oblicon cases 1156-1304

8/9/2019 Oblicon Cases 1156-1304

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TEDDY G. PABUGAIS, petitioner, vs. DAVE P. SAHIJWANI,respondent.D E C I S I O N YNARES-SANTIAGO, J.:

Assailed in this petition for reie! on "ertiorari is the Jan#ar$ %&,'(() A*ended De"ision+% of the Co#rt of Appeals+' in CA-G.R. CNo. /0( !hi"h set aside the Noe*1er '2, %22& De"ision+) of

the Re3ional Trial Co#rt of 4a5ati, 6ran"h &0, in Ciil Case No. 20-')&).

7#rs#ant to an 8A3ree*ent And 9nderta5in3+0 dated De"e*1er ),%22), petitioner Tedd$ G. 7a1#3ais, in "onsideration of the a*o#ntof ;ifteen 4illion ;o#r <#ndred Ei3ht$ Seen Tho#sand ;ie <#ndred7esos =7%,0>/,((.((?, a3reed to sell to respondent Dae 7.Sahi@!ani a lot "ontainin3 %,')2 s#are *eters lo"ated at Ja"arandaStreet, North ;or1es 7ar5, 4a5ati, 4etro 4anila. Respondent paidpetitioner the a*o#nt of 7&((,(((.(( as optionBreseration fee andthe 1alan"e of 7%0,>>/,((.(( to 1e paid !ithin &( da$s fro* theee"#tion of the "ontra"t, si*#ltaneo#s !ith delier$ of the o!nersd#pli"ate Transfer Certi"ate of Title in respondents na*e the Deed

of A1sol#te SaleF the Certi"ate of Non-Ta Delin#en"$ on realestate taes and Clearan"e on 7a$*ent of Asso"iation D#es. Theparties f#rther a3reed that fail#re on the part of respondent to pa$the 1alan"e of the p#r"hase pri"e entitles petitioner to forfeit the7&((,(((.(( optionBreseration feeF !hile non-delier$ 1$ the latterof the ne"essar$ do"#*ents o1li3es hi* to ret#rn to respondent thesaid optionBreseration fee !ith interest at %> per ann#*, th#s H

. DE;A9T H In "ase the ;IRST 7ARTY +herein respondent fails topa$ the 1alan"e of the p#r"hase pri"e !ithin the stip#lated d#edate, the s#* of 7&((,(((.(( shall 1e dee*ed forfeited, on theother hand, sho#ld the SECOND 7ARTY +herein petitioner fail todelier !ithin the stip#lated period the do"#*ents here1$#nderta5en, the SECOND 7ARTY shall ret#rn the s#* of 7&((,(((.((!ith interest at %> per ann#*.+

7etitioner failed to delier the re#ired do"#*ents. In "o*plian"e!ith their a3ree*ent, he ret#rned to respondent the latters

7&((,(((.(( optionBreseration fee 1$ !a$ of ;ar East 6an5 Tr#stCo*pan$ Che"5 No. 'AO0''7, !hi"h !as, ho!eer, dishonored.

Khat transpired thereafter is disp#ted 1$ 1oth parties. 7etitioner"lai*ed that he t!i"e tendered to respondent, thro#3h his "o#nsel,the a*o#nt of 7&/',2((.(( =representin3 the 7&((,(((.((optionBreseration fee pl#s %> interest per ann#* "o*p#ted fro*De"e*1er ), %22) to A#3#st ), %220? in the for* of ;ar East 6an5

Tr#st Co*pan$ 4ana3ers Che"5 No. (>>02>, dated A#3#st ), %220,1#t said "o#nsel ref#sed to a""ept the sa*e. <is rst atte*pt totender pa$*ent !as alle3edl$ *ade on A#3#st ), %220 thro#3h his*essen3erF+& !hile the se"ond one !as on A#3#st >, %220,+/!hen he sent ia D< Korld!ide Seri"es, the *ana3ers "he"5atta"hed to a letter dated A#3#st , %220.+> On A#3#st %%, %220,petitioner !rote a letter to respondent sa$in3 that he is "onsi3nin3the a*o#nt tendered !ith the Re3ional Trial Co#rt of 4a5ati Cit$.+2On A#3#st %, %220, petitioner led a "o*plaint for "onsi3nation.+%(

Respondents "o#nsel, on the other hand, ad*itted that his oL"ere"eied petitioners letter dated A#3#st , %220, 1#t "lai*ed that

no "he"5 !as appended thereto.+%% <e aerred that there !as noalid tender of pa$*ent 1e"a#se no "he"5 !as tendered and the"o*p#tation of the a*o#nt to 1e tendered !as ins#L"ient,+%'1e"a#se petitioner er1all$ pro*ised to pa$ ) *onthl$ interestand ' attorne$s fees as penalt$ for defa#lt, in addition to theinterest of %> per ann#* on the 7&((,(((.(( optionBreserationfee.+%)

On Noe*1er '2, %22&, the trial "o#rt rendered a de"ision de"larin3the "onsi3nation inalid for fail#re to proe that petitioner tenderedpa$*ent to respondent and that the latter ref#sed to re"eie thesa*e. It f#rther held that een ass#*in3 that respondent ref#sedthe tender, the sa*e is @#stied 1e"a#se the *ana3ers "he"5alle3edl$ oMered 1$ petitioner !as not le3al tender, hen"e, there!as no alid tender of pa$*ent. The trial "o#rt ordered petitionerto pa$ respondent the a*o#nt of 7&((,(((.(( !ith interest of %>per ann#* fro* De"e*1er ), %22) #ntil f#ll$ paid, pl#s *oralda*a3es and attorne$s fees.+%0

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7etitioner appealed the de"ision to the Co#rt of Appeals.4ean!hile, his "o#nsel, Att$. Kilhel*ina . Joen, died and she !ass#1stit#ted 1$ Att$. Salador 7. De G#*an, Jr.+% On De"e*1er '(,'((%, petitioner ee"#ted a 8Deed of Assi3n*ent+%& assi3nin3 infaor of Att$. De G#*an, Jr., part of the 7&/',2((.(( "onsi3ned !iththe trial "o#rt as partial pa$*ent of the latters attorne$s fees.+%/ Thereafter, on Jan#ar$ /, '((', petitioner led an E 7arte 4otion to

Kithdra! Consi3ned 4one$.+%> This !as follo!ed 1$ a 84otion toInterene led 1$ Att$. De G#*an, Jr., pra$in3 that the a*o#nt"onsi3ned 1e released to hi* 1$ irt#e of the Deed of Assi3n*ent.+%2

7etitioners *otion to !ithdra! the a*o#nt "onsi3ned !as denied1$ the Co#rt of Appeals and the de"ision of the trial "o#rt !asaLr*ed !ith *odi"ation as to the a*o#nt of *oral da*a3es andattorne$s fees.+'(

On a *otion for re"onsideration, the Co#rt of Appeals de"lared the"onsi3nation as alid in an A*ended De"ision dated Jan#ar$ %&,'((). It held that the alidit$ of the "onsi3nation had the eMe"t of

etin3#ishin3 petitioners o1li3ation to ret#rn the optionBreserationfee to respondent. <en"e, petitioner "an no lon3er !ithdra! thesa*e. The de"retal portion of the A*ended De"ision states:

K<ERE;ORE, pre*ises "onsidered, o#r de"ision dated April '&,'((' is RECONSIDERED. The trial "o#rts de"ision is here1$REERSED and SET ASIDE, and a ne! one is entered =%? DECARINGas alid the "onsi3nation 1$ the plaintiM-appellant in faor ofdefendant-appellee of the a*o#nt of 7&/',2((.(( !ith the 4a5atiCit$ RTC Cler5 of Co#rt and deposited #nder OL"ial Re"eipt No.)/2(&% dated % A#3#st %220 and ='? DECARING as etin3#ishedappellants o1li3ation in faor of appellee #nder para3raph of theparties 8AGREE4ENT AND 9NDERTAING. Neither part$ shallre"oer "osts fro* the other.

SO ORDERED.+'%

9nfaed, petitioner led the instant petition for reie! "ontendin3,inter alia, that he "an !ithdra! the a*o#nt deposited !ith the trial"o#rt as a *atter of ri3ht 1e"a#se at the ti*e he *oed for the!ithdra!al thereof, the Co#rt of Appeals has $et to r#le on the"onsi3nations alidit$ and the respondent had not $et a""epted thesa*e.

The resol#tion of the "ase at 1ar hin3es on the follo!in3 iss#es: =%?

Kas there a alid "onsi3nationP and ='? Can petitioner !ithdra! thea*o#nt "onsi3ned as a *atter of ri3htP

Consi3nation is the a"t of depositin3 the thin3 d#e !ith the "o#rt or @#di"ial a#thorities !heneer the "reditor "annot a""ept or ref#sesto a""ept pa$*ent and it 3enerall$ re#ires a prior tender ofpa$*ent.+'' In order that "onsi3nation *a$ 1e eMe"tie, thede1tor *#st sho! that: =%? there !as a de1t d#eF ='? the"onsi3nation of the o1li3ation had 1een *ade 1e"a#se the "reditorto !ho* tender of pa$*ent !as *ade ref#sed to a""ept it, or1e"a#se he !as a1sent or in"apa"itated, or 1e"a#se seeral persons"lai*ed to 1e entitled to re"eie the a*o#nt d#e or 1e"a#se thetitle to the o1li3ation has 1een lostF =)? preio#s noti"e of the

"onsi3nation had 1een 3ien to the person interested in theperfor*an"e of the o1li3ationF =0? the a*o#nt d#e !as pla"ed at thedisposal of the "o#rtF and =? after the "onsi3nation had 1een *adethe person interested !as notied thereof. ;ail#re in an$ of thesere#ire*ents is eno#3h 3ro#nd to render a "onsi3nation ineMe"tie.+')

The iss#es to 1e resoled in the instant "ase "on"erns one of thei*portant re#isites of "onsi3nation, i.e, the eisten"e of a alidtender of pa$*ent. As testied 1$ the "o#nsel for respondent, thereasons !h$ his "lient did not a""ept petitioners tender of pa$*ent!ere H =%? the "he"5 *entioned in the A#3#st , %220 letter ofpetitioner *anifestin3 that he is settlin3 the o1li3ation !as notatta"hed to the said letterF and ='? the a*o#nt tendered !asins#L"ient to "oer the o1li3ation. It is o1io#s that the reason forrespondents non-a""eptan"e of the tender of pa$*ent !as thealle3ed ins#L"ien"$ thereof H and not 1e"a#se the said "he"5 !asnot tendered to respondent, or 1e"a#se it !as in the for* of

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*ana3ers "he"5. Khile it is tr#e that in 3eneral, a *ana3ers "he"5is not le3al tender, the "reditor has the option of ref#sin3 ora""eptin3 it.+'0 7a$*ent in "he"5 1$ the de1tor *a$ 1e a""epta1leas alid, if no pro*pt o1@e"tion to said pa$*ent is *ade.+'Conse#entl$, petitioners tender of pa$*ent in the for* of*ana3ers "he"5 is alid.

Anent the s#L"ien"$ of the a*o#nt tendered, it appears that onl$

the interest of %> per ann#* on the 7&((,(((.((optionBreseration fee stated in the defa#lt "la#se of the 8A3ree*entAnd 9nderta5in3 !as a3reed #pon 1$ the parties, th#s H

. DE;A9T H In "ase the ;IRST 7ARTY +herein respondent fails topa$ the 1alan"e of the p#r"hase pri"e !ithin the stip#lated d#edate, the s#* of 7&((,(((.(( shall 1e dee*ed forfeited, on theother hand, sho#ld the SECOND 7ARTY +herein petitioner fail todelier !ithin the stip#lated period the do"#*ents here1$#nderta5en, the SECOND 7ARTY shall ret#rn the s#* of 7&((,(((.((!ith interest at %> per ann#*.+'&

The *ana3ers "he"5 in the a*o#nt of 7&/',2((.(( =representin3

the 7&((,(((.(( optionBreseration fee pl#s %> interest per ann#*"o*p#ted fro* De"e*1er ), %22) to A#3#st ), %220? !hi"h !astendered 1#t ref#sed 1$ respondent, and thereafter "onsi3ned !iththe "o#rt, !as eno#3h to satisf$ the o1li3ation.

There 1ein3 a alid tender of pa$*ent in an a*o#nt s#L"ient toetin3#ish the o1li3ation, the "onsi3nation is alid.

As re3ards petitioners ri3ht to !ithdra! the a*o#nt "onsi3ned,relian"e on Arti"le %'&( of the Ciil Code is *ispla"ed. The saidArti"le proides H

Art. %'&(. On"e the "onsi3nation has 1een d#l$ *ade, the de1tor*a$ as5 the @#d3e to order the "an"ellation of the o1li3ation.

6efore the "reditor has a""epted the "onsi3nation, or 1efore a @#di"ial "onr*ation that the "onsi3nation has 1een properl$ *ade,

the de1tor *a$ !ithdra! the thin3 or the s#* deposited, allo!in3the o1li3ation to re*ain in for"e.

The a*o#nt "onsi3ned !ith the trial "o#rt "an no lon3er 1e!ithdra!n 1$ petitioner 1e"a#se respondents pra$er in his ans!erthat the a*o#nt "onsi3ned 1e a!arded to hi* is e#ialent to ana""eptan"e of the "onsi3nation, !hi"h has the eMe"t ofetin3#ishin3 petitioners o1li3ation.

4oreoer, petitioner failed to *anifest his intention to "o*pl$ !iththe 8A3ree*ent And 9nderta5in3 1$ delierin3 the ne"essar$do"#*ents and the lot s#1@e"t of the sale to respondent in e"han3efor the a*o#nt deposited. Kithdra!al of the *one$ "onsi3ned!o#ld enri"h petitioner and #n@#stl$ pre@#di"e respondent.

The !ithdra!al of the a*o#nt deposited in order to pa$ attorne$sfees to petitioners "o#nsel, Att$. De G#*an, Jr., iolates Arti"le%02% of the Ciil Code !hi"h for1ids la!$ers fro* a"#irin3 1$assi3n*ent, propert$ and ri3hts !hi"h are the o1@e"t of an$liti3ation in !hi"h the$ *a$ ta5e part 1$ irt#e of their profession.+'/ ;#rther*ore, R#le %( of the Canons of 7rofessional Ethi"s

proides that 8the la!$er sho#ld not p#r"hase an$ interest in thes#1@e"t *atter of the liti3ation !hi"h he is "ond#"tin3. Theassailed transa"tion falls !ithin the prohi1ition 1e"a#se the Deedassi3nin3 the a*o#nt of 7&/',2((.(( to Att$. De G#*an, Jr., as partof his attorne$s fees !as ee"#ted d#rin3 the penden"$ of this "ase!ith the Co#rt of Appeals. In his 4otion to Interene, Att$. DeG#*an, Jr., not onl$ asserted o!nership oer said a*o#nt, 1#tli5e!ise pra$ed that the sa*e 1e released to hi*. That petitioner5no!in3l$ and ol#ntaril$ assi3ned the s#1@e"t a*o#nt to his"o#nsel did not re*oe their a3ree*ent !ithin the a*1it of theprohi1itor$ proisions.+'> To 3rant the !ithdra!al !o#ld 1e tosan"tion a oid "ontra"t.+'2

K<ERE;ORE, in ie! of all the fore3oin3, the instant petition forreie! is DENIED. The Jan#ar$ %&, '(() A*ended De"ision of theCo#rt of Appeals in CA-G.R. C No. /0(, !hi"h de"lared the"onsi3nation 1$ the petitioner in faor of respondent of the a*o#ntof 7&/',2((.(( !ith the Cler5 of Co#rt of the Re3ional Trial Co#rt of

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4a5ati Cit$ alid, and !hi"h de"lared petitioners o1li3ation torespondent #nder para3raph of the 8A3ree*ent And 9nderta5in3as hain3 1een etin3#ished, is A;;IR4ED. No "osts.

SO ORDERED.

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G.R. No. %0'>>' 4a$ ', '((&

S7S. RICARDO AND YDIA O6RERA, S7S. 6ENJA4IN AND EST<ERO6RERA, S7S. 4IE AND RESIDA 4AA, S7S. OTOR ANDDOINANG 6AGONTE, S7S. ED9ARDO AND DA4IANA ICO, S7S.ANTONIO AND 4ERY SOO4ON, S7S. ANSE4O AND ICYSOO4ON, S7S. AEQ AND CAR4EITA CAEJO, S7S. DE4ETRIOAND JOSE;INA ;ERRER, S7S. 6ENJA4IN AND ANITA 4ISANG, S7S.

DO4INGO AND ;EICIDAD SANC<E, S7S. ;ERNANDO ANDCAR4EITA 9E6RA, S7S. 6ERNARDO AND 7RISCIA 4OINA,7RISCIA 6AGA AND 6EEN SE46RANO, 7etitioners,s. JOSE;INA . ;ERNANDE, Respondent.

D E C I S I O N

GARCIA, J.:

9nder "onsideration is this petition for reie! on "ertiorari #nderR#le 0 of the R#les of Co#rt to n#llif$ and set aside the follo!in3iss#an"es of the Co#rt of Appeals =CA? in CA-G.R. S7 No. 0>2%>, to

!it:

%. De"ision dated J#ne )(, %222,% aLr*in3 the De"ision datedA#3#st /, %22> of the Re3ional Trial Co#rt =RTC? of Da3#pan Cit$,6ran"h 0%, in Ciil Case No. 2>-('))-D !hi"h aLr*ed an earlierde"ision of the 4#ni"ipal Trial Co#rt in Cities =4TCC?, Da3#pan Cit$,6ran"h ', in Ciil Case No. %(>0>, entitled Josena ;. De ene"ia;ernande s. Sps. 4ariano and o#rdes 4ele"io, et al., an a"tionfor e@e"t*ent.

'. Resol#tion dated 4ar"h '/, '(((,' den$in3 petitioners *otion forre"onsideration.

S#1@e"t of the "ontroers$ is a %,>02 s#are-*eter par"el of land,"oered 1$ Transfer Certi"ate of Title No. 2(0'. Respondent Josena . ;ernande, as one of the re3istered "o-o!ners of theland, sered a !ritten de*and letter #pon petitioners Spo#seslo1rera, et al., to a"ate the pre*ises !ithin fteen =%? da$s fro*

noti"e. Re"eipt of the de*and letter not!ithstandin3, petitionersref#sed to a"ate, ne"essitatin3 the lin3 1$ the respondent of afor*al "o*plaint a3ainst the* 1efore the 6aran3a$ Captain of6aran3a$ %%, Da3#pan Cit$. 9pon fail#re of the parties to rea"h an$settle*ent, the 6aran3a$ Captain iss#ed the ne"essar$ "erti"ationto le a"tion.

Respondent then led a eried Co*plaint for e@e"t*ent and

da*a3es a3ainst the petitioners 1efore the 4TCC of Da3#pan Cit$,!hi"h "o*plaint !as raUed to 6ran"h ' thereof.

6$ !a$ of defense, petitioners alle3ed in their Ans!er that the$ had1een o""#p$in3 the propert$ in #estion 1e3innin3 the $ear %20on!ards, !hen their prede"essors-in-interest, !ith the per*ission of G#al1erto de ene"ia, one of the other "o-o!ners of said land,deeloped and o""#pied the sa*e on "ondition that the$ !ill pa$their *onthl$ rental of 7'(.(( ea"h. ;ro* then on, the$ hae"ontin#o#sl$ paid their *onthl$ rentals to G#al1erto de ene"ia orRosita de ene"ia or their representaties, s#"h pa$*ents 1ein3d#l$ a"5no!led3ed 1$ re"eipts. 6e3innin3 so*eti*e J#ne %22&,ho!eer, the representatie of G#al1erto de ene"ia ref#sed to

a""ept their rentals, pro*ptin3 the* to "onsi3n the sa*e to 6an"oSan J#an, !hi"h 1an5 deposit the$ "ontin#ed to *aintain and #pdate!ith their *onthl$ rental pa$*ents.

In a de"ision dated ;e1r#ar$ %>, %22>, the 4TCC rendered @#d3*entfor the respondent as plaintiM, th#s:

K<ERE;ORE, pre*ises "onsidered, @#d3*ent is here1$ rendered infaor of the plaintiM and a3ainst the defendants as follo!s:

%. Orderin3 ea"h of the defendants to a"ate the portion of the landin #estion the$ respe"tiel$ o""#p$ and to restore the possessionthereof to the plaintiM and her "o-o!nersF

'. Orderin3 ea"h of the defendants to pa$ to the plaintiM the a*o#ntof 7)((.(( per *onth fro* Jan#ar$ %/, %22/ #ntil the$ a"ate theland in #estion as the reasona1le "o*pensation for the #se ando""#pation of the pre*isesF

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). Orderin3 the defendants to pa$ proportionatel$ the a*o#nt of7%(,(((.(( as attorne$s fee and 7',(((.(( as liti3ation epenses,and to pa$ the "ost of s#it.

SO ORDERED.

On petitioners appeal to the RTC of Da3#pan Cit$, 6ran"h 0%

thereof, in its de"ision of A#3#st /, %22>, aLr*ed the fore3oin3 @#d3*ent.

Therefro*, petitioners !ent to the CA !hereat their re"o#rse !asdo"5eted as CA-G.R. S7. No. 0>2%>. As stated at the thresholdhereof, the CA, in its De"ision of J#ne )(, %222, aLr*ed that of theRTC. Kith the CAs denial of their *otion for re"onsideration, in itsResol#tion of 4ar"h '/, '(((, petitioners are no! 1efore this Co#rt!ith the follo!in3 assi3n*ent of errors:

T<E <ONORA6E CO9RT O; A77EAS GRAEY ERRED IN:

A. <ODING T<AT T<E OCC97ATION AND 7OSSESSION o; T<E

7RO7ERTY in #estion is 1$ *ere toleran"e of the respondent.

6. holdin3 that the fail#re of the petitioners =defendants? to a"atethe pre*ises after de*ands !ere *ade #pon the* is a alid 3ro#ndfor their e@e"t*ent.

C. holdin3 that the "onsi3nation *ade 1$ petitioners in"onte*plation of arti"le %'& of the ne! "iil "ode is not le3all$tena1le.%aphil.net

D. aLr*in3 the de"ision of the re3ional trial "o#rt dated A#3#st /,%22> !hi"h, li5e!ise aLr*ed the de"ision of the *t"" de"isiondated ;e1r#ar$ %>, %22> insofar as the order for the petitioners

=defendants? to pa$ rental and attorne$s fees and liti3ationepenses.

At the heart of the "ontroers$ is the iss#e of !hether petitionerspossession of the s#1@e"t propert$ is fo#nded on "ontra"t or not.

This fa"t#al iss#e !as resoled 1$ the three =)? "o#rts 1elo! in faorof respondent. As tersel$ p#t 1$ the CA in its assailed de"ision of J#ne )(, %222:

7etitioners failed to present an$ !ritten *e*orand#* of the alle3edlease arran3e*ents 1et!een the* and G#al1erto De ene"ia. There"eipts "lai*ed to hae 1een iss#ed 1$ the o!ner !ere notpresented on the e"#se that the 4ar"h %2, %22& re 1#rned the

sa*e. Si*pl$ p#t, there is a dearth of eiden"e to s#1stantiate theaerred lessor-lessee relationship. .)

Consistent !ith this Co#rts lon3-standin3 poli"$, !hen the three"o#rts 1elo! hae "onsistentl$ and #nani*o#sl$ r#led on a fa"t#aliss#e, s#"h r#lin3 is dee*ed nal and "on"l#sie #pon this Co#rt,espe"iall$ in the a1sen"e of an$ "o3ent reason to depart therefro*.

;ro* the a1sen"e of proof of an$ "ontra"t#al 1asis for petitionerspossession of the s#1@e"t pre*ises, the onl$ le3al i*pli"ation is thattheir possession thereof is 1$ *ere toleran"e. In Roas s. Co#rt ofAppeals,0 !e r#led:

A person !ho o""#pies the land of another at the latters toleran"eor per*ission, !itho#t an$ "ontra"t 1et!een the*, is ne"essaril$1o#nd 1$ an i*plied pro*ise that he !ill a"ate #pon de*and,failin3 !hi"h, a s#**ar$ a"tion for e@e"t*ent is the proper re*ed$a3ainst hi*.

The @#d3*ent faorin3 the e@e"t*ent of petitioners 1ein3 "onsistent!ith la! and @#rispr#den"e "an onl$ 1e aLr*ed. The alle3ed"onsi3nation of the 7'(.(( *onthl$ rental to a 1an5 a""o#nt inrespondents na*e "annot sae the da$ for the petitioners si*pl$1e"a#se of the a1sen"e of an$ "ontra"t#al 1asis for their "lai* tori3htf#l possession of the s#1@e"t propert$. Consi3nation 1ased onArti"le %'& of the Ciil Code indispensa1l$ re#ires a "reditor-

de1tor relationship 1et!een the parties, in the a1sen"e of !hi"h,the le3al eMe"ts thereof "annot 1e aailed of.

Arti"le %'& pertinentl$ proides:

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Art. %'&. If the "reditor to !ho* tender of pa$*ent has 1een *aderef#ses !itho#t @#st "a#se to a""ept it, the de1tor shall 1e releasedfro* responsi1ilit$ 1$ the "onsi3nation of the thin3 or s#* d#e.

9nless there is an #n@#st ref#sal 1$ a "reditor to a""ept pa$*entfro* a de1tor, Arti"le %'& "annot appl$. In the present "ase, thepossession of the propert$ 1$ the petitioners 1ein3 1$ *eretoleran"e as the$ failed to esta1lish thro#3h "o*petent eiden"e

the eisten"e of an$ "ontra"t#al relations 1et!een the* and therespondent, the latter has no o1li3ation to re"eie an$ pa$*entfro* the*. Sin"e respondent is not a "reditor to petitioners as far asthe alle3ed 7'(.(( *onthl$ rental pa$*ent is "on"erned,respondent "annot 1e "o*pelled to re"eie s#"h pa$*ent eenthro#3h "onsi3nation #nder Arti"le %'&. The 1an5 deposit *ade 1$the petitioners intended as "onsi3nation has no le3al eMe"t insofaras the respondent is "on"erned.

;inall$, as re3ards the da*a3es a!arded 1$ the 4TCC in faor of therespondent, as aLr*ed 1$ 1oth the RTC and the CA, petitionersfailed to present an$ "onin"in3 ar3#*ent for the Co#rt to *odif$the sa*e. The fa"ts of the "ase d#l$ !arrant pa$*ent 1$ the

petitioners to respondent of a"t#al and "o*pensator$ da*a3es fordepriin3 the latter of the 1ene"ial #se and possession of thepropert$. Also, the #n@#stied ref#sal to s#rrender possession of thepropert$ 1$ the petitioners !ho !ere f#ll$ a!are that the$ "annotpresent an$ "o*petent eiden"e 1efore the "o#rt to proe their"lai* to ri3htf#l possession as a3ainst the tr#e o!ners is a alidle3al 1asis to a!ard attorne$s fees as da*a3es, as !ell as liti3ationepenses and "ost of s#it.

R#le /( of the R#les of Co#rt releantl$ reads:

Se". %/. J#d3*ent. H If after trial the "o#rt nds that the alle3ationsof the "o*plaint are tr#e, it shall render @#d3*ent in faor of the

plaintiM for the restit#tion of the pre*ises, the s#* @#stl$ d#e asarrears of rent or as reasona1le "o*pensation for the #se ando""#pation of the pre*ises, attorne$s fees and "osts. If it nds thatsaid alle3ations are not tr#e, it shall render @#d3*ent for thedefendant to re"oer his "osts. If a "o#nter"lai* is esta1lished, the

"o#rt shall render @#d3*ent for the s#* fo#nd in arrears fro* eitherpart$ and a!ard "osts as @#sti"e re#ires. =E*phasis s#pplied?.

There is no do#1t !hatsoeer that it is !ithin the 4TCCs"o*peten"e and @#risdi"tion to a!ard attorne$s fees and "osts in ane@e"t*ent "ase. After thoro#3hl$ "onsiderin3 petitioners ar3#*entsin this respe"t, the Co#rt "annot nd an$ stron3 and "o*pellin3reason to dist#r1 the #nani*o#s r#lin3 of the three =)? "o#rts 1elo!

on the *atter of da*a3es.

K<ERE;ORE, the petition is here1$ DENIED for la"5 of *erit, !ith"osts a3ainst petitioners.

SO ORDERED.

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G.R. No. %/''2 De"e*1er , '((&

S7S. JAI4E 6ENOS and 4ARINA 6ENOS, petitioners,s.S7S. GREGORIO AKIAO and JANICE GAI AKIAO, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for reie! #nder R#le 0 of the R#les of Co#rt assailsthe De"e*1er , '(( De"ision% of the Co#rt of Appeals in CA-G.R.S7 No. />>0, aLr*in3 the J#d3*ent' dated J#l$ %, '(() of theRe3ional Trial Co#rt of 6onto", 4o#ntain 7roin"e, 6ran"h ), in CiilCase No. %(2%. The Re3ional Trial Co#rt reersed the De"ision)dated Noe*1er %0, '((' of the 4#ni"ipal Cir"#it Trial Co#rt of6a#5o, 4o#ntain 7roin"e in Ciil Case No. )%0, and ordered the"onsolidation of o!nership of s#1@e"t propert$ in the na*e ofrespondent-spo#ses Gre3orio and Jani"e Gail a!ilao. Also assailed

is the 4ar"h %/, '((& Resol#tion0 den$in3 petitioners *otion forre"onsideration.

The ante"edent fa"ts are as follo!s:

On ;e1r#ar$ %%, %222, petitioner-spo#ses Jai*e and 4arina 6enos=the 6enos spo#ses? and respondent-spo#ses Gre3orio and Jani"eGail a!ilao =the a!ilao spo#ses? ee"#ted a 7a"to de RetroSale !here the 6enos spo#ses sold their lot "oered 1$ TaDe"laration No. ')(( and the 1#ildin3 ere"ted thereon for7)((,(((.((, one half of !hi"h !as to 1e paid in "ash to the 6enosspo#ses and the other half to 1e paid to the 1an5 to pa$ oM the loanof the 6enos spo#ses !hi"h !as se"#red 1$ the sa*e lot and

1#ildin3. 9nder the "ontra"t, the 6enos spo#ses "o#ld redee* thepropert$ !ithin %> *onths fro* date of ee"#tion 1$ ret#rnin3 the"ontra"t pri"e, other!ise, the sale !o#ld 1e"o*e irreo"a1le!itho#t ne"essit$ of a nal deed to "onsolidate o!nership oer thepropert$ in the na*e of the a!ilao spo#ses.

After pa$in3 the 7%(,(((.((, the a!ilao spo#ses i**ediatel$ too5possession of the propert$ and leased o#t the 1#ildin3 thereon.<o!eer, instead of pa$in3 the loan to the 1an5, Jani"e a!ilaorestr#"t#red it t!i"e. Eent#all$, the loan 1e"a*e d#e andde*anda1le.

On A#3#st %0, '(((, a son of the 6enos spo#ses paid the 1an5

7%2,(((.(( representin3 the prin"ipal and interest. On the sa*eda$, the a!ilao spo#ses also !ent to the 1an5 and oMered to pa$the loan, 1#t the 1an5 ref#sed to a""ept the pa$*ent. The a!ilaospo#ses then led !ith the 4#ni"ipal Cir"#it Trial Co#rt a petition&do"5eted as Ciil Case No. )%( for "onsi3nation a3ainst the 1an5and si*#ltaneo#sl$ deposited the a*o#nt of 7%2,(((.((. 9pon the1an5s *otion, the "o#rt dis*issed the petition for la"5 of "a#se ofa"tion.

S#1se#entl$, the a!ilao spo#ses led !ith the 4#ni"ipal Cir"#it Trial Co#rt a "o*plaint do"5eted as Ciil Case No. )%0, for"onsolidation of o!nership. This "o*plaint is the pre"#rsor of theinstant petition. The 6enos spo#ses *oed to dis*iss on 3ro#nds of

la"5 of @#risdi"tion and la"5 of "a#se of a"tion 1#t it !as denied andthe parties !ent to trial.

On Noe*1er %0, '((', the 4#ni"ipal Cir"#it Trial Co#rt rendered @#d3*ent in faor of the 6enos spo#ses, the dispositie portion of!hi"h states:

IN T<E IG<T of all the fore3oin3 "onsiderations, for la"5 of le3al andfa"t#al 1asis to de*and "onsolidation of o!nership oer the s#1@e"tpropert$, the a1oe-entitled "ase is here1$ ordered dis*issed.

No prono#n"e*ent as to da*a3es on the 3ro#nd that no pre*i#*sho#ld 1e assessed on the ri3ht to liti3ate.

No "osts.

SO ORDERED./

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The a!ilao spo#ses appealed 1efore the Re3ional Trial Co#rt !hi"hreersed the 4#ni"ipal Cir"#it Trial Co#rt and de"lared theo!nership of the s#1@e"t propert$ "onsolidated in faor of thea!ilao spo#ses.>

The 6enos spo#ses appealed to the Co#rt of Appeals !hi"h aLr*edthe Re3ional Trial Co#rt on De"e*1er , '((. The dispositieportion of the De"ision reads:

K<ERE;ORE, the petition for reie! is DIS4ISSED for la"5 ofs#L"ient *erit. The de"ision rendered 1$ the Re3ional Trial Co#rt,6ran"h ), 6onto", 4o#ntain 7roin"e in Ciil Case No. %(2% on % J#l$ '((), reersin3 the de"ision of the 4#ni"ipal Cir"#it Trial Co#rtof 6a#5o-Sa1an3an, 4o#ntain 7roin"e in =Ciil Case No.? )%0, isA;;IR4ED.

SO ORDERED.2

The appellate "o#rt denied petitioners *otion for re"onsideration,hen"e, the instant petition on the follo!in3 assi3n*ent of errors:

0.(. It !as error for the Re3ional Trial Co#rt and, s#1se#entl$, theCo#rt of Appeals to r#le that respondents "an "onsolidate o!nershipoer the s#1@e"t propert$.

0.%. It !as li5e!ise error for said lo!er "o#rts not to hae r#led thatthe "ontra"t 1et!een the parties is a"t#all$ an e#ita1le*ort3a3e.%(

The 6enos spo#ses ar3#e that "onsolidation is not proper 1e"a#sethe a!ilao spo#ses iolated the ter*s of the "ontra"t 1$ not pa$in3the 1an5 loanF that hain3 1rea"hed the ter*s of the "ontra"t, thea!ilao spo#ses "annot insist on the perfor*an"e thereof 1$ the6enos spo#sesF that the "ontra"t !as a"t#all$ an e#ita1le

*ort3a3e as sho!n 1$ the inade#a"$ of the "onsideration for thes#1@e"t propert$F and that respondent-spo#ses re*ed$ sho#ld hae1een for re"oer$ of the loan or fore"los#re of *ort3a3e.

The a!ilao spo#ses, on the other hand, assert that the 7a"to deRetro Sale reVe"ted the parties tr#e a3ree*entF that the 6enosspo#ses "annot ar$ its ter*s and "onditions 1e"a#se the$ did notp#t in iss#e in their pleadin3s its a*1i3#it$, *ista5e or i*perfe"tionas !ell as its fail#re to epress the parties tr#e intentionF that the6enos spo#ses ad*itted its 3en#ineness and d#e ee"#tionF andthat the delier$ of the propert$ to the a!ilao spo#ses after theee"#tion of the "ontra"t sho!s that the a3ree*ent !as a sale !ith

a ri3ht of rep#r"hase and not an e#ita1le *ort3a3e.

The a!ilao spo#ses also "lai* that the$ "o*plied !ith theiro1li3ation !hen the$ oMered to pa$ the loan to the 1an5 and led apetition for "onsi3nationF and that 1e"a#se of the fail#re of the6enos spo#ses to redee* the propert$, the title and o!nershipthereof i**ediatel$ ested in the* =a!ilao spo#ses?.

The iss#e for resol#tion is !hether the a!ilao spo#ses "an"onsolidate o!nership oer the s#1@e"t propert$.

The petition is i*pressed !ith *erit.

In r#lin3 for respondents, the Co#rt of Appeals held that: =%? thepa"to de retro sale !as perfe"ted 1e"a#se the parties ol#ntaril$a3reed #pon the o1@e"t thereof and the pri"eF ='? the a!ilaospo#ses a"#ired possession oer the propert$ i**ediatel$ afteree"#tion of the pa"to de retro saleF =)? the pa"to de retro sale doesnot proide for a#to*ati" res"ission in "ase the a!ilao spo#ses failto pa$ the f#ll pri"eF =0? the 6enos spo#ses did not res"ind the"ontra"t after the a!ilao spo#ses failed to pa$ the 7%(,(((.((loanF =? Jani"e a!ilao oMered to pa$ the loan and deposited7%(,(((.(( to the 1an5 altho#3h the period for pa$*ent hadepired th#s, "o*pl$in3 !ith Arti"le %2' of the Ciil Code allo!in3pa$*ent een after epiration of the period as lon3 as no de*andfor res"ission of the "ontra"t had 1een *ade either @#di"iall$ or 1$ a

notarial a"tF =&? the title and o!nership of the a!ilao spo#ses1e"a*e a1sol#te !hen the 6enos spo#ses failed to rep#r"hase thelot !ithin the rede*ption periodF and =/? the pa$*ent 1$ the 6enosspo#ses son of 7%2,(((.(( to the 1an5 does not a*o#nt to arep#r"hase as it iolates Arti"le %&%& of the Ciil Code re#irin3 the

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endor to ret#rn to the endee the pri"e of the sale, the epenses of the "ontra"t and other ne"essar$ and #sef#l epenses.%%

Contrar$ to the aforesaid ndin3s, the eiden"e sho!s that thea!ilao spo#ses did not *a5e a alid tender of pa$*ent and"onsi3nation of the 1alan"e of the "ontra"t pri"e. As "orre"tl$ fo#nd1$ the Re3ional Trial Co#rt:

As *atters stand, no alid tender of pa$*ent andBor "onsi3nation of the 7%(,(((.(( !hi"h the Appellant =a!ilaos? still o!es theAppellee =6enos? has 1een eMe"ted 1$ the for*er. The a*o#nt of7%2,(((.(( deposited !ith the 4CTC is in relation to Ciil Case No.)%( earlier dis*issed 1$ said "o#rt, and not to the instant a"tion.<en"e, this Co#rt "annot a#to*ati"all$ appl$ s#"h s#* insatisfa"tion of the aforesaid de1t of the Appellant and order theAppellee "reditor to a""ept the sa*e.%' =E*phasis s#pplied?

The a!ilao spo#ses did not appeal said ndin3, and it has 1e"o*enal and 1indin3 on the*. Altho#3h the$ had repeatedl$ alle3ed intheir pleadin3s that the a*o#nt of 7%2,(((.(( !as still !ith thetrial "o#rt !hi"h the 6enos spo#ses "o#ld !ithdra! an$ti*e, the$

neer *ade an$ step to !ithdra! the a*o#nt and thereafter"onsi3n it. Co*plian"e !ith the re#ire*ents of tender and"onsi3nation to hae the eMe"t of pa$*ent are *andator$. Th#s H

Tender of pa$*ent is the *anifestation 1$ de1tors of their desire to"o*pl$ !ith or to pa$ their o1li3ation. If the "reditor ref#ses thetender of pa$*ent !itho#t @#st "a#se, the de1tors are dis"har3edfro* the o1li3ation 1$ the "onsi3nation of the s#* d#e.Consi3nation is *ade 1$ depositin3 the proper a*o#nt to the @#di"ial a#thorit$, 1efore !ho* the tender of pa$*ent and theanno#n"e*ent of the "onsi3nation shall 1e proed. All interestedparties are to 1e notied of the "onsi3nation. Co*plian"e !ith thesere#isites is *andator$.%) =E*phasis s#pplied?

In the instant "ase, re"ords sho! that the a!ilao spo#ses led thepetition for "onsi3nation a3ainst the 1an5 in Ciil Case No. )%(!itho#t notif$in3 the 6enos spo#ses. The petition !as dis*issed forla"5 of "a#se of a"tion a3ainst the 1an5. <en"e, the a!ilao spo#ses

failed to proe their oMer to pa$ the 1alan"e of the p#r"hase pri"eand "onsi3nation. In fa"t, een 1efore the lin3 of the "onsi3nation"ase, the a!ilao spo#ses neer notied the 6enos spo#ses of theiroMer to pa$.

Th#s, as far as the 6enos are "on"erned, there !as no f#ll and"o*plete pa$*ent of the "ontra"t pri"e, !hi"h 3ies the* the ri3htto res"ind the "ontra"t p#rs#ant to Arti"les %%2% in relation to Arti"le

%2' of the Ciil Code, !hi"h proide:

Art. %%2%. The po!er to res"ind o1li3ations is i*plied in re"ipro"alones, in "ase one of the o1li3ors sho#ld not "o*pl$ !ith !hat isin"#*1ent #pon hi*.

The in@#red part$ *a$ "hoose 1et!een the f#lll*ent and theres"ission of the o1li3ation, !ith the pa$*ent of da*a3es in either"ase. <e *a$ also see5 res"ission, een after he has "hosenf#lll*ent, if the latter sho#ld 1e"o*e i*possi1le.

The "o#rt shall de"ree the res"ission "lai*ed, #nless there 1e @#st"a#se a#thoriin3 the in3 of a period.

This is #nderstood to 1e !itho#t pre@#di"e to the ri3hts of thirdpersons !ho hae a"#ired the thin3, in a""ordan"e !ith Arti"les%)> and %)>> of the 4ort3a3e a!.

Art. %2'. In the sale of i**oa1le propert$, een tho#3h it *a$hae 1een stip#lated that #pon fail#re to pa$ the pri"e at the ti*ea3reed #pon the res"ission of the "ontra"t shall of ri3ht ta5e pla"e,the endee *a$ pa$, een after the epiration of the period, as lon3as no de*and for res"ission of the "ontra"t has 1een *ade #ponhi* either @#di"iall$ or 1$ a notarial a"t. After the de*and, the "o#rt*a$ not 3rant hi* a ne! ter*.

In the instant "ase, !hile the 6enos spo#ses did not res"ind the7a"to de Retro Sale thro#3h a notarial a"t, the$ neerthelessres"inded the sa*e in their Ans!er !ith Co#nter"lai* !here the$stated that:

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%0. 7laintiMs did not perfor* their o1li3ation as spelled o#t in the7a"to de Retro Sale =ANNEQ A?, parti"#larl$ the ass#*ption of theo1li3ation of defendants to the R#ral 6an5 of 6onto". Defendants!ere the ones !ho paid their loan thro#3h their son, ADY 6ENOS.As a res#lt, ANNEQ A is rendered n#ll and of no eMe"t. Therefore,the ENDEE a retro !ho is one of plaintiMs herein "annot "onsolidateher o!nership oer the propert$ s#1@e"t of the n#ll and ineMe"tieinstr#*ent.

%. Sin"e plaintiMs did not perfor* their "orrespondin3 o1li3ation#nder ANNEQ A, defendants hae 1een all too !illin3 to ret#rn thea*o#nt of ON+E <9NDRED ;I;TY T<O9SAND 7ESOS =7%(,(((.((?and reasona1le interest thereon to plaintiMs. 6#t plaintiMs ref#sed toa""ept the sa*e.

Kith the lin3 of this ans!er, defendants pra$ that this seres as anoti"e of tender of pa$*ent, and the$ shall "onsi3n the a*o#nt !iththe proper "o#rt as soon as it is le3all$ feasi1le.%0

The$ also pra$ed that the 4#ni"ipal Cir"#it Trial Co#rt render @#d3*ent +de"larin3 the 7a"to de Retro Sale res"inded or

ineMe"tie or oid for la"5 of, or ins#L"ient "onsideration.%

In Irin3an . Co#rt of Appeals,%& !e r#led that een a "ross"lai*fo#nd in the Ans!er "o#ld "onstit#te a @#di"ial de*and for res"issionthat satises the re#ire*ent of the la!. Si*ilarl$, the "o#nter"lai*of the 6enos spo#ses in their ans!er satised the re#isites for the @#di"ial res"ission of the s#1@e"t 7a"to de Retro Sale.

The 4#ni"ipal Cir"#it Trial Co#rt th#s "orre"tl$ dis*issed the"o*plaint for "onsolidation of o!nership led 1$ the a!ilaospo#ses for their fail#re to "o*pl$ !ith the "onditions of the 7a"tode Retro Sale. Neertheless, it ref#sed to de"lare the res"ission ofthe 7a"to de Retro Sale as pra$ed for in the "o#nter"lai* of the

6enos spo#ses, statin3 that:

<o! a1o#t the other o1li3ations andBor ri3hts o!in3 to either part$1$ irt#e of the 7a"to de Retro SaleP This, the "o#rt opines that it"an not dele into !itho#t oersteppin3 the li*its of his f#n"tions

there 1ein3 appropriate re*edies. It is horn1oo5 in o#r @#rispr#den"e that a ri3ht in la! *a$ 1e enfor"ed and a !ron3 !a$1e re*edied 1#t al!a$s thro#3h the appropriate a"tion.%/

The iss#e of res"ission hain3 1een p#t in iss#e in the ans!er andthe sa*e hain3 1een liti3ated #pon !itho#t o1@e"tions 1$ thea!ilao spo#ses on 3ro#nds of @#risdi"tion, the 4#ni"ipal Cir"#it TrialCo#rt sho#ld hae r#led on the sa*e and !rote nis to the

"ontroers$.

Th#s, as a ne"essar$ "onse#en"e of its r#lin3 that the a!ilaospo#ses 1rea"hed the ter*s of the 7a"to de Retro Sale, the4#ni"ipal Cir"#it Trial Co#rt sho#ld hae res"inded the 7a"to deRetro Sale and dire"ted the 6enos spo#ses to ret#rn 7%(,(((.(( tothe a!ilao spo#ses, p#rs#ant to o#r r#lin3 in Cann# . Galan3,%> to!it:

7etitioners *aintain that inas*#"h as respondents-spo#ses Galan3!ere not 3ranted the ri3ht to #nilaterall$ res"ind the sale #nder theDeed of Sale !ith Ass#*ption of 4ort3a3e, the$ sho#ld hae rstas5ed the "o#rt for the res"ission thereof 1efore the$ f#ll$ paid the

o#tstandin3 1alan"e of the *ort3a3e loan !ith the N<4;C. The$"lai* that s#"h pa$*ent is a #nilateral a"t of res"ission !hi"hiolates eistin3 @#rispr#den"e.

In Tan . Co#rt of Appeals, this "o#rt said:

. . . +The po!er to res"ind o1li3ations is i*plied in re"ipro"al ones in"ase one of the o1li3ors sho#ld not "o*pl$ !ith !hat is in"#*1ent#pon hi* is "lear fro* a readin3 of the Ciil Code proisions.<o!eer, it is e#all$ settled that, in the a1sen"e of a stip#lation tothe "ontrar$, this po!er *#st 1e ino5ed @#di"iall$F it "annot 1eeer"ised solel$ on a part$s o!n @#d3*ent that the other has"o**itted a 1rea"h of the o1li3ation. Khere there is nothin3 in the

"ontra"t e*po!erin3 the petitioner to res"ind it !itho#t resort tothe "o#rts, the petitioners a"tion in #nilaterall$ ter*inatin3 the"ontra"t in this "ase is #n@#stied.

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It is eident that the "ontra"t #nder "onsideration does not "ontain aproision a#thoriin3 its etra@#di"ial res"ission in "ase one of theparties fails to "o*pl$ !ith !hat is in"#*1ent #pon hi*. This 1ein3the "ase, respondents-spo#ses sho#ld hae as5ed for @#di"ialinterention to o1tain a @#di"ial de"laration of res"ission. 6e that asit *a$, and "onsiderin3 that respondents-spo#ses Ans!er =!ithaLr*atie defenses? !ith Co#nter"lai* see5s for the res"ission ofthe Deed of Sale !ith Ass#*ption of 4ort3a3e, it 1ehooes the

"o#rt to settle the *atter on"e and for all than to hae the "ase re-liti3ated a3ain on an iss#e alread$ heard on the *erits and !hi"hthis "o#rt has alread$ ta5en "o3nian"e of. <ain3 fo#nd thatpetitioners serio#sl$ 1rea"hed the "ontra"t, !e, therefore, de"larethe sa*e is res"inded in faor of respondents-spo#ses.

As a "onse#en"e of the res"ission or, *ore a""#ratel$, resol#tion of the Deed of Sale !ith Ass#*ption of 4ort3a3e, it is the d#t$ of the"o#rt to re#ire the parties to s#rrender !hateer the$ *a$ haere"eied fro* the other. The parties sho#ld 1e restored to theirori3inal sit#ation.

The re"ord sho!s petitioners paid respondents-spo#ses the a*o#nt

of 7/,(((.(( o#t of the 7%'(,(((.(( a3reed #pon. The$ also *adepa$*ents to N<4;C a*o#ntin3 to 7,)%'.0/. As to the petitionersalle3ed pa$*ent to CER; Realt$ of 70&,&%&./(, e"ept for petitionereti"ia Cann#s 1are alle3ation, !e nd the sa*e not to 1es#pported 1$ "o*petent eiden"e. As a 3eneral r#le, one !hopleads pa$*ent has the 1#rden of proin3 it. <o!eer, sin"e it has1een ad*itted in respondents-spo#ses Ans!er that petitioners shallass#*e the se"ond *ort3a3e !ith CER; Realt$ in the a*o#nt of7),(((.((, and that Adelina Ti*1an3, respondents-spo#ses er$o!n !itness, testied that sa*e has 1een paid, it is 1#t proper toret#rn this a*o#nt to petitioners. The three a*o#nts total7%&,)%'.0/ -- the s#* to 1e ret#rned to petitioners.

K<ERE;ORE, the petition is GRANTED. The De"ision datedDe"e*1er , '(( and Resol#tion dated 4ar"h %/, '((& of theCo#rt of Appeals in CA-G.R. S7 No. />>0, aLr*in3 the J#d3*entdated J#l$ %, '(() of the Re3ional Trial Co#rt of 6onto", 4o#ntain7roin"e, 6ran"h ), in Ciil Case No. %(2%, are REERSED and SET

ASIDE. The De"ision dated Noe*1er %0, '((' of the 4#ni"ipalCir"#it Trial Co#rt of 6a#5o, 4o#ntain 7roin"e in Ciil Case No. No.)%0 dis*issin3 respondents "o*plaint for "onsolidation ofo!nership and da*a3es is REINSTATED KIT< T<E 4ODI;ICATIONthat the 7a"to de Retro Sale dated ;e1r#ar$ %%, %222 is de"laredres"inded and petitioners are ordered to ret#rn the a*o#nt of7%(,(((.(( to respondents. No "osts.

SO ORDERED.

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6.E. SAN DIEGO, INC., G.R. No. %&2(% 7etitioner, 7resent:

9IS946ING, J.,

Chairperson, - ers#s - CAR7IO, CAR7IO 4ORAES,

TINGA, and EASCO, JR., JJ.

7ro*#l3ated:

ROSARIO T. A9,Respondent. J#ne >, '((/

-----------------------------------------------------------------------------------------

D E C I S I O N

EASCO, JR., J.: The Case

This 7etition for Reie! on Certiorari+% #nder R#le 0 #estions the;e1r#ar$ %>, '(( De"ision+' of the Co#rt of Appeals =CA? in CA-G.R. S7 No. >%)0%, !hi"h 3ranted respondent Al#l the ri3ht to pa$the 1alan"e of the p#r"hase pri"e !ithin e =? da$s fro* re"eipt of the CA De"ision despite the lapse of the ori3inal period 3ien to saidpart$ thro#3h the nal Resol#tion of this Co#rt in an earlier "ase. The CA r#lin3 reersed the Septe*1er %>, '(() Resol#tion+) andDe"e*1er ', '(() Order+0 of the OL"e of the 7resident =O7? in O.7.Case No. (%-%-(2/, !hi"h #pheld the dis*issal of respondent Al#ls"o*plaint for "onsi3nation and spe"i" perfor*an"e 1efore the<o#sin3 and and 9se Re3#lator$ 6oard =<9R6? in <9R6 Case No.

RE4-A-22(2/-(%&/. i5e!ise "hallen3ed is the A#3#st )%, '(( CAResol#tion+ re@e"tin3 petitioners 4otion for Re"onsideration.

The ;a"ts

The fa"ts "#lled 1$ the CA are as follo!s:

On ;e1r#ar$ %(, %2/, +respondent Rosario T. Al#l p#r"hased

fro* +petitioner 6.E. San Die3o, In". fo#r =0? s#1diision lots !ith ana33re3ate area of %,'/ s#are *eters lo"ated at A#rora

S#1diision, 4a$silo, 4ala1on. These lots, !hi"h are no! s#1@e"t ofthis petition, !ere 1o#3ht thro#3h install*ent #nder Contra"t to SellNo. >&/ at One <#ndred 7esos =₧%((.((? per s#are *eter, !ith ado!npa$*ent +si" of T!ele Tho#sand Seen <#ndred ;ift$ 7esos=₧%',/(.((?, and *onthl$ install*ents of One Tho#sand T!o<#ndred ;ort$-Nine 7esos =₧%,'02.(?. The interest a3reed #pon!as %' per"ent =%'? per ann#* #ntil f#ll$ paid, th#s, the totalp#r"hase pri"e !as T!o <#ndred Thirt$ Seen Tho#sand Si<#ndred Sit$ 7esos =₧')/,&&(.((?.

+Respondent too5 i**ediate possession of the s#1@e"t

propert$, settin3 #p a peri*eter fen"e and "onstr#"tin3 a ho#sethereon.

On J#l$ ', %2//, +respondent si3ned a 8Conditional Deed ofAssi3n*ent and Transfer of Ri3hts !hi"h assi3ned to a "ertainKilson 7. Y# her ri3hts #nder the Contra"t to Sell. +7etitioner !asnotied of the ee"#tion of s#"h deed. ater on, the Contra"t to Sellin +respondents na*e !as "an"elled, and +petitioner iss#ed a ne!one in faor of Y# altho#3h it !as also deno*inated as 8Contra"t toSell No. >&/.

On J#l$ 0, %2/2, +respondent infor*ed +petitioner a1o#t Y#s

fail#re and ref#sal to pa$ the a*o#nts d#e #nder the "onditionaldeed. She also *anifested that she !o#ld 1e the one to pa$ the

install*ents d#e to respondent on a""o#nt of Y#s defa#lt.

On A#3#st ', %2>(, +respondent "o**en"ed an a"tion forres"ission of the "onditional deed of assi3n*ent a3ainst Y# 1eforethe Re3ional Trial Co#rt of Caloo"an Cit$. S#1se#entl$, on

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%. Ke hae lon3 le3all$ res"inded the sale in her faor in ie! ofher fail#re to pa$ the *onthl$ a*ortiation as per "ontra"t.

'. She sold her ri3hts to 4r. Kilson Y# !ho failed to pa$ his*onthl$ a*ortiations, too.

). Ke are not and hae neer 1een a part of the "ase $o# areall#din3 to hen"e !e "annot 1e 1o#nd 1$ the sa*e.

0. The propert$ in #estion is no! #nder pro"ess to 1ere"one$ed to #s as ordered 1$ the "o#rt 1$ irt#e of a"o*pro*ised =si"? a3ree*ent entered into in Ciil Case No. '&4N of the 4ala1on RTC 6ran"h entitled Spo#ses Carlos ent#ra andSandra ent#ra s. 6.E. San Die3o, In".

Thin5in3 that an a"tion for "onsi3nation alone !o#ld not 1e

s#L"ient to allo! for the ee"#tion of a nal @#d3*ent in her faor,+respondent de"ided to le an a"tion for "onsi3nation and spe"i"perfor*an"e a3ainst +petitioner 1efore the <o#sin3 and and 9seRe3#lator$ 6oard on 4ar"h %', %22>. The "o*plaint, do"5eted as

RE4-()%'2>-%(()2, pra$ed that a? +respondent 1e "onsidered tohae f#ll$ paid the total p#r"hase pri"e of the s#1@e"t propertiesF 1? TCT Nos. N-%0 to 0> !hi"h !ere de"lared oid in CA GR No. -%(2(/> 1e "an"elledF "? ne! "erti"ates of title oer the s#1@e"tproperties 1e iss#ed in the na*e of +respondentF and d? +petitioner1e ordered to rei*1#rse +respondent the s#* of ;ift$ Tho#sand7esos =₧(,(((.((? as attorne$s fees and liti3ation epenses.

