[G.R. No. 112733. October 24, 1997] ROMERO, J.: PEOPLES INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner, vs. COURT OF APPEALS AND MAR-ICK INVESTMENT CORPORATION, respondents. This petition for review on certiorari of the Decision[1] of the Court of Appeals arose from the complaint for accion publiacana de posesionover several subdivision lots that was premised on the automatic cancellation of the contracts to sell those lots. Private respondents Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondents entered into six (6) agreements with petitioner Peoples Industrial and Commercial Corporation whereby it agreed to sell to petitioner six (6) subdivision lots.[2] Except for Lot No. 8 that has an area of 253 square meters, all the lots measure 240 square meters each. Five of the agreements, involving Lots. Nos. 3, 4, 5, 6 and 7, similarly stipulate that the petitioner agreed to pay private respondents for each lot, the amount of P 7,333.20 with a down payment of P 480.00. The balance of P 6,853.20 shall be payable in 120 equal monthly installments of P 57.11 every 30th of the month, for a period of ten years. With respect to Lot No. 8, the parties agreed to the purchase price of P7,730.00. With a down payment of P506.00 and equal monthly installments of P60.20. All the agreements have the following provisions: 9. Should the PURCHASER fail to make the payment of any of the monthly installments as agreed herein, within One Hundred Twenty (120) days from its due date, this contract shall, by the mere fact of nonpayment, expire by it self and become null and void without necessity of notice to the PURCHASER or of any judicial declaration to the effect, and any and all sums of money paid under this contract shall be considered and become rentals on the property, and in this event, the PURCHASER should he/she be in possession of the property shall become a mere intruder or unlawful detainer of the same and may be ejected therefrom by means provided by law for trespassers or unlawful detainers. Immediately after the expiration of the 120 days provided for in this clause, the OWNER shall be at liberty to dispose of and sell said parcel of land to any other person in the same manner as if this contract had never been executed or entered into. The breach by the PURCHASER of any of the conditions considered herein shall have the same effect as non-payment of the installments of the purchase price. In any of the above cases the PURCHASER authorizes the OWNER or her representative to enter into the property to take possession of the same and take whatever action is necessary or advisable to protect its rights and interest in the property , and nothing that may be done or made by the PURCHASER shall be considered as revoking this authority or a denial thereof.[3] After the lapse of ten years, however, petitioner still had not fully paid for the six lots; It had paid only the down payment and eight (8) installments, even after private respondents had given petitioner a grace period of four months to pay the arrears.[4] As of May 1, 1980, the total amount due to private respondents under the contract was P214,418.00.[5] In this letter of March 30, 1980 to Mr. Tomas Siatianum (Siatianun) who signed the agreements for petitioner, private respondents counsel protested petitioners encroachment upon a portion of its subdivision particularly Lots Nos. 2, 3, 4, 5, 6, 7, and 8. A portion of the letter reads: Examinations conducted on the records of said lots revealed that you once contracted to purchase said lots but your contracts were cancelled for nonpayment of the stipulated installments. Desirous of maintaining good and neighborly relations with you, we caused to send you this formal demand for you to remove your said wall within fifteen (15) days from your receipt hereof, otherwise, much to our regret, we shall be constrained to seek redress before the courts and at the same time charge you with reasonable rentals for the use said lots at the rate of One (P1.00) Peso per square meter per month until you shall have finally removed said wall.[6] Private respondent reiterated its protest against the encroachment in a letter dated February 16, 1981.[7] It added that petitioner had failed to abide by its promise to remove the encroachment, or to purchase the lots involved at the current price or pay the rentals on the basis of the total area occupied, all within a short period of time. It also demanded the removal of the illegal constructions on the property that had prejudiced the subdivision and its neighbors.

After a series of negotiations between the parties, they agreed to enter into a new contract to sell[8] involving seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total area of 1,693 square meters. The contract stipulates that the previous contracts involving the same lots (actually minus Lot No.2) have been cancelled due to the failure of the PURCHASER to pay the stipulated installments. It states further that the new contract was entered into to avoid litigation, considering that the PURCHASER has already made use of the premises since 1981 to the present without paying the stipulated installments. The parties agreed that the contract price would be P423,250.00 with a down payment ofP42,325.00 payable upon the signing of the contract and the balance of P380,925.00 payable in fortyeight (48) equal monthly amortization payments of P7,935.94. The new contract bears the date of October 11, 1983 but neither of the parties signed it. Thereafter, Tomas Siatianum issued the following checks in the total amount of P37,642.72 to private respondent: (a) dated March 4, 1984 for P10,000.00; (b) dated March 31, 1984 forP10,000.00; (c) dated April 30, 1984 for P 10,000.00 ; (d) dated May 31, 1984 for P 7,079.00, and (e) dated May 31, 1984 for P563.72.[9] Private respondent received but did not encash those checks. Instead, on July 12, 1984 it filed in the Regional Trial Court of Antipolo, Rizal, a complaint for accion publicianan de posesion against petitioner and Tomas Siatianum, as president and majority stockholder of petitioner.[10]It prayed that petitioner be ordered to removed the wall on the premises and to surrender in possession of lots Nos. 2 to 8 of Block 11 of the Mar-ick subdivision, and that petitioner and Tomas Siatianum be ordered to pay: (a) P259,074.00 as reasonable rentals for the use of the lots from 1961, plus P1,680,074.00 per month from July 1, 1984 up to and until the premises shall have been vacated and the wall demolished; (b)P10,000.00 as attorneys fees; (c) moral and exemplary damages, and (d)costs of suit. In the alternative , the complaint prayed that should the agreements be deemed not automatically cancelled, the same agreements should be declared null and void. In due course, the lower court[11] rendered a decision finding that the original agreements of the parties were validly cancelled in accordance with provision No.9 of each agreement. The parties did not enter into a new contract in accordance with Art. 1403 (2) of the Civil Code as the parties did not sign the draft contract. Receipt by private respondent of the five checks could not amount to perfection of the contract because private respondent never encash and benefited from those checks. Furthermore, there was no meeting of the minds between the parties because Art 1475 of the Civil Code should be read with the Statute of Frauds that requires the embodiment of the contract in a note or memorandum. The lower court opined that the checks represented the deposit under the new contract because petitioner failed to prove that those were monthly installments that private respondent refused to accept. What petitioner prove instead was the fact that it was not able to pay the rest of the installments because of a strike, fire and storm that affected its operations. Be that is as it may, what was clearly proven was that both parties negotiated a new contract after the termination of the first. Thus, the fact that the parties tried to negotiate a new contract indicated that they considered that first contract as already cancelled. With respect to petitioners allegation on a "free right-of-way constituted on Lot No. 2, the lower court found that the agreement thereon was oral and not in writing. As such, it was not in accordance with Art. 749 of the Civil Code requiring that, to be valid, a donation must be in a public document. Consequently, because of the principle against unjust enrichment, petitioner must pay rentals for the occupancy of the property. The lower court disposed of the case as follows: IN VIEW OF ALL THE FOREGOING, Defendant Corporation is hereby directed to return subjects Nos. 2, 3, 4, 5, 6, 7, and 8 to Plaintiff Corporation, and to pay the latter the following amounts: 1. reasonable rental of P1.00 per square meter per month from May 29,1961, for Lots Nos. 3, 4, 5, 6, 7, and 8, and from July 21, 1984, for lot No. 2, up to the date they will vacate said lots. The amount of P4,735.21 (Exhibit R) already paid by defendant corporation to plaintiff corporation for the six (6) lots under the original contracts shall be deducted from the said rental; 2. attorneys fees in the amount of P10,000.00; and 3. costs of the suit. SO ORDERED." Petitioner elevated the case to the Court of Appeals. However, or October 16, 1992, the Court of Appeals affirmed in toto the lower courts decision. Petitioners

