oblicon cases 3rd set

8/20/2019 Oblicon Cases 3rd Set

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G.R. No. L-16449 August 31, 1962

PAUL SCHENKER, plaintif-appellant,

vs.

WILLIAM F. GEMPERLE, deendant-appellee.

Campos, Mendoza & Hernandez, Jose C. Zulueta and A.

R. Narvasa for plainti-appellant.

Angel . !am"oa for defendant-appellee.

PAREES, J.!

The amended complaint, in a nutshell, avers that

sometime in the summer o 1953, at Zurich,

Switzerland, plaintif aul Schen!er and deendant"illiam #. $emperle a%reed to or%anize a hilippine

&orporation, later named as 'The hilippine Swiss

Tradin% &o., (nc.', and to divide the capital stoc! e)uall*

+etween themselves andor their associates. This ver+al

a%reement was ac!nowled%ed and conrmed in writin%

+* deendant in his letter o Septem+er 1, 1953 /0nne

0, amended complaint2. eendant caused articles o

incorporation to +e drated and sent to plaintif at

Zurich. (n a moment o indiscretion and mista!en trust,accordin% to him, the plaintif si%ned and remitted to

the deendant at 4anila, the said articles which placed

in the name o plaintif onl* 6 o the total

su+scription and the +alance o 786 +ein% in the name

o deendant and his relatives. plainin% the

discrepanc* +etween the articles and their ver+al

covenant, the deendant stated in said letter 0nne 0,

that 'Temporaril*, ( had to place in m* name 756 o the

shares +ecause there is a local law which provides that

when one intends to ma!e contracts with the

%overnment, 756 o the su+scri+ed capital has to +e

#ilipino as otherwise the #la% :aw will +e applied.' (n the

same letter, how ever deendant assured the plaintif

that he would %ive the latter 'eactl* the same share

holdin% as ( have'. The plaintif paid to the deendantthe sum o 7,;;;. or his su+scription. (n view o the

consistent reusal o the deendant to live up to their

a%reement, notwithstandin% repeated demands, the

plaintif led the present complaint, pra*in% that

deendant +e condemned<

/a2 upon the rst cause o action, to transer or

cause to +e transerred or assi%ned to the plaintif

86 o the entire capital stoc! issued andsu+scri+ed, as o the date he o+e*s said

=ud%ment, o hilippine Swiss Tradin% &o., (nc., or

enou%h thereo to ma!e the plaintif>s interest and

participation in said corporation total 5;6 o said

entire capital stoc! issued an su+scri+ed, which

ever ma* +e more?

/+2 upon the second cause o action, to return to

the plaintif or properl* account to him or the

unepended +alance, in the sum o ,;;;.;;,

hilippine &urrenc*, o the remittance alle%ed in

para%raph 1@/a2 o the complaint?

/c2 Apon the third cause o action, to pa* the

plaintif the sum o 5,;;;.;;, hilippine

&urrenc*, +* wa* o recompense or +usiness lost,

prots unrealized and %oodwill impaired ordestro*ed? and



/d2 upon all three causes o actions, to pa* the

plaintif the additional sum o 1;;,;;;.;;,

hilippine &urrenc*, .... The plaintif also pra*s or

costs, and or such other an urther relie as to the

&ourt ma* appear =ust and e)uita+le.

0n 0nswer was led, with the customar*admissions an denials and with aBrmative

deenses and counterclaims.

Cn Dovem+er 1, 195@, the deendant led a pleadin%

st*led 'maniestation and motion to dismiss' /Section

1; Eule 92 F alle%in% that F '"ith reerence to the rst

cause o action, the amended complaint states no cause

o action'.

(n support o the motion to dismiss, deendant claimed

that

There is no alle%ation in the amended complaint

that the alle%ed o+li%ation o the deendant to

have the plaintif>s share holdin% in the capital

stoc! su+scri+ed in 0rticles o (ncorporation in the

proportion o 5;6 thereo is alread#

due.$%p'($.)*t

Such +ein% the situation, the demands alle%edl*

made upon the deendant or his compliance with

the o+li%ation sued upon have +een utile,

+ecause le%all* the alle%ed o+li%ation is not *et

due. +t not 'aving ed a period for its

ompliane, t'ere 'as "een no default t'ereof.

(n his opposition to the motion to dismiss, led on

Dovem+er 3, 195@, plaintif contended that the oral

a%reement was the actual as well as the epressed

+asis o plaintif>s cause o action? the letter 0nne 0,

was not the a%reement +ut onl* an evidence o it and i

the reerences o 0nne 0 were deleted rom the

amended complaint, the latter would not, or thatreason alone, cease to state a cause o action? the

o+li%ation +ein% pure, it is demanda+le immediatel*

/0rt. 1179, &ivil &ode2? the lin% o the complaint itsel

constituted a =udicial demand or perormance, there+*

ma!in% the deendant>s o+li%ation to +ecome due? even

i 0nne 0 is considered as the +asis o the action, it is

still a pure o+li%ation, +ecause it sa*s 'will %ive *ou,

however, eactl* the same share holdin% as ( have' F

which imparts an unconditional promise? and supposin%

that rom the alle%ations o the complaint, it ma*

reasona+l* +e inerred that it was intended to %ive the

deendant time to ulll his o+li%ation, the present

action can +e considered one or the in% o such time

/0rt. 1197, &ivil &ode2.

Cn Septem+er 3;, 1959? the trial court %ranted the

motion to dismiss in so ar as the rst cause o action isconcerned, predicatin% its rulin% upon the ollowin%

considerations< that the a%reement did not the time

within which the deendant sou%ht to perorm its

alle%ed promise and, thereore, the o+li%ation was not

due and the action or its compliance was premature

/Garreto v. &it* o 4anila, 7 hil. 18-;2? that the

o+li%ation is not pure, +ecause its compliance is

dependent upon a uture or uncertain event? that the

alle%ed oral a%reement had +een novated, ater the



eecution o the articles o incorporation, and that the

action +ein% or specic perormance and there +ein% a

need to the period or compliance o the a%reement

and the present complaint does not alle%e acts or lac!s

the characteristics or an action to the period, a

separate action to that efect should have +een led,

+ecause the action to that efect +e +rou%ht in order tohave a term ed is diferent rom the action to enorce

the o+li%ation? thus conve*in% the notion that the in%

o the period is incompati+le with an action or specic

perormance. laintif appealed )uestions o law.

0rticle 1197 o the &ivil &ode, provides F

( the o+li%ation does not a period, +ut rom its

nature and the circumstances it can +e inerredthat a period was intended, the courts ma* the

duration thereo.

The courts shall also the duration o the period

when it depends upon the will o the de+tor.

(n ever* case, the courts shall determine such

period ma* under the circumstances have +een

pro+a+l* contemplate +* the parties. Cnce ed+* the courts, the period cannot +e chan%ed +*

them.

The ultimate acts to +e alle%ed in a complaint to

properl* and ade)uatel* plead the ri%ht o action

%ranted the a+ove )uoted provision o law are /12 #acts

showin% that a contract was entered into, imposin% on

one the parties an o+li%ation or o+li%ations in avor o

the other? /2 #acts showin% that the perormance o the

o+li%ation was let to the will o the o+li%or or clean

showin% or rom which an inerence ma* reasona+l*

drawn, that a period was intended +* the parties. The

rst cause o action, under consideration, sets out act

descri+in% an o+li%ation with an indenite period, there

+* +rin%in% the case within the pale o the article a+ove

)uoted, al+eit it ails to specicall* and cate%oricall*demand that the court the duration o the period.

Ander the circumstances, the court could render

=ud%ment %rantin% the remed* indicated in said article

1197, notwithstandin% standin% the act that the

complaint does not positive and +* eplicit epression

as! or such relie. "hat determines the nature and

character o an action is not the pra*er +ut the essential

+asic alle%ations o act set orth in the pertinent

pleadin%. 0 =ud%ment ma* %rant the relie to which a

part* in whose avor it is entered is entitled, even i the

part* has not demanded such relie in his pleadin%s

/Sec. 9, Eule 35? Ga%uioro v. Garrios, 77 hil. 1;2. The

amended complaint in )uestion moreover, 'pra*s or . . .

such other and urther relie as the &ourt ma* appear

=ust and e)uita+le' which is +road and comprehensive

enou%h, to =usti* the etension o a remed# dierent

from or toget'er it', t'e rig't to +e declared owner orto recover the ownership or the possession o Twent*-si

/862 percent o the capital stoc! o the hilippine

Swiss Tradin% &o., (nc. presentl* in the name o the

deendant. The case o /arrette v. Cit# of Manila, supra,

cited +* the trial court, is o little help to the deendant-

appellee. (t stren%thens rather the plaintif-appellant>s

position. (n the Garreto case as in the present, the

essential alle%ations o the pleadin%s made out an

o+li%ation su+=ect to an indenite period. (n the Garretto



case, li!e the one at +ar, the complaint did not ris! or

the in% o the period, +ut or immediate and more

positive relie, *et this &ourt remanded the said case to

the court o ori%in 'or determination o the time within

which the conti%uous propert* must +e ac)uired +* the

cit* in order to compl* with the condition o the

donation' F all o which %o to show that the in% othe period in the case at +ar, ma* andor could +e

properl* underta!en +* the trial court.

ven discardin% the a+ove considerations, still there is

no %ainsa*in% the act that the o+li%ation in )uestion, is

pure, +ecause 'its perormance does not depend upon a

uture or uncertain event or upon a past event un!nown

to the parties' and as such, 'is demanda+le at once'

/0rt. 1179, Dew Hor! &ode2. (t was so understood andtreated +* the deendant-appellee himsel. The

immediate pa*ment +* the plaintif-appellant o his

su+scriptions, ater the or%anization o the corporation,

can onl* mean that the o+li%ation should +e

immediatel* ullled. %ivin% the deendant onl* such

time as mi%ht reasona+l* +e necessar* or its actual

ulllment. The contract was to or%anize the corporation

and to divide e)uall*, ater its or%anization, its capitalstoc!.

(D I(" JEC#, the order appealed rom is reversed

and the case remanded to the court o ori%in, or urther

and appropriate proceedin%s. Do costs.

/engzon, C.J., /autista Angelo, 0a"rador, Conepion,

Re#es, J./.0., /arrera, 1izon, Regala and Ma2alintal,

JJ.,concur.

MILA A. RE"ES ,

etitioner,

- versus -

#IC$%RIA $. $UPARAN,

Eespondent.

G.R. No. 1&&'64

resent<

&0E(C, J., C'airperson,

D0&JAE0,

E0:T0,

0G0, and

4DCZ0, JJ.

romul%ated<

Kune 1, ;11

L-----------------------------------------------------------------------------------------------------L

E C I S I % N



MENDOZA, J.:

Su+=ect o this petition or review is the #e+ruar*13, ;;9 ecisionM1N o the &ourt o 0ppeals 3CA4 whichaBrmed with modication the #e+ruar* , ;;8

ecision

MN

o the Ee%ional Trial &ourt, Granch 17,Ialenzuela &it* 3R5C4, in &ivil &ase Do. 395-I-9, anaction or Eescission o &ontract with ama%es.

Cn Septem+er 1;, 199, 4ila 0.Ee*es 3petitioner4 led a complaint or Eescission o &ontract with ama%es a%ainst Iictoria T.

Tuparan 3respondent4 +eore the ET&. (n her &omplaint,petitioner alle%ed, amon% others, that she was the

re%istered owner o a 1,7 s)uare meter residentialand commercial lot located inOaruhatan, Ialenzuela &it*, and covered +* T&T Do. I-13;? that on that propert*, she put up a three-store*commercial +uildin% !nown as EGK Guildin% and aresidential apartment +uildin%? that since 199;, she had+een operatin% a dru%store and cosmetics store on the%round Poor o EGK Guildin% where she also had +eenresidin% while the other areas o the +uildin%s includin%the sidewal!s were +ein% leased and occupied +*

tenants and street vendors.

(n ecem+er 19@9, respondent leased rompetitioner a space on the %round Poor o the EGK Guildin% or her pawnshop +usiness or amonthl* rental o Q,;;;.;;. 0 close riendshipdeveloped +etween the two which led to the respondentinvestin% thousands o pesos in petitioners

nancin%lendin% +usiness rom#e+ruar* 7, 199; to 4a*7, 199;, with interest at the rate o 86 a month.

Cn Kune ;, 19@@, petitioner mort%a%ed thesu+=ect real properties to the #armers Savin%s Gan! and:oan Gan!, (nc. 360 /an24 to secure a loan o Q,;;;,;;;.;; pa*a+le in installments. Cn Dovem+er15, 199;, petitioners outstandin% account on the

mort%a%e reached Q,7@,;[email protected]. etitioner thendecided to sell her real properties or at leastQ8,5;;,;;;.;; so she could li)uidate her +an! loan andnance her +usinesses. 0s a %esture o riendship,respondent ver+all* ofered to conditionall* +u*petitioners real properties or Q,;;,;;;.;; pa*a+le oninstallment +asis without interest and to assume the+an! loan. To induce the petitioner to accept her ofer,respondent ofered the ollowin%conditionsconcessions<

1. That the conditional sale will +ecancelled i the plaintif / petitioner 2 can nda +u*er o said properties or the amount o Q8,5;;,;;;.;; within the net three /32months provided all amounts received +*the plaintif rom the deendant/respondent 2 includin% pa*ments actuall*made +* deendant to #armers Savin%s and:oan Gan! would +e reunded to thedeendant with additional interest o si/862 monthl*?

. That the plaintif would continueusin% the space occupied +* her anddru%store and cosmetics store without an*rentals or the duration o the installment

pa*ments?

http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/188064.htm#_ftn1






3. That there will +e a lease or teen/152 *ears in avor o the plaintif over thespace or dru%store and cosmetics store at amonthl* rental o onl* Q@,;;;.;; ater ullpa*ment o the stipulated installment

pa*ments are made +* the deendant?

. That the deendant will underta!ethe renewal and pa*ment o the reinsurance policies on the two /2 su+=ect+uildin%s ollowin% the epiration o the theneistin% re insurance polic* o the plaintif up to the time that plaintif is ull* paid o the total purchase price o Q,;;,;;;.;;.M3N

0ter petitioners ver+al acceptance o all theconditionsconcessions, +oth parties wor!ed to%ether too+tain #S: Gan!s approval or respondent to assume her/petitioners2 outstandin% +an! account. The assumptionwould +e part o respondents purchase price orpetitioners mort%a%ed real properties. #S: Gan!approved their proposal on the condition that petitioner

would si%n or remain as co-ma!er or the mort%a%eo+li%ation assumed +* respondent.

Cn Dovem+er 8, 199;, the parties and #S: Gan!eecuted the correspondin% eed o &onditional Sale o Eeal roperties with 0ssumption o 4ort%a%e. ue totheir close personal riendship and +usinessrelationship, +oth parties chose not to reduce intowritin% the other terms o their a%reement mentioned inpara%raph 11 o the complaint. Gesides, #S: Gan! did

not want to incorporate in the eed o &onditional Saleo Eeal roperties with 0ssumption o 4ort%a%e an*other side a%reement +etween petitioner andrespondent.

Ander the eed o &onditional Sale o Eealroperties with 0ssumption o 4ort%a%e, respondentwas +ound to pa* the petitioner a lump sum o Q1.million pesos without interest as part o the purchaseprice in three /32 ed installments as ollows<

a2 Q;;,;;;.;; due Kanuar* 31, 1991

+2 Q;;,;;;.;; due Kune 3;, 1991

c2 Q@;;,;;;.;; due ecem+er 31, 1991

Eespondent, however, deaulted in the pa*mento her o+li%ations on their due dates. (nstead o pa*in%the amounts due in lump sum on their respectivematurit* dates, respondent paid petitioner in smallamounts rom time to time. To compensate or herdela*ed pa*ments, respondent a%reed to pa* petitioner

an interest o 86 a month. 0s o 0u%ust 31, 199,respondent had onl* paid Q395,;;;.;;, leavin% a+alance o Q@;5,;;;.;; as principal on the unpaidinstallments and Q88,@93.5 as unpaid accumulatedinterest.

etitioner urther averred that despite her successin ndin% a prospective +u*er or the su+=ect realproperties within the 3-month period a%reed upon,respondent rene%ed on her promise to allow the





cancellation o their deed o conditional sale. (nstead,respondent +ecame interested in ownin% the su+=ectreal properties and even wanted to convert the entirepropert* into a modern commercial comple.Donetheless, she consented +ecause respondentrepeatedl* proessed riendship and assured her that alltheir ver+al side a%reement would +e honored as shown

+* the act that since ecem+er 199;, she /respondent2had not collected an* rentals rom the petitioner or thespace occupied +* her dru%store and cosmetics store.

Cn 4arch 19, 199, the residential +uildin% was%utted +* re which caused the petitioner to lose rentalincome in the amount o Q@,;;;.;; a month since 0pril199. Eespondent ne%lected to renew the re insurance

polic* on the su+=ect +uildin%s.

Since ecem+er 199;, respondent had ta!enpossession o the su+=ect real properties and had +eencontinuousl* collectin% and receivin% monthl* rentalincome rom the tenants o the +uildin%s and vendors o the sidewal! rontin% the EGK +uildin% without sharin% itwith petitioner.

Cn Septem+er , 199, respondent ofered theamount o Q751,;;;.;; onl* pa*a+le on Septem+er 7,199, as ull pa*ment o the purchase price o thesu+=ect real properties and demanded the simultaneouseecution o the correspondin% deed o a+solute sale.

R(s)o*+(*ts A*s(

Eespondent countered, amon% others, that thetripartite a%reement erroneousl* desi%nated +* thepetitioner as a eed o &onditional Sale o Eeal ropert*with 0ssumption o 4ort%a%e was actuall* a pure anda+solute contract o sale with a term period. (t could not+e considered a conditional sale +ecause the ac)uisitiono contractual ri%hts and the perormance o the

o+li%ation therein did not depend upon a uture anduncertain event. 4oreover, the capital %ains anddocumentar* stamps and other miscellaneous epensesand real estate taes up to 199; were supposed to +epaid +* petitioner +ut she ailed to do so.

Eespondent urther averred that she successull*rescued the properties rom a denite oreclosure +*

pa*in% the assumed mort%a%e in the amount o Q,7@,;[email protected] plus interest and other nance char%es.Gecause o her pa*ment, she was a+le to o+tain a deedo cancellation o mort%a%e and secure a release o mort%a%e on the su+=ect real properties includin%petitioners ancestral residential propert* in Sta. 4aria,Gulacan.

etitioners claim or the +alance o the purchase

price o the su+=ect real properties was +aseless andunwarranted +ecause the ull amount o the purchaseprice had alread* +een paid, as she did pa* more thanQ,;;,;;;.;;, the a%reed purchase price o the su+=ectreal properties, and she had even introducedimprovements thereon worth more than Q,@;;,;;;.;;.0s the parties could no lon%er +e restored to theirori%inal positions, rescission could not +e resorted to.



Eespondent added that as a result o their+usiness relationship, petitioner was a+le to o+tain romher a loan in the amount o Q;;,;;;.;; with interestand too! several pieces o =ewelr* worth Q1;,;;;.;;.etitioner also ailed and reused to pa* the monthl*rental o Q;,;;;.;; since Dovem+er 18, 199; up to thepresent or the use and occupanc* o the %round Poor o

the +uildin% on the su+=ect real propert*, thus,accumulatin% arreara%es in the amount o Q7;,;;;.;;as o Ccto+er 199.

Ru/*g o0 t( R$C

Cn #e+ruar* , ;;8, the ET& handed down its decision

ndin% that respondent ailed to pa* in ull the Q.million total purchase price o the su+=ect real propertiesleavin% a +alance o Q@;5,;;;.;;. (t stated that thechec!s and receipts presented +* respondent reer toher pa*ments o the mort%a%e o+li%ation with #S: Gan!and not the pa*ment o the +alance o Q1,;;,;;;.;;.

The ET& also considered the eed o &onditional Sale o Eeal ropert* with 0ssumption o 4ort%a%e eecuted +*and amon% the two parties and #S: Gan! a contract tosell, and not a contract o sale. (t was o the opinion that

althou%h the petitioner was entitled to a rescission o the contract, it could not +e permitted +ecause her non-pa*ment in ull o the purchase price ma* not +econsidered as su+stantial and undamental +reach o the contract as to deeat the o+=ect o the parties inenterin% into the contract.MN The ET& +elieved that therespondents ofer stated in her counsels letterdatedSeptem+er , 199 to settle what she thou%ht washer unpaid +alance o Q751,;;;.;; showed her sincerit*and willin%ness to settle her o+li%ation. Jence, it would

+e more e)uita+le to %ive respondent a chance to pa*the +alance plus interest within a %iven period o time.

#inall*, the ET& stated that there was no actual or le%al+asis to award dama%es and attorne*s ees +ecausethere was no proo that either part* acted raudulentl*or in +ad aith.

Thus, the dispositive portion o the ET& ecisionreads<

"JE#CE, =ud%ment is here+*rendered as ollows<

1. 0llowin% the deendant to pa* theplaintif within thirt* /3;2 da*s rom thenalit* hereo the amount o Q@;5,;;;.;;,representin% the unpaid purchase price o the su+=ect propert*, with interest thereonat 6 a month rom Kanuar* 1, 199 untilull* paid. #ailure o the deendant to pa*

said amount within the said period shallcause the automatic rescission o thecontract /eed o &onditional Sale o Eealropert* with 0ssumption o 4ort%a%e2 andthe plaintif and the deendant shall +erestored to their ormer positions relative tothe su+=ect propert* with each returnin% tothe other whatever +enets each derivedrom the transaction?





. irectin% the deendant to allow theplaintif to continue usin% the spaceoccupied +* her or dru%store and cosmeticstore without an* rental pendin% pa*ment o the aoresaid +alance o the purchase price.

3. Crderin% the deendant, upon herull pa*ment o the purchase price to%etherwith interest, to eecute a contract o leaseor teen /152 *ears in avor o the plaintif over the space or the dru%store andcosmetic store at a ed monthl* rentalo Q@,;;;.;;? and

. irectin% the plaintif, upon ullpa*ment to her +* the deendant o thepurchase price to%ether with interest, toeecute the necessar* deed o sale, as wellas to pa* the &apital $ains Ta,documentar* stamps and othermiscellaneous epenses necessar* orsecurin% the G(E &learance, and to pa* thereal estate taes due on the su+=ectpropert* up to 199;, all necessar* to

transer ownership o the su+=ect propert*to the deendant.

Do pronouncement as to dama%es,attorne*s ees and costs.

SC CEE.M5N

Ru/*g o0 t( CA

Cn #e+ruar* 13, ;;9, the &0 rendered its decisionaBrmin% with modication the ET& ecision. The &0a%reed with the ET& that the contract entered into +*the parties is a contract to sell +ut ruled that theremed* o rescission could not appl* +ecause therespondents ailure to pa* the petitioner the +alance o the purchase price in the total amount o Q@;5,;;;.;;was not a +reach o contract, +ut merel* an event thatprevented the seller /petitioner2 rom conve*in% title tothe purchaser /respondent2. (t reasoned that out o thetotal purchase price o the su+=ect propert* in theamount o Q,;;,;;;.;;, respondents remainin%unpaid +alance was onl* Q@;5,;;;.;;. Since respondent

had alread* paid a su+stantial amount o the purchaseprice, it was +ut ri%ht and =ust to allow her to pa* theunpaid +alance o the purchase price plus interest.

Thus, the decretal portion o the &0 ecision reads<

"JE#CE, premises considered,the ecision dated #e+ruar* ;;8 andCrder dated ecem+er ;;8 o theEe%ional Trial &ourt o Ialenzuela &it*,

Granch 17 in &ivil &ase Do. 395-I-9 are0##(E4 with 4C(#(&0T(CD in thatdeendant-appellant Iictoria T. Tuparan ishere+* CEE to pa* plaintif-appelleeappellant 4ila 0. Ee*es, within 3;da*s rom nalit* o this ecision, theamount o Q@;5,;;;.;; representin% theunpaid +alance o the purchase price o thesu+=ect propert*, plus interest thereon atthe rate o 86 per annum rom 11

Septem+er 199 up to nalit* o this





ecision and, thereater, at the rate o 16per annum until ull pa*ment. The rulin% o the trial court on the automatic rescission o the eed o &onditional Sale with0ssumption o 4ort%a%e is here+* :T.Su+=ect to the ore%oin%, the dispositiveportion o the trial courts decision is

0##(E4 in all other respects.

SC CEE.M8N

0ter the denial o petitioners motion orreconsideration and respondents motion or partialreconsideration, petitioner led the su+=ect petition or

review pra*in% or the reversal and settin% aside o the&0 ecision anchored on the ollowin%

ASSIGNMEN$ %F ERR%RS

A. $HE C%UR$ %F APPEALSSERI%USL" ERRE AN AUSE I$SISCRE$I%N IN ISALL%WING $HE%U$RIGH$ RESCISSI%N %F $HE SUEC$EE %F C%NI$I%NAL SALE %F REALPR%PER$IES WI$H ASSUMP$I%N %FM%R$GAGE %N $HE GR%UN $HA$

RESP%NEN$ $UPARANS FAILURE $%PA" PE$I$I%NER RE"ES $HE ALANCE%F $HE PURCHASE PRICE %F&'5,'''.'' IS N%$ A REACH %FC%N$RAC$ ESPI$E I$S %WN FININGS$HA$ PE$I$I%NER S$ILL RE$AINS%WNERSHIP AN $I$LE %#ER $HESUEC$ REAL PR%PER$IES UE $%RESP%NEN$S REFUSAL $% PA" $HEALANCE %F $HE $%$AL PURCHASE

PRICE %F &'5,'''.'' WHICH IS EUAL$% 2'7 %F $HE $%$AL PURCHASEPRICE %F 4,2'','''.'' %R 667 %F$HE S$IPULA$E LAS$ INS$ALLMEN$%F 1,2'','''.'' PLUS $HE IN$ERES$$HERE%N. IN EFFEC$, $HE C%UR$ %FAPPEALS AFFIRME AN A%P$E $HE$RIAL C%UR$S C%NCLUSI%N $HA$ $HERESP%NEN$S N%N-PA"MEN$ %F $HE&'5,'''.'' IS %NL" A SLIGH$ %R

CASUAL REACH %F C%N$RAC$.

. $HE C%UR$ %F APPEALS SERI%USL"ERRE AN AUSE I$S ISCRE$I%N INISREGARING AS GR%UN F%R $HERESCISSI%N %F $HE SUEC$ C%N$RAC$ $HE%$HER FRAUULEN$ AN MALICI%US AC$SC%MMI$$E " $HE RESP%NEN$ AGAINS$

$HE PE$I$I%NER WHICH " $HEMSEL#ESSUFFICIEN$L" US$IF" A ENIAL %F A GRACE





PERI% %F $HIR$" 83' A"S $% $HERESP%NEN$ WI$HIN WHICH $% PA" $% $HEPE$I$I%NER $HE &'5,'''.'' PLUSIN$ERES$ $HERE%N.

C. E#EN ASSUMING ARGUEN%$HA$ PE$I$I%NER IS N%$ EN$I$LE $%$HE RESCISSI%N %F $HE SUEC$C%N$RAC$, $HE C%UR$ %F APPEALSS$ILL SERI%USL" ERRE AN AUSEI$S ISCRE$I%N IN REUCING $HEIN$ERES$ %N $HE &'5,'''.'' $%%NL" 67 PER ANNUM S$AR$ING FR%M$HE A$E %F FILING %F $HEC%MPLAIN$ %N SEP$EMER 11, 1992

ESPI$E $HE PERS%NAL C%MMI$MEN$%F $HE RESP%NEN$ AN AGREEMEN$E$WEEN $HE PAR$IES $HA$RESP%NEN$ WILL PA" IN$ERES$ %N$HE &'5,'''.'' A$ $HE RA$E %F 67M%N$HL" S$AR$ING $HE A$E %FELINUENC" %N ECEMER 31, 1991.

. $HE C%UR$ %F APPEALS

SERI%USL" ERRE AN AUSE I$SISCRE$I%N IN $HE APPRECIA$I%NAN:%R MISAPPRECIA$I%N %F FAC$SRESUL$ING IN$% $HE ENIAL %F $HECLAIM %F PE$I$I%NER RE"ES F%RAC$UAL AMAGES WHICHC%RRESP%N $% $HE MILLI%NS %FPES%S %F REN$ALS:FRUI$S %F $HESUEC$ REAL PR%PER$IES WHICHRESP%NEN$ $UPARAN C%LLEC$E

C%N$INU%USL" SINCE ECEMER 199',

E#EN WI$H $HE UNPAI ALANCE %F&'5,'''.'' AN ESPI$E $HE FAC$$HA$ RESP%NEN$ I N%$C%N$R%#ER$ SUCH CLAIM %F $HEPE$I$I%NER AS C%N$AINE IN HERAMENE C%MPLAIN$ A$E APRIL 22,2''6.

E. $HE C%UR$ %F APPEALSSERI%USL" ERRE AN AUSE I$SISCRE$I%N IN $HE APPRECIA$I%N %FFAC$S RESUL$ING IN$% $HE ENIAL %F$HE CLAIM %F PE$I$I%NER RE"ES F%R$HE 29,6'9.'' ACK REN$ALS $HA$WERE C%LLEC$E " RESP%NEN$

$UPARAN FR%M $HE %L $ENAN$S %F$HE PE$I$I%NER.

F. $HE C%UR$ %F APPEALSSERI%USL" ERRE AN AUSE I$SISCRE$I%N IN EN"ING $HEPE$I$I%NERS EARLIER URGEN$ M%$I%NF%R ISSUANCE %F A PRELIMINAR" MANA$%R" AN PR%HII$%R"

INUNC$I%N A$E UL" ;, 2''& AN$HE SUPPLEMEN$ $HERE$% A$EAUGUS$ 4, 2''& $HERE" C%N%NING$HE UNUS$IFIALE FAILURE:REFUSAL%F UGE FL%R% ALE% $% RES%L#EWI$HIN ELE#EN 811 "EARS $HEPE$I$I%NERS $HREE 83 SEPARA$EM%$I%NS F%R PRELIMINAR" INUNC$I%N: $EMP%RAR" RES$RAINING%RER, ACC%UN$ING AN EP%SI$ %F

REN$AL INC%ME A$E MARCH 1;,



1995, AUGUS$ 19, 1996 AN ANUAR" ;, 2''6 $HERE" PERMI$$ING $HERESP%NEN$ $% UNUS$L" ENRICHHERSELF " C%N$INU%USL" C%LLEC$ING ALL $HE REN$ALS:FRUI$S%F $HE SUEC$ REAL PR%PER$IESWI$H%U$ AN" ACC%UN$ING AN

C%UR$ EP%SI$ %F $HE C%LLEC$EREN$ALS:FRUI$S AN $HEPE$I$I%NERS URGEN$ M%$I%N $%IREC$ EFENAN$ #IC$%RIA$UPARAN $% PA" $HE ACCUMULA$EUNPAI REAL ES$A$E $A<ES AN SEF$A<ES %N $HE SUEC$ REALPR%PER$IES A$EANUAR" 13,2''; $HERE" E<P%SING $HE SUEC$REAL PR%PER$IES $% IMMINEN$

AUC$I%N SALE " $HE CI$" $REASURER%F#ALEN=UELA CI$".

G. $HE C%UR$ %F APPEALSSERI%USL" ERRE AN AUSE I$SISCRE$I%N IN EN"ING $HEPE$I$I%NERS CLAIM F%R M%RAL ANE<EMPLAR" AMAGES AN A$$%RNE"S

FEES AGAINS$ $HE RESP%NEN$.

(n sum, the crucial issue that needs to +e resolvedis whether or not the &0 was correct in rulin% that therewas no le%al +asis or the rescission o the eed o &onditional Sale with 0ssumption o 4ort%a%e.

Pos/t/o* o0 t( P(t/t/o*(

The petitioner +asicall* ar%ues that the &0 should have%ranted the rescission o the su+=ect eed o &onditional Sale o Eeal roperties with 0ssumption o 4ort%a%e or the ollowin% reasons<

1. The su+=ect deed o conditional saleis a reciprocal o+li%ation whose outstandin%characteristic is reciprocit* arisin% romidentit* o cause +* virtue o which oneo+li%ation is correlative o the other.

. The petitioner was rescindin% not

enorcin% the su+=ect eed o &onditionalSale pursuant to 0rticle 1191 o the &ivil&ode +ecause o the respondentsailurereusal to pa* the Q@;5,;;;.;;+alance o the total purchase price o thepetitioners properties within the stipulatedperiod endin% ecem+er 31, 1991.

3. There was no sli%ht or casual

+reach on the part o the respondent+ecause she /respondent2 deli+eratel* ailedto compl* with her contractual o+li%ationswith the petitioner +* violatin% the terms ormanner o pa*ment o the Q1,;;,;;;.;;+alance and un=ustl* enriched hersel at theepense o the petitioner +* collectin% allrental pa*ments or her personal +enetand en=o*ment.



#urthermore, the petitioner claims that therespondent is lia+le to pa* interest at the rate o 86 permonth on her unpaid installment o Q@;5,;;;.;; romthe date o the delin)uenc*, ecem+er 31, 1991,+ecause she o+li%ated hersel to do so.

#inall*, the petitioner asserts that her claim or

dama%es or lost income as well as or the +ac! rentalsin the amount o Q9,8;9.;; has +een ull*su+stantiated and, thereore, should have +een %ranted+* the &0. Jer claim or moral and eemplar* dama%esand attorne*s ees has +een li!ewise su+stantiated.

Pos/t/o* o0 t( R(s)o*+(*t

The respondent counters that the su+=ect eed o &onditional Sale with 0ssumption o 4ort%a%e enteredinto +etween the parties is a contract to sell and not acontract o sale +ecause the title o the su+=ectproperties still remains with the petitioner as she ailedto pa* the installment pa*ments in accordance withtheir a%reement.

Eespondent echoes the ET& position that her ina+ilit* topa* the ull +alance on the purchase price ma* not +econsidered as a su+stantial and undamental +reach o the su+=ect contract and it would +e more e)uita+le i she would +e allowed to pa* the +alance includin%interest within a certain period o time. She claims thatas earl* as 199, she has shown her sincerit* +*oferin% to pa* a certain amount which was, however,re=ected +* the petitioner.

#inall*, respondent states that the su+=ect deed o conditional sale eplicitl* provides that the installmentpa*ments shall not +ear an* interest. 4oreover,petitioner ailed to prove that she was entitled to +ac!rentals.

$( Couts Ru/*g

The petition lac!s merit.

The &ourt a%rees with the rulin% o the courts+elow that the su+=ect eed o &onditional Sale with0ssumption o 4ort%a%e entered into +* and amon% thetwo parties and #S: Gan! on Dovem+er 8, 199; is acontract to sell and not a contract o sale. The su+=ectcontract was correctl* classied as a contract to sell+ased on the ollowin% pertinent stipulations<

@. That the title and ownership o thesu+=ect real properties shall remain with the#irst art* until the ull pa*ment o the

Second art* o the +alance o the purchaseprice and li)uidation o the mort%a%eo+li%ation o Q,;;;,;;;.;;. endin%pa*ment o the +alance o the purchaseprice and li)uidation o the mort%a%eo+li%ation that was assumed +* the Secondart*, the Second art* shall not sell,transer and conve* and otherwiseencum+er the su+=ect real propertieswithout the written consent o the #irst and

Third art*.



9. That upon ull pa*ment +* theSecond art* o the ull +alance o thepurchase price and the assumed mort%a%eo+li%ation herein mentioned the Third art*shall issue the correspondin% eed o

&ancellation o 4ort%a%e and the #irst art*shall eecute the correspondin% eed o 0+solute Sale in avor o the Second art*.M7N

Gased on the a+ove provisions, the title andownership o the su+=ect properties remains with thepetitioner until the respondent ull* pa*s the +alance o the purchase price and the assumed mort%a%eo+li%ation. Thereater, #S: Gan! shall then issue the

correspondin% deed o cancellation o mort%a%e and thepetitioner shall eecute the correspondin% deed o a+solute sale in avor o the respondent.

0ccordin%l*, the petitioners o+li%ation to sell thesu+=ect properties +ecomes demanda+le onl* upon thehappenin% o the positive suspensive condition, which isthe respondents ull pa*ment o the purchase price.

"ithout respondents ull pa*ment, there can +e no+reach o contract to spea! o +ecause petitioner has noo+li%ation *et to turn over the title. Eespondents ailureto pa* in ull the purchase price is not the +reach o contract contemplated under 0rticle 1191 o the Dew&ivil &ode +ut rather =ust an event that prevents thepetitioner rom +ein% +ound to conve* title to therespondent. The ;;9 case o Na"us v. Joa7uin & Julia8asonM@N is enli%htenin%<

The &ourt holds that the contractentered into +* the Spouses Da+us andrespondents was a contract to sell, not acontract o sale.

0 contract o sale is dened in 0rticle15@ o the &ivil &ode, thus<

0rt. 15@. G* the contract o sale, oneo the contractin% parties o+li%ates himsel to transer the ownership o and to deliver adeterminate thin%, and the other to pa*thereor a price certain in mone* or itse)uivalent.

Sale, +* its ver* nature, is aconsensual contract +ecause it is perected+* mere consent. The essential elements o a contract o sale are the ollowin%<

a2 &onsent or meetin% o theminds, that is, consent totranser ownership inechan%e or the price?

+2 eterminate su+=ect matter?and

c2 rice certain in mone* or itse)uivalent.







Ander this denition, a &ontract toSell ma* not +e considered as a &ontract o Sale +ecause the rst essential element islac!in%. (n a contract to sell, the prospectiveseller eplicitl* reserves the transer o title

to the prospective +u*er, meanin%, theprospective seller does not as *et a%ree orconsent to transer ownership o thepropert* su+=ect o the contract to sell untilthe happenin% o an event, which orpresent purposes we shall ta!e as the ullpa*ment o the purchase price. "hat theseller a%rees or o+li%es himsel to do is toulll his promise to sell the su+=ect propert*when the entire amount o the purchase

price is delivered to him. (n other words, theull pa*ment o the purchase price parta!eso a suspensive condition, the non-ulllment o which prevents the o+li%ationto sell rom arisin% and, thus, ownership isretained +* the prospective seller withouturther remedies +* the prospective +u*er.

Stated positivel*, upon the ulllmento the suspensive condition which is the ullpa*ment o the purchase price, theprospective sellers o+li%ation to sell thesu+=ect propert* +* enterin% into a contracto sale with the prospective +u*er +ecomesdemanda+le as provided in 0rticle 179 o the &ivil &ode which states<

0rt. 179. 0 promise to +u* and sell adeterminate thin% or a price certain isreciprocall* demanda+le.

0n accepted unilateral promise to +u*or to sell a determinate thin% or a pricecertain is +indin% upon the promissor i thepromise is supported +* a considerationdistinct rom the price.

0 contract to sell ma* thus +e denedas a +ilateral contract where+* theprospective seller, while epressl* reservin%the ownership o the su+=ect propert*

despite deliver* thereo to the prospective+u*er, +inds himsel to sell the said propert*eclusivel* to the prospective +u*er uponulllment o the condition a%reed upon,that is, ull pa*ment o the purchase price.

0 contract to sell as denedhereina+ove, ma* not even +e consideredas a conditional contract o sale where theseller ma* li!ewise reserve title to thepropert* su+=ect o the sale until theulllment o a suspensive condition,+ecause in a conditional contract o sale,the rst element o consent is present,althou%h it is conditioned upon thehappenin% o a contin%ent event which ma*or ma* not occur. ( the suspensivecondition is not ullled, the perection o the contract o sale is completel* a+ated.Jowever, i the suspensive condition is



ullled, the contract o sale is there+*perected, such that i there had alread*+een previous deliver* o the propert*su+=ect o the sale to the +u*er, ownershipthereto automaticall* transers to the +u*er+* operation o law without an* urther acthavin% to +e perormed +* the seller.

(n a contract to sell, upon theulllment o the suspensive condition whichis the ull pa*ment o the purchase price,ownership will not automaticall* transer tothe +u*er althou%h the propert* ma* have+een previousl* delivered to him. Theprospective seller still has to conve* title tothe prospective +u*er +* enterin% into acontract o a+solute sale.

#urther, &hua v. &ourt o 0ppeals,cited this distinction +etween a contract o sale and a contract to sell<

(n a contract o sale, thetitle to the propert* passes tothe vendee upon the deliver* o the thin% sold? in a contract tosell, ownership is, +*a%reement, reserved in thevendor and is not to pass to thevendee until ull pa*ment o thepurchase price. Ctherwisestated, in a contract o sale, thevendor loses ownership over thepropert* and cannot recover it

until and unless the contract isresolved or rescinded? whereas,in a contract to sell, title isretained +* the vendor until ullpa*ment o the price. (n thelatter contract, pa*ment o theprice is a positive suspensive

condition, ailure o which is nota +reach +ut an event thatprevents the o+li%ation o thevendor to conve* title rom+ecomin% efective.

(t is not the title o the contract, +utits epress terms or stipulations thatdetermine the !ind o contract entered into+* the parties. (n this case, the contractentitled eed o &onditional Sale is actuall*a contract to sell. The contract stipulatedthat as soon as the ull consideration o thesale has +een paid +* the vendee, thecorrespondin% transer documents shall +eeecuted +* the vendor to the vendee orthe portion sold. "here the vendor promisesto eecute a deed o a+solute sale upon the

completion +* the vendee o the pa*ment o the price, the contract is onl* a contract tosell. The aorecited stipulation shows thatthe vendors reserved title to the su+=ectpropert* until ull pa*ment o the purchaseprice.



Anortunatel* or the Spouses acson,since the eed o &onditional Sale eecutedin their avor was merel* a contract to sell,the o+li%ation o the seller to sell +ecomesdemanda+le onl* upon the happenin% o thesuspensive condition. The ull pa*ment o the purchase price is the positive

suspensive condition, the ailure o whichis *ot a +reach o contract, +ut simpl* >*(?(*t t>t )(?(*t(+ t( o@/g>t/o* o0 t( ?(*+o to o*?(B t/t( 0o>Du//*g @/*+/*g 0o(. Thus, or its non-ullment, there is no contract to spea! o,the o+li%or havin% ailed to perorm thesuspensive condition which enorces a

=uridical relation. "ith this circumstance,there can +e *o (s/ss/o* or ulllment o

an o+li%ation that is still non-eistent, thesuspensive condition not havin% occurred as*et. mphasis should +e made that t(@(> o*t()>t(+ /* At/( 1191 o0 t( N( C/?/ Co+( /s t( o@/gos0>/u( to o)B /t >* o@/g>t/o*>(>+B (t>*t, *ot > 0>/u( o0 >o*+/t/o* to (*+( @/*+/*g t>to@/g>t/o*. Mmphases and underscorin%suppliedN

&onsistentl*, the &ourt handed down a similarrulin% in the ;1; case o Heirs of Atienza v.9spidol, M9N where it was written<

R(g>+/*g t( /gt to >*( t(o*t>t 0o *o*-)>B(*t o0 >*

/*st>(*t, t(( /s *((+ to /*/t/>B+(t(/*( /0 >t t( )>t/(s >+ >s> o*t>t o0 s>( o > o*t>t tos(. (n a contract o sale, the title to thepropert* passes to the +u*er upon thedeliver* o the thin% sold. (n a contract tosell, on the other hand, the ownership is, +*

a%reement, retained +* the seller and is notto pass to the vendee until ull pa*ment o the purchase price. (n the contract o sale,the +u*ers non-pa*ment o the price is ane%ative resolutor* condition? in thecontract to sell, the +u*ers ull pa*ment o the price is a positive suspensive conditionto the comin% into efect o thea%reement. (n the rst case, the seller haslost and cannot recover the ownership o

the propert* unless he ta!es action to setaside the contract o sale. (n the secondcase, the title simpl* remains in the seller i the +u*er does not compl* with thecondition precedent o ma!in% pa*ment atthe time specied in the contract. Jere, it is)uite evident that the contract involved wasone o a contract to sell since the 0tienzas,as sellers, were to retain title o ownershipto the land until respondent spidol, the

+u*er, has paid the a%reed price. (ndeed,there seems no )uestion that the partiesunderstood this to +e the case.

0dmittedl*, spidol was una+le to pa*the second installment o 1,75;,;;;.;;that ell due in ecem+er ;;. Thatpa*ment, said +oth the ET& and the &0, was

a positive suspensive condition ailure o which was *ot re%arded a +reach in the






sense that t(( >* @( *o (s/ss/o* o0 >* o@/g>t/o* 8to tu* o?( t/t( t>t+/+ *ot B(t (/st s/*( t( sus)(*s/?(o*+/t/o* >+ *ot t>(* )>(. .Mmphases and underscorin% suppliedN

Thus, the &ourt ull* a%rees with the &0 when itresolved< &onsiderin%, however, that the eed o &onditional Sale was not cancelled +* Iendor Ee*es/petitioner2 and that out o the total purchase price o the su+=ect propert* in the amount o Q,;;,;;;.;;,the remainin% unpaid +alance o Tuparan /respondent2is onl* Q@;5,;;;.;;, a su+stantial amount o thepurchase price has alread* +een paid. (t is onl* ri%htand =ust to allow Tuparan to pa* the said unpaid +alanceo the purchase price to Ee*es.M1;N

$rantin% that a rescission can +e permitted under0rticle 1191, the &ourt still cannot allow it or the reasonthat, considerin% the circumstances, there was onl* asli%ht or casual +reach in the ulllment o theo+li%ation.

Anless the parties stipulated it, rescission isallowed onl* when the +reach o the contract issu+stantial and undamental to the ulllment o theo+li%ation. "hether the +reach is sli%ht or su+stantial islar%el* determined +* the attendant circumstances.M11N (n the case at +ench, the su+=ect contract stipulatedthe ollowin% important provisions<

. That the purchase price o Q,;;,;;;.;; shall +e paid as ollows<

a2 Q7@,;[email protected] received in cash +*the #irst art* +ut directl* paid to the Thirdart* as partial pa*ment o the mort%a%eo+li%ation o the #irst art* in order toreduce the amount to Q,;;;,;;;.;; onl* aso Dovem+er 15, 199;?

+2 Q71,91.@7 received in cash +*the #irst art* as additional pa*ment o theSecond art*?

c2 Q1,;;,;;;.;; to +e paid

in installments as ollows<

1. Q;;,;;;.;; pa*a+le onor +eore Kanuar* 31, 1991?

. Q;;,;;;.;; pa*a+le on

or +eore Kune 3;, 1991?3. Q@;;,;;;.;; pa*a+le on

or +eore ecem+er 31,1991?

Dote< 0ll the installments shall not+ear an* interest.







d2 Q,;;;,;;;.;;outstandin% +alance o the mort%a%eo+li%ation as o Dovem+er 15, 199; which ishere+* assumed +* the Second art*.

3. That the Third art* here+*ac!nowled%es receipts rom the Secondart* 7@,;[email protected] as partial pa*ment o theloan o+li%ation o #irst art* in order toreduce the account to onl* Q,;;;,;;;.;;as o Dovem+er 15, 199; to +e assumed +*the Second art* efective Dovem+er 15,199;.M1N

#rom the records, it cannot +e denied thatrespondent paid to #S: Gan! petitioners mort%a%eo+li%ation in the amount o Q,7@,;[email protected], whichormed part o the purchase price o the su+=ectpropert*. :i!ewise, it is not disputed that respondentpaid directl* to petitioner the amount o Q71,91.@7representin% the additional pa*ment or the purchase o the su+=ect propert*. &learl*, out o the total price o

Q,;;,;;;.;;, respondent was a+le to pa* the totalamount o Q3,;;;,;;;.;;, leavin% a +alance o Q1,;;,;;;.;; pa*a+le in three /32 installments.

Cut o the Q1,;;,;;;.;; remainin% +alance,respondent paid on several dates the rst and secondinstallments o Q;;,;;;.;; each. She, however, ailedto pa* the third and last installment o Q@;;,;;;.;; dueon ecem+er 31, 1991. Devertheless, on 0u%ust 31,

199, respondent, throu%h counsel, ofered to pa* the

amount o Q751,;;;.;;, which was re=ected +*petitioner or the reason that the actual +alance wasQ@;5,;;;.;; ecludin% the interest char%es.

&onsiderin% that out o the total purchase price o Q,;;,;;;.;;, respondent has alread* paid thesu+stantial amount o Q3,;;,;;;.;;, more or less,leavin% an unpaid +alance o onl* Q@;5,;;;.;;, it isri%ht and =ust to allow her to settle, within a reasona+leperiod o time, the +alance o the unpaid purchaseprice. The &ourt a%rees with the courts +elow that therespondent showed her sincerit* and willin%ness tocompl* with her o+li%ation when she ofered to pa* thepetitioner the amount o Q751,;;;.;;.

Cn the issue o interest, petitioner ailed tosu+stantiate her claim that respondent made a personalcommitment to pa* a 86 monthl* interest on theQ@;5,;;;.;; rom the date o delin)uenc*, ecem+er31, 1991. 0s can +e %leaned rom the contract, therewas a stipulation statin% that< 0ll the installments shallnot +ear interest. The &0 was, however, correct inimposin% interest at the rate o 86 per annum startin%rom the lin% o the complaint on Septem+er 11, 199.

#inall*, the &ourt upholds the rulin% o the courts+elow re%ardin% the non-imposition o dama%es andattorne*s ees. 0side rom petitioners sel-servin%statements, there is not enou%h evidence on record toprove that respondent acted raudulentl* andmaliciousl* a%ainst the petitioner. (n the case o Heirs of

Atienza v. 9spidol,M13N it was stated<







Eespondents are not entitled to moraldama%es +ecause contracts are not reerredto in 0rticle 19 o the &ivil &ode, whichenumerates the cases when moral dama%esma* +e recovered. 0rticle ; o the &ivil&ode allows the recover* o moral dama%esin +reaches o contract where the deendant

acted raudulentl* or in +ad aith. Jowever,this case involves a contract to sell,wherein ull pa*ment o the purchase priceis a positive suspensive condition, the non-ulllment o which is not a +reach o contract, +ut merel* an event that preventsthe seller rom conve*in% title to thepurchaser. Since there is no +reach o contract in this case, respondents are notentitled to moral dama%es.

(n the a+sence o moral, temperate,li)uidated or compensator* dama%es,eemplar* dama%es cannot +e %ranted orthe* are allowed onl* in addition to an* o the our !inds o dama%es mentioned.

WHEREF%RE, the petition is ENIE.

G.R. No. 1;9965 F(@u>B 2', 2'13

NIC%LAS P. IEG%, etitioner,

vs.

R%%LF% P. IEG% >*+ EUAR% P.IEG%, Eespondents.

& ( S ( C D

EL CAS$ILL%, J.:

(t is settled =urisprudence, to the point o +ein%

elementar*, that an a%reement which stipulates that

the seller shall eecute a deed o sale onl* upon or ater

tl1ll pa*ment o the purchase price is a contract to

sell, not a contract o sale. (n Re#es v. 5uparan, 1 this

&ourt declared in cate%orical terms that (( t(?(*+o )o/s(s to ((ut( > +((+ o0 >@sout(s>( u)o* t( o)(t/o* @B t( ?(*+(( o0 t(

)>B(*t o0 t( )/(, t( o*t>t /s o*B >o*t>t to s(. $( >0o(/t(+ st/)u>t/o* sost>t t( ?(*+os (s(?(+ t/t( to t( su@J(t)o)(tB u*t/ 0u )>B(*t o0 t( )u>s()/(.

(n this case, it is not disputed as in tact +oth parties

a%reed that the deed o sale shall onl* +e eecuted

upon pa*ment o the remainin% +alance o the purchase

price. Thus, pursuant to the a+ove stated =urisprudence,we similarl* declare that the transaction entered into +*

the parties is a contract to sell.

Geore us is a etition or Eeview

on Certiorari )uestionin% the Kune 9, ;;7

ecision3 and the Ccto+er 3, ;;7 Eesolution o the

&ourt o 0ppeals /&02 in &0-$.E. &I Do. @851, which

aBrmed the 0pril 19, ;;5 ecision5 o the Ee%ional

http://www.lawphil.net/judjuris/juri2013/feb2013/gr_179965_2013.html#fnt1












Trial &ourt /ET&2, Granch ;, o a%upan &it* in &ivil

&ase Do. 99-;971-.

Factual Antecedents

(n 1993, petitioner Dicolas . ie%o /Dicolas2 and his

+rother Eodolo, respondent herein, entered into an oralcontract to sell coverin% DicolasRs share, ed

at 5;;,;;;.;;, as co-owner o the amil*Rs ie%o

Guildin% situated in a%upan &it*. Eodolo made a

downpa*ment o 5;,;;;.;;. (t was a%reed that the

deed o sale shall +e eecuted upon pa*ment o the

remainin% +alance o 5;,;;;.;;. Jowever, Eodolo

ailed to pa* the remainin% +alance.

4eanwhile, the +uildin% was leased out to third parties,+ut DicolasRs share in the rents were not remitted to him

+* herein respondent duardo, another +rother o

Dicolas and desi%nated administrator o the ie%o

Guildin%. (nstead, duardo %ave DicolasRs monthl* share

in the rents to Eodolo. espite demands and

protestations +* Dicolas, Eodolo and duardo ailed to

render an accountin% and remit his share in the rents

and ruits o the +uildin%, and duardo continued to

hand them over to Eodolo.

Thus, on 4a* 17, 1999, Dicolas led a

&omplaint8 a%ainst Eodolo and duardo +eore the ET&

o a%upan &it* and doc!eted as &ivil &ase Do. 99-

;971-. Dicolas pra*ed that duardo +e ordered to

render an accountin% o all the transactions over the

ie%o Guildin%? that duardo and Eodolo +e ordered to

deliver to Dicolas his share in the rents? and that

duardo and Eodolo +e held solidaril* lia+le or

attorne*Rs ees and liti%ation epenses.

Eodolo and duardo led their 0nswer with

&ounterclaim7 or dama%es and attorne*Rs ees. The*

ar%ued that Dicolas had no more claim in the rents in

the ie%o Guildin% since he had alread* sold his shareto Eodolo. Eodolo admitted havin% remitted

onl* 5;,;;;.;; to Dicolas. Je asserted that he would

pa* the +alance o the purchase price to Dicolas onl*

ater the latter shall have eecuted a deed o a+solute

sale.

Ruling of the Regional Trial Court

0ter trial on the merits, or on 0pril 19, ;;5, the trialcourt rendered its ecision@ dismissin% &ivil &ase Do.

99-;971- or lac! o merit and orderin% Dicolas to

eecute a deed o a+solute sale in avor o Eodolo upon

pa*ment +* the latter o the 5;,;;;.;; +alance o the

a%reed purchase price. (t made the ollowin% interestin%

pronouncement<

(t is undisputed that plaintif /Dicolas2 is one o the co-

owners o the ie%o Guildin%, . 0s a co-owner, he isentitled to MhisN share in the rentals o the said +uildin%.

Jowever, plaintif MhadN alread* sold his share to

deendant Eodolo ie%o in the amount o 5;;,;;;.;;

and in act, MhadN alread* received a partial pa*ment in

the purchase price in the amount

o 5;,;;;.;;. (0(*+>*t E+u>+o /(go t(st/(+t>t >s )( >g(((*t, ?(@>, o0 t( )>/*t/ >*++(0(*+>*t Ro+o0o /(go, t( (>/*/*g @>>*(o0 P25','''.'' / @( )>/+ u)o* t( ((ut/o* o0









t( ((+ o0 A@sout( S>(. (t was in the *ear 1997

when plaintif was +ein% re)uired +* deendant duardo

ie%o to si%n the eed o 0+solute Sale. &learl*,

deendant Eodolo ie%o was not *et in deault as the

plaintif claims which cause MsicN him to reuse to si%n

MsicN document. The contract o sale was alread*

perected as earl* as the *ear 1993 when plaintifreceived the partial pa*ment, hence, he cannot

unilaterall* revo!e or rescind the same. #rom then on,

plaintif has, thereore, ceased to +e a co-owner o the

+uildin% and is no lon%er entitled to the ruits o the

ie%o Guildin%.

)uit* and airness dictate that deendant MsicN has to

eecute the necessar* document re%ardin% the sale o

his share to deendant Eodolo ie%o. &orrespondin%l*,deendant Eodolo ie%o has to perorm his o+li%ation

as per their ver+al a%reement +* pa*in% the remainin%

+alance o 5;,;;;.;;.9

To summarize, the trial court ruled that as earl* as

1993, Dicolas was no lon%er entitled to the ruits o his

ali)uot share in the ie%o Guildin% +ecause he had

'ceased to +e a co-owner' thereo. The trial court held

that when Dicolas received the 5;,;;;.;;downpa*ment, a 'contract o sale' was perected.

&onse)uentl*, Dicolas is o+li%ated to conve* such share

to Eodolo, without ri%ht o rescission. #inall*, the trial

court held that the5;,;;;.;; +alance rom Eodolo

will onl* +e due and demanda+le when Dicolas eecutes

an a+solute deed o sale.

Ruling of the Court of Aeals

Dicolas appealed to the &0 which sustained the trial

courtRs ecision in toto. The &0 held that since there

was a perected contract o sale +etween Dicolas and

Eodolo, the latter ma* compel the ormer to eecute

the proper sale document. Gesides, DicolasRs insistence

that he has since rescinded their a%reement in 1997

proved the eistence o a perected sale. (t added thatDicolas could not validl* rescind the contract +ecause<

'12 Eodolo haMdN alread* made a partial pa*ment? 2

Dicolas haMdN alread* partiall* perormed his part

re%ardin% the contract? and 32 Eodolo opposes the

rescission.'1;

The &0 then proceeded to rule that since no period was

stipulated within which Eodolo shall deliver the +alance

o the purchase price, it was incum+ent upon Dicolas tohave led a civil case to the same. Gut +ecause he

ailed to do so, Eodolo cannot +e considered to +e in

dela* or deault.

#inall*, the &0 made another interestin%

pronouncement, that +* virtue o the a%reement Dicolas

entered into with Eodolo, he had alread* transerred his

ownership over the su+=ect propert* and as a

conse)uence, Eodolo is le%all* entitled to collect theruits thereo in the orm o rentals. DicolasR remainin%

ri%ht is to demand pa*ment o the +alance o the

purchase price, provided that he rst eecutes a deed o

a+solute sale in avor o Eodolo.

Dicolas moved or reconsideration +ut the same was

denied +* the &0 in its Eesolution dated Ccto+er 3,

;;7.







Jence, this etition.

Issu(s

The etition raises the ollowin% errors that must +e

rectied<

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!etitioner"s Argu#ents

(n his etition, the Supplement1 thereon, and

Eepl*,13 Dicolas ar%ues that, contrar* to what the &0

ound, there was no perected contract o sale even

thou%h Eodolo had partiall* paid the price? that in the

a+sence o the third element in a sale contract the

price there could +e no perected sale? that ailin% to

pa* the re)uired price in ull, Dicolas had the ri%ht to

rescind the a%reement as an unpaid seller.

Dicolas li!ewise ta!es eception to the &0 ndin% that

Eodolo was not in deault or dela* in the pa*ment othe a%reed +alance or his /DicolasRs2 ailure to le a

case to the period within which pa*ment o the

+alance should +e made. Je +elieves that EodoloRs

ailure to pa* within a reasona+le time was a su+stantial

and material +reach o the a%reement which %ave him

the ri%ht to unilaterall* and etra=udiciall* rescind the

a%reement and +e dischar%ed o his o+li%ations as

seller? and that his repeated written demands upon

Eodolo to pa* the +alance %ranted him such ri%hts.

Dicolas urther claims that +ased on his a%reement with

Eodolo, there was to +e no transer o title over his

share in the +uildin% until Eodolo has efected ull

pa*ment o the purchase price, thus, %ivin% no ri%ht to

the latter to collect his share in the rentals.

#inall*, Dicolas +ewails the &0Rs ailure to award

dama%es, attorne*Rs ees and liti%ation epenses or

what he +elieves is a case o un=ust enrichment at his

epense.

Resondents" Argu#ents

0part rom echoin% the ET& and &0 pronouncements,

respondents accuse the petitioner o 'cheatin%' them,

claimin% that ater the latter received the 5;,;;;.;;

downpa*ment, he 'vanished li!e thin air and hi+ernated

in the AS0, he +ein% an 0merican citizen,'1 onl* to

come +ac! claimin% that the said amount was a mere

loan.

The* add that the etition is a mere rehash and

reiteration o the petitionerRs ar%uments +elow, which

are deemed to have +een suBcientl* passed upon andde+un!ed +* the appellate court.

%u Ru/*g

The &ourt nds merit in the etition.

The contract entered into $% Nicolas and Rodolfo

&as a contract to sell.

> $( st/)u>t/o* to ((ut( > +((+ o0 s>( u)o*0u )>B(*t o0 t( )u>s( )/( /s > u*/Du( >*++/st/*gu/s/*g >>t(/st/ o0 > o*t>t to s(.It >so sos t>t t( ?(*+o (s(?(+ t/t( to t()o)(tB u*t/ 0u )>B(*t.

There is no dispute that in 1993, Eodolo a%reed to +u*

DicolasRs share in the ie%o Guildin% or the price

o5;;,;;;.;;. There is also no dispute that o the total











purchase price, Eodolo paid, and Dicolas

received,5;,;;;.;;. Si%nicantl*, it is also not

disputed that the parties a%reed that the remainin%

amount o 5;,;;;.;; would +e paid ater Dicolas shall

have eecuted a deed o sale.

This stipulation, i.e., to eecute a deed o a+solute saleupon ull pa*ment o the purchase price, is a uni)ue and

distin%uishin% characteristic o a o*t>t to s(.(n Re%es '. Tuaran,15 this &ourt ruled that a

stipulation in the contract, (( t( ?(*+o)o/s(s to ((ut( > +((+ o0 >@sout( s>( u)o*t( o)(t/o* @B t( ?(*+(( o0 t( )>B(*t o0t( )/(, indicates that the parties entered into

a o*t>t to s(. 0ccordin% to this &ourt, this

particular provision is tantamount to a reservation oownership on the part o the vendor. plicitl* stated,

the &ourt ruled that the a%reement to eecute a deed o

sale upon ull pa*ment o the purchase pricesost>t t( ?(*+os (s(?(+ t/t( to t( su@J(t)o)(tB u*t/ 0u )>B(*t o0 t( )u>s()/(.18

(n 5an v. /enolirao,17 this &ourt, spea!in%

throu%h ust/( /o*, ruled that the parties enteredinto a o*t>t to s( as revealed +* the ollowin%

stipulation<

d2 That in case, GAHE has complied with the terms and

conditions o this contract, then the S::ES shall

eecute and deliver to the GAHE the appropriate eed

o 0+solute Sale?1@

The &ourt urther held that Ju/s)u+(*( >s(st>@/s(+ t>t (( t( s(( )o/s(s to((ut( > +((+ o0 >@sout( s>( u)o* t(o)(t/o* @B t( @uB( o0 t( )>B(*t o0 t()/(, t( o*t>t /s o*B > o*t>t to s(.19

@ $( >*o(+g((*t ((/)t s/g*(+ @BN/o>s >s ( >s t( o*t()o>*(ous >ts o0t( )>t/(s so t>t t(B >g((+ o* > o*t>tto s(, *ot o0 s>(. $( >@s(*( o0 > 0o> +((+o0 o*?(B>*( /s /*+/>t/?( o0 > o*t>t to s(.

(n an 0orenzo 1evelopment Corporation v. Court of

Appeals,; the acts show that spouses 4i%uel and

acita :u /:u2 sold a certain parcel o land to a+lo

Ga+asanta /a+lo2. 0ter several pa*ments, a+lo wrote:u demandin% 'the eecution o a nal deed o sale in

his avor so that he could efect ull pa*ment o the

purchase price.'1 To prove his alle%ation that there was

a perected contract o sale +etween him and :u, a+lo

presented a receipt si%ned +* :u ac!nowled%in% receipt

o 5;,;;;.;; as partial pa*ment.

Jowever, when the case reached this &ourt, it was ruled

that the transaction entered into +* a+lo and :u wasonl* a o*t>t to s(, not a contract o sale. The

&ourt held thus<

The receipt si%ned +* acita :u merel* states that she

accepted the sum o t* thousand pesos /5;,;;;.;;2

rom Ga+asanta as partial pa*ment o 3.8 hectares o

arm lot situated in Sta. Eosa, :a%una. "hile there is no

stipulation that the seller reserves the ownership o the

propert* until ull pa*ment o the price which is a



















distin%uishin% eature o a contract to sell, the

su+se)uent acts o the parties convince us that t(S)ous(s Lu *(?( /*t(*+(+ to t>*s0( o*(s/)to >@>s>*t> (()t u)o* 0u )>B(*t o0 t()u>s( )/(.

Ga+asantaRs letter dated 4a* 19@9 was )uite tellin%.Je stated therein that despite his repeated re)uests or

the eecution o the nal deed o sale in his avor so

that he could efect ull pa*ment o the price, acita :u

alle%edl* reused to do so. I* ((t, >@>s>*t>/s(0 (og*/(+ t>t o*(s/) o0 t()o)(tB ou+ *ot @( t>*s0((+ to / u*t/su t/( >s ( s> >?( ((t(+ 0u )>B(*to0 t( )/(. Mo(o?(, >+ t( s((s /*t(*+(+ to

t>*s0( t/t(, t(B ou+ >?( (>s/B ((ut(+ t(+ou(*t o0 s>( /* /ts (Du/(+ 0os/ut>*(ousB /t t(/ >()t>*( o0 t()>t/> )>B(*t, @ut t(B +/+ *ot. ou@t(ssB,t( ((/)t s/g*(+ @B P>/t> Lu sou+ (g>B @(o*s/+((+ >s > )(0(t(+ o*t>t to s(.3

(n the instant case, records show that Dicolas si%ned a

mere receipt ac!nowled%in% partial pa*ment

o5;,;;;.;; rom Eodolo. (t states<

Kul* @, 1993

Eeceived the amount o M5;,;;;.;;N or 1 share o

ie%o Guildin% as partial pa*ment or Dicolas ie%o.

/si%ned2

Dicolas ie%o5

0s we ruled in an 0orenzo 1evelopment Corporation v.

Court of Appeals,8 the parties could have eecuted a

document o sale upon receipt o the partial pa*ment

+ut the* did not. This is thus an indication that Dicolas

did not intend to immediatel* transer title over his

share +ut onl* upon ull pa*ment o the purchase price.

Javin% thus reserved title over the propert*, thecontract entered into +* Dicolas is a contract to sell. (n

addition, duardo admitted that he and Eodolo

repeatedl* as!ed Dicolas to si%n the deed o sale7 +ut

the latter reused +ecause he was not *et paid the ull

amount. 0s we have ruled in an 0orenzo 1evelopment

Corporation v. Court of Appeals,@the act that duardo

and Eodolo as!ed Dicolas to eecute a deed o sale is a

clear reco%nition on their part that the ownership over

the propert* still remains with Dicolas. (n ne, thetotalit* o the partiesR acts convinces us that Dicolas

never intended to transer the ownership over his share

in the ie%o Guildin% until the ull pa*ment o the

purchase price. "ithout dou+t, the transaction a%reed

upon +* the parties was a contract to sell, not o sale.

(n C'ua v. Court of Appeals,9 the parties reached an

impasse when the seller wanted to +e rst paid the

consideration +eore a new transer certicate o title

/T&T2 is issued in the name o the +u*er. &ontraril*, the

+u*er wanted to secure a new T&T in his name +eore

pa*in% the ull amount. Their a%reement was em+odied

in a receipt containin% the ollowin% terms< '/12 the

+alance o 1;,15,;;;.;; is pa*a+le on or +eore 15

Kul* 19@9? /2 the capital %ains ta is or the account o

? and /32 i Mthe +u*erN ails to pa* the +alance

the MsellerN has the ri%ht to oreit the earnest mone*

















.'3; The case eventuall* reached this &ourt. (n resolvin%

the impasse, the &ourt, spea!in% throu%h ust/(C>)/o, held that 'MaN perusal o the Eeceipt shows that

the true a%reement +etween the parties was a contract

to sell.'31 The &ourt noted that 'the a%reement

was em+odied in a receipt rather than in a deed o sale,

ownership not havin% passed +etween them.'3

The&ourt thus concluded that t( >@s(*( o0 > 0o>+((+ o0 o*?(B>*( /s > sto*g /*+/>t/o* t>t t()>t/(s +/+ *ot /*t(*+ /(+/>t( t>*s0( o0o*(s/), @ut o*B > t>*s0( >0t( 0u )>B(*to0 t( )u>s( )/(.33 Thus, the 'true a%reement

+etween the parties was > o*t>t to s(.'3

(n the instant case, the parties were similarl* em+roiled

in an impasse. The partiesR a%reement was li!ewiseem+odied onl* in a receipt. 0lso, Dicolas did not want to

si%n the deed o sale unless he is ull* paid. Cn the

other hand, Eodolo did not want to pa* unless a deed

o sale is dul* eecuted in his avor. "e thus sa*,

pursuant to our rulin% in C'ua v. Court of Appeals35 that

the a%reement +etween Dicolas and Eodolo is a

contract to sell.

This &ourt cannot su+scri+e to the appellate courtRsview that Dicolas should rst eecute a deed o a+solute

sale in avor o Eodolo, +eore the latter can +e

compelled to pa* the +alance o the price. This is

patentl* ridiculous, and %oes a%ainst ever* rule in the

+oo!. This pronouncement virtuall* places the

prospective seller in a contract to sell at the merc* o

the prospective +u*er, and sustainin% this point o view

would place all contracts to sell in =eopard* o +ein%

rendered inefective +* the act o the prospective

+u*ers, who naturall* would demand that the deeds o

a+solute sale +e rst eecuted +eore the* pa* the

+alance o the price. Surel*, no prospective seller would

accommodate.

(n ne, t( *((+ to ((ut( > +((+ o0 >@sout(s>( u)o* o)(t/o* o0 )>B(*t o0 t( )/(g(*(>B /*+/>t(s t>t /t /s > o*t>t to s(, >s/t /)/(s t( (s(?>t/o* o0 t/t( /* t( ?(*+ou*t/ t( ?(*+(( >s o)(t(+ t( )>B(*t o0t( )/(.38 (n addition, 'MaN stipulation reservin%

ownership in the vendor until ull pa*ment o the price is

t*pical in a contract to sell.'37 Thus, contrar* to the

pronouncements o the trial and appellate courts, the

parties to this case onl* entered into a contract to sell?as such title cannot le%all* pass to Eodolo until he

ma!es ull pa*ment o the a%reed purchase price.

N/o>s +/+ *ot su(*+( o +(/?( t/t( o)oss(ss/o* to Ro+o0o.

4oreover, there could not even +e a surrender or

deliver* o title or possession to the prospective +u*er

Eodolo. This was made clear +* the nature o thea%reement, +* DicolasRs repeated demands or the

return o all rents unlawull* and un=ustl* remitted to

Eodolo +* duardo, and +* Eodolo and duardoRs

repeated demands or Dicolas to eecute a deed o sale

which, as we said +eore, is a reco%nition on their part

that ownership over the su+=ect propert* still remains

with Dicolas.



















Si%nicantl*, when duardo testied, he claimed to +e

!nowled%ea+le a+out the terms and conditions o the

transaction +etween Dicolas and Eodolo. Jowever,

aside rom statin% that out o the total consideration

o5;;,;;;.;;, the amount o 5;,;;;.;; had alread*

+een paid while the remainin% 5;,;;;.;; would +e

paid ater the eecution o the eed o Sale, he nevertestied that there was a stipulation as re%ards deliver*

o title or possession.3@

(t is also )uite understanda+le wh* Dicolas +elatedl*

demanded the pa*ment o the rentals. Eecords show

that the structural inte%rit* o the ie%o Guildin% was

severel* compromised when an earth)ua!e struc!

a%upan &it* in 199;.39 (n order to reha+ilitate the

+uildin%, the co-owners o+tained a loan rom a+an!.; Startin% 4a* 199, the propert* was leased to

third parties and the rentals received were used to pa*

of the loan.1 (t was onl* in 1998, or ater pa*ment o

the loan that the co-owners started receivin% their share

in the rentals. urin% this time, Dicolas was in the AS0

+ut immediatel* upon his return, he demanded or the

pa*ment o his share in the rentals which duardo

remitted to Eodolo. #ailin% which, he led the instant

&omplaint. To us, this +olsters our ndin%s that Dicolas

did not intend to immediatel* transer title over the

propert*.

(t must +e stressed that it is anathema in a contract to

sell that the prospective seller should deliver title to the

propert* to the prospective +u*er pendin% the latterRs

pa*ment o the price in ull. (t certainl* is a+surd to

assume that in the a+sence o stipulation, a +u*er under

a contract to sell is %ranted ownership o the propert*

even when he has not paid the seller in ull. ( this were

the case, then prospective sellers in a contract to sell

would in all li!elihood not +e paid the +alance o the

price.

This ponente has had occasion to rule that 'MaN contractto sell is one where the prospective seller reserves the

transer o title to the prospective +u*er until the

happenin% o an event, such as ull pa*ment o the

purchase price. "hat the seller o+li%es himsel to do is

to sell the su+=ect propert* onl* when the entire amount

o the purchase price has alread* +een delivered to him.

U(n other words, the ull pa*ment o the purchase price

parta!es o a suspensive condition, the nonulllment o

which prevents the o+li%ation to sell rom arisin% andthus, ownership is retained +* the prospective seller

without urther remedies +* the prospective +u*er.R (t

does not, +* itsel, transer ownership to the +u*er.'3

The contract to sell is ter#inated or cancelled.

Javin% esta+lished that the transaction was a contract

to sell, what happens now to the partiesR a%reementV

The remed* o rescission is not availa+le in contracts to

sell. 0s eplained in pouses antos v. Court of

Appeals<5

(n view o our ndin% in the present case that the

a%reement +etween the parties is a contract to sell, it

ollows that the appellate court erred when it decreed

that a =udicial rescission o said a%reement was

necessar*. This is +ecause there was no rescission to



















spea! o in the rst place. 0s we earlier pointed out, in a

contract to sell, title remains with the vendor and does

not pass on to the vendee until the purchase price is

paid in ull. Thus, in a contract to sell, the pa*ment o

the purchase price is a positive suspensive condition.

#ailure to pa* the price a%reed upon is not a mere

+reach, casual or serious, +ut a situation that preventsthe o+li%ation o the vendor to conve* title rom

ac)uirin% an o+li%ator* orce. This is entirel* diferent

rom the situation in a contract o sale, where non-

pa*ment o the price is a ne%ative resolutor* condition.

The efects in law are not identical. (n a contract o sale,

the vendor has lost ownership o the thin% sold and

cannot recover it, unless the contract o sale is

rescinded and set aside. (n a contract to sell, however,

the vendor remains the owner or as lon% as the vendeehas not complied ull* with the condition o pa*in% the

purchase price. ( the vendor should e=ect the vendee

or ailure to meet the condition precedent, he

is enforing t'e ontrat and not resinding it . "hen the

petitioners in the instant case repossessed the disputed

house and lot or ailure o private respondents to pa*

the purchase price in ull, the* were merel* enorcin%

the contract and not rescindin% it. 0s petitioners

correctl* point out, the &ourt o 0ppeals erred when it

ruled that petitioners should have =udiciall* rescinded

the contract pursuant to 0rticles 159 and 1191 o the

&ivil &ode. 0rticle 159 spea!s o non-pa*ment o the

purchase price as a resolutor* condition. (t does not

appl* to a contract to sell. 0s to 0rticle 1191, it is

su+ordinated to the provisions o 0rticle 159 when

applied to sales o immova+le propert*. Deither

provision is applica+le in the present case.8

Similarl*, we held in C'ua v. Court of Appeals7 that

'0rticle 159 o the &ivil &ode permits the +u*er to pa*,

even ater the epiration o the period, as lon% as no

demand or rescission o the contract has +een made

upon him either =udiciall* or +* notarial act. Jowever,

0rticle 159 does not appl* to a contract to sell where

the seller reserves the ownership until ull pa*ment othe price,'@ as in this case.$:p'i$

0ppl*in% the a+ove =urisprudence, we hold that when

Eodolo ailed to ull* pa* the purchase price, the

contract to sell was deemed terminated or

cancelled.9 0s we have held in C'ua v. Court of

Appeals,5; 'MsNince the a%reement is a mere

contract to sell, the ull pa*ment o the purchase price

parta!es o a suspensive condition. $( *o*-0u(*t o0 t( o*+/t/o* )(?(*ts t(o@/g>t/o* to s( 0o >/s/*g >*+ o*(s/) /s(t>/*(+ @B t( s(( /tout 0ut( ((+/(s@B t( @uB(.' Similarl*, we held in Re#es v.

5uparan51 that 'petitionerRs o+li%ation to sell the su+=ect

properties +ecomes demanda+le onl* upon the

happenin% o the positive suspensive condition, which is

the respondentRs ull pa*ment o the purchase

price. W/tout (s)o*+(*ts 0u )>B(*t, t((>* @( *o @(> o0 o*t>t to s)(> o0 @(>us()(t/t/o*( >s *o o@/g>t/o* B(t to tu* o?( t(t/t(.EespondentRs ailure to pa* in ull the purchase

price in ull is not the +reach o contract contemplated

under 0rticle 1191 o the Dew &ivil &ode +ut rather =ust

an event that prevents the petitioner rom +ein% +ound

to conve* title to respondent.' Ctherwise stated,

Eodolo has no ri%ht to compel Dicolas to transer















ownership to him +ecause he ailed to pa* in ull the

purchase price. &orrelativel*, Dicolas has no o+li%ation

to transer his ownership over his share in the ie%o

Guildin% to Eodolo.5

Thus, it was erroneous or the &0 to rule that Dicolas

should have led a case to the period or EodoloRspa*ment o the +alance o the purchase price. (t was not

DicolasRs o+li%ation to compel Eodolo to pa* the

+alance? it was EodoloRs dut* to remit it.

(t would appear that ater Dicolas reused to si%n the

deed as there was *et no ull pa*ment, Eodolo and

duardo hired the services o the aro*a 0ccountin%

CBce 'or the purpose o estimatin% the amount to

which MDicolasN still owes MEodoloN as a conse)uence othe unconsummated ver+al a%reement re%ardin% the

ormerRs share in the co-ownership o Mie%o Guildin%N in

avor o the latter.'53 0ccordin% to the accountantRs

report, ater Dicolas revo!ed his a%reement with Eodolo

due to non-pa*ment, the downpa*ment o 5;,;;;.;;

was considered a loan o Dicolas rom Eodolo.5 The

accountant opined that the 5;,;;;.;; should earn

interest at [email protected] Dicolas however o+=ected as re%ards

the imposition o interest as it was not previousl*a%reed upon. Dota+l*, the contents o the accountantRs

report were not disputed or re+utted +* the

respondents. (n act, it was stated therein that 'MaNll the

+ases and assumptions made particularl* in the in% o

the applica+le rate o interest have +een discussed with

MduardoN.'58

"e nd it irrelevant and immaterial that Dicolas

descri+ed the termination or cancellation o his

a%reement with Eodolo as one o rescission. Gein% a

la*man, he is understanda+l* not adept in le%al terms

and their implications. Gesides, this &ourt should not +e

held captive or +ound +* the conclusion reached +* the

parties. The proper characterization o an action should

+e +ased on what the law sa*s it to +e, not +* what a

part* +elieved it to +e. '0 contract is what the lawdenes it to +e and not what the contractin%

parties call it.'57

Cn the other hand, the respondentsR additional

su+mission that Dicolas cheated them +* 'vanishin%

and hi+ernatin%' in the AS0 ater receivin%

EodoloRs 5;,;;;.;; downpa*ment, onl* to come

+ac! later and claim that the amount he received was a

mere loan cannot +e +elieved. Jow the respondentscould have +een cheated or disadvanta%ed +* DicolasRs

leavin% is +e*ond comprehension. ( there was an*+od*

who +eneted rom DicolasRs perceived 'hi+ernation', it

was the respondents, or the* certainl* had ree rein

over DicolasRs interest in the ie%o Guildin%. Eodolo put

of pa*ment o the +alance o the price, *et, with the aid

o duardo, collected and appropriated or himsel the

rents which +elon%ed to Dicolas.

Eduardo is solidaril% lia$le &ith Rodolfo as

regards the share of Nicolas in the rents.

#or his complicit*, +ad aith and a+use o authorit* as

the ie%o Guildin% administrator, duardo must +e held

solidaril* lia+le with Eodolo or all that Dicolas should

+e entitled to rom 1993 up to the present, or in respect

o actual dama%es sufered in relation to his interest in

the ie%o Guildin%. duardo was the primar* cause o















DicolasRs loss, +ein% directl* responsi+le or ma!in% and

causin% the wron%ul pa*ments to Eodolo, who received

them under o+li%ation to return them to Dicolas, the

true recipient.$:p'i$ 0s such, duardo should +e

principall* responsi+le to Dicolas as well. SuBce it to

state that ever* person must, in the eercise o his

ri%hts and in the perormance o his duties, act with =ustice, %ive ever*one his due, and o+serve honest* and

%ood aith? and ever* person who, contrar* to law,

wilull* or ne%li%entl* causes dama%e to another, shall

indemni* the latter or the same.5@

Attorne%"s fees and other costs.

'0lthou%h attorne*Rs ees are not allowed in the

a+sence o stipulation, the court can award the samewhen the deendantRs act or omission has compelled the

plaintif to incur epenses to protect his interest or

where the deendant acted in %ross and evident +ad

aith in reusin% to satis* the plaintifRs plainl* valid, =ust

and demanda+le claim.'59 (n the instant case, it is

+e*ond cavil that petitioner was constrained to le the

instant case to protect his interest +ecause o

respondentsR unreasona+le and un=ustied reusal to

render an accountin% and to remit to the petitioner hisri%htul share in rents and ruits in the ie%o Guildin%.

Thus, we deem it proper to award to petitioner

attorne*Rs ees in the amount o 5;,;;;.;;,8; as well as

liti%ation epenses in the amount o ;,;;;.;; and the

sum o 1,;;;.;; or each court appearance +* his

law*er or law*ers, as pra*ed or.

WHEREF%RE, premises considered, the etition

is GRAN$E. The Kune 9, ;;7 ecision and Ccto+er

3, ;;7 Eesolution o the &ourt o 0ppeals in &0-$.E. &I

Do. @851, and the 0pril 19, ;;5 ecision o the

a%upan &it* Ee%ional Trial &ourt, Granch ; in &ivil

&ase Do. 99-;971-, are here+* ANNULLE >*+ SE$ASIE.

The &ourt urther decrees the ollowin%<

1. The oral contract to sell +etween petitioner

Dicolas . ie%o and respondent Eodolo . ie%o

isECLARE terminatedcancelled?

. Eespondents Eodolo . ie%o and duardo .

ie%o are %RERE to surrender possession and

control, as the case ma* +e, o Dicolas . ie%oRs

share in the ie%o Guildin%. Eespondents areurther commanded to return or surrender to the

petitioner the documents o title, receipts, papers,

contracts, and all other documents in an* orm or

manner pertainin% to the latterRs share in the

+uildin%, which are deemed to +e in their

unauthorized and ille%al possession?

3. Eespondents Eodolo . ie%o and duardo .

ie%o are %RERE to immediatel* render anaccountin% o all the transactions, rom the period

+e%innin% 1993 up to the present, pertainin% to

Dicolas . ie%oRs share in the ie%o Guildin%, and

thereater commanded to =ointl* and severall*

remit to the petitioner all rents, monies, pa*ments

and +enets o whatever !ind or nature pertainin%

thereto, which are here+* deemed received +*

them durin% the said period, and made to them or

are due, demanda+le and orthcomin% durin% the









said period and rom the date o this ecision,

with le%al interest rom the lin% o the &omplaint?

. Eespondents Eodolo . ie%o and duardo .

ie%o are %RERE, immediatel* and without

urther dela* upon receipt o this ecision, to

solidaril* pa* the petitioner attorne*Rs ees in theamount o5;,;;;.;;? liti%ation epenses in the

amount o ;,;;;.;; and the sum o 1,;;;.;;

per counsel or each court appearance +* his

law*er or law*ers?

5. The pa*ment o 5;,;;;.;; made +*

respondent Eodolo . ie%o, with le%al interest

rom the lin% o the &omplaint, shall

+e APPLIE, +* wa* o compensation, to hislia+ilities to the petitioner and to answer or all

dama%es and other awards and interests which

are owin% to the latter under this ecision? and

8. EespondentsR counterclaim is ISMISSE.

SC CEE.

G.R. No. ;;425 u*( 19, 1991

$HE R%MAN CA$H%LIC ARCHISH%P %F MANILA,$HE R%MAN CA$H%LIC ISH%P %F IMUS, >*+ t(SP%USES FL%RENCI% IGNA% >*+ S%LEA C.

IGNA%, petitioners,vs.H%N. C%UR$ %F APPEALS, $HE ES$A$E %FECEASE SP%USES EUSEI% E CAS$R% >*+MAR$INA RIE$A, ()(s(*t(+ @B MARINA RIE$AGRANA%S >*+ $HERESA RIE$A$%LEN$IN%, respondents.

G.R. No. ;;45' u*( 19, 1991

$HE R%MAN CA$H%LIC ARCHISH%P %F MANILA,$HE R%MAN CA$H%LIC ISH%P %F IMUS, >*+ t(SP%USES FL%RENCI% IGNA% >*+ S%LEA C.IGNA%, petitioners,vs.H%N. C%UR$ %F APPEALS, $HE ES$A$E %FECEASE SP%USES EUSEI% E CAS$R% >*+MAR$INA RIE$A, ()(s(*t(+ @B MARINA RIE$AGRANA%S >*+ $HERESA RIE$A$%LEN$IN%, respondents.

everino C. 1ominguez for petitioner Roman Cat'oli/is'op of +mus, Cavite.1olorno and 1ominguez 0a ;<es for ps. +gnao.

Joselito R. 9nri7uez for private respondents.

REGALA%, J.:

These two petitions or review on ertiorari1 see! tooverturn the decision o the &ourt o 0ppeals in &0-$.E.&I Do. ;558 which reversed and set aside the order o the Ee%ional Trial &ourt o (mus, &avite dismissin% &ivil&ase Do. ;95-@, as well as the order o said respondentcourt den*in% petitioner>s motions or thereconsideration o its aoresaid decision.

Cn Dovem+er 9, 19@, private respondents as

plaintifs, led a complaint or nullication o deed o

http://www.lawphil.net/judjuris/juri1991/jun1991/gr_77425_1991.html#rnt1






donation, rescission o contract and reconve*ance oreal propert* with dama%es a%ainst petitioners #lorencioand Soledad &. (%nao and the Eoman &atholic Gishop o(mus, &avite, to%ether with the Eoman &atholic0rch+ishop o 4anila, +eore the Ee%ional Trial &ourt,Granch LL, (mus, &avite and which was doc!eted as&ivil &ase Do. ;95-@ therein.3

(n their complaint, private respondents alle%ed that on0u%ust 3, 193;, the spouses use+io de &astro and4artina Eieta, now +oth deceased, eecuted a deed odonation in avor o therein deendant Eoman &atholic0rch+ishop o 4anila coverin% a parcel o land /:ot Do.88, &adastral Surve* o Oawit2, located at Oawit,&avite, containin% an area o 98 s)uare meters, moreor less. The deed o donation alle%edl* provides that thedonee shall not dispose or sell the propert* within a

period o one hundred /1;;2 *ears rom the eecution o the deed o donation, otherwise a violation o suchcondition would render ipso fato null and void the deedo donation and the propert* would revert to the estateo the donors.

(t is urther alle%ed that on or a+out Kune 3;, 19@;, andwhile still within the prohi+itive period to dispose o thepropert*, petitioner Eoman &atholic Gishop o (mus, inwhose administration all properties within the provinceo &avite owned +* the 0rchdiocese o 4anila wasalle%edl* transerred on 0pril 8, 198, eecuted a deedo a+solute sale o the propert* su+=ect o the donationin avor o petitioners #lorencio and Soledad &. (%nao inconsideration o the sum o 11,;;;. ;;. 0s aconse)uence o the sale, Transer &erticate o Title Do.11599; was issued +* the Ee%ister o eeds o &aviteon Dovem+er 15, 19@; in the name o said petitionerspouses.

"hat transpired thereater is narrated +* respondent

court in its assailed decision.

Cn ecem+er 17, 19@, petitioners #lorencio (%nao andSoledad &. (%nao led a motion to dismiss +ased on the%rounds that /12 herein private respondents, as plaintifstherein, have no le%al capacit* to sue? and /2 thecomplaint states no cause o action.

Cn ecem+er 19, 19@, petitioner Eoman &atholicGishop o (mus also led a motion to dismiss on three/32 %rounds, the rst two /2 %rounds o which wereidentical to that o the motion to dismiss led +* the(%nao spouses, and the third %round +ein% that thecause o action has prescri+ed.

Cn Kanuar* 9, 19@5, the Eoman &atholic 0rch+ishop o4anila li!ewise led a motion to dismiss on the %roundthat he is not a real part* in interest and, thereore, thecomplaint does not state a cause o action a%ainst him.

0ter private respondents had led their oppositions tothe said motions to dismiss and the petitioners hadcountered with their respective replies, with re=oindersthereto +* private respondents, the trial court issued anorder dated Kanuar* 31, 19@5, dismissin% the complainton the %round that the cause o action has prescri+ed.5

rivate respondents thereater appealed to the &ourt o0ppeals raisin% the issues on /a2 whether or not theaction or rescission o contracts /deed o donation and

deed o sale2 has prescri+ed? and /+2 whether or not thedismissal o the action or rescission o contracts /deedo donation and deed o sale2 on the %round oprescription carries with it the dismissal o the mainaction or reconve*ance o real propert*.8

Cn ecem+er 3, 19@8, respondent &ourt o 0ppeals,holdin% that the action has not *et presci+ed, rendereda decision in avor o private respondents, with theollowin% dispositive portion<











"JE#CE, the Crder o Kanuar* 31, 19@5dismissin% appellants> complaint is ST 0S( and&ivil &ase Do. ;95-@ is here+* orderedE(DST0T and E40D to the lower court orurther proceedin%s. Do &osts.7

etitioners (%nao and the Eoman &atholic Gishop o (musthen led their separate motions or reconsiderationwhich were denied +* respondent &ourt o 0ppeals in itsresolution dated #e+ruar* 8, 19@7,@ hence, the lin% othese appeals +* ertiorari.

(t is the contention o petitioners that the cause oaction o herein private respondents has alread*prescri+ed, invo!in% 0rticle 78 o the &ivil &ode whichprovides that '/t2he donation shall +e revo!ed at theinstance o the donor, when the donee ails to compl*with an* o the conditions which the ormer imposed

upon the latter,' and that '/t2his action shall prescri+eater our *ears rom the non-compliance with thecondition, ma* +e transmitted to the heirs o the donor,and ma* +e eercised a%ainst the donee>s heirs.

"e do not a%ree.

0lthou%h it is true that under 0rticle 78 o the &ivil&ode an action or the revocation o a donation must +e+rou%ht within our /2 *ears rom the non-compliance

o the conditions o the donation, the same is notapplica+le in the case at +ar. The deed o donationinvolved herein epressl* provides or automaticreversion o the propert* donated in case o violation othe condition therein, hence a =udicial declarationrevo!in% the same is not necessar*, 0s aptl* stated +*the &ourt o 0ppeals<

G* the ver* epress provision in the deed odonation itsel that the violation o the condition

thereo would render ipso fato null and void thedeed o donation, " are o the opinion that there

would +e no le%al necessit* an*more to have thedonation =udiciall* declared null and void or thereason that the ver* deed o donation itseldeclares it so. #or where /si2 it otherwise and thatthe donors and the donee contemplated a courtaction durin% the eecution o the deed odonation to have the donation =udiciall* rescinded

or declared null and void should the condition +eviolated, then the phrase readin% =ould renderipso fato null and void=would not appear in thedeed o donation.9

(n support o its aoresaid position, respondent courtrelied on the rule that a =udicial action or rescission o acontract is not necessar* where the contract providesthat it ma* +e revo!ed and cancelled or violation o an*o its terms and conditions.1; (t called attention to the

holdin% that there is nothin% in the law that prohi+its theparties rom enterin% into an a%reement that a violationo the terms o the contract would cause its cancellationeven without court intervention, and that it is notalwa*s necessar* or the in=ured part* to resort to courtor rescission o the contract.11 (t reiterated the doctrinethat a =udicial action is proper onl* when there isa+sence o a special provision %rantin% the power ocancellation.1

(t is true that the aoresaid rules were applied to thecontracts involved therein, +ut we see no reason wh*the same should not appl* to the donation in thepresent case. 0rticle 73 o the &ivil &ode provides thatdonations inter vivosshall +e %overned +* the %eneralprovisions on contracts and o+li%ations in all that is notdetermined in Title (((, Goo! ((( on donations. Dow, said

Title ((( does not have an eplicit provision on the mattero a donation with a resolutor* condition and which issu+=ect to an epress provision that the same shall +econsidered ipso fato revo!ed upon the +reach o saidresolutor* condition imposed in the deed thereor, as is















the case o the deed presentl* in )uestion. Thesuppletor* application o the ore%oin% doctrinal rulin%sto the present controvers* is conse)uentl* =ustied.

The validit* o such a stipulation in the deed o donationprovidin% or the automatic reversion o the donatedpropert* to the donor upon non-compliance o thecondition was upheld in the recent case o 1e 0una, etal. vs. A"rigo, et al.13 (t was held therein that saidstipulation is in the nature o an a%reement %rantin% apart* the ri%ht to rescind a contract unilaterall* in caseo +reach, without need o %oin% to court, and that,upon the happenin% o the resolutor* condition or non-compliance with the conditions o the contract, thedonation is automaticall* revo!ed without need o a

=udicial declaration to that efect. "hile what was thesu+=ect o that case was an onerous donation which,

under 0rticle 733 o the &ivil &ode is %overned +* therules on contracts, since the donation in the case at +aris also su+=ect to the same rules +ecause o its provisionon automatic revocation upon the violation o aresolutor* condition, rom parit* o reasons saidpronouncements in 1e 0una pertinentl* appl*.

