the time of Maria Florentino's
death. The Court of Appeals therefore concluded that Maria Florentino died in 1892, when Gregorio
Florentino was ten 12 years of age. We do not believe we can disturb the finding of the Court of
Appeals, because its deductions as to the date of Maria Florentino's death may be right or wrong,
according to one's own reasoning. In other words, its conclusion of fact from Gregorio Florentino's
testimony is not necessarily and unavoidably mistaken. On the contrary, it is reasonable to believe
that a person 58 years old cannot remember facts of inheritance as far back as when he was only 5
years of age.

Furthermore, the burial certificate and the gravestone, whose copy and photograph, respectively,
were offered by petitioner in a motion for new trial filed in the Court of Appeals, could have been
discovered by petitioner before the trial in the Court of First Instance by the exercise of due diligence.
There is no reason why this evidence could be found when the case was already before the Court of
Appeals, but could not be found before the trial in the Court of First Instance. It was easy, before such
trial, for the petitioner to inquire from the relatives of Maria Florentino as to when she died. And
having ascertained the date, it was also easy to secure the burial certificate and a photograph of the
gravestone, supposing them to be really of Maria Florentino. The fact is, petitioner never tried to find
out such date and never tried to secure the additional evidence till his counsel raised this issue for the
first time before the Court of Appeals. That Court was therefore died in 1885. (Sec. 497, Act. 190).
The petitioner's statement in his brief (p. 11) that the Court of Appeals neither passed upon his motion
nor took the burial certificate and the gravestone into account is not true, because the very words of
the Court of Appeals clearly show that the Court had in mind said motion and evidence when the
decision was signed. The decision said: "a la muerte de Maria Florentino ocurrida en 1892 (el
demandado sostiene que fue con anteriodad a 1889)" (Emphasis supplied).

Lastly, the issue as to the date of Maria Florentino's death cannot be raised for the first time on
appeal. Petitioner did not in the trial court allege or prove this point. He presented this issue for the
first time in the Court of Appeals. (Sec. 497, Act. 190).

Let us now consider Article 541 more closely in its application to the easement of light and view and
to the easement not to build higher (altius non tollendi). These two easements necessarily go
together because an easement of light and view requires that the owner of the servient estate shall
not build to a height that will obstruct the window. They are, as it were, the two sides of the same
coin. While an easement of light and view is positive, that of altius non tollendi is negative. Clemente
de Diego states that when article 538 speaks of the time for the commencement of prescription for
negative easements, "it refers to those negative easements which are the result and consequence of
others that are positive, such as the easement not to build higher, or not to construct, which is
indispensable to the easement of light." (Se refiere a aquellas servidumbres negativas que son
sucuela y consecuencia de otras positivaas, como la de no levantar mas alto, o de no edificar, que es
imprescindible para la servidumbre de luces.") ("Curso Elemental de Derecho Civil Españos, Comun
y Foral," vol. 3, p. 450). This relation of these two easements should be borned in mind in connection
with the following discussion of (1) the modes of establishing and acquiring easements; (2) the
meaning of article 541; and (3) the doctrine in the case of Cortes vs. Yu-Tibo.

First, as to the modes of establishing and acquiring easements. According to Article 536, easements
are established by law or by will of th owners. Acquisition of easements is first by title or its
equivalent and seconly by prescription. What acts take the place of title? They are mentioned in
Articles 540 and 541, namely, (1) a deed of recognition by the owner of the servient estate; (2) a final
judgment; and (3) an apparent sign between two estates, established by the owner of both, which is
the case of article 541. Sanchez Roman calls cuh apparent sign under article 541 "supletoria del titulo
constitutivo de la servidumbre (Derecho Civil, vol. 3, p. 656). The same jurist says in regard to the
ways of constituting easements:

(Spanish word - page 410)

In the Sentence of the Supreme Tribunal of Spain dated November 7, 1911, it was held that under
article 541 of the Civil Code, the visible and permanent sign of an easement "is the title that
characterizes its existence" ("es el titulo caracteristico de su existencia.")

It will thus be seen that under article 541 the existence of the apparent sign in the instance case, to
wit, the four windows under consideration, had for all legal purposes the same character and effect as
a title of acquisition of the easement of light and view by the respondents upon the death of the
original owner, Maria Florentino. Upon the establishment of that easement of light and view, the con-
comitant and concurrent easement of altius non tollendi was also constituted, the heir of
the camarin and its lot, Maria Encarnacion Florention, not having objected to the existence of the
windows. The theory of article 541, of making the existence of the apparent sign equivalent to a title,
when nothing to the contrary is said or done by the two owners, is sound and correct, because as it
happens in this case, there is an implied contract between them that the easements in question
should be constituted.

Analyzing article 541 further, it sees that its wording is not quite felicitous when it says that the
easement should continue. Sound juridical thinking rejects such an idea because, properly speaking,
the easement is not created till the division of the property, inasmuch as a predial or real easement is
one of the rights in another's property, or jura in re aliena and nobdy can have an easement over his
own property, nimini sua res servit. In the instant case, therefore, when the original owner, Maria
Florentino, opened the windows which received light and air from another lot belonging to her, she
was merely exercising her right of dominion. Consequently, the moment of the constitution of the
easement of light and view, together with that of altius non tollendi, as the time of the death of the
original owner of both properties. At that point, the requisite that there must be two proprietors — one
of the dominant estate and another of the servient estate — was fulfilled. (Article 530, Civil Code.)

Upon the question of the time when the easement in article 541 is created, Manresa presents a highly
interesting theory, whether one may agree with it or not. He says:

La servidumbre encubierta, digamoslo asi, por la unidad de dueño, se hace ostensible, se

revela con toda su verdadera importancia al separarse la propiedad de las fincas o porciones
de finca que respectivamente deben representar el papel de predios sirviente y dominante.

The concealed easement, as it were by the oneness of the owner, becomes visible, and is
revealed in all its importance when the ownership of the estate or portions of the estate which
respectively should play the role of servient and dominant estates is divided.

Such a view cannot be fully accepted because before the division of the estate there is only a service
in fact but not an easement in the strictly juridical sense between the two buildings or parcels of land.

We come now to the case of Cortes vs. Yu-Tibo, 2 Phil., 24 decided in 1903, Mr. Justice, later Chief
Justice, Mapa speaking for the Court. Counsel for petitioner contends that the doctrine in that case is
controlling in the present one. If the essential facts of the two cases were the same, there is not doubt
but that the early opinion would be decisive inasmuch as it is by its cogent reasoning one of the
landmarks in Philippine jurisprudence. However, the facts and theories of both cases are
fundamentally dissimilar. What is more, as will presently be explained, that every decision makes a
distinction between that case and the situation provided for in article 541. In that case, Cortes sought
an injunction to restrain Yu-Tibo from continuing the construction of certain buildings. Cortes' wife
owned a house in Manila which had windows that had been in existence since 1843. The defendant,
who occupied a house on the adjoining lot, commenced to raise the roof of the house in such a
manner that one-half of the windows in the house owned by plaintiff's wife had been covered. This
Court, in affirming the judgment of the lower court which dissolved the preliminary injunction, held that
the opening of windows through one's own wall does not in itself create an easement, because it is
merely tolerated by the owner of the adjoining lot, who may freely build upon his land to the extent of
covering the windows, under article 581, and that his kind of easement is negative which can be
acquired through prescription by counting the time from the date when the owner of the dominant
estate in a formal manner forbids the owner of the servient estate from obstructing the light, which
had not been done by the plaintiff in this case.
It will thus be clear that one of the essential differences between that case and the present is that
while the Yu-Tibo case involved acquisition of easement by prescription, in the present action the
question is the acquisition of easement by title, or its equivalent, under article 541. Therefore, while a
formal prohibition was necessary in the former case in order to start the period of prescription, no
such act is necessary here because the existence of the apparent sign when Maria Florentino died
was sufficient title in itself to created the easement.

Another difference is that while in the Yu-Tibo case, there were tow different owners of two separate
houses from the beginning, in the present case there was only one original owner of the two
structures. Each proprietor in the Yu-Tibo case was merely exercising his rights of dominion, while in
the instant case, the existence of the apparent sign upon the death of the original owner ipso
facto burdened the land belonging to petitioner's predecessor in interest, with the easements of light
and view and altius non tollendi in virtue of article 541.

The very decision in Cortes vs. Yu-Tibo distinguishes that case from the situation foreseen in article
541. Said this Court in that case:

It is true that the Supreme Court of Spain, in its decisions of February 7 and May 5, 1986, has
classified as positive easements of light which were the object of the suits in which these
decisions were rendered in cassation, and from these it might be believed at first glance, that
the former holdings of the supreme court upon this subject had been overruled. But this is not
so, as a matter of fact, inasmuch as there is no conflict between these decisions and the
former decisions above cited.

In the first of the suits referred to, the question turned upon two houses which had formerly
belonged to the same owner, who established a service of light on one of them for the benefit
of the other. These properties were subsequently conveyed to two different persons, but at the
time of the separation of the property noting was said as to the discontinuance of the
easement, nor were the windows which constituted the visible sign thereof removed. The new
owner of the house subject to the easement endeavored to free it from the incumbrance,
notwithstanding the fact that the easement had been in existence for thirty-five years, and
alleged that the owner of the dominant estate had not performed any act of opposition which
might serve as a starting point for the acquisition of a prescriptive title. The supreme court, in
deciding this case, on the 7th of February, 1896, held that the easement in this particular case
was positive, because it consisted in the active enjoyment of the light. This doctrine is
doubtless based upon article 541 of the Code, which is of the following tenor: "The existence of
apparent sign of an easement between two tenements, established by the owner of both of
them, shall be considered, should one be sold, as a title for the active and passive continuance
of the easement, unless, at the time of the division of the ownership of both tenements, the
contrary should be expressed in the deed of conveyance of either of them, or such sign is
taken away before the execution of such deed.'

The word "active" used in the decision quoted in classifying the particular enjoyment of light
referred to therein, presuposes on the part of the owner of the dominant estate a right to such
enjoyment arising, in the particular cases passed upon by that decision, from the voluntary act
of the original owner of the two houses, by which he imposed upon one of them an easement
for the benefit of the other. It is well known that easements are established, among other
cases, by the will of the owners. (Article 536 of the Code.) It was an act which was, in fact,
respected and acquiesced in by the new owner of the servient estate, since he purchased it
without making any stipulation against the easement existing thereon, but, on the contrary,
acquiesced in the continuance of the apparent sign thereof. As is stated in the decision itself,
"It is a principle of law that upon a division of a tenement among various persons — in the
 absence of any mention in the contract of a mode of enjoyment different from that to which the
former owner was accustomed — such easements as may be necessary for the continuation
of such enjoyment are understood to subsist." It will be seen, then, that the phrase "active
enjoyment" involves an idea directly opposed to the enjoyment which is the result of a mere
tolerance on the part of the adjacent owner, and which, as it is not based upon an absolute,
enforceable right, may be considered as of a merely passive character. (2 Phil., 29-31).

Finally, the Yu-Tibo case was decided upon the theory if the negative easement of altius non tollendi,
while the instant case is predicated on the idea of the positive easement of light and view under
article 541. On this point, suffice it to quote from Manresa's work. He says:

Que en las servidumbres cuyo aspecto positivo aparece enlazado al negativo, asi como al
efecto de la precripcion ha de considerarse prefente el aspecto negativo, al efecto del art. 541
basta atender al aspecto positivo, y asi la exitencia de huecos o ventanas entre dos fincas que
fueron de un mismo dueño es bastante para considerar establecidas, al separarse la
propiedad de esas fincas, las servidumbres de luces o vista, y con ellas las de no edificar on
no levantar mas ato, porque sin estas no prodrian existir aquellas.

That in easements whose positive aspect appears tied up with the negative aspect, just as for
the purposes of prescription the negative aspect has to be considered preferential, so for the
purposes of Article 541 it is sufficient to view the positive aspect, and therefore the existence of
openings or windows between two estates which belonged to the same owner is sufficient to
establish, when the ownership of these estates is divided, the easement of light or view, and
with them the easements of altius non tollendi because without the latter, the former cannot
exists.

There are several decisions of the Supreme Court of Spain which have applied Article 541. Some of
them are those of February 7, 1986; February 6, 1904; May 29, 1911; and November 17, 1911.

The sentence of February 7, 1896, dealt with windows established in one house by the original of two
houses. When he died, the two houses were adjudicated to different heirs. The court held that there
was an easement of light.

Considerando que, segun lo establecido por este Supremo Tribunal en repetidas sentencias, y
consignado, muy principalmente, en la dictada en 21 de Octubre de 1892, lo preceptuado en
la ley 14, titulo 31 de la Partida 3.a, al tratar del mode de constituirse las servidumbres, no
esta en oposicion con el pricipio mediante el que, dividida una finca entre diversas personas,
sin que en el contrato se mencione cosa alguna acerca de un modo de aprovenchamiento
distinto del que usaba el primitivo dueño de ella, se entieden subsistentes las servidumbres
ncesarias para que aquel pueda tener lugar.

Considerando que ese principio y jurisprudencia han obtenido nueva sancion, puesto que a
ellos obedece el concepto claro y concreto del articulo 541 del Codigo Civil, aplicable al caso, .
. . (Ruiz, Codigo Civil, Vol. V, pp. 349-350).

Considering that, according to what has been established by this Supreme Tribunal in
repeated sentences, and principally declared in the sentence promulgated on October 21,
1892, the provision of law 14, title 31 of Partida 3 in treating of the mode of constituting
easements, is not contrary to the principle that when an estate is divided between different
persons, and in the contract nothing is said out a mode of enjoyment different from that used
by the original owner thereof, the necessary easements for said mode of enjoyment are
understood to be subsisting;
 Considering that such principle and jurisprudence have obtained a new santion, for due to
them is the clear and concrete concept of Article 541 applicable to the case . . . .

Therefore, considering that Maria Florentino died in 1892, according to a finding of fact by the Court
of Appeals, there is an easement of light and view in favor of the respondents' property under article
541 of the Civil Code.

But granting, arguendo, that Maria Florentino died in 1885, as contended by petitioner, nevertheless
the same principle enunciated in article 541 of the Spanish Civil Code was already an integral part of
the Spanish law prior to the Civil Code, the easement in question would also have to be upheld. That
the law before the Civil Code was the same as at present is shown by the following:

1. Under Law 14, Title 31, Partida 3, this easement was constituted by an implied contract
among the heirs of Maria Florentino.

2. Granting for the sake of argument that this easement was not created through an implied
contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas was not
inconsistent with the principle in question, so that there was a gap in the Partidas which the
Supreme Court of Spain filled up from the Roman Law and modern civil codes, by recognizing
the existence of this kind of easement.