On J#l$ %', %222, a de"ision !as rendered 1$ the <9R6

thro#3h <o#sin3 and and 9se Ar1iter D#nstan T. San i"ente. It!as held, th#s:

8The p#rported 8"onsi3nation in this "ase is th#s of no *o*ent,

inas*#"h as the a*o#nt alle3edl$ d#e !as not een deposited orpla"ed at the disposal of this OL"e 1$ the "o*plainant.

In an$ eent, !e a3ree !ith +petitioner that een if the

"o*plainant had a"t#all$ *ade the "onsi3nation of the a*o#nt,

s#"h "onsi3nation is still ineMe"tie and oid for hain3 1een donelon3 after the epiration of the non-etendi1le period set forth in the%/ J#ne %22& S#pre*e Co#rt Resol#tion that epired on '(Septe*1er %22&.

K<ERE;ORE, 7re*ises Considered, a @#d3*ent is here1$ renderedDIS4ISSING the "o*plaint. Cost a3ainst "o*plainant.

IT =si"? SO ORDERED.

A33rieed 1$ the a1oe de"ision, +respondent led a 7etitionfor Reie! 1efore the <9R6s ;irst Diision. On 4ar"h %/, '(((, ade"ision !as rendered dis*issin3 the petition for la"5 of *erit, andaLr*in3 the de"ision dated J#l$ %', %222. +Respondent led a4otion for Re"onsideration, 1#t this !as denied on J#l$ )%, '((%.

+Respondent then led an appeal to the OL"e of the 7resident.

This !as, ho!eer, dis*issed on J#ne ', '(() for hain3 1een ledo#t of ti*e. A3ain, +respondent *oed for its re"onsideration. OnSepte*1er %>, '((), the OL"e of the 7resident 3ae d#e "o#rse to

+respondents *otion, and resoled the *otion a""ordin3 to its*erits. The sin3le #estion resoled !as !hether or not+respondents oMer of "onsi3nation !as "orre"tl$ denied 1$ the<9R6. Said oL"e r#led in the aLr*atie, and Ke #ote:

8;ro* the fore3oin3, it is eident that there !as no alid"onsi3nation of the 1alan"e of the p#r"hase pri"e. The )(-da$ non-etendi1le period set forth in the %/ J#ne %22& resol#tion hadalread$ epired on '( Septe*1er %22&. The <9R6 is therefore @#stied in ref#sin3 the "onsi3nation, other!ise it !o#ld 1e a""#sedof etendin3 the period 1e$ond that proided 1$ the S#pre*e Co#rt.A alid "onsi3nation is eMe"ted !hen there is an a"t#al "onsi3nationof the a*o#nt d#e !ithin the pres"ri1ed period =St. Do*ini"

Corporation s. Inter*ediate Appellate Co#rt, %)> SCRA '0'?. K<ERE;ORE, pre*ises "onsidered, the appeal is here1$ DIS4ISSEDfor la"5 of *erit.

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+Respondent led a 4otion for Re"onsideration +of the a1oeResol#tion, 1#t this !as denied !ith nalit$ on De"e*1er ', '(().+&

The R#lin3 of the Co#rt of Appeals

Respondent Al#l 1ro#3ht 1efore the CA a petition for "ertiorarido"5eted as CA-G.R. S7 No. &/&)/, as"ri1in3 3rae a1#se of

dis"retion to the O7 in dis*issin3 her appeal in O.7. Case No. (%-%-(2/ and aLr*in3 the 4ar"h %/, '((( De"ision+/ and J#l$ )%, '((%Resol#tion+> of the <9R6 ;irst Diision in <9R6 Case No. RE4-A-22(2(/-(%&/.

On ;e1r#ar$ %>, '((, the CA rendered its assailed De"isionreersin3 the Septe*1er %>, '(() Resol#tion and De"e*1er ', '(()Order of the O7, the fallo of !hi"h reads:

K<ERE;ORE, in the hi3her interest of @#sti"e, the assailed De"ision,Resol#tion and Order dated 4ar"h %/, '(((, Septe*1er %>, '(()and De"e*1er ', '((), respe"tiel$, are here1$ REERSED and SET

ASIDE. A""ordin3l$, +respondent Al#l is here1$ ordered to pa$+petitioner 6.E. San Die3o, In". the 1alan"e d#e for the sale of thes#1@e"t fo#r par"els of land !ithin e =? da$s fro* re"eipt of thisde"ision. +7etitioner 6.E. San Die3o, In"., on the other hand, isordered to a""ept s#"h pa$*ent fro* +respondent Al#l, after!hi"h, the "orrespondin3 Deed of Sale *#st 1e iss#ed.

SO ORDERED.+2

The CA a3reed !ith the <9R6 that no alid "onsi3nation !as *ade1$ respondent 1#t fo#nd that @#sti"e !o#ld 1e 1etter sered 1$allo!in3 respondent Al#l to eMe"t the "onsi3nation, al1eit 1elatedl$.It "ited the respondents ri3ht oer the disp#ted lots as "onr*ed 1$this Co#rt in G.R. No. %(2(/>, !hi"h, if ta5en a!a$ on a""o#nt of thedela$ in "o*pletin3 the pa$*ent, !o#ld a*o#nt to a 3rae in@#sti"e.

4oreoer, the CA pointed o#t that respondents "o#nsel "on"ededl$la"5ed the i3ilan"e and "o*peten"e in defendin3 his "lients ri3ht!hen he failed to "onsi3n the 1alan"e on ti*eF nonetheless, s#"h*a$ 1e disre3arded in the interest of @#sti"e. It "onsidered thefail#re of respondents "o#nsel to aail of the re*ed$ of"onsi3nation as a pro"ed#ral lapse, "itin3 the prin"iple that !here ari3id appli"ation of the r#les !ill res#lt in a *anifest fail#re or*is"arria3e of @#sti"e, te"hni"alities "an 1e i3nored.

A "op$ of the ;e1r#ar$ %>, '(( CA De"ision !as re"eied 1$respondent Al#l thro#3h her "o#nsel on ;e1r#ar$ '0, '((.

On 4ar"h 0, '((, respondent led a Co*plian"e and 4otion forEtension of Ti*e to Co*pl$ !ith the De"ision of the +CA+%(pra$in3 that she 1e 3ien an etension of ten =%(? da$s or fro*4ar"h ' to %%, '(( to "o*pl$ !ith the CA De"ision. On the otherhand, on 4ar"h >, '((, petitioner led its 4otion forRe"onsideration !ith Opposition to 7etitioners 84otion for Etensionof Ti*e to Co*pl$ !ith the De"ision of the +CA.+%%

Thro#3h its assailed A#3#st )%, '(( Resol#tion, the CA deniedpetitioners 4otion for Re"onsideration, and ndin3 that respondentd#l$ eerted eMorts to "o*pl$ !ith its De"ision and a alid"onsi3nation !as *ade 1$ respondent, it 3ranted the re#ested %(-da$ etension of ti*e to "o*pl$ !ith the ;e1r#ar$ %>, '(( De"isionand her *otion for "onsi3nation. The fallo of said Resol#tion reads:

IN IEK O; T<E ;OREGOING, the *otion for etension to "o*pl$!ith the De"ision is here1$ GRANTED, the *otion for re"onsiderationis DENIED and the *otion for "onsi3nation is GRANTED. +7etitioner6.E. San Die3o, In". is here1$ ordered to re"eie the pa$*ent of+respondent Rosario T. Al#l and to iss#e, in her faor, the"orrespondin3 Deed of Sale.+%'

The Iss#es

<en"e, 1efore #s is the instant petition !ith the follo!in3 iss#es:

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%. Khether or not the Co#rt of Appeals, in iss#in3 the assailed %>;e1r#ar$ '(( De"ision and )% A#3#st '(( Resol#tion in CA-G.R.S7 No. >%)0%, has de"ided #estions of la! in a !a$ not in a""ord!ith la! and !ith the appli"a1le de"isions of the <onora1le Co#rtF

'. Khether or not the Co#rt of Appeals "o**itted patent 3raea1#se of dis"retion andBor a"ted !itho#t or in e"ess of @#risdi"tion

in 3rantin3 respondent Al#ls s#1se#ent *otion for etension ofti*e to "o*pl$ !ith the %> ;e1r#ar$ '(( de"ision and *otion for"onsi3nationF and

). Khether or not the %> ;e1r#ar$ '(( De"ision and )% A#3#st'(( Resol#tion of the Co#rt of Appeals in CA-G.R. S7 No. >%)0%o#3ht to 1e ann#lled and set aside, for 1ein3 "ontrar$ to la! and @#rispr#den"e.+%)

The Co#rts R#lin3

On the pro"ed#ral iss#e, petitioner 6.E. San Die3o, In". assailsthe s#L"ien"$ of respondent Al#ls CA petition as the latter, iniolation of the r#les, alle3edl$ la"5ed the essential and releantpleadin3s led !ith the <9R6 and the O7.

Se"tion & of R#le 0), %22/ R#les of Ciil 7ro"ed#re pertinentl$

proides:

SEC. &. Contents of the petition.WThe petition for reie! shall

="? 1e a""o*panied 1$ a "learl$ le3i1le d#pli"ate ori3inal or a"ertied tr#e "op$ of the a!ard, @#d3*ent, nal order or resol#tionappealed fro*, to3ether !ith "ertied tr#e "opies of s#"h *aterial

portions of the re"ord referred to therein and other s#pportin3papersF =E*phasis s#pplied.?

The a1oe proiso epli"itl$ re#ires the follo!in3 to 1eappended to a petition: %? "learl$ le3i1le d#pli"ate ori3inal or a"ertied tr#e "op$ of the a!ard, @#d3*ent, nal order, or resol#tionappealed fro*F '? "ertied tr#e "opies of s#"h *aterial portions ofthe re"ord referred to in the petitionF and )? other s#pportin3papers.

O1io#sl$, the *ain reason for the pres"ri1ed atta"h*ents is to

fa"ilitate the reie! and eal#ation of the petition 1$ *a5in3 readil$aaila1le to the CA all the orders, resol#tions, de"isions, pleadin3s,trans"ripts, do"#*ents, and pie"es of eiden"e that are *aterialand releant to the iss#es presented in the petition !itho#t rel$in3on the "ase re"ords of the lo!er "o#rt. The r#le is the reie!in3"o#rt "an deter*ine the *erits of the petition solel$ on the 1asis ofthe s#1*issions 1$ the parties+%0 !itho#t the #se of the re"ords ofthe "o#rt a #o. It is a fa"t that it ta5es seeral *onths 1efore there"ords are eleated to the hi3her "o#rt, th#s the res#ltin3 dela$ inthe reie! of the petition. The atta"h*ent of all essential andne"essar$ papers and do"#*ents is *andator$F other!ise, thepetition "an 1e re@e"ted o#tri3ht #nder Se". / of R#le 0) of the R#lesof Co#rt, !hi"h proides:

EMe"t of fail#re to "o*pl$ !ith re#ire*ents.WThe fail#re of the

petitioner to "o*pl$ !ith an$ of the fore3oin3 re#ire*entsre3ardin3 the pa$*ent of the do"5et and other la!f#l fees, thedeposit for "osts, proof of seri"e of the petition, and the "ontents of and the do"#*ents !hi"h sho#ld a""o*pan$ the petition shall 1es#L"ient 3ro#nd for the dis*issal thereof.

To preent pre*at#re dis*issals, the re#ire*ents #nder Se". & onthe "ontents of the petition hae to 1e el#"idated.

;irst, there "an 1e no #estion that onl$ the a!ard, @#d3*ent, ornal order or resol#tion iss#ed 1$ the lo!er "o#rt or a3en"$ andappealed fro* has to 1e "ertied as tr#e.

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7etitioners post#lation *#st fail.

Se". / of R#le 0) does not pres"ri1e o#tri3ht re@e"tion of the

petition if it is not a""o*panied 1$ the re#ired do"#*ents 1#tsi*pl$ 3ies the dis"retion to the CA to deter*ine !hether s#"h1rea"h "onstit#tes a 8s#L"ient 3ro#nd for dis*issal. Apparentl$,petitioner !as not a1le to "onin"e the CA that the alle3ed *issin3

atta"h*ents depried said "o#rt of the f#ll opport#nit$ and fa"ilit$in ea*inin3 and resolin3 the petition. It has not 1eensatisfa"toril$ sho!n that the pleadin3s led 1$ petitioner !ith the#asi-@#di"ial a3en"ies hae *aterial 1earin3 or i*portan"e to theCA petition. S#"h pleadin3s "o#ld hae 1een atta"hed to the"o**ent of respondent and hen"e, no pre@#di"e !o#ld 1e s#Mered. Th#s, the CA did not eer"ise its dis"retion in an ar1itrar$ oroppressie *anner 1$ 3iin3 d#e "o#rse to the petition.

In addition, it !as noted in C#si-<ernande . Dia that the CA

Reised Internal R#les proide "ertain Vei1ilit$ in the s#1*ission ofadditional do"#*ents: Khen a petition does not hae the "o*plete annees or there#ired n#*1er of "opies, the Chief of the J#di"ial Re"ords Diisionshall re#ire the petitioner to "o*plete the annees or le thene"essar$ n#*1er of "opies of the petition 1efore do"5etin3 the"ase. 7leadin3s i*properl$ led in "o#rt shall 1e ret#rned to thesender 1$ the Chief of the J#di"ial Re"ords Diision.+%>

In Rosa Yap 7aras, et al. . J#d3e Is*ael O. 6aldado, et al., the Co#rtpreferred the deter*ination of "ases on the *erits oer te"hni"alit$or pro"ed#ral i*perfe"tions so that the ends of @#sti"e !o#ld 1esered 1etter, th#s:

At the sa*e ti*e, the R#les of Co#rt en"o#ra3e a readin3 of thepro"ed#ral re#ire*ents in a *anner that !ill help se"#re and notdefeat @#sti"e. Th#s:

Se"tion &. Constr#"tion.WThese R#les shall 1e li1erall$"onstr#ed in order to pro*ote their o1@e"tie of se"#rin3 a @#st,speed$ and inepensie disposition of eer$ a"tion and pro"eedin3.

As epressed in Al1erto s. Co#rt of Appeals, 8=!?hat sho#ld

3#ide @#di"ial a"tion is the prin"iple that a part$-liti3ant is to 1e3ien the f#llest opport#nit$ to esta1lish the *erits of his "o*plaintor defense rather than for hi* to lose life, li1ert$, honor or propert$

on te"hni"alities. =T?he r#les of pro"ed#re sho#ld 1e ie!ed as*ere tools desi3ned to fa"ilitate the attain*ent of @#sti"e. Theirstri"t and ri3id appli"ation, !hi"h !o#ld res#lt in te"hni"alities thattend to fr#strate rather than pro*ote s#1stantial @#sti"e, *#stal!a$s 1e es"he!ed.+%2

No! !e !ill address the *ain iss#eW!hether respondentAl#l is still entitled to "onsi3nation despite the lapse of the periodproided 1$ the Co#rt in G.R. No. %(2(/> entitled Y# . Co#rt ofAppeals.

7etitioner stresses the fa"t that respondent Al#l did not"o*pl$ !ith this Co#rts J#ne %/, %22& Resol#tion+'( !hi"h 3ae anon-etendi1le period of thirt$ =)(? da$s fro* entr$ of @#d3*ent!ithin !hi"h to *a5e f#ll pa$*ent for the s#1@e"t properties. Theentr$ of @#d3*ent sho!s that the De"e*1er '&, %22 Resol#tion+'%in G.R. No. %(2(/> 1e"a*e nal and ee"#tor$ on J#l$ ', %22&.Respondent Al#l re"eied thro#3h "o#nsel a "op$ of the entr$ of @#d3*ent on A#3#st '%, %22&. Th#s, respondent had #ntilSepte*1er '(, %22& !ithin !hi"h to *a5e the f#ll pa$*ent.

After three =)? #ns#""essf#l tenders of pa$*ent, respondent Al#l*ade no "onsi3nation of the a*o#nt to the "o#rt of ori3in. It !asonl$ on 4ar"h %', %22> or a1o#t a $ear and a half later that

respondent oMered to "onsi3n said a*o#nt in an a"tion for"onsi3n*ent 1efore the <9R6. Rel$in3 on the "ase of St. Do*ini"Corporation . Inter*ediate Appellate Co#rt,+'' petitioner stron3l$asserts that #pon its ref#sal to a""ept the tendered pa$*ent,respondent o#3ht to hae "onsi3ned it !ith the "o#rt of ori3in also

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!ithin the )(-da$ period or !ithin a reasona1le ti*e thereafter.Respondent failed to do this as she !aited for a $ear and a half1efore instit#tin3 the instant a"tion for spe"i" perfor*an"e and"onsi3n*ent 1efore the <9R6.

4oreoer, petitioner ar3#es that respondents dela$ of a $ear

and a half to p#rs#e f#ll pa$*ent *#st 1e re3arded as a !aier onher part to "lai* !hateer resid#al re*edies she *i3ht still hae for

the enfor"e*ent of the J#ne %/, %22& Resol#tion in G.R. No. %(2(/>. 7etitioner f#rther "ontends that een if the a"tion 1efore the <9R6!as *ade on ti*e, that is, !ithin the )(-da$ period, still it is fatall$defe"tie as respondent did not deposit an$ a*o#nt !ith the <9R6!hi"h iolated the r#les for "onsi3n*ent !hi"h re#ire a"t#aldeposit of the a*o#nt alle3edl$ d#e !ith the proper @#di"iala#thorit$.

7re*ised #pon these "onsiderations, petitioner fa#lts the

appellate "o#rt for its 3rant of respondents petition for reie! !hi"hn#llied the denial 1$ the <9R6 Ar1iter, <9R6 ;irst Diision, andthe O7 of respondents a"tion.

On the other hand, respondent "ontends that the J#ne %/,

%22& Resol#tion of this Co#rt sho#ld not 1e "onstr#ed a3ainst herina1ilit$ to eMe"t pa$*ent d#e to the o1stinate and #n@#st ref#sal 1$petitionerWa s#perenin3 "ir"#*stan"e 1e$ond her "ontrol.Respondent #nders"ores that !ithin the )(-da$ period, sherepeatedl$ atte*pted to eMe"t the pa$*ent to no aail. 4oreoer,the *#"h dela$ed response of petitioner e*1odied in its Jan#ar$ %0,%22> letter+') "onr*in3 its ref#sal !as 1ased on #ntena1le,1aseless, and "ontried 3ro#nds.

4oreoer, she ar3#es that the De"e*1er '&, %22 Resol#tion

in G.R. No. %(2(/> 3rantin3 her proprietar$ ri3hts oer the s#1@e"tlots has lon3 1e"o*e nal and ee"#tor$.

Anent the iss#e of la"hes and estoppel, respondent stron3l$

"ontends that s#"h do not appl$ in the instant "ase as

in"ontroerti1le "ir"#*stan"es sho! that she has relentlessl$p#rs#ed the prote"tion and enfor"e*ent of her ri3hts oer thedisp#ted lots for oer a #arter of a "ent#r$.

After a "aref#l st#d$ of the fa"t#al *ilie#, appli"a1le la!s, and @#rispr#den"e, !e nd the petition *eritorio#s.

Respondent Al#l !as a""orded le3al ri3hts oer s#1@e"t properties

In G.R. No. %(2(/>, ndin3 no reersi1le error on the part ofthe CA, !e denied Kilson 7. Y#s petition and aLr*ed the appellate"o#rts r#lin3 that as 1et!een Kilson 7. Y#, the ent#ra spo#ses,

petitioner 6.E. San Die3o, In"., and respondent Al#l, respondent hasin"hoate proprietar$ ri3hts oer the disp#ted lots. Ke #pheld the CAr#lin3 de"larin3 as 8n#ll and oid the titles iss#ed in the na*e ofthe ent#ra spo#ses and reinstatin3 the* in the na*e of 6.E. SanDie3o, In"., !ith the "orrespondin3 noti"es of lis pendens annotatedon the* in faor of respondent #ntil s#"h ti*e that o!nership of thes#1@e"t par"els of land is transferred to respondent Rosario Al#l.

It is th#s "lear that !e a""orded respondent Al#l epe"tant

ri3hts oer the disp#ted lots, 1#t s#"h is "onditioned on thepa$*ent of the 1alan"e of the p#r"hase pri"e. <ain3 1een"on"eded s#"h ri3hts, respondent had the o1li3ation to pa$ there*ainin3 1alan"e to est a1sol#te title and ri3hts of o!nership in

his na*e oer the s#1@e"t properties.

In o#r J#ne %/, %22& Resol#tion, !e "learl$ spe"ied thirt$=)(? da$s fro* entr$ of @#d3*ent for respondent to pro*ptl$ eMe"t

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the f#ll pa$*ent of the 1alan"e of the p#r"hase pri"e for the s#1@e"tproperties, th#s:

Ke ho!eer a3ree !ith the o1seration *ade 1$ *oants that

no ti*e li*it !as set 1$ the respondent Co#rt of Appeals in itsassailed De"ision for the priate respondent herein, Rosario Al#l, topa$ 6.E. San Die3o, In"., the ori3inal o!ner of the properties inliti3ation. To re"tif$ s#"h oersi3ht, priate respondent Rosario T.

Al#l is here1$ 3ien a non-etendi1le period of thirt$ =)(? da$s fro*entr$ of @#d3*ent, !ithin !hi"h to *a5e f#ll pa$*ent for theproperties in #estion.+'0 =E*phasis s#pplied.?

The non-"o*plian"e !ith o#r J#ne %/, %22& Resol#tion is fatal torespondent Al#ls a"tion for "onsi3nation and spe"i" perfor*an"e

9nfort#natel$, respondent failed to eMe"t s#"h f#ll pa$*ent of the 1alan"e of the p#r"hase pri"e for the s#1@e"t properties.

No "onsi3nation !ithin the )(-da$ period or at a reasona1le ti*ethereafter

It is "lear as da$ that respondent did not atte*pt nor p#rs#e"onsi3nation !ithin the )(-da$ period 3ien to her in a""ordan"e!ith the pres"ri1ed le3al pro"ed#re. She re"eied a "op$ of theentr$ of @#d3*ent on A#3#st '%, %22& and had )( da$s or #ntilSepte*1er '(, %22& to pa$ the 1alan"e of the p#r"hase pri"e topetitioner. She *ade a tender of pa$*ent on A#3#st '2, %22&,A#3#st )(, %22&, and Septe*1er '>, %22&, all of !hi"h !ere ref#sed1$ petitioner possi1l$ 1e"a#se the latter is of the ie! that it is not

1o#nd 1$ the Noe*1er '/, %22' De"ision in CA-G.R. C No. ))&%2nor the De"e*1er '&, %22 Resol#tion in G.R. No. %(2(/>, and thefa"t that respondent has forfeited her ri3hts to the lots 1e"a#se ofher fail#re to pa$ the *onthl$ a*ortiations.

It *#st 1e 1orne in *ind ho!eer that a *ere tender ofpa$*ent is not eno#3h to etin3#ish an o1li3ation. In 4eat 7a"5in3Corporation of the 7hilippines . Sandi3an1a$an, !e distin3#ished"onsi3nation fro* tender of pa$*ent and reiterated the r#le that1oth *#st 1e alidl$ done in order to eMe"t the etin3#ish*ent ofthe o1li3ation, th#s:

Consi3nation is the a"t of depositin3 the thin3 d#e !ith the

"o#rt or @#di"ial a#thorities !heneer the "reditor "annot a""ept orref#ses to a""ept pa$*ent, and it 3enerall$ re#ires a prior tenderof pa$*ent. It sho#ld 1e distin3#ished fro* tender of pa$*ent. Tender is the ante"edent of "onsi3nation, that is, an a"t preparator$to the "onsi3nation, !hi"h is the prin"ipal, and fro* !hi"h arederied the i**ediate "onse#en"es !hi"h the de1tor desires orsee5s to o1tain. Tender of pa$*ent *a$ 1e etra@#di"ial, !hile"onsi3nation is ne"essaril$ @#di"ial, and the priorit$ of the rst is theatte*pt to *a5e a priate settle*ent 1efore pro"eedin3 to thesole*nities of "onsi3nation. Tender and "onsi3nation, !here alidl$*ade, prod#"es the eMe"t of pa$*ent and etin3#ishes theo1li3ation.+' =E*phasis s#pplied.?

There is no disp#te that a alid tender of pa$*ent had 1een*ade 1$ respondent. A1sent ho!eer a alid "onsi3nation, *eretender !ill not s#L"e to etin3#ish her o1li3ation and "ons#**atethe a"#isition of the s#1@e"t properties.

In St. Do*ini" Corporation inolin3 the pa$*ent of the

install*ent 1alan"e for the p#r"hase of a lot si*ilar to the "ase at1ar, !here a period has 1een @#di"iall$ dire"ted to eMe"t thepa$*ent, the Co#rt held that a alid "onsi3nation is *ade !hen thea*o#nt is "onsi3ned !ith the "o#rt !ithin the re#ired period or!ithin a reasona1le ti*e thereafter. Ke r#led as follo!s:

;irst of all, the de"ision of the then Co#rt of Appeals !hi"h !as

pro*#l3ated on O"to1er '%, %2>%, is #ite "lear !hen it ordered thepa$*ent of the 1alan"e of the p#r"hase pri"e for the disp#ted lot!ithin &( da$s 8fro* re"eipt hereof *eanin3 fro* the re"eipt of the

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de"ision 1$ the respondents. It is an ad*itted fa"t that therespondents re"eied a "op$ of the de"ision on O"to1er )(, %2>%.<en"e, the$ had #p to De"e*1er '2, %2>% to *a5e the pa$*ent.9pon ref#sal 1$ the petitioner to re"eie s#"h pa$*ent, the properpro"ed#re !as for the respondent to "onsi3n the sa*e !ith the"o#rt also !ithin the &(-da$ period or !ithin a reasona1le ti*ethereafter.+'& =E*phasis s#pplied.?

The re"ords also reeal that respondent failed to eMe"t"onsi3nation !ithin a reasona1le ti*e after the )(-da$ period !hi"hepired on Septe*1er '(, %22&. Instead of "onsi3nin3 the a*o#nt!ith the "o#rt of ori3in, respondent led her Noe*1er %%, %22&4anifestation infor*in3 this Co#rt of petitioners #n@#st ref#sal ofthe tender of pa$*ent. Ke a"ted faora1l$ to it 1$ iss#in3 o#r Jan#ar$ '>, %22/ Resol#tion !hi"h ordered, th#s:

Considerin3 the *anifestation, dated Noe*1er %%, %22&, led

1$ "o#nsel for priate respondent Rosario T. Al#l, statin3 thatpriate respondent tendered to 6.E. San Die3o, In". the pa$*ent ofthe s#* of 7%>/,)>(.(( representin3 the 1alan"e of the p#r"hasepri"e of the properties !hi"h are the s#1@e"t of this liti3ation, 1#t6.E. San Die3o, In"., ref#sed to a""ept the sa*e, the Co#rt resoledto RE;ER the "ase to the "o#rt of ori3in, for appropriate a"tion.+'/

Respondent still failed to ta5e the "#e 1$ her ina"tion to"onsi3n the a*o#nt !ith the "o#rt of ori3in. 9ndo#1tedl$, p#rs#in3the a"tion for "onsi3nation on 4ar"h %', %22> or oer a $ear afterthe Co#rt iss#ed its Jan#ar$ '>, %22/ Resol#tion is !a$ 1e$ond a8reasona1le ti*e thereafter. Indeed, !e hae a""ordedrespondent, thro#3h said Resol#tion, all the opport#nit$ to p#rs#e"onsi3nation !ith the "o#rt of ori3in and $et, respondent failed to

*a5e a alid "onsi3nation. This is alread$ ine"#sa1le ne3le"t onthe part of respondent.

No alid "onsi3nation *ade

Ke a3ree !ith petitioners assertion that een 3rantin3ar3#endo that the instant "ase for "onsi3nation !as instit#ted !ithinthe )(-da$ period or !ithin a reasona1le ti*e thereafter, it !o#ldstill not a""ord respondent relief as no alid "onsi3nation !as *ade.Certainl$, the re"ords sho! that there !as no alid "onsi3nation*ade 1$ respondent 1efore the <9R6 as she did not deposit thea*o#nt !ith the #asi-@#di"ial 1od$ as re#ired 1$ la! and ther#les.

7ertinentl$, the rst para3raph of Arti"le %'> of the CiilCode proides that 8+"onsi3nation shall 1e *ade 1$ depositin3 thethin3s d#e at the disposal of @#di"ial a#thorit$, 1efore !ho* thetender of pa$*ent shall 1e proed, in a proper "ase, and theanno#n"e*ent of the "onsi3nation in other "ases =e*phasiss#pplied?.

It is tr#e eno#3h that respondent tendered pa$*ent to

petitioner three =)? ti*es thro#3h a Solid1an5 4ana3ers Che"5 No.%%0& in the a*o#nt of 7h7 %>/,)>(+'> on A#3#st '2 and )(, %22&and Septe*1er '>, %22&. It is tr#e li5e!ise that petitioner ref#sedto a""ept it 1#t not !itho#t 3ood reasons. 7etitioner !as not

i*pleaded as a part$ 1$ the ent#ra spo#ses in the 4ala1on Cit$RTC "ase for #ietin3 of title a3ainst Kilson Y# nor in the appealed"ase to the CA nor in G.R. No. %(2(/>.

7etitioner is of the ie! that there !as no @#risdi"tion a"#iredoer its person and hen"e, it is not 1o#nd 1$ the nal @#d3*ent and J#ne %/, %22& Resol#tion in G.R. No. %(2(/>. Se"ondl$, petitioner1elieed that respondent Al#l has lost her ri3hts oer the s#1@e"tlot 1$ the res"ission of the sale in her faor d#e to the latters fail#reto pa$ the install*ents and also as a res#lt of her transfereesfail#re to pa$ the a3reed a*ortiations. And een in the fa"e of theref#sal 1$ petitioner to a""ept tender of pa$*ent, respondent is not

left !itho#t a re*ed$. It is 1asi" that "onsi3nation is an aaila1lere*ed$, and respondent, !ith the aid of her "o#nsel, "o#ld haeeasil$ aailed of s#"h "o#rse of a"tion san"tioned #nder the CiilCode.

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Considerin3 the tenor of o#r J#ne %/, %22& Resol#tion,respondent o#3ht to hae "onsi3ned the a*o#nt !ith the "o#rt ofori3in !ithin the non-etendi1le period of )( da$s that !as a""ordedher or !ithin a reasona1le ti*e thereafter.

As "ited earlier, "onsi3nation is the a"t of depositin3 the thin3 d#e!ith the "o#rt or @#di"ial a#thorities !heneer the "reditor "annota""ept or ref#ses to a""ept pa$*ent and it 3enerall$ re#ires a prior

tender of pa$*ent.+'2 It is of no *o*ent if the ref#sal to a""eptpa$*ent 1e reasona1le or not. Indeed, "onsi3nation is the re*ed$for an #n@#st ref#sal to a""ept pa$*ent. The rst para3raph of Art.%'& of the Ciil Code pre"isel$ proides that 8+if the "reditor to!ho* tender of pa$*ent has 1een *ade ref#ses !itho#t @#st "a#seto a""ept it, the de1tor shall 1e released fro* responsi1ilit$ 1$ the"onsi3nation of the thin3 or s#* d#e =e*phasis s#pplied?.

The proper and alid "onsi3nation of the a*o#nt d#e !ith the "o#rtof ori3in, !hi"h shall @#di"iall$ prono#n"e the alidit$ of the"onsi3nation and de"lare the de1tor to 1e released fro* hisBherresponsi1ilit$, shall etin3#ish the "orrespondin3 o1li3ation.

4oreoer, in order that "onsi3nation *a$ 1e eMe"tie, the de1tor*#st sho! that: =%? there !as a de1t d#eF ='? the "onsi3nation ofthe o1li3ation had 1een *ade 1e"a#se the "reditor to !ho* tenderof pa$*ent !as *ade ref#sed to a""ept it, or 1e"a#se sBhe !asa1sent or in"apa"itated, or 1e"a#se seeral persons "lai*ed to 1eentitled to re"eie the a*o#nt d#e or 1e"a#se the title to theo1li3ation had 1een lostF =)? preio#s noti"e of the "onsi3nation had1een 3ien to the person interested in the perfor*an"e of theo1li3ationF =0? the a*o#nt d#e !as pla"ed at the disposal of the"o#rtF and =? after the "onsi3nation had 1een *ade, the personinterested !as notied of the a"tion.+)(

Respondent did not "o*pl$ !ith the proisions of la! parti"#larl$!ith the fo#rth and fth re#ire*ents spe"ied a1oe for a alid"onsi3nation. In her "o*plaint for "onsi3nation and spe"i"perfor*an"e, respondent onl$ pra$ed that she 1e allo!ed to *a5ethe "onsi3nation !itho#t pla"in3 or depositin3 the a*o#nt d#e at

the disposal of the "o#rt of ori3in. eril$, respondent *ade no alid"onsi3nation.

The ri3hts of petitioner and respondent oer the %,'/ s#are

*eter lot s#1@e"t of this petition !ill 1e deter*ined 1$ thesi3ni"an"e and eMe"ts of the De"e*1er '&, %22 Resol#tionrendered in G.R. No. %(2(/> entitled Y# . Co#rt of Appeals.+)%

The s#1@e"t *atter of G.R. No. %(2(/> is the Noe*1er '/,%22' De"ision rendered in CA-G.R. C No. ))&%2 entitled Carlos N.ent#ra and Sandra . ent#ra . Rosario T. Al#l, et al., the fallo of!hi"h reads:

K<ERE;ORE, the appealed de"ision is here1$ REERSED AND

SET ASIDE, and the "o*plaint therein is ordered dis*issed. TransferCerti"ates of Title Nos. N-%2'', N-%2'), N-%2'0, and N-%2', all ofthe Re3ister of Deeds of 4etro 4anila, Distri"t III, 4ala1on 6ran"h, inthe na*es of plaintiMs-appellees Carlos N. ent#ra and Sandra .ent#ra are here1$ de"lared n#ll and oid, and the titles ofo!nership reinstated in the na*e of 6.E. San Die3o, In"., !ith the"orrespondin3 noti"es of lis pendens therein annotated in faor of

defendant-appellant #ntil s#"h ti*e that o!nership of the s#1@e"tpar"els of land is transferred to herein defendant-appellant RosarioAl#l. Costs a3ainst plaintiM-appellees.

SO ORDERED.+)'

On De"e*1er '&, %22, this Co#rt iss#ed the Resol#tion inG.R. No. %(2(/> !herein it fo#nd no reersi1le error in the a"tions of the CA in its afore#oted disposition in CA-G.R. C No. ))&%2, andresoled to den$ the petition for la"5 of *erit. On ;e1r#ar$ , %22&,this Co#rt denied !ith nalit$ the 4otion for Re"onsideration led 1$

petitioner Kilson Y#.

<o!eer, on J#ne %/, %22&, this Co#rt, in resolin3 the 4otionfor Re"onsideration of priate respondents Spo#ses Carlos andSandra ent#ra, 3ranted respondent Al#l 8a non-etendi1le period

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of thirt$ =)(? da$s fro* entr$ of @#d3*ent, !ithin !hi"h to *a5e f#llpa$*ent for the properties in #estion.+))

The #estion isW"an the Co#rt, the CA, or the 4ala1on Cit$

RTC order petitioner 6.E. San Die3o, In". to a""ept the tender ofpa$*ent *ade 1$ respondent Al#lP

Denitel$, the$ "annot. The reason is that petitioner !as not

i*pleaded as a part$ in the 4ala1on Cit$ RTC "iil "ase, CA-G.R. CNo. ))&%2, nor in G.R. No. %(2(/> and hen"e is not #nder the @#risdi"tion of said "o#rts. Khat !ere deter*ined and de"ided inthe CA De"ision in CA-G.R. C No. ))&%2 !ere the ann#l*ent of thetitles of spo#ses Carlos and Sandra ent#ra, the reinstate*ent ofsaid titles to the na*e of petitioner, and the de"laration that theo!nership of the lots s#1@e"t of said titles !ill 1e transferred torespondent. There is no dire"tie to respondent 3rantin3 her theri3ht to pa$ the 1alan"e of the pri"e to petitioner and, *orei*portantl$, there is no order for petitioner to a""ept the pa$*ent. The dispositie or fallo of the de"ision is !hat a"t#all$ "onstit#testhe @#d3*ent or resol#tion of the "o#rt that "an 1e the s#1@e"t ofee"#tion. Khere there is a "onVi"t 1et!een the dispositie portion

of the de"ision and its 1od$, the dispositie portion "ontrolsirrespe"tie of !hat appears in the 1od$ of the de"ision.+)0 S#"h1ein3 the "ase, petitioner is not d#t$ 1o#nd to a""ept an$ tender ofpa$*ent fro* respondent pre"isel$ 1e"a#se s#"h di5tat is a1sent inthe fallo of the CA De"ision !hi"h !as aLr*ed 1$ this Co#rt in itsDe"e*1er '&, %22 Resol#tion in G.R. No. %(2(/>.

The la"#na in the CA De"ision !as so#3ht to 1e "orre"ted in

its J#ne %/, %22& Resol#tion in G.R. No. %(2(/> !here respondent!as 3ien 8a non-etendi1le period of thirt$ =)(? da$s fro* entr$ of @#d3*ent, !ithin !hi"h to *a5e f#ll pa$*ent for the properties in#estion. 7#rs#ant to this Resol#tion, !hat !as esta1lished !as

the ri3ht of respondent to pa$ the 1alan"e of the p#r"hase pri"e!ithin )( da$s. A3ain, the #er$ isW"an this Co#rt, the CA, or thetrial "o#rt "o*pel petitioner to a""ept the tender of pa$*ent fro*respondentP

The ans!er is no. The reason is o1io#s as @#risdi"tion !asneer a"#ired oer the person of petitioner. The a"tion for #ietin3of title is "hara"teried as #asi in re*. In Realt$ Sales Enterprise,In". . Inter*ediate Appellate Co#rt, it !as held that:

S#its to #iet title are not te"hni"all$ s#its in re*, nor are the$,

stri"tl$ spea5in3, in persona*, 1#t 1ein3 a3ainst the person inrespe"t of the res, these pro"eedin3s are "hara"teried as #asi in

re*. =4"Daniel . 4"El$, %(> So. >'( +%2'&.? The @#d3*ent ins#"h pro"eedin3s is "on"l#sie onl$ 1et!een the parties. =E*phasiss#pplied.?+)

Not 1ein3 i*pleaded as a ne"essar$ or indispensa1le part$,petitioner is not 1o#nd 1$ the dispositions in the CA De"ision in CA-G.R. C No. ))&%2 and the Resol#tions of this Co#rt in G.R. No.%(2(/>. 4oreoer, there is no epli"it and "lear dire"tie forpetitioner to a""ept the pa$*ent of the 1alan"e of the pri"e.

It is for this reason that respondent "annot as5 for a !rit of

ee"#tion fro* the trial "o#rt !here the "o*plaint !as ori3inall$instit#ted as said "o#rt has no @#risdi"tion oer the person ofpetitioner. Een if a !rit is iss#ed, it sho#ld "onfor* to the @#d3*ent, and the fallo of the CA De"ision does not i*pose the d#t$or o1li3ation on the part of petitioner to a""ept the pa$*ent fro*respondent. It is the settled do"trine that a !rit of ee"#tion *#st"onfor* to the @#d3*ent and if it is diMerent fro* or e"eeds theter*s of the @#d3*ent, then it is a n#llit$.+)&

In addition, Se". %(, R#le )2 proides the pro"ed#re for

ee"#tion of @#d3*ents for spe"i" a"ts, th#s:

Se". %(. Ee"#tion of @#d3*ents for spe"i" a"t.W=a?

Cone$an"e, delier$ of deeds, or other spe"i" a"tsF estin3 title.WIf a @#d3*ent dire"ts a part$ to ee"#te a "one$an"e of land orpersonal propert$, or to delier deeds or other do"#*ents, or toperfor* an$ other spe"i" a"t in "onne"tion there!ith, and thepart$ fails to "o*pl$ !ithin the ti*e spe"ied, the "o#rt *a$ dire"t

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the a"t to 1e done at the "ost of the diso1edient part$ 1$ so*eother person appointed 1$ the "o#rt and the a"t !hen so done shallhae li5e eMe"t as if done 1$ the part$. If real or personal propert$is sit#ated !ithin the 7hilippines, the "o#rt in lie# of dire"tin3 a"one$an"e thereof *a$ 1$ an order diest the title of an$ part$and est it in others, !hi"h shall hae the for"e and eMe"t of a"one$an"e ee"#ted in d#e for* of la!.

The r#le *entions the dire"tie to a 8part$. It is thereforeessential that the person tas5ed to perfor* the spe"i" a"t isi*pleaded as a part$ to the "ase. Other!ise, the @#d3*ent "annot1e ee"#ted. In the "ase at 1ar, petitioner sho#ld hae 1eeni*pleaded as a part$ so as to "o*pel it to a""ept pa$*ent andee"#te the deed of sale oer the disp#ted lots in faor ofrespondent. As petitioner !as not i*pleaded as a part$, then theCA De"ision in CA-G.R. C No. ))&%2 as aLr*ed in G.R. No. %(2(/>"annot 1e enfor"ed a3ainst it.

The "a#se of a"tion aaila1le to respondent is to le an a"tion

for "onsi3nation a3ainst petitioner !hi"h she did 1$ re3isterin3 a

"o*plaint for "onsi3nation 1efore the <9R6 on 4ar"h %', %22>.9nfort#natel$, it !as led !a$ 1e$ond the )(-da$ period !hi"hlapsed on Septe*1er '(, %22& or i**ediatel$ thereafter. 6e"a#seof the fail#re of respondent to eMe"t pa$*ent to petitioner !ithinthe )(-da$ period or soon thereafter, her ri3hts to 1#$ the disp#tedlots hae 1een forfeited, lost, and etin3#ished.

In St. Do*ini" Corporation, !hi"h is s#1stantiall$ si*ilar to

the "ase at 1ar, !e eplained the pro"ed#re !hen a part$ is dire"tedto pa$ the 1alan"e of the p#r"hase pri"e 1ased on a "o#rt de"ision,th#s:

;irst of all, the de"ision of the then Co#rt of Appeals !hi"h !aspro*#l3ated on O"to1er '%, %2>%, is #ite "lear !hen it ordered thepa$*ent of the 1alan"e of the p#r"hase pri"e for the disp#ted lot!ithin &( da$s 8fro* re"eipt hereof, *eanin3 fro* the re"eipt ofthe de"ision 1$ the respondents. It is an ad*itted fa"t that the

respondents re"eied a "op$ of the de"ision on O"to1er )(, %2>%.<en"e, the$ had #p to De"e*1er '2, %2>% to *a5e the pa$*ent.9pon ref#sal 1$ the petitioner to re"eie s#"h pa$*ent, the properpro"ed#re !as for the respondent to "onsi3n the sa*e !ith the"o#rt also !ithin the &(-da$ period or !ithin a reasona1le ti*ethereafter. The fa"t that eMorts !ere *ade 1$ the petitioner torea"h an a3ree*ent !ith the respondents after the pro*#l3ation ofthe de"ision did not in an$!a$ aMe"t the nalit$ of the @#d3*ent. This !as "learl$ e*phasied in the order of the appellate "o#rt on4a$ &, %2>'.

Se"ondl$, een if !e re"5on the &(-da$ period fro* the date ofthe nalit$ of the de"ision as interpreted 1$ the appellate "o#rt,s#"h nalit$ sho#ld 1e "o#nted fro* 4ar"h , %2>', !hi"h !as thedate the de"ision 1e"a*e nal as indi"ated in the entr$ of @#d3*entand not fro* A#3#st '&, %2>' !hi"h is the date the entr$ !as *ade. The date of a nalit$ of a de"ision is entirel$ distin"t fro* the dateof its entr$ and the dela$ in the latter does not aMe"t the eMe"tiit$of the for*er as s#"h is "o#nted fro* the epiration of the period toappeal.+)/

In the afore"ited "ase, the lot o!ner !as *ade a part$ to the "aseand the @#d3*ent of the "o#rt !as for the plaintiM to pa$ to the loto!ner the 1alan"e of the p#r"hase pri"e !ithin &( da$s fro* re"eiptof the De"ision. Een ass#*in3 ar3#endo that petitioner 6.E. SanDie3o, In"., tho#3h not a part$ in the "o*plaint for #ietin3 of title,"an 1e "o*pelled to re"eie the p#r"hase pri"e, still, the ref#sal tore"eie the *one$ re#ires respondent Al#l to follo! the pro"ed#rein St. Do*ini" Corporation and "onsi3n the *one$ !ith the "o#rt ofori3in. <ain3 failed in this respe"t, respondents ri3hts to thepropert$ hae 1een forfeited as a res#lt of non-pa$*ent !ithin thepres"ri1ed ti*e fra*e.

The CA relied on @#sti"e and e#it$ in 3rantin3 an additionalperiod of e =? da$s fro* re"eipt of the ;e1r#ar$ %>, '((De"ision in CA-G.R. S7 No. >%)0% to pa$ the 1alan"e d#e for the saleof the fo#r lots.+)> Khile !e "o**iserate !ith the pli3ht of

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respondent, the CA r#lin3 !ill not preail oer the esta1lished aio*that e#it$ is applied onl$ in the a1sen"e of and neer a3ainststat#tor$ la! or @#di"ial r#les of pro"ed#re.+)2 ;or all its "on"eded*erits, e#it$ is aaila1le onl$ in the a1sen"e of la! and not as itsrepla"e*ent.+0( E#it$ as an e"eptional eten#atin3"ir"#*stan"e does not faor, nor *a$ it 1e #sed to re!ard, theindolent. This Co#rt !ill not allo! a part$, in 3#ise of e#it$, to1enet fro* respondents o!n ne3li3en"e.+0%

In the li3ht of the fore3oin3 "onsiderations, !e nd that the

3rant of respondents petition in CA-G.R. S7 No. >%)0% and there"o3nition of the 1elated "onsi3nation of the a*o#nt nd nos#pport nor 1asis in la!, r#le, or @#rispr#den"e. The CAs holdin3that the non-"onsi3nation of the a*o#nt d#e is *erel$ a pro"ed#rallapse on the part of respondents "o#nsel is *ispla"ed and is"ontrar$ to settled @#rispr#den"e. 7lainl$, respondents ri3hts oerthe s#1@e"t propert$ are no! lost and forfeited.

<ain3 resoled the "ore iss#e on the alidit$ of the

"onsi3nation, the Co#rt sees no f#rther need to dis"#ss there*ainin3 iss#es raised in the petition.

7etitioner to rei*1#rse pa$*ents

<o!eer, respondent had *ade pa$*ents oer the s#1@e"t

properties 1ased on her a3ree*ent !ith petitioner. So as not toenri"h itself at the epense of respondent, petitioner is o1li3ed torei*1#rse respondent !hateer a*o#nt !as paid 1$ her in for* of*onthl$ a*ortiations. On the other hand, if respondent is inpossession of the s#1@e"t properties, she and all persons "lai*in3#nder her sho#ld s#rrender the possession to petitioner.

K<ERE;ORE, the petition is GRANTED, the ;e1r#ar$ %>, '((De"ision and A#3#st )%, '(( Resol#tion of the CA are REERSEDand SET ASIDE, and the Septe*1er %>, '(() Resol#tion andDe"e*1er ', '(() Order of the O7 are here1$ REINSTATED.7etitioner is ORDERED to rei*1#rse respondent !hateer a*o#nt

the latter has paid for the s#1@e"t properties per the Contra"t to SellNo. >&/. 7etitioner is DECARED to 1e the tr#e and le3al o!ner ofots Nos. , &, /, and >, 6lo"5 %>, A#rora S#1diision, 4a$silo,4ala1on Cit$. The Re3ister of Deeds of 4anila, Distri"t III, 4ala1onCit$ 6ran"h is ORDERED to "an"el Transfer Certi"ates of Title Nos.N-%2'', N-%2'), N-%2'0, and N-%2' in the na*es of spo#sesCarlos N. ent#ra and Sandra . ent#ra and re3ister the sa*e inthe na*e of petitioner. The lis pendens in faor of respondentannotated on the Transfer Certi"ates of Title oer the s#1@e"tproperties is here1$ I;TED, and the Re3ister of Deeds for 4etro4anila, Distri"t III is DIRECTED to CANCE said lis pendens.Respondent and all persons "lai*in3 #nder her are ORDERED toa"ate the s#1@e"t properties and s#rrender the* to petitioner!ithin sit$ =&(? da$s fro* nalit$ of this @#d3*ent. Noprono#n"e*ent as to "osts.

SO ORDERED.

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sear"h

Rep#1li" of the 7hilippinesS97RE4E CO9RT4anila

SECOND DIISION

G.R. No. %/%'2> April %, '(%)

S7O9SES OSCAR and T<E4A CACAYORIN, 7etitioners,s.AR4ED ;ORCES AND 7OICE 49T9A 6ENE;IT ASSOCIATION, INC.,Respondent.

D E C I S I O N

DE CASTIO, J.:

Consi3nation is ne"essaril$ @#di"ial. Arti"le %'> of the Ciil Code

spe"i"all$ proides that "onsi3nation shall 1e *ade 1$ depositin3the thin3 or thin3s d#e at the disposal of @#di"ial a#thorit$. The saidproision "learl$ pre"l#des "onsi3nation in en#es other than the"o#rts.

Assailed in this 7etition for Reie! on Certiorari% are the Septe*1er'2, '(( De"ision' of the Co#rt of Appeals =CA? !hi"h 3ranted the7etition for Certiorari in CA-G.R. S7 No. >000& and its Jan#ar$ %','((& Resol#tion) den$in3 petitionersX 4otion for Re"onsideration.0

;a"t#al Ante"edents

7etitioner Os"ar Ca"a$orin =Os"ar? is a *e*1er of respondent

Ar*ed ;or"es and 7oli"e 4#t#al 6enet Asso"iation, In". =A;746AI?,a *#t#al 1enet asso"iation d#l$ or3anied and eistin3 #nder7hilippine la!s and en3a3ed in the 1#siness of deelopin3 lo!-"ostho#sin3 pro@e"ts for personnel of the Ar*ed ;or"es of the7hilippines, 7hilippine National 7oli"e, 6#rea# of ;ire 7rote"tion,

6#rea# of Jail 4ana3e*ent and 7enolo3$, and 7hilippine CoastG#ard. <e led an appli"ation !ith A;746AI to p#r"hase a pie"e ofpropert$ !hi"h the latter o!ned, spe"i"all$ ot , 6lo"5 >, 7hase I,ali5asan 4#t#al <o*es, San 7edro, 7#erto 7rin"esa Cit$ =thepropert$?, thro#3h a loan fa"ilit$.

On J#l$ 0, %220, Os"ar and his !ife and "o-petitioner herein, Thel*a,on one hand, and the R#ral 6an5 of San Teodoro =the R#ral 6an5? onthe other, ee"#ted a oan and 4ort3a3e A3ree*ent !ith thefor*er as 1orro!ers and the R#ral 6an5 as lender, #nder thea#spi"es of 7a3-I6IG or <o*e Deelop*ent 4#t#al ;#nds <o*e;inan"in3 7ro3ra*.

The R#ral 6an5 iss#ed an A#3#st '', %220 letter of 3#arant$&infor*in3 A;746AI that the pro"eeds of petitioners approed loanin the a*o#nt of 7//,0%>.(( shall 1e released to A;746AI after titleto the propert$ is transferred in petitioners na*e and after there3istration and annotation of the parties *ort3a3e a3ree*ent.

On the 1asis of the R#ral 6an5s letter of 3#arant$, A;746AIee"#ted in petitioners faor a Deed of A1sol#te Sale,/ and a ne!

title H Transfer Certi"ate of Title No. )/(%/> =TCT No. )/(%/? H !asiss#ed in their na*e, !ith the "orrespondin3 annotation of their*ort3a3e a3ree*ent !ith the R#ral 6an5, #nder Entr$ No. ))&0.2

9nfort#natel$, the 7a3-I6IG loan fa"ilit$ did not p#sh thro#3h andthe R#ral 6an5 "losed and !as pla"ed #nder re"eiership 1$ the7hilippine Deposit Ins#ran"e Corporation =7DIC?. 4ean!hile,A;746AI so*eho! !as a1le to ta5e possession of petitioners loando"#*ents and TCT No. )/(%/, !hile petitioners !ere #na1le to pa$the loanB"onsideration for the propert$.

A;746AI *ade oral and !ritten de*ands for petitioners to pa$ theloanB "onsideration for the propert$.%(

In J#l$ '((), petitioners led a Co*plaint%% for "onsi3nation of loanpa$*ent, re"oer$ of title and "an"ellation of *ort3a3e annotationa3ainst A;746AI, 7DIC and the Re3ister of Deeds of 7#erto 7rin"esaCit$. The "ase !as do"5eted as Ciil Case No. )>%' and raUed to

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<en"e, the instant 7etition.

Iss#e

The sole iss#e that *#st 1e resoled in this 7etition is: Does theCo*plaint in Ciil Case No. )>%' fall !ithin the e"l#sie @#risdi"tionof the <9R6P

7etitioners Ar3#*ents

7etitioners assert that the ele*ents !hi"h *a5e #p a alid "ase for"onsi3nation are present in their Co*plaint. The$ add that sin"e adeed of a1sol#te sale has 1een iss#ed in their faor, and possessionof the propert$ has 1een s#rrendered to the*, not to *ention thattitle has 1een pla"ed in their na*e, the <9R6 lost @#risdi"tion oertheir "ase. And for this sa*e reason, petitioners ar3#e that their"ase *a$ not 1e said to 1e one for spe"i" perfor*an"e of"ontra"t#al and le3al o1li3ations #nder 7D 2/ as nothin3 *ore !asleft to 1e done in order to perfe"t or "onsolidate their title.

7etitioners th#s pra$ that the herein assailed De"ision and

Resol#tion of the CA 1e set aside, and that the trial "o#rt 1e orderedto "ontin#e !ith the pro"eedin3s in Ciil Case No. )>%'.

RespondentXs Ar3#*ents

Respondent, on the other hand, insists in its Co**ent'( that @#risdi"tion oer petitioners "ase lies !ith the <9R6, as it sprin3sfro* their "ontra"t#al relation as seller and 1#$er, respe"tiel$, of as#1diision lot. The pra$er in petitioners Co*plaint inoles thes#rrender or delier$ of the title after f#ll pa$*ent of the p#r"hasepri"e, !hi"h respondent "lai*s are re"ipro"al o1li3ations in a saletransa"tion "oered 1$ 7D 2/. Respondent adds that in eMe"t,petitioners are ea"tin3 spe"i" perfor*an"e fro* it, !hi"h pla"es

their "ase !ithin the @#risdi"tion of the <9R6.

O#r R#lin3

The Co#rt 3rants the 7etition.

The Co*plaint *a5es o#t a "ase for "onsi3nation.

The settled prin"iple is that the alle3ations of the Co*plaintdeter*ine the nat#re of the a"tion and "onse#entl$ the @#risdi"tionof the "o#rts. This r#le applies !hether or not the plaintiM is entitledto re"oer #pon all or so*e of the "lai*s asserted therein as this isa *atter that "an 1e resoled onl$ after and as a res#lt of thetrial.'%

Does the Co*plaint in Ciil Case No. )>%' *a5e o#t a "ase for"onsi3nationP It alle3es that:

&.( H Not lon3 after ho!eer, R6ST'' "losed shop and defendant7hilippine Deposit Ins#ran"e Corporation =7DIC? !as appointed as itsre"eier. The plaintiMs, thro#3h a representatie, *ade a er1alin#ir$ to the 7DIC re3ardin3 the pa$*ent of their loan 1#t !ere toldthat it has no infor*ation or re"ord of the said loan. This *ade +si"the plaintiMs in #andar$ as to !here or !ho* the$ !ill pa$ theirloan, !hi"h the$ intend to pa$ in f#ll, so as to "an"el the annotationof *ort3a3e in their title.

/.( H It !as dis"oered that the loan papers of the plaintiMs,in"l#din3 the d#pli"ate ori3inal of their title, !ere in the possessionof defendant A;746AI. It !as #n"lear tho#3h !h$ the saiddo"#*ents in"l#din3 the title !ere in the possession of A;746AI. These papers sho#ld hae 1een in R6STs possession and 3ien to7DIC after its "los#re in the latters "apa"it$ as re"eier.

>.( H 7laintiMs are no! intendin3 to pa$ in f#ll their real estate loan1#t "o#ld not de"ide !here to pa$ the sa*e 1e"a#se of R6ST +si""los#re and 7DICs fail#re to lo"ate the loan re"ords and title. This"o#rts interention is no! needed in order to deter*ine to +si"!here or !ho* the loan sho#ld 1e paid.