The rationale or the ore%oin% is that in contractsprovidin% or automatic revocation, =udicial interventionis necessar* not or purposes o o+tainin% a =udicialdeclaration rescindin% a contract alread* deemedrescinded +* virtue o an a%reement providin% orrescission even without =udicial intervention, +ut inorder to determine whether or not the rescission wasproper.1

"hen a deed o donation, as in this case, epressl*provides or automatic revocation and reversion o thepropert* donated, the rules on contract and the %eneralrules on prescription should appl*, and not 0rticle 78 o the &ivil &ode. Since 0rticle 13;8 o said &ode

authorizes the parties to a contract to esta+lish such

stipulations, clauses, terms and conditions not contrar*to law, morals, %ood customs, pu+lic order or pu+licpolic*, we are o the opinion that, at the ver* least, thatstipulation o the parties providin% or automaticrevocation o the deed o donation, without prior =udicialaction or that purpose, is valid su+=ect to thedetermination o the propriet* o the rescission sou%ht.

"here such propriet* is sustained, the decision o thecourt will +e merel* declarator* o the revocation, +ut itis not in itsel the revocator* act.

Cn the ore%oin% ratiocinations, the &ourt o 0ppealscommitted no error in holdin% that the cause o action o herein private respondents has not *et prescri+ed sincean action to enorce a written contract prescri+es in ten/1;2 *ears.15 (t is our view that 0rticle 78 was intendedto provide a =udicial remed* in case o non-ulllment or

contravention o conditions specied in the deed odonation i and when the parties have not a%reed on theautomatic revocation o such donation upon theoccurrence o the contin%enc* contemplated therein.

That is not the situation in the case at +ar.

Donetheless, we nd that althou%h the action led +*private respondents ma* not +e dismissed +* reason oprescription, the same should +e dismissed on the%round that private respondents have no cause oaction a%ainst petitioners.

The cause o action o private respondents is +ased onthe alle%ed +reach +* petitioners o the resolutor*condition in the deed o donation that the propert*donated should not +e sold within a period o onehundred /1;;2 *ears rom the date o eecution o thedeed o donation. Said condition, in our opinion,constitutes an undue restriction on the ri%hts arisin%rom ownership o petitioners and is, thereore, contrar*to pu+lic polic*.









onation, as a mode o ac)uirin% ownership, results inan efective transer o title over the propert* rom thedonor to the donee. Cnce a donation is accepted, thedonee +ecomes the a+solute owner o the propert*donated. 0lthou%h the donor ma* impose certainconditions in the deed o donation, the same must not+e contrar* to law, morals, %ood customs, pu+lic order

and pu+lic polic*. The condition imposed in the deed odonation in the case +eore us constitutes a patentl*unreasona+le and undue restriction on the ri%ht o thedonee to dispose o the propert* donated, which ri%ht isan indispensa+le attri+ute o ownership. Such aprohi+ition a%ainst alienation, in order to +e valid, mustnot +e perpetual or or an unreasona+le period o time.

&ertain provisions o the &ivil &ode illustrative o theaoresaid polic* ma* +e considered applica+le +*analo%*.$:p'i$Ander the third para%raph o 0rticle9, a donor or testator ma* prohi+it partition or aperiod which shall not eceed twent* /;2 *ears. 0rticle@7;, on its part, declares that the dispositions o thetestator declarin% all or part o the estate inaliena+le ormore than twent* /;2 *ears are void.

(t is si%nicant that the provisions therein re%ardin% atestator also necessaril* involve, in the main, thedevolution o propert* +* %ratuitous title hence, as is%enerall* the case o donations, +ein% an act oli+eralit*, the imposition o an unreasona+le period oprohi+ition to alienate the propert* should +e deemedanathema to the +asic and actual intent o either thedonor or testator. #or that reason, the re%ulator* arm othe law is or must +e interposed to prevent anunreasona+le departure rom the normative polic*epressed in the aoresaid 0rticles 9 and @7; o the&ode.

(n the case at +ar, we hold that the prohi+ition in the

deed o donation a%ainst the alienation o the propert*

or an entire centur*, +ein% an unreasona+leemasculation and denial o an inte%ral attri+ute oownership, should +e declared as an ille%al orimpossi+le condition within the contemplation o 0rticle77 o the &ivil &ode. &onse)uentl*, as specicall*stated in said statutor* provision, such condition shall+e considered as not imposed. Do reliance ma*

accordin%l* +e placed on said prohi+itor* para%raph inthe deed o donation. The net result is that, a+sent saidproscription, the deed o sale supposedl* constitutive othe cause o action or the nullication o the deed odonation is not in truth violative o the latter hence, orlac! o cause o action, the case or private respondentsmust ail.

(t ma* +e ar%ued that the validit* o such prohi+itor*provision in the deed o donation was not specicall*put in issue in the pleadin%s o the parties. That ma* +etrue, +ut such oversi%ht or inaction does not preventthis &ourt rom passin% upon and resolvin% the same.

(t will readil* +e noted that the provision in the deed odonation a%ainst alienation o the land or one hundred/1;;2 *ears was the ver* +asis or the action to nulli*the deed o d donation. 0t the same time, it wasli!ewise the controverted undament o the motion todismiss the case a 7uo, which motion was sustained +*the trial court and set aside +* respondent court, +othon the issue o prescription. That rulin% o respondentcourt interpretin% said provision was assi%ned as anerror in the present petition. "hile the issue o thevalidit* o the same provision was not s)uarel* raised, itis inelucta+l* related to petitioner>s aoresaidassi%nment o error since +oth issues are %rounded onand reer to the ver* same provision.

This &ourt is clothed with ample authorit* to reviewmatters, even i the* are not assi%ned as errors on

appeal, i it nds that their consideration is necessar* in



arrivin% at a =ust decision o the case<18 Thus, we haveheld that an unassi%ned error closel* related to an errorproperl* assi%ned,17 or upon which the determination othe )uestion properl* assi%ned is dependent, will +econsidered +* the appellate court notwithstandin% theailure to assi%n it as error.1@

0dditionall*, we have laid down the rule that theremand o the case to the lower court or urtherreception o evidence is not necessar* where the &ourtis in a position to resolve the dispute +ased on therecords +eore it. Cn man* occasions, the &ourt, in thepu+lic interest and or the epeditious administration o

=ustice, has resolved actions on the merits instead oremandin% them to the trial court or urtherproceedin%s, such as where the ends o =ustice, wouldnot +e su+served +* the remand o the case.19 Theaorestated considerations o+tain in and appl* to thepresent case with respect to the matter o the validit* o the resolutor* condition in )uestion.

"JE#CE, the =ud%ment o respondent court is ST0S( and another =ud%ment is here+* rendered(S4(SS(D$ &ivil &ase Do. ;95-@ o the Ee%ional Trial&ourt, Granch LL, (mus, &avite.

SC CEE.

%RIE AESA NIC%LAS, G.R. No. 15&'26

etitioner,

resent<

ADC, C.J., &hairperson,&0E(C,

- versus - O&CECD0,

0Z&AD0, and

:CD0EC- &0STEC, JJ.

EL-NACIA C%RP%RA$I%N, romul%ated<

Eespondent. 0pril 3, ;;@

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

& ( S ( C D

ADC, C.J.<

This case arose rom a complaint or unair +usiness

practiceM1N led +* petitioner orie 0+esa Dicolas /4rs.





http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/158026.htm#_ftn1










Dicolas2 a%ainst respondent el-Dacia &orporation /el-Dacia2 +eore the Jousin% and :and Ase Ee%ulator*Goard /J:AEG2.

Cn #e+ruar* ;, 19@@, the spouses 0rmandoDicolas and orie 0+esa Dicolas /Spouses Dicolas2 andel-Dacia entered into a :and urchase 0%reementMN

/0%reement2 or the sale +* the latter to the ormer o aparcel o land, covered +* Transer &erticate o TitleDo. 337;, consistin% o 1;,;;; s)uare meters,situated at :ot Do. 3-G-, el Dacia Iille Do. 5, San Kosedel 4onte, Gulacan.

The relevant parts o the 0%reement are<

/12 The AE&J0SE a%rees to pa* to theC"DE upon eecution o this &ontract thesum o #CETH TJCAS0D SCS /;,;;;2

as rst pa*ment on account o the purchaseprice and a%rees to pa* the +alance o #(IJADE TD TJCAS0D SCS/51;,;;;2 at the oBce o the C"DE in the&it* o uezon, hilippines, or such otheroBce as the C"DE ma* desi%nate in 1;e)ual monthl* installment o D(D

TJCAS0D CD JADE ($JTH D(D0D 51;; SCS /9,[email protected] interest+ein% included on successive monthl*

+alance at 1@6 per annum, and pa*mentsto +e made on the WWWWW da* o each monththereater +e%innin% 0pril ;, 19@@.

/52 (n the event that an* o the

pa*ments as stipulated +e not paid when,

where, and as the same +ecome due? it isa%reed that sums in arrears shall +earinterest at the rate o ($JTD /1@62 percentum per annum pa*a+le monthl* romthe date on which said sums is due andpa*a+le.

/82 ( an* such pa*ment or pa*ments shallcontinue in arrears or more than sit*-da*s,or i the AE&J0SE shall violate an* o theconditions herein set orth then the entireunpaid +alance due under this contract,with an* interest which ma* have attachedshall at once +ecome due and pa*a+le andshall +ear interest at the rate o T":I/162 per centum per annum until paid, and

in such case, the AE&J0SE urther a%reesto pa* to the C"DE a sum e)ual to ten/1;62 per centum o the amount due asattorne*s ees.M3N

Ander the 0%reement, the ownership o the landremains with el-Dacia until ull pa*ment o thestipulated purchase price under the ollowin% terms and

conditions</32 Title to said parcel o land shall remain inthe name o the C"DE until completepa*ment +* the AE&J0SE o allo+li%ations herein stipulated, at which timethe C"DE a%ree to eecute a nal deed o sale in avor o the AE&J0SE and causethe issuance o a certicate o title in thename o the latter, ree rom liens andencum+rances ecept those provided in the:and Ee%istration 0ct, those imposed +* the







authorities, and those contained in &lauses/1;2 and /182 o thisa%reement. Ee%istration ees anddocumentar* stamps o the deed o saleshall +e paid +* the AE&J0SE.

/2 Cnl* the AE&J0SE shall +e deemedor all le%al purposes to ta!e possession o the parcel o land upon pa*ment o thedown pa*ment provided, however, thathisher possession under this section shall+e onl* that o a tenant or lessee, andsu+=ect to e=ectment proceedin%s durin% allthe period o this a%reement.

/72 (n case the AE&J0SE ails tocompl* with an* conditions o this contractandor to pa* an* pa*ments herein a%reedupon, the AE&J0SE shall +e %ranted aperiod or periods o %race which in no caseshall eceed /8;2 da*s to +e counted romthe condition +reached ou%ht to +ecomplied with or the said pa*ments ou%hthave +een made, durin% which period o

%race the AE&J0SE must compl* with thesaid condition or satis* all due monetar*o+li%ations includin% those whichcorrespond to the period o %race. CTJE"(S, the &ontract shall +eautomaticall* cancelled and rescinded ando no orce and efect, and as aconse)uence thereore, the C"DE ma*dispose o the parcels o land covered +*this &ontract in avor o other persons, as i

this &ontract had never +een entered

into. (n case o such cancellation o this&ontract all amounts paid in accordancewith this a%reement, to%ether with all theimprovements introduced in the premises,shall +e considered as rents or the use andoccupation o the a+ovementioned premisesand as pa*ments or the dama%es sufered

on the C"DE on account o the ailure o the AE&J0SE to ulll his part o this&ontract and the AE&J0SE here+*renounces all his ri%hts to demand orreclaim the return o the same and urthero+li%ates himsel to peaceull* vacate thepremises and deliver the same to theC"DE? ECI(, JC"IE, that an*consideration, concession, tolerance orrelaation o provisions shall not +e

interpreted as a renunciation on the part o C"DE o an* ri%hts %ranted in this&ontract.MN

Apon si%nin% o the 0%reement, the Spouses Dicolaspaid the down pa*ment o ;,;;;. Thereupon, theSpouses Dicolas too! possession o the land, and orseveral months thereater, paid on or +eore the ; th o each month, the monthl* amortizations.M5N

Anortunatel*, however, 0rmando Dicolas died shortl*ater the si%nin% o the 0%reement and 4rs. Dicolas+e%an to alter in her pa*ments. 0s ound +* 0r+iter

Kose 0. 0tencio, Kr. /J:AEG 0r+iter2 o the CBce o 0ppeals, 0d=udication and :e%al 0fairs /C00:2, J:AEGEe%ion (((, the records o el-Dacia indicate that 4rs.Dicolas is delin)uent in her monthl* amortization or theollowin% months< Dovem+er 19@@? 4arch 19@9? 4a*19@9? Kune 19@9-Kul* 19@9? Septem+er 19@9? Ccto+er

19@9? Dovem+er 19@9-ecem+er 19@9? #e+ruar* 199;-







Septem+er 199;? Ccto+er 199;-Dovem+er 199;?ecem+er 199;-0pril 1991. The last pa*ment o 4rs.Dicolas was made on Kul* 19, 1991.M8N

el-Dacia sent 4rs. Dicolas notice to pa* her arreara%eswith a %race period o sit* /8;2 da*s within which toma!e pa*ment +ut to no avail. el-Dacia then causedthe notarial cancellation o the 0%reement on ecem+er3, 1991.M7N

Su+se)uentl*, el-Dacia ver+all* inormed 4rs.Dicolas to %et the cash surrender value o her pa*mentat its oBce. Jowever, 4rs. Dicolas did not claim thesame. el-Dacia prepared a chec! in the amounto 7;,851.@@ representin% the cash surrender value o 4rs. Dicolass pa*ment and sent it to her +* re%isteredmail.The chec! was received +* 4rs. Dicolas and untilnow it remains in her possession.M@N

Cn #e+ruar* 3, 1993, 4rs. Dicolas led a&omplaintM9N a%ainst el-Dacia +eore theJ:AEG. Cn ecem+er 15, 199, the J:AEG 0r+iterrendered a ecisionM1;N/0r+iter ecision2 with theollowin% disposition<

E4(SS considered, =ud%ment is here+*rendered as ollows<

a. eclarin% the notarial cancellationo the contract on ecem+er 3, 1991 as nulland void.

+. Crderin% respondent to ortwithurnish complainant accountin% o the paidand unpaid amortizations includin% interestsand penalt* interests and other stipulatedees or char%es coverin% the period ordelin)uent pa*ments, as a conse)uence o the latters deault statin% clearl* and

specicall* the +ases as stated in the

contract and or the complainant to pa* herunpaid o+li%ations within ort* ve /52 da*srom receipt o the saidcomputationaccountin%.

c. Crderin% the same respondent toeecute the pertinent deed in avor o thecomplainant within teen /152 da*s romreceipt o complainants ull pa*ment underpara%raph + aorementioned and thereaterto deliver to the latter the Transer&erticate o Title o the lot in )uestion.

d. Eemedies provided under E.0. 855and other le%al remedies ma* +e resortedto, at the option o the respondent, i complainant ails or reuses to pa* withinthe period provided under para%raph +.

So Crdered.M11N

4rs. Dicolas sou%ht review o the 0r+iter ecision +* theJ:AEG Goard o &ommissions /J:AEG Goard2 on theollowin% assi%nment o errors<

#(EST 0SS($D4DT C# EECE

TJ JCD. 0EG(TE EE (D CEE(D$ TJ (D&:AS(CD C# (DTESTS, D0:TH(DTESTS 0D CTJE ST(A:0T #SCE &J0E$S (D TJ AD(:0TE0:&C4AT0T(CD TC G 40 GH TJESCDDT-0:: 0S TJ AD0(CG:($0T(CD C# &C4:0(D0DT-0::0DT.

S&CD 0SS($D4DT C# EECE















TJ JCD. 0EG(TE EE (D CEE(D$ TJ &C4:0(D0DT-0::0DT TC 0H JESACS AD0( CG:($0T(CD G0SACD TJ AD(:0TE0: &C4AT0T(CD C#ESCDDT-0:: "(TJ(D #CETH #(I/52 0HS #EC4 E&(T C# S0(&C4AT0T(CD0&&CADT(D$.

TJ(E 0SS($D4DT C# EECE

TJ JCD. 0EG(TE EE (D $(I(D$ESCDDT-0:: TJ E($JT TCESCET TC E4(S ECI( ADEE.0. 855 0D CTJE :$0: E4(S.

#CAETJ 0SS($D4DT C# EECE

TJ JCD. 0EG(TE EE (D DCT0"0E(D$ 0TTCEDHS #S (D TJ SA4C# 5;,;;;.;; TC &C4:0(D0DT-0::0DT.

#(#TJ 0SS($D4DT C# EECE

TJ JCD. 0EG(TE EE (D DCT$E0DT(D$ TJ E0HE C# &C4:0(D0DT-0::0DT (D JE &C4:0(DT.M1N

The J:AEG Goard was partl* receptive o the appealand, on ecem+er 1, 1995, it handed down aecisionM13N /J:AEG Goard ecision2 ad=ud%in% that<

"JE#CE, in li%ht o the ore%oin%premises, we here+* 4C(#H the ecisiondated 15 ecem+er 199 o the CBce auo, insoar as para%raph /+2 o thedispositive portion is concerned and anadditional para%raph e, to wit<

/+2 Crderin% complainant to pa*respondent within sit* /8;2 da*s romreceipt hereo the amount o onehundred sevent* three thousand ninehundred t* seven pesos and91;;; /173,957.92 representin%the remainin% +alance o theinstallment purchase price o the landinclusive o le%al interests at the rate

o twelve percent /162 per annum.

/e2 Crderin% respondent to pa* thisGoard the amount o ten thousand/1;,;;;2 as an administrative ne orviolation o Section 5 o .. 957within thirt* /3;2 da*s rom nalit*hereo.

SC CEE. uezon &it*.M1N

el-Dacia led a 4otion or EeconsiderationM15N and aSupplement to 4otion or Eeconsideration.M18N 4eanwhile, 4rs. Dicolas led a motion or theconsi%nment o 173,957.9, representin% the +alance













o the purchase price o the land as ound +* the J:AEGGoard.

Cn Kune 1, 1998, the J:AEG Goard resolved to den*el-Dacias motion or reconsideration and ordered 4rs.Dicolas to deposit with it or sae!eepin% the amountindicated in its ecision until el-Dacia is willin% toaccept the same.M17N

&onse)uentl*, el-Dacia appealed to the CBce o theresident which, however, was dismissed +* its ecisiondated 4arch , 199@ /C.. Cri%inal ecision2.M1@NAponmotion or reconsideration, however, the CBce o theresident, in a Eesolution dated Kanuar* 5, ;;1 M19N /C..Eesolution2, set aside the C.. Cri%inal ecision andaBrmed the A@/t( ecision in toto.

Ansuccessul in her +id at overturnin% the C..

Eesolution, 4rs. Dicolas led a etition orEeviewM;N with the &ourt o 0ppeals /&02 doc!eted as&0-$.E. S Do. 8@;7. The &0 initiall* dismissed herpetition or ailin% to compl* with the proceduralre)uirements o Section 8/c2 o Eule 3 o the EevisedEules o &ourt.M1N4rs. Dicolas led an omni+us motionpra*in% that the &0 reconsider and set aside thedismissal o her petition and to admit her amendedpetition.MN The &0 then re)uired el-Dacia to su+mit itscomment to the petition.M3N

Cn Kanuar* 3, ;;3, the &0 rendered its ecision,MN aBrmin% the C.. Eesolution, to it <

"JE#CE, ndin% no Paw in theappealed C.. Eesolution, the same ishere+* 0##(E4 in toto, with costs a%ainst4rs. Dicolas.

SC CEE.

The 4otion or EeconsiderationM5N led +* 4rs. Dicolaswas denied +* the &0 in its Eesolution dated 0pril 9,;;3.M8N

Jence, this etition or Eeview on &ertiorariM7N,raisin% the lone issue o<

"JTJE CE DCT complainant /nowpetitioner2 is +ound to pa* the interests,penalt* interests and other stipulatedchar%es +ased on the unilateral accountin%or computation made +* respondent.M@N

The instant petition pra*s that the C.. Cri%inalecision, which aBrmed the J:AEG Goard ecision, +ereinstated +* this &ourt.

(n its &omment, el-Dacia ar%ues that the instantpetition +e denied or the ollowin% reasons< /12 ailureto compl* with section , Eule 5, and /2 ailure toadvance an* special reason that would warrant theeercise +* this &ourt o its discretionar* power o review.

Geore discussin% the merits o the case, we shall rst

discuss its procedural aspect.el-Dacia ur%es this &ourt to dismiss the instant

petition or ailin% to attach material portions o therecords o the case that will support the same asre)uired under Section 8 o Eule 8 o the Eevised Euleso &ourt, such as, or instance, copies o her ownpleadin%s led +eore the proceedin%s +elow.M9N (tappears that the 0%reement o the parties, su+=ect o the dispute, was not attached to the

petition. Devertheless, since the 0%reement and the





























other documents that were not attached to the petitionare alread* part o the records o this case, and couldeasil* +e reerred to +* this &ourt i necessar*, adismissal o the instant petition purel* on technical%rounds is not warranted. (ndeed, the &ourt has, in pastcases, %ranted relie in avor o the petitioner despitethis procedural inrmit*.M3;N Thus, we eplained the

rationale +ehind the &ourts li+eral stance as ollows<"e must stress that cases should +e

determined on the merits, ater all partieshave +een %iven ull opportunit* to ventilatetheir causes and deenses, rather than ontechnicalities or procedural imperections. (nthat wa*, the ends o =ustice would +eserved +etter. Eules o procedure are meretools desi%ned to epedite the decision orresolution o cases and other matterspendin% in court. 0 strict and ri%idapplication o rules, resultin% intechnicalities that tend to rustrate ratherthan promote su+stantial =ustice, must +eavoided. (n act, Section 8 o Eule 1 statesthat the Eules shall +e li+erall* construed inorder to promote their o+=ective o ensurin%the =ust, speed* and inepensive dispositiono ever* action and proceedin%.M31N

Dow on the merits o the case. The issue iswhether 4rs. Dicolas is lia+le to pa* interests, penalt*interests and other stipulated char%es to el-Dacia.

"e rule in the aBrmative.

4rs. Dicolas contends that +ased on the pa*ments shealread* made, she has overpaid the purchase price dueunder the 0%reement.M3N She assails the application o her pa*ments made +* el-Dacia since the latter

applied the +ul! o her pa*ments to interest rather than

the principal.M33N 0ccordin% to her, thereore, thepenalties, interests and surchar%es +ein% collected +*el-Dacia have no +asis in act or in law.M3N (n thisre%ard, she ur%es this &ourt to aBrm the J:AEG o>+(/s/o*M35N which reads<

&ursor* readin% o the a+ovementioneddocument reveal that there is indeed nospecic date indicated, as to whencomplainant should pa* her monthl*installments. (t is clear that that the spaceprovided or in ara%raph 1 o saiddocument or the date or da* o the monthon which pa*ment is to +e made has +eenlet +lan!.

&onsiderin% that the :and urchase0%reement is a pro-orma documentprepared +* respondent, an* am+i%uit*therein should +e interpreted in avor o thecomplainant.

Cn the +asis o the ore%oin%, we nd thatcomplainant did not incur an* dela*, hence,the imposition o surchar%es and penalt*interests are un=ustied.M38N

0ccordin% to el-Dacia, however, 4rs. Dicolasdisre%arded pa*in% the re%ular rate o interest, overdueinterest and penalt* interest which were voluntaril*a%reed upon under para%raphs /12, /52 and /82,respectivel*, o their 0%reement.M37N el-Dacia contendsthat the records clearl* esta+lish that 4rs. Dicolas was



















in dela* in her pa*ments o the monthl* amortizationsand she has not disputed the same. M3@N

0s ound +* the J:AEG A@/t(, the records o el-Dacia shows that 4rs. Dicolas incurred dela* in thepa*ment o her monthl* amortizations. M39N (t is a well-settled rule that actual ndin%s o administrativea%encies are conclusive and +indin% on the &ourt whensupported +* su+stantial evidence. W( >g(( /t t(%.P. R(sout/o*,4' / >s >+o)t(+ >*+>(+ @B t( CA, to it <

0ppellants Mel-DaciaN su+mission, however,that appellee M4rs. DicolasN incurred dela* inthe manner o pa*ment o her monthl*installment o+li%ations is impressed withmerit.The Jousin% 0r+iter, in his evaluationas trier o acts o appellees records o

pa*ment, was o the same view. Ander X1o the +asic purchase a%reement, supra,appellee undertoo! to pa* $>? e7ualmont'l# installments o 9,[email protected], pa#ments to "e made on t'e @@ da# of ea' mont' t'ereafter "eginning April >?, $BB. 0 airunderstandin% o this provision would simpl*mean that pa*ment should +e madeefected ever* ;th da* o each month

ollowin% 0pril ;, 19@@. Gased on therecords, one can sael* presume that thesame was ull* understood +* appellee, asshe had repeatedl* paid her monthl*amortization on the ;th da* o each, or aew da*s thereater. Deither did she)uestion the interest imposed +* appellantor her pa*ments made ater the ;th. Gethat as it ma*, this CBce is at a loss tounderstand the J:AEGs conclusion a+out

appellee not havin% deaulted in her

installment pa*ments. The eplanation%iven +* the J:AEG roper wh* itconsidered appellee not to have +een indela*, i. e., +ecause no spei date isDindiated in t'e pur'ase agreementD as to'en omplainant s'ould pa# 'er mont'l# installments addin% that t'e spae provided

for . . . t'e date or da# of t'e mont' 'i' pa#ment is to "e made 'as "een left "lan2, stri!es this CBce as too simplistic to+e accorded co%enc*. The adverted act o aspace in +lan! is o no moment or, toreiterate, the a%reement was or appellee toMtheN pa* the +alance /51;,;;;.;;2 o thepurchase price in 1; e)ual monthl*installments, the installment period to startrom 0pril ;, 19@@. The use o the

phrase$>? e7ual mont'l# installments and t'ereafter "eginning April>?, $BB can mean onl* one thin% that ater0pril ;, 19@@, the monthl* installment is toall due and +e pa*a+le on the ; th da* o the succeedin% months. The eplanationadverted to a+ove o the J:AEG, i pursuedto its lo%ical conclusion, would virtuall*allow appellee to perpetuall* withholdinstallment pa*ment without ris! o +ein%

considered in deault. The a+surdit* o thiseplanation needs no +ela+orin%.M1N

&learl*, under para%raphs /12, /52 and /82 o the0%reement, supra, 4rs. Dicolas was +ound to pa*re%ular interest, and in case o dela*, overdue interestand penalt*. (t cannot +e overemphasized that acontract is the law +etween the parties,MN and courtshave no choice +ut to enorce such contract so lon% as













the* are not contrar* to law, morals, %ood customs orpu+lic polic*.M3N

(n this connection, a stipulation or the pa*ment o interest and penalt* apart rom interest in case o dela*is not contrar* to law, moral, %ood customs or pu+licpolic*. To +e sure, the same is sanctioned +* theollowin% provisions o the &ivil &ode<

0rticle 1958. Do interest shall +e due unlessit has +een epressl* stipulated in writin%.

0rticle 18. (n o+li%ations with a penalclause, the penalt* shall su+stitute theindemnit* or dama%es and the pa*ment o interests in case o non-compliance, i thereis no stipulation to the contrar*.

0rticle ;9. ( the o+li%ation consists in thepa*ment o a sum o mone*, and the de+torincurs in dela*, the indemnit* or dama%es,there +ein% no stipulation to the contrar*,shall +e the pa*ment o the interest a%reedupon .

(n >> Moto Co)>*B ?. Es)//tu,MN

the&ourt ruled that the &ivil &ode permits the a%reementupon a penalt* apart rom the interest. Should there +esuch an a%reement, the penalt* does not include theinterest, and as such the two are diferent and distinctthin%s which ma* +e demanded separatel*. The sameprinciple was reiterated in EDu/t>@( >*/*g Co). ?.L/>*>g (t >.,M5N where this &ourt held that thestipulation a+out pa*ment o such additional rateparta!es o the nature o a penalt* clause, which is

sanctioned +* law.

Cn 4rs. Dicolas contention that she should notpa* interest and the other char%es +ased on theunilateral accountin% or computation made +* el-Dacia, a perusal o the ormula M8N or the computation o re%ular interest, overdue interest and penalt* interestused +* el-Dacia reveal that the same is in accord withthe provisions o the 0%reement and cannot +e said tohave +een unilaterall* imposed +* el-Dacia.

4oreover, the case o R(u/o ?. />*t(-G>* /R(u/o,M7N involves similar acts to the case at+ar where we ruled as ollows<

amination o the record shows thatthe )uestioned &ontract to Gu* and Sell thesu+division lots provided or pa*ment +*

private respondent o the sum o ;;.;; asdownpa*ment, and that 'the +alance Mo 1;,8;;.;;N shall +e paid in 1@; monthl*installments at @9.5 per month, includin%interest rate at si percent /862 per annum,until the purchase price is ull* paid.' Thisstipulation clearl* specied that an interestchar%e o si percent /862 per annum wasincluded in the monthl* installment price<private respondent could not have helped

noticin% that @9.5 multiplied +* 1@;monthl* installments e)uals 18,1;1.;;,and not 1;,8;;.;;. The contract price o 1;,@;;.;; ma* thus +e seen to +e the cashprice o the su+division lots, that is, theamount pa*a+le i the price o the lots wereto +e paid in cash and in ull at theeecution o the contract? it is not theamount that the vendor will have receivedin the a%%re%ate ater teen /152 *ears i

the vendee shall have reli%iousl* paid the













monthl* installments. The installment price,upon the other hand, o the su+division lotsthe sum total o the monthl* installments/i.e., 18,1;1.;;2 t*picall*, as in the instantcase, has an interest component whichcompensates the vendor or waitin% teen/152 *ears +eore receivin% the total

principal amount o 1;,8;;.;;.conomicall* or nanciall*, 1;,8;;.;;delivered in ull toda* is simpl* worth muchmore than a lon% series o small pa*mentstotallin%, ater teen /152 *ears,1;,8;;.;;. #or the vendor, upon receivin%the ull cash price, could have depositedthat amount in a +an!, or instance, andearned interest income which at si percent/862 per *ear and or teen /152 *ears,

would precisel* total 5,5;1.;; /thediference +etween the installment price o 18,1;1.;; and the cash price o 1;,8;;.;; 2 To suppose, as privaterespondent ar%ues, that mere promptpa*ment o the monthl* installments asthe* ell due would o+viate application o the interest char%e o si percent /862 perannum, is to i%nore that simple economicact. That economic act is, o course,

reco%nized +* law, which authorizes thepa*ment o interest when contractuall*stipulated or +* the parties or when impliedin reco%nized commercial custom or usa%e.

#(*+o >*+ ?(*+(( >( (g>B0(( to st/)u>t( 0o t( )>B(*t o0 (/t( t( >s )/( o0 > su@+/?/s/o*ot o /ts /*st>(*t )/(. Sou+ t(

?(*+(( o)t to )u>s( > su@+/?/s/o*

ot ?/> t( /*st>(*t )>B(*tsBst(, ( /s /* ((t )>B/*g /*t((sto* t( >s )/(, (t( t( 0>t >*+>t( o0 su /*t((st )>B(*t /s+/sos(+ /* t( o*t>t o *ot. $(o*t>t 0o t( )u>s( >*+ s>( o0 >)/(( o0 >*+ o* t( /*st>(*t

)>B(*t sBst( /* t( >s( >t @> /s*ot o*B Du/t( >0uQ /t >so ((ts >?(B /+( s)(>+ us>g( o usto /*ou )(s(*t +>B o(/> /0(.M@N

(n R(u/o, the &ourt also sustained the sellers theor*o declinin% +alance where+* the seller credited a+i%%er sum o the monthl* amortization to interestrather than the principal, such that in Murin%N thesucceedin% monthl* pa*ments, however, as theoutstandin% +alance on the principal %raduall* declined,the interest component /in a+solute terms2correspondin%l* ell while the component credited to theprincipal increased proportionatel*, thus amortizin% the+alance o the principal purchase price as that +alance%raduall* declined.M9N

(n the same vein, an eamination o the application o 4rs. Dicolas pa*ments +* el-Dacia in the ta+le M5;N thelatter prepared as rePected in the records o the case,shows that the same is in accord with the theor* o

declinin% +alance which was aBrmed +* this &ourtin R(u/o.

$iven the ore%oin%, it appears that the onl*dilemma which 4rs. Dicolas currentl* nds hersel in isthat the o+li%ations which she voluntar* undertoo!under the 0%reement turned out to +e more onerousthan what she epected. octrinal is the rule that courtsma* not etricate parties rom the necessar*conse)uences o their acts.M51N That the terms o a











contract turn out to +e nanciall* disadvanta%eous tothem will not relieve them o their o+li%ations therein.M5N

IN #IEW WHERE%F, the petition is(S4(SS. The decision o the &ourt o 0ppeals isaBrmed. &osts a%ainst the petitioner.

E4(D0 #. #:CEDT(DC,

etitioner,

- versus -

SAEI0:A, (D&.,

Eespondent.

$.E. Do. 173@

resent<

HD0ES-S0DT(0$C,

&hairperson,

0ASTE(0-40ET(DZ,

&J(&C-D0Z0E(C,

D0&JAE0, and

EHS, JJ.

romul%ated<

Septem+er 1, ;

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

E C I S I % N

&J(&C-D0Z0E(C, J.E

Geore this &ourt is a etition or Eeviewon Certiorari under Eule 5 o the Eevised Eules o &ourt, led +* petitioner rminda #. #lorentino, see!in%

to reverse and set aside the ecision,M1N

dated 1;Ccto+er ;;3 and the Eesolution,MN dated 19 0pril;;8 o the &ourt o 0ppeals in &0-$.E. &I Do.73@53. The appellate court, in its assailed ecision andEesolution, modied the ecision dated 3; 0pril ;;1 o the Ee%ional Trial &ourt /ET&2 o 4a!ati, Granch 57, in&ivil &ase Do. ;;-1;15, ndin% therespondent Supervalue, (nc., lia+le or the sumo 19,;;;.;;, representin% the securit* depositsmade +* the petitioner upon the commencement o

their &ontract o :ease. The dispositive portion o theassailed appellate courts ecision thus reads<

"JE#CE, premises considered,the appeal is 0ET:H $E0DT. The 0pril 3;,;;1 ecision o the Ee%ional Trial &ourto 4a!ati, Granch 57 is thereore 4C(#(to wit< /a2 the portion orderin% the MhereinrespondentN to pa* the amount

o 19,;;;.;; representin% the securit*


http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/172384.htm#_ftn1







deposits and 5;,;;;.;; as attorne*s eesin avor o the Mherein petitionerN as well as%ivin% MrespondentN the option to reim+urseMpetitionerN o the value o theimprovements introduced +* the MpetitionerNon the leased MpremisesN shouldMrespondentN choose to appropriate itsel or

re)uire the MpetitionerN to remove theimprovements, is here+* EIES andST 0S(? and /+2 the portion orderin% thereturn to MpetitionerN the properties seized+* MrespondentN ater the ormer settled hero+li%ation with the latter is however40(DT0(D.M3N

The actual and procedural antecedents o the

instant petition are as ollows<

etitioner is doin% +usiness under the +usinessname mpanada Eo*ale, a sole proprietorship en%a%edin the retail o empanada with outlets in diferent mallsand +usiness esta+lishments within 4etro 4anila.MN

Eespondent, on the other hand, is a domesticcorporation en%a%ed in the +usiness o leasin% stallsand commercial store spaces located inside S4 4allsound all throu%hout the countr*.M5N

Cn @ 4arch 1999, petitioner and respondent eecutedthree &ontracts o :ease containin% similar terms andconditions over the cart-t*pe stalls at S4Dorth dsa and S4 Southmall and a store space at

S4 4e%amall. The term o each contract is or a periodo our months and ma* +e renewed upon a%reement o the parties.M8N

Apon the epiration o the ori%inal &ontracts o :ease,the parties a%reed to renew the same +* etendin% their

terms until 31 4arch ;;;.M7N

Geore the epiration o said &ontracts o :ease, or on #e+ruar* ;;;, petitioner received two letters rom therespondent, +oth dated 1 Kanuar* ;;;, transmittedthrou%h acsimile transmissions.M@N

(n the rst letter, petitioner was char%ed with violatin%Section @ o the &ontracts o :ease +* not openin%

on 18 ecem+er 1999 and 8 ecem+er 1999.M9N

Eespondent also char%ed petitioner with sellin% anew variet* o empanada called mini-em"utido and o increasin% the price o her merchandise rom ;.;;to.;;, without the prior approval o the respondent.M1;N

Eespondent o+served that petitioner wasre)uentl* closin% earlier than the usual mall hours,either +ecause o non-deliver* or dela* in the deliver* o stoc!s to her outlets, a%ain in violation o the terms o the contract. 0 stern warnin% was thus %iven topetitioner to rerain rom committin% similar inractionsin the uture in order to avoid the termination o thelease contract.M11N





















(n the second letter, respondent inormed the petitionerthat it will no lon%er renew the &ontracts o :ease orthe three outlets, upon their epiration on 31 4arch;;;.M1N

(n a letter-repl* dated 11 #e+ruar* ;;;, petitioner

eplained that the mini-em"utido is not a new variet*o empanada +ut had similar llin%s, taste andin%redients as those o por! empanada? onl*, its sizewas reduced in order to ma!e it more aforda+le to the+u*ers.M13N

Such eplanation notwithstandin%, respondent stillreused to renew its &ontracts o :ease with thepetitioner. To the contrar*, respondent too! possessiono the store space in S4 4e%amall and conscated thee)uipment and personal +elon%in%s o the petitioneround therein ater the epiration o the lease contract.M1N

(n a letter dated @ 4a* ;;;, petitioner demanded thatthe respondent release the e)uipment and personal+elon%in%s it seized rom the S4 4e%amall store space

and return the securit* deposits, in the sumo 19,;;;.;;, turned over +* the petitioner uponsi%nin% o the &ontracts o :ease. Cn 15 Kune ;;;,petitioner sent respondent another letter reiteratin% herprevious demands, +ut the latter ailed or reused tocompl* therewith. M15N

Cn 17 0u%ust ;;;, an action or Specic erormance,Sum o 4one* and ama%es was led +* the petitioner

a%ainst the respondent +eore the ET& o 4a!ati, Granch57.M18N

(n her &omplaint doc!eted as &ivil &ase Do. ;;-1;15, petitioner alle%ed that the respondent madever+al representations that the &ontracts o :ease will

+e renewed rom time to time and, throu%h the saidrepresentations, the petitioner was induced to introduceimprovements upon the store space at S4 4e%amall inthe sum o ;;,;;;.;;, onl* to nd out a *ear laterthat the respondent will no lon%er renew her leasecontracts or all three outlets.M17N

(n addition, petitioner alle%ed that the respondent,without =ustia+le cause and without previous demand,reused to return the securit* deposits in the amounto19,;;;.;;.M1@N

#urther, petitioner claimed that the respondent seizedher e)uipment and personal +elon%in%s ound inside thestore space in S4 4e%amall ater the lease contract orthe said outlet epired and despite repeated writtendemands rom the petitioner, respondent continuousl*reused to return the seized items.M19N

etitioner thus pra*ed or the award o actual dama%esin the sum o 7,;;;.;;, representin% the sum o securit* deposits, cost o improvements and the valueo the personal properties seized. etitioner also as!edor the award o 3;;,;;;.;; as moraldama%es? 5;,;;;.;; as eemplar* dama%es?and @;,;;;.;; as attorne*s ees and epenses o liti%ation.M;N





















#or its part, respondent countered that petitionercommitted several violations o the terms o their&ontracts o :ease +* not openin% rom 18 ecem+er1999 to 8 ecem+er 1999, and +* introducin% a newvariet* o empanada without the prior consent o therespondent, as mandated +* the provision o Section

o the &ontract o :ease. Eespondent also alle%ed thatpetitioner inrin%ed the lease contract +* re)uentl*closin% earlier than the a%reed closin%hours. Eespondent nall* averred that petitioner islia+le or the amount 1;8,7.;9, representin% thepenalt* or sellin% a new variet* o empanada,electricit* and water +ills, and rental ad=ustment, amon%other char%es incidental to the leasea%reements. Eespondent claimed that the seizure o petitioners personal +elon%in%s and e)uipment was inthe eercise o its retainin% lien, considerin% that thepetitioner ailed to settle the said o+li%ations up to thetime the complaint was led.M1N

&onsiderin% that petitioner alread* committed several+reaches o contract, the respondent thus opted not torenew its &ontracts o :ease with her an*more. Thesecurit* deposits were made in order to ensure aithul

compliance with the terms o their lease a%reements?and since petitioner committed several inractionsthereo, respondent was =ustied in oreitin% thesecurit* deposits in the latters avor.

Cn 3; 0pril ;;1, the ET& rendered a Kud%mentMN inavor o the petitioner and ound that the ph*sicalta!eover +* the respondent o the leased premises andthe seizure o petitioners e)uipment and personal

+elon%in%s without prior notice wereille%al. The decretal part o the ET& Kud%ment reads<

"JE#CE, premises dul*considered, =ud%ment is here+* renderedorderin% the Mherein respondentN to pa*

Mherein petitionerN the amounto 19,;;;.;; representin% the securit*deposits made +* the MpetitionerNand 5;,;;;.;; as and or attorne*s ees.

The MrespondentN is li!ewise orderedto return to the MpetitionerN the variousproperties seized +* the ormer atersettlin% her account with the MrespondentN.

:astl*, the MrespondentN ma* chooseeither to reim+urse the MpetitionerN one hal /12 o the value o the improvementsintroduced +* the plaintif atS4 4e%amall should MrespondentN choose toappropriate the improvements to itsel orre)uire the MpetitionerN to remove the

improvements, even thou%h the principalthin% ma* sufer dama%e there+*.MetitionerN shall not, however, causean*more impairment upon the said leasedpremises than is necessar*.

The other dama%es claimed +* theplaintif are denied or lac! o merit.







0%%rieved, the respondent appealed the adverse ET& Kud%ment to the &ourt o 0ppeals.

(n a ecisionM3N dated 1; Ccto+er ;;3, the &ourt o 0ppeals modied the ET& Kud%ment and ound that therespondent was =ustied in oreitin% the securit*

deposits and was not lia+le to reim+urse the petitioneror the value o the improvements introduced in theleased premises and to pa* or attorne*s ees. (nmodi*in% the ndin%s o the lower court, the appellatecourt declared that in view o the +reaches o contractcommitted +* the petitioner, the respondent is =ustiedin oreitin% the securit* deposits. 4oreover, since thepetitioner did not o+tain the consent o the respondent+eore she introduced improvements on theS4 4e%amall store space, the respondent has thereore

no o+li%ation to reim+urse the petitioner or the amountepended in connection with the said improvements.MN The &ourt o 0ppeals, however, maintained the ordero the trial court or respondent to return to petitionerher properties ater she has settled her o+li%ations tothe respondent. The appellate court denied petitioners4otion or Eeconsideration in a EesolutionM5N dated 190pril ;;8.

Jence, this instant etition or Eeviewon Certiorari ()*+ led +* the petitioner assailin% the &ourto 0ppeals ecision. #or the resolution o this &ourt arethe ollowin% issues<

(. "hether or not the respondent is lia+le to return thesecurit* deposits to the petitions.

((. "hether or not the respondent is lia+le to reim+ursethe petitioner or the sum o the improvements sheintroduced in the leased premises.

(((. "hether or not the respondent is lia+le or attorne*sees.M7N

The appellate court, in ndin% that the respondent isauthorized to oreit the securit* deposits, relied on theprovisions o Sections 5 and 1@ o the &ontract o :ease,to wit<

Section 5. CS(T. $( LESSEE s>

>( > >s +()os/t /* t( su o0 SI<$" $H%USAN PES%S 8P6','''.'' (Du/?>(*t to t(( 83 o*ts (*t >ss(u/tB 0o t( 0u >*+ 0>/t0u)(0o>*( to (> >*+ (?(B t(,)o?/s/o*, o?(*>*t >*+ o*+/t/o* o0 t/s (>s( >*+ *ot >s > )(-)>B(*t o0 (*t. ( at an* time durin% the term o thislease the rent is increasedM,N the :SS ondemand shall ma!e an additional deposit

e)ual to the increase in rent. The :SSCEshall not +e re)uired to !eep the depositseparate rom its %eneral unds and thedeposit shall not +e entitled to interest. Thedeposit shall remain intact durin% the entireterm and shall not +e applied as pa*mentor an* monetar* o+li%ations o the :SSunder this contract. ( the :SS shallaithull* perorm ever* provision o this leaseM,N the deposit shall +e reunded to

the :SS upon the epiration o this :ease













and upon satisaction o all monetar*o+li%ation to the :SSCE.

Section 1@. TE4(D0T(CD. A*B @(>,*o*-)(0o>*( o *o*-o@s(?>*( o0 t( t(s >*+ o*+/t/o*s ((/*)o?/+(+ s> o*st/tut( +(0>ut /s> @( su/(*t gou*+ to t(/*>t(t/s (>s(, /ts (t(*s/o* o (*(>. (nwhich event, the :SSCE shall demand that:SS immediatel* vacate the premises,and LESS%R s> 0o0(/t /* /ts 0>?o t(+()os/t t(*+((+ /tout )(Ju+/( to>*B su ot( >))o)/>t( >t/o* >s>B @( (g>B >uto/(+. 2&

Since it was alread* esta+lished +* the trial courtthat the petitioner was %uilt* o committin% several+reaches o contract, the &ourt o 0ppeals decreed thatshe cannot thereore ri%htull* demand the return o thesecurit* deposits or the same are deemed oreited +*reason o evident contractual violations.

(t is undisputed that the a+ove-)uoted provision oundin all &ontracts o :ease is in the nature o a penalclause to ensure petitioners aithul compliance with theterms and conditions o the said contracts.

0 penal clause is an accessor* underta!in% to assume%reater lia+ilit* in case o +reach. (t is attached to an

o+li%ation in order to insure perormance and has a

dou+le unction< /12 to provide or li)uidated dama%es,and /2 to stren%then the coercive orce o theo+li%ation +* the threat o %reater responsi+ilit* in theevent o +reach.M9N The o+li%or would then +e +ound topa* the stipulated indemnit* without the necessit* o proo o the eistence and the measure o dama%escaused +* the +reach.M3;N 0rticle 18 o the &ivil &ode

states<

0rt. 18. (n o+li%ations with a penalclause, the penalt* shall su+stitute theindemnit* or dama%es and the pa*ment o interests in case o noncompliance, i thereis no stipulation to thecontrar*. Devertheless, dama%es shall +epaid i the o+li%or reuses to pa* the penalt*

or is %uilt* o raud in the ulllment o theo+li%ation.

The penalt* ma* +e enorced onl*when it is demanda+le in accordance withthe provisions o this &ode.

0s a %eneral rule, courts are not at li+ert* to i%nore thereedoms o the parties to a%ree on such terms andconditions as the* see t as lon% as the* are notcontrar* to law, morals, %ood customs, pu+lic order orpu+lic polic*. Devertheless, courts ma* e)uita+l* reducea stipulated penalt* in the contracts in two instances</12 i the principal o+li%ation has +een partl* orirre%ularl* complied with? and /2 even i there has +eenno compliance i the penalt* is ini)uitous orunconsciona+le in accordance with 0rticle 19 o the

&ivil &ode which clearl* provides<

i i 5;6 h l i









0rt. 19. The =ud%e shall e)uita+l*reduce the penalt* when the principalo+li%ation has +een partl* orirre%ularl* complied with +* the de+tor.ven i there has +een no perormance, thepenalt* ma* also +e reduced +* the courts i

it is ini)uitous or unconsciona+le.M31N

(n ascertainin% whether the penalt* is unconsciona+le ornot, this court set out the ollowin% standardin 0igutan v. Court of Appeals, ()+ to wit<

The )uestion o whether a penalt* is

reasona+le or ini)uitous can +e partl*su+=ective and partl* o+=ective. (tsresolution would depend on such actor as,+ut not necessaril* conned to, the t*pe,etent and purpose o the penalt*, thenature o the o+li%ation, the mode o +reachand its conse)uences, the supervenin%realities, the standin% and relationship o the parties, and the li!e, the application o which, +* and lar%e, is addressed to the

sound discretion o the court. .

(n the instant case, the oreiture o the entireamount o the securit* deposits in the sumo 19,;;;.;; was ecessive and unconsciona+leconsiderin% that the %ravit* o the +reaches committed+* the petitioner is not o such de%ree that therespondent was undul* pre=udiced there+*. (t is +ut

e)uita+le thereore to reduce the penalt* o the

petitioner to 5;6 o the total amount o securit*deposits.

(t is in the eercise o its sound discretion that thiscourt tempered the penalt* or the +reaches committed+* the petitioner to 5;6 o the amount o the securit*

deposits. The oreiture o the entire sumo 19,;;;.;; is clearl* a usurious and ini)uitouspenalt* or the trans%ressions committed +* thepetitioner. The respondent is thereore under theo+li%ation to return the 5;6 o 19,;;;.;; to thepetitioner.

Turnin% now to the lia+ilit* o the respondent toreim+urse the petitioner or one-hal o the epensesincurred or the improvements on the leased storespace at S44e%amall, the ollowin% provision in the&ontracts o :ease will enli%hten us in resolvin% thisissue<

Section 11. 0:TE0T(CDS, 0(T(CDS,(4ECI4DTS, T&. The :SS shall notma!e an* alterations, additions, or

improvements without the prior writtenconsent o :SSCE? and all alterations,additions or improvements made on theleased premises, ecept mova+le or turesput in at :SSs epense and which areremova+le, without deacin% the +uildin%s ordama%in% its Poorin%s, shall+ecome :SSCEs propert* withoutcompensationreim+ursement +ut the:SSCE reserves the ri%ht to re)uire the

l th id lt ti dditi th l i d it l i i d i i+l t







removal o the said alterations, additions orimprovements upon epiration o the lease.

The ore%oin% provision in the &ontract o :easemandates that +eore the petitioner can introduce an*improvement on the leased premises, she should rst

o+tain respondents consent. (n the case at +ar, it wasnot shown that petitioner previousl* secured theconsent o the respondent +eore she made theimprovements on the leased space in S4 4e%amall. (twas not even alle%ed +* the petitioner that sheo+tained such consent or she at least attempted tosecure the same. Cn the other hand, the petitionerasserted that respondent alle%edl* misrepresented toher that it would renew the terms o the contracts romtime to time ater their epirations, and that the

petitioner was so induced there+* that she ependedthe sum o ;;,;;;.;; or the improvement o thestore space leased.

This ar%ument was s)uarel* addressed +* this courtin 6ernandez v. Court of Appeals,M33N thus<

The &ourt ruled that the stipulation o theparties in their lease contract to +e

renewa+le at the option o +oth partiesstresses that the acult* to renew was %ivennot to the lessee alone nor to the lessor +*himsel +ut to the two simultaneousl*?hence, +oth must a%ree to renew i a newcontract is to come a+out.

etitioners contention that

respondents had ver+all* a%reed to etend

the lease indenitel* is inadmissi+le to)uali* the terms o the written contractunder the parole evidence rule, andunenorcea+le under the statute o rauds.M3N

4oreover, it is consonant with human eperience thatlessees, +eore occup*in% the leased premises,especiall* store spaces located inside malls and +i%commercial esta+lishments, would renovate the placeand introduce improvements thereon accordin% to theneeds and nature o their +usiness and in harmon* withtheir trademar! desi%ns as part o their mar!etin% plo*to attract customers. &ertainl*, no inducement ormisrepresentation rom the lessor is necessar* or thispurpose, or it is not onl* a matter o necessit* that a

lessee should re-desi%n its place o +usiness +ut a+usiness strate%* as well.

(n rulin% that the respondent is lia+le to reim+ursepetitioner one hal o the amount o improvementsmade on the leased store space should it choose toappropriate the same, the ET& relied on the provision o 0rticle 187@ o the &ivil &ode which provides<

0rt. 187@. ( the lessee ma!es, in %oodaith, useul improvements which aresuita+le to the use or which the lease isintended, without alterin% the orm orsu+stance o the propert* leased,the lessor upon the termination o the leaseshall pa* the lessee one-hal o the value o the improvements at that time. Shouldthe lessor reuse to reim+urse said amount,the lessee ma* remove the improvements,

even thou%h the principal thin% ma* sufer

d th + J h ll t 0 t 58 D h ll +







dama%e there+*. Je shall not,however, cause an* more impairment uponthe propert* leased than is necessar*.

"hile it is true that under the a+ove-)uoted provision o the &ivil &ode, the lessor is under the o+li%ation to pa*the lessee one-hal o the value o the improvementsmade should the lessor choose to appropriate the

improvements, 0rticle 187@ however should +e readto%ether with 0rticle @ and 0rticle 58 o the samestatute, which provide<

0rt. @. The owner o the land onwhich an*thin% has +een +uilt, sown orplanted in %ood aith, shall have the ri%ht toappropriate as his own the wor!s, sowin% or

plantin%, ater pa*ment o the indemnit*provided or in articles 58 and 5@, or too+li%e the one who +uilt or planted to pa*the price o the land, and the one whosowed, the proper rent. Jowever, the+uilder or planter cannot +e o+li%ed to +u*the land i its value is considera+l* morethan that o the +uildin% or trees. (n suchcase, he shall pa* reasona+le rent, i theowner o the land does not choose to

appropriate the +uildin% or trees aterproper indemnit*. The parties shall a%reeupon the terms o the lease and in case o disa%reement, the court shall the termsthereo.

0rt. 58. Decessar* epenses shall +ereunded to ever* possessor? +ut onl*possessor in %ood aith ma* retain the thin%until he has +een reim+ursed thereor.

Aseul epenses shall +e reunded onl* to

the possessor in %ood aith with the sameri%ht o retention, the person who hasdeeated him in the possession havin% theoption o reundin% the amount o theepenses or o pa*in% the increase in valuewhich the thin% ma* have ac)uired +*reason thereo.

Thus, to +e entitled to reim+ursement orimprovements introduced on the propert*, the

petitioner must +e considered a +uilder in %oodaith. #urther, 0rticles @ and 58 o the &ivil &ode,which allow ull reim+ursement o useul improvementsand retention o the premises until reim+ursement ismade, appl* onl* to a possessor in %ood aith, i.e., onewho +uilds on land with the +elie that he is the ownerthereo. 0 +uilder in %ood aith is one who is unaware o an* Paw in his title to the land at the time he +uilds onit.M35N (n this case, the petitioner cannot claim that shewas not aware o an* Paw in her title or was under the

+elie that she is the owner o the su+=ect premises or itis a settled act that she is merel* a lessee thereo.

(n !eminiano v. Court of Appeals, (*+ this &ourtwas emphatic in declarin% that lessees are notpossessors or +uilders in %ood aith, thus<

(/*g (( (ss((s t( )/?>t( to incur epenses to protect its interest +* reason o







(/*g (( (ss((s, t( )/?>t((s)o*+(*ts *( t>t t(/ou)>t/o* o0 t( )(/s(s ou+o*t/*u( o*B 0o t( /0( o0 t((>s(. P>/*B, t(B >**ot @(o*s/+((+ >s )oss(ssos *o @u/+(s/* goo+ 0>/t.

(n a plethora o cases, this &ourt hasheld that 0rticle @ o the &ivil &ode, inrelation to 0rticle 58 o the same &ode,which allows ull reim+ursement o useulimprovements and retention o the premisesuntil reim+ursement is made, applies onl* toa possessor in %ood aith, i.e., one who+uilds on land with the +elie that he is the

owner thereo. It +o(s *ot >))B ((o*(s o*B /*t((st /s t>t o0 > (ss((u*+( > (*t> o*t>tQ ot(/s(, /tou+ >>Bs @( /* t( )o( o0 t(t(*>*t to /)o?( /s >*+o+ out o0 /s )o)(tB.

Since petitioners interest in the store space is merel*that o the lessee under the lease contract, she cannotthereore +e considered a +uilder in %oodaith.&onse)uentl*, respondent ma* appropriate theimprovements introduced on the leased premiseswithout an* o+li%ation to reim+urse the petitioner orthe sum epended.

0nent the claim or attorne*s ees, we resolve toli!ewise den* the award o the same. 0ttorne*s ees

ma* +e awarded when a part* is compelled to liti%ate or

to incur epenses to protect its interest +* reason o un=ustied act o the other.M37N

(n the instant petition, it was not shown that therespondent un=ustia+l* reused to %rant the demandso the petitioner so as to compel the latter to initiate

le%al action to enorce her ri%ht. 0s we have oundherein, there is +asis or respondents reusal to return topetitioner the securit* deposits and to reim+urse thecosts o the improvements in the leased premises. Theaward o attorne*s ees is thereore not proper in theinstant case.

WHEREF%RE, premises considered, the instant etitionis PAR$L" GRAN$E. The &ourt o 0ppeals ecisiondated 1; Ccto+er ;;3 in &0-$.E. &I Do. 73@53 ishere+* AFFIRME with the M%IFICA$I%N that therespondent ma* oreit onl* 5;6 o the total amount o the securit* deposits in the sum o19,;;;.;;, andmust return the remainin% 5;6 to the petitioner. Docosts.

G.R. No. 19;&61 u*( 5, 2'13

SP%USES FL%REN$IN% $. MALLARI >*+ AUREA #.MALLARI, etitioners,

vs.

PRUEN$IAL ANK 8*o ANK %F $HE PHILIPPINEISLANS, Eespondent.

& ( S ( C D

PERAL$A J : 4ort%a%e8 in avor o respondent +an! coverin%



http://www.lawphil.net/judjuris/juri2013/jun2013/gr_197861_2013.html#fnt6




PERAL$A, J.:

Geore us is a etition or Eeview on &ertiorari under

Eule 5, assailin% the ecision1 dated Kune 17, ;1; and

the Eesolution dated Kul* ;, ;11 o the &ourt o

0ppeals /&02 in &0-$.E. &I Do. 85993.

The antecedent acts are as ollows<

Cn ecem+er 11, 19@, petitioner #lorentino T. 4allari

/#lorentino2 o+tained rom respondent rudential Gan!-

Tarlac Granch /respondent +an!2, a loan in the amount

o 3;;,;;;.;; as evidenced +* romissor* Dote /D2

Do. G @-;55.3 Ander the promissor* note, the loan

was su+=ect to an interest rate o 16 per annum /p.a.2,

attorne*>s ees e)uivalent to 156 o the total amount

due +ut not less than ;;.;; and, in case o deault, a

penalt* and collection char%es o 16 p.a. o the total

amount due. The loan had a maturit* date o Kanuar*

1;, 19@5, +ut was renewed up to #e+ruar* 17, 19@5.

etitioner #lorentino eecuted a eed o

0ssi%nment wherein he authorized the respondent

+an! to pa* his loan with his time deposit with the latter

in the amount o 3;;,;;;.;;.

Cn ecem+er , 19@9, petitioners spouses #lorentino

and 0urea 4allari /petitioners2 o+tained a%ain rom

respondent +an! another loan o 1.7 million as

evidenced +* D Do. GS 8;8-@95 with a maturit* date

o 4arch , 199;. The* stipulated that the loan will

+ear 36 interest p.a., attorne*>s ees e)uivalent to

156 p.a. o the total amount due, +ut not less

than ;;.;;, and penalt* and collection char%es o

16 p.a. etitioners eecuted a eed o Eeal state

4ort%a%e8 in avor o respondent +an! coverin%

petitioners> propert* under Transer &erticate o Title

/T&T2 Do. T-15175 o the Ee%ister o eeds o Tarlac to

answer or the said loan.

etitioners ailed to settle their loan o+li%ations with

respondent +an!, thus, the latter, throu%h its law*er,

sent a demand letter to the ormer or them to pa* their

o+li%ations, which when computed up to Kanuar* 31,

199, amounted to 571,[email protected] or D Do. G @-;55

and ,991,9.@ or D Do. GS 8;8-@9.

Cn #e+ruar* 5, 199, respondent +an! led with the

Ee%ional Trial &ourt /ET&2 o Tarlac, a petition or the

etra=udicial oreclosure o petitioners> mort%a%ed

propert* or the satisaction o the latter>s o+li%ation

o1,7;;,;;;.;; secured +* such mort%a%e, thus, the

auction sale was set +* the rovincial Sherif on 0pril 3,

199.7

Cn 0pril 1;, 199, respondent +an!>s 0ssistant 4ana%er

sent petitioners two /2 separate Statements o 0ccount

as o 0pril 3, 199, i.e., the loan o 3;;,;;;.;; was

increased to 59,;3.5, while the 1,7;;,;;;.;; loan

was alread* 3,171,@38.1@.

Cn 0pril ;, 199, petitioners led a complaint or

annulment o mort%a%e, deeds, in=unction, preliminar*

in=unction, temporar* restrainin% order and dama%es

claimin%, amon% others, that< /12 the 3;;,;;;.;; loan

o+li%ation should have +een considered paid, +ecause

the time deposit with the same amount under

&erticate o Time eposit Do. @;51 had alread*

+een assi%ned to respondent +an!? /2 respondent +an!

still added the 3;; ;;; ;; loan to the1 7 million loan Sherif rom efectin% or conductin% the auction sale the

















still added the 3;;,;;;.;; loan to the1.7 million loan

o+li%ation or purposes o appl*in% the proceeds o the

auction sale? and /32 the* realized that there were

onerous terms and conditions imposed +* respondent

+an! when it tried to unilaterall* increase the char%es

and interest over and a+ove those stipulated.

etitioners as!ed the court to restrain respondent +an!

rom proceedin% with the scheduled oreclosure sale.

Eespondent +an! led its 0nswer with counterclaim

ar%uin% that< /12 the interest rates were clearl* provided

in the promissor* notes, which were used in computin%

or interest char%es? /2 as earl* as Kanuar* 19@8,

petitioners> time deposit was made to appl* or the

pa*ment o interest o their 3;;,;;;.;; loan? and /32

the statement o account as o 0pril 1;, 199 providedor a computation o interest and penalt* char%es onl*

rom 4a* 8, 19@9, since the proceeds o petitioners>

time deposit was applied to the pa*ment o interest and

penalt* char%es or the precedin% period. Eespondent

+an! also claimed that petitioners were ull* apprised o

the +an!>s terms and conditions? and that the

etra=udicial oreclosure was sou%ht or the satisaction

o the second loan in the amount o 1.7 million covered

+* D Do. GS 8;8-@9 and the real estate mort%a%e,and not the 3;;,;;;.;; loan covered +* another D

Do. @-;55.

(n an Crder@ dated Dovem+er 1;, 199, the ET& denied

the 0pplication or a "rit o reliminar* (n=unction.

Jowever, in petitioners> Supplemental 4otion or

(ssuance o a Eestrainin% Crder andor reliminar*

(n=unction to en=oin respondent +an! and the rovincial

Sherif rom efectin% or conductin% the auction sale, the

ET& reversed itsel and issued the restrainin% order in its

Crder9 dated Kanuar* 1, 1993.

Eespondent +an! led its 4otion to :it Eestrainin%

Crder, which the ET& %ranted in its Crder1; dated 4arch

9, 1993. Eespondent +an! then proceeded with the

etra=udicial oreclosure o the mort%a%ed propert*. Cn Kul* 7, 1993, a &erticate o Sale was issued to

respondent +an! +ein% the hi%hest +idder in the amount

o 3,5;;,;;;.;;.

Su+se)uentl*, respondent +an! led a 4otion to

ismiss &omplaint11 or ailure to prosecute action or

unreasona+le len%th o time to which petitioners led

their Cpposition.1 Cn Dovem+er 19, 199@, the ET&

issued its Crder13 den*in% respondent +an!>s 4otion to

ismiss &omplaint.

Trial thereater ensued. etitioner #lorentino was

presented as the lone witness or the plaintifs.

Su+se)uentl*, respondent +an! led a emurrer to

vidence.

Cn Dovem+er 15, 1999, the ET& issued itsCrder1 %rantin% respondent>s demurrer to evidence, the

dispositive portion o which reads<

"JE#CE, this case is here+* ordered (S4(SS.

&onsiderin% there is no evidence o +ad aith, the &ourt

need not order the plaintifs to pa* dama%es under the

%eneral concept that there should +e no premium on

the ri%ht to liti%ate.

DC &CSTS certicate o sale was eecuted +* the sherif onl* on

















DC &CSTS.

SC CEE.15

The ET& ound that as to the 3;;,;;;.;; loan,

petitioners had assi%ned petitioner #lorentino>s time

deposit in the amount o 3;;,;;;.;; in avor o

respondent +an!, which maturit* coincided withpetitioners> loan maturit*. Thus, i the loan was unpaid,

which was later etended to #e+ruar* 17, 19@5,

respondent +an! should had =ust applied the time

deposit to the loan. Jowever, respondent +an! did not,

and allowed the loan interest to accumulate reachin%

the amount o 59,;3.5 as o 0pril 1;, 199, hence,

the amount o 9,8;;.;; as penalt* char%es was

un=ust and without +asis.

0s to the 1.7 million loan which petitioners o+tained

rom respondent +an! ater the 3;;,;;;.;; loan, it had

reached the amount o 3,171,@38.1@ per Statement o

0ccount dated 0pril 7, 1993, which was computed

+ased on the 36 interest rate and 16 penalt* char%e

a%reed upon +* the parties? and that contrar* to

petitioners> claim, respondent +an! did not add

the 3;;,;;;.;; loan to the 1.7 million loan o+li%ationor purposes o appl*in% the proceeds o the auction

sale.

The ET& ound no le%al +asis or petitioners> claim that

since the total o+li%ation was 1.7 million and

respondent +an!>s +id price was 3.5 million, the latter

should return to petitioners the diference o 1.@

million. (t ound that since petitioners> o+li%ation had

reached ,991,9.@ as o Kanuar* 31, 199, +ut the

certicate o sale was eecuted +* the sherif onl* on

Kul* 7, 1993, ater the restrainin% order was lited, the

stipulated interest and penalt* char%es rom Kanuar* 31,

199 to Kul* 7, 1993 added to the loan alread*

amounted to 3.5 million as o the auction sale.

The ET& ound that the 36 interest rate p.a., which

was then the prevailin% loan rate o interest could not+e considered unconsciona+le, since +an!s are not

hospita+le or e)uita+le institutions +ut are entities

ormed primaril* or prot. (t also ound that 0rticle

19 o the &ivil &ode invo!ed +* petitioners or the

reduction o the interest was not applica+le, since

petitioners had not paid an* sin%le centavo o the 1.7

million loan which showed the* had not complied with

an* part o the o+li%ation.

etitioners appealed the ET& decision to the &0. 0

&omment was led +* respondent +an! and petitioners

led their Eepl* thereto.

Cn Kune 17, ;1;, the &0 issued its assailed ecision,

the dispositive portion o which reads<

"JE#CE, the instant appeal is here+* D(. TheCrder dated Dovem+er 15, 1999 issued +* the Ee%ional

Trial &ourt /ET&2, Granch 8, Tarlac &it*, in &ivil &ase Do.

755; is here+* 0##(E4.18

The &0 ound that the time deposit o 3;;,;;;.;; was

e)uivalent onl* to the principal amount o the loan

o3;;,;;;.;; and would not +e suBcient to cover the

interest, penalt*, collection char%es and attorne*>s ees

a%reed upon, thus, in the Statement o 0ccount dated

0pril 1; 199 the outstandin% +alance o petitioners> valid the parties thereto are +ound to compl* with







0pril 1;, 199, the outstandin% +alance o petitioners

loan was59,;3.5. (t also ound not persuasive

petitioners> claim that the 3;;,;;;.;; loan was added

to the 1.7 million loan. The &0, li!ewise, ound that the

interest rates and penalt* char%es imposed were not

unconsciona+le and adopted in toto the ndin%s o the

ET& on the matter.

etitioners led their 4otion or Eeconsideration, which

the &0 denied in a Eesolution dated Kul* ;, ;11.

Jence, petitioners led this petition or review ar%uin%

that<

TJ JCD. &CAET C# 00:S EE (D 0##(E4(D$ TJ

CEE C# TJ ET&-GE0D&J 8, T0E:0& &(TH, 0T

DCI4GE 15, 1999, S(T TJ #0&T TJ0T TJ

S04 (S &CDTE0EH TC STT: KAE(SEAD& CD

TJ 40TTE.17

The issue or resolution is whether the 36 p.a. interest

rate and the 16 p.a. penalt* char%e on

petitioners>1,7;;,;;;.;; loan to which the* a%reed

upon is ecessive or unconsciona+le under the

circumstances.

arties are ree to enter into a%reements and stipulate

as to the terms and conditions o their contract, +ut

such reedom is not a+solute. 0s 0rticle 13;8 o the &ivil

&ode provides, 'The contractin% parties ma* esta+lish

such stipulations, clauses, terms and conditions as the*

ma* deem convenient, provided the* are not contrar*

to law, morals, %ood customs, pu+lic order, or pu+lic

polic*.' Jence, i the stipulations in the contract are

valid, the parties thereto are +ound to compl* with

them, since such contract is the law +etween the

parties. (n this case, petitioners and respondent +an!

a%reed upon on a 36 p.a. interest rate on the 1.7

million loan. Jowever, petitioners now contend that the

interest rate o 36 p.a. imposed +* respondent +an! is

ecessive or unconsciona+le, invo!in% our rulin% in

4edel v. &ourt o 0ppeals,1@ Torin% v. Spouses $anzon-

Clan,19 and &hua v. Timan.;

"e are not persuaded.

(n 4edel v. &ourt o 0ppeals,1 we ound the stipulated

interest rate o 886 p.a. or a 5.56 per month on

a5;;,;;;.;; loan ecessive, unconsciona+le and

eor+itant, hence, contrar* to morals i not a%ainst the

law and declared such stipulation void. (n Torin% v.

Spouses $anzon-Clan, the stipulated interest rates

involved were 36 and 3.@16 per month on a 1; million

loan, which we nd under the circumstances ecessive

and reduced the same to 16 per month. "hile in &hua

v. Timan,3 where the stipulated interest rates were 76

and 56 a month, which are e)uivalent to @6 and 8;6

p.a., respectivel*, we had reduced the same to 16 per

month or 16 p.a. "e said that we need not unsettlethe principle we had aBrmed in a plethora o cases that

stipulated interest rates o 36 per month and hi%her are

ecessive, unconsciona+le and eor+itant, hence, the

stipulation was void or +ein% contrar* to morals.

(n this case, the interest rate a%reed upon +* the parties

was onl* 36 p.a., or less than 6 per month, which

are much lower than those interest rates a%reed upon

+* the parties in the a+ove-mentioned cases. Thus,

there is no similarit* o actual milieu or the application ma* not +e considered unconsciona+le 4oreover



















there is no similarit* o actual milieu or the application

o those cases.

"e do not consider the interest rate o 36 p.a. a%reed

upon +* petitioners and respondent +an! to +e

unconsciona+le.

(n Iillanueva v. &ourt o 0ppeals,5 where the issueraised was whether the 6 p.a. stipulated interest rate

is unreasona+le under the circumstances, we answered

in the ne%ative and held<

(n Spouses Zacarias Gacolor and &atherine Gacolor v.

Ganco #ilipino Savin%s and 4ort%a%e Gan!, a%upan

&it* Granch, this &ourt held that the interest rate o 6

per annum on a loan o ,;;;.;;, a%reed upon +*

the parties, ma* not +e considered as unconsciona+le

and ecessive. 0s such, the &ourt ruled that the

+orrowers cannot rene%e on their o+li%ation to compl*

with what is incum+ent upon them under the contract o

loan as the said contract is the law +etween the parties

and the* are +ound +* its stipulations.

0lso, in $arcia v. &ourt o 0ppeals, this &ourt sustained

the a%reement o the parties to a 6 per annuminterest on an @,89,5;.;; loan ndin% the same to

+e reasona+le and clearl* evidenced +* the amended

credit line a%reement entered into +* the parties as well

as two promissor* notes eecuted +* the +orrower in

avor o the lender.

Gased on the a+ove =urisprudence, the &ourt nds that

the 6 per annum interest rate, provided or in the

su+=ect mort%a%e contracts or a loan o 5,;;;.;;,

ma* not +e considered unconsciona+le. 4oreover,

considerin% that the mort%a%e a%reement was reel*

entered into +* +oth parties, the same is the law

+etween them and the* are +ound to compl* with the

provisions contained therein.8

&learl*, =urisprudence esta+lish that the 6 p.a.

stipulated interest rate was not consideredunconsciona+le, thus, the 36 p.a. interest rate

imposed on petitioners> loan in this case can +* no

means +e considered ecessive or unconsciona+le.

"e also do not nd the stipulated 16 p.a. penalt*

char%e ecessive or unconsciona+le.

(n Euiz v. &0,7 we held<

The 16 surchar%e on the principal loan or ever* month

o deault is valid.$:p'i$ This surchar%e or penalt*

stipulated in a loan a%reement in case o deault

parta!es o the nature o li)uidated dama%es under 0rt.

7 o the Dew &ivil &ode, and is separate and distinct

rom interest pa*ment. 0lso reerred to as a penalt*

clause, it is epressl* reco%nized +* law. (t is an

accessor* underta!in% to assume %reater lia+ilit* on thepart o an o+li%or in case o +reach o an o+li%ation. The

o+li%or would then +e +ound to pa* the stipulated

amount o indemnit* without the necessit* o proo on

the eistence and on the measure o dama%es caused

+* the +reach. @ 0nd in evelopment Gan! o the

hilippines v. #amil* #oods 4anuacturin% &o., :td.,9 we

held that<

The enorcement o the penalt* can +e demanded GAUENCI% REUGERI% >*+ %SEFA













The enorcement o the penalt* can +e demanded

+* the creditor onl* when the non-perormance is due to

the ault or raud o the de+tor. The non-perormance

%ives rise to the presumption o ault? in order to avoid

the pa*ment o the penalt*, the de+tor has the +urden

o provin% an ecuse - the ailure o the perormance

was due to either orce ma=eure or the acts o the

creditor himsel.3;

Jere, petitioners deaulted in the pa*ment o their loan

o+li%ation with respondent +an! and their contract

provided or the pa*ment o 16 p.a. penalt* char%e,

and since there was no showin% that petitioners> ailure

to perorm their o+li%ation was due to orce ma=eure or

to respondent +an!>s acts, petitioners cannot now +ac!

out on their o+li%ation to pa* the penalt* char%e. 0contract is the law +etween the parties and the* are

+ound +* the stipulations therein.

"JE#CE, the petition or review is D(. The

ecision dated Kune 17, ;1; and the Eesolution dated

Kul* ;, ;11 o the &ourt o 0ppeals are here+*

0##(E4.

SC CEE.

G.R. No. L-622' M>B ;, 1954

MAR$INA UI=ANA, plaintif-appellee,

vs.

GAUENCI% REUGERI% >*+ %SEFAP%S$RA%, deendants-appellants.

amson and Amante for appellants.

a"ino 8alomares for appellee.

LARA%R, J.!

This is an appeal to this &ourt rom a decision rendered

+* the &ourt o #irst (nstance o 4arindu)ue, wherein

the deendants-appellants are ordered to pa* the

plaintif-appellee the sum o 55;, with interest rom the

time o the lin% o the complaint, and rom an order o

the same court den*in% a motion o the deendants-

appellants or the reconsideration o the =ud%ment on

the %round that the* were deprived o their da* in court.

The action was ori%inall* instituted in the =ustice o the

peace court o Sta. &ruz, 4arindu)ue, and the same is

+ased on an actiona+le document attached to the

complaint, si%ned +* the deendants-appellants on

Ccto+er , 19@, and containin% the ollowin% pertinent

provisions<

Da alan%-alan% sa amin% mahi%pit na

pan%an%ailan%an a* !amin% ma%asawa a*

lumapit !a* $inan% 4artina uizana, +alo, at

naninirahan sa Jupi, Sta. &ruz, 4arindu)ue, at

!ami a* umutan% sa !an*a n% hala%an% :iman%

aan at :iman% un% iso /55;.;;2, Salapin%

umiiral dito sa #ilipinas na amin% tinan%%ap na

husto at walan% !ulan% sa !an*a sa condicion na

an% hala%an% amin% inutan% a* i+a+ali! o

+a+a*aran namin sa !an*a sa !atapusan n% +eore the* received notice o the hearin% on the





+a+a*aran namin sa !an*a sa !atapusan n%

+uwan n% nero, taon% 199.

ina%!asunduan din namin% ma%asawa sa

sa!alin% hindi !ami ma!a+a*ad sa tanin% na

panahon a* amin% ipirenda o isasan%la sa !an*a

an% isa namin% pala%a* na nio%an sa lu%ar nan%

&ororocho, +arrio n% Galo%o, municipio n% Santa&ruz, lalawi%an% 4arindu)ue, Oapuluan% #ilipinas

at ito a* nalili+ot n% m%a !ahan%anan%

sumusunod<

Sa Dorte, almacio &onstantino? sa este, &atalina

Eeorma? sa sur, ionisio 0riola? at sa Ceste,

Eeodoro Eicamora, no natatala sa %o+ierno sa

ilalim n% eclaracion Do. WWWWWW na nasa pan%alan

!o, Kosea ostrado.

The deendants-appellants admit the eecution o the

document, +ut claim, as special deense, that since the

31st o Kanuar*, 199, the* ofered to pled%e the land

specied in the a%reement and transer possession

thereo to the plaintif-appellee, +ut that the latter

reused said ofer. Kud%ement havin% +een rendered +*

the =ustice o the peace court o Sta. &ruz, thedeendants-appellants appealed to the &ourt o #irst

(nstance. (n that court the* reiterated the deenses that

the* presented in the =ustice o the peace court. The

case was set or hearin% in the &ourt o #irst (nstance on

0u%ust 18, 1951. 0s earl* as Kul* 3; counsel or the

deendants-appellants presented an 'Ar%ent 4otion or

&ontinuance,' alle%in% that on the da* set or the

hearin% /0u%ust 18, 19512, the* would appear in the

hearin% o two criminal cases previousl* set or trial

+eore the* received notice o the hearin% on the

aoresaid date. The motion was su+mitted on 0u%ust ,

and was set or hearin% on 0u%ust . This motion was

not acted upon until the da* o the trial. Cn the date o

the trial the court denied the deendants-appellants>

motion or continuance, and ater hearin% the evidence

or the plaintif, in the a+sence o the deendants-

appellants and their counsel, rendered the decision

appealed rom. eendants-appellants upon receivin%

cop* o the decision, led a motion or reconsideration,

pra*in% that the decision +e set aside on the %round

that suBcient time in advance was %iven to the court to

pass upon their motion or continuance, +ut that the

same was not passed upon. This motion or

reconsideration was denied.

The main )uestion raised in this appeal is the nature

and efect o the actiona+le document mentioned

a+ove. The trial court evidentl* i%nored the second part

o deendants-appellants> written o+li%ation, and

enorced its last rst part, which ed pa*ment on

Kanuar* 31, 199. The plaintif-appellee, or his part,

claims that this part o the written o+li%ation is not

+indin% upon him or the reason that he did not si%n the

a%reement, and that even i it were so, the deendants-appellants did not eecute the document as a%reed

upon, +ut, accordin% to their answer, demanded the

plaintif-appellee to do so. This last contention o the

plaintif-appellee is due to a loose lan%ua%e in the

answer led with the &ourt o #irst (nstance. Gut upon

careul scrutin*, it will +e seen that what the

deendants-appellants wanted to alle%e is that the*

themselves had ofered to eecute the document o

mort%a%e and deliver the same to the plaintif-appellee, The decisive )uestion at issue, thereore, is whether the



o %a%e a d de e e sa e o e p a appe ee,

+ut that the latter reused to have it eecuted unless, an

additional securit* was urnished. Thus the answer

reads<

5. That immediatel* ater the due date o the loan

0nne '0' o the complaint, the deendants made

eforts to eecute the necessar* documents omort%a%e and to deliver the same to the plaintif,

in compliance with the terms and conditions

thereo, +ut the plaintif reused to eecute the

proper documents and insisted on another portion

o deendants> as additional securit* or the said

loan? /emphasis ours.2

(n our opinion it is not true that deendants-appellants

had not ofered to eecute the deed o mort%a%e.

The other reasons adduced +* the plaintif-appellee or

claimin% that the a%reement was not +indin% upon him

also deserves scant consideration. "hen plaintif-

appellee received the document, without an* o+=ection

on his part to the para%raph thereo in which the

o+li%ors ofered to deliver a mort%a%e on a propert* o

theirs in case the* ailed to pa* the de+t on the da*stipulated, he there+* accepted the said condition o the

a%reement. The acceptance +* him o the written

o+li%ation without o+=ection and protest, and the act

that he !ept it and +ased his action thereon, are

concrete and positive proo that he a%reed and

contested to all its terms, includin% the para%raph on

the constitution o the mort%a%e.

e dec s e )ues o a ssue, e e o e, s e e e

second part o the written o+li%ation, in which the

o+li%ors a%reed and promised to deliver a mort%a%e

over the parcel o land descri+ed therein, upon their

ailure to pa* the de+t on a date specied in the

proceedin% para%raph, is valid and +indin% and efective

upon the plaintif-appellee, the creditor. This second

part o the o+li%ation in )uestion is what is !nown in law

as a acultative o+li%ation, dened in article 1;8 o

&ivil &ode o the hilippines, which provides<

0ET. 1;8. "hen onl* one prestation has +een

a%reed upon, +ut the o+li%or ma* render another

in su+stitution, the o+li%ation is called acultative.

This is a new provision and is not ound in the old

Spanish &ivil &ode, which was the one in orce at the

time o the eecution o the a%reement.

There is nothin% in the a%reement which would ar%ue

a%ainst its enorcement. it is not contrar* to law or

pu+lic morals or pu+lic polic*, and notwithstandin% the

a+sence o an* le%al provision at the time it was

entered into %overnment it, as the parties had reel*

and voluntaril* entered into it, there is no %round or

reason wh* it should not +e %iven efect. (t is a new

ri%ht which should +e declared efective at once, in

consonance with the provisions o article 53 o the

&ivil &ode o the hilippines, thus<

0ET. 53. . . . Gut i a ri%ht should +e declared or

the rst time in this &ode, it shall +e efective at

once, even thou%h the act or event which %ives stB( o0 UALI$" PAPERS T PLAS$IC PR%UC$S



, % %

rise thereto ma* have +een done or ma* have

occurred under the prior le%islation, provided said

new ri%ht does not pre=udice or impair an* vested

or ac)uired ri%ht, o the same ori%in.

(n view o our avora+le resolution on the important

)uestion raised +* the deendants-appellants on thisappeal, it +ecomes unnecessar* to consider the other

)uestion o procedure raised +* them.

#or the ore%oin% considerations, the =ud%ment

appealed rom is here+* reversed, and in accordance

with the provisions o the written o+li%ation, the case is

here+* remanded to the &ourt o #irst (nstance, in which

court the deendants-appellants shall present a dul*

eecuted deed o mort%a%e over the propert* descri+ed

in the written o+li%ation, with a period o pa*ment to +e

a%reed upon +* the parties with the approval o the

court. "ithout costs.

8aras, C.J., 8a"lo, /engzon, Montema#or, Jugo, /autista

Angelo, and Conepion, JJ., concur.

G.R. No. 2'6&'6 u*( 25, 2'14

ARC% PULP AN PAPER C%., INC. >*+ CANIA A.SAN$%S, etitioners,

vs.

AN $. LIM, +o/*g @us/*(ss u*+( t( *>( >*+

B EN$ERPRISES, Eespondent.

& ( S ( C D

LE%NEN, J.:

Dovation must +e stated in clear and une)uivocal termsto etin%uish an o+li%ation. (t cannot +e presumed and

ma* +e implied onl* i the old and new contracts are

incompati+le on ever* point.

Geore us is a petition or review on certiorari1 assailin%

the &ourt o 0ppealsR decision in &0-$.E. &I Do. 957;9,

which stemmed rom a complaint3 led in the Ee%ional

Trial &ourt o Ialenzuela &it*, Granch 171, or collection

o sum o mone*.

The acts are as ollows<

an T. :im wor!s in the +usiness o suppl*in% scrap

papers, cartons, and other raw materials, under the

name ualit* aper and lastic roducts, nterprises, to

actories en%a%ed in the paper mill +usiness. #rom

#e+ruar* ;;7 to 4arch ;;7, he delivered scrap papers

worth 7,;,[email protected] to 0rco ulp and aper &ompan*,(nc. /0rco ulp and aper2 throu%h its &hie ecutive

CBcer and resident, &andida 0. Santos.5 The parties

alle%edl* a%reed that 0rco ulp and aper would either

pa* an T. :im the value o the raw materials or deliver

to him their nished products o e)uivalent value.8

an T. :im alle%ed that when he delivered the raw

materials, 0rco ulp and aper issued a post-dated

chec! dated 0pril 1@, ;;77 in the amount o Cn 4a* 5, ;;7, an T.:im sent a letter1 to 0rco ulp



















p

1,@7,788.8@ as partial pa*ment, with the assurance

that the chec! would not +ounce.@ "hen he deposited

the chec! on 0pril 1@, ;;7, it was dishonored or +ein%

drawn a%ainst a closed account.9

Cn the same da*, 0rco ulp and aper and a certain ric

S* eecuted a memorandum o a%reement1; where 0rcoulp and aper +ound themselves to deliver their

nished products to 4e%apac! &ontainer &orporation,

owned +* ric S*, or his account. 0ccordin% to the

memorandum, the raw materials would +e supplied +*

an T. :im, throu%h his compan*, ualit* aper and

lastic roducts. The memorandum o a%reement reads

as ollows<

er meetin% held at 0E&C, 0pril 1@, ;;7, it has +een

mutuall* a%reed +etween 4rs. &andida 0. Santos and

4r. ric S* that 0E&C will deliver 8;; tons Test :iner

15;175 $S4, ull width 78 inches at the price o [email protected];

per !%. to 4e%apac! &ontainer or 4r. ric S*Rs account.

Schedule o deliveries are as ollows<

. . . .

(t has +een a%reed urther that the :ocal C&& materials

to +e used or the production o the a+ove Test :iners

will +e supplied +* ualit* aper Y lastic roducts nt.,

total o 8;; 4etric Tons at 8.5; per !%. /price su+=ect

to chan%e per advance notice2. uantit* o :ocal C&&

deliver* will +e +ased on the )uantit* o Test :iner

delivered to 4e%apac! &ontainer &orp. +ased on the

a+ove production schedule.11

* p

and aper demandin% pa*ment o the amount o

7,;,[email protected], +ut no pa*ment was made to him.13

an T. :im led a complaint1 or collection o sum o

mone* with pra*er or attachment with the Ee%ional

Trial &ourt, Granch 171, Ialenzuela &it*, on 4a* @,

;;7. 0rco ulp and aper led its answer15 +ut ailed tohave its representatives attend the pre-trial hearin%.

Jence, the trial court allowed an T. :im to present his

evidence e parte.18

Cn Septem+er 19, ;;@, the trial court rendered a

=ud%ment in avor o 0rco ulp and aper and dismissed

the complaint, holdin% that when 0rco ulp and aper

and ric S* entered into the memorandum o

a%reement, novation too! place, which etin%uished

0rco ulp and aperRs o+li%ation to an T. :im.17

an T. :im appealed1@ the =ud%ment with the &ourt o

0ppeals. 0ccordin% to him, novation did not ta!e place

since the memorandum o a%reement +etween 0rco

ulp and aper and ric S* was an eclusive and private

a%reement +etween them. Je ar%ued that i his name

was mentioned in the contract, it was onl* or suppl*in%the parties their re)uired scrap papers, where his

conormit* throu%h a separate contract was

indispensa+le.19

Cn Kanuar* 11, ;13, the &ourt o 0ppeals; rendered a

decision1 reversin% and settin% aside the =ud%ment

dated Septem+er 19, ;;@ and orderin% 0rco ulp and

aper to =ointl* and severall* pa* an T. :im the amount

o7,;,[email protected] with interest at 16 per annum rom

the time o demand? 5;,;;;.;; moral 0ppeals was correct in holdin% petitioners solidaril*































dama%es? 5;,;;;.;; eemplar* dama%es?

and 5;,;;;.;; attorne*Rs ees.

The appellate court ruled that the acts and

circumstances in this case clearl* showed the eistence

o an alternative o+li%ation.3 (t also ruled that an T.

:im was entitled to dama%es and attorne*Rs ees due tothe +ad aith ehi+ited +* 0rco ulp and aper in not

honorin% its underta!in%.

(ts motion or reconsideration5 havin% +een

denied,8 0rco ulp and aper and its resident and

&hie ecutive CBcer, &andida 0. Santos, +rin% this

petition or review on certiorari.

Cn one hand, petitioners ar%ue that the eecution o thememorandum o a%reement constituted a novation o

the ori%inal o+li%ation since ric S* +ecame the new

de+tor o respondent. The* also ar%ue that there is no

le%al +asis to hold petitioner &andida 0. Santos

personall* lia+le or the transaction that petitioner

corporation entered into with respondent. The &ourt o

0ppeals, the* alle%e, also erred in awardin% moral and

eemplar* dama%es and attorne*Rs ees to respondentwho did not show proo that he was entitled to

dama%es.7

Eespondent, on the other hand, ar%ues that the &ourt o

0ppeals was correct in rulin% that there was no proper

novation in this case. Je ar%ues that the &ourt o

0ppeals was correct in orderin% the pa*ment o

7,;,[email protected] with dama%es since the de+t o petitioners

remains unpaid.@

Je also ar%ues that the &ourt o

pp % p *

lia+le since petitioner &andida 0. Santos was 'the prime

mover or such outstandin% corporate lia+ilit*.'9 (n their

repl*, petitioners reiterate that novation too! place

since there was nothin% in the memorandum o

a%reement showin% that the o+li%ation was alternative.

The* also ar%ue that when respondent allowed them to

deliver the nished products to ric S*, the ori%inal

o+li%ation was novated.3;

0 re=oinder was su+mitted +* respondent, +ut it was

noted without action in view o 0.4. Do. 99--;-S&

dated Dovem+er 1, ;;;.31

The issues to +e resolved +* this court are as ollows<

1. "hether the o+li%ation +etween the parties wasetin%uished +* novation

. "hether &andida 0. Santos was solidaril* lia+le

with 0rco ulp and aper &o., (nc.

3. "hether moral dama%es, eemplar* dama%es,

and attorne*Rs ees can +e awarded

The petition is denied.

The o+li%ation +etween the

parties was an alternative

o+li%ation

The rule on alternative o+li%ations is %overned +* 0rticle

1199 o the &ivil &ode, which states<

0rticle 1199. 0 person alternativel* +ound +* diferent The appellate court, thereore, correctl* identied the























prestations shall completel* perorm one o them.

The creditor cannot +e compelled to receive part o one

and part o the other underta!in%.

'(n an alternative o+li%ation, there is more than one

o+=ect, and the ulllment o one is suBcient,determined +* the choice o the de+tor who %enerall*

has the ri%ht o election.'3 The ri%ht o election is

etin%uished when the part* who ma* eercise that

option cate%oricall* and une)uivocall* ma!es his or her

choice !nown.33

The choice o the de+tor must also +e communicated to

the creditor who must receive notice o it since< The

o+=ect o this notice is to %ive the creditor . . .opportunit* to epress his consent, or to impu%n the

election made +* the de+tor, and onl* ater said notice

shall the election ta!e le%al efect when consented +*

the creditor, or i impu%ned +* the latter, when declared

proper +* a competent court.3

0ccordin% to the actual ndin%s o the trial court and

the appellate court, the ori%inal contract +etween the

parties was or respondent to deliver scrap papers

worth 7,;,[email protected] to petitioner 0rco ulp and aper.

The pa*ment or this deliver* +ecame petitioner 0rco

ulp and aperRs o+li%ation. G* a%reement, petitioner

0rco ulp and aper, as the de+tor, had the option to

either /12 pa* the price or/2 deliver the nished

products o e)uivalent value to respondent.35

o+li%ation +etween the parties as an alternative

o+li%ation, where+* petitioner 0rco ulp and aper, ater

receivin% the raw materials rom respondent, would

either pa* him the price o the raw materials or, in the

alternative, deliver to him the nished products o

e)uivalent value.

"hen petitioner 0rco ulp and aper tendered a chec!

to respondent in partial pa*ment or the scrap papers,

the* eercised their option to pa* the price.

EespondentRs receipt o the chec! and his su+se)uent

act o depositin% it constituted his notice o petitioner

0rco ulp and aperRs option to pa*.

This choice was also shown +* the terms o the

memorandum o a%reement, which was eecuted on the

same da*. The memorandum declared in clear terms

that the deliver* o petitioner 0rco ulp and aperRs

nished products would +e to a third person, there+*

etin%uishin% the option to deliver the nished products

o e)uivalent value to respondent.

The memorandum o

a%reement did not constitutea novation o the ori%inal

contract

The trial court erroneousl* ruled that the eecution o

the memorandum o a%reement constituted a novation

o the contract +etween the parties. "hen petitioner

0rco ulp and aper opted instead to deliver the

nished products to a third person, it did not novate the

ori%inal o+li%ation +etween the parties.

The rules on novation are outlined in the &ivil &ode, Dovation is a mode o etin%uishin% an o+li%ation +*











thus<

0rticle 191. C+li%ations ma* +e modied +*<

/12 &han%in% their o+=ect or principal conditions?

/2 Su+stitutin% the person o the de+tor?

/32 Su+ro%atin% a third person in the ri%hts o the

creditor. /1;32

0rticle 19. (n order that an o+li%ation ma* +e

etin%uished +* another which su+stitute the same, it is

imperative that it +e so declared in une)uivocal terms,

or that the old and the new o+li%ations +e on ever*

point incompati+le with each other. /1;2

0rticle 193. Dovation which consists in su+stitutin% a

new de+tor in the place o the ori%inal one, ma* +e

made even without the !nowled%e or a%ainst the will o

the latter, +ut not without the consent o the creditor.

a*ment +* the new de+tor %ives him the ri%hts

mentioned in 0rticles 138 and 137. /1;5a2

Dovation etin%uishes an o+li%ation +etween twoparties when there is a su+stitution o o+=ects or de+tors

or when there is su+ro%ation o the creditor. (t occurs

onl* when the new contract declares so 'in une)uivocal

terms' or that 'the old and the new o+li%ations +e on

ever* point incompati+le with each other.'38

Dovation was etensivel* discussed +* this court in

$arcia v. :lamas<37

chan%in% its o+=ects or principal o+li%ations, +*

su+stitutin% a new de+tor in place o the old one, or +*

su+ro%atin% a third person to the ri%hts o the creditor.