motion for reconsideration having been denied, it instituted the instant petition for review on certiorari raising the following issues for resolution: (1) whether or not the lower court had jurisdiction over the subject matter of the case in view of the provisions of Republic Act No. 6552 and Presidential Decree No. 1344; (2) whether or not there was a perfected and enforceable contract of sale (sic) on October 11, 1983 which modified the earlier contracts to sell which had not been validly rescinded; (3) whether or not there was a valid grant of right of way involving Lot No. 2 in favor of petitioner; and (4) whether or not there was justification for the grant of rentals and the award of attorneys fees in favor of private respondent.[12] The issue of jurisdiction has been precluded by the principle of estoppel. It is settled that lack of jurisdiction may be assailed at any stage of the proceedings. However, a partys participation therein the issue.[13] Petitioner undoubtedly has actively participated in the proceedings from its inception to date. In its answer to the complaint, petitioner did not assail the lower court jurisdiction ; instead, it prayed for affirmative relief.[14]Even after the lower court had decided against it, petitioner continued to affirm the lower courts jurisdiction by elevating the decision to the appellate court,[15] hoping to obtain a favorable decision but the Court Of Appeals affirmed the court a quos ruling. Then and only then did petitioner raise the issue of jurisdiction-in its motion for reconsideration of the appellate courts decision. Such a practice, according to Tijam v.Sibonghanoy,[16] cannot be countenanced for reasons of public policy. Granting, however, that the issue was raised seasonably at the first opportunity, still, petitioner has incorrectly considered as legal bases for its position on the issue of jurisdiction the provisions of P.D. Nos. 957 and 1344 and Republic Act No. 6552 P.D. No. 957, the Subdivision and Condominium Buyers Protective Decree which took effect upon its approval on July 12, 1976, vest upon the National Housing Authority (NHA) exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of the same decree.[17] P.D. No. 1344, issued on April 2, 1978, empowered the National Housing Authority to issue a writ of execution in the enforcement of its decisions under P.D. No. 957. These decrees, however, were not yet in existence when private respondents invoked provision No. 9 of the agreements of contracts to sell and cancelled these in October 1971.[18] Article 4 of the Civil Code provides that laws shall have no retroactive effect unless the contrary is provided. Thus, it is necessary that an express provision for its retroactive application must be made in law.[19] There being no such provision in both P.D. Nos. 957 and 1344, these decrees cannot be applied to a situation that occurred years before their promulgation. Moreover, granting that said decreed indeed provide for a retroactive application, still, these may not applied in this case. The contracts to sell of 1961 were cancelled in virtue of provision No. 9 thereof to which the parties voluntarily bound themselves. In Manila Bay Club Corp. v. Court of Appeals,[20] this Court interpreted as requiring mandatory compliance by the parties, a provision in a lease contract that failure or neglect to perform or comply with any of the covenants, conditions, agreements or restrictions stipulated shall result in the automatic termination and cancellation of the lease. The Court added: x x x . Certainly, there is nothing wrong if the parties to the lease contract agreed on certain mandatory provisions concerning their respective rights and obligations, such as the procurement of insurance and the rescission clause. For it is well to recall that contracts are respected as thelaw between the contracting parties, and they may establish such stipulations, clauses, terms and conditions as they may want to include. As long as such agreements are not contrary to law, moral, good customs, public policy or public order they shall have the force of law between them. Consequently, when petitioner failed to abide by its obligation to pay the installments in accordance with the contracts to sell, provision No. 9 automatically took effect. That private respondent failed to observe Section 4 of Republic Act No. 6552, the Realty installment Buyer Protection Act, is if no moment. That section provides that (I)f the buyers fails to pay the installment 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. Private respondents cancellation of the agreements without a duly notarized demand for rescission did not mean that it violated said provision of law. Republic Act No. 6552 was approved on August 26, 1972, long after provision No.9 of the contracts to sell had become automatically operational. As with P.D. Nos. 957 and 1344, Republic act No. 6552

does not expressly provide for its retroactive application and, therefore, it could not have encompassed the cancellation of the contracts to sell in this case. At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and not contracts of sale. The distinction between these contracts is graphically depicted in Adelfa Properties, Inc. v. Court of Appeals,[21] as follows: x x x . The distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until the full payment of the price , such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. That the agreements of 1961 are contracts to sell is clear from the following provisions thereof: 3. Title to said parcel of land shall remain in the name of the OWNER until complete payment by the PURCHASER of all obligations herein stipulated, at which time the OWNER agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance of a certificate of title in the name of the latter, free from liens and encumbrances except those provided in the Land Registration Act, those imposed by the authorities, and those contained in Clauses Nos. Five (5) and Six (6) of this agreement. xxx xxx x x x.

4. The PURCHASER shall be deemed for all purpose to take possession of the parcel of land upon payment of the down or first payment; provided, however, that his/her possession under this section shall be only of the that of a tenant or lessee and subject to ejectment proceeding during all the period of this agreement. 5.The parcel of land subject of this agreement shall be used by the PURCHASER exclusively for legal purposes, and he shall not be entitled to take or remove soil, stones, or gravel from it or any other lots belonging to the owner. Hence, being contracts to sell, article 592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable.[22] Neither may petitioner claim ignorance of the cancellation of the contracts. Aside from his letters of March 30, 1980 and February 16, 1981, private respondents counsel. Atty. Manuel Villamor, had sent petitioner other formal protest and demands.[23] These letters adequately satisfied the notice requirement stipulated in provision No.9 of the contracts to sell. If petitioner had not agreed to the automatic and extrajudicial cancellation of the contracts, it could have gone to court to impugn the same but it did not. Instead, it sought to enter into a new contract to sell, thereby confirming its veracity and validity of the extrajudicial rescission.[24] Had not private respondent filed the accion publiciana de posesion, petitioner would have remained silent about the whole situation. It is now estopped from questioning the validity of the cancellation of the contracts. An unopposed rescission of a contract has a legal effects.[25] Petitioners reliance on the portion of the Court of Appeals Decision stating that private respondent had not made known to petitioner its supposed rescission of the contract,[26] is misplaced. Moreover, it quoted only the portion that appears favorable to its case. To be sure, the Court of Appeals quoted provision No. 9 which requires that actual cancellation shall take place thirty days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value, and added that R.A. 6552 even more underscored the indispensability of such notice to the defaulting buyer. However, the same appellate court continued: The absence of the aforesaid notice in the case at bar in the forms respectively deemed efficacious before and after the passage of R.A. 6552 does not, however,necessarily impress merit in the appellants position. Extrajudicial rescission, after all, has legal effect where the other party does not oppose it (Zulueta vs. Mariano, 111 SCRA 206; Nera vs. Vacante, 3 SCRA 505; Magdalena Estate vs. Myrick, 71 Phil.344). Where it is objected to, a judicial determination of the issue is still necessary. In other words resolutions of reciprocal contracts

maybe made extrajudicially unlesssuccess fully impugned in court. If the debtor impugns the declaration it shall be subject to judicial determination (Jison vs. court of Appeals,164 SCRA 339, citing Palay Inc. vs. Clave, supra; Univ. of the Philippines vs. Angeles , supra). In its July 5, 1984 complaint, the appellee had, in fact, significantly prayed for the cancellation of the said sales agreement in the alternative (p. 4, orig. rec.)[27] (Italics supplied.) Moreover, private respondents act of cancelling the contracts to sell was not done arbitrarily. The record shows that private respondent dealt with petitioner with admirable patience, probably in view of the strike, the fire in 1968 that burned petitioners factory, and the typhoon in 1970.[28] It exercised its contractual authority to cancel the agreements only after petitioner had reneged in its obligation after paying only eight (8) installments. When the contracts matured, it still gave petitioner a grace period of four (4) months within which to comply with its obligations. It considered the contracts cancelled only as of October 1971 or several years after petitioners last installment payment[29] and definitely more than ten years after the agreements were entered into. Because the contracts to sell had long been cancelled when private respondents filed the accion publiciana de posesion on July 12, 1984, it was the proper Regional Trial Court that had jurisdiction over the case. By then, there was no more installment buyer and seller relationship to speak of. It had been recuded to a mere case of an owner claiming possession of its property that had long been illegally withheld from it by another. Petitioner alleges that there was a new perfected and enforceable contract of sale" between the parties in October 1983 for two reasons. First, it paid private respondent the down payment or deposit of Contract[30] through the five checks. Second, the receipt signed by private respondents representatives satisfies the requirement of a note or memorandum under Article 1403 (2) of the Civil Code because it states the object of the contract (six lots of Mar-Ick Subdivision measuring 1,453 square meters), the price (P250.00 per square meter with a down payment of 10% or P 37,542.72), and the receipt itself opens with a statement referring to the purchase of the six lots of Mar-Ick Subdivision.[31] The contract of October 1983 which respondents offered in evidence as Exhibit S, is entitled CONTRACT TO SELL. While the title of a contract is not controlling, its stipulations confirm the nature of that contract. Thus, it provides: 5. Title to said parcels of land shall remain in the name of the OWNER until complete payment by the PURCHASER of all obligations herein stipulated, at which time, the OWNER agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance of certificates of title in the name of the latter, free from all liens and encumbrances except those provided in the Land Registration Act, those imposed by the authorities, and those contained in the stipulation that follow. Under the law, there is a binding contract between the parties whose minds met on a certain matter notwithstanding that they did not affix their signature to its written form. In the case at the bar, it was private respondents company lawyer and sole witness, Atty. Manuel Villamayor, who volunteered that after the cancellation of the 1961 agreements, the parties should negotiate and enter into a new agreement based on the current price or at P400.00 per square meter. However, there was a hitch in the negotiations because after he had drafted the contract and sent it to the petitioner, the latter deposited a check for down payment but its representative refused to sign the prepared contract.[32] Private respondent even offered the contract to sell as its Exhibit S.[33] In the absence of proof to the contrary, this draft contract may be deemed to embody the agreement of the parties. Moreover, when Tomas Siatianun, petitioner president, testified, private respondent cross-examined him as regards to the October 1983 contract.[34] Private respondents did not and has not denied the existence of that contract. Under these facts, therefore, the parties may ideally be considered as having perfected the contract of October 1983. Again in Adelfa Properties, Inc. v. Court of Appeals, the Court said that x x x a contract, like a contract to sell, involves a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.[35] Moreover, private respondents offer to sell and petitioners acceptance thereof are manifest in the documentary evidence presented the (5) checks[36] that,