2.( H 7laintiMs here1$ respe"tf#ll$ pra$s +si" for this "o#rt to allo!the deposit of the a*o#nt of 7hp//,0%>.(( as f#ll pa$*ent of theirprin"ipal loan, e"l#din3 interest, p#rs#ant to the oan and4ort3a3e A3ree*ent on 0 J#l$ %220.')

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;ro* the a1oe alle3ations, it appears that the petitioners de1t iso#tstandin3F that the R#ral 6an5s re"eier, 7DIC, infor*edpetitioners that it has no re"ord of their loan een as it too5 oer theaMairs of the R#ral 6an5, !hi"h on re"ord is the petitioners "reditoras per the J#l$ 0, %220 oan and 4ort3a3e A3ree*entF that one !a$or another, A;746AI "a*e into possession of the loan do"#*ents as!ell as TCT No. )/(%/F that petitioners are read$ to pa$ the loan inf#llF ho!eer, #nder the "ir"#*stan"es, the$ do not 5no! !hi"h of

the t!o H the R#ral 6an5 or A;746AI H sho#ld re"eie f#ll pa$*entof the p#r"hase pri"e, or to !ho* tender of pa$*ent *#st alidl$ 1e*ade.

9nder Arti"le %'& of the Ciil Code,'0 the de1tor shall 1e releasedfro* responsi1ilit$ 1$ the "onsi3nation of the thin3 or s#* d#e,!itho#t need of prior tender of pa$*ent, !hen the "reditor is a1sentor #n5no!n, or !hen he is in"apa"itated to re"eie the pa$*ent atthe ti*e it is d#e, or !hen t!o or *ore persons "lai* the sa*e ri3htto "olle"t, or !hen the title to the o1li3ation has 1een lost. Appl$in3Arti"le %'& to the petitioners "ase as shaped 1$ the alle3ations intheir Co*plaint, the Co#rt nds that a "ase for "onsi3nation has

1een *ade o#t, as it no! appears that there are t!o entities !hi"hpetitioners *#st deal !ith in order to f#ll$ se"#re their title to thepropert$: %? the R#ral 6an5 =thro#3h 7DIC?, !hi"h is the apparent"reditor #nder the J#l$ 0, %220 oan and 4ort3a3e A3ree*entF and'? A;746AI, !hi"h is "#rrentl$ in possession of the loan do"#*entsand the "erti"ate of title, and the one *a5in3 de*ands #ponpetitioners to pa$. Clearl$, the alle3ations in the Co*plaint present asit#ation !here the "reditor is #n5no!n, or that t!o or *ore entitiesappear to possess the sa*e ri3ht to "olle"t fro* petitioners.Khateer transpired 1et!een the R#ral 6an5 or 7DIC and A;746AIin respe"t of petitioners loan a""o#nt, if an$, s#"h that A;746AI"a*e into possession of the loan do"#*ents and TCT No. )/(%/, itappears that petitioners !ere not infor*ed thereof, nor *ade pri$

thereto.

Indeed, the instant "ase presents a #ni#e sit#ation !here the1#$er, thro#3h no fa#lt of his o!n, !as a1le to o1tain title to realpropert$ in his na*e een 1efore he "o#ld pa$ the p#r"hase pri"e in

f#ll. There appears to 1e no itiated "onsent, nor is there an$ otheri*pedi*ent to the "ons#**ation of their a3ree*ent, @#st as itappears that it !o#ld 1e to the 1est interests of all parties to thesale that it 1e on"e and for all "o*pleted and ter*inated. ;or thisreason, Ciil Case No. )>%' sho#ld at this @#n"t#re 1e allo!ed topro"eed.

4oreoer, petitioners position is 1#ttressed 1$ A;746AIs o!nad*ission in its Co**ent' that it *ade oral and !ritten de*ands

#pon the for*er, !hi"h nat#rall$ a33raated their "onf#sion as to!ho !as their ri3htf#l "reditor to !ho* pa$*ent sho#ld 1e *ade Hthe R#ral 6an5 or A;746AI. Its s#1se#ent lin3 of the 4otion toDis*iss r#ns "o#nter to its de*ands to pa$. If it !anted to 1e paid!ith ala"rit$, then it sho#ld not hae *oed to dis*iss Ciil CaseNo. )>%', !hi"h !as 1ro#3ht pre"isel$ 1$ the petitioners in order to1e a1le to nall$ settle their o1li3ation in f#ll.

;inall$, the la"5 of prior tender of pa$*ent 1$ the petitioners is notfatal to their "onsi3nation "ase. The$ led the "ase for the ea"treason that the$ !ere at a loss as to !hi"h 1et!een the t!o H theR#ral 6an5 or A;746AI H !as entitled to s#"h a tender of pa$*ent.

6esides, as earlier stated, Arti"le %'& a#thories "onsi3nationalone, !itho#t need of prior tender of pa$*ent, !here the 3ro#ndfor "onsi3nation is that the "reditor is #n5no!n, or does not appearat the pla"e of pa$*entF or is in"apa"itated to re"eie the pa$*entat the ti*e it is d#eF or !hen, !itho#t @#st "a#se, he ref#ses to 3iea re"eiptF or !hen t!o or *ore persons "lai* the sa*e ri3ht to"olle"tF or !hen the title of the o1li3ation has 1een lost.

Consi3nation is ne"essaril$ @#di"ialF hen"e, @#risdi"tion lies !ith theRTC, not !ith the <9R6.

On the #estion of @#risdi"tion, petitioners "ase sho#ld 1e tried inthe 7#erto 7rin"esa RTC, and not the <9R6. Consi3nation is

ne"essaril$ @#di"ial,'& as the Ciil Code itself proides that"onsi3nation shall 1e *ade 1$ depositin3 the thin3 or thin3s d#e atthe disposal of @#di"ial a#thorit$, th#s:

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Art. %'>. Consi3nation shall 1e *ade 1$ depositin3 the thin3s d#eat the disposal of @#di"ial a#thorit$, 1efore !ho* the tender ofpa$*ent shall 1e proed, in a proper "ase, and the anno#n"e*entof the "onsi3nation in other "ases.

The "onsi3nation hain3 1een *ade, the interested parties shallalso 1e notied thereof. =E*phasis and #nders"orin3 s#pplied?

The a1oe proision "learl$ pre"l#des "onsi3nation in en#es other

than the "o#rts.%!phi% Else!here, !hat *a$ 1e *ade is a alidtender of pa$*ent, 1#t not "onsi3nation. The t!o, ho!eer, are to1e distin3#ished.

Tender of pa$*ent *#st 1e distin3#ished fro* "onsi3nation. Tenderis the ante"edent of "onsi3nation, that is, an a"t preparator$ to the"onsi3nation, !hi"h is the prin"ipal, and fro* !hi"h are deried thei**ediate "onse#en"es !hi"h the de1tor desires or see5s too1tain. Tender of pa$*ent *a$ 1e etra@#di"ial, !hile "onsi3nationis ne"essaril$ @#di"ial, and the priorit$ of the rst is the atte*pt to*a5e a priate settle*ent 1efore pro"eedin3 to the sole*nities of"onsi3nation. => 4anresa )'?.'/

Khile it *a$ 1e tr#e that petitioners "lai* relates to the ter*s and"onditions of the sale of A;746AIs s#1diision lot, this isoershado!ed 1$ the fa"t that sin"e the Co*plaint in Ciil Case No.)>%' pleads a "ase for "onsi3nation, the <9R6 is !itho#t @#risdi"tion to tr$ it, as s#"h "ase *a$ onl$ 1e tried 1$ the re3#lar"o#rts.

K<ERE;ORE, pre*ises "onsidered, the 7etition is GRANTED. TheSepte*1er '2, '(( De"ision and Jan#ar$ %', '((& Resol#tion ofthe Co#rt of Appeals in CA-G.R. S7 No. >000& are ANN9ED andSET ASIDE. The O"to1er %&, '(() and 4ar"h %2, '((0 Orders of theRe3ional Trial Co#rt of 7#erto 7rin"esa Cit$, 6ran"h 0/, are

REINSTATED, and the "ase is RE4ANDED to the said "o#rt for"ontin#ation of the pro"eedin3s.

SO ORDERED.

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7<II77INE NATIONA CONSTR9CTION COR7ORATION petitioner, s.CO9RT O; A77EAS, 4A. TERESA S. RAY49NDO-A6ARRA, JOSE S.RAY49NDO, ANTONIO S. RAY49NDO, RENE S. RAY49NDO, andA4ADOR S. RAY49NDO, respondents.D E C I S I O NDAIDE, JR., J.:

This petition for reie! on "ertiorari has its roots in Ciil Case No.)000, !hi"h !as spar5ed 1$ the petitionerXs ref#sal to pa$ the

rentals as stip#lated in the "ontra"t of lease+% on an #ndiidedportion of )(,((( s#are *eters of a par"el of land o!ned 1$ thepriate respondents.

The lease "ontra"t, ee"#ted on %> Noe*1er %2>, reads in part asfollo!s:

%. TER4 O; EASE - This lease shall 1e for a period of e =? $ears,"o**en"in3 on the date of iss#an"e of the ind#strial "learan"e 1$the 4inistr$ of <#*an Settle*ents, rene!a1le for a li5e or otherperiod at the option of the ESSEE #nder the sa*e ter*s and"onditions.

'. RATE O; RENT - ESSEE shall pa$ to the ESSOR rent at the*onthl$ rate of TKENTY T<O9SAND 7ESOS =7'(,(((.((?, 7hilippineC#rren"$, in the *anner set forth in 7ara3raph ) 1elo!. This rateshall 1e in"reased $earl$ 1$ ;ie 7er"ent =? 1ased on the a3reed*onthl$ rate of 7'(,(((.(( as follo!s:

4onthl$ Rate 7eriod Appli"a1le

7'%,(((.(( Startin3 on the 'nd $ear

7'',(((.(( Startin3 on the )rd $ear

7'),(((.(( Startin3 on the 0th $ear

7'0,(((.(( Startin3 on the th $ear

). TER4S O; 7AY4ENT - The rent stip#lated in 7ara3raph ' a1oeshall 1e paid $earl$ in adan"e 1$ the ESSEE. The rst ann#al rentin the a*o#nt of TKO <9NDRED ;ORTY T<O9SAND 7ESOS=7'0(,(((.((?, 7hilippine "#rren"$, shall 1e d#e and pa$a1le #ponthe ee"#tion of this A3ree*ent and the s#""eedin3 ann#al rentsshall 1e pa$a1le eer$ t!ele =%'? *onths thereafter d#rin3 theeMe"tiit$ of this A3ree*ent.

0. 9SE O; EASED 7RO7ERTY - It is #nderstood that the 7ropert$

shall 1e #sed 1$ the ESSEE as the site, 3ro#nds and pre*ises of aro"5 "r#shin3 plant and eld oL"e, sleepin3 #arters and"anteenB*ess hall. The ESSORS here1$ 3rant to the ESSEE theri3ht to ere"t on the eased 7ropert$ s#"h str#"t#re=s? andBori*proe*ent=s? ne"essar$ for or in"idental to the ESSEEXsp#rposes.

. . .

%%. TER4INATION O; EASE - This A3ree*ent *a$ 1e ter*inated 1$*#t#al a3ree*ent of the parties. 9pon the ter*ination orepiration of the period of lease !itho#t the sa*e 1ein3 rene!ed,

the ESSEE shall a"ate the eased 7ropert$ at its epense.

On / Jan#ar$ %2>&, petitioner o1tained fro* the 4inistr$ of <#*anSettle*ents a Te*porar$ 9se 7er*it+' for the proposed ro"5"r#shin3 pro@e"t. The per*it !as to 1e alid for t!o $ears #nlesssooner reo5ed 1$ the 4inistr$.

On %& Jan#ar$ %2>&, priate respondents !rote petitioner re#estin3pa$*ent of the rst ann#al rental in the a*o#nt of 7'0(,((( !hi"h!as d#e and pa$a1le #pon the ee"#tion of the "ontra"t. The$ alsoass#red the latter that the$ had alread$ stopped "onsiderin3 theproposals of other a33re3ates plants to lease the propert$ 1e"a#seof the eistin3 "ontra"t !ith petitioner.+)

In its repl$-letter, petitioner ar3#ed that #nder para3raph % of thelease "ontra"t, pa$*ent of rental !o#ld "o**en"e on the date ofthe iss#an"e of an ind#strial "learan"e 1$ the 4inistr$ of <#*anSettle*ents, and not fro* the date of si3nin3 of the "ontra"t. It

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then epressed its intention to ter*inate the "ontra"t, as it hadde"ided to "an"el or dis"ontin#e !ith the ro"5 "r#shin3 pro@e"t d#eto nan"ial, as !ell as te"hni"al, diL"#lties.+0

The priate respondents ref#sed to a""ede to petitionerXs re#est forthe preter*ination of the lease "ontra"t. The$ insisted on theperfor*an"e of petitionerXs o1li3ation and reiterated their de*andfor the pa$*ent of the rst ann#al rental.+

7etitioner o1@e"ted to the "lai* of the priate respondents andar3#ed that it !as onl$ o1li3ated to pa$ ... the a*o#nt of7'(,(((.(( as rental pa$*ents for the one-*onth period of lease,"o#nted fro* (/ Jan#ar$ %2>& !hen the Ind#strial 7er*it !as iss#ed1$ the 4inistr$ of <#*an Settle*ents #p to (/ ;e1r#ar$ %2>& !henthe Noti"e of Ter*ination !as sered+& on priate respondents.

On %2 4a$ %2>&, the priate respondents instit#ted !ith theRe3ional Trial Co#rt of 7asi3 an a"tion a3ainst petitioner for Spe"i"7erfor*an"e !ith Da*a3es.+/ The "ase !as do"5eted as Ciil CaseNo. )000 at 6ran"h %&( of the said "o#rt. After the lin3 1$petitioner of its Ans!er !ith Co#nter"lai*, the "ase !as set for trialon the *erits.

Khat transpired net !as s#**aried 1$ the trial "o#rt in this !ise:

7laintiMs rested their "ase on Septe*1er /, %2>/ =p. >/ re".?.Defendant as5ed for postpone*ent of the re"eption of its eiden"es"hed#led on A#3#st %(, %2>> and as pra$ed for, !as reset toA#3#st ', %2>> =p. 2% re".? Co#nsel for defendant a3ain as5ed forpostpone*ent, thro#3h representatie, as he !as presentl$indisposed. The "ase !as reset, intransfera1le to Septe*1er % and'&, %2>> =p. 20 re".? On Septe*1er ', %2>>, the oL"e of theGoern*ent Corporate Co#nsel entered its appearan"e fordefendant =p. 2, re".? and the ori3inal "o#nsel later !ithdre! his

appearan"e. On Septe*1er %, %2>> the Goern*ent CorporateCo#nsel as5ed for postpone*ent, represented 1$ Att$. Elpidio dee3a, and !ith his "onfor*it$ in open "o#rt, the hearin3 !as reset,intransfera1le to Septe*1er '& and O"to1er %/, %2>>. =p. 2>, re".?On Septe*1er '&, %2>> d#rin3 the hearin3, defendantXs "o#nsel

led a *otion for postpone*ent =#r3ent? as he had sore e$es, a*edi"al "erti"ate atta"hed.

Co#nsel for plaintiMs o1@e"ted to the postpone*ent and the "o#rt"onsidered the eiden"e of the 3oern*ent ter*inated or !aied. The "ase !as dee*ed s#1*itted for de"ision #pon the lin3 of the*e*orand#*. 7laintiMs led their *e*orand#* on O"to1er '&,%2>>. =p. %%%, re".?.

On O"to1er %>, %2>> in the *eanti*e, the defendant led a *otionfor re"onsideration of the order of the "o#rt on Septe*1er '&, %2>>=p. %(/, re".? The *otion !as not as5ed to 1e set for hearin3 =p.%%( re".? There !as also no proof of noti"e and seri"e to "o#nselfor plaintiM. The "o#rt in the interest of @#sti"e set the hearin3 onthe *otion on Noe*1er '2, %2>>. =p. %'(, re".? 1#t despite noti"e,a3ain defendantXs "o#nsel !as a1sent =p. %'(-A, dorsal side, re".?!itho#t reason. The "o#rt reset the *otion to De"e*1er %&, %2>>,in the interest of @#sti"e. The *otion for re"onsideration !as denied1$ the "o#rt. A se"ond *otion for re"onsideration !as led and"o#nsel set for hearin3 the *otion on Jan#ar$ %2, %2>2. D#rin3 thehearin3, "o#nsel for the 3oern*ent !as a1sent. The *otion !asdee*ed a1andoned 1#t the "o#rt at an$ rate, after a reie! of thein"idents and the 3ro#nds relied #pon in the earlier *otion ofdefendant, fo#nd no reason to dist#r1 its preio#s order.+>

On %' April %2>2, the trial "o#rt rendered a de"ision orderin3petitioner to pa$ the priate respondents the a*o#nt of 702',(((!hi"h represented the rentals for t!o $ears, !ith le3al interest fro*/ Jan#ar$ %2>& #ntil the a*o#nt !as f#ll$ paid, pl#s attorne$Xs feesin the a*o#nt of 7'(,((( and "osts.+2

7etitioner then appealed to the Co#rt of Appeals alle3in3 that thetrial "o#rt erred in orderin3 it to pa$ the priate respondent thea*o#nt of 702',((( and in den$in3 it the ri3ht to 1e heard.

9pon the aLr*an"e of the trial "o#rtXs de"ision+%( and the denialof its *otion for re"onsideration, petitioner "a*e to this Co#rtas"ri1in3 to the respondent Co#rt of Appeals the sa*e alle3ederrors and reiteratin3 their ar3#*ents.

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;irst. 7etitioner inites the attention of this Co#rt to para3raph % ofthe lease "ontra"t, !hi"h reads: This lease shall 1e for a period ofe =? $ears, "o**en"in3 on the date of iss#an"e of the ind#strial"learan"e 1$ the 4inistr$ of <#*an Settle*ents.... It then s#1*itsthat the iss#an"e of an ind#strial "learan"e is a s#spensie "ondition!itho#t !hi"h the ri3hts #nder the "ontra"t !o#ld not 1e a"#ired. The Te*porar$ 9se 7er*it is not the ind#strial "learan"e referred toin the "ontra"tF for the said per*it re#ires that a "learan"e fro*

the National 7rod#"tion Control Co**ission 1e rst se"#red, and1esides, there is a ndin3 in the per*it that the proposed pro@e"tdoes not "onfor* to the onin3 Ordinan"e of Rodri3#e, =for*erl$4ontal1an?, Rial, !here the leased propert$ is lo"ated. Kitho#t theind#strial "learan"e the lease "ontra"t "o#ld not 1e"o*e eMe"tieand petitioner "o#ld not 1e "o*pelled to perfor* its o1li3ation#nder the "ontra"t.

7etitioner is no! estopped fro* "lai*in3 that the Te*porar$ 9se7er*it !as not the ind#strial "learan"e "onte*plated in the"ontra"t. In its letter dated '0 April %2>&, petitioner states:

Ke !ish to reiterate 7NCC 4ana3e*entXs preio#s stand that it isonl$ o1li3ated to pa$ $o#r "lients the a*o#nt of 7'(,(((.(( asrental pa$*ents for the one-*onth period of the lease, "o#ntedfro* (/ Jan#ar$ %2>& !hen the Ind#strial 7er*it !as iss#ed 1$ the4inistr$ of <#*an Settle*ents #p to (/ ;e1r#ar$ %2>& !hen theNoti"e of Ter*ination !as sered on $o#r "lients.+%% =9nders"orin3S#pplied?.

The Ind#strial 7er*it *entioned in the said letter "o#ld onl$ referto the Te*porar$ 9se 7er*it iss#ed 1$ the 4inistr$ of <#*anSettle*ents on / Jan#ar$ %2>&. And it "an 1e 3leaned fro* thisletter that petitioner has "onsidered the per*it as ind#strial"learan"eF other!ise, petitioner "o#ld hae si*pl$ told the priate

respondents that its o1li3ation to pa$ rentals has not $et arisen1e"a#se the Te*porar$ 9se 7er*it is not the ind#strial "learan"e"onte*plated 1$ the*. Instead, petitioner re"o3nied its o1li3ationto pa$ rental "o#nted fro* the date the per*it !as iss#ed.

Also !orth notin3 is the earlier letter of petitionerF th#s:

+7lease 1e adised of 7NCC 4ana3e*entXs de"ision to "an"el ordis"ontin#e !ith the ro"5 "r#shin3 pro@e"t d#e to nan"ial as !ell aste"hni"al diL"#lties. In ie! thereof, !e !o#ld li5e to ter*inate o#rease Contra"t dated %> Noe*1er, %2>. Sho#ld $o# a3ree to the*#t#al ter*ination of o#r ease Contra"t, 5indl$ indi"ate $o#r"onfor*it$ hereto 1$ aLin3 $o#r si3nat#re on the spa"e proided1elo!. 4a$ !e li5e!ise re#est 4essrs. Rene, Jose and Antonio, all

s#rna*ed Ra$*#ndo and 4rs. So"orro A. Ra$*#ndo as Attorne$-in-;a"t of A*ador S. Ra$*#ndo to si3n on the spa"es indi"ated 1elo!.+%'

It "an 1e ded#"ed fro* this letter that the s#spensie "ondition -iss#an"e of ind#strial "learan"e - has alread$ 1een f#llled and thatthe lease "ontra"t has 1e"o*e operatie. Other!ise, petitioner didnot hae to soli"it the "onfor*it$ of the priate respondents to theter*ination of the "ontra"t for the si*ple reason that no @#ridi"alrelation !as "reated 1e"a#se of the non-f#lll*ent of the "ondition.

4oreoer, the reason of petitioner in dis"ontin#in3 !ith its pro@e"tand in "onse#entl$ "an"ellin3 the lease "ontra"t !as 8nan"ial as!ell as te"hni"al diL"#lties, not the alle3ed ins#L"ien"$ of the Te*porar$ 9se 7er*it.

Se"ond. Ino5in3 Arti"le %'&& and the prin"iple of re1#s si"stanti1#s, petitioner asserts that it sho#ld 1e released fro* theo1li3ator$ for"e of the "ontra"t of lease 1e"a#se the p#rpose of the"ontra"t did not *aterialie d#e to #nforeseen eents and "a#ses1e$ond its "ontrol, i.e., d#e to a1r#pt "han3e in politi"al "li*ateafter the EDSA Reol#tion and nan"ial diL"#lties.

It is a f#nda*ental r#le that "ontra"ts, on"e perfe"ted, 1ind 1oth"ontra"tin3 parties, and o1li3ations arisin3 therefro* hae the for"e

of la! 1et!een the parties and sho#ld 1e "o*plied !ith in 3oodfaith.+%) 6#t the la! re"o3nies e"eptions to the prin"iple of theo1li3ator$ for"e of "ontra"ts. One e"eption is laid do!n in Arti"le%'&& of the Ciil Code, !hi"h reads: The de1tor in o1li3ations to do

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shall also 1e released !hen the prestation 1e"o*es le3all$ orph$si"all$ i*possi1le !itho#t the fa#lt of the o1li3or.

7etitioner "annot, ho!eer, s#""essf#ll$ ta5e ref#3e in the saidarti"le, sin"e it is appli"a1le onl$ to o1li3ations to do, and not too1li3ations to 3ie.+%0 An o1li3ation to do in"l#des all 5inds of!or5 or seri"eF !hile an o1li3ation to 3ie is a prestation !hi"h"onsists in the delier$ of a *oa1le or an i**oa1le thin3 in orderto "reate a real ri3ht, or for the #se of the re"ipient, or for its si*ple

possession, or in order to ret#rn it to its o!ner.+%

The o1li3ation to pa$ rentals+%& or delier the thin3 in a "ontra"t oflease+%/ falls !ithin the prestation 8to 3ieF hen"e, it is not"oered !ithin the s"ope of Arti"le %'&&. At an$ rate, the#nforeseen eent and "a#ses *entioned 1$ petitioner are not thele3al or ph$si"al i*possi1ilities "onte*plated in said arti"le.6esides, petitioner failed to state spe"i"all$ the "ir"#*stan"es1ro#3ht a1o#t 1$ 8the a1r#pt "han3e in the politi"al "li*ate in the"o#ntr$ e"ept the alle3ed preailin3 #n"ertainties in 3oern*entpoli"ies on infrastr#"t#re pro@e"ts.

The prin"iple of re1#s si" stanti1#s+%> neither ts in !ith the fa"tsof the "ase. 9nder this theor$, the parties stip#late in the li3ht of"ertain preailin3 "onditions, and on"e these "onditions "ease toeist the "ontra"t also "eases to eist.+%2 This theor$ is said to 1ethe 1asis of Arti"le %'&/ of the Ciil Code, !hi"h proides:

ART. %'&/. Khen the seri"e has 1e"o*e so diL"#lt as to 1e*anifestl$ 1e$ond the "onte*plation of the parties, the o1li3or *a$also 1e released therefro*, in !hole or in part.

This arti"le, !hi"h en#n"iates the do"trine of #nforeseen eents, isnot, ho!eer, an a1sol#te appli"ation of the prin"iple of re1#s si"stanti1#s, !hi"h !o#ld endan3er the se"#rit$ of "ontra"t#al

relations. The parties to the "ontra"t *#st 1e pres#*ed to haeass#*ed the ris5s of #nfaora1le deelop*ents. It is therefore onl$in a1sol#tel$ e"eptional "han3es of "ir"#*stan"es that e#it$de*ands assistan"e for the de1tor.+'(

In this "ase, petitioner !ants this Co#rt to 1eliee that the a1r#pt"han3e in the politi"al "li*ate of the "o#ntr$ after the EDSAReol#tion and its poor nan"ial "ondition 8rendered theperfor*an"e of the lease "ontra"t i*pra"ti"al and ini*i"al to the"orporate s#rial of the petitioner.

This Co#rt "annot s#1s"ri1e to this ar3#*ent. As pointed o#t 1$priate respondents:+'%

It is a *atter of re"ord that petitioner 7NCC entered into a "ontra"t!ith priate respondents on Noe*1er %>, %2>. 7rior thereto, it isof @#di"ial noti"e that after the assassination of Senator A#ino onA#3#st '%, %2>), the "o#ntr$ has eperien"ed politi"al #pheaals,t#r*oils, al*ost dail$ *ass de*onstrations, #npre"edented,inVation, pea"e and order deterioration, the A#ino trial and *an$other thin3s that 1ro#3ht a1o#t the hatred of people een a3ainst"ron$ "orporations. On Noe*1er ), %2>, 7res. 4ar"os, 1ein3interie!ed lie on 9.S. teleision anno#n"ed that there !o#ld 1e asnap ele"tion s"hed#led for ;e1r#ar$ /, %2>&.

On Noe*1er %>, %2>, not!ithstandin3 the a1oe, petitioner 7NCCentered into the "ontra"t of lease !ith priate respondents !ithopen e$es of the deterioratin3 "onditions of the "o#ntr$.

Anent petitioners alle3ed poor nan"ial "ondition, the sa*e !illneither release petitioner fro* the 1indin3 eMe"t of the "ontra"t oflease. As held in Central 6an5 . Co#rt of Appeals,+'' "ited 1$ thepriate respondents, *ere pe"#niar$ ina1ilit$ to f#lll anen3a3e*ent does not dis"har3e a "ontra"t#al o1li3ation, nor does it"onstit#te a defense to an a"tion for spe"i" perfor*an"e.

Kith re3ard to the non-*aterialiation of petitioners parti"#larp#rpose in enterin3 into the "ontra"t of lease, i.e., to #se the leasedpre*ises as a site of a ro"5 "r#shin3 plant, the sa*e !ill not

inalidate the "ontra"t. The "a#se or essential p#rpose in a "ontra"tof lease is the #se or en@o$*ent of a thin3.+') As a 3eneralprin"iple, the *otie or parti"#lar p#rpose of a part$ in enterin3 intoa "ontra"t does not aMe"t the alidit$ or eisten"e of the "ontra"tFan e"eption is !hen the realiation of s#"h *otie or parti"#lar

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p#rpose has 1een *ade a "ondition #pon !hi"h the "ontra"t is*ade to depend.+'0 The e"eption is not appl$ here.

Third. A""ordin3 to petitioner, the a!ard of 702',((( representin3the rent for t!o $ears is e"essie, "onsiderin3 that it did not 1enetfro* the propert$. 6esides, the te*porar$ per*it, "onfor*a1l$ !iththe epress proision therein, !as dee*ed a#to*ati"all$ reo5edfor fail#re of petitioner to #se the sa*e !ithin one $ear fro* theiss#an"e thereof. <en"e, the rent pa$a1le sho#ld onl$ 1e for one

$ear.

7etitioner "annot 1e heard to "o*plain that the a!ard is e"essie. The te*porar$ per*it !as alid for t!o $ears 1#t !as a#to*ati"all$reo5ed 1e"a#se of its non-#se !ithin one $ear fro* its iss#an"e. The non-#se of the per*it and the non-entr$ into the propert$s#1@e"t of the lease "ontra"t !ere 1oth i*p#ta1le to petitioner and"annot, therefore, 1e ta5en adanta3e of in order to eade or lessenpetitioners *onetar$ o1li3ation. The da*a3e or pre@#di"e topriate respondents is 1e$ond disp#te. The$ #n#estiona1l$s#Mered pe"#niar$ losses 1e"a#se of their ina1ilit$ to #se the leasedpre*ises. Th#s, in a""ordan"e !ith Arti"le %&2 of the Ciil Code,+' the$ are entitled to inde*ni"ation for da*a3esF and the a!ardof 702',((( is fair and @#st #nder the "ir"#*stan"es of the "ase.

;inall$, petitioner s#1*its that the trial "o#rt 3rael$ a1#sed itsdis"retion in den$in3 petitioner the ri3ht to 1e heard.

Ke disa3ree. The trial "o#rt !as in fa"t li1eral in 3rantin3 seeralpostpone*ents+'& to petitioner 1efore it dee*ed ter*inated and!aied the presentation of eiden"e in petitioners 1ehalf.

It *#st 1e re"alled that priate respondents rested their "ase on /Septe*1er %2>/ $et.+'/ Al*ost a $ear after, or on %( A#3#st %2>>!hen it !as petitioners t#rn to present eiden"e, petitioners

"o#nsel as5ed for postpone*ent of the hearin3 to ' A#3#st %2>>d#e to "onVi"t of s"hed#les,+'> and this !as 3ranted.+'2 At theres"hed#led hearin3, petitioners "o#nsel, thro#3h a representatie,*oed ane! for postpone*ent, as he !as alle3edl$ indisposed.+)( The "ase !as then reset 8intransfera1le to Septe*1er % and '&,

%2>>.+)% On ' Septe*1er %2>>, the OL"e of the Goern*entCorporate Co#nsel, thro#3h Att$. Elpidio J. e3a, entered itsappearan"e for the petitioner,+)' and later the ori3inal "o#nsel!ithdre! his appearan"e.+)) On % Septe*1er %2>>, Att$. e3are#ested for postpone*ent to ena1le hi* to 3o oer the re"ords ofthe "ase.+)0 Kith his "onfor*it$, the hearin3 !as reset8intransfera1le to Septe*1er '& and O"to1er %/, %2>>.+) In the*ornin3 of '& Septe*1er %2>>, the "o#rt re"eied Att$. e3as9r3ent 4otion for 7ostpone*ent on the 3ro#nd that he !as aUi"ted

!ith "on@#n"tiitis or sore e$es.+)& This ti*e, priate respondentso1@e"tedF and #pon their *otion, the "o#rt dee*ed ter*inated and!aied the presentation of eiden"e for the petitioner.+)/Neertheless, 1efore the "o#rt "onsidered the "ase s#1*itted forde"ision, it re#ired the parties to s#1*it their respe"tie*e*oranda !ithin thirt$ da$s.+)> 6#t petitioner failed to le one.

i5e!ise, the "o#rt !as li1eral in respe"t to petitioners *otion forre"onsideration. Not!ithstandin3 the la"5 of re#est for hearin3and proof of noti"e and seri"e to priate respondents, the "o#rt setthe hearin3 of the said *otion on '2 Noe*1er %2>>.+)2 9pon thedenial of the said *otion for la"5 of *erit,+0( petitioner led ase"ond *otion for re"onsideration. 6#t d#rin3 the hearin3 of the*otion on a date sele"ted 1$ hi*, Att$. e3a !as a1sent for noreason at all, despite d#e noti"e.+0%

;ro* the fore3oin3 narration of pro"ed#ral ante"edents, it "annot 1esaid that the petitioner !as depried of its da$ in "o#rt. Theessen"e of d#e pro"ess is si*pl$ an opport#nit$ to 1e heard.+0' To1e heard does not onl$ *ean oral ar3#*ents in "o#rtF one *a$ 1eheard also thro#3h pleadin3s. Khere opport#nit$ to 1e heard, eitherthro#3h oral ar3#*ents or pleadin3s, is a""orded, there is no denialof pro"ed#ral d#e pro"ess.+0)

K<ERE;ORE, the instant petition is DENIED and the "hallen3ed

de"ision of the Co#rt of Appeals is A;;IR4ED in toto.

No prono#n"e*ents as to "osts.

SO ORDERED.

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petitioners, s. CO9RT O; A77EAS and SANTIAGO A. G9ERRERO,respondents.D E C I S I O N7ARDO, J.:

The "ase is an appeal+% fro* the de"ision of the Co#rt of Appeals+'reersin3 the de"ision of the Re3ional Trial Co#rt of 4a5ati, 4etro4anila,+) r#lin3 in faor of respondent Santia3o A. G#errero anddis*issin3 petitionersX "o*plaint.

;irst, the fa"ts.

7riate respondent Santia3o A. G#errero =hereinafter referred to asG#errero? !as 7resident and Chair*an of+0 8G#errero TransportSeri"es, a sin3le proprietorship.+

So*eti*e in %2/', G#errero Transport Seri"es !on a 1id for theoperation of a Veet of tai"a1s !ithin the S#1i" Naal 6ase, inOlon3apo. As hi3hest 1idder, G#errero !as to proide radio-"ontrolled tai seri"e !ithin the 9. S. Naal 6ase, S#1i" 6a$,#tiliin3 as de*and re#ires... %&( operational tais "onsistin3 offo#r !heel, fo#r-door, fo#r passen3er, radio "ontrolled, *eter"ontrolled, sedans, not *ore than one $ear...+&

On Septe*1er '', %2/', !ith the adent of *artial la!, 7resident;erdinand E. 4ar"os iss#ed etter of Instr#"tion No. % =hereinafterreferred to as the OI?. Ke reprod#"e the tet, as follo!s:

etter of Instr#"tion No. %

S96JECT: SEI9RE AND CONTRO O; A 7RIATEY OKNEDNEKS7A7ERS, 4AGAINES, RADIO AND TEEISION ;ACIITIES ANDA OT<ER4EDIA O; CO449NICATION.

To: %.The 7ress Se"retar$OL"e of the 7resident4anila '. The Se"retar$Depart*ent of National Defense

Ca*p E. A3#inaldo, .C.In ie! of the present national e*er3en"$ !hi"h has 1een 1ro#3hta1o#t 1$ the a"tiities of those !ho are a"tiel$ en3a3ed in a"ri*inal "onspira"$ to seie politi"al and state po!er in the7hilippines and to ta5e oer the Goern*ent 1$ for"e and iolen"ethe etent of !hi"h has no! ass#*ed the proportion of an a"t#al!ar a3ainst o#r people and their le3iti*ate Goern*ent, andp#rs#ant to 7ro"la*ation No. %(>% dated Septe*1er '%, %2/', andin *$ "apa"it$ as "o**ander in "hief of all the ar*ed for"es of the

7hilippines and in order to preent the #se of priatel$ o!nedne!spapers, *a3aines, radio and teleision fa"ilities and all other*edia of "o**#ni"ations, for propa3anda p#rposes a3ainst the3oern*ent and its d#l$ "onstit#ted a#thorities or for an$ p#rposethat tend to #nder*ine the faith and "onden"e of the people in o#r3oern*ent and a33raate the present national e*er3en"$, $o# arehere1$ ordered forth!ith to ta5e oer and "ontrol or "a#se theta5in3 oer and "ontrol of all s#"h ne!spapers, *a3aines, radioand teleision fa"ilities and all other *edia of "o**#ni"ations,!hereer the$ are, for the d#ration of the present nationale*er3en"$, or #ntil other!ise ordered 1$ *e or 1$ *$ d#l$desi3nated representatie.

In "arr$in3 o#t the fore3oin3 order $o# are here1$ also dire"ted tosee to it that reasona1le *eans are e*plo$ed 1$ $o# and $o#r *enand that in@#r$ to persons and propert$ *#st 1e "aref#ll$ aoided.

On Septe*1er ', %2/', p#rs#ant to the afore#oted etter ofInstr#"tion, the Radio Control OL"e iss#ed Ad*inistratie Cir"#larNo. 0 =hereinafter referred to as the Ad*in. Cir"#lar?, herein#oted in f#ll:

S96JECT: S9S7ENDING T<E ACCE7TANCE AND 7ROCESSING O;A77ICATIONS ;OR RADIO STATION CONSTR9CTION 7ER4ITS AND;OR 7ER4ITS TO OKN ANDBOR 7OSSESS RADIO TRANS4ITTERS OR

TRANSCEIERS.

In ie! of the eisten"e of a state of e*er3en"$ and thede"laration 1$ the 7resident of *artial la! in the entire "o#ntr$#nder 7ro"la*ation No. %(>% dated Septe*1er '%, %2/', eMe"tie

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i**ediatel$ the a""eptan"e and pro"essin3 1$ the radio "ontroloL"e of appli"ations for radio stations "onstr#"tions per*its and forper*its to possess, o!n, transfer, p#r"hase and sale of radiotrans*itters and transre"eiers as !ell as *an#fa"t#rers anddealers per*its of said e#ip*ent is here1$ s#spended. Ee*ptedfro* this "ir"#lar are appli"ations for radio station "onstr#"tionper*its and for per*its to possess, o!n, transfer, p#r"hase and sellradio trans*itters and trans"eiers for the follo!in3 radio stations:

%. Aerona#ti"al StationsF

'. Aerona#ti"al ;ied StationsF

). Air"raft StationsF

0. Coastal StationsF and

. Ship Stations.

This "ir"#lar shall 1e stri"tl$ o1sered #ntil lifted #pon properinstr#"tions fro* hi3her a#thorities.

On Septe*1er ', %2/', G#errero and i"torino D. 4a3at=hereinafter referred to as i"torino?, as General 4ana3er ofSpe"tr#* Ele"troni" a1oratories, a sin3le proprietorship, ee"#teda letter-"ontra"t for the p#r"hase of trans"eiers at a #oted pri"e of 9SZ//,&'(.2, ;O6 Yo5oho*a. i"torino !as to delier thetrans"eiers !ithin &( to 2( da$s after re"eiin3 noti"e fro*G#errero of the assi3ned radio fre#en"$,+/ ta5in3 note ofGoern*ent Re3#lations.+>

The "ontra"t !as si3ned and i"torino "onta"ted his Japaneses#pplier, oide Co., td. and pla"ed an order for the trans"eiers.

On Septe*1er '2, %2/', Na$ E"han3e OL"er, A. G. 4ason"onr*ed that G#errero !on the 1id for the "o**er"ialtransportation "ontra"t.+2

On O"to1er 0, %2/', *iddle *an and 1ro5er+%( Isidro . Ali3ada ofRelian"e Gro#p En3ineers, In". =hereinafter referred to as Ali3ada?,!rote i"torino, infor*in3 hi* that a radio fre#en"$ !as not $etassi3ned to G#errero and that 3oern*ent re3#lations *i3ht"o*pli"ate the i*portation of the trans"eiers. <o!eer, in thesa*e letter, i"torino !as adised to adise his s#pplier to pro"eed=!ith? prod#"tion pendin3 fre#en"$ infor*ation. i"torino !as alsoass#red of G#erreroXs nan"ial "apa1ilit$ to "o*pl$ !ith the"ontra"t.+%%

On O"to1er &, %2/', G#errero infor*ed Ali3ada of the fre#en"$n#*1er+%' assi3ned 1$ S#1i" Naal 6ase a#thorities. Ali3ada !asinstr#"ted to pro"eed !ith the order thr# Spe"tr#* Ele"troni"sa1oratories.+%)

On O"to1er /, %2/', Ali3ada infor*ed 4a3at of the assi3nedfre#en"$ n#*1er. Ali3ada also adised i"torino to pro"eed !iththe order #pon re"eipt of letter of "redit.+%0

On Jan#ar$ %(, %2/), G#errero applied for a letter of "redit !ith the4etropolitan 6an5 and Tr#st Co*pan$.+% This appli"ation !as notp#rs#ed.+%&

On 4ar"h '/, %2/), i"torino, represented 1$ his la!$er, Att$.Sinesio S. er3ara, infor*ed G#ererro that the order !ith the Japanese s#pplier has not 1een "an"eled. Sho#ld the "ontra"t 1e"an"eled, the Japanese r* !o#ld forfeit )( of the deposit and"har3e a "an"ellation fee in an a*o#nt not $et 5no!n, G#errero to1ear the loss. ;#rther, sho#ld the "ontra"t 1e "an"eled, i"torino!o#ld de*and an additional a*o#nt e#ialent to %( of the"ontra"t pri"e.+%/

9na1le to 3et a letter of "redit fro* the Central 6an5 d#e to theref#sal of the 7hilippine 3oern*ent+%> to iss#e a per*it to i*port

the trans"eiers,+%2 G#errero "o**en"ed operation of the tai"a1s !ithin S#1i" Naal 6ase, #sin3 radio #nits 1orro!ed fro* the9.S. 3oern*ent =thro#3h the S#1i" Naal 6ase a#thorities?.+'(i"torino th#s "an"eled his order !ith his Japanese s#pplier.

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On 4a$ '', %2/), i"torino led !ith the Re3ional Trial Co#rt, 4a5atia "o*plaint for da*a3es arisin3 fro* 1rea"h of "ontra"t a3ainstG#errero.+'%

On J#ne /, %2/), G#errero *oed to dis*iss the "o*plaint on the3ro#nd that it did not state a "a#se of a"tion.+''

On J#ne %&, %2/), the trial "o#rt+') 3ranted the *otion anddis*issed the "o*plaint.+'0

On J#l$ %%, %2/), i"torino led a petition for reie! on "ertiorari!ith this Co#rt assailin3 the dis*issal of the "o*plaint.+'

On April '(, %2>), this Co#rt+'& r#led that the "o*plaint s#L"ientl$aerred a "a#se of a"tion. Ke set aside the order of dis*issal andre*anded the "ase to the trial "o#rt for f#rther pro"eedin3s, to !it:+'/

ACCORDINGY, the #estioned order of dis*issal is here1$ setaside and the "ase ordered re*anded to the "o#rt of ori3in forf#rther pro"eedin3s. No "osts.

SO ORDERED.

On Noe*1er '/, %2>0, the trial "o#rt+'> ordered that the "ase 1ear"hied for fail#re of i"torino to prose"#te.+'2

On 4ar"h %%, %2>, petitioners, Oliia, D#l"e, 4a. 4a3nolia, Ronaldand Dennis 4a3at =hereinafter referred to as heirs of i"torino?,*oed to reinstate the "ase and to s#1stit#te i"torino in itsprose"#tion. Apparentl$, i"torino died on ;e1r#ar$ %>, %2>.+)(

On April '2, %2>, the trial "o#rt 3ranted the *otion.+)%

On J#l$ %', %22%, the trial "o#rt de"ided in faor of the heirs ofi"torino and ordered G#errero to pa$ te*perate, *oral andee*plar$ da*a3es, and attorne$Xs fees, disposin3 of the "ase inthis !ise :+)'

K<ERE;ORE, @#d3*ent is rendered for the s#1stit#ted plaintiMsand a3ainst the defendant

%. Orderin3 defendant to pa$ s#1stit#ted plaintiMs the s#* of-7',(((.(( for te*perate da*a3es for in@#r$ to plaintiMXs 1#sinessdealin3s !ith forei3n and lo"al 1#siness*enF

'. 7(,(((.(( as *oral da*a3esF

). 7',(((.(( as ee*plar$ da*a3esF and

0. 7'(,(((.(( as attorne$Xs fees.

SO ORDERED.

On A#3#st '%, %22%, G#errero appealed to the Co#rt of Appeals.+))

On O"to1er 0, %22, the Co#rt of Appeals rendered the de"isionappealed fro*, disposin3 as follo!s:+)0

K<ERE;ORE, @#d3*ent is here1$ rendered DIS4ISSING the"o*plaint.

No prono#n"e*ents as to "osts.

SO ORDERED.

On O"to1er '&, %22, the heirs of i"torino led !ith the Co#rt ofAppeals a *otion for re"onsideration.+)

On 4ar"h %', %22&, the Co#rt of Appeals denied the *otion forre"onsideration.+)&

<en"e, this appeal.+)/

The iss#e is !hether the "ontra"t 1et!een i"torino and G#errerofor the p#r"hase of radio trans"eiers !as oid. Stated diMerentl$,!hether the trans"eiers s#1@e"t of the "ontra"t !ere 1annedB

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"ontra1and ite*s prohi1ited 1$ the OI and the Ad*inistratieCir"#lar to i*port.

The "ontra"t !as alidF the radio trans"eiers !ere not "ontra1and.

Contra1and 3enerall$ refers to an$ propert$ !hi"h is #nla!f#l toprod#"e or possess. It refers to 3oods !hi"h are eported andi*ported into a "o#ntr$ a3ainst its la!s.+)>

In de"larin3 the "ontra"t oid a1 initio, the Co#rt of Appeals r#ledthat the i*portation of the trans"eiers *eant the ineita1lepassin3 of s#"h 3oods thro#3h 7hilippine 7orts, !here the OI andthe Ad*inistratie Cir"#lar hae to 1e o1sered and applied !ith f#llfor"e and eMe"t.+)2 The Co#rt of Appeals de"lared that theproposed i*portation of s#"h 3oods !as "ontrar$ to la!, hen"e, then#llit$ of the "ontra"t.+0(

Ke do not a3ree. The "ontra"t !as not oid a1 initio. No!here in theOI and Ad*in. Cir"#lar is there an epress 1an on the i*portationof trans"eiers.

The OI and Ad*inistratie Cir"#lar did not render radios andtrans"eiers ille3al per se. The Ad*inistratie Cir"#lar *erel$ordered the Radio Control OL"e to s#spend the a""eptan"e andpro"essin3 .... of appli"ations... for per*its to possess, o!n, transfer,p#r"hase and sell radio trans*itters and trans"eiers...+0% Therefore, possession and i*portation of the radio trans*itters andtrans"eiers !as le3al proided one had the ne"essar$ li"ense for it.+0' Trans"eiers !ere not prohi1ited 1#t *erel$ re3#lated 3oods. The OI and Ad*inistratie Cir"#lar did not render the trans"eierso#tside the "o**er"e of *an. The$ !ere alid o1@e"ts of the"ontra"t.+0)

ALr*in3 the alidit$ of the "ontra"t, !e net dis"#ss !hether the

"ontra"t !as 1rea"hed.

G#errero testied that a per*it to i*port the trans"eiers fro* Japan !as denied 1$ the Radio Control 6oard. <e stated that he,to3ether !ith Ali3ada, i"torino and a "ertain John Da#den

personall$ !ent to the Radio Control OL"e, and !ere denied aper*it to i*port. The$ also !ent to the OL"e of the 7resident,!here Se"retar$ Ronaldo 6. a*ora eplained that radios !ere1anned li5e 3#ns 1e"a#se of *artial la!.+00 G#errero testiedthat this preented hi* fro* se"#rin3 a letter of "redit fro* theCentral 6an5.+0 This testi*on$ !as not re1#tted.

The la! proides that +!hen the seri"e =re#ired 1$ the "ontra"t?has 1e"o*e so *anifestl$ 1e$ond the "onte*plation of the parties,

the o1li3or *a$ also 1e released therefro*, in !hole or in part.+0&<ere, G#erreroXs ina1ilit$ to se"#re a letter of "redit and to "o*pl$!ith his o1li3ation !as a dire"t "onse#en"e of the denial of theper*it to i*port. ;or this, he "annot 1e fa#lted.

Een if !e ass#*e that there !as a 1rea"h of "ontra"t, da*a3es"annot 1e a!arded. Da*n#* a1s#e in@#ria.

There !as no 1ad faith.+0/ 6ad faith does not si*pl$ "onnote 1ad @#d3*ent or ne3li3en"e. It i*ports a dishonest p#rpose or so*e*oral o1li#it$ and "ons"io#s doin3 of !ron3. It *eans a 1rea"h ofa 5no!n d#t$ thro#3h so*e *otie or interest or ill !ill thatparta5es of the nat#re of fra#d.+0> G#errero honestl$ relied on therepresentations of the Radio Control OL"e and the OL"e of the7resident.

Tr#e, G#errero 1orro!ed e#ip*ent fro* the S#1i" Naal 6asea#thorities at ero "ost.+02 This does not a#to*ati"all$ translate to1ad faith. G#errero !as fa"ed !ith the dan3er of the "an"ellation ofhis "ontra"t !ith S#1i" Naal 6ase. <e 1orro!ed e#ip*ent as apr#dent and s!ift alternatie. There !as no proof that he resorted tothis option !ith a deli1erate and *ali"io#s intent to dishonor his"ontra"t !ith i"torino. An a!ard of da*a3es s#rel$ "annot 1e1ased on *ere h$potheses, "on@e"t#res and s#r*ises. Good faith ispres#*ed, the 1#rden of proin3 1ad faith rests on the one alle3in3

it.+( 7etitioners did not eMe"tiel$ dis"har3e the 1#rden in this"ase.

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To re"oer *oral da*a3es in an a"tion for 1rea"h of "ontra"t, the1rea"h *#st 1e palpa1l$ !anton, re"5less, *ali"io#s, in 1ad faith,oppressie or a1#sie.+% This is not the "ase here.

Ee*plar$ da*a3es also "annot 1e a!arded. G#errero did not a"tin a !anton, fra#d#lent, re"5less, oppressie or *aleolent *anner.+'

Neither "an a"t#al da*a3es 1e a!arded. Tr#e, inde*ni"ation for

da*a3es "onte*plates not onl$ a"t#al loss s#Mered =da*n#*e*er3ens? 1#t #nrealied prots =l#"r#* "essans? as !ell.+)<o!eer, to 1e entitled to ade#ate "o*pensation for pe"#niar$loss, the loss *#st 1e a"t#all$ s#Mered and d#l$ proed.+0 Tore"oer a"t#al da*a3es, the a*o#nt of loss *#st not onl$ 1e"apa1le of proof, 1#t *#st 1e proen !ith a reasona1le de3ree of"ertaint$. The "lai* *#st 1e pre*ised #pon "o*petent proof or#pon the 1est eiden"e o1taina1le,+ s#"h as re"eipts+& or otherdo"#*entar$ proof.

Onl$ the testi*on$ of Ali3ada !as presented to s#1stantiatepetitionersX "lai* for #nrealied prots.+/ Ali3ada testied that asa res#lt of the "an"ellation of the "ontra"t, i"torino had to s#spendtransa"tions !ith his Japanese s#pplier for si =&? *onths. Ali3adastated that the ol#*e of i"torinoXs 1#siness !ith S#1i" Naal 6asealso di*inished si3ni"antl$. Ali3ada approi*ated that i"torinoXs#nrealied 1#siness opport#nities a*o#nted to 70((,(((.((.+>6ein3 a !itness for i"torinoXs heirs and standin3 to 3ain fro* the"ontra"tXs f#lll*ent, Ali3adaXs testi*on$ is self-serin3. It is alsohearsa$. Ke fail to see ho! this eiden"e proes a"t#al da*a3es!ith a reasona1le de3ree of "ertaint$.+2 If proof is Vi*s$, !e"annot a!ard a"t#al da*a3es.+&(

K<ERE;ORE, !e A;;IR4 the de"ision of the Co#rt of Appealspro*#l3ated on O"to1er %%, %22, in CA-G. R. C No. )02',

dis*issin3 the "o*plaint.

No "osts.

SO ORDERED.

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G.R. No. /0&/>. 4ar"h >, %22).

6AN O; T<E 7<II77INE ISANDS, petitioner, s. T<EINTER4EDIATE A77EATE CO9RT AND RO4AQ 4ARETING CENTER,INC., respondents.

eonen, Ra*ire Asso"iates for petitioner.

Alt#na, Alt#na, 6a"li3 Asso"iates for priate respondent.

SYA69S

%. CO44ERCIA AKSF NEGOTIA6E INSTR94ENTSF C<ECSF )DAYS CEARING 7ERIOD S<O9D 6E STRICTY O6SERED. W Thefa"t that the deposit slip of priate respondent on Noe*1er '>,%2/ had a ) DAYS CEARING sta*ped on its fa"e indi"ates that the"he"5 deposited on said date in the a*o#nt of 7',(((.(( !as d#l$deposited 1efore the ':(( p.*. "#t-oM ti*e of petitioner and said"he"5 !o#ld hae 1een "leared on the *ornin3 of De"e*1er ',%2/. Therefore, !hen priate respondent iss#ed C6TC Che"5N#*1er >(&) in the a*o#nt of 7'/,0/.2( to its s#pplier onNoe*1er '2, %2/, a Sat#rda$, and the s#pplier deposited it thefollo!in3 1an5in3 da$ or on De"e*1er %, %2/, said "he"5 !o#ldli5e!ise #nder3o the )-da$s "learin3 period and sho#ld hae 1een"leared on De"e*1er ), %2/. 6$ that da$, priate respondentXs"#rrent a""o#nt !o#ld hae 1een ade#atel$ f#nded 1$ the "he"5deposit it *ade on Noe*1er '>, %2/, !hi"h sho#ld hae 1een"leared on De"e*1er ', %2/ if onl$ petitioner had not a"tedne3li3entl$, to3ether !ith its 1an5 1alan"e of 7),(((.(( !hi"h!o#ld a*o#nt to 7'>,(((.((.

'. CII AKF CO47ENSATORY DA4AGESF R9E ON T<E AKARD T<EREO;F CASE AT 6AR. W Kell-settled is the r#le that a"t#al or"o*pensator$ da*a3es "annot 1e pres#*ed, 1#t *#st 1e d#l$

proed, and proed !ith reasona1le de3ree of "ertaint$. A "o#rt"annot rel$ on spe"#lation, "on@e"t#re or 3#ess!or5 as to the fa"tand a*o#nt of da*a3es 1#t *#st depend #pon "o*petent proofthat the$ hae s#Mered and on eiden"e of the a"t#al a*o#ntthereof. =Di"hoso s. Co#rt of Appeals, %2' SCRA %&2 +%22(?.

Eiden"e that there is a possi1ilit$ of "an"ellation on the p#r"haseorders of priate respondentXs "lient "annot sere as a 1asis for thea!ard of "o*pensator$ da*a3es in the a1sen"e of proof that saidp#r"hase orders !ere a"t#all$ "an"elled. i5e!ise, the a*o#nt ofprots priate respondent "o#ld hae earned or realied had thep#r"hase orders of its "lients 1een "ons#**ated is *erel$ pre*isedon the fa"t that it fa"ed the possi1ilit$ of the "an"ellation of saidp#r"hase orders as it en"o#ntered diL"#lt$ in se"#rin3 "reditfa"ilities fro* its s#ppliers after its "he"5 !as dishonored 1$

petitioner. Da*a3es !hi"h are *erel$ possi1le are spe"#latie=Sha#f s. "o#rt of Appeals, %2% SCRA /%) +%22(? and sho#ldtherefore not 1e a!arded.

D E C I S I O N

NOCON, J p:

This is a petition for reie! on "ertiorari the de"ision % dated April ',%2>& of the then Inter*ediate Appellate Co#rt aLr*in3 the de"isionof the trial "o#rt ' in orderin3 petitioner 6an5 of the 7hilippineIslands to pa$ "o*pensator$ da*a3es, da*a3es for loss of in"o*e,attorne$Xs fees and "osts to priate respondent Ro*a 4ar5etin3Center, In"., as !ell as the Resol#tion dated 4a$ %', %2>& den$in3petitionerXs 4otion for Re"onsideration of the appealed de"ision.

It appears on re"ord that priate respondent Ro*a 4ar5etin3Center, In"., a do*esti" "orporation en3a3ed pri*aril$ in tradin3"onstr#"tion *aterials and s#pplies, opened and *aintained a"#rrent a""o#nt deposit !ith petitioner 6an5 of 7hilippine Islands=then Co**er"ial 6an5 and Tr#st Co*pan$? 4a3allanes 1ran"h#nder C#rrent A""o#nt No. %%-%/>-%'.