0rticle 193 o the &ivil &ode denes novation as

ollows<

'0rt. 193. Dovation which consists in su+stitutin% anew de+tor in the place o the ori%inal one, ma* +e



a*ment +* the new de+tor %ives him ri%hts mentioned

in articles 138 and 137.'

(n %eneral, there are two modes o su+stitutin% the

person o the de+tor< /12 epromision and /2

dele%acion. (n epromision, the initiative or the chan%e

does not come rom F and ma* even +e made without

the !nowled%e o F the de+tor, since it consists o a

third personRs assumption o the o+li%ation. 0s such, it

lo%icall* re)uires the consent o the third person and

the creditor. (n dele%acion, the de+tor ofers, and the

creditor accepts, a third person who consents to the

su+stitution and assumes the o+li%ation? thus, the

consent o these three persons are necessar*. Gothmodes o su+stitution +* the de+tor re)uire the consent

o the creditor.

Dovation ma* also +e etinctive or modicator*. (t is

etinctive when an old o+li%ation is terminated +* the

creation o a new one that ta!es the place o the ormer.

(t is merel* modicator* when the old o+li%ation

su+sists to the etent that it remains compati+le with

the amendator* a%reement. "hether etinctive or

modicator*, novation is made either +* chan%in% the the old o+li%ation or the new one.39 /mphasis supplied2









o+=ect or the principal conditions, reerred to as

o+=ective or real novation? or +* su+stitutin% the person

o the de+tor or su+ro%atin% a third person to the ri%hts

o the creditor, an act !nown as su+=ective or personal

novation. #or novation to ta!e place, the ollowin%

re)uisites must concur<

12 There must +e a previous valid o+li%ation.

2 The parties concerned must a%ree to a new

contract.

32 The old contract must +e etin%uished.

2 There must +e a valid new contract.

Dovation ma* also +e epress or implied. (t is epress

when the new o+li%ation declares in une)uivocal terms

that the old o+li%ation is etin%uished. (t is implied when

the new o+li%ation is incompati+le with the old one on

ever* point. The test o incompati+ilit* is whether the

two o+li%ations can stand to%ether, each one with its

own independent eistence.3@ /mphasis supplied2

Gecause novation re)uires that it +e clear andune)uivocal, it is never presumed, thus<

(n the civil law settin%, novatio is literall* construed as

to ma!e new. So it is deepl* rooted in the Eoman :aw

=urisprudence, the principle F novatio non praesumitur

Fthat novation is never presumed.0t +ottom, or

novation to+e a =ural realit*, its animus must +e ever

present, de+itum pro de+ito F +asicall* etin%uishin%

There is nothin% in the memorandum o a%reement that

states that with its eecution, the o+li%ation o

petitioner 0rco ulp and aper to respondent would +e

etin%uished. (t also does not state that ric S*

somehow su+stituted petitioner 0rco ulp and aper as

respondentRs de+tor. (t merel* shows that petitioner

0rco ulp and aper opted to deliver the nishedproducts to a third person instead.

The consent o the creditor must also +e secured or the

novation to +e valid<

Dovation must +e epressl* consented to. 4oreover, the

conPictin% intention and acts o the parties underscore

the a+sence o an* epress disclosure or circumstances

with which to deduce a clear and une)uivocal intent +*

the parties to novate the old a%reement.; /mphasis

supplied2

(n this case, respondent was not priv* to the

memorandum o a%reement, thus, his conormit* to the

contract need not +e secured. This is clear rom the rst

line o the memorandum, which states<



4r. ric S*. . . .1

( the memorandum o a%reement was intended to

novate the ori%inal a%reement +etween the parties,

respondent must have rst a%reed to the su+stitution o

ric S* as his new de+tor. The memorandum o

a%reement must also state in clear and une)uivocal

terms that it has replaced the ori%inal o+li%ation o 4oral dama%es are not recovera+le simpl* +ecause a









petitioner 0rco ulp and aper to respondent. Deither o

these circumstances is present in this case.

etitioner 0rco ulp and aperRs act o tenderin% partial

pa*ment to respondent also conPicts with their alle%ed

intent to pass on their o+li%ation to ric S*. "hen

respondent sent his letter o demand to petitioner 0rcoulp and aper, and not to ric S*, it showed that the

ormer neither ac!nowled%ed nor consented to the

latter as his new de+tor. These acts, when ta!en

to%ether, clearl* show that novation did not ta!e place.

Since there was no novation, petitioner 0rco ulp and

aperRs o+li%ation to respondent remains valid and

eistin%. etitioner 0rco ulp and aper, thereore, must

still pa* respondent the ull amount o 7,;,[email protected].

etitioners are lia+le or

dama%es

Ander 0rticle ; o the &ivil &ode, moral dama%es

ma* +e awarded in case o +reach o contract where the

+reach is due to raud or +ad aith<

0rt. ;. "illull in=ur* to propert* ma* +e a le%al

%round or awardin% moral dama%es i the court should

nd that, under the circumstances, such dama%es are

=ustl* due. The same rule applies to +reaches o

contract where the deendant acted raudulentl* or in

+ad aith. /mphasis supplied2

4oral dama%es are not awarded as a matter o ri%ht +ut

onl* ater the part* claimin% it proved that the +reach

was due to raud or +ad aith. 0s this court stated<

contract has +een +reached. The* are recovera+le onl*

i the part* rom whom it is claimed acted raudulentl*

or in +ad aith or in wanton disre%ard o his contractual

o+li%ations. The +reach must +e wanton, rec!less,

malicious or in +ad aith, and oppressive or a+usive.

#urther, the ollowin% re)uisites must +e proven or therecover* o moral dama%es<

0n award o moral dama%es would re)uire certain

conditions to +e met, to wit< /12rst, there must +e an

in=ur*, whether ph*sical, mental or ps*cholo%ical,

clearl* sustained +* the claimant? /2 second, there

must +e culpa+le act or omission actuall* esta+lished?

/32 third, the wron%ul act or omission o the deendant

is the proimate cause o the in=ur* sustained +* the

claimant? and /2 ourth, the award o dama%es is

predicated on an* o the cases stated in 0rticle 19 o

the &ivil &ode.3

Jere, the in=ur* sufered +* respondent is the loss

o 7,;,[email protected] rom his +usiness. This has remained

unpaid since ;;7. This in=ur* undou+tedl* was caused

+* petitioner 0rco ulp and aperRs act o reusin% topa* its o+li%ations.

"hen the o+li%ation +ecame due and demanda+le,

petitioner 0rco ulp and aper not onl* issued an

ununded chec! +ut also entered into a contract with a

third person in an efort to evade its lia+ilit*. This proves

the third re)uirement.

0s to the ourth re)uisite, 0rticle 19 o the &ivil &ode perormance o his duties, act with =ustice, %ive







provides that moral dama%es ma* +e awarded in the

ollowin% instances<

0rticle 19. 4oral dama%es ma* +e recovered in the

ollowin% and analo%ous cases<

/12 0 criminal ofense resultin% in ph*sical in=uries?

/2 uasi-delicts causin% ph*sical in=uries?

/32 Seduction, a+duction, rape, or other lascivious

acts?

/2 0dulter* or concu+ina%e?

/52 (lle%al or ar+itrar* detention or arrest?

/82 (lle%al search?

/72 :i+el, slander or an* other orm o deamation?

/@2 4alicious prosecution?

/92 0cts mentioned in 0rticle 3;9?

/1;2 0cts and actions reerred to in 0rticles 1, 8,

7, @, 9, 3;, 3, 3, and 35.

Greaches o contract done in +ad aith, however, are not

specied within this enumeration. "hen a part*

+reaches a contract, he or she %oes a%ainst 0rticle 19 o

the &ivil &ode, which states< 0rticle 19. ver* person

must, in the eercise o his ri%hts and in the

ever*one his due, and o+serve honest* and %ood aith.

ersons who have the ri%ht to enter into contractual

relations must eercise that ri%ht with honest* and %ood

aith. #ailure to do so results in an a+use o that ri%ht,

which ma* +ecome the +asis o an action or dama%es.

0rticle 19, however, cannot +e its sole +asis<

0rticle 19 is the %eneral rule which %overns the conduct

o human relations. G* itsel, it is not the +asis o an

actiona+le tort. 0rticle 19 descri+es the de%ree o care

re)uired so that an actiona+le tort ma* arise when it is

alle%ed to%ether with 0rticle ; or 0rticle 1.

0rticle ; and 1 o the &ivil &ode are as ollows<

0rticle ;. ver* person who, contrar* to law, wilull* or

ne%li%entl* causes dama%e to another, shall indemni*

the latter or the same.

0rticle 1.0n* person who wilull* causes loss or in=ur*

to another in a manner that is contrar* to morals, %ood

customs or pu+lic polic* shall compensate the latter or

the dama%e.

To +e actiona+le, 0rticle ; re)uires a violation o law,

while 0rticle 1 onl* concerns with lawul acts that are

contrar* to morals, %ood customs, and pu+lic polic*<

0rticle ; concerns violations o eistin% law as +asis or

an in=ur*. (t allows recover* should the act have +een

willul or ne%li%ent. "illul ma* reer to the intention to

do the act and the desire to achieve the outcome which

is considered +* the plaintif in tort action as in=urious.

li i i h h

4oral dama%es, however, are not recovera+le on the

+ h h i l i h





De%li%ence ma* reer to a situation where the act was

consciousl* done +ut without intendin% the result which

the plaintif considers as in=urious.

0rticle 1, on the other hand, concerns in=uries that ma*

+e caused +* acts which are not necessaril* proscri+ed

+* law. This article re)uires that the act +e willul, thatis, that there was an intention to do the act and a desire

to achieve the outcome. (n cases under 0rticle 1, the

le%al issues revolve around whether such outcome

should +e considered a le%al in=ur* on the part o the

plaintif or whether the commission o the act was done

in violation o the standards o care re)uired in 0rticle

19.5

"hen parties act in +ad aith and do not aithull*

compl* with their o+li%ations under contract, the* run

the ris! o violatin% 0rticle 1159 o the &ivil &ode<

0rticle 1159. C+li%ations arisin% rom contracts have the

orce o law +etween the contractin% parties and should

+e complied with in %ood aith.

0rticle 19, thereore, is not an ehaustive list o the

instances where moral dama%es ma* +e recovered

since it onl* species, amon% others, 0rticle 1. "hen a

part* rene%es on his or her o+li%ations arisin% rom

contracts in +ad aith, the act is not onl* contrar* to

morals, %ood customs, and pu+lic polic*? it is also a

violation o 0rticle 1159. Greaches o contract +ecome

the +asis o moral dama%es, not onl* under 0rticle

;, +ut also under 0rticles 19 and ; in relation to

0rticle 1159.

mere +reach o the contract. 0rticle ; re)uires that

the +reach +e done raudulentl* or in +ad aith. (n

0driano v. :asala<8

To recover moral dama%es in an action or +reach o

contract, the +reach must +e palpa+l* wanton, rec!less

and malicious, in +ad aith, oppressive, or a+usive.Jence, the person claimin% +ad aith must prove its

eistence +* clear and convincin% evidence or the law

alwa*s presumes %ood aith.

Gad aith does not simpl* connote +ad =ud%ment or

ne%li%ence. (t imports a dishonest purpose or some

moral o+li)uit* and conscious doin% o a wron%, a

+reach o !nown dut* throu%h some motive or interest

or ill will that parta!es o the nature o raud. (t is,

thereore, a )uestion o intention, which can +e inerred

rom oneRs conduct andor contemporaneous

statements.7 /mphasis supplied2

Since a ndin% o +ad aith is %enerall* premised on the

intent o the doer, it re)uires an eamination o the

circumstances in each case.

"hen petitioner 0rco ulp and aper issued a chec! in

partial pa*ment o its o+li%ation to respondent, it was

presuma+l* with the !nowled%e that it was +ein% drawn

a%ainst a closed account. "orse, it attempted to shit

their o+li%ations to a third person without the consent o

respondent.

etitioner 0rco ulp and aperRs actions clearl* show 'a

dishonest purpose or some moral o+li)uit* and

conscious doin% o a wron%, a +reach o !nown dut*

th h ti i t t ill ill th t t !

as a deterrent to serious wron% doin%s, and as a

i di ti d f i d t i i









throu%h some motive or interest or ill will that parta!es

o the nature o raud.'@ 4oral dama%es ma*, thereore,

+e awarded.

emplar* dama%es ma* also +e awarded. Ander the

&ivil &ode, eemplar* dama%es are due in the ollowin%

circumstances<

0rticle 3. (n contracts and )uasi-contracts, the court

ma* award eemplar* dama%es i the deendant acted

in a wanton, raudulent, rec!less, oppressive, or

malevolent manner.

0rticle 33. emplar* dama%es cannot +e recovered

as a matter o ri%ht? the court will decide whether or not

the* should +e ad=udicated.

0rticle 3. "hile the amount o the eemplar*

dama%es need not +e proven, the plaintif must show

that he is entitled to moral, temperate or compensator*

dama%es +eore the court ma* consider the )uestion o

whether or not eemplar* dama%es should +e awarded.

(n Tan!eh v. evelopment Gan! o the hilippines,9 we

stated that<

The purpose o eemplar* dama%es is to serve as a

deterrent to uture and su+se)uent parties rom the

commission o a similar ofense. The case o eople v.

Eantecitin% eople v. alisa* held that<

0lso !nown as UpunitiveR or UvindictiveR dama%es,

eemplar* or corrective dama%es are intended to serve

vindication o undue suferin%s and wanton invasion o

the ri%hts o an in=ured or a punishment or those %uilt*

o outra%eous conduct. These terms are %enerall*, +ut

not alwa*s, used interchan%ea+l*. (n common law, there

is preerence in the use o eemplar* dama%es when

the award is to account or in=ur* to eelin%s and or the

sense o indi%nit* and humiliation sufered +* a personas a result o an in=ur* that has +een maliciousl* and

wantonl* inPicted, the theor* +ein% that there should +e

compensation or the hurt caused +* the hi%hl*

reprehensi+le conduct o the deendantFassociated

with such circumstances as willulness, wantonness,

malice, %ross ne%li%ence or rec!lessness, oppression,

insult or raud or %ross raudFthat intensies the in=ur*.

The terms punitive or vindictive dama%es are oten usedto reer to those species o dama%es that ma* +e

awarded a%ainst a person to punish him or his

outra%eous conduct. (n either case, these dama%es are

intended in %ood measure to deter the wron%doer and

others li!e him rom similar conduct in the

uture.5; /mphasis supplied? citations omitted2

The re)uisites or the award o eemplar* dama%es are

as ollows<

/12 the* ma* +e imposed +* wa* o eample in

addition to compensator* dama%es, and onl* ater

the claimant>s ri%ht to them has +een esta+lished?

/2 that the* cannot +e recovered as a matter o

ri%ht, their determination dependin% upon the

amount o compensator* dama%es that ma* +e

awarded to the claimant? and

/32 the act must +e accompanied +* +ad aith or

d i t d l t i

Gasic is the rule in corporation law that a corporation is

= idi l tit hi h i t d ith l l lit









done in a wanton, raudulent, oppressive or

malevolent manner.51

Gusiness owners must alwa*s +e orthri%ht in their

dealin%s. The* cannot +e allowed to rene%e on their

o+li%ations, considerin% that these o+li%ations were

reel* entered into +* them. emplar* dama%es ma*also +e awarded in this case to serve as a deterrent to

those who use raudulent means to evade their

lia+ilities.

Since the award o eemplar* dama%es is proper,

attorne*Rs ees and cost o the suit ma* also +e

recovered.

0rticle ;@ o the &ivil &ode states<

0rticle ;@. (n the a+sence o stipulation, attorne*>s

ees and epenses o liti%ation, other than =udicial costs,

cannot +e recovered, ecept<

/12 "hen eemplar* dama%es are awardedM.N

etitioner &andida 0. Santos

is solidaril* lia+le with

petitioner corporation

etitioners ar%ue that the ndin% o solidar* lia+ilit* was

erroneous since no evidence was adduced to prove that

the transaction was also a personal underta!in% o

petitioner Santos. "e disa%ree.

(n Jeirs o #e Tan A* v. (nternational chan%e

Gan!,5 we stated that<

a =uridical entit* which is vested with a le%al personalit*

separate and distinct rom those actin% or and in its

+ehal and, in %eneral, rom the people comprisin% it.

#ollowin% this principle, o+li%ations incurred +* the

corporation, actin% throu%h its directors, oBcers and

emplo*ees, are its sole lia+ilities. 0 director, oBcer or

emplo*ee o a corporation is %enerall* not heldpersonall* lia+le or o+li%ations incurred +* the

corporation. Devertheless, this le%al ction ma* +e

disre%arded i it is used as a means to perpetrate raud

or an ille%al act, or as a vehicle or the evasion o an

eistin% o+li%ation, the circumvention o statutes, or to

conuse le%itimate issues.

. . . .

Geore a director or oBcer o a corporation can +e held

personall* lia+le or corporate o+li%ations, however, the

ollowin% re)uisites must concur< /12 the complainant

must alle%e in the complaint that the director or oBcer

assented to patentl* unlawul acts o the corporation, or

that the oBcer was %uilt* o %ross ne%li%ence or +ad

aith? and /2 the complainant must clearl* and

convincin%l* prove such unlawul acts, ne%li%ence or+ad aith.

"hile it is true that the determination o the eistence

o an* o the circumstances that would warrant the

piercin% o the veil o corporate ction is a )uestion o

act which cannot +e the su+=ect o a petition or review

on certiorari under Eule 5, this &ourt can ta!e

co%nizance o actual issues i the ndin%s o the lower

court are not supported +* the evidence on record or

are +ased on a misapprehension o acts.53 /mphasis

supplied2

carr* out similar or ine)uita+le considerations, other

un=ustia+le aims or intentions in hich case the









supplied2

0s a %eneral rule, directors, oBcers, or emplo*ees o a

corporation cannot +e held personall* lia+le or

o+li%ations incurred +* the corporation. Jowever, this

veil o corporate ction ma* +e pierced i complainant is

a+le to prove, as in this case, that /12 the oBcer is %uilt*o ne%li%ence or +ad aith, and /2 such ne%li%ence or

+ad aith was clearl* and convincin%l* proven.

Jere, petitioner Santos entered into a contract with

respondent in her capacit* as the resident and &hie

ecutive CBcer o 0rco ulp and aper. She also issued

the chec! in partial pa*ment o petitioner corporationRs

o+li%ations to respondent on +ehal o petitioner 0rco

ulp and aper. This is clear on the ace o the chec!

+earin% the account name, '0rco ulp Y aper, &o.,

(nc.'5 0n* o+li%ation arisin% rom these acts would not,

ordinaril*, +e petitioner SantosR personal underta!in%

or which she would +e solidaril* lia+le with petitioner

0rco ulp and aper.

"e nd, however, that the corporate veil must +e

pierced. (n :ivese* v. Ginswan%er hilippines<55

iercin% the veil o corporate ction is an e)uita+le

doctrine developed to address situations where the

separate corporate personalit* o a corporation is

a+used or used or wron%ul purposes. Ander the

doctrine, the corporate eistence ma* +e disre%arded

where the entit* is ormed or used or non-le%itimate

purposes, such as to evade a =ust and due o+li%ation, or

to =usti* a wron%, to shield or perpetrate raud or to

un=ustia+le aims or intentions, in which case, the

ction will +e disre%arded and the individuals

composin% it and the two corporations will +e treated as

identical.58 /mphasis supplied2

0ccordin% to the &ourt o 0ppeals, petitioner Santos was

solidaril* lia+le with petitioner 0rco ulp and aper,statin% that<

(n the present case, "e nd +ad aith on the part o the

MpetitionersN when the* un=ustia+l* reused to honor

their underta!in% in avor o the MrespondentN. 0ter the

chec! in the amount o 1,@7,788.8@ issued +*

MpetitionerN Santos was dishonored or +ein% drawn

a%ainst a closed account, MpetitionerN corporation

denied an* privit* with MrespondentN. These acts

prompted the MrespondentN to avail o the remedies

provided +* law in order to protect his ri%hts.57

"e a%ree with the &ourt o 0ppeals. etitioner Santos

cannot +e allowed to hide +ehind the corporate

veil.$:p'i$ "hen petitioner 0rco ulp and aperRs

o+li%ation to respondent +ecame due and demanda+le,

she not onl* issued an ununded chec! +ut also

contracted with a third part* in an efort to shit

petitioner 0rco ulp and aperRs lia+ilit*. She

un=ustia+l* reused to honor petitioner corporationRs

o+li%ations to respondent. These acts clearl* amount to

+ad aith. (n this instance, the corporate veil ma* +e

pierced, and petitioner Santos ma* +e held solidaril*

lia+le with petitioner 0rco ulp and aper.

The rate o interest due on

the o+li%ation must +e

1. "hen the o+li%ation is +reached, and it consists

in the pa*ment o a sum o mone* i e a loan or












reduced in view o Dacar v.

$aller* #rames5@

(n view, however, o the promul%ation +* this court o

the decision dated 0u%ust 13, ;13 in Dacar v. $aller*

#rames,59 the rate o interest due on the o+li%ation must+e modied rom 16 per annum to 86 per annum

rom the time o demand.

Dacar efectivel* amended the %uidelines stated in

astern Shippin% v. &ourt o 0ppeals,8; and we have laid

down the ollowin% %uidelines with re%ard to the rate o

le%al interest<

To recapitulate and or uture %uidance, the %uidelineslaid down in the case o astern Shippin% :inesare

accordin%l* modied to em+od* GS-4G &ircular Do.

799, as ollows<

(. "hen an o+li%ation, re%ardless o its source, i.e., law,

contracts, )uasi-contracts, delicts or )uasi-delicts is

+reached, the contravenor can +e held lia+le or

dama%es. The provisions under Title LI((( on 'ama%es'

o the &ivil &ode %overn in determinin% the measure o

recovera+le dama%es.

((. "ith re%ard particularl* to an award o interest in the

concept o actual and compensator* dama%es, the rate

o interest, as well as the accrual thereo, is imposed, as

ollows<

in the pa*ment o a sum o mone*, i.e., a loan or

or+earance o mone*, the interest due should +e

that which ma* have +een stipulated in writin%.

#urthermore, the interest due shall itsel earn

le%al interest rom the time it is =udiciall*

demanded. (n the a+sence o stipulation, the rate

o interest shall +e 86 per annum to +e computedrom deault, i.e., rom =udicial or etra=udicial

demand under and su+=ect to the provisions o

0rticle 1189 o the &ivil &ode.

. "hen an o+li%ation, not constitutin% a loan or

or+earance o mone*, is +reached, an interest on

the amount o dama%es awarded ma* +e imposed

at the discretion o the court at the rate o 86 per

annum. Do interest, however, shall +e ad=ud%ed

on unli)uidated claims or dama%es, ecept when

or until the demand can +e esta+lished with

reasona+le certaint*. 0ccordin%l*, where the

demand is esta+lished with reasona+le certaint*,

the interest shall +e%in to run rom the time the

claim is made =udiciall* or etra=udiciall* /0rt.

1189, &ivil &ode2, +ut when such certaint* cannot

+e so reasona+l* esta+lished at the time thedemand is made, the interest shall +e%in to run

onl* rom the date the =ud%ment o the court is

made /at which time the )uantication o

dama%es ma* +e deemed to have +een

reasona+l* ascertained2. The actual +ase or the

computation o le%al interest shall, in an* case, +e

on the amount nall* ad=ud%ed.

3. "hen the =ud%ment o the court awardin% a

sum o mone* +ecomes nal and eecutor* the









sum o mone* +ecomes nal and eecutor*, the

rate o le%al interest, whether the case alls under

para%raph 1 or para%raph , a+ove, shall +e 86

per annum rom such nalit* until its satisaction,

this interim period +ein% deemed to +e +* then an

e)uivalent to a or+earance o credit.

0nd, in addition to the a+ove, =ud%ments that have

+ecome nal and eecutor* prior to Kul* 1, ;13, shall

not +e distur+ed and shall continue to +e implemented

appl*in% the rate o interest ed therein.81 /mphasis

supplied? citations omitted.2

0ccordin% to these %uidelines, the interest due on the

o+li%ation o 7,;,[email protected] should now +e at 86 per

annum, computed rom 4a* 5, ;;7, when respondent

sent his letter o demand to petitioners. This interest

shall continue to +e due rom the nalit* o this decision

until its ull satisaction.

"JE#CE, the petition is D( in part. The

decision in &0-$.E. &I Do. 957;9 is 0##(E4.

etitioners 0rco ulp Y aper &o., (nc. and &andida 0.

Santos are here+* ordered solidaril* to pa* respondent

an T. :im the amount o 7,;,[email protected] with interest o

86 per annum at the time o demand until nalit* o

=ud%ment and its ull satisaction, with moral dama%es

in the amount o 5;,;;;.;;, eemplar* dama%es in the

amount o5;,;;;.;;, and attorne*>s ees in the amount

o 5;,;;;.;;.

G.R. No. 14;9'2 M> 1;, 2''6

SP%USES #ICEN$E "U AN EME$RIA LEE- "U, 8etitioners,

vs.

PHILIPPINE C%MMERCIAL IN$ERNA$I%NALANK, Respondent.

& ( S ( C D

AUS$RIA-MAR$INE=, J.:

Geore the &ourt is a etition or Eeview on &ertiorari o

the ecision1 dated Dovem+er 1, ;;; o the &ourt o

0ppeals /&02 in &0-$.E. S Do. 5@9@ and the &0Eesolution dated 0pril 8, ;;1, which denied

petitionerRs 4otion or Eeconsideration.

The actual +ac!%round o the case is as ollows<

Ander a Eeal state 4ort%a%e dated 0u%ust 15,

199 and 0mendments o Eeal state 4ort%a%e dated

0pril , 19953 and ecem+er , 1995, spouses Iicente

Hu and emetria :ee-Hu /petitioners2 and spousesEamon T. Hu and Iir%inia 0. Tiu, or Hu Tian Joc! a!a

IictorinoIicente Hu, mort%a%ed their title, interest, and

participation over several parcels o land located in

a%upan &it* and uezon &it*, in avor o the hilippine

&ommercial (nternational Gan! /respondent2 as securit*

or the pa*ment o a loan in the amount

o 9,;;;,;;;.;;.5

0s the petitioners ailed to pa* the loan, the interest,

and the penalties due thereon respondent led on Kul*

+* conductin% two separate oreclosure proceedin%s on

the mort%a%e properties in a%upan &it* and uezon


http://www.lawphil.net/judjuris/juri2006/mar2006/gr_147902_2006.html#fnt1













and the penalties due thereon, respondent led on Kul*

1, 199@ with the CBce o the &ler! o &ourt and -

CBcio Sherif o the Ee%ional Trial &ourt o a%upan &it*

a etition or tra-Kudicial #oreclosure o Eeal state

4ort%a%e on the a%upan &it* properties.8 Cn 0u%ust 3,

199@, the &it* Sherif issued a Dotice o tra-Kudicial

Sale schedulin% the auction sale on Septem+er 1;, 199@at 1;<;; oRcloc! in the mornin% or soon thereater in

ront o the Kustice Jall, Gonuan, Tondali%an, a%upan

&it*.7

0t the auction sale on Septem+er 1;, 199@, respondent

emer%ed as the hi%hest +idder.@ Cn Septem+er 1,

199@, a &erticate o Sale was issued in avor o

respondent.9 Cn Ccto+er 1, 199@, the sale was

re%istered with the Ee%istr* o eeds o a%upan &it*.

0+out two months +eore the epiration o the

redemption period, or on 0u%ust ;, 1999, respondent

led an -arte etition or "rit o ossession +eore

the Ee%ional Trial &ourt o a%upan &it*, doc!eted as

Special roceedin% Do. 99-;;9@@- and raed to

Granch 3 /ET& Granch 32.1; Jearin% was conducted on

Septem+er 1, 1999 and respondent presented itsevidence e-parte.11 The testimon* o Eodante 4anuel

was admitted e-parte and thereater the petition was

deemed su+mitted or resolution.

Cn Septem+er 3;, 1999, petitioners led a 4otion to

ismiss and to Stri!e Cut Testimon* o Eodante 4anuel

statin% that the &erticate o Sale dated Septem+er 1,

199@ is void +ecause respondent violated 0rticle ;@9

o the &ivil &ode on the indivisi+ilit* o the mort%a%ed

the mort%a%e properties in a%upan &it* and uezon

&it* and indicatin% in the two notices o etra-=udicial

sale that petitionersR o+li%ation is 1;,37,;15.;1 as

o 4arch 31, 199@, when petitioners are not inde+ted or

the total amount o ;,@7,;31.58.13

(n the meantime, petitioners led a complaint or0nnulment o &erticate o Sale +eore the Ee%ional

Trial &ourt o a%upan &it*, doc!eted as &ivil &ase Do.

99-;3189- and raed to Granch /ET& Granch 2.

Cn #e+ruar* 1, ;;;, ET& Granch 3 denied

petitionersR 4otion to ismiss and to Stri!e Cut

Testimon* o Eodante 4anuel, rulin% that the lin% o a

motion to dismiss is not allowed in petitions or issuance

o writ o possession under Section 7 o 0ct Do. 3135.1

Cn #e+ruar* , ;;;, petitioners led a 4otion or

Eeconsideration, urther ar%uin% that the pendenc* o

&ivil &ase Do. 99-;3189- in ET& Granch is a

pre=udicial issue to Spec. roc. Do. 99-;;9@@- in ET&

Granch 3, the resolution o which is determinative on

the propriet* o the issuance o a writ o possession.15

Cn 4a* @, ;;;, ET& Granch 3 denied petitionersR

4otion or Eeconsideration, holdin% that the principle o

pre=udicial )uestion is not applica+le +ecause the case

pendin% +eore ET& Granch is also a civil case and

not a criminal case.18

Cn Kune 1, ;;;, petitioners led a etition or &ertiorari

with the &0.17 Cn Dovem+er 1, ;;;, the &0 dismissed

petitionersR etition or &ertiorari on the %rounds that

petitioners violated Section @ o 0ct Do. 3135 and

disre%arded the rule a%ainst multiplicit* o suits in lin%

properties in a%upan &it* and uezon &it* cannot +e

separatel* oreclosed etitioners urther point out that



























disre%arded the rule a%ainst multiplicit* o suits in lin%

&ivil &ase Do. 99-;3189- in ET& Granch despite ull

!nowled%e o the pendenc* o Spec. roc. Do. 99-;;9@@-

in ET& Granch 3? that since the one-*ear period o

redemption has alread* lapsed, the issuance o a writ o

possession in avor o respondent +ecomes a ministerial

dut* o the trial court? that the issues in &ivil &ase Do.99-;3189- are not pre=udicial )uestions to Spec. roc.

Do. 99-;;9@@- +ecause< /a2 the special proceedin% is

alread* ait accompli, /+2 &ivil &ase Do. 99-;3189- is

deemed not led or +ein% contrar* to Section @ o 0ct

Do. 3135, /c2 the lin% o &ivil &ase Do. 99-;3189- is

an aterthou%ht and dilator* in nature, and /d2 le%all*

spea!in% what seems to eist is litis pendentia and not

pre=udicial )uestion.1@

etitioners led a 4otion or Eeconsideration19 +ut it was

denied +* the &0 on 0pril 8, ;;1.;

Jence, the present etition or Eeview on &ertiorari.

etitioners pose two issues or resolution, to wit<

0. "hether or not a real estate mort%a%e over

several properties located in diferent localit* MsicN

can +e separatel* oreclosed in diferent places.

G. "hether or not the pendenc* o a pre=udicial

issue renders the issues in Special roceedin%s

Do. 99-;;9@@- as MsicN moot and academic.1

0nent the rst issue, petitioners contend that since a

real estate mort%a%e is indivisi+le, the mort%a%ed

separatel* oreclosed. etitioners urther point out that

two notices o etra-=udicial sale indicated that

petitionersR o+li%ation is 1;,37,;15.; each as o

4arch 31, 199@ or a total o;,@7,;3;.;,3 *et their

own computation *ields onl* 9,957,5;@.9; as o

#e+ruar* 7, 199@.

0s to the second issue, petitioners posit that the

pendenc* o &ivil &ase Do. 99-;3189- is a pre=udicial

issue, the resolution o which will render the issues in

Spec. roc. Do. 99-;;9@@- moot and academic.

etitioners urther aver that the* did not violate Section

@ o 0ct Do. 3135 in lin% a separate case to annul the

certicate o sale since the use o the word 'ma*' in

said provision indicates that the* have the option to

see! relie o lin% a petition to annul the certicate o

sale in the proceedin% involvin% the application or a

writ o possession or in a separate proceedin%.

Eespondent contends that, with respect to the rst

issue, the lin% o two separate oreclosure proceedin%s

did not violate 0rticle ;@9 o the &ivil &ode on the

indivisi+ilit* o a real estate mort%a%e since Section o

0ct Do. 3135 epressl* provides that etra-=udicialoreclosure ma* onl* +e made in the province or

municipalit* where the propert* is situated. Eespondent

urther su+mits that the lin% o separate applications

or etra-=udicial oreclosure o mort%a%e involvin%

several properties in diferent locations is allowed +*

0.4. Do. 99-1;-;5-;, the rocedure on tra-Kudicial

#oreclosure o 4ort%a%e, as urther amended on 0u%ust

7, ;;1.

0s to the second issue, respondent maintains that there

is no pre=udicial )uestion +etween &ivil &ase Do 99-

Thereore, the de+torRs heir who has paid a part o the

de+t cannot as! or the proportionate etin%uishment o

















is no pre=udicial )uestion +etween &ivil &ase Do. 99

;3189- and Spec. roc. Do. 99-;;9@@- since the

pendenc* o a civil action )uestionin% the validit* o the

mort%a%e and the etra-=udicial oreclosure thereo does

not +ar the issuance o a writ o possession. Eespondent

also insists that petitioners should have led their

etition to 0nnul the &erticate o Sale in the same casewhere possession is +ein% sou%ht, that is, in Spec. roc.

Do. 99-;;9@@-, and not in a separate proceedin% /&ivil

&ase Do. 99-;1389-2 +ecause the venue o the action

to )uestion the validit* o the oreclosure is not

discretionar* since the use o the word 'ma*' in Section

@ o 0ct Do. 3135 reers to the lin% o the petition or

action itsel and not to the venue. Eespondent urther

ar%ues that even i petitioners led the etition to 0nnul

the &erticate o Sale in Spec. roc. Do. 99-;;9@@-, the

writ o possession must still +e issued +ecause issuance

o the writ in avor o the purchaser is a ministerial act

o the trial court and the one-*ear period o redemption

has alread* lapsed.

0nent the rst issue, the &ourt nds that petitioners

have a mista!en notion that the indivisi+ilit* o a real

estate mort%a%e relates to the venue o etra-=udicialoreclosure proceedin%s. The rule on indivisi+ilit* o a

real estate mort%a%e is provided or in 0rticle ;@9 o

the &ivil &ode, which provides<

0rt. ;@9. 0 pled%e or mort%a%e is indivisi+le, even

thou%h the de+t ma* +e divided amon% the successors

in interest o the de+tor or o the creditor.

de+t cannot as! or the proportionate etin%uishment o

the pled%e or mort%a%e as the de+t is not completel*

satised.

Deither can the creditorRs heir who received his share o

the de+t return the pled%e or cancel the mort%a%e, to

the pre=udice o the other heirs who have not +een paid.

#rom these provisions is ecepted the case in which,

there +ein% several thin%s %iven in mort%a%e or pled%e,

each one o them %uarantees onl* a determinate

portion o the credit.

The de+tor, in this case, shall have a ri%ht to the

etin%uishment o the pled%e or mort%a%e as the

portion o the de+t or which each thin% is speciall*answera+le is satised.

This rule presupposes several heirs o the de+tor or

creditor5 and thereore not applica+le to the present

case. #urthermore, what the law proscri+es is the

oreclosure o onl* a portion o the propert* or a num+er

o the several properties mort%a%ed correspondin% to

the unpaid portion o the de+t where, +eore oreclosure

proceedin%s, partial pa*ment was made +* the de+tor

on his total outstandin% loan or o+li%ation. This also

means that the de+tor cannot as! or the release o an*

portion o the mort%a%ed propert* or o one or some o

the several lots mort%a%ed unless and until the loan

thus secured has +een ull* paid, notwithstandin% the

act that there has +een partial ulllment o the

o+li%ation. Jence, it is provided that the de+tor who has

paid a part o the de+t cannot as! or the proportionate

etin%uishment o the mort%a%e as lon% as the de+t is

not completel* satised 8 (n essence indivisi+ilit*

lin% ees collected, the mort%a%es sou%ht to +e

oreclosed the real estates andor chattels mort%a%ed







not completel* satised. (n essence, indivisi+ilit*

means that the mort%a%e o+li%ation cannot +e divided

amon% the diferent lots,7 that is, each and ever* parcel

under mort%a%e answers or the totalit* o the de+t.@

Cn the other hand, the venue o the etra-=udicial

oreclosure proceedin%s is the place where each o themort%a%ed propert* is located, as prescri+ed +* Section

o 0ct Do. 3135,9 to wit<

S&T(CD . Said sale cannot +e made le%all* outside o

the province in which the propert* sold is situated? and

in case the place within said province in which the sale

is to +e made is su+=ect to stipulation, such sale shall +e

made in said place or in the municipal +uildin% o the

municipalit* in which the propert* or part thereo issituated.

0.4. Do. 99-1;-;5-;,3; the rocedure on tra-Kudicial

#oreclosure o 4ort%a%e, la*s down the %uidelines or

etra-=udicial oreclosure proceedin%s on mort%a%ed

properties located in diferent provinces. (t provides that

the venue o the etra-=udicial oreclosure proceedin%s

is the place where each o the mort%a%ed propert* is

located. Eelevant portion thereo provides<

"here the application concerns the etra=udicial

oreclosure o mort%a%es o real estates andor chattels

in diferent locations coverin% one inde+tedness, onl*

one lin% ee correspondin% to such inde+tedness shall

+e collected. The collectin% &ler! o &ourt shall, apart

rom the oBcial receipt o the ees, issue a certicate o

pa*ment indicatin% the amount o inde+tedness, the

oreclosed, the real estates andor chattels mort%a%ed

and their respective locations, / (t/>t( s>s(?( t( )u)os( o0 >?/*g t( >))/>t/o*+o(t(+ /t t( C(s o0 Cout o0 t( )>(s(( t( ot( )o)(t/(s >( o>t(+ >*+ o0>o/*g t( (t>Ju+//> 0o(osu(s to )o((+

t((>t. /mphasis supplied2

The indivisi+ilit* o the real estate mort%a%e is not

violated +* conductin% two separate oreclosure

proceedin%s on mort%a%ed properties located in

diferent provinces as lon% as each parcel o land is

answera+le or the entire de+t. etitionersR assumption

that their total o+li%ation is ;,@7,;3;.; +ecause the

two notices o etra-=udicial sale indicated that

petitionersR o+li%ation is 1;,37,;15.;31 each, is

thereore Pawed. &onsiderin% the indivisi+ilit* o a real

estate mort%a%e, the mort%a%ed properties in a%upan

&it* and uezon &it* are made to answer or the entire

de+t o 1;,37,;15.9.3

0s to the second issue, that is, whether a civil case or

annulment o a certicate o sale is a pre=udicial

)uestion to a petition or issuance o a writ opossession, this issue is ar rom novel and, in act, not

without precedence. (n ahan% v. Iestil,33 the &ourt said<

0 pre=udicial )uestion is one that arises in a case the

resolution o which is a lo%ical antecedent o the issue

involved therein, and the co%nizance o which pertains

to another tri+unal. (t %enerall* comes into pla* in a

situation where a civil action and a criminal action are

+oth pendin% and there eists in the ormer an issue

that must +e preemptivel* resolved +eore the criminal

action ma* proceed, +ecause howsoever the issue

(n the present case, &ivil &ase Do. 99-;1389- and

Spec. roc. Do. 99-;;9@@- are +oth civil in nature. The


















action ma* proceed, +ecause howsoever the issue

raised in the civil action is resolved would +e

determinative =uris et de =ure o the %uilt or innocence o

the accused in the criminal case. The rationale +ehind

the principle o pre=udicial )uestion is to avoid two

conPictin% decisions. $avvp'Fl.net

(n the present case, the complaint o the petitioners or

0nnulment o tra=udicial Sale is a civil action and the

respondentRs petition or the issuance o a writ o

possession o :ot Do. 3-0, Gloc! 1, sd-;7-;11;, T&T

Do. 88@ is +ut an incident in the land re%istration

case and, thereore, no pre=udicial )uestion can arise

rom the eistence o the two actions. 0 similar issue

was raised in 4analo v. &ourt o 0ppeals, where we held

that<

0t an* rate, it taes our ima%ination wh* the )uestions

raised in &ase Do. 9@-;@8@ must +e considered

determinative o &ase Do. 9;11. The +asic issue in the

ormer is whether the respondent, as the purchaser in

the etra=udicial oreclosure proceedin%s, ma* +e

compelled to have the propert* repurchased or resold to

a mort%a%orRs successor-in-interest /petitioner2? whilethat in the latter is merel* whether the respondent, as

the purchaser in the etra=udicial oreclosure

proceedin%s, is entitled to a writ o possession ater the

statutor* period or redemption has epired. The two

cases, assumin% +oth are pendin%, can proceed

separatel* and ta!e their own direction independent o

each other.3

Spec. roc. Do. 99 ;;9@@ are +oth civil in nature. The

issue in &ivil &ase Do. 99-;1389- is whether the etra-

=udicial oreclosure o the real estate mort%a%e eecuted

+* the petitioners in avor o the respondent and the

sale o their properties at pu+lic auction are null and

void, whereas, the issue in Spec. roc. Do. 99-;;9@@-

is whether the respondent is entitled to a writ opossession o the oreclosed properties. &learl*, no

pre=udicial )uestion can arise rom the eistence o the

two actions. The two cases can proceed separatel* and

ta!e their own direction independentl* o each other.

Devertheless, there is a need to correct the &0Rs view

that petitioners violated Section @ o 0ct Do. 3135 and

disre%arded the proscription on multiplicit* o suits +*

institutin% a separate civil suit or annulment o the

certicate o sale while there is a pendin% petition or

issuance o the writ o possession in a special

proceedin%.

Section @ o 0ct Do. 3135 provides<

Sec. @. etting aside of sale and rit of possession.

The de+tor ma*, in the proceedin%s in which possession

was re)uested, +ut not later than thirt* da*s ater the

purchaser was %iven possession, petition that the sale

+e set aside and the writ o possession cancelled,

speci*in% the dama%es sufered +* him, +ecause the

mort%a%e was not violated or the sale was not made in

accordance with the provisions hereo, and the court

shall ta!e co%nizance o this petition in accordance with

the summar* procedure provided or in section one

hundred and twelve o 0ct Dum+ered #our hundred and

ninet*-si? and i it nds the complaint o the de+tor

=ustied, it shall dispose in his avor o all or part o the

allow the purchaser to have possession o the oreclosed

propert* without dela*, such possession +ein% ounded





=ustied, it shall dispose in his avor o all or part o the

+ond urnished +* the person who o+tained possession.

ither o the parties ma* appeal rom the order o the

=ud%e in accordance with section ourteen o 0ct

Dum+ered #our hundred and ninet*-si? +ut the order o

possession shall continue in efect durin% the pendenc*

o the appeal. /mphasis supplied2

Ander the provision a+ove cited, the mort%a%or ma* le

a petition to set aside the sale and or the cancellation

o a writ o possession with the trial court which issued

the writ o possession within 3; da*s ater the

purchaser mort%a%ee was %iven possession. (t provides

the plain, speed*, and ade)uate remed* in opposin% the

issuance o a writ o possession.35 Thus, this provision

presupposes that the trial court alread* issued a writ o

possession. (n Sps. Cn% v. &ourt o 0ppeals,38 the &ourt

elucidated<

The law is clear that the purchaser must rst +e placed

in possession o the mort%a%ed propert* pendin%

proceedin%s assailin% the issuance o the writ o

possession. ( the trial court later nds merit in the

petition to set aside the writ o possession, it shalldispose in avor o the mort%a%or the +ond urnished +*

the purchaser. Thereater, either part* ma* appeal rom

the order o the =ud%e in accordance with Section 1 o

0ct 98, which provides that 'ever* order, decision, and

decree o the &ourt o :and Ee%istration ma* +e

reviewed[in the same manner as an order, decision,

decree or =ud%ment o a &ourt o #irst (nstance /ET&2

mi%ht +e reviewed.' The rationale or the mandate is to

propert* without dela*, such possession +ein% ounded

on his ri%ht o ownership.37

0ccordin%l*, Section @ o 0ct Do. 3135 is not applica+le

to the present case since at the time o the lin% o the

separate civil suit or annulment o the certicate o

sale in ET& Granch , no writ o possession was *etissued +* ET& Granch 3.

Similarl*, the &ourt re=ects the &0Rs application o the

principle o litis pendentia to &ivil &ase Do. 99-;3189-

in relation to Spec. roc. Do. 99-;;9@@-. 0itis

pendentia reers to that situation wherein another

action is pendin% +etween the same parties or the

same cause o actions and that the second action

+ecomes unnecessar* and veatious. #or litis pendentia to +e invo!ed, the concurrence o the

ollowin% re)uisites is necessar*< /a2 identit* o parties

or at least such as represent the same interest in +oth

actions? /+2 identit* o ri%hts asserted and relies pra*ed

or, the relies +ein% ounded on the same acts? and, /c2

the identit* in the two cases should +e such that the

=ud%ment that ma* +e rendered in one would,

re%ardless o which part* is successul, amount to res Gudiata in the other.3@

0ppl*in% the ore%oin% criteria in the instant case, litis

pendentia does not o+tain in this case +ecause o the

a+sence o the second and third re)uisites. The

issuance o the writ o possession +ein%

a ministerial unction, andsummar# in nature, it cannot

+e said to +e a =ud%ment on the merits, +ut simpl* an

incident in the transer o title. Jence, a separate case

or annulment o mort%a%e and oreclosure sale cannot

+e +arred +* litis pendentia or res Gudiata.39 Thus,

pre=udice o course to the eventual outcome o said

case.3















* p G ,

insoar as Spec. roc. Do. 99-;;9@@- and &ivil &ase Do.

99-;3189- pendin% +eore diferent +ranches o ET&

a%upan &it* are concerned, there is no litis pendentia.

To sum up, the &ourt holds that the rule on indivisi+ilit*

o the real estate mort%a%e cannot +e e)uated with thevenue o oreclosure proceedin%s on mort%a%ed

properties located in diferent provinces since these are

two unrelated concepts. 0lso, no pre=udicial )uestion

can arise rom the eistence o a civil case or

annulment o a certicate o sale and a petition or the

issuance o a writ o possession in a special proceedin%

since the two cases are +oth civil in nature which can

proceed separatel* and ta!e their own direction

independentl* o each other.

#urthermore, since the one-*ear period to redeem the

oreclosed properties lapsed on Ccto+er 1, 1999, title to

the oreclosed properties had alread* +een consolidated

under the name o the respondent. 0s the owner o the

properties, respondent is entitled to its possession as a

matter o ri%ht.; The issuance o a writ o possession

over the properties +* the trial court is merel* aministerial unction. 0s such, the trial court neither

eercises its oBcial discretion nor =ud%ment.1 0n*

)uestion re%ardin% the validit* o the mort%a%e or its

oreclosure cannot +e a le%al %round or reusin% the

issuance o a writ o possession. Ee%ardless o the

pendin% suit or annulment o the certicate o sale,

respondent is entitled to a writ o possession, without

"JE#CE, the petition is ENIE.

G.R. No. 151953 u*( 29, 2'';

SAL#A%R P. ESCA% >*+ MARI% M.SIL%S, petitioner,

vs.

RAFAEL %R$IGAS, R., respondent.

& ( S ( C D

$INGA, J.:

The main contention raised in this petition is that

petitioners are not under o+li%ation to reim+urse

respondent, a claim that can +e easil* de+un!ed. The

more perplein% )uestion is whether this o+li%ation to

repa* is solidar*, as contended +* respondent and the

lower courts, or merel* =oint as ar%ued +* petitioners.

Cn @ 0pril 19@;, rivate evelopment &orporation o

the hilippines /&21 entered into a loan a%reement

with #alcon 4inerals, (nc. /#alcon2 where+* & a%reed

to ma!e availa+le and lend to #alcon the amount o

AS\3;,;;;.;;, or specic purposes and su+=ect to

certain terms and conditions. Cn the same da*, three

stoc!holders-oBcers o #alcon, namel*< respondent

Eaael Crti%as, Kr. /Crti%as2, $eor%e 0. Schole* and

$eor%e T. Schole* eecuted an 0ssumption o Solidar*

:ia+ilit* where+* the* a%reed 'to assume in MtheirN

rom their said %uarantees MsicN, SAET(S here+*

irrevoca+l* a%ree and underta!e to assume all o















* * * % M N

individual capacit*, solidar* lia+ilit* with M#alconN or the

due and punctual pa*ment' o the loan contracted +*

#alcon with &.3 (n the meantime, two separate

%uaranties were eecuted to %uarantee the pa*ment o

the same loan +* other stoc!holders and oBcers o

#alcon, actin% in their personal and individual capacities.Cne $uarant* was eecuted +* petitioner Salvador

sca]o /sca]o2, while the other5 +* petitioner 4ario 4.

Silos /Silos2, Eicardo &. Silverio /Silverio2, &arlos :.

(nductivo /(nductivo2 and Koa)uin K. Eodri%uez

/Eodri%uez2.

Two *ears later, an a%reement developed to cede

control o #alcon to sca]o, Silos and Koseph 4. 4atti

/4atti2. Thus, contracts were eecuted where+* Crti%as,

$eor%e 0. Schole*, (nductivo and the heirs o then

alread* deceased $eor%e T. Schole* assi%ned their

shares o stoc! in #alcon to sca]o, Silos and 4atti.8 art

o the consideration that induced the sale o stoc! was a

desire +* Crti%as, et al., to relieve themselves o all

lia+ilit* arisin% rom their previous =oint and several

underta!in%s with #alcon, includin% those related to the

loan with &. Thus, an Anderta!in% dated 11 Kune19@ was eecuted +* the concerned parties,7 namel*<

with sca]o, Silos and 4atti identied in the document

as 'SAET(S,' on one hand, and Crti%as, (nductivo and

the Schole*s as 'CG:($CES,' on the other. The

Anderta!in% reads in part<

3. That whether or not SAET(S are a+le to

immediatel* cause & and 0(& to release CG:($CES

* %

CG:($CEsR said %uarantees MsicN to & and 0(&

under the ollowin% terms and conditions<

a. Apon receipt +* an* o MtheN CG:($CES o an*

demand rom & andor 0(& or the pa*ment o

#0:&CDRs o+li%ations with it, an* o MtheN CG:($CESshall immediatel* inorm SAET(S thereo so that the

latter can timel* ta!e appropriate measures?

+. Should suit +e impleaded +* & andor 0(&

a%ainst an* andor all o CG:($CES or collection o said

loans andor credit acilities, SAET(S a%ree to deend

CG:($CES at their own epense, without pre=udice to

an* andor all o CG:($CES impleadin% SAET(S

therein or contri+ution, indemnit*, su+ro%ation or otherrelie in respect to an* o the claims o & andor

0(&? and

c. (n the event that an* o MtheN CG:($CES is or an*

reason made to pa* an* amount to & andor 0(&,

SAET(S shall reim+urse CG:($CES or said amounts

within seven /72 calendar da*s rom such pa*ment?

. CG:($CES here+* waive in avor o SAET(S an* and

all ees which ma* +e due rom #0:&CD arisin% out o,

or in connection with, their said %uaranteesMsicN.@

#alcon eventuall* availed o the sum o AS\17@,855.59

rom the credit line etended +* &. (t would also

eecute a eed o &hattel 4ort%a%e over its personal

properties to urther secure the loan. Jowever, #alcon

su+se)uentl* deaulted in its pa*ments. 0ter &

oreclosed on the chattel mort%a%e, there remained a

su+sistin% decienc* o 5,;31,;;.;7, which #alcon did

or claim arisin% rom the #alcon loan a%reement, and a

renunciation o its claims a%ainst Crti%as.















% *

not satis* despite demand.9

Cn @ 0pril 19@9, in order to recover the inde+tedness,

& led a complaint or sum o mone* with the

Ee%ional Trial &ourt o 4a!ati /ET&2 a%ainst #alcon,

Crti%as, sca]o, Silos, Silverio and (nductivo. The casewas doc!eted as &ivil &ase Do. @9-51@. #or his part,

Crti%as led to%ether with his answer a cross-claim

a%ainst his co-deendants #alcon, sca]o and Silos, and

also maniested his intent to le a third-part* complaint

a%ainst the Schole*s and 4atti.1; The cross-claim lod%ed

a%ainst sca]o and Silos was predicated on the 19@

Anderta!in%, wherein the* a%reed to assume the

lia+ilities o Crti%as with respect to the & loan.

sca]o, Crti%as and Silos each sou%ht to see! a

settlement with &. The rst to come to terms with

& was sca]o, who in ecem+er o 1993, entered

into a compromise a%reement where+* he a%reed to

pa* the +an!1,;;;,;;;.;;. (n echan%e, & waived

or assi%ned in avor o sca]o one-third /132 o its

entire claim in the complaint a%ainst all o the other

deendants in the case.

11

The compromise a%reementwas approved +* the ET& in a Kud%ment1 dated 8

Kanuar* 199.

Then on #e+ruar* 199, Crti%as entered into his own

compromise a%reement13 with &, alle%edl* without

the !nowled%e o sca]o, 4atti and Silos. There+*,

Crti%as a%reed to pa* & 1,3;;,;;;.;; as 'ull

satisaction o the &Rs claim a%ainst Crti%as,'1 in

echan%e or &Rs release o Crti%as rom an* lia+ilit*

% %

(n 1995, Silos and & entered into a artial

&ompromise 0%reement where+* he a%reed to

pa* 5;;,;;;.;; in echan%e or &Rs waiver o its

claims a%ainst him.15

(n the meantime, ater havin% settled with &, Crti%as

pursued his claims a%ainst sca]o, Silos and 4atti, on

the +asis o the 19@ Anderta!in%. Je initiated a third-

part* complaint a%ainst 4atti and Silos,18 while he

maintained his cross-claim a%ainst sca]o. (n 1995,

Crti%as led a motion or Summar* Kud%ment in his

avor a%ainst sca]o, Silos and 4atti. Cn 5 Ccto+er

1995, the ET& issued the Summar* Kud%ment, orderin%

sca]o, Silos and 4atti to pa* Crti%as, =ointl* andseverall*, the amount o 1,3;;,;;;.;;, as well

as ;,;;;.;; in attorne*Rs ees.17 The trial court

ratiocinated that none o the third-part* deendants

disputed the 19@ Anderta!in%, and that 'the mere

denials o deendants with respect to non-compliance o

Crti%as o the terms and conditions o the Anderta!in%,

unaccompanied +* an* su+stantial act which would +e

admissi+le in evidence at a hearin%, are not suBcient toraise %enuine issues o act necessar* to deeat a

motion or summar* =ud%ment, even i such acts were

raised in the pleadin%s.'1@ (n an Crder dated 7 4arch

1998, the trial court denied the motion or

reconsideration o the Summar* Kud%ment and awarded

Crti%as le%al interest o 16 per annum to +e computed

rom @ #e+ruar* 199.19

#rom the Summar* Kud%ment, recourse was had +* wa*

o appeal to the &ourt o 0ppeals. sca]o and Silos

the appropriateness o the summar* =ud%ment as a

relie avora+le to Crti%as. Ander Section 3, Eule 35 o

























appealed =ointl* while 4atti appealed +* his lonesome.

(n a ecision; dated 3 Kanuar* ;;, the &ourt o

0ppeals dismissed the appeals and aBrmed the

Summar* Kud%ment. The appellate court ound that the

ET& did not err in renderin% the summar* =ud%ment

since the three appellants did not efectivel* den* theireecution o the 19@ Anderta!in%. The special

deenses that were raised, 'pa*ment and ecussion,'

were characterized +* the &ourt o 0ppeals as

'appearMin%N to +e merel* sham in the li%ht o the

pleadin%s and supportin% documents and

aBdavits.'1 Thus, it was concluded that there was no

%enuine issue that would still re)uire the ri%ors o trial,

and that the appealed =ud%ment was decided on the

+ases o the undisputed and esta+lished acts o the

case.

Jence, the present petition or review led +* sca]o

and Silos. Two main issues are raised. #irst, petitioners

dispute that the* are lia+le to Crti%as on the +asis o the

19@ Anderta!in%, a document which the* do not

disavow and have in act anneed to their petition.

Second, on the assumption that the* are lia+le toCrti%as under the 19@ Anderta!in%, petitioners ar%ue

that the* are =ointl* lia+le onl*, and not solidaril*.

#urther assumin% that the* are lia+le, petitioners also

su+mit that the* are not lia+le or interest and i at all,

the proper interest rate is 86 and not 16.

(nterestin%l*, petitioners do not challen%e, whether in

their petition or their memorandum +eore the &ourt,

the 1997 Eules o &ivil rocedure, summar* =ud%ment

ma* avail i the pleadin%s, supportin% aBdavits,

depositions and admissions on le show that, ecept as

to the amount o dama%es, there is no %enuine issue as

to an* material act and that the movin% part* is

entitled to a =ud%ment as a matter o law. etitionerhave not attempted to demonstrate +eore us that there

eisted a %enuine issue as to an* material act that

would preclude summar* =ud%ment. Thus, we aBrm

with ease the common rulin%s o the lower courts that

summar* =ud%ment is an appropriate recourse in this

case.

The vital issue actuall* raised +eore us is whether

petitioners were correctl* held lia+le to Crti%as on the

+asis o the 19@ Anderta!in% in this Summar*

Kud%ment. 0n eamination o the document reveals

several clauses that ma!e it clear that the a%reement

was +rou%ht orth +* the desire o Crti%as, (nductivo and

the Schole*s to +e released rom their lia+ilit* under the

loan a%reement which release was, in turn, part o the

consideration or the assi%nment o their shares in

#alcon to petitioners and 4atti. The whereas clausesmaniest that Crti%as had +ound himsel with #alcon or

the pa*ment o the loan with &, and that 'amon%st

the consideration or CG:($CES andor their principals

aoresaid sellin% is SAET(SR relievin% CG:($CES o an*

and all lia+ilit* arisin% rom their said =oint and several

underta!in%s with #0:&CD.'3 4ost crucial is the clause

in ara%raph 3 o the Anderta!in% wherein petitioners

'irrevoca+l* a%ree and underta!e to assume all o

CG:($CEsR said %uarantees MsicN to & under the

ollowin% terms and conditions.'

settlement o o+li%ation such as what Crti%as had

underta!en to pa* to &, as it is indeed o+vious that













0t the same time, it is clear that the assumption +*

petitioners o Crti%asRs '%uarantees' MsicN to & is

%overned +* stipulated terms and conditions as set orth

in su+-para%raphs /a2 to /c2 o ara%raph 3. #irst, upon

receipt +* 'an* o CG:($CES' o an* demand rom &or the pa*ment o #alconRs o+li%ations with it, 'an* o

CG:($CES' was to immediatel* inorm 'SAET(S'

thereo so that the latter can timel* ta!e appropriate

measures. Second, should 'an* andor all o CG:($CES'

+e impleaded +* & in a suit or collection o its loan,

'SAET(S a%reeMdN to deend CG:($CES at their own

epense, without pre=udice to an* andor all o

CG:($CES impleadin% SAET(S therein or

contri+ution, indemnit*, su+ro%ation or other relie'5 in

respect to an* o the claims o &. Third, i an* o the

'CG:($CES is or an* reason made to pa* an* amount

to M&N, SAET(S Mwere toN reim+urse CG:($CES or

said amounts within seven /72 calendar da*s rom such

pa*ment.'8

etitioners claim that, contrar* to para%raph 3/c2 o the

Anderta!in%, Crti%as was not 'made to pa*' & the

amount now sou%ht to +e reim+ursed, as Crti%as

voluntaril* paid & the amount o 1.3 4illion as an

amica+le settlement o the claims posed +* the +an!

a%ainst him. Jowever, the su+=ect clause in para%raph

3/c2 actuall* reads 'MiNn the event that an* o CG:($CES

is or an* reason made to pa* an* amount to &

'7 0s pointed out +* Crti%as, the phrase 'or an*

reason' reasona+l* includes an* etra-=udicial

the phrase was incorporated in the clause to render the

eventual pa*ment adverted to therein unlimited and

un)ualied.

The interpretation posed +* petitioners would have held

water had the Anderta!in% made clear that the ri%ht oCrti%as to see! reim+ursement accrued onl* ater he

had delivered pa*ment to & as a conse)uence o a

nal and eecutor* =ud%ment. Cn the contrar*, the clear

intent o the Anderta!in% was or petitioners and 4atti

to relieve the +urden on Crti%as and his ellow

'CG:($CES' as soon as possi+le, and not onl* ater

Crti%as had +een su+=ected to a nal and eecutor*

adverse =ud%ment.

ara%raph 1 o the Anderta!in% en=oins petitioners to

'eert all eforts to cause & to within a

reasona+le time release all the CG:($CES rom

their %uarantees MsicN to & '@ (n the event that

Crti%as and his ellow 'CG:($CES' could not +e released

rom their %uaranties, para%raph commits petitioners

and 4atti to cause the Goard o irectors o #alcon to

ma!e a call on its stoc!holders or the pa*ment o their

unpaid su+scriptions and to pled%e or assi%n such

pa*ments to Crti%as, et al., as securit* or whatever

amounts the latter ma* +e held lia+le under their

%uaranties. (n addition, para%raph 1 also ma!es clear

that nothin% in the Anderta!in% 'shall prevent

CG:($CES, or an* one o them, rom themselves

ne%otiatin% with & or the release o their said

%uarantees MsicN.'9

There is no ar%ument to support petitionersR position on

the import o the phrase 'made to pa*' in the

the su%%estion o petitioners that Crti%as, ater alread*

havin% +een impleaded as a deendant in the collection













Anderta!in%, other than an undul* literalist readin% that

is clearl* inconsistent with the thrust o the document.

Ander the &ivil &ode, the various stipulations o a

contract shall +e interpreted to%ether, attri+utin% to the

dou+tul ones that sense which ma* result rom all o

them ta!en =ointl*.3; :i!ewise applica+le is the provisionthat i some stipulation o an* contract should admit o

several meanin%s, it shall +e understood as +earin%

that import which is most ade)uate to render it

efectual.31 0s a means to efect the %eneral intent o

the document to relieve Crti%as rom lia+ilit* to &, it

is his interpretation, not that o petitioners, that holds

swa* with this &ourt.

Deither do petitioners impress us o the non-ulllment

o an* o the other conditions set in para%raph 3, as

the* claim. #ollowin% the %eneral assertion in the

petition that Crti%as violated the terms o the

Anderta!in%, petitioners add that Crti%as 'paid &

G0DO the amount o 1.3 million without petitioners

S&0DC and S(:CSRs !nowled%e and

consent.'3 ara%raph 3/a2 o the Anderta!in% does

impose a re)uirement that an* o the 'CG:($CES' shall

immediatel* inorm 'SAET(S' i the* received an*

demand or pa*ment o #0:&CDRs o+li%ations to &,

+ut that re)uirement is reasoned 'so that the

MSAET(SN can timel* ta!e appropriate

measures'33 presuma+l* to settle the o+li%ation without

havin% to +urden the 'CG:($CES.' This notice

re)uirement in para%raph 3/a2 is mar!edl* wa* of rom

suit, was o+li%ed under the 19@ Anderta!in% to noti*

them +eore settlin% with &.

The other ar%uments petitioners have ofered to escape

lia+ilit* to Crti%as are similarl* wea!.

etitioners impu%n Crti%as or havin% settled with &

in the rst place. The* note that Crti%as had, in his

answer, denied an* lia+ilit* to & and had alle%ed

that he si%ned the 0ssumption o Solidar* :ia+ilit* not in

his personal capacit*, +ut as an oBcer o #alcon.

Jowever, such position, accordin% to petitioners, could

not +e =ustied since Crti%as later voluntaril* paid &

the amount o 1.3 4illion. Such circumstances,

accordin% to petitioners, amounted to estoppel on thepart o Crti%as.

ven as we entertain this ar%ument at depth, its

premises are still erroneous. The artial &ompromise

0%reement +etween & and Crti%as epressl*

stipulated that Crti%asRs ofer to pa* & was

conditioned 'without MCrti%asRsN admittin% lia+ilit* to

plaintif & Gan!Rs complaint, and to terminate and

dismiss the said case as a%ainst Crti%as

solel*.'3 etitioners proess it is 'unthin!a+le' or

Crti%as to have voluntaril* paid & without admittin%

his lia+ilit*,35 *et such contention +ased on assumption

cannot supersede the literal terms o the artial

&ompromise 0%reement.

etitioners urther o+serve that Crti%as made the

pa*ment to & ater he had alread* assi%ned his

o+li%ation to petitioners throu%h the 19@ Anderta!in%.

Het the act is & did pursue a =udicial claim a%ainst

part that 'MtNhere is a solidar* lia+ilit* onl* when the

o+li%ation epressl* so states, or when the law or the















Crti%as notwithstandin% the Anderta!in% he eecuted

with petitioners. Dot +ein% a part* to such Anderta!in%,

& was not precluded +* a contract rom pursuin% its

claim a%ainst Crti%as +ased on the ori%inal 0ssumption

o Solidar* :ia+ilit*.

0t the same time, the Anderta!in% did not preclude

Crti%as rom relievin% his distress throu%h a settlement

with the creditor +an!. (ndeed, para%raph 1 o the

Anderta!in% epressl* states that 'nothin% herein shall

prevent CG:($CES, or an* one o them, rom

themselves ne%otiatin% with & or the release

o their said %uarantees MsicN.'38 Simpl* put, the

Anderta!in% did not +ar Crti%as rom pursuin% his own

settlement with &. Deither did the Anderta!in% +arCrti%as rom recoverin% rom petitioners whatever

amount he ma* have paid & throu%h his own

settlement. The stipulation that i Crti%as was 'or an*

reason made to pa* an* amount to &M,N

SAET(S shall reim+urse CG:($CES or said amounts

within seven /72 calendar da*s rom such

pa*ment'37ma!es it clear that petitioners remain lia+le

to reim+urse Crti%as or the sums he paid &.

"e now turn to the set o ar%uments posed +*

petitioners, in the alternative, that is, on the assumption

that the* are indeed lia+le.

etitioners su+mit that the* could onl* +e held =ointl*,

not solidaril*, lia+le to Crti%as, claimin% that the

Anderta!in% did not provide or epress solidarit*. The*

cite 0rticle 1;7 o the Dew &ivil &ode, which states in

nature o the o+li%ation re)uires solidarit*.'

Crti%as in turn ar%ues that petitioners, as well as 4atti,

are =ointl* and severall* lia+le or the Anderta!in%, as

the lan%ua%e used in the a%reement 'clearl* shows that

it is a suret* a%reement'3@ +etween the o+li%ors /Crti%as%roup2 and the sureties /sca]o %roup2. Crti%as points

out that the Anderta!in% uses the word 'SAET(S'

althou%h the document, in descri+in% the parties. (t is

urther contended that the principal o+=ective o the

parties in eecutin% the Anderta!in% cannot +e attained

unless petitioners are solidaril* lia+le '+ecause the total

loan o+li%ation can not +e paid or settled to ree or

release the CG:($CES i one or an* o the SAET(S

deault rom their o+li%ation in the Anderta!in%.'39

(n case, there is a concurrence o two or more creditors

or o two or more de+tors in one and the same

o+li%ation, 0rticle 1;7 o the &ivil &ode states that

amon% them, 'MtNhere is a solidar* lia+ilit* onl* when

the o+li%ation epressl* so states, or when the law or

the nature o the o+li%ation re)uires solidarit*.' 0rticle

11; supplies urther caution a%ainst the +road

interpretation o solidarit* +* providin%< 'The

indivisi+ilit* o an o+li%ation does not necessaril* %ive

rise to solidarit*. Dor does solidarit* o itsel impl*

indivisi+ilit*.'

These &ivil &ode provisions esta+lish that in case o

concurrence o two or more creditors or o two or more

de+tors in one and the same o+li%ation, and in the

a+sence o epress and indu+ita+le terms characterizin%

the o+li%ation as solidar*, the presumption is that the

o+li%ation is onl* =oint. (t thus +ecomes incum+ent upon

( a person +inds himsel solidaril* with the principal

de+tor, the provisions o Section , &hapter 3, Title ( o











the part* alle%in% that the o+li%ation is indeed solidar*

in character to prove such act with a preponderance o

evidence.

The Anderta!in% does not contain an* epress

stipulation that the petitioners a%reed 'to +indthemselves =ointl* and severall*' in their o+li%ations to

the Crti%as %roup, or an* such terms to that efect.

Jence, such o+li%ation esta+lished in the Anderta!in% is

presumed onl* to +e =oint. Crti%as, as the part* alle%in%

that the o+li%ation is in act solidar*, +ears the +urden

to overcome the presumption o =ointness o o+li%ations.

"e rule and so hold that he ailed to dischar%e such

+urden.

Crti%as places primar* reliance on the act that the

petitioners and 4atti identied themselves in the

Anderta!in% as 'SAET(S', a term repeated no less

than thirteen /132 times in the document. Crti%as claims

that such manner o identication suBcientl*

esta+lishes that the o+li%ation o petitioners to him was

=oint and solidar* in nature.

The term 'suret*' has a specic meanin% under our &ivil

&ode. 0rticle ;7 provides the statutor* denition o a

suret* a%reement, thus<

0rt. ;7. G* %uarant* a person, called the %uarantor,

+inds himsel to the creditor to ulll the o+li%ation o

the principal de+tor in case the latter should ail to do

so.

this Goo! shall +e o+served. (n such case the contract is

called a suret*ship. Mmphasis suppliedN;

0s provided in 0rticle ;7 in a suret* a%reement the

suret* underta!es to +e +ound solidaril* with the

principal de+tor. Thus, a suret* a%reement is anancillar* contract as it presupposes the eistence o a

principal contract. (t appears that Crti%asRs ar%ument

rests solel* on the solidar* nature o the o+li%ation o

the suret* under 0rticle ;7. (n tandem with the

nomenclature 'SAET(S' accorded to petitioners and

4atti in the Anderta!in%, however, this ar%ument can

onl* +e via+le i the o+li%ations esta+lished in the

Anderta!in% do parta!e o the nature o a suret*ship asdened under 0rticle ;7 in the rst place. That clearl*

is not the case here, notwithstandin% the use o the

nomenclature 'SAET(S' in the Anderta!in%.

0%ain, as indicated +* 0rticle ;7, a suret*ship

re)uires a principal de+tor to whom the suret* is

solidaril* +ound +* wa* o an ancillar* o+li%ation o

se%re%ate identit* rom the o+li%ation +etween the

principal de+tor and the creditor. The suret*ship does

+ind the suret* to the creditor, inasmuch as the latter is

vested with the ri%ht to proceed a%ainst the ormer to

collect the credit in lieu o proceedin% a%ainst the

principal de+tor or the same o+li%ation.1 0t the same

time, there is also a le%al tie created +etween the suret*

and the principal de+tor to which the creditor is not

priv* or part* to. The moment the suret* ull* answers

to the creditor or the o+li%ation created +* the principal

de+tor, such o+li%ation is etin%uished. 0t the same

time, the suret* ma* see! reim+ursement rom the

while a solidar* co-de+tor has no other ri%hts than those

+estowed upon him in Section , &hapter 3, Title (, Goo!









principal de+tor or the amount paid, or the suret* does

in act '+ecome su+ro%ated to all the ri%hts and

remedies o the creditor.'3

Dote that 0rticle ;7 itsel specicall* calls or the

application o the provisions on =oint and solidar*o+li%ations to suret*ship contracts. 0rticle 117 o the

&ivil &ode thus comes into pla*, reco%nizin% the ri%ht o

reim+ursement rom a co-de+tor /the principal de+tor,

in case o suret*ship2 in avor o the one who paid /i.e.,

the suret*2.5Jowever, a si%nicant distinction still lies

+etween a =oint and several de+tor, on one hand, and a

suret* on the other. Solidarit* si%nies that the creditor

can compel an* one o the =oint and several de+tors or

the suret* alone to answer or the entiret* o theprincipal de+t. The diference lies in the respective

aculties o the =oint and several de+tor and the suret*

to see! reim+ursement or the sums the* paid out to

the creditor.

r. Tolentino eplains the diferences +etween a solidar*

co-de+tor and a suret*<

0 %uarantor who +inds himsel in solidum with the

principal de+tor under the provisions o the second

para%raph does not +ecome a solidar* co-de+tor to all

intents and purposes. There is a diference +etween a

solidar* co-de+tor and a ador in solidum /suret*2. The

latter, outside o the lia+ilit* he assumes to pa* the

de+t +eore the propert* o the principal de+tor has

+een ehausted, retains all the other ri%hts, actions and

+enets which pertain to him +* reason o the ansa?

(I o the &ivil &ode.

The second para%raph o M0rticle ;7N is practicall*

e)uivalent to the contract o suret*ship. The civil law

suret*ship is, accordin%l*, nearl* s*non*mous with the

common law %uarant*? and the civil law relationshipeistin% +etween the co-de+tors lia+le in solidum is

similar to the common law suret*ship.8

(n the case o =oint and several de+tors, 0rticle 117

ma!es plain that the solidar* de+tor who efected the

pa*ment to the creditor 'ma* claim rom his co-de+tors

onl* the share which corresponds to each, with the

interest or the pa*ment alread* made.' Such solidar*

de+tor will not +e a+le to recover rom the co-de+torsthe ull amount alread* paid to the creditor, +ecause the

ri%ht to recover* etends onl* to the proportional share

o the other co-de+tors, and not as to the particular

proportional share o the solidar* de+tor who alread*

paid. (n contrast, even as the suret* is solidaril* +ound

with the principal de+tor to the creditor, the suret* who

does pa* the creditor has the ri%ht to recover the ull

amount paid, and not =ust an* proportional share, rom

the principal de+tor or de+tors. Such ri%ht to ull

reim+ursement alls within the other ri%hts, actions and

+enets which pertain to the suret* +* reason o the

su+sidiar* o+li%ation assumed +* the suret*.

"hat is the source o this ri%ht to ull reim+ursement +*

the suret*V "e nd the ri%ht under 0rticle ;88 o the

&ivil &ode, which assures that 'MtNhe %uarantor who

pa*s or a de+tor must +e indemnied +* the latter,'

such indemnit* comprisin% o, amon% others, 'the total

amount o the de+t.'7 #urther, 0rticle ;87 o the &ivil

& d li! i +li h h M Nh h

accord the conclusion that +ecause petitioners are

identied in the Anderta!in% as 'SAET(S,' the* are

l = i d ll li +l C i













&ode li!ewise esta+lishes that 'MtNhe %uarantor who

pa*s is su+ro%ated +* virtue thereo to all the ri%hts

which the creditor had a%ainst the de+tor.'@

0rticles ;88 and ;87 eplicitl* pertain to %uarantors,and one mi%ht ar%ue that the provisions should not

etend to sureties, especiall* in li%ht o the )ualier in

0rticle ;7 that the provisions on =oint and several

o+li%ations should appl* to sureties. "e re=ect that

ar%ument, and instead adopt r. TolentinoRs o+servation

that 'MtNhe reerence in the second para%raph o M0rticle

;7N to the provisions o Section , &hapter 3, Title (,

Goo! (I, on solidar* or several o+li%ations, however,

does not mean that suret*ship is withdrawn rom theapplica+le provisions %overnin% %uarant*.'9 #or i that

were not the implication, there would +e no material

diference +etween the suret* as dened under 0rticle

;7 and the =oint and several de+tors, or +oth classes

o o+li%ors would +e %overned +* eactl* the same rules

and limitations.

0ccordin%l*, the ri%hts to indemnication and

su+ro%ation as esta+lished and %ranted to the %uarantor

+* 0rticles ;88 and ;87 etend as well to sureties as

dened under 0rticle ;7. These ri%hts %ranted to the

suret* who pa*s materiall* difer rom those %ranted

under 0rticle 117 to the solidar* de+tor who pa*s,

since the 'indemnication' that pertains to the latter

etends 'onl* MtoN the share which corresponds to each

Mco-de+torN.' (t is or this reason that the &ourt cannot

conse)uentl* =oint and severall* lia+le to Crti%as.

(n order or the conclusion espoused +* Crti%as to hold,

in li%ht o the %eneral presumption avorin% =oint

lia+ilit*, the &ourt would have to +e satised that

amon% the petitioners and 4atti, there is one or some o them who stand as the principal de+tor to Crti%as and

another as suret* who has the ri%ht to ull

reim+ursement rom the principal de+tor or de+tors. Do

su%%estion is made +* the parties that such is the case,

and certainl* the Anderta!in% is not revelator* o such

intention. ( the &ourt were to %ive ull ruition to the use

o the term 'sureties' as conclusive indication o the

eistence o a suret* a%reement that in turn %ives rise

to a solidar* o+li%ation to pa* Crti%as, the necessar*implication would +e to la* down a correspondin% set o

ri%hts and o+li%ations as +etween the 'SAET(S' which

petitioners and 4atti did not clearl* intend.

(t is not impossi+le that as +etween sca]o, Silos and

4atti, there was an a%reement where+* in the event

that Crti%as were to see! reim+ursement rom them per

the terms o the Anderta!in%, one o them was to act as

suret* and to pa* Crti%as in ull, su+=ect to his ri%ht to

ull reim+ursement rom the other two o+li%ors. (n such

case, there would have +een, in act, a suret*

a%reement which evinces a solidar* o+li%ation in avor

o Crti%as. Het i there was indeed such an a%reement, it

does not appear on the record. 4ore conse)uentiall*, no

such intention is rePected in the Anderta!in% itsel, the

ver* document that creates the conditional o+li%ation

that petitioners and 4atti reim+urse Crti%as should he

+e made to pa* &. The mere utilization o the term

'SAET(S' ld t ! t h f t i ll

"e disa%ree. 0s Crti%as points out, the acts or

omissions o the petitioners led to his +ein% impleaded

i th it l d + & Th A d t !i i l







'SAET(S' could not wor! to such efect, especiall* as

it does not appear who eactl* is the principal de+tor

whose o+li%ation is 'assured' or '%uaranteed' +* the

suret*.

Crti%as urther ar%ues that the nature o theAnderta!in% re)uires 'solidar* o+li%ation o the

Sureties,' since the Anderta!in% epressl* see!s to

'relievMeN o+li%ors o an* and all lia+ilit* arisin% rom

their said =oint and several underta!in% with M#Nalcon,'

and or the 'sureties' to 'irrevoca+l* a%ree and

underta!e to assume all o o+li%ors said %uarantees to

&.'5; "e do not dou+t that a ndin% o solidar*

lia+ilit* amon% the petitioners wor!s to the +enet o

Crti%as in the acilitation o these %oals, *et theAnderta!in% itsel contains no stipulation or clause that

esta+lishes petitionersR o+li%ation to Crti%as as solidar*.

4oreover, the aims adverted to +* Crti%as do not +*

themselves esta+lish that the nature o the o+li%ation

re)uires solidarit*. ven i the lia+ilit* o petitioners and

4atti were ad=ud%ed as merel* =oint, the ull relie and

reim+ursement o Crti%as arisin% rom his pa*ment to

& would still +e accomplished throu%h the completeeecution o such a =ud%ment.

etitioners urther claim that the* are not lia+le or

attorne*Rs ees since the Anderta!in% contained no such

stipulation or attorne*Rs ees, and that the situation did

not all under the instances under 0rticle ;@ o the

&ivil &ode where attorne*Rs ees are recovera+le in the

a+sence o stipulation.

in the suit led +* &. The Anderta!in% was precisel*

eecuted as a means to o+tain the release o Crti%as

and the Schole*s rom their previous o+li%ations as

sureties o #alcon, especiall* considerin% that the* were

alread* divestin% their shares in the corporation.

Specic provisions in the Anderta!in% o+li%atepetitioners to wor! or the release o Crti%as rom his

suret* a%reements with #alcon. Specic provisions

li!ewise mandate the immediate repa*ment o Crti%as

should he still +e made to pa* & +* reason o the

%uarant* a%reements rom which he was ostensi+l* to

+e released throu%h the eforts o petitioners. Done o

these provisions were complied with +* petitioners, and

0rticle ;@/2 precisel* allows or the recover* o

attorne*Rs ees 'MwNhen the deendantRs act or omission

has compelled the plaintif to liti%ate with third persons

or to incur epenses to protect his interest.'

#inall*, petitioners claim that the* should not +e lia+le

or interest since the Anderta!in% does not contain an*

stipulation or interest, and assumin% that the* are

lia+le, that the rate o interest should not +e 16 per

annum, as ad=ud%ed +* the ET&.

The seminal rulin% in astern Shippin% :ines, (nc. v.

&ourt o 0ppeals51 set orth the rules with respect to the

manner o computin% le%al interest<








computation o le%al interest shall, in an* case, +e on

th t ll d= d d







((. "ith re%ard particularl* to an award o interest in the

concept o actual and compensator* dama%es, the rate


ollows<

1. "hen the o+li%ation is +reached, and it consists in

the pa*ment o a sum o mone*, i.e., a loan or

or+earance o mone*, the interest due should +e that

which ma* have +een stipulated in writin%. #urthermore,

the interest due shall itsel earn le%al interest rom the

time it is =udiciall* demanded. (n the a+sence o

stipulation, the rate o interest shall +e 16 per annum

to +e computed rom deault, i.e., rom =udicial or

etra=udicial demand under and su+=ect to theprovisions o 0rticle 1189 o the &ivil &ode.


or+earance o mone*, is +reached, an interest on the

amount o dama%es awarded ma* +e imposed at the

discretion o the court at the rate o 86 per annum. Do

interest, however, shall +e ad=ud%ed on unli)uidated

claims or dama%es ecept when or until the demand

can +e esta+lished with reasona+le certaint*.

0ccordin%l*, where the demand is esta+lished with

reasona+le certaint*, the interest shall +e%in to run rom

the time the claim is made =udiciall* or etra=udiciall*

/0rt. 1189, &ivil &ode2 +ut when such certaint* cannot

+e so reasona+l* esta+lished at the time the demand is

made, the interest shall +e%in to run onl* rom the date

the =ud%ment o the court is made /at which time

)uantication o dama%es ma* +e deemed to have +een

the amount nall* ad=ud%ed.

3. "hen the =ud%ment o the court awardin% a sum o

mone* +ecomes nal and eecutor*, the rate o le%al

interest, whether the case alls under para%raph 1 or

para%raph , a+ove, shall +e 16 per annum rom suchnalit* until its satisaction, this interim period +ein%

deemed to +e +* then an e)uivalent to a or+earance o

credit.5

Since what was the constituted in the Anderta!in%

consisted o a pa*ment in a sum o mone*, the rate o

interest thereon shall +e 16 per annum to +e

computed rom deault, i.e., rom =udicial or etra=udicial

demand. The interest rate imposed +* the ET& is thusproper. Jowever, the computation should +e rec!oned

rom =udicial or etra=udicial demand. er records, there

is no indication that Crti%as made an* etra=udicial

demand to petitioners and 4atti ater he paid &, +ut

on 1 4arch 199, Crti%as made a =udicial demand

when he led a Third-art* &omplaint pra*in% that

petitioners and 4atti +e made to reim+urse him or the

pa*ments made to &. (t is the lin% o this Third

art* &omplaint on 1 4arch 199 that should +e

considered as the date o =udicial demand rom which

the computation o interest should +e rec!oned.53 Since

the ET& held that interest should +e computed rom @

#e+ruar* 199, the appropriate redenition should +e

made.

"JE#CE, the etition is $E0DT in 0ET. The

Crder o the Ee%ional Trial &ourt dated 5 Ccto+er 1995

is modied +* declarin% that petitioners and Koseph 4.

4atti are onl* =ointl* lia+le, not =ointl* and severall*, to

respondent Eaael Crti%as Kr in the amount

Eespondents. Kune 7, ;1







respondent Eaael Crti%as, Kr. in the amount

o 1,3;;,;;;.;;. The Crder o the Ee%ional Trial &ourt

dated 7 4arch 1998 is 4C(#( in that the le%al

interest o 16 per annum on the amount

o 1,3;;,;;;.;; is to +e computed rom 1 4arch

199, the date o =udicial demand, and not rom @#e+ruar* 199 as directed in the Crder o the lower

court. The assailed rulin%s are aBrmed in all other

respects. &osts a%ainst petitioners.

HEIRS %F SER#AN%FRANC%,

etitioners,

- versus -

SP%USES #ER%NICA ANANIL% G%N=ALES,

G.R. No. 159;'9

resent<

:CD0EC- &0STEC,

Ating C'airperson,

GES04(D,: &0ST(::C,

I(::0E040, KE, and

E:0S-GED0G, JJ.

romul%ated<

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

E C I S I % N

ERSAMIN, J.!

There is novation when there is an irreconcila+leincompati+ilit* +etween the old and the newo+li%ations. There is no novation in case o onl* sli%htmodications? hence, the old o+li%ation prevails.

The petitioners challen%e the decision promul%ated on4arch 19, ;;3,M1N where+* the &ourt o 0ppeals /&02upheld the issuance o a writ o eecution +* theEe%ional Trial &ourt /ET&2, Granch 18, in 4alolos,Gulacan.

A*t((+(*ts

The &ourt adopts the ollowin% summar* o theantecedents rendered +* the &ourt in Medel v. Court of

Appeals,MN the case rom which this case ori%inated, towit<

Cn Dovem+er 7, 19@5, Servando #ranco

over a propert* +elon%in% to :eticia4a!alintal Haptincha*, who issued a specialpower o attorne* in avor o :eticia 4edel







and :eticia 4edel /hereater Servando and:eticia2 o+tained a loan rom Ieronica E.$onzales /hereater Ieronica2, who wasen%a%ed in the mone* lendin% +usinessunder the name $onzales &redit

nterprises, in the amount o 5;,;;;.;;,pa*a+le in two months. Ieronica %ave onl*the amount o7,;;;.;;, to the +orrowers,as she retained 3,;;;.;;, as advanceinterest or one month at 86 per month.Servado and :eticia eecuted a promissor*note or 5;,;;;.;;, to evidence the loan,pa*a+le on Kanuar* 7, 19@8.

Cn Dovem+er 19, 19@5, Servando and:eticia o+tained rom Ieronica another loanin the amount o 9;,;;;.;;, pa*a+le in twomonths, at 86 interest per month. The*eecuted a promissor* note to evidence theloan, maturin% on Kanuar* 19, 19@8. The*received onl* @,;;;.;;, out o theproceeds o the loan.

Cn maturit* o the two promissor*notes, the +orrowers ailed to pa* theinde+tedness.

Cn Kune 11, 19@8, Servando and :eticiasecured rom Ieronica still another loan inthe amount o 3;;,;;;.;;, maturin% in onemonth, secured +* a real estate mort%a%e

power o attorne* in avor o :eticia 4edel,authorizin% her to eecute the mort%a%e.Servando and :eticia eecuted a promissor*note in avor o Ieronica to pa* the sumo 3;;,;;;.;;, ater a month, or on Kul* 11,19@8. Jowever, onl* the sum

o 75,;;;.;;, was %iven to them out o the proceeds o the loan.

:i!e the previous loans, Servando and4edel ailed to pa* the third loan onmaturit*.

Cn Kul* 3, 19@8, Servando and :eticiawith the latter>s hus+and, r. Eaael 4edel,consolidated all their previous unpaid loanstotalin% ;,;;;.;;, and sou%ht romIeronica another loan in the amounto 8;,;;;.;;, +rin%in% their inde+tednessto a total o 5;;,;;;.;;, pa*a+le on 0u%ust3, 19@8. The* eecuted a promissor* note,readin% as ollows<

Galiwa%, Gulacan Kul* 3, 19@8

4aturit* ate 0u%ust 3, 19@8

5;;,;;;.;;

#CE I0:A E&(I, (" =ointl*

deductions as 0ttorne*>s #ee whether actuall* incurred or not, o the totalamount due and demanda+le,



and severall* promise to pa* to theorder o IECD(&0 E. $CDZ0:Sdoin% +usiness in the +usiness st*leo $CDZ0:S &E(T DTEE(SS,#ilipino, o le%al a%e, married to

anilo $. $onzales, Kr., o Galiwa%Gulacan, the sum o SCS ........#(I JADE TJCAS0D ...../P5;;,;;;.;;2 hilippine&urrenc* with interest thereon at therate o 5.5 E &DT per month plus6 service char%e per annum rom date hereountil ull* paid accordin%to the amortization schedulecontained herein. /Anderscorin%

supplied2

a*ment will +e made in ull atthe maturit* date.

Should (" ail to pa* an* amortization or portion hereo when due,

all the other installments to%etherwith all interest accrued shallimmediatel* +e due and pa*a+le and(" here+* a%ree to pa*an additional amount e)uivalent to one per cent /162 per month o the amount due and demanda+le as penalt* char%es in the ormo li)uidated dama%es until ull* paid? and theurther sum o T"DTH #(I E &

DT /562 thereo in ull, without

amount due and demanda+le,eclusive o costs and =udicial oretra =udicial epenses./Anderscorin% supplied2

(, " urther a%ree that in theevent the present rate o interest onloan is increased +* law or the&entral Gan! o the hilippines, theholder shall have the option to appl*and collect the increased interestchar%es without notice althou%h theori%inal interest have alread* +eencollected wholl* or partiall* unlessthe contrar* is re)uired +* law.

(t is also a special condition o thiscontract that the parties hereina%ree that the amount o peso-o+li%ation under this a%reement is+ased on the present value o peso,and i there +e an* chan%e in thevalue thereo, due to etraordinar*

inPation or dePation, or an* othercause or reason, then the peso-o+li%ation herein contracted shall +ead=usted in accordance with thevalue o the peso then prevailin% atthe time o the complete ulllmento o+li%ation.

emand and notice o dishonorwaived. Jolder ma* accept partialpa*ments and %rant renewals o this

deendants :eticia and r. Eaael 4edel who+orrowed rom the plaintifs the sumo 5;;,;;;.;;, and actuall* received the



pa*ments and %rant renewals o thisnote or etension o pa*ments,reservin% ri%hts a%ainst each and allindorsers and all parties to this note.

(D &0S C# KA(&(0: ecution o this o+li%ation, or an* part o it, thede+tors waive all histheir ri%htsunder the provisions o Section 1,Eule 39, o the Eevised Eules o &ourt.

Cn maturit* o the loan, the +orrowers

ailed to pa* the inde+tednesso 5;;,;;;.;;, plus interests and penalties,evidenced +* the a+ove-)uoted promissor*note.

Cn #e+ruar* ;, 199;, Ieronica E.$onzales, =oined +* her hus+and anilo $.$onzales, led with the Ee%ional Trial &ourto Gulacan, Granch 18, at 4alolos, Gulacan,a complaint or collection o the ull amounto the loan includin% interests and otherchar%es.

(n his answer to the complaint led withthe trial court on 0pril 5, 199;, deendantServando alle%ed that he did not o+tain an*loan rom the plaintifs? that it was

o 5;;,;;;.;;, and actuall* received theamount and +eneted thererom? that theloan was secured +* a real estate mort%a%eeecuted in avor o the plaintifs, and thathe /Servando #ranco2 si%ned the promissor*note onl* as a witness.

(n their separate answer led on 0pril1;,199;, deendants :eticia and Eaael4edel alle%ed that the loan was thetransaction o :eticia Haptincha*, whoeecuted a mort%a%e in avor o theplaintifs over a parcel o real estatesituated in San Kuan, Gatan%as? that theinterest rate is ecessive at 5.56 per monthwith additional service char%e o 6 perannum, and penalt* char%e o 16 permonth? that the stipulation or attorne*>sees o 56 o the amount due isunconsciona+le, ille%al and ecessive, andthat su+stantial pa*ments made wereapplied to interest, penalties and otherchar%es.

0ter due trial, the lower court declaredthat the due eecution and %enuineness o the our promissor* notes had +een dul*proved, and ruled that althou%h the Asur*:aw had +een repealed, the interestchar%ed +* the plaintifs on the loans wasunconsciona+le and 'revoltin% to theconscience'. Jence, the trial court applied'the provision o the Dew M&ivilN &ode' that

the 'le%al rate o interest or loan oror+earance o mone*, %oods or credit is16 per annum.'

3. Crderin% the deendants to pa*the plaintifs, =ointl* and severall*,the amount o @5,;;;.;; plus 16



p

0ccordin%l*, on ecem+er 9, 1991, thetrial court rendered =ud%ment, thedispositive portion o which reads as ollows<

"JE#CE, premisesconsidered, =ud%ment is here+*rendered, as ollows<

1. Crderin% the deendantsServando #ranco and :eticia 4edel,

=ointl* and severall*, to pa* plaintifsthe amount o 7,;;;.;; plus 16interest per annum rom Dovem+er7, 19@5 and 16 per month aspenalt*, until the entire amount ispaid in ull.

. Crderin% the deendants

Servando #ranco and :eticia H. 4edelto plaintifs, =ointl* and severall* theamount o @,;;;.;; with 16interest per annum and 16 per centper month as penalt* romDovem+er 19,19@5 until the wholeamount is ull* paid?

, pinterest per annum and 16 permonth as penalt* rom Kul* 11, 19@8,until the whole amount is ull* paid?

. Crderin% the deendants to pa*plaintifs, =ointl* and severall*, theamount o 5;,;;;.;; as attorne*>sees?

5. 0ll counterclaims are here+*dismissed.

