oblicon 1st cases copy

8/10/2019 Oblicon 1st Cases Copy

1/31

Resp

onde

nt

Parking Fees

Ayala

Land

On weekdays, P25.00 for the first four hours andP10.00 for every

succeeding hour; on weekends, flat rate of P25.00 per day

Robin

sons

P20.00 for the first three hours and P10.00 for every succeeding hour

Shan

gri-la

Flat rate of P30.00 per day

SM

Prime

P10.00 to P20.00 (depending on whether the parking space is outdoors or

indoors) for the first three hours and 59 minutes, and P10.00 for every

succeeding hour or fraction thereof

Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 177056 September 18, 2009THE OFFICE OF THE SOLICITOR GENERAL,Petitioner,

vs.

AYALA LAND INCORPORATED, ROBINSON'S LAND CORPORATION, SHANGRI-LA PLAZA CORPORATION and SM PRIMEHOLDINGS, INC.,Respondents.

D E C I S I O N

CHICO-NAZARIO,J.:Before this Court is a Petition for Review on Certiorari,1 under Rule 45 of the Revised Rules of Court, filed by petitioner Office of

the Solicitor General (OSG), seeking the reversal and setting aside of the Decision2 dated 25 January 2007 of the Court of

Appeals in CA-G.R. CV No. 76298, which affirmed in toto the Joint Decision3 dated 29 May 2002 of the Regional Trial Court

(RTC) of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210; and (2) the Resolution4 dated 14 March 2007 ofthe appellate court in the same case which denied the Motion for Reconsideration of the OSG. The RTC adjudged that

respondents Ayala Land Incorporated (Ayala Land), Robinsons Land Corporation (Robinsons), Shangri-la Plaza Corporation

(Shangri-la), and SM Prime Holdings, Inc. (SM Prime) could not be obliged to provide free parking spaces in their malls to their

patrons and the general public.

Respondents Ayala Land, Robinsons, and Shangri-la maintain and operate shopping malls in various locations in Metro Manila.

Respondent SM Prime constructs, operates, and leases out commercial buildings and other structures, among which, are SM

City, Manila; SM Centerpoint, Sta. Mesa, Manila; SM City, North Avenue, Quezon City; and SM Southmall, Las Pias.

The shopping malls operated or leased out by respondents have parking facilities for all kinds of motor vehicles, either by way

of parking spaces inside the mall buildings or in separate buildings and/or adjacent lots that are solely devoted for use as

parking spaces. Respondents Ayala Land, Robinsons, and SM Prime spent for the construction of their own parking facilities.

Respondent Shangri-la is renting its parking facilities, consisting of land and building specifically used as parking spaces, which

were constructed for the lessors account.Respondents expend for the maintenance and administration of their respective parking facilities. They provide security

personnel to protect the vehicles parked in their parking facilities and maintain order within the area. In turn, they collect the

following parking fees from the persons making use of their parking facilities, regardless of whether said persons are mall

patrons or not:

The parking tickets or cards issued by respondents to vehicle owners contain the stipulation that respondents shall not be

responsible for any loss or damage to the vehicles parked in respondents parking facilities.

In 1999, the Senate Committees on Trade and Commerce and on Justice and Human Rights conducted a joint investigation for


2/31

the following purposes: (1) to inquire into the legality of the prevalent practice of shopping malls of charging parking fees; (2)

assuming arguendo that the collection of parking fees was legally authorized, to find out the basis and reasonableness of the

parking rates charged by shopping malls; and (3) to determine the legality of the policy of shopping malls of denying liability

in cases of theft, robbery, or carnapping, by invoking the waiver clause at the back of the parking tickets. Said Senate

Committees invited the top executives of respondents, who operate the major malls in the country; the officials from the

Department of Trade and Industry (DTI), Department of Public Works and Highways (DPWH), Metro Manila Development

Authority (MMDA), and other local government officials; and the Philippine Motorists Association (PMA) as representative ofthe consumers group.

After three public hearings held on 30 September, 3 November, and 1 December 1999, the afore-mentioned Senate

Committees jointly issued Senate Committee Report No. 2255 on 2 May 2000, in which they concluded:

In view of the foregoing, the Committees find that the collection of parking fees by shopping malls is contrary to the National

Building Code and is therefor [sic] illegal. While it is true that the Code merely requires malls to provide parking spaces,

without specifying whether it is free or not, both Committees believe that the reasonable and logical interpretation of the

Code is that the parking spaces are for free. This interpretation is not only reasonable and logical but finds support in the

actual practice in other countries like the United States of America where parking spaces owned and operated by mall owners

are free of charge.

Figuratively speaking, the Code has "expropriated" the land for parking something similar to the subdivision law which

require developers to devote so much of the land area for parks.Moreover, Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides that "it is the policy of the State to protect the

interest of the consumers, promote the general welfare and establish standards of conduct for business and industry."

Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be going against the declared policy of

R.A. 7394.

Section 201 of the National Building Code gives the responsibility for the administration and enforcement of the provisions of

the Code, including the imposition of penalties for administrative violations thereof to the Secretary of Public Works. This set

up, however, is not being carried out in reality.

In the position paper submitted by the Metropolitan Manila Development Authority (MMDA), its chairman, Jejomar C. Binay,

accurately pointed out that the Secretary of the DPWH is responsible for the implementation/enforcement of the National

Building Code. After the enactment of the Local Government Code of 1991, the local government units (LGUs) were tasked to

discharge the regulatory powers of the DPWH. Hence, in the local level, the Building Officials enforce all rules/ regulationsformulated by the DPWH relative to all building plans, specifications and designs including parking space requirements. There

is, however, no single national department or agency directly tasked to supervise the enforcement of the provisions of the

Code on parking, notwithstanding the national character of the law.6

Senate Committee Report No. 225, thus, contained the following recommendations:

In light of the foregoing, the Committees on Trade and Commerce and Justice and Human Rights hereby recommend the

following:

1. The Office of the Solicitor General should institute the necessary action to enjoin the collection of parking fees as well as to

enforce the penal sanction provisions of the National Building Code. The Office of the Solicitor General should likewise study

how refund can be exacted from mall owners who continue to collect parking fees.

2. The Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the Consumer Act of

the Philippines should enforce the provisions of the Code relative to parking. Towards this end, the DTI should formulate thenecessary implementing rules and regulations on parking in shopping malls, with prior consultations with the local

government units where these are located. Furthermore, the DTI, in coordination with the DPWH, should be empowered to

regulate and supervise the construction and maintenance of parking establishments.

3. Finally, Congress should amend and update the National Building Code to expressly prohibit shopping malls from collecting

parking fees by at the same time, prohibit them from invoking the waiver of liability.7

Respondent SM Prime thereafter received information that, pursuant to Senate Committee Report No. 225, the DPWH

Secretary and the local building officials of Manila, Quezon City, and Las Pias intended to institute, through the OSG, an action

to enjoin respondent SM Prime and similar establishments from collecting parking fees, and to impose upon said


3/31

establishments penal sanctions under Presidential Decree No. 1096, otherwise known as the National Building Code of the

Philippines (National Building Code), and its Implementing Rules and Regulations (IRR). With the threatened action against it,

respondent SM Prime filed, on 3 October 2000, a Petition for Declaratory Relief8 under Rule 63 of the Revised Rules of Court,

against the DPWH Secretary and local building officials of Manila, Quezon City, and Las Pias. Said Petition was docketed as

Civil Case No. 00-1208 and assigned to the RTC of Makati City, Branch 138, presided over by Judge Sixto Marella, Jr. (Judge

Marella). In its Petition, respondent SM Prime prayed for judgment:

a) Declaring Rule XIX of the Implementing Rules and Regulations of the National Building Code as ultra vires, hence,

unconstitutional and void;

b) Declaring [herein respondent SM Prime]s clear legal right to lease parking spaces appurtenant to its department stores,

malls, shopping centers and other commercial establishments; and

c) Declaring the National Building Code of the Philippines Implementing Rules and Regulations as ineffective, not having been

published once a week for three (3) consecutive weeks in a newspaper of general circulation, as prescribed by Section 211 of

Presidential Decree No. 1096.