6et!een %(:(( a.*. and %(:)( a.*. of Noe*1er '>, %2/ !hi"hfell on a ;rida$, priate respondent deposited in its "#rrent a""o#nt

!ith Co**er"ial 6an5 and Tr#st Co*pan$ a "he"5 in the a*o#nt of7',(((.(( as eiden"ed 1$ the deposit slip on !hi"h !as sta*ped) DAYS TO CEAR. ) Its 1an5 1alan"e on that da$ !as a1o#t7),(((.((. 0

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7etitionerXs "ontention that at the ti*e the "he"5 of priaterespondent to ;ar Eastern 7l#*1in3 S#ppl$, In". !as dishonored, thepro"eeds of the 7r#dential 6an5 and Tr#st Co*pan$Xs "he"5 !hi"hthe latter had deposited in its "#rrent a""o#nt on Noe*1er '>,%2/ had not $et 1een "olle"ted and therefore it "annot 1e *adelia1le for the dishonorin3 of priate respondentXs "he"5, as itslia1ilit$ atta"hes onl$ after the pro"eeds of the "he"5 shall hae"o*e into its possession, is erroneo#s to sa$ the least.

There is no do#1t that the da*a3e in"#rred 1$ priate respondent,as a res#lt of the dishonorin3 of its "he"5 to ;ar Eastern 7l#*1in3S#ppl$, In"., !as "a#sed 1$ petitionerXs fail#re to send for "learin3the "he"5 priate respondent deposited on Noe*1er '>, %2/.

Sin"e priate respondentXs "he"5 to its s#pplier !o#ld hae 1eenhonored had petitioner onl$ dis"har3ed its d#t$ faithf#ll$ anddili3entl$ in sendin3 all deposited "he"5s for "learin3 at theappointed ti*e, petitioner !as "learl$ 3#ilt$ of ne3li3en"e andtherefore lia1le to pa$ for the da*a3e "a#sed. This !as li5e!ise thendin3 of the respondent appellate "o#rt in its de"ision, !hi"h Ke#ote:

It has 1een esta1lished 1$ preponderan"e of eiden"e that the"he"5 !as deposited 1$ plaintiM 1et!een %(:(( and %(:)( in the*ornin3 of Noe*1er '>, %2/, @#st in ti*e to rea"h the Central6an5 for "learin3 at 0:(( p.*. or that sa*e date. Khile defendantpresented the tellerXs tape =Eh. '? the sa*e !hi"h 1ears "ertain3#res are er$ eas$ to prod#"e and "o#ld 1e interpreted an$ !a$that a !itness *a$ !ant, to s#it his "lai*. 6esides, defendant hasnot presented "lear and "onin"in3 proof that the "he"5 !asa"t#all$ deposited after ':(( p.*. on Noe*1er '>, %2/. The!itness !ho testied on the tellerXs tape !as si*pl$ ass#*in3 thatdo"#*ents of this nat#re are #s#all$ prepared after ':(( p.*. Thereis no proof that s#"h pra"ti"e is a re3#lar r#le follo!ed 1$ defendant

1an5.

This 1ein3 the "ase, defendant had a"ted ne3li3entl$ in not sendin3the "he"5 to the "learin3 ho#se to 1e in"l#ded in the "he"5s to 1e"leared at the Central 6an5 at 0:(( p.*. on Noe*1er '>, %2/.

6e"a#se of this, plaintiM s#Mered loss of 3ood!ill and 3oodrep#tation in 1#siness "ir"les. %(

;#rther*ore, Se"tion 0="? of the Central 6an5 Cir"#lar No. 2, asa*ended, proides:

Ite*s !hi"h sho#ld 1e ret#rned for an$ reason !hatsoeer shall 1eret#rned dire"tl$ to the 1an5, instit#tion or entit$ fro* !hi"h theite* !as re"eied. ;or this p#rpose, the Re"eipt for Ret#rned

Che"5s =Cash ;or* No. 2? sho#ld 1e #sed. The ori3inal and d#pli"ate"opies of said Re"eipt shall 1e 3ien to 1an5, instit#tion or entit$!hi"h ret#rned the ite*s and the tripli"ate "op$ sho#ld 1e retained1$ the 1an5, instit#tion or entit$ !hose de*and is 1ein3 ret#rned.At the follo!in3 "learin3, the ori3inal of the Re"eipt for Ret#rnedChe"5s shall 1e presented thro#3h the Clearin3 OL"e as a de*anda3ainst the 1an5, instit#tion or entit$ !hose ite* has 1een ret#rned.Nothin3 in this se"tion shall preent the ret#rned ite*s fro* 1ein3settled 1$ dire"t rei*1#rse*ent to the 1an5, instit#tion or entit$ret#rnin3 the ite*s. All ite*s "leared at %%:(( oX"lo"5 a.*. shall 1eret#rned not later than %:0 oX"lo"5 p.*. on the sa*e da$ and allite*s "leared at ):(( oX"lo"5 p.*. shall 1e ret#rned not later than>:)( a.*. of the follo!in3 1#siness da$, . . .

The fa"t that the deposit slip of priate respondent on Noe*1er '>,%2/ had a ) DAYS CEARING sta*ped on its fa"e indi"ates that the"he"5 deposited on said date in the a*o#nt of 7',(((.(( !as d#l$deposited 1efore the ':(( p.*. "#t-oM ti*e of petitioner and said"he"5 !o#ld hae 1een "leared on the *ornin3 of De"e*1er ',%2/.

Therefore, !hen priate respondent iss#ed C6TC Che"5 N#*1er>(&) in the a*o#nt of 7'/,0/.2( to its s#pplier on Noe*1er '2,%2/, a Sat#rda$, and the s#pplier deposited it the follo!in31an5in3 da$ or on De"e*1er %, %2/, said "he"5 !o#ld li5e!ise

#nder3o the )-da$s "learin3 period and sho#ld hae 1een "leared onDe"e*1er ), %2/. 6$ that da$, priate respondentXs "#rrenta""o#nt !o#ld hae 1een ade#atel$ f#nded 1$ the "he"5 deposit it*ade on Noe*1er '>, %2/, !hi"h sho#ld hae 1een "leared onDe"e*1er ', %2/ if onl$ petitioner had not a"ted ne3li3entl$,

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7<II77INE NATIONA 6AN, petitioner, s. T<E CO9RT O; A77EASand RA4ON A7E,+% doin3 1#siness #nder the na*e and st$leSA77<IRE S<I77ING, respondents.

D E C I S I O N

7ANGANI6AN, J.:

Does a lo"al 1an5, !hile a"tin3 as lo"al "orrespondent 1an5, hae

the ri3ht to inter"ept f#nds 1ein3 "o#rsed thro#3h it 1$ its forei3n"o#nterpart for trans*ittal and deposit to the a""o#nt of anindiid#al !ith another lo"al 1an5, and appl$ the said f#nds to"ertain o1li3ations o!ed to it 1$ the said indiid#alP

Assailed in this petition is the De"ision of respondent Co#rt ofAppeals+' in CA-G.R. C No. '/2'& rendered on J#ne %&, %22'aLr*in3 the de"ision of the Re3ional Trial Co#rt, 6ran"h %(/ of#eon Cit$, the dispositie portion of !hi"h read:+)

K<ERE;ORE, @#d3*ent is here1$ rendered:

8[%? In the *ain "o*plaint, orderin3 the defendant =herein petitioner7N6? to pa$ the plaintiM =priate respondent herein? the s#* of9SZ',&'/.%% or its e#ialent in 7hilippine "#rren"$ !ith interest atthe le3al rate fro* Jan#ar$ %), %2>/, the date of @#di"ial de*andF

8['? The plaintiMXs s#pple*ental "o*plaint is here1$ ds*issed=si"?F

8[)? The defendantXs "o#nter"lai*s are li5e!ise dis*issed.[

The ;a"ts

The fa"t#al ante"edents as #oted 1$ the respondent Co#rt are

reprod#"ed herein1elo!, the sa*e 1ein3 #ndisp#ted 1$ the parties:+0

The 1od$ of the de"ision reads:

XAfter a "lose s"r#tin$ and anal$sis of the pleadin3s as !ell as theeiden"e of 1oth parties, the Co#rt *a5es the follo!in3 "on"l#sions:

X=a? The defendant appliedBappropriated the a*o#nts of Z',&'/.%%and 7)0,)0(.)> fro* re*ittan"es of the plaintiMXs prin"ipals =si"?a1road. These !ere ad*itted 1$ the defendant, s#1@e"t to theaLr*atie defenses of "o*pensation for !hat is o!in3 to it on theprin"iple of sol#tion =si"? inde1itiF

X=1? The rst re*ittan"e !as *ade 1$ the NC6 of Jeddah for the1enet of the plaintiM, to 1e "redited to his a""o#nt at Citi1an5,Greenhills 6ran"hF the se"ond !as fro* i1$a, and !as intended to1e deposited at the plaintiMXs a""o#nt !ith the defendant, No. >)(-'0%(F

8[="? The plaintiM *ade a !ritten de*and #pon the defendant forre*ittan"e of the e#ialent of 7',&'/.%% 1$ *eans of a letter datedDe"e*1er 0, %2>& =Eh. D?. This !as ans!ered 1$ the defendant onDe"e*1er '', %2>& =Eh. %)?, initin3 the plaintiM to "o*e for a"onferen"eF

X=d? There !ere indeed t!o instan"es in the past, one in Noe*1er%2>( and the other in Jan#ar$ %2>% !hen the plaintiMXs a""o#nt No.>)(-'0%( !as do#1l$ "redited !ith the e#ialents of Z,&/2.') andZ,>>.)>, respe"tiel$, !hi"h a*o#nted to an a33re3ate a*o#nt of 7>/,)>(.00. The defendantXs eiden"e on this point =Ehs. % thr#%%, %0 and %F see also Annees C and E to defendantXs Ans!er?,!ere neer ref#ted nor i*p#3ned 1$ the plaintiM. <e "lai*s,ho!eer, that plaintiMs "lai* has pres"ri1ed.

X=e? Defendant 7N6 *ade a de*and #pon the plaintiM for ref#nd ofthe do#1le or d#pli"ated "redits erroneo#sl$ *ade on plaintiMXsa""o#nt, 1$ *eans of a letter =Eh. %'? dated O"to1er '), %2>& or $ears and %% *onths fro* Noe*1er %2>(, and $ears and 2

*onths fro* Jan#ar$ %2>%. S#"h letter !as ans!ered 1$ theplaintiM on De"e*1er ', %2>& =Anne C, Co*plaint?. This plaintiMXsletter !as li5e!ise replied to 1$ the defendant thro#3h Eh. %)F

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X=f? The ded#"tion of 7)0,)0(.)> !as *ade 1$ the defendant not!itho#t the 5no!led3e and "onsent of the plaintiM, !ho !as iss#eda re"eipt No. >//& dated ;e1r#ar$ %>, %2>/ =Eh. E? 1$ thedefendant.[

XThere is no #estion that the t!o erroneo#s do#1le pa$*ents*ade to plaintiMXs a""o#nts in %2>( and %2>% "reated an etra-"ontra"t#al o1li3ation on the part of the plaintiM in faor of thedefendant, #nder the prin"iple of sol#tio inde1iti, as follo!s:

XIf so*ethin3 is re"eied !hen there is no ri3ht to de*and it, and it!as #nd#l$ deliered thro#3h3 =si"? *ista5e, the o1li3ation to ret#rnit arises.X =Arti"le '%0, Ciil Code of the 7hil.?

T!o iss#es !ere raised 1efore the trial "o#rt, na*el$, rst, !hetherthe herein petitioner !as le3all$ @#stied in *a5in3 the"o*pensation or set-oM a3ainst the t!o re*ittan"es "o#rsedthro#3h it in faor of priate respondent to re"oer on the do#1le"redits it erroneo#sl$ *ade in %2>( and %2>%, 1ased on theprin"iple of sol#tio inde1iti, and se"ond, !hether or not petitionerXs"lai* is 1arred 1$ the stat#te of li*itations. The trial "o#rtXsratio"ination, as #oted 1$ the appellate Co#rt, follo!s:+

XArti"le %'/2 of the Ciil Code proides:

XIn order that "o*pensation *a$ prosper, it is ne"essar$:

=%? That ea"h one of the o1li3ors 1e 1o#nd prin"ipall$, and that he1e at the sa*e ti*e a prin"ipal "reditor of the otherF

='? That 1oth de1ts "onsists in a s#* of *one$, or if the thin3s d#eare "ons#*a1le, the$ 1e of the sa*e 5ind, and also of the sa*e#alit$ if the latter has 1een statedF

=)? That the t!o de1ts 1e d#eF

=0? That the$ 1e li#idated and de*anda1leF

=? That oer neither of the* there 1$ an$ retention or "ontroers$,"o**en"ed 1$ third persons and "o**#ni"ated in d#e ti*e to thede1tor.X

XIn the "ase of the Z',&'/.%%, re#isites Nos. ' thro#3h areapparentl$ present, for 1oth de1ts "onsist in a s#* of *one$, are1oth d#e, li#idated and de*anda1le, and oer neither of the* isthere a retention or "ontroers$ "o**en"ed 1$ third persons and"o**#ni"ated in d#e ti*e to the de1tor. The #estion, ho!eer, is,

!here 1oth of the o1li3ors 1o#nd prin"ipall$, and !as ea"h one ofthe* a de1tor and "reditor of the other at the sa*e ti*eP

XAnal$in3 no! the relationship 1et!een the parties, it appearsthat:

X=a? Kith respe"t to the plaintiMXs 1ein3 a depositor of thedefendant 1an5, the$ are "reditor and de1tor respe"tiel$=G#in3ona, et al. s. Cit$ ;is"al, et al., %'> SCRA //?F

X=1? As to the relationship "reated 1$ the teleed f#nd transfersfro* a1road: A "ontra"t 1et!een a forei3n 1an5 and lo"al 1an5as5in3 the latter to pa$ an a*o#nt to a 1ene"iar$ is a stip#lation

po#r a#tr#i. =6an5 of A*eri"a NT SA s. IAC, %0 SCRA 0%2?.

XA stip#lation po#r a#tr#i is a stip#lation in faor of a third person=;lorentino s. En"arna"ion, /2 SCRA %2)F 6onifa"io 6rothers s.4ora, '( SCRA '&%F 9$ Ta* s. eonard, )( 7hils. 0/?.

XTh#s 1et!een the defendant 1an5 =as the lo"al "orrespondent ofthe National Co**er"ial 6an5 of Jeddah? and the plaintiM as1ene"iar$, there is "reated an i*plied tr#st p#rs#ant to Art. %0)of the Ciil Code, #oted as follo!s:

XKhen the propert$ is "one$ed to a person in relian"e #pon his

de"lared intention to hold it for, or transfer it to another or the3rantor, there is an i*plied tr#st in faor of the person !hose1enet is "onte*plated =si"?.

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X"? 6$ the prin"iple of sol#tio inde1iti =Art. '%0, Ciil Code?, theplaintiM !ho #nd#l$ re"eied so*ethin3 =si"? 1$ *ista5e =i.e., the 'do#1le "redits, altho#3h he had no ri3ht to de*and it?, 1e"a*eo1li3ated to the defendant to ret#rn !hat he #nd#l$ re"eied. Th#s,there !as "reated 1et!een the* a relationship of o1li3or ando1li3ee, or of de1tor and "reditor #nder a #asi-"ontra"t.

In ie! of the fore3oin3, the Co#rt is of the opinion that the partiesare not 1oth prin"ipall$ 1o#nd !ith respe"t to the Z',&'/.%% fro*

Jeddah neither are the$ at the sa*e ti*e prin"ipal "reditor of theother. Therefore, as *atters stand, the partiesX o1li3ations are nots#1@e"t to "o*pensation or set oM #nder Art. %'/2 of the Ciil Code,for the reason that the defendant is not a prin"ipal de1tor nor is theplaintiM a prin"ipal "reditor insofar as the a*o#nt of Z',&'/.%% is"on"erned. The$ are de1tor and "reditor onl$ !ith respe"t to thedo#1le pa$*entsF 1#t are tr#stee-1ene"iar$ as to the f#nd transferof Z',&'/.%%.

XOnl$ the plaintiM is prin"ipall$ 1o#nd as a de1tor of the defendantto the etent of the do#1le "redits. On the other hand, thedefendant !as an i*plied tr#stee, !ho !as o1li3ed to delier to theCiti1an5 for the 1enet of the plaintiM the s#* of Z',&'/.%%.

XTh#s !hile it *a$ 1e "on"l#ded that the plaintiM o!es thedefendant the e#ialent of the s#*s of Z,%/2.') and Z,>>.)>erroneo#sl$ do#1l$ "redited to his a""o#nt, the defendantXsa"t#ation in inter"eptin3 the a*o#nt of Z',&'/.%% s#pposed to 1ere*itted to another 1an5 is not onl$ i*properF it !ill also erode thetr#st and "onden"e of the international 1an5in3 "o**#nit$ in the1an5in3 s$ste* of the "o#ntr$, so*ethin3 !e "an ill aMord at thisti*e !hen !e need to attra"t and inite deposits of forei3n"#rren"ies.X

It !o#ld hae 1een diMerent has the tele adi"e fro* NC6 of

Jeddah 1een for deposit of Z',&'/.%% to plaintiMs a""o#nt No. >)(-'0%( !ith the defendant 1an5. <o!eer, the defendant alle3ed thisfor the rst ti*e in its 4e*orand#* =7ls. see par. %&, p. & ofdefendantXs 4e*orand#*?. There !as neither an$ alle3ationthereof in its pleadin3s, nor !as there an$ eiden"e to proe s#"h

fa"t. On the "ontrar$, the defendant ad*itted that the tele adi"e!as for "redit of the a*o#nt of Z',&'/.%% to plaintiMs a""o#nt !ithCiti1an5, Greenhills, San J#an, 4etro4anila =7ls. see par. ofdefendantXs Ans!er !ith Co*p#lsor$ Co#nter"lai*, in relation toplaintiMXs Co*plaint?. <en"e, it is s#1*itted that the set-oM or"o*pensation of Z',&'/.%% a3ainst the do#1le pa$*ents toplaintiMXs a""o#nt is not in a""ordan"e !ith la!.

XOn this point, the Co#rt nds the plaintiMXs theor$ of a3en"$ to 1e

#ntena1le. ;or one thin3, there !as no epress "ontra"t of a3en"$.On the other hand, !ere !e to infer that there !as an i*plieda3en"$, the sa*e !o#ld not 1e 1et!een the plaintiM and defendant,1#t rather, 1et!een the National Co**er"ial 6an5 of Jeddah asprin"ipal on the one hand, and the defendant as a3ent on the other. Th#s, in "ase of iolation of the a3en"$, the "a#se of a"tion !o#lda""r#e to the NC6 and not to the plaintiM.

XThe 7)0,)0(.)> s#1@e"t of the s#pple*ental "o*plaint is #iteanother thin3. The plaintiMXs Eh. E, !hi"h is a re"eipt iss#ed tothe plaintiM 1$ the defendant for the a*o#nt of 7)0,)0(.(( in f#llsettle*ent of a""o#nts re"eia1les !ith RIC6 ;#nd TransferDepart*ent, 7N6-Es"olta 1ase on e3al Depart*ent 4e*o dated

;e1r#ar$ '>, %2>/ see*s to #phold the defendantXs theor$ that thesaid a*o#nt !as ol#ntaril$ deliered 1$ the plaintiM to thedefendant as alle3ed in the last para3raph of defendantXs*e*orand#*. The sa*e is in a""ordan"e !ith the defendantXsans!er, as follo!s:

The retention and appli"ation of the a*o#nt of 7)0,)0(.)> !asdone in a *anner "onsonant !ith 1asi" d#e pro"ess "onsiderin3 thatplaintiM !as not onl$ f#rnished do"#*ented proof of the "a#se 1#t!as also 3ien the opport#nit$ to "on=tro?ert s#"h 7roof.

4oreoer, plaintiM, thro#3h "o#nsel, "o**#ni"ated his #ne#io"al

and #n"onditional "onsent to the retention and appli"ation of thea*o#nt in #estion. =7ls. see para3raphs >-2, defendantXs Ans!er!ith Co*p#lsor$ Co#nter"lai* to 7laintiMXs S#pple*entalCo*plaint?.

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8[This "on"l#sion is 1orne 1$ the fa"t that the re"eipt is in the handsof the plaintiM, indi"atin3 that s#"h re"eipt !as handed oer to theplaintiM !hen he paid or allo!ed the ded#"tion fro* the a*o#nt of Z'>,)2'.)> fro* i1$a.

XAt an$ rate, the plaintiM in his 4e*orand#*, stated that thes#1se#ent f#nd transfer fro* 6re3a 7etrole#* 4ar5etin3 Co*pan$of i1$a =fro* !here the 7)0,)0(.)> !as ded#"ted? !as intendedfor "redit and deposit in plaintiMXs a""o#nt at the defendantXs 6an5

CA No. >)(-'0%( =per par. %, pa3e ', 4e*orand#* for the plaintiM?.S#"h 1ein3 the "ase, the Co#rt 1eliees that insofar as the a*o#ntof 7)0,)0(.)> is "on"erned, all the re#ire*ents of Art. %'/2 of theCiil Code are present, and the said a*o#nt *a$ properl$ 1e thes#1@e"t of "o*pensation or set-oM. And sin"e all the re#isites ofArt. %'/2 of the Ciil Code are present =insofar as the a*o#nt of7)0,)2'.)> is "on"erned?, "o*pensation ta5es pla"e 1$ operation of la! =Art. %'>&, I1id.?, al1eit onl$ partial !ith respe"t to plaintiMXsinde1tedness of 7/,)>(.00.

No!, on the #estion of pres"ription, the Co#rt 1eliees that Art.%%02 as "ited 1$ the plaintiM is not appli"a1le in this "ase. Rather,the appli"a1le la! is Art. %%0, !hi"h es the pres"riptie period

for a"tions #pon a #asi-"ontra"t =s#"h as sol#tio inde1iti? at si$ears.

In the dispositie portion of its de"ision, the trial "o#rt r#led that theherein petitioner !as o1li3ated to pa$ priate respondent thea*o#nt of 9SZ',&'/.%% or its peso e#ialent, !ith interest at thele3al rate. The "o#rt dis*issed all other "lai*s and "o#nter"lai*s.

On appeal to the respondent Co#rt, petitioner 1an5 "ontin#ed toinsist that it alidl$ retained the 9SZ',&'/.%% in pa$*ent of thepriate respondentXs inde1tedness 1$ !a$ of "o*pensation or set-oM, as proided #nder Art. %'/2 of the Ciil Code.

The respondent Co#rt of Appeals re@e"ted s#"h ar3#*ent, sa$in3:

The tele3raphi" *one$ transfer !as sent 1$ the I6N, plaintiMXsprin"ipal in Jeddah, Sa#di Ara1ia, thr# the National Co**er"ial 6an5

of Jeddah, Sa#di Ara1ia =NC6, for short?, for the "reditBa""o#nt of7laintiM !ith the Citi1an5, Greenhills 6ran"h, San J#an, 4etro 4anila,"o#rsed thr# the 7N6Xs head oL"e, the NC6Xs "orresponden=t? 1an5in the 7hilippines.

The "redit a""o#nt, or si*pl$ a""o#nt *eans that the a*o#ntstated in the tele3raphi" *one$ transfer is to 1e "redited in thea""o#nt of plaintiM !ith the Citi1an5, and, in that sense,pres#pposes a "reditor-de1tor relationship 1et!een the plaintiM, as

"reditor and the Citi1an5, as de1tor. Kithal the tele3raphi" *one$transfer, no s#"h "reditor-de1tor relationship "o#ld hae 1een"reated 1et!een the plaintiM and defendant.

The tele3raphi" *one$ transfer, or si*pl$ tele3raphi" transfer=,?!as p#r"hased 1$ the I6N fro* the NC6 in Sa#di Ara1ia, and sin"ethe 7N6 is the NC6Xs "orresponden=t? 1an5 in the 7hilippines, thereis "reated 1et!een the t!o 1an5s a sort of "o**#ni"ation e"han3efor the "orresponden=t? 1an5 to trans*it andBor re*it andBor pa$ theal#e of the tele3raphi" transfer in a""ordan"e !ith the di"tate ofthe "orresponden"e e"han3e. So*e s#"h responsi1ilit$ of the"orresponden=t? 1an5 is a5in to Se"tion / of the R#les andRe3#lations I*ple*entin3 E.O. >/, as a*ended 1$ E.O. 2',

to ta5e "har3e of the pro*pt pa$*ent of the tele3raphi" transfer,that is, 1$ trans*ittin3 the tele3raphi" *one$ transfer to theCiti1an5 so that the a*o#nt "an 1e pro*ptl$ "redited to the a""o#ntof the plaintiM !ith the said 1an5. That is all that the 7N6 "an do#nder the re*ittan"e arran3e*ent that it has !ith the NC6. Kith itsresponsi1ilit$ as dened as !ell as 1$ the nat#re of its 1an5in31#siness and the responsi1ilit$ atta"hed to it, and thro#3h !hi"h theind#str$, trade and "o**er"e of all "o#ntries and "o**#nities are"arried on, the 7N6Xs lia1ilit$ as "orresponden=t? 1an5 "ontin#es#ntil it has "o*plet3el$ =si"? perfor*ed and dis"har3ed it=s?o1li3ation there#nder. =#nders"orin3 o#rs?

<en"e, the respondent Co#rt aLr*ed the trial "o#rtXs holdin3 intoto.

Dissatised, petitioner 1an5 "o*es 1efore this Co#rt see5in3 areie! of the assailed De"ision.

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The Iss#e

7etitionerXs ar3#*ents reole aro#nd one sin3le iss#e:+&

K<IE T<E RES7ONDENT CO9RT CORRECTY ;O9ND 7RIATERES7ONDENT EGAY 6O9ND =9NDER T<E 7RINCI7E O; SO9TIOINDE6ITI? TO RET9RN TO 7N6 T<E S94 O; 9SZ',&'/.%%, IT ERREDIN NOT R9ING T<AT EGA CO47ENSATION <AS TAEN 7ACE

K<EN 7N6 KAS ORDERED 6Y T<E TRIA CO9RT TO RET9RN TO7RIATE RES7ONDENT T<E SA4E A4O9NT. S9C< CO9RSE O;ACTION IS IN CONSONANCE KIT< S7EEDY AND S96STANTIA J9STICE, AND KO9D 7REENT T<E 9NNECESSARY ;IING O; AS96SE9ENT S9IT 6Y 7N6 ;OR T<E COECTION O; T<E SA4EA4O9NT ;RO4 7RIATE RES7ONDENT.

The Co#rtXs R#lin3

Ke note that in fra*in3 the iss#e in the *anner afore"ited, thepetitioner i*pli"itl$ ad*its the "orre"tness of the respondent Co#rtXsaLr*an"e of the trial "o#rtXs r#lin3 ndin3 herein petitioner lia1le topriate respondent for the s#* of 9SZ',&'/.%% or its peso

e#ialent. And it "o#ld not hae done other!ise. After a "aref#ls"r#tin$ of 1oth the de"ision of the trial "o#rt and that of theappellate "o#rt, !e nd no reersi1le error !hatsoeer in eitherr#lin3, and see no need to add to the etensie dis"#ssions alread$*ade re3ardin3 the non-eisten"e of all the re#isites for le3al"o*pensation to ta5e pla"e.

6#t petitioner has adopted a noel theor$, "ontendin3 that sin"erespondent Co#rt fo#nd that priate respondent is an o1li3or of7N6 and the latter, as aforesaid, has 1e"o*e an o1li3or of priaterespondent =res#ltin3 in le3al "o*pensation?, the =h?onora1lerespondent "o#rt sho#ld hae ordered priate respondent to pa$

7N6 !hat the latter is 1o#nd 1$ the trial "o#rtXs de"ision to ret#rnthe for*er.+/

6$ this si*plisti" approa"h, petitioner in eMe"t see5s to rendern#3ator$ the de"isions of the trial "o#rt and the appellate Co#rt, and

hae this Co#rt alidate its ori3inal *isdeed, there1$ *a5in3 a*o"5er$ of the entire @#di"ial pro"ess of this "o#ntr$. Khat thepetitioner 1an5 is eMe"tiel$ sa$in3 is that sin"e the respondentCo#rt of Appeals r#led that petitioner 1an5 "o#ld not do a short"#tand si*pl$ inter"ept f#nds 1ein3 "o#rsed thro#3h it, for trans*ittalto another 1an5, and eent#all$ to 1e deposited to the a""o#nt of anindiid#al !ho happens to o!e so*e a*o#nt of *one$ to thepetitioner, and 1e"a#se respondent Co#rt ordered petitioner 1an5 toret#rn the inter"epted a*o#nt to said indiid#al, !ho in t#rn !as

fo#nd 1$ the appellate Co#rt to 1e inde1ted to petitioner 1an5, T<ERE;ORE, there *#st no! 1e le3al "o*pensation of the a*o#ntsea"h o!es the other, and hen"e, there is no need for petitioner 1an5to a"t#all$ ret#rn the a*o#nt, and nall$, that petitioner 1an5 ends#p in ea"tl$ the sa*e position as !hen it rst too5 the i*properand #n!arranted short"#t 1$ inter"eptin3 the said *one$ transfer,not!ithstandin3 the assailed De"ision sa$in3 that this "o#ld not 1edone\

Ke see in this petition a "leer plo$ to #se this Co#rt to alidate orle3alie an i*proper a"t of the petitioner 1an5, !ith the noti*possi1le intention of #sin3 this "ase as a pre"edent for si*ilara"ts of inter"eption in the f#t#re. This pirati"al attit#de of the

nationXs pre*ier 1an5 deseres a !arnin3 that it sho#ld not a1#sethe @#sti"e s$ste* in its "olle"tion eMorts, parti"#larl$ sin"e !e area!are that if the petitioner 1an5 had 1een in 3ood faith, it "o#ldhae easil$ disposed of this "ontroers$ in ten *in#tes Vat 1$*eans of an e"han3e of "he"5s !ith priate respondent for thesa*e a*o#nt. The liti3ation "o#ld hae ended there, 1#t it did not.Instead, this plainl$ #n*eritorio#s "ase had to "lo3 o#r do"5et andta5e #p the al#a1le ti*e of this Co#rt.

K<ERE;ORE, the instant petition is here!ith DENIED for 1ein3plainl$ #n*eritorio#s, and the assailed De"ision is A;;IR4ED in toto.Costs a3ainst petitioner.

SO ORDERED.

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E.G.. REATY DEEO74ENT COR7ORATION and CRISTINACONDO4INI94 COR7ORATION, petitioners, s. CO9RT O; A77EASand 9NIS<7ERE INTERNATIONA, INC. respondents.D E C I S I O NA79NAN, J.:

This petition for reie! on "ertiorari see5s to set aside the de"isionand resol#tion of the Co#rt of Appeals rendered on ;e1r#ar$ %/,%22 and on 4a$ %, %22, respe"tiel$, in CA-G.R. S7 No. ''/)

reersin3 the order of the Se"#rities and E"han3e Co**ission=SEC? in SEC-AC No. '/% iss#ed on A#3#st '%, %22(.

The follo!in3 fa"ts are not disp#ted:

7etitioner E.G.. Realt$ Deelop*ent Corporation =hereinafterreferred to as E.G.. Realt$? is the o!nerBdeeloper of a seen-store$ "ondo*ini#* 1#ildin3 5no!n as Cristina Condo*ini#*.Cristina Condo*ini#* Corporation =hereinafter referred to as CCC?holds title to all "o**on areas of Cristina Condo*ini#* and is in"har3e of *ana3in3, *aintainin3 and ad*inisterin3 the"ondo*ini#*s "o**on areas and proidin3 for the 1#ildin3sse"#rit$.

Respondent 9nisphere International, In". =hereinafter referred to as9nisphere? is the o!nerBo""#pant of 9nit )(% of said "ondo*ini#*.

On Noe*1er '>, %2>%, respondent 9nispheres 9nit )(% !asalle3edl$ ro11ed of ario#s ite*s al#ed at 7&,%&.((. The in"ident!as reported to petitioner CCC.

On J#l$ ', %2>', another ro11er$ alle3edl$ o""#rred at 9nit )(%!here the ite*s "arted a!a$ !ere al#ed at 7&,%)(.((, 1rin3in3 thetotal al#e of ite*s lost to 7%','2.((. This in"ident !as li5e!isereported to petitioner CCC.

On O"to1er , %2>', respondent 9nisphere de*anded "o*pensationand rei*1#rse*ent fro* petitioner CCC for the losses in"#rred as ares#lt of the ro11er$.

7etitioner CCC denied an$ lia1ilit$ for the losses "lai*ed to hae1een in"#rred 1$ respondent 9nisphere, statin3 that the 3oods lost1elon3ed to A*trade, a third part$.

As a "onse#en"e of the denial, respondent 9nisphere !ithheldpa$*ent of its *onthl$ d#es startin3 Noe*1er %2>'.

On Septe*1er %), %2>), respondent 9nisphere re"eied a letterfro* petitioner CCC de*andin3 pa$*ent of past d#es.

On De"e*1er , %2>0, petitioner E.G.. Realt$ ee"#ted a Deed ofA1sol#te Sale oer 9nit )(% in faor of respondent 9nisphere. Thereafter, Condo*ini#* Certi"ate of Title No. /(%( !as iss#ed inrespondent 9nispheres na*e 1earin3 the annotation of a lien infaor of petitioner E.G.. Realt$ for the #npaid "ondo*ini#* d#es inthe a*o#nt of 7%),%0'.&/.

On Jan#ar$ '>, %2>/, petitioners E.G.. Realt$ and CCC @ointl$ led apetition !ith the Se"#rities and E"han3e Co**ission =SEC? for the"olle"tion of the #npaid *onthl$ d#es in the a*o#nt of 7%),%0'.&/a3ainst respondent 9nisphere.

In its ans!er, respondent 9nisphere alle3ed that it "o#ld not 1edee*ed in defa#lt in the pa$*ent of said #npaid d#es 1e"a#se itstardiness !as o""asioned 1$ the petitionersX fail#re to "o*pl$ !ith!hat !as in"#*1ent #pon the*, that is, to proide se"#rit$ for the1#ildin3 pre*ises in order to preent, if not to stop, the ro11eriesta5in3 pla"e therein. It asserted as "o#nter"lai* that the a*o#nt of 7%','2.(( representin3 the total al#e of its loss d#e to the t!oro11eries 1e a!arded to it 1$ !a$ of da*a3es for the latters fail#reto se"#re the pre*ises.

On Jan#ar$ %%, %2>2, SEC <earin3 OL"er Antero ;.. illaVor, Jr.rendered a de"ision !hi"h dispositiel$ read as follo!s:

K<ERE;ORE, respondent is here1$ ordered to pa$ petitioner thes#* of 7%),%0'.&/ !ithin fteen =%? da$s fro* re"eipt of thisDe"ision. ;#rther, petitioner is here1$ ordered to pa$ respondent

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!ithin fteen =%? da$s fro* re"eipt of this De"ision, the s#* of7%','2.((.

et "op$ of this De"ision 1e f#rnished the Re3ister of Deeds of4a5ati, 4etro 4anila for the p#rpose of "an"ellation of the lien infaor of Cristina Condo*ini#* fo#nd at the 1a"5 of Title for #npaid*onthl$ d#es in the s#* of 7%),%0'.&/, #pon f#ll pa$*ent ofrespondent of said a*o#nt #nto petitioner.

SO ORDERED.+%

6oth parties led their respe"tie *otions for re"onsideration.

On J#l$ %/, %2>2, the de"ision of <earin3 OL"er illaVor !as*odied and a*ended 1$ <earin3 OL"er Enri#e . ;lores, Jr. toread as follo!s:

K<ERE;ORE, respondents *otion for re"onsideration sho#ld 1e, asit is, here1$ DENIED and the petitioners *otion for re"onsiderationis here1$ GRANTED.

A""ordin3l$, the de"ision dated Jan#ar$ %%, %2>2, is partiall$

re"onsidered to the eMe"t that petitioners are not *ade lia1le forthe al#e of the ite*sBarti"les 1#r3laried fro* respondents"ondo*ini#* #nit.

SO ORDERED.+'

On J#l$ %>, %2>2, respondent 9nisphere led a noti"e of appeal !iththe SEC en 1an" #estionin3 the a1oe-*entioned de"ision.

On A#3#st %, %2>2, it led a *otion for an etension of thirt$ =)(?da$s to le its *e*orand#* on appeal thirt$ =)(? da$s fro* thestated deadline of A#3#st %>, %2>2.

Said *otion !as 3ranted on A#3#st %/, %2>2.

On Septe*1er %>, %2>2, respondent 9nisphere led a se"ond*otion for etension of ti*e to le its *e*orand#* on appeal foranother t!ent$ ='(? da$s.

The *otion !as li5e!ise 3ranted on Septe*1er '&, %2>2.

On O"to1er 2, %2>2, respondent 9nisphere led its *e*orand#* onappeal.

After the petitioners led their repl$ thereto, the SEC en 1an" iss#edthe Order dated ;e1r#ar$ '), %22( !hi"h is #oted here#nder:

6efore this Co**ission en 1an" is an appeal fro* the Order dated J#l$ %/, %2>2 of the <earin3 OL"er in SEC Case No. )%%2 entitled[E.G.. Realt$ Deelop*ent Corporation and Cristina Condo*ini#*Corporation s. 9nisphere International , In".

The re"ords of the "ase sho! that respondent-appellant re"eied a"op$ of the a1oe order on J#l$ %>, %2>2 and led its Noti"e ofAppeal on J#l$ '%, %2>2. On A#3#st %, %2>2, respondent as5ed foran etension of thirt$ =)(? da$s to le its 4e*orand#* on Appeal!hi"h !as 3ranted on A#3#st %/, %2>2.

On Septe*1er %>, %2>2, respondent as5ed for an additional periodof t!ent$ ='(? da$s #ntil O"to1er >, %2>2 to le his Appeal !hi"h!as also 3ranted.

Respondent led his 4e*orand#* on O"to1er %), %2>2, e da$safter the d#e date.

The pen#lti*ate para3raph of Se"tion & of 7residential De"ree no.2('-A =as a*ended? "learl$ proides:

The de"ision, r#lin3 or order of an$ s#"h Co**issioner, 1odies,1oards, "o**ittees, andBor oL"er as *a$ 1e appealed to theCo**ission sittin3 en 1an" !ithin thirt$ =)(? da$s after re"eipt 1$the appellant of noti"e of s#"h de"ision, r#lin3 or order. TheCo**ission shall pro*#l3ate r#les or pro"ed#re to 3oern the

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pro"eedin3s, hearin3s and appeals of "ases fallin3 !ithin its @#risdi"tion.

7#rs#ant to the a1oe proision, the Co**ission pro*#l3ated theReised R#les of 7ro"ed#re of the Se"#rities and E"han3eCo**isison, Se"tion ), R#le QI of said R#les reiterates the thirt$=)(?-da$ period proided for #nder the a1oe proision:

Appeal *a$ 1e ta5en 1$ lin3 !ith the <earin3 OL"er !ho

pro*#l3ated the de"ision, order or r#lin3 !ithin thirt$ =)(? da$sfro* noti"e thereof, and serin3 #pon the aderse part$, a noti"e ofappeal and a *e*orand#* on appeal and pa$in3 the "orrespondin3do"5et fee therefor. The appeal shall 1e "onsidered perfe"ted #ponthe lin3 of the *e*orand#* on appeal and pa$*ent of the do"5etfee !ithin the period hereina1oe ed.

The Co**ission en 1an" notes that respondent had, etensionsin"l#ded, a total of ei3ht$ =>(? da$s to le its Appeal *e*orand#*1#t failed to do so.

K<ERE;ORE, pre*ises "onsidered, the instant appeal is here1$dis*issed for hain3 1een led o#t of ti*e.

SO ORDERED.+)

Respondent 9nisphere *oed for a re"onsideration of the a1oe-#oted order 1#t the sa*e !as denied, and so !as it its se"ond*otion for re"onsideration.

On Septe*1er &, %22(, respondent 9nisphere led a noti"e ofappeal to the SEC en 1an" in order to #estion the latters r#lin3 tothe Co#rt of Appeals p#rs#ant to R#le 0) of the R#les of Co#rt, asa*ended 1$ Rep#1li" A"t No. 0)0.

On Septe*1er %(, %22(, it led a noti"e of appeal to the Co#rt ofAppeals.

The Co#rt of Appeals reersed the SEC en 1an"s Order of A#3#st'%, %22( in its De"ision dated ;e1r#ar$ %/, %22 !hi"h dispositiel$reads as follo!s:

K<ERE;ORE, the instant petition is GRANTED and the assailed Orderdated A#3#st '%, %2>2 is here1$ REERSED and SET ASIDE.Another @#d3*ent is entered de"larin3 that the appeal*e*orand#* 1efore the SEC =en 1an"? of appellant 9nisphere !asled on ti*e and that the a*o#nt of 7%),%0'.&/, the #npaid

*onthl$ d#es of 9nisphere to the Corporation sho#ld 1e oMset 1$the losses s#Mered 1$ the 9nisphere in the a*o#nt of 7%','2.((.9nisphere is here1$ ordered to pa$ the Cristina Condo*ini#*Corporation the a*o#nt of 7>0/.&/ representin3 the 1alan"e afteroMsettin3 the a*o#nt of 7%','2.(( a3ainst the said 7%),%0'.&/,!ith %' interest per ann#* fro* Jan#ar$ '>, %2>/ !hen the Joint7etition of the petitioners-appellees !as led 1efore the SEC =for"olle"tion and da*a3es? #ntil f#ll$ paid.

No prono#n"e*ent as to "osts.

SO ORDERED.+0

7etitioners *oed for re"onsideration of the said de"ision 1#t thesa*e !as denied 1$ the appellate "o#rt on 4a$ %, %22.

<en"e, the instant petition for reie! interposed 1$ petitionersE.G.. Realt$ and CCC "hallen3in3 the de"ision of the Co#rt ofAppeals on the follo!in3 3ro#nds: =a? the Co#rt of Appeals did nota"#ire @#risdi"tion oer respondent 9nispheres appeal 1e"a#se thelatter failed to "o*pl$ !ith the pres"ri1ed *ode of appealF =1? eenif the @#risdi"tional inr*it$ is 1r#shed aside, the SEC en 1an" Orderdated ;e1r#ar$ '), %22( has alread$ attained nalit$F and ="? ther#lin3 of the Co#rt of Appeals on the oMsettin3 of the parties "lai*sis #nfo#nded.

A per#sal of the fore3oin3 iss#es readil$ reeals that petitionersraise t!o ='? aspe"ts of the "ase for "onsideration, that is, thepro"ed#ral aspe"t and the s#1stantie aspe"t.

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Ke !ill dis"#ss the pro"ed#ral aspe"t rst. 7etitioners "ontend that=a? the Co#rt of Appeals did not a"#ire @#risdi"tion oer the appeal1e"a#se respondent failed to "o*pl$ !ith the pres"ri1ed *ode ofappealF and =1? ass#*in3 that the Co#rt of Appeals has @#risdi"tion,the assailed SEC en 1an" Order of ;e1r#ar$ '), %22( had alread$1e"o*e nal and ee"#tor$.

Anent the rst "ontention, petitioners "lai* that respondent9nisphere erred in *erel$ lin3 a noti"e of appeal as in ordinar$ "iil

"ases fro* the re3#lar "o#rts instead of a petition for reie! !iththe Co#rt of Appeals.

Contrar$ to petitioners "ontention, respondent 9nisphere "o*plied!ith the pres"ri1ed *ode of appeal. At the ti*e the appeal !aseleated to the Co#rt of Appeals in %22(, the r#le 3oernin3re"o#rse to the Co#rt of Appeals fro* the de"ision, resol#tion ornal order of a #asi-@#di"ial 1od$ !as R#le 0) of the Reised R#lesof Co#rt, as a*ended 1$ Rep#1li" A"t No. 0)0 as e*1odied in6atas 7a*1ansa 6l3. %'2 and its Interi* R#les and G#idelines.+ The r#le proided for a #nifor* pro"ed#re for appeals fro* thespe"ied ad*inistratie tri1#nals, SEC in"l#ded, to the Co#rt ofAppeals 1$ lin3 a noti"e of appeal !ith the appellate "o#rt and !ith

the "o#rt, oL"er, 1oard, "o**ission or a3en"$ that *ade orrendered the assailed r#lin3 !ithin fteen =%? da$s fro* noti"ethereof. Re"ords 1ear o#t that respondent 9nisphere "o*plied !iththe fore3oin3 r#les !hen it led a noti"e of appeal !ith the SEC en1an" on Septe*1er &, %22( and !ith the Co#rt of Appeals onSepte*1er %(, %22(. Clearl$ therefore, respondent 9nisphere"o*plied !ith the proper *ode of appeal as *andated 1$ the r#les.

Kith respe"t to the se"ond "ontention, petitioners asseerate thatthe ;e1r#ar$ '), %22( order of the SEC en 1an" has alread$ 1e"o*enal and #nappeala1le, therefore "an no lon3er 1e reersed,a*ended or *odied. The$ *aintain that respondent 9nispherere"eied a "op$ of said order on ;e1r#ar$ '&, %22( and that ten =%(?da$s thereafter, it led its *otion for re"onsideration. Said *otion!as denied 1$ the SEC on 4a$ %0, %22( !hi"h !as re"eied 1$respondent 9nisphere on 4a$ %, %22(. Conse#entl$, the$ assertthat respondent 9nisphere had onl$ the re*ainin3 e =? da$s or

on 4a$ '(, %22( !ithin !hi"h to le a noti"e of appeal. <o!eer,instead of appealin3 therefro*, respondent 9nisphere led a se"ond*otion for re"onsideration on 4a$ ', %22( !ith the SEC en 1an".7etitioners "ontend that no se"ond *otion for re"onsideration isallo!ed 1$ SEC R#les #nless !ith epress prior to leae of thehearin3 oL"er. Said se"ond *otion for re"onsideration !as li5e!isedenied on A#3#st '%, %22(. ;ifteen =%? da$s later or on Septe*1er, %22(, respondent 9nisphere led its noti"e of appeal.

Se"tion >, R#le QII of the Reised R#les of 7ro"ed#re of the SECproides that:

SEC. >. Re"onsideration.-- Kithin thirt$ =)(? da$s fro* re"eipt of theorder or de"ision of the <earin3 OL"er, the a33rieed part$ *a$ lea *otion for re"onsideration of s#"h order or de"ision to3ether !ithproof of seri"e thereof #pon the aderse part$. No *ore than one*otion for re"onsideration shall 1e allo!ed #nless !ith the epressprior leae of the <earin3 OL"er.

Respondent 9nispheres non-o1seran"e of the fore3oin3 r#lerendered the ;e1r#ar$ '), %22( and the 4a$ %0, %22( orders of theSEC en 1an" nal and #nappeala1le. Its fail#re to perfe"t its appeal

in the *anner and !ithin the period ed 1$ la! rendered thede"ision so#3ht to 1e appealed nal, !ith the res#lt that no "o#rt"an eer"ise appellate @#risdi"tion to reie! the de"ision.+&Contrar$ to petitioners ie!, the appeal to the Co#rt of Appeals inthis "ase sho#ld hae 1een perfe"ted !ithin fteen =%? da$s fro*re"eipt of the order den$in3 the *otion for re"onsideration on 4a$%, %22(. 6#t instead of appealin3, respondent 9nisphere led aprohi1ited se"ond *otion for re"onsideration !itho#t epress priorleae of the hearin3 oL"er. Conse#entl$, !hen it s#1se#entl$led its noti"e of appeal on Septe*1er &, %22(, it !as alread$ei3ht$-t!o =>'? da$s late. Therefore, the appeal 1efore the Co#rt ofAppeals "o#ld hae 1een dis*issed o#tri3ht for 1ein3 ti*e-1arred.R#les of pro"ed#re are intended to ens#re the proper ad*inistrationof @#sti"e and the prote"tion of s#1stantie ri3hts in @#di"ial and#asi-@#di"ial pro"eedin3s. 6latant iolation of s#"h r#les s*a"5s ofa dilator$ ta"ti" !hi"h !e si*pl$ "annot "o#ntenan"e.

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No!, !e 3o to the s#1stantie aspe"t.

It is petitioners assertion that the r#lin3 of the Co#rt of Appeals tooMset the alle3ed losses as a res#lt of the ro11eries in the a*o#nt of 7%','2.(( fro* the #npaid *onthl$ d#es of 7%),%0'.&/ is#nfo#nded 1e"a#se respondent 9nisphere is not the o!ner of the3oods lost 1#t a third part$, A*trade. Respondent 9nisphere, on itspart, "lai*s that this iss#e is fa"t#al, hen"e, not a proper iss#e toraise 1efore this Co#rt.

A"t#all$, the iss#e for o#r "onsideration is !hether or not set-oM or"o*pensation has ta5en pla"e in the instant "ase. The Co#rt ofAppeals dissertation on the *atter is "o**enda1l$ instr#"tie, 1#t,la*enta1l$, it rea"hed a diMerent "on"l#sion. Ke #ote pertinentportions of the assailed de"ision:

Co*pensation or oMset #nder the Ne! Ciil Code ta5es pla"e onl$!hen t!o persons or entities in their o!n ri3hts, are "reditors andde1tors of ea"h other. =Art. %'/>?.

A distin"tion *#st 1e *ade 1et!een a de1t and a *ere "lai*. Ade1t is an a*o#nt a"t#all$ as"ertained. It is a "lai* !hi"h has 1een

for*all$ passed #pon 1$ the "o#rts or #asi-@#di"ial 1odies to !hi"hit "an in la! 1e s#1*itted and has 1een de"lared to 1e a de1t. A"lai*, on the other hand, is a de1t in e*1r$o. It is *ere eiden"e of a de1t and *#st pass thr# the pro"ess pres"ri1ed 1$ la! 1efore itdeelops into !hat is properl$ "alled a de1t. =allarta s. CA, %&)SCRA >/?. A1sent, ho!eer, an$ s#"h "ate3ori"al ad*ission 1$ ano1li3or or nal ad@#di"ation, no "o*pensation or oM-set "an ta5epla"e. 9nless ad*itted 1$ a de1tor hi*self, the "on"l#sion that heis in tr#th inde1ted to another "annot 1e denitel$ and nall$prono#n"ed, no *atter ho! "onin"ed he *a$ 1e fro* theea*ination of the pertinent re"ords of the alidit$ of that"on"l#sion the inde1tedness *#st 1e one that is ad*itted 1$ thealle3ed de1tor or prono#n"ed 1$ nal @#d3*ent of a "o*petent"o#rt or in this "ase 1$ the Co**ission =illan#ea s. Tant#i"o, %>'SCRA '&)?.

There "an 1e no do#1t that 9nisphere is inde1ted to the Corporationfor its #npaid *onthl$ d#es in the a*o#nt of 7%),%0'.&/. This isad*itted. 6#t !hether the Corporation is inde1ted to 9nisphere isi3oro#sl$ disp#ted 1$ the for*er.

It appears #ite "lear that the oMsettin3 of de1ts does not etend to#nli#idated, disp#ted "lai*s arisin3 fro* tort or 1rea"h of"ontra"t. =Co*pania General de To1a"os s. ;ren"h and 9nson, )27hil. )0F oreno and 4artine s. herrero, %/ 7hil. '2?.

It *#st 1e noted that 9nisphere @#st stopped pa$in3 its *onthl$d#es to the Corporation on Septe*1er '), %2>) !itho#t notif$in3the latter. It !as onl$ on ;e1r#ar$ '0, %2>0, or e *onths after,that it infor*ed the "orporation of its s#spension of pa$*ent of the"ondo*ini#* d#es to oMset the losses it s#Mered 1e"a#se of thero11eries.

In resistin3 the ndin3 !hi"h #nders"ores their ne3li3en"e, E.G..Realt$ and Cristina "ondo*ini#* "orporation, !o#ld hae this Co#rtappre"iate in their faor the ad*ission of 4r. Alfonso a*ora of9nisphere that there !as no s#"h a3ree*ent a*on3 the #nit o!nersthat an$ *e*1er !ho in"#rred losses !ill 1e inde*nied fro* the

"o**on "ontri1#tion. =TSN, J#l$ /, %2>/, p. &(?.

The herein appellees f#rther ar3#e that the "a#se of a"tion forrei*1#rse*ent of the al#e of the ite*s lost 1e"a#se of thero11eries sho#ld 1e a3ainst the se"#rit$ a3en"$ and not theCorporation.

On the other hand, 9nisphere ino5es ART. %%/( of the Ciil Code!hi"h proides:

ART. %%/(.- Those !ho in the perfor*an"e of their o1li3ations are3#ilt$ of fra#d, ne3li3en"e, or dela$ and those !ho in an$ *anner"ontraene the tenor thereof, are lia1le for da*a3es.

There is !ei3ht in the initial fa"t#al ndin3s of the SEC <earin3OL"er !ith respe"t to the losses s#Mered 1$ 9nisphere in thea*o#nt of 7%','2.((:

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7laintiM li5e!ise does not disp#te the fa"t of ro11er$ that o""#rredon Noe*1er '>, %2>% and J#l$ '&, %2>' inside )(% CristinaCondo*ini#*.

7laintiM ad*its that it had se"#red the seri"es of Ji*ene 7rote"tieand Se"#rit$ A3en"$ to safe3#ard the Condo*ini#* pre*ises #nderits instr#"tions and s#perision, 1#t !hi"h failed to dete"t thero11er$ in"idents that o""#rred t!i"e at 9nit )(% of respondent,

"antin3 =si"? a!a$ 1#l5 ite*s.

;ro* the #ndisp#ted fa"ts, plaintiM !as re*issed =si"? !ithin itso1li3ation to proide safet$ to respondent inside its #nit. This !asde*onstrated 1$ the fa"t that t!o ro11er$ in"idents 1efellrespondents #nder the ne3li3ent e$e of plaintiMs hired se"#rit$3#ards. It "an 1e safel$ prono#n"ed that plaintiM has not "o*plied!ith !hat !as in"#*1ent #pon it to do in a proper *anner.

Sin"e it has 1een deter*ined and proen 1$ the eiden"e presented1efore the hearin3 oL"e of respondent SEC that 9nisphere indeed

s#Mered losses 1e"a#se of the ro11er$ in"idents and sin"e it=9nisphere? did not ref#te its lia1ilit$ to the "orporation for the#npaid *onthl$ d#es in the a*o#nt of 7%),%0'. &/, this a*o#ntsho#ld 1e set-oM a3ainst the aforestated losses of 9nisphere.+/

Ke f#ll$ a3ree !ith the appellate "o#rts dissertation on the nat#reand "hara"ter of a set-oM or "o*pensation. <o!eer, !e "annots#1s"ri1e to its "on"l#sion that a set-oM or "o*pensation too5 pla"ein this "ase.

In Arti"le %'/> of the Ciil Code, "o*pensation is said to ta5e pla"e!hen t!o persons, in their o!n ri3ht, are "reditors and de1tors ofea"h other. Co*pensation is 8a *ode of etin3#ishin3 to the"on"#rrent a*o#nt, the o1li3ations of those persons !ho in theiro!n ri3ht are re"ipro"all$ de1tors an "reditors of ea"h other and8the oMsettin3 of t!o o1li3ations !hi"h are re"ipro"all$ etin3#ished

if the$ are of e#al al#e, or etin3#ished to the "on"#rrent a*o#ntif of diMerent al#es.+> Arti"le %'/2 of the sa*e Code proides:

Arti"le %'/2. In order that "o*pensation *a$ 1e proper, it isne"essar$:


='? That 1oth de1ts "onsist in a s#* of *one$, or if the thin3s d#eare "ons#*a1le, the$ 1e of the sa*e 5ind, and also of the sa*e#alit$ if the latter has 1een statedF



=? That oer neither of the* there 1e an$ retention or "ontroers$,"o**en"ed 1$ third persons and "o**#ni"ated in d#e ti*e to thede1tor.

A1sent an$ sho!in3 that all of these re#isites eist, "o*pensation

*a$ not ta5e pla"e.