"ith costs a%ainst the

deendants.

(n due time, +oth plaintifs anddeendants appealed to the &ourt o 0ppeals.

(n their appeal, plaintifs-appellantsar%ued that the promissor* note, whichconsolidated all the unpaid loans o thedeendants, is the law that %overns theparties. The* urther ar%ued that &ircularDo. 18 o the &entral Gan! prescri+in% therate o interest or loans or or+earance o mone*, %oods or credit at 16 per annum,applies onl* in the a+sence o a stipulation

on interest rate, +ut not when the partiesa%reed thereon.

The award to the plaintifs 5; ;;; ;; > i



The &ourt o 0ppeals sustained theplaintifs-appellants> contention. (t ruledthat the Asur* :aw havin% +ecome le%all*ineistent with the promul%ation +* the&entral Gan! in 19@ o &ircular Do. 9;5, thelender and +orrower could a%ree on an*interest that ma* +e char%ed on the loan.

The &ourt o 0ppeals urther held that 'theimposition o an additional amounte)uivalent to 16 per month o the amountdue and demanda+le as penalt* char%es inthe orm o li)uidated dama%es until ull*paid was allowed +* law.

0ccordin%l*, on 4arch 1, 1997, the&ourt o 0ppeals promul%ated it decisionreversin% that o the Ee%ional Trial &ourt,disposin% as ollows<

"JE#CE, the appealed =ud%ment is here+* 4C(#( suchthat deendants are here+* orderedto pa* the plaintifs the sumo 5;;,;;;.;;, plus 5.56 per monthinterest and 6 service char%e perannum efective Kul* 3, 19@8, plus16 per month o the total amountdue and demanda+le as penalt*char%es efective 0u%ust , 19@8,until the entire amount is ull* paid.

o 5;,;;;.;; as attorne*>s ees isaBrmed. 0nd so is the imposition o costs a%ainst the deendants.

SC CEE.

Cn 0pril 15, 1997, deendants-appellants led a motion or reconsiderationo the said decision. G* resolution datedDovem+er 5, 1997, the &ourt o 0ppealsdenied the motion.M3N

Cn review, the &ourt in Medel v. Court of

Appeals struc! down as void the stipulation on theinterest or +ein% ini)uitous or unconsciona+le, andrevived the =ud%ment o the ET& rendered on ecem+er9, 1991, viz <

"JE#CE, the &ourt here+*EIESS and STS 0S( the decision o the &ourt o 0ppeals promul%ated on 4arch

1, 1997, and its resolution dated Dovem+er5, 1997. (nstead, we render =ud%mentEI(I(D$ and 0##(E4(D$ the decision datedecem+er 9, 1991, o the Ee%ional Trial&ourt o Gulacan, Granch 18, 4alolos,Gulacan, in &ivil &ase Do. 13-4-9;,involvin% the same parties.

Do pronouncement as to costs in thisinstance.

&.0., 7 S&E0 5992. (n this respect, thedecision deserves to +e respected.





SC CEE.MN

Apon the nalit* o the decision in Medel v. Court of Appeals, the respondents moved or eecution.M5N Servando #ranco opposed,M8N claimin% that he and therespondents had a%reed to the entire o+li%ationat 775,;;;.;;.M7N 0ccordin% to Servando, theira%reement, which was alle%edl* em+odied in a receiptdated #e+ruar* 5, 199,M@N where+* he made an initialpa*ment o ;;,;;;.;; and promised to pa* the+alance o 375,;;;.;; on #e+ruar* 9, 199,superseded the Kul* 3, 19@8 promissor* note.

The ET& %ranted the motion or eecution overServandos opposition, thus<

There is no dou+t that the decisiondated ecem+er 9, 1991 had alread* +eenaBrmed and had alread* +ecome nal and

eecutor*. Thus, in accordance with Sec. 1o Eule 39 o the 1997 Eules o &ivilrocedure, eecution shall issue as a mattero ri%ht. (t has li!ewise +een ruled that a

=ud%ment which has ac)uired nalit*+ecomes immuta+le and unaltera+le andhence ma* no lon%er +e modied at an*respect ecept onl* to correct clerical errorsor mista!es /Oorean 0irlines &o. :td. vs.

The ar%ument a+out the modication o the contract or non-participation o deendant Servando #ranco in theproceedin%s on appeal on the alle%ed +elie that the pa*ment he made had alread*a+solved him rom lia+ilit* is o no moment.rimaril*, the decision was or him and:eticia 4edel to pa* the plaintifs =ointl* andseverall* the amounts stated in theecision. (n other words, the lia+ilit* o thedeendants thereunder is solidar*. Gased onthis aspect alone, the new deense raised +*deendant #ranco is unavailin%.

"JE#CE, in the li%ht o all theore%oin%, the &ourt here+* %rants the4otion or ecution o Kud%ment.

0ccordin%l*, let a writ o eecution +eissued or implementation +* the eput*Sherif o this &ourt.

SC CEE.M9N

Cn 4arch @, ;;1, the ET& issued the writ o eecution.M1;N

the a%%rieved part* must move orits eecution, not its invalidation.

















Servando moved or reconsideration,M11N +ut theET& denied his motion.M1N

Cn 4arch 19, ;;3, the &0 aBrmed the ET& throu%h itsassailed decision, rulin% that the eecution was proper+ecause o Servandos ailure to compl* with the termso the compromise a%reement, statin%<M13N

etitioner cannot den* the act thatthere was no ull compliance with the tenoro the compromise a%reement. rivate

respondents on their part did not disre%ardthe pa*ments made +* the petitioner. The*even ofered that whatever pa*ments made+* petitioner, it can +e deducted rom theprincipal o+li%ation includin% interest.Jowever, private respondents posit that thepa*ments made cannot alter, modi* orrevo!e the decision o the Supreme &ourt inthe instant case.

(n the case o 8rudene Realt# and1evelopment Corporation vs. Court of

Appeals, the Supreme &ourt ruled that<

"hen the terms o thecompromise =ud%ment is violated,

(t is clear rom the aorementioned =urisprudence that even i there is acompromise a%reement and the terms have+een violated, the a%%rieved part*, such asthe private respondents, has the ri%ht tomove or the issuance o a writ o eecutiono the nal =ud%ment su+=ect o thecompromise a%reement.

4oreover, under the circumstances o this case, petitioner does not stand to suferan* harm or pre=udice or the simple reason

that what has +een as!ed +* privaterespondents to +e the su+=ect o a writ o eecution is onl* the +alance o petitionerso+li%ation ater deductin% the pa*mentsmade on the +asis o the compromisea%reement.

"JE#CE, premises considered, theinstant petition is here+* D( A&CAES and conse)uentl* (S4(SS orlac! o merit.

SC CEE.

Jis motion or reconsideration havin% +een denied,M1N Servando appealed. Je was eventuall* su+stituted+* his heirs, now the petitioners herein, on account o

+een impliedl* novated when the principal o+li%ationo 5;;,;;;.;; had +een ed at 75;,;;;.;;, and thematurit* date had +een etended rom 0u%ust 3, 19@8











his intervenin% death. The su+stitution was pursuant tothe resolution dated Kune 15, ;;5.M15N

Issu(

The petitioners su+mit that the &0 erred in rulin% that<

(

TJ 9 &4GE 1991 &(S(CD C#GE0D&J 18 C# TJ E$(CD0: TE(0: &CAET

C# 40:C:CS, GA:0&0D "0S DCT DCI0TGH TJ &C4EC4(S 0$E4DTGT"D TJ 0ET(S CD 5 #GEA0EH199.

((

TJ :(0G(:(TH C# TJ T(T(CDE TCESCDDTS SJCA: G G0S CD TJ

&4GE 1991 &(S(CD C# GE0D&J 18C# TJ E$(CD0: TE(0: &CAET C#40:C:CS, GA:0&0D 0D DCT CD TJ&C4EC4(S 0$E4DT L&AT (D199.

The petitioners insist that the ET& could not validl*enorce a =ud%ment +ased on a promissor* note that

had +een alread* novated? that the promissor* note had

to #e+ruar* 9, 199.

(n contrast, the respondents aver that the petitionerssee! to alter, modi* or revo!e the nal and eecutor*decision o the &ourt? that novation did not ta!e place+ecause there was no complete incompati+ilit* +etweenthe promissor* note and the memorandum receipt? thatServandos previous pa*ment would +e deducted romthe total lia+ilit* o the de+tors +ased on the ET&sdecision.

Issu(

"as there a novation o the 0u%ust 3, 19@8promissor* note when respondent Ieronica $onzalesissued the #e+ruar* 5, 199 receiptV

Ru/*g

The petition lac!s merits.

I

No?>t/o* +/+ *ot t>*s)/( @(>us( *o

/(o*/>@( /*o)>t/@//tB (/st(+

@(t((* t( )o/ssoB *ot( >*+ t( ((/)t

To +uttress their claim o novation, the petitioners rel*on the receipt issued on #e+ruar* 5 199 +*

#e+ruar* 5, 199





on the receipt issued on #e+ruar* 5, 199 +*respondent Ieronica where+* Servandos o+li%ation wased at75;,;;;.;;. The* insist that even the maturit*date was etended until #e+ruar* 9, 199. Suchchan%es, the* assert, were incompati+le with those o

the ori%inal a%reement under the promissor* note.

The petitioners assertion is wron%.

0 novation arises when there is a su+stitution o ano+li%ation +* a su+se)uent one that etin%uishes therst, either +* chan%in% the o+=ect or the principalconditions, or +* su+stitutin% the person o the de+tor,or +* su+ro%atin% a third person in the ri%hts o thecreditor.M18N #or a valid novation to ta!e place, there must+e, thereore< /a2 a previous valid o+li%ation? /"2 ana%reement o the parties to ma!e a new contract? /2 anetin%uishment o the old contract? and /d2 a valid newcontract.M17N (n short, the new o+li%ation etin%uishes theprior a%reement onl* when the su+stitution isune)uivocall* declared, or the old and the newo+li%ations are incompati+le on ever* point. 0

compromise o a nal =ud%ment operates as a novationo the =ud%ment o+li%ation upon compliance with eithero these two conditions.M1@N

The receipt dated #e+ruar* 5, 199, ecerpted +elow,did not create a new o+li%ation incompati+le with theold one under the promissor* note, viz <

Eeceived rom SEI0DC #E0D&C G(4ana%ers &hec! Do. ;;17;; in the amounto ;;,;;.;; as partial pa*ment o loan.Galance o 375,;;;.;; to +e paid on or+eore #GEA0EH 9, 199. (n case o

deault an interest will +e char%ed asstipulated in the promissor* note su+=ect o this case.

/S%d2

I. $onzalezM19N

To +e clear, novation is not presumed. This means thatthe parties to a contract should epressl* a%ree toa+ro%ate the old contract in avor o a new one. (n thea+sence o the epress a%reement, the old and the newo+li%ations must +e incompati+le on ever* point.M;N 0ccordin% to California /us 0ines, +n. v. tate+nvestment House, +n.<M1N

The etin%uishment o the old o+li%ation +*the new one is a necessar* element o novation which ma* +e efected eitherepressl* or impliedl*. The term epressl*means that the contractin% partiesincontroverti+l* disclose that their o+=ect ineecutin% the new contract is to etin%uishthe old one. Apon the other hand, nospecic orm is re)uired or an impliednovation, and all that is prescri+ed +* law

would +e an incompati+ilit* +etween thetwo contracts. "hile there is reall* no hardand ast rule to determine what mi%ht

i + B i h h

o his a%reement with the respondents. (ndeed, the&ourt has ruled that an o+li%ation to pa* a sum o mone* is not novated +* an instrument that epressl*

i h ld h l h















constitute to +e a suBcient chan%e that can+rin% a+out novation, the touchstone orcontrariet*, however, would +e anirreconcila+le incompati+ilit* +etween theold and the new o+li%ations.

There is incompati+ilit* when the two o+li%ations cannotstand to%ether, each one havin% its independenteistence. ( the two o+li%ations cannot stand to%ether,the latter o+li%ation novates the rst. MN &han%es that+reed incompati+ilit* must +e essential in nature andnot merel* accidental. The incompati+ilit* must afectan* o the essential elements o the o+li%ation, such asits o+=ect, cause or principal conditions thereo?otherwise, the chan%e is merel* modicator* in nature

and insuBcient to etin%uish the ori%inal o+li%ation.

M3N

(n li%ht o the ore%oin%, the issuance o the receiptcreated no new o+li%ation. (nstead, the respondentsonl* there+* reco%nized the ori%inal o+li%ation +*statin% in the receipt that the ;;,;;;.;; was partialpa*ment o loan and +* reerrin% to the promissor* notesu+=ect o the case in imposin% the interest.

The loan mentioned in the receipt was still the same

loan involvin% the 5;;,;;;.;; etended toServando. 0dvertence to the interest stipulated in thepromissor* note indicated that the contract stillsu+sisted, not replaced and etin%uished, as thepetitioners claim.

The receipt dated #e+ruar* 5, 199 was onl* the proo o Servandos pa*ment o his o+li%ation as conrmed +*

the decision o the ET&. (t did not esta+lish the novation

reco%nizes the old, or chan%es onl* the terms o pa*ment, or adds other o+li%ations not incompati+lewith the old ones, or the new contract merel*supplements the old one.MN 0 new contract that is amere reiteration, ac!nowled%ment or ratication o the

old contract with sli%ht modications or alterations as tothe cause or o+=ect or principal conditions can standto%ether with the ormer one, and there can +e noincompati+ilit* +etween them.M5N 4oreover, a creditorsacceptance o pa*ment ater demand does not operateas a modication o the ori%inal contract.M8N

"orth notin% is that Servandos lia+ilit* was =oint andsolidar* with his co-de+tors. (n a solidar* o+li%ation, thecreditor ma* proceed a%ainst an* one o the solidar*de+tors or some or all o them simultaneousl*. M7N Thechoice to determine a%ainst whom the collection isenorced +elon%s to the creditor until the o+li%ation isull* satised.M@N Thus, the o+li%ation was +ein%enorced a%ainst Servando, who, in order to escapelia+ilit*, should have presented evidence to prove thathis o+li%ation had alread* +een cancelled +* the newo+li%ation or that another de+tor had assumed hisplace. (n case o chan%e in the person o the de+tor, thesu+stitution must +e clear and epress,M9N and madewith the consent o the creditor.M3;N Het, thesecircumstances did not o+tain herein, provin% precisel*that Servando remained a solidar* de+tor a%ainst whomthe entire or part o the o+li%ation mi%ht +e enorced.

:astl*, the etension o the maturit* date did notconstitute a novation o the previous a%reement. (t is

settled that an etension o the term or period o thematurit* date does not result in novation.M31N

II

G.R. No. 1;242& No?(@( 2&, 2''&

HERMAN C. CR"S$AL, LAMER$% C. CR"S$AL, ANN























II

$ot> />@//tB to @( (+u(+ @B P4'','''.''

The petitioners ar%ue that Servandos remainin% lia+ilit*amounted to onl* 375,;;;.;;, the +alance indicated inthe #e+ruar* 5, 199 receipt. 0ccordin%l*, the +alancewas not *et due +ecause the respondents did not *etma!e a demand or pa*ment.

The petitioners cannot +e upheld.

The +alance o 375,;;;.;; was premised on the ta!in%place o a novation. Jowever, as ound now, novationdid not ta!e place. 0ccordin%l*, Servandos o+li%ation,+ein% solidar*, remained to +e that decreed in theecem+er 9, 1991 decision o the ET&, inclusive o interests, less the amount o ;;,;;;.;; that wasmeanwhile paid +* him.

WHEREF%RE, the &ourt AFFIRMS the decision o the &ourt o 0ppeals promul%ated on 4arch 19,;;3? %RERS the Ee%ional Trial &ourt, Granch 18, in4alolos, Gulacan to proceed with the eecution +asedon its decision rendered on ecem+er 9, 1991,deductin% the amount o ;;,;;;.;; alread* paid +*the late Servando #ranco? and IREC$S the petitionersto pa* the costs o suit.

GE%RGIA C. S%LAN$E, >*+ %RIS C. MAGLASANG,>s H(/s o0 ((>s(+ SP%USES RA"MUN% I.CR"S$AL >*+ ESAMPARA%S C.CR"S$AL, petitioners,

vs.ANK %F $HE PHILIPPINE ISLANS, respondent.

E C I S I % N

$INGA, J.!

Geore us is a etition or Eeview1 o the ecision and

Eesolution3 o the &ourt o 0ppeals dated Ccto+er

;;5 and 31 4arch ;;8, respectivel*, in &0 $.E. &IDo. 7@@8, which aBrmed the @ Kune ;;1 decision o

the Ee%ional Trial &ourt, Granch 5, o &e+u &it*.

The acts, as culled rom the records, ollow.

Cn @ 4arch 197@, spouses Ea*mundo and

esamparados &r*stal o+tained a 3;;,;;;.;; loan in

+ehal o the &e+u &ontractors &onsortium &o. /&&&&2

rom the Gan! o the hilippine (slands-Gutuan +ranch/G(-Gutuan2. The loan was secured +* a chattel

mort%a%e on heav* e)uipment and machiner* o &&&&.

Cn the same date, the spouses eecuted in avor o G(-

Gutuan a &ontinuin% Suret*ship5 where the* +ound

themselves as suret* o &&&& in the a%%re%ate principal

sum o not eceedin% 3;;,;;;.;;. Thereater, or on 9

4arch 1979, Ea*mundo &r*stal eecuted a promissor*

note8 or the amount o 3;;,;;;.;;, also in avor o

G(-Gutuan.

reached 7;7,393.9;.14eanwhile, on 7 Kul* 19@1,

(nsular Gan! o 0sia and 0merica /(G002, throu%h its

Iice-resident or :e%al and &orporate 0fairs, ofered to

http://www.lawphil.net/judjuris/juri2008/nov2008/gr_172428_2008.html#fnt1
















Sometime in 0u%ust 1979, &&&& renewed a previous

loan, this time rom G(, &e+u &it* +ranch /G(-&e+u

&it*2. The renewal was evidenced +* a promissor*

note7 dated 13 0u%ust 1979, si%ned +* the spouses in

their personal capacities and as mana%in% partners o&&&&. The promissor* note states that the spouses are

=ointl* and severall* lia+le with &&&&. (t appears that

+eore the ori%inal loan could +e %ranted, G(-&e+u &it*

re)uired &&&& to put up a securit*.

Jowever, &&&& had no real propert* to ofer as securit*

or the loan? hence, the spouses eecuted a real estate

mort%a%e@ over their own real propert* on

Septem+er 1977.9 Cn 3 Ccto+er 1977, the* eecutedanother real estate mort%a%e over the same lot in avor

o G(-&e+u &it*, to secure an additional loan

o ;,;;;.;; o &&&&.1;

&&&& ailed to pa* its loans to +oth G(-Gutuan and G(-

&e+u &it* when the* +ecame due. &&&&, as well as the

spouses, ailed to pa* their o+li%ations despite

demands. Thus, G( resorted to the oreclosure o the

chattel mort%a%e and the real estate mort%a%e. Theoreclosure sale on the chattel mort%a%e was initiall*

stalled with the issuance o a restrainin% order a%ainst

G(.11 Jowever, ollowin% G(Rs compliance with the

necessar* re)uisites o etra=udicial oreclosure, the

oreclosure sale on the chattel mort%a%e was

consummated on @ #e+ruar* 19@@, with the proceeds

amountin% to ;,;;;.;; applied to the loan rom G(-

Gutuan which had then

+u* the lot su+=ect o the two /2 real

estate mort%a%es and to pa* directl* the spousesR

inde+tedness in echan%e or the release o the

mort%a%es. G( re=ected (G00Rs ofer to pa*.13

G( led a complaint or sum o mone* a%ainst &&&&

and the spouses +eore the Ee%ional Trial &ourt o

Gutuan &it* /ET& Gutuan2, see!in% to recover the

decienc* o the loan o &&&& and the spouses with G(-

Gutuan. The trial court ruled in avor o G(. ursuant to

the decision, G( instituted etra=udicial oreclosure o

the spousesR mort%a%ed propert*.1

Cn 1; 0pril 19@5, the spouses led an action

or +nGuntion it' 1amages, it' A 8ra#er 6or A

Restraining ;rder andI or rit of 8reliminar#

+nGuntion.15 The spouses claimed that the oreclosure o

the real estate mort%a%es is ille%al +ecause G( should

have ehausted &&&&Rs properties rst, stressin% that

the* are mere %uarantors o the renewed loans. The*

also pra*ed that the* +e awarded moral and eemplar*

dama%es, attorne*Rs ees, liti%ation epenses and costo suit. Su+se)uentl*, the spouses led an amended

complaint,18 additionall* alle%in% that &&&& had opened

and maintained a orei%n currenc* savin%s account

/#&S0-1972 with +pi, 4a!ati +ranch /G(-4a!ati2, and

that said #&S0 was used as securit* or a 5;,;;;.;;

loan also etended +* G(-4a!ati. The5;,;;;.;; loan

was alle%edl* paid, and thereater the spouses

demanded the return o the #&S0 pass+oo!. G(

re=ected the demand? thus, the spouses were una+le to

withdraw rom the said account to pa* or their other

o+li%ations to G(.

the 3;;,;;;.;; loan rom G(-Gutuan would also +e

paid. &onse)uentl*, in view o G(Rs un=ust reusal to

accept pa*ment o the G(-&e+u &it* loan, the loan





















The trial court dismissed the spousesR complaint and

ordered them to pa* moral and eemplar* dama%es and

attorne*Rs ees to G(.17 (t ruled that since the spouses

a%reed to +ind themselves =ointl* and severall*, the*are solidaril* lia+le or the loans? hence, G( can validl*

oreclose the two real estate mort%a%es. 4oreover,

+ein% %uarantors-mort%a%ors, the spouses are not

entitled to the +enet o ehaustion. 0nent the #&S0,

the trial court ound that &&&& ori%inall* had #&A S0

Do. 197 with G(, ewe* Goulevard +ranch, which was

transerred to G(-4a!ati as #&A S0 78;;35, at the

re)uest o esamparados &r*stal. #&A S0 78;;35

was thus closed, +ut esamparados &r*stal ailed tosurrender the pass+oo! +ecause it was lost. The

transerred #&S0 in G(-4a!ati was the one used as

securit* or &&&&Rs 5;,;;;.;; loan rom G(-4a!ati.

&&&& was no lon%er allowed to withdraw rom #&A S0

Do. 197 +ecause it was alread* closed.

The spouses appealed the decision o the trial court to

the &ourt o 0ppeals, +ut their appeal was

dismissed.1@ The spouses moved or the reconsideration

o the decision, +ut the &ourt o 0ppeals also denied

their motion or reconsideration.19 Jence, the present

petition.

Geore the &ourt, petitioners who are the heirs o the

spouses ar%ue that the ailure o the spouses to pa* the

G(-&e+u &it* loan o 1;,;;;.;; was due to G(Rs

ille%al reusal to accept pa*ment or the loan unless

o+li%ation o the spouses was etin%uished, petitioners

contend.

The contention has no merit. etitioners rel* on (G00Rs

ofer to purchase the mort%a%ed lot rom them and todirectl* pa* G( out o the proceeds thereo to settle the

loan.; G(Rs reusal to a%ree to such pa*ment scheme

cannot etin%uish the spousesR loan o+li%ation. (n the

rst place, (G00 is not priv* to the loan a%reement or

the promissor* note +etween the spouses and G(.

&ontracts, ater all, ta!e efect onl* +etween the parties,

their successors in interest, heirs

and assi%ns.1 Gesides, under 0rt. 138 o the &ivil&ode, the creditor is not +ound to accept pa*ment or

perormance +* a third person who has no interest in

the ulllment o the o+li%ation, unless there is a

stipulation to the contrar*. "e see no stipulation in the

promissor* note which states that a third person ma*

ulll the spousesR o+li%ation. Thus, it is clear that the

spouses alone +ear responsi+ilit* or the same.

(n an* event, the promissor* note is the controllin%repositor* o the o+li%ation o the spouses. Ander the

promissor* note, the spouses dened the parameters o

their o+li%ation as ollows<

Cn or +eore Kune 9, 19@; on demand, or value

received, (we promise to pa*, =ointl* and

severall*, to the G0DO C# TJ J(:((D

(S:0DS, at its oBce in the cit* o &e+u

hilippines, the sum o CD JADE T"DTH

TJCAS0D SCS /1;,;;;;.;;2, hilippine

&urrenc*, su+=ect to periodic installments on the

or promisee o the principal is said to +e direct, primar*,

and a+solute? in other words, the suret* is directl* and

e)uall* +ound with the principal. The suret* thereore













principal as ollows< 3;,;;;.;; )uarterl*

amortization startin% Septem+er @, 1979.

0 solidar* o+li%ation is one in which each o the de+tors

is lia+le or the entire o+li%ation, and each o thecreditors is entitled to demand the satisaction o the

whole o+li%ation rom an* or all o the de+tors. 3 0

lia+ilit* is solidar* 'onl* when the o+li%ation epressl*

so states, when the law so provides or when the nature

o the

o+li%ation so re)uires.' Thus, when the o+li%or

underta!es to +e '=ointl* and severall*' lia+le, it means

that the o+li%ation is solidar*,5 such as in this case. G*statin% '(we promise to pa*, =ointl* and severall*, to the

G0DO C# TJ J(:((D (S:0DS,' the spouses a%reed

to +e sou%ht out and +e demanded pa*ment rom, +*

G(. G( did demand pa*ment rom them, +ut the* ailed

to compl* with their o+li%ation, promptin% G(Rs valid

resort to the oreclosure o the chattel mort%a%e and

the real estate mort%a%es.

4ore importantl*, the promissor* note, wherein thespouses undertoo! to +e solidaril* lia+le or the principal

loan, parta!es the nature o a suret*ship and thereore

is an additional securit* or the loan. Thus we held in

one case that i solidar* lia+ilit* was instituted to

'%uarantee' a principal o+li%ation, the law deems the

contract to +e one o suret*ship.8 0nd while a contract

o a suret* is in essence secondar* onl* to a valid

principal o+li%ation, the suret*Rs lia+ilit* to the creditor

+ecomes lia+le or the de+t or dut* o another even i he

possesses no direct or personal interest over the

o+li%ations nor does he receive an* +enet thererom.7

etitioners contend that the &ourt o 0ppeals erred innot %rantin% their counterclaims, considerin% that the*

sufered moral dama%es in view o the un=ust reusal o

G( to accept the pa*ment scheme proposed +* (G00

and the alle%edl* un=ust and ille%al oreclosure o the

real estate mort%a%es on their propert*.@ &onversel*,

the* ar%ue that the &ourt o 0ppeals erred in awardin%

moral dama%es to G(, which is a corporation, as well as

eemplar* dama%es, attorne*Rs ees and epenses o

liti%ation.9

"e do not a%ree. 4oral dama%es are meant to

compensate the claimant or an* ph*sical suferin%,

mental an%uish, ri%ht, serious aniet*, +esmirched

reputation, wounded eelin%s, moral shoc!, social

humiliation and similar in=uries un=ustl* caused.3; Such

dama%es, to +e recovera+le, must +e the proimate

result o a wron%ul act or omission the actual +asis or

which is satisactoril* esta+lished +* the a%%rieved

part*.31 There +ein% no wron%ul or un=ust act on the

part o G( in demandin% pa*ment rom them and in

see!in% the oreclosure o the chattel and real estate

mort%a%es, there is no lawul +asis or award o

dama%es in avor o the spouses.

Deither is G( entitled to moral dama%es. 0 =uridical

person is %enerall* not entitled to moral dama%es

+ecause, unli!e a natural person, it cannot eperience

ph*sical suferin% or such sentiments as wounded

eelin%s, serious aniet*, mental an%uish or moral

3AM9C-/CCM4,3@ the &ourt held that the statements in

4anero and 4am+ulao were mere o+iter dicta, impl*in%

that the award o moral dama%es to corporations is not


























shoc!.3 The &ourt o 0ppeals ound G( as '+ein%

amous and havin% %ained its amiliarit* and respect not

onl* in the hilippines +ut also in the whole world

+ecause o its %ood will and %ood reputation must

protect and deend the same a%ainst an* unwarrantedsuit such as the case at +ench.'33 (n holdin% that G( is

entitled to moral dama%es, the &ourt o 0ppeals relied

on the case o 8eople v. Manero,3 wherein the &ourt

ruled that 'MiNt is onl* when a =uridical person has a %ood

reputation that is de+ased, resultin% in social

humiliation, that moral dama%es ma* +e awarded.'35

"e do not a%ree with the &ourt o 0ppeals. 0 statement

similar to that made +* the &ourt in Manerocan +eound in the case o Mam"ulao 0um"er Co. v. 8N/, et

al.,38 thus<

C+viousl*, an articial person li!e herein

appellant corporation cannot eperience ph*sical

suferin%s, mental an%uish, ri%ht, serious aniet*,

wounded eelin%s, moral shoc! or social

humiliation which are +asis o moral dama%es. A

o)o>t/o* >B >?( goo+ ()ut>t/o*/, /0 @(s/(+ >B >so @( > gou*+0o t( >>+ o0 o> +>>g(s.

/mphasis supplied2

Devertheless, in the more recent cases o A/-C/N

Corp. v. Court of Appeals, et al.,37 and 6ilipinas

/roadasting Netor2, +n. v. Ago Medial and

9duational Center-/iol C'ristian College of Mediine

a hard and ast rule. (ndeed, while the &ourt ma* allow

the %rant o moral dama%es to corporations, it is not

automaticall* %ranted? there must still +e proo o the

eistence o the actual +asis o the dama%e and its

causal relation to the deendantRs acts. This is so+ecause moral dama%es, thou%h incapa+le o pecuniar*

estimation, are in the cate%or* o an award desi%ned to

compensate the claimant or actual in-ur% sufered and

not to impose a penalt* on the wron%doer.39

The spousesR complaint a%ainst G( proved to +e

unounded, +ut it does not automaticall* entitle G( to

moral dama%es. 0lthou%h the institution o a clearl*

unounded civil suit can at times +e a le%al

=ustication or an award o attorne*>s ees, such lin%,

however, has almost invaria+l* +een held not to +e a

%round or an award o moral dama%es. The rationale

or the rule is that the law could not have meant to

impose a penalt* on the ri%ht to liti%ate. Ctherwise,

moral dama%es must ever* time +e awarded in avor o

the prevailin% deendant a%ainst an unsuccessul

plaintif.; G( ma* have +een inconvenienced +* thesuit, +ut we do not see how it could have possi+l*

sufered +esmirched reputation on account o the sin%le

suit alone. Jence, the award o moral dama%es should

+e deleted.

The awards o eemplar* dama%es and attorne*Rs ees,

however, are proper. emplar* dama%es, on the other

hand, are imposed +* wa* o eample or correction or

the pu+lic %ood, when the part* to a contract acts in a

wanton, raudulent, oppressive or malevolent manner,

while attorne*Rs ees are allowed when eemplar*

This is a petition or review on ertiorari o the decision

o the &ourt o 0ppeals aBrmin% that o the Ee%ional

Trial &ourt o 4isamis Criental, Granch 1@, 1 which



















dama%es are awarded and when the part* to a suit is

compelled to incur epenses to protect his

interest.1 The spouses instituted their complaint a%ainst

G( notwithstandin% the act that the* were the ones

who ailed to pa* their o+li%ations. &onse)uentl*, G(was orced to liti%ate and deend its interest. #or these

reasons, G( is entitled to the awards o eemplar*

dama%es and attorne*Rs ees.

"JE#CE, the petition is D(. The ecision and

Eesolution o the &ourt o 0ppeals dated Ccto+er

;;5 and 31 4arch ;;8, respectivel*, are here+*

0##(E4, with the 4C(#(&0T(CD that the award o

moral dama%es to Gan! o the hilippine (slands is:T.

&osts a%ainst the petitioners.

G.R. No. 964'5 u*( 26, 1996

AL%MER% INCI%NG, R., petitioner,vs.

C%UR$ %F APPEALS >*+ PHILIPPINE ANK %FC%MMUNICA$I%NS, respondents.

R%MER%, J.: p

disposed o &ivil &ase Do. 1;5;7 or collection o a sum

o mone* and dama%es, as ollows<

"JE#CE, deendant G0:C4EC :.

(D&(CD$, KE. is ad=ud%ed solidaril* lia+le andordered to pa* to the plaintif hilippine

Gan! o &ommunications, &a%a*an de Cro

&it*, the amount o #(#TH TJCAS0D SCS

/5;,;;;.;;2, with interest thereon rom

4a* 5, 19@3 at 186 per annum until ull*

paid? and 86 per annum on the total

amount due, as li)uidated dama%es or

penalt* rom 4a* 5, 19@3 until ull* paid?

plus 1;6 o the total amount due orepenses o liti%ation and attorne*>s ees?

and to pa* the costs.

The counterclaim, as well as the cross claim,

are dismissed or lac! o merit.

SC CEE.

etitioner>s lia+ilit* resulted rom the promissor* note inthe amount o 5;,;;;.;; which he si%ned with Eene &.

Da*+e and $re%orio . antanosas on #e+ruar* 3, 19@3,

holdin% themselves =ointl* and severall* lia+le to private

respondent hilippine Gan! o &ommunications,

&a%a*an de Cro &it* +ranch. The promissor* note was

due on 4a* 5, 19@3.

Said due date epired without the promissors havin%

paid their o+li%ation. &onse)uentl*, on Dovem+er 1,

19@3 and on Kune @, 19@, private respondent sent2

petitioner to act as a 'co-ma!er' in the said loan.

etitioner alle%edl* acceded +ut with the understandin%

that he would onl* +e a co-ma!er or the loan o





petitioner tele%rams demandin% pa*ment thereo. 2 Cn

ecem+er 11, 19@ private respondent also sent +*

re%istered mail a nal letter o demand to Eene &.

Da*+e. Since +oth o+li%ors did not respond to the

demands made, private respondent led on Kanuar* ,19@8 a complaint or collection o the sum o

5;,;;;.;; a%ainst the three o+li%ors.

Cn Dovem+er 5, 19@8, the complaint was dismissed

or ailure o the plaintif to prosecute the case.

Jowever, on Kanuar* 9, 19@7, the lower court

reconsidered the dismissal order and re)uired the sherif

to serve the summonses. Cn Kanuar* 7, 19@7, the

lower court dismissed the case a%ainst deendantantanosas as pra*ed or +* the private respondent

herein. 4eanwhile, onl* the summons addressed to

petitioner was served as the sherif learned that

deendant Da*+e had %one to Saudi 0ra+ia.

(n his answer, petitioner alle%ed that sometime in

Kanuar* 19@3, he was approached +* his riend, Eud*

&ampos, who told him that he was a partner o io Tio,

the +ranch mana%er o private respondent in &a%a*ande Cro &it*, in the alcata lo%s operation +usiness.

&ampos also intimated to him that Eene &. Da*+e was

interested in the +usiness and would contri+ute a

chainsaw to the venture. Je added that, althou%h

Da*+e had no mone* to +u* the e)uipment, io Tio had

assured Da*+e o the approval o a loan he would ma!e

with private respondent. &ampos then persuaded

5;,;;;.;;.

etitioner alle%ed urther that ve /52 copies o a +lan!

promissor* note were +rou%ht to him +* &ampos at his

oBce. Je aBed his si%nature thereto +ut in one cop*,he indicated that he +ound himsel onl* or the amount

o 5,;;;.;;. Thus, it was +* tric!er*, raud and

misrepresentation that he was made lia+le or the

amount o 5;,;;;.;;.

(n the aorementioned decision o the lower court, it

noted that the t*pewritten %ure '-- 5;,;;; --' clearl*

appears directl* +elow the admitted si%nature o the

petitioner in the promissor* note.3

Jence, the latter>suncorro+orated testimon* on his limited lia+ilit* cannot

prevail over the presumed re%ularit* and airness o the

transaction, under Sec. 5 /)2 o Eule 131. The lower

court added that it was 'rather odd' or petitioner to

have indicated in a cop* and not in the ori%inal, o the

promissor* note, his supposed o+li%ation in the amount

o 5,;;;.;; onl*. #inall*, the lower court held that,

even %rantin% that said limited amount had actuall*

+een a%reed upon, the same would have +een merel*collateral +etween him and Da*+e and, thereore, not

+indin% upon the private respondent as creditor-+an!.

The lower court also noted that petitioner was a holder

o a Gachelor o :aws de%ree and a la+or consultant who

was supposed to ta!e due care o his concerns, and

that, on the witness stand, io Tio denied havin%

participated in the alle%ed +usiness venture althou%h he

!new or a act that the alcata lo%s operation was

encoura%ed +* the +an! or its eport potential.

etitioner appealed the said decision to the &ourt o

decision o the lower court, +* $re%orio antanosas, Kr.,

an 4T&& =ud%e and petitioner>s co-ma!er in the

promissor* note. (t supports petitioner>s alle%ation that

h i d d i h i h



etitioner appealed the said decision to the &ourt o

0ppeals which, in its decision o 0u%ust 31, 199;,

aBrmed that o the lower court. Jis motion or

reconsideration o the said decision havin% +een denied,

he led the instant petition or review on ertiorari.

Cn #e+ruar* 8, 1991, the &ourt denied the petition or

ailure o petitioner to compl* with the Eules o &ourt

and para%raph o &ircular

Do. 1-@@, and to suBcientl* show that respondent court

had committed an* reversi+le error in its )uestioned

decision. 4 Jis motion or the reconsideration o the

denial o his petition was li!ewise denied with nalit* in

the Eesolution o 0pril , 1991. 5

Thereater, petitionerled a motion or leave to le a second motion or

reconsideration which, in the Eesolution o 4a* 7,

1991, the &ourt denied. (n the same Eesolution, the

&ourt ordered the entr* o =ud%ment in this case. 6

Anazed, petitioner led a notion or leave to le a

motion or clarication. (n the latter motion, he asserted

that he had attached Ee%istr* Eeceipt Do. 38@ to pa%e

1 o the petition in compliance with &ircular Do. 1-@@. Thus, on 0u%ust 7, 1991, the &ourt %ranted his pra*er

that his petition +e %iven due course and reinstated the

same. ;

Donetheless, we nd the petition unmeritorious.

0nneed to the petition is a cop* o an aBdavit

eecuted on 4a* 3, 19@@, or ater the rendition o the

the* were induced to si%n the promissor* note on the

+elie that it was onl* or 5,;;;.;;, addin% that it was

&ampos who caused the amount o the loan to +e

increased to 5;,;;;.;;.

The aBdavit is clearl* intended to +uttress petitioner>s

contention in the instant petition that the &ourt o

0ppeals should have declared the promissor* note null

and void on the ollowin% %rounds< /a2 the promissor*

note was si%ned in the oBce o Kud%e antanosas,

outside the premises o the +an!? /+2 the loan was

incurred or the purpose o +u*in% a second-hand

chainsaw which cost onl* 5,;;;.;;? /c2 even a new

chainsaw would cost onl* 7,5;;.;;? /d2 the loan wasnot approved +* the +oard or credit committee which

was the practice, as it eceeded 5,;;;.;;? /e2 the loan

had no collateral? /2 petitioner and Kud%e antanosas

were not present at the time the loan was released in

contravention o the +an! practice, and /%2 notices o

deault are sent simultaneousl* and separatel* +ut no

notice was validl* sent to him. & #inall*, petitioner

contends that in si%nin% the promissor* note, his

consent was vitiated +* raud as, contrar* to their

a%reement that the loan was onl* or the amount o

5,;;;.;;, the promissor* note stated the amount o

5;,;;;.;;.

The a+ove-stated points are clearl* actual. etitioner is

to +e reminded o the +asic rule that this &ourt is not a

trier o acts. Javin% lost the chance to ull* ventilate

his actual claims +elow, petitioner ma* no lon%er +e

accorded the same opportunit* in the a+sence o %rave

a+use o discretion on the part o the court +elow. Jad

h t d K d t Bd it + th

that the

parties intended a diferent contract rom that

epressed in the writin% si%ned +* them.' 11 Thus, or

th l id l t l itt t t d



he presented Kud%e antanosas aBdavit +eore the

lower court, it would have stren%thened his claim that

the promissor* note did not rePect the correct amount

o the loan.

Dor is there merit in petitioner>s assertion that since the

promissor* note 'is not a pu+lic deed with the

ormalities prescri+ed +* law +ut . . . a mere commercial

paper which does not +ear the si%nature o . . . attestin%

witnesses,' parol evidence ma* 'overcome' the

contents o the promissor* note. 9 The rst para%raph o

the parol evidence rule 1'states<

"hen the terms o an a%reement have +eenreduced to writin%, it is considered as

containin% all the terms a%reed upon and

there can +e, +etween the parties and their

successors in interest, no evidence o such

terms other than the contents o the written

a%reement.

&learl*, the rule does not speci* that the written

a%reement +e a pu+lic document.

"hat is re)uired is that the a%reement +e in riting as

the rule is in act ounded on 'lon% eperience that

written evidence is so much more certain and accurate

than that which rests in Peetin% memor* onl*, that it

would +e unsae, when parties have epressed the

terms o their contract in writin%, to admit wea!er

evidence to control and var* the stron%er and to show

the parol evidence rule to appl*, a written contract need

not +e in an* particular orm, or +e si%ned +* +oth

parties. 12 0s a %eneral rule, +ills, notes and other

instruments o a similar nature are not su+=ect to +e

varied or contradicted +* parol or etrinsic evidence.13

G* alle%in% raud in his answer, 14 petitioner was

actuall* in the ri%ht direction towards provin% that he

and his co-ma!ers a%reed to a loan o 5,;;;.;; onl*

considerin% that, where a parol contemporaneous

a%reement was the inducin% and movin% cause o the

written contract, it ma* +e shown +* parol

evidence. 15 Jowever, raud must +e esta+lished +*

clear and convincin% evidence, mere preponderance oevidence, not even +ein% ade)uate. 16 etitioner>s

attempt to prove raud must, thereore, ail as it was

evidenced onl* +* his own uncorro+orated and,

epectedl*, sel-servin% testimon*.

etitioner also ar%ues that the dismissal o the

complaint a%ainst Da*+e, the principal de+tor, and

a%ainst antanosas, his co-ma!er, constituted a release

o his o+li%ation, especiall* +ecause the dismissal o thecase a%ainst antanosas was upon the motion o private

respondent itsel. Je cites as +asis or his ar%ument,

0rticle ;@; o the &ivil &ode which provides that<

The %uarantors, even thou%h the* +e

solidar*, are released rom their o+li%ation

whenever +* some act o the creditor, the*

cannot +e su+ro%ated to the ri%hts,

mort%a%es, and preerences o the latter.

(t is to +e noted however that petitioner si%ned the

"hile a %uarantor ma* +ind himsel solidaril* with

the principal de+tor, the lia+ilit* o a %uarantor is

diferent rom that o a solidar* de+tor. Thus,

T l ti l i



(t is to +e noted, however, that petitioner si%ned the

promissor* note as a solidar* co-ma!er and not as a

%uarantor. This is patent even rom the rst sentence o

the promissor* note which states as ollows<

Dinet* one /912 da*s ater date, or value

received, (we, KC(DT:H and SIE0::H

promise to pa* to the J(:((D G0DO C#

&C44AD(&0T(CDS at its oBce in the &it* o

&a%a*an de Cro, hilippines the sum o

#(#TH TJCAS0D CD:H /5;,;;;.;;2 esos,

hilippine &urrenc*, to%ether with interest . .

. at the rate o S(LTD /182 per cent per

annum until ull* paid.

0 solidar* or =oint and several o+li%ation is one in which

each de+tor is lia+le or the entire o+li%ation, and each

creditor is entitled to demand the whole

o+li%ation. 1; on the other hand, 0rticle ;7 o the &ivil

&ode states<

G* %uarant* a person, called the %uarantor,

+inds himsel to the creditor to ulll theo+li%ation o the principal de+tor in ase t'e

latter s'ould fail to do so.

( a person +inds himsel solidaril* with the

principal de+tor, the provisions o Section ,

&hapter 3, Title ( o this Goo! shall +e

o+served. (n such a case the contract is

called a suret*ship. /mphasis supplied.2

Tolentino eplains<

0 %uarantor who +inds himsel in

solidum with the principal de+tor under the

provisions o the second para%raph does not+ecome a solidar* co-de+tor to all intents

and purposes. There is a diference +etween

a solidar* co-de+tor and a ador in

solidum /suret*2. The latter, outside o the

lia+ilit* he assumes to pa* the de+t +eore

the propert* o the principal de+tor has

+een ehausted, retains all the other ri%hts,

actions and +enets which pertain to him +*

reason o the ansa? while a solidar* co-de+tor has no other ri%hts than those

+estowed upon him in Section , &hapter 3,

Title (, Goo! (I o the &ivil &ode. 1&

Section , &hapter 3, Title (, Goo! (I o the &ivil &ode

states the law on =oint and several o+li%ations. Ander

0rt. 1;7 thereo, when there are two or more de+tors

in one and the same o+li%ation, the presumption is that

the o+li%ation is =oint so that each o the de+tors islia+le onl* or a proportionate part o the de+t. There is

a solidar* lia+ilit* onl* when the o+li%ation epressl* so

states, when the law so provides or when the nature o

the o+li%ation so re)uires. 19

Gecause the promissor* note involved in this case

epressl* states that the three si%natories therein

are Gointl# and severall# lia"le, an* one, some or all o

them ma* +e proceeded a%ainst or the entire

o+li%ation. 2' The choice is let to the solidar* creditor to

determine a%ainst whom he will enorce

collection 21 &onse)uentl* the dismissal o the case

This is a petition or ertiorari assailin% the Eesolution

dated Septem+er , 1991 issued +* the Dational :a+or

Eelations &ommission in E0G-I((-;711-@ on the alle%ed

%round that it committed a %rave a+use o discretion



collection. 21 &onse)uentl*, the dismissal o the case

a%ainst Kud%e ontanosas ma* not +e deemed as havin%

dischar%ed petitioner rom lia+ilit* as well. 0s re%ards

Da*+e, suBce it to sa* that the court never ac)uired

=urisdiction over him. etitioner, thereore, ma* onl*have recourse a%ainst his co-ma!ers, as provided +*

law.

"JE#CE, the instant petition or review

on ertiorari is here+* D( and the )uestioned

decision o the &ourt o 0ppeals is 0##(E4. &osts

a%ainst petitioner.

G.R. No. 1'1;23. M>B 11, 2'''

INUS$RIAL MANAGEMEN$ IN$ERNA$I%NALE#EL%PMEN$ C%RP. 8INIMAC%, etitioner,

's. NA$I%NAL LA%R RELA$I%NS C%MMISSI%N,8Fout /?/s/o* C(@u C/tB, >*+ ENRIUE SULI$,S%C%RR% MAHINA", ESMERAL% PEGARI%, $I$A

ACUSM%, GIN% NIERE, #IRGINIA ACUS,R%ER$% NEMEN=%, ARI% G%, >*+ R%ER$%ALEGARES, resondents.

E C I S I % N

UENA, J.!

%round that it committed a %rave a+use o discretion

amountin% to lac! o =urisdiction in upholdin% the 0lias

"rit o ecution issued +* the :a+or 0r+iter which

deviated rom the dispositive portion o the ecision

dated 4arch 1;, 19@7, there+* holdin% that the lia+ilit*o the si respondents in the case +elow is solidar*

despite the a+sence o the word 'solidar*' in the

dispositive portion o the ecision, when their lia+ilit*

should merel* +e =oint. S-=c=

The actual antecedents are undisputed< Supr-eme

(n Septem+er 19@, private respondent nri)ue Sulit,

Socorro 4ahina*, smeraldo e%arido, Tita Gacusmo,$ino Diere, Iir%inia Gacus, Eo+erto Demenzo, ario%o,

and Eo+erto 0le%ar+es led a complaint with the

epartment o :a+or and mplo*ment, Ee%ional

0r+itration Granch Do. I(( in &e+u &it* a%ainst #ilipinas

&ar+on 4inin% &orporation, $erardo Sicat, 0ntonio

$onzales, &hiu &hin $in, :o Ouan &hin, and petitioner

(ndustrial 4ana%ement evelopment &orporation

/(D(40&C2, or pa*ment o separation pa* and unpaid

wa%es. Sc-==

(n a ecision dated 4arch 1;, 19@7, :a+or 0r+iter

Goniacio G. Tumama! held that<

'ESCDS(I, to all the ore%oin%, =ud%ment

is here+* entered, orderin% respondents

#ilipinas &ar+on and 4inin% &orp. $erardo

Sicat, 0ntonio $onzales(ndustrial

4ana%ement evelopment &orp. /(D(40&C2,

&hiu &hin $in and :o Ouan &hin, to pa*

complainants nri)ue Sulit, the total award

o @ @;; ;;? S4E0:C $0E(C the

/(D(40&C2 situated at Garan%a* :ahu%,

&e+u &it*, in ront o :a &uracha

Eestaurant, >*+:o to #ilipinas &ar+on and

4inin% corporation and $erardo Sicat at th



o @,@;;.;;? S4E0:C $0E(C the

ull award o 19,585.;;? Eo+erto Demenzo

the total sum o 9,83.8; and 0E(C $C

the total award o 8,599.71, or the total

a%%re%ate award o CD JADE TJ(ETH-($JT TJCAS0D #(I JADE ($JTH-

($JT SCS 0D 311;; /13@,5@@.312 to

+e deposited with this &ommission within

ten /1;2 da*s rom receipt o this ecision

or appropriate disposition. 0ll other claims

are here+* ismiss /sic2 or lac! o merit. K=s-

c

'SC CEE.

'&e+u &it*, hilippines.

'1; 4arch 19@7.';M1N

Do appeal was led within the re%lementar* period

thus, the a+ove ecision +ecame nal and eecutor*.

Cn Kune 18, 19@7, the :a+or 0r+iter issued a writ o

eecution +ut it was returned unsatised. Cn 0u%ust 8,19@7, the :a+or 0r+iter issued an 0lias "rit o ecution

which ordered thus< d-pm-is

'DC" TJE#CE, +* virtue o the powers

vested in me +* law, *ou are here+*

commanded to proceed to the premises o

respondents 0ntonio $onzales(ndustrial

4ana%ement evelopment &orporation

4inin% corporation and $erardo Sicat at th

#loor Aniversal E-Gld%. 1;8 aseo de

Eoas, :e%aspi Iilla%e, 4a!ati 4etro 4anila

and at hilippine Dational Gan!, scolta,

4anila respectivel*, and collect thea%%re%ate award o CD JADE TJ(ETH-

($JT TJCAS0D #(I JADE ($JTH-

($JT SCS 0D TJ(ETH CD &DT0ICS

/13@,5@@.312 and thereater turn over said

amount to complainants DE(A SA:(T,

S4E0:C $0E(C, ECGETC

D4DZC 0D 0E(C $C or to this CBce

or appropriate disposition. Should *ou ail

to collect the said sum in cash, *ou arehere+* authorized to cause the satisaction

o the same on the mova+le or immova+le

propert*/s2 o respondents not eempt rom

eecution. Hou are to return this writ sit*

/82 /sic2 da*s rom *our receipt hereo,

to%ether with *our correspondin% report.

'Hou ma* collect *our le%al epenses rom

the respondents as provided or +* law.

'SC CEE.'MN

Cn Septem+er 3, 19@7, petitioner led a '4otion to

uash 0lias "rit o ecution and Set 0side

ecision,'M3N alle%in% amon% others that the alias writ o

eecution altered and chan%ed the tenor o the decision

+* chan%in% the lia+ilit* o therein respondents rom

=oint to solidar*, +* the insertion o the words '0DCE'

+etween '0ntonio $onzales(ndustrial 4ana%ement

evelopment &orporation and #ilipinas &ar+on and

4inin% &orporation et al ' Jowever in an order dated

in a proceedin% +eore As, "e hold that the

"rit o ecution +e %iven due course in all

respects.' d-p

http://sc.judiciary.gov.ph/jurisprudence/2000/may2000/101723.html#_ftn1








4inin% &orporation, et al. Jowever, in an order dated

Septem+er 1, 19@7, the :a+or 0r+iter denied the

motion. 4is-oedp

Cn Ccto+er , 19@7, petitioner appealed

MN

the :a+or0r+iters Crder dated Septem+er 1, 19@7 to the

respondent D:E&. 4is-edp

The respondent D:E& dismissed the appeal in a

ecisionM5N dated 0u%ust 31, 19@@, the pertinent portions

o which read<

'(n matters afectin% la+or ri%hts and la+or

=ustice, we have alwa*s adopted the li+eralapproach which avors the eercise o la+or

ri%hts and which is +enecial to la+or as a

means to %ive ull meanin% and import to

the constitutional mandate to aford

protection to la+or. &onsiderin% the actual

circumstances in this case, there is no dou+t

in our mind that the respondents herein are

called upon to pa*, =ointl* and severall*, the

claims o the complainants as was thelatters pra*ers. (nasmuch as respondents

herein never controverted the claims o the

complainants +elow, there is no reason wh*

complainants pra*er should not +e %ranted.

#urther, in line with the powers %ranted to

the &ommission under 0rticle 1@ /c2 o the

:a+or code, to waive an* error, deect or

irre%ularit* whether in su+stance or in orm

Cn Kul* 31, 19@9, petitioner led a '4otion To &ompel

Sherif To 0ccept a*ment C 3,19@.;5 Eepresentin%

Cne Sith ro Eata Share o Eespondent (D(40&C 0s #ull

and #inal Satisaction o Kud%ment 0s to SaidEespondent.'M8N The private respondents opposed the

motion. (n an CrderM7N dated 0u%ust 15, 19@9, the :a+or

0r+iter denied the motion rulin% thus<

'"JE#CE, responsive to the ore%oin%

respondent (D(40&Cs 4otions are here+*

D(. The Sherif o this CBce is order

/sic2 to accept (D(40&Cs tender pa*ment

/sic2 o the sum o 3,19@.;5, as partialsatisaction o the =ud%ment and to proceed

with the enorcement o the 0lias "rit o

ecution o the levied properties, now

issued +* this CBce, or the ull and nal

satisaction o the monetar* award %ranted

in the instant case.

'SC CEE.' d-psc

etitioner appealed the a+ove Crder o the :a+or 0r+iter

+ut this was a%ain dismissed +* the respondent D:E& in

its EesolutionM@N dated Septem+er , 1991 which held

that<

'The ar%uments o respondent on the

nalit* o the dispositive portion o the

decision in this case is +eside the point.

"hat is important is that the &ommission

has ruled that the "rit o ecution issued

+* the :a+or 0r+iter in this case is proper. (t

is not reall* correct to sa* that said "rit o

Apon careul eamination o the pleadin%s led +* the

parties, the &ourt nds that petitioner (D(40&Cs lia+ilit*

is not solidar* +ut merel* =oint and that the respondent

D:E& acted with %rave a+use o discretion in upholdin%













is not reall* correct to sa* that said "rit o

ecution varied the terms o the =ud%ment.

0t most, considerin% the nature o la+or

proceedin%s there was, an am+i%uit* in said

dispositive portion which was su+se)uentl*claried +* the :a+or 0r+iter and the

&ommission in the incidents which were

initiated +* (D(40&C itsel. G* sheer

technicalit* and unounded assertions,

(D(40&C would now reopen the issue which

was alread* resolved a%ainst it. (t is not in

!eepin% with the esta+lished rules o

practice and procedure to allow this attempt

o (D(40&C to dela* the nal disposition othis case.

'"JE#CE, in view o all the ore%oin%,

this appeal is (S4(SS and the Crder

appealed rom is here+* 0##(E4. Sce-dp

'"ith dou+le costs a%ainst appellant.'

issatised with the ore%oin%, petitioner led theinstant case, alle%in% that the respondent D:E&

committed %rave a+use o discretion in aBrmin% the

Crder o the :a+or 0r+iter dated 0u%ust 15, 19@9, which

declared the lia+ilit* o petitioner to +e solidar*.

The onl* issue in this petition is whether petitioners

lia+ilit* pursuant to the ecision o the :a+or 0r+iter

dated 4arch 1;, 19@7, is solidar* or not. &alrs-pped

D:E& acted with %rave a+use o discretion in upholdin%

the :a+or 0r+iters 0lias "rit o ecution and

su+se)uent Crders to the efect that petitioners lia+ilit*

is solidar*.

0 solidar* or =oint and several o+li%ation is one in which

each de+tor is lia+le or the entire o+li%ation, and each

creditor is entitled to demand the whole o+li%ation.M9N (n

a =oint o+li%ation each o+li%or answers onl* or a part o

the whole lia+ilit* and to each o+li%ee +elon%s onl* a

part o the correlative ri%hts.M1;N

"ell-entrenched is the rule that solidar* o+li%ation

cannot li%htl* +e inerred.M11N

There is a solidar* lia+ilit*onl* when the o+li%ation epressl* so states, when the

law so provides or when the nature o the o+li%ation so

re)uires.M1N

(n the dispositive portion o the :a+or 0r+iter, the word

'solidar*' does not appear. The said fallo epressl*

states the ollowin% respondents therein as lia+le,

namel*< #ilipinas &ar+on and 4inin% &orporation,

$erardo Sicat, 0ntonio $onzales, (ndustrial 4ana%ementevelopment &orporation /petitioner (D(40&C2, &hiu

&hin $in, and :o Ouan &hin. Dor can it +e inerred

thererom that the lia+ilit* o the si /82 respondents in

the case +elow is solidar*, thus their lia+ilit* should

merel* +e =oint.

4oreover, it is alread* a well-settled doctrine in this

=urisdiction that, when it is not provided in a =ud%ment

that the deendants are lia+le to pa* =ointl* and

severall* a certain sum o mone*, none o them ma* +e

compelled to satis* in ull said =ud%ment. (n Oriental

Co##ercial Co 's A$eto and Ma$anag (+ this

that purpose.M17N 0n order o eecution which varies the

tenor o the =ud%ment or eceeds the terms thereo is a

nullit*.M1@N

















Co##ercial Co. 's. A$eto and Ma$anag this

&ourt held<

'(t is o no conse)uence that, under the

contract o suret*ship eecuted +* theparties, the o+li%ation contracted +* the

sureties was =oint and several in character.

The nal =ud%ment, which superseded the

action or the enorcement o said contract,

declared the o+li%ation to +e merel* =oint,

and the same cannot +e eecuted

otherwise.'M1N

$rantin% that the :a+or 0r+iter has committed amista!e in ailin% to indicate in the dispositive portion

that the lia+ilit* o respondents therein is solidar*, the

correction -- which is su+stantial -- can no lon%er +e

allowed in this case +ecause the =ud%ment has alread*

+ecome nal and eecutor*. Scc-alr

(t is an elementar* principle o procedure that the

resolution o the court in a %iven issue as em+odied in

the dispositive part o a decision or order is thecontrollin% actor as to settlement o ri%hts o the

parties.M15N Cnce a decision or order +ecomes nal and

eecutor*, it is removed rom the power or =urisdiction

o the court which rendered it to urther alter or amend

it.M18N (t there+* +ecomes immuta+le and unaltera+le and

an* amendment or alteration which su+stantiall* afects

a nal and eecutor* =ud%ment is null and void or lac!

o =urisdiction, includin% the entire proceedin%s held or

Done o the parties in the case +eore the :a+or 0r+iter

appealed the ecision dated 4arch 1;, 19@7, hence the

same +ecame nal and eecutor*. (t was, thereore,

removed rom the =urisdiction o the :a+or 0r+iter or theD:E& to urther alter or amend it. Thus, the proceedin%s

held or the purpose o amendin% or alterin% the

dispositive portion o the said decision are null and void

or lac! o =urisdiction. 0lso, the 0lias "rit o ecution is

null and void +ecause it varied the tenor o the

=ud%ment in that it sou%ht to enorce the nal =ud%ment

a%ainst '0ntonio $onzales(ndustrial 4ana%ement

evelopment &orp. /(D(40&C2 >*+:o #ilipinas &ar+on

and 4inin% &orp. and $erardo Sicat,' which ma!es thelia+ilit* solidar*. &a-lrsc

WHEREF%RE, the petition is here+* $E0DT. The

Eesolution dated Septem+er , 1991 o the respondent

Dational :a+or Eelations is here+* declared DA:: and

IC(. The lia+ilit* o the respondents in E0G-I((-;711-@

pursuant to the ecision o the :a+or 0r+iter dated

4arch 1;, 19@7 should +e, as it is here+*, considered

=oint and petitioners pa*ment which has +een acceptedconsidered as ull satisaction o its lia+ilit*, without

pre=udice to the enorcement o the award, a%ainst the

other ve /52 respondents in the said case.

G.R. No. &'645 August 3, 1993

MARCELIN% GALANG, GUAALUPEGALANG, petitioners,

vs.

C%UR$ %F APPEALS RAM%N R UENA#EN$URA

parcels o land situated in Ta%a*ta* &it*. The a%reement

was em+odied in a eed o Sale which stated the

ollowin%<











C%UR$ %F APPEALS, RAM%N R. UENA#EN$URA,ANGELES UENA#EN$URA, C%RA=%NUENA#EN$URA, >*+ MA. LUISAUENA#EN$URA, respondents.

Mariano . Ampl, Jr. for petitioners.

Ramon R. /uenaventura for private-respondents.

R%MER%, J.:

This is a petition or review on ertiorari o the

decision 1 o the &ourt o 0ppeals aBrmin% in toto the

=ud%ment rendered +* the then &ourt o #irst (nstance in

&ivil &ase Do. E-@-71@8 /1;75@52. The dispositive

portion o the assailed decision reads as ollows<

"JE#CE, ndin% no reversi+le error in

the =ud%ment appealed rom, the same is

here+* A66+RM91 +N 5;5; without an*

pronouncement as to costs at thisinstance. 2

#rom the records, we nd the ollowin% acts.

Cn Kul* 18, 1978, Eamon Guenaventura on his own

+ehal and as attorne*-in-act o 0n%eles, &orazon,

0mparo, and 4aria :uisa, all surnamed Guenaventura,

sold to $uadalupe $alan% and 4arcelino $alan% two /2

(, E04CD E. GAD0IDTAE0, #ilipino, o

le%al a%e, married, and residin% at 111 4.

0driatico, 4alate, 4anila, in his own +ehal

and as attorne* in act o 0n%eles, &orazon,0mparo and 4aria :uisa, all surnamed

Guenaventura as per the special powers o

attorne* alread* re%istered and annotated

at the +ac! o the certicate o title, or and

in consideration o the sum o Cne Jundred

Dinet* Two Thousand Seven Jundred Dinet*

#ive /19,795.;;2 esos, hilippine

&urrenc*, here+* S::, TE0DS#E 0D

&CDIH ADTC 40E&:(DC $0:0D$ and$A00:A $0:0D$, #ilipino, o le%al a%e,

spouses and residents o 7 th St., Dew

4anila, uezon &it* those parcels o land

situated at Ta%a*ta* &it*, inherited +* us

rom our parents and our eclusive

paraphernal propert*, o which we are the

a+solute owners, our title thereto +ein%

evidenced +* T&T Do. T-38;3 o Ta%a*ta*

&it* Ee%ister o eeds, more particularl*

desccri+ed as ollows<

Ander the ollowin% terms<

/a2 56 o the purchase price upon si%nin%

o this instrument?

/+2 56 within three months, or upon

removal o the 'encar%ado' rom the

premises, with the deliver* o the owner>s

duplicate certicate o title?

'encar%ado' rom the premises sold and or

them to deliver the owner>s duplicate

certicate o title to the plaintifs +ut said

deendants ailed and reused and still ail



duplicate certicate o title?

/c2 5;6 +alance within one /12 *ear rom

date hereo upon which the title will +e

transerred to the +u*ers +ut 16 interestper annum will +e char%ed ater said one

*ear in the event ull pa*ment is not made. 3

4arcelino and $uadalupe $alan%, herein petitioners

ppaid to the sellers the rst 56 o the purchase

ppprice as stated in the deed. Thereater, the* alle%edl*

demanded rom private respondents ailed to do so

despite the willin%ness o petitioners to pa* the second

56 o the purchase price. &onse)uentl*, 4arcelino and$uadalupe $alan% led on 4arch 1@, 1977 a complaint

or specic perormance with dama%es where the*

alle%ed amon% others, that<

5. The period ed within the deendants

should remove the 'encar%ado> rom the

premises and to deliver the owner>s

duplicate certicate o title had lapsed

without the deendants compl*in% with theiro+li%ations thus preventin% the plaintifs

rom ta!in% ppossession o the propert* sold

and rom developin% and improvin% the

same.

8. Cn several occasions, the plaintifs

demanded rom the deendants, +oth orall*

and in writin%, the removal o the latter>s

deendants ailed and reused and still ail

and reuse to do so, the demands

notwithstandin%. 4

eendants, herein private respondents, denied thealle%ations and stated that the contract did not state

the true intention o the parties and that it was not their

ault that the 'encar%ado' reused to leave.

#urthermore, the* led on Kul* 1, 197@, a third-part*

complaint a%ainst the 'encar%ado' or su+ro%ation and

reim+ursement in case o an adverse =ud%ment a%ainst

third-part* plaintif. Apon the 'encar%ado>s' motion, the

complaint was dismissed on the %round that it did not

state a cause o action or the e=ectment o the tenantF the 'encar%ado.'

0ter trial, the lower court rendered a decision, the

dispositive portion o which is here+* )uoted, to wit<

E4(SS &CDS(E, the &ourt here+*

orders the deendants to pa* =ointl* and

severall*, the plaintifs 5;,;;;.;; with

interest at 16 per annum rom Kul* 18,1978? 5,;;;.;; +* wa* o nominal

dama%es? and 3,;;;.;; as attorne* ees

and the costs. 5

(n renderin% the decision, the trial court reasoned that<

There is no )uestion that, +ecause the

deendants had not complied with their

o+li%ation to remove the 'encar%ado,' the

plaintifs, as in=ured parties, ma* choose

+etween the ulllment o the contract o

sale and its rescission, in accordance and

0%reein% that the 'encar%ado' was an a%ricultural

tenant who could not +e e=ected without cause, the

&ourt o 0ppeals aBrmed the decision.



sale and its rescission, in accordance and

/sic2 0rticle 1191 o the &ivil &ode. The*

chose enorcement o the contract which,

however is le%all* impossi+le. The lands

sold to the plaintif are a%ricultural, plantedto cofee, amon% other plants, not onl* +*

the 'encar%ado' +ut also +* his deceased

parents. The law prohi+its, under pain o

dama%es, ne and imprisonment, and

landlord rom dispossessin% his a%ricultural

tenant without the court>s approval and on

%rounds ed +* the law, not one o which is

shown to eist in respect deendants>

'encar%ado.' /Section 31 and 38, The0%ricultural :and Eeorm &ode, E0 3@ as

amended2.

(mpossi+le conditions, those contrar* to

%ood customs or pu+lic polic* and those

prohi+ited +* law shall annul the o+li%ation

which depends upon them. /0rticle 11@3,

&ivil &ode2. Since the consummation o the

sale +etween the parties is dependent uponthe ouster o an a%ricultural lessee, which

cannot +e done +ecause it is a%ainst %ood

custom, pu+lic polic* and the law, the sale

is a nullit*. . . . 6

Jence, this petition.

(n their petition, 4arcelino and $uadalupe $alan%

ar%ued that respondent &ourt erred in orderin%? the

rescission instead o specic perormance o the

contract o sale on the %round that the e=ectment o the

'encar%ado' -tenant was a le%all* impossi+le condition

that prevented the ulllment o the contract. &ontrar*

to the reason advanced +* the &ourt o 0ppeals and the

trial court, petitioners averred that the removal o the

'encar%ado' was not a condition precedent to the

ulllment o the contract as para%raph two /2 thereo

provides or an alternative period within whichpetitioners would have to pa* the second 56 o the

purchase price and concomitantl*, private respondents

would deliver the owner>s duplicate certicate o title.

Thus, whether or not the 'encar%ado' was removed, the

amount would still +e due and private respondents

would still have to deliver the duplicate title.

"e are now conronted with the )uestion< "as the

removal o the 'encar%ado' a condition precedent to theulllment o the contract o sale such that ndin% that

it was a le%all* impossi+le condition would entitle the

+u*ers to the rescission o the contractV

"e answer in the ne%ative.

The trial court and the &ourt o 0ppeals +ased their

decision on 0rt. 11@3 o the &ivil &ode which provides,

thus<

the perection o the contract, the ailure o such

condition would prevent such perection. 1' "hat we

have here is a contract to sell or it is the transer o

ownership, not the perection o the contract that was



0rt. 11@3. (mpossi+le conditions, those

contrar* to %ood customs or pu+lic polic*

and those prohi+ited +* law shall annul the

o+li%ation which depends upon them. . . .

Goth courts declared the 'encar%ado' a tenant. This

+ein% the case, it ollows that he ma* not +e removed

rom the su+=ect land without =ust cause, as provided +*

residential ecree Do. 1;3@. Since the $alan%s, then

plaintifs demanded the removal o the 'encar%ado'

which, +ein% le%all* impossi+le, could not +e met, the

contract o sale was rescinded +* the courts.

"e disa%ree with the conclusion arrived at +* the

respondent court. Eeviewin% the terms o the eed o

Sale )uoted earlier, it is clear that the parties had

reached the sta%e o perection o the contract o sale,

there +ein% alread* 'a meetin% o the minds upon the

thin% which is the o+=ect o the contract and upon the

price,' ; and on the +asis o which +oth parties had the

personal ri%ht to reciprocall* demand rom the other the

ulllment o their respective o+li%ations. Gut contractso sale ma* either +e a+solute or conditional. & Cne orm

o conditional sales, is what is now popularl* termed as

a '&ontract to Sell,' where ownership or title is retained

until the ulllment o a positive condition, normall* the

pa*ment o the purchase price in the manner a%reed

upon. The +reach o that condition can prevent the

o+li%ation to conve* title rom ac)uirin% a +indin%

orce. 9 "here the condition is imposed, instead, upon

ownership, not the perection o the contract that was

su+=ected to a condition. Cwnership was not to vest in

the +u*ers until ull pa*ment o the purchase price and

the transer o the title to the +u*ers. 0part rom ull

pa*ment o the purchase price, we nd no othercondition which would afect the o+li%ations o the

parties, i.e., to pa*, on the part o the +u*er and to

conve* ownership, on the part o the seller.

The alle%ed condition precedent, the removal o the

'encar%ado,' was simpl* an alternative period or

pa*ment o the second 56 o the purchase price %iven

+* the seller to the +u*er. 0ssumin% that the removal o

the 'encar%ado' could not +e +rou%ht a+out, the+u*ers, petitioners herein, could have nonetheless

demanded the deliver* o the owner>s duplicate

certicate o title +* pa*in% the second 56 o the sale

price within three months. (n this case, the lin% o the

complaint or specic perormance o the seller>s

o+li%ation was the root o the errors committed rst, +*

the trial court and later, +* the &ourt o 0ppeals. Goth

courts overloo!ed the o+vious act that onl* the time or

pa*in% the second 56 o the purchase price was)ualied and that the entire para%raph reads< '56

within three months or upon removal o the 'encar%ado'

rom the premises . . .' and not simpl* 56 upon

removal o the 'encar%ado.'

The case +eore us could have +een resolved +* the

lower courts without rulin% on whether the 'encar%ado'

was a tenant or not. $rantin% that it was necessar* to

rule on the le%al status o the 'encar%ado,' we nd that

the courts had +een )uite precipitate in holdin% that the

'encar%ado' was a tenant. There was no suBcient

the then 4inistr*, now the epartment o

0%rarian Eeorm, to proceed a%ainst such

'encar%ado.' Then, too, i the said

'encar%ado' did not have the status o a



%

evidence to support that conclusion apart rom the

aBdavits o the 'encar%ado' and his nei%h+or. The

conclusion o the &ourt o 0ppeals re%ardin% this matter

rested on surmises. (t held<

"e discern no reversi+le error in the ndin%

and conclusion o the trial court that the

unnamed 'encar%ado' on the lands in

)uestion is actuall* a tenant or a%ricultural

lessee. The +ases o this inelucta+le

conclusion are not hard to see. 0s succinctl*

pointed out +* the court a 7uo, the

'encar%ado' is sta*in% in his own eistin%house thereon, and su+=ect a%ricultural land

is planted to cofee and other plants not

onl* +* the 'encar%ado' +ut also his

deceased parents. (ndeed, i the

'encar%ado>s' parents were not tenants or

a%ricultural lessees, the present

'encar%ado' could not have continued

occup*in% and wor!in% thereon, without

acin% e=ectment proceedin%s? considerin%that one o the landowners, deendants-

appellees here, is a law*er himsel. (n act,

as can +e %leaned rom the decision under

scrutin*, deendants-appellees led a third-

part* complaint a%ainst the 'encar%ado' +ut

the* did not pursue such a course o action

+ecause the* did not have a clearance rom

%

tenant or a%ricultural lessee entitled to

protection under the a%rarian reorm laws,

he would not have +een %iven the attention

and importance as to +e +rou%ht +eore thecourt a 7uo twice, =ust or a possi+le

amica+le settlement, and he would not have

had the rmness to re=ect an ofer or him to

continue wor!in% hal the area under

controvers*.

)uall* supportive o the ore%oin% opinion

are the ollowin% ratiocinations in &ruz v.

&ourt o 0ppeals, :-5;35;, 4a* 15, 19@,19 S&E0 <

. . . it is also undisputed that respondent

lives on a hut erected on the landholdin%.

This ull* supports the appellate court>s

conclusion, since onl* tenants are entitled

to a homelot where he can +uild his house

thereon as an incident to this ri%ht as a

tenant.

0lso, the &ourt is aware o the practice o

landowners, +* wa* o evadin% the

provisions o tenanc* laws, to have their

tenants si%n contracts or a%reements

intended to camouPa%e the real import o

their relationship.

0ll thin%s dul* considered, let alone the

purchase price, 19,795.;; is in order. Jowever, the

16 interest per annum that was stipulated in

para%raph 3 o the contract o sale should not +e

assessed a%ainst petitioners. Cn the other hand, private



+etter rule that all dou+ts vis-a-vis the

status o a tiller o the soil should +e

resolved in avor o tenanc* relationship. "e

cannot help +ut conclude here that the

'encar%ado' on the landholdin% deeded out

in the deed o sale /hi+it '0'2 is a tenant

or a%ricultural lessees within the purview

and under the mantle o protection o the

&ode o 0%rarian Eeorms. 11

To summarize, we hold that there was no +asis or

rescindin% the contract +ecause the removal o the

'encar%ado' was not a condition precedent to thecontract o sale. Eather, it was one o the alternative

periods or the pa*ment o the second installment %iven

+* the seller himsel to the +u*ers. Secondl*, even

%rantin% that it was indeed a condition precedent

renderin% necessar* the determination o the le%al

status o the 'encar%ado,' the lower courts were rash in

holdin% that the 'encar%ado' was a tenant o the land in

)uestion.

(n view o the ore%oin% circumstances, we are

convinced that specic perormance +* the parties o

their respective o+li%ations is proper. 0ccordin%l*,

petitioners 4arcelino and $uadalupe $alan% are ordered

to pa* private respondents the second 56 o the

purchase price. &onsiderin%, however, the time that has

lapsed since the parties entered into the contract,

pa*ment o the ull +alance, that is, 756 o the

% p , p

respondents Eamon Guenaventura, 0n%eles

Guenaventura, &orazon Guenaventura, and 4aria :uisa

Guenaventura are o+li%ed to deliver the owner>s

duplicate certicate o title and to transer the title tothe land in )uestion upon pa*ment o the purchase

price +* petitioners.

Ander the &ivil &ode, private respondents are lia+le or

dama%es to the in=ured part*, the petitioners in this

case. Jowever, in lieu o actual pa*ment o dama%es,

and considerin% the act that private respondents were

in possession o the land durin% the entire period that

this case was pendin%, private respondents are nolon%er entitled to the interest pa*ments which would

have +een due rom petitioners. 12

"JE#CE, in view o the ore%oin%, the petition is

here+* $E0DT and the decision o the &ourt o

0ppeals is EIES and ST 0S(. etitioners

4arcelino and $uadalupe $alan% are here+* ordered to

pa* the ull 756 +alance o the purchase price

/1,598.52 within thirt* /3;2 da*s rom notice, withinterest upon deault. rivate respondents Eamon

Guenaventura, &orazon Guenaventura and 4aria :uisa

Guenaventura are here+* ordered to transer the title to

petitioners upon ull pa*ment o the purchase price.

G.R. No. 1';112 F(@u>B 24, 1994

NAGA $ELEPH%NE C%., INC. 8NA$ELC% ANLUCIAN% M. MAGGA", petitioners,

vs.

$HE C%UR$ %F APPEALS AN CAMARINES SUR II

(n the report o the &ode &ommission, the rationale

+ehind this innovation was eplained, thus<

The %eneral rule is that impossi+ilit* o



ELEC$RIC C%%PERA$I#E, INC. 8CASUREC%II,respondents.

9rnesto 8. 8angalangan for petitioners.

0uis !eneral, Jr. for private respondent.

N%C%N, J.:

The case o Ee*es v. &alte /hilippines2,

(nc. 1 enunciated the doctrine that where a person +* his

contract char%es himsel with an o+li%ation possi+le to

+e perormed, he must perorm it, unless its

perormance is rendered impossi+le +* the act o $od,

+* the law, or +* the other part*, it +ein% the rule that

in case the part* desires to +e ecused rom

perormance in the event o contin%encies arisin%

thereto, it is his dut* to provide the +asis thereor in his

contract.

"ith the enactment o the Dew &ivil &ode, a new

provision was included therein, namel*, 0rticle 187

which provides<

"hen the service has +ecome so diBcult as

to +e maniestl* +e*ond the contemplation

o the parties, the o+li%or ma* also +e

released thererom, in whole or in part.

perormance releases the o+li%or. Jowever,

it is su+mitted that when the service has

+ecome so diBcult as to +e maniestl*

+e*ond the contemplation o the parties,

the court should +e authorized to release

the o+li%or in whole or in part. The intention

o the parties should %overn and i it

appears that the service turns out to +e so

diBcult as to have +een +e*ond their

contemplation, it would +e doin% violence to

that intention to hold their contemplation, it

would +e doin% violence to that intention to

hold the o+li%or still responsi+le. 2

(n other words, air and s)uare consideration

underscores the le%al precept therein.

Da%a Telephone &o., (nc. remonstrates mainl* a%ainst

the application +* the &ourt o 0ppeals o 0rticle 187

in avor o &amarines Sur (( lectric &ooperative, (nc. in

the case +eore us. Stated diferentl*, the ormer insists

that the complaint should have +een dismissed orailure to state a cause o action.

The antecedent acts, as narrated +* respondent &ourt

o 0ppeals are, as ollows<

etitioner Da%a Telephone &o., (nc. /D0T:&C2 is a

telephone compan* renderin% local as well as lon%

distance telephone service in Da%a &it* while private

respondent &amarines Sur (( lectric &ooperative, (nc.

/&0SAE&C ((2 is a private corporation esta+lished or

the purpose o operatin% an electric power service in

the same cit*.

/a2 That the term or period o this contract

shall +e as lon% as the part* o the rst part

has need or the electric li%ht posts o the

part* o the second part it +ein% understood



Cn Dovem+er 1, 1977, the parties entered into a

contract /h. '0'2 or the use +* petitioners in the

operation o its telephone service the electric li%ht posts

o private respondent in Da%a &it*. (n consideration

thereor, petitioners a%reed to install, ree o char%e, ten

/1;2 telephone connections or the use +* private

respondent in the ollowin% places<

/a2 3 units F The 4ain CBce o /private

respondent2?

/+2 Anits F The "arehouse o /privaterespondent2?

/c2 1 Anit F The Su+-Station o /private

respondent2 at &oncepcion e)ue]a?

/d2 1 Anit F The Eesidence o /private

respondent>s2 resident?

/e2 1 Anit F The Eesidence o /privaterespondent>s2 0ctin% $eneral 4ana%er? Y

/2 Anits F To +e determined +* the

$eneral 4ana%er. 3

Said contract also provided<

that this contract shall terminate when or

an* reason whatsoever, the part* o the

second part is orced to stop, a+andoned

MsicN its operation as a pu+lic service and it+ecomes necessar* to remove the electric

li%htpost? /sic2 4

(t was prepared +* or with the assistance o the other

petitioner, 0tt*. :uciano 4. 4a%%a*, then a mem+er o

the Goard o irectors o private respondent and at the

same time the le%al counsel o petitioner.

0ter the contract had +een enorced or over ten /1;2*ears, private respondent led on Kanuar* , 19@9 with

the Ee%ional Trial &ourt o Da%a &it* /Gr. @2 &.&. Do. @9-

18 a%ainst petitioners or reormation o the contract

with dama%es, on the %round that it is too one-sided in

avor o petitioners? that it is not in conormit* with the

%uidelines o the Dational lectrication 0dministration

/D02 which direct that the reasona+le compensation or

the use o the posts is 1;.;; per post, per month? that

ater eleven /112 *ears o petitioners> use o the posts,the telephone ca+les strun% +* them thereon have

+ecome much heavier with the increase in the volume

o their su+scri+ers, worsened +* the act that their

linemen +ore holes throu%h the posts at which points

those posts were +ro!en durin% t*phoons? that a post

now costs as much as ,83;.;;? so that =ustice and

e)uit* demand that the contract +e reormed to a+olish

the ine)uities thereon.

0s second cause o action, private respondent alle%ed

the use o the posts, so that i there was an* ine)uit*, it

was sufered +* them.

Ee%ardin% the second cause o action, petitioners



that startin% with the *ear 19@1, petitioners have used

319 posts in the towns o ili, &anaman, 4a%arao and

4ilaor, &amarines Sur, all outside Da%a &it*, without

an* contract with it? that at the rate o 1;.;; per post,

petitioners should pa* private respondent or the use

thereo the total amount o 87,98;.;; rom 19@1 up

to the lin% o its complaint? and that petitioners had

reused to pa* private respondent said amount despite

demands.

0nd as third cause o action, private respondent

complained a+out the poor servicin% +* petitioners o

the ten /1;2 telephone units which had caused it %reatinconvenience and dama%es to the tune o not less than

1;;,;;;.;;

(n petitioners> answer to the rst cause o action, the*

averred that it should +e dismissed +ecause /12 it does

not suBcientl* state a cause o action or reormation o

contract? /2 it is +arred +* prescription, the same

havin% +een led more than ten /1;2 *ears ater the

eecution o the contract? and /32 it is +arred +*estoppel, since private respondent see!s to enorce the

contract in the same action. etitioners urther alle%ed

that their utilization o private respondent>s posts could

not have caused their deterioration +ecause the* have

alread* +een in use or eleven /112 *ears? and that the

value o their epenses or the ten /1;2 telephone lines

lon% en=o*ed +* private respondent ree o char%e are

ar in ecess o the amounts claimed +* the latter or

claimed that private respondent had as!ed or

telephone lines in areas outside Da%a &it* or which its

posts were used +* them? and that i petitioners had

reused to compl* with private respondent>s demands

or pa*ment or the use o the posts outside Da%a &it*,

it was pro+a+l* +ecause what is due to them rom

private respondent is more than its claim a%ainst them.

0nd with respect to the third cause o action, petitioners

claimed, inter alia, that their telephone service had

+een cate%orized +* the Dational Telecommunication

&orporation /DT&2 as 'ver* hi%h' and o 'superior

)ualit*.'

urin% the trial, private respondent presented the

ollowin% witnesses<

/12 ioscoro Ea%ra%io, one o the two oBcials who

si%ned the contract in its +ehal, declared that it was

petitioner 4a%%a* who prepared the contract? that the

understandin% +etween private respondent and

petitioners was that the latter would onl* use the postsin Da%a &it* +ecause at that time, petitioners> capa+ilit*

was ver* limited and the* had no epectation o

epansion +ecause o le%al s)ua++les within the

compan*? that private respondent a%reed to allow

petitioners to use its posts in Da%a &it* +ecause there

were man* su+scri+ers therein who could not +e served

+* them +ecause o lac! o acilities? and that while the

telephone lines strun% to the posts were ver* li%ht in

1977, said posts have +ecome heavil* loaded in 19@9.

/2 n%r. 0ntonio Gor=a, &hie o private respondent>s

and considerin% the escalation o prices since 19@5,

electric cooperatives have +een char%in% rom 1;.;; to

15.;; per post, which is what petitioners should pa*

or the use o the posts.



:ine Cperation and 4aintenance epartment, declared

that the posts +ein% used +* petitioners totalled 1,;3

as o 0pril 17, 19@9, 19 o which were in the towns o

ili, &anaman, and 4a%arao, all outside Da%a &it* /hs.

'G' and 'G-1'2? that petitioners> ca+les strun% to the

posts in 19@9 are much +i%%er than those in Dovem+er,

1977? that in 19@7, almost 1;; posts were destro*ed +*

t*phoon Sisan%< around ; posts were located +etween

Da%a &it* and the town o ili while the posts in

+aran%a* &oncepcion, Da%a &it* were +ro!en at the

middle which had +een +ored +* petitioner>s linemen to

ena+le them to strin% +i%%er telephone lines? that while

the cost per post in 1977 was onl* rom 7;;.;; to1,;;;.;;, their costs in 19@9 went up rom 1,5;;.;;

to ,;;;.;;, dependin% on the size? that some lines

that were strun% to the posts did not ollow the

minimum vertical clearance re)uired +* the Dational

Guildin% &ode, so that there were cases in 19@@ where,

+ecause o the low clearance o the ca+les, passin%

truc!s would accidentall* touch said ca+les causin% the

posts to all and resultin% in +rown-outs until the electric

lines were repaired.

/32 ario Gernardez, ro=ect Supervisor and 0ctin%

$eneral 4ana%er o private respondent and 4ana%er o

Ee%ion I o D0, declared that accordin% to D0

%uidelines in 19@5 /h. '&'2, or the use +* private

telephone s*stems o electric cooperatives> posts, the*

should pa* a minimum monthl* rental o .;; per post,

/2 n%ineer 0ntonio 4acando%, epartment Jead o

the CBce o Services o private respondent, testied on

the poor service rendered +* petitioner>s telephone

lines, li!e the telephone in their &omplaints Section

which was usuall* out o order such that the* could not

respond to the calls o their customers. (n case o

disruption o their telephone lines, it would ta!e two to

three hours or petitioners to reactivate them

notwithstandin% their calls on the emer%enc* line.

/52 #inall*, 0tt*. :uis $eneral, Kr., private respondent>s

counsel, testied that the Goard o irectors as!ed himto stud* the contract sometime durin% the latter part o

19@ or in 19@3, as it had appeared ver*

disadvanta%eous to private respondent.

Dotwithstandin% his recommendation or the lin% o a

court action to reorm the contract, the ormer %eneral

mana%ers o private respondent wanted to adopt a sot

approach with petitioners a+out the matter until the

term o $eneral 4ana%er Jenr* ascual who, ater

ailin% to settle the matter amica+l* with petitioners,nall* a%reed or him to le the present action or

reormation o contract.

Cn the other hand, petitioner 4a%%a* testied to the

ollowin% efect<

/12 (t is true that he was a mem+er o the Goard o

irectors o private respondent and at the same time

the law*er o petitioner when the contract was

eecuted, +ut 0tt*. $audioso Tena, who was also a

mem+er o the Goard o irectors o private respondent,

was the one who saw to it that the contract was air to

respondent, in act, had as!ed or telephone

connections outside Da%a &it* or its oBcers and

emplo*ees residin% there in addition to the ten /1;2

telephone units mentioned in the contract. etitioners



+oth parties.

/2 "ith re%ard to the rst cause o action<

/a2 rivate respondent has the ri%ht under the contract

to use ten /1;2 telephone units o petitioners or as lon%

as it wishes without pa*in% an*thin% thereor ecept or

lon% distance calls throu%h :T out o which the latter

%et onl* 1;6 o the char%es.

/+2 (n most cases, onl* drop wires and not telephone

ca+les have +een strun% to the posts, which posts have

remained erect up to the present?

/c2 etitioner>s linemen have strun% onl* small

messen%er wires to man* o the posts and the* need

onl* small holes to pass throu%h? and

/d2 ocuments eistin% in the DT& show that the

strin%in% o petitioners> ca+les in Da%a &it* are

accordin% to standard and compara+le to those o :T.

The accidents mentioned +* private respondentinvolved truc!s that were either overloaded or had loads

that protruded upwards, causin% them to hit the ca+les.

/32 &oncernin% the second cause o action, the intention

o the parties when the* entered into the contract was

that the covera%e thereo would include the whole area

serviced +* petitioners +ecause at that time, the*

alread* had su+scri+ers outside Da%a &it*. rivate

have not +een char%in% private respondent or the

installation, transers and re-connections o said

telephones so that naturall*, the* use the posts or

those telephone lines.

/2 "ith respect to the third cause o action, the DT&

has ound petitioners> ca+le installations to +e in

accordance with en%ineerin% standards and practice

and compara+le to the +est in the countr*.

Cn the +asis o the ore%oin% countervailin% evidence o

the parties, the trial court ound, as re%ards private

respondent>s rst cause o action, that while thecontract appeared to +e air to +oth parties when it was

entered into +* them durin% the rst *ear o private

respondent>s operation and when its Goard o irectors

did not *et have an* eperience in that +usiness, it had

+ecome disadvanta%eous and unair to private

respondent +ecause o su+se)uent events and

conditions, particularl* the increase in the volume o the

su+scri+ers o petitioners or more than ten /1;2 *ears

without the correspondin% increase in the num+er otelephone connections to private respondent ree o

char%e. The trial court concluded that while in an action

or reormation o contract, it cannot ma!e another

contract or the parties, it can, however, or reasons o

=ustice and e)uit*, order that the contract +e reormed

to a+olish the ine)uities therein. Thus, said court ruled

that the contract should +e reormed +* orderin%

petitioners to pa* private respondent compensation or

the use o their posts in Da%a &it*, while private

respondent should also +e ordered to pa* the monthl*

+ills or the use o the telephones also in Da%a &it*. 0nd

Thus, the ollowin% decretal portion o the trial court>s

decision dated Kul* ;, 199;<

"JE#CE, in view o all the ore%oin%,

d i i i h + d d d i th



ta!in% into consideration the %uidelines o the D0 on

the rental o posts +* telephone companies and the

increase in the costs o such posts, the trial court opined

that a monthl* rental o 1;.;; or each post o privaterespondent used +* petitioners is reasona+le, which

rental it should pa* rom the lin% o the complaint in

this case on Kanuar* , 19@9. 0nd in li!e manner, private

respondent should pa* petitioners rom the same date

its monthl* +ills or the use and transers o its

telephones in Da%a &it* at the same rate that the pu+lic

are pa*in%.

Cn private respondent>s second cause o action, the trialcourt ound that the contract does not mention an*thin%

a+out the use +* petitioners o private respondent>s

posts outside Da%a &it*. Thereore, the trial court held

that or reason o e)uit*, the contract should +e

reormed +* includin% therein the provision that or the

use o private respondent>s posts outside Da%a &it*,

petitioners should pa* a monthl* rental o 1;.;; per

post, the pa*ment to start on the date this case was

led, or on Kanuar* , 19@9, and private respondentshould also pa* petitioners the monthl* dues on its

telephone connections located outside Da%a &it*

+e%innin% Kanuar*, 19@9.

0nd with respect to private respondent>s third cause o

action, the trial court ound the claim not suBcientl*

proved.

decision is here+* rendered orderin% the

reormation o the a%reement /h. 02?

orderin% the deendants to pa* plaintif>s

electric poles in Da%a &it* and in the towns

o 4ilaor, &anaman, 4a%arao and ili,

&amarines Sur and in other places where

deendant D0T:&C uses plaintif>s electric

poles, the sum o TD /1;.;;2 SCS per

plaintif>s pole, per month +e%innin%

Kanuar*, 19@9 and orderin% also the plaintif

to pa* deendant D0T:&C the monthl*

dues o all its telephones includin% those

installed at the residence o its oBcers,namel*? n%r. Koventino &ruz, n%r. 0ntonio

Gor=a, n%r. 0ntonio 4acando%, 4r. Kesus

Cpiana and 0tt*. :uis $eneral, Kr. +e%innin%

Kanuar*, 19@9. laintif>s claim or attorne*>s

ees and epenses o liti%ation and

deendants> counterclaim are +oth here+*

ordered dismissed. "ithout pronouncement

as to costs.

isa%reein% with the ore%oin% =ud%ment, petitioners

appealed to respondent &ourt o 0ppeals. (n the

decision dated 4a* @, 199, respondent court aBrmed

the decision o the trial court, 5 +ut +ased on diferent

%rounds to wit< /12 that 0rticle 187 o the Dew &ivil

&ode is applica+le and /2 that the contract was su+=ect

to a potestative condition which rendered said condition

void. The motion or reconsideration was denied in the

resolution dated Septem+er 1;, 199. 6Jence, the

present petition.

titi i th ll i ti t

lie and ma* prosper, there must +e

suBcient alle%ations as well as proo that

the contract in )uestion ailed to epress

the true intention o the parties due to error



etitioners assi%n the ollowin% pertinent errors

committed +* respondent court<

12 in ma!in% a contract or the parties +*

invo!in% 0rticle 187 o the Dew &ivil &ode?

2 in rulin% that prescription o the action or

reormation o the contract in this case

commenced rom the time it +ecame

disadvanta%eous to private respondent? and

32 in rulin% that the contract was su+=ect to

a potestative condition in avor o

petitioners.

etitioners assert earnestl* that 0rticle 187 o the Dew

&ivil &ode is not applica+le primaril* +ecause the

contract does not involve the rendition o service or a

personal prestation and it is not or uture service with

uture unusual chan%e. (nstead, the rulin% in the case

o ;e)a, et al. v. Ja"son, et., et al., ; which

interpreted the article, should +e ollowed in resolvin%this case. Gesides, said article was never raised +* the

parties in their pleadin%s and was never the su+=ect o

trial and evidence.