[Respondent SM Prime] further prays for such other reliefs as may be deemed just and equitable under the premises.9

The very next day, 4 October 2000, the OSG filed a Petition for Declaratory Relief and Injunction (with Prayer for Temporary

Restraining Order and Writ of Preliminary Injunction)10 against respondents. This Petition was docketed as Civil Case No.

00-1210 and raffled to the RTC of Makati, Branch 135, presided over by Judge Francisco B. Ibay (Judge Ibay). Petitioner prayed

that the RTC:

1. After summary hearing, a temporary restraining order and a writ of preliminary injunction be issued restraining respondents

from collecting parking fees from their customers; and

2. After hearing, judgment be rendered declaring that the practice of respondents in charging parking fees is violative of the

National Building Code and its Implementing Rules and Regulations and is therefore invalid, and making permanent any

injunctive writ issued in this case.

Other reliefs just and equitable under the premises are likewise prayed for.11

On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch 135, issued an Order consolidating Civil Case No. 00-1210

with Civil Case No. 00-1208 pending before Judge Marella of RTC of Makati, Branch 138.

As a result of the pre-trial conference held on the morning of 8 August 2001, the RTC issued a Pre-Trial Order12of even date

which limited the issues to be resolved in Civil Cases No. 00-1208 and No. 00-1210 to the following:

1. Capacity of the plaintiff [OSG] in Civil Case No. 00-1210 to institute the present proceedings and relative thereto whether the

controversy in the collection of parking fees by mall owners is a matter of public welfare.2. Whether declaratory relief is proper.

3. Whether respondent Ayala Land, Robinsons, Shangri-La and SM Prime are obligated to provide parking spaces in their malls

for the use of their patrons or the public in general, free of charge.

4. Entitlement of the parties of [sic] award of damages.13

On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases No. 00-1208 and No. 00-1210.

The RTC resolved the first two issues affirmatively. It ruled that the OSG can initiate Civil Case No. 00-1210 under Presidential

Decree No. 478 and the Administrative Code of 1987.14 It also found that all the requisites for an action for declaratory relief

were present, to wit:

The requisites for an action for declaratory relief are: (a) there is a justiciable controversy; (b) the controversy is between

persons whose interests are adverse; (c) the party seeking the relief has a legal interest in the controversy; and (d) the issue

involved is ripe for judicial determination.

SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator who stands to be affected directly by the position taken by

the government officials sued namely the Secretary of Public Highways and the Building Officials of the local government units

where it operates shopping malls. The OSG on the other hand acts on a matter of public interest and has taken a position

adverse to that of the mall owners whom it sued. The construction of new and bigger malls has been announced, a matter

which the Court can take judicial notice and the unsettled issue of whether mall operators should provide parking facilities,

free of charge needs to be resolved.15

As to the third and most contentious issue, the RTC pronounced that:


4/31

The Building Code, which is the enabling law and the Implementing Rules and Regulations do not impose that parking spaces

shall be provided by the mall owners free of charge. Absent such directive[,] Ayala Land, Robinsons, Shangri-la and SM [Prime]

are under no obligation to provide them for free. Article 1158 of the Civil Code is clear:

"Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are

demandable and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen,

by the provisions of this Book (1090).["]

x x x x

The provision on ratios of parking slots to several variables, like shopping floor area or customer area found in Rule XIX of the

Implementing Rules and Regulations cannot be construed as a directive to provide free parking spaces, because the enabling

law, the Building Code does not so provide. x x x.

To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to provide parking spaces for free can be considered as an

unlawful taking of property right without just compensation.

Parking spaces in shopping malls are privately owned and for their use, the mall operators collect fees. The legal relationship

could be either lease or deposit. In either case[,] the mall owners have the right to collect money which translates into income.

Should parking spaces be made free, this right of mall owners shall be gone. This, without just compensation. Further, loss of

effective control over their property will ensue which is frowned upon by law.

The presence of parking spaces can be viewed in another light. They can be looked at as necessary facilities to entice thepublic to increase patronage of their malls because without parking spaces, going to their malls will be inconvenient. These

are[,] however[,] business considerations which mall operators will have to decide for themselves. They are not sufficient to

justify a legal conclusion, as the OSG would like the Court to adopt that it is the obligation of the mall owners to provide

parking spaces for free.16

The RTC then held that there was no sufficient evidence to justify any award for damages.

The RTC finally decreed in its 29 May 2002 Joint Decision in Civil Cases No. 00-1208 and No. 00-1210 that:

FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc., Robinsons Land Corporation, Shangri-la Plaza Corporation

and SM Prime Holdings[,] Inc. are not obligated to provide parking spaces in their malls for the use of their patrons or public in

general, free of charge.

All counterclaims in Civil Case No. 00-1210 are dismissed.

No pronouncement as to costs.17CA-G.R. CV No. 76298 involved the separate appeals of the OSG18 and respondent SMPrime19 filed with the Court of Appeals. The sole assignment of error of the OSG in its Appellants Brief was:

THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL BUILDING CODE DID NOT INTEND MALL PARKING SPACES TO BE

FREE OF CHARGE[;]20

while the four errors assigned by respondent SM Prime in its Appellants Brief were:

I

THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE IMPLEMENTING RULES AS HAVING BEEN ENACTED ULTRA

VIRES, HENCE, UNCONSTITUTIONAL AND VOID.

II

THE TRIAL COURT ERRED IN FAILING TO DECLARE THE IMPLEMENTING RULES INEFFECTIVE FOR NOT HAVING BEEN PUBLISHED

AS REQUIRED BY LAW.

III

THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSGS PETITION FOR DECLARATORY RELIEF AND INJUNCTION FORFAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.

IV

THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG HAS NO LEGAL CAPACITY TO SUE AND/OR THAT IT IS NOT A

REAL PARTY-IN-INTEREST IN THE INSTANT CASE.21

Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG on the ground that the lone issue raised therein involved a

pure question of law, not reviewable by the Court of Appeals.

The Court of Appeals promulgated its Decision in CA-G.R. CV No. 76298 on 25 January 2007. The appellate court agreed with


5/31

respondent Robinsons that the appeal of the OSG should suffer the fate of dismissal, since "the issue on whether or not the

National Building Code and its implementing rules require shopping mall operators to provide parking facilities to the public

for free" was evidently a question of law. Even so, since CA-G.R. CV No. 76298 also included the appeal of respondent SM

Prime, which raised issues worthy of consideration, and in order to satisfy the demands of substantial justice, the Court of

Appeals proceeded to rule on the merits of the case.

In its Decision, the Court of Appeals affirmed the capacity of the OSG to initiate Civil Case No. 00-1210 before the RTC as thelegal representative of the government,22 and as the one deputized by the Senate of the Republic of the Philippines through

Senate Committee Report No. 225.

The Court of Appeals rejected the contention of respondent SM Prime that the OSG failed to exhaust administrative remedies.

The appellate court explained that an administrative review is not a condition precedent to judicial relief where the question in

dispute is purely a legal one, and nothing of an administrative nature is to be or can be done.

The Court of Appeals likewise refused to rule on the validity of the IRR of the National Building Code, as such issue was not

among those the parties had agreed to be resolved by the RTC during the pre-trial conference for Civil Cases No. 00-1208 and

No. 00-1210. Issues cannot be raised for the first time on appeal. Furthermore, the appellate court found that the controversy

could be settled on other grounds, without touching on the issue of the validity of the IRR. It referred to the settled rule that

courts should refrain from passing upon the constitutionality of a law or implementing rules, because of the principle that bars

judicial inquiry into a constitutional question, unless the resolution thereof is indispensable to the determination of the case.Lastly, the Court of Appeals declared that Section 803 of the National Building Code and Rule XIX of the IRR were clear and

needed no further construction. Said provisions were only intended to control the occupancy or congestion of areas and

structures. In the absence of any express and clear provision of law, respondents could not be obliged and expected to provide

parking slots free of charge.