through Atty. Villamayor, it admitted as the down payment under the October 1983 contract. Private respondents intentional non- encashment of the check cannot serve to belie the fact of its tender as down payment. For its part, petitioner presented Exhibit 10, a receipt dated February 28, 1984, showing that private respondents authorized representative received the total amount of P37,642.72 represented by said five checks as deposit of Contract (sic). As this Court also held in the Adelfa Properties case, acceptance may be evidenced by some acts or conduct communicated to the offeror, either in a formal or an informal manner, that clearly manifest the intention of determination to accept the offer to buy or sell.[37] Justice and equity, however, will not be served by a positive ruling on the perfection and performance of the contract to sell. There are facts on record proving that, after all, the parties had not arrived at a definite agreement. By Atty. Villamayors admission, the checks were not encashed because Tomas Siatianun did not sign the draft contract that he had prepared.[38] On his part, Tomac Siatianun explained that he did not sign the contract because it covered seven (7) lots while their agreement was only for six (6) lots. According to him, private respondent had conceded that Lot No. 2 was meant for petitioners right of way[39] and, therefore, it could not have been part of the properties it wanted to buy. It is on record, moreover, that the only agreement that the parties arrived at in a conference at the Silahis Hotel was the price indicated in the draft contract.[40] The number of lots to be sold is a material component of the contract to sell. Without an agreement on the matter, the parties may not in any way be considered as having arrived at a contract under the law. The parties failure to agree on a fundamental provision of the contract was aggravated by petitioners failure to deposit the installments agreed upon. Neither did it attempt to make a consignation of installments. This Courts disquisition on the matter in the Adelfa Properties case is relevant. Thus: The mere sending of a letter by the vendee expressing the intention to pay, without the accompanying payment, is not considered a valid tender of payment. Besides, a mere tender of payment is not sufficient to compel private respondents to deliver the property and execute the deed of absolute sale. It is consignation which is essential in order to extinguish petitioners obligation to pay the balance of the purchase price. The rule is different in case of an option contract or in legal redemption or in a sale with right to repurchase, wherein consignation is not necessary because this cases involves an exercise of a right privilege (to buy, redeem, or repurchase) rather than the discharge of the obligation, hence tender of payment would be sufficient to preserve the right or privilege. This is because the provision on consignation are not applicable when there is no obligation to pay. A contract to sell, as in the case before us, involves the performance of an obligation, not merely the exercise of the privilege or a right. Consequently, performance or payment may be effected not by tender of payment alone but by both tender and consignation.[41] (Underscoring supplied.) As earlier noted, petitioner did not lift a finger towards the performance of the contract other than the tender of down payment. There is no record that it even bothered to tender payment of the installments or to amend the contract to reflect the true intention of the parties as regards the number of lots to be sold. Indeed, by petitioners inaction, private respondents may not be judicially enjoined to validate a contract that the former appeared to have taken for granted. As in the earlier agreements, petitioner ignored opportunities to resuscitate a contract to sell that was rendered moribund and inoperative by its inaction. In view of the foregoing, there is no need to discuss the issue of whether or not there was a valid grant of right of way in favor of the petitioners. Suffice it to say that the documentary evidence offered by the petitioner on the matter manifest that the right of way on an unidentified property was granted in April 1961 by private respondents board of directors to W. Ick & Sons, Inc. and Julian Martinez.[42] On May 12, 1961, Fritz Ick, the president of W. Ick & Sons, Inc., in turn indorsed the unidentified property to petitioner.[43] What needs stressing is that the installment paid by the petitioner on the land should be deemed rentals in accordance with provision No.9, as well as by law. Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.[44] The down payment and the eight (8) installments paid by the petitioner on the six lots under the 1961 agreements amount to P5,672.00. The lots, including Lot No. 2, adjoins petitioners Vetsin and oil factories constructed on a 20,111-square-meter land that petitioner likewise bought from private respondent. Obviously, petitioner made use of the lots not only the construction of the factories but also during its operations as an oil factory. Petitioner enclosed the area with a fence and made construction thereon. It is, therefore, not unconscionable to allow respondents rentals on the lots are correctly decreed by the lower court.

As to attorneys fees, Article 2208 of the Civil Code allows the award of such fees when its claimants is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. In view of petitioners rejection of private respondents demands for rentals[45]and its unjustified refusal to settle private respondents claims,[46] the award of attorneys fees of P10,000.00 is more than just and reasonable.[47] WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned Decision of the Court of Appeals is AFFIRMED. This Decision is immediately executory. Cost against petitioner. G.R. No. L-29280 August 11, 1988 PARAS, J.: PEOPLE'S BANK AND TRUST COMPANY, vs. SYVEL'S INCORPORATED, ANTONIO Y. SYYAP and ANGEL Y SYYAP, defendants-appellants. This is an appeal from the decision dated May 16, 1968 rendered by the Court of First Instance of Manila, Branch XII in Civil Case No. 68095, the decretal portion of which states: IN VIEW OF THE FOREGOING, judgment is rendered sentencing all the defendants to pay the plaintiff jointly and severally the sum of P601,633.01 with interest thereon at the rate of 11% per annum from June 17, 1967, until the whole amount is paid, plus 10% of the total amount due for attorney's fees and the costs of suit. Should the defendants fail to pay the same to the plaintiff, then it is ordered that all the effects, materials and stocks covered by the chattel mortgages be sold at public auction in conformity with the Provisions of Sec. 14 of the Chattel Mortgage Law, and the proceeds thereof applied to satisfy the judgment herein rendered. The counterclaim of the defendants, upon the evidence presented and in the light of the authorities above cited, is dismissed for lack of merit. SO ORDERED (pp. 89-90, Record on Appeal; p. 15, Rollo) The facts of the case based on the statement of facts, made by the trial court in its decision as cited in the briefs of both parties are as follows: This is an action for foreclosure of chattel mortgage executed in favor of the plaintiff by the defendant Syvel's Incorporated on its stocks of goods, personal properties and other materials owned by it and located at its stores or warehouses at No. 406, Escolta, Manila; Nos. 764-766 Rizal Avenue, Manila; Nos. 10-11 Cartimar Avenue, Pasay City; No. 886 Nicanor Reyes, Sr. (formerly Morayta), Manila; as evidenced by Annex"A."The chattel mortgage was duly registered in the corresponding registry of deeds of Manila and Pasay City. The chattel mortgage was in connection with a credit commercial line in the amount of P900,000.00 granted the said defendant corporation, the expiry date of which was May 20, 1966. On May 20, 1965, defendants Antonio V. Syyap and Angel Y. Syyap executed an undertaking in favor of the plaintiff whereby they both agreed to guarantee absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness to be incurred on account of the said credit line. Against the credit line granted the defendant Syvel's Incorporated the latter drew advances in the form of promissory notes which are attached to the complaint as Annexes "C" to "l." In view of the failure of the defendant corporation to make payment in accordance with the terms and conditions agreed upon in the Commercial Credit Agreement the plaintiff started to foreclose extrajudicially the chattel mortgage. However, because of an attempt to have the matter settled, the extra-judicial foreclosure was not pushed thru. As no payment had been paid, this case was even tually filed in this Court. On petition of the plaintiff based on the affidavits executed by Mr. Leopoldo R. Rivera, Assistant Vice President of the plaintiff bank and Atty. Eduardo J. Berenguer on January 12, 1967, to the effect, among others, that the defendants are disposing of their properties with intent to defraud their creditors, particularly the plaintiff herein, a preliminary writ of attachment was issued. As a consequence of the issuance of the writ of attachment, the defendants, in their answer to the complaint set up a compulsory counterclaim for damages. After the filing of this case in this court and during its pendency defendant Antonio v. Syyap proposed to have the case settled amicably and to that end a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of the Bank, plaintiff, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case because he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. De las Alas consented, and so the Real Estate Mortgage, marked as Exhibit A, was executed by the defendant Antonio V. Syyap and his wife Margarita Bengco Syyap on June