(n appl*in% 0rticle 187, respondent court rationalized<

"e a%ree with appellant that in order that

an action or reormation o contract would

or mista!e, accident, or raud. (ndeed, in

em+od*in% the e)uita+le remed* o

reormation o instruments in the Dew &ivil

&ode, the &ode &ommission %ave itsreasons as ollows<

)uit* dictates the reormation

o an instrument in order that

the true intention o the

contractin% parties ma* +e

epressed. The courts +* the

reormation do not attempt to

ma!e a new contract or theparties, +ut to ma!e the

instrument epress their real

a%reement. The rationale o the

doctrine is that it would +e

un=ust and ine)uita+le to allow

the enorcement o a written

instrument which does not

rePect or disclose the real

meetin% o the minds o theparties. The ri%or o the

le%alistic rule that a written

instrument should +e the nal

and inPei+le criterion and

measure o the ri%hts and

o+li%ations o the contractin%

parties is thus tempered to

orestall the efects o mista!e,

raud, ine)uita+le conduct, or

accident. /pp. 55-58, Eeport o

&ode &ommission2

aoresaid a%reement, 0tt*. 4a%%a* must

have considered the same air and e)uita+le

to +oth sides, and this was aBrmed +* the

lower court when it ound said contract to

h + i + h i h i



Thus, 0rticles 1359, 1381, 138, 1383 and

138 o the Dew &ivil &ode provide in

essence that where throu%h mista!e or

accident on the part o either or +oth o the

parties or mista!e or raud on the part o the

cler! or t*pist who prepared the instrument,

the true intention o the parties is not

epressed therein, then the instrument ma*

+e reormed at the instance o either part* i

there was mutual mista!e on their part, or

+* the in=ured part* i onl* he was mista!en.

Jere, plaintif-appellee did not alle%e in its

complaint, nor does its evidence prove, that

there was a mista!e on its part or mutual

mista!e on the part o +oth parties when

the* entered into the a%reement h. '0',

and that +ecause o this mista!e, said

a%reement ailed to epress their true

intention. Eather, plaintif>s evidence shows

that said a%reement was prepared +* 0tt*.:uciano 4a%%a*, then a mem+er o

plaintif>s Goard o irectors and its le%al

counsel at that time, who was also the le%al

counsel or deendant-appellant, so that as

le%al counsel or +oth companies and

presuma+l* with the interests o +oth

companies in mind when he prepared the

have +een air to +oth parties at the time o

its eecution. (n act, there were no

complaints on the part o +oth sides at the

time o and ater the eecution o saidcontract, and accordin% to 73-*ear old

Kustino de Kesus, Iice resident and $eneral

mana%er o appellant at the time who

si%ned the a%reement h. '0' in its +ehal

and who was one o the witnesses or the

plaintif /sic2, +oth parties complied with

said contract 'rom the ver* +e%innin%' /p.

5, tsn, 0pril 17, 19@92.

That the aoresaid contract has +ecome

ine)uitous or unavora+le or

disadvanta%eous to the plaintif with the

epansion o the +usiness o appellant and

the increase in the volume o its su+scri+ers

in Da%a &it* and environs throu%h the

*ears, necessitatin% the strin%in% o more

and +i%%er telephone ca+le wires +*

appellant to plaintif>s electric posts withouta correspondin% increase in the ten /1;2

telephone connections %iven +* appellant to

plaintif ree o char%e in the a%reement

h. '0' as consideration or its use o the

latter>s electric posts in Da%a &it*, appear,

however, undisputed rom the totalit* o the

evidence on record and the lower court so

ound. 0nd it was or this reason that in the

later /sic2 part o 19@ or 19@3 /or ve or si

*ears ater the su+=ect a%reement was

entered into +* the parties2, plaintif>s Goard

i t l d ! d 0tt : i $ l

suBcientl* ma!e out a cause o action

under 0rt. 187 o the Dew &ivil &ode or its

release rom the a%reement in )uestion.



o irectors alread* as!ed 0tt*. :uis $eneral

who had +ecome their le%al counsel in

19@, to stud* said a%reement which the*

+elieved had +ecome disadvanta%eous to

their compan* and to ma!e the proper

recommendation, which stud* 0tt*. $eneral

did, and thereater, he alread*

recommended to the Goard the lin% o a

court action to reorm said contract, +ut no

action was ta!en on 0tt*. $eneral>s

recommendation +ecause the ormer

%eneral mana%ers o plaintif wanted to

adopt a sot approach in discussin% thematter with appellant, until, durin% the term

o $eneral 4ana%er Jenr* ascual, the

latter, ater ailin% to settle the pro+lem with

0tt*. :uciano 4a%%a* who had +ecome the

president and %eneral mana%er o appellant,

alread* a%reed or 0tt*. $eneral>s lin% o

the present action. The act that said

contract has +ecome ine)uitous or

disadvanta%eous to plaintif as the *earswent +* did not, however, %ive plaintif a

cause o action or reormation o said

contract, or the reasons alread* pointed out

earlier. Gut this does not mean that plaintif

is completel* without a remed*, or we

+elieve that the alle%ations o its complaint

herein and the evidence it has presented

The understandin% o the parties when the*

entered into the 0%reement h. '0' on

Dovem+er 1, 1977 and the prevailin%

circumstances and conditions at the time,

were descri+ed +* ioscoro Ea%ra%io, the

resident o plaintif in 1977 and one o its

two oBcials who si%ned said a%reement in

its +ehal, as ollows<

Cur understandin% at that time

is that we will allow D0T:&C to

utilize the posts o &0SAE&C ((

onl* in the &it* o Da%a +ecause

at that time the capa+ilit* o

D0T:&C was ver* limited, as a

matter o act we do MsicN not

epect to +e a+le to epand

+ecause o the le%al s)ua++les

%oin% on in the D0T:&C. So,

even at that time there were soman* su+scri+ers in Da%a &it*

that cannot +e served +* the

D0T:&C, so as a mater o

pu+lic service we allowed them

to sue /sic2 our posts within the

Da%a &it*. /p. @, tsn 0pril 3,

19@92

Ea%ra%io also declared that while the

telephone wires strun% to the electric posts

o plaintif were ver* li%ht and that ver* ew

telephone lines were attached to the posts

&0SAE&C (( i 1977 id t h

Da%a &it* /h. 'G'2. 0dd to this the

destruction o some o plaintif>s poles

durin% t*phoons li!e the stron% t*phoon

Sisan% in 19@7 +ecause o the heav*

t l h +l tt h d th t d th



o &0SAE&C (( in 1977, said posts have

+ecome 'heavil* loaded' in 19@9 /tsn, id.2.

(n truth, as also correctl* ound +* the lower

court, despite the increase in the volume o

appellant>s su+scri+ers and the

correspondin% increase in the telephone

ca+les and wires strun% +* it to plaintif>s

electric posts in Da%a &it* or the more 1;

*ears that the a%reement h. '0' o the

parties has +een in efect, there has +een

no correspondin% increase in the ten /1;2

telephone units connected +* appellant reeo char%e to plaintif>s oBces and other

places chosen +* plaintif>s %eneral mana%er

which was the onl* consideration provided

or in said a%reement or appellant>s use o

plaintifs electric posts. Dot onl* that,

appellant even started usin% plaintif>s

electric posts outside Da%a &it* althou%h

this was not provided or in the a%reement

h. '0' as it etended and epanded itstelephone services to towns outside said

cit*. Jence, while ver* ew o plaintif>s

electric posts were +ein% used +* appellant

in 1977 and the* were all in the &it* o

Da%a, the num+er o plaintif>s electric posts

that appellant was usin% in 19@9 had

=umped to 1,;3,19 o which are outside

telephone ca+les attached thereto, and the

escalation o the costs o electric poles rom

1977 to 19@9, and the conclusion is indeed

inelucta+le that the a%reement h. '0' has

alread* +ecome too one-sided in avor o

appellant to the %reat disadvanta%e o

plaintif, in short, the continued

enorcement o said contract has maniestl*

%one ar +e*ond the contemplation o

plaintif, so much so that it should now +e

released thererom under 0rt. 187 o the

Dew &ivil &ode to avoid appellant>s un=ust

enrichment at its /plaintif>s2 epense. 0sstated +* Tolentino in his commentaries on

the &ivil &ode citin% orei%n civilist

Eu%%iero, =e7uit# demands a ertain

eonomi e7uili"rium "eteen t'e

prestation and t'e ounter-prestation, and

does not permit t'e unlimited

impoveris'ment of one part# for t'e "enet

of t'e ot'er "# t'e eessive rigidit# of t'e

priniple of t'e o"ligator# fore ofontrats /(I Tolentino, &ivil &ode o the

hilippines, 19@8 ed.,

pp. 7-@2.

"e thereore, nd nothin% wron% with the

rulin% o the trial court, althou%h +ased on a

diferent and wron% premise /i.e.,

reormation o contract2, that rom the date

o the lin% o this case, appellant must pa*

or the use o plaintif>s electric posts in

Da%a &it* at the reasona+le monthl* rental

o 1; ;; per post while plaintif should pa*

&it*, which is the service contemplated in said article.

#urthermore, a +are readin% o this article reveals that it

is not a re)uirement thereunder that the contract +e or

uture service with uture unusual chan%e. 0ccordin% to

Senator 0rturo 4 Tolentino 1' 0rticle 187 states in our



o 1;.;; per post, while plaintif should pa*

appellant or the telephones in the same

&it* that it was ormerl* usin% ree o char%e

under the terms o the a%reement h. '0'

at the same rate +ein% paid +* the %eneral

pu+lic. (n aBrmin% said rulin%, we are not

ma!in% a new contract or the parties

herein, +ut we nd it necessar* to do so in

order not to disrupt the +asic and essential

services +ein% rendered +* +oth parties

herein to the pu+lic and to avoid un=ust

enrichment +* appellant at the epense o

plaintif, said arran%ement to continue onl*until such time as said parties can re-

ne%otiate another a%reement over the same

su+=ect-matter covered +* the a%reement

h. '0'. Cnce said a%reement is reached

and eecuted +* the parties, the aoresaid

rulin% o the lower court and aBrmed +* us

shall cease to eist and shall +e su+stituted

and superseded +* their new

a%reement. . . .. &

0rticle 187 spea!s o 'service' which has +ecome so

diBcult. Ta!in% into consideration the rationale +ehind

this provision, 9 the term 'service' should +e understood

as reerrin% to the 'perormance' o the o+li%ation. (n

the present case, the o+li%ation o private respondent

consists in allowin% petitioners to use its posts in Da%a

Senator 0rturo 4. Tolentino, 1' 0rticle 187 states in our

law the doctrine o unorseen events. This is said to +e

+ased on the discredited theor* o re"us si stanti"us in

pu+lic international law? under this theor*, the parties

stipulate in the li%ht o certain prevailin% conditions, and

once these conditions cease to eist the contract also

ceases to eist. &onsiderin% practical needs and the

demands o e)uit* and %ood aith, the disappearance o

the +asis o a contract %ives rise to a ri%ht to relie in

avor o the part* pre=udiced.

(n a nutshell, private respondent in the Ccce]a case

led a complaint a%ainst petitioner +eore the trial courtpra*in% or modiation o the terms and conditions o

the contract that the* entered into +* in% the proper

shares that should pertain to them out o the %ross

proceeds rom the sales o su+divided lots. "e ordered

the dismissal o the complaint therein or ailure to state

a suBcient cause o action. "e rationalized that the

&ourt o 0ppeals misapplied 0rticle 187 +ecause<

. . . respondent>s complaintsee!s not release rom the su+division

contract +ut that the court 'render

=ud%ment modif#ing the terms and

conditions o the contract . . .

+* ing the proper s'ares that

should pertain to the herein parties out o

the gross proeeds rom the sales o

su+divided lots o su+=ect su+division'. The

cited article /0rticle 1872 does not %rant

the courts /the2 authorit* to rema!e, modi*

or revise the contract or to the division o

shares +etween the parties as contractuall*

ordered +* the trial court< 12 petitioners to pa* private

respondent or the use o its posts in Da%a &it* and in

the towns o 4ilaor, &anaman, 4a%arao and ili,

&amarines Sur and in other places where petitioners use

private respondent>s posts the sum o ten /1; ;;2



shares +etween the parties as contractuall*

stipulated with the orce o law +etween the

parties, so as to su+stitute its own terms or

those covenanted +* the parties

themselves. Eespondent>s complaint or

modication o contract maniestl* has no

+asis in law and thereore states no cause o

action. Ander the particular alle%ations o

respondent>s complaint and the

circumstances therein averred, the courts

cannot even in e)uit* %rant the relie

sou%ht. 11

The rulin% in the Ccce]a case is not applica+le +ecause

we a%ree with respondent court that the alle%ations in

private respondent>s complaint and the evidence it has

presented suBcientl* made out a cause o action under

0rticle 187. "e, thereore, release the parties rom

their correlative o+li%ations under the contract.

Jowever, our disposition o the present controvers*

does not end here. "e have to ta!e into account the

possi+le conse)uences o merel* releasin% the partiesthererom< petitioners will remove the telephone

wiresca+les in the posts o private respondent,

resultin% in disruption o their service to the pu+lic?

while private respondent, in consonance with the

contract 12 will return all the telephone units to

petitioners, causin% pre=udice to its +usiness. "e shall

not allow such eventualit*. Eather, we re)uire, as

private respondent s posts, the sum o ten /1;.;;2

pesos per post, per month, +e%innin% Kanuar*, 19@9?

and 2 private respondent to pa* petitioner the monthl*

dues o all its telephones at the same rate +ein% paid +*

the pu+lic +e%innin% Kanuar*, 19@9. The peculiar

circumstances o the present case, as distin%uished

urther rom the Ccce]a case, necessitates eercise o

our e)uit* =urisdiction. 13 G* wa* o emphasis, we

reiterate the rationalization o respondent court that<

. . . (n aBrmin% said rulin%, we are not

ma!in% a new contract or the parties

herein, +ut we nd it necessar* to do so inorder not to disrupt the +asic and essential

services +ein% rendered +* +oth parties

herein to the pu+lic and to avoid un=ust

enrichment +* appellant at the epense o

plaintif . . . .14

etitioners> assertion that 0rticle 187 was never raised

+* the parties in their pleadin%s and was never the

su+=ect o trial and evidence has +een passed upon +*respondent court in its well reasoned resolution, which

we hereunder )uote as our own<

#irst, we do not a%ree with deendant-

appellant that in appl*in% 0rt. 187 o the

Dew &ivil &ode to this case, we have

chan%ed its theor* and decided the same on

an issue not invo!ed +* plaintif in the lower

court. #or +asicall*, the main and pivotal

issue in this case is whether the continued

enorcement o the contract h. '0'

+etween the parties has, throu%h the *ears

/since 19772 +ecome too ine)uitous or

manner it can in the li%ht o the proven acts

and the law or laws applica+le thereto.

(t is settled that when the trial court decides

a case in avor o a part* on a certain



/since 19772, +ecome too ine)uitous or

disadvanta%eous to the plaintif and too

one-sided in avor o deendant-appellant,

so that a solution must +e ound to relieve

plaintif rom the continued operation o said

a%reement and to prevent deendant-

appellant rom urther un=ustl* enrichin%

itsel at plaintif>s epense. (t is indeed

unortunate that deendant had turned dea

ears to plaintifs re)uests or rene%otiation,

constrainin% the latter to %o to court. Gut

althou%h plaintif cannot, as we have held,

correctl* invo!e reormation o contract as aproper remed* /there havin% +een no

showin% o a mista!e or error in said

contract on the part o an* o the parties so

as to result in its ailure to epress their true

intent2, this does not mean that plaintif is

a+solutel* without a remed* in order to

relieve itsel rom a contract that has %one

ar +e*ond its contemplation and has

+ecome so hi%hl* ine)uitous anddisadvanta%eous to it throu%h the *ears

+ecause o the epansion o deendant-

appellant>s +usiness and the increase in the

volume o its su+scri+ers. 0nd as it is the

dut* o the &ourt to administer =ustice, it

must do so in this case in the +est wa* and

a case in avor o a part* on a certain

%round, the appellant court ma* uphold the

decision +elow upon some other point which

was i%nored or erroneousl* decided +* the

trial court /$arcia Ialdez v. Tuazon, ; hil.

93? Eelativo v. &astro, 78 hil. 583? &arillo

v. Sala! de az, 1@ S&E0 872. #urthermore,

the appellate court has the discretion to

consider an unassi%ned error that is closel*

related to an error properl* assi%ned

/aterno v. Kao Han, 1 S&E0 831? Jernandez

v. 0ndal, 7@ hil. 1982. (t has also +een held

that the Supreme &ourt /and this &ourt aswell2 has the authorit* to review matters,

even i the* are not assi%ned as errors in

the appeal, i it is ound that their

consideration is necessar* in arrivin% at a

=ust decision o the case /Saura (mport Y

port &o., (nc. v. hil. (nternational Suret*

&o. and DG, @ S&E0 132. #or it is the

material alle%ations o act in the complaint,

not the le%al conclusion made therein or thepra*er, that determines the relie to which

the plaintif is entitled, and the plaintif is

entitled to as much relie as the acts

warrant althou%h that relie is not

specicall* pra*ed or in the complaint

/Eosales v. Ee*es and Crdoveza, 5 hil.

95? &a+i%ao v. :im, 5; hil. @? Ga%uioro

v. Garrios, 77 hil. 1;2. To )uote an old +ut

ver* illuminatin% decision o our Supreme

&ourt throu%h the pen o 0merican =urist

0dam &. &arson<

)uestions on =urisdiction, no

)uestion will +e entertained on

appeal unless it has +een raised

in the court +elow and it is

within the issues made +* the



'Ander our s*stem o pleadin% it

is the dut* o the courts to %rant

the relie to which the parties

are shown to +e entitled +* the

alle%ations in their pleadin%s

and the acts proven at the trial,

and the mere act that the*

themselves misconstrue the

le%al efect o the acts thus

alle%ed and proven will not

prevent the court rom placin%

the =ust construction thereonand ad=udicatin% the issues

accordin%l*.' /0lzua v. Kohnson,

1 hil. 3;@2

0nd in the airl* recent case o &alte hil.,

(nc. v (0&, 178 S&E0 71, the Jonora+le

Supreme &ourt also held<

"e rule that the respondentcourt did not commit an* error

in ta!in% co%nizance o the

aoresaid issues, althou%h not

raised +eore the trial court. The

presence o stron% consideration

o su+stantial =ustice has led this

&ourt to rela the well-

entrenched rule that, ecept

within the issues made +* the

parties in their pleadin%s

/&ordero v. &a+ral, :-387@9, Kul*

5, 19@3, 13 S&E0 532. . . .

"e +elieve that the a+ove authorities suBce

to show that this &ourt did not err in

appl*in% 0rt. 187 o the Dew &ivil &ode to

this case. eendant-appellant stresses that

the applica+ilit* o said provision is

a 7uestion of fat , and that it should have

+een %iven the opportunit* to present

evidence on said )uestion. Gut deendant-appellant cannot honestl* and truthull*

claim that it /did2 not /have2 the opportunit*

to present evidence on the issue o whether

the continued operation o the contract h.

'0' has now +ecome too one-sided in its

avor and too ine)uitous, unair, and

disadvanta%eous to plaintif. 0s held in our

decision, the a+undant and copious

evidence presented +* +oth parties in thiscase and summarized in said decision

esta+lished the ollowin% essential and vital

acts which led us to appl* 0rt. 187 o the

Dew &ivil &ode to this case<

15

Cn the issue o prescription o private respondent>s

action or reormation o contract, petitioners alle%e that

respondent court>s rulin% that the ri%ht o action 'arose

onl* ater said contract had alread* +ecome

disadvanta%eous and unair to it due to su+se)uent

Ee%ardin% the last issue, petitioners alle%e that there is

nothin% purel* potestative a+out the prestations o

either part* +ecause petitioner>s permission or ree use

o telephones is not made to depend purel* on their will,

neither is private respondent>s permission or ree use o



disadvanta%eous and unair to it due to su+se)uent

events and conditions, which must +e sometime durin%

the latter part o 19@ or in 19@3 . . .' 16 is erroneous. (n

reormation o contracts, what is reormed is not the

contract itsel, +ut the instrument em+od*in% the

contract. (t ollows that whether the contract is

disadvanta%eous or not is irrelevant to reormation and

thereore, cannot +e an element in the determination o

the period or prescription o the action to reorm.

0rticle 11 o the Dew &ivil &ode provides, inter alia,

that an action upon a written contract must +e +rou%ht

within ten /1;2 *ears rom the time the ri%ht o actionaccrues. &learl*, the ten /1;2 *ear period is to +e

rec!oned from t'e time t'e rig't of ation

arues which is not necessaril* the date o eecution o

the contract. 0s correctl* ruled +* respondent court,

private respondent>s ri%ht o action arose 'sometime

durin% the latter part o 19@ or in 19@3 when accordin%

to 0tt*. :uis $eneral, Kr. . . ., he was as!ed +* /private

respondent>s2 Goard o irectors to stud* said contract

as it alread* appeared disadvanta%eous to /privaterespondent2 /p. 31, tsn, 4a* @, 19@92. /rivate

respondent>s2 cause o action to as! or reormation o

said contract should thus +e considered to have arisen

onl* in 19@ or 19@3, and rom 19@ to Kanuar* , 19@9

when the complaint in this case was led, ten /1;2 *ears

had not *et elapsed.' 1;

neither is private respondent s permission or ree use o

its posts dependent purel* on its will.

0part rom appl*in% 0rticle 187, respondent court cited

another le%al remed* availa+le to private respondent

under the alle%ations o its complaint and the

preponderant evidence presented +* it<

. . . we +elieve that the provision

in said a%reement F

/a2 That the term or period o

this contract shall +e as long as

t'e part# of t'e rst part Mherein

appellantN has need or the

electric li%ht posts o the part*

o the second part Mherein

plaintifN it +ein% understood

that this contract shall

terminate when or an* reason

whatsoever, the part* o the

second part is orced to stop,a+andoned MsicN its operation as

a pu+lic service and it +ecomes

necessar* to remove the electric

li%ht post MsiN'? /mphasis

supplied2

is invalid or +ein% purel* potestative on the

part o appellant as it leaves the continued

efectivit* o the aoresaid a%reement to the

latter>s sole and eclusive will as lon% as

plaintif is in operation. 0 similar provision in

a contract o lease wherein the parties

a%reed that the lessee could sta* on the

The a+ove can also +e said o the

a%reement h. '0' +etween the parties in

this case. There is no mutualit* and e)ualit*

+etween them under the aore-)uoted

provision thereo since the lie and



a%reed that the lessee could sta* on the

leased premises 'or as lon% as the

deendant needed the premises and can

meet and pa* said increases' was recentl*

held +* the Supreme &ourt in :im v. &.0.,

191 S&E0 15;, citin% the much earlier case

o ncarnacion v. Galdomar, 77 hil. 7;, as

invalid or +ein% 'a purel* potestative

condition +ecause it leaves the efectivit*

and en=o*ment o leasehold ri%hts to the

sole and eclusive will o the lessee.'

#urther held the Ji%h &ourt in the :im case<

The continuance, efectivit* and

ulllment o a contract o lease

cannot +e made to depend

eclusivel* upon the ree and

uncontrolled choice o the

lessee +etween continuin% the

pa*ment o the rentals or not,

completel* deprivin% the owner

o an* sa* in the matter.4utualit* does not o+tain in

such a contract o lease o no

e)ualit* eists +etween the

lessor and the lessee since the

lie o the contract is dictated

solel* +* the lessee.

provision thereo since the lie and

continuit* o said a%reement is made to

depend as lon% as appellant needs plaintif>s

electric posts. 0nd this is precisel* wh*,

since 1977 when said a%reement was

eecuted and up to 19@9 when this case

was nall* led +* plaintif, it could do

nothin% to +e released rom or terminate

said a%reement notwithstandin% that its

continued efectivit* has +ecome ver*

disadvanta%eous and ine)uitous to it due to

the epansion and increase o appellant>s

telephone services within Da%a &it* andeven outside the same, without a

correspondin% increase in the ten /1;2

telephone units +ein% used +* plaintif ree

o char%e, as well as the +ad and ineBcient

service o said telephones to the pre=udice

and inconvenience o plaintif and its

customers. . . . 1&

etitioners> alle%ations must +e upheld in this re%ard. 0potestative condition is a condition, the ulllment o

which depends upon the sole will o the de+tor, in which

case, the conditional o+li%ation is void. 19 Gased on this

denition, respondent court>s ndin% that the provision

in the contract, to wit<

/a2 That the term or period o this contract

shall +e as lon% as the part* o the rst part

/petitioner2 has need or the electric li%ht

posts o the part* o the second part

/private respondent2

MANILA IN$ERNA$I%NALAIRP%R$ AU$H%RI$",

etitioner,

G.R. No. 161;1&



/private respondent2 . . ..

is a potestative condition, is correct. Jowever, it must

have overloo!ed the other conditions in the same

provision, to wit<

. . . it +ein% understood that this contract

shall terminate when or an* reason

whatsoever, the part* o the second part

/private respondent2 is orced to stop,

a+andoned /sic2 its operation as a pu+lic

service and it +ecomes necessar* to remove

the electric li%ht post /sic2?

which are casual conditions since the* depend on

chance, hazard, or the will o a third person. 2' (n sum,

the contract is su+=ect to mied conditions, that is, the*

depend partl* on the will o the de+tor and partl* on

chance, hazard or the will o a third person, which do

not invalidate the aorementioned

provision. 21 Devertheless, in view o our discussions

under the rst and second issues raised +* petitioners,there is no reason to set aside the )uestioned decision

and resolution o respondent court.

"JE#CE, the petition is here+* D(. The

decision o the &ourt o 0ppeals dated 4a* @, 199

and its resolution dated Septem+er 1;, 199 are

0##(E4.

,

- versus -

ING #ELA"% SP%R$SCEN$ER, INC.,

Eespondent.

resent<

&CECD0, C.J.,

&hairperson,

:CD0EC- &0ST

GES04(D,

: &0ST(::C, and

I(::0E040, KE., JJ.

romul%ated<

ecem+er 1, ;11

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

E C I S I % N

LE%NAR%-E CAS$R%, J.!

Geore As is a etition or Eeview under Eule 5 o the Eules o &ourt o the ecisionM1N dated Kanuar* @,

premises due to the act that a ma=orportion o it consists o swamp* and talahi+inested silt and a+andoned shponds andoccupied +* s)uatters and someMpetitionersN emplo*ees with un%ainl*ma!eshit dwellin%s

http://sc.judiciary.gov.ph/jurisprudence/2011/december2011/161718.htm#_ftn1




K *;; o the &ourt 0ppeals in &0-$.E. &I Do. 8@7@7,aBrmin% the ecisionMN dated Ccto+er 9, 1999 o Granch 111 o the Ee%ional Trial &ourt /ET&2 o asa*

&it* in &ivil &ase Do. @@7, which %ranted the &omplaintor (n=unction, &onsi%nation, and ama%es with pra*eror a Temporar* Eestrainin% Crder led +* respondentin% Iela*o Sports &enter, (nc. a%ainst petitioner 4anila(nternational 0irport 0uthorit* /4(002, and essentiall*compelled petitioner to renew the lease o respondentover a parcel o land within the airport premises.

Gelow are the acts as culled rom the records o

the case<

Cn #e+ruar* 15, 1987, petitioner /then still calledthe &ivil 0eronautics 0dministration or &002 and Salem(nvestment &orporation /Salem2 entered into a &ontracto :ease where+* petitioner leased in avor o Salem aparcel o land !nown as :ot -0, with an area o 78,3@s)uare meters, located in ront o the 4anila

(nternational 0irport /4(02 in asa* &it*, and re%isteredunder Transer &erticate o Title /T&T2 Do. 8735 in thename o the Eepu+lic /:ot -02. etitionerandSalem entered into said &ontract o :ease or theollowin% reasons<

"JE0S, this particular portion o land is presentl* an e*esore to the airport

ma!eshit dwellin%s?

"JE0S, the :SSCE, in accordancewith its %eneral plan to improve and+eauti* the airport premises, is interestedin developin% this particular area +*providin% such acilities and conveniencesas ma* +e necessar* or the comort,convenience and relaation o transients,tourists and the %eneral pu+lic?

"JE0S, the :SS, a corporationen%a%ed in hostelr* and other allied+usiness, is read*, willin% and a+le tocooperate with the :SSCE in theimplementation o this %eneral developmentplan or the airport premises?

"JE0S, the :SSs main interestis to have a suBcient land area within whichto construct a modern hotel with suchacilities as would ordinaril* %o with modernhostelr*, includin% recreation halls, acilitiesor +an!s, tourist a%encies, travel +ureaus,laundr* shops, postal stations, curio and

native shops and other allied +usinesscalculated to ma!e the hotel and itsacilities comorta+le, convenient andattractive, and or this purpose, an initialland area o some Thirt*M-N#ive ThousandTen /35 ;1;2 s)uare meters would +e rst

that the :SS shall have the ri%ht toremove rom the premises such e)uipment,urnitures, accessories and other articles aswould ordinaril* +e classied as mova+lepropert* under pertinent provisions o law.






Ten /35,;1;2 s)uare meters would +e rstutilized.M3N

The term o the lease and renewal thereo as stipulatedupon +* petitioner and Salem are as ollows<

3. That the term o the lease shall +e or aperiod o Twent*-#ive /52 *ears,commencin% rom the date o receipt o

approval o this &ontract +* the Secretar* o u+lic "or!s and &ommunications, and atthe option o the :SS, renewa+le oranother Twent*-#ive /52 *ears. (t isunderstood, that ater the rst 5 *earslease, the ownership o, and ull title to, allthe +uildin%s and permanent improvementsintroduced +* the :SS on the leasedpremises includin% those introduced onthe $ol rivin% Ean%e shall automaticall*

vest in the :SSCE, without cost.

Apon the termination o the lease or shouldthe :SS not eercise this option orrenewal, the :SS shall deliver thepeaceul possession o all the +uildin% andother permanent improvements hereina+ove reerred to, with the understandin%

. That the renewal o this lease contract

shall +e or another period o Twent*-#ive/52 *ears, under the same terms andconditions herein stipulated? provided,however that, since the ownership o thehotel +uildin% and permanent improvementhave passed on the :SSCE, the :SSshall pa* as rental, in addition to the rentalsherein a%reed upon, an amount e)uivalentto Cne percent /162 o the appraised valueo the hotel +uildin% and permanent

improvements at the time o epiration o Twent*-#ive /52 *ears lease period, pa*a+leannuall*.MN

Su+se)uentl*, in a Transer o :ease Ei%hts andistin% (mprovements dated Septem+er 3;, 197,Salem conve*ed in avor o in% Iela*o port

&orporation /Iela*o port2, or the considerationo 1,;5;,;;;.;;, its leasehold ri%hts over a portion o :ot -0, measurin% a+out 15,53 s)uare meters, withthe improvements thereon, consistin% o an unnishedcinema-theater. 0ccordin%l*, petitioner and Iela*oport eecuted a &ontract o :ease dated Dovem+er8, 197pertainin% to the aorementioned leasedportion o :ot -0.

(n turn, Iela*o port eecuted a Transer o :ease Ei%hts dated 0pril 7, 1978 +* which it conve*edto respondent, or the consideration o 5;;,;;;.;;, itsleasehold ri%hts over an @,@1-s)uare meter area/su+=ect propert*2 out o the 15,53-s)uare meterportion it was leasin% rom petitioner 0s a result

ursuant to the aore)uoted o+=ectives,respondent a%reed to the ollowin%<

9. h*sical improvements on +uildin%







portion it was leasin% rom petitioner. 0s a result,petitioner and respondent eecuted another &ontract o :easeM5N dated 4a* 1, 1978 coverin% the su+=ectpropert*.

The &ontract o :ease dated 4a* 1,1978 +etween petitioner /as lessor2 and respondent /aslessee2 specied how respondent shall develop and usethe su+=ect propert*<

. That the :SS shall utilize thepremises as the site or the construction o a

Sports &omple acilities and shoppin%centers in line with the residential ecreeor Sports evelopment and h*sical#itness, includin% the +eautication o thepremises and providin% cemented par!in%areas.

3. That the :SS shall construct atits epense on the leased premises a

par!in% area parallel to and rontin% theomestic 0irport Terminal to +e open to thetravelin% pu+lic ree o char%e to ease thepro+lem o par!in% con%estion at theomestic 0irport.M8N

spaces and areas su+=ect o this a%reementma* +e underta!en +* and at the epenseso the :SS. Jowever, no improvements

ma* +e commenced without prior approvalo the plans +* the :SSCE and, wheneverdeemed necessar* a cash deposit shall +emade in avor o the :SSCE which shall +ee)uivalent to the cost o restoration o an*portion afected +* such alteration orimprovements?

1;. The :SS a%rees and +inds

himsel to complete the ph*sicalimprovements or contemplated structureswithin the leased premises or a period o one /12 *ear.#ailure on the part o the:SS to do so within said period shallautomaticall* revo!e the &ontract o :easewithout necessit* o =udicial process.M7N

The lease rental shall +e computed as ollows<

5. That the :SS shall pa* to the:SSCE as monthl* rentals or the leasedpremises the rate o ;.5 per s)uare meteror the rst 3;; s)uare meters, ;.3; pers)uare meter or the net 5;; s)uare

meters, and ;.5 per s)uare meter or theremainin% area pursuant to art I(((, Section o 0dministrative Crder Do. , Series o 197;, which in the case o the @,@1 s)uaremeters herein leased shall amountto ;5 5 per month or a ro*alt*

(n the event o relocation o the :SS toother areas, the cost o relocation shall +eshouldered +* the :SS.M@N











to ,;5.5 per month, or a ro*alt*e)uivalent to one percent /162 o themonthl* %ross income o the :SS,whichever is hi%her.

8. That or the purpose o accuratel*determinin% the monthl* %ross income, the:SS here+* %ives its consent or theeamination o the +oo!s +* authorizedrepresentatives o the :SSCE or the&ommission on 0udit?

13. (, durin% the lietime o this a%reementand upon approval +* the :SSCE, theleased area is increased or diminished, orthe :SS is relocated to another area,rentals, ees, and char%es imposed shall +e

amended accordin%l*. Su+se)uentamendments to the 0dministrative Crderwhich will afect an increase o the rates o ees, char%es and rentals a%reed upon inthis contract shall automaticall* amend thiscontract to the etent that the rates o ees,rentals, and char%es are increased.

Donpa*ment o lease rentals shall have theollowin% conse)uence<

@. #ailure on the part o the :SS TC 0H0DH ees, char%es, rentals or the ro*alt* o one percent /162 within thirt* /3;2 da*sater receipt o written demand, the :SSCEshall den* the :SS o the urther use o the leased premises and or an* o itsacilities, utilities and services. .M9N

The &ontract o :ease prohi+its respondent romtranserrin% its leasehold ri%hts, en%a%in% in an* other+usiness outside those mentioned in said &ontract, andsu+lettin% the premises whether in whole or in part,

thus<

18. The :SS a%rees not to assi%n, sell,transer or mort%a%e his ri%hts under thisa%reement or su+let the whole or part o premises covered +* it to a third part* orparties nor en%a%e in an* other +usinessoutside o those mentioned in this

contract. Iiolation o this provision shall also+e a %round or revocation o the leasecontract without need o =udicial process.M1;N

15. This contract o lease ma* +eterminated +* other part* upon thirt* /3;2da*s notice in writin%. #ailure on the part o the :SS to compl* with an* o theprovisions o this lease contract or an*violation o an* rule or re%ulations o the







eriod o the lease and renewal thereo are%overned +* para%raphs and 17 o the &ontract o :ease that read<

. That the period o this lease shall ta!eefect rom Kune 1, 1978 up to #e+ruar* 15,199 which is e)uivalent to the unepiredportion o the lease contract eecuted+etween MpetitionerN and in% Iela*o port&orporation.

17. The :SS, i desirous o continuin% hislease, should noti* the :SSCE sit* /8;2da*s prior to epiration o the period a%reedupon or the renewal o the &ontract o

:ease.M11N

The lease ma* +e revo!edterminated under theollowin% conditions<

violation o an* rule or re%ulations o the0irport shall %ive the :SSCE the ri%ht torevo!e this contract efective thirt* /3;2da*s ater notice o revocation without needo =udicial demand. Jowever, the :SSshall remain lia+le and o+li%ated to pa*rentals and other ees and char%es due andin arrears with interest at the rate o twelvepercent /162 per annum?

1@. Apon termination or revocation o thiscontract o lease as herein provided, the:SS shall deliver possession o thepremises to the :SSCE in the samecondition that the* were received %ivin%allowance to normal wear and tear and todama%e or destruction caused +* act o $od. 0ll permanent improvements,however, which the :SS mi%ht have

constructed in the premises +* virtue hereo shall upon the termination o this leaseautomaticall* +ecome the a+solute propert*o the :SSCE without cost?

19. (n the event that the :SSCE shall needthe leased premises in its airportdevelopment pro%ram, the :SS a%rees

to vacate the premises within thirt* /3;2da*s rom receipt o notice. 0llimprovements not removed +* the :SSwithin the thirt* /3;2 da* period shall+ecome the propert* o the :SSCE withoutcost M1N

etitioner eventuall* issued 0dministrative Crder/0C2 Do. , series o 19@,M18N and 0C Do. 1, series o 19@, in% various rates or the lease rentals o itsproperties. 0C Do. , series o 19@, and 0C Do. 1,series o 19@, alle%edl* efected an increase in thelease rental o respondent or the su+=ect propert* as









cost.

Eespondent +e%an occup*in% the su+=ect propert*and pa*in% petitioner the amount o ,;5.5 permonth as rental ee. Eespondent then constructed amulti-million plaza with a three-store* +uildin% on saidpropert*. Eespondent leased spaces in the +uildin% tovarious +usiness proprietors.

(n a :etterM13N

dated 0pril 11, 1979, petitionerre)uested respondent or a cop* o the latters $ross(ncome Statement rom ecem+er 1977 to ecem+er197@, dul* certied +* a certied pu+lic accountant, orthe purpose o computin% the ro*alt* e)uivalent to 16o the monthl* %ross income o respondent. 0ccedin% tothis re)uest, respondent sent petitioner a:etterM1N dated 4a* 31, 1979 and appended therewiththe re)uested income statements which disclosed thatthe total %ross income o respondent or the period in

)uestion amounted to 1,97,[email protected]. Eespondent alsosu+mitted to petitioner and the &ommission on 0udit/&C02 its dul* audited nancial statementsM15N or the*ears 19@ to 19@@. 4eanwhile, petitioner hadcontinued +illin% respondent the amount o ,;5.5as monthl* rental ee, which the latter o+edientl* paid.

lease rental o respondent or the su+=ect propert*, asprovided or in para%raph 13 o the &ontract o :easedated 4a* 1, 1978 +etween petitioner andrespondent. Jowever, said issuances were su+=ected to

review or revision purposes and their implementationwas suspended. Still, petitioner, throu%h a letterdated Septem+er 3, 19@8, re)uired respondent to pa*a moratorium rental at the rate o 5.;; per s)uaremeter rate per month or a total o ,;5.;; ever*month.

(n a :etterM17N dated Ccto+er 1@, 19@8, respondent

opposed the implementation o an* increase in its leaserental or the su+=ect propert*. Eespondent wrote<

"e +elieve that an increase in rentalo a propert* which does not orm part o the 0irport or its immediate premises, li!ethe premises leased to IS&, althou%howned +* 4(00 is not covered +* Gatasam+ansa Gl%. 35 or #inance 4inistr*

Crder Do. 8-@3. #urthermore, the lan%ua%eo G.. Do. 35 and 4inistr* Crder Do. 8-@3authorizes the in% or revision o ees andchar%es onl* or services and unctions.

0ssumin% that the increase in rental o 4(00 propert* is authorized +* G.. Do. 35and 4inistr* Crder Do. 8-@3, such increaseas ordered in *our moratorium rental rateinsoar as it is made applica+le to IS& isnot valid

#ollowin% the ore%oin% echan%e, petitioner had!ept on char%in% respondent the ori%inal monthl* rentalo ,;5.5.

4 th 8; d i t th i ti th












not valid.

The increase which is around ,;;;percent or ; times a+ove present rentalrate is unreasona+l* hi%h. Goth G.. Do. 35and 4inistr* Crder Do. 8-@3 prescri+ed onl*

=ust and reasona+le rates suBcient to coveradministrative costs.

Such increase in rental is uncalled orconsiderin% that<

Apon termination o the lease, all theimprovements on the propert* shall +elon%to 4(00 without costs. The ori%inal cost o the +uildin%s and other improvements onthe land we have leasedis 1;,8;;,;;;.;;. Said improvementswould now cost over 3;,;;;,;;;.;;. (n

efect the $overnment would +e collectin%another .; million a *ear.

"e, thereore, re)uest that themoratorium rate +e not applied to us.

4ore than 8; da*s prior to the epiration o thelease +etween petitioner and respondent, the latter,throu%h its resident, &onrado 4. Iela*o /Iela*o2, sent

the ormer a :etterM1@N

dated ecem+er , 1991 statin%that respondent was interested in renewin% the lease oranother 5 *ears.

etitioner, throu%h its $eneral 4ana%er, duardoC. &arrascoso, in a :etterM19N dated #e+ruar* , 199,declined to renew the lease, ordered respondent tovacate the su+=ect propert* within ve da*s, anddemanded respondent to pa* arrears in lease rentals as

o Kanuar* 199 in the sum o 15,871,173.75.

Iela*o, on +ehal o respondent, replied topetitioner throu%h a :etterM;N dated 4arch 3, 199 thatreads<

This reers to *our letters which wereceived on 8 #e+ruar* 199 and 7#e+ruar* 199, respectivel*, the rst as aresponse to our letter o ecem+er1991 where we inormed *ou o ourintention to renew our lease contract, andthe second wherein *ou as!ed us to vacatewithin ve /52 da*s the leased premises.

Hour second letter surprised usinasmuch as we have +een ne%otiatin% with

*ou or the renewal o our lease. (n addition,*our sudden decision %ave us no time todiscuss *our terms and conditions with ourGoard considerin% that the issues involvedma=or decision.

Jowever, around the same time, Samuel0lomesen /0lomesen2 +ecame the new resident and$eneral 4ana%er o respondent, replacin%Iela*o. 0lomesen, actin% on +ehal o respondent, sent










#or a smoother transition and or the

mutual interest o the %overnment, thetenants and ourselves, ma* we re)uest or areconsideration o *our decision, and we +e%iven up to the end o 4arch 199 topeaceull* turn-over to *ou the leasedpremises. This will ena+le *ou to create acommittee that will ta!e-over the leasedpropert* and its operations.

:i!ewise, consistent with our previousstand as communicated to *ou +* our le%alcounsel, cop* o which is hereto attached,we den* an* lia+ilit* on rental increases.

(n :ettersM1N all dated 4arch 1;, 199, Iela*o inormedpetitioner that he alread* sent individual letters to4anila lectric &ompan*, hilippine :on% istance

Telephone &ompan*, and 4anila "aterwor!s andSewera%e S*stem, instructin% the said utilit* companiesthat succeedin% +illin%s or electric, telephone, andwater consumptions should alread* +e transerred tothe account o petitioner in li%ht o the epected turn-over o the su+=ect propert* and improvements thereonrom respondent to petitioner.

petitioner a :etterMN dated 4arch 5, 199, revo!in%the aorementioned :etters dated 4arch 3 and 1;, 199since these were purportedl* sent +* Iela*o without

authorit* rom respondents Goard o irectors. Eespondent epressed its interest incontinuin% the lease o the su+=ect propert* or another5 *ears and tendered to petitioner a mana%ers chec!in the amount o @,@1.;; as pa*ment or the leaserentals or the su+=ect propert* rom ecem+er 1991until 4arch 199.

etitioner entirel* disre%arded the claims o respondent and threatened to ta!e-over the su+=ectpropert*.

Cn 4arch 3;, 199, respondent led a%ainstpetitioner +eore the ET& a &omplaint or (n=unction,&onsi%nation, and ama%es with a ra*er or a

Temporar* Eestrainin% Crder.M3N Eespondent essentiall*pra*ed or the ET& to order the renewal o the &ontract

o :ease +etween the parties or another 5-*ear termcounted rom #e+ruar* 15, 199. Cn even date, the ET&issued a Temporar* Eestrainin% CrderMN preventin%petitioner and all persons actin% on its +ehal romta!in% possession o the entire or an* portion o thesu+=ect propert*, rom administerin% the said propert*,rom collectin% rental pa*ments rom su+-lessees, androm ta!in% an* action a%ainst respondent or thecollection o alle%ed arrears in rental pa*ments untilurther orders rom the trial court.

(n its 0nswer,M5N petitioner contended that its&ontract o :ease with respondent was alread*terminated on #e+ruar* 15, 199, the epiration dateeplicitl* stated under para%raph o the same

0ter the preliminar* hearin%, the ET& issued a"rit o reliminar* (n=unctionM8N a%ainst petitioneron 0pril 3;, 199 upon the postin% +* respondent o a+ond in the amount o 1;;,;;;.;;.















&ontract. etitioner was not +ound to renew the&ontract o :ease with respondent. The renewalprovision under para%raph 17 o the &ontract was not

automatic +ut merel* director* and procedural and that,in an* event, Iela*o, the ormer resident o respondent, alread* conceded to the non-renewal o the&ontract.

etitioner li!ewise invo!ed para%raph 15 o the&ontract o :ease, i.e., its ri%ht to revo!e the said&ontract in case o violation o an* o the provisionsthereo +* respondent. etitioner averred thatrespondent committed the ollowin% violations< /12

respondent ailed to ulll the conditions set orth underpara%raphs and 3 o the &ontract as it did notesta+lish a shoppin% center on the su+=ect propert* anddid not help ease the pro+lems o par!in% con%estion atthe omestic 0irport? /2 respondent su+-leased thesu+=ect propert* in deance o the prohi+ition underpara%raph 18 o the &ontract? and /32 respondent didnot pa* the lease rentals in accordance with para%raphs5 and 13 o the &ontract, thus, incurrin% a totaloutstandin% +alance o 15,871,173.75 as o #e+ruar*

199.

G* wa* o counter-claim, petitioner demandedthat respondent pa* the total outstandin% +alance o itslease rentals or the su+=ect propert* and turn-overlease rentals it had collected rom su+-lessees+e%innin% #e+ruar* 15, 199.

(n an CrderM7N dated Kune 11, 1998, the ET&denied the Cmni+us 4otion o petitioner or the

dissolution o the writ o in=unction and appointment o a receiver or the ruits o the su+=ect propert*? and atthe same time, %ranted the motion o respondent orthe consi%nment o their monthl* lease rentals or thesu+=ect propert* with the ET&.

The ET& terminated the pre-trial proceedin%s in anCrderM@N dated Ccto+er 3, 1997 or ailure o theparties to amica+l* settle the dispute. Thereater, trial

on the merits ensued.

Eespondent presented the testimonies o 4arianoDocom, Kr.,M9N $ladioluz Se%undo,M3;N 4ariano Docom, Sr.,M31N and Eosila 4a+ana%.M3N The ET& admitted all thedocumentar* evidence o respondent in anCrderM33N dated ecem+er 1, 199@.

etitioner, on the other hand, presented the lonetestimon* o their accountin% mana%er, 0rleneGritanico.M3N 0mon% the numerous documents su+mitted+* petitioner as evidence were its own issuancesimposin% various rates or the lease o its properties,which alle%edl* efected an increase in the lease rentalso respondent or the su+=ect propert*, specicall*, 0C

Do. , series o 19@?M35N 0C Do. 1, series o 19@? M38N 0CDo. 1, series o 199;?M37N 0C Do. 1, series o 1993?M3@N Eesolution Do. 9-7,M39N Eesolution Do. 98-3,M;N andEesolution Do. 97-51,M1N all amendin% 0C Do. 1, series o 1993? and 0C Do. 1, series o [email protected] o thedocumentar* evidence o petitioner were admitted +*

3. To accept therental pa*ment consi%ned+* the MrespondentN to thecourt +e%innin% ecem+er



































* p *the ET& in an CrderM3N dated 4a* @, 1999.

(n its ecision dated Ccto+er 9, 1999, the ET&ruled in avor o respondent, disposin% thus<

"JE#CE, =ud%ment is here+*rendered in avor o MrespondentN anda%ainst MpetitionerN.

0ccordin%l*, MpetitionerN is here+*ordered to<

1. $rant renewal o the lease contract or thesame term as stipulated inthe old contract and therental to +e +ased on the

applica+le rate o the timeor renewal?

. To respect andmaintain MrespondentsNpeaceul possession o thepremises?

1991 onward until andater a renewal has +eendul* eecuted +* +oth

parties?

. To pa*MrespondentN as and +*wa* o attorne*s ees thesum o 5;;,;;;.;;? and

5. To pa* the cost o suit.MN

etitioner appealed the ET& =ud%ment +eore the&ourt o 0ppeals and assi%ned these errors<

(. The trial court %ravel* erred in

declarin% that MrespondentN is entitledto a renewal o the contract o lease.

((. The trial court %ravel* erred inorderin% the renewal o the contract o lease despite o the act that it has nole%al authorit* to do so.

(((. The trial court %ravel* erred indeclarin% that MrespondentN did notviolate the terms and conditions o thecontract.

etitioner ar%ues that the renewal o the &ontracto :ease cannot +e made to depend on the sole will o respondent or the same would then +e void or +ein% apotestative condition.







(I. The trial court %ravel* erred indeclarin% that MpetitionersN act o

efectin% the increase in the rentaldurin% the stipulated lietime o thecontract has no valid +asis.

I. The trial court %ravel* erred innot ndin% that MpetitionerN is entitledto its counterclaim.M5N

The &ourt o 0ppeals promul%ated its ecisionon Kanuar* @, ;;, ndin% no reversi+le error in theappealed =ud%ment o the ET& and decreein% as ollows<

"JE#CE, ndin% no reversi+leerror committed +* the trial court, the

instant appeal is here+* (S4(SS, and theassailed decision is here+* 0##(E4.M8N

Jence, the instant etition or Eeview, whereinpetitioner +asicall* attri+uted to the &ourt o 0ppealsthe ver* same errors it assi%ned to the ET&.

"e do not a%ree. 0s we have alread* eplainedin Allied /an2ing Corporation v. Court of Appeals M7N<

0rticle 13;@ o the &ivil &ode epresseswhat is !nown in law as the principle o mutualit* o contracts. (t provides that 'thecontract must +ind +oth the contractin%parties? its validit* or compliance cannot +elet to the will o one o them.' This +indin%

efect o a contract on +oth parties is +asedon the principle that the o+li%ations arisin%rom contracts have the orce o law+etween the contractin% parties, and theremust +e mutualit* +etween them +asedessentiall* on their e)ualit* under which it isrepu%nant to have one part* +ound +* thecontract while leavin% the other reethererom. The ultimate purpose is to rendervoid a contract containin% a condition which

ma!es its ulllment dependent solel* uponthe uncontrolled will o one o thecontractin% parties.

A* ()(ss >g(((*t /g/?(s t( (ss(( t( so( o)t/o* to(*( t( (>s( /s 0(Du(*t >*+ su@J(tto st>tutoB (st/t/o*s, ?>/+ >*+

@/*+/*g o* t( )>t/(s. This option, whichis provided in the same lease a%reement, isundamentall* part o the consideration inthe contract and is no diferent rom an*other provision o the lease carr*in% anunderta!in% on the part o the lessor to act

contract and e)ualit* eists +etween thelessor and the lessee since the* remain withthe same aculties in respect to ulllment.M@N











% pconditioned on the perormance +* thelessee. (t is a purel* eecutor* contract andat most coners a ri%ht to o+tain a renewal i

there is compliance with the conditions onwhich the ri%ht is made to depend. The ri%hto renewal constitutes a part o the lessee>sinterest in the land and orms a su+stantialand inte%ral part o the a%reement.

$( 0>t t>t su o)t/o* /s@/*+/*g o*B o* t( (sso >*+ >* @(((/s(+ o*B @B t( (ss(( +o(s *ot(*+( /t ?o/+ 0o > o0 utu>/tB. A0t( >, t( (sso /s 0(( tog/?( o *ot to g/?( t( o)t/o* to t((ss((. 0nd while the lessee has a ri%ht toelect whether to continue with the lease ornot, once he eercises his option to continueand the lessor accepts, +oth parties arethereater +ound +* the new leasea%reement. Their ri%hts and o+li%ations+ecome mutuall* ed, and the lessee isentitled to retain possession o the propert*or the duration o the new lease, and thelessor ma* hold him lia+le or the rentthereor. The lessee cannot thereaterescape lia+ilit* even i he shouldsu+se)uentl* decide to a+andon thepremises. 4utualit* o+tains in such a

ara%raph 17 o the &ontract o :ease dated 4a*1, 1978 +etween petitioner and respondent solel*%ranted to respondent the option o renewin% the leaseo the su+=ect propert*, the onl* epress re)uirementwas or respondent to noti* petitioner o its decision torenew the lease within 8; da*s prior to the epiration o the ori%inal lease term. (t has not +een disputed thatsaid &ontract o :ease was willin%l* and !nowin%l*entered into +* petitioner and respondent. Thus,petitioner reel* consented to %ivin% respondent theeclusive ri%ht to choose whether or not to renew thelease. 0s we stated in Allied /an2ing, the ri%ht o renewal constitutes a part o the interest o respondent,as lessee, in the su+=ect propert*, and orms asu+stantial and inte%ral part o the lease a%reementwith petitioner. Eecords show that respondent had dul*complied with the onl* condition or renewal underSection 17 o the &ontract o :ease +* noti*in%petitioner 8; da*s prior to the epiration o said&ontract that it chooses to renew the lease. "e cannotnow allow petitioner to ar+itraril* den* respondent o said ri%ht ater havin% previousl* a%reed to the %rant o the same.

)uall* unmeritorious is the assertion o petitionerthat para%raph 17 o the &ontract o :ease dated 4a*1, 1978 merel* provides a procedural +asis or ane%otiation or renewal o the lease and the termsthereo. The eercise +* respondent o its option to

renew the lease need no lon%er +e su+=ect tone%otiations. "e reiterate the point we made in Allied/an2ing that<

M(N we were to adopt the contrar* theor*

(n 0edesma v. Javellana this &ourt wasconronted with a similar pro+lem. (n thatcase the lessee was %iven the sole option torenew the lease, +ut the contract ailed tospeci* the terms and conditions that would%overn the new contract. "hen the lease



M(N we were to adopt the contrar* theor*that the terms and conditions to +eem+odied in the renewed contract were still

su+=ect to mutual a%reement +* and+etween the parties, then the option - whichis an inte%ral part o the consideration orthe contract - would +e renderedworthless. #or then, the lessor could easil*deeat the lessee>s ri%ht o renewal +*simpl* imposin% unreasona+le and onerousconditions to prevent the parties romreachin% an a%reement, as in the case at+ar. 0s in a statute, no word, clause,

sentence, provision or part o a contractshall +e considered surplusa%e orsuperPuous, meanin%less, void, insi%nicantor nu%ator*, i that can +e reasona+l*avoided. To this end, a construction whichwill render ever* word operative is to +epreerred over that which would ma!e somewords idle and nu%ator*.M9N

(n case the lessee chooses to renew the lease +utthere are no specied terms and conditions or the newcontract o lease, the same terms and conditions as theori%inal contract o lease shall continue to %overn, asthe ollowin% surve* o cases in Allied /an2ing wouldshow<

epired, the lessee demanded an etensionunder the same terms and conditions. Thelessor epressed conormit* to the renewal

o the contract +ut reused to accede to theclaim o the lessee that the renewal should+e under the same terms and conditions asthe ori%inal contract. (n sustainin% thelessee, this &ourt made the ollowin%pronouncement<

MiNn the case o Hi2s

v. Manila Hotel Compan# , asimilar issue was resolved +*this &ourt. (t was heldthat su > >us( (>t(s tot( ?(B o*t>t /* / /t/s )>(+, >*+ +o(s *ot)(/t t( +(0(*+>*t u)o*t( (*(> o0 t( o*t>t/* / t( >us( /s 0ou*+,to /*s/st u)o* +/((*t

t(s t>* tos( (@>(+/* t( o*t>t to @((*((+Q and that >st/)u>t/o* to (*( >>Bs(>t(s to t( o*t>t /*/ /t /s 0ou*+ >*+ t(/gts g>*t(+ t((u*+(,u*(ss /t ()(ssB )o?/+(s0o ?>/>t/o*s /* t( t(s o0 t( o*t>t to @( (*((+.

The same principle is upheld in0merican :aw re%ardin% the renewal o lease contracts. (n 5; 0m. Kur. d, Sec. 1159,at p. 5, we nd the ollowin%citations $( u( /s ( (st>@/s(+

$( s(tt(+ u( /s t>t /* >s( o0 u*(t>/*tB >s to t( (>*/*g o0 >)o?/s/o* g>*t/*g (t(*s/o* to >o*t>t o0 (>s(, t( t(*>*t /s t( o*(0>?o(+ >*+ *ot t( >*+o+ >0s a





citations< $( u( /s (-(st>@/s(+t>t > g(*(> o?(*>*t to (*( o(t(*+ > (>s( / >(s *o

)o?/s/o* >s to t( t(s o0 >(*(> o (t(*s/o* /)/(s> (*(> o (t(*s/o* u)o* t( s>(t(s >s )o?/+(+ /* t( o/g/*>(>s(.

(n the lease contract underconsideration, there is no provision toindicate that the renewal will +e su+=ect tonew terms and conditions that the partiesma* *et a%ree upon. (t is to renewalprovisions o lease contracts o the !indpresentl* considered that the principlesstated a+ove s)uarel* appl*. "e do nota%ree with the contention o the appellantsthat i it was intended +* the parties torenew the contract under the sameterms and conditions stipulated inthe contract o lease, such should haveepressl* so stated in thecontract itsel. Thesame ar%ument could easil* +e interposed+* the appellee who could li!ewise contendthat i the intention was to renew thecontract o lease under such new terms andconditions that the parties ma* a%ree upon,the contract should have sospecied. Getween the two assertions, thereis more lo%ic in the latter.

0>?o(+ >*+ *ot t( >*+o+. >0s a%eneral rule, inconstruin% provisions relatin% to renewals or

etensions, where there is an* uncertaint*,the tenant is avored, and not the landlord,+ecause the latter, havin% the power o stipulatin% in his own avor, has ne%lectedto do so? and also upon theprinciple that ever* man>s %rant is to +eta!en most stron%l* a%ainst himsel /5; 0m

Kur. d, Sec. 118, p. @? see also 51 &.K.S.5992.>M5;N /mphases supplied.2

Gein% consistent with the ore%oin% principles, wesustain the interpretation o the ET& o para%raph 17 o the &ontract o :ease dated 4a* 1, 1978 +etweenpetitioner and respondent, to wit<

Mara%raph 17 o the &ontract o :easedated 4a* 1, 1978N admits severalmeanin%s. I* s/)( t(s, t()>s(, i.e., /0 +(s/ous o0 o*t/*u/*g/s (>s(, >B @( s/)B (st>t(+, i.e.,/0 ( >*ts to go o* /t /s (>s(,o*s/+(/*g t( o+ VC%N$INUE /* /ts?(@ 0o o+/*>/B (>*s to go o* /*)(s(*t st>t(, o (?(* (st>t(+ /*>*ot( >B /0 +(s/ous o0 (t(*+/*g

/s (>s(, @(>us( t( o+ Vo*t/*u(/* /ts ?(@ 0o >so (>*s (t(*+u*/0oB. Thus, i we are to adopt theinterpretation o MpetitionerN that thestipulation merel* esta+lished theprocedural +asis or a ne%otiation or

+* Salem to #(>Bo S)ots Co)(,I*. MrespondentN herein on A)/ 29,19;6 /h. C2. $us, o* M>B 14, 19;6,(s)o*+(*t >*+ CAA, )(+((sso-/*-/*t((st o0 )(t/t/o*(, o*u+(+ t((>s( >g(((*t /* Du(st/o* /t >





renewal then the aore)uoted phrase would+e rendered a mere surplusa%e,meanin%less and insi%nicant. Gut i we are

to prod deeper to the ver* contet o theentire stipulations setorth in the contractand rom what is o+vious with respect to theintentions o the contractin% parties +asedon their contemporaneous and su+se)uentacts includin% +ut not limited to thehistorical antecedents o the a%reementthen an interpretation invaria+l* diferentrom that o MpetitionerN +ecomes inevita+le.

Specicall*, the etraneous source o the lease contract in )uestion could +ethe ori%inal and renewed contract o lease+* and +etween S>( I*?(st(*tCo)o>t/o* >*+ CAA the predecessor-in-interest o MpetitionerN eecutedon F(@u>B 1', 196; /h. 42. Ander thesaid lease contract +etween &00 and Salem,

the term is or a period o twent*-ve /52*ears renewa+le or another 5 *ears at theoption o the lessee Salem /h. H-12. :ater,with the approval o &00, Salem transerredits leasehold ri%hts over a portion o theland leased to /*g #(>Bo E)otCo)o>t/o* on S()t(@( 3',19;4 /h. D2 and in turn Iela*o porttranserred its leasehold ri%hts over aportion o the leased land transerred to it

t( (Du/?>(*t to t( u*()/(+)ot/o* o0 t( (>s( @(t((* #(>BoE)ot >*+ CAA.

0s culled rom the transers efectedprior to the 4a* 1, 1978 a%reement o MrespondentN and MpetitionerNs predecessor-in-interest, the renewal o the contract wasclearl* at the option o thelessee. &onsiderin% that there was noevidence positivel* showin% that

MrespondentN and &00 epressl* intendedthe removal o the option or the renewal o the lease contract rom the lessee, it is +utlo%ical to conclude, althou%h the stipulationsetorth in para%raph 17 appears to have+een worded or couched in somewhatuncertain terms, that the parties a%reedthat the option should remain with thelessee. $/s ust @( so @(>us( @>s(+o* t( o*t(t o0 t(/ >g(((*ts >*+

@ost((+ @B t( t(st/o*B o0 M.M>/>*o Noo o0 S>( I*?(st(*t>*+ )>t/u>B Ros/> M>@>*>g, o*(o0 t( s/g*>toB /t*(ss to t( o*t>t>*+ > (t/(+ ()oB(( o0 CAAs L(g>/?/s/o* t( )>t/(s (>B /*t(*+(+ >(*(> 0o t( s>( t( >s /t >st(* t( usu> )>t/( o0 CAA to >?(t( t( o0 (>s(s o* >*+s ((su@st>*t/> >ou*t / @( /*?o?(+ /*

t( o*stut/o* o0 t( /)o?((*tsto @( u*+(t>(* @B t( (ss(( to g/?(> (*(>. (n act, it clearl* appears thatthe ri%ht o renewal constitutes a part o thelessees interest in the land considerin% themultimillion investments it made relative toh i h + ildi d ili i

su+=ect propert*, petitioner insists on its ri%ht to reusethe renewal +ecause o purported violations o the said&ontract +* respondent, particularl*< /12 su+leasin% o the premises? /2 ailure to ease the pro+lems o par!in%con%estion at the omestic 0irport and to provide ashoppin% center and sports acilities, such as an oval

! d i i l d /32 il



the construction o the +uildin% and acilitiesthereon and orms a su+stantial and inte%ralpart o the a%reement.M51N /mphases

supplied.2

(n sum, the renewed contract o lease o thesu+=ect propert* +etween petitioner and respondentshall +e +ased on the same terms and conditions as theori%inal contract o lease. The ori%inal contract o leasedoes not pertain to the &ontract o :ease dated 4a* 1,1978 +etween petitioner and respondent alone, +ut alsoto the &ontract o :ease dated #e+ruar* 15, 1987+etween petitioner /then still called &002 and Salem, aswell as the &ontract o :ease dated Dovem+er 8, 197+etween petitioner and Iela*o port all three contracts+ein% inetrica+l* connected. Since the &ontract o :ease +etween petitioner and Salem was or a term o 5 *ears, then the renewed contract o lease o +etweenpetitioner and respondent shall +e or another term o 5 *ears. This construction o the renewal clause underpara%raph 17 o the &ontract o :ease dated 4a* 1,1978 +etween petitioner and respondent is mostconsistent with the intent o the parties at the time o the eecution o said &ontract and most efectual inimplementin% the same.

(n addition to challen%in% the eclusive ri%ht o respondent to renew the &ontract o :ease over the

trac! and a swimmin% pool? and /32 ailure to pa*monthl* lease rentals in the orm o ro*alties e)uivalentto 16 o the %ross income o respondent or

in accordance with the rates ed in the administrativeorders o petitioner.

"e nd no violations +* the respondent o the&ontract o :ease dated 4a* 1, 1978 as to =usti* therevocation or reusal to renew o said &ontract +*petitioner.

The ET& is once a%ain correct in its construal thatpara%raph 18 o the &ontract o :ease, prohi+itin% thesu+leasin% o the premises, reers onl* to the su+=ectpropert*. "e stress that when the said &ontract waseecuted on 4a* 1, 1978, the premises leased +*petitioner to respondent, and which respondent was notallowed to su+lease, is the su+=ect propert*, i.e., an idlepiece o land with an area o @,@1 s)uare meters. 4oreimportantl*, +ein% the +uilder o the improvements on

the su+=ect propert*, said improvements are owned +*respondent until their turn-over to petitioner at the endo the 5-*ear lease in 199. 0s respondent is notleasin% the improvements rom petitioner, then it is notsu+leasin% the same to third parties.

"hile the &ontract o :ease epressl* o+li%atedrespondent to +uild certain improvements, such as

par!in%, shoppin% mall, and sports acilities, the +elatedinsistence +* petitioner on compliance with the sameappears to +e a mere aterthou%ht.

0rticle 135 o the &ivil &ode states that MwNhen

%ross income o respondent, whichever is hi%her. 0t thever* +e%innin% o the lease, respondent had +eenpa*in% monthl* lease rentals +ased on the rates ed+* 0C Do. , series o 197;, which amountedto ,;5.5 per month. "hen re)uested, respondentsu+mitted to petitioner its %ross income statements, so

titi ld ll t th 16





c e 35 o e & &ode s a es a M N ethe o+li%ee accepts the perormance, !nowin% itsincompleteness or irre%ularit*, and without epressin%

an* protest or o+=ection, the o+li%ation is deemed ull*complied with.

0s aptl* o+served +* the ET&, para%raphs 9 and1; o the &ontract o :ease li!ewise epressl* re)uirerespondent to su+mit, or )/o >))o?> +* petitioner,all construction plans on the su+=ect propert*? and tocomplete the contemplated improvementsthereon /t/* > B(>. The &ontract o :ease was

eecuted on 4a* 1, 1978, and the one-*ear periodepired on 4a* 1, 1977. Het, petitioner did not re%isteran* protest or o+=ection to the alle%ed incompletenesso or irre%ularit* in the perormance +* respondent o itso+li%ation to +uild and develop improvements on thesu+=ect propert*. (n act, upon the epiration o theori%inal 5-*ear lease period in #e+ruar* 199,petitioner was alread* read* and willin% to accept andappropriate as its own the improvements +uilt on thesu+=ect propert* in 199.etitioner onl* raised the issue

o the purported incompletenessirre%ularit* o the saidimprovements when it was +rou%ht to court +*respondent or reusin% to renew the lease.

Kust as the ET& ad=ud%ed, no ault could +eattri+uted to respondent or decient pa*ment o leaserentals. :ease rentals were +ased on either the ratesed +* 0C Do. , series o 197;, or 16 o the monthl*

petitioner could ver* well compute the 16ro*alt*. Jowever, petitioner continued to char%erespondent onl* ,;5.5 monthl* lease rental, which

the latter aithull* paid.

etitioner later demanded an increase in leaserentals +ased on su+se)uent administrative issuancesraisin% the rates or the rental o its properties. Gut theET& ound that the adverted administrative orders werenot pu+lished in ull, thus, the same were le%all* invalidwithin the contet o 0rticle o the &ivil &ode which

provides that MlNaws shall ta!e efect ater teen da*sollowin% the completion o their pu+lication in theCBcial $azette, unless it is otherwise provided. (n5aada v. 5uvera,M5N we enunciated that pu+lication isindispensa+le in order that all statutes, includin%administrative rules that are intended to enorce orimplement eistin% laws, attain +indin% orce and efect,to wit<

"e hold thereore that all statutes,includin% those o local application andprivate laws, shall +e pu+lished as acondition or their efectivit*, which shall+e%in teen da*s ater pu+lication unless adiferent efectivit* date is ed +* thele%islature.

&overed +* this rule are presidentialdecrees and eecutive orders promul%ated +*the resident in the eercise o le%islativepowers whenever the same are validl*dele%ated +* the le%islature or, at present,directl* conerred +* the& tit ti 0d i i t ti l d

avor ust >?( (/(+ o >t(+ o* su()(s(*t>t/o*s. Said article provides<

0rt. 131. Throu%hestoppel an admission or





&onstitution. 0dministrative rules andre%ulations must also +e pu+lished i theirpurpose is to enorce or implement eistin%

law pursuant also to a valid dele%ation.M53N

There is no +asis or the ar%ument o petitionerthat the validit* o its administrative orders cannot +ecollaterall* attac!ed. To the contrar*, we havepreviousl* declared that a part* ma* raise theunconstitutionalit* or invalidit* o an administrativere%ulation on ever* occasion that said re%ulation is+ein% enorced.M5N Since it is petitioner which rstinvo!ed its administrative orders to =usti* the increasein lease rentals o respondent, then respondent ma*raise +eore the court the invalidit* o saidadministrative orders on the %round o non-pu+licationthereo.

#inall*, petitioner cannot oppose the renewal o the lease +ecause o estoppel. Cur ollowin% dis)uisitionin Kalalo v. 0uz M55N is relevant herein<

Ander 0rticle 131 o the &ivil &ode, inorder that estoppel ma* appl* the person,to whom representations have +een madeand who claims the estoppel in his

pprepresentation is renderedconclusive upon the person

ma!in% it, and cannot +e deniedor disproved as a%ainst theperson rel*in% thereon.

0n essential element o estoppel isthat t( )(so* /*?o/*g /t >s @((*/*u(*(+ >*+ >s (/(+ o* t(()(s(*t>t/o*s o o*+ut o0 t()(so* sougt to @( (sto))(+, and this

element is wantin% in the instant case.(n Cristo"al vs. !omez , this &ourt held thatno estoppel +ased on a document can +einvo!ed +* one who has not +een misled +*the alse statements contained therein. 0ndin Repu"li of t'e 8'ilippines vs. !aria, et al., this &ourt ruled that there is no estoppelwhen the statement or action invo!ed as its+asis did not mislead the adversepart*. stoppel has +een characterized as

harsh or odious, and not avored inlaw. "hen misapplied, estoppel +ecomes amost efective weapon to accomplish anin=ustice, inasmuch as it shuts a man>smouth rom spea!in% the truth and de+arsthe truth in a particular case. stoppelcannot +e sustained +* mere ar%ument ordou+tul inerence? /t ust @( (>B)o?(+ /* > /ts (ss(*t/> (((*ts @B

(>, o*?/*/*g >*+ s>t/s0>toB(?/+(*(. Do part* should +e precludedrom ma!in% out his case accordin% to itstruth unless +* orce o some positiveprinciple o law, and, conse)uentl*, estoppelin pais must +e applied strictl* and shouldnot +e enorced unless su+stantiated in

(ndeed, Iela*os :etters dated 4arch 3 and 1;,199 to petitioner ma* have alread* epressedac)uiescence to the non-renewal o the lease and turn-









not +e enorced unless su+stantiated inever* particular.

The essential elements o estoppel in pais ma* +e considered in relation to thepart* sou%ht to +e estopped, and in relationto the part* invo!in% the estoppel in hisavor. 0s related to the part* to +eestopped, the essential elements are< /12conduct amountin% to alse representationor concealment o material acts? or at least

calculated to conve* the impression that theacts are otherwise than, and inconsistentwith, those which the part* su+se)uentl*attempts to assert? /2 intent, or at leastepectation that his conduct shall +e actedupon +*, or at least inPuence, the otherpart*? and /32 !nowled%e, actual orconstructive, o the real acts. As (>t(+to t( )>tB >//*g t( (sto))(, t((ss(*t/> (((*ts >( 81 > o0

*o(+g( >*+ o0 t( (>*s o0 *o(+g( o0 t( tut >s t( 0>ts /*Du(st/o*sQ 82 (/>*(, /* goo+ 0>/t,u)o* t( o*+ut o st>t((*ts o0 t()>tB to @( (sto))(+Q 83 >t/o* o/*>t/o* @>s(+ t((o* o0 su>>t( >s to >*g( t( )os/t/o* ost>tus o0 t( )>tB >//*g t((sto))(, to /s /*JuB, +(t/(*t o)(Ju+/(.M58N /mphases ours.2

)over o the improvements on the su+=ect propert* topetitioner. Gut not lon% thereater, 0lomesen, the new

resident o respondent, alread* wrote another :etterdated 4arch 5, 199, which revo!ed Iela*os earlier:etters or havin% +een sent without authorit* o theGoard o irectors o respondent, insisted on therenewal o the lease, and tendered pa*ment o past duelease rentals. Eespondent, throu%h 0lomesen, timel*acted to correct Iela*os mista!es. (n the 15-da* interval+etween Iela*os :etter dated 4arch 1;, 199 and0lomesens :etter dated 4arch 5, 199, there is noshowin% that petitioner, rel*in% in %ood aith on Iela*os

:etters, acted or did not act as to have caused it in=ur*,detriment, or pre=udice. There is an utter lac! o clear,convincin%, and satisactor* evidence on the part o petitioner, as the part* claimin% estoppel, o the secondand third elements or the application o said principlea%ainst respondent.

WHEREF%RE, the instant etition ishere+* ENIE or lac! o merit. The ecision

dated Kanuar* @, ;; o the &ourt 0ppeals in &0-$.E.&I Do. 8@7@7, which aBrmed the ecisiondated Ccto+er 9, 1999 o Granch 111 o the ET& o asa* &it* in &ivil &ase Do. @@7, is here+* AFFIRME.

G.R. No. 2'6&'6 u*( 25, 2'14

ARC% PULP AN PAPER C%., INC. >*+ CANIA A.SAN$%S, etitioners,

vs.

AN $. LIM, +o/*g @us/*(ss u*+( t( *>( >*+stB( o0 UALI$" PAPERS T PLAS$IC PR%UC$SEN$ERPRISES, Eespondent

an T. :im wor!s in the +usiness o suppl*in% scrap

papers, cartons, and other raw materials, under the

name ualit* aper and lastic roducts, nterprises, to

actories en%a%ed in the paper mill +usiness. #rom

#e+ruar* ;;7 to 4arch ;;7, he delivered scrap papers

worth 7 ; 98@ 31 to 0rco ulp and aper &ompan*







EN$ERPRISES, Eespondent.

& ( S ( C D

LE%NEN, J.:

Dovation must +e stated in clear and une)uivocal terms

to etin%uish an o+li%ation. (t cannot +e presumed and

ma* +e implied onl* i the old and new contracts are

incompati+le on ever* point.

Geore us is a petition or review on certiorari1 assailin%

the &ourt o 0ppealsR decision in &0-$.E. &I Do. 957;9,which stemmed rom a complaint3 led in the Ee%ional

Trial &ourt o Ialenzuela &it*, Granch 171, or collection

o sum o mone*.

The acts are as ollows<

worth 7,;,[email protected] to 0rco ulp and aper &ompan*,

(nc. /0rco ulp and aper2 throu%h its &hie ecutive

CBcer and resident, &andida 0. Santos.5 The parties

alle%edl* a%reed that 0rco ulp and aper would eitherpa* an T. :im the value o the raw materials or deliver

to him their nished products o e)uivalent value.8

an T. :im alle%ed that when he delivered the raw

materials, 0rco ulp and aper issued a post-dated

chec! dated 0pril 1@, ;;77 in the amount o

1,@7,788.8@ as partial pa*ment, with the assurance

that the chec! would not +ounce.@ "hen he deposited

the chec! on 0pril 1@, ;;7, it was dishonored or +ein%

drawn a%ainst a closed account.9

Cn the same da*, 0rco ulp and aper and a certain ric

S* eecuted a memorandum o a%reement1; where 0rco

ulp and aper +ound themselves to deliver their

nished products to 4e%apac! &ontainer &orporation,

owned +* ric S*, or his account. 0ccordin% to the

memorandum, the raw materials would +e supplied +*an T. :im, throu%h his compan*, ualit* aper and

lastic roducts. The memorandum o a%reement reads

as ollows<



4r. ric S* that 0E&C will deliver 8;; tons Test :iner

15;175 $S4, ull width 78 inches at the price o [email protected];

per !%. to 4e%apac! &ontainer or 4r. ric S*Rs account.

Schedule o deliveries are as ollows<

. . . .

(t has +een a%reed urther that the :ocal C&& materials

an T. :im appealed1@ the =ud%ment with the &ourt o

0ppeals. 0ccordin% to him, novation did not ta!e place

since the memorandum o a%reement +etween 0rco

ulp and aper and ric S* was an eclusive and private

a%reement +etween them. Je ar%ued that i his name

was mentioned in the contract, it was onl* or suppl*in%























to +e used or the production o the a+ove Test :iners

will +e supplied +* ualit* aper Y lastic roducts nt.,

total o 8;; 4etric Tons at 8.5; per !%. /price su+=ectto chan%e per advance notice2. uantit* o :ocal C&&

deliver* will +e +ased on the )uantit* o Test :iner

delivered to 4e%apac! &ontainer &orp. +ased on the

a+ove production schedule.11

Cn 4a* 5, ;;7, an T.:im sent a letter1 to 0rco ulp

and aper demandin% pa*ment o the amount o

7,;,[email protected], +ut no pa*ment was made to him.13

an T. :im led a complaint1 or collection o sum o

mone* with pra*er or attachment with the Ee%ional

Trial &ourt, Granch 171, Ialenzuela &it*, on 4a* @,

;;7. 0rco ulp and aper led its answer15 +ut ailed to

have its representatives attend the pre-trial hearin%.

Jence, the trial court allowed an T. :im to present his

evidence e parte.18

Cn Septem+er 19, ;;@, the trial court rendered a

=ud%ment in avor o 0rco ulp and aper and dismissed

the complaint, holdin% that when 0rco ulp and aper

and ric S* entered into the memorandum o

a%reement, novation too! place, which etin%uished

0rco ulp and aperRs o+li%ation to an T. :im.17

was mentioned in the contract, it was onl* or suppl*in%

the parties their re)uired scrap papers, where his

conormit* throu%h a separate contract was

indispensa+le.19

Cn Kanuar* 11, ;13, the &ourt o 0ppeals; rendered a

decision1 reversin% and settin% aside the =ud%ment

dated Septem+er 19, ;;@ and orderin% 0rco ulp and

aper to =ointl* and severall* pa* an T. :im the amount

o7,;,[email protected] with interest at 16 per annum rom

the time o demand? 5;,;;;.;; moral

dama%es? 5;,;;;.;; eemplar* dama%es?

and 5;,;;;.;; attorne*Rs ees.

The appellate court ruled that the acts and

circumstances in this case clearl* showed the eistence

o an alternative o+li%ation.3 (t also ruled that an T.

:im was entitled to dama%es and attorne*Rs ees due to

the +ad aith ehi+ited +* 0rco ulp and aper in not

honorin% its underta!in%.

(ts motion or reconsideration5 havin% +een

denied,8 0rco ulp and aper and its resident and

&hie ecutive CBcer, &andida 0. Santos, +rin% this

petition or review on certiorari.

Cn one hand, petitioners ar%ue that the eecution o the

memorandum o a%reement constituted a novation o

the ori%inal o+li%ation since ric S* +ecame the new

de+tor o respondent. The* also ar%ue that there is no

le%al +asis to hold petitioner &andida 0. Santos

personall* lia+le or the transaction that petitioner

corporation entered into with respondent. The &ourt o

0ppeals, the* alle%e, also erred in awardin% moral and

eemplar* dama%es and attorne*Rs ees to respondent

. "hether &andida 0. Santos was solidaril* lia+le

with 0rco ulp and aper &o., (nc.

3. "hether moral dama%es, eemplar* dama%es,

and attorne*Rs ees can +e awarded

































eemplar* dama%es and attorne* s ees to respondent

who did not show proo that he was entitled to

dama%es.7

Eespondent, on the other hand, ar%ues that the &ourt o

0ppeals was correct in rulin% that there was no proper

novation in this case. Je ar%ues that the &ourt o

0ppeals was correct in orderin% the pa*ment o

7,;,[email protected] with dama%es since the de+t o petitioners

remains unpaid.@ Je also ar%ues that the &ourt o

0ppeals was correct in holdin% petitioners solidaril*

lia+le since petitioner &andida 0. Santos was 'the prime

mover or such outstandin% corporate lia+ilit*.'9 (n their

repl*, petitioners reiterate that novation too! place

since there was nothin% in the memorandum o

a%reement showin% that the o+li%ation was alternative.

The* also ar%ue that when respondent allowed them to

deliver the nished products to ric S*, the ori%inal

o+li%ation was novated.3;

0 re=oinder was su+mitted +* respondent, +ut it wasnoted without action in view o 0.4. Do. 99--;-S&

dated Dovem+er 1, ;;;.31

The issues to +e resolved +* this court are as ollows<

1. "hether the o+li%ation +etween the parties was

etin%uished +* novation

The petition is denied.

The o+li%ation +etween theparties was an alternative

o+li%ation

The rule on alternative o+li%ations is %overned +* 0rticle

1199 o the &ivil &ode, which states<

0rticle 1199. 0 person alternativel* +ound +* diferent

prestations shall completel* perorm one o them.

The creditor cannot +e compelled to receive part o one

and part o the other underta!in%.

'(n an alternative o+li%ation, there is more than one

o+=ect, and the ulllment o one is suBcient,

determined +* the choice o the de+tor who %enerall*

has the ri%ht o election.'3 The ri%ht o election is

etin%uished when the part* who ma* eercise that

option cate%oricall* and une)uivocall* ma!es his or herchoice !nown.33

The choice o the de+tor must also +e communicated to

the creditor who must receive notice o it since< The

o+=ect o this notice is to %ive the creditor . . .

opportunit* to epress his consent, or to impu%n the

election made +* the de+tor, and onl* ater said notice

shall the election ta!e le%al efect when consented +*

the creditor, or i impu%ned +* the latter, when declared

proper +* a competent court.3

0ccordin% to the actual ndin%s o the trial court and

the appellate court, the ori%inal contract +etween the

etin%uishin% the option to deliver the nished products

o e)uivalent value to respondent.

The memorandum o

a%reement did not constitute

a novation o the ori%inal



















pp %

parties was or respondent to deliver scrap papers

worth 7,;,[email protected] to petitioner 0rco ulp and aper.

The pa*ment or this deliver* +ecame petitioner 0rcoulp and aperRs o+li%ation. G* a%reement, petitioner

0rco ulp and aper, as the de+tor, had the option to

either /12 pa* the price or/2 deliver the nished

products o e)uivalent value to respondent.35

The appellate court, thereore, correctl* identied the

o+li%ation +etween the parties as an alternative

o+li%ation, where+* petitioner 0rco ulp and aper, ater

receivin% the raw materials rom respondent, would

either pa* him the price o the raw materials or, in the

alternative, deliver to him the nished products o

e)uivalent value.

"hen petitioner 0rco ulp and aper tendered a chec!

to respondent in partial pa*ment or the scrap papers,

the* eercised their option to pa* the price.

EespondentRs receipt o the chec! and his su+se)uent

act o depositin% it constituted his notice o petitioner

0rco ulp and aperRs option to pa*.

This choice was also shown +* the terms o the

memorandum o a%reement, which was eecuted on the

same da*. The memorandum declared in clear terms

that the deliver* o petitioner 0rco ulp and aperRs

nished products would +e to a third person, there+*

%

contract

The trial court erroneousl* ruled that the eecution othe memorandum o a%reement constituted a novation

o the contract +etween the parties. "hen petitioner

0rco ulp and aper opted instead to deliver the

nished products to a third person, it did not novate the

ori%inal o+li%ation +etween the parties.

The rules on novation are outlined in the &ivil &ode,

thus<

0rticle 191. C+li%ations ma* +e modied +*<

/12 &han%in% their o+=ect or principal conditions?

/2 Su+stitutin% the person o the de+tor?

/32 Su+ro%atin% a third person in the ri%hts o the

creditor. /1;32

0rticle 19. (n order that an o+li%ation ma* +e

etin%uished +* another which su+stitute the same, it is

imperative that it +e so declared in une)uivocal terms,

or that the old and the new o+li%ations +e on ever*

point incompati+le with each other. /1;2

0rticle 193. Dovation which consists in su+stitutin% a




a*ment +* the new de+tor %ives him the ri%hts

mentioned in 0rticles 138 and 137. /1;5a2

does not come rom F and ma* even +e made without

the !nowled%e o F the de+tor, since it consists o a

third personRs assumption o the o+li%ation. 0s such, it








/ 2

Dovation etin%uishes an o+li%ation +etween two

parties when there is a su+stitution o o+=ects or de+torsor when there is su+ro%ation o the creditor. (t occurs

onl* when the new contract declares so 'in une)uivocal

terms' or that 'the old and the new o+li%ations +e on

ever* point incompati+le with each other.'38

Dovation was etensivel* discussed +* this court in

$arcia v. :lamas<37

Dovation is a mode o etin%uishin% an o+li%ation +*chan%in% its o+=ects or principal o+li%ations, +*


su+ro%atin% a third person to the ri%hts o the creditor.

0rticle 193 o the &ivil &ode denes novation as

ollows<

'0rt. 193. Dovation which consists in su+stitutin% a





in articles 138 and 137.'


person o the de+tor< /12 epromision and /2

dele%acion. (n epromision, the initiative or the chan%e

p , p


consent o these three persons are necessar*. Goth

modes o su+stitution +* the de+tor re)uire the consento the creditor.



creation o a new one that ta!es the place o the ormer.

(t is merel* modicator* when the old o+li%ation


the amendator* a%reement. "hether etinctive or

modicator*, novation is made either +* chan%in% the

o+=ect or the principal conditions, reerred to as



o the creditor, an act !nown as su+=ective or personal

novation. #or novation to ta!e place, the ollowin%

re)uisites must concur<


2 The parties concerned must a%ree to a new

contract.


2 There must +e a valid new contract.

Dovation ma* also +e epress or implied. (t is epress

when the new o+li%ation declares in une)uivocal terms

that the old o+li%ation is etin%uished. (t is implied when

the new o+li%ation is incompati+le with the old one on

ever* point. The test o incompati+ilit* is whether the

two o+li%ations can stand to%ether, each one with its

the parties to novate the old a%reement.; /mphasis

supplied2

(n this case, respondent was not priv* to the

memorandum o a%reement, thus, his conormit* to the

contract need not +e secured. This is clear rom the rst









% %

own independent eistence.3@ /mphasis supplied2

Gecause novation re)uires that it +e clear andune)uivocal, it is never presumed, thus<

(n the civil law settin%, novatio is literall* construed as

to ma!e new. So it is deepl* rooted in the Eoman :aw

=urisprudence, the principle F novatio non praesumitur

Fthat novation is never presumed.0t +ottom, or

novation to+e a =ural realit*, its animus must +e ever

present, de+itum pro de+ito F +asicall* etin%uishin%

the old o+li%ation or the new one.39 /mphasis supplied2

There is nothin% in the memorandum o a%reement that

states that with its eecution, the o+li%ation o

petitioner 0rco ulp and aper to respondent would +e

etin%uished. (t also does not state that ric S*

somehow su+stituted petitioner 0rco ulp and aper as

respondentRs de+tor. (t merel* shows that petitioner

0rco ulp and aper opted to deliver the nished

products to a third person instead.

The consent o the creditor must also +e secured or the

novation to +e valid<

Dovation must +e epressl* consented to. 4oreover, the

conPictin% intention and acts o the parties underscore

the a+sence o an* epress disclosure or circumstances

with which to deduce a clear and une)uivocal intent +*

line o the memorandum, which states<

er meetin% held at 0E&C, 0pril 1@, ;;7, it has +eenmutuall* a%reed +etween 4rs. &andida 0. Santos and

4r. ric S*. . . .1

( the memorandum o a%reement was intended to

novate the ori%inal a%reement +etween the parties,

respondent must have rst a%reed to the su+stitution o

ric S* as his new de+tor. The memorandum o

a%reement must also state in clear and une)uivocal

terms that it has replaced the ori%inal o+li%ation opetitioner 0rco ulp and aper to respondent. Deither o

these circumstances is present in this case.

etitioner 0rco ulp and aperRs act o tenderin% partial

pa*ment to respondent also conPicts with their alle%ed

intent to pass on their o+li%ation to ric S*. "hen

respondent sent his letter o demand to petitioner 0rco

ulp and aper, and not to ric S*, it showed that the

ormer neither ac!nowled%ed nor consented to the

latter as his new de+tor. These acts, when ta!en

to%ether, clearl* show that novation did not ta!e place.

Since there was no novation, petitioner 0rco ulp and

aperRs o+li%ation to respondent remains valid and

eistin%. etitioner 0rco ulp and aper, thereore, must

still pa* respondent the ull amount o 7,;,[email protected].

etitioners are lia+le or

dama%es

Ander 0rticle ; o the &ivil &ode, moral dama%es

ma* +e awarded in case o +reach o contract where the

+reach is due to raud or +ad aith<

is the proimate cause o the in=ur* sustained +* the

claimant? and /2 ourth, the award o dama%es is

predicated on an* o the cases stated in 0rticle 19 o

the &ivil &ode.3

Jere, the in=ur* sufered +* respondent is the loss











0rt. ;. "illull in=ur* to propert* ma* +e a le%al

%round or awardin% moral dama%es i the court shouldnd that, under the circumstances, such dama%es are

=ustl* due. The same rule applies to +reaches o

contract where the deendant acted raudulentl* or in

+ad aith. /mphasis supplied2

4oral dama%es are not awarded as a matter o ri%ht +ut

onl* ater the part* claimin% it proved that the +reach

was due to raud or +ad aith. 0s this court stated<

4oral dama%es are not recovera+le simpl* +ecause a

contract has +een +reached. The* are recovera+le onl*

i the part* rom whom it is claimed acted raudulentl*

or in +ad aith or in wanton disre%ard o his contractual

o+li%ations. The +reach must +e wanton, rec!less,

malicious or in +ad aith, and oppressive or a+usive.

#urther, the ollowin% re)uisites must +e proven or the

recover* o moral dama%es<

0n award o moral dama%es would re)uire certain

conditions to +e met, to wit< /12rst, there must +e an

in=ur*, whether ph*sical, mental or ps*cholo%ical,

clearl* sustained +* the claimant? /2 second, there

must +e culpa+le act or omission actuall* esta+lished?

/32 third, the wron%ul act or omission o the deendant

o 7,;,[email protected] rom his +usiness. This has remained

unpaid since ;;7. This in=ur* undou+tedl* was caused

+* petitioner 0rco ulp and aperRs act o reusin% topa* its o+li%ations.

"hen the o+li%ation +ecame due and demanda+le,

petitioner 0rco ulp and aper not onl* issued an

ununded chec! +ut also entered into a contract with a

third person in an efort to evade its lia+ilit*. This proves

the third re)uirement.

0s to the ourth re)uisite, 0rticle 19 o the &ivil &odeprovides that moral dama%es ma* +e awarded in the

ollowin% instances<

0rticle 19. 4oral dama%es ma* +e recovered in the

ollowin% and analo%ous cases<

/12 0 criminal ofense resultin% in ph*sical in=uries?

/2 uasi-delicts causin% ph*sical in=uries?

/32 Seduction, a+duction, rape, or other lascivious

acts?

/2 0dulter* or concu+ina%e?

/52 (lle%al or ar+itrar* detention or arrest?

/82 (lle%al search?

/72 :i+el, slander or an* other orm o deamation?

/@2 4alicious prosecution?

/92 0cts mentioned in 0rticle 3;9

0rticle ;. ver* person who, contrar* to law, wilull* or

ne%li%entl* causes dama%e to another, shall indemni*

the latter or the same.

0rticle 1.0n* person who wilull* causes loss or in=ur*

to another in a manner that is contrar* to morals, %ood





/92 0cts mentioned in 0rticle 3;9?

/1;2 0cts and actions reerred to in 0rticles 1, 8,7, @, 9, 3;, 3, 3, and 35.

Greaches o contract done in +ad aith, however, are not

specied within this enumeration. "hen a part*

+reaches a contract, he or she %oes a%ainst 0rticle 19 o

the &ivil &ode, which states< 0rticle 19. ver* person

must, in the eercise o his ri%hts and in the

perormance o his duties, act with =ustice, %ive

ever*one his due, and o+serve honest* and %ood aith.

ersons who have the ri%ht to enter into contractual

relations must eercise that ri%ht with honest* and %ood

aith. #ailure to do so results in an a+use o that ri%ht,

which ma* +ecome the +asis o an action or dama%es.

0rticle 19, however, cannot +e its sole +asis<

0rticle 19 is the %eneral rule which %overns the conduct

o human relations. G* itsel, it is not the +asis o anactiona+le tort. 0rticle 19 descri+es the de%ree o care

re)uired so that an actiona+le tort ma* arise when it is

alle%ed to%ether with 0rticle ; or 0rticle 1.

0rticle ; and 1 o the &ivil &ode are as ollows<

customs or pu+lic polic* shall compensate the latter or

the dama%e.

To +e actiona+le, 0rticle ; re)uires a violation o law,

while 0rticle 1 onl* concerns with lawul acts that are

contrar* to morals, %ood customs, and pu+lic polic*<

0rticle ; concerns violations o eistin% law as +asis or

an in=ur*. (t allows recover* should the act have +een

willul or ne%li%ent. "illul ma* reer to the intention to

do the act and the desire to achieve the outcome which

is considered +* the plaintif in tort action as in=urious.De%li%ence ma* reer to a situation where the act was

consciousl* done +ut without intendin% the result which

the plaintif considers as in=urious.

0rticle 1, on the other hand, concerns in=uries that ma*

+e caused +* acts which are not necessaril* proscri+ed

+* law. This article re)uires that the act +e willul, that

is, that there was an intention to do the act and a desire

to achieve the outcome. (n cases under 0rticle 1, the

le%al issues revolve around whether such outcome

should +e considered a le%al in=ur* on the part o the

plaintif or whether the commission o the act was done

in violation o the standards o care re)uired in 0rticle

19.5

"hen parties act in +ad aith and do not aithull*

compl* with their o+li%ations under contract, the* run

the ris! o violatin% 0rticle 1159 o the &ivil &ode<

0rticle 1159. C+li%ations arisin% rom contracts have the

orce o law +etween the contractin% parties and should

+reach o !nown dut* throu%h some motive or interest

or ill will that parta!es o the nature o raud. (t is,

thereore, a )uestion o intention, which can +e inerred

rom oneRs conduct andor contemporaneous

statements.7 /mphasis supplied2









+e complied with in %ood aith.