Khile respondent 9nisphere does not den$ its lia1ilit$ for its #npaidd#es to petitioners, the latter do not ad*it an$ responsi1ilit$ for theloss s#Mered 1$ the for*er o""asioned 1$ the 1#r3lar$. At 1est,!hat respondent 9nisphere has a3ainst petitioners is @#st a "lai*,not a de1t. S#"h 1ein3 the "ase, it is not enfor"ea1le in "o#rt. It isonl$ the de1ts that are enfor"ea1le in "o#rt, there 1ein3 no apparentdefenses inherent in the*.+2 Respondent 9nispheres "lai* for itsloss has not 1een passed #pon 1$ an$ le3al a#thorit$ so as toeleate it to the leel of a de1t. So !e held in Alfonso allarta .Co#rt of Appeals, et al.,+%( that:

Co*pensation or oMset ta5es pla"e 1$ operation of la! !hen t!o ='?persons, in their o!n ri3ht, are "reditor and de1tor of ea"h other.;or "o*pensation to ta5e pla"e, a distin"tion *#st 1e *ade1et!een a de1t and a *ere "lai*. A de1t is a "lai* !hi"h has 1een

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for*all$ passed #pon 1$ the hi3hest a#thorit$ to !hi"h it "an in la!1e s#1*itted and has 1een de"lared to 1e a de1t. A "lai*, on theother hand, is a de1t in e*1r$o. It is *ere eiden"e of a de1t and*#st pass thr# the pro"ess pres"ri1ed 1$ la! 1efore it deelops into!hat is properl$ "alled a de1t.+%%

Tested 1$ the fore3oin3 $ardsti"5, it has not 1een s#L"ientl$esta1lished that "o*pensation or set-oM is proper here as there isla"5 of eiden"e to sho! that petitioners E.G.. Realt$ and CCC and

respondent 9nisphere are *#t#all$ de1tors and "reditors to ea"hother.

Considerin3 the fore3oin3 dis#isition, therefore, !e nd thatrespondent Co#rt of Appeals "o**itted reersi1le error in r#lin3that "o*pensation or set-oM is proper in the instant "ase.

K<ERE;ORE, for all the fore3oin3 , the instant petition is here1$GRANTED. The De"ision of the Co#rt of Appeals dated ;e1r#ar$ %/,%22 is REERSED and SET ASIDE. The Order of the Se"#rities andE"han3e Co**ission dated A#3#st '%, %22( reiteratin3 the<earin3 OL"ers De"ision dated Jan#ar$ %%, %2>2, as a*ended 1$the Order of J#l$ %/, %2>2, is here1$ REINSTATED.

SO ORDERED.

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held that 4ETRO6AN had failed to sho! a pri*a fa"ie "ase that the TONDAS iolated the Tr#st Re"eipts a! in relation to Art. )% =%? =1?of the Reised 7enal Code in the fa"e of "onin"in3 proof that thatthe a*o#nt of 7'.> 4illion representin3 the o#tstandin3 o1li3ation of the TONDAS #nder the tr#st re"eipts a""o#nt had alread$ 1eensettled 1$ the* in "o*plian"e !ith the loan restr#"t#rin3 proposalFand that in the a1sen"e of a loan restr#"t#rin3 a3ree*ent,4ETRO6AN "o#ld still alidl$ appl$ the a*o#nt as pa$*entthereof. The releant portions of the Co#rt of Appeals de"ision are

#oted as follo!s:

7etitioners ad*itted that in %22% their "o*pan$, the <one$ TreeApparel Corporation =<TAC?, had so*e nan"ial reersals *a5in3 itdiL"#lt for the* to "o*pl$ !ith their loan o1li3ations !ith4etro1an5. The$ !ere then "onstrained to propose a loanrestr#"t#rin3 a3ree*ent !ith the priate respondent to ena1le the*to nall$ settle all o#tstandin3 o1li3ations !ith the latter. In a letterdated ') Septe*1er %22%, petitioner Joa#in Tonda s#1*itted aproposed oan Restr#"t#rin3 S"he*e to 4etro1an5. In said letter,petitioner Tonda proposed to i**ediatel$ pa$ in f#ll the o#tstandin3prin"ipal "har3es #nder the tr#st re"eipts a""o#nt and the re*ainin3o1li3ations #nder a separate s"hed#le of pa$*ent. 7etitioners

atta"hed !ith said letter an ite*ied proposal =Atta"h*ent A?, partof !hi"h reads:

%. Tr#st Re"eipts - The ne! *ana3e*ent and. 4r. Joa#in G. Tonda!ill pa$ i**ediatel$ the entire prin"ipal of the o#tstandin3 Tr#stRe"eipts a*o#ntin3 to 7',>(),(2/.%0. Khile the interest a""r#ed#p to Septe*1er %), %22% a*o#ntin3 to 70(2,&(%./ pl#s theadditional interest shall 1e re-str#"t#red to3ether !ith ite* no. '1elo!. A @oint sharin3 a""o#nt in the na*e of Joa#in G. Tonda andKan3 Tien En e#al to Tr#st Re"eipt a*o#nt of %.> 4illion !ill 1eopened at 4etro1an5 4a5ati. =e*phasis s#pplied?

It !o#ld appear that the aforestated a*o#nt of %.> 4illion !aserroneo#sl$ !ritten sin"e the intention of the petitioners !as toopen an a""o#nt of 7'.> 4illion to pa$ the entire prin"ipal of theo#tstandin3 tr#st re"eipts a""o#nt. In fa"t, also on ') Septe*1er%22%, petitioner Joa#in Tonda and Kan3 Tien En deposited fo#r

diMerent "he"5s !ith a total a*o#nt of 7',>((,(((.(( !ith4etro1an5. The "he"5s !ere re"eied 1$ a "ertain ;lor C. Naanep.Nota1l$, the petitioners had o1tained a !ritten a"5no!led3e*ent of re"eipt of the "he"5s totalin3 7'.> 4illion fro* the 4etro1an5 oL"erin order to sho! proof of "o*plian"e !ith the loan restr#"t#rin3proposal. If the petitioners had intended it to 1e a si*ple deposit,then a deposit slip !ith a *a"hine alidation 1$ the priaterespondent 1an5 !o#ld hae other!ise 1een s#L"ient.

In a letter dated '' O"to1er %22%, 4etro1an5 !rote to thepetitioners infor*in3 the* that the 1an5 had a""epted theirproposal s#1@e"t to "ertain "onditions, the rst of !hi"h referred tothe i**ediate pa$*ent of the a*o#nt of 7'.> 4illion, representin3the o#tstandin3 tr#st re"eipts a""o#nt. The petitioners appeared tohae oMered a "o#nter proposal s#"h that no nal a3ree*ent had$et 1een rea"hed.

<o!eer, the s#""eedin3 ne3otiations 1et!een petitioners and4etro1an5, after the initial oMer of ') Septe*1er %22% !as *ade,dealt !ith the other o#tstandin3 o1li3ations !hile the *atterre3ardin3 the tr#st re"eipts a""o#nt re*ained #n"han3edF therefore,it !as settled 1et!een the parties that the a*o#nt of 7'.> 4illion

sho#ld 1e paid to "oer all o#tstandin3 o1li3ations #nder the tr#stre"eipts a""o#nt. Despite the ina1ilit$ of 1oth parties to rea"h a*#t#all$ a3reea1le loan restr#"t#red a3ree*ent, the a*o#nt of7'.> 4illion !hi"h !as deposited on ') Septe*1er %22% 1$ thepetitioners appears to re*ain inta"t and #nto#"hed as 4etro1an5had failed to sho! eiden"e that the *one$ has 1een !ithdra!nfro* the sain3s a""o#nt of the petitioners.

4oreoer, the deposit *ade 1$ the petitioners !as *ade 5no!n to4etro1an5 "learl$ as a "o*plian"e !ith the proposed loanrestr#"t#rin3 a3ree*ent. As sho!n in the "orresponden"e *ade 1$the petitioners on '> ;e1r#ar$ %22' to 4etro1an5, after the latterhad *ade a for*al de*and for pa$*ent of all o#tstandin3o1li3ations, the deposit !as *entioned, to !it:

4a$ !e e*phasie that to sho! sin"erit$ and nan"ial "apa1ilit$,soon after !e re"eied $o#r letter dated O"to1er '', %22% infor*in3

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#s of $o#r approal of the restr#"t#rin3 and "onsolidation of o#rr*Xs o1li3ations, a personal a""o#nt !as opened 1$ t!o ='? of o#rsto"5holders in the a*o#nt e#ialent to the TRBC, A""o#nt ofa1o#t 7'.> 4illion !hi"h deposit is still *aintained !ith $o#r 1an5,free fro* an$ lien or en"#*1ran"e, and *a$ 1e applied an$ti*e tothe pa$*ent of the TRBC A""o#nt #pon the i*ple*entation 1$ theparties of the ter*s of restr#"t#rin3.=e*phasis s#pplied?

The "ontention of 4etro1an5 that the *one$ had not 1een a"t#all$

applied as pa$*ent for petitionersX o#tstandin3 o1li3ation #nder thetr#st re"eipts a""o#nt is a1sol#tel$ deoid of *erit, "onsiderin3 thatthe petitioners !ere still in the pro"ess of ne3otiatin3 for areasona1le loan restr#"t#rin3 arran3e*ent !ith 4etro1an5 !henthe latter a1r#ptl$ a1andoned all eMorts to ne3otiate and instantl$de*anded fro* the petitioners the f#lll*ent of all theiro#tstandin3 o1li3ations.

In the "ase of Tan Tion3 Ti"5 s. A*eri"an Apothe"aries, & 7hil.0%0, the S#pre*e Co#rt had held that:

8Khen a depositor is inde1ted to a 1an5, and the de1ts are *#t#al -that is, 1et!een the sa*e parties and in the, sa*e ri3ht - the 1an5

*a$ appl$ the deposit, or s#"h portion thereof as *a$ 1e ne"essar$,to the pa$*ent of the de1t d#e it 1$ the depositor, proided there isno epress a3ree*ent to the "ontrar$ and the deposit is notspe"i"all$ appli"a1le to so*e other parti"#lar p#rpose.

Appl$in3 the a1oe-*entioned r#lin3 in this "ase, if the partiestherefore fail to rea"h an a3ree*ent re3ardin3 the restr#"t#rin3 of<TACXs loan, 4etro1an5 "an alidl$ appl$ the a*o#nt deposited 1$the petitioners as pa$*ent of the prin"ipal o1li3ation #nder the tr#stre"eipts a""o#nt.

On the 1asis of all the eiden"e 1efore 9s, this Co#rt is "onin"edthat the a*o#nt of 7'.> 4illion representin3 the o#tstandin3o1li3ation of the petitioners #nder the tr#st re"eipts a""o#nt hadalread$ 1een settled 1$ the petitioners. The *one$ re*ainsdeposited #nder the sain3s a""o#nt of the petitioners a!aitin3 anal a3ree*ent !ith 4etro1an5 re3ardin3 the loan restr#"t#rin3

arran3e*ent. 4ean!hile, 4etro1an5 has the ri3ht to #se thedeposited a*o#nt in "onne"tion !ith an$ of its 1an5in3 1#siness.

Kith "onin"in3 proof that the a*o#nt of 7'.> 4illion deposited#nder petitionersX sain3s a""o#nt !ith 4etro1an5 !as indeedintended to 1e applied as pa$*ent for the o#tstandin3 o1li3ations of <TAC #nder the tr#st re"eipts, 4etro1an5, therefore, had failed tosho! a pri*a fa"ie "ase that the petitioners had iolated the Tr#stRe"eipts a! =7.D. No. %%? in relation to Art. )% of the Reised

7enal Code. 6esides, there is a1sol#tel$ no eiden"e s#33estin3that 4etro1an5 has 1een da*a3ed 1$ the proposal and the deposit*ade 1$ the petitioners. As noted 1$ the prose"#tor:

8It is "lear fro* the eiden"e that "o*plainant 1an5 had, all the!hile, 1een infor*ed of the steps #nderta5en 1$ the respondentsrelatie to the tr#st re"eipts and other nan"ial o1li3ations is-a-is<TACXs nan"ial diL"#lties. <ardl$ therefore, "o#ld it 1e said thatrespondents !ere #nfaithf#ll$, de"eptiel$, de"eitf#ll$ andfra#d#lentl$ dealin3 !ith "o*plainant 1an5 to !arrant an indi"t*entfor Estafa.+>

<en"e, this re"o#rse to this Co#rt !here petitioner s#1*its for the

"onsideration of this Co#rt the follo!in3 iss#es:

I.

K<ET<ER 4ETRO6AN <AS S<OKN A 7RI4A ;ACIE IOATION O; T<E TR9ST RECEI7TS AK IN REATION TO ART. )% O; T<EREISED 7ENA CODE

II.

K<ET<ER AN AGREE4ENT KAS ;ORGED 6ETKEEN T<E 7ARTIES T<AT T<E '.> 4IION DE7OSITED IN T<E JOINT ACCO9NT O; JOAG9IN G. TONDA AND KANG TIEN EN KO9D 6E CONSIDERED AS7AY4ENT ;OR T<E O9TSTANDING O6IGATIONS O; T<E S7O9SES TONDA 9NDER T<E TR9ST RECEI7TS

III.

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K<ET<ER INS7ITE O; T<E ;AI9RE O; T<E 7ARTIES TO AGREE 97ONA RESTR9CT9RING AGREE4ENT, 4ETRO6AN CAN STI A77Y T<E7'.> 4IION DE7OSIT AS 7AY4ENT TO T<E 7RINCI7A A4O9NTCOERED 6Y T<E TR9ST RECEI7TS

I.

K<ET<ER DA4AGE <AS 6EEN CA9SED TO 4ETRO6AN 6ECA9SE

O; T<E 7RO7OSA AND O; T<E DE7OSIT

.

K<ET<ER 4ETRO6AN <AS T<E STANDING TO 7ROSEC9TE T<ECASE A 9O

I.

K<ET<ER T<E ASSIGNED ERRORS IN T<E 7ETITION ;OR CERTIORARI;IED KIT< T<IS <ONORA6E CO9RT RAISES 79REY 9ESTIONS O;;ACTS+2

In response to the fore3oin3, the TONDAS *aintain that4ETRO6AN has no le3al standin3 to le the present petition!itho#t the "onfor*it$ or a#thorit$ of the prose"#tor as it dealssolel$ !ith the "ri*inal aspe"t of the "ase, a separate a"tion tore"oer "iil lia1ilit$ hain3 alread$ 1een instit#tedF that the iss#esraised in the present petition are p#rel$ fa"t#alF and that the s#1@e"ttr#st re"eipts o1li3ations hae 1een etin3#ished 1$ pa$*ent orle3al "o*pensation.

Ke nd for petitioner 1an5.

7reli*inaril$, !e shall resole the iss#es raised 1$ the TONDASre3ardin3 the standin3 of 4ETRO6AN to le the instant petition and!hether the sa*e raises #estions of la!.

The 3eneral r#le is that it is onl$ the Soli"itor General !ho isa#thoried to 1rin3 or defend a"tions on 1ehalf of the 7eople or the

Rep#1li" of the 7hilippines on"e the "ase is 1ro#3ht 1efore this Co#rtor the Co#rt of Appeals. <o!eer, an e"eption has 1een *ade thatif there appears to 1e 3rae error "o**itted 1$ the @#d3e or la"5 of d#e pro"ess, the petition !ill 1e dee*ed led 1$ the priate"o*plainants therein as if it !ere led 1$ the Soli"itor General.+%(In that "ase, the Co#rt 3ae d#e "o#rse to the petition and allo!edthe petitioners to ar3#e their "ase in lie# of the Soli"itor General.Ke a""ord the sa*e treat*ent to the instant petition on a""o#nt ofthe 3rae errors "o**itted 1$ the Co#rt of Appeals. Ke add that no

infor*ation hain3 1een led $et in "o#rt, there is, stri"tl$ spea5in3,no "ase $et for the 7eople or the Rep#1li" of the 7hilippines. Inans!er to the se"ond iss#e raised 1$ the TONDAS, !hile the @#risdi"tion of the S#pre*e Co#rt in a petition for reie! on"ertiorari #nder R#le 0 of the Reised R#les of Co#rt is li*ited toreie!in3 onl$ errors of la!, not of fa"t, one e"eption to the r#le is!hen the fa"t#al ndin3s "o*plained of are deoid of s#pport 1$the eiden"e on re"ord or the assailed @#d3*ent is 1ased on*isappre"iation of fa"ts+%%, as !ill 1e sho!n to hae happened inthe instant "ase.

In the *ain, the iss#e is !hether or not the dis*issal 1$ the Co#rt of Appeals of the "har3e for iolation of the Tr#st Re"eipts a! in

relation to Art. )%=%? =1? of the Reised 7enal Code a3ainst the TONDAS is !arranted 1$ the eiden"e at hand and 1$ la!.

The Co#rt of Appeals 3rael$ erred in reersin3 the Depart*ent of J#sti"e on the ndin3 of pro1a1le "a#se to hold the TONDAS for trial. The do"#*entar$ eiden"e presented d#rin3 the preli*inar$inesti3ation "learl$ sho! that there !as pro1a1le "a#se to !arranta "ri*inal prose"#tion for iolation of the Tr#st Re"eipts a!.

The releant penal proision of 7.D. %% proides:

SEC. %). 7enalt$ Cla#se. - The fail#re of an entr#stee to t#rn oerthe pro"eeds of the sale of the 3oods, do"#*ents or instr#*ents"oered 1$ a tr#st re"eipt to the etent of the a*o#nt o!in3 to theentr#ster or as appears in the tr#st re"eipt or to ret#rn said 3oods,do"#*ents or instr#*ents if the$ !ere not sold or disposed of ina""ordan"e !ith the ter*s of the tr#st re"eipt shall "onstit#te the

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"ri*e of estafa, p#nisha1le #nder the proisions of Arti"le Three<#ndred and ;ifteen, 7ara3raph One =1?, of A"t N#*1ered Three Tho#sand Ei3ht <#ndred and ;ifteen, as a*ended, other!ise 5no!nas the Reised 7enal Code. If the iolation or oMense is "o**itted1$ a "orporation, partnership, asso"iation or other @#di"ial entities,the penalt$ proided for in this De"ree shall 1e i*posed #pon thedire"tors, oL"ers, e*plo$ees or other oL"ials or persons thereinresponsi1le for the oMense, !itho#t pre@#di"e to the "iil lia1ilitiesarisin3 fro* the "ri*inal oMense.

Se"tion % =1?, Arti"le )% of the Reised 7enal Code #nder !hi"h theiolation is *ade to fall, states:

S!indlin3 =estafa?. - An$ person !ho shall defra#d another 1$an$ of the *ans *entioned herein 1elo! :

1. 6$ *isappropriatin3 or "onertin3, to the pre@#di"e of another,*one$, 3oods, or an$ other personal propert$ re"eied 1$ theoMender in tr#st or on "o**ission, or for ad*inistration, or #nderan$ other o1li3ation inolin3 the d#t$ to *a5e delier$ of or to

ret#rn the sa*e, een tho#3h s#"h o1li3ation 1e totall$ or partiall$3#aranteed 1$ a 1ondF or 1$ den$in3 hain3 re"eied s#"h *one$,3oods, or other propert$.

6ased on the fore3oin3, it is plain to see that the Tr#st Re"eipts a!de"lares the fail#re to t#rn oer the 3oods or the pro"eeds realiedfro* the sale thereof, as a "ri*inal oMense p#nisha1le #nder Arti"le)% =%? =1? of the Reised 7enal Code. The la! is iolated !heneerthe entr#stee or the person to !ho* the tr#st re"eipts !ere iss#edin faor of fails to: =%? ret#rn the 3oods "oered 1$ the tr#stre"eiptsF or ='? ret#rn the pro"eeds of the sale of the said 3oods. The fore3oin3 a"ts "onstit#te estafa p#nisha1le #nder Arti"le )% =%?=1? of the Reised 7enal Code. Gien that ario#s tr#st re"eipts !ereee"#ted 1$ the TONDAS and that as entr#stees, the$ did not ret#rnthe pro"eeds fro* the 3oods sold nor the 3oods the*seles to4ETRO6AN, there is no disp#te that that the TONDAS failed to

"o*pl$ !ith the o1li3ations #nder the tr#st re"eipts despite seeralde*ands fro* 4ETRO6AN.

;indin3 faora1l$ for the TONDAS, ho!eer, and orderin3 thedis*issal of the "o*plaint a3ainst the*, the Co#rt of Appeals heldthat: =%? the TONDAS opened a sain3s a""o#nt of 7'.> 4illion topa$ the entire prin"ipal of the o#tstandin3 tr#st re"eipts a""o#ntF ='?the TONDAS o1tained fro* a 4ETRO6AN oL"er+%' a !rittena"5no!led3e*ent of re"eipt of "he"5s totalin3 7'.> 4illion in order

to sho! proof of "o*plian"e !ith the loan restr#"t#rin3 proposalF =)?it !as settled 1et!een the parties that the a*o#nt of '.> 4illionsho#ld 1e paid to "oer all o#tstandin3 o1li3ations #nder the tr#stre"eipts a""o#ntF =0? the *one$ re*ains deposited #nder thesain3s a""o#nt of petitioners a!aitin3 a nal a3ree*ent !ith4ETRO6AN re3ardin3 the loan restr#"t#rin3 arran3e*entF and that=? there is no eiden"e s#33estin3 that 4ETRO6AN has 1eenda*a3ed 1$ the proposal and the deposit or that the TONDASe*plo$ed fra#d and de"eit in their dealin3s !ith the 1an5.

The fore3oin3 ndin3s and "on"l#sions are palpa1l$ erroneo#s.

;irst, the a*o#nt of 7'.> *illion !as not dire"tl$ paid to

4ETRO6AN to settle the tr#st re"eipt a""o#nts, 1#t deposited in a @oint a""o#nt of Joa#in G. Tonda and a "ertain Kan3 Tien En. In aletter dated ;e1r#ar$ '>, %22', si3ned 1$ <TACXs i"e 7resident for;inan"e, 4ETRO6AN !as infor*ed that the a*o#nt *a$ 1eapplied an$ti*e to the pa$*ent of the tr#st re"eipts a""o#nt #poni*ple*entation of the parties of the ter*s of the restr#"t#rin3.+%) The parties failed to a3ree on the ter*s of the loan restr#"t#rin3a3ree*ent as the oMer 1$ the TONDAS to restr#"t#re the loan !asfollo!ed 1$ a series of "o#nter-oMers !hi"h $ielded nothin3. It isaio*ati" that a""eptan"e of an oMer *#st 1e #n#alied anda1sol#te+%0 to perfe"t a "ontra"t. The alle3ed pa$*ent of the tr#stre"eipts a""o#nts neer 1e"a*e eMe"t#al on a""o#nt of the fail#reof the parties to nalie a loan restr#"t#rin3 arran3e*ent.

Se"ond, the hand!ritten note 1$ the 4ETRO6AN oL"era"5no!led3in3 re"eipt of the "he"5s a*o#ntin3 to 7'.> 4illion *adeno referen"e to the TONDASX tr#st re"eipt o1li3ations, and !e

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"annot pres#*e that it !as an$thin3 *ore than an ordinar$ 1an5deposit. The Co#rt of Appeals "itin3 the "ase of Tan Tion3 Ti"5 s.A*eri"an Apothe"ories+% i*plied that in *a5in3 the deposit, the TONDAS are entitled to set oM, 1$ !a$ of "o*pensation, theiro1li3ations to 4ETRO6AN. <o!eer, Arti"le %'>> of the Ciil Codeproides that "o*pensation shall not 1e proper !hen one of thede1ts "onsists in "iil lia1ilit$ arisin3 fro* a penal oMense as in the"ase at 1ar. The raison dXetre for this is that, if one of the de1ts"onsists in "iil lia1ilit$ arisin3 fro* a penal oMense, "o*pensation

!o#ld 1e i*proper and inadisa1le 1e"a#se the satisfa"tion of s#"ho1li3ation is i*peratie.+%&

Third, relian"e on the ne3otiations for the settle*ent of the tr#stre"eipts o1li3ations 1et!een the TONDAS and 4ETRO6AN is si*pl$*ispla"ed. The ne3otiations pertain and aMe"t onl$ the "iil aspe"tof the "ase 1#t does not pre"l#de prose"#tion for the oMensealread$ "o**itted. It has 1een held that +an$ "o*pro*iserelatin3 to the "iil lia1ilit$ arisin3 fro* an oMense does nota#to*ati"all$ ter*inate the "ri*inal pro"eedin3 a3ainst oretin3#ish the "ri*inal lia1ilit$ of the *alefa"tor.+%/ All told, the7'.> 4illion deposit "o#ld not 1e "onsidered as hain3 settled thetr#st re"eipts o1li3ations of the TONDAS to the end of etin3#ishin3

an$ in"ipient "ri*inal "#lpa1ilit$ arisin3 therefro*.

<en"e, it has 1een held in OL"e of the Co#rt Ad*inistrator s.Soriano+%> that:

8 it is too !ell-settled for an$ serio#s ar3#*ent that !hether in*alersation of p#1li" f#nds or estafa, pa$*ent, inde*ni"ation, orrei*1#rse*ent of, or "o*pro*ise as to, the a*o#nts or f#nds*alersed or *isappropriated, after the "o**ission of the "ri*e,aMe"ts onl$ the "iil lia1ilit$ of the oMender 1#t does not etin3#ishhis "ri*inal lia1ilit$ or reliee hi* fro* the penalt$ pres"ri1ed 1$la! for the oMense "o**itted, 1e"a#se 1oth "ri*es are p#1li"oMenses a3ainst the people that *#st 1e prose"#ted and penalied1$ the Goern*ent on its o!n *otion, tho#3h "o*plete reparationsho#ld hae 1een *ade of the da*a3e s#Mered 1$ the oMendedparties. .

As to the state*ent of the Co#rt of Appeals that there is noeiden"e that 4ETRO6AN has 1een da*a3ed 1$ the proposal andthe deposit, it *#st 1e "laried that the da*a3e "an 1e tra"ed fro*the non-f#lll*ent of an entr#steeXs o1li3ation #nder the tr#stre"eipts. The nat#re of tr#st re"eipt a3ree*ents and the da*a3e"a#sed to trade "ir"les and the 1an5in3 "o**#nit$ in "ase ofiolation thereof !as eplained in intola s. I6AA+%2 and e"hoed in7eople s. Nitafan+'(, as follo!s:

+tr#st re"eipt arran3e*ents do not inole a si*ple loantransa"tion 1et!een a "reditor and a de1tor-i*porter. Apart fro* aloan feat#re, the tr#st re"eipt arran3e*ent has a se"#rit$ feat#rethat is "oered 1$ the tr#st re"eipt itself. The se"ond feat#re is !hatproides the *#"h needed nan"ial assistan"e to traders in thei*portation or p#r"hase of 3oods or *er"handise thro#3h the #se of those 3oods or *er"handise as "ollateral for the adan"e*ents*ade 1$ the 1an5. The title of the 1an5 to the se"#rit$ is the oneso#3ht to 1e prote"ted and not the loan !hi"h is a separate anddistin"t a3ree*ent.

.

Tr#st re"eipts are indispensa1le "ontra"ts in international anddo*esti" 1#siness transa"tions. The prealent #se of tr#st re"eipts,the dan3er of their *is#se andBor *isappropriation of the 3oods orpro"eeds realied fro* the sale of 3oods, do"#*ents or instr#*entsheld in tr#st for entr#ster-1an5s, and the need for re3#lation of tr#stre"eipt transa"tions to safe3#ard the ri3hts and enfor"e theo1li3ations of the parties inoled are the *ain thr#sts of 7.D. %%.As "orre"tl$ o1sered 1$ the Soli"itor General, 7.D. %%, li5e 6ata7a*1ansa 6l3. '', p#nishes the a"t not as an oMense a3ainstpropert$, 1#t as an oMense a3ainst p#1li" order. The *is#se of tr#st re"eipts therefore sho#ld 1e deterred to preent an$ possi1lehao" in trade "ir"les and the 1an5in3 "o**#nit$. ="itin3 oano s.4artine, %0& SCRA )') +%2>&F Rollo, p. /? It is in the "ontet of#pholdin3 p#1li" interest that the la! no! spe"i"all$ desi3nates a1rea"h of a tr#st re"eipt a3ree*ent to 1e an a"t that shall *a5eone lia1le foe estafa.

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The ndin3 that there !as no fra#d and de"eit is li5e!ise *ispla"edConsiderin3 that the oMense is p#nished as a *al#* prohi1it#*re3ardless of the eisten"e of intent or *ali"e. A *ere fail#re todelier the pro"eeds of the sale or the 3oods if not sold, "onstit#tesa "ri*inal oMense that "a#ses pre@#di"e not onl$ to another, 1#t*ore to the p#1li" interest.+'%

;inall$, it is !orth$ of *ention that a preli*inar$ inesti3ationproper - !hether or not there is reasona1le 3ro#nd to 1eliee that

the a""#sed is 3#ilt$ of the oMense and therefore, !hether or not hesho#ld 1e s#1@e"ted to the epense, ri3ors and e*1arrass*ent oftrial - is the f#n"tion of the prose"#tor.+'' 7reli*inar$ inesti3ationis an ee"#tie, not a @#di"ial f#n"tion.+') S#"h inesti3ation is notpart of the trial, hen"e, a f#ll and eha#stie presentation of thepartiesX eiden"e is not re#ired, 1#t onl$ s#"h as *a$ en3ender a!ell-3ro#nded 1elief that an oMense has 1een "o**itted and thatthe a""#sed is pro1a1l$ 3#ilt$ thereof.+'0

Se"tion 0, R#le %%' of the R#les of Co#rt re"o3nies the a#thorit$ ofthe Se"retar$ of J#sti"e to reerse the resol#tion of the proin"ial or"it$ prose"#tor or "hief state prose"#tor #pon petition 1$ a properpart$.+' J#di"ial reie! of the resol#tion of the Se"retar$ of J#sti"e

is li*ited to a deter*ination of !hether there has 1een a 3raea1#se of dis"retion a*o#ntin3 to la"5 or e"ess of @#risdi"tion"onsiderin3 that the f#ll dis"retionar$ a#thorit$ has 1een dele3atedto the ee"#tie 1ran"h in the deter*ination of pro1a1le "a#sed#rin3 a preli*inar$ inesti3ation. Co#rts are not e*po!ered tos#1stit#te their @#d3*ent for that of the ee"#tie 1ran"hF it *a$,ho!eer, loo5 into the #estion of !hether s#"h eer"ise has 1een*ade in 3rae a1#se of dis"retion.+'&

eril$, there !as no 3rae a1#se of dis"retion on the part of theSe"retar$ of J#sti"e in dire"tin3 the lin3 of the Infor*ation a3ainstthe TONDAS, end the Co#rt of Appeals oerstepped its 1o#ndaries inreersin3 the sa*e !itho#t 1asis in la! and in eiden"e. Kee*phasie that for p#rposes of preli*inar$ inesti3ation, it iseno#3h that there is eiden"e sho!in3 that a "ri*e has 1een"o**itted and that the a""#sed is pro1a1l$ 3#ilt$ thereof.+'/ 6$reason of the a11reiated nat#re of preli*inar$ inesti3ations, a

dis*issal of the "har3es as a res#lt thereof is not e#ialent to a @#di"ial prono#n"e*ent of a"#ittal,+'> a "onerso, the ndin3 of apri*a fa"ie "ase to hold the a""#sed for trial is not e#ialent to andin3 of 3#ilt.

K<ERE;ORE, the petition is here1$ GRANTED. The assailedDe"ision is REERSED and SET ASIDE.

SO ORDERED.

h d h h d d f l 1 h d i i 1

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G.R. No. %0/0// J#ne '/, '((&

<ER4ENEGIDO 4. TRINIDAD, 7etitioner,s.ESTREA ACA79CO, Respondent

D E C I S I O N

A9STRIA-4ARTINE, J.:

6efore this Co#rt is a 7etition for Reie! #nder R#le 0 of the R#lesof Co#rt assailin3 the De"ision% of the Co#rt of Appeals =CA? in CA-G.R. C No. 0'%> pro*#l3ated on ;e1r#ar$ %&, '((%, !hi"haLr*ed the De"ision' of the Re3ional Trial Co#rt =RTC? Ce1# Cit$,6ran"h & dated 4ar"h '), %22'.

The fa"ts are as follo!s:

On 4a$ &, %22%, respondent Estrella A"ap#l"o led a Co*plaint1efore the RTC see5in3 the n#lli"ation of a sale she *ade in faorof petitioner <er*ene3ildo 4. Trinidad. She alle3ed: So*eti*e in;e1r#ar$ %22%, a "ertain 7ri*itio Caête re#ested her to sell a

4er"edes 6en for 7>(,(((.((. Caête also said that if respondentherself !ill 1#$ the "ar, Caête !as !illin3 to sell it for 7((,(((.((.7etitioner 1orro!ed the "ar fro* respondent for t!o da$s 1#tinstead of ret#rnin3 the "ar as pro*ised, petitioner told respondentto 1#$ the "ar fro* Caête for 7((,(((.(( and that petitioner!o#ld pa$ respondent after petitioner ret#rns fro* Daao. ;ollo!in3petitioners instr#"tions, respondent re#ested Caête to ee"#te adeed of sale "oerin3 the "ar in respondents faor for 7((,(((.((for !hi"h respondent iss#ed three "he"5s in faor of Caête.Respondent thereafter ee"#ted a deed of sale in faor of petitionereen tho#3h petitioner did not pa$ her an$ "onsideration for thesale. Khen petitioner ret#rned fro* Daao, he ref#sed to pa$respondent the a*o#nt of 7((,(((.(( sa$in3 that said a*o#nt!o#ld @#st 1e ded#"ted fro* !hateer o#tstandin3 o1li3ationrespondent had !ith petitioner. D#e to petitioners fail#re to pa$respondent, the "he"5s that respondent iss#ed in faor of Caête1o#n"ed, th#s "ri*inal "har3es !ere led a3ainst her.) Respondent

then pra$ed that the deed of sale 1et!een her and petitioner 1ede"lared n#ll and oidF that the "ar 1e ret#rned to herF and thatpetitioner 1e ordered to pa$ da*a3es.0

In his Ans!er petitioner "ontended that: it is not tr#e that he1orro!ed the "ar and that an$ de*and !as *ade to ret#rn itF healso did not 3ie an$ instr#"tions to respondent to 1#$ the "ar fro*Caête 1e"a#se as earl$ as Septe*1er '>, %22(, Caête hasalread$ sold the "ar to respondent for 7((,(((.((F at the ti*e

respondent ee"#ted the deed of sale in his faor on 4ar"h 0, %22%,respondent !as alread$ in possession of the deed of sale fro*CaêteF the a*o#nt of 7((,(((.(( !as f#ll$ paid 1$ !a$ of dationin pa$*ent to partiall$ etin3#ish respondents o1li3ation !ithpetitionerF the "ontra"t entered into !as a tr#e sale of a *otorehi"le and the *ode of pa$*ent !as that of dation in pa$*enta3reed #pon at the ti*e of the sale.

The parties led their respe"tie pre-trial 1riefs. 7etitioner raised asiss#e: !hether or not there is alid dation in pa$*entF& !hilerespondent p#t forth the #estions: !hether or not she is inde1tedto petitioner in the a*o#nt of 7&&,(((.((, and !hether the "ar !as"eded 1$ her to petitioner in order to partiall$ pa$ oM her o1li3ation

of 7&&,(((.(( to petitioner as dation in pa$*ent./

On Septe*1er &, %22%, the trial "o#rt "a*e o#t !ith its 7re-TrialOrder li*itin3 the iss#e to !hether there is da"ion en pa3o 1et!eenpetitioner and respondent.>

Trial ens#ed and on 4ar"h '), %22', the RTC rendered its De"isionndin3 that no da"ion en pa3o is present in this "ase as "o**on"onsent !as not proen.2 The fallo of said de"ision reads:

K<ERE;ORE, @#d3*ent is here1$ rendered in faor of the plaintiM=A"ap#l"o? and a3ainst the defendant =Trinidad?, to !it:

%. De"larin3 the deed of sale ee"#ted 1$ plaintiM in faor ofdefendant as n#ll and oid for 1ein3 "titio#s andBor si*#latedF

' Th d f d t i d d t t th 4 d 6 i t d 1t 1 t th d li f d th t th d i i f

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'. The defendant is ordered to ret#rn the 4er"edes 6en "ar in#estion to plaintiM in the sa*e "ondition !hen it !as deliered tohi* 1$ plaintiMF

). Defendant is ordered to pa$ plaintiM the a*o#nt of 7%((,(((.((as *oral da*a3esF 7'(,(((.(( as ee*plar$ da*a3es andattorne$s fees of 7'(,(((.(( as !ell as liti3ation epenses in thea*o#nt of 7,(((.(( and "osts.

SO ORDERED.%(

7etitioner led a 4otion for Re"onsideration ar3#in3 that "ontrar$ tothe ndin3s of the trial "o#rt that there !as no "o**on "onsent,the oMer to delier the "ar to hi* a"t#all$ "a*e fro* respondentafter petitioner told her that he !as 3oin3 to le estafa "asesa3ainst her for her fail#re to pa$ her de1t to petitioner.%%

7etitioner also led a S#pple*ental 4otion and for the rst ti*eaerred that ass#*in3 that respondent did not a3ree to hain3 thep#r"hase pri"e "har3ed a3ainst the 7&&,(((.(( she o!edpetitioner, nonetheless, !ith or !itho#t her "onsent andBor5no!led3e, the o1li3ations parties o!ed to ea"h other !ere

etin3#ished 1$ operation of la! or thro#3h le3al "o*pensation inthe a*o#nt of 7((,(((.((.%'

The RTC iss#ed an Order dated O"to1er %>, %22' den$in3 the 4otionfor Re"onsideration and S#pple*ental 4otion of petitioner statin3that the "lai* of da"ion en pa3o is ineistent in this "ase and thedefense of le3al "o*pensation !as not alle3ed or pleaded inpetitioners Ans!er.%)

7etitioner appealed to the CA !hi"h aLr*ed the De"ision of the trial"o#rt, ndin3 that the iss#e of le3al "o*pensation !as led too lateas it !as 1ro#3ht #p onl$ in the s#pple*ental *otion forre"onsiderationF that the parties a3reed that the iss#e to 1e tried

!as !hether or not there !as da"ion en pa3oF that da"ion en pa3oho!eer is not present in this "ase as the parties did not 3ie their"onsent theretoF that there "an also 1e no le3al "o*pensation asone of the o1li3ations of this "ase did not entail pa$*ent of a

*onetar$ de1t 1#t the delier$ of a "arF and that the ad*ission ofpetitioner that the sale pri"e of the "ar !as not paid entitledrespondent to le the a"tion for res"ission of sale.%0

7etitioner no! "o*es 1efore this Co#rt "lai*in3 that:

_%. T<E <ONORA6E A77EATE CO9RT ERRED IN <ODING T<AT T<E ANSKER DID NOT AEGE ;ACTS A4O9NTING TOEQTING9IS<4ENT O; O6IGATION 6Y EGA CO47ENSATIONF

_'. T<E <ONORA6E A77EATE CO9RT ERRED IN GIING 9ND9EREIANCE TO 7ETITIONERS CONC9SION IN <IS ANSKER T<AT <ISO6IGATION KAS DEE4ED EQTING9IS<ED 6ECA9SE O; DATION IN7AY4ENT INSTEAD O; DISREGARDING SAID CONC9SION ANDSI47Y A77RECIATING T<E ;ACTS AEGED AND 7ROED ANDDRAKING ;OR ITSE; T<E J9RIDICA I47ICATION O; SAID ;ACTSF

_). ASS94ING T<AT EGA CO47ENSATION <AD NOT 6EENAEGED IN T<E ANSKER, STI T<E <ONORA6E A77EATECO9RT ERRED IN <ODING T<AT EGA CO47ENSATION AS A4ANNER O; E;;ECTING 7AY4ENT <AD TO 6E S7ECI;ICAYAEGED, T<E SA4E 6EING ONY EIDENTIARYF

_0. ASS94ING T<AT EGA CO47ENSATION <AD TO 6E AEGEDAND T<AT T<E ANSKER ;AIED TO DO SO, NEERT<EESS T<E<ONORA6E A77EATE CO9RT ERRED IN IGNORING T<E EIDENCE7RESENTED KIT<O9T O6JECTION ;RO4 RES7ONDENT S<OKING T<AT 7ARITES=SIC? 49T9A 4ONETARY O6IGATIONS TO EAC<OT<ER <AD 6EEN EQTING9IS<ED TO T<E CONC9RRENT A4O9NTO; 7((,((.((F

_. T<E <ONORA6E A77EATE CO9RT ERRED IN <ODING T<ATEGA CO47ENSATION CO9D 6E E;;ECTED ONY T<RO9G< T<ECONSENT O; T<E 7ARTIESF

_&. T<E <ONORA6E A77EATE CO9RT ERRED IN <ODING T<ATNON-7AY4ENT O; T<E 79RC<ASE 7RICE 4ADE T<E CONTRACT O;SAE ;ICTITIO9S, <ENCE N9 AND OIDF

/ IN IEK O; T<E RES7ONDENTS AD4ISSION T<AT S<E OKED f th 1 t l i i th f i d t ll it t

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_/. IN IEK O; T<E RES7ONDENTS AD4ISSION T<AT S<E OKED7ETITIONER 7&&,(((.((, T<E <ONORA6E A77EATE CO9RTERRED IN NOT ORDERING RES7ONDENT TO 7AY T<E SA4E KIT<EGA INTERESTF

_>. T<E <ONORA6E A77EATE CO9RT ERRED IN ASSESSINGDA4AGES AGAINST T<E 7ETITIONER.%

7etitioner ar3#es that: the p#r"hase pri"e of the "ar had 1een

a#to*ati"all$ oMset 1$ respondents o!n *onetar$ o1li3ation of7&&,(((.((, een if he and respondent had not a3reed to oMsettin3follo!in3 Arti"le %'2(%& of the Ciil CodeF 6an5 of the 7hilippineIslands . Co#rt of Appeals%/ also held that "o*pensation shall ta5epla"e !hen t!o persons, in their o!n ri3ht, are "reditors andde1tors of ea"h otherF le3al "o*pensation ta5es pla"e 1$ operationof la! and *a$ 1e ta5en #p een tho#3h it is not raised in thepleadin3s or d#rin3 trialF it is the d#t$ of "o#rts to 3rant the relief to!hi"h the parties are entitled as sho!n 1$ the alle3ations and thefa"ts proen at the trialF here, !hile petitioner "lai*ed dation inpa$*ent, there !as *ore than eno#3h testi*on$ and ad*issions toproe ele*ents of le3al "o*pensationF fail#re to pa$ the a3reedp#r"hase pri"e does not *a5e the "ontra"t of sale "titio#s and n#ll

and oidF the CA erred in not orderin3 respondent to pa$ petitionerthe 1alan"e of her partiall$ etin3#ished inde1tedness and inassessin3 da*a3es a3ainst hi* as there !as no 1asis therefor.%>

In her Co**ent, respondent "o#nters that: it !as onl$ in theS#pple*ental 4otion for Re"onsideration of the de"ision of the trial"o#rt that petitioner "han3ed his theor$ and started "lai*in3 le3al"o*pensation as a defenseF the CA did not "o**it an$ error inre@e"tin3 the 1elated ne! defense of petitioner as it !o#ld 1eoMensie to the 1asi" r#le of fair pla$, @#sti"e and d#e pro"essFArti"le %'/2 of the Ciil Code also states that for le3al "o*pensationto 1e proper 1oth de1ts sho#ld "onsist of s#* of *one$F in this"ase, one of the o1li3ations does not entail pa$*ent of *one$ 1#t

delier$ of a "ar.%2

7etitioner *erel$ reiterated his ar3#*ents in his 4e*orand#*,'(!hile respondent in hers, f#rther aerred that: she is not the o!ner

of the "ar, 1#t !as onl$ in possession thereof in order to sell it at apri"e of 7>(,(((.(( !ith 7>(,(((.(( 3oin3 to herF 1oth the trial"o#rt and the CA failed to *a5e a ndin3 as to the ea"t a*o#ntrespondent o!ed petitioners.'%

Stripped to its 1asi"s, !hat petitioner is "ontendin3 is that le3al"o*pensation sho#ld 1e appre"iated, tho#3h not epressl$ stated inhis Ans!er to the Co*plaint 1efore the trial "o#rt, as his alle3ationstherein and the fa"ts proen at the trial sho! the presen"e of le3al

"o*pensation. <e f#rther ar3#es that, in an$ "ase, le3al"o*pensation ta5es pla"e 1$ operation of la! een !itho#t the"onsent of the interested parties.

The Co#rt resoles to 3rant the petition.

O#r r#les re"o3nie the 1road dis"retionar$ po!er of an appellate"o#rt to !aie the la"5 of proper assi3n*ent of errors and to"onsider errors not assi3ned.'' The interest of @#sti"e di"tates thatthe Co#rt "onsider and resole iss#es een tho#3h not parti"#larl$raised if it is ne"essar$ for the "o*plete ad@#di"ation of the ri3htsand o1li3ations of the parties and it falls !ithin the iss#es alread$fo#nd 1$ the*.') Khile it is tr#e that petitioner failed to raise the

iss#e of le3al "o*pensation at the earliest opport#nit$, this sho#ldnot pre"l#de the "o#rts fro* appre"iatin3 the sa*e espe"iall$ in this"ase, !here i3norin3 the sa*e !o#ld onl$ res#lt to #nne"essar$ and"ir"#ito#s lin3 of "ases.

Indeed, the do"trine that hi3her "o#rts are pre"l#ded fro*entertainin3 *atters neither alle3ed in the pleadin3s nor raisedd#rin3 the pro"eedin3s 1elo! 1#t entilated for the rst ti*e onl$ ina *otion for re"onsideration or on appeal, is s#1@e"t to e"eptions,s#"h as !hen:

=a? 3ro#nds not assi3ned as errors 1#t aMe"tin3 @#risdi"tion oer thes#1@e"t *atterF =1? *atters not assi3ned as errors on appeal 1#t are

eidentl$ plain or "leri"al errors !ithin "onte*plation of la!F ="?*atters not assi3ned as errors on appeal 1#t "onsideration of !hi"his ne"essar$ in arriin3 at a @#st de"ision and "o*plete resol#tion ofthe "ase or to sere the interests of @#sti"e or to aoid dispensin3

pie"e*eal @#sti"e =d? *atters not spe"i"all$ assi3ned as errors on Arti"le %'/2 proides that in order that "o*pensation *a$ 1e

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pie"e*eal @#sti"eF =d? *atters not spe"i"all$ assi3ned as errors onappeal 1#t raised in the trial "o#rt and are *atters of re"ord hain3so*e 1earin3 on the iss#e s#1*itted !hi"h the parties failed toraise or !hi"h the lo!er "o#rt i3noredF =e? *atters not assi3ned aserrors on appeal 1#t "losel$ related to an error assi3nedF and =f?*atters not assi3ned as errors on appeal 1#t #pon !hi"h thedeter*ination of a #estion properl$ assi3ned, is dependent.'0

In this "ase, petitioner raised the iss#e of da"ion en pa3o in his

Ans!er to respondents Co*plaint. The trial "o#rt th#s fo"#sed onas"ertainin3 !hether the ele*ents of da"ion en pa3o are present inthe "ase at 1ar, i.e.: !hether there is "onsent, o1@e"t "ertain and"a#se or "onsideration, !ith "o**on "onsent as an essentialprere#isite to hae the eMe"t of totall$ etin3#ishin3 the de1t oro1li3ation.' As respondents "onsent !as not ade#atel$ proen1$ petitioner, the trial "o#rt held that there "o#ld 1e no da"ion enpa3o. 7etitioner thereafter led a 4otion for Re"onsideration and aS#pple*ental 4otion for Re"onsideration !here, for the rst ti*e,he raised the iss#e of le3al "o*pensation. In stri5in3 do!npetitioners "lai* of le3al "o*pensation, the trial "o#rt reasonedthat it !as raised too late. This !as aLr*ed 1$ the CA.

This Co#rt holds other!ise.

Co*pensation ta5es eMe"t 1$ operation of la! een !itho#t the"onsent or 5no!led3e of the parties "on"erned !hen all there#isites *entioned in Arti"le %'/2 of the Ciil Code are present.'& This is in "onsonan"e !ith Arti"le %'2( of the Ciil Code !hi"hproides that:

Arti"le %'2(. Khen all the re#isites *entioned in arti"le %'/2 arepresent, "o*pensation ta5es eMe"t 1$ operation of la!, andetin3#ishes 1oth de1ts to the "on"#rrent a*o#nt, een tho#3h the"reditors and de1tors are not a!are of the "o*pensation.

Sin"e it ta5es pla"e ipso @#re,'/ !hen #sed as a defense, it retroa"tsto the date !hen all its re#isites are f#llled.'>

Arti"le %'/2 proides that in order that "o*pensation *a$ 1eproper, it is ne"essar$:

=%? that ea"h one of the o1li3ors 1e 1o#nd prin"ipall$, and that he1e at the sa*e ti*e a prin"ipal "reditor of the otherF

='? that 1oth de1ts "onsist in a s#* of *one$, or if the thin3s d#eare "ons#*a1le, the$ 1e of the sa*e 5ind, and also of the sa*e#alit$ if the latter has 1een statedF

=)? that the t!o de1ts 1e d#eF

=0? that the$ 1e li#idated and de*anda1leF

=? that oer neither of the* there 1e an$ retention or "ontroers$,"o**en"ed 1$ third persons and "o**#ni"ated in d#e ti*e to thede1tor.

<ere, petitioners stan"e is that le3al "o*pensation has ta5en pla"eand operates een a3ainst the !ill of the parties 1e"a#se: =a?respondent and petitioner !ere personall$ 1oth "reditor and de1torof ea"h otherF =1? the *onetar$ o1li3ation of respondent !as

7&&,(((.(( and that of the petitioner !as 7((,(((.(( sho!in3that 1oth inde1tedness !ere *onetar$ o1li3ations the a*o#nt of!hi"h !ere also 1oth 5no!n and li#idatedF ="? 1oth *onetar$o1li3ations had 1e"o*e d#e and de*anda1leWpetitionerso1li3ation as sho!n in the deed of sale and respondentsinde1tedness as sho!n in the dishonored "he"5sF and =d? neither ofthe de1ts or o1li3ations are s#1@e"t of a "ontroers$ "o**en"ed 1$a third person.

Khile the pro"eedin3s in the RTC fo"#sed on as"ertainin3 thepresen"e of the ele*ents of da"ion en pa3o, it !as li5e!ise proenthat petitioner o!ed respondent the a*o#nt of 7((,(((.(( !hilerespondent o!ed petitioner 7&&,(((.((F that 1oth de1ts are d#e,

li#idated and de*anda1le, andF that neither of the de1ts oro1li3ations are s#1@e"t of a "ontroers$ "o**en"ed 1$ a thirdperson.

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Indeed for a "o#rt to arrie #pon a @#di"io#s approi*ation of

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Indeed, for a "o#rt to arrie #pon a @#di"io#s approi*ation ofe*otional or *oral in@#r$, "o*petent and s#1stantial proof of thes#Merin3 eperien"ed *#st 1e laid 1efore it.)> There *#st 1edenite ndin3s as to !hat the s#pposed *oral da*a3es s#Mered"onsisted of.)2 The a!ard of *oral da*a3es *#st 1e solidl$an"hored on a denite sho!in3 that the "lai*in3 part$ a"t#all$eperien"ed e*otional and *ental s#Merin3s.0(

In this "ase, respondent *erel$ testied that after petitioner ref#sed

the pa$*ent of the "ar as !ell as its ret#rn, she !as er$ *#"h!orried, !hi"h if "onerted into *onetar$ a*o#nt is e#ialent to7'((,(((.((.0% Ke dee* s#"h testi*on$ ins#L"ient to !arrant thea!ard of *oral da*a3es.

Si*ilarl$, in order that ee*plar$ da*a3es *a$ 1e a!arded, it *#st1e sho!n that the !ron3f#l a"t !as a""o*panied 1$ 1ad faith ordone in a !anton, fra#d#lent, re"5less or *aleolent *anner.0'Ee*plar$ da*a3es are also allo!ed onl$ in addition to *oralda*a3es s#"h that no ee*plar$ da*a3e "an 1e a!arded #nlessthe "lai*ant rst esta1lishes his "lear ri3ht to *oral da*a3es.0) As*oral da*a3es are i*proper in the present "ase, so is the a!ard ofee*plar$ da*a3es.

The de"ision of the trial "o#rt also does not *ention the reason forthe a!ard of attorne$s fees and the a!ard !as si*pl$ "ontained inthe dispositie portion of the de"ision. A3ain, the trial "o#rt erred onthis s"ore as it *#st epli"itl$ state in the 1od$ of its de"ision andnot onl$ in the dispositie portion thereof the le3al reason for thea!ard of attorne$s fees.00

K<ERE;ORE, the petition is GRANTED. The de"ision of the Co#rt ofAppeals dated ;e1r#ar$ %&, '((% is REERSED and SET ASIDE. The7((,(((.(( !hi"h <er*ene3ildo 4. Trinidad o!ed Estrella A"ap#l"ois oMset a3ainst the 7&&,(((.(( !hi"h A"ap#l"o o!ed Trinidad.A"ap#l"o is ordered to pa$ Trinidad the a*o#nt of 7&&,(((.(( pl#s

interest at %' per ann#* fro* 4a$ '(, %22' #ntil f#ll pa$*ent.

SO ORDERED.

G R No %>))(> April ' '(%' in faor of COEC "oerin3 the said transa"tion COEC paid the

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G.R. No. %>))(> April ', '(%'

INS9AR INEST4ENT AND TR9ST COR7ORATION, 7etitioner,s.CA7ITA ONE E9ITIES COR7. =no! 5no!n as CA7ITA ONE<ODINGS COR7.? and 7ANTERS DEEO74ENT 6AN,Respondents.

D E C I S I O N

4ENDOA, J.:

This is a petition for reie! on "ertiorari #nder R#le 0 of the %22/Reised R#les of Ciil 7ro"ed#re assailin3 the J#ne &, '((> De"ision%of the Co#rt of Appeals =CA? in C.A.-G.R. C No. /2)'( entitledIns#lar Inest*ent and Tr#st Corporation . Capital One E#itiesCorporation =no! 5no!n as Capital One <oldin3s Corporation? and7lanters Deelop*ent 6an5.

T<E ;ACTS

6ased on the re"ords of the "ase and on the Septe*1er ', %222

7artial Stip#lation of ;a"ts and Do"#*ents' =the 7artial Stip#lation?a3reed #pon 1$ the parties, the fa"ts are as follo!s:

7etitioner Ins#lar Inest*ent and Tr#st Corporation =IITC? andrespondents Capital One E#ities Corporation =COEC? and 7lantersDeelop*ent 6an5 =7D6? are re3#larl$ en3a3ed in the tradin3, saleand p#r"hase of 7hilippine treas#r$ 1ills.

On ario#s dates in %220, IITC p#r"hased fro* COEC treas#r$ 1ills!ith an a33re3ate fa"e al#e of 7'&(,&>),)2'.% =the IITC T-6ills?, aseiden"ed 1$ the "onr*ations of p#r"hase iss#ed 1$ IITC. Thep#r"hase pri"e for the said treas#r$ 1ills !ere f#ll$ paid 1$ IITC toCOEC !hi"h !as a1le to delier 7%'%,((,(((.(( !orth of treas#r$

1ills to IITC.

On 4a$ ', %220, COEC p#r"hased treas#r$ 1ills !ith a fa"e al#e of7%>&,//0,/)2.02 =the COEC T-6ills?. IITC iss#ed "onr*ations of sale

in faor of COEC "oerin3 the said transa"tion. COEC paid thep#r"hase pri"e 1$ iss#in3 the follo!in3 "he"5s:

Che"5 No. 7a$ee A*o#nt=%? Cit$ Tr#st 4ana3ersChe"5 No. ((%%>( 7lanters Deelop*ent 6an5 7%0,>(',)0%.2='? 9C76-A$ala 4ana3ersChe"5 No. AYO0)>0% 7lanters Deelop*ent 6an5

7%&,2/,>>).>2

=)? 9C76-A$ala 4ana3ersChe"5 No. AYO0)>0( 7lanters Deelop*ent 6an57%(,0%),(0)./>

=0? 9C76-A$alaChe"5 No. AY'%))0& Ins#lar Inest*ent and Tr#stCorporation 7'0,%%&.%%6oth IITC and 7D6 re"eied the pro"eeds of the "he"5s.

On 4a$ ', %220, 7D6 iss#ed "onr*ations of sale in faor of IITC forthe sale of treas#r$ 1ills and IITC, in t#rn, iss#ed "onr*ations ofp#r"hase in faor of 7D6 oer treas#r$ 1ills !ith a total fa"e al#e of 7%>&,/2(,(((.((.

Thereafter, 7D6 sent a letter) dated 4a$ 0, %220 to IITC #nderta5in3to delier treas#r$ 1ills !orth 7%>&,/2(,(((.((, !hi"h IITCp#r"hased fro* 7D6 on 4a$ ', %220, as soon as the$ !o#ld 1eaaila1le.