22, 1967. In that deed of mortgage, defendant Syyap admitted that as of June 16, 1967, the indebtedness of Syvel's Incorporated was P601,633.01, the breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. Complying with the promise of the plaintiff thru its Vice President to ask for the dismissal of this case, a motion to dismiss this case without prejudice was prepared, Exhibit C, but the defendants did not want to agree if the dismissal would mean also the dismissal of their counterclaim Against the plaintiff. Hence, trial proceeded. As regards the liabilities of the defendants, there is no dispute that a credit line to the maximum amount of P900,000.00 was granted to the defendant corporation on the guaranty of the merchandise or stocks in goods of the said corporation which were covered by chattel mortgage duly registered as required by law. There is likewise no dispute that the defendants Syyap guaranteed absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness incurred by the defendant corporation under the credit line granted it by the plaintiff. As of June 16, 1967, its indebtedness was in the total amount of P601,633.01. This was admitted by defendant Antonio V. Syyap in the deed of real estate mortgage executed by him. No part of the amount has been paid by either of the defendants. Hence their liabilities cannot be questioned. (pp. 3-6, Brief for Appellee; p. 26, Rollo) In their brief, appellants assign the following errors: I The lower court erred in not holding that the obligation secured by the Chattel Mortgage sought to be foreclosed in the above-entitled case was novated by the subsequent execution between appellee and appellant Antonio V, Syyap of a real estate mortgage as additional collateral to the obligation secured by said chattel mortgage. II The lower court erred in not dismissing the above-entitled case and in finding appellants liable under the complaint. III The lower court erred in not holding that the writ of preliminary attachment is devoid of any legal and factual basis whatsoever. IV The lower court erred in dismissing appellants'counterclaim and in not holding appellee liable to appellants for the consequent damages arising out of a wrongful attachment. (pp. 1-2, Brief for the Appellants, p. 25, Rollo) Appellants admit that they are indebted to the appellee bank in the amount of P601,633.01, breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. After the filing of the case and during its pendency, defendant Antonio V. Syyap proposed to have the case amicably settled and for that purpose a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of plaintiff People's Bank and Trust Company, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case as he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. de las Alas consented, and so the Real Estate Mortgage (Exhibit "A") was executed by defendant Antonio Syyap and his wife Margarita Bengco Syyap on June 22, 1967. Defendants did not agree with plaintiffs motion to dismiss which included the dismissal of their counterclaim and filed instead their own motion to dismiss (Record on Appeal, pp. 68-72) on the ground that by the execution of said real estate mortgage, the obligation secured by the chattel mortgage subject of this case was novated, and therefore, appellee's cause of action thereon was extinguished. In an Order dated September 23, 1967, the motion was denied for not being well founded (record on Appeal, p. 78). Appellants contention is without merit.

Novation takes place when the object or principal condition of an obligation is changed or altered. It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect (Goni v. CA, 144 SCRA 223 [1986]; National Power Corp. v. Dayrit, 125 SCRA 849 [1983]). In the case at bar, there is nothing in the Real Estate Mortgage which supports appellants'submission. The contract on its face does not show the existence of an explicit novation nor incompatibility on every point between the "old and the "new" agreements as the second contract evidently indicates that the same was executed as new additional security to the chattel mortgage previously entered into by the parties. Moreover, records show that in the real estate mortgage, appellants agreed that the chattel mortgage "shall remain in full force and shall not be impaired by this (real estate) mortgage." The pertinent provision of the contract is quoted as follows:

Appellants having failed to adduce evidence of bad faith or malice on the part of appellee in the procurement of the writ of preliminary attachment, the claim of the former for damages is evidently negated. In fact, the allegations in the appellee's complaint more than justify the issuance of the writ of attachment. PREMISES CONSIDERED, this appeal is DISMISSED for lack of merit and the judgment appealed from is AFFIRMED. G.R. No. 83271 May 8, 1991 VICTOR D. YOUNG and JOHNNY YOUNG, petitioners, vs. COURT OF APPEALS, as nominal party respondent, and FAUSTA B. JAGDON, AMPARO R. CASAFRANCA and MIGUELA R. JARIOL, respondents. Ramires, Corro & Associates for petitioners. Navarro Law Office collaborating counsel for petitioners.

That the chattel mortgage executed by Syvel's Inc. (Doc. No. 439, Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila); real estate mortgage executed by Angel V. Syyap and Rita V. Syyap (Doc. No. 441, Page No. 90, Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila) shall remain in full force and shall not be impaired by this mortgage (par. 5, Exhibit"A," Emphasis ours). It is clear, therefore, that a novation was not intended. The real estate mortgage was evidently taken as additional security for the performance of the contract (Bank of P.I. v. Herrige, 47 Phil. 57). In the determination of the legality of the writ of attachment by the Court of First Instance of Manila, it is a well established rule that the grant or denial of a writ of attachment rests upon the sound discretion of the court. Records are bereft of any evidence that grave abuse of discretion was committed by respondent judge in the issuance of the writ of attachment. Appellants contend that the affidavits of Messrs. Rivera and Berenguer on which the lower court based the issuance of the writ of preliminary attachment relied on the reports of credit investigators sent to the field and not on the personal knowledge of the affiants. Such contention deserves scant consideration. Evidence adduced during the trial strongly shows that the witnesses have personal knowledge of the facts stated in their affidavits in support of the application for the writ. They testified that Syvel's Inc. had disposed of all the articles covered by the chattel mortgage but had not remitted the proceeds to appellee bank; that the Syvel's Stores at the Escolta, Rizal Avenue and Morayta Street were no longer operated by appellants and that the latter were disposing of their properties to defraud appellee bank. Such testimonies and circumstances were given full credit by the trial court in its decision (Brief for Appellee, p. 14). Hence, the attachment sought on the ground of actual removal of property is justified where there is physical removal thereof by the debtor, as shown by the records (McTaggert v. Putnam Corset Co., 8 N.Y. S 800 cited in Moran, Comments on the Rules of Court, 1970 Ed., Vol. 3, p. 7). Besides, the actuations of appellants were clearly seen by the witnesses who "saw a Fiat Bantam Car-Fiat Car, a small car and about three or four persons hurrying; they were carrying goods coming from the back portion of this store of Syvels at the Escolta, between 5:30 and 6:00 o'clock in the evening." (Record on Appeal, pp. 45-46). Therefore, "the act of debtor (appellant) in taking his stock of goods from the rear of his store at night, is sufficient to support an attachment upon the ground of the fraudulent concealment of property for the purpose of delaying and defrauding creditors." (4 Am. Jur., 841 cited in Francisco, Revised Rules of Court, Second Edition, 1985, p. 24). In any case, intent to defraud may be and usually is inferred from the facts and circumstances of the case; it can rarely be proved by direct evidence. It may be gleaned also from the statements and conduct of the debtor, and in this connection, the principle may be applied that every person is presumed to intend the natural consequences of his acts (Francisco, Revised Rules of Court, supra, pp. 24-25), In fact the trial court is impressed "that not only has the plaintiff acted in perfect good faith but also on facts sufficient in themselves to convince an ordinary man that the defendants were obviously trying to spirit away a port;.on of the stocks of Syvel's Incorporated in order to render ineffectual at least partially anyjudgment that may be rendered in favor of the plaintiff." (Decision; Civil Case No. 68095; Record on Appeal, pp. 88-89).

Manuel V Trinidad and Efren V. Ramirez for private respondents.