0rticle 19, thereore, is not an ehaustive list o theinstances where moral dama%es ma* +e recovered

since it onl* species, amon% others, 0rticle 1. "hen a

part* rene%es on his or her o+li%ations arisin% rom

contracts in +ad aith, the act is not onl* contrar* to

morals, %ood customs, and pu+lic polic*? it is also a

violation o 0rticle 1159. Greaches o contract +ecome

the +asis o moral dama%es, not onl* under 0rticle

;, +ut also under 0rticles 19 and ; in relation to

0rticle 1159.

4oral dama%es, however, are not recovera+le on the

mere +reach o the contract. 0rticle ; re)uires that

the +reach +e done raudulentl* or in +ad aith. (n

0driano v. :asala<8

To recover moral dama%es in an action or +reach o

contract, the +reach must +e palpa+l* wanton, rec!less

and malicious, in +ad aith, oppressive, or a+usive.

Jence, the person claimin% +ad aith must prove its

eistence +* clear and convincin% evidence or the law

alwa*s presumes %ood aith.

Gad aith does not simpl* connote +ad =ud%ment or

ne%li%ence. (t imports a dishonest purpose or some

moral o+li)uit* and conscious doin% o a wron%, a

Since a ndin% o +ad aith is %enerall* premised on the

intent o the doer, it re)uires an eamination o the

circumstances in each case.

"hen petitioner 0rco ulp and aper issued a chec! in

partial pa*ment o its o+li%ation to respondent, it was

presuma+l* with the !nowled%e that it was +ein% drawn

a%ainst a closed account. "orse, it attempted to shit

their o+li%ations to a third person without the consent o

respondent.

etitioner 0rco ulp and aperRs actions clearl* show 'adishonest purpose or some moral o+li)uit* and

conscious doin% o a wron%, a +reach o !nown dut*

throu%h some motive or interest or ill will that parta!es

o the nature o raud.'@ 4oral dama%es ma*, thereore,

+e awarded.

emplar* dama%es ma* also +e awarded. Ander the

&ivil &ode, eemplar* dama%es are due in the ollowin%

circumstances<

0rticle 3. (n contracts and )uasi-contracts, the court

ma* award eemplar* dama%es i the deendant acted

in a wanton, raudulent, rec!less, oppressive, or

malevolent manner.

0rticle 33. emplar* dama%es cannot +e recovered

as a matter o ri%ht? the court will decide whether or not

the* should +e ad=udicated.

0rticle 3. "hile the amount o the eemplar*

dama%es need not +e proven, the plaintif must show

insult or raud or %ross raudFthat intensies the in=ur*.

The terms punitive or vindictive dama%es are oten used

to reer to those species o dama%es that ma* +e

awarded a%ainst a person to punish him or his

outra%eous conduct. (n either case, these dama%es are

intended in %ood measure to deter the wron%doer and







that he is entitled to moral, temperate or compensator*

dama%es +eore the court ma* consider the )uestion o

whether or not eemplar* dama%es should +e awarded.

(n Tan!eh v. evelopment Gan! o the hilippines,9 we

stated that<

The purpose o eemplar* dama%es is to serve as a

deterrent to uture and su+se)uent parties rom the

commission o a similar ofense. The case o eople v.

Eantecitin% eople v. alisa* held that<

0lso !nown as UpunitiveR or UvindictiveR dama%es,

eemplar* or corrective dama%es are intended to serve

as a deterrent to serious wron% doin%s, and as a

vindication o undue suferin%s and wanton invasion o

the ri%hts o an in=ured or a punishment or those %uilt*

o outra%eous conduct. These terms are %enerall*, +ut

not alwa*s, used interchan%ea+l*. (n common law, there

is preerence in the use o eemplar* dama%es when

the award is to account or in=ur* to eelin%s and or the

sense o indi%nit* and humiliation sufered +* a person

as a result o an in=ur* that has +een maliciousl* and

wantonl* inPicted, the theor* +ein% that there should +e

compensation or the hurt caused +* the hi%hl*

reprehensi+le conduct o the deendantFassociated

with such circumstances as willulness, wantonness,

malice, %ross ne%li%ence or rec!lessness, oppression,

others li!e him rom similar conduct in the

uture.5; /mphasis supplied? citations omitted2

The re)uisites or the award o eemplar* dama%es are

as ollows<

/12 the* ma* +e imposed +* wa* o eample in

addition to compensator* dama%es, and onl* ater

the claimant>s ri%ht to them has +een esta+lished?

/2 that the* cannot +e recovered as a matter o

ri%ht, their determination dependin% upon theamount o compensator* dama%es that ma* +e

awarded to the claimant? and

/32 the act must +e accompanied +* +ad aith or

done in a wanton, raudulent, oppressive or

malevolent manner.51

Gusiness owners must alwa*s +e orthri%ht in their

dealin%s. The* cannot +e allowed to rene%e on theiro+li%ations, considerin% that these o+li%ations were

reel* entered into +* them. emplar* dama%es ma*

also +e awarded in this case to serve as a deterrent to

those who use raudulent means to evade their

lia+ilities.

Since the award o eemplar* dama%es is proper,

attorne*Rs ees and cost o the suit ma* also +e

recovered.

0rticle ;@ o the &ivil &ode states<

0rticle ;@ (n the a+sence o stipulation attorne*>s

or an ille%al act, or as a vehicle or the evasion o an

eistin% o+li%ation, the circumvention o statutes, or to

conuse le%itimate issues.

. . . .










0rticle ;@. (n the a+sence o stipulation, attorne*>s

ees and epenses o liti%ation, other than =udicial costs,

cannot +e recovered, ecept<

/12 "hen eemplar* dama%es are awardedM.N

etitioner &andida 0. Santos

is solidaril* lia+le with

petitioner corporation

etitioners ar%ue that the ndin% o solidar* lia+ilit* was

erroneous since no evidence was adduced to prove that

the transaction was also a personal underta!in% opetitioner Santos. "e disa%ree.

(n Jeirs o #e Tan A* v. (nternational chan%e

Gan!,5 we stated that<

Gasic is the rule in corporation law that a corporation is

a =uridical entit* which is vested with a le%al personalit*

separate and distinct rom those actin% or and in its

+ehal and, in %eneral, rom the people comprisin% it.#ollowin% this principle, o+li%ations incurred +* the

corporation, actin% throu%h its directors, oBcers and

emplo*ees, are its sole lia+ilities. 0 director, oBcer or

emplo*ee o a corporation is %enerall* not held

personall* lia+le or o+li%ations incurred +* the

corporation. Devertheless, this le%al ction ma* +e

disre%arded i it is used as a means to perpetrate raud


personall* lia+le or corporate o+li%ations, however, the

ollowin% re)uisites must concur< /12 the complainantmust alle%e in the complaint that the director or oBcer

assented to patentl* unlawul acts o the corporation, or

that the oBcer was %uilt* o %ross ne%li%ence or +ad

aith? and /2 the complainant must clearl* and

convincin%l* prove such unlawul acts, ne%li%ence or

+ad aith.

"hile it is true that the determination o the eistence

o an* o the circumstances that would warrant thepiercin% o the veil o corporate ction is a )uestion o

act which cannot +e the su+=ect o a petition or review

on certiorari under Eule 5, this &ourt can ta!e

co%nizance o actual issues i the ndin%s o the lower

court are not supported +* the evidence on record or

are +ased on a misapprehension o acts.53 /mphasis

supplied2

0s a %eneral rule, directors, oBcers, or emplo*ees o a

corporation cannot +e held personall* lia+le or

o+li%ations incurred +* the corporation. Jowever, this

veil o corporate ction ma* +e pierced i complainant is

a+le to prove, as in this case, that /12 the oBcer is %uilt*

o ne%li%ence or +ad aith, and /2 such ne%li%ence or

+ad aith was clearl* and convincin%l* proven.

Jere, petitioner Santos entered into a contract with

respondent in her capacit* as the resident and &hie

ecutive CBcer o 0rco ulp and aper. She also issued

the chec! in partial pa*ment o petitioner corporationRs

o+li%ations to respondent on +ehal o petitioner 0rco

ulp and aper. This is clear on the ace o the chec!

(n the present case, "e nd +ad aith on the part o the

MpetitionersN when the* un=ustia+l* reused to honor

their underta!in% in avor o the MrespondentN. 0ter the

chec! in the amount o 1,@7,788.8@ issued +*

MpetitionerN Santos was dishonored or +ein% drawn

a%ainst a closed account, MpetitionerN corporation







+earin% the account name, '0rco ulp Y aper, &o.,

(nc.'5 0n* o+li%ation arisin% rom these acts would not,

ordinaril*, +e petitioner SantosR personal underta!in%or which she would +e solidaril* lia+le with petitioner

0rco ulp and aper.

"e nd, however, that the corporate veil must +e

pierced. (n :ivese* v. Ginswan%er hilippines<55

iercin% the veil o corporate ction is an e)uita+le

doctrine developed to address situations where the

separate corporate personalit* o a corporation isa+used or used or wron%ul purposes. Ander the

doctrine, the corporate eistence ma* +e disre%arded

where the entit* is ormed or used or non-le%itimate

purposes, such as to evade a =ust and due o+li%ation, or

to =usti* a wron%, to shield or perpetrate raud or to

carr* out similar or ine)uita+le considerations, other

un=ustia+le aims or intentions, in which case, the

ction will +e disre%arded and the individualscomposin% it and the two corporations will +e treated as

identical.58 /mphasis supplied2

0ccordin% to the &ourt o 0ppeals, petitioner Santos was

solidaril* lia+le with petitioner 0rco ulp and aper,

statin% that<

denied an* privit* with MrespondentN. These acts

prompted the MrespondentN to avail o the remedies

provided +* law in order to protect his ri%hts.57

"e a%ree with the &ourt o 0ppeals. etitioner Santos

cannot +e allowed to hide +ehind the corporate

veil.$:p'i$ "hen petitioner 0rco ulp and aperRs

o+li%ation to respondent +ecame due and demanda+le,

she not onl* issued an ununded chec! +ut also

contracted with a third part* in an efort to shit

petitioner 0rco ulp and aperRs lia+ilit*. She

un=ustia+l* reused to honor petitioner corporationRs

o+li%ations to respondent. These acts clearl* amount to

+ad aith. (n this instance, the corporate veil ma* +e

pierced, and petitioner Santos ma* +e held solidaril*

lia+le with petitioner 0rco ulp and aper.

The rate o interest due on


reduced in view o Dacar v.$aller* #rames5@

(n view, however, o the promul%ation +* this court o

the decision dated 0u%ust 13, ;13 in Dacar v. $aller*

#rames,59 the rate o interest due on the o+li%ation must

+e modied rom 16 per annum to 86 per annum

rom the time o demand.

Dacar efectivel* amended the %uidelines stated in

astern Shippin% v. &ourt o 0ppeals,8; and we have laid

down the ollowin% %uidelines with re%ard to the rate o

le%al interest<

To recapitulate and or uture %uidance, the %uidelines

l id d i th t Shi i :i


or+earance o mone*, is +reached, an interest on

the amount o dama%es awarded ma* +e imposed

at the discretion o the court at the rate o 86 per

annum. Do interest, however, shall +e ad=ud%ed

on unli)uidated claims or dama%es, ecept when

il h d d + +li h d i h

















laid down in the case o astern Shippin% :inesare

accordin%l* modied to em+od* GS-4G &ircular Do.

799, as ollows<







((. "ith re%ard particularl* to an award o interest in theconcept o actual and compensator* dama%es, the rate


ollows<

1. "hen the o+li%ation is +reached, and it consists

in the pa*ment o a sum o mone*, i.e., a loan or

or+earance o mone*, the interest due should +e

that which ma* have +een stipulated in writin%.

#urthermore, the interest due shall itsel earn

le%al interest rom the time it is =udiciall*

demanded. (n the a+sence o stipulation, the rate

o interest shall +e 86 per annum to +e computed

rom deault, i.e., rom =udicial or etra=udicial

demand under and su+=ect to the provisions o

0rticle 1189 o the &ivil &ode.

or until the demand can +e esta+lished with

reasona+le certaint*. 0ccordin%l*, where the

demand is esta+lished with reasona+le certaint*,the interest shall +e%in to run rom the time the

claim is made =udiciall* or etra=udiciall* /0rt.

1189, &ivil &ode2, +ut when such certaint* cannot

+e so reasona+l* esta+lished at the time the

demand is made, the interest shall +e%in to run

onl* rom the date the =ud%ment o the court is

made /at which time the )uantication o

dama%es ma* +e deemed to have +een


computation o le%al interest shall, in an* case, +e

on the amount nall* ad=ud%ed.

3. "hen the =ud%ment o the court awardin% a

sum o mone* +ecomes nal and eecutor*, the

rate o le%al interest, whether the case alls under

para%raph 1 or para%raph , a+ove, shall +e 86

per annum rom such nalit* until its satisaction,this interim period +ein% deemed to +e +* then an

e)uivalent to a or+earance o credit.

0nd, in addition to the a+ove, =ud%ments that have

+ecome nal and eecutor* prior to Kul* 1, ;13, shall

not +e distur+ed and shall continue to +e implemented

appl*in% the rate o interest ed therein.81 /mphasis

supplied? citations omitted.2

0ccordin% to these %uidelines, the interest due on the

o+li%ation o 7,;,[email protected] should now +e at 86 per

annum, computed rom 4a* 5, ;;7, when respondent

sent his letter o demand to petitioners This interest

- ?(sus -

&0E(C 4CE0:S, and

$0E&(0, JJ.





sent his letter o demand to petitioners. This interest

shall continue to +e due rom the nalit* o this decision

until its ull satisaction.

"JE#CE, the petition is D( in part. The

decision in &0-$.E. &I Do. 957;9 is 0##(E4.

etitioners 0rco ulp Y aper &o., (nc. and &andida 0.

Santos are here+* ordered solidaril* to pa* respondent

an T. :im the amount o 7,;,[email protected] with interest o

86 per annum at the time o demand until nalit* o

=ud%ment and its ull satisaction, with moral dama%esin the amount o 5;,;;;.;;, eemplar* dama%es in the

amount o5;,;;;.;;, and attorne*>s ees in the amount

o 5;,;;;.;;.

MA#ES$ 8U.S.A. INC., >*+MA#ES$ M>*/> L/>/so*%(,

P(t/t/o*(s,

G.R. No. 12;454

resent<

0D$0D(G0D, J., C'airman

S0DCI0:-$AT(EEZ,

&CECD0,

SAMPAGUI$A GARMEN$C%RP%RA$I%N,

R(s)o*+(*t.

romul%ated<

Septem+er 1, ;;5

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

-----

E C I S I % N

GARCIA, J.!

0ssailed and sou%ht to +e set aside in this petition orreview on ertiorari under Eule 5 o the Eules o &ourtis the (/s/o*1 +>t(+ 1' ((@( 1996 o the&ourt o 0ppeals in CA-!.R. No. LB>>-C , aBrmin%,with modications, an earlier decision o the Ee%ional

Trial &ourt at 4a!ati &it* in &ivil &ase Do. 9;-1131, anaction or a sum o mone* thereat commenced +* the

herein respondent Sampa%uita $arment &orporationa%ainst the herein petitioners 40IST /A.S.02, (nc. and40IST 4anila :iaison CBce and two /2 others.

etitioner MA#ES$ 8U.S.A., I*. /40IST, A.S.0., orshort2 is a corporation dul* or%anized and eistin% under

. ach transaction wasem+odied in a purchase orderMCN speci*in% the st*le anddescription, as ollows?

a. St*le 333;3 /SZ-172, 1;;6

http://sc.judiciary.gov.ph/jurisprudence/2005/sep2005/127454.htm#_ftn1




short2 is a corporation dul* or%anized and eistin% underthe laws o the Anited States o 0merica +ut re%isteredwith the hilippine Goard o (nvestments, while co-petitioner MA#ES$ M>*/> L/>/so* %( is 40ISTA.S.0.s representative in the hilippines. Cn the otherhand, respondent S>)>gu/t> G>(*tCo)o>t/o* is a domestic corporation en%a%ed in the+usiness o manuacturin% and eportin% %arments.

0s ound +* the appellate court in the decision underreview, the actual antecedents are<

1. Sometime in Kul* and 0u%ust19@9, Mpetitioners 4avest A.S.0.and 4avest 4anila :iaison CBceNentered into a series o transactions with MrespondentNSampa%uita $arment&orporation, where+* the ormerwould urnish rom a+road rawmaterials to +e manuactured +*the latter into nished products,or shipment to MpetitionersNorei%n +u*ers, earsRoe"u2 and JC 8enne#.

a. St*le 333;3 /SZ 172, 1;;6&otton i%ment Twill

Shorts, MCN dated 0u%ust 9,19@9 . . . . ?

+. St*le 571 /S7592,D*lon Swim Trun!s, MCNdated Kul* , 19@9 . . . . ?

c. St*le 571 /SSZ-1@2, D*lonSwim Trun!s, MCN dated Kul*, 19@9 . . . . ?

d. St*le 5715 /SSZ192, D*lonSwim Trun!s, MCN dated Kul*, 19@9 . . . . ?

e. St*le 7511, Solid "ovenJooded Kac!et, /CN dated

Kul* 1, 19@9 . . . . ?

. St*le Dos. K-1 GE and K-1 LT,&otton "oven ants MCNdated 0u%ust 1;, 19@9 . . . . ?

as well as the )uantit*, modeand date o deliver*.

3. St*les /333;3, 571, 571,

4a!ati &it* a%ainst the hereinpetitioners and two /2 others,namel*, 40IST (nternational&o., :T and atric! "an%, ormer$eneral 4ana%er o 4:CN.



57152 were upon the orderso ears Roe"u2 ,while St*les

/7511, K-1 GE and K-1 LT2 wereupon the orders o JC 8enne#.

. The orders o earsRoe"u2 were dul* paid in ull +*wa* o letter o credit. The JC8enne# orders consistin% o @,;;;pcs. &otton "oven ants /St*les

K-1 GE and K-1 LT at \3.85per piece or a total o \9,;;.;;were not covered +* a letter o credit.

5. espite shipment and receipt+* JC 8enne# o said orders, nopa*ment was made, thuspromptin% MrespondentN to send

demand letters which remainedunheeded.

8. Cn 0pril 7, 199;, MrespondentNled a complaint or collection o a sum o mone* amountin% toAS\9,;;.;; with dama%esM+eore the Ee%ional Trial &ourt at

7. (n their 0nswer with&ounterclaim led on Kune 1,199;, Mpetitioners and their twoco-deendantsN countered thatplaintif MSampa%uita $arment&orporationN has alread* +eenpaid +* virtue o le%alcompensation, and that it isplaintif which owes deendantsAS5, 799.57 due to the dama%esand losses it /sic2 incurred as aresult o the +reaches committedin the previous shipmentsto ears Roe"u2. The dama%esand losses reer to< i2 ailure too+serve specications and)uantit* re)uirements? ii2 dela* inshippin% out the %arments? iii2over declaration o value in St*leDo. 333;3? iv2 shortshipment o %arments? v2 ailure to return rawmaterials or the unshipped%arments, amountin% toAS\3,999.57. 4oreover,Mpetitioners and their co-deendantsN alle%ed that the*also sufered losses on account o dela*s in the JC8enne# shipments.

@. urin% the pre-trial, the partiescame up with the ollowin%stipulation o acts<

. That all the ore%oin% %armentsSt*le Dos. 571, 571, 5715,7511 and SZ-17 wereairshipped ater inspection andacceptance and upon theinstruction o deendant 4avest



1. That the deendant/s2ordered rom plaintif ana%%re%ate volume o @,;;;pieces Houn%mens &otton"oven ants at AS\9,;;.;;and which were delivered to JC8enne# &orporation o &aliornia, the consi%nee?

. That the total costs o the %oods remained unpaid,su+=ect to the deense o compensation.

Jowever, as urtherproposed +* the plaintif, thedeendant/s2 denied that the

%oods were accepted +* theconsi%nee and that it wasproperl* inspected +* them.

9. Cn Septem+er 9, 1991, apartial stipulation o acts dul*si%ned +* counsels o +oth partieswas su+mitted, with the ollowin%statements<

instruction o deendant 4avest(ntl. &orp, as evidenced +* the

ollowin% documents to +emar!ed as plaintifs ehi+its.

1;. Cn 0u%ust 8, 1993, Mpetitionersand their co-deendantsN led an0mended 0nswer /To &onorm Tovidence2 with counterclaim . . . .

11. (n said 0mended 0nswer with&ounterclaim, MdeendantsNalle%ed that +* virtue o le%alcompensation, plaintif hasalread* +een paid as, in act, itstill owes deendantsAS\1;1,59.7, more or less./"ords in +rac!et, underscorin%

and italicization ours2.

0ter a protracted trial that lasted or our /2 *ears, thetrial court rendered =ud%ment in avor o hereinrespondent, as plaintif and a%ainst the petitioners andtheir co-deendants, thus<

"JE#CE, =ud%ment is here+*rendered in avor o plaintif and a%ainst thedeendants orderin% the deendants =ointl*and severall* to pa* plaintif, as ollows<

"JE#CE, the appealed decision in&ivil &ase Do. 9;-1131 is 0##(E4 with theollowin% 4C(#(&0T(CDS<



12 theamount o AS\9,;;.;; or its e)uivalent inhilippine esos at the time o pa*ment plusinterest at the rate o si percent /862 perannum rom the time o lin% o thiscomplaint until ull* paid as actualdama%es?

2 theamount o 3;;,;;;.;; as andor attorne*s ees? and

32 costs o suit.

SC CEE.

Thererom, petitioners and their co-deendants a7uo appealed to the &ourt o 0ppeals /&02 whereat theirrecourse was doc!eted as CA-!.R. No. LB>>-C . 0nd,in a decisionMN dated 1; ecem+er 1998, the appellatecourt modied that o the trial court in the sense thatpetitioners co-deendants were in efect released roman* lia+ilit* and the award o attorne*s ees and costso suit deleted. ispositivel*, the appellate courtsdecision reads<

1. Thecomplaint a%ainst deendants4avest (nternational &o., :td.and atric! "an% is (S4(SS?

. ^etitionerN 4avest-A.S.0., (nc.4avest4anila :iaison CBce is orderedto pa* MrespondentN the amount

o AS\9,;;.;; or itse)uivalent in hilippine esos atthe time o pa*ment plusinterest at the rate o sipercent /862 per annum romthe time o lin% o thiscomplaint until ull* paid asactual dama%es?

3. Theattorne*s ees and costs o suitare deleted.

Do costs.

SC CEE. /"ords in +rac!et ours2.

Andaunted, petitioners are now with us via the instantrecourse, contendin% that the appellate court erred

(





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I

(D EA:(D$ TJ0T T(T(CDES 0E:(0G: TC 0H ESCDDT 0&TA0:040$S (D TJ 04CADT C#AS\9,;;.;; CE (TS A(I0:DT (DJ(:((DS SCS 0T TJ T(4 C#0H4DT :AS (DTEST 0T TJ E0TC# S(L E&DT /862 E 0DDA4

The interrelated rst, second and th assi%ned errorsconver%ed on petitioners main su+mission that theamount o AS\9,;;.;; claimed +* respondent or%arments delivered to J.C. 8enne# is compensa+le andhas in act +een compensated +* the dama%eslossespetitioners sufered rom previous transactions involvin%deliveries to ears Roe"u2. poundin%, petitionersassert that respondent, with respect to the earsRoe"u2 shipment, inter alia ailed to o+serve thespecications and )uantit* re)uirements, missed

deliver* dates and incurred dela* in the shipment o certain %oods. Apon this postulate, petitioners ar%uethat the unpaid amount due respondent has there+*+een etin%uished +* reason o le%al compensation.

"e are not persuaded.

&oncededl*, the &ivil &ode lists compensation as one o the modes o etin%uishin% the o+li%ations o personswho, in their own ri%ht, are creditors and de+tors o each other.M3N &ompensation ma* +e le%al orconventional. :e%al compensation ta!es place ipso

Gure when all the re)uisites o law are present,MN asopposed to conventional or voluntar* compensationwhich occurs when the parties a%ree to the mutualetin%uishment o their credits or to compensate theirmutual o+li%ations even in the a+sence o some o thele%al re)uisites.M5N

#or compensation to validl* ta!e place, the %overnin%&ivil &ode provisionsM8N re)uire the concurrence o well-dened conditions. 0t its minimum, compensationpresupposes two persons who, in their own ri%ht and asprincipals, are mutuall* inde+ted to each otherrespectin% e)uall* demanda+le and li)uidated

want to %ive the impression that we areholdin% the pa*ment or K-1 Twill ants. "e honor our word that we will issuecorrespondin% chec! valued atAS\9,;;.;;. /"ords in +rac!et ours2.

Dot to +e overloo!ed on the ac!nowled%ment-o-











o+li%ations over an* o which no retention orcontrovers* commenced and communicated in due timeto the de+tor eists. Gut while compensation, +e it le%alor conventional, re)uires the conPuence in the partieso the characters o mutual de+tors and creditors, theirri%hts as such creditors, or their o+li%ations as suchde+tors, need not sprin% rom one and the samecontract or transaction.M7N

"ith the view we ta!e o this controvers*, le%alcompensation could not have occurred in this case. Theappellate court delved on the reason wh* le%al

compensation does not o+tain herein. (t pointed to theact that petitioners, on one hand, and respondent, onthe other, are not mutuall* +ound as creditors andde+tors. 0s correctl* ound +* the &ourt o 0ppeals, itwas onl* the petitioners de+t to the respondent that had+een ri%htull* esta+lished. The same court added theo+servation that petitioners even ac!nowled%ed theiro+li%ation to respondent in the amount o AS\9,;;.;;. Said the appellate court, )uotin% withapproval the trial courts decision<

(t is li!ewise o+served thatMpetitionersN had ac!nowled%ed theiro+li%ation to MrespondentN in the amount o AS\9,;;.;;. Cn #e+ruar* 15, 199;,deendant atric! "an%, %eneral mana%er o 4avest 4anila :iaison CBce, wroteMrespondentN statin% that the* would not

Dot to +e overloo!ed on the ac!nowled%ment ode+t an%le is what the parties stipulated durin% the pre-

trial conerence +eore the trial court, to wit<

1. That the deendant ordered romplaintif an a%%re%ate volume o @,;;; pieces o *oun% mens cottonwoven pants at AS\3.85 per pieceor a total amount o AS\9,;;.;;and which were delivered to K&enne* &orporation o &aliornia,

the consi%nee?

. That the total cost o the %oodsremains unpaid, su+=ect to the

deense o compensation.M@N

(n contrast, petitioners ailed to esta+lish respondentspurported lia+ilit* to them which would have then set

the automatic operation o le%al compensation inmotion. 0s ma* +e recalled, petitioners un*ieldin%stance is that respondent is inde+ted to them to theli)uidated tune o AS\3,999.57, the mone* value o the dama%eslosses the* incurred respectin% theprevious shipments to ears Roe"u2 . Thesedama%eslosses, the* add, arose out o respondentsalle%ed ailure to o+serve specications and )uantit*re)uirements? short shipment and dela* in shipment?

and other +reaches o contract. (t cannot +eoveremphasized, however, that, as ound +* theappellate court, petitioners appeared not to haveo+=ected to the )ualit* or )uantit* o the wor! done +*respondent or to the production or deliver* schedule ito+served. (n act, their actuations relative to theearsRoe"u2 shipments, particularl* their havin% paid in ullor such shipments ar%ue a%ainst the notion o

plaintifs alle%edl* incurred/Anderscorin% and words in +rac!etaddedN

(t ma* +e that petitioners acceptance o the %oodsdelivered does not preclude them rom su+se)uentl*raisin% o+=ections a+out the eistence o hidden deectsin the nished and delivered products o respondent. (n







or such shipments, ar%ue a%ainst the notion o respondent rene%in% on its aithul part o the +ar%ain.

0ptl* wrote the &ourt o 0ppeals in this re%ard<

eendants MpetitionersN +asetheir deense o compensation, as inset-of, on previousl* delivered %oodscovered +* diferent MCsN.Jowever, these MCsN had +eencompletel* settled and paid +eore

this case was instituted. (t was alsoesta+lished that deendants acceptedthose deliveries made without an*)ualication, protest or challen%e. 0ll%oods were properl* inspected +* thedeendants andor the deendants+u*ers. The acceptance o the %oods+* deendants +u*ers . . . is anindication that the* were satisedwith the %oods delivered, thus, the

consummation o the contract withrespect to the %oods accepted. Thedeendants never inormed plaintif MrespondentN that the* had suferedan* loss with respect to the previousshipments sent to their +u*ers.

Thereore, the deendants cannot nowclaim compensation or the dama%esthe* alle%edl* incurred or the

act, 0rticle 1719 o the &ivil &ode admits o two /2eceptions to the rule that acceptance relieves the

contractor o lia+ilit* or an* deect in the wor!, to wit</12 the deect is hidden and the emplo*er is not, +* hisspecial !nowled%e, epected to reco%nize the same?and /2 the emplo*er epressl* reserves his ri%hta%ainst the contractor +* reason o hidden deects.

Sadl*, however, petitioners, with respect todeects, i an*, in the manuactured clothes which werenot discovera+le upon a casual eamination thereo,

appeared to have !ept silent. Deither did the*, uponacceptance o the %arments, epressl* reserve the ri%htto ta!e such action as ma* +e appropriate a%ainstrespondent. uite the contrar*, in the stipulation o acts si%ned +* counsels o +oth parties, it is evenac!nowled%ed

. That all the ore%oin% %armentsSt*le Dos. 571, 571, 5715,7511 and SZ 17 wereairshipped >0t( /*s)(t/o* >*+>()t>*( >*+ u)o* t(/*stut/o* o0 +(0(*+>*tM>?(st I*t Co)., as evidenced+* the ollowin% documents to +emar!ed as plaintifs ehi+its, ..M9N /mphasis supplied2

$iven the ore%oin% perspective, we rule withouthesitanc* that what petitioners ta!e as losses anddama%es incurred while transactin% with respondentcannot plausi+l* +e cate%orized as respondentscompensa+le de+t to them. 0nd since the parties are

petitioners pleadin%s, the +urden is on them to provetheir averments +* the )uantum o proo re)uired incivil cases, namel*, preponderance o evidence,M1Ni.e., evidene 'i' is of greater eig't, or moreonvining t'an t'at 'i' is oered in opposition to it .M13N

The cate%orical conclusion o the &ourt o 0 l h h i l i h









compensa+le de+t to them. 0nd since the parties arenot mutuall* creditors and de+tors o each other, there

can +e no valid set-of. (n short, petitioners still owerespondent the amount o AS\9,;;.;;.

Cn their third assi%ned error, petitioners ault theappellate court or not %ivin% pro+ative value to theirevidence in support o their claim or dama%es.

Section 1, Eule 131 o the Eules o &ourt,M1;N assi%ns the +urden o proo upon the part* whoalle%es the truth o his claim or deense, or an* act in

issue. 0nd this, he must dischar%e +* the amount o evidence re)uired +* law. (n civil cases, the +urden o proo is on the deendant i he alle%es, in his answer, anaBrmative deense, which is not a denial o an essentialin%redient in the plaintifs cause o action, +ut is onewhich, i esta+lished, will +e a %ood deense i.e., anavoidance o the claim, which prima faie, the plaintif alread* has +ecause o the deendants own admissionsin the pleadin%s.M11N

etitioners deense in this case is dou+tless

aBrmative in character. 0s it were, the* did not den*owin% respondent the amount o AS\9,;;.;;. "hatthe* averred was that their o+li%ation to pa* wasdeemed etin%uished +ecause o le%al compensation.

The* also maintained havin% incurred losses anddama%es due to respondents actions or inaction, as thecase ma* +e. Gecause these are alle%ations in

0ppeals, conrmator* o that o the trial court, is thatthat petitioners evidence, al+eit numerous, ailed to

suBcientl* esta+lish, +* the re)uired )uantum o evidence, the underl*in% causes o their lossesdama%es which the* alle%ed to +e respondents doin%.0s earlier mentioned, these causes stemmed romrespondents ailure to meet specications and )uantit*standards, dela* in shipment, under - shipment, overdeclaration o value in St*le 333;3 and its ailure toreturn raw materials rom unshipped %arments. To theappellate court, what petitioners adduced could notsupport a solid inerence that respondent should +e heldlia+le or the dama%es and losses the* alle%edl*sustained that would =usti* the application, under thepremises, o le%al compensation.

(t is evident that the issue tendered underpetitioners third assi%nment o error relates to thecorrectness o the &ourt o 0ppeals actualdetermination as to whether or not the* incurredlossesdama%es as a result o what the* re%ard as

contractual +reaches committed +* respondent in theshipment o %arments to meet ears Roe"u2 =o+orders. Such issue, however, is contetuall* +e*ond thepurview o the &ourts reviewin% power. #or, it is not theunction o this &ourt to anal*ze or wei%h all over a%ainthe evidence or premises supportive o such actualdetermination,M1N ecept or the most compellin% andwell-dened co%ent reasons.M15N 0s nothin% in the recordindicates an* o such eceptions, the actual conclusion

o the appellate court that petitioners evidence did notade)uatel* support their claim or dama%es must +eaBrmed.

(n their ourth assi%ned error, petitioners su+mitsthat 4avest 4anila :iaison CBce /4:C2, +ein% merel*an a%ent o 4avest A.S.0, should not +e held solidaril*lia+le with the principal.

WHEREF%RE, the instant petition is ENIE andthe assailed decision o the &ourt o 0ppeals AFFIRME in toto.

G.R. No. 16&251 uB 2;, 2'11











etitioners were two /2 o the ori%inal our /2deendants impleaded in the +asic complaint, the othertwo /2 +ein% 4avest (nternational &o., :td. /4(&:2, arm or%anized under the laws o Taiwan, and 4r. atric!"an%, a ormer mana%er o 4(&: and 4:C. Goth 4(&:and 4r. "an%, while ad=ud%ed lia+le in solidum with thepetitioners +* the trial court, were eventuall* a+solvedrom an* lia+ilit* +* the &ourt o 0ppeals.

(n holdin% 4:C solidaril* lia+le with 4avest A.S.0.,the appellate court proceeded on the postulate that4:C is the liaison oBce o 4avest A.S.0 and theetension oBce o +oth 4avest A.S.0. and 4(:&.

The &ourt o 0ppeals holdin% commends itsel orconcurrence.

0s it were, 4avest A.S.0. appears to haveconstituted 4:C as its representative and its ull*su+sidized etension oBce in the hilippines. 0s such,4:C can +e char%ed or the lia+ilities incurred +*4avest A.S.0. in the countr*. 0nd i 4:C can +e sochar%ed, there is no rh*me nor reason wh* it cannot +ead=ud%ed, as did the appellate court, as solidaril* lia+lewith head oBce, 4avest A.S.0.

ESUS M. M%N$EMA"%R, etitioner,

vs.#ICEN$E . MILL%RA, Eespondent.

& ( S ( C D

EL CAS$ILL%, J.:

"hen the dispositive portion o a =ud%ment is clear and

une)uivocal, it must +e eecuted strictl* accordin% to its

tenor.

This etition or Eeview on &ertiorari1 assails the

ecision dated 4a* 19, ;;5 o the &ourt o 0ppeals

/&02 in &0-$.E. S Do. @1;75, which dismissed the

petition or ertiorari see!in% to annul and set aside the

Crders dated Septem+er 8, ;;3 and Ccto+er ,

;;3 o the Ee%ional Trial &ourt /ET&2 o uezon &it*,

Granch 9@ in &ivil &ase Do. -93-1755.

Factual Antecedents

Cn Kul* , 199;, respondent 0tt*. Iicente . 4illora

/Iicente2 o+tained a

loan o ;;,;;;.;; rom petitioner r. Kesus 4.

4ontema*or /Kesus2 as evidenced +* a promissor*

note5eecuted +* Iicente. Cn 0u%ust 1;, 199;, the

parties eecuted a loan contract8 wherein it was

provided that the loan has a stipulated monthl* interest

o 6 and that Iicente had alread* paid the amount

o 1;;,;;;.;; as well as the @,;;;.;; representin%

the interest or the period Kul* to 0u%ust 3, 199;.

to pa* Iicente his attorne*Rs ees which is e)uivalent to

the amount o IicenteRs monetar* lia+ilit*, and which

shall +e set-of with the amount Iicente is ad=ud%ed to

pa* Kesus, viz<

"JE#CE, premises a+ove-considered MsicN,

KA$4DT is here+* rendered orderin% deendant

http://www.lawphil.net/judjuris/juri2011/jul2011/gr_168251_2011.html#fnt1














Su+se)uentl* and with IicenteRs consent, the interest

rate was increased to 3.56 or 1;,5;;.;; a month.#rom 4arch , 1991 to Kul* 3, 1991, or or a period o

our months, Iicente was supposed to pa* ,;;;.;;

as interest +ut was a+le to pa* onl* ,;;;.;;. This

was the last pa*ment Iicente made. Kesus made several

demands7 or Iicente to settle his o+li%ation +ut to no

avail.

Thus, on 0u%ust 17, 1993, Kesus led +eore the ET& o

uezon &it* a &omplaint@ or Sum o 4one* a%ainstIicente which was doc!eted as &ivil &ase Do. -93-

1755. Cn Ccto+er 19, 1993, Iicente led his

0nswer9interposin% a counterclaim or attorne*Rs ees o

not less than 5;;,;;;.;;. Iicente claimed that he

handled several cases or Kesus +ut he was summaril*

dismissed rom handlin% them when the instant

complaint or sum o mone* was led.

Ruling of t'e Regional 5rial Court

(n its ecision1; dated Ccto+er 7, 1999, the ET&

ordered Iicente to pa* Kesus his monetar* o+li%ation

amountin% to 3;;,;;;.;; plus interest o 16 rom the

time o the lin% o the complaint on 0u%ust 17, 1993

until ull* paid. 0t the same time, the trial court ound

merit in IicenteRs counterclaim and thus ordered Kesus

K * %

Iicente . 4illora to pa* plaintif Kesus 4. 4ontema*or

the sum o 3;;,;;;.;; with interest at the rate o 16per annum counted rom the lin% o the instant

complaint on 0u%ust 17, 1993 until ull* paid and

whatever amount recovera+le rom deendant shall +e

set of +* an e)uivalent amount awarded +* the court

on the counterclaim representin% attorne*Rs ees o

deendant on the +asis o ')uantum meruit' or le%al

services previousl* rendered to plaintif.

Do pronouncement as to attorne*Rs ees and costs osuit.

SC CEE.11

Cn ecem+er @, 1999, Iicente led a 4otion or

Eeconsideration1 to which Kesus led an

Cpposition.13 Cn 4arch 15, ;;;, Iicente led a 4otion

or the (ssuance o a "rit o ecution1 with respect to

the portion o the ET& ecision which awarded himattorne*Rs ees under his counterclaim. Kesus led his

Ar%ent Cpposition to eendantRs 4otion or the

(ssuance o a "rit o ecution15 dated 4a* 31, ;;;.

(n an Crder18 dated Kune 3, ;;;, the ET& denied

IicenteRs 4otion or Eeconsideration +ut %ranted his

4otion or (ssuance o a "rit o ecution o the portion

o the decision concernin% the award o attorne*Rs ees.

(ntendin% to appeal the portion o the ET& ecision

which declared him lia+le to Kesus or the sum

o 3;;,;;;.;; with interest at the rate o 16 per

annum counted rom the lin% o the complaint on

Kesus went to the &0 via a etition or &ertiorari7 under

Eule 85 o the Eules o &ourt.

Cn 4a* 19, ;;5, the &0 issued its ecision the

dispositive portion o which provides<

WHEREF%RE, the ore%oin% considered, the petition or

























0u%ust 17, 1993 until ull* paid, Iicente led on Kul* 8,

;;; a Dotice o 0ppeal.17

This was however denied +*the ET& in an Crder1@ dated Kul* 1;, ;;; on the %round

that the ecision has alread* +ecome nal and

eecutor* on Kul* 1, ;;;.19

4eanwhile, Kesus led on Kul* 1, ;;; a 4otion or

Eeconsideration and &larication; o the Kune 3, ;;;

Crder %rantin% IicenteRs 4otion or the (ssuance o a

"rit o ecution. Thereater, Kesus led on Septem+er

, ;;; his 4otion or the (ssuance o a "rit oecution.1 0ter the hearin% on the said motions, the

ET& issued an Crderdated Septem+er 8, ;; den*in%

+oth motions or lac! o merit. The 4otion or

Eeconsideration and &larication was denied or

violatin% Section 5,3 Eule 15 o the Eules o &ourt and

li!ewise the 4otion or the (ssuance o a "rit o

ecution, or violatin% Section 8, Eule 15 o the same

Eules.

Kesus led his 4otion or Eeconsideration5 thereto on

Ccto+er 1;, ;; +ut this was eventuall* denied +* the

trial court throu%h its Crder8 dated Ccto+er , ;;3.

Ruling of t'e Court of Appeals

certiorari is ENIE and the assailed Crders

areAFFIRME in toto. Do costs.

SC CEE.@

Dot satised, Kesus is now +eore this &ourt via a

etition or Eeview on &ertiorari under Eule 5 o the

Eules o &ourt.

(ssue

notwithstandin% the nalit* o the trial courtRs decision

o Ccto+er 7, 1999, as well as the orders o Septem+er

8, ;; and Ccto+er , ;;3, the le%al issue to +e

resolved in this case is whether MS(TN the

a+sence o a specic amount in the decision

representin% respondentRs counterclaim, the same could

+e validl* MofsetN a%ainst the specic amount o award

mentioned in the decision in avor o the petitioner.9

!etitioner"s Argu#ents

Kesus contends that the trial court %rievousl* erred in

orderin% the implementation o the ET&Rs Ccto+er 7,

1999 ecision considerin% that same does the

amount o attorne*Rs ees. 0ccordin% to Kesus, such

disposition leaves the matter o computation o the

attorne*Rs ees uncertain and, hence, the writ o

eecution cannot +e implemented. (n this re%ard, Kesus

points out that not even the Sherif who will implement

said ecision can compute the =ud%ment awards.

Gesides, a sherif is not clothed with the authorit* to

render =udicial unctions such as the computation o

specic amounts o =ud%ment awards.

+e modied even i the modication is meant to correct

erroneous conclusions o act or law. The doctrine o

nalit* o =ud%ment is eplained in !allardo-Corro v.

!allardo<3;

Dothin% is more settled in law than that once a

=ud%ment attains nalit* it there+* +ecomes immuta+le





























p = %

Resondent"s Argu#ents

Iicente counter-ar%ues that the Ccto+er 7, 1999 ET&

ecision can no lon%er +e made su+=ect o review,

either +* wa* o an appeal or +* wa* o a special civil

action or certiorari +ecause it had alread* attained

nalit* when ater its promul%ation, Kesus did not even

le a motion or reconsideration thereo or interpose an

appeal thereto. (n act, it was Iicente who actuall* led

a motion or reconsideration and a notice o appeal,which was eventuall* denied and disapproved +* the

trial court.

%u Ru/*g

The petition lac!s merit.

The Ccto+er 7, 1999 ecision o the ET& is alread*

nal and eecutor*, hence, immuta+le.

0t the outset, it should +e stressed that the Ccto+er 7,

1999 ecision o the ET& is alread* nal and eecutor*.

Jence, it can no lon%er +e the su+=ect o an appeal.

&onse)uentl*, Kesus is +ound +* the decision and can no

lon%er impu%n the same. (ndeed, well-settled is the rule

that a decision that has attained nalit* can no lon%er

and unaltera+le. (t ma* no lon%er +e modied in an*

respect, even i the modication is meant to correctwhat is perceived to +e an erroneous conclusion o act

or law, and re%ardless o whether the modication is

attempted to +e made +* the court renderin% it or +*

the hi%hest court o the land. Kust as the losin% part*

has the ri%ht to le an appeal within the prescri+ed

period, the winnin% part* also has the correlative ri%ht

to en=o* the nalit* o the resolution o his case. The

doctrine o nalit* o =ud%ment is %rounded on

undamental considerations o pu+lic polic* and soundpractice, and that, at the ris! o occasional errors, the

=ud%ments or orders o courts must +ecome nal at

some denite time ed +* law? otherwise, there would

+e no end to liti%ations, thus settin% to nau%ht the main

role o courts o =ustice which is to assist in the

enorcement o the rule o law and the maintenance o

peace and order +* settlin% =usticia+le controversies

with nalit*.

31

To stress, the Ccto+er 7, 1999 ecision o the ET& has

alread* attained nalit*. 'Such denitive =ud%ment is no

lon%er su+=ect to chan%e, revision, amendment or

reversal. Apon nalit* o the =ud%ment, the &ourt loses

its =urisdiction to amend, modi* or alter the same.

cept or correction o clerical errors or the ma!in%

o nun pro tunentries which cause no pre=udice to an*

part*, or where the =ud%ment is void, the =ud%ment can

neither +e amended nor altered ater it has +ecome

nal and eecutor*. This is the principle o immuta+ilit*

o nal =ud%ment.'3

The amount o attorne*Rs ees is ascertaina+le rom the

/2 That +oth de+ts consist in a sum o mone*, or

i the thin%s due are consuma+le, the* +e o the

same !ind, and also o the same )ualit* i the

latter has +een stated?

/32 That the two de+ts +e due?







ET& ecision. Thus, compensation is possi+le.

Kesus contends that ofsettin% cannot +e made +ecause

the Ccto+er 7, 1999 =ud%ment o the ET& ailed to

speci* the amount o attorne*Rs ees. Je maintains that

or ofsettin% to appl*, the two de+ts must +e li)uidated

or ascertaina+le. Jowever, the trial court merel*

awarded to Iicente attorne*Rs ees +ased on )uantum

meruit without speci*in% the eact amount thereo.

"e do not a%ree.

#or le%al compensation to ta!e place, the re)uirements

set orth in 0rticles 17@ and 179 o the &ivil &ode,

)uoted +elow, must +e present.

0ET(&: 17@. &ompensation shall ta!e place when two

persons, in their own ri%ht, are creditors and de+tors o

each other.

0ET(&: 179. (n order that compensation ma* +e

proper, it is necessar*<

/12 That each one o the o+li%ors +e +ound

principall*, and that he +e at the same time a

principal creditor o the other?

/2 That the* +e li)uidated and demanda+le?

/52 That over neither o them there +e an*

retention or controvers*, commenced +* third

persons and communicated in due time to the

de+tor.

'0 de+t is li)uidated when its eistence and amount are

determined. (t is not necessar* that it +e admitted +*

the de+tor. Dor is it necessar* that the credit appear in

a nal =ud%ment in order that it can +e considered asli)uidated? it is enou%h that its eact amount is !nown.

0nd a de+t is considered li)uidated, not onl* when it is

epressed alread* in denite %ures which do not

re)uire verication, +ut also when the determination o

the eact amount depends onl* on a simple arithmetical

operation .'33

(n 0ao v. peial 8lans, +n.,3 we ruled that<

"hen the deendant, who has an unli)uidated claim,

sets it up +* wa* o counterclaim, and a =ud%ment is

rendered li)uidatin% such claim, it can +e compensated

a%ainst the plaintifRs claim rom the moment it is

li)uidated +* =ud%ment. "e have restated this in Solinap

v. Jon. el Eosario35 where we held that compensation

ta!es place onl* i +oth o+li%ations are li)uidated.

(n the instant case, +oth o+li%ations are li)uidated.

Iicente has the o+li%ation to pa* his de+t due to Kesus

in the amount o 3;;,;;;.;; with interest at the rate o

16 per annum counted rom the lin% o the instant

complaint on 0u%ust 17, 1993 until ull* paid. Kesus, on

the other hand, has the o+li%ation to pa* attorne*Rs ees

which the ET& had alread* determined to +e e)uivalent

&omplaint si%ned and veried +* plaintif /h. 52. 0side

rom this contin%ent ee, deendant had li!ewise told

plaintif that his usual acceptance ee or a case li!e the

:a%una land case is ;;,;;;.;; and his appearance

ee at that time was ,;;;.;; per appearance +ut

still plaintif paid nothin%.









to whatever amount recovera+le rom Iicente. The said

attorne*Rs ees were awarded +* the ET& on thecounterclaim o Iicente on the +asis o ')uantum

meruit' or the le%al services he previousl* rendered to

Kesus.

(n its ecision, the trial court elucidated on how Iicente

had esta+lished his entitlement or attorne*Rs ees

+ased on his counterclaim in this manner<

eendant, on his counterclaim, has esta+lished theeistence o a law*er-client relationship +etween him

and plaintif and this was admitted +* the latter.

eendant had represented plaintif in several court

cases which include the :a%una propert* case, the

various cases led +* 0tt*. Eomulo Ee*es a%ainst

plaintif such as the alsication and li+el cases and the

dis+arment case led +* plaintif a%ainst 0tt*. Eomulo

Ee*es +eore the &ommission on Gar (nte%ration. 0side

rom these cases, plaintif had made deendant his

consultant on almost ever*thin% that involved le%al

opinions.

4ore particularl* in the &alam+a, :a%una land case

alone, plaintif had a%reed to pa* deendant a

contin%ent ee o 56 o the value o the propert* or

the latterRs le%al services as em+odied in the 0mended

The law*er-client relationship +etween the parties was

severed +ecause o the instant case. The court ishowever ull* aware o deendantRs stature in lie a A

law %raduate, Gar topnotcher in 1957 +ar eamination,

ormer Senior rovincial Goard 4em+er, Iice-$overnor

and $overnor o the province o an%asinan, later as

0ssem+l*man o the Gatasan% am+ansa and is

considered a prominent trial law*er since 195@. #or all

his le%al services rendered to plaintif, deendant

deserves to +e compensated at least on a ')uantum

meruit' +asis.38

The a+ove discussion in the ET& ecision was then

immediatel* ollowed +* the dispositive portion, viz<

"JE#CE, premises a+ove-considered, KA$4DT is

here+* rendered orderin% deendant Iicente . 4illora

to pa* plaintif Kesus 4. 4ontema*or the sum

o 3;;.;;;.;; with interest at the rate o 16 per

annum counted rom the lin% o the instant complainton 0u%ust 17, 1993 until ull* paid and >t(?(>ou*t (o?(>@( 0o +(0(*+>*t s> @( s(to @B >* (Du/?>(*t >ou*t >>+(+ @B t( outo* t( ou*t(>/ ()(s(*t/*g >tto*(Bs 0((so0 +(0(*+>*t on the +asis o ')uantum meruit' or

le%al services previousl* rendered to plaintif.

Do pronouncement as to attorne*Rs ees and costs o

suit.

SC CEE.37 /mphasis supplied.2

(t is thereore clear that in the eecution o the ET&

ecision, there are two parts to +e eecuted. The rst

t i th t ti th t d t K Thi

(n act, the ET&, in addressin% KesusR 4otion or

Eeconsideration and &larication dated Kul* 1, ;;;

had alread* succinctl* eplained this matter in its Crder

dated Septem+er 8, ;;, viz<

Dotwithstandin% the tenor o the said portion o the

=ud%ment, still, there is nothin% to eecute and satis* in







part is the computation o the amount due to Kesus. This

is achieved +* doin% a simple arithmetical operation atthe time o eecution. The principal amount

o 3;;,;;;.;; is to +e multiplied +* the interest rate o

16. The product is then multiplied +* the num+er o

*ears that had lapsed rom the lin% o the complaint on

0u%ust 17, 1993 up to the date when the =ud%ment is to

+e eecuted. The result thereo plus the principal

o 3;;,;;;.;; is the total amount that Iicente must

pa* Kesus.

The second part is the pa*ment o attorne*Rs ees to

Iicente. This is achieved +* ollowin% the clear wordin%s

o the a+ove fallo o the ET& ecision which provides

that Iicente is entitled to attorne*Rs ees which is

e)uivalent to whatever amount recovera+le rom him +*

Kesus. Thereore, whatever amount due to Kesus as

pa*ment o IicenteRs de+t is e)uivalent to the amount

awarded to the latter as his attorne*Rs ees. :e%al

compensation or set-of then ta!es place +etween Kesusand Iicente and +oth parties are on even terms such

that there is actuall* nothin% let to eecute and satis*

in avor o either part*.

avor o either o the herein prota%onists +ecause the

said decision also states clearl* that '>t(?(>ou*t (o?(>@( 0o +(0(*+>*t s> @( SE$-%FF @B >* (Du/?>(*t >ou*t >>+(+ @B t(Cout o* t( ou*t(>/ ()(s(*t/*g>tto*(Bs 0((s o0 +(0(*+>*t o* t( @>s/s o0/uantu# #eruit 0o (g> s(?/(s )(?/ousB(*+((+ to )>/*t/ .

Said dispositive portion o the decision is ree rom an*

am+i%uit*. (t une)uivoca+l* ordered that an* amountdue in avor o plaintif and a%ainst deendant is set of

+* an e)uivalent amount awarded to deendant in the

orm o counterclaims representin% attorne*Rs ees or

past le%al services he rendered to plaintif.

(t will +e an eercise in utilit* and a waste o so

precious time and unnecessar* efort to enorce

satisaction o the plaintifRs claims a%ainst deendant,

and vice versa +ecause there is in act a settin% of oeach otherRs claims and lia+ilities under the said

=ud%ment which has lon% +ecome nal.3@ /mphasis in

the ori%inal.2

0 readin% o the dispositive portion o the ET& ecision

would clearl* show that no am+i%uit* o an* !ind eists.

#urthermore, i indeed there is an* am+i%uit* in the

dispositive portion as claimed +* Kesus, the ET& had

alread* claried it throu%h its Crder dated Septem+er 8,

;; +* cate%oricall* statin% that the attorne*Rs ees

awarded in the counterclaim o Iicente is o an amount

e)uivalent to whatever amount recovera+le rom him +*

Kesus. This clarication is not an amendment,

modication, correction or alteration to an alread* nal

resent<

ADC, J.,

C'airman,

- versus - 0ASTE(0-40ET(DZ,





decision as it is conceded that such cannot +e done

an*more. "hat the ET& simpl* did was to state incate%orical terms what it o+viousl* meant in its

decision. SuBce it to sa* that the dispositive portion o

the decision is clear and une)uivocal such that a

readin% o it can lead to no other conclusion, that is, an*

amount due in avor o Kesus and a%ainst Iicente is set

of +* an e)uivalent amount in the orm o IicenteRs

attorne*Rs ees or past le%al services he rendered or

Kesus.

WHEREF%RE, the instant etition or Eeview

on Certiorari is ENIE. The assailed ecision o the

&ourt o 0ppeals dated 4a* 19, ;;5 in &0-$.E. S Do.

@1;75 which dismissed the petition

or ertiorari see!in% to annul and set aside the Crders

dated Septem+er 8, ;; and Ccto+er , ;;3 o the

Ee%ional Trial &ourt o uezon &it*, Granch 9@ in &ivil

&ase Do. -93-1755, is here+* AFFIRME.

(S0(0S #. #0GE($0S and $.E. Do. 1538

40E&:(D0 E. #0GE($0S,

8etitioners,

&0::KC, SE.,

T(D$0, and

&J(&C-D0Z0E(C, JJ.

S0D #E0D&(S&C :

4CDT, (D&.,

Respondent . romul%ated<

Dovem+er 5, ;;5

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

&(S(CD

T(D$0, J.<

Geore the &ourt is a petition or review on certiorariunder Eule 5 o the 1997 Eules o &ivil rocedure,which assails the 1eision o the &ourt o 0ppeals in &0-$.E. &I Do. 5;3 and its Resolution therein den*in%petitioners motion or reconsideration.Said 1eisionaBrmed the 1eision dated Kanuar* 3,199 o the Ee%ional Trial &ourt /ET&2, Granch 83,4a!ati &it* in &ivil &ase Do. 9;-711 entitled an

possession or occupation romdeendants are ordered to vacateand leave the premises, descri+edas :ot Do. 9 Gloc! Do. 3 o Su+division lan /:E&2 sd-5;;8covered +* Transer &erticate o

Title Do. 9@; /1818532 T-1;@3 o the Ee%istr* o eeds o Eizal, and



6raniso 1el Monte, +n. v. +saias 6. 6a"rigas and

Marelina R. 6a"rigas.

The dispositive portion o the trialcourts 1eision reads<

(n the li%ht o the ore%oin%, the &ourt isconvinced that plaintif has proven +*

preponderance o evidence, the alle%ationappearin% in its complaint and is thereore,entitled to the relies pra*ed or.

&onsiderin%, however, that deendants hadalread* paid 7@,15.;;, the &ourteercisin% its discretion, here+* renders

=ud%ment as ollows<

1. Crderin% deendant to ma!ecomplete pa*ment under theconditions o &ontract to Sell Do.91-I dated Kanuar* 1, 19@5,within twent* da*s rom receipt o this ecision, and in the event thatdeendant ail or reuse to o+servethe latter, deendants and allpersons claimin% ri%ht o

to surrender possession thereo to

plaintif or an* o its authorizedrepresentatives?

. That in the event that deendantschose to surrender possession o the propert*, the* are urtherordered to pa*plaintif ;8,3.@; as unpaidinstallments on the land inclusive

o interests?

3. Crderin% deendants to =ointl*and severall* pa* plaintif theamount o 1;,;;;.;; as and orattorne*s ees? and

. Crderin% deendants to pa* thecosts o suit.

SC CEE.M1N

The ollowin% actual antecedents are matters o record.

Cn 0pril 3, 19@3, herein petitioner spouses (saiasand 4arcelina #a+ri%as /Spouses #a+ri%as or petitioners2and respondent San #rancisco el 4onte, (nc. /el4onte2 entered into an a%reement, denominatedas Contrat to ell No. >LB>- , where+* the lattera%reed to sell to Spouses #a+ri%as a parcel o residentialland situated in Garrio 0lmanza, :as ias, 4anila or andin consideration o the amount o 1;9,;;.;;. Said

hi h i ! 9 l ! 3

a%rees to peacea+l* vacate the said

premises.M3N

0ter pa*in% 3;,;;;.;;, Spouses #a+ri%as too!possession o the propert* +ut ailed to ma!e an*installment pa*ments on the +alance o the purchase

http://sc.judiciary.gov.ph/jurisprudence/2005/nov2005/152346.htm#_ftn1






propert*, which is !nown as :ot Do. 9, Gloc! Do. 3 o

Su+division lan /:E&2 sd-5;;8, is covered +* Transer&erticate o Title Do. 9@; /1818532 T-1;@3 re%isteredin the name o respondent el 4onte. The a%reementstipulated that Spouses #a+ri%as shall pa* 3;,;;;.;;as downpa*ment and the +alance within ten /1;2 *earsin monthl* successive installments o1,@5.89.MN 0mon% the clauses in the contract is an automaticcancellation clause in case o deault, which states asollows<

7. Should the AE&J0SE ail to ma!e

an* o the pa*ments includin% interest as

herein provided, within 3; da*s ater the

due date, this contract will +e deemed and

considered as oreited and annulled without

necessit* o notice to the AE&J0SE, and

said S::E shall +e at li+ert* to dispose o

the said parcel o land to an* other personin the same manner as i this contract had

never +een eecuted. (n the event o such

oreiture, all sums o mone* paid under this

contract will +e considered and treated as

rentals or the use o said parcel o land,

and the AE&J0SE here+* waives all ri%ht

to as! or demand the return thereo and

price. el 4onte sent demand letters on our occasions

to remind Spouses #a+ri%as to satis* their contractualo+li%ation.MN (n particular, el 4ontes third letter datedDovem+er 9, 19@3 demanded the pa*ment o arrears inthe amount o@,999.;;. Said notice %ranted Spouses#a+ri%as a teen-da* %race period within which tosettle their accounts. etitioners ailure to heed el4ontes demands prompted the latter to send a naldemand letter dated ecem+er 7, 19@3, %rantin%Spouses #a+ri%as another %race period o teen da*swithin which to pa* the overdue amount and warned

them that their ailure to satis* their o+li%ation wouldcause the rescission o the contract and the oreiture o the sums o mone* alread* paid. etitioners receivedel 4ontes nal demand letter on ecem+er 3, [email protected] 4onte considered Contrat to ell No. >LB>- cancelled teen da*s thereater, +ut did not urnishpetitioners an* notice re%ardin% its cancellation.M5N

Cn Dovem+er 8, 19@, petitioner 4arcelina

#a+ri%as /petitioner 4arcelina2 remitted the amounto 13,;;;.;; to el 4onte.M8N Cn Kanuar* 1, 19@5,petitioner 4arcelina a%ain remitted the amounto 1,;;;.;;.M7N 0 ew da*s thereater, or on Kanuar* 1,19@5, petitioner 4arcelina and el 4onte entered intoanother a%reement denominated as Contrat to ell No.>L$- , coverin% the same propert* +ut underrestructured terms o pa*ment. Ander the secondcontract, the parties a%reed on a new purchase price

o131,8.5@, the amount o 8,[email protected] asdownpa*ment and the +alance to +e paid in monthl*installments o ,[email protected]; each.M@N

Getween 4arch 19@5 and Kanuar* 19@8, Spouses#a+ri%as made irre%ular pa*ments under Contrat toell No. >L$-, to wit<

Kune 8, 19@8 , ;;;.;;

Kul* 1, 19@8 , ;;;.;;M11N

Do other pa*ments were made +* petitioners ecept theamount o 1; ;;; ;; which petitioners tendered

















ell No. >L$ , to wit<

4arch 19, 19@5 1, [email protected]

Kul* , 19@5 , 8;;.;;

Septem+er 3;, 19@5 , 8;;.;;

Dovem+er 7, 19@5 , 8;;.;;

Kanuar* ;, 19@8 , ;;;.;;M9N

el 4onte sent a demand letter dated #e+ruar* 3,19@8, inormin% petitioners o their overdue accounte)uivalent to nine /92 installments or a total amounto 8,@81.;. el 4onte re)uired petitioners to satis*said amount immediatel* in two su+se)uent lettersdated 4arch 5 and 0pril , [email protected];N This prompted

petitioners to pa* the ollowin% amounts<

#e+ruar* 3, 19@8 , ;;;.;;

4arch 1;, 19@8 , ;;;.;;

0pril 9, 19@8 , ;;;.;;

4a* 13, 19@8 , ;;;.;;

amount o 1;,;;;.;; which petitioners tendered

sometime in Ccto+er 19@7 +ut which el 4onte reusedto accept, the latter claimin% that the pa*ment wasintended or the satisaction o Contrat to ell No.>LB>- which had alread* +een previousl* cancelled. Cn4arch , 19@@, el 4onte sent a letter demandin% thepa*ment o accrued installments under Contrat to ellNo. >L$- in the amount o 185,759.8;less @,[email protected], representin% the pa*ments madeunder the restructured contract, or the net amounto 117,831.;@. el 4onte allowed petitioners a %race

period o thirt* /3;2 da*s within which to pa* theamount as!ed to avoid rescission o the contract. #orailure to pa*, el 4onte notied petitioners on 4arch3;, 19@9 that Contrat to ell No. >LB>- had +eencancelled and demanded that petitioners vacate thepropert*.M1N

Cn Septem+er @, 199;, el 4onte instituted anaction or Eecover* o ossession with ama%es a%ainst

Spouses #a+ri%as +eore the ET&, Granch 83 o 4a!ati&it*. The complaint alle%ed that Spouses #a+ri%as owedel 4onte the principal amount o ;8,3.@; plusinterest o 6 per annum. (n their answer, Spouses#a+ri%as claimed, amon% others, that el 4onteunilaterall* cancelled the rst contract and orcedpetitioner 4arcelina to eecute the second contract,which materiall* and un=ustl* altered the terms andconditions o the ori%inal contract.M13N

0ter trial on the merits, the trial court rendereda 1eision on Kanuar* 3, 199, upholdin% the validit*o Contrat to ell No. >L$- and orderin% Spouses#a+ri%as either to complete pa*ments thereunder or tovacate the propert*.

G. TJ &CAET C# 00:S $E0I:HEE (D EA:(D$ TJ0T TJE "0S 0D(4:( E0T(#(&0T(CD C# &CDTE0&T TCS:: DC. 91-I.

&. TJ &CAET C# 00:S EE (D(TS 0:(&0T(CD C# TJ EA:S C#











0%%rieved, Spouses #a+ri%as elevated the matterto the &ourt o 0ppeals, ar%uin% that the trial courtshould have upheld the validit* and eistenceo Contrat to ell No. >LB>- instead andnullied Contrat to ell No. >L$- . The &ourt o 0ppeals re=ected this ar%ument on the %roundthat Contrat to ell No. >LB>- had +een rescindedpursuant to the automatic rescission clause therein."hile the &ourt o 0ppeals declared Contrat to ell No.>L$- as merel* unenorcea+le or havin% +een

eecuted without petitioner 4arcelinas si%nature, itupheld its validit* upon ndin% that the contract wassu+se)uentl* ratied.

Jence, the instant petition attri+utin% theollowin% errors to the &ourt o 0ppeals<

0. TJ &CAET C# 00:S $E0I:HEE "JD (T ($DCE TJ ECI(S(CDSC# E.0. DC. 855 /TJ 40&0 :0"2 0DEA: TJ0T &CDTE0&T TC S:: DC. @-I"0S I0:(:H &0D&:: GH SD(D$ 04E DCT(& TC TJ T(T(CDES.

DCI0T(CD TC TJ (DST0DT &0S.M1N

0s reramed or +etter understandin%, the)uestions are the ollowin%< "as Contrat to ell No.>LB>- etin%uished throu%h rescission or was itnovated +* the su+se)uent Contrat to ell No. >L$- V( Contrat to ell No. >LB>- was rescinded, should themanner o rescission compl* with the re)uirements o Eepu+lic 0ct Do. /E.0.2 855V ( Contrat to ell No.>LB>- was su+se)uentl* novated +* Contrat to ellNo. >L$- , are petitioners lia+le or +reach under thesu+se)uent a%reementV

etitioners theorize that Contrat to ell No. >LB>- should remain valid and su+sistin% +ecause the noticeo cancellation sent +* el 4onte did not o+serve the

re)uisites under Section 3 o E.0. 855.M15N

0ccordin% topetitioners, since respondent did not send a notarialnotice inormin% them o the cancellation or rescissiono Contrat to ell No. >LB>- and also did not pa* themthe cash surrender value o the pa*ments on thepropert*, the &ourt o 0ppeals erred in concludin% thatrespondent correctl* applied the automatic rescissionclause o Contrat to ell No. >LB>- . etitioners alsocite Section 7M18N o said law to +olster their theor* that

the automatic rescission clause in Contrat to ell No.>LB>- is invalid or +ein% contrar* to law and pu+licpolic*.

The &ourt o 0ppeals erred in rulin% that el4onte was well within its ri%ht to cancel the contract +*epress %rant o para%raph 7 without the need o

%race period, the seller ma* cancel thecontract ater thirt* da*s rom receipt +* the+u*er o the notice o cancellation or thedemand or rescission o the contract +* anotarial act.

Thus, the cancellation o the contract under









p % p % pnoti*in% MpetitionersN,M17N instead o appl*in% the

pertinent provisions o E.0. 855. etitioners contentionthat none o el 4ontes demand letters constituted avalid rescission o Contrat to ell No. >LB>- is correct.

etitioners deaulted in all monthl* installments. The* ma* +e credited onl* with the amounto 3;,;;;.;; paid upon the eecution o Contrat toell No. >LB>- , which should +e deemed e)uivalent to

less than two /2 *ears installments. $iven the nature o the contract +etween petitioners and el 4onte, theapplica+le le%al provision on the mode o cancellationo Contrat to ell No. >LB>- is Section and notSection 3 o E.0. 855. Section is applica+le toinstances where less than two *ears installments werepaid. (t reads<

S&T(CD . (n case where less than

two *ears o installments were paid, theseller shall %ive the +u*er a %race period o not less than sit* da*s rom the date theinstallment +ecame due.

( the +u*er ails to pa* theinstallments due at the epiration o the

Section is a two-step process. #irst, the seller

should etend the +u*er a %race period o at leastsit* /8;2 da*s rom the due date o the installment.Second, at the end o the %race period, the sellershall urnish the +u*er with a notice o cancellationor demand or rescission throu%h a notarial act,efective thirt* /3;2 da*s rom the +u*ers receiptthereo. (t is worth mentionin%, o course, that a merenotice or letter, short o a notarial act, would notsuBce.

"hile the &ourt concedes that el 4onte had

allowed petitioners a %race period lon%er than theminimum sit* /8;2-da* re)uirement under Section, it did not compl*, however, with the re)uiremento notice o cancellation or a demand or rescission.(nstead, el 4onte applied the automatic rescissionclause o the contract. &ontrar*, however, to el4ontes position which the appellate court sustained,the automatic cancellation clause is void under

Section 7M1@N in relation to Section o E.0. 855.M19N

Eescission, o course, is not the onl* mode o etin%uishin% o+li%ations. Crdinaril*, o+li%ations are alsoetin%uished +* pa*ment or perormance, +* the loss o the thin% due, +* the condonation or remission o thede+t, +* the conusion or mer%er o the ri%hts o thecreditor and de+tor, +* compensation, or +* novation.M;N

Dovation, in its +road concept, ma* either +eetinctive or modicator*. (t is etinctive when an oldo+li%ation is terminated +* the creation o a newo+li%ation that ta!es the place o the ormer? it is merel*modicator* when the old o+li%ation su+sists to theetent it remains compati+le with the amendator*a%reement 0n etinctive novation results either +*

(n order that an o+li%ation ma* +e etin%uished +*another which su+stitutes the same, it is imperative thatit +e so declared in une)uivocal terms, or that the oldand the new o+li%ations +e on ever* point incompati+lewith each other.MN The test o incompati+ilit* is whetheror not the two o+li%ations can stand to%ether, each onehavin% its independent eistence ( the* cannot the*













a%reement. 0n etinctive novation results either +*chan%in% the o+=ect or principal conditions /o+=ective orreal2, or +* su+stitutin% the person o the de+tor orsu+ro%atin% a third person in the ri%hts o the creditor/su+=ective or personal2. Ander this mode, novationwould have dual unctionsone to etin%uish an eistin%o+li%ation, the other to su+stitute a new one in itsplacere)uirin% a conPu o our essential re)uisites< /12a previous valid o+li%ation? /2 an a%reement o allparties concerned to a new contract? /32 theetin%uishment o the old o+li%ation? and /2 the +irth o a valid new o+li%ation.M1N

Dotwithstandin% the improper rescission, the actso the case show that Contrat to ell No. >LB>- wassu+se)uentl* novated +*Contrat to ell No. >L$- .

The eecution o Contrat to ell No. >L$- accompanied an upward chan%e in the contract price,which constitutes a chan%e in the o+=ect or principalconditions o the contract. (n enterin% into Contrat to

ell No. >L$-, the parties were impelled +* causesdiferent rom those o+tainin% under Contrat to ell No.>LB>- . Cn the part o petitioners, the* a%reed to theterms and conditions o Contrat to ell No. >L$- notonl* to ac)uire ownership over the su+=ect propert* +utalso to avoid the conse)uences o their deaultunder Contrat No. >LB>- . Cn el 4ontes end, theupward chan%e in price was the consideration orenterin% intoContrat to ell No. >L$- .

havin% its independent eistence. ( the* cannot, the*are incompati+le and the latter o+li%ation novates therst.M3N The eecution o Contrat to ell No. >L$- created new o+li%ations in lieu o thoseunder Contrat to ell No. >LB>- , which are alread*considered etin%uished upon the eecution o thesecond contract. The two contracts do not haveindependent eistence or to hold otherwise wouldpresent an a+surd situation where the parties would +elia+le under each contract havin% onl* one su+=ectmatter.

To dispel the novation o Contrat to ell No.>LB>- +* Contrat to ell No. >L$-, petitionerscontend that the su+se)uent contract is void or tworeasons< rst, petitioner (saias #a+ri%as did not %ive hisconsent thereto, and second, the su+se)uent contract isa contract o adhesion.

etitioner rel* on 0rticle 17 o the &ivil &ode%overnin% their propert* relations as spouses. Saidarticle states that the wie cannot +ind the con=u%alpartnership without the hus+ands consent ecept incases provided +* law. Since onl* petitioner 4arcelinaeecutedContrat to ell No. >L$- , the same isalle%edl* void, petitioners conclude.

Ander the &ivil &ode, the hus+and is theadministrator o the con=u%al partnership.MN Anless thewie has +een declared a non ompos mentis or aspendthrit, or is under civil interdiction or is conned ina leprosarium, the hus+and cannot alienate orencum+er an* real propert* o the con=u%al partnershipwithout the wie>s consent.M5N &onversel*, the wiecannot +ind the con=u%al partnership without thehus+ands consent ecept in cases provided +* law M8N

capacit* to %ive consent +elon%ed not even to thehus+and alone +ut to +oth

spouses.M3;N (n that case, the &ourt anchored its rulin% on0rticle 173 o the &ivil &ode which states that contractsentered +* the hus+and without the consent o the wiewhen such consent is re)uired, are annulla+le at herinstance durin% the marria%e and within ten *ears romthe transaction mentioned.M31N

















hus+ands consent ecept in cases provided +* law.M8N

Thus, i a contract entered into +* one spouseinvolvin% a con=u%al propert* lac!s the consent o theother spouse, as in the case at +ar, is it automaticall*void or that reason aloneV

0rticle 173M7N o the &ivil &ode epressl* classies

a contract eecuted +* the hus+and without the consento the wie as merel* annulla+le at the instance o thewie. Jowever, there is no compara+le provisioncoverin% an instance where the wie alone hasconsented to a contract involvin% con=u%al propert*.0rticle 17 o the &ivil &ode, thou%h, does not epressl*declare as void a contract entered +* the wie withoutthe hus+ands consent. (t is also not one o the contractsconsidered as void under 0rticle 1;9M@N o the &ivil&ode.

(n 6elipe v. Heirs of Maimo Aldon,M9N the &ourthad the occasion to rule on the validit* o a sale o lands+elon%in% to the con=u%al partnership made +* the wiewithout the consent o the hus+and. Spea!in% throu%h4r. Kustice 0+ad Santos, the &ourt declared such acontract as voida+le +ecause one o the parties isincapa+le o %ivin% consent to the contract. The

the transaction mentioned.

The actual milieu o the instant case, however,difers rom that in 6elipe. The deect which Contrat toell No. >L$- sufers rom is lac! o consent o thehus+and, who was out o the countr* at the time o theeecution o the contract. There is no epress provisionin the &ivil &ode %overnin% a situation where thehus+and is a+sent and his a+sence incapacitates himrom administerin% the con=u%al partnership propert*.

The ollowin% &ivil &ode provisions, however, areilluminatin%<

0ET(&: 187. (n case o a+use o powers o administration o the con=u%alpartnership propert* +* the hus+and, thecourts, on petition o the wie, ma* provideor receivership, or administration +* thewie, or separation o propert*.

0ET(&: 18@. The wie ma*, +*epress authorit* o the hus+and em+odiedin a pu+lic instrument, administer thecon=u%al partnership propert*.

0ET(&: 189. The wie ma* also, +*epress authorit* o the hus+and appearin%in a pu+lic instrument, administer thelatter>s estate.

"hile the hus+and is the reco%nized administrator

0nent el 4ontes claim that Contrat to ell No.>L$- is a contract o adhesion, suBce it to sa* thatassumin% or the nonce that the contract is such thecharacterization does not automaticall* render it void. 0contract o adhesion is so-called +ecause its terms areprepared +* onl* one part* while the other part* merel*aBes his si%nature si%ni*in% his adhesion thereto.Such contracts are not void in themselves. The* are as+indin% as ordinar* contracts arties who enter into












"hile the hus+and is the reco%nized administrator

o the con=u%al propert* under the &ivil &ode, there areinstances when the wie ma* assume administrativepowers or as! or the separation o propert*. (n thea+ovementioned instances, the wie must +e authorizedeither +* the court or +* the hus+and. "here thehus+and is a+sent and incapa+le o administerin% thecon=u%al propert*, the wie must +e epressl*authorized +* the hus+and or see! =udicial authorit* toassume powers o administration. Thus, an* transactionentered +* the wie without the court or the hus+ands

authorit* is unenorcea+le in accordance with 0rticle1317M3N o the &ivil &ode. That is the status to +eaccorded Contrat to ell No. >L$-, it havin% +eeneecuted +* petitioner 4arcelina without her hus+andsconormit*.

Gein% an unenorcea+le contract, Contrat to ellNo. >L$- is suscepti+le to ratication. 0s ound +* thecourts +elow, ater +ein% inormed o the eecution o the contract, the hus+and, petitioner (saias #a+ri%as,continued remittin% pa*ments or the satisaction o theo+li%ation under Contrat to ell No. >L$- . These actsconstitute ratication o the contract. Such raticationcleanses the contract rom all its deects rom themoment it was constituted. The actual ndin%s o thecourts +elow are +e*ond review at this sta%e.

+indin% as ordinar* contracts. arties who enter into

such contracts are ree to re=ect the stipulations entirel*.M33N

The &ourt )uotes with approval the ollowin%actual o+servations o the trial court, which cannot +edistur+ed in this case, to wit<

The &ourt notes that deendant, 4arcelina#a+ri%as, althou%h she had to si%n contract

Do. 91-I, to avoid oreiture o her

downpa*ment, and her other monthl*

amortizations, was entirel* ree to reuse to

accept the new contract. There was no clear

case o intimidation or threat on the part o

plaintif in oferin% the new contract to her.

0t most, since she was o suBcient

intelli%ence to discern the a%reement she isenterin% into, her si%nin% o &ontract Do.

91-I is ta!en to +e valid and +indin%. The

act that she has paid monthl*

amortizations su+se)uent to the eecution

o &ontract to Sell Do. 91-I, is an

indication that she had reco%nized the

validit* o such contract. . . .M3N

(n sum, Contrat to ell No. >L$- is valid and+indin%. There is nothin% to prevent respondent el4onte rom enorcin% its contractual stipulations andpursuin% the proper court action to hold petitionerslia+le or their +reach thereo.

$( C>s(

Geore us is a etition or EeviewM1N under Eule 5 o

the Eules o &ourt, see!in% to nulli* the Dovem+er 8,

;;1 ecisionMN and the Kune 8, ;; EesolutionM3N o

the &ourt o 0ppeals /&02 in &0-$E &I Do. 8;51. The

appellate court disposed as ollows<







http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn1








"JE#CE, the instant etition or Eeview isD( and the Septem+er @, ;;1 1eision o the&ourt o 0ppeals in &0-$.E. &I Do. 5;3 is 0##(E4.

&osts a%ainst petitioners.

R%ME% C. GARCIA, etitioner, 's. I%NISI% #.LLAMAS, resondent .

E C I S I % N

PANGANIAN, J.:

Dovation cannot +e presumed. (t must +e clearl*

shown either +* the epress assent o the parties or +*

the complete incompati+ilit* +etween the old and the

new a%reements. etitioner herein ails to show either

re)uirement convincin%l*? hence, the summar*

=ud%ment holdin% him lia+le as a =oint

and solidar* de+tor stands.

UP%N $HE #IEW WE $AKE %F $HIS CASE,$HUS, the =ud%ment appealed rom, insoar as it

pertains to MetitionerN Eomeo $arcia, must +e, as it

here+* is, AFFIRME, su+=ect to the modication that

the award or attorne*s ees and cost o suit

is ELE$E. The portion o the =ud%ment that pertains

to duardo de Kesus is SE$ASIE and #ACA$E. 0ccordin%l*, the case a%ainst

duardo de Kesus is REMANE to the court o

ori%in or purposes oreceivin% e parte MEespondentN ionisio :lamas

evidence a%ainst duardo de Kesus.MN

The challen%ed Eesolution, on the other hand,

denied petitioners 4otion or Eeconsideration.

$( A*t((+(*ts

The antecedents o the case are narrated +* the &0as ollows<

This case started out as a complaint or sum o mone*

and dama%es +* MEespondentN ionisio :lamas

a%ainst MetitionerN Eomeo $arcia and duardo de

Kesus. oc!eted as &ivil &ase Do. 97-3-@73, the

complaint alle%ed that on 3 ecem+er 1998M,N

Mpetitioner and de KesusN +orrowed ;;,;;;.;; rom

MrespondentN? that, on the same da*, Mthe*N eecuted a

promissor* note wherein the* +ound themselves =ointl*

and severall* to pa* the loan on or +eore 3 Kanuar*

1997 with a 56 interest per month? that the loan has

lon% +een overdue and, despite repeated demands,

Mpetitioner and de KesusN have ailed and reused to pa*

it? and that +* reason o theMirN un=ustied reusal

shoppin%. 0nneed to the repl* were the ace o the

chec! and the reverse side thereo.

#or his part, de Kesus asserted in his M0Nnswer with

M&Nounterclaim that out o the supposed ;;,;;;.;;

loan, he received onl* 38;,;;;.;;, the ;,;;;.;;

havin% +een advance interest thereon or two months,

that is, or Kanuar* and #e+ruar* 1997? thatM,N in actM,N





it? and that, +* reason o theMirN un=ustied reusal,

MrespondentN was compelled to en%a%e the services ocounsel to whom he a%reed to pa* 56 o the sum to

+e recovered rom Mpetitioner and de KesusN,

plus ,;;;.;; or ever* appearance in court. 0nneed

to the complaint were the promissor* note a+ove-

mentioned and a demand letter, dated ; 4a* 1997, +*

MrespondentN addressed to Mpetitioner and de KesusN.

Eesistin% the complaint, Metitioner $arcia,N in his

M0nswer,N averred that he assumed no lia+ilit* under thepromissor* note +ecause he si%ned it merel* as an

accommodation part* or de Kesus? and,

alternativel*, that he is relieved rom an* lia+ilit* arisin%

rom the note inasmuch as the loan had +een paid +*

de Kesus +* means o a chec! dated 17 0pril 1997?

and that, in an* event, the issuance o the chec! and

MrespondentsN acceptance thereo novated or

superseded the note.

MEespondentN tendered a repl* to MetitionerN $arcias

answer, thereunder assertin% that the loan remained

unpaid or the reason that the chec! issued +* de

Kesus +ounced, and that MetitionerN $arcias answer was

not even accompanied +* a certicate o non-orum

that is, or Kanuar* and #e+ruar* 1997? thatM,N in actM,N

he paid the sum o 1;,;;;.;; +* wa* o interests?that this was made when MrespondentsN dau%hter, one

Dits :lamas-ui=encio, received rom the &entral olice

istrict &ommand at Gicutan, Ta%ui%, 4etro 4anila

/where de Kesus wor!ed2, the sum o ;,;;;.;;,

representin% the peso e)uivalent o his accumulated

leave credits, another ;,;;;.;; as advance interest,

and still another ;,;;;.;; as interest or the months

o 4arch and 0pril 1997? that he had diBcult* in pa*in%

the loan and had as!ed MrespondentN or an etension o time? that MrespondentN acted in +ad aith in institutin%

the case, MrespondentN havin% a%reed to accept the

+enets he /de Kesus2 would receive or his retirement,

+ut MrespondentN nonetheless led the instant case

while his retirement was +ein% processed? and that, in

deense o his ri%hts, he a%reed to pa* his

counsel ;,;;;.;; MasN attorne*s ees, plus 1,;;;.;;

or ever* court appearance.

urin% the pre-trial conerence, de Kesus and his

law*er did not appear, nor did the* le an* pre-trial

+rie. Deither did MetitionerN $arcia le a pre-trial +rie,

and his counsel even maniested that he would no

Mlon%erN present evidence. $iven this development, the

trial court %ave MrespondentN permission to present his

evidence e parte a%ainst de Kesus? and, as

re%ards MetitionerN $arcia, the trial court directed

MrespondentN to le a motion or =ud%ment on the

pleadin%s, and or MetitionerN $arcia to le his comment

or opposition thereto.

(nstead, MrespondentN led a M4Notion to declare

MetitionerN $arcia in deault and to allow him to present

2 1;;,;;;.;; as attorne*s ees plus appearance ee

o ,;;;.;; or each da* o McNourt appearance, and?

32 &ost o this suit.M8N

Ru/*g o0 t( Cout o0 A))(>s

The &0 ruled that the trial court had erred when it





MetitionerN $arcia in deault and to allow him to present

his evidence e parte. 4eanwhile, MetitionerN $arcialed a M4Naniestation su+mittin% his deense to a

=ud%ment on the pleadin%s. Su+se)uentl*, MrespondentN

led a M4NaniestationM4Notion to su+mit the case or

=ud%ement on the pleadin%s, withdrawin% in the process

his previous motion. Thereunder, he asserted that

Mpetitioners and de KesusN solidar* lia+ilit* under the

promissor* note cannot +e an* clearer, and that the

chec! issued +* de Kesus did not dischar%e the loan

since the chec! +ounced.M5N

Cn Kul* 7, 199@, the Ee%ional Trial &ourt /ET&2

o uezon &it* /Granch 2 disposed o the case as

ollows<

"JE#CE, premises considered, =ud%ment on the

pleadin%s is here+* rendered in avor o MrespondentN

and a%ainst Mpetitioner and e KesusN, who are here+*

ordered to pa*, =ointl* and severall*, the MrespondentNthe ollowin% sums, to wit<

12 ;;,;;;.;; representin% the principal amount plus

56 interest thereon per month rom Kanuar* 3, 1997

until the same shall have +een ull* paid, less the

amount o 1;,;;;.;; representin% interests alread*

paid +* de Kesus?

rendered a =ud%ment on the pleadin%s a%ainst e Kesus.

0ccordin% to the appellate court, his 0nswer raised

%enuinel* contentious issues. 4oreover, he was still

re)uired to present his evidence e parte. Thus,

respondent was not ipso fato entitled to the ET&

=ud%ment, even thou%h e Kesus had +een declared in

deault. The case a%ainst the latter was thereore

remanded +* the &0 to the trial court or

the e parte reception o the ormers evidence.

0s to petitioner, the &0 treated his case as a

summar* =ud%ment, +ecause his 0nswer had ailed to

raise even a sin%le %enuine issue re%ardin% an* material

act.

The appellate court ruled that no novation -- epress

or implied -- had ta!en place when respondent accepted

the chec! rom e Kesus. 0ccordin% to the &0, the chec!

was issued precisel* to pa* or the loan that wascovered +* the promissor* note =ointl* and severall*

underta!en +* petitioner and e Kesus. Eespondents

acceptance o the chec! did not serve to ma!e e Kesus

the sole de+tor +ecause, rst , the o+li%ation incurred +*

him and petitioner was =oint and several? and, seond,

the chec! -- which had +een intended to etin%uish the

o+li%ation -- +ounced upon its presentment.

Jence, this etition.M7N

Issu(s

etitioner su+mits the ollowin% issues or our

consideration<

(

to nancial diBculties, he +e %iven an

etension o time to pa* his loan

o+li%ation and that his retirement

+enets rom the hilippine Dational

olice will answer or said o+li%ation.

((







"hether or not the Jonora+le &ourt o 0ppeals %ravel*erred in not holdin% that novation applies in the instant

case as duardo de Kesus had epressl* assumed

sole and eclusive lia+ilit* or the loan o+li%ation he

o+tained rom Eespondent ionisio :lamas, as

clearl* evidenced +*<

a2 (ssuance +* de Kesus o a chec! in

pa*ment o the ull amount o the loan

o ;;,;;;.;; in avor o Eespondent

:lamas, althou%h the chec!

su+se)uentl* +ouncedM?N

+2 0cceptance o the chec! +* the

respondent which resulted

in MtheN su+stitution +* de Kesus

or Mthe supersedin% oN the promissor*

note?

c2 de Kesus havin% paid interests on the

loan in the total amount

o 1;,;;;.;;?

d2 The act that Eespondent :lamas a%reed to

the proposal o de Kesus that due

"hether or not the Jonora+le &ourt o 0ppeals seriousl*

erred in not holdin% that the deense o petitioner that

he was merel* an accommodation part*, despite the

act that the promissor* note provided or a =oint

and solidar* lia+ilit*, should have +een %iven wei%ht

and credence considerin% that su+se)uent events

showed that the principal o+li%or was in truth and in act

de Kesus, as evidenced +* the ore%oin%

circumstances showin% his assumption o sole lia+ilit*

over the loan o+li%ation.

(((

"hether or not =ud%ment on the pleadin%s or summar*

=ud%ment was properl* availed o +* Eespondent

:lamas, despite the act that there are %enuine issues o

act, which the Jonora+le &ourt o 0ppeals itsel

admitted in its ecision, which call or the presentation

o evidence in a ull-+lown trial.M@N

Simpl* put, the issues are the ollowin%< 12 whether

there was novation o the o+li%ation? 2 whether the

deense that petitioner was onl* an accommodation

part* had an* +asis? and 32 whether the =ud%ment

a%ainst him -- +e it a =ud%ment on the pleadin%s or a

summar* =ud%ment -- was proper.

$( Couts Ru/*g

The etition has no merit.

F/st Issu(!

No'ation

i i ! i hi l hi

0rt. 193. Dovation which consists in su+stitutin% a new

de+tor in the place o the ori%inal one, ma* +e made

even without the !nowled%e or a%ainst the will o the

latter, +ut not without the consent o the

creditor. a*ment +* the new de+tor %ives him ri%hts

mentioned in articles 138 and 137.






etitioner see!s to etricate himsel rom his

o+li%ation as =oint and solidar* de+tor +* insistin%that novation too! place, either throu%h the su+stitution

o e Kesus as sole de+tor or the replacement o the

promissor* note +* the chec!. 0lternativel*, the ormer

ar%ues that the ori%inal o+li%ation was etin%uished

when the latter, who was his co-o+li%or, paid the loan

with the chec!.

The allac* o the second /alternative2 ar%ument is

all too apparent. The chec! could not have etin%uished

the o+li%ation, +ecause it +ounced upon presentment.

G* law,M9Nthe deliver* o a chec! produces the efect o

pa*ment onl* when it is encashed.

"e now come to the main issue o

whether novation too! place.

Dovation is a mode o etin%uishin% an o+li%ation +*chan%in% its o+=ects or principal o+li%ations, +*


su+ro%atin% a third person to the ri%hts o the creditor.M1;N 0rticle 193 o the &ivil &ode denes novation as

ollows<

% , %

person o the de+tor< /12 epromision and/2 delegaion. (n epromision, the initiative or the

chan%e does not come rom -- and ma* even +e made

without the !nowled%e o -- the de+tor, since it consists

o a third persons assumption o the o+li%ation. 0s such,

it lo%icall* re)uires the consent o the third person and

the creditor. (n delegaion, the de+tor ofers, and the



consent o these three persons are necessar*. M11N Gothmodes o su+stitution +* the de+tor re)uire the consent

o the creditor.M1N



creation o a new one that ta!es the place o the

ormer. (t is merel* modicator* when the old o+li%ation


the amendator* a%reement.M13N "hether etinctiveor modicator*, novation is made either +* chan%in%

the o+=ect or the principal conditions, reerred to as



o the creditor, an act !nown as su+=ective or

personal novation.M1N #or novation to ta!e place, the

ollowin% re)uisites must concur<


2 The parties concerned must a%ree to a new contract.


Deither could the pa*ment o interests -- which, in

petitioners view, also constitutes novationM1@N -- chan%e

the terms and conditions o the o+li%ation. Such

pa*ment was alread* provided or in the promissor*

note and, li!e the chec!, was totall* in accord with the

terms thereo.

0lso unmeritorious is petitioners ar%ument that the

















2 There must +e a valid new contract.M15N

Dovation ma* also +e epress or implied. (t is

epress when the new o+li%ation declares in

une)uivocal terms that the old o+li%ation is

etin%uished. (t is implied when the new o+li%ation is

incompati+le with the old one on ever* point.M18N The test

o incompati+ilit* is whether the two o+li%ations can

stand to%ether, each one with its own independent

eistence.M17N

0ppl*in% the ore%oin% to the instant case, we hold

that no novation too! place.

The parties did not une)uivocall* declare that the

old o+li%ation had +een etin%uished +* the issuance

and the acceptance o the chec!, or that the chec!

would ta!e the place o the note. There is noincompati+ilit* +etween the promissor* note and the

chec!. 0s the &0 correctl* o+served, the chec! had

+een issued precisel* to answer or the o+li%ation. Cn

the one hand, the note evidences the loan o+li%ation?

and on the other, the chec! answers or it. Ieril*, the

two can stand to%ether.

p %

o+li%ation was novated +* the su+stitution o de+tors. (norder to chan%e the person o the de+tor, the old one

must +e epressl* released rom the o+li%ation, and the

third person or new de+tor must assume

the ormers place in the relation.M19N "ell-settled is the

rule that novation is never presumed.M;N &onse)uentl*,

that which arises rom a purported chan%e in the person

o the de+tor must +e clear and epress.M1N (t is thus

incum+ent on petitioner to show clearl* and

une)uivocall* that novation has indeed ta!en place.

(n the present case, petitioner has not shown that he

was epressl* released rom the o+li%ation, that a third

person was su+stituted in his place, or that the =oint

andsolidar* o+li%ation was cancelled and su+stituted +*

the solitar* underta!in% o e Kesus. The &0 aptl* held<

. laintifs acceptance o the +um chec! did not

result in su+stitution +* de Kesus either, the nature othe o+li%ation +ein% solidar* due to the act that the

promissor* note epressl* declared that the lia+ilit* o

appellants thereunder is =oint and Msolidar*.N Eeason<

under the law, a creditor ma* demand pa*ment or

perormance rom one o the solidar* de+tors or some

or all o them simultaneousl*, and pa*ment made +*

one o them etin%uishes the o+li%ation. (t thereore

ollows that in case the creditor ails to collect rom one

o the solidar* de+tors, he ma* still proceed a%ainst the

other or others. MN

4oreover, it must +e noted that or novation to +e

valid and le%al, the law re)uires that the creditor

epressl* consent to the su+stitution o a new de+tor.M3N Since novationimplies a waiver o the ri%ht the

etitioner avers that he si%ned the promissor* note

merel* as an accommodation part*? and that, as such,

he was released as o+li%or when respondent a%reed to

etend the term o the o+li%ation.