On 4a$ %(, %220, COEC !rote a letter to IITC de*andin3 theph$si"al delier$ of the treas#r$ 1ills !hi"h the for*er p#r"hasedfro* the latter on 4a$ ', %220.

In its 4a$ %>, %220 etter0 to 7D6, IITC re#ested, on 1ehalf ofCOEC, the delier$ to IITC of treas#r$ 1ills !orth 7%>&,/2(,(((.((!hi"h had 1een paid in f#ll 1$ COEC. COEC !as f#rnished !ith a"op$ of the said letter.

On 4a$ )(, %220, COEC protested the tenor of IITCs letter to 7D6and too5 e"eption to IITCs assertion that it *erel$ a"ted as afa"ilitator !ith re3ard to the sale of the treas#r$ 1ills.

7'( ((( ((( (( in "onsideration of !hi"h IITC relin#ished all its

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IITC sent COEC a letter dated J#ne ), %220, de*andin3 that COECdelier to it =IITC? the 7%)2,>)),)2'.(( !orth of treas#r$ 1ills orret#rn the f#ll p#r"hase pri"e. In either "ase, it also de*anded thatCOEC =%? pa$ IITC the a*o#nt of 7%,/'2,(&2.( representin31#siness opport#nit$ lost d#e to the non-delier$ of the treas#r$1ills, and ='? delier treas#r$ 1ills !orth 7%'%,((,((( !ith thesa*e *at#rit$ dates ori3inall$ p#r"hased 1$ IITC.

COEC sent a letter-repl$& dated J#ne 2, %220 to IITC in !hi"h ita"5no!led3ed its o1li3ation to delier the treas#r$ 1ills !orth7%)2,>)),)2'.((/ !hi"h it sold to IITC and for*all$ de*anded thedelier$ of the treas#r$ 1ills !orth 7%>&,//0,/)2.02 !hi"h itp#r"hased fro* IITC. COEC also de*anded the pa$*ent of lostprots in the a*o#nt of 7),'),'(.((. Considerin3 that COEC andIITC 1oth hae "lai*s a3ainst ea"h other for the delier$ of treas#r$1ills, COEC proposed that a le3al set-oM 1e eMe"ted, !hi"h !o#ldres#lt in IITC o!in3 COEC the diMeren"e of 70&,20%,00&.02.

In its J#ne %), %220 letter to COEC, IITC re@e"ted the s#33estion for ale3al settin3-oM of o1li3ations, alle3in3 that it *erel$ a"ted as afa"ilitator 1et!een 7D6 and COEC.

On J#ne '/, %220, COEC replied to IITCs letter, reiteratin3 itsde*and and its position stated in its J#ne 2, %220 letter.

On J#l$ %, %220, IITC, COEC and 7D6 entered into a TripartiteA3ree*ent> =the Tripartite A3ree*ent? !herein 7D6 assi3ned toIITC, !hi"h in t#rn assi3ned to COEC, Central 6an5 6ills !ith a totalfa"e al#e of 7(,(((,(((.((. These assi3n*ents !ere *ade in"onsideration of =a? IITC relin#ishin3 all its ri3hts to "lai* delier$#nder the "onr*ation of sale iss#ed 1$ 7D6 to IITC to the etent of7(,(((,(((.(( =fa"e al#e? and =1? COEC relin#ishin3 all its ri3htsto "lai* delier$ of the COEC T-6ills #nder the IITC "onr*ations ofsale to COEC to the etent of 7(,(((,(((.(( =fa"e al#e?.

On the sa*e da$, COEC and IITC entered into an A3ree*ent2 =theCOEC-IITC A3ree*ent? !here1$ COEC reassi3ned to IITC the Central6an5 1ills s#1@e"t of the Tripartite A3ree*ent to the etent of

7'(,(((,(((.(( in "onsideration of !hi"h IITC relin#ished all itsri3hts to "lai* fro* COEC the IITC T-6ills "oered 1$ the COEC"onr*ation of sale to the etent of an a33re3ate 7'(,(((,(((.((fa"e al#e.

Despite repeated de*ands, ho!eer, 7D6 failed to delier the1alan"e of 7%)&,/2(,(((.(( !orth of treas#r$ 1ills !hi"h IITCp#r"hased fro* 7D6 alle3edl$ for COEC. COEC !as li5e!ise #na1leto delier the re*ainin3 IITC T-6ills a*o#ntin3 to 7%%2,&)),)2'.((.

Neither 7D6 and COEC ret#rned the p#r"hase pri"e for the d#l$ paidtreas#r$ 1ills.%(

This pro*pted IITC to le the A*ended Co*plaint%% dated 4ar"h'(, %22 1efore the Re3ional Trial Co#rt, 6ran"h %)>, 4a5ati Cit$=RTC?, pra$in3 that COEC 1e ordered to delier treas#r$ 1ills !orth7%%2,&)),)2'.(( to IITC or pa$ the *onetar$ e#ialent pl#s le3alinterestsF and, in the alternatie, that 7D6 1e ordered to "o*pl$!ith its o1li3ations #nder the "ond#it transa"tion inolin3 treas#r$1ills !orth 7%)&,/2(,(((.(( 1$ delierin3 the treas#r$ 1ills to IITC, inaddition to a"t#al and ee*plar$ da*a3es and attorne$s fees.

COEC led its Ans!er to A*ended Co*plaint%' dated April %(,

%22, ad*ittin3 that it o!ed IITC treas#r$ 1ills !orth7%%2,&)),)2'.((. It "o#ntered, ho!eer, that IITC had ano#tstandin3 o1li3ation to delier to COEC treas#r$ 1ills !orth7%)&,//0,/)2.02.%) COEC pra$ed that IITC 1e re#ired to delier7%/,%0%,)0/.02 =the a*o#nt IITC still o!ed COEC after a le3al oM-settin3 of their de1ts a3ainst ea"h other? to COEC in addition to*oral and ee*plar$ da*a3es and attorne$s fees.%0

7D6, for its part, insisted in its Ans!er Ad Ca#tela*% that it had no5no!led3e or parti"ipation in the sale 1$ IITC of treas#r$ 1ills toCOEC. It ad*itted that it sent a letter dated 4a$ 0, %220 to IITC,#nderta5in3 to delier treas#r$ 1ills !orth 7%>&,/2(,(((.(( !hi"hIITC p#r"hased fro* 7D6. 7D6 posited, ho!eer, that IITC !as not

entitled to the delier$ of the said treas#r$ 1ills 1e"a#se IITC did notre*it pa$*ent to 7D6. Neither did the s#1@e"t se"#rities 1e"o*eaaila1le to 7D6.

In its J#d3*ent%& dated J#ne %& '(() the RTC fo#nd that COEC still that the petition inoles #estions of fa"t the S#pre*e Co#rt *a$

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In its J#d3*ent%& dated J#ne %&, '((), the RTC fo#nd that COEC stillo!ed IITC 7%%2,&)),)2'.(( !orth of treas#r$ 1ills, p#rs#ant to theirtransa"tion in earl$ %220. As re3ards the sale of treas#r$ 1ills 1$ IITCto COEC, ho!eer, the RTC deter*ined that IITC !as not *erel$ a"ond#it in the p#r"hase a sale of treas#r$ 1ills 1et!een 7D6 andCOEC. Rather, IITC a"ted as a prin"ipal in t!o transa"tions: as a1#$er of treas#r$ 1ills fro* 7D6 and as a seller to COEC. Ta5in3 into"onsideration the Tripartite A3ree*ent, IITC !as still lia1le to pa$COEC the s#* of 7%)&,/2(,(((.((. Sin"e IITC and COEC !ere 1oth

de1tors and "reditors of ea"h other, the RTC oM-set their de1ts,res#ltin3 in a diMeren"e of 7 %/,(&,&(>.(( in faor of COEC. As to7D6s lia1ilit$, it r#led that 7D6 had the o1li3ation to pa$7%)&,/2(,(((.(( to IITC. Th#s, the trial "o#rt ordered =a? IITC to pa$COEC 7%/,(&,&(>.(( !ith interest at the rate of & fro* J#ne %(,%220 #ntil f#ll pa$*ent and =1? 7D6 to pa$ IITC 7%)&,/2(,(((.((!ith interest at the rate of & fro* 4ar"h '%, %22 #ntil f#llpa$*ent.

A33rieed, all parties appealed to the CA !hi"h pro*#l3ated itsde"ision on J#ne &, '((>. The CA aLr*ed the RTC ndin3 that IITC!as not a *ere "ond#it 1#t rather a dire"t seller to COEC of thetreas#r$ 1ills.%/ The CA, ho!eer, a1soled 7D6 fro* an$ lia1ilit$,

r#lin3 that 1e"a#se 7D6 !as not inoled in the transa"tions1et!een IITC and COEC, IITC sho#ld hae alle3ed and proed that7D6 sold treas#r$ 1ills to IITC.%> 4oreoer, 7D6 onl$ #ndertoo5 todelier treas#r$ 1ills !orth 7%>&,/2(,(((.(( to IITC as soon as the$are aaila1le.%2 6#t, the said treas#r$ 1ills did not 1e"o*eaaila1le. Neither did IITC re*it pa$*ent to 7D6. As s#"h, 7D6in"#rred no o1li3ation to delier 7%>&,/2(,(((.(( !orth of treas#r$1ills to IITC.

<en"e, this petition.

T<E ISS9ES

IITC raises the follo!in3 3ro#nds for the 3rant of its petition:

A. The petition is not dis*issi1le. The iss#e of !hether IITC a"ted asa "ond#it is a #estion of la!. Ass#*in3 for the sa5e of ar3#*ent

that the petition inoles #estions of fa"t, the S#pre*e Co#rt *a$ta5e "o3nian"e of the petition #nder e"eptional "ir"#*stan"es.

6. The Co#rt of Appeals 3rael$ erred and a"ted "ontrar$ to la! and @#rispr#den"e and the eiden"e on re"ord in holdin3 that IITC did nota"t as a "ond#it of Capital One and 7lanters1an5 in the ' 4a$ %220sale of COEC T-1ills.

C. The Co#rt of Appeals erred and a"ted "ontrar$ to la! and the

eiden"e on re"ord in r#lin3 that 7lanters1an5 did not hae an$o1li3ation to delier$ the COEC T-6ills to IITC #nder IITCs alternatie"a#se of a"tion.

D. The Co#rt of Appeals erred and a"ted "ontrar$ to la! in holdin3that Capital One "o#ld alidl$ set oM its "lai*s for the #ndelieredCOEC T-6ills a3ainst the f#ll$ paid IITC T-6ills.

E. The Co#rt of Appeals f#rther erred and a"ted "ontrar$ to la! inholdin3 that Capital One and 7lanters1an5 !ere not 3#ilt$ of fra#d.

;. The Co#rt of Appeals iolated IITCs ri3ht to d#e pro"ess inaLr*in3, !itho#t "itin3 an$ 1asis !hatsoeer, the erroneo#s

holdin3 of the trial "o#rt that there !as ins#L"ient eiden"e toproe the a"t#al and "onse#ential da*a3es s#stained 1$ IITC.'(

COEC p#ts forth the follo!in3 iss#es:

Khether the Co#rt of Appeals "orre"tl$ held that IITC did not a"t as a"ond#it of Capital One and 7lanters1an5 in the 4a$ ', %220 sale ofthe COEC T-6ills 1$ IITC to Capital One.

Khether the Co#rt of Appeals "orre"tl$ held that Capital One *a$alidl$ set oM its "lai* for the #ndeliered COEC T-6ills a3ainst the1alan"e of the IITC T-6ills.

Khether the Co#rt of Appeals "orre"tl$ aLr*ed the holdin3 of thetrial "o#rt that Capital One and 7lanters1an5 are not 3#ilt$ of fra#d.

Khether the 7etition raises #estions of fa"t, and !hether it is

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Khether the 7etition raises #estions of fa"t, and !hether it isdefe"tie.

Khether Capital One is entitled to the "orre"tion of the*athe*ati"al error in the "o*p#tation of the *one$ @#d3*ent in itsfaor.'%

;or its part, 7D6 identies the prin"ipal iss#e to 1e !hether it !aso1li3ed to delier to petitioner Ins#lar the treas#r$ 1ills !hi"h the

latter sold, as prin"ipal, to Capital One, andBor pa$ the al#ethereof.'' The follo!in3 are stated as "orollar$ iss#es:

Khether petitioner Ins#lar !as a"tin3 as fa"ilitator or "ond#it inthe 4a$ ', %220 sales of the treas#r$ 1illsF

Khether petitioner Ins#lar *a$ raise in this petition the iss#e of it1ein3 *erel$ as fa"ilitator or "ond#it after the Trial Co#rt andCo#rt of Appeals fo#nd that petitioner Ins#lar !as not a fa"ilitatoror "ond#it.

Khether respondents 7lanters1an5 and Capital One !ere 3#ilt$ offra#d in their transa"tions !ith petitioner Ins#lar.

Khether petitioner Ins#lar !as entitled to a"t#al and "onse#entialda*a3es.')

The n#*ero#s iss#es "an 1e si*plied as follo!s:

=%? Khether IITC a"ted as a "ond#it in the transa"tion 1et!eenCOEC and 7D6F

='? Khether COEC "an set-oM its o1li3ation to IITC as a3ainst thelatters o1li3ation to itF and

=)? Khether 7D6 has the o1li3ation to delier treas#r$ 1ills to IITC.

T<E CO9RTS R9ING

The petition is partl$ *eritorio#s.

#estion of fa"tF

IITC did not a"t as "ond#it

7etitioner IITC insists that the iss#e of !hether it a"ted as a "ond#itis a #estion of la! !hi"h "an properl$ 1e the s#1@e"t of a petitionfor reie! 1efore this Co#rt. 6e"a#se the parties alread$ enteredinto a stip#lation of fa"ts and do"#*ents, the fa"ts are no lon3er at

iss#eF rather, the "o#rt *#st no! deter*ine the appli"a1le la!1ased on the ad*itted fa"ts, there1$ *a5in3 it a #estion of la!.Een ass#*in3 that the deter*ination of IITCs role in the t!otransa"tions is a p#re #estion of fa"t, it falls #nder the e"eptions!hen the Co#rt *a$ de"ide to reie! a #estion of fa"t.'0

Respondent COEC, on the other hand, ar3#es that IITC raises#estions of fa"t. An iss#e is one of fa"t !hen: =a? there is a do#1t ordiMeren"e as to the tr#th or falsehood of the alle3ed fa"ts, =1? theiss#es raised inite a "ali1ration, assess*ent, re-ea*ination andre-eal#ation of the eiden"e presented, ="? it #estions thepro1atie al#e of eiden"e presented or the proofs presented 1$one part$ are "lear, "onin"in3 and ade#ate. 6e"a#se the #estion

of !hether IITC !as *erel$ a "ond#it satises all the "onditionsen#*erated, then it is a #estion of fa"t !hi"h this Co#rt "annotpass #pon. In addition, COEC "alls attention to the prin"iple thatndin3s of fa"t of the trial "o#rt, espe"iall$ !hen approed 1$ theCo#rt of Appeals, are 1indin3 and "on"l#sie on the S#pre*eCo#rt.'

7D6 also *aintains that the ndin3 of the RTC that IITC did not a"tas a "ond#it 1et!een 7D6 and COEC !as s#pported 1$ s#1stantialeiden"e and !as s#stained 1$ the CA. Th#s, it is alread$ 1indin3and "on"l#sie #pon this Co#rt, !hose @#risdi"tion is li*ited toreie!in3 onl$ errors of la! and not of fa"t.'&

Respondents are "orre"t.

The iss#e raised 1$ IITC is fa"t#al in nat#re as it re#ires the Co#rtto dele into the re"ords and reie! the eiden"e presented 1$ the

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This ar3#*ent is far-fet"hed and 1orders on the in"redi1le. At the itself #sin3 its o!n do"#*ents. Therefore, it dees i*a3ination ho!

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3o#tset, it sho#ld 1e pointed o#t that there is no a*1i3#it$!hatsoeer in the lan3#a3e of the do"#*ents #sed. The"onr*ations of sale and p#r"hase #ne#io"all$ state that IITCa"ted as a prin"ipal 1#$er and seller of treas#r$ 1ills. The lan3#a3e#sed is as "lear as da$ and "annot 1e *ore epli"it. Th#s, 1e"a#sethe !ords of the do"#*ents in #estion are "lear and readil$#nderstanda1le 1$ an$ ordinar$ reader, there is no need for theinterpretation or "onstr#"tion thereof.)0 This !as e*phasied in the"ase of 7i"hel . Alono:)

Q. To 1e3in !ith, Ke a3ree !ith petitioner that "onstr#"tion orinterpretation of the do"#*ent in #estion is not "alled for. A per#salof the deed fails to dis"lose an$ a*1i3#it$ or o1s"#rit$ in itsproisions, nor is there do#1t as to the real intention of the"ontra"tin3 parties. The ter*s of the a3ree*ent are "lear and#ne#io"al, hen"e the literal and plain *eanin3 thereof sho#ld 1eo1sered. S#"h is the *andate of the Ciil Code of the 7hilippines!hi"h proides that:

Art. %)/(. If the ter*s of a "ontra"t are "lear and leae no do#1t#pon the intention of the "ontra"tin3 parties, the literal *eanin3 of

its stip#lation shall "ontrol`

7#rs#ant to the afore#oted le3al proision, the rst andf#nda*ental d#t$ of the "o#rts is the appli"ation of the "ontra"ta""ordin3 to its epress ter*s, interpretation 1ein3 resorted to onl$!hen s#"h literal appli"ation is i*possi1le.)& =E*phases s#pplied?

COEC and 7D6 did not ta5e adanta3e of an$ a3#eness in thedo"#*ents in #estion. The$ onl$ see5 to enfor"e the intention ofthe parties, in a""ordan"e !ith the ter*s of the "onr*ations ofsale and p#r"hase ol#ntaril$ entered into 1$ the parties.

The Co#rt also nds it hard to 1eliee that an entit$ !o#ld "arelessl$

and i*pr#dentl$ epose itself to lia1ilit$ in the a*o#nt of *illions ofpesos 1$ failin3 to ens#re that the do"#*ents #sed in thetransa"tion !o#ld 1e a faithf#l a""o#nt of its tr#e nat#re. It isi*portant to note that the "onr*ations of sale !ere iss#ed 1$ IITC

3 , 3COEC and 7D6 "o#ld hae foisted oM these for*s on IITC a3ainst its!ill.

In addition, a "o*parison of the "onr*ations of sale iss#ed 1$ IITCin faor of COEC as a3ainst the "onr*ations of sale iss#ed 1$ 7D6in faor of IITC indi"ates that there is a diMeren"e in the interestrates of the treas#r$ 1ills and in the fa"e al#es:

7D6 Conr*ations of Sale to IITC)/

4at#rit$ Date Yield ;a"e al#e Total 7ri"e J#l$ %), %220 %/.%( 700,%/(,(((.(( 70',22>,%&2.(( J#l$ &, %220 %/.%( %0',&'(,(((.(( %)2,%2),%((.& 7%>&,/2(,(((.(( 7%>',%2%,'&2.&IITC Conr*ations of Sale to COEC)>

4at#rit$ Date Yield ;a"e al#e Total 7ri"e J#l$ %), %220 %/.( 7 00,%&%,/((.00 7 0),(((,(((.(( J#l$ &, %220 %/.( %0',&%),()2.( %)2,'%,)>./( 7%>&,//0,/)2.02 7%>','%,)>./(IITC oMered a lo!er interest rate of %/ to COEC, in "ontrast to the

%/.% interest rate 3ien to it 1$ 7D6. There is also a nota1lediMeren"e in the fa"e al#e of the treas#r$ 1ills and in the total pri"epaid for ea"h set. If, as IITC insists, it onl$ a"ted as a "ond#it to thesale 1et!een 7D6 and COEC, then there sho#ld 1e no disparit$ inthe ter*s =the interest rate, the fa"e al#e and the total pri"e? ofthe sale of the treas#r$ 1ills. O1io#sl$, this is not the "ase. The3#res lead to no other "on"l#sion 1#t that there !ere t!o separatetransa"tions in 1oth of !hi"h IITC pla$ed a prin"ipal role H as a 1#$erfro* 7D6 of treas#r$ 1ills !ith an a33re3ate fa"e al#e of7%>&,/2(,(((.(( at an interest rate of %/.% and as a seller toCOEC of treas#r$ 1ills !ith an a33re3ate fa"e al#e of7%>&,//0,/)2.02 at an interest rate of %/.

A3ain, IITC atte*pts to hold 7D6 and COEC responsi1le for this#estiona1le ariation, alle3in3 that it !as 7D6 and COEC !hi"hdi"tated the details of the p#r"hase and sale of the treas#r$ 1ills.IITC heail$ relies on the fa"t that COEC dire"tl$ paid 7D6 the

a*o#nt of 7%>',%2%,'&2.'& representin3 the a*o#nt "oered in the elephant in the liin3 roo*.0% To IITC, it is apparent that the

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p 3"onr*ations of sale iss#ed 1$ 7D6 to stren3then its position that it*erel$ a"ted as a "ond#it 1et!een 7D6 and COEC.)2 This !asf#rther s#pported 1$ the internal tradin3 sheets of IITC !here thefollo!in3 hand!ritten notations !ere *ade: =%? in 7#r"hase Tradin3Sheet No. %(>& "oerin3 the p#r"hase of treas#r$ 1ills 1$ IITC fro*7D6: dont prepare an$ "he"5F pa$*ent !ill "o*e fro* Capital One=See STS %(>%%?, and ='? in Sale Tradin3 Sheet No. %(>%% "oerin3the sale of treas#r$ 1ills 1$ IITC to COEC: for STS %(>%( and %(>%%!ill re"eie ' "he"5s pa$a1le to the M: %. 7lanters Det 6an5 -7%>',%2%,'&2.2 '. IITC - '0,%%&.%%

The Co#rt is not "onin"ed. That COEC dire"tl$ paid 7D6 is of no*o*ent and does not ne"essaril$ *ean that COEC re"o3nied IITCs"ond#it role in the transa"tion. Neither does it disproe the ndin3sof 1oth the RTC and the CA that IITC a"ted as prin"ipal in the t!otransa"tions H the p#r"hase of treas#r$ 1ills fro* 7D6 and thes#1se#ent sale thereof to COEC. The Co#rt a3rees !ith theeplanation of the RTC:

The Co#rt is a!are that in the tradin3 1#siness, a3ree*ents are"on"l#ded een 1efore the 3oods 1ein3 traded are re"eied 1$ the

!o#ld 1e seller. 6#$ers in t#rn "on"l#de their transa"tions een1efore the$ are paid. ;or this reason, the *ere fa"t that in do"#*entfor internal #se, the instr#"tion that pa$*ent !ill "o*e fro* CapitalOne !ill not, 1$ itself, proe that plaintiM !as a *ere "ond#it.Neither "o#ld it 1e "onsidered as "ir"#*stantial to esta1lish the fa"tin iss#e. At *ost, the instr#"tions *erel$ identied the so#r"e off#nds 1#t !hether those f#nds are to 1e re"eied 1$ the plaintiM asp#r"hase pri"e or for re*ittan"e to !hoeer is entitled to it, none!as indi"ated. The Co#rt *a$ loo5 at the instr#"tion diMerentl$ if theentries !ere H no pa$*ent re#iredF COEC to pa$ 7D6 dire"tl$ orthis is a "ond#it transa"tionF seri"in3 to 1e done 1$ COEC orCOEC to pa$ 7D6 dire"tl$.0(

IITC also insists that the fa"t that the 7'0,%%&.%% !hi"h it "lai*s to1e a fa"ilitation fee is ea"tl$ the diMeren"e 1et!een the prin"ipala*o#nts of the treas#r$ 1ills p#r"hased fro* 7D6 and the treas#r$1ills sold to COEC "onstit#tes the s*o5in3 3#n or the erita1le

p 3 ppa*o#nt is a fa"ilitation fee, addin3 "reden"e to its "ontention that itonl$ a"ted as a "ond#it.

The Co#rt "annot s#stain that ie!. There is nothin3 to proe thatthe a*o#nt of 7'0,%%&.%% re"eied 1$ IITC fro* COEC !as afa"ilitation fee. As eplained 1$ COEC, the a*o#nt "o#ld easil$ hae1een the *ar3in or spread earned 1$ IITC in the 1#$-and-selltransa"tion.0' This is, ho!eer, not for the Co#rt to deter*ine. Ass#"h, the Co#rt relies on the ndin3s of the RTC on this *atter:

7laintiMs other eiden"e to proe its "ond#it role !as the delier$ toit 1$ COEC 1$ !a$ of its "orporate "he"5 of 7'0,%%&.%% in pa$*entof plaintiMs "ond#it fee. The Co#rt is hesitant to 3ie pro1atieal#e to this proof 1e"a#se no!here does it appear in the tradin3sheets or an$ other do"#*ent that it !as "olle"ted 1$ plaintiM andre"eied 1$ it fro* COEC in that "on"ept. 6#siness pra"ti"e is toiss#e an oL"ial re"eipt 1e"a#se it is an in"o*e, 1#t none !aspresented. The testi*onial eiden"e !as ref#ted. COEC presented"ontroertin3 eiden"e on the ori3inal *ode of pa$*ent !hi"h !asre#ested to 1e "han3ed 1$ !itness 6o*1aes. COEC presented the#nsi3ned "he"5 and o#"her. The latter !as d#l$ a""o*plished and

1ears the si3nat#res or initials of the approin3 oL"ers. On thisparti"#lar iss#e, COECs eiden"e deseres *ore !ei3ht.0)

;inall$, as "orre"tl$ o1sered 1$ the RTC, the a"tions of IITC after thetransa"tion !ere not those of a "ond#it 1#t of a prin"ipal:

The Co#rt notes !ith parti"#lar interest the eents !hi"h transpiredon 4a$ 0, %220, t!o ='? da$s after plaintiM thro#3h !itness 4endoalearned of the non-delier$ 1$ 7D6 of the treas#r$ 1ills. Kitness4endoa !ent to the oL"e of 7D6 and se"#red the letter, Ehi1it E,!hi"h "ontains the #nderta5in3 of 7D6 to delier the treas#r$ 1ills. This !as pro"#red 1$ plaintiM and addressed to the plaintiM. Thelan3#a3e #sed 1$ 7D6 !as p#r"hase+d fro* #s and plaintiM

a""epted it.

7laintiM failed to eplain the reason for de*andin3 delier$ of thetreas#r$ 1ills !hen it !as not the 1#$er as it so "lai*s. It also failed

to o1@e"t to the #se 1$ 7D6 of the !ords p#r"hase+d fro* #s, The appli"a1le proisions of la! are Arti"les %'/>, %'/2 and %'2( of

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so*ethin3 !hi"h it "o#ld easil$ do or sho#ld do "onsiderin3 thea*o#nt inoled.

The "ond#"t of the plaintiM after "on"l#din3 the 4a$ ', %220transa"tion +!as +that of a 1#$er.00

;ro* the fore3oin3, it is "lear that IITC a"ted as prin"ipal p#r"haserfro* 7D6 and prin"ipal seller to COEC, and not si*pl$ as a "ond#it1et!een 7D6 and COEC.

Set-oM allo!ed

IITC ar3#es that the RTC and the CA erred in holdin3 that COEC "analidl$ set oM its "lai*s for the #ndeliered IITC T-6ills a3ainst theCOEC T-6ills.0 IITC reiterates that COEC did not 1e"o*e a "reditorof IITC 1e"a#se the for*er did not pa$ the latter for the p#r"hasedtreas#r$ 1ills. Rather, it !as 7D6 !hi"h re"eied the pro"eeds of thepa$*ent fro* COEC.0& In addition, their o1li3ations do not "onsistof a s#* or *one$. Neither are the$ of the sa*e 5ind 1e"a#se theo1li3ations "all for the delier$ of spe"i" deter*inate thin3s Htreas#r$ 1ills !ith spe"i" *at#rit$ dates and ario#s interest rates.

Th#s, le3al "o*pensation "annot ta5e pla"e.0/

COEC, on the other hand, points o#t that it has alread$#n#estiona1l$ proen that IITC a"ted as a prin"ipal, and not as a"ond#it, in the sale of treas#r$ 1ills to COEC.0> ;#rther*ore, itasserts that the treas#r$ 1ills in #estion are 3eneri" in nat#re1e"a#se the "onr*ations of sale and p#r"hase do not *entionspe"i" treas#r$ 1ills !ith serial n#*1ers.02 The se"#rities !eresold as indeter*inate o1@e"ts !hi"h hae a *onetar$ e#ialent, asa"5no!led3ed 1$ the parties in the Tripartite A3ree*ent.( As s#"h,1e"a#se 1oth IITC and COEC are prin"ipal "reditors of the other oerde1ts !hi"h "onsist of "ons#*a1le thin3s or a s#* of *one$, theRTC "orre"tl$ r#led that COEC *a$ alidl$ set-oM its "lai*s for

#ndeliered treas#r$ 1ills a3ainst that of IITCs "lai*s.%

The Co#rt nds in faor of respondent COEC.

the Ciil Code of the 7hilippines:

Art. %'/>. Co*pensation shall ta5e pla"e !hen t!o persons, in theiro!n ri3ht, are "reditors and de1tors of ea"h other.

Art. %'/2. In order that "o*pensation *a$ 1e proper, it isne"essar$:


='? That 1oth de1ts "onsist in a s#* of *one$, or if the thin3s d#eare "ons#*a1le, the$ 1e of the sa*e 5ind, and also of the sa*e#alit$ if the latter has 1een statedF



=? That oer neither of the* there 1e an$ retention or "ontroers$,"o**en"ed 1$ third persons and "o**#ni"ated in d#e ti*e to the

de1tor.

Art. %'2(. Khen all the re#isites *entioned in Arti"le %'/2 arepresent, "o*pensation ta5es eMe"t 1$ operation of la!, andetin3#ishes 1oth de1ts to the "on"#rrent a*o#nt, een tho#3h the"reditors and de1tors are not a!are of the "o*pensation.

6ased on the fore3oin3, in order for "o*pensation to 1e alid, thee re#isites *entioned in the a1oe#oted Arti"le %'/2 sho#ld 1epresent, as in the "ase at 1en"h. The lo!er "o#rts hae alread$deter*ined, to !hi"h this Co#rt "on"#rs, that IITC a"ted as a

prin"ipal in the p#r"hase of treas#r$ 1ills fro* 7D6 and in thes#1se#ent sale to COEC of the COEC T-6ills. Th#s, COEC and IITCare prin"ipal "reditors of ea"h other in relation to the sale of theCOEC T-6ills and IITC T-6ills, respe"tiel$.

<ain3 esta1lished that "o*pensation or set-oM is allo!ed 1et!een

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IITC also "lai*s that the COEC T-6ills "annot 1e set-oM a3ainst theIITC T-6ills 1e"a#se the latter are spe"i" deter*inate thin3s !hi"h"onsist of treas#r$ 1ills !ith spe"i" *at#rit$ dates and ario#sinterest rates.' IITCs a"tions 1elie its o!n assertion. The fa"t thatIITC a""epted the assi3n*ent 1$ COEC of Central 6an5 6ills !ith ana33re3ate fa"e al#e of 7'(,(((,(((.(( as pa$*ent of part of theIITC T-6ills is eiden"e of IITCs !illin3ness to a""ept other for*s ofse"#rit$ as satisfa"tion of COECs o1li3ation. It sho#ld 1e noted thatthe se"ond re#isite onl$ re#ires that the thin3 1e of the sa*e 5indand #alit$. The COEC T-6ills and the IITC T-6ills are 1oth3oern*ent se"#rities !hi"h, !hile hain3 diMerin3 interest ratesand dates of *at#rit$, hae ea"h 1een assi3ned a "ertain fa"e al#eto deter*ine their *onetar$ e#ialent. In fa"t, in the TripartiteA3ree*ent, the COEC-IITC A3ree*ent and in the *e*oranda of theparties, the parties re"o3nied the *onetar$ al#e of the treas#r$1ills in #estion, and, in so*e instan"es, treated the* as s#*s of*one$.) Th#s, the$ are of the sa*e 5ind and are "apa1le of 1ein3s#1@e"t to "o*pensation.

The third, fo#rth and fth re#ire*ents are "learl$ present and arenot denied 1$ the parties. 6oth de1ts are d#e and de*anda1le

1e"a#se 1oth re*ain #nsatised, despite pa$*ent *ade 1$ IITC forthe IITC T-6ills and 1$ COEC for the COEC T-6ills. 4oreoer, COECreadil$ ad*its that it has an o#tstandin3 1alan"e in faor of IITC.0Conersel$, IITC has 1een fo#nd 1$ the lo!er "o#rts to 1e lia1le, asprin"ipal seller, for the delier$ of the COEC T-6ills. The de1ts arealso li#idated 1e"a#se their eisten"e and a*o#nt aredeter*ined.& ;inall$, there eists no retention or "ontroers$ oerthe COEC T-6ills and the IITC T-6ills.

6e"a#se all the stip#lations #nder Arti"le %'/2 are present in this"ase, "o*pensation "an ta5e pla"e. COEC is allo!ed to set-oM itso1li3ation to delier the IITC T-6ills a3ainst IITCs o1li3ation todelier the COEC T-6ills.

Corre"tion of the a*o#nt d#e

COEC and IITC, the Co#rt !ill no! dele into the proper a*o#nt ofthe a!ard and the appli"a1le interest rates.

The RTC, in its J#d3*ent, ordered IITC to pa$ COEC the a*o#nt of7%/,(&,&(> !ith interest at the rate of & per ann#* #ntil f#llpa$*ent. In arriin3 at the said a*o#nt, the trial "o#rt #sed, as its1asis, COECs "lai* a3ainst IITC for 7%>&,/2(,((( !orth of treas#r$1ills less 7(,(((,((( !hi"h it re"eied #nder the TripartiteA3ree*ent. Then it ded#"ted fro* this the 7%)2,&)),)2'.(( fa"eal#e of the #ndeliered treas#r$ 1ills 1$ COEC to IITC less the7'(,(((,((( !hi"h COEC assi3ned to IITC p#rs#ant to the COEC-IITCA3ree*ent./

As "orre"tl$ pointed o#t 1$ COEC, there !as a *ista5e in thearith*eti" s#1tra"tion *ade 1$ the RTC. 9sin3 the 3#res proided1$ the lo!er "o#rt, the "orre"t res#lt sho#ld hae 1een7%/,%&,&(>.((, 7%((,(((.(( *ore than !hat !as ad@#d3ed in faorof COEC. To ill#strate:

The trial "o#rts "o*p#tationCOECs "o#nter"lai* a3ainst IITC 7%>&,/2(,(((.((

A*o#nt assi3ned 1$ IITC to COEC =(,(((,(((.((?S#1total 7%)&,/2(,(((.((IITCs "lai* a3ainst COEC 7%)2,&)),)2'.((A*o#nt reassi3ned 1$ COEC to IITC='(,(((,(((.((?S#1total 7%%2,&)),)2'.(( TOTA 7%/,%&,&(>.((Aside fro* the error in the RTCs *athe*ati"al "o*p#tation, areie! of the re"ords, parti"#larl$ the 4ar"h '(, %22 A*endedCo*plaint led 1$ IITC, the April %(, %22 Ans!er to A*endedCo*plaint =Kith Co#nter"lai*? led 1$ COEC and the Septe*1er ',%222 7artial Stip#lation of ;a"ts and Do"#*ents s#1*itted 1$ IITC,COEC and 7D6 to the trial "o#rt, reeals that there !as so*e"onf#sion as to the "orre"t 1asis to 1e #sed for "al"#latin3 the

a*o#nt d#e to COEC. In COECs Ans!er and in the 7artialStip#lation, it epli"itl$ stated that it p#r"hased fro* IITC treas#r$1ills !ith a fa"e al#e of 7%>&,//0,/)2.02, as eiden"ed 1$ theConr*ations of Sale iss#ed 1$ IITC. If this 3#re is #sed in

"o*p#tin3 COECs a!ard, the res#ltin3 a*o#nt !o#ld 1e

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7%/,%0%,)0/.02, !hi"h is "onsistent !ith COECs "o#nter"lai*.

The reised "o*p#tationCOECs "o#nter"lai* a3ainst IITC 7%>&,//0,/)2.02A*o#nt assi3ned 1$ IITC to COEC =(,(((,(((.((?S#1total 7%)&,//0,/)2.02IITCs "lai* a3ainst COEC 7%)2,&)),)2'.((A*o#nt reassi3ned 1$ COEC to IITC='(,(((,(((.((?S#1total 7%%2,&)),)2'.(( TOTA 7%/,%0%,)0/.02astl$, as re3ards the le3al interest !hi"h sho#ld 1e i*posed on thea!ard, the Co#rt dire"ts the attention of the parties to the "ase ofEastern Shippin3 ines . Co#rt of Appeals,>

%. Khen the o1li3ation is 1rea"hed, and it "onsists in the pa$*ent of a s#* of *one$, i.e., a loan or for1earan"e of *one$, the interestd#e sho#ld 1e that !hi"h *a$ hae 1een stip#lated in !ritin3.;#rther*ore, the interest d#e shall itself earn le3al interest fro* theti*e it is @#di"iall$ de*anded. In the a1sen"e of stip#lation, the rateof interest shall 1e %' per ann#* to 1e "o*p#ted fro* defa#lt,i.e., fro* @#di"ial or etra@#di"ial de*and #nder and s#1@e"t to the

proisions of Arti"le %%&2 of the Ciil Code.

'. Khen an o1li3ation, not "onstit#tin3 a loan or for1earan"e of*one$, is 1rea"hed, an interest on the a*o#nt of da*a3es a!arded*a$ 1e i*posed at the dis"retion of the "o#rt at the rate of & perann#*. No interest, ho!eer, shall 1e ad@#d3ed on #nli#idated"lai*s or da*a3es e"ept !hen or #ntil the de*and "an 1eesta1lished !ith reasona1le "ertaint$. A""ordin3l$, !here thede*and is esta1lished !ith reasona1le "ertaint$, the interest shall1e3in to r#n fro* the ti*e the "lai* is *ade @#di"iall$ oretra@#di"iall$ =Art. %%&2, Ciil Code? 1#t !hen s#"h "ertaint$ "annot1e so reasona1l$ esta1lished at the ti*e the de*and is *ade, theinterest shall 1e3in to r#n onl$ fro* the date the @#d3*ent of the

"o#rt is *ade =at !hi"h ti*e the #anti"ation of da*a3es *a$ 1edee*ed to hae 1een reasona1l$ as"ertained?. The a"t#al 1ase forthe "o*p#tation of le3al interest shall, in an$ "ase, 1e on thea*o#nt nall$ ad@#d3ed.

). Khen the @#d3*ent of the "o#rt a!ardin3 a s#* of *one$1e"o*es nal and ee"#tor$, the rate of le3al interest, !hether the"ase falls #nder para3raph % or para3raph ', a1oe, shall 1e %'per ann#* fro* s#"h nalit$ #ntil its satisfa"tion, this interi* period1ein3 dee*ed to 1e 1$ then an e#ialent to a for1earan"e of"redit.2 =E*phases s#pplied?

6e"a#se the o1li3ation arose fro* a "ontra"t of sale and p#r"hase of 3oern*ent se"#rities, and not fro* a loan or for1earan"e of*one$, the appli"a1le interest rate is & fro* J#ne %(, %220, !henIITC re"eied the de*and letter fro* COEC.&( After the @#d3*ent1e"o*es nal and ee"#tor$, the le3al interest rate in"reases to%' #ntil the o1li3ation is satised.

In s#*, the Co#rt nds that after "o*pensation is eMe"ted, IITC stillo!es COEC 7%/,%0%,)0/.02 !orth of treas#r$ 1ills, s#1@e"t to theinterest rate of & per ann#* fro* J#ne %(, %220, thens#1se#entl$ to the in"reased interest rate of %' fro* the date ofnalit$ of this de"ision #ntil f#ll pa$*ent.

7D6 has an o1li3ation to delier

the treas#r$ 1ills to IITC

The CA, in a1solin3 7D6 fro* all lia1ilit$, reasoned that: =%? 7D6!as not inoled in the transa"tions for the p#r"hase and sale oftreas#r$ 1ills 1et!een IITC and COECF ='? IITC failed to alle3e in itsA*ended Co*plaint and proe d#rin3 the trial that 7D6 dire"tl$ andprin"ipall$ sold to IITC 7%>&,/2(,((( !orth of treas#r$ 1illsF =)? !hile7D6 #ndertoo5, in its 4a$ 0, %220 letter to delier to IITC the saidtreas#r$ 1ills, the o1li3ation did not ripen 1e"a#se the 1ills did not1e"o*e aaila1le to 7D6 and IITC did not re*it an$ pa$*ent to 7D6F=0? IITC did not de*and delier$ of the treas#r$ 1illsF =? IITC *erel$s#ed 7D6 as an alternatie defendant, i*pl$in3 that IITC did nothae a prin"ipal and dire"t "a#se of a"tion a3ainst 7D6 on the

treas#r$ 1illsF and =&? there !as nothin3 in the re"ords to s#pportthe trial "o#rts ndin3 that 7D6 o!ed IITC 7%>&,/2(,((( !orth oftreas#r$ 1ills.&%

7D6 essentiall$ e"hoes the reasons set forth 1$ the CA andi d h 1 IITC did f h 1ill 1@

7D6 for the se"#rities p#r"hased 1$ IITC, #nder that theor$ that IITCd i i l 1 h ld 1 1li i h

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reiterated that 1e"a#se IITC did not pa$ for the treas#r$ 1ills s#1@e"tof its =7D6? 4a$ 0 #nderta5in3, then IITC had no ri3ht to de*anddelier$ of the said se"#rities fro* 7D6. 4oreoer, the "he"5pa$*ents *ade 1$ COEC to 7D6 !ere not in pa$*ent of thetreas#r$ 1ills p#r"hased 1$ IITC fro* 7D6, 1#t for COECs othero1li3ations !ith 7D6. The total a*o#nt of the "he"5s7%>',%2%,'&2.'& did not "orrespond to the treas#r$ 1ills !orth7%>&,/2(,((( !hi"h COEC alle3edl$ p#r"hased fro* 7D6 !ith IITCa"tin3 as "ond#it. 7D6 also points o#t that COEC did not interpose a"ross-"lai* a3ainst it pre"isel$ 1e"a#se COEC !as a!are that it hadno "lai* a3ainst 7D6.&' Also, the "he"5s "learl$ indi"ated that the$!ere *ade in pa$*ent for the a""o#nt of COEC.&)

IITC insists that it alle3ed in its A*ended Co*plaint =1$ !a$ ofalternatie "a#se of a"tion? that 7D6 dire"tl$ and prin"ipall$ sold toIITC treas#r$ 1ills !orth 7%>&,/2(,(((.((. 6$ s#in3 7D6 as analternatie defendant, IITC did not a"5no!led3e that 7D6 "o#ld not1e held prin"ipall$ lia1le. On the "ontrar$, 1$ 1rin3in3 s#it a3ainst7D6 #nder an alternatie "a#se of a"tion, IITC set forth a "lai*a3ainst 7D6 as the prin"ipal seller of the treas#r$ 1ills. In addition,IITC "ate3ori"all$ ref#ted 7D6s alle3ation that the for*er did not

pa$ for the treas#r$ 1ills p#r"hased fro* the latter. The @#di"ialad*issions of 7D6 d#rin3 the "o#rse of the trial and in the 7artialStip#lation, that 7D6 re"eied the pro"eeds of the *ana3ers "he"5siss#ed 1$ COEC as pa$*ent for COECs p#r"hase of treas#r$ 1illsfro* IITC, "ontradi"t 7D6s defense that no pa$*ent !as *ade 1$IITC for the said treas#r$ 1ills. 7a$*ent 1$ COEC to 7D6, #pon IITCsinstr#"tions, sho#ld 1e treated as a pa$*ent 1$ a third person !iththe 5no!led3e of the de1tor, #nder Arti"le %')& of the Ciil Code. Th#s, !hen 7D6 a""epted COECs "he"5s, it 1e"a*e d#t$ 1o#nd todelier the treas#r$ 1ills sold to IITC as the prin"ipal 1#$er.&0

astl$, IITC points o#t the a1s#rdit$ of the CA de"ision in allo!in3COEC to oMset its lia1ilit$ to IITC a3ainst its lia1ilit$ to delier the

treas#r$ 1ills p#r"hased 1$ COEC. The parties do not den$ thatCOEC paid for the p#r"hase pri"e of the s#1@e"t treas#r$ 1ills 1$iss#in3 *ana3ers "he"5s in the na*e of 7D6 and IITC. As s#"h,#nless COECs pa$*ent to 7D6 is "redited as pa$*ent 1$ IITC to

a"ted as a prin"ipal 1#$er, there !o#ld 1e no o1li3ation on the partof IITC a3ainst !hi"h a set-oM "an 1e eMe"ted 1$ COEC.&

On this point, the Co#rt a3rees !ith IITC.

;irst, !hile it is tr#e that 7D6 !as not inoled in the sale of theCOEC T-6ills, it is irreleant to the iss#e 1e"a#se it is I ITC !hi"hinterposed a "lai*, al1eit an alternatie one, a3ainst 7D6 for hain3sold to IITC treas#r$ 1ills !orth 7%>&,/2(,(((.((. This !as alle3ed inIITCs A*ended Co*plaint and !as dee*ed 1$ the RTC to hae1een s#""essf#ll$ proen.&& The ndin3s of the RTC are s#pported1$ the "onr*ations of sale iss#ed 1$ 7D6 in faor of IITC and 7D6sletter dated 4a$ 0, %220 #nderta5in3 to delier the treas#r$ 1ills!orth 7%>&,/2(,(((.(( to IITC.&/ The d#e ee"#tion and theera"it$ of the "ontents of the aforesaid do"#*ents hae 1eenad*itted 1$ the parties.&>

Se"ond, it is erroneo#s to sa$ that IITC neer *ade an$ de*and#pon 7D6. IITCs letter dated 4a$ %>, %220 addressed to 7D6"onr*s that it de*anded delier$ 1$ 7D6 of the treas#r$ 1ills"oered 1$ the "onr*ations of sale iss#ed 1$ 7D6 in its faor.

Altho#3h the de*and !as *ade on 1ehalf of COEC, !hi"h alle3edl$p#r"hased the treas#r$ 1ills fro* 7D6, "onsistent !ith IITCsassertion that it onl$ fa"ilitated the sale, it !as neertheless ade*and for delier$. Een if this !ere to 1e "onsidered an inalidde*and 1e"a#se it !as not *ade 1$ IITC as the prin"ipal part$ tothe transa"tion !ith 7D6, the lin3 of the A*ended Co*plaint 1$IITC is e#ialent to de*and, in 5eepin3 !ith the r#le that the lin3of a "o*plaint "onstit#tes @#di"ial de*and.&2

Third, the CA r#lin3 that IITC i*pliedl$ did not hae a prin"ipal "a#seof a"tion 1e"a#se it *erel$ s#ed 7D6 as an alternatie defendant isan etre*el$ Va!ed and 1aseless s#pposition !hi"h r#ns "o#nter toesta1lished la! and @#rispr#den"e. The lin3 of a s#it a3ainst an

alternatie defendant and #nder an alternatie "a#se of a"tionsho#ld not 1e ta5en a3ainst IITC. Se"tion %), R#le ) and Se"tion ',R#le > of the R#les of Ciil 7ro"ed#re epli"itl$ allo!s s#"h lin3:

R#le %), Se"tion %): Alternatie defendants. W Khere the plaintiM ist i i t h f l h i titl d t li f h

the Co#rt ela1orated on this esta1lished standard in the follo!in3

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#n"ertain a3ainst !ho of seeral persons he is entitled to relief, he*a$ @oin an$ or all of the* as defendants in the alternatie,altho#3h a ri3ht to relief a3ainst one *a$ 1e in"onsistent !ith ari3ht of relief a3ainst the other. =%)a?

R#le >, Se"tion ': Alternatie "a#ses of a"tion or defenses. H A part$*a$ set forth t!o or *ore state*ents of a "lai* or defensealternatiel$ or h$potheti"all$, either in one "a#se of a"tion ordefense or in separate "a#ses of a"tion or defenses. Khen t!o or*ore state*ents are *ade in the alternatie and one of the* if*ade independentl$ !o#ld 1e s#L"ient, the pleadin3 is not *adeins#L"ient 1$ the ins#L"ien"$ of one or *ore of the alternatiestate*ents.

As dis"#ssed earlier, the Co#rt is not 3rantin3 IITCs pri*ar$ "a#seof a"tion a3ainst COEC 1e"a#se IITC a"ted, not as a *ere "ond#it forthe sale of shares 1$ 7D6 to COEC as alle3ed 1$ IITC, 1#t rather as aprin"ipal p#r"haser of se"#rities fro* 7D6 and then later as aprin"ipal seller to COEC. 6$ reason of this deter*ination, COEC isallo!ed to oMset its o#tstandin3 o1li3ation to delier the re*ainin3IITC T-6ills a3ainst the latters o1li3ation to delier the COEC T-6ills.

Conse#entl$, IITCs alternatie a"tion a3ainst the alternatiedefendant 7D6 sho#ld 1e "onsidered in order for IITC to 1e a1le tore"oer fro* 7D6 the 7%>&,/2(,(((.(( !orth of treas#r$ 1ills !hi"hhad alread$ 1een f#ll$ paid for.

To as"ertain !hether IITC !as a1le to ade#atel$ state analternatie "a#se of a"tion a3ainst 7D6 in its A*ended Co*plaint,the Co#rt refers to 7erpet#al Sain3s 6an5 . ;a@ardo/( !here thetest for deter*inin3 the eisten"e of a "a#se of a"tion !asetensiel$ dis"#ssed:

The fa*iliar test for deter*inin3 !hether a "o*plaint did or did notstate a "a#se of a"tion a3ainst the defendants is !hether or not,

ad*ittin3 h$potheti"all$ the tr#th of the alle3ations of fa"t *ade inthe "o*plaint, a @#d3e *a$ alidl$ 3rant the relief de*anded in the"o*plaint. In Raa Deelop*ent Corporation . Co#rt of Appeals,

*anner:

The r#le is that a defendant *oin3 to dis*iss a "o*plaint on the3ro#nd of la"5 of "a#se of a"tion is re3arded as hain3h$potheti"all$ ad*itted all the aer*ents thereof. The test of thes#L"ien"$ of the fa"ts fo#nd in a petition as "onstit#tin3 a "a#se ofa"tion is !hether or not, ad*ittin3 the fa"ts alle3ed, the "o#rt "anrender a alid @#d3*ent #pon the sa*e in a""ordan"e !ith thepra$er thereof =Consolidated 6an5 and Tr#st Corp. . Co#rt ofAppeals, %2/ SCRA &&) +%22%?.%!phi%

In deter*inin3 the eisten"e of a "a#se of a"tion, onl$ thestate*ents in the "o*plaint *a$ properl$ 1e "onsidered. It is errorfor the "o#rt to ta5e "o3nian"e of eternal fa"ts or hold preli*inar$hearin3s to deter*ine their eisten"e. If the alle3ation in a"o*plaint f#rnish s#L"ient 1asis 1$ !hi"h the "o*plaint *a$ 1e*aintained, the sa*e sho#ld not 1e dis*issed re3ardless of thedefenses that *a$ 1e assessed 1$ the defendants =s#pra?.

A "aref#l reie! of the re"ords of this "ase reeals that thealle3ations set forth in the "o*plaint s#L"ientl$ esta1lish a "a#se of

a"tion. The follo!in3 are the re#isites for the eisten"e of a "a#seof a"tion: =%? a ri3ht in faor of the plaintiM 1$ !hateer *eans and#nder !hateer la! it arises or is "reatedF ='? an o1li3ation on thepart of the na*ed defendant to respe"t, or not to iolate s#"h ri3htFand =)? an a"t or o*ission on the part of the said defendants"onstit#tin3 a iolation of the plaintiMXs ri3ht or a 1rea"h of theo1li3ation of the defendant to the plaintiM =<eirs of IldefonsoCos"oll#ela, Sr., In". . Ri"o General Ins#ran"e Corporation, %/2SCRA %% +%2>2?./% =E*phases s#pplied?

;ollo!in3 the dis#isition a1oe, IITCs A*ended Co*plaint, !hilenot a *odel of s#per1 drafts*anship in its str#33le to *aintainIITCs "ond#it theor$, ade#atel$ sets forth a "a#se of a"tion a3ainst

7D6. 9nder its "lai* a3ainst 7D6 as alternatie defendant, IITCalle3ed that, een if it a"ted as a dire"t 1#$er fro* 7D6, =%? IITC isentitled to the delier$ of the treas#r$ 1ills !orth 7%>&,/2(,(((.(("oered 1$ the "onr*ations of sale iss#ed 1$ 7D6, ='? 7D6 has an

o1li3ation to delier the sa*e to IITC, and =)? 7D6 failed to delierth id iti t IITC /'

Sin"e it has 1een s#L"ientl$ esta1lished that it !as IITC !hi"hi t t d th t t 1 d t 7D6 it i t th t th id

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the said se"#rities to IITC./'

It !o#ld 1e the hei3ht of in@#sti"e to hold IITC a""o#nta1le for thedelier$ of the COEC T-6ills to COEC !itho#t si*ilarl$ holdin3 7D6lia1le for the release of the treas#r$ 1ills !orth 7%>&,/2(,(((.(( toIITC, !hi"h "annot 1e a""o*plished !itho#t allo!in3 IITCsalternatie "a#se of a"tion a3ainst 7D6 to prosper.

The Co#rt no! ta"5les the *ain ar3#*ent of 7D6 for s#stainin3 ther#lin3 of the CA a1solin3 it fro* lia1ilit$ H that IITC alle3edl$ failedto *a5e the re#ired pa$*ent for the p#r"hase. 7D6 "lai*s that the*ana3ers "he"5s !hi"h it re"eied fro* COEC !ere pa$*ent 1$the latter for its other o1li3ations to the for*er. Conspi"#o#sl$, 7D6failed to ela1orate on the s#pposed o1li3ations of COEC.

This Vi*s$ alle3ation is patentl$ #ntr#e. In its 4e*orand#*,/)COEC denied that the "he"5s !ere pa$*ent for an a""o#nt !hi"h ithad !ith 7D6, as 7D6 so desperatel$ alle3es. COEC "laried that the*ana3ers "he"5s pa$a1le to 7D6 !ere iss#ed 1$ COEC #pon theinstr#"tions of IITC in pa$*ent for the COEC T-6ills. 7D6s theor$ !asne3ated 1$ COEC itself as the iss#er of the "he"5s. 4oreoer, 7D6

alread$ @#di"iall$ ad*itted, thro#3h the 7artial Stip#lation, that the"he"5s !ere 3ien 1$ COEC as pa$*ent for the COEC T-6ills. Se"tion0, R#le %'2 of the Reised R#les of Eiden"e proides that:

Se". 0. J#di"ial ad*issions. H An ad*ission, er1al or !ritten, *ade1$ a part$ in the "o#rse of the pro"eedin3s in the sa*e "ase, doesnot re#ire proof. The ad*ission *a$ 1e "ontradi"ted onl$ 1$sho!in3 that it !as *ade thro#3h palpa1le *ista5e or that no s#"had*ission !as *ade.

As s#"h, 7D6 "annot no! 3ainsa$ itself 1$ "lai*in3 that the "he"5s!ere pa$*ent 1$ COEC for "ertain #nidentied o1li3ations to 7D6.It is !ell-settled that @#di"ial ad*issions "annot 1e "ontradi"ted 1$

the ad*itter !ho is the part$ hi*self and 1inds the person !ho*a5es the sa*e, and a1sent an$ sho!in3 that this !as *ade thr#palpa1le *ista5e, no a*o#nt of rationaliation "an oMset it./0

instr#"ted that pa$*ent 1e *ade to 7D6, it is apparent that the said"he"5s !ere deliered to 7D6 in "onsideration of a transa"tion1et!een 7D6 and IITC. On 4a$ ', %220, the sa*e date the "he"5s!ere iss#ed, IITC p#r"hased treas#r$ 1ills !ith a "o*1ined fa"eal#e of 7%>&,/2(,(((.(( fro* 7D6 for the total pri"e of7%>',%2%,'&2.&. The Co#rt notes that the 7%>',%2%,'&2.'&a33re3ate a*o#nt of the "he"5s iss#ed 1$ COEC to 7D6 is al*ostea"tl$ e#al to the total pri"e of the treas#r$ 1ills !hi"h IITCp#r"hased fro* 7D6./ The pa$*ent 1$ COEC on 1ehalf of IITC "an1e "onsidered as pa$*ent *ade 1$ a third-part$ to the transa"tion1et!een IITC and 7D6 !hi"h is allo!ed #nder Arti"le %')& of theCiil Code of the 7hilippines./&

The Co#rt nds no lo3i"al reason either for 7D6 to ee"#te the 4a$0, %220 etter to IITC #nderta5in3 to delier treas#r$ 1ills !orth7%>&,/2(,(((.(( if it had not re"eied the pa$*ent fro* IITC.Espe"iall$ so 1e"a#se there is nothin3 in the letter to indi"ate that7D6 !as still a!aitin3 pa$*ent for the said se"#rities. There is noother reasona1le "on"l#sion 1#t that 7D6 re"eied pa$*ent, in thefor* of three *ana3ers "he"5s iss#ed 1$ COEC, for the treas#r$1ills p#r"hased 1$ IITC, and that hain3 failed to pro*ptl$ delier

the treas#r$ 1ills despite hain3 en"ashed the "he"5s, 7D6 thenee"#ted the fore3oin3 letter of #nderta5in3.