CRUZ, J.:p On November 7, 1961, the estates of Humiliano Rodriguez and Timoteo Rodriguez leased to Victor D. Young a parcel of land consisting of 840 square meters and located at Colon Street, Cebu City, on which the latter's building, then known as Liza Theater (later renamed Nation Theater), was standing. The contract of lease contained the following stipulation: (8) That at the end of this lease contract or after the twenty-first (21st) year, the LESSORS may purchase the LIZA THEATRE building (excluding movie projectors, equipment, and other movables of the business of the LESSEE) at their option from the LESSEE by paying the market value thereof if acceptable to the LESSEE; provided, however, that if the LESSORS do not exercise this option to buy, the LESSEE shall continue for another period of TWENTY-ONE (21) YEARS and the rental will be agreed upon by the parties with the prevailing rental of properties near the premises as the basis. On December 18, 1961, exactly the same contract was again executed by the same parties, except that the estate of Humiliano Rodriguez was this time represented by Antolin A. Jariol, instead of Miguela Rodriguez, as one of the signatories. During the period of the lease, the two estates were finally settled, and the land leased to Victor Young was distributed among Fausta R. Jagdon, Amparo R. Casafranca, Miguela R. Jariol, the herein private respondents, and Teresita R. Natividad. Natividad later sold her share, consisting of 223 square meters, to Johnny Young, son of Victor D. Young. On November 5, 1982, or two days before the expiration of the first contract, the heirs (except Natividad) filed a suit for specific performance against Victor D. Young to compel him to sell to them his theater-building for P 135,000.00. They tendered this amount with the clerk of court by way of consignation. They also sued Victor Young's son, Johnny, as an unwilling co-plaintiff. The defendants contended that the plaintiffs had no cause of action because the complaint was premature. The lease contract of November 7, 1961, had been novated by the second lease contract dated December 18, 1961; hence, the lease was terminated on December 18, 1982, and not November 7, 1982. Moreover, even if the lease ended on November 7, 1982, the action brought by the respondent on November 5, 1982, was still premature because the plaintiffs had not yet then notified Victor Young of the exercise of their option. The lease expired without a valid exercise of the option and the lease contract was thus renewed for another 21 years. In his decision dated May 28, 1986, Judge Ramon Am. Torres of the Regional Trial Court of Cebu found in favor of the plaintiffs and held that there was no novation. The second contract was executed merely to substitute the correct signatory. As

there was no express stipulation therein that it superseded and replaced the first contract, the complaint was not prematurely filed. The dispositive portion of the decision read: WHEREFORE, judgment is hereby rendered: (a) declaring the sum of P250,000.00 as the fair market value of the building known as the Liza Theatre (Nation Theatre); (b) declaring the plaintiffs as the legal owners of the said building when they shall have paid the defendant Victor Young the sum of P250,000.00; (c) ordering the defendant Victor Young to pay the plaintiffs the sum of P50,000.00 as moral damages, Pl0,000.00 as attorney's fees for Fausta R. Jagdon and another P 10,000.00 as attorney's fees for the other plaintiffs and costs of the suit; (d) ordering the defendant Johnny Young to pay his proportionate share of the sum of P250,000.00 as well as in the sum of P20,000.00 incurred by the plaintiffs as attorney's fees. SO ORDERED. On appeal, the decision was modified by the respondent court 1 which, while agreeing that there was no novation of the first contract, declared that the original period of the lease was extended by the second contract. It did not find that the complaint was premature because although the action below had been filed a month early, the question became moot and academic when Victor D. Young declared in his letter dated November 9, 1982, his refusal to sell the building in question. This stand was confirmed in the answer he filed on December 7, 1982, in which he rejected the plaintiffs' offer of P135,000.00. The respondent court also held that the plaintiffs' complaint could be considered originally as an action for declaratory relief, which was later converted into an ordinary action for specific performance. It is this decision that is now questioned in this petition for review. Law and jurisprudence on the concept and effects of novation are well settled in this jurisdiction. In Caneda, Jr. v.Court of Appeals, 2 we held: Novation has been defined as the extinguishment of an obligation by a subsequent one which terminates it, either by changing its object or principal conditions, referred to as objective or real novation or by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor, also called as subjective or personal novation. But as explained by this Court, novation is never presumed; it must be explicitly stated or there must be a manifest incompatibility between the old and the new obligations in every aspect. The test of incompatibility between two obligations or contracts, is whether or not they can stand together, each one having an independent existence. If they cannot, they are incompatible, and the later obligation novates the first. (Emphasis supplied.) A careful examination of the text of the two contracts will show that the only change introduced in the second contract was the substitution by Antolin A. Jariol of his wife Miguela as signatory for the estate of Humiliano Rodriguez. There was no express declaration in the second contract that it was novating the first. To determine if there was at least an implied novation because of a clear incompatibility between the old and new contracts, we apply the rule that In order that there may be implied novation arising from incompatibility of the old and new obligations, the change must refer to the object, the cause, or the principal conditions of the obligation. In other words, there must be an essential change. There was clearly no implied novation for lack of an essential change in the object, cause, or principal conditions of the obligation. At most, the substitution of a signatory in the second contract can be considered only an accidental

modification which, according to Tolentino, "does not extinguish an existing obligation. When the changes refer to secondary agreements, and not to the object or principal conditions of the contract, there is no novation; such changes will produce modifications of incidental facts, but will not extinguish the original obligation."3 Hence, he concludes, "it is not proper to consider an obligation novated by unimportant modifications which do not alter its essence." 4 There being no novation, the lease is properly deemed to have commenced on November 7, 1961, and so ended 21 years later on November 7, 1982. It is significant that it was in fact from this first date that Victor Young effectively started as lessee. We do not agree with the respondent court that there was an extension of the period of lease in the second contract. As earlier explained, the only reason for the execution of the second contract was to change the signatory. There is no clear showing from the language of that contract that the parties intended to extend the lease for one month. According to Article 1370 of the new Civil Code: If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. But although the lease contract was not novated or extended, the action for specific performance was still premature because it was filed before the petitioner was given a chance to refuse the option. The complaint was filed on November 5, 1982, and it was only on the following day, or on November 6, 1982, that the plaintiffs informed Victor Young of their decision to buy the theater-building. The tender of the purchase price is further proof of the fact that Victor Young was informed of that decision only on November 6, 1982. The action was premature not because the option was exercised prior to the expiration of the lease but because the complaint was filed before the defendant could reject the lessors' offer. No right of the plaintiffs had as yet been violated when they filed their complaint on November 5, 1982. Since a "cause of action" requires, as essential elements, not only a legal right of the plaintiff and a correlative obligation of the defendant but also "an act or omission of the defendant in violation of said legal right," the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty. 5 Therefore unless the plaintiff has a valid and subsisting cause of action at the time his action is commenced, the defect cannot be cured or remedied by the acquisition or accrual of one while the action is pending, and a supplemental complaint or an amendment setting up such after-accrued cause of action is not permissible. 6(Emphasis supplied.) The Court adds that even if the case was prematurely filed, it did not follow that the option was not properly exercised. An option may be exercised at any time before the expiration of the period agreed upon. An "option" is defined as a contract granting a person the privilege to buy or not to buy certain objects at any time within the agreed period at a fixed price. 7 It is settled that when the offer has stated a fixed period for acceptance, the offeree may accept at any time until such period expires. 8 The ruling of the respondent court that the complaint for specific performance could be originally regarded as a petition for declaratory relief is not acceptable. The Rules of Court provide that an action for declaratory relief may be filed by "any person" 9 and does not say it may be initiated by the court itself motu proprio. More importantly, there was as yet no refusal or denial by the defendants of the plaintiffs' claimed right to buy the theater-building when the complaint was filed on November 5, 1986. In fact, as previously noted, it was only the following day that the defendants were informed of the plaintiffs' decision to exercise their option under the contract. Before that date, there was no uncertainty about the said option to justify the filing of a petition for declaratory relief. Hence, there was no cause of action to support a declaratory relief proceeding. We dismiss out of hand the argument that the merger of the character of the lessor and the lessee in Johnny Young resulted in the extinguishment of the right

to the option to buy. It is utterly fallacious. Victor Young did not purchase any portion of the land covered by the lease; it was his son, Johnny Young, who did. The sale to the son of part of the land under lease to the father did not extinguish the plaintiffs' option to buy, which was enforceable against Victor D. Young and no other. The respondent court rejected the petitioner's contention that the case has become moot and academic because the theater subject of the option was no longer existing, having been gutted by fire. Its reason was that there was no adequate evidence of such destruction. On the contrary, the record contains a certificate from the Deputy Chief of Constabulary that the building was indeed burned to the ground on January 31, 1987. 10 This fact indeed rendered the action for specific performance no longer viable. Since the action filed by the private respondents was premature, they are not entitled to any award of damages. Neither may the petitioners recover on their counterclaim because the private respondents filed their complaint in the honest belief that they had a right to the relief they were seeking. Attorney's fees are also not due to either of the parties because it has not been shown that any of them acted "in a wanton, fraudulent, reckless, oppressive, or malevolent manner." The parties must therefore bear their own costs. WHEREFORE, the challenged decision is SET ASIDE and a new judgment is rendered: (a) DISMISSING the complaint for specific performance; (b) DECLARING the lease terminated as of November 7, 1982; and (c) ORDERING petitioner Victor D. Young to vacate the leased premises. It is so ordered. [G.R. No. 145441. April 26, 2005]