The fallo of the 25 January 2007 Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the instant appeals are DENIED. Accordingly, appealed Decision is hereby AFFIRMED in

toto.23

In its Resolution issued on 14 March 2007, the Court of Appeals denied the Motion for Reconsideration of the OSG, finding that

the grounds relied upon by the latter had already been carefully considered, evaluated, and passed upon by the appellate

court, and there was no strong and cogent reason to modify much less reverse the assailed judgment.

The OSG now comes before this Court, via the instant Petition for Review, with a single assignment of error:THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE RULING OF THE LOWER COURT THAT RESPONDENTS ARE NOT

OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS OR THE PUBLIC.24

The OSG argues that respondents are mandated to provide free parking by Section 803 of the National Building Code and Rule

XIX of the IRR.

According to Section 803 of the National Building Code:

SECTION 803. Percentage of Site Occupancy

(a) Maximum site occupancy shall be governed by the use, type of construction, and height of the building and the use, area,

nature, and location of the site; and subject to the provisions of the local zoning requirements and in accordance with the rules

and regulations promulgated by the Secretary.

In connection therewith, Rule XIX of the old IRR,25 provides:

RULE XIX PARKING AND LOADING SPACE REQUIREMENTS

Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site occupancy, the following

provisions on parking and loading space requirements shall be observed:

1. The parking space ratings listed below are minimum off-street requirements for specific uses/occupancies for

buildings/structures:

1.1 The size of an average automobile parking slot shall be computed as 2.4 meters by 5.00 meters for perpendicular or

diagonal parking, 2.00 meters by 6.00 meters for parallel parking. A truck or bus parking/loading slot shall be computed at a

minimum of 3.60 meters by 12.00 meters. The parking slot shall be drawn to scale and the total number of which shall be


6/31

indicated on the plans and specified whether or not parking accommodations, are attendant-managed. (See Section 2 for

computation of parking requirements).

x x x x

1.7 Neighborhood shopping center 1 slot/100 sq. m. of shopping floor area

The OSG avers that the aforequoted provisions should be read together with Section 102 of the National Building Code, which

declares:

SECTION 102. Declaration of PolicyIt is hereby declared to be the policy of the State to safeguard life, health, property, and public welfare, consistent with the

principles of sound environmental management and control; and to this end, make it the purpose of this Code to provide for

all buildings and structures, a framework of minimum standards and requirements to regulate and control their location, site,

design, quality of materials, construction, use, occupancy, and maintenance.

The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of safeguarding "life, health,

property, and public welfare, consistent with the principles of sound environmental management and control." Adequate

parking spaces would contribute greatly to alleviating traffic congestion when complemented by quick and easy access

thereto because of free-charge parking. Moreover, the power to regulate and control the use, occupancy, and maintenance of

buildings and structures carries with it the power to impose fees and, conversely, to control -- partially or, as in this case,

absolutely -- the imposition of such fees.

The Court finds no merit in the present Petition.

The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain reading thereof, is that

respondents, as operators/lessors of neighborhood shopping centers, should provide parking and loading spaces, in

accordance with the minimum ratio of one slot per 100 square meters of shopping floor area. There is nothing therein

pertaining to the collection (or non-collection) of parking fees by respondents. In fact, the term "parking fees" cannot even be

found at all in the entire National Building Code and its IRR. Statutory construction has it that if a statute is clear and

unequivocal, it must be given its literal meaning and applied without any attempt at interpretation.26 Since Section 803 of the

National Building Code and Rule XIX of its IRR do not mention parking fees, then simply, said provisions do not regulate the

collection of the same. The RTC and the Court of Appeals correctly applied Article 1158 of the New Civil Code, which states:

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are

demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen,

by the provisions of this Book. (Emphasis ours.)

Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its IRR, the OSG had toresort to specious and feeble argumentation, in which the Court cannot concur.

The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of Section 803 of the same Code

and Rule XIX of the IRR, so as to include the regulation of parking fees. The OSG limits its citation to the first part of Section 102

of the National Building Code declaring the policy of the State "to safeguard life, health, property, and public welfare,

consistent with the principles of sound environmental management and control"; but totally ignores the second part of said

provision, which reads, "and to this end, make it the purpose of this Code to provide for all buildings and structures, a

framework of minimum standards and requirements to regulate and control their location, site, design, quality of materials,

construction, use, occupancy, and maintenance." While the first part of Section 102 of the National Building Code lays down

the State policy, it is the second part thereof that explains how said policy shall be carried out in the Code. Section 102 of the

National Building Code is not an all-encompassing grant of regulatory power to the DPWH Secretary and local building officials

in the name of life, health, property, and public welfare. On the contrary, it limits the regulatory power of said officials toensuring that the minimum standards and requirements for all buildings and structures, as set forth in the National Building

Code, are complied with.

Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking spaces for buildings,

Rule XIX of the IRR also mandates that such parking spaces be provided by building owners free of charge. If Rule XIX is not

covered by the enabling law, then it cannot be added to or included in the implementing rules. The rule-making power of

administrative agencies must be confined to details for regulating the mode or proceedings to carry into effect the law as it

has been enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not


7/31

covered by the statute. Administrative regulations must always be in harmony with the provisions of the law because any

resulting discrepancy between the two will always be resolved in favor of the basic law.27

From the RTC all the way to this Court, the OSG repeatedly referred to Republic v. Gonzales28 and City of Ozamis v. Lumapas29

to support its position that the State has the power to regulate parking spaces to promote the health, safety, and welfare of

the public; and it is by virtue of said power that respondents may be required to provide free parking facilities. The OSG,

though, failed to consider the substantial differences in the factual and legal backgrounds of these two cases from those of thePetition at bar.

In Republic, the Municipality of Malabon sought to eject the occupants of two parcels of land of the public domain to give way

to a road-widening project. It was in this context that the Court pronounced:

Indiscriminate parking along F. Sevilla Boulevard and other main thoroughfares was prevalent; this, of course, caused the build

up of traffic in the surrounding area to the great discomfort and inconvenience of the public who use the streets. Traffic

congestion constitutes a threat to the health, welfare, safety and convenience of the people and it can only be substantially

relieved by widening streets and providing adequate parking areas.

The Court, in City of Ozamis, declared that the City had been clothed with full power to control and regulate its streets for the

purpose of promoting public health, safety and welfare. The City can regulate the time, place, and manner of parking in the

streets and public places; and charge minimal fees for the street parking to cover the expenses for supervision, inspection and

control, to ensure the smooth flow of traffic in the environs of the public market, and for the safety and convenience of thepublic.

Republic and City of Ozamis involved parking in the local streets; in contrast, the present case deals with privately owned

parking facilities available for use by the general public. In Republic and City of Ozamis, the concerned local governments

regulated parking pursuant to their power to control and regulate their streets; in the instant case, the DPWH Secretary and

local building officials regulate parking pursuant to their authority to ensure compliance with the minimum standards and

requirements under the National Building Code and its IRR. With the difference in subject matters and the bases for the

regulatory powers being invoked, Republic and City of Ozamis do not constitute precedents for this case.

Indeed, Republic and City of Ozamis both contain pronouncements that weaken the position of the OSG in the case at bar. In

Republic, the Court, instead of placing the burden on private persons to provide parking facilities to the general public,

mentioned the trend in other jurisdictions wherein the municipal governments themselves took the initiative to make more

parking spaces available so as to alleviate the traffic problems, thus:

Under the Land Transportation and Traffic Code, parking in designated areas along public streets or highways is allowed which

clearly indicates that provision for parking spaces serves a useful purpose. In other jurisdictions where traffic is at least as

voluminous as here, the provision by municipal governments of parking space is not limited to parking along public streets or

highways. There has been a marked trend to build off-street parking facilities with the view to removing parked cars from the

streets. While the provision of off-street parking facilities or carparks has been commonly undertaken by private enterprise,

municipal governments have been constrained to put up carparks in response to public necessity where private enterprise

had failed to keep up with the growing public demand. American courts have upheld the right of municipal governments to

construct off-street parking facilities as clearly redounding to the public benefit.30

In City of Ozamis, the Court authorized the collection by the City of minimal fees for the parking of vehicles along the streets:

so why then should the Court now preclude respondents from collecting from the public a fee for the use of the mall parkingfacilities? Undoubtedly, respondents also incur expenses in the maintenance and operation of the mall parking facilities, such

as electric consumption, compensation for parking attendants and security, and upkeep of the physical structures.