This reasonin% is misplaced, +ecause the note herein

is not a ne%otia+le instrument. The note reads<



















creditor had +eore the novation, such waiver must +eepress.MN (t cannot +e supposed, without clear proo,

that the present respondent has done awa* with his

ri%ht to eact ulllment rom either o

the solidar* de+tors.M5N

4ore important, e Kesus was not a third person to

the o+li%ation. #rom the +e%innin%, he was a =oint

and solidar* o+li%or o the ;;,;;; loan? thus, he can

+e released rom it onl* upon itsetin%uishment. Eespondents acceptance o his chec!

did not chan%e the person o the de+tor, +ecause a =oint

and solidar* o+li%or is re)uired to pa* the entiret* o the

o+li%ation.

(t must +e noted that in a solidar* o+li%ation, the

creditor is entitled to demand the satisaction o the

whole o+li%ation rom an* or all o the de+tors. M8N (t is up

to the ormer to determine a%ainst whom to enorcecollection.M7N Javin% made himsel =ointl* and severall*

lia+le with e Kesus, petitioner is thereore lia+le M@N or

the entire o+li%ation.M9N

S(o*+ Issu(!

Acco##odation !art%

EC4(SSCEH DCT

;;,;;;.;;

E&(I #EC4 0TTH. (CD(S(C I. ::040S, the sum o

#CAE JADE TJCAS0D SCS, hilippine &urrenc*

pa*a+le on or +eore Kanuar* 3, 1997 at Do. 1 O-1;

St.Oamias, uezon &it*, with interest at the rate o 56

per month or raction thereo.

(t is understood that our lia+ilit* under this loan is =ointl*

and severall* MsicN.

one at uezon &it*, 4etro 4anila this 3rd da* o

ecem+er, 1998.M3;N

G* its terms, the note was made pa*a+le to a

specic person rather than to +earer or to order M31N -- a

re)uisite or ne%otia+ilit* under 0ct ;31, theDe%otia+le (nstruments :aw /D(:2. Jence, petitioner

cannot avail himsel o the D(:s provisions on the

lia+ilities and deenses o an accommodation

part*. Gesides, a non-ne%otia+le note is merel* a simple

contract in writin% and is evidence o such intan%i+le

ri%hts as ma* have +een created +* the assent o the

parties.M3N The promissor* note is thus covered +* the

%eneral provisions o the &ivil &ode, not +* the D(:.

ven %rantin% arguendo that the D(: was applica+le,

still, petitioner would +e lia+le or the promissor*

note. Ander 0rticle 9 o 0ct ;31, an accommodation

part* is lia+le or the instrument to a holder or value

even i, at the time o its ta!in%, the latter !new the

0 summar* =ud%ment is a procedural device

desi%ned or the prompt disposition o actions in which

the pleadin%s raise onl* a le%al, not a %enuine, issue

re%ardin% an* material act.M35N &onse)uentl*, acts are

asserted in the complaint re%ardin% which there is *et

no admission, disavowal or )ualication? or specic

denials or aBrmative deenses are set orth in the

answer, +ut the issues are ctitious as shown +* the
























ormer to +e onl* an accommodation part*. The relation+etween an accommodation part* and the part*

accommodated is, in efect, one o principal and suret*

-- the accommodation part* +ein% the suret*.M33N (t is a

settled rule that a suret* is +ound e)uall* and

a+solutel* with the principal and is deemed an

ori%inal promissor and de+tor rom the +e%innin%. The

lia+ilit* is immediate and direct.M3N

$/+ Issu(!

!roriet% of 0u##ar% Judg#ent

or Judg#ent on the !leadings

The net issue illustrates the usual conusion

+etween a =ud%ment on the pleadin%s and a summar*

=ud%ment. Ander Section 3 o Eule 35 o the Eules o

&ourt, a summar* =ud%ment ma* +e rendered ater asummar* hearin% i the pleadin%s, supportin% aBdavits,

depositions and admissions on le show that /12 ecept

as to the amount o dama%es, there is no %enuine issue

re%ardin% an* material act? and /2 the movin% part* is

entitled to a =ud%ment as a matter o law.

, *

pleadin%s, depositions or admissions.M38N

0 summar* =ud%ment ma* +e applied or +* either a claimant or a

deendin% part*.M37N

Cn the other hand, under Section 1 o Eule 3 o the

Eules o &ourt, a =ud%ment on the pleadin%s is proper

when an answer ails to render an issue or otherwise

admits the material alle%ations o the adverse part*s

pleadin%. The essential )uestion is whether there are

issues %enerated +* the pleadin%s.M3@N 0 =ud%ment on thepleadin%s ma* +e sou%ht onl* +* a claimant, who is the

part* see!in% to recover upon a claim, counterclaim or

cross-claim? or to o+tain a declarator* relie. M39N

0propos thereto, it must +e stressed that the trial

courts =ud%ment a%ainst petitioner was correctl* treated

+* the appellate court as a summar* =ud%ment, rather

than as a =ud%ment on the pleadin%s. Jis

0nswerM;N apparentl* raised several issues -- that hesi%ned the promissor* note alle%edl* as a mere

accommodation part*, and that the o+li%ation was

etin%uished +* either pa*ment or novation. Jowever,

these are not actual issues re)uirin% trial. "e )uote

with approval the &0s o+servations<

0lthou%h $arcias M0Nnswer tendered some issues, +*

wa* o aBrmative deenses, the documents su+mitted

+* MrespondentN nevertheless clearl* showed that the

issues so tendered were not valid issues. #irstl*, $arcias

claim that he was merel* an accommodation part* is

+elied +* the promissor* note that he si%ned. Dothin% in

the note indicates that he was onl* an accommodation

part* as he claimed to +e. uite the contrar*, the

1avide, Jr., C.J., 3C'airman4, nares-antiago,

Carpio, and Azuna, JJ., concur.

G.R. No. 1&'144 S()t(@( 24, 2'14

LE%NAR% %GN%$, etitioner,

vs


















p * *

promissor* note +ears the statement< (t is understoodthat our lia+ilit* under this loan is =ointl* and severall*

MsicN. Secondl*, his claim that his co-deendant de Kesus

alread* paid the loan +* means o a chec! collapses in

view o the dishonor thereo as shown at the dorsal side

o said chec!.M1N

#rom the records, it also appears that petitioner

himsel moved to su+mit the case or =ud%ment on the

+asis o the pleadin%s and documents. (n a written4aniestation,MNhe stated that =ud%ment on the

pleadin%s ma* now +e rendered without urther

evidence, considerin% the alle%ations and admissions o

the parties.M3N

(n view o the ore%oin%, the &0 correctl* considered

as a summar* =ud%ment that which the trial court had

issued a%ainst petitioner.

WHEREF%RE, this etition is here+* 19N+91 and

the assailed ecision A66+RM91. &osts a%ainst

petitioner.

S% %RERE.

vs.

RRI LENING C%RP%RA$I%N, ()(s(*t(+ @B /tsG(*(> M>*>g(, ARI% .ERNARE=, Eespondent.

& ( S ( C D

RI%N, J.:

Geore the &ourt is the petition or review on

certiorari1 led +* :eonardo Go%not /petitioner2 assailin%the 4arch @, ;;7 decision and the Ccto+er 15, ;;7

resolution3 o the &ourt o 0ppeals /&02 in &0-$.E. &I

Do. 88915.

Gac!%round #acts

EE( :endin% &orporation /respondent2 is an entit*

en%a%ed in the +usiness o lendin% mone* to its

+orrowers within 4etro 4anila. (t is dul* represented +*its $eneral 4ana%er, 4r. ario K. Gernardez /Gernardez2.

Sometime in Septem+er 1998, the petitioner and his

*oun%er +rother, Eolando 0. Go%not /collectivel*

reerred to as the 'Go%not si+lin%s'2, applied or and

o+tained a loan o #ive Jundred Thousand esos

/5;;,;;;.;;2 rom the respondent, pa*a+le on

Dovem+er 3;, 1998. The loan was evidenced +* a

promissor* note and was secured +* a post dated

chec!5 dated Dovem+er 3;, 1998.

vidence on record shows that the petitioner renewed

the loan several times on a monthl* +asis. Je paid a

renewal ee o 5,8;;.;; or each renewal, issued a

oBce and applied or another renewal o the loan. She

issued in avor o the respondent romissor* Dote Do.

97-;51, and (nternational Gan! chan%e /(G2 &hec!

Do. ;;;15, dated Kul* 3;, 1997, in the amount

o5,8;;.;; as renewal ee.

Cn the ecuse that she needs to +rin% home the loan

documents or the Go%not si+lin%sR si%natures and




http://www.lawphil.net/judjuris/juri2014/sep2014/gr_180144_2014.html#fnt1















new post-dated chec!as securit*, and eecuted andorrenewed the promissor* note previousl*issued. The

respondent on the other hand, cancelled and returned

to the petitioner the post-dated chec!s issued prior to

their renewal.

Sometime in 4arch 1997, the petitioner applied or

another loan renewal. Je a%ain eecuted as principal

and si%ned romissor* Dote Do. 97-;358 pa*a+le on

0pril 1, 1997? his co-ma!er was a%ain Eolando. 0ssecurit* or the loan, the petitioner also issued G(

&hec! Do. ;59538,7 post dated to 0pril 1, 1997.@

Su+se)uentl*, the loan was a%ain renewed on a monthl*

+asis /until Kune 3;, 19972, as shown +* the CBcial

Eeceipt Do. 7979 dated 4a* 5, 1997, and the isclosure

Statement dated 4a* 3;, 1997 dul* si%ned +*

Gernardez. The petitioner purportedl* paid the renewal

ees and issued a post-dated chec! dated Kune 3;, 1997as securit*. 0s had +een done in the past, the

respondent superimposed the date 'Kune 3;, 1997' on

the upper ri%ht portion o romissor* Dote Do. 97-;35 to

ma!e it appear that it would mature on the said date.

Several da*s +eore the loanRs maturit*, EolandoRs wie,

Kulieta Go%not /4rs. Go%not2, went to the respondentRs

replacement, 4rs. Go%not as!ed the respondentRs cler!to release to her the promissor* note, the disclosure

statement, and the chec! dated Kul* 3;, 1997. 4rs.

Go%not, however, never returned these documents nor

issued a new post-dated chec!. &onse)uentl*, the

respondent sent the petitioner ollow-up letters

demandin% pa*ment o the loan, plus interest and

penalt* char%es. These demands went unheeded.

Cn Dovem+er 7, 1997, the respondent, throu%hGernardez, led a complaint or sum o mone* +eore

the Ee%ional Trial &ourt /ET&2 a%ainst the Go%not

si+lin%s. The respondent mainl* alle%ed that the loan

renewal pa*a+le on Kune 3;, 1997 which the Go%not

si+lin%s applied or remained unpaid? that +eore

Kune3;, 1997, 4rs. Go%not applied or another loan

etension and issued (G &hec! Do. ;;;15 as

pa*ment or the renewal ee? that 4rs. Go%not

convinced the respondentRs cler! to release to her thepromissor* note and the other loan documents? that

since 4rs. Go%not never issued an* replacement chec!,

no loanetension too! place and the loan, ori%inall*

pa*a+le on Kune 3;, 1997, +ecame due on this date? and

despite repeated demands, the Go%not si+lin%s ailed to

pa* their =oint and solidar* o+li%ation.

Summons were served on the Go%notsi+lin%s. Jowever,

onl* the petitioner led his answer.

(n his 0nswer,1; the petitioner claimed that the

complaint states no cause o action +ecause the

respondentRs claim had +een paid, waived, a+andoned

or otherwise etin%uished. Je denied +ein% a part* to

an* loan application andor renewal in 4a* 1997. Je

Eecords li!ewise reveal that while he claims that the

o+li%ation had +een ull* paid in his 0nswer, he did not,

in order to protect his ri%ht led /sic2 a cross-claim

a%ainst his co-deendant Eolando Go%not despite the

act that the latter did not le an* responsive pleadin%.

(n ne, deendants are lia+le solidaril* to plaintif and

must pa* the loan o 5;;,;;;.;; plus 56 interest













also denied havin% issued the G( chec! post-dated to Kune 3;, 1997, as well as the promissor* note dated

Kune 3;, 1997, claimin% that this note had +een

tampered. Je claimed that the one /12 month loan

contracted +* Eolando and his wie in Dovem+er 1998

which was lastl* renewed in 4arch 1997 had alread*

+een ull* paid and etin%uished in 0pril 1997.11

Trial on the merits thereater ensued.

The Ee%ional Trial &ourt Eulin%

(n a decision1 dated Kanuar* 17, ;;;,the ET& ruled in

the respondentRs avor and ordered the Go%not si+lin%s

to pa* the amount o the loan, plus interest and penalt*

char%es. (t considered the wordin%s o the promissor*

note and ound that the loan the* contracted was =oint

and solidar*. (t also noted that the petitioner si%ned the

promissor* note as a principal /and not merel* as a%uarantor2, while Eolando was the co-ma!er. (t +rushed

the petitionerRs deense o ull pa*ment aside, rulin%

that the respondent had successull* proven, +*

preponderance o evidence, the nonpa*ment o the

loan. The trial court said<

monthl* as well as 1;6 monthl* penalt* char%es romthe lin% o the complaint on ecem+er 3, 1997 until

ull* paid. 0s plaintif was constrained to en%a%e the

services o counsel in order to protect his

ri%ht,deendants are directed to pa* the ormer =ointl*

and severall* the amount o 5;,;;;.;; as and +* wa*

o attorne*Rs ee.

The petitioner appealed the decision to the &ourt o

0ppeals.

The &ourt o 0ppeals Eulin%

(n its decision dated 4arch @, ;;7, the &0 aBrmed

the ET&Rs ndin%s. (t ound the petitionerRs deense o

pa*ment untena+le and unsupported +* clear and

convincin% evidence. (t o+served that the petitioner did

not present an* evidence showin% that the chec! dated

Kune 3;, 1997 had, in act, +een encashed +* therespondent and the proceeds applied to the loan, or an*

oBcial receipt evidencin% the pa*ment o the loan. (t

urther stated that the onl* document relied upon+* the

petitioner to su+stantiate his deense was the 0pril 1,

1997 chec!he issued which was cancelled and returned

to him +* the respondent.

The &0, however, noted the respondentRs esta+lished

polic* o cancellin% and returnin% the post-dated chec!s

previousl* issued, as well as the su+se)uent loan

renewals applied or +* the petitioner, as maniested +*

the oBcial receipts under his name. The &0 thus ruled

that the petitioner ailed to dischar%e the +urden o

provin% pa*ment.

pa*ment o the loan. Je maintained that even without

the proo o pa*ment, the material alteration o the

promissor* note is suBcient to etin%uish his lia+ilit*.

:astl*, he claimed that he had +een released rom his

inde+tedness +* novation when 4rs. Go%not renewed

the loan and assumed the inde+tedness.

Th & th E d t







The petitioner moved or the reconsideration o thedecision, +ut the &0 denied his motion in its resolution

o Ccto+er 15, ;;7, hence, the present recourse to us

pursuant toEule 5 o the Eules o &ourt.

The etition

The petitioner su+mits that the &0 erred in holdin% him

solidaril* lia+le with Eolando and his wie. Jeclaimed

that +ased on the le%al presumption provided +* 0rticle171 o the &ivil &ode,13 his o+li%ation had +een

dischar%ed +* virtue o his possession o the post-dated

chec! /stamped '&0D&::'2 that evidenced his

inde+tedness. Je ar%ued that it was 4rs. Go%not who

su+se)uentl* assumed the o+li%ation +* renewin% the

loan, pa*in% the ees and char%es, and issuin% a chec!.

Thus, there is an entirel* new o+li%ation whose pa*ment

is her sole responsi+ilit*.

The petitioner also ar%ued that as a result o the

alteration o the promissor* note without his consent

/e.%., the superimposition o the date 'Kune 3;, 1997' on

the upper ri%ht portion o romissor* Dote Do. 97-;35 to

ma!e it appear that it would mature on this date2, the

respondent can no lon%er collect on the tampered note,

let alone, hold him solidaril* lia+le with Eolando or the

The &ase or the Eespondents

The respondent su+mits that the issues the petitioner

raised hin%e on the appreciation o the adduced

evidence and o the actual lower courtsR ndin%s that,

as a rule, are notreviewa+le +* this &ourt.

The (ssues

The case presents to us the ollowin% issues<

1. "hether the &0 committed a reversi+le error in

holdin% the petitioner solidaril* lia+le with

Eolando?

. "hether the petitioner is relieved rom lia+ilit*

+* reason o the material alteration in the

promissor* note? and

3. "hether the partiesR o+li%ation was

etin%uished +*< /i2 pa*ment? and /ii2 novation +*

su+stitution o de+tors.

Cur Eulin%

"e nd the petition partl* meritorious.

0s a rule, the &ourtRs =urisdiction in a Eule 5 petition is

limited to the review o pure )uestions o

law.1 0ppreciation o evidence and in)uir* on the

correctness o the appellate court>s actual ndin%s are

not the unctions o this &ourt? we are not a trier o

acts.15

0 )uestion o law eists when the dou+t or dispute

an inde+tedness is dul* esta+lished +* evidence, the

+urden o showin% with le%al certaint* that the

o+li%ation has +een dischar%ed +* pa*ment rests on the

de+tor.19

(n the present case, the petitioner ailed to satisactoril*

prove that his o+li%ation had alread* +een etin%uished

+* pa*ment. 0s the &0 correctl* noted, the petitioner











relates to the application o the law on %iven acts. Cnthe other hand, a )uestion o act eists when the dou+t

or dispute relates to the truth or alsit* o the partiesR

actual alle%ations.18

0s the respondent correctl* pointedout, the petitionerRs

alle%ations are actual issuesthat are not proper or the

petition he led. (n the a+sence o compellin% reasons,

the &ourt cannot re-eamine, review or re-evaluate the

evidence and the lower courtsR actual conclusions. Thisis especiall* true when the &0 aBrmed the lower courtRs

ndin%s, as in this case. Since the &0Rs ndin%s o acts

aBrmed those o the trial court, the* are +indin% on this

&ourt, renderin% an* urther actual review unnecessar*.

( onl* to la* the issues raised - +oth actual and le%al

to rest, we shall proceed to discuss their merits and

demerits.

Do vidence "as resented to sta+lish the #act o

a*ment

Kurisprudence tells us that one who pleads pa*ment has

the +urden o provin% it?17 the +urden rests on the

deendant to prove pa*ment, rather than on the plaintif

to prove non-pa*ment.1@ (ndeed, once the eistence o

ailed to present an* evidence that the respondent hadin act encashed his chec! and applied the proceeds to

the pa*ment o the loan. Deither did he present oBcial

receipts evidencin% pa*ment, nor an* proo that the

chec! had +een dishonored.

"e note that the petitioner merel* relied on the

respondentRs cancellation and return to him o the chec!

dated 0pril 1, 1997. The evidence shows that this chec!

was issued to secure the inde+tedness. The actsimputed on the respondent, standin% alone, do not

constitute suBcient evidence o pa*ment.

0rticle 19, para%raph o the &ivil &ode provides<

The deliver* o promissor* notes pa*a+le to order, or

+ills o echan%e or other mercantile documents shallproduce the efect o pa*ment onl* when the* have

+een cashed, or when throu%h the ault o the creditor

the* have +een impaired. /mphasis supplied2

0lso, we held in Gan! o the hilippine (slands v.

Spouses Eo*eca<;

Settled is the rule that pa*ment must +e made in le%al

tender. 0 chec! is not le%al tender and, thereore,

cannot constitute a valid tender o pa*ment. Since a

ne%otia+le instrument is onl* a su+stitute or mone*

and not mone*, the deliver* o such an instrument does

not, +* itsel, operate as pa*ment. 4ere deliver* o

chec!s does not dischar%e the o+li%ation under a

=ud%ment. The o+li%ation is not etin%uished and

under the acts o this case, to the ollowin% testimonial

echan%es<

&ivil &ase Do. 97-;57

TSD ecem+er 1, 199@, a%e 13.

0tt*. 0lmeda<











remains suspended until the pa*ment +* commercialdocument is actuall* realized./mphasis supplied2

0lthou%h 0rticle 171 o the &ivil &ode provides or a

le%al presumption o renunciation o action /in cases

where a private document evidencin% a credit was

voluntaril* returned +* the creditor to the de+tor2, this

presumption is merel* prima acieand is not conclusive?

the presumption loses eBcac* when aced with

evidence to the contrar*.

4oreover, the cited provision merel* raises a

presumption, not o pa*ment, +ut o the renunciation o

the credit where more convincin% evidence would +e

re)uired than what normall* would +e called or to

prove pa*ment.1 Thus, reliance +* the petitioner on the

le%al presumption to prove pa*ment is misplaced.

To reiterate, no cash pa*ment was proven +* thepetitioner. The cancellation and return o the chec!

dated 0pril 1, 1997, simpl* esta+lished his renewal o

the loan not the act o pa*ment. #urthermore, it has

+een esta+lished durin% trial, throu%h repeated acts,

that the respondent cancelled and surrendered the post-

dated chec! previousl* issued whenever the loan is

renewed. "e trace whatwould amount to a practice

< (n the case o the renewal o the loan *ou admittedthat a renewal ee is char%ed to the de+tor which he or

she must pa* +eore a renewal is allowed. ( show *ou

hi+it '3' oBcial receipt o plaintif dated Kul* 3, 1997,

would this +e *our oBcial receipt which *ou issued to

*our client which the* ma!e renewal o the loanV

0< Hes, sir.

< 0nd naturall* when a loan has +een renewed, the old

one which is replaced +* the renewal has alread* +een

cancelled, is that correctV

0< Hes, sir.

< (t is also true to sa* that all promissor* notes and all

postdated chec!s covered +* the old loan which have+een the su+=ect o the renewal are deemed cancelled

and replaced is that correctV

0< Hes, sir.

&ivil &ase Do. 97-;57

TSD Dovem+er 7, 199@, a%e 7.

< "hat happened to the chec! that 4r. Go%not issuedV

&ourt< There are two Go%nots. "ho in particularV

< :eonardo Go%not, Hour Jonor.

0< ver* month, the* were renewed, he issued a new

0lthou%h the respondent did not dispute the act o

alteration, he nevertheless denied that the alteration

was done without the petitionerRs consent. The partiesR

re-Trial Crder dated Dovem+er 3, 199@ states that<

There +ein% no possi+ilit* o a possi+le compromise

a%reement, stipulations, admissions, and denials were

made, to wit<









0< ver* month, the* were renewed, he issued a new

chec!, sir.

< o *ou have a cop* o the chec!sV

0< "e returned the chec! upon renewin% the loan.3

(n li%ht o these echan%es, wend that the petitioner

ailed to dischar%e his +urden oprovin% pa*ment.

The 0lteration o the romissor* Dote

id Dot Eelieve the etitioner #rom :ia+ilit*

"e now come to the issue o material alteration. The

petitioner raised as deense the alle%ed material

alteration o romissor* Dote Do. 97-;35 as +asis to

claim release rom his loan. Je alle%ed that the

respondentRs superimposition o the due date 'Kune 3;,

1997' on the promissor* note without his consentefectivel* relieved him o lia+ilit*.

"e nd this deense untena+le.

#CE #D0DT :CD0EC GC$DCT

13. That the promissor* note su+=ect o this case

mar!ed as 0nne '0' o the complaint was ori%inall*

dated 0pril 1, 1997 with a superimposed ru++er stamp

mar! 'Kune 3;, 1997' to which the plaintif admitted the

superimposition.

1. The superimposition was done without the

!nowled%e, consent or prior consultation with :eonardo

Go%not which was denied +* plaintif.'5 /mphasis

supplied2

Si%nicantl*, the respondent also admitted in the re-

Trial Crder that part o its compan* practice is to ru++er

stamp, or ma!e a superimposition throu%h a ru++er

stamp, the old promissor* note which has +een renewed

to ma!e it appear that there is a new loan o+li%ation. The petitioner did not re+ut this statement. To our mind,

the ailure to re+ut is tantamount to an admission o the

respondentRs alle%ations<

'. That it is the practice o plaintif to =ust ru++er

stamp or ma!e superimposition throu%h a ru++er stamp

on old promissor* note which has +een renewed to

ma!e it appear that there is a new loan o+li%ation to

which the plaintif admitted.' /mphasis Supplied2.8

ven assumin% that the note had indeed +een tampered

without the petitionerRs consent, the latter cannot

totall* avoid pa*ment o his o+li%ation to the

respondent +ased on the contract o loan.

Gased on the records the Go%not Si+lin%s had applied

%rant, renewal and non-pa*ment o the loan? th, proo

o non-pa*ment o the loan? sith, the loan renewals?

and seventh, the approval and receipt o the loan

renewals.

(n $uinsatao v. &ourt o 0ppeals,31 this &ourt pointed out

that while a promissor* note is evidence o an

inde+tedness, it is not the onl* evidence, or the

eistence o the o+li%ation can +e proven +* other











Gased on the records, the Go%not Si+lin%s had applied

or and were %ranted a loan o 5;;,;;;.;; +* the

respondent. The loan was evidenced +* a promissor*

note and secured +* a post-dated chec!7 dated

Dovem+er 3;, 1998. (n act, the petitioner himsel

admitted his loan application was evidenced +* the

romissor* Dote dated 0pril 1, 1997.@ This loan was

renewed several times +* the petitioner, ater pa*in%

the renewal ees, as shown +* the CBcial Eeceipt Dos.

7979

and 5@73;

dated 4a* 5 and Kul* 3, 1997,respectivel*. These oBcial receipts were issued in the

name o the petitioner. 0lthou%h the petitioner had

insisted that the loan had +een etin%uished, no other

evidence was presented to prove pa*ment other than

the cancelled and returnedpost-dated chec!.

Ander this evidentiar* situation, the petitioner cannot

validl* den* his o+li%ation and lia+ilit* to the

respondent solel* on the %round that the romissor*Dote in )uestion was tampered. Dota+l*, the eistence

o the o+li%ation, as well as its su+se)uent renewals,

have +een dul* esta+lished +*< rst, the petitionerRs

application or the loan? second, his admission that the

loan had +een o+tained rom the respondent? third, the

post-dated chec!s issued +* the petitioner to secure the

loan? ourth, the testimon* o 4r. Gernardez on the

eistence o the o+li%ation can +e proven +* other

documentar* evidence such as a written memorandum

si%ned +* the parties. (n acheco v. &ourt o

0ppeals,3 this &ourt li!ewise epressl* reco%nized that

a chec! constitutes anevidence o inde+tedness and is a

verita+le proo o an o+li%ation. (t can+e used in lieu o

and or the same purpose as a promissor* note and can

thereore +e presented to esta+lish the eistence o

inde+tedness.33

(n the present petition, we nd that the totalit* o the

evidence on record suBcientl* esta+lished the

eistence o the petitionerRs inde+tedness /and lia+ilit*2

+ased on the contract oPoan. ven with the tampered

promissor* note, we hold that the petitioner can still +e

held lia+le or the unpaid loan.

The etitionerRs Gelated&laim o Dovation +*

Su+stitution 4a* no :on%er +e ntertained

(t has not escaped the &ourtRs attention that the

petitioner raised the ar%ument that the o+li%ation had

+een etin%uished +* novation. The petitioner never

raised this issue +eore the lower courts.

(t is a settled principle o law thatno issue ma* +e raisedon appeal unless it has +een +rou%ht +eore the lower

tri+unal or its consideration.3 4atters neither alle%ed in

the pleadin%snor raised durin% the proceedin%s +elow

cannot +e ventilated or the rst time on appeal +eore

the Supreme &ourt.35

(n an* event, we nd no merit in the deense o

novation as we discuss at len%th +elow Dovation cannot

To %ive novation le%al efect, the ori%inal de+tor must +eepressl* released rom the o+li%ation, and the new

de+tor must assume the ori%inal de+torRs place in the

contractual relationship. ependin% on who too! the

initiative, novation +* su+stitution o de+tor has two

orms su+stitution +* epromision and su+stitution +*

dele%acion. The diference +etween these two was

eplained in $arcia v. :lamas<37





















novation as we discuss at len%th +elow. Dovation cannot

+e presumed and must +e clearl* and une)uivoca+l*

proven.

Dovation is a mode o etin%uishin% an o+li%ation +*

chan%in% its o+=ects or principal o+li%ations, +*


su+ro%atin% a third person to the ri%hts o the creditor.38

0rticle 193 o the &ivil &ode denes novation asollows<

'0rt. 193. Dovation which consists insu+stitutin% a new

de+tor in the place o the ori%inalone, ma* +e made

even without the !nowled%e or a%ainst the will o the

latter, +ut not without the consent o the creditor.


in 0rticles 138 and 137.'

'(n epromision, the initiative or the chan%e does not

come rom -- and ma* even +e made without the

!nowled%e o -- the de+tor, since it consists o a third

personRs assumption o the o+li%ation. 0s such, it





consent o these three persons are necessar*.'

(n +oth cases, the ori%inal de+tor must +e released rom

the o+li%ation? otherwise, there can +e no valid

novation.3@#urthermore, novation +* su+stitution o

de+tor must alwa*s+e made with the consent o the

creditor.39

The petitioner contends thatnovation too! place throu%h

a su+stitution o de+tors when 4rs. Go%not renewed theloan and assumed the de+t. Je alle%ed that 4rs. Go%not

assumed the o+li%ation +* pa*in% the renewal ees and

char%es, and +* eecutin% a new promissor* note. Je

urther claimed that she issued her own chec!; to cover

the renewal ees, which act, accordin% to the petitioner,

was done with the respondentRs consent.

&ontrar* to the petitionerRs contention, 4rs. Go%not didnot su+stitute the petitioner as de+tor. She merel*

attempted to renew the ori%inal loan +* eecutin% a

new promissor* note1 and chec!. The purported one

month renewal o the loan, however, did not push

throu%h, as 4rs. Go%not did not return the documents or

issue a new post dated chec!. Since the loan was not

renewed or another month, the ori%inaldue date, Kune

clearl* no a%reement to release the petitioner rom hisresponsi+ilit*, does not constitute novation.

The Dature o the etitionerRs :ia+ilit*

Cn the nature o the petitionerRs lia+ilit*, we rule

however, that the &0 erred in holdin% the petitioner

solidaril* lia+le with Eolando.













3;,1997, continued to stand.

4ore importantl*, the respondent never a%reed to

release the petitioner rom his o+li%ation. That the

respondent initiall* allowed 4rs. Go%not to +rin% home

the promissor* note, disclosure statement and the

petitionerRs previous chec! dated Kune 3;, 1997, does

not ipso actoresult in novation. Deither will this

ac)uiescence constitute an implied acceptance o the

su+stitution o the de+tor.

(n order to %ive novation le%al efect, the creditor should

consent to the su+stitution o a new de+tor. Dovation

must +e clearl* and une)uivocall* shown, and cannot

+e presumed.

Since the petitioner ailed to show thatthe respondent

assented to the su+stitution, no valid novation too!

place with the efect o releasin% the petitioner rom hiso+li%ation to the respondent.

4oreover, in the a+sence o showin% that 4rs. Go%not

and the respondent had a%reed to release the

petitioner, the respondent can still enorce the pa*ment

o the o+li%ation a%ainst the ori%inal de+tor. 4ere

ac)uiescence to the renewal o the loan, when there is

0 solidar* o+li%ation is one in which each o the de+torsis lia+le or the entire o+li%ation, and each o the

creditors is entitled to demand the satisaction o the

whole o+li%ation rom an* or all o the de+tors. There

is solidar* lia+ilit* when the o+li%ation epressl* so

states, when the law so provides, or when the nature o

the o+li%ation so re)uires.3 Thus, when the o+li%or

underta!es to +e '=ointl* and severall*' lia+le, the

o+li%ation is solidar*,

(n this case, +oth the ET& and the &0 ound the

petitioner solidaril* lia+le with Eolando +ased on

romissor* Dote Do. 97-;35 dated Kune 3;, 1997. Ander

the promissor* note, the Go%not Si+lin%s dened the

parameters o their o+li%ation as ollows<

'#CE I0:A E&(I, (", =ointl* and severall*,

promise to pa* to E0H ESCAE&S (DISTCES EE(:D(D$ &CEC. or Crder, its oBce at arana)ue, 4.4.

the principal sum o #ive Jundred Thousand SCS

/5;;,;;;.;;2, hilippine&urrenc*, with interest thereon

at the rate o #ive percent /562 per monthannum,

pa*a+le in Cne (nstallment /;12 e)ual

dail*wee!l*semi-monthl*monthl* o SCS #ive

Jundred Thousand esos /5;;,;;;.;;2, rst

installment to +ecome due on Kune 3;, 1997.' /mphasis Curs2.

0lthou%h the phrase '=ointl* and severall*' in the

promissor* note clearl* and unmista!a+l* provided or

the solidar* lia+ilit* o the parties, we note and stress

that the promissor* note is merel* a photocop*o the

ori%inal, which was never produced.

The well-entrenched rule is that solidar* o+li%ationcannot +e inerred li%htl*. (t must +e positivel* and

clearl* epressed and cannot +e presumed.7

(n view o the inadmissi+ilit* o the promissor* note, and

in the a+sence o evidence showin% that the petitioner

had +ound himsel solidaril* with Eolando or the

pa*ment o the loan, we cannot +ut conclude that the

o+li%ation to pa* is onl* =oint @













Ander the +est evidence rule, whenthe su+=ect o

in)uir* is the contents o a document, no evidence

isadmissi+le other than the ori%inal document itsel

ecept in the instances mentioned in Section 3, Eule

13; o the Eevised Eules o &ourt.5

The records show that the respondenthad the custod* o

the ori%inal promissor* note dated 0pril 1, 1997, with a

superimposed ru++er stamp mar! 'Kune 3;, 1997', andthat it had +een %iven ever* opportunit* to present it.

The respondent even admitted durin% pre-trial that it

could not present the ori%inal promissor* note +ecause

it is in the custod* o its cashier who is stranded in

Gicol.8 Since the respondent never produced the

ori%inal o the promissor* note, much less ofered to

produce it, the photocop* o the promissor* note cannot

+e admitted as evidence. Cther than the promissor*

note in )uestion, the respondent has not presented an*other evidence to support a ndin% o solidar* lia+ilit*.

0s we earlier noted, +oth lower courts completel* relied

on the note when the* ound the Go%not

si+lin%ssolidaril* lia+le.

o+li%ation to pa* is onl* =oint.

The 56 4onthl* (nterest Stipulated in the romissor*

Dote is Anconsciona+le and Should +e )uita+l*

Eeduced

#inall*, on the issue o interest, while we a%ree with the

&0 that the petitioner is lia+le to the respondentor the

unpaid loan, we nd the imposition o the 56 monthl*

interest to +e ecessive, ini)uitous, unconsciona+le andeor+itant, and hence, contrar* to morals and

=urisprudence. 0lthou%h parties to a loan a%reement

have wide latitude to stipulate on the applica+le interest

rate under &entral Gan! &ircular Do. 9;5 s. 19@ /which

suspended the Asur* :aw ceilin% on interest efective

Kanuar* 1, 19@32, we stress that unconsciona+le interest

rates ma* still +e declared ille%al.9

(n several cases, we haveruled that stipulationsauthorizin% ini)uitous or unconsciona+le interests are

contrar* to morals and are ille%al. (n 4edel v. &ourt o

0ppeals,5; we annulled a stipulated 5.56 per month or

886 per annum interest on a 5;;,;;;.;; loan, and a

86 per month or 76 per annum interest on

a 8;,;;;.;; loan, respectivel*, or +ein% ecessive,

ini)uitous, unconsciona+leand eor+itant.$:p'i$

"e reiterated this rulin% in &hua v. Timan,51 where weheld that the stipulated interest rates o 36 per month

and hi%her are ecessive, ini)uitous, unconsciona+le

and eor+itant, and must thereore +e reduced to 16

per annum.

0ppl*in% these cited rulin%s, we now accordin%l* hold

that the stipulated interest rate o 56 per month, /or

8;6 per annum2 in the promissor* note is ecessive

MANUEL G% CINC% >*+ARACELI S. G% CINC%,

etitioners,

- versus -

G.R. No. 1519'3

resent<

_&CECD0, J.,

__&0E(C-4CE0:S,












http://sc.judiciary.gov.ph/jurisprudence/2009/october2009/151903.htm#_ftn1







8;6 per annum2 in the promissor* note is ecessive,

unconsciona+le, contrar* to morals and is thus ille%al. (t

is void a+ initioor violatin% 0rticle 13;85 o the &ivil

&ode.$:p'i$ "e accordin%l* nd it e)uita+le to reduce

the interest rate rom 56 per month to 16 per month or

16 per annum in line with the prevailin%

=urisprudence.

"JE#CE, premises considered, the ecision dated

4arch @, ;;7 o the &ourt o 0ppeals in &0-$.E. &IDo. 88915 is here+* 0##(E4 with 4C(#(&0T(CD, as

ollows<

1. The petitioner :eonardo 0. Go%notand his

+rother, Eolando 0. Go%not are KC(DT:H :(0G: to

pa* the sum o 5;;,;;;.;; plus 16 interest per

annum rom ecem+er 3, 1997 until ull* paid.

. The rest o the &ourt o 0ppeals> dispositionsare here+* 0##(E4.

&osts a%ainst petitioner :eonardo 0. Go%not.

versus

C%UR$ %F APPEALS, ES$ERSER#ACI% >*+ MAASIN

$RAERS LENINGC%RP%RA$I%N,

Eespondents.

Ating C'airperson,___D0&JAE0,

GE(CD, and

0G0, JJ.

romul%ated<

Ccto+er 9, ;;9

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

E C I S I % N

RI%N, J.<

Geore the &ourt is a petition or reviewon ertiorar i (+ led +* petitioners, spouses 4anuel and0raceli $o &inco /collectivel*, the spouses !o Cino2,assailin% the decisionMN dated Kune , ;;1 o the &ourto 0ppeals /CA2 in &0-$.E. &I Do. 757@, as well as theresolutionM3N dated Kanuar* 5, ;; den*in% thespouses $o &incos motion or reconsideration.

mort%a%ed to 4T:&. The DG approved the loanapplication or 1.3 4illionM8N throu%h a letter dated Kul*@, 19@9? the release o the amount, however, wasconditioned on the cancellation o the mort%a%e in avoro 4T:&.

Cn Kul* 18, 19@9, 4anuel went to the house o respondent ster Servacio /9ster 2, 4T:&s resident, to
















$HE FAC$UAL AN$ECEEN$S

(n ecem+er 19@7, petitioner 4anuel &inco /Manuel2o+tained a commercial loan in the amounto 7;;,;;;.;; rom respondent 4aasin Traders :endin%

&orporation /M50C2. The loan was evidenced +* apromissor* note dated ecem+er 11, 19@7,MN andsecured +* a real estate mort%a%e eecutedon ecem+er 15, 19@7 over the spouses $o &incos landand -store* +uildin% located in 4aasin, Southern :e*te.

Ander the terms o the promissor* note,the 7;;,;;;.;; loan was su+=ect to a monthl* interestrate o 36 or 386 per annum and was pa*a+le within aterm o 1@; da*s or 8 months, renewa+le or another1@; da*s. 0s o Kul* 18, 19@9, 4anuels outstandin%o+li%ation with 4T:& amounted to 1,;71,58.88, whichamount included the principal, interest, and penalties.M5N

To +e a+le to pa* the loan in avor o 4T:&, the spouses$o &inco applied or a loan with the hilippine DationalGan!, 4aasin Granch /8N/ or t'e "an2 2 and ofered ascollateral the same properties the* previousl*

inorm her that there was mone* with the DG or thepa*ment o his loan with 4T:&. ster then proceeded tothe DG to veri* the inormation, +ut she claimed thatthe +an!s oBcers inormed her that 4anuel had nopendin% loan application with them. "hen she told4anuel o the +an!s response, 4anuel assured her therewas mone* with the DG and promised to eecute adocument that would allow her to collect the proceedso the DG loan.

Cn Kul* ;, 19@9, 4anuel eecuted a Special

ower o 0ttorne*M7N /8A2 authorizin% ster to collect theproceeds o his DG loan. ster a%ain went to the +an!to in)uire a+out the proceeds o the loan. This time, the+an!s oBcers conrmed the eistence o the 1.34illion loan, +ut the* re)uired ster to rst si%n a deedo releasecancellation o mort%a%e +eore the* couldrelease the proceeds o the loan to her. Cutra%ed thatthe spouses $o &inco used the same propertiesmort%a%ed to 4T:& as collateral or the DG loan, sterreused to si%n the deed and did not collect the 1.34illion loan proceeds.

0s the 4T:& loan was alread* due, ster institutedoreclosure proceedin%s a%ainst the spouses $o &incoon Kul* , 19@9.

To prevent the oreclosure o their properties, thespouses $o &inco led an action or specicperormance, dama%es, and preliminar*in=unctionM@N +eore the Ee%ional Trial &ourt /R5C2,Granch 5, 4aasin, Southern :e*te. The spouses $o&inco alle%ed that oreclosure o the mort%a%e was nolon%er proper as there had alread* +een settlement o 4anuels o+li%ation in avor o 4T:&. The* claimed that

pa*ment or perormance o o+li%ation to the dama%eand pre=udice o de+tors who ma* stand lia+le orpa*ment o hi%her interest rates.M1;N 0ter ndin% 4T:&and ster lia+le or a+use o ri%hts, the ET& ordered theaward o the ollowin% amounts to the spouses $o&inco<

/a2 1,;,75.15 plus 535.83 per da*













the assi%nment o the proceeds o the DG loanamounted to the pa*ment o the 4T:& loan. stersreusal to si%n the deed o releasecancellation o mort%a%e and to collect the proceeds o the DG loanwere, to the spouses $o &inco, completel* un=ustiedand entitled them to the pa*ment o dama%es.

ster countered these alle%ations +* claimin% that

she had not +een previousl* inormed o the spouses $o&incos plan to o+tain a loan rom the DG and to use theloan proceeds to settle 4anuels loan with 4T:&. Sheclaimed that she had no eplicit a%reement with 4anuelauthorizin% her to appl# the proceeds o the DG loan to4anuels loan with 4T:&? the S0 merel* authorized herto ollet the proceeds o the loan. She thus averredthat it was unair or the spouses $o &inco to re)uirethe release o the mort%a%e to 4T:& when no actualpa*ment o the loan had +een made.

(n a decision dated 0u%ust 18, 199,M9N the ET&ruled in avor o the spouses $o &inco. The trial courtound that the evidence suBcientl* esta+lished theeistence o the DG loan whose proceeds wereavaila+le to satis* 4anuels o+li%ation with 4T:&, andthat ster un=ustia+l* reused to collect theamount.&reditors, it ruled, cannot unreasona+l* prevent

hereater, representin% loss o savin%son interest, +* wa* o actual orcompensator* dama%es, i deendantcorporation insists on the ori%inal 36monthl* interest rate?

/+2 1;;,;;;.;; as unrealized prot?

/c2 1,;;;,;;;.;; as moral dama%es?

/d2 ;,;;;.;; as eemplar* dama%es?

/e2 ,;;;.;; as liti%ation epenses?and

/2 1;6 o the total amount as attorne*sees plus costs.M11N

Throu%h an appeal with the &0, 4T:& and stersuccessull* secured a reversal o the ET&sdecision. Anli!e the trial court, the appellate court oundit si%nicant that there was no eplicit a%reement+etween ster and the spouses $o &inco or thecancellation o the 4T:& mort%a%e in avor o DG toacilitate the release and collection +* ster o theproceeds o the DG loan. The &0 read the S0 asmerel* authorizin% ster to it'dra the proceeds o

the loan. 0s 4anuels loan o+li%ation with 4T:&remained unpaid, the &0 ruled that no valid o+=ectioncould +e made to the institution o the oreclosureproceedin%s. 0ccordin%l*, it dismissed the spouses $o&inco complaint. #rom this dismissal, the spouses $o&inco led the present appeal +* ertiorari.

$HE PE$I$I%N

not aware o the loan and the mort%a%e to DG, andthat there was no a%reement that the proceeds o theDG loan were to +e used to settle 4anuels o+li%ationwith 4T:&. Since the 4T:& loan remained unpaid, the*insist that the institution o the oreclosure proceedin%swas proper. 0dditionall*, 4T:& and ster contend thatthe present petition raised )uestions o act that cannot+e addressed in a Eule 5 petition.







The spouses $o &inco impute error on the part o the &0 or its ailure to consider their acts as e)uivalentto pa*ment that etin%uished the 4T:& loan? their act o appl*in% or a loan with the DG was indicative o their%ood aith and honest intention to settle the loan with4T:&. The* contend that the creditors have thecorrelative dut* to accept the pa*ment.

The spouses $o &inco char%e 4T:& and ster with+ad aith and ill-motive or un=ustl* reusin% to collectthe proceeds o the loan and to eecute the deed o release o mort%a%e. The* assert that sters

=ustications or reusin% the pa*ment were Pims*ecuses so she could proceed with the oreclosure o themort%a%ed properties that were worth more than theamount due to 4T:&. Thus, the* conclude that the acts

o 4T:& and o ster amount to a+use o ri%hts thatwarrants the award o dama%es in their /spouses $o&incos2 avor.

(n reutin% the claims o the spouses $o &inco,4T:& and ster raise the same ar%uments the* raised+eore the ET& and the &0. The* claim that the* were

$HE C%UR$S RULING

$( Cout *+s t( )(t/t/o* (/to/ous.

!reli#inar% Considerations

Cur review o the records shows that there are noactual )uestions involved in this case? the ultimateacts necessar* or the resolution o the case alread*appear in the records. The ET& and the &0 decisionsdifered not so much on the ndin%s o act, +ut on theconclusions derived rom these actual ndin%s. Thecorrectness o the conclusions derived rom actualndin%s raises le%al )uestions when the conclusionsare so lin!ed to, or are inetrica+l* intertwined with, the

appreciation o the applica+le law that the casere)uires, as in the present case. M1N The petition raisesthe issue o 'et'er t'e loan due t'e M50C 'ad "eenetinguis'edO this is a )uestion o law that this &ourtcan ull* address and settle in an appeal +* ertiorari.

!a%#ent as Mode of

E1tinguishing O$ligations

C+li%ations are etin%uished, amon% others, +*pa*ment or perormance,M13N the mode most relevant tothe actual situation in the present case. Ander 0rticle13 o the &ivil &ode, pa*ment means not onl* thedeliver* o mone* +ut also the perormance, in an*other manner, o an o+li%ation. 0rticle 133 o the &ivil&ode states that a de+t shall not +e understood to have+een paid unless the thin% or service in which the

Ander these acts, 4anuel posits two thin%s< rst ,that sters reusal was +ased on completel*un=ustia+le %rounds? and seond, that the reusal wase)uivalent to pa*ment that led to the etin%uishment o the o+li%ation.

>. 2n-ust Refusal to Accet !a%#ent







o+li%ation consists has +een completel* delivered orrendered, as the case ma* +e. (n contracts o loan, thede+tor is epected to deliver the sum o mone* due thecreditor. These provisions must +e read in relation withthe other rules on pa*ment under the &ivil &ode,M1N which rules impliedl* re)uire acceptance +* thecreditor o the pa*ment in order to etin%uish ano+li%ation.

(n the present case, 4anuel sou%ht to pa* ster+* authorizin% her, throu%h an S0, to collect theproceeds o the DG loan an act that would have led topa*ment i ster had collected the loan proceeds asauthorized. 0dmittedl*, the deliver* o the S0 was not,strictl* spea!in%, a deliver* o the sum o mone* due to4T:&, and ster could not +e compelled to accept it aspa*ment +ased on 0rticle 133. Donetheless, the S0stood as an authorit* to collect the proceeds o the

alread*-approved DG loan that, upon receipt +* ster,would have constituted as pa*ment o the 4T:& loan.M15N Jad ster presented the S0 to the +an! and si%nedthe deed o releasecancellation o mort%a%e, thedeliver* o the sum o mone* would have +een efectedand the o+li%ation etin%uished.M18N 0s the records show,ster reused to collect and allow the cancellation o themort%a%e.

>. 2n-ust Refusal to Accet !a%#ent

0ter considerin% sters ar%uments, we a%ree with4anuel that sters reusal o the pa*ment was without+asis.

ster reused to accept the pa*ment +ecause the+an! re)uired her to rst si%n a deed o releasecancellation o the mort%a%e +eore theproceeds o the DG loan could +e released. 0s a priormort%a%ee, she claimed that the spouses $o &incoshould have o+tained her consent +eore oferin% theproperties alread* mort%a%ed to her as securit* or theDG loan. 4oreover, ster alle%ed that the S0 merel*authorized her to collect the proceeds o the loan? therewas no eplicit a%reement that the 4T:& loan would +epaid out o the proceeds o the DG loan.

There is nothin% le%all* o+=ectiona+le in amort%a%ors act o ta!in% a second or su+se)uentmort%a%e on a propert* alread* mort%a%ed? asu+se)uent mort%a%e is reco%nized as valid +* law and+* commercial practice, su+=ect to the prior ri%hts o previous mort%a%es. Section , Eule 8@ o the 1997Eules o &ivil rocedure on the disposition o the

proceeds o sale ater oreclosure actuall* re)uires thepa*ment o the proceeds to, amon% others, the =uniorencum+rancers in the order o their priorit*.M17N Ander0rticle 13; o the &ivil &ode, a stipulation or+iddin%the owner rom alienatin% the immova+le mort%a%ed isconsidered void. ( the mort%a%or-owner is allowed toconve* the entiret* o his interests in the mort%a%edpropert*, reason dictates that the lesser ri%ht toencum+er his propert* with other liens must also +ereco%nized. ster, thereore, could not validl* re)uire

"hile sters reusal was un=ustied andunreasona+le, we cannot a%ree with 4anuels positionthat this reusal had the efect o pa*ment thatetin%uished his o+li%ation to 4T:&. 0rticle 158 is clearand une)uivocal on this point when it provides that

0ET(&: 158. ( the creditor to whom











% , , * )the spouses $o &inco to rst o+tain her consent to theDG loan and mort%a%e. Gesides, with the pa*ment o the 4T:& loan usin% the proceeds o the DG loan, themort%a%e in avor o the 4T:& would have naturall*+een cancelled.

"e nd it impro+a+le or ster to claim that therewas no a%reement to appl* the proceeds o the DG

loan to the 4T:& loan. Ge%innin% Kul* 18, 19@9, 4anuelhad alread* epressed intent to pa* his loan with 4T:&and thus re)uested or an updated statement o account. $iven 4anuels epress intent o ull* settlin%the 4T:& loan and o pa*in% throu%h the DG loan hewould secure /and in act secured2, we also cannot %ivecredit to the claim that the S0 onl* allowed ster tocollect the proceeds o the DG loan, without %ivin% herthe accompan*in% authorit*, althou%h ver+al, to appl*these proceeds to the 4T:& loan. ven sters actions

+elie her claim as she in act even went to the DG tocollect the proceeds. (n sum, the surroundin%circumstances o the case simpl* do not support stersposition.

@. 2n-ust Refusal Cannot $e E/uated to!a%#ent

0ET(&: 158. ( the creditor to whomtender o pa*ment has +een made (0us(s/tout Just >us( to >()t /t, thede+tor shall +e released rom responsi+ilit*+* the consi%nation o the thin% or sum due.Mmphasis supplied.N

(n short, a reusal without =ust cause is not e)uivalent topa*ment? to have the efect o pa*ment and the

conse)uent etin%uishment o the o+li%ation to pa*, thelaw re)uires the companion acts o tender o pa*mentand consi%nation.

Tender o pa*ment, as dened in 6ar 9ast /an2 and 5rust Compan# v. 1iaz Realt#, +n.,M1@N is thedenitive act o oferin% the creditor what is due him orher, to%ether with the demand that the creditor acceptthe same. "hen a creditor reuses the de+tors tender o pa*ment, the law allows the consi%nation o the thin% orthe sum due. Tender and consi%nation have the efect o pa*ment, as +* consi%nation, the thin% due is depositedand placed at the disposal o the =udicial authorities orthe creditor to collect.M19N

0 sad twist in this case or 4anuel was that hecould not avail o consi%nation to etin%uish hiso+li%ation to 4T:&, as DG would not release theproceeds o the loan unless and until ster had si%nedthe deed o releasecancellation o mort%a%e, which sheun=ustl* reused to do. Jence, to compel ster to acceptthe loan proceeds and to prevent their mort%a%edproperties rom +ein% oreclosed, the spouses $o &incoound it necessar* to institute the present case orspecic perormance and dama%es.

"e also nd that under the circumstances, thespouses $o &inco have underta!en, at the ver*least, t'e e7uivalent of a tender of pa#ment that cannot+ut have le%al efect. Since pa*ment was availa+le andwas un=ustia+l* reused, =ustice and e)uit* demandthat the spouses $o &inco +e 0((+ 0o t(o@/g>t/o* to )>B /*t((st o* t( outst>*+/*g>ou*t 0o t( t/( t( u*Just (0us> too )>(?M;N the* would not have +een lia+le or an*interest rom the time tender o pa*ment was made i









p p %

. E3ects of 2n-ust Refusal

Ander these circumstances, we hold that while nocompleted tender o pa*ment and consi%nation too!place suBcient to constitute pa*ment, the spouses $o&inco dul* esta+lished that the* have le%itimatel*

secured a means o pa*in% of their loan with 4T:&?the* were onl* prevented rom doin% so +* the un=ustreusal o ster to accept the proceeds o the DG loanthrou%h her reusal to eecute the release o themort%a%e on the properties mort%a%ed to 4T:&. (nother words, 4T:& and ster in act prevented thespouses $o &inco rom the eercise o their ri%ht tosecure pa*ment o their loan. Do reason eists underthis le%al situation wh* we cannot compel 4T:& andster< /12 to release the mort%a%e to 4T:& as acondition to the release o the proceeds o the DG loan,upon DGs ac!nowled%ment that the proceeds o theloan are read* and shall orthwith +e released? and /2to accept the proceeds, su<ient to over t'e totalamount of t'e loan to M50C, as pa*ment or 4anuelsloan with 4T:&.

p *the pa*ment had onl* +een accepted. Ander 0rticle 19o the &ivil &ode, the* should li!ewise +e entitled todama%es, as the un=ust reusal was efectivel* ana+usive act contrar* to the dut* to act with honest* and%ood aith in the eercise o ri%hts and the ulllment o dut*.

#or these reasons, we delete the amounts

awarded +* the ET& to the spouses $o &inco/1,;,75.15, plus 583.83 per month2representin% loss of savings on interests or lac! o le%al+asis. These amounts were computed +ased on thediference in the interest rates char%ed +* the 4T:&/386 per annum2 and the DG /176 to 1@6 perannum2, rom the date o tender o pa*ment up to thetime o the promul%ation o the ET& decision. The trialcourt ailed to consider the efects o a tender o pa*ment and erroneousl* declared that 4T:& can

char%e interest at the rate o onl* 1@6 per annum thesame rate that DG char%ed, not the 386 interest ratethat 4T:& char%ed? the ET& awarded the diference inthe interest rates as actual dama%es.

0s part o the actual and compensator* dama%es, theET& also awarded 1;;,;;;.;; to the spouses $o &inco

representin% unrealized prots. 0pparentl*, i theproceeds o the DG loan /1,;3,[email protected] had +eenapplied to the 4T:& loan /1,;71,58.552, there wouldhave +een a +alance o 13,@.8 let, which amountthe spouses $o &inco could have invested in their+usinesses that would have earned them a prot o atleast 1;;,;;;.;;.

sters act o reusin% pa*ment was motivated +* +adaith as evidenced +* the utter lac! o su+stantialreasons to support it. Jer un=ust reusal, in her +ehal and or the 4T:& which she represents, amounted to ana+use o ri%hts? the* acted in an oppressive mannerand, thus, are lia+le or moral and eemplar* dama%es.MN "e nevertheless reducethe 1,;;;,;;;.;; to 1;;,;;;.;; as the ori%inall*awarded amount or moral dama%es is plainl*ecessive.





"e nd no actual +asis or this award. Thespouses $o &inco were una+le to su+stantiate theamount the* claimed as unrealized prots? there wasonl* their +are claim that the ecess could have +eeninvested in their other +usinesses. "ithout more, thisclaim o epected prots is at +est speculative andcannot +e the +asis or a claim or dama%es. (n 0uas v.pouses Ro#o,M1N we declared that<

(n determinin% actual dama%es, the &ourtcannot rel* on speculation, con=ecture or%uesswor! as to the amount. 0ctual andcompensator* dama%es are thoserecovera+le +ecause o )(u*/>B oss in+usiness, trade, propert*, proession, =o+ oroccupation and the same ust @(su/(*tB )o?(+, ot(/s(, /0 t()oo0 /s /sB >*+ u*su@st>*t/>t(+, *o+>>g(s / @( g/?(*. Mmphasis

supplied.N

"e a%ree, however, that there was +asis or the awardo moral and eemplar* dama%es and attorne*s ees.

"e aBrm the %rant o eemplar* dama%es +* wa*o eample or correction or the pu+lic %ood in li%ht o the same reasons that =ustied the %rant o moraldama%es.

0s the spouses $o &inco were compelled to

liti%ate to protect their interests, the* are entitled topa*ment o 1;6 o the total amount o awardeddama%es as attorne*s ees and epenses o liti%ation.

WHEREF%RE, we GRAN$ the petitioners petitionor review on ertiorari, and RE#ERSE the decisiono Kune , ;;1 o the &ourt o 0ppeals in &0-$.E. &IDo. 757@, as well as the resolution o Kanuar* 5,

;; that ollowed. "e REINS$A$E the decisiondated 0u%ust 18, 199 o the Ee%ional Trial &ourt,Granch 5, 4aasin, Southern :e*te, with theollowin% M%IFICA$I%NS!

/12 The respondents are here+*directed to accept the proceeds o the

spouses $o &incos DG loan, i stillavaila+le, and to consent to the releaseo the mort%a%e on the propert* %ivenas securit* or the loan upon DGsac!nowled%ment that the proceeds o the loan, suBcient to cover the totalinde+tedness to respondent 4aasin

Traders :endin% &orporation computedas o Kune ;, 19@9, shall orthwith +ereleased?

ERSAMIN, J.:

To avoid un=ust enrichment to a part* rom resultin% out

o a su+stantiall* perormed contract, the principle o

)uantum meruit ma* +e used to determine his

compensation in the a+sence o a written a%reement or

that purpose. The principle o )uantum meruit =usties

the pa*ment o the reasona+le value o the services

rendered +* him.





/2 The award or loss o savin%s and unrealized prot is deleted?

/32 The award or moraldama%es is reduced to 1;;,;;;.;;?and

/2 The awards or eemplar*dama%es, attorne*s ees, and epenseso liti%ation are retained.

The awards under /32 and /2 a+ove shall +e deductedrom the amount o the outstandin% loan due therespondents as o Kune ;, 19@9. &osts a%ainst therespondents.

G.R. No. 15&361 A)/ 1', 2'13

IN$ERNA$I%NAL H%$EL C%RP%RA$I%N, etitioner,

vs.

FRANCISC% . %AUIN, R. >*+ RAFAELSUARE=, Eespondents.

& ( S ( C D

$( C>s(

Ander review is the decision the &ourt o 0ppeals /&02

promul%ated on Dovem+er @, ;;,1 disposin%<

"JE#CE, premises considered, the decision dated

0u%ust 8, 1993 o the Ee%ional Trial &ourt, Granch 13,

4anila in &ivil &ase Do. E-@-3 is 0##(E4 with

4odication as to the amounts awarded as ollows<

deendant-appellant (J& is ordered to pa* plaintif-

appellant Koa)uin 7;;,;;;.;; and plaintif-appellant

Suarez;;,;;;.;;, +oth to +e paid in cash.

SC CEE.

A*t((+(*ts

Cn #e+ruar* 1, 1989, respondent #rancisco G. Koa)uin,

Kr. su+mitted a proposal to the Goard o irectors o the

(nternational Jotel &orporation /(J&2 or him to render

technical assistance in securin% a orei%n loan or the

construction o a hotel, to +e %uaranteed +* the

evelopment Gan! o the hilippines /G2. The

proposal encompassed nine phases, namel*< /12 the

preparation o a new pro=ect stud*? /2 the settlement o the unre%istered mort%a%e prior to the su+mission o

the application or %uarant* or processin% +* G? /32

the preparation o papers necessar* to the application

or %uarant*? /2 the securin% o a orei%n nancier or

the pro=ect? /52 the securin% o the approval o the G

Goard o $overnors? /82 the actual ollow up o the

application with G3? /72 the overall coordination in

implementin% the pro=ections o the pro=ect stud*? /@2

Cn Kune ;, 197;, Koa)uin presented to the (J& Goard o irectors the results o his ne%otiations with potential

orei%n nanciers. Je narrowed the nanciers to Eo%er

unn Y &ompan* and 4aterials Jandlin% &orporation.

Je recommended that the Goard o irectors consider

4aterials Jandlin% &orporation +ased on the more

+enecial terms it had ofered. Jis recommendation was

accepted.1;

http://www.lawphil.net/judjuris/juri2013/apr2013/gr_158361_2013.html#fnt1










p % p = p = * / 2

the preparation o the staf or actual hotel operations?

and /92 the actual hotel operations.

The (J& Goard o irectors approved phase one to

phase si o the proposal durin% the special +oard

meetin% on #e+ruar* 11, 1989, and

earmar!ed ,;;;,;;;.;; or the pro=ect.5 0nent the

nancin%, (J& applied with G or a orei%n loan

%uarant*. G processed the application,8

and approvedit on Ccto+er , 1989 su+=ect to several conditions.7

Cn Kul* 11, 1989, shortl* ater su+mittin% the

application to G, Koa)uin wrote to (J& to re)uest the

pa*ment o his ees in the amount o 5;;,;;;.;; or

the services that he had provided and would +e

providin% to (J& in relation to the hotel pro=ect that were

outside the scope o the technical proposal. Koa)uin

intimated his amena+ilit* to receive shares o stoc!instead o cash in view o (J&Rs nancial situation.@

Cn Kul* 11, 1989, the stoc!holders o (J& met and

%ranted Koa)uinRs re)uest, allowin% the pa*ment or

+oth Koa)uin and Eaael Suarez or their services in

implementin% the proposal.9

De%otiations with 4aterials Jandlin% &orporation and,

later on, with its principal, Garnes (nternational /Garnes2,

ensued. "hile the ne%otiations with Garnes were

on%oin%, Koa)uin and Kose Ialero, the ecutive irector

o (J&, met with another nancier, the "eston

(nternational &orporation /"eston2, to eplore possi+le

nancin%.11 "hen Garnes ailed to deliver the needed

loan, (J& inormed G that it would su+mit "eston or

GRs consideration.1

0s a result, G cancelled itsprevious %uarant* throu%h a letter dated ecem+er 8,

1971.13

Cn ecem+er 13, 1971, (J& entered into an a%reement

with "eston, and communicated this development to

G on Kune 8, 197. Jowever, G denied the

application or %uarant* or ailure to compl* with the

conditions contained in its Dovem+er 1, 1971 letter.1

ue to Koa)uinRs ailure to secure the needed loan, (J&,

throu%h its resident Gautista, canceled the 17,;;;

shares o stoc! previousl* issued to Koa)uin and Suarez

as pa*ment or their services. The latter re)uested a

reconsideration o the cancellation, +ut their re)uest

was re=ected.

&onse)uentl*, Koa)uin and Suarez commenced thisaction or specic perormance, annulment, dama%es

and in=unction +* a complaint dated ecem+er 8, 1973

in the Ee%ional Trial &ourt in 4anila /ET&2, impleadin%

(J& and the mem+ers o its Goard o irectors, namel*,

#eli 0n%elo Gautista, Ser%io C. Eustia, phraim $.

$ochan%co, 4ario G. Kulian, Gen=amin K. Gautista, Gasilio

:. :ira%, anilo E. :acerna and Jermene%ildo E.

Ee*es.15 The complaint alle%ed that the cancellation o

Similarl*, $ochan%co and Ee*es denied an* !nowled%eo or participation in the cancellation o the shares, and

claried that the* were not directors o (J&.19 (n the

course o the proceedin%s, Ee*es died and was

su+stituted +* &onsorcia . Ee*es, the administratri o

his estate.;

Ru/*g o0 t( R$C





























* p %

the shares had +een ille%al, and had deprived them o

their ri%ht to participate in the meetin%s and elections

held +* (J&? that Garnes had +een recommended +* (J&

resident Gautista, not +* Koa)uin? that the* had ailed

to meet their o+li%ation +ecause resident Gautista and

his son had intervened and ne%otiated with Garnes

instead o "eston? that G had canceled the %uarant*

+ecause Garnes had ailed to release the loan? and that

(J& had a%reed to compensate their services with17,;;; shares o the common stoc! plus cash

o 1,;;;,;;;.;;.18

(J&, to%ether with #eli 0n%elo Gautista, Ser%io C.

Eustia, 4ario G. Kulian and Gen=amin K. Gautista, led an

answer claimin% that the shares issued to Koa)uin and

Suarez as compensation or their 'past and uture

services' had +een issued in violation o Section 18 o

the &orporation &ode? that Koa)uin and Suarez had notprovided a orei%n nancier accepta+le to G? and that

the* had alread* received 98,35;.;; as pa*ment or

their services.17

Cn their part, :ira% and :acerna denied an* !nowled%e

o or participation in the cancellation o the shares.1@

Ander its decision rendered on 0u%ust 8, 1993, the ET&held (J& lia+le pursuant to the second para%raph o

0rticle 1@ o the &ivil &ode, disposin% thusl*<

"JE#CE, in the li%ht o the a+ove acts, law and

=urisprudence, the &ourt here+* orders the deendant

(nternational Jotel &orporation to pa* plaintif #rancisco

G. Koa)uin, the amount o Two Jundred Thousand esos

/;;,;;;.;;2 and to pa* plaintif Eaael Suarez the

amount o #it* Thousand esos /5;,;;;.;;2? that the

said deendant (J& li!ewise pa* the co-plaintifs,

attorne*Rs ees o ;,;;;.;;, and costs o suit.

(T (S SC CEE.1

The ET& ound that Koa)uin and Suarez had ailed to

meet their o+li%ations when (J& had chosen to

ne%otiate with Garnes rather than with "eston, thenancier that Koa)uin had recommended? and that the

cancellation o the shares o stoc! had +een proper

under Section 8@ o the &orporation &ode, which

allowed such transer o shares to compensate onl* past

services, not uture ones.

Ru/*g o0 t( CA

Goth parties appealed.

Koa)uin and Suarez assi%ned the ollowin% errors, to wit<

S(T J0I(D$ &CEE&T:H 0&ODC":$ TJ0T

:0(DT(##S-0::0DTS #A::H E#CE4 0:: TJ0T

"0S (D&A4GDT ACD TJ4, TJ JCDCE0G: KA$

EE (D DCT CEE(D$ TJ0T<

TJ :C"E &CAET EE (D 0"0E(D$ :0(DT(##S-0::0DTS 0TTCEDHRS #S 0D &CSTS C# SA(T.

(n its )uestioned decision promul%ated on Dovem+er @,

;;, the &0 concurred with the ET&, upholdin% (J&Rs

lia+ilit* under 0rticle 11@8 o the &ivil &ode. (t ruled that

in the contet o 0rticle 13 o the &ivil &ode, Koa)uin

had su+stantiall* perormed his o+li%ations and had

+ecome entitled to +e paid or his services? and that the
















0. #D0DTS "E ADKAST(#( (D&0D&::(D$ TJ SJ0ES C# STC&O EI(CAS:H

(SSA TC :0(DT(##S-0::0DTS? 0D

G. #D0DTS 0H :0(DT(##S-0::0DTS T"C

4(::(CD SID JADE SCS /sic2

/,7;;,;;;.;;2, (D&:A(D$ (DTEST TJECD

#EC4 1973, EESDT(D$ TJ TCT0:

CG:($0T(CD A :0(DT(##S-0::0DTS.3

Cn the other hand, (J& attri+uted errors to the ET&, as

ollows<

(.

TJ :C"E &CAET EE (D JC:(D$ TJ0T

:0(DT(##S-0::0DTS J0I DCTGD &C4:T:H

0( #CE TJ(E SEI(&S, 0D (D CEE(D$ TJ

#D0DT-0::0DT TC 0H T"C JADE

TJCAS0D SCS /;;,;;;.;;2 0D #(#TH TJCAS0D

SCS /5;,;;;.;;2 TC :0(DT(##S-0::0DTS

#E0D&(S&C G. KC0A(D 0D E0#0: SA0EZ,

ES&T(I:H.

((.

issuance o the shares o stoc! was ultra vires or havin%

+een issued as consideration or uture services.

0nent how much was due to Koa)uin and Suarez, the &0

eplained thusl*<

This &ourt does not su+scri+e to plaintifs-appellantsR

view that deendant-appellant (J& a%reed to pa*

them,;;;,;;;.;;. laintif-appellant Koa)uinRs letter

to deendant-appellee #.0. Gautista, )uotin% deendant-

appellant (J&Rs +oard resolutions which supposedl*

authorized the pa*ment o such amount cannot +e

sustained. The resolutions are )uite clear and when

ta!en to%ether show that said amount was onl* the

'estimated maimum epenses' which deendant-

appellant (J& epected to incur in accomplishin% phases

1 to 8, not eclusivel* to plaintifs-appellantsR

compensation.This conclusion nds support in anunnum+ered +oard resolution o deendant-appellant

(J& dated Kul* 11, 1989<

'(ncidentall*, it was also ta!en up the necessit* o

%ivin% the Technical $roup a portion o the

compensation that was authorized +* this corporation in

its Eesolution o #e+ruar* 11, 1989 considerin% that the

assistance so ar %iven the corporation +* said Technical$roup in continuin% our pro=ect with the G and its

re)uest or %uarant* or a orei%n loan is 7;6

completed leavin% onl* some details which are now

+ein% processed. (t is estimated that;;,;;;.;; worth

o &ommon Stoc! would +e reasona+le or the present

accomplishments and to this efect, the resident is

authorized to issue the same in the name o the

Technical $roup, as ollows<

0lthou%h the lower court ailed to eplain wh* it was%rantin% the attorne*Rs ees, this &ourt nonetheless

nds its award proper %iven deendant-appellant (J&Rs

actions.5

Issu(s

(n this appeal, the (J& raises as issues or our

consideration and resolution the ollowin%<







;;,;;;.;; in common stoc! to Eaael Suarez, as

associate in the Technical $roup, and ;;,;;;.;; in

common stoc! to #rancisco $. Koa)uin, Kr., also a

mem+er o the Technical $roup.

(t is apparent that not all o the ,;;;,;;;.;; was

allocated eclusivel* to compensate plaintifs-

appellants. Eather, it was intended to und the wholeunderta!in% includin% their compensation. Cn the same

date, deendant-appellant (J& also authorized its

president to pa*-appellant Koa)uin 5;;,;;;.;; either in

cash or in stoc! or +oth.

The amount awarded +* the lower court was thereore

less than what deendant-appellant (J& a%reed to pa*

plaintifs-appellants. "hile this &ourt cannot decree that

the cancelled shares +e restored, or the* are without adou+t null and void, still and all, deendant-appellant

(J& cannot now put up its own ultra vires act as an

ecuse to escape o+li%ation to plaintifs-appellants.

(nstead o shares o stoc!, deendant-appellant (J& is

ordered to pa* plaintif-appellant Koa)uin a total

o 7;;,;;;.;; and plaintif-appellant

Suarez ;;,;;;.;;, +oth to +e paid in cash.

(

"JTJE CE DCT TJ &CAET C# 00:S (S &CEE&T

(D 0"0E(D$ &C4DS0T(CD 0D ID 4C(#H(D$

TJ 0H4DT TC JE(D ESCDDTS S(T DCD-

#A:#(::4DT C# TJ(E CG:($0T(CD TC JE(D

T(T(CDE

((

"JTJE CE DCT TJ &CAET C# 00:S (S &CEE&T

(D 0"0E(D$ 0TTCEDHRS #S TC ESCDDTS8

(J& maintains that 0rticle 11@8 o the &ivil &ode was

erroneousl* applied? that it had no intention o

preventin% Koa)uin rom compl*in% with his o+li%ations

when it adopted his recommendation to ne%otiate with

Garnes? that 0rticle 13 o the &ivil &ode applied onl* i

there was a merel* sli%ht deviation rom the o+li%ation,

and the omission or deect was technical and

unimportant? that su+stantial compliance was

unaccepta+le +ecause the orei%n loan was material and

was, in act, the ultimate %oal o its contract with

Koa)uin and Suarez? that +ecause the o+li%ation was

indivisi+le and su+=ect to a suspensive condition, 0rticle11@1 o the &ivil &ode7 applied, under which a partial

perormance was e)uivalent to non-perormance? and

that the award o attorne*Rs ees should +e deleted or

lac! o le%al and actual +ases.

Cn the part o respondents, onl* Koa)uin led a

comment,@ ar%uin% that the petition was atall*

deective or raisin% )uestions o act? that the

acts, the )uestion o whether or not the conclusiondrawn rom the acts is correct is a )uestion o law.31

&onsiderin% that what (J& see!s to review is the &0Rs

application o the law on the acts presented therein,

there is no dou+t that (J& raises )uestions o law. The

+asic issue posed here is whether the conclusions drawn

+* the &0 were correct under the pertinent laws.











o+li%ation was divisi+le and capa+le o partial

perormance? and that the suspensive condition was

deemed ullled throu%h (J&Rs own actions.9

Ru/*g

"e den* the petition or review on certiorari su+=ect to

the ensuin% dis)uisitions.

1.

(J& raises )uestions o law

"e rst consider and resolve whether (J&Rs petition

improperl* raised )uestions o act.

0 )uestion o law eists when there is dou+t as to what

the law is on a certain state o acts, +ut, in contrast, a

)uestion o act eists when the dou+t arises as to thetruth or alsit* o the acts alle%ed. 0 )uestion o law

does not involve an eamination o the pro+ative value

o the evidence presented +* the liti%ants or +* an* o

them? the resolution o the issue must rest solel* on

what the law provides on the %iven set o

circumstances.3; "hen there is no dispute as to the

.

0rticle 11@8 and 0rticle 13 o the &ivil &ode cannot

+e the source o (J&Rs o+li%ation to pa* respondents (J&

ar%ues that it should not +e held lia+le +ecause< /a2 it

was Koa)uin who had recommended Garnes? and /+2

(J&Rs ne%otiation with Garnes had +een neither

intentional nor willull* intended to prevent Koa)uin rom

compl*in% with his o+li%ations.

(J&Rs ar%ument is meritorious.

0rticle 11@8 o the &ivil &ode reads<

0rticle 11@8. The condition shall +e deemed ullled

when the o+li%or voluntaril* prevents its ulllment.

This provision reers to the constructive ulllment o a

suspensive condition,3 whose application calls or twore)uisites, namel*< /a2 the intent o the o+li%or to

prevent the ulllment o the condition, and /+2 the

actual prevention o the ulllment. 4ere intention o

the de+tor to prevent the happenin% o the condition, or

to place inefective o+stacles to its compliance, without

actuall* preventin% the ulllment, is insuBcient.33

The error lies in the &0Rs ailure to determine (J&Rsintent to pre-empt Koa)uin rom meetin% his o+li%ations.

The Kune ;, 197; minutes o (J&Rs special +oard

meetin% discloses that Koa)uin impressed upon the

mem+ers o the Goard that 4aterials Jandlin% was

oferin% more avora+le terms or (J&, to wit<

0 h i ll h + h G d

conditions o pa*ment as well as the rate o interest aremuch more reasona+le and would +e much less onerous

to our corporation. Jowever, he eplained that the

corporation accepted, in principle, the ofer o Eo%er

unn, per the corporationRs tele%rams to 4r. Eudolph

4eir o the rivate Gan! o Zurich, Switzerland, and until

such time as the corporationRs ne%otiations with Eo%er

unn is terminated, we are committed, on one wa* or

the other, to their nancin%.











0t the meetin% all the mem+ers o the Goard oirectors o the (nternational Jotel &orporation were

present with the eception o irectors Gen=amin K.

Gautista and Ser%io C. Eustia who as!ed to +e ecused

+ecause o previous en%a%ements. (n that meetin%, the

resident called on 4r. #rancisco $. Koa)uin, Kr. to

eplain the diferent ne%otiations he had conducted

relative to o+tainin% the needed nancin% or the hotel

pro=ect in !eepin% with the authorit* %iven to him in aresolution approved +* the Goard o irectors.

4r. Koa)uin presentl* eplained that he contacted

several local and orei%n nanciers throu%h diferent

+ro!ers and ater eaminin% the diferent ofers he

narrowed down his choice to two /2, to wit< the orei%n

nancier recommended +* $eor%e "ri%ht o the Eo%er

unn Y &ompan* and the ofer made +* the 4aterials

Jandlin% &orporation.

0ter eplainin% the advanta%es and disadvanta%es to

our corporation o the two /2 ofers specicall* with

re%ard to the terms and repa*ment o the loan and the

rate o interest re)uested +* them, he concluded that

the ofer made +* the 4aterials Jandlin% &orporation is

much more advanta%eous +ecause the terms and

(t was decided +* the irectors that, should the

ne%otiations with Eo%er unn materialize, at the same

time as the ofer o 4aterials Jandlin% &orporation, that

the unds committed +* Eo%er unn ma* +e diverted to

other +orrowers o the evelopment Gan! o the

hilippines. "ith this condition, irector Koa)uin showed

the advanta%es o the ofer o 4aterials Jandlin%

&orporation. 4r. Koa)uin also inormed the corporationthat, as o this date, the +an! conrmation o Eo%er

unn Y &ompan* has not +een received. (n view o the

act that the corporation is racin% a%ainst time in

securin% its nancin%, he recommended that the

corporation entertain other ofers.

0ter a +rie echan%e o views on the part o the

irectors present and ater hearin% the clarication and

eplanation made +* 4r. &. 4. Kavier who was presentand who represented the 4aterials Jandlin%

&orporation, the irectors present approved

unanimousl* the recommendation o 4r. Koa)uin to

entertain the ofer o 4aterials Jandlin% &orporation.3

videntl*, (J& onl* relied on the opinion o its consultant

in decidin% to transact with 4aterials Jandlin% and,

later on, with Garnes. (n ne%otiatin% with Garnes, (J&had no intention, willul or otherwise, to prevent Koa)uin

and Suarez rom meetin% their underta!in%. Such

a+sence o an* intention ne%ated the +asis or the &0Rs

reliance on 0rticle 11@8 o the &ivil &ode.

Dor do we a%ree with the &0Rs upholdin% o (J&Rs

lia+ilit* +* virtue o Koa)uin and SuarezRs su+stantial

perormance. (n so rulin%, the &0 applied 0rticle 13 o

th &i il & d hi h t t

whole or +e so material that the o+=ect which the partiesintended to accomplish in a particular manner is not

attained. The non-perormance o a material part o a

contract will prevent the perormance rom amountin%

to a su+stantial compliance.

The part* claimin% su+stantial perormance must show

that he has attempted in %ood aith to perorm his

contract, +ut has throu%h oversi%ht, misunderstandin%

+l l t il d t l t l i





the &ivil &ode, which states<

0rticle 13. ( the o+li%ation has +een su+stantiall*

perormed in %ood aith, the o+li%or ma* recover as

thou%h there had +een a strict and complete ulllment,

less dama%es sufered +* the o+li%ee.

(t is well to note that 0rticle 13 applies onl* when an

o+li%or admits +reachin% the contract35 ater honestl*

and aithull* perormin% all the material elements

thereo ecept or some technical aspects that cause no

serious harm to the o+li%ee.38 (J& correctl* su+mits that

the provision reers to an omission or deviation that is

sli%ht, or technical and unimportant, and does not afect

the real purpose o the contract.

Tolentino eplains the character o the o+li%orRs +reach

under 0rticle 13 in the ollowin% manner, to wit<

(n order that there ma* +e su+stantial perormance o

an o+li%ation, there must have +een an attempt in %ood

aith to perorm, without an* willul or intentional

departure thererom. The deviation rom the o+li%ation

must +e sli%ht, and the omission or deect must +e

technical and unimportant, and must not pervade the

or an* ecusa+le ne%lect ailed to completel* perorm in

certain ne%li%i+le respects, or which the other part*

ma* +e ade)uatel* indemnied +* an allowance and

deduction rom the contract price or +* an award o

dama%es. Gut a part* who !nowin%l* and wilull* ails to

perorm his contract in an* respect, or omits to perorm

a material part o it, cannot +e permitted, under the

protection o this rule, to compel the other part*, and

the trend o the more recent decisions is to hold that thepercenta%e o omitted or irre%ular perormance ma* in

and o itsel +e suBcient to show that there had not

+een a su+stantial perormance.37

G* reason o the inconse)uential nature o the +reach or

omission, the law deems the perormance as

su+stantial, ma!in% it the o+li%eeRs dut* to pa*.3@ The

compulsion o pa*ment is predicated on the su+stantial

+enet derived +* the o+li%ee rom the partialperormance. 0lthou%h compelled to pa*, the o+li%ee is

nonetheless entitled to an allowance or the sum

re)uired to remed* omissions or deects and to

complete the wor! a%reed upon.39

&onversel*, the principle o su+stantial perormance is

inappropriate when the incomplete perormance

constitutes a material +reach o the contract. 0contractual +reach is material i it will adversel* afect

the nature o the o+li%ation that the o+li%or promised to

deliver, the +enets that the o+li%ee epects to receive

ater ull compliance, and the etent that the non-

perormance deeated the purposes o the

contract.; 0ccordin%l*, or the principle em+odied in

0rticle 13 to appl*, the ailure o Koa)uin and Suarez

to compl* with their commitment should not deeat the

unimportant as to have resulted in Koa)uin and SuarezRssu+stantial perormance that conse)uentiall* +enetted

(J&. "hatever +enets (J& %ained rom their services

could onl* +e minimal, and were even pro+a+l*

outwei%hed +* whatever losses (J& sufered rom the

dela*ed construction o its hotel. &onse)uentl*, 0rticle

13 did not appl*.

3.















ultimate purpose o the contract.

The primar* o+=ective o the parties in enterin% into the

services a%reement was to o+tain a orei%n loan to

nance the construction o (J&Rs hotel pro=ect. This

o+=ective could +e inerred rom (J&Rs approval o phase

1 to phase 8 o the proposal. hase 1 and phase ,

respectivel* the preparation o a new pro=ect stud* and

the settlement o the unre%istered mort%a%e, wouldpave the wa* or Koa)uin and Suarez to render

assistance to (J& in appl*in% or the G %uarant* and

thereater to loo! or an a+le and willin% orei%n

nancial institution accepta+le to G. 0ll the steps that

Koa)uin and Suarez undertoo! to accomplish had a

sin%le o+=ective to secure a loan to und the

construction and eventual operations o the hotel o

(J&. (n that re%ard, Koa)uin himsel admitted that his

assistance was specicall* sou%ht to see! nancin% or(J&Rs hotel pro=ect.1

Deedless to sa*, ndin% the orei%n nancier that G

would %uarantee was the essence o the partiesR

contract, so that the ailure to completel* satis* such

o+li%ation could not +e characterized as sli%ht and

IHC /s *o*(t((ss />@( to )>B u*+( t( u( o*o*stut/?( 0u(*t o0 > /(+ o*+/t/o*>o@/g>t/o*

Dotwithstandin% the inapplica+ilit* o 0rticle 11@8 and

0rticle 13 o the &ivil &ode, (J& was lia+le +ased on

the nature o the o+li%ation.

&onsiderin% that the a%reement +etween the partieswas not circumscri+ed +* a denite period, its

termination was su+=ect to a condition the happenin%

o a uture and uncertain event. The prevailin% rule in

conditional o+li%ations is that the ac)uisition o ri%hts,

as well as the etin%uishment or loss o those alread*

ac)uired, shall depend upon the happenin% o the event

that constitutes the condition.3

To recall, +oth the ET& and the &0 held that Koa)uin and

SuarezRs o+li%ation was su+=ect to the suspensive

condition o successull* securin% a orei%n loan

%uaranteed +* G. (J& a%rees with +oth lower courts,

and even ar%ues that the o+li%ation with a suspensive

condition did not arise when the event or occurrence did

not happen. (n that instance, partial perormance o the

contract su+=ect to the suspensive condition wastantamount to no perormance at all. 0s such, the

respondents were not entitled to an* compensation.

"e have to disa%ree with (J&Rs ar%ument.

To secure a G-%uaranteed orei%n loan did not solel*

depend on the dili%ence or the sole will o the

respondents +ecause it re)uired the action and

di ti thi d +l d illi i

The net issue to resolve is the amount o the ees that(J& should pa* to Koa)uin and Suarez.

Koa)uin claimed that aside rom the

approved ,;;;,;;;.;; ee to implement phase 1 to

phase 8, the (J& Goard o irectors had approved an

additional 5;;,;;;.;; as pa*ment or his services. The

ET& declared that he and Suarez were entitled

to ;;,;;;.;; each, +ut the &0 revised the amounts

t 7;; ;;; ;; K i d;; ;;; ;; S









discretion o third persons an a+le and willin% orei%nnancial institution to provide the needed unds, and

the G Goard o $overnors to %uarantee the loan. Such

third persons could not +e le%all* compelled to act in a

manner avora+le to (J&. There is no )uestion that when

the ulllment o a condition is dependent partl* on the

will o one o the contractin% parties, or o the o+li%or,

and partl* on chance, hazard or the will o a third

person, the o+li%ation is mied.5 The eistin% rule in a

mied conditional o+li%ation is that when the condition

was not ullled +ut the o+li%or did all in his power to

compl* with the o+li%ation, the condition should +e

deemed satised.8

&onsiderin% that the respondents were a+le to secure

an a%reement with "eston, and su+se)uentl* tried to

reverse the prior cancellation o the %uarant* +* G,

we rule that the* there+* constructivel* ullled theiro+li%ation.

.

uantum meruit should appl* in the a+sence o an

epress a%reement on the ees

to 7;;,;;;.;; or Koa)uin and;;,;;;.;; or Suarez.

0nent the ,;;;,;;;.;;, the &0 ri%htl* concluded that

the ull amount o ,;;;,;;;.;; could not +e awarded

to respondents +ecause such amount was not allocated

eclusivel* to compensate respondents, +ut was

intended to +e the estimated maimum to und the

epenses in underta!in% phase 8 o the scope o

services. (ts conclusion was un)uestiona+l* +orne out

+* the minutes o the #e+ruar* 11, 1989 meetin%, viz<

((

The preparation o the necessar* papers or the G

includin% the preparation o the application, the

presentation o the mechanics o nancin%, the actual

ollow up with the diferent departments o the G

which includes the eplanation o the easi+ilit* studies

up to the approval o the loan, conditioned on the GRs

acceptance o the pro=ect as easi+le. The estimated

epenses or this particular phase would +e contin%ent,

i.e. upon GRs approval o the plan now +ein% studied

and prepared, is somewhere around ,;;;,;;;.;;.

0ter a +rie discussion on the matter, the Goard onmotion dul* made and seconded, unanimousl* adopted

a resolution o the ollowin% tenor<

ESC:AT(CD DC. WWWWWW

/Series o 19892

'ESC:I, as it is here+* ESC:I, that i the

Eeparations allocation and the plan +ein% ne%otiated

with the G is realized the estimated maimum

$entlemen<

( have the honor to re)uest this God* or its deli+eration

and action on the ees or m* services rendered and to

+e rendered to the hotel pro=ect and to the corporation.

These ees are separate rom the ees *ou have

approved in *our previous Goard Eesolution, since m*

ees are separate. ( realize the position o the

corporation at present, in that it is not in a nancial

position to pa* m* services in cash thereore ( am









with the G is realized the estimated maimumepenses o ,;;;,;;;.;; or this phase is here+*

authorized su+=ect to the sound discretion o the

committee composed o Kustice #eli 0n%elo Gautista,

Kose D. Ialero and phraim $. $ochan%co.'7 /mphasis

supplied2

Koa)uinRs claim or the additional sum o 5;;,;;;.;;

was similarl* without actual and le%al +ases. Je had

re)uested the pa*ment o that amount to cover services

rendered and still to +e rendered to (J& separatel* rom

those covered +* the rst si phases o the scope o

wor!. Jowever, there is no reason to hold (J& lia+le or

that amount due to his ailure to present suBcient proo

o the services rendered towards that end. #urthermore,

his Kul* 11, 1989 letter revealed that the additional

services that he had supposedl* rendered were identical

to those enumerated in the technical proposal, thus<

The Goard o irectors

(nternational Jotel &orporation

Thru< Kustice #eli 0n%elo Gautista

resident Y &hairman o the Goard

position to pa* m* services in cash, thereore, ( amre)uestin% this God* to consider pa*ment o m* ees

even in the orm o shares o stoc!, as *ou have done to

the other technical men and or other services rendered

to the corporation +* other people.

(nasmuch as m* ees are contin%ent on the successul

implementation o this pro=ect, ( re)uest that m* ees +e

+ased on a percenta%e o the total pro=ect cost. The ees

which ( consider reasona+le or the services that ( have

rendered to the pro=ect up to the completion o its

construction is 5;;,;;;.;;. ( +elieve said amount is

reasona+le since this is approimatel* onl* ` o 16 o

the total pro=ect cost.

So ar, ( have accomplished hases 1-5 o m* report

dated #e+ruar* 1, 1989 and which *ou authorized us to

do under Goard Eesolution o #e+ruar* 11, 1989. (t isonl* hase 8 which now remains to +e implemented. #or

m* appointment as &onsultant dated 4a* 1, 1989 and

the Goard Eesolution dated Kune 3, 1989 wherein ( was

appointed to the Technical &ommittee, it now ollows

that ( have +een also authorized to implement part o

hases 7 Y @.

0 +rie summar* o m* accomplished wor! has +een asollows<

1. ( have revised and made the new ro=ect Stud*

o *our hotel pro=ect, ma!in% it +an!a+le and

easi+le.

. ( have reduced the total cost o *our pro=ect +*

approimatel* ,735,;;;.;;.

7. ( have su+mitted to *ou several ofers alread*o orei%n nanciers which are in *our les. "e are

presentl* arran%in% the said nanciers to conrm

their unds to the G or our pro=ect,

@. "e have secured the approval o the G to

process the loan application o this corporation as

per its letter Kul* , 1989.

9 "e have perormed other services or the





3. ( have seen to it that a re%istered mort%a%e

with the Eeparations &ommission did not afect

the application with the (G or approval to

processin%.

. ( have prepared the application papers

accepta+le to the G +* means o an advance

anal*sis and the presentation o the nancial

mechanics, which was accepted +* the G.

5. ( have presented the nancial mechanics o the

loan wherein the re)uirement o the G or an

additional 19,;;;,;;;.;; in e)uit* rom the

corporation +ecame unnecessar*.

8. The eplanation o the nancial mechanics and

the =ustication o this pro=ect was instrumental in

chan%in% the ori%inal recommendation o the

(nvestment Gan!in% epartment o the G,

which recommended disapproval o this

application, to the present recommendation o the

Eeal state epartment which is or the approval

o this pro=ect or proceedin%.

9. "e have perormed other services or thecorporation which led to the cooperation and

understandin% o the diferent actions o this

corporation.

( have rendered services to *our corporation or the past

8 months with no clear understandin% as to the

compensation o m* services. 0ll ( have drawn rom the

corporation is the amount o 5;;.;; dated 4a* 1,

1989 and personal pa*ment advanced +* Kustice #eli

0n%elo Gautista in the amount o1,;;;.;;.

( am, thereore, re)uestin% this God* or their approval

o m* ees. ( have shown m* %ood aith and willin%ness

to render services to *our corporation which is

evidenced +* m* continued services in the past 8

months as well as the accomplishments a+ove

mentioned. ( +elieve that the nal completion o thishotel, at least or the processin% o the G up to the

completion o the construction, will ta!e approimatel*

another *ears. (n view o the a+ove, ( a%ain

reiterate m* re)uest or *our approval o m* ees. "hen

the corporation is in a +etter nancial position, ( will

re)uest or a withdrawal o a monthl* allowance, said

amount to +e determined +* this God*.

Ier* trul* *ours,

/S%d.2

#rancisco $., Koa)uin, Kr.@

/mphasis supplied2

Koa)uin could not even rest his claim on the approval +*

(J&Rs Goard o irectors. The approval apparentl* arose

rom the conusion +etween the supposedl* separate

services that Koa)uin had rendered and those to +e

ro=ect.$:p'i$ The resident is %iven ull discretion todiscuss with 4r. Koa)uin the manner o pa*ment o said

compensation, authorizin% him to pa* part in stoc! and

part in cash.'

(ncidentall*, it was also ta!en up the necessit* o %ivin%

the Technical $roup a portion o the compensation that

was authorized +* this corporation in its Eesolution o

#e+ruar* 11, 1989 considerin% that the assistance so ar

%iven the corporation +* said Technical $roup in





services that Koa)uin had rendered and those to +edone under the technical proposal. The minutes o the

Kul* 11, 1989 +oard meetin% /when the Goard o

irectors allowed the pa*ment or Koa)uinRs past

services and or the 7;6 pro=ect completion +* the

technical %roup2 showed as ollows<

(((

The Third order o +usiness is the compensation o 4r.#rancisco $. Koa)uin, Kr. or his services in the

corporation.