3. Law 17, Title 31, Partida 3 regarding the extinguishment of an easement did not prohibit the
easement in the instant case, Therefore, we should adhere to the decisions of the Supreme
Court of Spain which maintain this easement under the Spanish law prior to Civil Code.

4. Other considerations show that the principle of apparent sign as announced by the Supreme
Tribunal of Spain is not incompatible with the Partidas.

First, as to the implied contract. Law 14, Title 31, Partida 3 provided that easements were acquired
by contract, by will and by prescription. Upon the death of the original owner, Maria Florentino, the
four windows under consideration already existed and were visible. One of the heirs, Maria
Encarnacion Florentino, to whom the camarin and its lot had been devised, having failed to object to
the same, knowingly consented to their continuance. Nor did Gabriel and Jose Florentino (devisees of
the house that had the four windows) permanently close the windows. There was consequently an
implied agreement between her and the devisees of the house with the four windows to the effect that
the service of these windows would continue, thus creating the easement of light and view and the
concomitant easement of altius non tollendi. Hence, the easement in question was acquired by
Gabriel and Jose Florentino through contract under Law 14, Title 31, Partida 3.

Secondly, with respect to the doctrine of the Supreme Tribunal of Spain. In a series of decisions of
that court, it was held that Law 14, Title 31, Partida 3 was not opposed to the easement under review.
One of those decisions is that of November 7, 1883, which held:

(Spanish word - page 418)

Other decisions of the Supreme Tribunal of Spain to the same effect are those of September 14,
1867 and June 7, 1883. (See Scaevola, "Codigo Civil Comentado" vol. 10, pp. 272-274.)

So that, granting for the sake of argument, that the easement was not created through an implied
contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas, according to
decisions of the Supreme Tribunal of Spain, was not inconsistent with the principle in question. The
problem in this case not having been foreseen in Law 14, Title 31, Partida 3, there was a gap in the
old legislation, which the Supreme Tribunal of Spain filled up from the Roman Law and from modern
Civil Codes.

The principle in question was deeply rooted in the Roman Law. It is from the Roman Law that the
Supreme Tribunal of Spain obtained this principle, in order to solve a question not provided for by the
Partidas, whose main source was also the Roman law. In other words, the Partidas being silent on
the point under consideration, the Supreme Tribunal of Spain resorted to the authoritative voice of the
Roman law from which the Law of the Partidas had derived its inspiration.

The following quotations from the Spanish version the Roman Law Digest will prove the assertions
just made:

(Spanish word - page 419)

Among the modern civil codes which contain the rule in question are those of France, Belgium,
Holland, Portugal, Mexico and Chile. It is presumed that the Supreme Tribunal of Spain had also in
mind at least one of them when it decided cases involving this principle before the promulgation of the
Spanish Civil Code.

When, therefore, Maria Florentino died (supposing she died in 1885), the status of the Spanish law
was in favor of the doctrine in question. We cannot change it because it was in full force at the time of
the alleged date of Maria Florentino's death. We cannot reject a doctrine established by the Spanish
Supreme Tribunal as an integral part of the Spanish law before the promulgation of the Civil Code in
1889. And we know that jurisprudence — in the sense of court decisions — is one of the sources of
the law.

Thirdly, concerning Law 17, Title 31, Partida 3. It is true that the eminent jurist, Manresa, is of the
opinion that "el precepto del art. 541 no solo no existia en nuestra antigua legislacion, sino que podia
deducirse claramente lo contrario de la ley 17, tit. 31, Partida 3.a . . . ." However, a careful reading of
this provision of the Partidas reveals that the same did not militate against the creation of an
easement by an apparent sign if nothing was said or done when the property is divided. Law 17, Title
31, Partida 3, read as follows:

(spanish word - page 420-21)

This law regulates the extinguishment of an easement by merger of the dominant and the servient
estates. Speaking of this law of the Partidas and of article 546, par. 1, of the Civil Code, both of which
refer to merger of the two estates, Acaevola says: (p. 319, vol. 10)

But there is a world of difference between extinguishment of an easement by merger of the two

estates and the constitution of an easement by an apparent sign when nothing is done or said upon
the division of the property. Law 17, title 31, Partida 3, having in mind only the modes
of extinguishment, the legislator did not intend to cover the question involved in the present case,
which refers to the creation of an easement.

What, then, are the differences between the extinguishment of an easement by merger under Law
17, title 31, Partida 3, and the constitution of an easement in this case, both before and after the Civil
Code went into effect?

First, in merger under Law 17, Title 31, Partida 3, there were from the very beginning, already two
separate estates, the dominant and the servient estates, whereas in this case, there was only one
estate.
Second, in merger under said Law 17, there were already two owners, whereas in this case, there
was only one owner, Maria Florentino.

Third, in merger under Law 17, there was already an easement in the legal sense, whereas in the
instant case, there was only a service between the two lots, (while Maria Florentino was living) but
there was as yet no easement from the juridical viewpoint.

4. Other considerations prove that the principle of apparent sign as enunciated by the Supreme
Tribunal of Spain is not inconsistent with the Partidas. These considerations are:

1. Article 537, Civil Code, provides that continuous and apparent easements are acquired
by title, or by prescription. However, side by side with that article is article 541 which
contemplates an easement upon division of an estate, unless a stipulation to the contrary is
agreed upon, or the sign is destroyed. Bearing in mind that "title" includes a contract, our view
is that if Article 537 and 541 of the Civil Code can stand together, there is no reason why Law
14, title 31, Partida 3, whereby easements are acquired by contract, by will and by prescription
should be considered incompatible with the easement under review.

2. Article 546, par. 1 of the Civil Code ordains that by merger of the two estates in the same
owner an easement is extinguished. Yet, coexistent with such provision is that of article 541
regarding the apparent sign which is a title for the easement. If these two principles can and do
stand together under the Civil Code, the doctrine laid down by the Supreme Tribunal of Spain
— before the Civil Code was in force — about the effect of an apparent sign can also stand
together with Law 17, title 31, Partida 3 declaring the extinguishment of an easement by
merger.

3. Under article 546, par. 1 of the Civil Code, merger extinguishes an easement. So in case the
estate is again divided by purchase, etc., the easement is not, under the Civil Code
automatically revived. That is the same provision of law 17, title 31, Partida 3, which does not
reject the principle in question, just as article 546, par. 1 of the Civil Code does not reject
article 541 about an apparent sign.

III.

Aside from the foregoing reasons that support the easement under consideration, the same has been
acquired by respondents through prescriptions.

The easement involved in this case is of two aspects: light and view and altius non tollendi. These
two aspects necessarily go together because an easement of light and view prevents the owner of
the sevient estate from building to a height that will obstruct the windows. This court in Cortes vs. Yu-
Tibo, supra, held that the easement concerned when there is an apparent sign established by the
owner of two estates is positive. Manresa is of the same opinion, supra. This being so, and inasmuch
as the original heirs of Maria Florentino succeeded to these two estates either in 1885 or in 1892 and
as petitioner bought one of the lots in 1911, the prescriptive period under any legislation that may be
applied — the Partidas, Civil Code or Code of Civil Procedure — has elapsed without the necessity of
formal prohibition on the owner of the servient estate. The respondent's action was brought in 1938.
The persons who were present, and 20 years between absentees. (4 Manresa, 605). According to
article 537 of the Civil Code, continous and apparent easements may be acquired by prescription for
20 years. Under sections 40 and 41 of the Code of Civil Procedure, the period is 10 years.

IV.
The petitioner maintains that he is an innocent purchaser for value of the lot and camarin thereon,
and that he was not bound to know the existence of the easement because the mere opening of
windows on one's own wall does not ipso facto create an easement of light. Such contention might
perhaps be in point if the estates had not originally belonged to the same owner, who opened the
windows. But the petitioner was in duty bound to inquire into the significance of the windows,
particularly because in the deed of sale, it was stated that the seller had inherited the property from
her aunt, Maria Florentino. Referring to the Sentence of the Supreme Court of Spain dated February
7, 1896, which applied Article 541, this Court in the case of Cortes vs. Yu-Tibo already cited, said that
the establishment of the easement "was an act which was in fact respected and acquiesced in by the
new owner of the servient estate, since he purchased it without making any stipulation against the
easement existing thereon, but on the contrary acquiesced in the new owner of the servient estate,
since he purchased it without making any stipulation against the easement existing thereon, but on
the contrary, acquiesced in the continuance of the apparent sign thereof." (p. 31). Moreover, it has
been held that purchasers of lands burdened with apparent easements do not enjoy the rights of third
persons who acquire property, though the burden it not recorded. (Sentence of the Supreme Tribunal
of Spain, April 5, 1898).

V.

Let us now discuss the case from the standpoint of justice and public policy.

First. — When Maria Encarnacion Florentino, as one of the devisees, accepted the camarin and the
lot, she could not in fairness receive the benefit without assuming the burden of the legacy. That
burden consisted of the service in fact during the lifetime of the original owner, which service became
a true easement upon her death.

Second. — According to Scaevola, the reason for the principle in question is that there is a tacit
contract. He says in vol. 10, p. 277:

(spanish word - page 424)

Aun hay mas: hay, en nuestro entender, no solo presuncion de voluntad del enajenante, o sea
del dueño de las fincas que estuvieren confundidas, sino convencion, siquiera sea tacita, entre
el vendedor y al adquirente de la finca vendida. Puesto que pudiendo estipular la no existencia
de la servidumbre, nada dicen o nada hacen, fuerza es presumir que el segundo (comprador)
acepta el estado jurisdico creado por el primero (vendedor).

It is not just to allow Maria Encarnacion Florentino or her successor in interest to repudiate her own
undertaking, implied, it is true, but binding nevertheless. This easement is therefore a burden which
Maria Encarnacion Florentino and her successor in interest willingly accepted. They cannot now
murmur against any inconvenience consequent upon their own agreement.

Third. During the construction of the new house by the petitioner, the respondents filed an action to
stop the work. But petitioner continued the construction, so that when the Court of First Instance was
ready to pass upon the preliminary injunction, the work had almost been finished. Petitioner,
therefore, cannot complain if he is now ordered to tear down part of the new structure so as not to
shut off the light from respondents' windows.

Fourth. When petitioner bought this lot from the original coheir, Maria Encarnacion Florentino, the
windows on respondents' house were visible. It was petitioner's duty to inquire into the significance of
those windows. Having failed to do so, he cannot now question the easement against the property
which he purchased.
(spanish word - page 425)

This idea of easements can never become obsolete in the face of modern progress. On the contrary,
its need is all the more pressing and evident, considering that this mutual assistance and giving way
among estates is demanded by the complexities of modern conditions, such as those which obtain in
large cities where buildings, large and small, are so close together.

VI.

Recapitulating, we believe the easement of light and view has been established in favor of the
property of respondents, for these reasons:

1. Maria Florentino having died in 1892, according to a finding of fact of the Court of Appeals,
which we cannot review, Article 541 of the Civil Code is applicable to this case.

2. Granting, arguendo, that Maria Florentino died in 1885, nevertheless that same principle
embodied in article 541 of the Civil Code was already an integral part of the Spanish law
before the promulgation of the Civil Code in 1889, and therefore, even if the instant case
should be governed by the Spanish law prior to the Civil Code, the easement in question would
also have to be upheld.

3. The easement under review has been acquired by respondents through prescription.

4. The petitioner was not an innocent purchaser, as he was in duty bound to inquire into the
significance of the windows.

5. Justice and public policy are on the side of the respondents.

Wherefore, the judgment appealed from should be and is hereby affirmed, with costs against the
petitioner. So ordered.
 EN BANC

G.R. No. L-8200            March 17, 1914

LEONARD LUCIDO, plaintiff-appellee,
vs.
GELASIO CALUPITAN, ET AL., defendants-appellants.

Pedro Guevara for appellants.

Ramon Diokno for appellee.

TRENT, J.:

In this case it appears that some chattels and real estate belonging to the plaintiff, Lucido, were
regularly sold at an execution sale on February 10, 1903, to one Rosales, who the text day
transferred a one-half interest in the property of Zolaivar. On March 30, 1903, a public document was
executed and signed by all of the above parties and the defendant, Gelasio Calupitan, wherein it was
stated that Rosales and Zolaivar, with the consent of Lucido, sold all their rights had obligation
pertaining to the property in question to Calupitan for the amount of the purchase price together with
1 per cent per month interest thereon up to the time of redemption, or 1,687 Mexican dollars, plus
33.74 Mexican dollars, the amount of the interest. It will be observed that the computation of the
transfer price is in accordance with section 465 of the Code of Civil Procedure. On the same day
Lucido and Calupitan executed the following document:

I, Gelasio Calupitan y Agarao, married, certify that I have delivered this statement to Leonardo
Lucido y Vidal to witness that his lands, which appear in the instrument I hold from the deputy
sheriff and for which he has accepted money from me, I have ceded to him all the irrigated
lands until such time as he may repurchase all said lands from me (not only he irrigated ones),
as also the Vienna chairs, the five-lamp chandelier, a lamp stand, two wall tables, and a
marble table; no coconut tree on said irrigated land is included. Apart from this, our real
agreement is to permit three (3) whole year to elapse, reckoned from the date of this
instrument, which has been drawn up n duplicate, before he may redeem or repurchase them
from me.

The lower court held that this document constituted a sale with the right to conventional redemption
set forth in articles 1507 et seq. of the Civil Code. The present action not having been instituted until
February 17, 1910, the fur the question arose as to whether the redemption period had expired, which
the lower court decided in the negative. The lower court further found as a fact that Lucido had prior
to the institution of the action offered the redemption price to the defendant, who refused it, and that
this offer was a sufficient compliance with article 1518 of the Civil Code. The decision of the lower
court was that the property in question should be returned to the plaintiff. From this judgment the
defendant appealed, and all three of the above rulings of the court are assigned as errors.

1. Considerable doubt might arise as to the correctness of the ruling of the lower court upon the first
question, if the document executed by the execution purchasers and the parties to this action stood
alone. In that document it appears that Calupitan acquired the rights and obligations of the execution
purchasers pertaining to the property in question. These rights and obligations are defined in the
Code of Civil Procedure to be the ownership of the property sold, subject only to the right of
redemption on the part of the judgment debtor or a redemptioner, within one year from the date of the
sale. (Secs. 463-465, Code Civ. Proc.) Were this the nature of the transaction between the parties,
however, the intervention of Lucido in the transfer would be wholly unnecessary. Hence, the fact that
he intervened as an interested party is at least some indication that the parties intended something
more or different by the document in question than a simple assignment of the rights and obligations
of the execution purchasers to a third person.