Also tellin3 is 7D6s parti"ipation in the Tripartite A3ree*ent !ithIITC and COEC !here it assi3ned 7(,(((,((( !orth of Central 6an56ills to IITC, in "onsideration of !hi"h, IITC relin#ished its ri3ht to"lai* delier$ #nder the "onr*ations of sale iss#ed 1$ 7D6 to theetent of 7(,(((,(((. Khile the a3ree*ent stip#lated that it !asnot in an$ !a$ an ad*ission of an$ lia1ilit$ 1$ an$ one of the*a3ainst another, the fa"t that 7D6 a3reed to ee"#te s#"h ana3ree*ent is indi"atie of the eisten"e of its o1li3ation to IITC. Inits Ans!er Ad Ca#tela* led 1efore the RTC, 7D6 eplained that it3ae #p 7(,(((,((( !orth of Central 6an5 6ills si*pl$ to assist

COEC and IITC *eet their nan"ial diL"#lties. The Co#rt nds thisalle3ation hi3hl$ in"on"eia1le, prepostero#s and een l#di"ro#s1e"a#se no "o*pan$ in its ri3ht *ind !o#ld !illin3l$ part !ith s#"h

a h#3e a*o#nt of 1an5 1ills for no "onsideration !hatsoeer e"eptfor solel$ altr#isti" reasons

In the re"ent "ase of ;lores . Spo#ses indo,// this Co#rtepo#nded on the s#1@e"t *atter:

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for solel$ altr#isti" reasons.

;inall$, 7D6s ar3#*ent that it had no o1li3ation to delier thetreas#r$ 1ills p#r"hased 1$ IITC 1e"a#se the sa*e did not 1e"o*eaaila1le to 7D6 is eidentl$ a franti" last dit"h atte*pt to eadelia1ilit$. That the s#1@e"t se"#rities did not 1e"o*e aaila1le to 7D6sho#ld not 1e the "on"ern of IITC. ;or as lon3 as pa$*ent !as *ade,7D6 !as o1li3ed to delier the se"#rities s#1@e"t of its "onr*ationsof sale.

7D6s adroit *ane#erin3 "o#pled !ith IITCs poorl$ "on"eied"ond#it theor$ led the CA to rea"h an erroneo#s "on"l#sion. ThisCo#rt, ho!eer, !ill not 1e si*ilarl$ 1linded. There is si*pl$ anin"on3r#it$ in the CA de"ision. A""ordin3l$, this Co#rt r#les that 7D6sho#ld 1e lia1le for the delier$ of 7%>&,/2(,(((.(( !orth oftreas#r$ 1ills to IITC, or pa$*ent of the sa*e, red#"ed 1$7(,(((,(((.(( !hi"h the for*er assi3ned to the latter #nder the Tripartite A3ree*ent. The total lia1ilit$ of 7D6 is 7%)&,/2(,(((.((,"o*p#ted as follo!s:

7D6s ia1ilit$

A*o#nt of treas#r$ 1ills p#r"hased 1$ IITC 7%>&,/2(,(((.((A*o#nt assi3ned 1$ 7D6 to IITC (,(((,(((.(( TOTA 7%)&,/2(,(((.(( This shall 1e s#1@e"t to interest at the rate of & per ann#* fro*the date of the lin3 of the A*ended Co*plaint on 4ar"h '%, %22,"onsidered as the date of @#di"ial de*and, then to %' per ann#*fro* the date of nalit$ of this de"ision #ntil f#ll pa$*ent.

To r#le other!ise !o#ld 1e to allo! #n@#st enri"h*ent on the part of7D6 to the detri*ent of IITC. Arti"le '' of the Ciil Code of the7hilippines proides that:

Art. ''. Eer$ person !ho thro#3h an a"t of perfor*an"e 1$

another, or an$ other *eans, a"#ires or "o*es into possession ofso*ethin3 at the epense of the latter !itho#t @#st or le3al 3ro#nd,shall ret#rn the sa*e to hi*.

epo#nded on the s#1@e"t *atter:

There is #n@#st enri"h*ent !hen a person #n@#stl$ retains a 1enetto the loss of another, or !hen a person retains *one$ or propert$of another a3ainst the f#nda*ental prin"iples of @#sti"e, e#it$ and3ood "ons"ien"e. The prin"iple of #n@#st enri"h*ent re#ires t!o"onditions: =%? that a person is 1eneted !itho#t a alid 1asis or @#sti"ation, and ='? that s#"h 1enet is deried at the epense ofanother.

The *ain o1@e"tie of the prin"iple a3ainst #n@#st enri"h*ent is topreent one fro* enri"hin3 hi*self at the epense of another!itho#t @#st "a#se or "onsideration./>

The Co#rt "annot "ondone a de"ision !hi"h is *anifestl$ partial.Neither shall the Co#rt 1e a part$ to the perpetration of in@#sti"e. Asthe last 1astion of @#sti"e, this Co#rt shall al!a$s r#le p#rs#ant tothe pre"epts of fairness and e#it$ in order to dispel an$ do#1t inthe inte3rit$ and "o*peten"e of the J#di"iar$.

K<ERE;ORE, the petition is 7ARTIAY GRANTED. The J#ne &, '((>

De"ision of the Co#rt of Appeals in C.A.-G.R. C No. /2)'( is SETASIDE. A""ordin3l$, the J#ne %&, '(() RTC De"ision is REINSTATEDtho#3h 4ODI;IED to read as follo!s:

;OR T<E REASONS GIEN, @#d3*ent is here1$ rendered -

a orderin3 7lanters Deelop*ent 6an5 to pa$ plaintiM 7%)&,/2(,(((.(( !ith interest at the rate of si =&? per"ent perann#* fro* 4ar"h '%, %22 #ntil f#ll pa$*entF

1 orderin3 Ins#lar and Tr#st Inest*ent Corporation to pa$ CapitalOne E#ities Corporation 7 %/,%&,&(>.(( !ith le3al interest at therate of si =&? per"ent per ann#* fro* J#ne %(, %220 #ntil f#ll

pa$*entF and

" dis*issin3 the "o#nter"lai* of 7lanters Deelop*ent 6an5.

An$ a*o#nt not paid #pon the nalit$ of this de"ision shall 1es#1@e"t to interest at the in"reased rate of t!ele =%'? per"ent per

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s#1@e"t to interest at the in"reased rate of t!ele =%'? per"ent perann#* re"5oned fro* the date of nalit$ of this de"ision #ntil f#llpa$*ent thereof.


SO ORDERED.

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9pon present*ent of the "he"5s for pa$*ent, the respondentlearned that ;9CC had ordered the pa$*ent stopped The On 4a$ %0 %22& the RTC rendered its @#d3*ent ) ndin3 the

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learned that ;9CC had ordered the pa$*ent stopped. Therespondent i**ediatel$ de*anded the f#ll settle*ent of theiro1li3ation fro* the petitioners, 1#t to no aail. Instead, thepetitioners infor*ed the respondent that the$ !ere !ithholdin3pa$*ent of the "he"5s d#e to the 1rea5do!n of one of the d#*ptr#"5s the$ had earlier p#r"hased fro* respondent, spe"i"all$ these"ond d#*p tr#"5 deliered on 4a$ '/, %22'.

D#e to the ref#sal to pa$, the respondent "o**en"ed this a"tion for"olle"tion on April '2, %22), see5in3 pa$*ent of the #npaid 1alan"ein the a*o#nt of 7/),(((.(( represented 1$ the t!o "he"5s.

In their ans!er, the petitioners aerred that the$ had stopped thepa$*ent on the t!o "he"5s !orth 7/),(((.(( 1e"a#se of therespondents ref#sal to repair the se"ond d#*p tr#"5F and that the$had infor*ed the respondent of the defe"ts in that #nit 1#t therespondent had ref#sed to "o*pl$ !ith its !arrant$, "o*pellin3the* to in"#r epenses for the repair and spare parts. The$ pra$edthat the respondent ret#rn the pri"e of the defe"tie d#*p tr#"5!orth 7>)(,(((.(( *in#s the a*o#nts of their t!o "he"5s !orth7/),(((.((, !ith %' per ann#* interest on the diMeren"e of

72(,(((.(( fro* 4a$ %22) #ntil the sa*e is f#ll$ paidF that therespondent sho#ld also rei*1#rse the* the s#* of 7'0/,2(.(( astheir epenses for the repair of the d#*p tr#"5, !ith %' perann#* interest fro* De"e*1er %&, %22', the date of de*and, #ntilf#ll$ paidF and that the respondent pa$ ee*plar$ da*a3es asdeter*ined to 1e @#st and reasona1le 1#t not less than 7((,(((,and attorne$s fees of 7(,((( pl#s 7%,(((.(( per "o#rt appearan"eand other liti3ation epenses.

It !as the position of the respondent that the petitioners !ere notle3all$ @#stied in !ithholdin3 pa$*ent of the #npaid 1alan"e of thep#r"hase pri"e of the <ino 7ri*e 4oer and the Is## Transit 4ierd#e the alle3ed defe"ts in se"ond d#*p tr#"5 1e"a#se the p#r"hase

of the t!o #nits !as an entirel$ diMerent transa"tion fro* the sale of the d#*p tr#"5s, the !arranties for !hi"h hain3 lon3 epired.

J#d3*ent of the RTC

On 4a$ %0, %22&, the RTC rendered its @#d3*ent,) ndin3 thepetitioners lia1le to pa$ for the #npaid 1alan"e of the p#r"hase pri"eof the <ino 7ri*e 4oer and the Is## Transit 4ier totalin37/),(((.(( !ith le3al interest and attorne$s feesF and de"larin3the respondent lia1le to pa$ to the petitioners the s#* of7/%,)(.(( as "osts of the repairs in"#rred 1$ the petitioners. TheRTC held that the petitioners "o#ld not aail the*seles of le3al"o*pensation 1e"a#se the "lai*s the$ had set #p in the"o#nter"lai* !ere not li#idated and de*anda1le. The fallo of the @#d3*ent states:

K<ERE;ORE, @#d3*ent is here1$ rendered:

Orderin3 defendants, @ointl$ and seerall$ to pa$ plaintiM the s#* of 7)&(,(((.(( and 7)/,(((.(( !ith interest at the le3al rate of %'per ann#* "o*p#ted fro* ;e1r#ar$ %%, %22), !hi"h is the date ofthe rst etra@#di"ial de*and, #ntil f#ll$ paidFOrderin3 the defendants, @ointl$ and seerall$, to pa$ plaintiM thes#* e#ialent to %( of the prin"ipal a*o#nt d#e, for attorne$sfeesF

On the "o#nter"lai*, orderin3 plaintiM to pa$ defendants the s#* of7/%,)(.(( !ith interest at the le3al rate of %' per ann#*"o*p#ted fro* the date of this de"ision #ntil f#ll$ paidF

Orderin3 plaintiM to pa$ the defendants attorne$s fees e#ialent to%( of the a*o#nt d#eF


SO ORDERED.0

De"ision of the CA

The petitioners appealed, statin3 that the$ "o#ld @#stia1l$ stop thepa$*ent of the "he"5s in the eer"ise of their ri3ht of re"o#p*ent1e"a#se of the respondents ref#sal to settle their "lai* for 1rea"hof !arrant$ as to the p#r"hase of the se"ond d#*p tr#"5.

In its de"ision pro*#l3ated on J#l$ '& '((0 ho!eer the CAtr#"5 earlier p#r"hasedF that the !ithholdin3 of pa$*ents !as aneMe"tie eer"ise of their ri3ht of re"o#p*ent as allo!ed 1$ Arti"le

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In its de"ision pro*#l3ated on J#l$ '&, '((0, ho!eer, the CAaLr*ed the @#d3*ent of the RTC. It held that the re*ed$ ofre"o#p*ent "o#ld not 1e properl$ ino5ed 1$ the petitioners1e"a#se the transa"tions !ere diMerentF that the epenses in"#rredfor the repair and spare parts of the se"ond d#*p tr#"5 !ere not aproper s#1@e"t of re"o#p*ent 1e"a#se the$ did not arise o#t of thep#r"hase of the <ino 7ri*e 4oer and the Is## Transit 4ierF andthat the petitioners "lai* "o#ld not also 1e the s#1@e"t of le3al"o*pensation or set-oM, 1e"a#se the de1ts in a set-oM sho#ld 1eli#idated and de*anda1le.

Iss#es

The petitioners are no! 1efore the Co#rt assertin3 in their petitionfor reie! on "ertiorari that the CA erred in:

I

NOT 97<ODING T<E RIG<T O; 7ETITIONER+S TORECO974ENT 9NDER 7AR. =%? O; ART. %22 O; T<E CII CODE,K<IC< 7ROIDES +;OR T<E RIG<TS AND RE4EDIES AAIA6E TO

A 69YER AGAINST A SEERS 6REAC< O; KARRANTY.

II

R9ING T<AT 7ETITIONERS CANNOT AAI O; CO47ENSATIONAEGEDY 6ECA9SE T<EIR CAI4S AGAINST RES7ONDENT ARENOT I9IDATED AND DE4ANDA6E.

III

NOT <ODING RES7ONDENT IA6E TO 7ETITIONERS ;OREGA INTEREST CO479TED ;RO4 T<E ;IRST EQTRAJ9DICIADE4AND, AND ;OR ACT9A EQE47ARY DA4AGES.&

The petitioners s#1*it that the$ !ere @#stied in stoppin3 thepa$*ent of the t!o "he"5s d#e to the respondents 1rea"h of!arrant$ 1$ ref#sin3 to repair or repla"e the defe"tie se"ond d#*p

eMe"tie eer"ise of their ri3ht of re"o#p*ent as allo!ed 1$ Arti"le%22=%? of the Ciil CodeF d#e to the sellers 1rea"h of !arrant$ thatthe CAs interpretation =that re"o#p*ent in di*in#tion or etin"tionof pri"e in "ase of 1rea"h of !arrant$ 1$ the seller sho#ld refer tothe red#"tion or etin"tion of the pri"e of the sa*e ite* or #nit soldand not to a diMerent transa"tion or "ontra"t of sale? !as nots#pported 1$ @#rispr#den"eF that re"o#p*ent sho#ld not 1erestri"tiel$ interpreted 1#t sho#ld in"l#de the "on"ept of"o*pensation or set-oM 1et!een t!o parties !ho had "lai*s arisin3fro* diMerent transa"tionsF and that the series of p#r"hases and theo1li3ations arisin3 therefro*, 1ein3 inter-related, "o#ld 1e"onsidered as a sin3le and on3oin3 transa"tion for all intents andp#rposes.

The respondent "o#nters that the petitioners "o#ld not ref#se to pa$the 1alan"e of the p#r"hase pri"e of the <ino 7ri*e 4oer and theIs## Transit 4ier on the 1asis of the ri3ht of re"o#p*ent #nderArti"le %22 of the Ciil CodeF that the 1#$ers re*ed$ ofre"o#p*ent related onl$ to the sa*e transa"tionF and that"o*pensation !as not proper 1e"a#se the "lai*s of the petitionersas alle3ed in their "o#nter"lai* !ere not li#idated and

de*anda1le.

There is no lon3er an$ #estion that the petitioners !ere lia1le tothe respondent for the #npaid 1alan"e of the p#r"hase pri"e of the<ino 7ri*e 4oer and the Is## Transit 4ier. Khat re*ain to 1eresoled are stri"tl$ le3al, na*el$: one, !hether or not thepetitioners alidl$ eer"ised the ri3ht of re"o#p*ent thro#3h the!ithholdin3 of pa$*ent of the #npaid 1alan"e of the p#r"hase pri"eof the <ino 7ri*e 4oer and the Is## Transit 4ierF and, t!o,!hether or not the "osts of the repairs and spare parts for these"ond d#*p tr#"5 deliered to ;9CC on 4a$ '/, %22' "o#ld 1eoMset for the petitioners o1li3ations to the respondent.

R#lin3

Ke aLr* the de"ision of the CA !ith *odi"ation.

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not 3rant to petitioners the ri3ht to stop and !ithhold pa$*ent oftheir re*ainin3 1alan"e on the last t!o p#r"hases.

The RTC alread$ fo#nd that petitioners !ere entitled to the a*o#ntof 7/%,)(.(( stated in their "o#nter"lai*, and the CA "on"#rred in

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their re*ainin3 1alan"e on the last t!o p#r"hases.

'.

e3al "o*pensation !as per*issi1le

e3al "o*pensation ta5es pla"e !hen the re#ire*ents set forth inArti"le %'/> and Arti"le %'/2 of the Ciil Code are present, to !it:

Arti"le %'/>. Co*pensation shall ta5e pla"e !hen t!o persons, intheir o!n ri3ht, are "reditors and de1tors of ea"h other.

Arti"le %'/2. In order that "o*pensation *a$ 1e proper, it isne"essar$:

=%? That ea"h of the o1li3ors 1e 1o#nd prin"ipall$, and that he 1e atthe sa*e ti*e a prin"ipal "reditor of the otherF

='? That 1oth de1ts "onsists in a s#* of *one$, or if the thin3s d#eare "ons#*a1le, the$ 1e of the sa*e 5ind, and also of the sa*e#alit$ if the latter has 1een statedF



=? That oer neither of the* there 1e an$ retention or "ontroers$,"o**en"ed 1$ third persons and "o**#ni"ated in d#e ti*e to thede1tor.

As to !hether petitioners "o#ld aail the*seles of "o*pensation,1oth the RTC and CA r#led that the$ "o#ld not 1e"a#se the "lai*s of petitioners a3ainst respondent !ere not li#idated and de*anda1le.

The Co#rt "annot #phold the CA and the RTC.

of 7/%,)(.(( stated in their "o#nter"lai*, and the CA "on"#rred inthe ndin3, statin3 th#sl$:

It is note!orth$ that in the letter of De"e*1er %&, %22' =Eh. 8%?defendants !ere "har3in3 plaintiM onl$ for the follo!in3 ite*s ofrepair:

%. Cost of repair and spare parts - 70&,>((.(('. Cost of repair and spare parts - '0,(.((

7/%,)(.((Said a*o#nts *a$ 1e "onsidered to hae 1een spent for repairs"oered 1$ the !arrant$ period of three =)? *onths. Khile theinoi"es =Ehs. 8'-6 and 8)-A? dated Septe*1er '&, %22' andSepte*1er %>, %22', this dela$ in repairs is attri1#ta1le to the fa"tthat !hen defe"ts !ere 1ro#3ht to the attention of the plaintiM inthe letter of A#3#st %0, %22' =Eh. 8>? !hi"h !as !ithin the!arrant$ period, the plaintiM did not respond !ith the re#iredrepairs and a"t#al repairs !ere #nderta5en 1$ defendants. Thereafter, the spare parts "oered 1$ Ehi1its 8'-6 and 8)-Apertain to the en3ine, !hi"h !as "oered 1$ the !arrant$.

. Defendants in their letter of A#3#st %0, %22' =Eh1. 8>?de*anded "orre"tion of defe"ts. In their letter of A#3#st '', %22'=Eh. 82? the$ de*anded repla"e*ent. In their letter of A#3#st '/,%22' =Eh. 8%(?, the$ de*anded [repla"e*entBrepair. InSepte*1er, %22', the$ #ndertoo5 repairs the*seles =Ehs. 8'-6and 8)-A? and de*anded pa$*ent for the epenses in their letterof De"e*1er %&, %22' =Eh. 8%?. All other ite*s of epenses"onne"ted !ith s#1se#ent 1rea5do!ns are no lon3er "har3ea1le toplaintiM !hi"h 3ranted onl$ a )-*onth !arrant$. %(

Considerin3 that preponderant eiden"e sho!in3 that petitionershad spent the a*o#nt of 7/%,)(.(( for the repairs and spare partsof the se"ond d#*p tr#"5 !ithin the !arrant$ period of three

*onths s#pported the ndin3 of the t!o lo!er "o#rts, the Co#rta""epts their ndin3. eril$, fa"t#al ndin3s of the trial "o#rt, !henaLr*ed 1$ the CA, are "on"l#sie on the Co#rt !hen s#pported 1$the eiden"e on re"ord.%%

A de1t is li#idated !hen its eisten"e and a*o#nt are

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deter*ined.%' A""ordin3l$, an #nli#idated "lai* set #p as a"o#nter"lai* 1$ a defendant "an 1e set oM a3ainst the plaintiMs"lai* fro* the *o*ent it is li#idated 1$ @#d3*ent.%) Arti"le %'2(of the Ciil Code proides that !hen all the re#isites *entioned inArti"le %'/2 of the Ciil Code are present, "o*pensation ta5es eMe"t1$ operation of la!, and etin3#ishes 1oth de1ts to the "on"#rrenta*o#nt. Kith petitioners epenses for the repair of the d#*p tr#"51ein3 alread$ esta1lished and deter*ined !ith "ertaint$ 1$ the

lo!er "o#rts, it follo!s that le3al "o*pensation "o#ld ta5e pla"e1e"a#se all the re#ire*ents !ere present. <en"e, the a*o#nt of7/%,)(.(( sho#ld 1e set oM a3ainst petitioners #npaid o1li3ationof 7/),(((.((, leain3 a 1alan"e of 7&&),&(.((, the a*o#ntpetitioners still o!ed to respondent.

Ke dee* it ne"essar$ to *odif$ the interest rate i*posed 1$ thetrial and appellate "o#rts. The le3al interest rate to 1e i*posed fro*;e1r#ar$ %%, %22), the ti*e of the etra@#di"ial de*and 1$respondent, sho#ld 1e & per ann#* in the a1sen"e of an$stip#lation in !ritin3 in a""ordan"e !ith Arti"le ''(2 of the CiilCode, !hi"h proides:

Arti"le ''(2. If the o1li3ation "onsists in the pa$*ent of a s#* of*one$, and the de1tor in"#rs in dela$, the inde*nit$ for da*a3es,there 1ein3 no stip#lation to the "ontrar$, shall 1e the pa$*ent ofthe interest a3reed #pon, and in the a1sen"e of stip#lation, the le3alinterest, !hi"h is si per "ent per ann#*.

K<ERE;ORE, the Co#rt A;;IR4S the de"ision pro*#l3ated on J#l$'&, '((0 in all respe"ts s#1@e"t to the 4ODI;ICATION that petitionersare ordered, @ointl$ and seerall$, to pa$ to respondent the s#* of7&&),&(.((, pl#s interest of & per ann#* "o*p#ted fro*;e1r#ar$ %%, %22), the date of the rst etra@#di"ial de*and, #ntilf#ll$ paidF and ORDERS the petitioners to pa$ the "osts of s#it.

SO ORDERED.

A6EARDO 6. ICAROS, petitioner, s. ANTONIO 7. GAT4AITAN,respondent.

1een etendin3 *ana3erial, nan"ial and inest*ent "ons#ltan"$seri"es to ario#s r*s and "orporations 1oth here and a1road. To

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pD E C I S I O NGONAGA-REYES, J.:

This is a petition for reie! on "ertiorari #nder R#le 0 of the R#lesof Co#rt. The petition see5s to reerse and set aside the De"ision+%dated ;e1r#ar$ %(, '((( of the Co#rt of Appeals and itsResol#tion+' dated April /, '((( den$in3 petitioners 4otion forRe"onsideration thereto. The appellate "o#rt de"ision reersed the

De"ision+) dated Noe*1er %%, %22/ of the Re3ional Trial Co#rt of4a5ati, 6ran"h %0 in Ciil Case No. 2&-%'%%.

The fa"ts of the "ase, as stated in the De"ision of the Co#rt ofAppeals dated ;e1r#ar$ %(, '(((, are as follo!s:

8The An3lo-Asean 6an5 and Tr#st i*ited =An3lo-Asean, for 1reit$?,is a priate 1an5 re3istered and or3anied to do 1#siness #nder thela!s of the Rep#1li" of an#at# 1#t not in the 7hilippines. Its1#siness "onsists pri*aril$ in re"eiin3 f#nd pla"e*ents 1$ !a$ ofdeposits fro* instit#tions and indiid#al inestors fro* diMerentparts of the !orld and thereafter inestin3 s#"h deposits in *one$

*ar5et pla"e*ents and potentiall$ prota1le "apital ent#res in<on35on3, E#rope and the 9nited States for the p#rpose of*ai*iin3 the ret#rns on those inest*ents.

Enti"ed 1$ the l#"ratie prospe"ts of doin3 1#siness !ith An3lo-Asean, A1elardo i"aros, a ;ilipino 1#siness*an, de"ided to *a5e af#nd pla"e*ent !ith said 1an5 so*eti*e in the %2>(s. As it t#rnedo#t, the 3ri* o#t"o*e of i"aros fora$ in oerseas f#nd inest*ent!as not ea"tl$ !hat he enisioned it to 1e. 4ore parti"#larl$,i"aros, after hain3 inested in An3lo-Asean, en"o#nteredtre*endo#s and #neplained diL"#lties in retriein3, not onl$ theinterest or prots, 1#t een the er$ inest*ents he had p#t inAn3lo-Asean.

Confronted !ith the dire prospe"t of not 3ettin3 1a"5 an$ of hisinest*ents, i"aros then de"ided to see5 the "o#nsel of Antonio 7.Gat*aitan, a rep#ta1le 1an5er and inest*ent *ana3er !ho had

pi"aros relief, Gat*aitan !as onl$ too !illin3 eno#3h to help.Gat*aitan ol#ntaril$ oMered to ass#*e the pa$*ent of An3lo-Aseans inde1tedness to i"aros s#1@e"t to "ertain ter*s and"onditions. In order to eMe"t#ate and for*alie the partiesrespe"tie "o**it*ents, the t!o ee"#ted a notaried4E4ORAND94 O; AGREE4ENT on J#l$ '2, %2>> =Eh. 86F alsoEhi1it 8%?, the f#ll tet of !hi"h reads:

[4e*orand#* of A3ree*ent

NOK A 4EN 6Y T<ESE 7RESENTS:

This 4E4ORAND94 O; AGREE4ENT *ade and ee"#ted this '2thda$ of J#l$ %2>>, at 4a5ati 1$ and 1et!een:

A6EARDO 6. ICAROS, ;ilipino, of le3al a3e and holdin3 oL"e atCon"ep"ion 6#ildin3, Intra*#ros, 4anila hereinafter referred to as T<E 7ARTY O; T<E ;IRST 7ART,

and

ANTONIO 7. GAT4AITAN, ;ilipino, of le3al a3e and residin3 at /4an3$an St., a ista, hereinafter referred to as the 7ARTY O; T<ESECOND 7ART,

KITNESSET< T<AT:

K<EREAS, ANGO-ASEAN 6AN TR9ST, a "o*pan$ in"orporated1$ the Rep#1li" of an#at#, hereinafter referred to as the O;;S<ORE6AN, is inde1ted to the 7ARTY O; T<E ;IRST 7ART in the a*o#nt of9S dollarsF ONE <9NDRED ;I;TY T<O9SAND ONY =9SZ%(,(((?!hi"h de1t is no! d#e and de*anda1le.

K<EREAS, the 7ARTY O; T<E ;IRST 7ART has en"o#ntereddiL"#lties in se"#rin3 f#ll settle*ent of the said inde1tedness fro*the O;;S<ORE 6AN and has so#3ht a 1#siness arran3e*ent !iththe 7ARTY O; T<E SECOND 7ART re3ardin3 his "lai*sF

K<EREAS, the 7ARTY O; T<E SECOND 7ART, !ith his o!n reso#r"es1. Grant the 7ARTY O; T<E SECOND 7ART the f#ll po!er anda#thorit$, for his o!n #se and 1enet, 1#t at his o!n "ost and

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and d#e to his asso"iation !ith the O;;S<ORE 6AN, has oMered tothe 7ARTY O; T<E ;IRST 7ART to ass#*e the pa$*ent of theaforesaid inde1tedness, #pon "ertain ter*s and "onditions, !hi"hoMer, the 7ARTY O; T<E ;IRST 7ART has a""eptedF

K<EREAS, the parties herein hae "o*e to an a3ree*ent on thenat#re, for* and etent of their *#t#al prestations !hi"h the$ no!re"ord herein !ith the epress "onfor*it$ of the third parties

"on"ernedF

NOK, T<ERE;ORE, for and in "onsideration of the fore3oin3 and the*#t#al "oenants stip#lated herein, the 7ARTY O; T<E ;IRST 7ARTand the 7ARTY O; T<E SECOND 7ART hae a3reed, as the$ dohere1$ a3ree, as follo!s:

%. The 7ARTY O; T<E SECOND 7ART here1$ #nderta5es to pa$the 7ARTY O; T<E ;IRST 7ART the a*o#nt of 9S DOARS ONE<9NDRED ;I;TY T<O9SAND ==9SZ%(,(((? pa$a1le in 7hilippineC#rren"$ at the ed e"han3e rate of 7hilippine 7esos '% to 9SZ%!itho#t interest on or 1efore J#l$ %, %22).

;or this p#rpose, the 7ARTY O; T<E SECOND 7ART shall ee"#te anddelier a non ne3otia1le pro*issor$ note, 1earin3 the aforesaid*aterial "onsideration in faor of the 7ARTY O; T<E ;IRST 7ART#pon ee"#tion of this 4E4ORAND94 O; AGREE4ENT, !hi"hpro*issor$ note shall for* part as ANNEQ A hereof.

'. ;or and in "onsideration of the o1li3ation of the 7ARTY O; T<E SECOND 7ART, the 7ARTY O; T<E ;IRST does here1$F

a. Sell, assi3n, transfer and set oer #nto the 7ARTY O; T<ESECOND 7ART that "ertain de1t no! d#e and o!in3 to the 7ARTY O; T<E ;IRST 7ART 1$ the O;;S<ORE 6AN, to the a*o#nt of 9S

Dollars One <#ndred ;ift$ Tho#sand pl#s interest d#e and a""r#in3thereonF

$epense, to de*and, "olle"t, re"eie, "o*po#nd, "o*pro*ise and3ie a"#ittan"e for the sa*e or an$ part thereof, and in the na*eof the 7ARTY O; T<E ;IRST 7ART, to prose"#te, and !ithdra! an$s#it or pro"eedin3s thereforF

". A3ree and stip#late that the de1t assi3ned herein is @#stl$o!in3 and d#e to the 7ARTY O; T<E ;IRST 7ART fro* the saidO;;S<ORE 6AN, and that the 7ARTY O; T<E ;IRST 7ART has not

done and !ill not "a#se an$thin3 to 1e done to di*inish ordis"har3e said de1t, or to dela$ or preent the 7ARTY O; T<ESECOND 7ART fro* "olle"tin3 the sa*eF andF

d. At the re#est of the 7ARTY O; SECOND 7ART and the latterso!n "ost and epense, to ee"#te and do all s#"h f#rther a"ts anddeeds as shall 1e reasona1l$ ne"essar$ for proin3 said de1t and to*ore eMe"t#all$ ena1le the 7ARTY O; T<E SECOND 7ART to re"oerthe sa*e in a""ordan"e !ith the tr#e intent and *eanin3 of thearran3e*ents herein.

IN KITNESS K<EREO;, the parties hae "a#sed this 4E4ORAND94

O; AGREE4ENT to 1e si3ned on the date and pla"e rst !rittena1oe.

S3d. S3d.A6EARDO 6. ICAROS ANTONIO 7. GAT4AITAN7ARTY O; T<E ;IRST 7ART 7ARTY O; T<E ;IRST 7ART

KIT< O9R CON;OR4E:ANGO-ASEAN 6AN TR9ST6Y: =9nsi3ned?

SIGNED IN T<E 7RESENCE O;: S3d. =ille3i1le?

]]]]]]]]]]]]]]]]]]]]]]]] ]]]]]]]]]]]]]]]]]]]]]]]]

Confor*a1l$ !ith his #nderta5in3 #nder para3raph % of theafore#oted a3ree*ent, Gat*aitan ee"#ted in faor of i"aros a

NON-NEGOTIA6E 7RO4ISSORY NOTE KIT< ASSIGN4ENT O; CAS<DIIDENDS =Ehs. 8AF also Eh. 8'?, !hi"h pro*issor$ note, 4anila, 7hilippines

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appended as Anne 8A to the sa*e 4e*orand#* of A3ree*ent,states in f#ll, th#s

8NON-NEGOTIA6E 7RO4ISSORY NOTE KIT< ASSIGN4ENT O; CAS< DIIDENDS

This pro*issor$ note is Anne A of the 4e*orand#* of A3ree*entee"#ted 1et!een A1elardo 6. i"aros and Antonio 7. Gat*aitan, on

]]]]]] %2>> at 4a5ati, 7hilippines and is an inte3ral part of said4e*orand#* of A3ree*ent.

7),%(,(((.

On or 1efore J#l$ %, %22), I pro*ise to pa$ to A1elardo 6. i"arosthe s#* of 7hilippine 7esos ),%(,((( =7),%(,(((? !itho#t interestas *aterial "onsideration for the f#ll settle*ent of his *one$ "lai*sfro* ANGO-ASEAN 6AN, referred to in the 4e*orand#* ofA3ree*ent as the [O;;S<ORE 6AN.

As se"#rit$ for the pa$*ent of this 7ro*issor$ Note, I here1$

ASSIGN, CEDE and TRANS;ER, Seent$ 7er"ent =/(? of A CAS<DIIDENDS, that *a$ 1e d#e or o!in3 to *e as the re3istered o!nerof ]]]]]]]]]]]]]]]]]]] =]]]]]]]]]]? shares of sto"5 in the 7r#dentialife Realt$, In".

This assi3n*ent shall li5e!ise in"l#de SEENTY 7ERCENT =/(? of"ash diidends that *a$ 1e de"lared 1$ 7r#dential ife Realt$, In".and d#e or o!in3 to 7r#dential ife 7lan, In"., of !hi"h I a* asto"5holder, to the etent of or in proportion to *$ aforesaidshareholdin3 in 7r#dential ife 7lan, In"., the latter 1ein3 the holdin3"o*pan$ of 7r#dential ife Realt$, In".

In the eent that I de"ide to sell or transfer *$ aforesaid shares in

either or 1oth the 7r#dential ife 7lan, In". or 7r#dential ife Realt$,In". and the 7ro*issor$ Note re*ains #npaid or o#tstandin3, Ihere1$ 3ie 4r. A1elardo 6. i"aros the rst option to 1#$ the saidshares.

J#l$ ]]]]], %2>>

=SGD.?

Antonio 7. Gat*aitan

/ 4an3$an St., a ista, C

Si3ned in the 7resen"e of =SGD.? ]]]]]]]]]]]]]]]]] ]]]]]]]]]]]]]]]]]] ;ran"is"o A. Al1a7resident, 7r#dential ife 7lan, In"..

Thereafter, Gat*aitan presented to An3lo-Asean the 4e*orand#*of A3ree*ent earlier ee"#ted 1$ hi* and i"aros for the p#rpose of "olle"tin3 the latters pla"e*ent thereat of 9.S.Z%(,(((.((. Al1eitthe oL"ers of An3lo-Asean alle3edl$ "o**itted the*seles to 8loo5into +this *atter, no for*al response !as eer *ade 1$ said 1an5

to either i"aros or Gat*aitan. To date, An3lo-Asean has not a"tedon Gat*aitans *onetar$ "lai*s.

Eidentl$, 1e"a#se of his ina1ilit$ to "olle"t fro* An3lo-Asean,Gat*aitan did not 1other an$*ore to *a5e 3ood his pro*ise to pa$i"aros the a*o#nt stated in his pro*issor$ note =Eh. 8AF also Eh.'?. i"aros, ho!eer, tho#3ht diMerentl$. <e felt that he had ari3ht to "olle"t on the 1asis of the pro*issor$ note re3ardless of theo#t"o*e of Gat*aitanXs re"oer$ eMorts. Th#s, in J#l$ %22&,i"aros, thr# "o#nsel, addressed s#""essie de*and letters toGat*aitan =Ehs. 8C and 8D?, de*andin3 pa$*ent of the latterso1li3ations #nder the pro*issor$ note. Gat*aitan, ho!eer, did nota""ede to these de*ands.

<en"e, on A#3#st %, %22&, in the Re3ional Trial Co#rt at 4a5ati,i"aros led the "o*plaint in this "ase. In his "o*plaint, do"5eted in

the "o#rt 1elo! as Ciil Case No. 2&-%'%%, i"aros pra$ed for a @#d3*ent orderin3 Gat*aitan to pa$ hi* the follo!in3:

This *atter is deter*inatie of !hether or not respondent 1e"a*elia1le to petitioner #nder the pro*issor$ note "onsiderin3 that its

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[a? 7rin"ipal O1li3ation in the a*o#nt of Three 4illion ;ie <#ndred Tho#sand 7esos =7),((,(((.((?F

1? e3al interest thereon at the rate of si =&? per"ent per ann#*fro* J#l$ %&, %22) !hen the a*o#nt 1e"a*e d#e #ntil the o1li3ationis f#ll$ paidF

"? T!ent$ per"ent ='(? of the a*o#nt d#e as reasona1leattorne$s feesF

d? Costs of the s#it.+0

After trial on the *erits, the "o#rt a #o rendered @#d3*ent in faorof petitioner i"aros and fo#nd respondent Gat*aitan lia1le #nderthe 4e*orand#* of A3ree*ent and 7ro*issor$ Note for7),%(,(((.(( pl#s %' interest per ann#* fro* J#l$ %&, %22) #ntilthe a*o#nt is f#ll$ paid. Respondent !as li5e!ise ordered to pa$attorne$s fees of 7'((,(((.((.+

Respondent Gat*aitan appealed the trial "o#rts de"ision to theCo#rt of Appeals. In a de"ision pro*#l3ated on ;e1r#ar$ %(, '(((,the appellate "o#rt reersed the de"ision of the trial "o#rt and heldthat respondent Gat*aitan did not at an$ point 1e"o*e o1li3ated topa$ to petitioner i"aros the a*o#nt stated in the pro*issor$ note.In a Resol#tion dated April /, '(((, the Co#rt of Appeals deniedpetitioners 4otion for Re"onsideration of its ;e1r#ar$ %(, '(((De"ision.

<en"e this petition for reie! on "ertiorari !here petitioner pra$s forthe reersal of the ;e1r#ar$ %(, '((( De"ision of the Co#rt ofAppeals and the reinstate*ent of the Noe*1er %%, %22/ de"isionof the Re3ional Trial Co#rt.

The threshold iss#e for the deter*ination of this Co#rt is !hetherthe 4e*orand#* of A3ree*ent 1et!een petitioner and respondentis one of assi3n*ent of "redit or one of "onentional s#1ro3ation.

eL"a"$ is dependent on the 4e*orand#* of A3ree*ent, the note1ein3 *erel$ an anne to the said *e*orand#*.+&

An assi3n*ent of "redit has 1een dened as the pro"ess oftransferrin3 the ri3ht of the assi3nor to the assi3nee !ho !o#ld thenhae the ri3ht to pro"eed a3ainst the de1tor. The assi3n*ent *a$1e done 3rat#ito#sl$ or onero#sl$, in !hi"h "ase, the assi3n*enthas an eMe"t si*ilar to that of a sale.+/

On the other hand, s#1ro3ation has 1een dened as the transfer ofall the ri3hts of the "reditor to a third person, !ho s#1stit#tes hi* inall his ri3hts. It *a$ either 1e le3al or "onentional. e3als#1ro3ation is that !hi"h ta5es pla"e !itho#t a3ree*ent 1#t 1$operation of la! 1e"a#se of "ertain a"ts. Conentional s#1ro3ationis that !hi"h ta5es pla"e 1$ a3ree*ent of parties.+>

The 3eneral tenor of the fore3oin3 denitions of the ter*s8s#1ro3ation and 8assi3n*ent of "redit *a$ *a5e it see* thatthe$ are one and the sa*e !hi"h the$ are not. A noted epert in"iil la! notes their distin"tions th#s:

89nder o#r Code, ho!eer, "onentional s#1ro3ation is not identi"alto assi3n*ent of "redit. In the for*er, the de1tors "onsent isne"essar$F in the latter it is not re#ired. S#1ro3ation etin3#ishesthe o1li3ation and 3ies rise to a ne! oneF assi3n*ent refers to thesa*e ri3ht !hi"h passes fro* one person to another. The n#llit$ ofan old o1li3ation *a$ 1e "#red 1$ s#1ro3ation, s#"h that a ne!o1li3ation !ill 1e perfe"tl$ alidF 1#t the n#llit$ of an o1li3ation isnot re*edied 1$ the assi3n*ent of the "reditors ri3ht toanother.+2

;or o#r p#rposes, the "r#"ial distin"tion deals !ith the ne"essit$ ofthe "onsent of the de1tor in the ori3inal transa"tion. In an

assi3n*ent of "redit, the "onsent of the de1tor is not ne"essar$ inorder that the assi3n*ent *a$ f#ll$ prod#"e le3al eMe"ts.+%( Khatthe la! re#ires in an assi3n*ent of "redit is not the "onsent of thede1tor 1#t *erel$ noti"e to hi* as the assi3n*ent ta5es eMe"t onl$

fro* the ti*e he has 5no!led3e thereof.+%% A "reditor *a$,therefore, alidl$ assi3n his "redit and its a""essories !itho#t thed 1 + ' O h h h d i l 1 i

re"ord herein !ith the epress "onfor*it$ of the third parties"on"erned =e*phasis s#pplied?,

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de1tors "onsent.+%' On the other hand, "onentional s#1ro3ationre#ires an a3ree*ent a*on3 the three parties "on"erned H theori3inal "reditor, the de1tor, and the ne! "reditor. It is a ne!"ontra"t#al relation 1ased on the *#t#al a3ree*ent a*on3 all thene"essar$ parties. Th#s, Arti"le %)(% of the Ciil Code epli"itl$states that 8=C?onentional s#1ro3ation of a third person re#iresthe "onsent of the ori3inal parties and of the third person.

The trial "o#rt, in ndin3 for the petitioner, r#led that the4e*orand#* of A3ree*ent !as in the nat#re of an assi3n*ent of"redit. As s#"h, the "o#rt a #o held respondent lia1le for thea*o#nt stated in the said a3ree*ent een if the parties theretofailed to o1tain the "onsent of An3lo-Asean 6an5. On the otherhand, the appellate "o#rt held that the a3ree*ent !as one of"onentional s#1ro3ation !hi"h ne"essaril$ re#ires the a3ree*entof all the parties "on"erned. The Co#rt of Appeals th#s r#led thatthe 4e*orand#* of A3ree*ent neer "a*e into eMe"t d#e to thefail#re of the parties to 3et the "onsent of An3lo-Asean 6an5 to thea3ree*ent and, as s#"h, respondent neer 1e"a*e lia1le for thea*o#nt stip#lated.

Ke a3ree !ith the ndin3 of the Co#rt of Appeals that the4e*orand#* of A3ree*ent dated J#l$ '2, %2>> !as in the nat#re of a "onentional s#1ro3ation !hi"h re#ires the "onsent of thede1tor, An3lo-Asean 6an5, for its alidit$. Ke note !ith approal thefollo!in3 prono#n"e*ent of the Co#rt of Appeals:

8I**ediatel$ dis"erni1le fro* a1oe is the "o**on feat#re of"ontra"ts inolin3 "onentional s#1ro3ation, na*el$, the approalof the de1tor to the s#1ro3ation of a third person in pla"e of the"reditor. That Gat*aitan and i"aros had intended to treat theira3ree*ent as one of "onentional s#1ro3ation is plainl$ 1orne 1$ astip#lation in their 4e*orand#* of A3ree*ent, to !it:

8K<EREAS, the parties herein hae "o*e to an a3ree*ent on thenat#re, for* and etent of their *#t#al prestations !hi"h the$ no!

!hi"h third part$ is ad*ittedl$ An3lo-Asean 6an5.

<ad the intention 1een *erel$ to "onfer on appellant the stat#s of a*ere 8assi3nee of appellees "redit, there is si*pl$ no sense forthe* to hae stip#lated in their a3ree*ent that the sa*e is"onditioned on the 8epress "onfor*it$ thereto of An3lo-Asean6an5. That the$ did so onl$ a""ent#ates their intention to treat the

a3ree*ent as one of "onentional s#1ro3ation. And it is 1asi" in theinterpretation of "ontra"ts that the intention of the parties *#st 1ethe one p#rs#ed =R#le %)(, Se"tion %', R#les of Co#rt?.

Gien o#r ndin3 that the 4e*orand#* of A3ree*ent =Eh. 86Falso Eh. 8%?, is not one of 8assi3n*ent of "redit 1#t is a"t#all$ a8"onentional s#1ro3ation, the net #estion that "o*es to *ind is!hether s#"h a3ree*ent !as eer perfe"ted at all. Needless tostate, the perfe"tion H or non-perfe"tion H of the s#1@e"t a3ree*entis of #t*ost relean"e at this point. ;or, if the sa*e 4e*orand#*of A3ree*ent !as a"t#all$ perfe"ted, then it "annot 1e denied thatGat*aitan still has a s#1sistin3 "o**it*ent to pa$ i"aros on the1asis of his pro*issor$ note. If not, i"aros s#it for "olle"tion *#stne"essaril$ fail.

<ere, it 1ears stressin3 that the s#1@e"t 4e*orand#* of A3ree*entepressl$ re#ires the "onsent of An3lo-Asean to the s#1ro3ation.9pon !ho* the tas5 of se"#rin3 s#"h "onsent deoles, 1e it oni"aros or Gat*aitan, is of no si3ni"an"e. Khat "o#nts *ost is thehard realit$ that there has 1een an a1@e"t fail#re to 3et An3lo-Aseans nod of approal oer Gat*aitans 1ein3 s#1ro3ated in thepla"e of i"aros. Do#1tless, the a1sen"e of s#"h "onfor*it$ on thepart of An3lo-Asean, !hi"h is there1$ *ade a part$ to the sa*e4e*orand#* of A3ree*ent, preented the a3ree*ent fro*1e"o*in3 eMe"tie, *#"h less fro* 1ein3 a so#r"e of an$ "a#se of

a"tion for the si3natories thereto.+%)

Aside for the 8!hereas "la#se "ited 1$ the appellate "o#rt in itsde"ision, !e li5e!ise note that on the si3nat#re pa3e, ri3ht #nder

the pla"e resered for the si3nat#res of petitioner and respondent,there is, t$pe!ritten, the !ords 8KIT< O9R CON;OR4E. 9nder this

t ti th d 8ANGO ASEAN 6AN AND TR9ST ittIt is tr#e that "onentional s#1ro3ation has the eMe"t of

ti i hi th ld 1li ti d i i i t

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notation, the !ords 8ANGO-ASEAN 6AN AND TR9ST !ere !ritten1$ hand.+%0 To o#r *ind, this proision !hi"h "onte*plates thesi3ned "onfor*it$ of An3lo-Asean 6an5, ta5en to3ether !ith theafore*entioned prea*1#lator$ "la#se leads to the "on"l#sion that1oth parties intended that An3lo-Asean 6an5 sho#ld si3nif$ itsa3ree*ent and "onfor*it$ to the "ontra"t#al arran3e*ent 1et!eenpetitioner and respondent. The fa"t that An3lo-Asean 6an5 did not3ie s#"h "onsent rendered the a3ree*ent inoperatie "onsiderin3

that, as preio#sl$ dis"#ssed, the "onsent of the de1tor is needed inthe s#1ro3ation of a third person to the ri3hts of a "reditor.

In this petition, petitioner assails the r#lin3 of the Co#rt of Appealsthat !hat !as entered into 1$ the parties !as a "onentionals#1ro3ation of petitioners ri3hts as "reditor of the An3lo-Asean6an5 !hi"h ne"essaril$ re#ires the "onsent of the latter. Ins#pport, petitioner alle3es that: =%? the 4e*orand#* of A3ree*entdid not "reate a ne! o1li3ation and, as s#"h, the sa*e "annot 1e a"onentional s#1ro3ationF ='? the "onsent of An3lo-Asean 6an5 !asnot ne"essar$ for the alidit$ of the 4e*orand#* of A3ree*entF =)?ass#*in3 that s#"h "onsent !as ne"essar$, respondent failed tose"#re the sa*e as !as in"#*1ent #pon hi*F and =0? respondenthi*self ad*itted that the transa"tion !as one of assi3n*ent of"redit.

7etitioner ar3#es that the parties to the 4e*orand#* of A3ree*ent"o#ld not hae intended the sa*e to 1e a "onentional s#1ro3ation"onsiderin3 that no ne! o1li3ation !as "reated. A""ordin3 topetitioner, the o1li3ation of An3lo-Asean 6an5 to pa$ #nder Contra"tNo. ((%2) !as not etin3#ished and in fa"t, it !as the 1asi"intention of the parties to the 4e*orand#* of A3ree*ent to enfor"ethe sa*e o1li3ation of An3lo-Asean 6an5 #nder its "ontra"t !ithpetitioner. Considerin3 that the old o1li3ation of An3lo-Asean 6an5#nder Contra"t No. ((%2) !as neer etin3#ished #nder the

4e*orand#* of A3ree*ent, it is "ontended that the sa*e "o#ld not1e "onsidered as a "onentional s#1ro3ation.

Ke are not pers#aded.

etin3#ishin3 the old o1li3ation and 3iin3 rise to a ne! one.<o!eer, the etin3#ish*ent of the old o1li3ation is the eMe"t ofthe esta1lish*ent of a "ontra"t for "onentional s#1ro3ation. It isnot a re#isite !itho#t !hi"h a "ontra"t for "onentionals#1ro3ation *a$ not 1e "reated. As s#"h, it is not deter*inatie of!hether or not a "ontra"t of "onentional s#1ro3ation !as"onstit#ted.

4oreoer, it is of no *o*ent that the s#1@e"t of the 4e*orand#* of A3ree*ent !as the "olle"tion of the o1li3ation of An3lo-Asean 6an5to petitioner i"aros #nder Contra"t No. ((%2). 7re"isel$, if"onentional s#1ro3ation had ta5en pla"e !ith the "onsent of An3lo-Asean 6an5 to eMe"t a "han3e in the person of its "reditor, there isne"essaril$ "reated a ne! o1li3ation !here1$ An3lo-Asean 6an5*#st no! 3ie pa$*ent to its ne! "reditor, herein respondent.

7etitioner net ar3#es that the "onsent or "onfor*it$ of An3lo-Asean6an5 is not ne"essar$ to the alidit$ of the 4e*orand#* ofA3ree*ent as the eiden"e on re"ord alle3edl$ sho!s that it !asneer the intention of the parties thereto to treat the sa*e as one of "onentional s#1ro3ation. <e "lai*s that the prea*1#lator$ "la#sere#irin3 the epress "onfor*it$ of third parties, !hi"h ad*ittedl$!as An3lo-Asean 6an5, is a *ere s#rpl#sa3e !hi"h is not ne"essar$to the alidit$ of the a3ree*ent.

As preio#sl$ dis"#ssed, the intention of the parties to treat the4e*orand#* of A3ree*ent as e*1od$in3 a "onentionals#1ro3ation is sho!n not onl$ 1$ the 8!hereas "la#se 1#t also 1$the si3nat#re spa"e "aptioned 8KIT< O9R CON;OR4E resered forthe si3nat#re of a representatie of An3lo-Asean 6an5. Theseproisions in the afore*entioned 4e*orand#* of A3ree*ent *a$not si*pl$ 1e disre3arded or dis*issed as s#perV#o#s.

It is a 1asi" r#le in the interpretation of "ontra"ts that 8=t?he ario#sstip#lations of a "ontra"t shall 1e interpreted to3ether, attri1#tin3 tothe do#1tf#l ones that sense !hi"h *a$ res#lt fro* all of the*ta5en @ointl$.+% 4oreoer, #nder o#r R#les of Co#rt, it is

*andated that 8=i?n the "onstr#"tion of an instr#*ent !here thereare seeral proisions or parti"#lars, s#"h a "onstr#"tion is, if

i1l t 1 d t d ill i M t t ll +%& ; th

Respondent is not a la!$er and as s#"h, he is not so !ell ersed inla! that he !o#ld 1e a1le to distin3#ish 1et!een the "on"epts of

ti l 1 ti d f i t f dit 4

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possi1le, to 1e adopted as !ill 3ie eMe"t to all.+%& ;#rther, @#rispr#den"e has laid do!n the r#le that "ontra"ts sho#ld 1e so"onstr#ed as to har*onie and 3ie eMe"t to the diMerent proisionsthereof.+%/

In the "ase at 1en"h, the 4e*orand#* of A3ree*ent e*1odies"ertain proisions that are "onsistent !ith either a "onentionals#1ro3ation or assi3n*ent of "redit. It has not 1een sho!n that an$

"la#se or proision in the 4e*orand#* of A3ree*ent is in"onsistentor in"o*pati1le !ith a "onentional s#1ro3ation. On the otherhand, the t!o "ited proisions re#irin3 "onsent of the de1tor to the*e*orand#* is in"onsistent !ith a "ontra"t of assi3n*ent of "redit. Th#s, if !e !ere to interpret the sa*e as one of assi3n*ent of"redit, then the afore*entioned stip#lations re3ardin3 the "onsentof An3lo-Asean 6an5 !o#ld 1e rendered in#tile and #seless"onsiderin3 that, as preio#sl$ dis"#ssed, the "onsent of the de1toris not ne"essar$ in an assi3n*ent of "redit.

7etitioner net ar3#es that ass#*in3 that the "onfor*it$ of An3lo-Asean !as ne"essar$ to the alidit$ of the 4e*orand#* ofA3ree*ent, respondent onl$ had hi*self to 1la*e for the fail#re tose"#re s#"h "onfor*it$ as !as, alle3edl$, in"#*1ent #pon hi*#nder the *e*orand#*.

As to this ar3#*ent re3ardin3 the part$ responsi1le for se"#rin3 the"onfor*it$ of An3lo-Asean 6an5, !e fail to see ho! this #estion!o#ld hae an$ relean"e on the o#t"o*e of this "ase. <ain3r#led that the "onsent of An3lo-Asean !as ne"essar$ for the alidit$of the 4e*orand#* of A3ree*ent, the deter*inatie fa"t is thats#"h "onsent !as not se"#red 1$ either petitioner or respondent!hi"h "onse#entl$ res#lted in the inalidit$ of the said*e*orand#*.

Kith respe"t to the ar3#*ent of petitioner that respondent hi*selfalle3edl$ ad*itted in open "o#rt that an assi3n*ent of "redit !asintended, it is eno#3h to sa$ that respondent apparentl$ #sed the!ord 8assi3n*ent in his testi*on$ in the 3eneral sense.

"onentional s#1ro3ation and of assi3n*ent of "redit. 4oreoer,een ass#*in3 that there !as an ad*ission on his part, s#"had*ission is not "on"l#sie on this "o#rt as the nat#re andinterpretation of the 4e*orand#* of A3ree*ent is a #estion of la!!hi"h *a$ not 1e the s#1@e"t of stip#lations and ad*issions.+%>

Considerin3 the fore3oin3, it "annot then 1e said that the "onsent of the de1tor An3lo-Asean 6an5 is not ne"essar$ to the alidit$ of the

4e*orand#* of A3ree*ent. As a1oe stated, the 4e*orand#* ofA3ree*ent e*1odies a "ontra"t for "onentional s#1ro3ation and ins#"h a "ase, the "onsent of the ori3inal parties and the third personis re#ired.+%2 The a1sen"e of s#"h "onfor*it$ 1$ An3lo-Asean6an5 preented the 4e*orand#* of A3ree*ent fro* 1e"o*in3alid and eMe"tie. A""ordin3l$, the Co#rt of Appeals did not err!hen it r#led that the 4e*orand#* of A3ree*ent !as neerperfe"ted.