2. The VENDORS hereby warrant valid title to, and peaceful possession of the property herein sold subject to the encumbrance hereinbefore mentioned. 3. This instrument shall be subject to the Consent of the Philippine Savings Bank. 4. All expenses relative to this instrument including documentary stamps, registration fees, transfer taxes and other charges shall be for the account of the VENDEES.[6] Thereafter, the 3 parcels of land purchased by the Galicias, together with another property, were in turn mortgaged by them to secure a P2,600,000.00 loan which they obtained from PSBank. Specifically, the mortgaged properties include TCT Nos. N-36192, N-36193, N-36194, (formerly TCT Nos. N-6162, N-8552 and 469843, respectively) and 75584.[7] This loan is evidenced by Promissory Note LC-79-36.[8] On March 12, 1979, Maalac paid PSBank P919,698.11 which corresponds to the value of the parcels of land covered by TCT Nos. N-36192, N-36193, and N-36194, now registered in the name of the spouses Galicia. Accordingly, PSBank executed a partial release of the real estate mortgage covered by the aforesaid properties.[9] On August 25, 1981, the spouses Galicia obtained a second loan from PSBank in the amount of P3,250,000.00 for which they executed Promissory Note LC No. 81108. They also executed a Real Estate Mortgage in favor of the bank covering TCT Nos. N-36192, N-36193, N-36194, 75584 and 87690.[10] Since Maalac defaulted again in the payment of their loan installments and despite repeated demands still failed to pay their past due obligation which now amounted to P1,804,241.76, PSBank filed with the Office of the Provincial Sheriff of Rizal a petition for extrajudicial foreclosure of their 5 remaining mortgaged properties, specifically those covered by TCT Nos. 417012, N-1347, N-1348, N3267, and 343593. Despite several postponements of the public auction sale, Maalac still failed to pay their mortgage obligation. Thus, on May 3, 1982, the foreclosure sale of the subject real properties proceeded with PSBank as the highest bidder in the amount of P2,185,225.76.[11] On the same date, the Certificate of Sale was issued by the Acting Ex-Oficio Provincial Sheriff for Rizal province.[12] Maalac failed to redeem the properties hence titles thereto were consolidated in the name of PSBank and new certificates of title were issued in favor of the bank, namely, TCT No. N-79995 in lieu of TCT No. 343593; TCT No. 79996 in lieu of TCT No. 417012; TCT No. 79997 in lieu of TCT No. N-3267; TCT No. N-79998 in lieu of TCT No. N-1347; and TCT No. N-79999 in lieu of TCT No. N-1348. On December 16, 1983, Maalac wrote the Chairman of the Board of PSBank asking information on their request for the partial release of the mortgage covered by TCT Nos. N-36192, N-36193, N-36194, and 417012 (now TCT No. 79996). TCT Nos. 36192, 36193, and 36194 were registered in the name of the Galicias, and mortgaged to partially secure their outstanding loan from the bank. Enclosed in the same letter is a Cashiers Check for P1,200,000.00 with a notation which reads: Re: Payment to effect release of TCT Nos. N-36192, 36193, and 36194 under loan account of Spouses Igmedio and Dolores Galicia; and TCT No. 417012 under Loan Account of Spouses Rodolfo and Rosita Maalac. Upon receipt of the check, PSBanks Acting Manager Lino L. Macasaet issued a typewritten receipt with the inscription:[13] Received from Sps. Rodolfo and Rosita Maalac and Sps. Igmidio and Dolores Galicia PCIB Check No. 002133 in the amount of One Million Two Hundred Thousand Pesos Only (P1,200,000.00). It is understood however, that receipt of said check is not a commitment on the part of the Bank to release the Four (4) TCTs requested to be released on your letter dated 19 December 1983. On December 19, 1983, the bank applied P1,000,000.00 of the P1,200,000.00 to the loan account of the Galicias as payment for the arrearages in interest and the remaining P200,000.00 thereof was applied to the expenses relative to the account of Maalac.[14] On May 23, 1985, the bank sold the property covered by TCT No. 79996 (previously TCT No. 343593) to Ester Villanueva who thereafter sold it to Maalac. On October 30, 1985, the land covered by TCT No. 79995 was sold by the bank to Teresita Jalbuena.

PHILIPPINE SAVINGS BANK, petitioner, vs. SPS. RODOLFO C. MAALAC, JR. and ROSITA P. MAALAC,respondents. YNARES-SANTIAGO, J.: This appeal by certiorari[1] assails the decision of the Court of Appeals dated October 12, 2000 in CA-G.R. CV No. 50292[2] which affirmed with modifications the decision of the Regional Trial Court of Pasig, Branch 161[3] dated April 27, 1993 in Civil Case No. 53967 which ordered the annulment of the Certificate of Sale involving TCT Nos. N-1347, N-1348 and N-3267 issued in favor of petitioner Philippine Savings Bank (PSBank) and dismissing Land Registration Case No. R3951. The facts as culled from the records are as follows: On October 8, 1976, respondent-spouses Rodolfo and Rosita Maalac (Maalac) obtained a P1,300,000.00 loan from PSBank covered by promissory note L.C. No. 76-269. As security for the loan, Maalac executed a Real Estate Mortgage in favor of the bank over 8 parcels of land covered by TCT Nos. 417012, N-1348, N1347, N-3267, N-8552, N-6162, 469843 and 343593. In view of Maalacs inability to pay the loan installments as they fell due, their loan obligation was restructured on October 13, 1977. Accordingly, Maalac signed another promissory note denominated as LC No. 77-232 for P1,550,000.00 payable to the order of PSBank with interest rate of 19% annum.[4] To secure the payment of the restructured loan, Maalac executed a Real Estate Mortgage dated October 13, 1977 in favor of PSBank over the same aforementioned 8 real properties. On March 5, 1979, Maalac and spouses Igmidio and Dolores Galicia, with the prior consent of PSBank,[5] entered into a Deed of Sale with Assumption of Mortgage involving 3 of the mortgaged properties covered by TCT Nos. N-6162 (now N-36192), N-8552 (now TCT No. N-36193), and 469843 (now TCT No. N36194). The Deed of Sale with Assumption of Mortgage contained the following stipulations: 1. The VENDEES shall assume as they hereby assume as part of the purchase price, the amount of P550,000.00, representing the portion of the mortgaged obligation of the VENDORS in favor of the Philippine Savings Bank, which is secured by that Real Estate Mortgage contract mentioned in the Second Whereas Clause hereof covering among others the above-described parcels of land under the same terms and conditions as originally constituted.

Thereafter, or on October 20, 1986, Maalac instituted an action for damages, docketed as Civil Case No. 53967, before the Regional Trial Court of Pasig, Branch 161, against PSBank and its officers namely Cezar Valenzuela, Alfredo Barretto and Antonio Viray, and spouses Alejandro and Teresita Jalbuena. The bank also filed a petition, docketed as LRC Case No. R-3951, before the Regional Trial Court of Pasig, Branch 159, for the issuance of a writ of possession against the properties covered by TCT Nos. N-79997, N-79998, and N-79999 (formerly TCT Nos. N-3267, N-1347, and N-1348) and the ejectment of the respondents. In an order dated January 2, 1989, the trial court consolidated LRC Case No. R3951 with Civil Case No. 53967. On April 27, 1993, a judgment was rendered the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering: For Civil Case No. 53967 1. The annulment of the Certificate of Sale issued by the acting Ex-Oficio Provincial Sheriff of Rizal on May 3, 1982 involving Transfer Certificate of Title Nos. N-1347-Rizal, N-1348-Rizal and N-3267-Rizal and the Contract to Sell executed by defendant PSB in favor of defendants spouses Alejandro Jalbuena and Teresita Jalbuena involving the real property covered by Transfer Certificate of Title No. N79995; and, 2. The dismissal of counterclaims for lack of merit.