Any doubt, however, as to the character of this transaction is removed by the agreement entered into
between Lucido and calupitan on the same day. In this document it is distinctly stipulated that the
right to redeem the property is preserved to Lucido, to be exercised after the expiration of three years.
The right to repurchase must necessary imply a former ownership of the property.

Further indication that Calupitan himself considered this transaction as a sale with the right to
conventional redemption is to be found in his original answer to the complaint. This original answer
was introduced in evidence by the plaintiff over the objection of the defendant. Its admission was
proper, especially in view of the fact that it was signed by Calupitan himself, who was the time acting
as his own attorney.

Jones on evidence (secs. 272, 273), after remarking that the earlier cases were not in harmony on
the point, says:

Many of the cases holding that pleadings inadmissible as admissions were based on the
theory that most of the allegations were merely pleader's matter -- fiction stated by counsel and
sanctioned by the courts. The whole modern tendency is to reject this view and to treat
pleadings as statements of the real issues in the cause and hence as admissions of the
parties, having weight according to the circumstances of each case. But some of the
authorities still hold that if the pleading is not signed by the party there should be some proof
that he has authorized it.

On the same principles where amended pleadings have been filed, allegations in the original
pleadings are held admissible, but in such case the original pleadings can have no effect,
unless formally offered in evidence.

In this original answer it was expressly stated that the transaction was one of sale with the right to
repurchase governed by the provisions of articles 1507 et seq. of the Civil Code.

It further appears from the uncontradicted testimony of the plaintiff that he furnished $20 Mexican of
the account necessary to redeem the property from the execution purchasers. It therefore appears
beyond dispute that the redemption of the property from the execution purchasers was made by the
plaintiff himself by means of a loan furnished by the defendant Calupitan, who took possession of the
major portion of the land as his security for its redemption. The ruling of the lower court the
transaction between Lucido and Calupitan was one of purchase and sale with the right to redeem was
therefore correct.

2. By the terms of his agreement with Calupitan the plaintiff could not exercise his right to redeem the
property within three years from March 30, 1903; and the lower court arrived at the date upon which
the right to redeem expired by computing five years from March 30, 1906, on the ground that there
was no express agreement as to how long the right to repurchase, once available, should continue.
Counsel for the appellant admits in his brief that the complaint was filed forty-three days before the
expiration of this period. In accordance with our decision in Rosales vs. Reyes and Ordoveza (25
Phil. Rep., 495), we hold that this ruling of the court was correct.

3. The court held that the plaintiff had actually tendered the redemption price to the defendant
Calupitan. After an examination of the evidence of record as to this finding of fact, we concur therein.
We discussed the legal sufficiency of such tender in the above-cited case of Rosales vs. Reyes and
Ordoveza, and held that it was sufficient. This assignment of error must therefore be held to be
unfounded.

4. The defendants Oreta and Bueno have no interest in the subject matter of this action. it appears
that the defendant Dorado purchased the land from his codefendant Calupitan subsequent to the
tender of the redemption price to the latter by the plaintiff. It does not appear that the property was
ever registered by any one, nor was the document of sale with the right to repurchase registered by
either Calupitan or Lucido. No evidence of the purchase of the land from Calupitan by Dorado is of
record with the exception of the oral testimony although it may be taken as established that such a
sale actually took place, since all the parties interested agree on this point. Dorado himself testified
that he purchased the property with the knowledge that Calupitan had purchased the property from
Lucido subject to the right of redemption and insists that he purchased with the knowledge and
consent of Lucido. Lucido denies that he was aware of the sale of Dorado until after it had taken
place. Upon this state on facts, it is clear that the following provisions of article 1510 of the Civil Code
are applicable:

The vendor may bring his action against every possessor whose right arises that of the
vendee, even though in the second contract no mention should have been made of the
conventional redemption; without prejudice to the provisions of the Mortgage Law with regard
to third persons.

The provisions of the Mortgage Law with regard to third persons are clearly not applicable to Dorado.
(Manresa, vol., 10, p. 317.)

5. The lower court ordered the redelivery of the land to the plaintiff upon his payment to Calupitan of
P1,600, plus the costs entailed in the execution of the document of repurchase. The amount paid to
the purchaser at the execution sale for the redemption of the property was $1,720.74 Mexican. Of this
amount the plaintiff furnished $120 Mexican, and Calupitan the balance of $1,600.74 Mexican. No
amount is fixed in the document of purchase and sale above set forth, but the amount borrowed from
Calupitan to redeem the land from the execution sale being thus clearly established no objection can
be or is made to the plaintiff's paying this amount. In ordering the payment of this amount to the
defendant the lower court failed to reduce it to Philippine currency. On this appeal plaintiff alleges that
this amount in Mexican currency exceeds the amount he actually owes to the defendant by about
P100, but that rather than spend the time and incur the expense attendant to new trial for the purpose
of determining the equivalent of his amount in Philippine currency he is agreeable to pay the
defendant P1,600.74 Philippine currency, as the redemption price of the property. In view of this offer
and in case it is accepted by the defendant it will be unnecessary to go through formality of a new trial
for the purpose of ascertaining the amount of the fact that it is claimed that Calupitan has sold the
land in question to his codefendant, Macario Dorado, and it not clearly appearing to whom the plaintiff
should pay the P1.600.74, we think this amount should be turned over to the clerk of the Court of First
Instance of the Province of Laguna to be held by him until it is determined in the proper manner who
is the owner of this amount, Calupitan for Dorado.

For the foregoing reasons, judgment will be entered directing the defendants Calupitan and Dorado to
deliver the possession of the land in question to the plaintiff upon the plaintiff's depositing with the
clerk of the court the sum of P1,600.74, to be disposed of in the manner above set forth. In all other
respects the judgment appealed from is affirmed with costs against the appellants Calupitan and
Dorado.
 SECOND DIVISION

[G.R. No. 22511. December 22, 1924. ]

Inventory insolvency of U. de Poli. FELISA ROMAN, claimant-appellee, v. J.R.

HERRIDGE, assignee-appellant. BOWRING & CO., C.T. BOWRING & CO., LTD., ET
AL., creditors-appellants.

J.A. Wolfson, Crossfield & O’Brien, Camus & Delgado, Ross, Lawrence & Selph,
Fisher & DeWitt, Gibbs & Mcdonough, and Thomas Cary Welch for Appellants.

Araneta & Zaragoza for Appellee.

SYLLABUS

1. WHEN CONTRACT IS EXECUTORY. — The general rule for determining whether a

contract of sale is executed or executory is if anything remains to be done by either
party to the transaction before delivery, as, for example, to determine the price,
quantity or identity of the thing sold, the title does not vest in the purchaser, and the
contract is executory.

2. WHEN NOTARIAL DOCUMENT IS NOT A PUBLIC INSTRUMENT. — Where it appears

upon the face of a notarial document that it is an executory contract and that within
itself no debts are created or credits given, and that all of such matters are in futuro and
contingent upon the performance of the contract, the notarial document does not create
a preference and is not a public instrument within the meaning of article 1924 of the
Civil Code.

DECISION

STATEMENT

Based on a proper proceeding in December 8, 1920, U. de Poli was declared

insolvent by the Court of First Instance of manila. January 4, 1921, the claim of
Felisa Roman was presented to the assignee founded upon what is known in
the record as Exhibit A, which is an agreement entered into by and between her
and the insolvent on October 23, 1920. She then claimed that she placed in De
Poli’s bodegas 3,031 quintals and 7 kilos of tobacco of the value of P78,815.69.
That under the terms of the agreement, De Poli had paid her P15,000 in cash,
and had executed four promissory notes for the balance, each for the sum of
P15,953.92, and maturing in order thirty, sixty, ninety and one hundred and
twenty days after their execution. She also claimed that all of the tobacco
remained as her own, except that portion represented by the cash payment of
P15,000. In her petition, she prayed for an order of the court that the option of
De Poli to purchase the 2,201 bales and 57 bales of tobacco described in
Exhibit A be cancelled, and that she be declared the sole owner thereof, unless
the assignee of the insolvent secure her in the payment of the agreed purchase
 price.

January 15, 1921, the assignee filed an answer to her petition in which he
claims, among other things, that the four promissory notes were a valid claim
against the insolvent estate and that delivery of the tobacco had been made
and that title to it has passed to the insolvent.

January 18, 1921, the lower court held in legal effect that the transaction was
one of purchase and sale, and that under the provisions of article 1922 of the
Civil Code, Felisa Roman, had a preference right for the amount of the unpaid
purchase price on the proceeds from the sale of the tobacco then in the hands
of the assignee, and ordered him to pay her the unpaid purchase price derived
from the proceeds of such sale.

April 19, 1921, Felisa Roman filed two other motions: (a) To declare null and
void the contract of pledge between De Poli and the Asia Banking Corporation
for 576 bales of the tobacco in question, and (b) to order the assignee to sell
the 2, 777 fardos of tobacco for which the court had decided that she held a
preference at the rate of P10 per quintal. This give rise to the case known as
Roman v. Asia Banking Corporation (46 Phil., 705), decided by the Supreme
Court on June 26, 1922, in which it was held in legal effect that the only lien
upon the tobacco which Felisa Roman had claim was a vendor’s lien, and that
the claim of the Asia Banking Corporation based upon quedans was superior to
that of Felisa Roman.

August 3, 1922, through other and different counsel Felisa Roman claimed that
Exhibit A made between the parties on October 23, 1920, was a notarial
agreement and, as such, was a public document, and that the claim of Felisa
roman had a preference over all other creditors of her claim was P64,640.96,
with interest at 10 per cent per annum from August 2, 1922, and that she be
allowed such preference.

March 8, 1924, the assignee filed written objections to the allowance of the
claim as a preference, and alleged that the proceeds derived from the sale of
the remainder of the tobacco had been paid over to the claimant in accordance
with the order of January 18, 1921. That the question of the preference is now
res judicata. That she did not have any preference and that her claim should be
denied.

March 18, 1924, and apparently without a hearing or the taking of any
testimony, the lower court made an order that:jgc:chanrobles.com.ph

"The balance still unpaid of the claim of Felisa Roman, viz: the sum of
P55,218.52, with interest of 10 per cent from November 19, 1920, is hereby
allowed by this court with the preference due to its being evidenced by a public
document."cralaw virtua1aw library

From this decision the assignee and numerous creditors appeal, contending
that the lower court erred in failing to sustain the plea of res judicata and in
 applying article 1924 of the Civil code to the claim of Felisa Roman, in holding
that she had a preference over other creditors of the insolvent estate, and in
making its order without notice to the other creditors.

JOHNS, J.  :

Numerous other questions are ably discussed in the briefs of opposing counsel, but the
storm center of this case os the legal force and effect of Exhibit A. Among other things,
it recites that Felisa Roman is the owner of from 2,500 to 3,000 quintals of tobacco of
different classes.

"2d. That she has agreed to sell said quantity of from 2,500 to 3,000 quintals of tobacco
aforementioned to the property of the second part, which purchase and sale is to be
governed by the following conditions:jgc:chanrobles.com.ph

"(a) The party of the first part shall ship to the party of the second part, duly baled, the
tobacco of which she is the owner in bales not less than 50 kilos, all the expenses to be
caused by said merchadise up to the railroad station at Tutuban to be for the account of
said party of the first part, in which station the party of the second part shall take
charge of said merchandise and from that moment the risk thereof shall be for the
account of the latter.

"(b) The price for which the party of the first part sells to the party of the second part
the aforesaid tobacco is P26, Philippine currency, per quintal, payable in the manner
hereinafter to be stated.

"(c) The party of the second part shall be the consignee of the tobacco in the City of
Manila and shall take charge thereof upon receiving the bill of shipment and the internal
revenue stamp, and shall take it to his warehouse wherein the same shall be held as a
deposit until the date on which said party of the second part shall pay the price thereof,
the payment of storage and insurance to be for the account of said party of the second
part."cralaw virtua1aw library

It then recites that upon the last shipment of tobacco, it should all be weight is
ascertained, there should be a liquidation of the price, on the account of which P15,000
should be paid and the balance should be divided into four promissory notes if equal
amount, the first of which should become due thirty days from date, the second after
another thirty days, etc., all of which should draw interest at the rate of ten per cent per
annum. The contract then recites:jgc:chanrobles.com.ph

"The installments granted the purchasers for the payment of the price are subject to the
resolutory condition that, if before the maturity of each installment, the purchaser
should sell a part of the tobacco in proportion to the amount of any of the remaining
notes not yet due, or in case he should sell all the tobacco, the installments shall
become due, for it is agreed that in this case from the moment that the party of the
second party of the second part should have sold the tobacco, the deposit thereof as
security for the payment of the price is cancelled and the amount of the part remaining
unpaid shall simultaneously become demandable."cralaw virtua1aw library
As we analyze it the instrument is an executory contract upon which nothing becomes
due and payable until such time as all of the tobacco is shipped, receive and weighed by
De Poli, when the amount would them be ascertained and determined and P15,000 of
the amount paid, and the balance divided equally to be evidenced by four promissory
notes. The contract also expressly recites that Felisa Roman is the owner of from 2,500
to 3,000 quintals of tobacco which she agreed to sell to De Poli upon the conditions
above specified. In other words, the quantity of the tobacco , ranges from 2,500 to
3,000 quintals, and the amount is not to be fixed or determined until after the arrival of
the last shipment, at which time it is all to be weighed. Hence, the amount which De Poli
would owe Felisa Roman was not and could not be ascertained or determined until after
the last shipment was made and the tobacco wa weighed.

Article 1924 of the Civil Code, among other things, provides that "With respect to the
other personal and real property of the debtor, the following credits shall be
preferred: . . ." And subdivision 3 is as follows:jgc:chanrobles.com.ph

"Credits which without a special privilege are evidenced by:jgc:chanrobles.com.ph

"A. A public instrument; or

"B. A final judgment, should they have been the subject of litigation.

"These credits shall have preference among themselves in the order of the priority of
dates of the instruments and of the judgments respectively."cralaw virtua1aw library

Exhibit A is an executory contract. Within itself no debt was created and it is not
evidence of any credit. By its express terms De Poli did not owe Felisa Roman anything
and was not to pay her anything until after the last shipment of the tobacco was
received and then weighed. Within the meaning of the word "credit", as defined by
article 1924, there was no debt or liability on the part of De Poli until after Felisa Roman
complied with her part of the contract. If for any reason she had failed to deliver the
tobacco, no one would contend that she would have any claim against De Poli. Her claim
would be contingent upon the delivery of the tobacco. the amount of the tobacco which
was to be delivered ranged from 2,500 to 3,000 quintals. Hence, the amount of the
claim could not become certain or definite until the last shipment was made and the
tobacco weighed. In other words, the document itself does not show upon its face that
any debt is due or owing from De Poli to Felisa Roman or the amount of it. The fact
should only be determined by matters outside of the document and would be contingent
upon the shipment and weighing of the tobacco, and the quantity of it which would
range from 2,500 to 3,000 quintals at P26 per quintal.