<ain3 arried at the a1oe "on"l#sion, the Co#rt nds no need todis"#ss the other iss#es raised 1$ petitioner.

K<ERE;ORE, the instant petition is DENIED and the De"ision of theCo#rt of Appeals dated ;e1r#ar$ %(, '((( and its Resol#tion datedApril /, '((( are here1$ A;;IR4ED.

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interest, and still another 70(,(((.(( as interest for the *onths of4ar"h and April %22/F that he had diL"#lt$ in pa$in3 the loan andhad as5ed +respondent for an etension of ti*eF that +respondent

[%? 70((,(((.(( representin3 the prin"ipal a*o#nt pl#s interest thereon per *onth fro* Jan#ar$ '), %22/ #ntil the sa*eshall hae 1een f#ll$ paid less the a*o#nt of 7%'( ((( ((

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had as5ed +respondent for an etension of ti*eF that +respondenta"ted in 1ad faith in instit#tin3 the "ase, +respondent hain3 a3reedto a""ept the 1enets he =de Jes#s? !o#ld re"eie for his retire*ent,1#t +respondent nonetheless led the instant "ase !hile hisretire*ent !as 1ein3 pro"essedF and that, in defense of his ri3hts,he a3reed to pa$ his "o#nsel 7'(,(((.(( +as attorne$s fees, pl#s7%,(((.(( for eer$ "o#rt appearan"e.

8D#rin3 the pre-trial "onferen"e, de Jes#s and his la!$er didnot appear, nor did the$ le an$ pre-trial 1rief. Neither did+7etitioner Gar"ia le a pre-trial 1rief, and his "o#nsel een*anifested that he !o#ld no +lon3er present eiden"e. Gien thisdeelop*ent, the trial "o#rt 3ae +respondent per*ission topresent his eiden"e e parte a3ainst de Jes#sF and, as re3ards+7etitioner Gar"ia, the trial "o#rt dire"ted +respondent to le a*otion for @#d3*ent on the pleadin3s, and for +7etitioner Gar"ia tole his "o**ent or opposition thereto.

8Instead, +respondent led a +4otion to de"lare +7etitioner Gar"iain defa#lt and to allo! hi* to present his eiden"e e parte.4ean!hile, +7etitioner Gar"ia led a +4anifestation s#1*ittin3 hisdefense to a @#d3*ent on the pleadin3s. S#1se#entl$, +respondentled a +4anifestationB+4otion to s#1*it the "ase for @#d3e*ent onthe pleadin3s, !ithdra!in3 in the pro"ess his preio#s *otion. There#nder, he asserted that +petitioners and de Jes#s solidar$lia1ilit$ #nder the pro*issor$ note "annot 1e an$ "learer, and thatthe "he"5 iss#ed 1$ de Jes#s did not dis"har3e the loan sin"e the"he"5 1o#n"ed.+

On J#l$ /, %22>, the Re3ional Trial Co#rt =RTC? of #eon Cit$=6ran"h '''? disposed of the "ase as follo!s:

8K<ERE;ORE, pre*ises "onsidered, @#d3*ent on the pleadin3s is

here1$ rendered in faor of +respondent and a3ainst +petitioner andDe Jes#s, !ho are here1$ ordered to pa$, @ointl$ and seerall$, the+respondent the follo!in3 s#*s, to !it:

shall hae 1een f#ll$ paid, less the a*o#nt of 7%'(,(((.((representin3 interests alread$ paid 1$ de Jes#sF

['? 7%((,(((.(( as attorne$s fees pl#s appearan"e fee of7',(((.(( for ea"h da$ of +"o#rt appearan"e, andF

[)? Cost of this s#it.+&

R#lin3 of the Co#rt of Appeals

The CA r#led that the trial "o#rt had erred !hen it rendered a @#d3*ent on the pleadin3s a3ainst De Jes#s. A""ordin3 to theappellate "o#rt, his Ans!er raised 3en#inel$ "ontentio#s iss#es.4oreoer, he !as still re#ired to present his eiden"e e parte. Th#s, respondent !as not ipso fa"to entitled to the RTC @#d3*ent,een tho#3h De Jes#s had 1een de"lared in defa#lt. The "asea3ainst the latter !as therefore re*anded 1$ the CA to the trial"o#rt for the e parte re"eption of the for*ers eiden"e.

As to petitioner, the CA treated his "ase as a s#**ar$ @#d3*ent,1e"a#se his Ans!er had failed to raise een a sin3le 3en#ine iss#ere3ardin3 an$ *aterial fa"t.

The appellate "o#rt r#led that no noation -- epress or i*plied --had ta5en pla"e !hen respondent a""epted the "he"5 fro* De Jes#s. A""ordin3 to the CA, the "he"5 !as iss#ed pre"isel$ to pa$for the loan that !as "oered 1$ the pro*issor$ note @ointl$ andseerall$ #nderta5en 1$ petitioner and De Jes#s. Respondentsa""eptan"e of the "he"5 did not sere to *a5e De Jes#s the solede1tor 1e"a#se, rst, the o1li3ation in"#rred 1$ hi* and petitioner!as @oint and seeralF and, se"ond, the "he"5 -- !hi"h had 1eenintended to etin3#ish the o1li3ation -- 1o#n"ed #pon itspresent*ent.

<en"e, this 7etition.+/

Iss#es

7etitioner s#1*its the follo!in3 iss#es for o#r "onsideration:8III

Khether or not @#d3*ent on the pleadin3s or s#**ar$ @#d3*ent

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8I

Khether or not the <onora1le Co#rt of Appeals 3rael$ erred in notholdin3 that noation applies in the instant "ase as Ed#ardo de Jes#s had epressl$ ass#*ed sole and e"l#sie lia1ilit$ for the loano1li3ation he o1tained fro* Respondent Dionisio la*as, as"learl$ eiden"ed 1$:

a? Iss#an"e 1$ de Jes#s of a "he"5 in pa$*ent of the f#lla*o#nt of the loan of 70((,(((.(( in faor of Respondent la*as,altho#3h the "he"5 s#1se#entl$ 1o#n"ed+F

1? A""eptan"e of the "he"5 1$ the respondent !hi"h res#lted in +the s#1stit#tion 1$ de Jes#s or +thes#persedin3 of the pro*issor$ noteF

"? de Jes#s hain3 paid interests on the loan in the totala*o#nt of 7%'(,(((.((F

d? The fa"t that Respondent la*as a3reed to the proposal of de Jes#s that d#e to nan"ial diL"#lties, he 1e 3ien anetension of ti*e to pa$ his loan o1li3ation and that his retire*ent1enets fro* the 7hilippine National 7oli"e !ill ans!er for saido1li3ation.

8II

Khether or not the <onora1le Co#rt of Appeals serio#sl$ erred in notholdin3 that the defense of petitioner that he !as *erel$ ana""o**odation part$, despite the fa"t that the pro*issor$ noteproided for a @oint and solidar$ lia1ilit$, sho#ld hae 1een 3ien!ei3ht and "reden"e "onsiderin3 that s#1se#ent eents sho!ed

that the prin"ipal o1li3or !as in tr#th and in fa"t de Jes#s, aseiden"ed 1$ the fore3oin3 "ir"#*stan"es sho!in3 his ass#*ptionof sole lia1ilit$ oer the loan o1li3ation.

Khether or not @#d3*ent on the pleadin3s or s#**ar$ @#d3*ent!as properl$ aailed of 1$ Respondent la*as, despite the fa"t thatthere are 3en#ine iss#es of fa"t, !hi"h the <onora1le Co#rt ofAppeals itself ad*itted in its De"ision, !hi"h "all for thepresentation of eiden"e in a f#ll-1lo!n trial.+>

Si*pl$ p#t, the iss#es are the follo!in3: %? !hether there !asnoation of the o1li3ationF '? !hether the defense that petitioner

!as onl$ an a""o**odation part$ had an$ 1asisF and )? !hetherthe @#d3*ent a3ainst hi* -- 1e it a @#d3*ent on the pleadin3s or as#**ar$ @#d3*ent -- !as proper.

The Co#rts R#lin3

The 7etition has no *erit.

;irst Iss#e:Noation

7etitioner see5s to etri"ate hi*self fro* his o1li3ation as @oint andsolidar$ de1tor 1$ insistin3 that noation too5 pla"e, either thro#3hthe s#1stit#tion of De Jes#s as sole de1tor or the repla"e*ent of thepro*issor$ note 1$ the "he"5. Alternatiel$, the for*er ar3#es thatthe ori3inal o1li3ation !as etin3#ished !hen the latter, !ho !ashis "o-o1li3or, 8paid the loan !ith the "he"5.

The falla"$ of the se"ond =alternatie? ar3#*ent is all too apparent. The "he"5 "o#ld not hae etin3#ished the o1li3ation, 1e"a#se it1o#n"ed #pon present*ent. 6$ la!,+2 the delier$ of a "he"5prod#"es the eMe"t of pa$*ent onl$ !hen it is en"ashed.

Ke no! "o*e to the *ain iss#e of !hether noation too5 pla"e.

Noation is a *ode of etin3#ishin3 an o1li3ation 1$ "han3in3 itso1@e"ts or prin"ipal o1li3ations, 1$ s#1stit#tin3 a ne! de1tor inpla"e of the old one, or 1$ s#1ro3atin3 a third person to the ri3hts of

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his pla"e, or that the @oint and solidar$ o1li3ation !as "an"elled ands#1stit#ted 1$ the solitar$ #nderta5in3 of De Jes#s. The CA aptl$held:

7etitioner aers that he si3ned the pro*issor$ note *erel$ as ana""o**odation part$F and that as s#"h he !as released as o1li3or

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held:

8 . 7laintiMs a""eptan"e of the 1#* "he"5 did not res#lt ins#1stit#tion 1$ de Jes#s either, the nat#re of the o1li3ation 1ein3solidar$ d#e to the fa"t that the pro*issor$ note epressl$ de"laredthat the lia1ilit$ of appellants there#nder is @oint and +solidar$.Reason: #nder the la!, a "reditor *a$ de*and pa$*ent orperfor*an"e fro* one of the solidar$ de1tors or so*e or all of the*

si*#ltaneo#sl$, and pa$*ent *ade 1$ one of the* etin3#ishes theo1li3ation. It therefore follo!s that in "ase the "reditor fails to"olle"t fro* one of the solidar$ de1tors, he *a$ still pro"eed a3ainstthe other or others. +''

4oreoer, it *#st 1e noted that for noation to 1e alid and le3al,the la! re#ires that the "reditor epressl$ "onsent to thes#1stit#tion of a ne! de1tor.+') Sin"e noation i*plies a !aier ofthe ri3ht the "reditor had 1efore the noation, s#"h !aier *#st 1eepress.+'0 It "annot 1e s#pposed, !itho#t "lear proof, that thepresent respondent has done a!a$ !ith his ri3ht to ea"t f#lll*entfro* either of the solidar$ de1tors.+'

4ore i*portant, De Jes#s !as not a third person to the o1li3ation.;ro* the 1e3innin3, he !as a @oint and solidar$ o1li3or of the70((,((( loanF th#s, he "an 1e released fro* it onl$ #pon itsetin3#ish*ent. Respondents a""eptan"e of his "he"5 did not"han3e the person of the de1tor, 1e"a#se a @oint and solidar$o1li3or is re#ired to pa$ the entiret$ of the o1li3ation.

It *#st 1e noted that in a solidar$ o1li3ation, the "reditor is entitledto de*and the satisfa"tion of the !hole o1li3ation fro* an$ or all ofthe de1tors.+'& It is #p to the for*er to deter*ine a3ainst !ho* toenfor"e "olle"tion.+'/ <ain3 *ade hi*self @ointl$ and seerall$lia1le !ith De Jes#s, petitioner is therefore lia1le+'> for the entire

o1li3ation.+'2

Se"ond Iss#e:A""o**odation 7art$

a""o**odation part$F and that, as s#"h, he !as released as o1li3or!hen respondent a3reed to etend the ter* of the o1li3ation.

This reasonin3 is *ispla"ed, 1e"a#se the note herein is not ane3otia1le instr#*ent. The note reads:

87RO4ISSORY NOTE

870((,(((.((

8RECEIED ;RO4 ATTY. DIONISIO . A4AS, the s#* of ;O9R<9NDRED T<O9SAND 7ESOS, 7hilippine C#rren"$ pa$a1le on or1efore Jan#ar$ '), %22/ at No. %00 -%( St. a*ias, #eon Cit$,!ith interest at the rate of per *onth or fra"tion thereof.

8It is #nderstood that o#r lia1ilit$ #nder this loan is @ointl$ andseerall$ +si".

8Done at #eon Cit$, 4etro 4anila this ')rd da$ of De"e*1er,%22&.+)(

6$ its ter*s, the note !as *ade pa$a1le to a spe"i" person ratherthan to 1earer or to order+)% -- a re#isite for ne3otia1ilit$ #nderA"t '()%, the Ne3otia1le Instr#*ents a! =NI?. <en"e, petitioner"annot aail hi*self of the NIs proisions on the lia1ilities anddefenses of an a""o**odation part$. 6esides, a non-ne3otia1lenote is *erel$ a si*ple "ontra"t in !ritin3 and is eiden"e of s#"hintan3i1le ri3hts as *a$ hae 1een "reated 1$ the assent of theparties.+)' The pro*issor$ note is th#s "oered 1$ the 3eneralproisions of the Ciil Code, not 1$ the NI.

Een 3rantin3 ar3#endo that the NI !as appli"a1le, still, petitioner!o#ld 1e lia1le for the pro*issor$ note. 9nder Arti"le '2 of A"t

'()%, an a""o**odation part$ is lia1le for the instr#*ent to aholder for al#e een if, at the ti*e of its ta5in3, the latter 5ne! thefor*er to 1e onl$ an a""o**odation part$. The relation 1et!een ana""o**odation part$ and the part$ a""o**odated is, in eMe"t, one

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AI;ORNIA 69S INES, INC., petitioner, s. STATE INEST4ENT<O9SE, INC., respondent.D E C I S I O N

pro"eedin3s to enfor"e "olle"tion. In addition to the notes, C6Iee"#ted "hattel *ort3a3es oer the ) 1#ses in Deltas faor.

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D E C I S I O N9IS946ING, J.:

In this petition for reie!, California 6#s ines, In"., assails thede"ision,+% dated April %/, '((%, of the Co#rt of Appeals in CA-G.R.C No. '&&/, reersin3 the @#d3*ent+', dated J#ne ), %22), of theRe3ional Trial Co#rt of 4anila, 6ran"h %), in Ciil Case No. >0-'>(entitled State Inest*ent <o#se, In". . California 6#s ines, In"., for

"olle"tion of a s#* of *one$. The Co#rt of Appeals held petitionerCalifornia 6#s ines, In"., lia1le for the al#e of e pro*issor$notes assi3ned to respondent State Inest*ent <o#se, In".

The fa"ts, as "#lled fro* the re"ords, are as follo!s:

So*eti*e in %2/2, Delta 4otors CorporationW4.A.N. Diision=Delta? applied for nan"ial assistan"e fro* respondent StateInest*ent <o#se, In". =hereafter SI<I?, a do*esti" "orporationen3a3ed in the 1#siness of #asi-1an5in3. SI<I a3reed to etend a"redit line to Delta for 7',(((,(((.(( in three separate "redita3ree*ents dated 4a$ %%, J#ne %2, and A#3#st '', %2/2.+) Onseeral o""asions, Delta aailed of the "redit line 1$ dis"o#ntin3!ith SI(, petitioner California 6#sines, In". =hereafter C6I?, p#r"hased on install*ent 1asis ) #nitsof 4.A.N. Diesel 6#ses and t!o ='? #nits of 4.A.N. Diesel ConersionEn3ines fro* Delta. To se"#re the pa$*ent of the p#r"hase pri"e ofthe ) 1#ses, C6I and its president, 4r. Dionisio O. la*as,ee"#ted siteen =%&? pro*issor$ notes in faor of Delta on Jan#ar$') and April ', %2>(.+ In ea"h pro*issor$ note, C6I pro*ised topa$ Delta or order, 7',)%0,((( pa$a1le in &( *onthl$ install*ents

startin3 A#3#st )%, %2>(, !ith interest at %0 per ann#*. C6If#rther pro*ised to pa$ the holder of the said notes ' of thea*o#nt d#e on the sa*e as attorne$s fees and epenses of"olle"tion, !hether a"t#all$ in"#rred or not, in "ase of @#di"ial

Khen C6I defa#lted on all pa$*ents d#e, it entered into arestr#"t#rin3 a3ree*ent !ith Delta on O"to1er /, %2>%, to "oer itsoerd#e o1li3ations #nder the pro*issor$ notes.+& Therestr#"t#rin3 a3ree*ent proided for a ne! s"hed#le of pa$*entsof C6Is past d#e install*ents, etendin3 the period to pa$, andstip#latin3 dail$ re*ittan"e instead of the preio#sl$ a3reed*onthl$ re*ittan"e of pa$*ents. In "ase of defa#lt, Delta !o#ld

hae the a#thorit$ to ta5e oer the *ana3e*ent and operations ofC6I #ntil C6I andBor its president, 4r. Dionisio la*as, re*ittedandBor #pdated C6Is past d#e a""o#nt. C6I and Delta alsoin"reased the interest rate to %& p.a. and added a do"#*entationfee of ' p.a. and a 0 p.a. restr#"t#rin3 fee.

On De"e*1er '), %2>%, Delta ee"#ted a Contin#in3 Deed ofAssi3n*ent of Re"eia1les+/ in faor of SI'.+>Delta o1li3ated itself to pa$ a ed *onthl$ a*ortiation of70((,((( to SI,(((,((( !orth ofre"eia1les !ith the #nderstandin3 that SI<I shall appl$ thepro"eeds a3ainst Deltas oerd#e a""o#nts.

C6I "ontin#ed hain3 tro#1le *eetin3 its o1li3ations to Delta. Thispro*pted Delta to threaten C6I !ith the enfor"e*ent of the*ana3e*ent ta5eoer "la#se. To pre-e*pt the ta5e-oer, C6I ledon 4a$ ), %2>', a "o*plaint for in@#n"tion+2, do"5eted as Ciil CaseNo. ((')-7, !ith the Co#rt of ;irst Instan"e of Rial, 7asa$ Cit$, =no!Re3ional Trial Co#rt of 7asa$ Cit$?. In d#e ti*e, Delta led itsa*ended ans!er !ith appli"ations for the iss#an"e of a !rit ofpreli*inar$ *andator$ in@#n"tion to enfor"e the *ana3e*entta5eoer "la#se and a !rit of preli*inar$ atta"h*ent oer the 1#ses

it sold to C6I.+%( On De"e*1er '/, %2>',+%% the trial "o#rt3ranted Deltas pra$er for iss#an"e of a !rit of preli*inar$*andator$ in@#n"tion and preli*inar$ atta"h*ent on a""o#nt of thefra#d#lent disposition 1$ C6I of its assets.

On Septe*1er %, %2>), p#rs#ant to the 4e*orand#* ofA3ree*ent, Delta ee"#ted a Deed of Sale+%' assi3nin3 to SI<I e

notes, "ontendin3 that the "o*pro*ise a3ree*ent !as in f#llsettle*ent of all its o1li3ations to Delta in"l#din3 its o1li3ations#nder the pro*issor$ notes.

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3 ee e , e a e e"# ed a eed o Sa e+ ass 3 3 o S e=? of the siteen =%&? pro*issor$ notes+%) fro* California 6#sines, In". At the ti*e of assi3n*ent, these e pro*issor$ notes,identied and n#*1ered as >(-), >(-0, >(-, >(-&, and >(-/,had a total al#e of 7%&,%',>%2.>( in"l#sie of interest at %0 perann#*.

SI),

+%0 to C6I re#irin3 C6I to re*it the pa$*ents d#e on the epro*issor$ notes dire"tl$ to it. C6I replied infor*in3 SI<I of CiilCase No. ((')-7 and of the fa"t that Delta had ta5en oer its*ana3e*ent and operations.+%

As re3ards Deltas re*ainin3 o1li3ation to SI<I, Delta oMered itsaaila1le 1#s #nits, al#ed at 7'/,(&/,%&'.'', as pa$*ent in 5ind.+%& On De"e*1er '2, %2>), SI<I a""epted Deltas oMer, and Deltatransferred the o!nership of its aaila1le 1#ses to SI<I, !hi"h in t#rna"5no!led3ed f#ll pa$*ent of Deltas re*ainin3 o1li3ation.+%/Khen SI0-')(%2. The 4anila RTC iss#ed a !rit of replein andSI/(,'&.2> to Deltas o#tstandin3 o1li3ation.Deltas o1li3ation to SI2>.2/. OnDe"e*1er , %2>0, 6ran"h & of the RTC of 4anila rendered @#d3*ent in Ciil Case No. >0-')(%2 orderin3 Delta to pa$ SI0,+%> in Ciil Case No. ((')-7, the in@#n"tion "ase1efore the RTC of 7asa$. C6I a3reed that Delta !o#ld eer"ise its

ri3ht to etra@#di"iall$ fore"lose on the "hattel *ort3a3es oer the) 1#s #nits. The RTC of 7asa$ approed this "o*pro*isea3ree*ent the follo!in3 da$, J#l$ ', %2>0.+%2 ;ollo!in3 this, C6Iehe*entl$ ref#sed to pa$ SI0, SI0-'>(, a3ainst C6I in the Re3ional Trial Co#rt of4anila, 6ran"h )0, to "olle"t on the e =? pro*issor$ notes !ithinterest at %0 p.a. SI, %2>0, Delta led a petition for etra@#di"ialfore"los#re of "hattel *ort3a3es p#rs#ant to its "o*pro*isea3ree*ent !ith C6I. On Jan#ar$ ', %2>, Delta led in the RTC of7asa$ a *otion for ee"#tion of the @#d3*ent 1ased on the"o*pro*ise a3ree*ent.+'% The RTC of 7asa$ 3ranted this *otionthe follo!in3 da$.+''

In ie! of Deltas petition and *otion for ee"#tion per the @#d3*ent of "o*pro*ise, the RTC of 4anila 3ranted in Ciil Case No.>0-'>( SI<Is appli"ation for preli*inar$ atta"h*ent on Jan#ar$ 0,%2>.+') Conse#entl$, SI<I !as a1le to atta"h and ph$si"all$ ta5epossession of thirt$-t!o =)'? 1#ses 1elon3in3 to C6I.+'0 <o!eer,a"tin3 on C6Is *otion to #ash the !rit of preli*inar$ atta"h*ent,the sa*e "o#rt resoled on Jan#ar$ %, %2>&,+' to dis"har3e the!rit of preli*inar$ atta"h*ent. SI)/>. On J#l$ )%, %2>/, the Co#rt of Appeals 3ranted SI<Ispetition in CA-GR S7 No. (>)/> and r#led that the !rit of preli*inar$atta"h*ent iss#ed 1$ 6ran"h )0 of the RTC 4anila in Ciil Case No.>0-'>( sho#ld sta$.+'& The de"ision of the Co#rt of Appealsattained nalit$ on A#3#st '', %2>/.+'/

4ean!hile, p#rs#ant to the Jan#ar$ ), %2> Order of the RTC of7asa$, the sheriM of 7asa$ Cit$ "ond#"ted a p#1li" a#"tion and

iss#ed a "erti"ate of sheriMs sale to Delta on April ', %2>/,attestin3 to the fa"t that Delta 1o#3ht %0 of the ) 1#ses for7),2'(,(((.+'> On April /, %2>/, the sheriM of 4anila, 1$ irt#e ofthe !rit of ee"#tion dated 4ar"h '/, %2>/, iss#ed 1$ 6ran"h & of

the RTC of 4anila in Ciil Case No. >0-')(%2, sold the sa*e %01#ses at p#1li" a#"tion in partial satisfa"tion of the @#d3*ent SI<Io1tained a3ainst Delta in Ciil Case No. >0-')(%2.

SI<I appealed the de"ision to the Co#rt of Appeals. The "ase !asdo"5eted as CA-G.R. C No. '&&/. On April %/, '((%, the Co#rt of

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3

So*eti*e in 4a$ %2>/, Ciil Case No. >0-'>( !as raUed to6ran"h %) of the RTC of 4anila in ie! of the retire*ent of thepresidin3 @#d3e of 6ran"h )0. S#1se#entl$, SI0-'>( p#rs#ant to the Jan#ar$ 0,%2>, Order of the RTC of 4anila.+'2 SI<Is *otion !as 3ranted on

De"e*1er %&, %2>/.+)( On Noe*1er '2, %2>>, ho!eer, SI<I ledan #r3ent e-parte *otion to a*end this order "lai*in3 that thro#3hinaderten"e and e"#sa1le ne3li3en"e of its ne! "o#nsel, it *ade a*ista5e in the list of 1#ses in the 4otion to Sell Atta"hed 7ropertiesit had earlier led.+)% SI/, 1$ irt#e of the Jan#ar$), %2> Order of the RTC of 7asa$, and that t!o of the 1#ses listedhad 1een released to third part$, "lai*ant 7ilipinas 6an5, 1$ Orderdated Septe*1er %&, %2>/+)' of 6ran"h %) of the RTC of 4anila.

C6I opposed SI<Is *otion to allo! the sale of the %& 1#ses. On4a$ ), %2>2,+)) 6ran"h %) of the RTC of 4anila denied SI<Is#r3ent *otion to allo! the sale of the %& 1#ses listed in its *otion toa*end. The trial "o#rt r#led that the 1est interest of the parties*i3ht 1e 1etter sered 1$ den$in3 f#rther sales of the 1#ses and to3o dire"t to the trial of the "ase on the *erits.+)0

After trial, @#d3*ent !as rendered in Ciil Case No. >0-'>( on J#ne ), %22), dis"har3in3 C6I fro* lia1ilit$ on the e pro*issor$notes. The trial "o#rt li5e!ise faora1l$ r#led on C6Is "o*p#lsor$"o#nter"lai*. The trial "o#rt dire"ted SI, the dateSI%, 1et!een Delta and C6I noated the e pro*issor$ notesFhen"e, at the ti*e Delta assi3ned the e pro*issor$ notes to SI<I,the notes !ere alread$ *er3ed in the restr#"t#rin3 a3ree*ent and"annot 1e enfor"ed a3ainst C6I.

p , ,Appeals de"ided CA-G.R. C No. '&&/ in this *anner:

K<ERE;ORE, 1ased on the fore3oin3 pre*ises and ndin3 theappeal to 1e *eritorio#s, Ke nd defendant-appellee C6I lia1le forthe al#e of the e =? pro*issor$ notes s#1@e"t of the "o*plaint a#o less the pro"eeds fro* the atta"hed siteen =%&? 1#ses. Thea!ard of attorne$s fees and "osts is eli*inated. The appealed

de"ision is here1$ REERSED. No "osts.

SO ORDERED.+)

<en"e, this appeal !here C6I "ontends that

I. T<E CO9RT O; A77EAS ERRED IN DECARING T<AT T<ERESTR9CT9RING AGREE4ENT 6ETKEEN DETA AND T<E7ETITIONER DID NOT S96STANTIAY NOATE T<E TER4S O; T<E;IE 7RO4ISSORY NOTES.

II. T<E CO9RT O; A77EAS ERRED IN <ODING T<AT T<ECO47RO4ISE AGREE4ENT 6ETKEEN DETA AND T<E 7ETITIONER IN T<E 7ASAY CITY CASE DID NOT S97ERSEDE AND DISC<ARGE T<E7RO4ISSORY NOTES.

III. T<E CO9RT O; A77EAS ERRED IN 97<ODING T<E CONTIN9INGAIDITY O; T<E 7REI4INARY ATTAC<4ENT AND EQONERATING T<ERES7ONDENT O; 4AE;ACTIONS IN 7RESERING AND ASSERTINGITS RIG<TS T<ERE9NDER.+)&

Essentiall$, the iss#es are =%? !hether the Restr#"t#rin3 A3ree*entdated O"to1er /, %2>%, 1et!een petitioner C6I and Delta 4otors,Corp. noated the e pro*issor$ notes Delta 4otors, Corp.assi3ned to respondent SI<I, and ='? !hether the "o*pro*ise

a3ree*ent in Ciil Case No. ((')-7 s#perseded andBor dis"har3edthe s#1@e"t e pro*issor$ notes. The iss#es 1ein3 interrelated,the$ shall 1e @ointl$ dis"#ssed.

C6I rst "ontends that the Restr#"t#rin3 A3ree*ent did not *erel$"han3e the in"idental ele*ents of the o1li3ation #nder all siteen=%&? pro*issor$ notes, 1#t it also in"reased the o1li3ations of C6I

Noation is neer pres#*ed,+0& and the ani*#s noandi, !hethertotall$ or partiall$, *#st appear 1$ epress a3ree*ent of theparties, or 1$ their a"ts that are too "lear and #ne#io"al to 1e

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p $ 3!ith the addition of ne! o1li3ations that !ere in"o*pati1le !ith theold o1li3ations in the said notes.+)/ C6I adds that een if therestr#"t#rin3 a3ree*ent did not totall$ etin3#ish the o1li3ations#nder the siteen =%&? pro*issor$ notes, the J#l$ '0, %2>0,"o*pro*ise a3ree*ent ee"#ted in Ciil Case No. ((')-7 did.+)>C6I "ites para3raph of the "o*pro*ise a3ree*ent !hi"h statesthat the a3ree*ent 1et!een it and C6I !as in 8f#ll and nal

settle*ent, ad@#di"ation and ter*ination of all their ri3hts ando1li3ations as of the date of =the? a3ree*ent, and of the iss#es in=the? "ase. A""ordin3 to C6I, inas*#"h as the e pro*issor$notes !ere s#1@e"t *atters of the Ciil Case No. ((')-7, thede"ision approin3 the "o*pro*ise a3ree*ent operated as res @#di"ata in the present "ase.+)2

Noation has 1een dened as the etin3#ish*ent of an o1li3ation1$ the s#1stit#tion or "han3e of the o1li3ation 1$ a s#1se#ent one!hi"h ter*inates the rst, either 1$ "han3in3 the o1@e"t or prin"ipal"onditions, or 1$ s#1stit#tin3 the person of the de1tor, ors#1ro3atin3 a third person in the ri3hts of the "reditor.+0(

Noation, in its 1road "on"ept, *a$ either 1e etin"tie or*odi"ator$.+0% It is etin"tie !hen an old o1li3ation is ter*inated1$ the "reation of a ne! o1li3ation that ta5es the pla"e of thefor*erF it is *erel$ *odi"ator$ !hen the old o1li3ation s#1sists tothe etent it re*ains "o*pati1le !ith the a*endator$ a3ree*ent.+0' An etin"tie noation res#lts either 1$ "han3in3 the o1@e"t orprin"ipal "onditions =o1@e"tie or real?, or 1$ s#1stit#tin3 the personof the de1tor or s#1ro3atin3 a third person in the ri3hts of the"reditor =s#1@e"tie or personal?.+0) Noation has t!o f#n"tions:one to etin3#ish an eistin3 o1li3ation, the other to s#1stit#te ane! one in its pla"e.+00 ;or noation to ta5e pla"e, fo#r essentialre#isites hae to 1e *et, na*el$, =%? a preio#s alid o1li3ationF

='? an a3ree*ent of all parties "on"erned to a ne! "ontra"tF =)? theetin3#ish*ent of the old o1li3ationF and =0? the 1irth of a alid ne!o1li3ation.+0

p $ *ista5en.+0/

The etin3#ish*ent of the old o1li3ation 1$ the ne! one is ane"essar$ ele*ent of noation !hi"h *a$ 1e eMe"ted eitherepressl$ or i*pliedl$.+0> The ter* epressl$ *eans that the"ontra"tin3 parties in"ontroerti1l$ dis"lose that their o1@e"t inee"#tin3 the ne! "ontra"t is to etin3#ish the old one.+02 9pon

the other hand, no spe"i" for* is re#ired for an i*plied noation,and all that is pres"ri1ed 1$ la! !o#ld 1e an in"o*pati1ilit$1et!een the t!o "ontra"ts.+( Khile there is reall$ no hard and fastr#le to deter*ine !hat *i3ht "onstit#te to 1e a s#L"ient "han3ethat "an 1rin3 a1o#t noation, the to#"hstone for "ontrariet$,ho!eer, !o#ld 1e an irre"on"ila1le in"o*pati1ilit$ 1et!een the oldand the ne! o1li3ations.

There are t!o !a$s !hi"h "o#ld indi"ate, in ne, the presen"e ofnoation and there1$ prod#"e the eMe"t of etin3#ishin3 ano1li3ation 1$ another !hi"h s#1stit#tes the sa*e. The rst is !hennoation has 1een epli"itl$ stated and de"lared in #ne#io"alter*s. The se"ond is !hen the old and the ne! o1li3ations arein"o*pati1le on eer$ point. The test of in"o*pati1ilit$ is !hetherthe t!o o1li3ations "an stand to3ether, ea"h one hain3 itsindependent eisten"e.+% If the$ "annot, the$ are in"o*pati1leand the latter o1li3ation noates the rst.+' Corollaril$, "han3esthat 1reed in"o*pati1ilit$ *#st 1e essential in nat#re and not*erel$ a""idental. The in"o*pati1ilit$ *#st ta5e pla"e in an$ of theessential ele*ents of the o1li3ation, s#"h as its o1@e"t, "a#se orprin"ipal "onditions thereofF other!ise, the "han3e !o#ld 1e *erel$*odi"ator$ in nat#re and ins#L"ient to etin3#ish the ori3inalo1li3ation.+)

The ne"essit$ to proe the fore3oin3 1$ "lear and "onin"in3

eiden"e is a""ent#ated !here the o1li3ation of the de1tor ino5in3the defense of noation has alread$ *at#red.+0

Kith respe"t to o1li3ations to pa$ a s#* of *one$, this Co#rt has"onsistentl$ applied the !ell-settled r#le that the o1li3ation is notnoated 1$ an instr#*ent that epressl$ re"o3nies the old,

0. In "ase of @#di"ial "olle"tion on the notes, the *a5er =C6I?and "o-*a5er =its president, 4r. Dionisio O. la*as, Jr? !eresolidaril$ lia1le of attorne$s fees and epenses of ' of the

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"han3es onl$ the ter*s of pa$*ent, and adds other o1li3ations notin"o*pati1le !ith the old ones, or !here the ne! "ontra"t *erel$s#pple*ents the old one.+

In In"ha#sti Co. . Y#lo+& this Co#rt held that an o1li3ation topa$ a s#* of *one$ is not noated in a ne! instr#*ent !herein theold is ratied, 1$ "han3in3 onl$ the ter* of pa$*ent and addin3

other o1li3ations not in"o*pati1le !ith the old one. In Ti1le .A#ino+/ and 7as"#al . a"sa*ana+> this Co#rt de"lared that itis !ell settled that a *ere etension of pa$*ent and the addition ofanother o1li3ation not in"o*pati1le !ith the old one is not anoation thereof.

In this "ase, the attendant fa"ts do not *a5e o#t a "ase of noation. The restr#"t#rin3 a3ree*ent 1et!een Delta and C6I ee"#ted onO"to1er /, %2>%, sho!s that the parties did not epressl$ stip#latethat the restr#"t#rin3 a3ree*ent noated the pro*issor$ notes.A1sent an #ne#io"al de"laration of etin3#ish*ent of the pre-eistin3 o1li3ation, onl$ a sho!in3 of "o*plete in"o*pati1ilit$1et!een the old and the ne! o1li3ation !o#ld s#stain a ndin3 of

noation 1$ i*pli"ation.+2 <o!eer, o#r reie! of its ter*s $ieldsno in"o*pati1ilit$ 1et!een the pro*issor$ notes and therestr#"t#rin3 a3ree*ent.

The e pro*issor$ notes, !hi"h Delta assi3ned to SI), "ontained the follo!in3 "o**on stip#lations:

%. The$ !ere pa$a1le in &( *onthl$ install*ents #p to J#l$ )%,%2>F

'. Interest: %0 per ann#*F

). ;ail#re to pa$ an$ of the install*ents !o#ld render the entirere*ainin3 1alan"e d#e and pa$a1le at the option of the holder ofthe notesF

a*o#nt d#e in addition to the "osts of s#it.

The restr#"t#rin3 a3ree*ent, for its part, had the follo!in3proisions:

K<EREAS, C6 and A4AS ad*it their past d#e install*ent on thefollo!in3 pro*issor$ notes:

a. 7N Nos. %& to '& =%% #nits?

7ast D#e as of Septe*1er )(, %2>% H 7%,0%%,0)0.((

1. 7N Nos. ' to / ='0 #nits?

7ast D#e as of Septe*1er )(, %2>% H 7%,%(,)).((

K<EREAS, the parties a3reed to restr#"t#re the a1oe-*entionedpast d#e install*ents #nder the follo!in3 ter*s and "onditions:

a. 7N Nos. %& to '& =%% #nits? H )/ *onths

7N Nos. ' to / ='0 #nits? H 0& *onths

1. Interest Rate: %& per ann#*

". Do"#*entation ;ee: ' per ann#*

d. 7enalt$ preio#sl$ in"#rred and Restr#"t#rin3 fee: 0 p.a.

e. 4ode of 7a$*ent: Dail$ Re*ittan"e

NOK, T<ERE;ORE, for and in "onsideration of the fore3oin3

pre*ises, the parties here1$ a3ree and "oenant as follo!s:

%. That the past d#e install*ent referred to a1oe pl#s the "#rrentandBor fallin3 d#e a*ortiation as of O"to1er %, %2>% for 7ro*issor$

Notes Nos. %& to '& and ' to / shall 1e paid 1$ C6 andBorA4AS in a""ordan"e !ith the follo!in3 s"hed#le of pa$*ents: . Kithin thirt$ =)(? da$s after the end of the ter*s of the 7N Nos.

%& to '& and ' to /, C6 or A4AS shall re*it in l#*p s#*

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Dail$ pa$*ents of 7%%,(((.(( fro*O"to1er % to De"e*1er )%, %2>%

Dail$ pa$*ents of 7%',(((.(( fro* Jan#ar$ %, %2>' to 4ar"h )%, %2>'

Dail$ pa$*ents of 7%),(((.(( fro*

April %, %2>' to J#ne )(, %2>'

Dail$ pa$*ents of 7%0,(((.(( fro* J#l$ %, %2>' to Septe*1er )(, %2>'

Dail$ pa$*ents of 7%,(((.(( fro*O"to1er %, %2>' to De"e*1er )%, %2>'

Dail$ pa$*ents of 7%&,(((.(( fro* Jan#ar$ %, %2>) to J#ne )(, %2>)

Dail$ pa$*ents of 7%/,(((.(( fro* J#l$ %, %2>)

'. C6 or A4AS shall re*it to D4C on or 1efore %%:(( a.*.eer$da$ the dail$ "ash pa$*ents d#e to D4C in a""ordan"e !iththe s"hed#le in para3raph %. D4C *a$ send a "olle"tor to re"eiethe a*o#nt d#e at C6s pre*ises. All dela$ed re*ittan"es shall 1e"har3ed additional ' penalt$ interest per *onth.

). All pa$*ents shall 1e applied to a*ortiations and penalties d#ein a""ordan"e !ith para3raph of the restr#"t#red past d#einstall*ents a1oe *entioned and 7N Nos. %& to '& and ' to /.

0. D4C *a$ at an$ti*e assi3n andBor send its representaties to

*onitor the operations of C6 pertainin3 to the nan"ial and eldoperations and seri"e and *aintenan"e *atters of 4.A.N. #nits.Re"ords needed 1$ the D4C representaties in *onitorin3 saidoperations shall 1e *ade aaila1le 1$ C6 and A4AS.

!hateer 1alan"e is left after ded#"tin3 all pa$*ents *ade fro*!hat is d#e and pa$a1le to D4C in a""ordan"e !ith para3raph % ofthis a3ree*ent and 7N Nos. %& to '& and ' to /.

&. In the eent that C6 and A4AS fail to re*it the dail$re*ittan"e a3reed #pon and the total a""#*#lated #nre*itteda*o#nt has rea"hed and =si"? e#ialent of Sit$ =&(? da$s, D4C

and Silerio shall eer"ise an$ or all of the follo!in3 options:

=a? The !hole s#* re*ainin3 then #npaid pl#s ' penalt$ per*onth and %& interest per ann#* on total past d#e install*ents!ill i**ediatel$ 1e"o*e d#e and pa$a1le. In the eent of @#di"ialpro"eedin3s to enfor"e "olle"tion, C6 and A4AS !ill pa$ to D4Can additional s#* e#ialent to ' of the a*o#nt d#e forattorne$s fees and epenses of "olle"tion, !hether a"t#all$ in"#rredor not, in addition to the "ost of s#itF

=1? To enfor"e in a""ordan"e !ith la!, their ri3hts #nder theChattel 4ort3a3e oer ario#s 4.A.N. Diesel 1#s !ith Nos. C9 >(-)2,>(-0(, >(-0%, >(-0', >(-0), >(-00 and >(-%, andBor

="? To ta5e oer *ana3e*ent and operations of C6 #ntil s#"hti*e that C6 andBor A4AS hae re*itted andBor #pdated theirpast d#e a""o#nt !ith D4C.

/. D4C and SIERIO shall ins#re to C6 "ontin#o#s s#ppl$ of spareparts for the 4.A.N. Diesel 6#ses and shall *a5e aaila1le to C6 atthe pri"e preailin3 at the ti*e of p#r"hase, an inentor$ of spareparts "onsistin3 of at least ninet$ =2(? per"ent of the needs of C61ased on a *oin3 &-*onth re#ire*ent to 1e prepared ands#1*itted 1$ C6, and a""epta1le to D4C, !ithin the rst !ee5 ofea"h *onth.

>. E"ept as other!ise *odied in this A3ree*ent, the ter*s and"onditions stip#lated in 7N Nos. %& to '& and ' to / shall "ontin#eto 3oern the relationship 1et!een the parties and that the Chattel

4ort3a3e oer ario#s 4.A.N. Diesel 6#ses !ith Nos. C4 No. >(-)2,>(-0(, >(-0%, >(-0', >(-0), >(-00 and C4 No. >(-% as !ell as theDeed of 7led3e ee"#ted 1$ 4r. la*as shall "ontin#e to se"#re the

Neither is there *erit in C6Is ar3#*ent that the "o*pro*isea3ree*ent dated J#l$ '0, %2>0, in Ciil Case No. ((')-7 s#persededandBor dis"har3ed the e pro*issor$ notes. 6oth Delta and C6I

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o1li3ation #ntil f#ll pa$*ent.

2. D4C and SIERIO #nderta5e to re"all or !ithdra! its preio#sre#est to Notar$ 7#1li" Al1erto G. Doller and to instr#"t hi* not topro"eed !ith the p#1li" a#"tion sale of the shares of sto"5 of C6s#1@e"t-*atter of the Deed of 7led3e of Shares. A4AS, on theother hand, #nderta5es to *oe for the i**ediate dis*issal of Ciil

Case No. 20&(-7 entitled 8Dionisio O. la*as s. Al1erto G. Doller, etal., Co#rt of ;irst Instan"e of 7asa$, 6ran"h QQIQ.+&(

It is "lear fro* the fore3oin3 that the restr#"t#rin3 a3ree*ent,instead of "ontainin3 proisions 8a1sol#tel$ in"o*pati1le !ith theo1li3ations of the @#d3*ent, epressl$ raties s#"h o1li3ations inpara3raph > and "ontains proisions for satisf$in3 the*. There !asno "han3e in the o1@e"t of the prior o1li3ations. The restr#"t#rin3a3ree*ent *erel$ proided for a ne! s"hed#le of pa$*ents andadditional se"#rit$ in para3raph & ="? 3iin3 Delta a#thorit$ to ta5eoer the *ana3e*ent and operations of C6I in "ase C6I fails topa$ install*ents e#ialent to &( da$s. Khere the parties to thene! o1li3ation epressl$ re"o3nie the "ontin#in3 eisten"e and

alidit$ of the old one, there "an 1e no noation.+&% 4oreoer, thisCo#rt has r#led that an a3ree*ent s#1se#entl$ ee"#ted 1et!eena seller and a 1#$er that proided for a diMerent s"hed#le and*anner of pa$*ent, to restr#"t#re the *ode of pa$*ents 1$ the1#$er so that it "o#ld settle its o#tstandin3 o1li3ation in spite of itsdelin#en"$ in pa$*ent, is not tanta*o#nt to noation. +&'

The addition of other o1li3ations li5e!ise did not etin3#ish thepro*issor$ notes. In Yo#n3 . CA+&), this Co#rt r#led that a "han3ein the in"idental ele*ents of, or an addition of s#"h ele*ent to, ano1li3ation, #nless other!ise epressed 1$ the parties !ill not res#ltin its etin3#ish*ent.

In ne, the restr#"t#rin3 a3ree*ent "an stand to3ether !ith thepro*issor$ notes.

"annot den$ that the e pro*issor$ notes !ere no lon3er s#1@e"tof Ciil Case No. ((')-7 !hen the$ entered into the "o*pro*isea3ree*ent on J#l$ '0, %2>0.

<ain3 preio#sl$ assi3ned the e pro*issor$ notes to SI<I, Deltahad no *ore ri3ht to "o*pro*ise the sa*e. Deltas li*iteda#thorit$ to "olle"t for SI,

Deed of Sale "annot 1e "onstr#ed to in"l#de the po!er to"o*pro*ise C6Is o1li3ations in the said pro*issor$ notes. Ana#thorit$ to "o*pro*ise, 1$ epress proision of Arti"le %>/>+&0 ofthe Ciil Code, re#ires a spe"ial po!er of attorne$, !hi"h is notpresent in this "ase. In"identall$, Deltas a#thorit$ to "olle"t in1ehalf of SI),re#irin3 C6I to re*it the pa$*ents dire"tl$ to SI<I eMe"tiel$reo5ed Deltas li*ited ri3ht to "olle"t in 1ehalf of SI<I. This sho#ldhae dispelled C6Is erroneo#s notion that Delta !as a"tin3 in

1ehalf of SI<I, !ith a#thorit$ to "o*pro*ise the e pro*issor$notes.

6#t *ore i*portantl$, the "o*pro*ise a3ree*ent itself proidedthat it "oered the ri3hts and o1li3ations onl$ of Delta and C6I andthat it did not refer to, nor "oer the ri3hts of, SI<I as the ne!"reditor of C6I in the s#1@e"t pro*issor$ notes. C6I and Deltastip#lated in para3raph of the a3ree*ent that:

. This CO47RO4ISE AGREE4ENT "onstit#tes the entire#nderstandin3 1$ and 1et!een the plaintiMs and the defendants as!ell as their la!$ers, and operates as f#ll and nal settle*ent,

ad@#di"ation and ter*ination of all their ri3hts and o1li3ations as ofthe date of this a3ree*ent, and of the iss#es in this "ase.+&&

Een in the a1sen"e of s#"h a proision, the "o*pro*ise a3ree*entstill "annot 1ind SI<I #nder the settled r#le that a "o*pro*isea3ree*ent deter*ines the ri3hts and o1li3ations of onl$ the parties

i +&/ Th f h ld h h i

SEC. %. Kho *a$ interene.WA person !ho has a le3al interest inthe *atter in liti3ation, or in the s#""ess of either of the parties, oran interest a3ainst 1oth, or is so sit#ated as to 1e adersel$ aMe"ted1 di i1 i h di i i f i h d f

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to it.+&/ Therefore, !e hold that the "o*pro*ise a3ree*ent"oered the ri3hts and o1li3ations onl$ of Delta and C6I and onl$!ith respe"t to the eleen =%%? other pro*issor$ notes thatre*ained !ith Delta.

C6I net *aintains that SI<I is estopped fro* #estionin3 the"o*pro*ise a3ree*ent 1e"a#se SI<I failed to interene in Ciil

Case No. ((')-7 after C6I infor*ed it of the ta5eoer 1$ Delta ofC6Is *ana3e*ent and operations and the res#ltant i*possi1ilit$for C6I to "o*pl$ !ith its o1li3ations in the s#1@e"t pro*issor$notes. C6I also adds that SI<Is fail#re to interene in Ciil CaseNo. ((')-7 is proof that Delta "ontin#ed to a"t in SI<Is 1ehalf ineMe"tin3 "olle"tion #nder the notes.

The "ontention is #ntena1le. As a res#lt of the assi3n*ent, Deltarelin#ished all its ri3hts to the s#1@e"t pro*issor$ notes in faor ofSI<I. This had the eMe"t of separatin3 the e pro*issor$ notesfro* the %& pro*issor$ notes s#1@e"t of Ciil Case No. ((')-7. ;ro*that ti*e, C6Is o1li3ations to SI<I e*1odied in the e pro*issor$notes 1e"a*e separate and distin"t fro* C6Is o1li3ations in

eleen =%%? other pro*issor$ notes that re*ained !ith Delta. Th#s,an$ 1rea"h of these independent o1li3ations 3ies rise to a separate"a#se of a"tion in faor of SI<I a3ainst C6I. Considerin3 thatDeltas assi3n*ent to SI<I of these e pro*issor$ notes had theeMe"t of re*oin3 the said notes fro* Ciil Case No. ((')-7, there!as no reason for SI Nota1l$, Se"tion ',+&2 R#le %' of the then %2>>Reised R#les of 7ro"ed#re #ses the !ord [*a$ in denin3 the ri3htto interene. The present r#les *aintain the per*issie nat#re of

interention in Se"tion %, R#le %2 of the %22/ R#les of Ciil7ro"ed#re, !hi"h proides as follo!s:

1$ a distri1#tion or other disposition of propert$ in the "#stod$ ofthe "o#rt or of an oL"er thereof *a$, !ith leae of "o#rt, 1eallo!ed to interene in the a"tion. The "o#rt shall "onsider !hetheror not the interention !ill #nd#l$ dela$ or pre@#di"e thead@#di"ation of the ri3hts of the ori3inal parties, and !hether or notthe interenorXs ri3hts *a$ 1e f#ll$ prote"ted in a separatepro"eedin3.+/(

Also, re"all that Delta transferred the e pro*issor$ notes to SI<Ion Septe*1er %), %2>) !hile Ciil Case No. ((')-7 !as pendin3. Then as no!, the r#le in "ase of transfer of interest pendente lite isthat the a"tion *a$ 1e "ontin#ed 1$ or a3ainst the ori3inal part$#nless the "o#rt, #pon *otion, dire"ts the person to !ho* theinterest is transferred to 1e s#1stit#ted in the a"tion or @oined !iththe ori3inal part$.+/% The non-in"l#sion of a ne"essar$ part$ doesnot preent the "o#rt fro* pro"eedin3 in the a"tion, and the @#d3*ent rendered therein shall 1e !itho#t pre@#di"e to the ri3hts of s#"h ne"essar$ part$.+/'

In li3ht of the fore3oin3, SI<Is ref#sal to interene in Ciil Case No.

((')-7 in another "o#rt does not a*o#nt to an estoppel that *a$preent SI<I fro* instit#tin3 a separate and independent a"tion ofits o!n.+/) This is espe"iall$ so sin"e it does not appear that aseparate pro"eedin3 !o#ld 1e inade#ate to prote"t f#ll$ SI<Isri3hts.+/0 Indeed, SI<Is ref#sal to interene is pre"isel$ 1e"a#se it"onsidered that its ri3hts !o#ld 1e 1etter prote"ted in a separateand independent s#it.

The @#d3*ent on "o*pro*ise in Ciil Case No. ((')-7 did notoperate as res @#di"ata to preent SI<I fro* prose"#tin3 its "lai*s inthe present "ase. As preio#sl$ dis"#ssed, the "o*pro*isea3ree*ent and the @#d3*ent on "o*pro*ise in Ciil Case No. ((')-

7 "oered onl$ Delta and C6I and their respe"tie ri3hts #nder the%% pro*issor$ notes not assi3ned to SI<I. In "ontrast, the instant"ase inoles SI0=)?Wappli"a1le to SI<I as C6I "ontends. C6Is last "ontention *#st,therefore, fail. Ke hold that the !rit of ee"#tion to enfor"e the@ d t f i i Ci il C N ((') 7 d th

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C6I *aintains, ho!eer, that in an$ eent, re"oer$ #nder thes#1@e"t pro*issor$ notes is no lon3er allo!ed 1$ Arti"le %0>0=)?+/of the Ciil Code, !hi"h prohi1its a "reditor fro* s#in3 for thede"ien"$ after it has fore"losed on the "hattel *ort3a3es. SI<I,1ein3 the s#""essor-in-interest of Delta, is no lon3er allo!ed tore"oer on the pro*issor$ notes 3ien as se"#rit$ for the p#r"hasepri"e of the ) 1#ses 1e"a#se Delta had alread$ etra@#di"iall$

fore"losed on the "hattel *ort3a3es oer the said 1#ses on April ',%2>/.

This "lai* is li5e!ise #ntena1le.

Arti"le %0>0=)? nds no appli"ation in the present "ase. Theetra@#di"ial fore"los#re of the "hattel *ort3a3es Delta eMe"ted"annot pre@#di"e SI<Is ri3hts. As stated earlier, the assi3n*ent ofthe e notes operated to "reate a separate and independento1li3ation on the part of C6I to SI<I, distin"t and separate fro*C6Is o1li3ations to Delta. And sin"e there !as a preio#sreo"ation of Deltas a#thorit$ to "olle"t for SI<I, Delta !as nolon3er SI<Is "olle"tin3 a3ent. C6I, in t#rn, 5ne! of the assi3n*ent

and Deltas la"5 of a#thorit$ to "o*pro*ise the s#1@e"t notes, $et itreadil$ a3reed to the fore"los#re. To san"tion C6Is ar3#*ent andto appl$ Arti"le %0>0 =)? to this "ase !o#ld !or5 in@#sti"e to SI0-')(%2 the 1#ses Delta earlieretra@#di"iall$ fore"losed on April ', %2>/, in Ciil Case No. ((')-7,did not operate to render the "o*pro*ise a3ree*ent and thefore"los#re 1indin3 on SI<I. At the ti*e SI0-')(%2, the said 1#ses alread$ pertained to Delta 1$ irt#e ofthe April ', %2>/ a#"tion sale. C6I no lon3er had an$ interest inthe said 1#ses. 9nder the "ir"#*stan"es, !e "annot see ho! SI<Is1elated a"#isition of the fore"losed 1#ses operates to hold the

@#d3*ent of "o*pro*ise in Ciil Case No. ((')-7 and thefore"los#re sale of April ', %2>/, done p#rs#ant to the said !rit ofee"#tion aMe"ted onl$ the eleen =%%? other pro*issor$ notes"oered 1$ the "o*pro*ise a3ree*ent and the @#d3*ent on"o*pro*ise in Ciil Case No. ((')-7.

In s#pport of its third assi3n*ent of error, C6I *aintains that there

!as no 1asis for SI<Is appli"ation for a !rit of preli*inar$atta"h*ent.+/& A""ordin3 to C6I, it "o**itted no fra#d in"ontra"tin3 its o1li3ation #nder the e pro*issor$ notes 1e"a#se it!as nan"iall$ so#nd !hen it iss#ed the said notes on April ',%2>(.+// C6I also asserts that at no ti*e did it falsel$ represent toSI A""ordin3 to C6I, it !as not 3#ilt$ offra#d#lent "on"eal*ent, re*oal, or disposal, or of fra#d#lent intentto "on"eal, re*oe, or dispose of its properties to defra#d its"reditorsF+/2 and that SI<Is 1are alle3ations on this *atter !ereins#L"ient for the preli*inar$ atta"h*ent of C6Is properties.+>(

The #estion !hether the atta"h*ent of the siteen =%&? 1#ses !as

alid and in a""ordan"e !ith la!, ho!eer, has alread$ 1eenresoled !ith nalit$ 1$ the Co#rt of Appeals in CA-G.R. S7 No.(>)/&. In its J#l$ )%, %2>/, de"ision, the Co#rt of Appeals #pheldthe le3alit$ of the !rit of preli*inar$ atta"h*ent SI<I o1tained andr#led that the trial "o#rt @#d3e a"ted !ith 3rae a1#se of dis"retionin dis"har3in3 the !rit of atta"h*ent despite the "lear presen"e of adeter*ined s"he*e on the part of C6I to dispose of its propert$.Considerin3 that the said Co#rt of Appeals de"ision has alread$attained nalit$ on A#3#st '', %2>/, there eists no reason toresole this #estion ane!. Reasons of p#1li" poli"$, @#di"ialorderliness, e"ono*$ and @#di"ial ti*e and the interests of liti3antsas !ell as the pea"e and order of so"iet$, all re#ire that sta1ilit$ 1e

a""orded the sole*n and nal @#d3*ents of "o#rts or tri1#nals of"o*petent @#risdi"tion.+>%

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oblicon cases 1156-1304

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