It is not sufficient for the OSG to claim that "the power to regulate and control the use, occupancy, and maintenance of

buildings and structures carries with it the power to impose fees and, conversely, to control, partially or, as in this case,

absolutely, the imposition of such fees." Firstly, the fees within the power of regulatory agencies to impose are regulatory fees.

It has been settled law in this jurisdiction that this broad and all-compassing governmental competence to restrict rights of

liberty and property carries with it the undeniable power to collect a regulatory fee. It looks to the enactment of specific

measures that govern the relations not only as between individuals but also as between private parties and the political


8/31

society.31 True, if the regulatory agencies have the power to impose regulatory fees, then conversely, they also have the

power to remove the same. Even so, it is worthy to note that the present case does not involve the imposition by the DPWH

Secretary and local building officials of regulatory fees upon respondents; but the collection by respondents of parking fees

from persons who use the mall parking facilities. Secondly, assuming arguendo that the DPWH Secretary and local building

officials do have regulatory powers over the collection of parking fees for the use of privately owned parking facilities, they

cannot allow or prohibit such collection arbitrarily or whimsically. Whether allowing or prohibiting the collection of such

parking fees, the action of the DPWH Secretary and local building officials must pass the test of classic reasonableness andpropriety of the measures or means in the promotion of the ends sought to be accomplished.32

Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the Court notes that Section

803 of the National Building Code falls under Chapter 8 on Light and Ventilation. Evidently, the Code deems it necessary to

regulate site occupancy to ensure that there is proper lighting and ventilation in every building. Pursuant thereto, Rule XIX of

the IRR requires that a building, depending on its specific use and/or floor area, should provide a minimum number of parking

spaces. The Court, however, fails to see the connection between regulating site occupancy to ensure proper light and

ventilation in every building vis--vis regulating the collection by building owners of fees for the use of their parking spaces.

Contrary to the averment of the OSG, the former does not necessarily include or imply the latter. It totally escapes this Court

how lighting and ventilation conditions at the malls could be affected by the fact that parking facilities thereat are free or paid

for.

The OSG attempts to provide the missing link by arguing that:Under Section 803 of the National Building Code, complimentary parking spaces are required to enhance light and ventilation,

that is, to avoid traffic congestion in areas surrounding the building, which certainly affects the ventilation within the building

itself, which otherwise, the annexed parking spaces would have served. Free-of-charge parking avoids traffic congestion by

ensuring quick and easy access of legitimate shoppers to off-street parking spaces annexed to the malls, and thereby

removing the vehicles of these legitimate shoppers off the busy streets near the commercial establishments.33

The Court is unconvinced. The National Building Code regulates buildings, by setting the minimum specifications and

requirements for the same. It does not concern itself with traffic congestion in areas surrounding the building. It is already a

stretch to say that the National Building Code and its IRR also intend to solve the problem of traffic congestion around the

buildings so as to ensure that the said buildings shall have adequate lighting and ventilation. Moreover, the Court cannot

simply assume, as the OSG has apparently done, that the traffic congestion in areas around the malls is due to the fact that

respondents charge for their parking facilities, thus, forcing vehicle owners to just park in the streets. The Court notes that

despite the fees charged by respondents, vehicle owners still use the mall parking facilities, which are even fully occupied onsome days. Vehicle owners may be parking in the streets only because there are not enough parking spaces in the malls, and

not because they are deterred by the parking fees charged by respondents. Free parking spaces at the malls may even have

the opposite effect from what the OSG envisioned: more people may be encouraged by the free parking to bring their own

vehicles, instead of taking public transport, to the malls; as a result, the parking facilities would become full sooner, leaving

more vehicles without parking spaces in the malls and parked in the streets instead, causing even more traffic congestion.

Without using the term outright, the OSG is actually invoking police power to justify the regulation by the State, through the

DPWH Secretary and local building officials, of privately owned parking facilities, including the collection by the

owners/operators of such facilities of parking fees from the public for the use thereof. The Court finds, however, that in totally

prohibiting respondents from collecting parking fees from the public for the use of the mall parking facilities, the State would

be acting beyond the bounds of police power.

Police power is the power of promoting the public welfare by restraining and regulating the use of liberty and property. It is

usually exerted in order to merely regulate the use and enjoyment of the property of the owner. The power to regulate,

however, does not include the power to prohibit. A fortiori, the power to regulate does not include the power to confiscate.

Police power does not involve the taking or confiscation of property, with the exception of a few cases where there is a

necessity to confiscate private property in order to destroy it for the purpose of protecting peace and order and of promoting

the general welfare; for instance, the confiscation of an illegally possessed article, such as opium and firearms. 34

When there is a taking or confiscation of private property for public use, the State is no longer exercising police power, but

another of its inherent powers, namely, eminent domain. Eminent domain enables the State to forcibly acquire private lands


9/31

intended for public use upon payment of just compensation to the owner.35

Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the

expropriated property; but no cogent reason appears why the said power may not be availed of only to impose a burden upon

the owner of condemned property, without loss of title and possession.36 It is a settled rule that neither acquisition of title nor

total destruction of value is essential to taking. It is usually in cases where title remains with the private owner that inquiry

should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking.A regulation that deprives any person of the profitable use of his property constitutes a taking and entitles him to

compensation, unless the invasion of rights is so slight as to permit the regulation to be justified under the police power.

Similarly, a police regulation that unreasonably restricts the right to use business property for business purposes amounts to a

taking of private property, and the owner may recover therefor.371avvphi1

Although in the present case, title to and/or possession of the parking facilities remain/s with respondents, the prohibition

against their collection of parking fees from the public, for the use of said facilities, is already tantamount to a taking or

confiscation of their properties. The State is not only requiring that respondents devote a portion of the latters properties for

use as parking spaces, but is also mandating that they give the public access to said parking spaces for free. Such is already an

excessive intrusion into the property rights of respondents. Not only are they being deprived of the right to use a portion of

their properties as they wish, they are further prohibited from profiting from its use or even just recovering therefrom the

expenses for the maintenance and operation of the required parking facilities.

The ruling of this Court in City Government of Quezon City v. Judge Ericta38 is edifying. Therein, the City Government of

Quezon City passed an ordinance obliging private cemeteries within its jurisdiction to set aside at least six percent of their total

area for charity, that is, for burial grounds of deceased paupers. According to the Court, the ordinance in question was null and

void, for it authorized the taking of private property without just compensation:

There is no reasonable relation between the setting aside of at least six (6) percent of the total area of all private cemeteries for

charity burial grounds of deceased paupers and the promotion of' health, morals, good order, safety, or the general welfare of

the people. The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit

paupers who are charges of the municipal corporation. Instead of' building or maintaining a public cemetery for this purpose,

the city passes the burden to private cemeteries.

'The expropriation without compensation of a portion of private cemeteries is not covered by Section 12(t) of Republic Act 537,

the Revised Charter of Quezon City which empowers the city council to prohibit the burial of the dead within the center ofpopulation of the city and to provide for their burial in a proper place subject to the provisions of general law regulating burial

grounds and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section 177(q) that a

sangguniang panlungsod may "provide for the burial of the dead in such place and in such manner as prescribed by law or

ordinance" it simply authorizes the city to provide its own city owned land or to buy or expropriate private properties to

construct public cemeteries. This has been the law, and practise in the past. It continues to the present. Expropriation,

however, requires payment of just compensation. The questioned ordinance is different from laws and regulations requiring

owners of subdivisions to set aside certain areas for streets, parks, playgrounds, and other public facilities from the land they

sell to buyers of subdivision lots. The necessities of public safety, health, and convenience are very clear from said

requirements which are intended to insure the development of communities with salubrious and wholesome environments.