As this court held, after the tobacco was delivered, under the terms of the contract,
Felisa Roman had a vendor’s lien, but she would not have such a lien until after the
delivery of the tobacco. A fortiori she would not have a preferred lien under the
provisions of article 1924 until after such delivery. Until the contract was actually
consummated by both parties, either had a right to rescind. The plaintiff could refuse to
make delivery, and De Poli could refuse to accept delivery of the tobacco. It was a
contract to be performed in the future, contingent upon delivery and acceptance.
A preference is an exception to the general rule, and is what its name implies. By it one
person is given a superior right or claim over another. For such reason the law as to
preferences should be strictly construed.

The following definitions are given of the words "executory contract" in Words &
Phrases, volume 3, pages 2572, 2573:jgc:chanrobles.com.ph

"An agreement to sell is an executory contract.

x       x       x

"An agreement to sell and convey lands, but which is not a conveyance operating as a
present transfer of legal estate in seisin, is at law wholly executory, and produces no
effects upon the estates and parties, and creates no lien or charge on the land itself, yet
it confers and estate and right in equity.

x       x       x

"‘Executory agreement,’ as used in the law of sales, means agreement for the sale of a
thing where it is not specified, or the article is not manufactured, or the agreement is
relative to a certain quantity of goods in general without any identification or
appropriation of the dame to the contract, or when something remains to be done to put
the goods in a deliverable state, or to ascertain the price to be paid by the buyer.

x       x       x

"Mr. Story says that an executory contract of sale is absolutely to sell at a future time,
while a conditional contract of sales conditionally to sell. In the one case, he says, the
performance of the contract is suspended and deferred to a future time; in the other the
very existence and performance of the contract depends upon a contingency.

x       x       x

"The general rule for determining whether a contract of sale executed or executory is if
anything remains to be done by either party to the transaction before delivery-as, for
example, to determine the price, quantity, or identity of the thing sold — the title does
not vest in the purchaser, and the contract is merely executory. If the sale is complete,
and the goods perish without the fault of the seller, and purchaser is bound to pay the
agreed price. (Foley v. Felrath, 98 Ala., 176; 13 South., 485;39 Am. St. Rep., 39) Thus,
a contract for the sale of cotton out of a certain number of bales, nothing to be taken
below middlings, the number of bales not being ascertained, was executory, . . ."cralaw
virtua1aw library

In the instant case, the contract Exhibit A was made in October 23, 1920. Neither the
original nor copies of the four promissory notes are in the record. But is very apparent
that they were executed on the 19th of November, 1920. Prior to that time there were
not any credits or existing debts between the parties within the meaning of article 1924.
An examination of Exhibit A would nor disclose the debtor the amount of the notes or
credits or the actual amount of the tobacco to be delivered. Such fact could only be
determined by the delivery of the tobacco, the weighing and acceptance of it. At the
time Exhibit A was executed, there were no credits and there was not any debt. All of
such matters were in futuro, contingent upon the performance of the contract.

Under such a state of facts, Exhibit A was not a public document within the meaning of
article 1924, and the plaintiff does not have a preferred lien for the unpaid balance of
the contract.

The judgment of the lower court is reversed, and one will be entered here that the
plaintiff does not have a preference, and that her existing claim can only be paid out of
the general fund to be prorated in common with unsecured creditors. So ordered.
 EN BANC

G.R. No. L-13602            April 6, 1918

LEUNG BEN, plaintiff,
vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of
Manila, defendants.

Thos. D. Aitken and W. A. Armstrong for plaintiff.

Kincaid & Perkins for defendants.

STREET, J.:

This is an application for a writ of certiorari, the purpose of which is to quash an attachment issued
from the Court of First Instance of the City of Manila under circumstances hereinbelow stated.

Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila
by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been lost by the plaintiff
to the defendant in a series of gambling, banking and percentage games conducted ruing the two or
three months prior to the institution of the suit. In his verified complaint the plaintiff asked for an
attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of the
defendant, on the ground that the latter was about to depart from the Philippine islands with intent to
defraud his creditors. This attachment was issued; and acting under the authority thereof, the sheriff
attached the sum of P15,000 which had been deposited by the defendant with the International
Banking Corporation.

The defendant thereupon appeared by his attorney and moved the court to quash the attachment.
Said motion having dismissed in the Court of First Instance, the petitioner, Leung Ben, the defendant
in that action, presented to this court, upon January 8, 1918 his petition for the writ
of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of the city of
Manila whose names are mentioned in the caption hereof. The prayer is that the Honorable James A.
Ostrand, as the judge having cognizance of the action in said court be required to certify the record to
this court for review and that the order of attachment which had been issued should be revoked and
discharged. with costs. Upon the filing of said petition in this court the usual order was entered
requiring the defendants to show cause why the writ should not issue. The response of the
defendants, in the nature of a demurrer, was filed upon January 21, 1918; and the matter is now
heard upon the pleadings thus presented.

The provision of law under which this attachment was issued requires that there should be accuse of
action arising upon contract, express or implied. The contention of the petitioner is that the statutory
action to recover money lost at gaming is that the statutory action to recover money lost at gaming is
no such an action as is contemplated in this provision, and he therefore insists that the original
complaint shows on its face that the remedy of attachment is not available in aid thereof; that the
Court of First Instance acted in excess of its jurisdiction in granting the writ of attachment; that the
petitioner has no plain, speedy, and adequate remedy by appeal or otherwise; and that consequently
the writ of certiorari supplies the appropriate remedy for his relief.

The case presents the two following questions of law, either of which, if decided unfavorably to the
petitioner, will be fatal to his application:
(1) Supposing that the Court of First Instance has granted an attachment for which there is no
statutory authority, can this court entertain the present petition and grant the desired relief?

(2) Is the statutory obligation to restore money won at gaming an obligation arising from "contract,
express or implied?"

We are of the opinion that the answer to the first question should be in the affirmative. Under section
514 of the Code of Civil Procedure the Supreme Court has original jurisdiction by the writ
of certiorari over the proceedings of Courts of First Instance, wherever said courts have exceeded
their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same section, it is
further declared that the proceedings in the Supreme Court in such cases hall be as prescribed for
Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme Court, so far as
applicable, the provisions contained in those section to the same extent as if they had been
reproduced verbatim immediately after section 514. Turning to section 217, we find that, in defining
the conditions under which certiorari can be maintained in a Court of First Instance substantially the
same language is used as is the same remedy can be maintained in the Supreme Court of First
Instance, substantially the same language is used as is found in section 514 relative to the conditions
under which the same remedy can be maintained in the Supreme Court, namely, when the inferior
tribunal has exceeded its jurisdiction and there is no appeal, nor any plain, speedy and adequate
remedy. In using these expressions the author of the Code of Civil Procedure merely adopted the
language which, in American jurisdictions at least, had long ago reached the stage of stereotyped
formula.

In section 220 of the same Code, we have a provision relative to the final proceedings in certiorari,
and herein it is stated that the court shall determine whether the inferior tribunal has regularly pursued
its authority it shall give judgment either affirming annulling, or modifying the proceedings below, as
the law requires. The expression, has not regularly pursued its authority as here used, is suggestive,
and we think it should be construed in connection with the other expressions have exceeded their
jurisdiction, as used in section 514, and has exceeded their jurisdiction as used in section 217. Taking
the three together, it results in our opinion that any irregular exercise of juridical power by a Court of
First Instance, in excess of its lawful jurisdiction, is remediable by the writ of certiorari, provided there
is no other plain, speedy, and adequate remedy; and in order to make out a case for the granting of
the writ it is not necessary that the court should have acted in the matter without any jurisdiction
whatever. Indeed the repeated use of expression excess of jurisdiction shows that the lawmaker
contemplated the situation where a court, having jurisdiction should irregularly transcend its authority
as well as the situation where the court is totally devoid of lawful power.

It may be observed in this connection that the word jurisdiction as used in attachment cases, has
reference not only to the authority of the court to entertain the principal action but also to its authority
to issue the attachment, as dependent upon the existence of the statutory ground. (6 C. J., 89.) This
distinction between jurisdiction to issue the attachment as an ancillary remedy incident to the principal
litigation is of importance; as a court's jurisdiction over the main action may be complete, and yet it
may lack authority to grant an attachment as ancillary to such action. This distinction between
jurisdiction over the ancillary has been recognized by this court in connection with actions involving
the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), a
receiver had been appointed without legal justification. It was held that the order making the
appointment was beyond the jurisdiction of the court; and though the court admittedly had jurisdiction
of the main cause, the order was vacated by this court upon application a writ of certiorari.
(See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735,
Yangco vs. Rohde, 1 Phil. Rep., 404.)
By parity of reasoning it must follow that when a court issues a writ of attachment for which there is
no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the sense necessary to
justify the Supreme Court in granting relief by the writ of certiorari. In applying this proposition it is of
course necessary to take account of the difference between a ground of attachment based on the
nature of the action and a ground of attachment based on the acts or the conditions of the defendant.
Every complaint must show a cause of action some sort; and when the statue declares that the
attachment may issue in an action arising upon contract, the express or implied, it announces a
criterion which may be determined from an inspection of the language of the complaint. The
determination of this question is purely a matter of law. On the other hand, when the stature declares
that an attachment may be issued when the defendant is about to depart from the Islands, a criterion
is announced which is wholly foreign to the cause of action; and the determination of it may involve a
disputed question of fact which must be decided by the court. In making this determination, the court
obviously acts within its powers; and it would be idle to suppose that the writ of certiorari would be
available to reverse the action of a Court of First Instance in determining the sufficiency of the proof
on such a disputed point, and in granting or refusing the attachment accordingly.

We should not be understood, in anything that has been said, as intending to infringe the doctrine
enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly
applied. It was there held that we would not, upon application for a writ of certiorari, dissolve an
interlocutory mandatory injunction that had been issued in a Court of First Instance as an incident in
an action of mandamus. The issuance of an interlocutory injunction depends upon conditions
essentially different from those involved in the issuance of an attachment. The injunction is designed
primarily for the prevention of irreparable injury and the use of the remedy is in a great measure
dependent upon the exercise of discretion. Generally, it may be said that the exercise of the injunctive
powers is inherent in judicial authority; and ordinarily it would be impossible to distinguish between
the jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory injunction,
for the latter is involved in the former. That the writ of certiorari can not be used to reverse an order
denying a motion for a preliminary injunction is of course not to cavil. (Somes vs. Crossfield and
Molina, 8 Phil. Rep., 284.)

But it will be said that the writ of certiorari is not available in this cae, because the petitioner is
protected by the attachment bond, and that he has a plain, speedy, and adequate remedy appeal.
This suggestion seems to be sufficiently answered in the case of Rocha & Co vs. Crossfield and
Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there cited. The remedy by
appeal is not sufficiently speedy to meet the exigencies of the case. An attachment is extremely
violent, and its abuse may often result in infliction of damage which could never be repaired by any
pecuniary award at the final hearing. To postpone the granting of the writ in such a case until the final
hearing and to compel the petitioner to bring the case here upon appeal merely in order to correct the
action of the trial court in the matter of allowing the attachment would seem both unjust and
unnecessary.

Passing to the problem propounded in the second question it may be observed that, upon general
principles,. recognize both the civil and common law, money lost in gaming and voluntarily paid by the
loser to the winner can not in the absence of statue, be recovered in a civil action. But Act No. 1757
of the Philippine Commission, which defines and penalizes several forms of gambling, contains
numerous provisions recognizing the right to recover money lost in gambling or in the playing of
certain games (secs. 6, 7, 8, 9, 11). The original complaint in the action in the Court of First Instance
is not clear as to the particular section of Act No. 1757 under which the action is brought, but it is
alleged that the money was lost at gambling, banking, and percentage game in which the defendant
was banker. It must therefore be assumed that the action is based upon the right of recovery given in
Section 7 of said Act, which declares that an action may be brought against the banker by any person
losing money at a banking or percentage game.
Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the
Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil Procedure
is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally admitted to be proper
in the interpretation of any statute, to consider its historical antecedents and its juris prudential
sources. The Code of Civil Procedure, as is well known, is an American contribution to Philippine
legislation. It therefore speaks the language of the common-law and for the most part reflects its
ideas. When the draftsman of this Code used the expression contract, express or implied, he used a
phrase that has been long current among writers on American and English law; and it is therefore
appropriate to resort to that system of law to discover the appropriate to resort to that system of law to
discover the meaning which the legislator intended to convey by those meaning which the legislator
intended to convey by those terms. We remark in passing that the expression contrato tracito, used in
the official translation of the Code of Civil Procedure as the Spanish equivalent of implied contract,
does not appear to render the full sense of the English expression.

The English contract law, so far as relates to simple contracts is planted upon two foundations, which
are supplied by two very different conceptions of legal liability. These two conceptions are revealed in
the ideas respectively underlying (1) the common- law debt and (2) the assumptual promise. In the
early and formative stages of the common-law the only simple contract of which the courts took
account was the real contract or contract re, in which the contractual duty imposed by law arises
upon the delivery of a chattle, as in the mutuum, commodatum, depositum, and the like; and the
purely consensual agreements of the Roman Law found no congenial place in the early common law
system.

In course of time the idea underlying the contract re was extended so as to include from one person
to another under such circumstances as to constitute a justa cuas debendi. The obligation thereby
created was a debt. The constitutive element in this litigation is found in the fact that the debtor has
received something from the creditor, which he is bound by the obligation of law to return or pay for.
From an early day this element was denominated the quid pro quo, an ungainly phrase coined by
Mediaeval Latinity. The quid pro quo was primarily a materials or physical object, and its constituted
the recompense or equivalent acquired by the debtor. Upon the passage of the quid pro quo from
one party to the other, the law imposed that real contractual duty peculiar to the debt. No one
conversant with the early history of English law would ever conceive of the debt as an obligation
created by promise. It is the legal duty to pay or deliver a sum certain of money or an ascertainable
quantity of ponderable or measurable chattles.

The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to the
debtor at the time of the creation of the debt, but the term is equally applicable to duties imposed by
custom or statute, or by judgment of a court.

The existence of a debt supposes one person to have possession of thing (res) which he owes and
hence ought to turn over the owner. This obligation is the oldest conception of contract with which the
common law is familiar; and notwithstanding the centuries that have rolled over Westminster Hall that
conception remains as one of the fundamental bases of the common-law contract.