suit in a court of justice by which one party prosecutes another for the enforcement or protection of a right, or a prevention of a wrong. Citing A.G. Development Corp. v. Court of Appeals,[18] petitioner posits that LRC Case No. R3951, being summary in nature and not being an action within the contemplation of the Rules of Court, should not have been consolidated with Civil Case No. 53967. We do not agree. In Active Wood Products Co., Inc. v. Court of Appeals,[19] this Court also deemed it proper to consolidate Civil Case No. 6518-M, which was an ordinary civil action, with LRC Case No. P-39-84, which was a petition for the issuance of a writ of possession. The Court held that while a petition for a writ of possession is an ex parte proceeding, being made on a presumed right of ownership, when such presumed right of ownership is contested and is made the basis of another action, then the proceedings for writ of possession would also become groundless. The entire case must be litigated and if need be must be consolidated with a related case so as to thresh out thoroughly all related issues. In the same case, the Court likewise rejected the contention that under the Rules of Court only actions can be consolidated. The Court held that the technical difference between an action and a proceeding, which involve the same parties and subject matter, becomes insignificant and consolidation becomes a logical conclusion in order to avoid confusion and unnecessary expenses with the multiplicity of suits. In the instant case, the consolidation of Civil Case No. 53967 with LRC Case No. R3951 is more in consonance with the rationale behind the consolidation of cases which is to promote a more expeditious and less expensive resolution of the controversy than if they were heard independently by separate branches of the trial court. Hence, the technical difference between Civil Case No. 53967 and LRC Case No. R-3951 must be disregarded in order to promote the ends of justice. Petitioner also contends that the Court of Appeals committed reversible error in applying the doctrine laid down in Barican v. Intermediate Appellate Court.[20] It insists on the application of the general rule that it is ministerial upon the court to issue a writ of possession on the part of the purchaser in a foreclosure sale. It argues that the Barican doctrine is inapplicable because the sale with assumption of mortgage in the present case involves properties different from those which are the subject of the writ of possession while in Barican, the assumption of mortgage refers to the same property subject of the writ of possession. We recall that the Court of Appeals applied the Barican doctrine based on the following factual similarities between the two cases, thus:[21] In Civil Case No. C-11232, the petitioner-spouses claim ownership of the foreclosed property against the respondent bank and Nicanor Reyes to whom the former sold the property by negotiated sale; the complaint alleged that the DBP knew the assumption of mortgage between the mortgagors and the petitionerspouses and the latter have paid to the respondent bank certain amounts to update the loan balances of the mortgagors and transfer and restructuring fees which payments are duly receipted; the petitioner-spouses were already in possession of the property since September 28, 1979 and long before the respondent bank sold the same property to respondent Nicanor Reyes on October 28, 1984; and the respondent bank never took physical possession of the property. In a similar manner, the following facts were duly established in the case at bench: 1. The petition for issuance of the writ of possession was only filed sometime in May 1988 although the right of redemption lapsed as early as May 7, 1983; 2. Appellant bank neither obtained physical possession of the properties nor did they file any action for ejectment against the plaintiffs-appellants; 3. On December 16, 1983, the plaintiffs-appellants issued a check in favor of the appellant bank to effect the release of TCT Nos. 36192, 36193, 36194 and 417012 which was applied by appellant bank to the plaintiffs-appellants account and that of the Galicias and; 4. Appellant bank executed a Deed of Absolute Sale over TCT No. 79996 (formerly TCT No. 417012) on May 23, 1985 in favor of a certain Elsa Calusa Villanueva who thereafter sold it back to the plaintiffs-appellants. Hence, the same ruling in the Barican case should be applied, that is, the obligation of a court to issue a writ of possession in favor of the purchaser in a foreclosure of mortgage case ceases to be ministerial. We agree with the petitioner. While indeed the two cases demonstrate palpable similarities, the Court of Appeals overlooked essential differences that would render the Barican doctrine inapplicable to the instant case. In Barican, the issuance of the writ of possession was deferred because a pending action for the declaration of ownership over the foreclosed property was made by an adverse claimant who was in possession of the subject property. Clearly, the rights of the third parties, who are plaintiffs in the pending civil case, would be adversely affected with the implementation of the writ. In the instant case, the petitioner bank became the absolute owner of the properties subject of the writ of possession, after they were foreclosed, and titles thereto were consolidated in the name of the bank. It sufficiently established its

For Land Registration Case No. R-3951 3. The dismissal of the petition for lack of merit.

No costs. SO ORDERED.[15] The Court of Appeals affirmed with modification the decision of the trial court, the decretal portion of which reads: WHEREFORE, the decision appealed from is AFFIRMED with the modification that the defendant-appellant Philippine Savings Bank is directed to indemnify the plaintiffs-appellants in the amount of Two Hundred Thousand Pesos (200,000.00) each as moral damages. Costs against the defendant-appellant bank. SO ORDERED.[16] Hence the instant petition which raises the following issues: THE APPELLATE COURT HAS DECIDED QUESTIONS OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT WHEN IT: a.] HELD THAT THE GENERAL RULE WITH RESPECT TO THE ISSUANCE OF WRITS OF POSSESSION SHOULD NOT BE APPLIED IN THIS CASE, AND WHAT SHOULD INSTEAD BE APPLIED IS THE EXCEPTION ENUNCIATED IN VACA VS. COURT OF APPEALS, 234 SCRA 146; b.] UPHELD THE CONSOLIDATION OF CIVIL CASE NO. 53967 WITH LRC CASE NO. 3951 WHEN PROCEDURALLY THOSE TWO PROCEEDINGS COULD SCARCELY BE CONSOLIDATED; c.] HELD THAT SUPPOSEDLY THERE WAS A NOVATION OF THE PREVIOUS MORTGAGE OF THE PROPERTIES WHEN IN TRUTH AND IN FACT THE MORTGAGE HAD ALREADY CEASED TO EXIST, THAT IS, THE MORTGAGE HAD BECOME NULL AND VOID AS THE SAME HAD BEEN FORECLOSED BY PETITIONER; d.] AWARDED MORAL DAMAGES IN FAVOR OF RESPONDENTS.[17]

Petitioner claims that the Court of Appeals erred in sustaining the trial courts order consolidating Civil Case No. 53967 with LRC Case No. R-3951, arguing that consolidation is proper only when it involves actions, which means an ordinary

ownership over the parcels of land subject of the writ of possession, by presenting in evidence the Certificate of Sale,[22] Affidavit of Consolidation of Ownership,[23] and copies of new TCTs of the foreclosed properties in the name of the petitioner.[24] Unlike in Barican, the ownership of the foreclosed properties are not open to question the ownership thereof being established by competent evidence. Moreover, as earlier pointed out by the petitioner, the parcels of land subject of the writ of possession are different from those sold by the petitioner bank to Jalbuena and Villanueva. Hence, unlike in the Barican case, the implementation of the writ will not affect the rights of innocent third persons. On the issue of novation, the Court of Appeals held that novation occurred when PSBank applied P1,000,000.00 of the P1,200,000.00 PCIB Check No. 002133 tendered by Maalac to the loan account of the Galicias and the remaining P200,000.00 thereof to Maalacs account. It held that when the bank applied the amount of the check in accordance with the instructions contained therein, there was novation of the previous mortgage of the properties. It further observed that the bank was fully aware that the issuance of the check was conditional hence, when it made the application thereof, it agreed to be bound by the conditions imposed by Maalac.[25] Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order for novation to take place, the concurrence of the following requisites is indispensable: 1. There must be a previous valid obligation, 2. There must be an agreement of the parties concerned to a new contract, 3. There must be the extinguishment of the old contract, and 4. There must be the validity of the new contract.[26] The elements of novation are patently lacking in the instant case. Maalac tendered a check for P1,200,000.00 to PSBank for the release of 4 parcels of land covered by TCT Nos. N-36192, 36193, and 36194, under the loan account of the Galicias and 417012 (now TCT No. 79996) under the loan account of Maalac. However, while the bank applied the tendered amount to the accounts as specified by Maalac, it nevertheless refused to release the subject properties. Instead, it issued a receipt with a notation that the acceptance of the check is not a commitment on the part of the bank to release the 4 TCTs as requested by Maalac. From the foregoing, it is obvious that there was no agreement to form a new contract by novating the mortgage contracts of the Maalacs and the Galicias. In accepting the check, the bank only acceded to Maalacs instruction on whose loan accounts the proceeds shall be applied but rejected the other condition that the 4 parcels of land be released from mortgage. Clearly, there is no mutual consent to replace the old mortgage contract with a new obligation. The conflicting intention and acts of the parties underscore the absence of any express disclosure or circumstances with which to deduce a clear and unequivocal intent by the parties to novate the old agreement. Novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unmistakable. The extinguishment of the old obligation by the new one is a necessary element of novation, which may be effected either expressly or impliedly. The term "expressly" means that the contracting parties incontrovertibly disclose that their object in executing the new contract is to extinguish the old one. Upon the other hand, no specific form is required for an implied novation, and all that is prescribed by law would be an incompatibility between the two contracts. While there is really no hard and fast rule to determine what might constitute to be a sufficient change that can bring about novation, the touchstone for contrariety, however, would be an irreconcilable incompatibility between the old and the new obligations.[27] A fortiori, 3 of the 4 properties sought to be released from mortgage, namely, TCT Nos. N-36192, N-36193, and N-36194, have already been sold by Maalac to Galicia and are now registered in the name of the latter who thereafter mortgaged the same as security to a separate loan they obtained from the bank. Thus, without the consent of PSBank as the mortgagee bank, Maalac, not being a party to the mortgage contract between the Galicias and the bank, cannot demand much less impose upon the bank the release of the subject properties. Unless there is a stipulation to the contrary, the release of the mortgaged property can only be made upon the full satisfaction of the loan obligation upon which the mortgage attaches. Unfortunately, Maalac has not shown that the P1,000,000.00 was sufficient to cover not only the accrued interests but also the entire indebtedness of the Galicias to the bank.