The beneficiaries of the regulation, in turn, are made to pay by the subdivision developer when individual lots are sold to

homeowners.

In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use the mall

parking facilities has no basis in the National Building Code or its IRR. The State also cannot impose the same prohibition by

generally invoking police power, since said prohibition amounts to a taking of respondents property without payment of just

compensation.

Given the foregoing, the Court finds no more need to address the issue persistently raised by respondent SM Prime concerning

the unconstitutionality of Rule XIX of the IRR. In addition, the said issue was not among those that the parties, during the

pre-trial conference for Civil Cases No. 12-08 and No. 00-1210, agreed to submit for resolution of the RTC. It is likewise


10/31

axiomatic that the constitutionality of a law, a regulation, an ordinance or an act will not be resolved by courts if the

controversy can be, as in this case it has been, settled on other grounds.39

WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 25 January 2007 and

Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298, affirming in toto the Joint Decision dated 29

May 2002 of the Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210 are hereby

AFFIRMED. No costs.SO ORDERED.


SUPREME COURTManila

EN BANC

G.R. No. L-18719 October 31, 1964PILAR JOAQUIN, ET AL., plaintiffs-appellants,

vs.

FELIX ANICETO, ET AL.,defendants-appellee.

Arturo B. Atienza & F. B. del Rosario for plaintiff appellants.D. A. Karganilla for defendants-appellees.

REGALA,J.:This case comes to Us for review directly from the Court of First Instance of Manila. The facts are not in dispute. They are as

follows:

While Pilar Joaquin was on the sidewalk of Aviles Street, Manila, on April 27, 1960, a taxicab driven by Felix Aniceto and owned

by Ruperto Rodelas bumped her As a result, she suffered physical injuries.

Aniceto was charged with serious physical injuries through reckless imprudence in the Municipal Court (now the City Court) of

Manila. He was subsequently found guilty and sentenced to imprisonment. However, no ruling was made on his civil liability to

the offended party in view of the latter's reservation to file a separate civil action for damages for the injuries suffered by her.

Aniceto appealed the judgment of conviction to the Court of First Instance of Manila. While the criminal case was thus pendingappeal, Pilar Joaquin, the injured party, filed this case for damages in the Court of First Instance of Manila, in accordance with

the reservation which she had earlier made. Felix Aniceto and Ruperto Rodelas, driver and owner, respectively, of the taxicab

were made party defendants.

At the trial of this case, the plaintiff blocked all attempts of Rodelas to prove that, as employer, he had exercised due diligence

in the selection and supervision of his employee, on the ground that such a defense is not available in a civil action brought

under the Penal Code to recover the subsidiary civil liability arising from the crime. The lower court sustained plaintiff's

objection. However, it dismissed the case on the ground that in the absence of a final judgment of conviction against the

driver in the criminal case, any action to enforce the employer's subsidiary civil liability would be premature. Such liability, the

trial court added, may only be enforced on proof of the insolvency of the employee. Hence, this appeal.

The issue in this case is: May an employee's primary civil liability for crime and his employer's subsidiary liability therefor be

proved in a separate civil action even while the criminal case against the employee is still pending?

To begin with, obligations arise from law, contract, quasi-contract, crime and quasi-delict.1According to appellant, her action is

one to enforce the civil liability arising from crimes. With respect to obligations arising from crimes, Article 1161 of the New

Civil Code provides:

Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and

of the pertinent provisions of Chapter 2, Preliminary, Title, on Human Relations, and of Title XVIII of this Book, regulating

damages. (Emphasis supplied)

The Revised Penal Code provides in turn that "every person criminally liable for a felony is also civilly liable"2and that in default


11/31

of the persons criminally liable, employers, teachers persons and corporations engaged in any kind of industry shall be civilly

liable for felonies committed by their servants, pupils, workmen, apprentices or employees in the discharge of their duties.3

As this Court held in City of Manila v. Manila Electric Co., 52 Phil. 586:

... The Penal Code authorizes the determination of subsidiary liability. The Civil Code negatives its applicability providing that

civil obligations arising from crimes or misdemeanors shall be governed by the provisions of the Penal Code. In other words,

the Penal Code affirms its jurisdiction while the Civil Code negatives its jurisdiction.

It is now settled that for an employer to be subsidiarily liable, the following requisites must be present: (1) That an employee

has committed a crime in the discharge of his duties; (2) that said employee is insolvent and has not satisfied his civil liability;

(3) that the employer is engaged in some kind of industry. (1 Padilla, Criminal Law, Revised Penal Code 794 [1964])

Without the conviction of the employee, the employer cannot be subsidiarily liable.

Now, it is no reason to bring such action against the employer on the ground that in cases of defamation, fraud and physical

injuries, Article 33 of the Civil Code authorizes a civil action that is "entirely separate, and distinct from the criminal action,"

(Carangdang v. Santiago, 51 O.G. 2878; Reyes v. De la Rosa, 52 O.G. 6548; Dyogi v. Yatco, G. R. No. L-9623, January 22, 1957).

Can Article 33 above cited be made applicable to an employer in a civil action for subsidiary liability? The answer to this

question is undoubtedly in the negative.

What this article 33 authorizes is an action against the employee on his primary civil liability. It cannot apply to an actionagainst the employer to enforce his subsidiary civil liability as stated above, because such liability arises only after conviction of

the employee in the criminal case. Any action brought against him before the conviction of his employee is premature.

In cases of negligence, the injured party or his heirs has the choice, between an action to enforce the civil liability arising from

crime under Article 100 of the Revised Penal Code and an action for quasi-delict under Articles 2176-2194 of the Civil Code.

(See Barredo v. Garcia and Almario, 73 Phil. 607; Parker v. Panlilio, et al., 91 Phil. 1)

If he chooses an action for quasi-delict, he may hold an employer liable for the negligent act of the employee subject, however,

to the employer's defense of exercise of the diligence of a good father of the family. (Art. 2180, Civil Code)

On the other hand, should he choose to prosecute his action under Article 100 of the Penal Code, he can hold the employer

subsidiarily liable only upon prior conviction of the employee. While a separate and independent civil action for damages may

be brought against the employee under Article 33 of the Civil Code, no such action may be filed against the employer on the

latter's subsidiary civil liability because such liability is governed not by the Civil Code but by the Penal Code, under whichconviction of the employee is a condition sine qua non for the employer's subsidiary liability. If the court trying the employee's

liability adjudges the employee liable, but the court trying the criminal action acquits the employee, the subsequent

insolvency of the employee cannot make the employer subsidiary liable to the offended party or to the latter's heirs.

WHEREFORE, the decision appealed from is affirmed, without pronouncement as to costs.


SUPREME COURTManila

SECOND DIVISION

G.R. No. 169467 February 25, 2010

ALFREDO P. PACIS and CLEOPATRA D. PACIS,Petitioners,vs.

JEROME JOVANNE MORALES,Respondent.

D E C I S I O N

CARPIO,J.:

The Case

This petition for review1 assails the 11 May 2005 Decision2 and the 19 August 2005 Resolution of the Court of Appeals in


12/31

CA-G.R. CV No. 60669.

The Facts

On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis (petitioners) filed with the trial court a civil case for

damages against respondent Jerome Jovanne Morales (respondent). Petitioners are the parents of Alfred Dennis Pacis, Jr.

(Alfred), a 17-year old student who died in a shooting incident inside the Top Gun Firearms and Ammunitions Store (gun store)

in Baguio City. Respondent is the owner of the gun store.The facts as found by the trial court are as follows:

On January 19, 1991, Alfred Dennis Pacis, then 17 years old and a first year student at the Baguio Colleges Foundation taking

up BS Computer Science, died due to a gunshot wound in the head which he sustained while he was at the Top Gun Firearm[s]

and Ammunition[s] Store located at Upper Mabini Street, Baguio City. The gun store was owned and operated by defendant

Jerome Jovanne Morales.

With Alfred Pacis at the time of the shooting were Aristedes Matibag and Jason Herbolario. They were sales agents of the

defendant, and at that particular time, the caretakers of the gun store.