Near the end of the fifteenth century there was evolved in England a new conception of contractual
liability, which embodied the idea of obligation resulting from promise and which found expression in
the common law assumpsit, or parol promise supported by a consideration. The application of this
novel conception had the effect of greatly extending the filed of contractual liability and by this means
rights of action came to be recognized which had been unknown before. The action of assumpsit
which was the instrument for giving effect to this obligation was found to be a useful remedy; and
presently this action came to be used for the enforcement of common-law debts. The result was to
give to our contract law the superficial appearance of being based more or less exclusively upon the
notion of the obligation of promise.

An idea is widely entertained to the effect that all simple contracts recognized in the common-law
system are referable to a singly category. They all have their roots, so many of us imagine, in one
general notion of obligation; and of course the obligation of promise is supposed to supply this
general notion, being considered a sort of menstruum in which all other forms of contractual
obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the debt
which was the first conception of contract liability revealed in the common law, has remained,
although it was detained to be in a measure obscured by the more modern conception of obligation
resulting from promise.

What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of
money or an ascertainable quantity of ponderable or measurable chattles — which is indicated by
them debt — has ever been recognized, in the common-law system, as a true contract, regardless, of
the source of the duty or the manner in which it is create — whether derived from custom, statue or
some consensual transaction depending upon the voluntary acts of the parties. the form of contract
known as the debt is of the most ancient lineage; and when reference is had to historical
antecedents, the right of the debt to be classed as a contract cannot be questioned. Indeed when the
new form of engagement consisting of the parol promise supported by a consideration first appeared,
it was looked upon as an upstart and its right to be considered a true contract was questioned. It was
long customary to refer to it exclusively as an assumpsit, agreement, undertaking, or parol promise, in
fact anything but a contract. Only in time did the new form of engagement attain the dignity of being
classed among true contract.

The term implied takers us into shadowy domain of those obligations the theoretical classification of
which has engaged the attention of scholars from the time of Gaius until our own day and has been a
source of as much difficulty to the civilian as to the common-law jurist. There we are concerned with
those acts which make one person debtor to another without there having intervened between them
any true agreement tending to produce a legal bond (vinculum juris). Of late years some American
and English writers have adopted the term quasi-contract as descriptive of these obligations or some
of them; but the expression more commonly used is implied contract.

Upon examination of these obligations, from the view point of the common-law jurisprudence, it will
be found that they fall readily into two divisions according as they bear an analogy to the common-law
debt or to the common law assumpsit. To exhibit the scope of these different classes of obligations is
here impracticable. It is only necessary in this connection to observe that the most conspicuous
division is that which comprises duties in the nature of debt. The characteristic feature of these
obligations is that upon certain states of fact the law imposes an obligation to pay a sum certain of
money; and it is characteristic of this obligation that the money in respect to which the duty is raised is
conceived as being equivalent of something taken or detained under circumstances giving rise to the
duty to return or compensate therefore. The proposition that no one shall be allowed to enrich himself
unduly at the expense of another embodies the general principle here lying at the basis of obligation.
The right to recover money improperly paid (repeticion de lo indebido) is also recognized as belong to
this class of duties.

It will observed that according to the Civil Code obligations are supposed to be derived either from (1)
the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort
ob lame or negligence is present. This enumeration of sources of obligations and the obligation
imposed by law are different types. The learned Italian jurist, Jorge Giorgi, criticises this assumption
and says that the classification embodied in the code is theoretically erroneous. His conclusion is that
one or the other of these categories should have been suppressed and merged in the other.
(Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5 arts. 5, 7, 9.) The validity of this criticism is,
we thin, self-evident; and it is of interest to note that the common law makes no distinction between
the two sources of liability. The obligations which in the Code are indicated as quasi-contracts, as well
as those arising ex lege, are in the common la system, merged into the category of obligations
imposed by law, and all are denominated implied contracts.

Many refinements, more or less illusory, have been attempted by various writers in distinguishing
different sorts of implied contracts, as for example, the contract implied as of fact and the contract
implied as of law. No explanation of these distinctions will be here attempted. Suffice it to say that the
term contract, express or implied, is used to by common-law jurists to include all purely personal
obligations other than those which have their source in delict, or tort. As to these it may be said that,
generally speaking, the law does not impose a contractual duty upon a wrongdoer to compensate for
injury done. It is true that in certain situations where a wrongdoer unjustly acquired something at the
expense of another, the law imposes on him a duty to surrender his unjust acquisitions, and the
injured party may here elect to sue upon this contractual duty instead of suing upon the tort; but even
here the distinction between the two liabilities, in contract and in tort, is never lost to sight; and it is
always recognized that the liability arising out of the tort is delictual and not of a contractual or quasi-
contractual nature.

In the case now under consideration the duty of the defendant to refund the money which he won
from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore, it is
a duty to return a certain sum which had passed from the plaintiff to the defendant. By all the criteria
which the common law supplies, this a duty in the nature of debt and is properly classified as an
implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery,
if recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money
had and received. (Clarke vs. Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs.
Fisher, 25 Vt., 514.) This means that in the common law the duty to return money won in this way is
an implied contract, or quasi-contract.

It is no argument to say in reply to this that the obligation here recognized is called an implied
contract merely because the remedy commonly used in suing upon ordinary contract can be here
used, or that the law adopted the fiction of promise in order to bring the obligation within the scope of
the action of assumpsit. Such statements fail to express the true import of the phenomenon. Before
the remedy was the idea; and the use of the remedy could not have been approved if it had not been
for historical antecedents which made the recognition of this remedy at one logical and proper.
Furthermore, it should not be forgotten that the question is not how this duty but what sort of
obligation did the author of the Code of Civil Procedure intend to describe when he sued the term
implied contract in section 412.

In what has been said we have assumed that the obligation which is at the foundation of the original
action in the court below is not a quasi-contract, when judge by the principles of the civil law. A few
observations will show that this assumption is not by any means free from doubt. The obligation in
question certainly does not fall under the definition of either of the two-quasi- contracts which are
made the subject of special treatment in the Civil Code, for its does not arise from a licit act as
contemplated in article 1895. The obligation is clearly a creation of the positive law — a circumstance
which brings it within the purview of article 1090, in relation with article, 1089; and it is also derived
from an illicit act, namely, the playing of a prohibited game. It is thus seen that the provisions of the
Civil Code which might be consulted with a view to the correct theoretical classification of this
obligation are unsatisfactory and confusing.

The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the
obligation incident to the officious management of the affairs of other person (gestion de negocios
ajenos) and (2) the recovery of what has been improperly paid (cabro de lo indebido). That the
authors of the Civil Code selected these two obligations for special treatment does not signify an
intention to deny the possibility of the existence of other quasi-contractual obligations. As is well said
by the commentator Manresa.

The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the
generations of the said obligations; but the Code, just as we shall see further on, in the
impracticableness of enumerating or including them all in a methodical and orderly
classification, has concerned itself with two only — namely, the management of the affairs of
other person and the recovery of things improperly paid — without attempting by this to
exclude the others. (Manresa, 2d ed., vol. 12, p. 549.)

It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence of
more than a thousand years, should have arbitrarily assumed to limit the quasi-contract to two
obligations. The author from whom we have just quoted further observes that the two obligations in
question were selected for special treatment in the Code not only because they were the most
conspicuous of the quasi-contracts, but because they had not been the subject of consideration in
other parts of the Code. (Opus citat., 550.)

It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide range.
The Italian jurist, Jorge Giorgi, to whom we have already referred, considers under this head, among
other obligations, the following: payments made upon a future consideration which is not realized or
upon an existing consideration which fails; payments wrongfully made upon a consideration which is
contrary to law, or opposed to public policy; and payments made upon a vicious consideration or
obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.)

Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the
application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these articles relate to
gambling contracts, while article 1305 treats of the nullity of contracts proceeding from a vicious or
illicit consideration. Taking all these provisions together, it must be apparent that the obligation to
return money lost at play has a decided affinity to contractual obligations; and we believe that it could,
without violence to the doctrines of the civil law, be held that such obligations is an innominate quasi-
contract. It is, however, unnecessary to place the decision on this ground.

From what has been said it follows that in our opinion the cause of action stated in the complaints in
the court below is based on a contract, express or implied and is therefore of such nature that the
court had authority to issue writ of attachment. The application for the writ of certiorari must therefore
be denied and the proceedings dismissed. So ordered.
 EN BANC

G.R. No. L-26332            October 26, 1968

THE SWEDISH EAST ASIA CO., LTD., petitioner,

vs.
MANILA PORT SERVICE AND/OR MANILA RAILROAD COMPANY, respondents.

Ross, Selph, Salcedo, Del Rosario, Bito & Misa for petitioner.
Government Corporate Counsel D. F. Macaranas for respondents.

CASTRO, J.:

This is a petition for review of the decision of the Court of Appeals in CA-G.R. 34279-R, entitled "The
Swedish East Asia Co., Ltd. vs. Manila Port Service, et al." The petitioner, The Swedish East Asia
Co., Ltd., a corporation duly organized and existing under the laws of Sweden with principal offices at
Gothenburg, Sweden, is admittedly not licensed to do business in the Philippines.

On December 3, 1967 the MS "SUDAN", owned and operated by the petitioner, arrived at the port of
Manila and discharged cargo destined thereto unto the custody of the respondent Manila Port
Service, a subsidiary of the respondent Manila Railroad Company, contractor and operator of the
arrastre service of the port of Manila. By mistake, cargo destined for Hongkong consisting of sixteen
bundles of "lifts of mild steel tees window sections" covering which the petitioner had issued a bill of
lading in the name of S.A. Citals Lodelinsart, as shipper, and of Welcome Trading Co. of Hongkong,
as consignee, were also landed at Manila. The erroneous discharge was obviously engendered by
the fact that the same ship on the same day discharged forty similar bundles destined for consignees
in the Philippines.

Vicente Pacheco, claims manager of the International Harvester McCleod and Company, the
petitioner's agent in Manila, upon being notified by letter from Hongkong of the erroneous discharge,
sent the company's customs men to investigate, who found the sixteen bundles at the customs piers.
Pacheco then instructed their customs men to arrange for the reshipment of the sixteen bundles to
Hongkong and accomplish all necessary papers for payment of customs, arrastre and storage
charges due on the goods, which charges were as a matter of fact paid by the petitioner. However,
the reshipment of all the sixteen bundles was not effected, because only eight of these were available
at the time that all were scheduled to be loaded on board the M.S. "Minikoi" bound for Hongkong, as
the remaining eight could not be found. After an exchange of letters between Pacheco and the Manila
Port Service, in the last of which the latter advised the International Harvester of its inability to locate
the eight missing bundles, the petitioner, on January 10, 1958, presented a formal claim for the value
of the missing cargo to the Manila Port Service in the sum of P2,349.62. On March 8, 1960 the
petitioner received a letter from the respondents rejecting the claim.

On March 13, 1961 the petitioner filed a complaint in the Court of First Instance of Manila, for
recovery of the amount of P2,349.62, the value of the missing goods, which sum it had paid to the
consignee in Hongkong, as well as the amount of P2,000 in moral damages and P1,000 as attorney's
fees, and costs.

On April 29, 1964, after due trial, the lower court rendered judgment ordering the respondents, jointly
and severally, to pay the petitioner the sum of P2,349.62, with interest thereon at the rate of 6% per
annum from March 13, 1961, the date of the filing of the complaint, and the sum of P600 in attorney's
fees, plus costs.
From this judgment, the respondents interposed an appeal to the Court of Appeals, which on April 30,
1966 promulgated its decision reversing that of the lower court and absolving the respondents.

Hence, the present recourse.

The petitioner contends in this appeal that the Court of Appeals erred "(1) in holding that the
obligation of the Manila Port Service to a non-resident consignee of cargo not destined for Manila but
mistakenly discharged at Manila is governed by its management contract with the Bureau of Customs
and not by article 2154 of the Civil Code of the Philippines; (2) assuming arguendo that the
management contract of the Manila Port Service with the Bureau of Customs governs the obligations
of respondents and is binding on petitioner, in holding that a claim filed thirty-eight days after the
discharge of the cargo but within fifteen days from the time the cargo was placed at the disposal of
the consignee is time-barred; and (3) in not holding that suit against the Manila Port Service for loss
of cargo may be filed within one year from notice of the rejection of consignee's claim."

The Court of Appeals held that the petitioner's action in the lower court was time-barred, its claim
having been filed only on January 10, 1958, or thirty-eight days from December 3, 1957, when the
cargo in question was landed at the port of Manila, and court action having been commenced only on
March 13, 1961, or more than three years thereafter, in violation of the provisions of the management
contract between the Manila Port Service and the Bureau of Customs, which, in part, reads:

... in any event the CONTRACTOR shall be relieved and released of any and all responsibility
or liability for loss, damage, misdelivery and/or non-delivery of goods unless suit in the court of
proper jurisdiction is brought within a period one (1) year from the date of the discharge of the
goods, or from the date when the claim for the value of such goods have [sic] been rejected or
denied by the CONTRACTOR, provided that such claim shall have been filed with the
contractor within 15 days from the date of discharge of the last package from the carrying
vessel ...

The petitioner argues that the cases cited by the Court of Appeals, on the basis of which it absolved
the respondents from liability, are not applicable to the case at bar, because the said cases involved
cargo destined for the Philippines, and the consignees are residents of the Philippines who availed
themselves of the services of the customs arrastre operator. These conditions, the petitioner states,
do not exist in the present case as (1) the cargo herein involved was destined not for Manila but for
Hongkong, (2) the consignee is not a resident of the Philippines, (3) the cargo was mistakenly
discharged at Manila unto the custody of the arrastre operator, and (4) the consignee cannot be said
to have availed itself of the services of the arrastre operator.

Admitting that the Hongkong consignee of the cargo involved is not bound by the management
contract, for the reason that it was not charged with notice of the provisions thereof, the respondents
nonetheless maintain that the petitioner is bound thereby, because the petitioner had been
transacting business with the respondents regularly in the past and is charged with knowledge of the
provisions of the management contract. They further argue that since it was the petitioner, and not
the consignee, which had mistakenly delivered the goods, there could be no subrogation in favor of
the petitioner entitling it to invoke in its favor the non-applicability of the management contract to the
consignee.

It is our view that the position taken by the petitioner is correct. True it is that this Court has held in a
number of cases that it is not only the parties to a management contract that are bound thereby, but
also third parties who have availed themselves of the services of the arrastre operator, taking delivery
therefrom in pursuance of a permit and a pass issued by the latter. 1 The disparate facts of the present
case, however, do not warrant application of this doctrine. For it is not disputed that the petitioner had
no intention of availing itself of the services of the Manila Port Service, nor did it seek to derive benefit
therefrom, in so far as the cargo in question is concerned. On the contrary, its intention was to have
the sixteen bundles discharged in Hongkong, pursuant to its contract with the consignee, the
Welmore Trading Co., to deliver the cargo to that place. Discharge of the good in Manila was made
through mistake, in good faith.