Neither can Maalac be deemed substitute debtor within the contemplation of Article 1293 of the Civil Code, which states that: Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237.[28] In order to change the person of the debtor, the old one must be expressly released from the obligation, and the third person or new debtor must assume the formers place in the relation. Novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus incumbent on Maalac to show clearly and unequivocally that novation has indeed taken place.[29] In Magdalena Estates Inc. v. Rodriguez,[30] we held that the mere fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility, does not constitute a novation, and the creditor can still enforce the obligation against the original debtor. Maalac has not shown by competent evidence that they were expressly taking the place of Galicia as debtor, or that the latter were being released from their solidary obligation. Nor was it shown that the obligation of the Galicias was being extinguished and replaced by a new one. The existence of novation must be shown in clear and unmistakable terms. Likewise, we hold that Maalac cannot demand to repurchase the foreclosed piece of land covered by TCT No. 417012 (now TCT No. 79996) from the bank. Its foreclosure and the consolidation of ownership in favor of the bank and the resultant cancellation of mortgage effectively cancelled the mortgage contract between Maalac and the bank. Insofar as TCT No. 417012 is concerned, there is no more existing mortgage to speak of. As the absolute owner of the foreclosed property, the petitioner has the discretion to reject or accept any offer to repurchase. Granting arguendo that a new obligation was established with the acceptance by the bank of the PCIB Check and its application to the loan account of Maalac on the condition that TCT No. 417012 would be released, this new obligation however could not supplant the October 13, 1977 real estate mortgage executed by Maalac, which, by all intents and purposes, is now a defunct and non-existent contract. As mentioned earlier, novation cannot be presumed. We however sustain the award of moral damages. While the bank had the legal basis to withhold the release of the mortgaged properties, nevertheless, it was not forthright and was lacking in candor in dealing with Maalac. In accepting the PCIB Check, the bank knew fully well that the payment was conditioned on its commitment to release the specified properties. At the first instance, the bank should not have accepted the check or returned the same had it intended beforehand not to honor the request of Maalac. In accepting the check and applying the proceeds thereof to the loan accounts of Maalac and Galicia, the former were led to believe that the bank was favorably acting on their request. In justifying the award of moral damages, the Court of Appeals correctly observed that there is the unjustified refusal of the appellant bank to make a definite commitment while profiting from the proceeds of the check by applying it to the principal and the interest of the Galicias and plaintiff-appellants.[31] Moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly caused. Although incapable of pecuniary estimation, the amount must somehow be proportional to and in approximation of the suffering inflicted. Moral damages are not punitive in nature and were never intended to enrich the claimant at the expense of the defendant. There is no hard-and-fast rule in determining what would be a fair and reasonable amount of moral damages, since each case must be governed by its own peculiar facts. Trial courts are given discretion in determining the amount, with the limitation that it should not be palpably and scandalously excessive. Indeed, it must be commensurate to the loss or injury suffered.[32] Respondent Rosita Maalac has adequately established the factual basis for the award of moral damages when she testified that she suffered mental anguish and social humiliation as a result of the failure of the bank to release the subject properties or its failure to return the check despite its refusal to make a definite commitment to comply with the clearly-stated object of the payment. Respondent Rodolfo Maalac however is not similarly entitled to moral damages. The award of moral damages must be anchored on a clear showing that he actually experienced mental anguish, besmirched reputation, sleepless nights, wounded feelings or similar injury. There was no better witness to this experience than respondent himself. Since respondent Rodolfo Maalac failed to testify on

the witness stand, the trial court did not have any factual basis to award moral damages to him.[33] Indeed, respondent Rodolfo Maalac should have taken the witness stand and should have testified on the mental anguish, serious anxiety, wounded feelings and other emotional and mental suffering he purportedly suffered to sustain his claim for moral damages. Mere allegations do not suffice; they must be substantiated by clear and convincing proof. Nevertheless, we find the award of P200,000.00 excessive and unconscionable. As we said, moral damages are not intended to enrich the complainant at the expense of the defendant. Rather, these are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering that resulted by reason of the defendants culpable action. The purpose of such damages is essentially indemnity or reparation, not punishment or correction. In other words, the award thereof is aimed at a restoration within the limits of the possible, of the spiritual status quo ante; therefore, it must always reasonably approximate the extent of injury and be proportional to the wrong committed.[34] The award of P50,000.00 as moral damages is reasonable under the circumstances.[35] WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated October 12, 2000 in CA-G.R. CV No. 50292 is REVERSED and SET ASIDE. The petitioner Philippine Savings Bank is DIRECTED to indemnify respondent Rosita P. Maalac in the amount of P50,000.00 as moral damages. The Regional Trial Court of the City of Pasig, Branch 161 is ORDERED to issue a writ of possession in favor of Philippine Savings Bank. No costs. [G.R. No. 136729. September 23 ,2003]

stipulated rate of 16% per annum and stipulated penalty charges of 16% per annum computed from January 1, 1985 until the amount is fully paid. With costs. SO ORDERED.[7] The trial court observed that if Roxas really intended to sign the instruments merely in his capacity as President of Astro, then he should have signed only once in the promissory note.[8] On appeal, the Court of Appeals affirmed the RTC decision agreeing with the trial court that Roxas failed to explain satisfactorily why he had to sign twice in the contract and therefore the presumption that private transactions have been fair and regular must be sustained.[9] In the present petition, the principal issue to be resolved is whether or not Roxas should be jointly and severally liable (solidary) with Astro for the sum awarded by the RTC. The answer is in the affirmative. Astros loan with Philtrust Bank is secured by three promissory notes. These promissory notes are valid and binding against Astro and Roxas. As it appears on the notes, Roxas signed twice: first, as president of Astro and second, in his personal capacity. In signing his name aside from being the President of Asro, Roxas became a co-maker of the promissory notes and cannot escape any liability arising from it. Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers,[10] promising that they will pay to the order of the payee or any holder according to its tenor.[11] Thus, even without the phrase personal capacity, Roxas will still be primarily liable as a joint and several debtor under the notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on each of the promissory notes twice which necessarily would imply that he is undertaking the obligation in two different capacities, official and personal. Unnoticed by both the trial court and the Court of Appeals, a closer examination of the signatures affixed by Roxas on the promissory notes, Exhibits A-4 and 3A and B-4 and 4-A readily reveals that portions of his signatures covered portions of the typewritten words personal capacity indicating with certainty that the typewritten words were already existing at the time Roxas affixed his signatures thus demolishing his claim that the typewritten words were just inserted after he signed the promissory notes. If what he claims is true, then portions of the typewritten words would have covered portions of his signatures, and not vice versa. As to the third promissory note, Exhibit C-4 and 5-A, the copy submitted is not clear so that this Court could not discern the same observations on the notes, Exhibits A-4 and 3-A and B-4 and 4-A. Nevertheless, the following discussions equally apply to all three promissory notes. The three promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly, severally and solidarily, promise to pay to PHILTRUST BANK or order...[12] An instrument which begins with I, We, or Either of us promise to pay, when signed by two or more persons, makes them solidarily liable. [13] Also, the phrase joint and several binds the makers jointly and individually to the payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit.[14] Having signed under such terms, Roxas assumed the solidary liability of a debtor and Philtrust Bank may choose to enforce the notes against him alone or jointly with Astro. Roxas claim that the phrases in his personal capacity and in his official capacity were inserted on the notes without his knowledge was correctly disregarded by the RTC and the Court of Appeals. It is not disputed that Roxas does not deny that he signed the notes twice. As aptly found by both the trial and appellate court, Roxas did not offer any explanation why he did so. It devolves upon him to overcome the presumptions that private transactions are presumed to be fair and regular[15] and that a person takes ordinary care of his concerns.[16] Aside from his self-serving allegations, Roxas failed to prove the truth of such allegations. Thus, said presumptions prevail over his claims. Bare allegations, when unsubstantiated by evidence, documentary or otherwise, are not equivalent to proof under our Rules of Court.[17] Roxas is the President of Astro and reasonably, a businessman who is presumed to take ordinary care of his concerns. Absent any countervailing evidence, it cannot be gainsaid that he will not sign document without first informing himself of its contents and consequences. Clearly, he knew the nature of the transactions and documents involved as he not only executed these notes on two different dates but he also executed, and again, signed twice, a continuing Surety ship

ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioner, vs. PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, respondent. DECISION AUSTRIA-MARTINEZ, J.: Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court is the decision of the Court of Appeals in CA-G.R. CV No. 41274,[1] affirming the decision of the Regional Trial Court (Branch 147) of Makati, then Metro Manila, whereby petitioners Peter Roxas and Astro Electronics Corp. (Astro for brevity) were ordered to pay respondent Philippine Export and Foreign Loan Guarantee Corporation (Philguarantee), jointly and