The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a customer of the gun store for repair.

The gun, an AMT Automag II Cal. 22 Rimfire Magnum with Serial No. SN-H34194 (Exhibit "Q"), was left by defendant Morales in

a drawer of a table located inside the gun store.

Defendant Morales was in Manila at the time. His employee Armando Jarnague, who was the regular caretaker of the gun store

was also not around. He left earlier and requested sales agents Matibag and Herbolario to look after the gun store while he and

defendant Morales were away. Jarnague entrusted to Matibag and Herbolario a bunch of keys used in the gun store which

included the key to the drawer where the fatal gun was kept.

It appears that Matibag and Herbolario later brought out the gun from the drawer and placed it on top of the table. Attracted

by the sight of the gun, the young Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis Pacis to return the

gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the young Alfred in the head.

A criminal case for homicide was filed against Matibag before branch VII of this Court. Matibag, however, was acquitted of the

charge against him because of the exempting circumstance of "accident" under Art. 12, par. 4 of the Revised Penal Code.

By agreement of the parties, the evidence adduced in the criminal case for homicide against Matibag was reproduced andadopted by them as part of their evidence in the instant case.3

On 8 April 1998, the trial court rendered its decision in favor of petitioners. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs [Spouses Alfredo P. Pacis and

Cleopatra D. Pacis] and against the defendant [Jerome Jovanne Morales] ordering the defendant to pay plaintiffs

(1) P30,000.00 as indemnity for the death of Alfred Pacis;

(2) P29,437.65 as actual damages for the hospitalization and burial expenses incurred by the plaintiffs;

(3) P100,000.00 as compensatory damages;

(4) P100,000.00 as moral damages;

(5) P50,000.00 as attorneys fees.

SO ORDERED.4

Respondent appealed to the Court of Appeals. In its Decision5 dated 11 May 2005, the Court of Appeals reversed the trial

courts Decision and absolved respondent from civil liability under Article 2180 of the Civil Code.6

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its Resolution dated 19 August 2005.

Hence, this petition.

The Trial Courts RulingThe trial court held respondent civilly liable for the death of Alfred under Article 2180 in relation to Article 2176 of the Civil

Code.7 The trial court held that the accidental shooting of Alfred which caused his death was partly due to the negligence of


13/31


14/31

of enforcing their claim for damages in the homicide case filed against Matibag, petitioners opted to file an independent civil

action for damages against respondent whom they alleged was Matibags employer. Petitioners based their claim for damages

under Articles 2176 and 2180 of the Civil Code.

Unlike the subsidiary liability of the employer under Article 10312 of the Revised Penal Code,13 the liability of the employer, or

any person for that matter, under Article 2176 of the Civil Code is primary and direct, based on a persons own negligence.

Article 2176 states:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the

damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called

quasi-delict and is governed by the provisions of this Chapter.

This case involves the accidental discharge of a firearm inside a gun store.1avvphi1Under PNP Circular No. 9, entitled the

"Policy on Firearms and Ammunition Dealership/Repair," a person who is in the business of purchasing and selling of firearms

and ammunition must maintain basic security and safety requirements of a gun dealer, otherwise his License to Operate

Dealership will be suspended or canceled.14

Indeed, a higher degree of care is required of someone who has in his possession or under his control an instrumentality

extremely dangerous in character, such as dangerous weapons or substances. Such person in possession or control of

dangerous instrumentalities has the duty to take exceptional precautions to prevent any injury being done thereby.15 Unlikethe ordinary affairs of life or business which involve little or no risk, a business dealing with dangerous weapons requires the

exercise of a higher degree of care.

As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and should have known never to

keep a loaded weapon in his store to avoid unreasonable risk of harm or injury to others. Respondent has the duty to ensure

that all the guns in his store are not loaded. Firearms should be stored unloaded and separate from ammunition when the

firearms are not needed for ready-access defensive use.16With more reason, guns accepted by the store for repair should not

be loaded precisely because they are defective and may cause an accidental discharge such as what happened in this case.

Respondent was clearly negligent when he accepted the gun for repair and placed it inside the drawer without ensuring first

that it was not loaded. In the first place, the defective gun should have been stored in a vault. Before accepting the defective

gun for repair, respondent should have made sure that it was not loaded to prevent any untoward accident. Indeed,

respondent should never accept a firearm from another person, until the cylinder or action is open and he has personally

checked that the weapon is completely unloaded.17 For failing to insure that the gun was not loaded, respondent himself wasnegligent. Furthermore, it was not shown in this case whether respondent had a License to Repair which authorizes him to

repair defective firearms to restore its original composition or enhance or upgrade firearms.18

Clearly, respondent did not exercise the degree of care and diligence required of a good father of a family, much less the

degree of care required of someone dealing with dangerous weapons, as would exempt him from liability in this case.

WHEREFORE, we GRANT the petition. We SET ASIDE the 11 May 2005 Decision and the 19 August 2005 Resolution of the Court

of Appeals in CA-G.R. CV No. 60669. We REINSTATE the trial courts Decision dated 8 April 1998.

SO ORDERED.


SUPREME COURT

ManilaEN BANC

G.R. No. 133879 November 21, 2001EQUATORIAL REALTY DEVELOPMENT, INC.,petitioner,

vs.

MAYFAIR THEATER, INC.,respondent.PANGANIBAN,J.:


15/31

General propositions do not decide specific cases. Rather, laws are interpreted in the context of the peculiar factual situation of

each proceeding. Each case has its own flesh and blood and cannot be ruled upon on the basis of isolated clinical classroom

principles.

While we agree with the general proposition that a contract of sale is valid until rescinded, it is equally true that ownership of

the thing sold is not acquired by mere agreement, but by tradition or delivery. The peculiar facts of the present controversy as

found by this Court in an earlier relevant Decision show that delivery was not actually effected; in fact, it was prevented by alegally effective impediment. Not having been the owner, petitioner cannot be entitled to the civil fruits of ownership like

rentals of the thing sold. Furthermore, petitioner's bad faith, as again demonstrated by the specific factual milieu of said

Decision, bars the grant of such benefits. Otherwise, bad faith would be rewarded instead of punished.

The Case

Filed before this Court is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the March 11, 1998 Order2 of

the Regional Trial Court of Manila (RTC), Branch 8, in Civil Case No. 97-85141. The dispositive portion of the assailed Order reads

as follows:

"WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby GRANTED, and the complaint filed by plaintiff

Equatorial is hereby DISMISSED."3

Also questioned is the May 29, 1998 RTC Order4 denying petitioner's Motion for Reconsideration.

The Facts

The main factual antecedents of the present Petition are matters of record, because it arose out of an earlier case decided by

this Court on November 21, 1996, entitled Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.5 (henceforth referred to as

the "mother case"), docketed as G.R No. 106063.

Carmelo & Bauermann, Inc. ("Camelo" ) used to own a parcel of land, together with two 2-storey buildings constructed

thereon, located at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds

of Manila.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. ("Mayfair") for a period of 20 years. The

lease covered a portion of the second floor and mezzanine of a two-storey building with about 1,610 square meters of floor

area, which respondent used as a movie house known as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with Carmelo for the lease of anotherportion of the latter's property namely, a part of the second floor of the two-storey building, with a floor area of about 1,064

square meters; and two store spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square

meters. In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a

period of 20 years.

Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July

30, 1978 within the 20-year-lease term the subject properties were sold by Carmelo to Equatorial Realty Development,

Inc. ("Equatorial") for the total sum of P11,300,000, without their first being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial Court of Manila

(Branch 7) for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and

(c) damages. After trial on the merits, the lower court rendered a Decision in favor of Carmelo and Equatorial. This case, entitled"Mayfair" Theater, Inc. v. Carmelo and Bauermann, Inc., et al.," was docketed as Civil Case No. 118019.

On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely reversed and set aside the judgment of

the lower court.