The petitioner not being bound by the management contract either as a party thereto or as one who
has taken advantage of the provisions thereof, it follows that its right to bring an action to recover the
value of the missing goods can not be limited by the pre-conditions as to time set forth in the said
management contract.

The respondents who had no right to the sixteen bundles delivered to them by mistake, had actually
received them, thereby giving rise to an obligation on their part to return them to the one who
delivered them by mistake, which, by virtue of this circumstance, acquired the character of creditor of
the receiver, remaining at the same time answerable to the consignee thereof. 2 It results that the
petitioner having acquired the right to demand in its own capacity the return of the shipment delivered
by mistake to the respondents, this Court may grant relief to it not as subrogee of the consignee, but
as creditor in its own right, in which capacity the petitioner has brought this action as shown by the
allegations of the complaint considered as a whole.

In the case at bar, there is no question that the defendants received the sixteen bundles which were
mistakenly discharged in Manila as in fact they were located at the piers, and that the charges for
their storage were paid by the petitioner. There was therefore an obligation on the part of the
respondents to return them to the petitioner.

The defense that the agents of the shipper were negligent in allowing the landing of the cargo at
Manila by mistake, will not exempt the respondents from liability, because the obligation of one who
has erroneously received a thing to return the same to the one who delivered it by mistake remains
unaffected by such circumstance. And this holds true even where, as in this case, the one who
wrongfully delivered the thing, pays its value to the rightful owner thereof.

The foregoing disquisition dispenses with the need of passing upon the other two assignments of
error.

The complaint having been filed on March 13, 1961, less than four years from the date the petitioner's
right of action accrued, that is, from December 3, 1957, when the missing cargo was admittedly
landed unto the custody of the defendants, the action of the petitioner has not prescribed, whether we
apply article 1146 of the new Civil Code which provides for a prescriptive period of four years for an
action "upon an injury to the rights of the plaintiff," or article 1149 of the same Code which provides
that "all other actions whose periods are not fixed in this Code or in other laws must be brought within
five years from the time the right of action accrues."

The respondents challenge the petitioner's capacity to sue, it being admittedly a foreign corporation
without license to engage in business in the Philippines, citing section 69 of the Corporation Law. It
must be stated however that this section is not applicable to a foreign corporation performing single
acts or "isolated transactions."3 There is nothing in the record to show that the petitioner has been in
the Philippines engaged in continuing business or enterprise for which it was organized, when the
sixteen bundles were erroneously discharged in Manila, for it to be cosidered as transacting business
in the Philippines. The fact is that the bundles, the value of which is sought to be recovered, were
landed not as a result of a business transaction, "isolated" or otherwise, but due to a mistaken belief
that they were part of the shipment of forty similar bundles consigned to persons or entities in the
Philippines. There is no justification, therefore, for invoking the provisions of section 69 of the
Corporation Law.

ACCORDINGLY, the judgment of the Court of Appeals is reversed, and another judgment is hereby
rendered ordering the respondents, jointly and severally, to pay the petitioner the sum of P2,349.62
with interest thereon at the rate of 6% per annum from March 13, 1961, the date of the filing of the
complaint, until the amount shall have been fully paid, and the sum of P600 as attorney's fees. Costs
against the respondents.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Angeles, Fernando and Capistrano,
JJ., concur.
Zaldivar, J., is on leave.
 EN BANC

G.R. No. L-7097             October 23, 1912

VICENTE DELGADO, defendant-appellee,
vs.
PEDRO BONNEVIE and FRANCISCO ARANDEZ, plaintiffs-appellants.

O' Brien and DeWitt, and A. V. Herrero, for appellants.

Roco and Roco, for appellee.

ARELLANO, C.J.:

When Pedro Bonnevie and Francisco Arandez formed in Nueva Caceres, Ambos Camarines, a
regular general partnership for engaging in the business of threshing paddy, Vicente Delgado
undertook to deliver to them paddy for this purpose to be cleaned and returned to him as rice, with
the agreement of payment them 10 centimos for each cavan and to have returned in the rice one-half
the amount received as paddy. The paddy received for this purpose was credited by receipts made
out in this way: "Receipt for (number) cavanes of paddy in favor of (owner of the paddy), Nueva
Caceres, (day) of (month), 1898." And they issued to Vicente Delgado receipts Nos. 86-99 for a total
of 2,003 cavanes and a half of paddy, from April 9 to June 8, 1898.

On February 6, 1909, Vicente Delgado appeared in the Court of First Instance of Ambos Camarines
with said receipts, demanding return of the said 2,003 and a half cavanes of paddy, or in the absence
thereof, of the price of said article at the rate of 3 pesos the cavan of 6,009 pesos and 50 centimos,
with the interest thereon at 6 percent a year reckoning from, November 21, 905, until complete
payment, and the costs. The plaintiff asked that the interest run from November 21, 1905, because on
that date his counsel demanded of the defendants, Bonnevie and Arandez, their partnership having
been dissolved, that they settle the accounts in this matter.

The court decided the case by sentencing the defendant, Pedro Bonnevie and Francisco Arandez, to
pay to Vicente Delgado two thousand seven hundred and fifty-four pesos and
81 centimos (2,754.81), the value of 2,003 ½ cavanes of paddy at the rate of
11 reales the cavan and 6 percent interest on said sum reckoned from November 21, 1905, and the
costs.

On appeal to this Supreme Court, the only grounds of error assigned are: (1) Violation of articles 532
and 950 of the Code of Commerce; (2) violation of articles 309 of the Code of Commerce and 1955
and 1962 of the Civil Code; and (3) violation of section 296 of the Code of Civil Procedure.

With reference to the first assignment of error it is alleged that the receipts in question, the form
whereof has been set forth, were all issued before July 11, 1898, and being credit paper as defined in
paragraph 2 of article 532 of the Code of Commerce, the right of action arising therefrom prescribed
before July 11, 1901, in accordance with article 950 of the Code of Commerce.

This conclusion is not admissible. It is true that, according to the article 950 of the Code of
Commerce, actions arising from bills of exchange, drafts, notes, checks, securities, dividends,
coupons, and the amounts of the amortization of obligations issued in accordance with said code,
shall extinguish three years after they have fallen due; but it is also true that as the receipts in
question are not documents of any kinds enumerated in said article, the actions arising therefrom do
not extinguish three years from their date (that, after all, they do not fall due). It is true that paragraph
2 of article 950 also mentions, besides those already stated, "other instruments of draft or exchange;"
but it is also true that the receipts in this case are not documents of draft or exchange, they are not
drafts payable to order, but they are, as the appellants acknowledge, simple promises to pay, or
rather mere documents evidencing the receipt of some cavanes of paddy for the purpose already
stated, which is nothing more than purely for industrial, and not for mercantile exchange. They are
documents such as would be issued by the thousand so-called rice-mills scattered throughout the
Islands, wherein a few poor women of the people in like manner clean the paddy by pounding it with a
pestle and return hulled rice. The contract whereby one person receives from another a quantity of
unhulled rice to return it hulled, for a fixed compensation or renumeration, is an industrial, not a
commercial act; it is, as the appellant say, a hire of services without mercantile character, for there is
nothing about the operation of washing clothes. Articles 532 and 950 of the Code of Commerce have
not, therefore, been violated, for they are not applicable to the case at bar.

Neither are articles 309 of the Code of Commerce and 1955 and 1962 of the Civil Code applicable.
The first of these articles reads thus:

Whenever, with the consent of the depositor, the depositary disposes of the articles on deposit
either for himself or for his business, or for transactions intrusted to him by the former, the
rights and obligations of the depositary and of the depositor shall cease, and the rules and
provisions applicable to the commercial loans, commission, or contract which took place of the
deposit shall be observed.

The appellants say that, in accordance with this legal provision, the puddy received on deposit
ceased to continue under such character in order to remain in their possession under the contract of
hire of services, in virtue whereof they could change it by returning rice instead of paddy and a half
less than the quantity received. They further say that the ownership of personal property, according to
article 1955 of the Civil Code, prescribes by uninterrupted possession for six years, without necessity
of any other condition, and in accordance with article 1962 of the same Code real actions, with regard
to personal property, prescribe after the lapse of six years from the loss of possession. 1awphil.net

Two questions are presented in these allegations: One regarding the nature of the obligation
contracted by the appellants; and the other regarding prescription, not for a period of three years, but
of six years.

With reference to the first, it is acknowledged that the obligation of the appellants arose primarily out
of the contract of deposit, but this deposit was later converted into a contract of hire of services, and
this is true. But it is also true that, after the object of the hire of services had been fulfilled, the rice in
every way remained as a deposit in the possession of the appellants for them to return to the
depositor at any time they might be required to do so, and nothing has relieved them of this
obligation; neither the dissolution of the partnership that united them, nor the revolutionary movement
of a political character that seems to have occurred in 1898, nor the fact that they may at some time
have lost possession of the rice.

With reference to the second question, or under title of deposit or hire of services, the possession of
the appellants can in no way amount to prescription, for the thing received on deposit or for hire of
services could not prescribe, since for every prescription of ownership the possession must be in the
capacity of an owner, public, peaceful, and uninterrupted (Civil Code, 1941); and the appellants could
not possess the rice in the capacity of owners, taking for granted that the depositor or lessor never
could have believed that he had transferred to them ownership of the thing deposited or leased, but
merely the care of the thing on deposit and the use or profit thereof; which is expressed in legal terms
by saying that the possession of the depositary or of the lessee is not adverse to that of the depositor
or lessor, who continues to be the owner of the thing which is merely held in trust by the depositary or
lessee.

In strict law, the deposit, when it is of fungible goods received by weight, number or measurement,
becomes a mutual loan, by reason of the authorization which the depositary may have from the
depositor to make use of the goods deposited. (Civil Code, 1768, and Code of Commerce, 309.) .

But in the present case neither was there for authorization of the depositor nor did the depositaries
intend to make use of the rice for their own consumption or profit; they were merely released from the
obligation of returning the same thing and contracted in lieu thereof the obligation of delivering
something similar to the half of it, being bound by no fixed terms, the opposite of what happens in a
mutual loan, to make the delivery or return when and how it might please the depositor.

In fact, it has happened that the depositaries have, with the consent of the depositor, as provided in
article 309 of the Code of Commerce, disposed of the paddy "for transactions he intrusted to them,"
and that in lieu of the deposit there has been a hire of services, which is one entered into between the
parties to the end that one should return in rice half of the quantity of paddy delivered by the other,
with the obligation on the latter's part of paying 10 centimos for each cavan of hulled rice. The
consequence of this is that the rules and regulations for contract of hire of services must be applied to
the case, one of which is that the thing must be returned after the operation entrusted and payment of
compensation, and the other that the action for claiming the thing leased, being personal, does not
prescribe for fifteen years under article 1964 of the Civil Code. 1awphi1.net

If the action arising from the receipts in question does not prescribe in three years, as does that from
bills of exchange, because they are not drafts payable to order or anything but receipts that any
warehouseman would sign; if the possession of the paddy on the part of those who received it for
threshing is not in the capacity of owner but only in that of depositary or lessor of services and under
such character ownership thereof could not prescribe in six years, or at any time, because adverse
possession and not mere holding in trust is required prescription; if the action to recover the paddy so
delivered is not real with regard to personal property, possession whereof has been lost, but a
personal obligation arising from contract of lease for recovery of possession that has not been lost but
maintained in the lessee in the name of the lessor; if prescription of any kind can in no way be held,
only because there could not have been either beginning or end of a fixed period for the prescription,
it is useless to talk of interruption of the period for the prescription, to which tends the third
assignment of error, wherein it is said that the court violated article 296 of the Code of Civil Procedure
in admitting as proven facts not alleged in the complaint, justas if by admitting them there would have
been a finding with regard to the computation of the period for timely exercise of the action, taking
into consideration the legal interruptions of the running of the period of prescription. The court has
made no finding in the sense that this or that period of time during which these or those facts occured
must be counted out, and therefore the action has not prescribed, because by eliminating such period
of time and comparing such and such date the action has been brought in due time. Prescription of
three or six years cannot be presupposed in the terms alleged, but only of fifteen years, which is what
is proper to oppose to the exercise of a right of action arising from hire of services and even of
deposit or mutual loan, whether common or mercantile; and such is the prescription considered
possible by the trial court, in conformity with articles 943 of the Code of Commerce and 1964 of the
Civil Code.

The trial judge confined himself to sentencing the defendants to payment of the price of the paddy,
ignoring the thing itself, return whereof ought to have been the subject of judgment in the first place,
because the thing itself appears to have been extinguished and its price has taken its place. But the
assigning of legal interest from November 21, 1905, can have no other ground than the demand
made by plaintiff's counsel upon the defendants to settle this matter. Legal interest on delinquent
debts can only be owed from the time the principal amount constitutes a clear and certain debt, and in
the present case the principal debt has only been clear and certain since the date of the judgment of
the lower court; so the legal interest can be owed. only since then.

The judgment appealed from is affirmed, except that the legal interest shall be understood to be owed
from the date thereof; with the costs of this instance against the appellants.
 EN BANC
[G.R. No. L-8881.  October 31, 1956.]
REYNALDO T SANTOS, Plaintiff-Appellee, vs. EMILIANO ACUÑA, ET AL., Defendants-Appellants.
 
DECISION
REYES, J. B. L., J.:
On May 2, 1951, Reynaldo T. Santos instituted an action in the Court of First Instance of Rizal to foreclose the
mortgage on two parcels of land with the building and improvements thereon, belonging
to Defendants Emiliano Acuña and Nieves B. Acuña. Based on an “Agreement” of the parties, the Court, on
August 1, 1951, rendered judgment for the Plaintiff, and a writ of execution was issued on December 20, 1951.
Pursuant to the writ, the Provincial Sheriff sold the properties to Plaintiff as the highest bidder, and on March
10, 1952, the certificate of sale was approved and confirmed by the Court. The sale was duly recorded in the
office of the Register of Deeds of Rizal and T. C. T. No. 25996 covering the two lots and improvements thereon
sold was issued to Plaintiff Santos.
Because of the Defendant’s refusal to surrender possession of the properties in question to Plaintiff, the latter
applied for a writ of possession, which the Court issued on May 15, 1952. On June 13, 1952, the special deputy
sheriff of Rizal made a return of the writ with the statement that he had delivered possession of the properties
in question to a representative of the Plaintiff, and that he had given the Defendants 15 days within which to
vacate peacefully the premises. One day prior to the lapse of the 15 days period aforesaid, Defendants filed in
Court an urgent motion for extension of the time to vacate the premises, which the Court denied for the
reason that its decision having become final and executory, it had no more jurisdiction over the same. On
August 17, 1952, the Sheriff filed a motion manifesting that, the 15-day period given by him to Defendants to
vacate the premises as well as an additional period up to July 25, 1952, given by Plaintiff, had already expired,
and praying that he be given authority to get police or Constabulary protection to take possession of the
properties in question. Plaintiff likewise moved to declare Defendants in contempt of court for their failure to
surrender the possession of the premises. The Defendants prayed for ten days more within which to vacate,
and with the conformity of Plaintiff, the Court gave them the period they pray for.
The ten days given to Defendants to vacate lapsed and still Defendants did not leave the premises; chan
roblesvirtualawlibrarywherefore, upon Plaintiff’s petition, the lower court authorized the deputy sheriff to
solicit the aid of the local authorities to enforce its writ of possession. Plaintiff called the attention of the Court
that the writ of possession had already expired, and so, on October 14, 1952, an alias writ of possession was
issued. The enforcement of the alias writ was, however, held in abeyance because on October 29, 1952, the
parties reached an agreement whereby the Defendants where given by Plaintiff the right to repurchase the
properties in question for P45,000 payable as follows:chanroblesvirtuallawlibrary
P1,000 on October 31, 1952
4,000 on November 15, 1952
5,000 on November 30, 19523
5,000 on January 31, 1953
subject to the express conditions that upon failure of Defendants to pay any of the installments on the dates
due, the agreement would immediately and automatically become null and void, and that any payments
already made would be applied to the deficiency judgment and the excess, if any, to the use and occupation of
the premises at P500 a month. Defendants paid the first installment of P1,000 but failed to pay the second of
the date it fell due. For this reasons, Plaintiff sought a second alias writ of execution.
On November 19, 1952, the Sheriff again advised Defendants to vacate the premises on or before November
21, 1952, or he would eject them forcibly therefrom. On December 2, 1952, Defendants manifested in Court
that they were ready to pay or deposit in court any amounts already due on their agreement with Plaintiff,
provided that Plaintiff would execute the corresponding deed of sale in their favor; chan
roblesvirtualawlibraryand prayed that if Plaintiff would refuse to execute the said deed, they be allowed to
pay or deposit in court the entire balance of the purchase price on January 31, 1953. Plaintiff opposed the
motion on the ground that his agreement with Defendants had already become null and void, but the court, in
its desire to give Defendants another chance to buy the premises, gave them up to December 26, 1952, to
deposit in court the amount of P9,000 corresponding to the second and third installment.
Again Defendants failed to comply with the above order of the Court, so that on December 18, 1952, a third
alias writ of possession was issued and on December 29, 1952, the Defendants were notified anew by the
sheriff that they would be ejected from the premises with the use of force, if necessary. Defendants again
came to court and prayed for a “last extension to peacefully vacate the premises an deliver possession thereof
to Plaintiff up to January 31, 1953”, which motion the Court denied. Then on January 12, 1953, the Court
ordered the sheriff to execute the third alias writ of execution, warning that “this Court would brook no delays
in the enforcement of its lawful orders and processes. The Defendants again moved for further extension of
time to vacate, and upon agreement of Plaintiff, were given a final extension up to January 31, 1953.
As Defendants likewise failed to comply with this last extension, the lower Court, on June 2, 1953, issued a
fourth alias writ of possession.
On June 9, 1953, the parties submitted to the Court an agreement and petition superseding all previous
agreements between them, whereby it was agreed that Defendants could purchase the properties in question
for the price of P40,000 on or before December 31, 1953; chan roblesvirtualawlibrarysubject to the conditions
that Defendants would pay the amount of P500 a month for the use and occupation of the premises; chan
roblesvirtualawlibrarythat all amounts that had already been previously paid to Plaintiff were forfeited; chan
roblesvirtualawlibraryand that the agreement was not a waiver of Plaintiff’s rights under his judgment, and
“shall not be treated and considered as a contract of lease and shall be without prejudice to the right of
the Plaintiff to enforce the writ of possession issued in this case” upon default of Defendants to pay any of the
monthly rentals or the purchase price as agreed. The agreement was approved by the court and the
enforcement of the fourth alias writ of possession hold in abeyance.
Defendants again failed to comply with their obligations under agreement with Plaintiff of June 9, 1953.
Consequently, the Court issued a fifth alias writ of possession, authorizing the provincial sheriff to get the
assistance of Constabulary soldiers in enforcing the same. To resist the execution, Defendants moved to quash
the alias writ on the ground that the agreement of the parties of June 9, 1953 satisfied or novated the
judgment, and that therefore, the lower court had no more jurisdiction to further act in the case. On July 8,
1954, the Court below issued an order denying the motion to quash; chan roblesvirtualawlibraryhence this
appeal by Defendants.
Defendants-Appellants submit two arguments in support of this appeal, namely:chanroblesvirtuallawlibrary
(1)  That the judgment of the Court below of August 1, 1951, had been satisfied on June 13, 1952 when the
provincial sheriff made a return of the writ of execution with the statement that he had delivered possession
of the properties in question to a representative of the Plaintiff; chan roblesvirtualawlibraryand
(2)  That the lower Court’s decision of August 1, 1951 had been novated by the agreement of the parties of
October 29, 1952 and June 9, 1953 which changed their relation of judgment creditor and debtor, to lessor-
vendor and lessee-vendee.
The claim that the judgment of the Court below of August 1, 1951 had been fully satisfied by the return of the
sheriff of June 13, 1951 because he stated therein that he had delivered possession of the properties in
question to representative of the Plaintiff, is more apparent than real. In the same return of June 13, 1952, the
sheriff also stated that he “gave Defendants fifteen (15) days period from June 13, 1952 within which to vacate
peacefully the said premises,” (Rec. App., p. 23), showing that he had not, at the time he return the writ on
June 13, 1951, delivered actual possession of the premises to Plaintiff. As for the argument that legal
possession on the part of Plaintiff is not incompatible with Defendants’ failure to vacate the premises, it
cannot be seriously denied that the provincial sheriff had never placed Plaintiff in actual or real possession or
control of said properties, for the Appellants had, up to the signing of the agreement of July 9, 1953, always
resisted all attempts on the sheriff’s part to enforce the writ of possession, either by outright refusals to leave
the premises, or by motions filed in court for the extensions of the time to vacate.
There is likewise no merit in the argument that both the lower Court, in its order of July 2, 1952,
and Plaintiff in his pleading of May 4, 1952, admitted that the Court below had no longer jurisdiction over the
case. What the lower Court and Plaintiff meant in the order and pleading cited was that the Court no longer
had jurisdiction to amend or modify its judgment, since it had already become final and executory, and so it
could not give any extensions of time to Appellants to deliver possession of the premises to Plaintiff without
the later’s conformity or consent. Jurisdiction of the court over its judgment, to amend, modify, or alter the
same, should be distinguished from jurisdiction to enforce said judgment. “The former terminates when the
judgment becomes final; chan roblesvirtualawlibrarythe latter continues even after the judgment has become
final for the purpose of execution and enforcement of the judgment.” (Miranda vs. Tiangco, 96 Phil., 526).
With respect to Appellants’ theory that the lower Court’s decision of August 1, 1951 was allegedly novated by
the subsequent agreements of the parties of October 29, 1952 and June 9, 1953, we note that the voluminous
record of the protracted proceedings in the lower Court (due to Appellants’ varied and repeated attempts to
secure deferment of the execution of the judgment against them) clearly shows that the Plaintiff had always
insisted in the execution of the decision. If he agreed twice to give Appellants the chance to repurchase the
properties in question and accept reasonable compensation for their use by Appellants pending the
repurchase, it was always subject to the right to have the judgment enforced in case the Appellants failed to
comply with their end of the bargain. In fact, the last agreement of June 9, 1953, with which Appellants again
did not comply, expressly stipulated that:chanroblesvirtuallawlibrary
“it should not be treated and considered as a contract of lease and shall be without prejudice to the right
of Plaintiff to enforce the writ of possession issued in these case  cralaw and it is likewise expressly agreed that
this agreement shall not be tantamount to a waiver of the Plaintiff’s right under the judgment in this case.” (R.
A., p. 57)
Appellants understood and expressly agreed to be bound by this condition, when the stipulated that “they will
voluntarily deliver and surrender possession of the premises to the Plaintiff in such event” (Rec. on appeal, p.
57, supra). Hence, it is plain that in no case were the subsequent arrangements entered into with any
unqualified intention to discard or replace the judgment in favor of the Plaintiff-Appellee; chan
roblesvirtualawlibraryand without such intent or animus novandi, no substitution of obligations could possibly
take place.
Appellants themselves know that, notwithstanding the opportunities granted them to purchase the property,
the judgment remained in force until their obligations had been fully performed. This is shown by their
reiterate petitions for additional time to vacate, and promises of faithful performance upon which
the Appellee and the Court relied, but which apparently the Appellants never intended to perform.
The case falls squarely within the doctrine laid down by this Court in Zapanta vs. De Ratache, 21 Phil. 154,
159:chanroblesvirtuallawlibrary
“A final judgment is one of the most solemn obligations incurred by parties known to the law. The Civil Code,
in article 1156, provides the method by which all civil obligations may be extinguished. One of the methods
recognized by said code for the extinguishment of obligations is that by novation. (Civil Code, Articles 1156,
1203 to 1213.) In order, however, that an obligation shall be extinguished by another obligation (by novation)
which substitutes it, the law requires that the novation or extinguishment shall be expressly declared or that
the old and new obligations shall be absolutely incompatible. (Civil Code, Article 1204.) In the present case,
the contract referred to does not expressly extinguished the obligations existing in said judgment. Upon the
contrary it expressly recognizes the obligations existing between the parties in said judgment and expressly
provides a method by which the same shall be extinguished, which method is, as it expressly indicated in said
contract, by monthly payments. The contract, instead of containing provisions “absolutely incompatible” with
the obligations of the judgment, expressly ratifies such obligations and contains provisions for satisfying them.
The said agreement simply gave the Plaintiff a method and more time for the satisfaction of said judgment. It
did not extinguished the obligations contained in the judgment, until the terms of said contract had been fully
complied with. Had the Plaintiff continued to comply with the conditions of said contract, he might have
successfully invoked its provisions against the issuance of an execution upon the said judgment. The contract
and the punctual compliance with its terms only delayed the right of the Defendant to an execution upon the
judgment. The judgment was not satisfied and the obligations existing thereunder still subsisted until the
terms of the agreement had been fully complied with. The Plaintiff was bound to perform the conditions
mentioned in said contract punctually and fully, in default of which the Defendant was remitted to the original
rights under his judgments.”
Appellant claim that the agreement of July 9, 1953, in so far as it stipulates that it should not be considered as
a contract of lease is void as against the law. We see no merit in this contention. Lease is essentially a
consensual contract, and its existence depends upon agreement of the parties. And there is no law prohibiting
stipulations that contracts, although similar to leases, should not be regarded as such between the parties.
The standard contracts delineated in the law may be varied by the parties as will in the absence of legal
prohibition, or conflict with morals, good customs, public order or public policy. That is precisely why the new
Civil Code expressly recognizes (Article 1307) the so called innominate contracts that do not strictly conform
to the standard contracts, and the existence of which had been acknowledged also under the preceding Code
(Alcantara vs. Alinea, 8 Phil. 111).
At any rate the Plaintiff Appellee having the right to enforce the judgment in his favor within five years, upon
proper motion, he had the legal right to defer its execution only upon compliance of the conditions that he
and Appellant agreed upon. Having voluntarily refused to fulfill these condition, Appellants cannot complain
against the judgment being executed.
Neither Fun Can Lu vs. Yap Fauco, 74, Phil. 287, nor Dimayuga vs. Raymundo, 76 Phil 143, control the case at
bar, since in those cases there was no express reservation of the right to enforce judgment in case of non-
compliance of the subsequent agreement.
Wherefore, the order appealed from is affirmed, with costs against Appellants Acuña. SO ORDERED.
 EN BANC

G.R. No. L-1648             August 17, 1949

PEDRO SYQUIA, GONZALO SYQUIA, and LEOPOLDO SYQUIA, petitioners,

vs.
NATIVIDAD ALMEDA LOPEZ, Judge of Municipal Court of Manila, CONRADO V. SANCHEZ,
Judge of Court of First Instance of Manila, GEORGE F. MOORE, ET AL., respondents.

Gibbs, Gibbs, Chuidian and Quasha for petitioner.

J. A. Wolfson for respondent.

MONTEMAYOR, J.:

For the purposes of this decision, the following facts gathered from and based on the pleadings, may
be stated. The plaintiffs named Pedro, Gonzalo, and Leopoldo, all surnamed Syquia, are the
undivided joint owners of three apartment buildings situated in the City of Manila known as the North
Syquia Apartments, South Syquia Apartments and Michel Apartments located at 1131 M. H. del Pilar,
1151 M. H. del Pilar and 1188 A. Mabini Streets, respectively.

About the middle of the year 1945, said plaintiffs executed three lease contracts, one for each of the
three apartments, in favor of the United States of America at a monthly rental of P1,775 for the North
Syquia Apartments, P1,890 for the South Syquia Apartment, and P3,335 for the Michel Apartments.
The term or period for the three leases was to be "for the duration of the war and six months
thereafter, unless sooner terminated by the United States of America." The apartment buildings were
used for billeting and quartering officers of the U. S. armed forces stationed in the Manila area.

In March 1947, when these court proceedings were commenced, George F. Moore was the
Commanding General, United States Army, Philippine Ryukus Command, Manila, and as
Commanding General of the U. S. Army in the Manila Theatre, was said to control the occupancy of
the said apartment houses and had authority in the name of the United States Government to assign
officers of the U. S. Army to said apartments or to order said officers to vacate the same. Erland A.
Tillman was the Chief, Real Estate Division, Office of the District Engineers, U. S. Army, Manila, who,
under the command of defendant Moore was in direct charge and control of the lease and occupancy
of said three apartment buildings. Defendant Moore and Tillman themselves did not occupy any part
of the premises in question.