The controversy reached this Court via G.R No. 106063. In this mother case, it denied the Petition for Review in this wise:

"WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is

HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo &


16/31

Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty

Development the purchase price. The latter is directed to execute the deeds and documents necessary to return ownership to

Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid

lots for P11,300,000.00."6

The foregoing Decision of this Court became final and executory on March 17, 1997. On April 25, 1997, Mayfair filed a Motion

for Execution, which the trial court granted.

However, Carmelo could no longer be located. Thus, following the order of execution of the trial court, Mayfair deposited with

the clerk of court a quoits payment to Carmelo in the sum of P11,300,000 less; P847,000 as withholding tax. The lower court

issued a Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of these documents,

the Registry of Deeds of Manila canceled Equatorial's titles and issued new Certificates of Title7 in the name of Mayfair.

Ruling on Equatorial's Petition for Certiorari and Petition contesting the foregoing manner of execution, the CA in its

Resolution of November 20, 1998, explained that Mayfair had no right to deduct the P847,000 as withholding tax. Since

Carmelo could no longer be located, the appellate court ordered Mayfair to deposit the said sum with the Office of the Clerk of

Court, Manila, to complete the full amount of P11,300,000 to be turned over to Equatorial.

Equatorial questioned the legality of the above CA ruling before this Court in G.R No. 136221 entitled "Equatorial Realty

Development, Inc. v. Mayfair Theater, Inc." In a Decision promulgated on May 12, 2000,8 this Court directed the trial court tofollow strictly the Decision in GR. No. 106063, the mother case. It explained its ruling in these words:

"We agree that Carmelo and Bauermann is obliged to return the entire amount of eleven million three hundred thousand

pesos (P11,300,000.00) to Equatorial. On the other hand, Mayfair may not deduct from the purchase price the amount of eight

hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to withhold taxes due, if any, is imposed on

the seller Carmelo and Bauermann, Inc."9

Meanwhile, on September 18, 1997 barely five months after Mayfair had submitted its Motion for Execution before the RTC

of Manila, Branch 7 Equatorial filed with the Regional Trial Court of Manila, Branch 8, an action for the collection of a sum of

money against Mayfair, claiming payment of rentals or reasonable compensation for the defendant's use of the subject

premises afterits lease contracts had expired. This action was the progenitor of the present case.

In its Complaint, Equatorial alleged among other things that the Lease Contract covering the premises occupied by MaximTheater expired on May 31, 1987, while the Lease Contract covering the premises occupied by Miramar Theater lapsed on

March 31, 1989.10 Representing itself as the owner of the subject premises by reason of the Contract of Sale on July 30, 1978, it

claimed rentals arising from Mayfair's occupation thereof.

Ruling of the RTC Manila, Branch 8

As earlier stated, the trial court dismissed the Complaint via the herein assailed Order and denied the Motion for

Reconsideration filed by Equatorial.11

The lower court debunked the claim of petitioner for unpaid back rentals, holding that the rescission of the Deed of Absolute

Sale in the mother case did not confer on Equatorial any vested or residual proprietary rights, even in expectancy.

In granting the Motion to Dismiss, the court a quo held that the critical issue was whether Equatorial was the owner of the

subject property and could thus enjoy the fruits or rentals therefrom. It declared the rescinded Deed of Absolute Sale as avoidat its inception as though it did not happen."

The trial court ratiocinated as follows:

"The meaning of rescind in the aforequoted decision is to set aside. In the case of Ocampo v. Court of Appeals, G.R. No. 97442,

June 30, 1994, the Supreme Court held that, 'to rescind is to declare a contract void in its inception and to put an end as

though it never were. It is not merely to terminate it and release parties from further obligations to each other but to abrogate

it from the beginning and restore parties to relative positions which they would have occupied had no contract ever been

made.'


17/31

"Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial and Carmelo dated July 31, 1978 is voidat

its inception as though it did not happen.

"The argument of Equatorial that this complaint for back rentals as 'reasonable compensation for use of the subject propertyafter expiration of the lease contractspresumes that the Deed of Absolute Sale dated July 30, 1978 from whence the fountain of

Equatorial's all rights flows is still valid and existing.

xxx xxx xxx

"The subject Deed of Absolute Sale having been rescinded by the Supreme Court, Equatorial is not the owner and does not

have any right to demand backrentals from the subject property. . .12

The trial court added: "The Supreme Court in the Equatorial case, G.R No. 106063, has categorically stated that the Deed of

Absolute Sale dated July 31, 1978 has been rescinded subjecting the present complaint to res judicata."13

Hence, the present recourse.14

Issues

Petitioner submits, for the consideration of this Court, the following issues:15

"A

The basis of the dismissal of the Complaint by the Regional Trial Court not only disregards basic concepts and principles in the

law on contracts and in civil law, especially those on rescission and its corresponding legal effects, but also ignores the

dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled 'Equatorial Realty Development, Inc. &Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc.'

"B.

The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of petitioner by Carmelo & Bauermann, Inc.,

dated July 31, 1978, over the premises used and occupied by respondent, having been 'deemed rescinded' by the Supreme

Court in G.R. No. 106063, is 'void at its inception as though it did not happen.'

"C.

The Regional Trial Court likewise erred in holding that the aforesaid Deed of Absolute Sale, dated July 31, 1978, having been

'deemed rescinded' by the Supreme Court in G.R. No. 106063, petitioner 'is not the owner and does not have any right to

demand backrentals from the subject property,' and that the rescission of the Deed of Absolute Sale by the Supreme Court

does not confer to petitioner 'any vested right nor any residual proprietary rights even in expectancy.'

"D.

The issue upon which the Regional Trial Court dismissed the civil case, as stated in its Order of March 11, 1998, was not raised

by respondent in its Motion to Dismiss."E.

The sole ground upon which the Regional Trial Court dismissed Civil Case No. 97-85141 is not one of the grounds of a Motion

to Dismiss under Sec. 1 of Rule 16 of the 1997 Rules of Civil Procedure."

Basically, the issues can be summarized into two: (1) the substantive issue of whether Equatorial is entitled to back rentals; and

(2) the procedural issue of whether the court a quo's dismissal of Civil Case No. 97-85141 was based on one of the grounds

raised by respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.This Court's Ruling

The Petition is not meritorious.

First Issue:

Ownership of Subject PropertiesWe hold that under the peculiar facts and circumstances of the case at bar, as found by this Court en banc in its Decision

promulgated in 1996 in the mother case, no right of ownership was transferred from Carmelo to Equatorial in view of a patent

failure to deliver the property to the buyer.

Rental a Civil

Fruit of Ownership

To better understand the peculiarity of the instant case, let us begin with some basic parameters. Rent is a civil fruit16 that

belongs to the owner of the property producing it17 by right of accession.18 Consequently and ordinarily, the rentals that fell


18/31

due from the time of the perfection of the sale to petitioner until its rescission by final judgment should belong to the owner of

the property during that period.

By a contract of sale, "one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate

thing and the other to pay therefor a price certain in money or its equivalent."19

Ownership of the thing sold is a real right,20 which the buyer acquires only upon delivery of the thing to him "in any of the waysspecified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the

vendor to the vendee."21 This right is transferred, not merely by contract, but also by tradition or delivery.22 Non nudis pactis

sed traditione dominia rerum transferantur. And there is said to be delivery if and when the thing sold "is placed in the control

and possession of the vendee."23 Thus, it has been held that while the execution of a public instrument of sale is recognized

by law as equivalent to the delivery of the thing sold,24 such constructive or symbolic delivery, being merely presumptive, is

deemed negated by the failure of the vendee to take actual possession of the land sold.25

Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur.

It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and

the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it

means transfer of possession.26 In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery

contemplate "the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption

of the same by the vendee."27

Possession Never

Acquired by Petitioner

Let us now apply the foregoing discussion to the present issue. From the peculiar facts of this case, it is clear that petitioner

never took actual controland possession of the property sold, in view of respondent's timely objection to the sale and the

continued actual possession of the property. The objection took the form of a court action impugning the sale which, as we

know, was rescinded by a judgment rendered by this Court in the mother case. It has been held that the execution of a

contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is no impediment that may

prevent the passing of the property from the hands of the vendor into those of the vendee.28 When there is such impediment,

"fiction yields to reality the delivery has not been effected."29

Hence, respondent's opposition to the transfer of the property by way of sale to Equatorial was a legally sufficient impediment

that effectively prevented the passing of the property into the latter's hands.