Under the theory that said leases terminated six months after September 2, 1945, when Japan
surrendered, plaintiffs sometime in March, 1946, approached the predecessors in office of defendants
Moore and Tillman and requested the return of the apartment buildings to them, but were advised that
the U. S. Army wanted to continue occupying the premises. On May 11, 1946, said plaintiffs
requested the predecessors in office of Moore and Tillman to renegotiate said leases, execute lease
contract for a period of three years and to pay a reasonable rental higher than those payable under
the old contracts. The predecessors in office of Moore in a letter dated June 6, 1946, refused to
execute new leases but advised that "it is contemplated that the United States Army will vacate
subject properties prior to 1 February 1947." Not being in conformity with the continuance of the old
leases because of the alleged comparatively low rentals being paid thereunder, plaintiffs formally
requested Tillman to cancel said three leases and to release the apartment buildings on June 28,
1946. Tillman refused to comply with the request. Because of the alleged representation and
assurance that the U.S. Government would vacate the premises before February 1, 1947, the
plaintiffs took no further steps to secure possession of the buildings and accepted the monthly rentals
tendered by the predecessors in office of Moore and Tillman on the basis of a month to month lease
subject to cancellation upon thirty days notice. Because of the failure to comply with the alleged
representation and assurance that the three apartment buildings will be vacated prior to February 1,
1947, plaintiffs on February 17, 1947, served formal notice upon defendants Moore and Tillman and
64 other army officers or members of the United States Armed Forces who were then occupying
apartments in said three buildings, demanding (a) cancellation of said leases; (b) increase in rentals
to P300 per month per apartment effective thirty days from notice; (c) execution of new leases for the
three or any one or two of the said apartment buildings for a definite term, otherwise, (d) release of
said apartment buildings within thirty days of said notice in the event of the failure to comply with the
foregoing demands. The thirty-day period having expired without any of the defendants having
complied with plaintiffs' demands, the plaintiffs commenced the present action in the Municipal Court
of Manila in the form of an action for unlawful detainer (desahucio) against Moore and Tillman and the
64 persons occupying apartments in the three buildings for the purpose of having them vacate the
apartments, each occupants to pay P300 a month for his particular apartment from January 1, 1947
until each of said particular defendant had vacated said apartment; to permit plaintiffs access to said
apartment buildings for the purpose of appraising the damages sustained as the result of the
occupancy by defendants; that defendants be ordered to pay plaintiffs whatever damages may have
been actually caused on said property; and that in the event said occupants are unable to pay said
P300 a month and/or the damages sustained by said property, the defendants Moore and Tillman
jointly and severally be made to pay said monthly rentals of P300 per month per apartment from
January 1, 1947 to March 19, 1947, inclusive, and/or the damages sustained by said apartments, and
that defendants Moore and Tillman be permanently enjoined against ordering any additional parties in
the future from entering and occupying said premises.

Acting upon a motion to dismiss filed through the Special Assistant of the Judge Advocate, Philippine
Ryukus Command on the ground that the court had no jurisdiction over the defendants and over the
subject matter of the action, because the real party in interest was the U.S. Government and not the
individual defendants named in the complaint, and that the complaint did not state a cause of action,
the municipal court of Manila in an order dated April 29, 1947, found that the war between the United
States of America and her allies on one side and Germany and Japan on the other, had not yet
terminated and, consequently, the period or term of the three leases had not yet expired; that under
the well settled rule of International Law, a foreign government like the United States Government
cannot be sued in the courts of another state without its consent; that it was clear from the allegations
of the complaint that although the United States of America has not been named therein as
defendant, it is nevertheless the real defendant in this case, as the parties named as defendants are
officers of the United States Army and were occupying the buildings in question as such and pursuant
to orders received from that Government. The municipal court dismissed the action with costs against
the plaintiffs with the suggestion or opinion that a citizen of the Philippines, who feels aggrieved by
the acts of the Government of a foreign country has the right to demand that the Philippine
Government study his claim and if found meritorious, take such diplomatic steps as may be
necessary for the vindication of rights of that citizen, and that the matter included or involved in the
action should be a proper subject matter of representations between the Government of the
Government of the United States of America and the Philippines. Not being satisfied with the order,
plaintiffs appealed to the Court of Manila, where the motion to dismiss was renewed.

The Court of First Instance of Manila in an order dated July 12, 1947, affirmed the order of the
municipal court dismissing plaintiffs' complaint. It conceded that under the doctrine laid down in the
case of U. S. vs. Lee, 106 U. S., 196 and affirmed in the case of Tindal vs. Wesley, 167 U. S., 204
ordinarily, courts have jurisdiction over cases where private parties sue to recover possession of
property being held by officers or agents acting in the name of the U. S. Government even though no
suit can be brought against the Government itself, but inasmuch as the plaintiffs in the present case
are bringing this action against officers and agents of the U. S. Government not only to recover the
possession of the three apartment houses supposedly being held illegally by them in the name of
their government, but also to collect back rents, not only at the rate agreed upon in the lease
contracts entered into by the United States of America but in excess of said rate, to say nothing of the
damages claimed, as a result of which, a judgment in these proceedings may become a charge
against the U. S. Treasury, then under the rule laid down in the case of Land vs. Dollar, 91 Law. ed.,
1209, the present suit must be regarded as one against the United States Government itself, which
cannot be sued without its consent, specially by citizens of another country.

The plaintiffs as petitioners have brought this case before us on a petition for a writ of mandamus
seeking to order the Municipal Court of Manila to take jurisdiction over the case. On October 30,
1947, counsel for respondents Almeda Lopez, Sanchez, Moore and Tillman filed a motion to dismiss
on several grounds. The case was orally argued on November 26, 1947. On March 4, 1948,
petitioners filed a petition which, among other things, informed this Court that the North Syquia
Apartments, the South Syquia Apartments and Michel Apartments would be vacated by their
occupants on February 29, March 31, and May 31, 1948, respectively. As a matter of fact, said
apartments were actually vacated on the dates already mentioned and were received by the plaintiff-
owners.

On the basis of this petition and because of the return of the three apartment houses to the owners,
counsel for respondents Almeda Lopez, Sanchez, Moore and Tillman filed a petition to dismiss the
present case on the ground that it is moot. Counsel for the petitioners answering the motion, claimed
that the plaintiffs and petitioners possession of the three apartment houses, reserving all of their
rights against respondents including the right to collect rents and damages; that they have not been
paid rents since January 1, 1947; that respondents admitted that there is a total of P109,895 in
rentals due and owing to petitioners; that should this case be now dismissed, the petitioners will be
unable to enforce collection; that the question of law involved in this case may again come up before
the courts when conflicts arise between Filipino civilian property owners and the U.S. Army authorities
concerning contracts entered into in the Philippines between said Filipinos and the U.S. Government.
Consequently, this Court, according to the petitioners, far from dismissing the case, should decide it,
particularly the question of jurisdiction.

On June 18, 1949, through a "petition to amend complaint" counsel for the petitioners informed this
court that petitioners had already received the U. S. Army Forces in the Western Pacific the sum of
P109,895 as rentals for the three apartments, but with the reservation that said acceptance should
not be construed as jeopardizing the rights of the petitioners in the case now pending in the courts of
the Philippines or their rights against the U. S. Government with respect to the three apartment
houses. In view of this last petition, counsel for respondents alleging that both respondent Moore and
Tillman had long left the Islands for other Army assignments, and now that both the possession of the
three apartments in question as well as the rentals for their occupation have already been received by
the petitioners renew their motion for dismissal on the ground that this case has now become moot.

The main purpose of the original action in the municipal court was to recover the possession of the
three apartment houses in question. The recovery of rentals as submitted by the very counsel for the
petitioner was merely incidental to the main action. Because the prime purpose of the action had
been achieved, namely, the recovery of the possession of the premises, apart from the fact that the
rentals amounting to P109,895 had been paid to the petitioners and accepted by them though under
reservations, this Court may now well dismiss the present proceedings on the ground that the
questions involved therein have become academic and moot. Counsel for the petitioners however,
insists that a decision be rendered on the merits, particularly on the question of jurisdiction of the
municipal court over the original action, not only for the satisfaction of the parties involved but also to
serve as a guide in future cases involving cases of similar nature such as contracts of lease entered
into between the Government of the United States of America on one side and Filipino citizens on the
other regarding properties of the latter. We accept the suggestion of petitioners and shall proceed to
discuss the facts and law involved and rule upon them.

We shall concede as correctly did the Court of First Instance, that following the doctrine laid down in
the cases of U. S. vs. Lee and U. S. vs. Tindal, supra, a private citizen claiming title and right of
possession of a certain property may, to recover possession of said property, sue as individuals,
officers and agents of the Government who are said to be illegally witholding the same from him,
though in doing so, said officers and agents claim that they are acting for the Government, and the
court may entertain such a suit altho the Government itself is not included as a party-defendant. Of
course, the Government is not bound or concluded by the decision. The philosophy of this ruling is
that unless the courts are permitted to take cognizance and to assume jurisdiction over such a case,
a private citizen would be helpless and without redress and protection of his rights which may have
been invaded by the officers of the government professing to act in its name. In such a case the
officials or agents asserting rightful possession must prove and justify their claim before the courts,
when it is made to appear in the suit against them that the title and right of possession is in the
private citizen. However, and this is important, where the judgment in such a case would result not
only in the recovery of possession of the property in favor of said citizen but also in a charge against
or financial liability to the Government, then the suit should be regarded as one against the
government itself, and, consequently, it cannot prosper or be validly entertained by the courts except
with the consent of said Government. (See case of Land vs. Dollar, 91 Law. ed., 1209.)

From a careful study of this case, considering the facts involved therein as well as those of public
knowledge of which we take judicial cognizance, we are convinced that the real party in interest as
defendant in the original case is the United States of America. The lessee in each of the three lease
agreements was the United States of America and the lease agreement themselves were executed in
her name by her officials acting as her agents. The considerations or rentals was always paid by the
U. S. Government. The original action in the municipal court was brought on the basis of these three
lease contracts and it is obvious in the opinion of this court that any back rentals or increased rentals
will have to be paid by the U. S. Government not only because, as already stated, the contracts of
lease were entered into by such Government but also because the premises were used by officers of
her armed forces during the war and immediately after the terminations of hostilities.

We cannot see how the defendants and respondents Moore and Tillman could be held individually
responsible for the payments of rentals or damages in relation to the occupancy of the apartment
houses in question. Both of these army officials had no intervention whatsoever in the execution of
the lease agreements nor in the initial occupancy of the premises both of which were effected thru the
intervention of and at the instance of their predecessors in office. The original request made by the
petitioners for the return of the apartment buildings after the supposed termination of the leases, was
made to, and denied not by Moore and Tillman but by their predecessors in office. The notice and
decision that the U. S. Army wanted and in fact continued to occupy the premises was made not by
Moore and Tillman but by predecessors in office. The refusal to renegotiate the leases as requested
by the petitioners was made not by Moore but by his predecessors in office according to the very
complaint filed in the municipal court. The assurance that the U. S. Army will vacate the premises
prior to February 29, 1947, was also made by the predecessors in office of Moore.

As to the defendant Tillman, according to the complaint he was Chief, Real State Division, Office of
the District Engineer, U. S. Army, and was in direct charge and control of the leases and occupancy
of the apartment buildings, but he was under the command of defendant Moore, his superior officer.
We cannot see how said defendant Tillman in assigning new officers to occupy apartments in the
three buildings, in obedience to order or direction from his superior, defendant Moore, could be held
personally liable for the payment of rentals or increase thereof, or damages said to have been
suffered by the plaintiffs.

With respect to defendant General Moore, when he assumed his command in Manila, these lease
agreement had already been negotiated and executed and were in actual operation. The three
apartment buildings were occupied by army officers assigned thereto by his predecessors in office.
All that he must have done was to assign or billet incoming army officers to apartments as they were
vacated by outgoing officers due to changes in station. He found these apartment buildings occupied
by his government and devoted to the use and occupancy of army officers stationed in Manila under
his command, and he had reasons to believe that he could continue holding and using the premises
theretofore assigned for that purpose and under contracts previously entered into by his government,
as long as and until orders to the contrary were received by him. It is even to be presumed that when
demand was made by the plaintiffs for the payment of increased rentals or for vacating the three
apartment buildings, defendant Moore, not a lawyer by profession but a soldier, must have consulted
and sought the advise of his legal department, and that his action in declining to pay the increased
rentals or to eject all his army officers from the three buildings must have been in pursuance to the
advice and counsel of his legal division. At least, he was not in a position to pay increased rentals
above those set and stipulated in the lease agreements, without the approval of his government,
unless he personally assumed financial responsibility therefor. Under these circumstances, neither do
we believe nor find that defendant Moore can be held personally liable for the payment of back or
increased rentals and alleged damages.

As to the army officers who actually occupied the apartments involved, there is less reason for
holding them personally liable for rentals and supposed damages as sought by the plaintiffs. It must
be remembered that these army officers when coming to their station in Manila were not given the
choice of their dwellings. They were merely assigned quarters in the apartment buildings in question.
Said assignments or billets may well be regarded as orders, and all that those officers did was to
obey them, and, accordingly, occupied the rooms assigned to them. Under such circumstances, can it
be supposed or conceived that such army officers would first inquire whether the rental being paid by
the government for the rooms or apartments assigned to them by order of their superior officer was
fair and reasonable or not, and whether the period of lease between their government and the owners
of the premises had expired, and whether their occupancy of their rooms or apartments was legal or
illegal? And if they dismissed these seemingly idle speculations, assuming that they ever entered
their minds, and continued to live in their apartments unless and until orders to the contrary were
received by them, could they later be held personally liable for any back rentals which their
government may have failed to pay to the owners of the building, or for any damages to the premises
incident to all leases of property, specially in the absence of proof that such damages to property had
been caused by them and not by the previous occupants, also army officers who are not now parties
defendant to this suit? Incidentally it may be stated that both defendants Moore and Tillman have long
left these Islands to assume other commands or assignments and in all probability none of their 64
co-defendants is still within this jurisdiction.

On the basis of the foregoing considerations we are of the belief and we hold that the real party
defendant in interest is the Government of the United States of America; that any judgment for back
or increased rentals or damages will have to be paid not by defendants Moore and Tillman and their
64 co-defendants but by the said U. S. Government. On the basis of the ruling in the case of Land vs.
Dollar already cited, and on what we have already stated, the present action must be considered as
one against the U. S. Government. It is clear that the courts of the Philippines including the Municipal
Court of Manila have no jurisdiction over the present case for unlawful detainer. The question of lack
of jurisdiction was raised and interposed at the very beginning of the action. The U. S. Government
has not given its consent to the filing of this suit which is essentially against her, though not in name.
Moreover, this is not only a case of a citizen filing a suit against his own Government without the
latter's consent but it is of citizen filing an action against a foreign government without said
government's consent, which renders more obvious the lack of jurisdiction of the courts of his country.
The principles of the law behind this rule are so elementary and of such general acceptance that we
deem it unnecessary to cite authorities in support thereof.

In conclusion we find that the Municipal Court of Manila committed no error in dismissing the case for
lack of jurisdiction and that the Court of First Instance acted correctly in affirming the municipal court's
order of dismissal. Case dismissed, without pronouncement as to costs.