This was the same impediment contemplated inVda. de Sarmiento v. Lesaca,30 in which the Court held as follows:

"The question that now arises is: Is there any stipulation in the sale in question from which we can infer that the vendor did not

intend to deliver outright the possession of the lands to the vendee? We find none. On the contrary, it can be clearly seen

therein that the vendor intended to place the vendee in actual possession of the lands immediately as can be inferred from the

stipulation that the vendee 'takes actual possession thereof . . . with full rights to dispose, enjoy and make use thereof in such

manner and form as would be most advantageous to herself.' The possession referred to in the contract evidently refers to

actual possession and not merely symbolical inferable from the mere execution of the document.

"Has the vendor complied with this express commitment? she did not. As provided in Article 1462, the thing sold shall be

deemed delivered when the vendee is placed in the controland possession thereof, which situation does not here obtain

because from the execution of the sale up to the present the vendee was never able to take possession of the lands due to the

insistent refusal of Martin Deloso to surrender them claiming ownership thereof. And although it is postulated in the samearticle that the execution of a public document is equivalent to delivery, this legal fiction only holds true when there is no

impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. x x x."31

The execution of a public instrument gives rise, therefore, only to a prima facie presumption of delivery. Such presumption is

destroyed when the instrument itself expresses or implies that delivery was not intended; or when by other means it is shown

that such delivery was not effected, because a third person was actually in possession of the thing. In the latter case, the sale cannot

be considered consummated.

However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as buyer acquired a right to the fruits of


19/31

the thing sold from the time the obligation to deliver the property to petitioner arose.32 That time arose upon the perfection

of the Contract of Sale on July 30, 1978, from which moment the laws provide that the parties to a sale may reciprocally

demand performance.33 Does this mean that despite the judgment rescinding the sale, the right to the fruits34 belonged to,

and remained enforceable by, Equatorial?

Article 1385 of the Civil Code answers this question in the negative, because "[r]escission creates the obligation to return the

things which were the object of the contract, together with their fruits, and the price with its interest; x x x" Not only the landand building sold, but also the rental payments paid, if any, had to be returned by the buyer.

Another point. The Decision in the mother case stated that "Equatorial x x x has received rents" from Mayfair "during all the

years that this controversy has been litigated." The Separate Opinion of Justice Teodoro Padilla in the mother case also said

that Equatorial was "deriving rental income" from the disputed property. Even hereinponente'sSeparate Concurring Opinion in

the mother case recognized these rentals. The question now is: Do all these statements concede actual delivery?

The answer is "No." The fact that Mayfair paid rentals to Equatorial during the litigation should not be interpreted to mean

either actual delivery or ipso facto recognition of Equatorial's title.

The CA Records of the mother case 35 show that Equatorial as alleged buyer of the disputed properties and as alleged

successor-in-interest of Carmelo's rights as lessor submitted two ejectment suits against Mayfair. Filed in the Metropolitan

Trial Court of Manila, the firstwas docketed as Civil Case No. 121570 on July 9, 1987; and thesecond, as Civil Case No. 131944 on

May 28, 1990. Mayfair eventually won them both. However, to be able to maintain physical possession of the premises whileawaiting the outcome of the mother case, it had no choice but to pay the rentals.

The rental payments made by Mayfair should not be construed as a recognition of Equatorial as the new owner. They were

made merely to avoid imminent eviction. It is in this context that one should understand the aforequoted factual statements in

theponenciain the mother case, as well as the Separate Opinion of Mr. Justice Padilla and the Separate Concurring Opinion of

the hereinponente.

At bottom, it may be conceded that, theoretically, a rescissible contract is valid until rescinded. However, thisgeneralprinciple

is not decisive to the issue of whether Equatorial ever acquired the right to collect rentals. What is decisive is the civil law rule

that ownership is acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of this

controversy as found by this Court in the mother case, Equatorial was never put in actual and effective control or possession of

the property because of Mayfair's timely objection.

As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather, "laws are interpreted in the

context of the peculiar factual situation of each case. Each case has its own flesh and blood and cannot be decided on the basis

of isolated clinical classroom principles."36

In short, the sale to Equatorial may have been valid from inception, but it was judicially rescinded before it could be

consummated. Petitioner never acquired ownership, not because the sale was void, as erroneously claimed by the trial court,

but because the sale was not consummated by a legally effectivedelivery of the property sold.

Benefits Precluded by

Petitioner's Bad Faith

Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is not entitled to any benefits from

the "rescinded" Deed of Absolute Sale because of its bad faith. This being the law of the mother case decided in 1996, it mayno longer be changed because it has long become final and executory. Petitioner's bad faith is set forth in the following

pertinent portions of the mother case:

"First and foremost is that the petitioners acted in bad faithto render Paragraph 8 'inutile.'

xxx xxx xxx

"Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with

respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its


20/31

lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good

faith, and, therefore, rescission lies.

xxx xxx xxx

"As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized by bad faith, since it was

knowingly entered into in violation of the rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of

Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior to the sale. Equatorial's knowledge of thestipulations therein should have cautioned it to look further into the agreement to determine if it involved stipulations that

would prejudice its own interests.

xxx xxx xxx

"On the part of Equatorial, it cannot be a buyer in good faithbecause it bought the property with notice and full knowledge that

Mayfair had a right to or interest in the property superior to its own. Carmelo and Equatorial took unconscientious advantage

of Mayfair."37 (Italics supplied)

Thus, petitioner was and still is entitled solelyto he return of the purchase price it paid to Carmelo; no more, no less. This Court

has firmly ruled in the mother case that neither of them is entitled to any consideration of equity, as both "took

unconscientious advantage of Mayfair."38

In the mother case, this Court categorically denied the payment of interest, a fruit of ownership. By the same token, rentals, anotherfruit of ownership, cannot be granted without mocking this Court's en banc Decision, which has long become final.

Petitioner's claim of reasonable compensation for respondent's use and occupation of the subject property from the time the

lease expired cannot be countenanced. If it suffered any loss, petitioner must bear it in silence, since it had wrought that loss

upon itself.Otherwise, bad faith would be rewarded instead of [email protected]

We uphold the trial court's disposition, not for the reason it gave, but for (a) the patent failure to deliver the property and (b)

petitioner's bad faith, as above discussed.

Second Issue:itc-alf

Ground in Motion to Dismiss

Procedurally, petitioner claims that the trial court deviated from the accepted and usual course of judicial proceedings when it

dismissed Civil Case No. 97-85141 on a ground not raised in respondent's Motion to Dismiss. Worse, it allegedly based its

dismissal on a ground not provided for in a motion to dismiss as enunciated in the Rules of [email protected]

We are not convinced A review of respondent's Motion to Dismiss Civil Case No. 97-85141 shows that there were two grounds

invoked, as follows:

"(A)

Plaintiff is guilty of forum-shopping.itc-alf

"(B)

Plaintiff's cause of action, if any, is barred by prior judgment."39

The court a quoruled, inter alia, that the cause of action of petitioner plaintiff in the case below) had been barred by a prior

judgment of this Court in G.R No. 106063, the mother case.

Although it erred in its interpretation of the said Decision when it argued that the rescinded Deed of Absolute Sale was avoid,"

we hold, nonetheless, that petitioner's cause of action is indeed barred by a prior judgment of this Court. As already discussed,

our Decision in G.R No. 106063 shows that petitioner is not entitled to back rentals, because it never became the owner of the

disputed properties due to a failure of delivery. And even assuming arguendo that there was a valid delivery, petitioner's badfaith negates its entitlement to the civil fruits of ownership, like interest and rentals.

Under the doctrine of res judicata or bar by prior judgment, a matter that has been adjudicated by a court of competent

jurisdi

oblicon 1st cases copy

Documents