0ter a +rie discussion that ensued, upon motion dul*

made and seconded, the stoc!holders unanimousl*

approved a resolution o the ollowin% tenor<

ESC:AT(CD DC. WWW

/Series o 19892

'ESC:I that 4r. #rancisco $. Koa)uin, Kr. +e %ranted

a compensation in the amount o #ive Jundred

Thousand /5;;,;;;.;;2 esos or his past services and

services still to +e rendered in the uture to the

corporation up to the completion o the

%iven the corporation +* said Technical $roup incontinuin% our pro=ect with the G and its re)uest or

%uarant* or a orei%n loan is 7;6 completed leavin%

onl* some details which are now +ein% processed. (t is

estimated that ;;,;;;.;; worth o &ommon Stoc!

would +e reasona+le or the present accomplishments

and to this efect, the resident is authorized to issue

the same in the name o the Technical $roup, as ollows<

;;,;;;.;; in &ommon Stoc! to Eaael Suarez, an

associate in the Technical $roup, and ;;,;;;.;; in

&ommon stoc! to #rancisco $. Koa)uin, Kr., also a

mem+er o the Technical $roup.9

:astl*, the amount purportedl* included services still to

+e rendered that supposedl* etended until the

completion o the construction o the hotel. (t is +asic,

however, that in o+li%ations to do, there can +e nopa*ment unless the o+li%ation has +een completel*

rendered.5;

(t is nota+le that the conusion on the amounts o

compensation arose rom the partiesR ina+ilit* to a%ree

on the ees that respondents should receive.

&onsiderin% the a+sence o an a%reement, and in view

o respondentsR constructive ulllment o theiro+li%ation, the &ourt has to appl* the principle o

)uantum meruit in determinin% how much was still due

and owin% to respondents. Ander the principle o

)uantum meruit, a contractor is allowed to recover the

reasona+le value o the services rendered despite the

lac! o a written contract.51 The measure o recover*

under the principle should relate to the reasona+le

value o the services perormed.5 The principle

prevents undue enrichment +ased on the e)uita+le

Do. 7;9 su+=ect to the 4C(#(&0T(CDS that< /a2(nternational Jotel &orporation is ordered to. pa*

#rancisco $. Koa)uin, Kr. and Eaael Suarez 1;;,;;;.;;

each as compensation or their services, and /+2 the

award o ;,;;;.;; as attorne*>s ees is deleted.

Do costs o suit.











prevents undue enrichment +ased on the e)uita+le

postulate that it is un=ust or a person to retain an*

+enet without pa*in% or it. Gein% predicated on e)uit*,

the principle should onl* +e applied i no epress

contract was entered into, and no specic statutor*

provision was applica+le.53

Ander the esta+lished circumstances, we deem the total

amount o ;;,;;;.;; to +e reasona+le compensationor respondentsR services under the principle o

)uantum meruit.

#inall*, we sustain (J&Rs position that the %rant o

attorne*Rs ees lac!ed actual or le%al +asis. 0ttorne*Rs

ees are not awarded ever* time a part* prevails in a

suit +ecause o the polic* that no premium should +e

placed on the ri%ht to liti%ate. There should +e actual or

le%al support in the records +eore the award o suchees is sustained. (t is not enou%h =ustication or the

award simpl* +ecause respondents were compelled to

protect their ri%hts.5

0&&CE(D$:H, the &ourt D(S the petition or review

on certiorari? and 0##(E4S the decision o the &ourt o

0ppeals promul%ated on Dovem+er @, ;; in &.0.-$.E.

PREMIERE E#EL%PMEN$ ANK,

etitioner,

- versus -

CEN$RAL SURE$" T INSURANCEC%MPAN", INC.,

Eespondent.

G.R. No. 1;6246

resent<

HD0ES-S0DT(0$C,

C'airperson,

0ASTE(0-40ET(DZ,

&J(&C-D0Z0E(C,

D0&JAE0, and

:CD0EC- &0STE

romul%ated<

#e+ruar* 13, ;;9

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

ECISI%N

NACHURA J !

the loan. (n all, should &entral Suret* ail to pa*, itwould +e lia+le to remiere Gan! or< /12 unpaid interestup to maturit* date? /2 unpaid penalties up to maturit*date? and /32 unpaid +alance o the principal.

To secure pa*ment o the 8,;;;,;;;.;; loan, &entralSuret* eecuted in avor o remiere Gan! a eed o 0ssi%nment with led%eMN coverin% &entral Suret*s

4em+ership #ee &erticate Do 17 representin% itsproprietar* share in "ac! "ac! $ol and &ountr* &lu+





http://sc.judiciary.gov.ph/jurisprudence/2009/feb2009/176246.htm#_ftn5




NACHURA, J.!

Geore us is a petition or review on ertiorari assailin%

the &ourt o 0ppeals /&02 ecisionM1N in &0-$.E. &I Do.@593;, which reversed and set aside the decision o theEe%ional Trial &ourt /ET&2, Granch 13, 4a!ati &it* in&ivil &ase Do. ;;513;8.MN

Cn 0u%ust ;, 1999, respondent &entral Suret* Y(nsurance &ompan* /&entral Suret*2 o+tained anindustrial loan o 8,;;;,;;;.;; rom petitioner

remiere evelopment Gan! /remiere Gan!2 with amaturit* date o 0u%ust 1, ;;;. This 8,;;;,;;;.;;loan, evidenced +* romissor* Dote /D2 Do. 71-H,M3N stipulates pa*ment o 176interest per annum pa*a+le monthl* in arrears and theprincipal pa*a+le on due date. (n addition, D Do. 71-Hprovides or a penalt* char%e o 6interest per annum +ased on the unpaidamortizationinstallment or the entire unpaid +alance o

4em+ership #ee &erticate Do. 17 representin% itsproprietar* share in "ac! "ac! $ol and &ountr* &lu+(ncorporated /"ac! "ac! 4em+ership2. (n +oth D Do.71-H and eed o 0ssi%nment, &onstancio T. &astaeda,

Kr. and n%racio T. &astaeda, president and vice-president o &entral Suret*, respectivel*, represented&entral Suret* and solidaril* +ound themselves to thepa*ment o the o+li%ation.

arentheticall*, &entral Suret* had another commercialloan with remiere Gan! in the amounto ;,@9@,;;;.;; maturin% on Ccto+er 1;, ;;1. Thisloan was, li!ewise, evidenced +* a D num+ered 378-LM5N and secured +* a real estate mort%a%e over&ondominium &erticate o Title Do. @@;, 4a!ati &it*.D Do. 378-L was availed o throu%h a renewal o &entral Suret*s prior loan, then covered +* D Do. 387-Z.M8N 0s with the 8,;;;,;;;.;; loan and the constitutedpled%e over the "ac! "ac! 4em+ership,

the ;,@9@,;;;.;; loan with real estate mort%a%e wastransacted +* &onstancio and n%racio &astaeda on+ehal o &entral Suret*.

(t appears that on 0u%ust , ;;;, remiere Gan! senta letter to &entral Suret* demandin% pa*ment o the 8,;;;,;;;.;; loan, to wit<













0u%ust ;;;

4r. (%nacio E. De+rida, Kr.

Senior 0sst. Iice resident

Gusiness evelopment $roup Jead

remiere Gan!

S0 cor 4a%allanes 0venue

Ier* trul* *ours,

/s%d.2

D$E0&(C T. &0ST0D0

Iice-residentM@N





S0 cor. 4a%allanes 0venue

4a!ati &it*

Sir<

it' referene to t'is P.? Million loan

aount , e 'ave informed Ms. 9vangelineeloira t'at e are intending to settle t'eaount "# t'e end of eptem"er . 0s o 10u%ust ;;; we made pa*ment to *our+an! as per receipt attached.

0s *ou ma* !now, present conditions have+een diBcult or the insurance industr*whose perormance is so closel* lin!ed tothe nations economic prosperit*? and we arenow as!in% or some consideration andleewa* on *our ver* stif and immediatedemands.

Oindl* etend to us *our avora+le approval.

0ccordin%l*, +* Septem+er ;, ;;;, &entral Suret*issued Gan! o &ommerce /G&2 &hec! Do. ;@11M9N datedSeptem+er , ;;; in the amount o 8,;;;,;;;.;;and pa*a+le to remiere Gan!. The chec! was received+* remiere Gan!s Senior 0ccount 4ana%er, van%elineIeloira, with the notation ull pa*ment o loan-"ac!

"ac!, as rePected in &entral Suret*s is+ursementIoucher.M1;N Jowever, or undisclosed reasons, remiereGan! returned G& &hec! Do. ;@11 to &entral Suret*,and in its letter dated Septem+er @, ;;;, demandedrom the latter, not =ust pa*ment o the 8,;;;,;;;.;;loan, +ut also the ;,@9@,;;;.;; loan which wasori%inall* covered +* D Do. 387-Z.M11N (n the same letter,remiere Gan! threatened oreclosure o the loansrespective securities, the pled%e and real estatemort%a%e, should &entral Suret* ail to pa* these within

ten da*s rom date, thus<

@Septem+er;;;

&DTE0: SAETH Y (DSAE0D& &C.

G*< &onstancio T. &astaeda Kr. resident

n%racio T. &astaeda Iice resident

nd #loor Aniversalre Gld%. Do. 1;8

aseo de Eoas, :e%aspi Iilla%e, 4a!ati &it*

(n view o the ore%oin% and to protect theinterest o our client, please +e advisedthat unless t'e outstanding "alanes of

#our loan aounts as of date plus interest, penalties and ot'er fees and 'arges are paid in full or neessar# arrangementsaepta"le to our lient is made "# #ouit'in ten 3$?4 da#s from date 'ereof, we

shall +e constrained much to our re%ret tol l di i t th









E< ;QR C;MM9RC+A0 0;AN;6 8L?,BB,???.?? &

8P,???,???.?? +5H 8R9M+9R91990;8M9N5 /ANK

QN19R ACC;QN5 N;. C;M-P-Z AN1C;M $L-

__________________________________________________

ear Sirs<

e rite on "e'alf of our lient, 8remiere1evelopment /an2, in onnetion it' #our

a"ove-aptioned loan aount.

"hile our client has %iven *ou all theconcessions, acilities and opportunities toservice *our loans, we re%ret to inorm *outhat *ou have ailed to settle the samedespite their past due status.

shall +e constrained much to our re%ret, tole oreclosure proceedin%s a%ainst thecollateral o the loan mort%a%ed to the Gan!or pursue such action necessar* in thepremises.

"e trust, thereore, that *ou will %ive thismatter *our preerential attention.

Ier* trul* *ours,

/s%d.2

0&(T0 4. 0E0CSM1N

Gusiness evelopment $roup Jead

Ee < romissor* Dote Do. 71-H

Sir<

5'is is furt'er to our lients letter to #ou





0&(T0 4. 0E0CS

/italics supplied2

The ver* net da*, on Septem+er 9, ;;;, &entralSuret*, throu%h its counsel, wrote remiere Gan! and re-

tendered pa*ment o the chec!<

9Septem+er;;;

E4(E G0DO

S0 cor. 4a%allanes 0venue

4a!ati &it*

0ttention< 4r. (%nacio E. De+rida, Kr.

Senior 0sst. Iice resident

5'is is furt'er to our lients letter to #oudated >L August >???, informing #ou t'at it ould settle its aount "# t'e end of eptem"er >???.

lease +e advised that on ; Septem+er;;; our client delivered to *our +an! G&che)ue no. ;@11 pa*a+le to remiere Gan!

in the amount o SI< MILLI%N PES%S8P6,''','''.'', which was received +**our Senior 0ccount 4ana%er, 4s.van%eline Ieloira. Jowever, oruneplained reasons the che)ue wasreturned to us.

"e are a%ain tenderin% to *ou the saidche)ue o SI< MILLI%N PES%S8P6,''','''.'', in pa*ment o PN;14-

" . lease accept the che)ue and issue thecorrespondin% receipt thereo. Should *oua%ain reuse to accept this che)ue, then (shall advise m* client to deposit it in courtor proper disposition.



Than! *ou.

Ier* trul* *ours,

/s%d.2

(#0D(C . &A0

&ounsel or &entral Suret* Y (nsurance

# Aniversalre &ondominium

1;8 aseo de Eoas

:e%aspi Iilla%e, 4a!ati &it*

ear 0tt*. &ua<

5'an2 #ou for #our to 3>4 letters "ot'



&ounsel or &entral Suret* Y (nsurance&ompan*M13N

/italics supplied2

Cn even date, a separate letter with another G& &hec!Do. ;@115 in the amount o ,8;;,;;;.;; was also

tendered to remiere Gan! as pa*ment or the Spousesn%racio and :ourdes &astaedas /Spouses &astaedas2personal loan covered +* D Do. 717-L and secured +*4anila olo &lu+, (nc. mem+ership shares.

Cn Ccto+er 13, ;;;, remiere Gan! responded andsi%nied acceptance o &entral Suret*s chec!s underthe ollowin% application o pa*ments<

13Ccto+er ;;;

0TTH. (#0D(C . &A0

5'an2 #ou for #our to 3>4 letters "ot'dated > eptem"er >??? on "e'alf of #our lients it' t'e enlosed 'e2 nos.???B$$L and ???B$$S for t'e totalof 8B,P??,???.??.

0s previousl* rela*ed to *our client,remiere Gan! cannot accept the two /2

chec!s as ull settlement o the o+li%ationunder 0ccount Dos. D X71-H and D X717-L, as the amount is insuBcient.

(n accordance with the terms and conditionso the romissor* Dotes eecuted +* *ourclients in avor o remiere evelopmentGan!, we have applied the two /2 chec!s tothe due o+li%ations o *our clients asollows<

12 0ccount Do.< &C4 35-ZM1N 1,;,939.5

2 0ccount Do.< (D 717-L 1,59,893.15

32 0ccount Do.< &C4 387-ZM15N ,78,;;.1@

2 0ccount Do.< &C4 71-H 1,819,1@7.

TCT0: @,8;;,;;;.;;

"e are enclosin% Lero cop* each o our /2oBcial receipts coverin% the a+ovepa*ments. The ori%inals are with us which

*our clients or their dul* authorizedrepresentative ma* pic! up an*time durin%

Si%nicantl*, the @,8;;,;;;.;; chec! pa*ments werenot applied in ull to &entral Suret*s 8,;;;,;;;.;; loanunder D Do. 71-H and the Spouses &astaedas personalloan o ,8;;,;;;.;; under D Do. 717-L. remiereGan! also applied proceeds thereo to a commercialloan under D Do. 35-Z ta!en out +* &asent Eealt* andevelopment &orporation /&asent Eealt*2,M17N and to&entral Suret*s loan ori%inall* covered +* D Do. 387-Z,











* *representative ma* pic!-up an*time durin%oBce hours.

"e shall appreciate the settlement in ull o the accounts o *our client or necessar*arran%ements or settlement thereo +emade as soon as possi+le to put theaccounts on up to-date status.

Than! *ou.

Ier* trul* *ours,

/s%d.24S. :S0 4. S00C

4ana%er

:oans 0ccountin% and

&ontrolepartmentM18N

&entral Suret*s loan ori%inall* covered +* D Do. 387 Z,renewed under D Do. 378-L, maturin% on Ccto+er ;,;;1.

Stron%l* o+=ectin% to remiere Gan!s application o pa*ments, &entral Suret*s counsel wrote remiere Gan!and reiterated &entral Suret*s demand or theapplication o the chec! pa*ments to the loans covered

+* D Dos. 71-L and 71-H. 0dditionall*, &entral Suret*as!ed that the "ac! "ac! 4em+ership pled%e, thesecurit* or the 8,;;;,;;;.;; loan, should +e released.

(n the nal echan%e o correspondence, remiereGan!, throu%h its S0I0ctin% Jead-:$&, 0tt*. acita0raos, responded and reused to accede to &entralSuret*s demand. remiere Gan! insisted that the Dcoverin% the 8,;;;,;;;.;; loan %ranted remiere Gan!sole discretion respectin%< /12 de+ts to which pa*mentsshould +e applied in cases o several o+li%ations +* ano+li%or andor de+tor? and /2 the initial application o pa*ments to other costs, advances, epenses, and pastdue interest stipulated thereunder.

0s a result, &entral Suret* led a complaint ordama%es and release o securit* collateral, specicall*pra*in% that the court render =ud%ment< /12 declarin%&entral Suret*s 8,;;;,;;;.;; loan covered +* D Do.71-H as ull* paid? /2 orderin% remiere Gan! torelease to &entral Suret* its mem+ership certicate o shares in "ac! "ac!? /32 orderin% remiere Gan! to pa*&entral Suret* compensator* and actual dama%es,eemplar* dama%es, attorne*s ees, and epenses o liti%ation? and /2 directin% remiere Gan! to pa* the

cost o suit.

connection with one another. Thereore,Mremiere Gan!N cannot appl* the pa*menttendered +* &entral Suret* to the other twoentities capriciousl* and epressl* violatin%the law and pertinent &entral Gan! rulesand re%ulations. H(*(, t( >))/>t/o*o0 t( )>B(*t to t( o>* o0 C>s(*tR(>tB 8Aou*t No. C%M 236-= >*+ tot( o>* o0 M. E*g>/o C>st>(+>8Aou*t No. IN ;1;-< /s ?o/+ >*+

ust @( >**u(+.





Cn Kul* 1, ;;5, the ET& rendered a decisiondismissin% &entral Suret*s complaint and orderin% it topa* remiere Gan! 1;;,;;;.;; as attorne*s ees. TheET& ruled that the stipulation in the D %rantin%remiere Gan! sole discretion in the application o pa*ments, althou%h it partoo! o a contract o adhesion,was valid. (t disposed o the case, to wit<

Dow that the issue as to the validit* o thestipulation is settled, Mremiere Gan!N wasri%ht in contendin% that it had the ri%ht toappl* M&entral Suret*sN pa*ment to the mostonerous o+li%ation or to the one it sees t to+e paid rst rom amon% the severalo+li%ations. The application o the pa*ment

to the other two loans o &entral Suret*namel*, account nos. &C4 387-Zand (D 71-H was within Mremiere Gan!sNvalid eercise o its ri%ht accordin% thestipulation. Jowever, Mremiere Gan!N erredin appl*in% the pa*ment to the loan o &asent Eealt* and to the personal o+li%ationo 4r. n%racio &astaeda despite their

ust @( >**u(+.

0s to the issue o whether or not M&entralSuret*N is entitled to the release o 4em+ership #ee &erticate in the "ac!"ac! $ol and &ountr* &lu+, considerin%now that M&entral Suret*N cannot compelMremiere Gan!N to release the su+=ectcollateral.

"ith re%ard to the issue o dama%es andattorne*s ees, the court nds no +asis to%rant Mremiere Gan!sN pra*er or moral andeemplar* dama%es +ut deems it =ust ande)uita+le to award in its avor attorne*sees in the sum o hp 1;;,;;;.;;.

WHEREF%RE, =ud%ment is here+*rendered +/s/ss/*g the complaint andorderin% M&entral Suret*N to pa* MremiereGan!N hp 1;;,;;;.;; as attorne*s ees.M1@N /emphasis supplied2

Cn appeal +* &entral Suret*, the &0 reversed and setaside the trial courts rulin%. The appellate court heldthat with remiere Gan!s letter dated 0u%ust , ;;;specicall* demandin% pa*ment o &entralSuret*s 8,;;;,;;;.;; loan, it was deemed to havewaived the stipulation in D Do. 71-H %rantin% it theri%ht to solel* determine application o pa*ments, andwas, conse)uentl*, estopped rom enorcin% the

same. (n this re%ard, with the holdin% o ull settlemento &entral Suret*s8 ;;; ;;; ;; loan under D Do 71-





% %o &entral Suret*s8,;;;,;;;.;; loan under D Do. 71 H, the &0 ordered the release o the "ac! "ac!4em+ership pled%ed to remiere Gan!.

Jence, this recourse +* remiere Gan! positin% theollowin% issues<

"JTJE CE DCT TJ JCDCE0G: &CAETC# 00:S &C44(TT EIES(G: 0D0:0G: EECE "JD (T 0:( TJE(D&(: C# "0(IE 0D STC: (D

TJ ESDT &0S (DSC#0E 0S TJ40D :TTE SDT TC M&DTE0:SAETHN (S &CD&ED DA::(#H(D$ TJ

"JTJE CE DCT TJE (S 0 I0:( TDE C# 0H4DT 0D &CDS($D0T(CDC# TJ SAGK&T T"C &J&O 0H4DTS GHM&DTE0: SAETHN.

"JTJE CE DCT, 0S &CEE&T:H #CADGH TJ &CAET A TQ; M&DTE0: SAETHN (SSTC #EC4 &CDTST(D$ TJST(A:0T(CDS CE ECI(S(CDS C# TJEC4(SSCEH DCTS 0ATJCE(Z(D$



0:(&0T(CD C# 0H4DTS LE&(S GHME4(E G0DON

"JTJE CE DCT TJ #(D(D$ C# "0(IE0D STC: GH TJ JCDCE0G: &CAETC# 00:S &CA: EI0(: CIE TJ&:0E 0D AD4(ST0O0G: ST0TATCEH 0D

&CDTE0&TA0: E($JT C# ME4(E G0DON TC LE&(S 0:(&0T(CD C# 0H4DT 0S"0EE0DT GH TJ EC4(SSCEH DCT

ID 0SSA4(D$ L $E0T(0 TJ0T TJ 84(::(CD SJCA: G 0:( TC TJSAGK&T :C0D C# ESCDDT, "JTJECE DCT TJ SAGK&T "0&O-"0&O SJ0ES&CA: G E:0SMN S(T TJ &ECSS#0A:T 0D &ECSS $A0E0DTECI(S(CDS C# TJ C# 0SS($D4DT"(TJ :$ 0D E:I0DT E0: ST0T4CET$0$ &CDTE0&TS L&AT GHM&DTE0: SAETHN, &0SDT E0:TH 0DSS. &0ST00.

ME4(E G0DON TC 40O SA&J0:(&0T(CD C# 0H4DTS

"JTJE CE DCT 0S &CEE&T:H #CADGH TJ :C"E &CAET ME4(E G0DON (SDT(T: TC 0D 0"0E C# 040$S 0SC&&0S(CD GH TJ 40:(&(CAS #(:(D$ C#

TJ(S SA(T.M19N

0t the outset, we )uali* that this case deals onl* withthe etin%uishment o &entral Suret*s 8,;;;,;;;.;;loan secured +* the "ac! "ac! 4em+ership pled%e. "edo not dispose herein the matter o the ,8;;,;;;.;;loan covered +* D Do. 717-L su+=ect o G& &hec! Do.

;@115.

"e note that +oth lower courts were one in annullin%remiere Gan!s application o pa*ments to the loans o &asent Eealt* and the Spouses &astaeda under D Dos.35-Z and 717-L, respectivel*, thus<

(t +ears stressin% that the parties to D Do.71-H secured +* "ac! "ac! mem+ershipcerticate are onl* &entral Suret*, as de+torand Mremiere Gan!N, as creditor. Thus,when the )uestioned stipulation spea!s o several o+li%ations, it onl* reers to theo+li%ations o M&entral Suret*N and no+od*else.

M(Nt is plain that M&entral Suret*N has onl*

n%racio &astaeda is the vice-president o M&entral Suret*N, and president o &asentEealt*, it does not ollow that the twocorporations are one and the same. Goth areinvested +* law with a personalit* separateand distinct rom each other.

Thus, M&entral Suret*N cannot +e held lia+leor the o+li%ation o &asent Eealt*, a+sentevidence showin% that the latter is +ein%





two loan o+li%ations, namel*< 1.2 Aou*tNo. ;14-" secured +* W> W> (@(s/) (t/>t(? and .2 Aou*tNo. 36;-=secured +* Co*+o/*/uC(t/>t( o0 $/t(. The two loans aresecured +* separate and diferentcollaterals. The collateral or 0ccount Do.71-H, which is the "ac! "ac! mem+ershipcerticate answers onl* or that account andnothin% else. The collateral or 0ccount Do.387-Z, which is the &ondominium &erticateo Title, is answera+le onl* or the saidaccount.

The act that the loan o+li%ations o M&entralSuret*N are secured +* separate and distinctcollateral simpl* shows that each collateral

secures onl* a particular loan o+li%ation anddoes not cover loans includin% uture loansor advancements.

0s re%ards the loan covered +* 0ccount Do.35-Z, this was o+tained +* &asent Eealt*,not +* M&entral Suret*N. 0lthou%h 4r.

used to deeat pu+lic convenience, =usti*wron%, protect raud or deend crime? orused as a shield to conuse the le%itimateissues, or when it is merel* an ad=unct, a+usiness conduit or an alter e%o o M&entralSuret*N or o another corporation? or used asa cloa! to cover or raud or ille%alit*, or towor! in=ustice, or where necessar* toachieve e)uit* or or the protection o creditors.

:i!ewise, M&entral Suret*N cannot +e heldaccounta+le or the loan o+li%ation o spouses &astaeda under 0ccountDo. (D 717-L. Settled is the rule that acorporation is invested +* law with apersonalit* separate and distinct rom those

o the persons composin% it. The corporatede+t or credit is not the de+t or credit o thestoc!holder nor is the stoc!holders de+t orcredit that o the corporation.

The mere act that a person is a president o the corporation does not render the

propert* he owns or possesses the propert*o the corporation, since that president, asan individual, and the corporation areseparate entities.M;N

(n act, remiere Gan! did not appeal or )uestion theET&s rulin% specicall* annullin% the application o

the 8,;;;,;;;.;; chec! pa*ment to the respectiveloans o &asent Eealt* and the Spouses &astaeda

The etition is meritorious.

"e shall ta!e the rst and the second issues in tandem.





loans o &asent Eealt* and the Spouses &astaeda.Andou+tedl*, remiere Gan! cannot +e allowed, throu%hthis petition, to surreptitiousl* include the validit* o itsapplication o pa*ments concernin% the loans to &asentEealt* and the Spouses &astaeda.

Thus, we sit throu%h the issues posited +* remiereGan! and restate the same, to wit<

1. "hether remiere Gan! waived its ri%ht o application o pa*ments on the loans o &entral Suret*.

. (n the alternative, whetherthe 8,;;;,;;;.;; loan o &entralSuret* was etin%uished +* the encashment

o G& &hec! Do. ;@11.

3. &orollaril*, whether the release o the"ac! "ac! 4em+ership pled%e is in order.

Creditor gi'en right

to al% a%#ents

0t the hu+ o the controvers* is the statutor* provisionon application o pa*ments, specicall* 0rticle 15 o the &ivil &ode, viz.<

avor o one and the same creditor, #a% declare at thetime o ma!in% the pa*ment, to which o the same must+e applied.

(ndeed, the de+tors ri%ht to appl* pa*ment has+een considered merel* director*, and not mandator*,M1N ollowin% this &ourts earlier pronouncement that theordinar* acceptation o the terms ma* and shall ma* +eresorted to as %uides in ascertainin% the mandator* ordirector* character o statutor* provisions.MN







Artile $>S>. Je who has variousde+ts o the same !ind in avor o one andthe same creditor, >B declare at the timeo ma!in% the pa*ment, to which o themthe same must +e applied. Anless theparties so stipulate, or when the applicationo pa*ment is made +* the part* or whose+enet the term has +een constituted,application shall not +e made as to de+tswhich are not *et due.

( the de+tor accepts rom the creditora receipt in which an application o thepa*ment is made, the ormer cannotcomplain o the same, unless there is acause or invalidatin% the contract.

The de+tors ri%ht to appl* pa*ment is notmandator*. This is clear rom the use o the word ma*rather than the word shall in the provision whichreads< Je who has various de+ts o the same !ind in

0rticle 15 %ives the ri%ht to the de+tor to choose towhich o several o+li%ations to appl* a particularpa*ment that he tenders to the creditor. Gut li!ewise%ranted in the same provision is the ri%ht o the creditorto appl* such pa*ment in case the de+tor ails to directits application. This is o+vious in 0rt. 15, par. , viz.E +f

t'e de"tor aepts from t'e reditor a reeipt in 'i'an appliation of pa#ment is made, t'e former annot omplain of t'e same. (t is the director* nature o thisri%ht and the su+sidiar* ri%ht o the creditor to appl*pa*ments when the de+tor does not elect to do so thatma!e this ri%ht, li!e an* other ri%ht, waiva+le.

Ei%hts ma* +e waived, unless the waiver is contrar*to law, pu+lic order, pu+lic polic*, morals or %oodcustoms, or pre=udicial to a third person with a ri%htreco%nized +* law.M3N

0 de+tor, in ma!in% a voluntar* pa*ment, ma* atthe time o pa*ment direct an application o it towhatever account he chooses, unless he has assi%nedor waived that ri%ht. ( the de+tor does not do so, theri%ht passes to the creditor, who ma* ma!e such

application as he chooses. Gut i neither part* haseercised its option, the court will appl* the pa*mentaccordin% to the =ustice and e)uit* o the case, ta!in%into consideration all its circumstances.MN

Ieril*, the de+tors ri%ht to appl* pa*ment can +ewaived and even %ranted to the creditor i the de+tor soa%rees.M5N This was eplained +* ormer Senator 0rturo4.Tolentino, an ac!nowled%ed epert on the &ivil &ode,thus<

discretion. 0ppellees do not reutethis. Jence, the de+tors had no ri%ht +*a%reement to direct the pa*ments. Thisalso precludes the application o the A.S.Eule, which applies onl* in a+sence o astatute or specic a%reement. Thus thetrial court erred. lanters was entitled toappl* the Ji-lains pa*ments as it saw t.M7N











The ollowin% are some limitations on theri%ht o the de+tor to appl* his pa*ment<

52 when there is an a%reement as to thede+ts which are to +e paid rst, the de+torcannot var* this a%reement.M8N

Eelevantl*, in a ecision o the Supreme &ourt o Oansas in a case with parallel acts, it was held that<

The de+tor re)uested lanters appl* thepa*ments to the 19@1 loan rather than tothe 197@ loan. lanters reused. lantersnotes it was epressl* provided in thesecurit* a%reement on the 19@1 loan thatlanters had a le%al ri%ht to directapplication o pa*ments in its sole

(n the case at +ench, the records show thatremiere Gan! and &entral Suret* entered into severalcontracts o loan, securities +* wa* o pled%es, andsuret*ship a%reements. (n at least two /2 promissor*notes +etween the parties, romissor* Dote Do. 71-Hand romissor* Dote Do. 378-L, &entral Suret* epressl*a%reed to %rant remiere Gan! the authorit* to appl*an* and all o &entral Suret*s pa*ments, thus<

(n case ("e have several o+li%ations withMremiere Gan!N, ("e here+* empowerMremiere Gan!N to appl* without notice andin an* manner it sees t, an* or all o m*our deposits and pa*ments to an* o m*our o+li%ations whether due or not. 0n*such application o deposits or pa*ments

shall +e conclusive and +indin% upon us.

This proviso is representative o all the other romissor*Dotes involved in this case. (t is in the eercise o thisepress authorit* under the romissor* Dotes, and

ollowin% /ang2o entral ng 8ilipinas Ee%ulations, thatremiere Gan! applied pa*ments made +* &entralSuret*, as it deemed t, to the several de+ts o thelatter.

All de$ts &ere due4 There &as no

&ai'er on the art of etitioner

Deither can it +e said that remiere Gan! waivedits ri%ht to appl* pa*ments when it specicall*demanded pa*ment o the 8,;;;,;;;.;; loan underromissor* Dote Do. 71-H. (t is an elementar* rule thatthe eistence o a waiver must +e positivel*demonstrated since a waiver +* implication is notnormall* countenanced. The norm is that a waiver mustnot onl* +e voluntar*, +ut must have +een made!nowin%l*, intelli%entl*, and with suBcient awareness o the relevant circumstances and li!el*

conse)uences. There must +e persuasive evidence toshow an actual intention to relin)uish the ri%ht 4ere





Andou+tedl*, at the time o conPict +etween theparties material to this case, romissor* Dote Do. 71-Hdated 0u%ust ;, 1999, in the amount o8,;;;,;;;.;;and secured +* the pled%e o the "ac! "ac!4em+ership, was past the due and demand sta%e. G*its terms, remiere Gan! was entitled to declare saidDote and all sums pa*a+le thereunder immediatel* due

and pa*a+le, without need o presentment, demand, protest or notie of an# 2ind. The su+se)uent demandmade +* remiere Gan! was, thereore, merel* asuperPuit*, which cannot +e e)uated with a waiver o the ri%ht to demand pa*ment o all the maturedo+li%ations o &entral Suret* to remiere Gan!.

4oreover, this &ourt ma* ta!e =udicial notice that

the standard practice in commercial transactions tosend demand letters has +ecome part and parcel o ever* collection efort, especiall* in li%ht o the le%alre)uirement that demand is a prere)uisite +eoredeault ma* set in, su+=ect to certain well-!nowneceptions, includin% the situation where the law or theo+li%ations epressl* declare it unnecessar*.M@N

show an actual intention to relin)uish the ri%ht. 4eresilence on the part o the holder o the ri%ht should not+e construed as a surrender thereo? the courts mustindul%e ever* reasona+le presumption a%ainst theeistence and validit* o such waiver.M9N

Gesides, in this case, an* inerence o a waiver o remiere Gan!s, as creditor, ri%ht to appl* pa*ments iseschewed +* the epress provision o the romissor*Dote that< no failure on t'e part of 8remiere /an2D toeerise, and no dela# in eerising an% rig't 'ereunder, s'all operate as a aiver t'ereof.

Thus, we nd it unnecessar* to rule on theapplica+ilit* o the e)uita+le principle o waiver that the&ourt o 0ppeals ascri+ed to the demand made +*

remiere Gan! upon &entral Suret* to pa* the amounto 8,;;;,;;;.;;, in the ace o +oth the epressprovisions o the law and the a%reements entered into+* the parties.0ter all, a dili%ent creditor should notneedlessl* +e interered with in the prosecution o hisle%al remedies.M3;N

"hen &entral Suret* directed the application o itspa*ment to a specic de+t, it !new it had another de+twith remiere Gan!, that covered +* romissor* Dote387-Z, which had +een renewed under romissor* Dote378-L, in the amount o ;.@9@ 4illion. &entral Suret*is aware that romissor* Dote 387-Z /or 378-L2 containsthe same provision as in romissor* Dote Do 71-Hwhich %rants the remiere Gan! authorit* to appl*pa*ments made +* &entral Suret*, viz.<

( (" h l +li ti ith

mone* due under >*B ot( +ou(*t o>g(((*t (?/+(*/*g o@/g>t/o*s 0o@oo(+ o*(B .M3N

+* virtue o which, it ollows that the o+li%ation underromissor* Dote 387-Z had +ecome past due anddemanda+le, with urther notice epressl* waived, when

&entral Suret* deaulted on its o+li%ations underromissor* Dote Do 71-H











(n case ("e have several o+li%ations withMremiere Gan!N, ("e here+* empowerMremiere Gan!N to appl* without notice andin an* manner it sees t, an* or all o m*our deposits and pa*ments to >*B o0 B:ou o@/g>t/o*s (t( +u( o*ot. 0n* such application o deposits orpa*ments shall +e conclusive and +indin%upon us.M31N

C+viousl*, &entral Suret* is also co%nizant thatromissor* Dote 387-Z contains the proviso that<

the +an! shall +e entitled to declare this

Dote and all sums pa*a+le hereunder to +eimmediatel* due and pa*a+le, without needo presentment, demand, protest or noticeo na* !ind, all o which ("e here+*epressl* waive, upon occurrence o an* o the ollowin% events< /ii2 4*Cur ailureto pa* an* >ot/>t/o* o /*st>(*t+u( ((u*+(? /iii2 4*Cur ailure to pa*

romissor* Dote Do. 71-H.

Mendoza v. Court of AppealsM33N orecloses an*dou+t that an acceleration clause is valid and producesle%al efects. (n act, in elegna Management and1evelopment Corporation v. Qnited Coonut 8lanters/an2,M3N we held that<

&onsiderin% that the contract is the law+etween the parties, respondent is =ustiedin invo!in% the acceleration clause declarin%the entire o+li%ation immediatel* due andpa*a+le.That clause o+li%ed petitioners topa* the entire loan on Kanuar* 9, 1999, thedate ed +* respondent.

(t is worth notin% that ater the dela*ed pa*mento 8,;;;,;;;.;; was tendered +* &entral Suret*,remiere Gan! returned the amount as insuBcient,ostensi+l* +ecause there was, at least, another accountthat was li!ewise due. C+viousl*, in its demand o @

Septem+er ;;;, petitioner sou%ht pa*ment, not =ust o the 8,;;;,;;;.;;, +ut o all these past dueaccounts. There is etant testimon* to support thisclaim, as the transcript o steno%raphic notes on thetestimon* o 0tt*. 0raos reveals<

Att#. ;pinion< . Gut *ou accepted thispa*ment o Si 4illion /8,;;;,;;;.;;2 lateron when to%ether with this was paid anotherchec! or 1.@ 4illionV

Att#. ;pinionE . "ere these accounts duealread* when *ou made this application,distri+ution o pa*mentsV

itnessE 0. Hes sir.M35N

&onversel*, in its evidence-in-chie, &entral Suret* didi i h i











itnessE 0. "e accepted.

Att#. ;pinionE . 0nd *ou applied this to our/2 other accounts three /32 other accountsor to our /2 accounts mentioned in hi+it

K. (s that correctV

Att#. 5agalogE "e can stipulate on that. HourJonor.

CourtE This was stipulatedV

Att#. 5agalogE Hes, Hour Jonor. (n act, thereis alread* stipulation that we conrm thatthose are the applications o pa*mentsmade +* the deendant Gan! on those loanaccounts.

not present an* witness to testi* on the pa*ment o itso+li%ations. (n act, the record shows that ater mar!in%its evidence, &entral Suret* proceeded to ofer itsevidence immediatel*. Cnl* on the re+uttal sta%e did&entral Suret* present a witness? +ut even then, noevidence was adduced o pa*ment o an* othero+li%ation. (n this li%ht, the &ourt is constrained to rulethat all o+li%ations o &entral Suret* to remiere Gan!

were due? and thus, the application o pa*ments waswarranted.

Gein% in receipt o amounts tendered +* &entralSuret*, which were insuBcient to cover its moreonerous o+li%ations, remiere Gan! cannot +e aultedor eercisin% the authorit* %ranted to it under theromissor* Dotes, and appl*in% pa*ment to theo+li%ations as it deemed t. Su+=ect to the aveat that

our rulin% herein shall +e limited onl* to thetransactions entered into +* the parties to this case, the&ourt will not distur+ the ndin% o the lower court thatremiere Gan! ri%htl* applied the pa*ments that &entralSuret* had tendered. &orollar* thereto, and upon thesecond issue, the tender o the amounto 8,;;;,;;;.;; +* &entral Suret*, and the

encashment o G& &hec! Do. ;@11 did not totall*etin%uish the de+t covered +* D Do. 71-H.

Release of the ledged

5ac6 5ac6 Me#$ershi

Contrat of Ad'esion

dependence, i%norance, indi%ence, mentalwea!ness, tender a%e or other handicap,the courts must +e vi%ilant or hisprotection.

Gut in this case, &entral Suret* does not appear so wea!as to +e placed at a distinct disadvanta%e vis--vis the

+an!. 0s ound +* the lower court<



Contrat of Ad'esion

To the etent that the su+=ect promissor* noteswere prepared +* the remiere Gan! and presented to&entral Suret* or si%nature, these a%reements were,indeed, contracts o adhesion. Gut contracts o adhesionare not invalid per se. &ontracts o adhesion, where onepart* imposes a read*-made orm o contract on theother, are not entirel* prohi+ited. The one who adheresto the contract is, in realit*, ree to re=ect it entirel*? i he adheres, he %ives his consent.

(n interpretin% such contracts, however, courts areepected to o+serve %reater vi%ilance in order to shield

the unwar* or wea!er part* rom deceptive schemescontained in read*-made covenants.M38N Thus, 0rticle o the &ivil &ode pertinentl* states<

(n all contractual, propert* or otherrelations, when one o the parties is at adisadvanta%e on account o his moral

&onsiderin% that M&entral Suret*N is a !nown+usiness entit*, the Mremiere Gan!N wasri%ht in assumin% that the M&entral Suret*Ncould not have +een cheated or misled ina%reein% thereto, it could have ne%otiatedwith the +an! on a more avora+le term

considerin% that it has alread* esta+lished acertain reputation with the Mremiere Gan!Nas evidenced +* its numeroustransactions. (t is thereore a+surd that anesta+lished compan* such as the M&entralSuret*N has no !nowled%e o the lawre%ardin% +an! practice in loan transactions.

The Dragnet Clause.

The actual circumstances o this case showin%the chain o transactions and lon%-standin% relationship

+etween remiere Gan! and &entral Suret* militatea%ainst the latters pra*er in its complaint or the releaseo the "ac! "ac! 4em+ership, the securit* attached toromissor* Dote 71-H.

0 tall* o the acts shows the ollowin%transactions +etween remiere Gan! and &entral Suret*<





ate (nstrume

nt0moun

tcovere

d

Stipulation

0u%ust ;,1999

D 71-H 8 4

hilippine &urrenc* in accordance with theromissor* Dote attached hereto and madean inte%ral part hereo as 0nne 0 andIor su' 8romissor# NoteIs 'i' t'e

A+!N;RI8091!;R s'all 'ereafter eeutein favor of t'e A+!N99I8091!99, the0SS($DCE:$CE here+* transers,assi%ns, conve*s, endorses, encum+ers anddelivers +* wa* o rst pled%e unto the0SS($D:$, its successors and

assi%ns, that certain 4em+ership ee&erticate Share in "ac! "ac! $ol and



0u%ust 9,1999

eed o 0ssi%nment withled%e

15 4 0s securit* or D71-H andor suchromissor* Doteswhich the 0SS($DCE :$CE shallhereater eecute inavor o the0SS($D:$

#rom these transactions and the proviso in theeed o 0ssi%nment with led%e, it is clear that thesecurit*, which peculiarl* specied an amountat15,;;;,;;;.;; /nota+l* %reater than the amount o the promissor* note it secured2, was intended to

%uarantee not =ust the o+li%ation under D 71-H, +utalso uture advances. Thus, the said deed is eplicit<

0s securit* or the pa*ment o loano+tained +* the 0SS($DCE:$CE romthe 0SS($D:$ in the amount o #(#TD 4(::(CD SCS /15,;;;,;;;.;;2

&ountr* &lu+ (ncorporate covered +* Stoc!&erticate Do. 17 with Serial Do. 1793 dul*issue +* "ac! "ac! $ol and &ountr* &lu+(ncorporated on 0u%ust 7, 1998 in thename o the 0SS($DCE. /mphasis made inthe etition.2

Then, a &ontinuin% $uarant*&omprehensiveSuret* 0%reement was later eecuted +* &entral Suret*as ollows<

ate (nstrument 0mount Stipulation

Dotarized,Sept. ,1999

&ontinuin%$uarant*&omprehensive Suret*0%reement

;,@9@,;;;.;;

(nconsiderationo the loanandor an*credit

accommodation which *ou

0u%ust 9,1999

eed o 0ssi%nmentwith led%e

15 4 0s secu71-Hsuch Dotes0SS($D:$Chereatin avo

0SS($D



*/petitioner2have etendedandor willetend to&entral Suret*and (nsurance&o.

0nd on Ccto+er 1;, ;;;, romissor* Dote 378-Lwas entered into, a renewal o the prior romissor* Dote387-Z, in the amount o ;,@9@,;;;.;;. (n all, thetransactions that transpired +etween remiere Gan! and&entral Suret* maniest themselves, thusl*<

ate (nstrument 0mountcovered

Stipulation

0u%ust ;,1999

D 71-H 8 4

Dotarized,

Sept. ,1999

&ontinuin%$uarant*&omprehensive Suret*0%reement

;,@9@,;;;.;;

(n cono thandoraccomwhich/petitio

etendewill e&entraland&o.

Ccto+er1;, ;;;

romissor* Dote378-L /D 387-Z2

;,@9@,;;;.;;

#rom the ore%oin%, it is more than apparent thatwhen, on 0u%ust 9, 1999, the parties eecuted theeed o 0ssi%nment with led%e /o the "ac! "ac!4em+ership2, to serve as securit* or an o+li%ation in

the amount o 15,;;;,;;;.;; /when the actual loancovered +* D Do. 71-H was onl* 8,;;;,;;;.;;2, theintent o the parties was or the "ac! "ac! 4em+ershipto serve as securit* also or uture advancements. Thesu+se)uent loan was nothin% more than a ulllment o the intention o the parties. C course, +ecause thesu+se)uent loan was or a much %reater amount/;,@9@,;;;.;;2, it +ecame necessar* to put upanother securit*, in addition to the "ac! "ac!4em+ership. Thus, the su+se)uent suret* a%reement

and the specic securit* or D Do. 387-L were, li!e the"ac! "ac! 4em+ership, meant to secure the +alloonin%

is one which is specicall* phrased tosu+sume all de+ts o past or uture ori%ins.Such clauses are careull* scrutinized andstrictl* construed. 4ort%a%es o thischaracter ena+le the parties to providecontinuous dealin%s, the nature or etent o which ma* not +e !nown or anticipated atthe time, and the* avoid the epense andinconvenience o eecutin% a new securit*on each new transaction. 0 dra%net clause

operates as a convenience andaccommodation to the +orrowers as it



de+t o the &entral Suret*.

The a+ove-)uoted provision in the eed o 0ssi%nment, also !nown as the dra%net clause in0merican =urisprudence, would su+sume all de+ts o respondent o past and uture ori%ins. (t is a valid andle%al underta!in%, and the amounts specied asconsideration in the contracts do not limit the amountor which the pled%e or mort%a%e stands as securit*, i rom the our corners o the instrument, the intent tosecure uture and other inde+tedness can +e%athered. 0 pled%e or mort%a%e %iven to secure utureadvancements is a continuin% securit* and is notdischar%ed +* the repa*ment o the amount named inthe mort%a%e until the ull amount o all advancementsshall have +een paid.M37N

Cur rulin% in 8rudential /an2 v. Alviar M3@N isinstructive<

0 +lan!et mort%a%e clause, also !nown asa dra%net clause in 0merican =urisprudence,

ma!es availa+le additional unds withouttheir havin% to eecute additional securit*documents, there+* savin% time, travel,loan closin% costs, costs o etra le%alservices, recordin% ees, et etera. (ndeed,it has +een settled in a lon% line o decisionsthat mort%a%es %iven to secure utureadvancements are valid and le%al contracts,

and the amounts named as consideration insaid contracts do not limit the amount orwhich the mort%a%e ma* stand as securit* i rom the our corners o the instrument theintent to secure uture and otherinde+tedness can +e %athered.

The +lan!et mort%a%e clause in the instantcase states<

That or and in consideration o certain loans, overdrat andother credit accommodationso+tained rom the 4ort%a%ee +*the 4ort%a%or andor

WWWWWWWWWWWWWWWW hereinaterreerred to, irrespective o num+er, as GTCE, and tosecure the pa*ment o the sameand those that ma* hereater +eo+tained,the principal or all o which is here+* ed at TwoJundred #it* Thousand/5;,;;;.;;2 esos, hilippine&urrenc*, as well as those that

the 4ort%a%ee ma* etend tothe 4ort%a%or andor GTCE,

(n the case at +ar, the su+se)uent

loans o+tained +* respondents weresecured +* other securities, thus< DGX78&-35, eecuted +* on 0lviar wassecured +* a hold-out on his orei%ncurrenc* savin%s account, while DGX78&-3;, eecuted +* respondents oronalco Tradin%, (nc., was secured +*

&lean-hase out TC &0 393 andeventuall* +* a deed o assi%nment on twopromissor* notes eecuted +* Gancom







includin% interest and epensesor an* other o+li%ation owin% tothe 4ort%a%ee, whether director indirect, principal orsecondar* as appears in theaccounts, +oo!s and records othe 4ort%a%ee, the 4ort%a%ordoes here+* transer and

conve* +* wa* o mort%a%eunto the 4ort%a%ee, itssuccessors or assi%ns, theparcels o land which aredescri+ed in the list inserted onthe +ac! o this document,andor appended hereto,to%ether with all the +uildin%sand improvements now eistin%or which ma* hereater +e

erected or constructed thereon,o which the 4ort%a%or declaresthat heit is the a+solute ownerree rom all liens andincum+rances. . . .

promissor* notes eecuted +* GancomEealt* &orporation with eed o $uaranteein avor o 0.A. Ialencia and &o., and +* achattel mort%a%e on various heav* andtransportation e)uipment. The matter o DGX78&-3; has alread* +een discussed.

Thus, the critical issue is whether the+lan!et mort%a%e clause applies even to

su+se)uent advancements or which othersecurities were intended, or particularl*, toD GX78&-35.

Ander 0merican =urisprudence, twoschools o thou%ht have emer%ed on this)uestion. Cne school advocates thata dra%net clause so worded as to +e +roadenou%h to cover all other de+ts in addition

to the one specicall* secured will +econstrued to cover a diferent de+t,althou%h such other de+t is secured +*another mort%a%e. The contrar* thin!in%maintains that a mort%a%e with such aclause will not secure a note that epresseson its ace that it is otherwise secured as toits entiret*, at least to an*thin% other than a

decienc* ater ehaustin% the securit*specied therein, such decienc* +ein% aninde+tedness within the meanin% o themort%a%e, in the a+sence o a specialcontract ecludin% it rom the arran%ement.

The latter school represents the +etterposition. The parties havin% conormed tothe +lan!et mort%a%e clause or dra%net

clause, it is reasona+le to conclude thatthe* also a%reed to an implied

parties relied on the securit* o the rst loancould +e inerred, so it was held. Therationale involved, the court said, was thatthe dra%net clause in the rst securit*instrument constituted a continuin% ofer +*the +orrower to secure urther loans underthe securit* o the rst securit* instrument,and that when the lender accepted adiferent securit* he did not accept the ofer.

(n another case, it was held that a



the* also a%reed to an impliedunderstandin% that su+se)uent loans neednot +e secured +* other securities, as thesu+se)uent loans will +e secured +* the rstmort%a%e. (n other words, the suBcienc* o the rst securit* is a corollar* component o the dra%net clause. Gut o course, there isno prohi+ition, as in the mort%a%e contractin issue, a%ainst contractuall* re)uirin%other securities or the su+se)uent loans.

Thus, when the mort%a%or ta!es anotherloan or which another securit* was %iven itcould not +e inerred that such loan wasmade in reliance solel* on the ori%inalsecurit* with the dra%net clause, +ut rather,on the new securit* %iven. This is thereliance on the securit* test.

Jence, +ased on the reliance on thesecurit* test, the &aliornia court in the citedcase made an in)uir* whether the secondloan was made in reliance on the ori%inalsecurit* containin% a dra%net clause.0ccordin%l*, ndin% a diferent securit* wasta!en or the second loan no intent that the

(n another case, it was held that amort%a%e with a dra%net clause is an ofer+* the mort%a%or to the +an! to provide thesecurit* o the mort%a%e or advances o and when the* were made. Thus, it wasconcluded that the ofer was not accepted+* the +an! when a su+se)uent advancewas made +ecause /12 the second note wassecured +* a chattel mort%a%e on certainvehicles, and the clause therein stated thatthe note was secured +* such chattelmort%a%e? /2 there was no reerence in thesecond note or chattel mort%a%e indicatin%a connection +etween the real estatemort%a%e and the advance? /32 themort%a%or si%ned the real estate mort%a%e+* her name alone, whereas the secondnote and chattel mort%a%e were si%ned +*the mort%a%or doin% +usiness under anassumed name? and /2 there was noalle%ation +* the +an!, and apparentl* noproo, that it relied on the securit* o thereal estate mort%a%e in ma!in% theadvance.

(ndeed, in some instances, it has +eenheld that in the a+sence o clear, supportiveevidence o a contrar* intention, amort%a%e containin% a dra%net clause willnot +e etended to cover uture advancesunless the document evidencin% thesu+se)uent advance reers to the mort%a%eas providin% securit* thereor.

(t was thereore improper orpetitioner in this case to see! oreclosure o

The securit* clause involved in the case at +arshows that, +* its terms<

0s securit* or the pa*ment o loan o+tained+* the 0SS($DCE:$CE rom the

0SS($D:$ in the amount o #(#TD 4(::(CD SCS /15,;;;,;;;.;;2hilippine &urrenc* in accordance with the



petitioner in this case to see! oreclosure o the mort%a%ed propert* +ecause o non-pa*ment o all the three promissor* notes."hile the eistence and validit* o the dra%net clause cannot +e denied, thereis a need to respect the eistence o theother securit* %iven or D GX78&-35.

The oreclosure o the mort%a%ed propert*should onl* +e or the 5;,;;;.;; loancovered +* D GX75&-5, and or an*amount not covered +* the securit* or thesecond promissor* note. 0s held in onecase, where deeds a+solute in orm wereeecuted to secure an* and all !inds o inde+tedness that mi%ht su+se)uentl*+ecome due, a +alance due on a note, aterehaustin% the special securit* %iven or thepa*ment o such note, was in the a+senceo a special a%reement to the contrar*,within the protection o the mort%a%e,notwithstandin% the %ivin% o the specialsecurit*. This is reco%nition that whilethe dra%net clause su+sists, the securit*specicall* eecuted or su+se)uent loansmust rst +e ehausted +eore themort%a%ed propert* can +e resorted to.

hilippine &urrenc* in accordance with theromissor* Dote attached hereto and madean inte%ral part hereo as 0nne 0 andorsuch romissor* Dotes which the0SS($DCE:$CE shall hereater eecutein avor o the 0SS($D:$, the0SS($DCE :$CE here+* transers,assi%ns, conve*s, endorses, encum+ers and

delivers +* wa* o rst pled%e unto the0SS($D:$, its successors andassi%ns, that certain 4em+ership ee&erticate Share in "ac! "ac! $ol and&ountr* &lu+ (ncorporated covered +* Stoc!&erticate Do. 17 with Serial Do. 1793 dul*issue +* "ac! "ac! $ol and &ountr* &lu+(ncorporated on 0u%ust 7, 1998 in thename o the 0SS($DCE.

it is compara+le with the securit* clause in the caseo 8rudential, viz.<

That or and in consideration o certainloans, overdrat and other creditaccommodations o+tained rom the4ort%a%ee +* the 4ort%a%or andor

WWWWWWWWWWWWWWWW hereinater reerred to,irrespective o num+er, as GTCE, and tosecure the pa*ment o the same and thosethat ma* hereater +e o+tained, theprincipal or all o which is here+* ed at

Two Jundred #it* Thousand /5;,;;;.;;2

esos, hilippine &urrenc*, as well as thosethat the 4ort%a%ee ma* etend to the4 t d GTCE i l di

To recall, the critical issue resolvedin 8rudential was whether the +lan!et mort%a%e clauseapplies even to su+se)uent advancements or whichother securities were intended. "e then declared thatthe special securit* or su+se)uent loans must rst +eehausted in a situation where the creditor desires tooreclose on the su+se)uent loans that aredue. Jowever, the dra%net clause allows the creditor tohold on to the rst securit* in case o decienc* ateroreclosure on the special securit* or the su+se)uent

loans.



4ort%a%or andor GTCE, includin%interest and epenses or an* othero+li%ation owin% to the 4ort%a%ee,whether direct or indirect, principal orsecondar* as appears in the accounts,+oo!s and records o the 4ort%a%ee, the4ort%a%or does here+* transer and conve*+* wa* o mort%a%e unto the 4ort%a%ee, its

successors or assi%ns, the parcels o landwhich are descri+ed in the list inserted onthe +ac! o this document, andor appendedhereto, to%ether with all the +uildin%s andimprovements now eistin% or which ma*hereater +e erected or constructed thereon,o which the 4ort%a%or declares that heitis the a+solute owner ree rom all liens andincum+rances. . . .

and there is no su+stantive diference +etween theterms utilized in +oth clauses securin% uture advances.

(n 8rudential, we disallowed the petitionersattempt at multiple oreclosures, as it oreclosed on allo the mort%a%ed properties servin% as individualsecurities or each o the three loans. This &ourt thenlaid down the rule, thus<

where deeds a+solute in orm wereeecuted to secure an* and all !inds o inde+tedness that mi%ht su+se)uentl*+ecome due, a +alance due on a note, aterehaustin% the special securit* %iven or thepa*ment o such note, was, in the a+senceo a special a%reement to the contrar*,within the protection o the mort%a%e,notwithstandin% the %ivin% o the special

securit*. This is reco%nition that while thedra%net clause su+sists, the securit*specicall* eecuted or su+se)uent loansmust rst +e ehausted +eore themort%a%ed propert* can +e resorted to.

Jowever, this does not prevent the creditor romoreclosin% on the securit* or the rst loan i that loanis past due, +ecause there is nothin% in law thatprohi+its the eercise o that ri%ht. Jence, in the case at+ench, remiere Gan! has the ri%ht to oreclose on the"ac! "ac! 4em+ership, the securit* correspondin% tothe rst promissor* note, with the deed o assi%nmentthat ori%inated the dra%net clause. This conorms to thedoctrine in 8rudential, as, in act, ac!nowled%ed in thedecisions penultimate para%raph, viz.<

Dote 71-H, and which also stands as securit* orsu+se)uent de+ts o &entral Suret*, is a securit* in theorm o a pled%e. (ts return to &entral Suret* upon thepretet that &entral Suret* is entitled to pa* onl* theo+li%ation in romissor* Dote Do. 71-H, will result in theetin%uishment o the pled%e, even with respect to thesu+se)uent o+li%ations, +ecause 0rticle 11; o the&ivil &ode provides<

/+4f t'e t'ing pledged is returned "# t'e pledgor or oner, t'e pledge is



etitioner, however, is not withoutrecourse. Goth the &ourt o 0ppeals and thetrial court ound that respondents have not*et paid the 5;,;;;.;; and %ave nocredence to their claim that the* paid thesaid amount when the* paidpetitioner ,;;;,;;;.;;. Thus, themort%a%ed propert* could still +e properl*

su+=ected to oreclosure proceedin%s or theunpaid 5;,;;;.;; loan, and as mentionedearlier, or an* decienc* ater 0S#LX19, securit* or D GX78c-35,has +een ehausted, su+=ect o course todeenses which are availa+le torespondents.

(n an* event, even without this &ourts prescriptionin 8rudential, the release o the "ac! "ac! 4em+ershipas the pled%ed securit* or romissor* Dote 71-Hcannot *et +e done as sou%ht +* &entral Suret*. Thechain o contracts concluded +etween remiere Gan!and &entral Suret* reveals that the "ac! "ac!4em+ership, which stood as securit* or romissor*

p g , p getinguis'ed. An# stipulation to t'e ontrar# is void.

This is contrar* to the epress a%reement o the parties,somethin% which &entral Suret* wants this &ourt toundo. "e reiterate that, as a rule, courts cannotintervene to save parties rom disadvanta%eousprovisions o their contracts i the* consented to thesame reel* and voluntaril*.M39N

Attorne%s Fees

The nal issue is the propriet* o attorne*sees. The trial court +ased its award on the supposedmalice o &entral Suret* in institutin% this case a%ainstremiere Gan!. "e nd no malice on the part o &entralSuret*? indeed, we are convinced that &entral Suret*led the case in the lower court in %ood aith, upon thehonest +elie that it had the prero%ative to choose towhich loan its pa*ments should +e applied.

4alicious prosecution, +oth in criminal and civil

cases, re)uires the presence o two elements, to wit< /a2malice and /+2 a+sence o pro+a+le cause. 4oreover,there must +e proo that the prosecution was prompted+* a sinister desi%n to ve and humiliate a person? andthat it was initiated deli+eratel*, !nowin% that thechar%e was alse and +aseless. Jence, the mere lin% o what turns out to +e an unsuccessul suit does notrender a person lia+le or malicious prosecution, or thelaw could not have meant to impose a penalt* on theri%ht to liti%ate M;N 4alice must +e proved with clear and

&0E(C, J.,&hairperson,

D0&JAE0,

- versus - E0:T0,

0G0, and

4DCZ0, JJ.







ri%ht to liti%ate. 4alice must +e proved with clear andconvincin% evidence, which we nd wantin% in this case.

WHEREF%RE, the instant petitionis PAR$IALL" GRAN$E. The assailed ecision o the&ourt o 0ppeals in &0-$.E. &I Do. @593; dated Kul* 31,;;8, as well as its Eesolution dated Kanuar* , ;;7,

are RE#ERSE and SE$ ASIE. The ecision o theEe%ional Trial &ourt o 4a!ati &it*, Granch 13, in &ivil&ase Do. ;;-1538, dated Kul* 1, ;;5,is REINS$A$E with the M%IFICA$I%N that theaward o attorne*s ees to petitioner is ELE$E. Dopronouncement as to costs.

S%LEA AL$%N, G.R. No. 1;25;;

etitioner,

resent<

FGR REAL$" AN E#EL%PMEN$

C%RP%RA$I%N, FELI< NG,

NENI$A NG, >*+ FL%RA R. A"RI$ romul%ated<

o FL%RA REGNER,

Eespondents. >*u>B 19, 2'11

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

R E S % L U $ I % N

CARPI%, J.!

$( C>s(

This is a petition1 or review on certiorari under Eule 5

o the Eules o &ourt. The petition challen%es the 9

Dovem+er ;;5 ecision and 1; 0pril ;;8

Eesolution3

o the &ourt o 0ppeals in &0-$.E. &I Do.78538. The &ourt o 0ppeals aBrmed the 8 #e+ruar*

;; i i th E i l T i l & t /ET&2 K di i l

(n Kune 19@5, a*rit sold the propert* to respondent#$E Eealt* and evelopment &orporation /#$E2. (n

0u%ust 19@5, a*rit and #$E stopped acceptin% rental

pa*ments +ecause the* wanted to terminate the lease

a%reements with alton and Sasam, et al.

(n a complaint5 dated 11 Septem+er 19@5, alton

and Sasam, et al. consi%ned the rental pa*ments withthe ET&. The* ailed to noti* a*rit and #$E a+out the


http://sc.judiciary.gov.ph/jurisprudence/2011/january2011/172577.html#sdfootnote1sym














;; ecision o the Ee%ional Trial &ourt /ET&2, Kudicial

Ee%ion 7, Granch 13, &e+u &it*, in &ivil &ase Do. &G

1@.

$( F>ts

#lora E. a*rit /a*rit2 owned a 1,@11-s)uare meter

parcel o land located at the corner o Eama 0venue and

Ielez Street in &e+u &it*. etitioner Soledad alton

/alton2, &lemente Sasam,

Eomulo Iillalon%a, 4i%uela Iillarente, 0niceta #uentes,

erla ormento, Goniacio &a+a=ar, &armencita Huson,

0n%el once, edro Ee%udo, edroue+edo,4ar* &a+anlit, 4arciana nca+o and olores :im

/Sasam, et al.2 leased portions o the propert*.

consi%nation. (n motions dated 7 4arch 19@7,8 1;

Dovem+er 19@7,7 @ Kul* 19@@,@ and @ Dovem+er

199,9 a*rit and #$E withdrew the rental pa*ments. (n

their motions, a*rit and #$E reserved the ri%ht to

)uestion the validit* o the consi%nation.

a*rit, #$E and Sasam, et al. entered into compromise

a%reements dated 5 4arch 19971; and ; Kune

1997.11 (n the compromise a%reements, the* a%reed to

a+andon all claims a%ainst each other. alton did not

enter into a compromise a%reement with a*rit and

#$E.

$( R$Cs Ru/*g

(n its 8 #e+ruar* ;; ecision, the ET& dismissed the11 Septem+er 19@5 complaint and ordered alton to

vacate the propert*. The ET& held that<

Soledad alton +uilt a house which she initiall*

used as a dwellin% and store space. She vacated

the premises when her children %ot married. She

transerred her residence near #. Eamos u+lic4ar!et, &e+u &it*.

1. The eistence o a valid de+t.

. Ialid prior tender, unless tender is ecuse MsicN?

3. rior notice o consi%nation /+eore deposit2

. 0ctual consi%nation /deposit2?

5. Su+se)uent notice o consi%nation?

















She constructed the ; eet +* ; eet Poor area

house sometime in 1973. The last monthl* rental

was 89.;;. "hen deendants reused to accept

rental and demanded vacation o the premises,

she consi%nated MsicN her monthl* rentals in court.

(t is ver* clear rom the acts that there was no

valid consi%nation made.

The re)uisites o consi%nation are as ollows<

Ee)uisite Dos. 3 and 5 are a+sent or were not

complied with. (t is ver* clear that there were no

prior notices o consi%nation /+eore deposit2 and

su+se)uent notices o consi%nation /ater deposit2

Gesides, the last deposit was made on ecem+er

1, 19@@. 0t the time alton testied on

ecem+er , 1999, she did not present evidence

o pa*ment in 1999. She had not, thereore,

reli%iousl* paid her monthl* o+li%ation.

G* clear preponderance o evidence, deendants

have esta+lished that plaintif was no lon%er

residin% at s!ina Ganawa at the time she

testied in court. She vacated her house and

converted it into a store or +usiness

esta+lishment. This is +uttressed +* the testimon*

o Eo%elio &apacio, the courts appointed

commissioner, who su+mitted a report, the ulltet o which reads as ollows<

R98;R5 AN1I;R ;/9RA5+;N

Soledad alton did not ta!e eception to the saidreport.

Two witnesses who were ormer su+-lessees

testied and clearl* esta+lished that 4rs. alton

use the house or +usiness purposes and not or

dwellin%.1





R98;R5 AN1I;R ;/9RA5+;N

The store andor dwellin% su+=ect to ocular

inspection is stuated MsicN on the let portion o the

road which is a+out t*-ve /552 meters rom the

corner o Ganawa-$uadalupe Streets, when

turnin% ri%ht headin% towards the direction o

$uadalupe &hurch, i travellin% rom the &apitol

Guildin%.

( o+served that when we arrived at the ocular

inspection site, 4rs. Soledad alton with the use

o a !e* opened the loc! o a closed door. Sheclaimed that it was a part o the dwellin% which

she occupies and was utilized as a store. There

were ew salea+le items inside said space.

alton appealed to the &ourt o 0ppeals.

$( Cout o0 A))(>s Ru/*g

(n its 9 Dovem+er ;;5 ecision, the &ourt o 0ppeals

aBrmed the ET&s 8 #e+ruar* ;; ecision. The &ourt

o 0ppeals held that<

0ter a careul review o the acts and evidence in

this case, we nd no +asis or overturnin% the

decision o the lower court dismissin% plaintifs-

appellants complaint, as we nd that no valid

consi%nation was made +* the plaintif-appellant.

&onsi%nation is the act o depositin% the thin% duewith the court or =udicial authorities whenever the

creditor cannot accept or reuses to accept

pa*ment and %enerall* re)uires a prior tender o

pa*ment. (n order that consi%nation ma* +e

efective, the de+tor must show that< /12 there

was a de+t due? /2 the consi%nation o the

o+li%ation had +een made +ecause the creditor to

whom tender o pa*ment was made reused to

accept it, or +ecause he was a+sent orincapacitated, or +ecause several persons claimed

the plaintif-appellant was invalid or ailure tomeet re)uisites 3 and 5 o a valid consi%nation

/i.e., previous notice o the consi%nation %iven to

the person interested in the perormance o the

o+li%ation and, ater the consi%nation had +een

made, the person interested was notied thereo2.

laintif-appellant ailed to noti* deendants-appellees o her intention to consi%n the amount

d t th t l Sh h = ti



to +e entitled to receive the amount due or

+ecause the title to the o+li%ation has +een lost?

/32 previous notice o the consi%nation had +een

%iven to the person interested in the perormance

o the o+li%ation? /2 the amount due was placed

at the disposal o the court? and /52 ater the

consi%nation had +een made the person

interested was notied thereo. #ailure in an* o

these re)uirements is enou%h %round to render a

consi%nation inefective.

&onsi%nation is made +* depositin% the proper

amount to the =udicial authorit*, +eore whom the

tender o pa*ment and the announcement o the

consi%nation shall +e proved. 0ll interested parties

are to +e notied o the consi%nation. (t had +eenconsistentl* held that compliance with these

re)uisites is mandator*.

Do error, thereore, can +e attri+uted to the lower

court when it held that the consi%nation made +*

due to them as rentals. She, however, =usties

such ailure +* claimin% that there had +een

su+stantial compliance with the said re)uirement

o notice upon the service o the complaint on the

deendants-appellees to%ether with the summons.

"e do not a%ree with such contention.

The prevailin% rule is that su+stantial compliance

with the re)uisites o a valid consi%nation is not

enou%h. (n :icuanan vs. iaz, reiteratin% the rulin%

in Soco vs. 4ilitante, the Supreme &ourt had the

occasion to rule thus<

(n addition, it must +e stated that in the case

o Soco v. 4ilitante /13 S&E0 18;, 188-187

M19@3N2, this &ourt ruled that the codal provisions

o the &ivil &ode dealin% with consi%nation/0rticles 15-1812 should +e accorded

mandator* construction

"e do not a%ree with the )uestioned decision. "e

hold that the essential re)uisites o a valid

consi%nation must +e complied with ull* and

strictl* in accordance with the law. 0rticles 158-181, Dew &ivil &ode. That these 0rticles must +e

d d d t t ti i l l

interested in the ulllment o the o+li%ation, theconsi%nation as a means o pa*ment is void.

0s to the other issues raised +* the plaintif-

appellant in her second and third assi%ned errors,

we hold that the rulin% o the lower court on such

issues is supported +* the evidence adduced in

this case.



accorded a mandator* construction is clearl*

evident and plain rom the ver* lan%ua%e o

the codal provisions themselves which re)uire

a+solute compliance with the essential re)uisites

therein provided. Su+stantial compliance is not

enou%h or that would render onl* director*

construction o the law. The use o the words shall

and must MsicN which are imperative, operatin% toimpose a dut* which ma* +e enorced, positivel*

indicated that all the essential re)uisites o a valid

consi%nation must +e complied with. The &ivil

&ode 0rticles epressl* and eplicitl* direct what

must +e essentiall* done in order that

consi%nation shall +e valid and efectual...

&learl* then, no valid consi%nation was made +*

the plaintif-appellant or she did not %ive notice

to the deendants-appellees o her intention to so

consi%n her rental pa*ments. "ithout an*

announcement o the intention to resort to

consi%nation rst havin% +een made to persons

That plaintif-appellant is not residin% at the

leased premises in s!ina Ganawa and that she is

usin% the same or +usiness purposes, not as

dwellin% place, is ampl* supported +* the

testimon* o two o plaintif-appellants su+-

lessees. The &ommissioners Eeport su+mitted +*Eo%elio &apacio, who was commissioned +* the

lower court to conduct an ocular inspection o the

leased premises, urther lends support to the

lower courts ndin%s. Cn the other hand, plaintif-

appellant onl* has her sel-servin% claims that she

is residin% at the leased premises

in s!ina Ganawa to prove her continued use o

the leased premises as dwellin% place.

There is thus no merit to plaintif-appellants ourth

assi%ned error. The lower court acted within its

authorit* in orderin% the plaintif-appellant to

vacate the leased premises. The evidence shows

that plaintif-appellant had ailed to continuousl*pa* the rentals due to the deendants-appellees. (t

was thereore within the powers o the lower court

to %rant such other relie and remedies e)uita+le

under the circumstances.

(n sum, there havin% +een no valid consi%nation

and with the plaintif-appellant havin% ailed topa* the rentals due to the deendants-appellees,

no error can +e attri+uted to the lower court in

respondents o the amounts consi%ned and deposited+* the petitioner as rental o the su+=ect premises.1

The &ourt is not impressed. #irst, in withdrawin% the

amounts consi%ned, a*rit and #$E epressl* reserved

the ri%ht to )uestion the validit* o the consi%nation.

(nRiesen"e2 v. Court of Appeals,15 the &ourt held that<

0 sensu ontrario, (* t( (+/tos>()t>*( o0 t( o*(B o*s/g*(+ /s







no error can +e attri+uted to the lower court in

renderin% its assailed decision.13

Jence, the present petition. alton raises as issues that

the &ourt o 0ppeals erred in rulin% that /12 the

consi%nation was void, and /2 alton ailed to pa* rent.

$( Couts Ru/*g

The petition is unmeritorious.

alton claims that, the issue as to whether the

consi%nation made +* the petitioner is valid or not or

lac! o notice has alread* +een rendered moot and

academic with the withdrawal +* the private

>()t>*( o0 t( o*(B o*s/g*(+ /so*+/t/o*> >*+ /t (s(?>t/o*s, ( /s *ot+(((+ to >?( >/?(+ t( >/s ((s(?(+ >g>/*st /s +(@to. Thus, when the

amount consi%ned does not cover the entire

o+li%ation, the creditor ma* accept it, reservin%

his ri%ht to the +alance /Tolentino, &ivil &ode o

the hil., Iol. (I, 1973 d., p. 317, citin%3 :lerena 832. The same actual milieu o+tains

here +ecause the (s)o*+(*t (+/to>()t(+ /t (s(?>t/o* t( >ou*to*s/g*(+ /* out @B t( )(t/t/o*(-+(@to.$((0o(, t( (+/to /s *ot @>(+ 0o>/s/*g /s ot( >/s, as he did in his answer

with special deenses and counterclaim a%ainst

petitioner-de+tor.

0s respondent-creditors acceptance o the amount

consi%ned was with reservations, it did not

completel* etin%uish the entire inde+tedness o

the petitioner-de+tor. (t is apposite to note here

that o*s/g*>t/o* /s o)(t(+ >t t( t/(t( (+/to >()ts t( s>( /touto@J(t/o*s, o, /0 ( o@J(ts, >t t( t/( t(out +(>(s t>t /t >s @((* ?>/+B >+(/* >o+>*( /t >.18 /mphasis supplied2

Second, compliance with the re)uisites o a valid

consi%nation is mandator*. #ailure to compl* strictl*with an* o the re)uisites will render the consi%nation

void Su+stantial compliance is not enou%h

0rt. 157. I* o+( t>t t( o*s/g*>t/o* o0t( t/*g +u( >B ((>s( t( o@/go, /tust st @( >**ou*(+ to t( )(so*s/*t((st(+ /* t( 0u(*t o0 t(o@/g>t/o*.

$( o*s/g*>t/o* s> @( /*((tu> /0 /t /s*ot >+( st/tB /* o*so*>*( /t t(







void. Su+stantial compliance is not enou%h.

(n +nsular 0ife Assurane Compan#, 0td. v. 5o#ota /el-

Air, +n.,17 the &ourt enumerated the re)uisites o a valid

consi%nation< /12 a de+t due? /2 the creditor to whom

tender o pa*ment was made reused without =ust causeto accept the pa*ment, or the creditor was a+sent,

un!nown or incapacitated, or several persons claimed

the same ri%ht to collect, or the title o the o+li%ation

was lost? /32 t( )(so* /*t((st(+ /* t()(0o>*( o0 t( o@/g>t/o* >s g/?(* *ot/(@(0o( o*s/g*>t/o* >s >+(? /2 the amount was

placed at the disposal o the court? and /52 t( )(so*/*t((st(+ /* t( )(0o>*( o0 t( o@/g>t/o*

>s g/?(* *ot/( >0t( t( o*s/g*>t/o* >s>+(.

0rticles 157 and 15@ o the &ivil &ode state,

respectivel*<

*ot >+( st/tB /* o*so*>*( /t t()o?/s/o*s / (gu>t( )>B(*t.

0rt. 15@. &onsi%nation shall +e made +*

depositin% the thin%s due at the disposal o

=udicial authorit*, +eore whom the tender opa*ment shall +e proved, in a proper case, and

the announcement o the consi%nation in other

cases.

$( o*s/g*>t/o* >?/*g @((* >+(, t(/*t((st(+ )>t/(s s> >so @( *ot/(+

t((o0 . /mphasis supplied2

The %ivin% o notice to the persons interested in the

perormance o the o+li%ation is mandator*. #ailure to

noti* the persons interested in the perormance o the

o+li%ation will render the consi%nation void. (n Ramos v.arao,1@ the &ourt held that, A /*t((st(+ )>t/(s>( to @( *ot/(+ o0 t( o*s/g*>t/o*. Co)/>*(/t Mt/s (Du/s/t(N /s >*+>toB.19 (n aldellon v.

5engo,; the &ourt held that<

Ander 0rt. 157 o our &ivil &ode, /* o+( t>t

o*s/g*>t/o* o0 t( t/*g +u( >B ((>s(t( o@/go, /t ust st @( >**ou*(+ to t()(so*s /*t((st(+ /* t( 0u(*t o0 t(

essential re)uisites therein provided. Su@st>*t/>o)/>*( /s *ot (*oug 0o t>t ou+(*+( o*B > +/(toB o*stut/o* to t(>. The use o the words shall and must which

are imperative, operatin% to impose a dut* which

ma* +e enorced, positivel* indicate that all the

essential re)uisites o a valid consi%nation must

+e complied with. $( C/?/ Co+( At/(s()(ssB >*+ ()//tB +/(t >t ust @(

(ss(*t/>B +o*( /* o+( t>t o*s/g*>t/o*s> @( ?>/+ >*+ ((tu>.3 /mphasis

li d2













)(so*s /*t((st(+ /* t( 0u(*t o0 t(o@/g>t/o*. $( o*s/g*>t/o* s> @(/*((tu> /0 /t /s *ot >+( st/tB /*o*so*>*( /t t( )o?/s/o*s /(gu>t( )>B(*t. (n said 0rticle 15@, /t /s0ut( st>t(+ t>t t( o*s/g*>t/o* >?/*g@((* >+(, t( /*t((st(+ )>tB s> >so

@( *ot/(+ t((o0 .1 /mphasis supplied2

(n oo v. Militante, et al., the &ourt held that<

"e hold that t( (ss(*t/> (Du/s/t(s o0 >

?>/+ o*s/g*>t/o* ust @( o)/(+ /t0uB >*+ st/tB /* >o+>*( /t t( >,

0rticles 158 to 181, Dew &ivil &ode. That these

0rticles must +e accorded a mandator*

construction is clearl* evident and plain rom the

ver* lan%ua%e o the codal provisions themselves

which re)uire a+solute compliance with the

supplied2

alton claims that the &ourt o 0ppeals erred in rulin%

that she ailed to pa* rent. The &ourt is not impressed.

Section 1, Eule 5 o the Eules o &ourt states that

petitions or review on certiorari shall raise onl*)uestions o law which must +e distinctl* set

orth. (n 8agsi"igan v. 8eople, the &ourt held that<

0 petition or review under Eule 5 o the Eules o

&ourt should cover onl* )uestions o law.

uestions o act are not reviewa+le. 0 )uestion o

law eists when the dou+t centers on what thelaw is on a certain set o acts. 0 )uestion o act

eists when the dou+t centers on the truth or

alsit* o the alle%ed acts.

There is a )uestion o law i the issue raised iscapa+le o +ein% resolved without need o

reviewin% the pro+ative value o the evidence.

The issue to +e resolved must +e limited to

determinin% what the law is on a certain set o

acts. Cnce the issue invites a review o the

evidence, the )uestion posed is one o act.5

"hether alton ailed to pa* rent is a )uestion o act. (t

is not reviewa+le

WHEREF%RE, the &ourt ENIES the petition. The&ourt AFFIRMS the 9 Dovem+er ;;5 ecision and 1;

0pril ;;8 Eesolution o the &ourt o 0ppeals in &0-$.E.

&I Do. 78538.

.E. SAN IEG%, INC., G.R. No. 1695'1

etitioner,

resent<

A(SA4G(D$ J &hairperson











is not reviewa+le.

The actual ndin%s o the lower courts are +indin% on

the &ourt. The eceptions to this rule are /12 when there

is %rave a+use o discretion? /2 when the ndin%s are

%rounded on speculation? /32 when the inerence madeis maniestl* mista!en? /2 when the =ud%ment o the

&ourt o 0ppeals is +ased on a misapprehension o

acts? /52 when the actual ndin%s are conPictin%? /82

when the &ourt o 0ppeals went +e*ond the issues o

the case and its ndin%s are contrar* to the admissions

o the parties? /72 when the &ourt o 0ppeals overloo!ed

undisputed acts which, i properl* considered, would

=usti* a diferent conclusion? /@2 when the acts set

orth +* the petitioner are not disputed +* therespondent? and /92 when the ndin%s o the &ourt o

0ppeals are premised on the a+sence o evidence and

are contradicted +* the evidence on record.8alton did

not show that an* o these circumstances is present.

A(SA4G(D$, J., &hairperson,

- versus - &0E(C,

&0E(C 4CE0:S,

T(D$0, and

I:0S&C, KE., JJ.

romul%ated<

R%SARI% $. AL=UL,

Eespondent. Kune @, ;;7

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

E C I S I % N

#ELASC%, R., J.!

$( C>s(

This etition or Eeview on &ertiorari

M1N

under Eule5 )uestions the #e+ruar* 1@, ;;5 ecisionMN o the&ourt o 0ppeals /&02 in &0-$.E. S Do. @131, which%ranted respondent 0lzul the ri%ht to pa* the +alance o the purchase price within ve /52 da*s rom receipt o the &0 ecision despite the lapse o the ori%inal period%iven to said part* throu%h the nal Eesolution o this&ourt in an earlier case. The &0 rulin% reversed theSeptem+er 1@, ;;3 EesolutionM3N and ecem+er , ;;3CrderMN o the CBce o the resident /C2 in C.. &ase

Do. ;1-1-;97, which upheld the dismissal o respondent0lzuls complaint or consi%nation and specicperormance +eore the Jousin% and :and Ase

Seven Jundred #it* esos/b1,75;.;;2, and monthl*installments o Cne Thousand TwoJundred #ort*-Dine esos/b1,9.5;2. The interest a%reed uponwas 1 percent /162 per annum untilull* paid, thus, the total purchase pricewas Two Jundred Thirt* Seven

Thousand Si Jundred Sit* esos/b37,88;.;;2.

MEespondentN too! immediate













p %Ee%ulator* Goard /J:AEG2 in J:AEG &ase Do. E4-0-99;97-;187. :i!ewise challen%ed is the 0u%ust 31,;;5&0 EesolutionM5N re=ectin% petitioners 4otion orEeconsideration.

$( F>ts

The acts culled +* the &0 are as ollows<

Cn #e+ruar* 1;, 1975, MrespondentNEosario T. 0lzul purchased romMpetitionerN G.. San ie%o, (nc. our /2su+division lots with an a%%re%ate area

o 1,75 s)uare meters located at0urora Su+division, 4a*silo,4ala+on. These lots, which are nowsu+=ect o this petition, were +ou%htthrou%h installment under &ontract toSell Do. @87 at Cne Jundred esos/b1;;.;;2 per s)uare meter, with adownpa*ment MsicN o Twelve Thousand

MEespondentN too! immediatepossession o the su+=ect propert*,settin% up a perimeter ence andconstructin% a house thereon.

Cn Kul* 5, 1977, MrespondentN si%ned a

&onditional eed o 0ssi%nment and Transer o Ei%hts which assi%ned to acertain "ilson . Hu her ri%hts under the&ontract to Sell. MetitionerN wasnotied o the eecution o suchdeed. :ater on, the &ontract to Sell inMrespondentsN name was cancelled, andMpetitionerN issued a new one in avor o

Hu althou%h it was also denominated as&ontract to Sell Do. @87.

Cn Kul* , 1979, MrespondentN inormedMpetitionerN a+out Hus ailure andreusal to pa* the amounts due underthe conditional deed. She alsomaniested that she would +e the one

to pa* the installments due torespondent on account o Hus deault.

Cn 0u%ust 5, 19@;, MrespondentNcommenced an action or rescission o the conditional deed o assi%nmenta%ainst Hu +eorethe Ee%ional Trial &ourt o &aloocan &it*. Su+se)uentl*, on Septem+er 3;,

19@5, MrespondentN caused theannotation o notices o lis pendens onthe titles coverin% the su+=ect lots

&ourt o 4ala+on. The trial court ruledin avor o the Ientura spouses. Cnappeal +eore this MappellateN &ourt,however, the decision was reversedon Dovem+er 7, 199, as ollows<

"JE#CE, the appealeddecision is here+* EIESand ST 0S(, and the

complaint therein is ordereddismissed. Transer &erticateso Title Dos D-19 D-193 D-





the titles coverin% the su+=ect lots.

The trial court ruled inMrespondentsN avor in the rescissioncase. The decision was even aBrmed+* this MappellateN &ourt. Hu +rou%ht his

cause +eore the Supreme &ourt in aetition or Eeview, +ut this wasli!ewise denied.

Cn #e+ruar* 17, 19@9, MpetitionerNnotied MrespondentN that &ontract toSell Do. @87 was declared rescindedand cancelled. Cn 0pril @, 19@9, thesu+=ect lots were sold to spouses &arlosand Sandra Ientura who were alle%edl*surprised to nd the annotation o lispendens in their owners duplicate title.

Cn 4a* @, 199;, the Ientura spousesled an action or uietin% o Title withra*er or &ancellation o 0nnotationand ama%es +eore the Ee%ional Trial

o Title Dos. D-19, D-193, D-19, and D-195, all o theEe%ister o eeds o 4etro4anila, istrict (((, 4ala+onGranch, in the names o plaintifs-appellees &arlos D.Ientura and Sandra :. Ienturaare here+* declared null and

void, and the titles o ownershipreinstated in the name o G..San ie%o, (nc. with thecorrespondin% notices o lispendens therein annotated inavor o deendant-appellantuntil such time that ownershipo the su+=ect parcels o land istranserred to herein deendant-appellant Eosario 0lzul. &osts

a%ainst plaintif-appellees.

SC CEE.

Apon lin% o an appeal to the Supreme&ourt doc!eted as $E Do. 1;9;7@, thea+ove decision was aBrmedon ecem+er 8, 1995. 0 motion orreconsideration was led, +ut this wasdenied +* the Ji%hest Tri+unalon #e+ruar* 5, 1998.

Cn Kune 17, 1998, a resolution was

issued +* the Supreme &ourt, orderin%,as ollows<

herein MrespondentN tried to servepa*ment upon MpetitionerN on 0u%ust9, 1998, 0u%ust 3;,1998 and Septem+er @, 1998. Cn allthese dates, however, MpetitionerNalle%edl* reused to accept pa*mentrom MrespondentN.

Cn Dovem+er 11, 1998, MrespondentN

led a 4aniestation in $E Do. 1;9;7@inormin% the Supreme &ourt thatMpetitionerN on three /32 occasions



"e, however, a%ree with theo+servation made +* movantsthat no time limit was set +* therespondent &ourt o 0ppeals inits assailed ecision or the

private respondent herein,Eosario 0lzul, to pa* G.. Sanie%o, (nc. the ori%inal owner o the properties in liti%ation. $o(t/0B su o?(s/gt,)/?>t( (s)o*+(*t Ros>/o$. Au /s ((@B g/?(* >*o*-(t(*+/@( )(/o+ o0 t/tB 83' +>Bs 0o (*tBo0 Ju+g(*t, /t/* / to

>( 0u )>B(*t 0o t()o)(t/(s /* Du(st/o*. /mphasis supplied.2

Cn Kul* 1, 1998, an ntr* o Kud%mentwas issued. (n an attempt to compl*with the Supreme &ourts directive,

MpetitionerN, on three /32 occasions,reused to accept MherN pa*ment o the+alance in the amounto b1@7,3@;.;;. Cn Kanuar* 9, 1997,a Eesolution was issued +* theSupreme &ourt reerrin% the case to thecourt o ori%in or appropriate action,on account o MrespondentsN

maniestation.

Cn Ccto+er 1, 1997, MrespondentsNcounsel wrote a letter to MpetitionerNcitin% the latters reusal to accept herpa*ment on several occasions. (t wasalso mentioned therein that due to itsreusal, MrespondentN would =ust

consi%n the +alance due to MpetitionerN+eore the proper =udicial authorit*.

Cn Kanuar* 1, 199@, a repl* was sent+* MpetitionerN throu%h a certain #loraSan ie%o. MEespondentsN re)uest wasre=ected on account o the ollowin%<

1. "e have lon% le%all* rescinded the

sale in her avor in view o her ailureto pa* the monthl* amortization asper contract.

. She sold her ri%hts to 4r. "ilson Huwho ailed to pa* his monthl*

amortizations, too.

complaint, doc!eted as E4-;319@-1;;39, pra*ed that a2 MrespondentN +econsidered to have ull* paid the totalpurchase price o the su+=ectproperties? +2 T&T Dos. D-15555 to @which were declared void in &0 $E Do.:-1;9;7@ +e cancelled? c2 newcerticates o title over the su+=ectproperties +e issued in the name o MrespondentN? and d2 MpetitionerN +e

ordered to reim+urse MrespondentN thesum o #it* Thousand esos/b5;,;;;.;;2 as attorne*s ees and



3. "e are not and have never +een apart o the case *ou are alludin% tohence we cannot +e +ound +* thesame.

. The propert* in )uestion is nowunder process to +e reconve*ed to usas ordered +* the court +* virtue o acompromised /sic2 a%reement enteredinto in &ivil &ase Do. 855 4D o the4ala+on ET& Granch entitled Spouses&arlos Ientura and Sandra Ientura vs.G.. San ie%o, (nc.

Thin!in% that an action or consi%nationalone would not +e suBcient to allowor the eecution o a nal =ud%ment inher avor, MrespondentN decided to lean action or consi%nation and specicperormance a%ainst MpetitionerN +eorethe Jousin% and :and Ase Ee%ulator*Goard on 4arch 1, 199@. The

liti%ation epenses.

Cn Kul* 1, 1999, a decision wasrendered +* the J:AEG throu%hJousin% and :and Ase 0r+iter unstan

T. San Iicente. (t was held, thus<

The purported consi%nation inthis case is thus o no moment,inasmuch as the amountalle%edl* due was not evendeposited or placed at thedisposal o this CBce +* thecomplainant.

(n an* event, we a%ree withMpetitionerN that even i thecomplainant had actuall* madethe consi%nation o the amount,such consi%nation is stillinefective and void or havin%

+een done lon% ater theepiration o the non-etendi+leperiod set orth in the 17 Kune1998 Supreme &ourt Eesolutionthat epired on ; Septem+er1998.

"JE#CE, remises&onsidered, a =ud%ment is

here+* rendered (S4(SS(D$the complaint. &ost a%ainstcomplainant.

;;3, the CBce o the resident %avedue course to MrespondentsN motion,and resolved the motion accordin% toits merits. The sin%le )uestion resolvedwas whether or not MrespondentsN ofero consi%nation was correctl* denied +*the J:AEG. Said oBce ruled in theaBrmative, and "e )uote<

#rom the ore%oin%, it isevident that there was no validconsi%nation o the +alance o



complainant.

(T /sic2 SC CEE.

0%%rieved +* the a+ove decision,

MrespondentN led a etition or Eeview+eore the J:AEGs #irstivision. Cn 4arch 17, ;;;, a decisionwas rendered dismissin% the petitionor lac! o merit, and aBrmin% thedecision dated Kul* 1,1999. MEespondentN led a 4otion orEeconsideration, +ut this was deniedon Kul* 31, ;;1.

MEespondentN then led an appeal tothe CBce o the resident. This was,however, dismissed on Kune , ;;3 orhavin% +een led out o time. 0%ain,MrespondentN moved or itsreconsideration. Cn Septem+er 1@,

consi%nation o the +alance o the purchase price. The 3;-da*non-etendi+le period set orthin the 17 Kune 1998 resolutionhad alread* epired on ;Septem+er 1998. The J:AEG isthereore =ustied in reusin% theconsi%nation, otherwise it would

+e accused o etendin% theperiod +e*ond that provided +*the Supreme &ourt. 0 validconsi%nation is efected whenthere is an actual consi%nationo the amount due within theprescri+ed period /St. ominic&orporation vs. (ntermediate0ppellate &ourt, 13@ S&E0 2.

"JE#CE, premisesconsidered, the appeal is here+*(S4(SS or lac! o merit.

MEespondentN led a 4otion orEeconsideration MoN the a+oveEesolution, +ut this was denied withnalit* on ecem+er , ;;3.M8N

$( Ru/*g o0 t( Cout o0 A))(>s

Eespondent 0lzul +rou%ht +eore the &0 a petitionor certiorari doc!eted as &0-$.E. S Do. 87837,ascri+in% %rave a+use o discretion to the C indismissin% her appeal in C &ase Do ;1 1 ;97 and

ie%o, (nc.N, on the other hand, isordered to accept such pa*ment romMrespondent 0lzulN, ater which, thecorrespondin% eed o Sale must +eissued.

SC CEE.M9N

The &0 a%reed with the J:AEG that no valid







dismissin% her appeal in C.. &ase Do. ;1-1-;97 andaBrmin% the 4arch 17, ;;; ecisionM7N and Kul* 31,;;1 EesolutionM@N o the J:AEG #irst ivision in J:AEG&ase Do. E4-0-99;9;7-;187.

Cn #e+ruar* 1@, ;;5, the &0 rendered its

assailed ecision reversin% the Septem+er 1@,;;3 Eesolution and ecem+er , ;;3 Crder o the C,the fallo o which reads<

"JE#CE, in the hi%her interesto =ustice, the assailed ecision,Eesolution and Crder dated 4arch 17,;;;, Septem+er 1@, ;;3 andecem+er , ;;3, respectivel*, arehere+* RE#ERSE and SE$ASIE. 0ccordin%l*, Mrespondent 0lzulNis here+* ordered to pa* MpetitionerG.. San ie%o, (nc.N the +alance dueor the sale o the su+=ect our parcelso land within ve /52 da*s rom receipto this decision. Metitioner G.. San

The &0 a%reed with the J:AEG that no validconsi%nation was made +* respondent +ut ound that

=ustice would +e +etter served +* allowin% respondent0lzul to efect the consi%nation, al+eit +elatedl*. (t citedthe respondents ri%ht over the disputed lots asconrmed +* this &ourt in $.E. Do. 1;9;7@, which, i ta!en awa* on account o the dela* in completin% thepa*ment, would amount to a %rave in=ustice.

4oreover, the &0 pointed out that respondentscounsel concededl* lac!ed the vi%ilance andcompetence in deendin% his clients ri%ht when he ailedto consi%n the +alance on time? nonetheless, such ma*+e disre%arded in the interest o =ustice. (t consideredthe ailure o respondents counsel to avail o the remed*o consi%nation as a procedural lapse, citin% the

principle that where a ri%id application o the rules willresult in a maniest ailure or miscarria%e o =ustice,technicalities can +e i%nored.

0 cop* o the #e+ruar* 1@, ;;5 &0 ecision wasreceived +* respondent 0lzul throu%h her counselon #e+ruar* , ;;5.

Cn 4arch , ;;5, respondent led a &omplianceand 4otion or tension o Time to &ompl* with theecision o the M&0NM1;N pra*in% that she +e %iven anetension o ten /1;2 da*s or rom 4arch to 11,;;5 to compl* with the &0 ecision. Cn the otherhand, on 4arch @, ;;5, petitioner led its 4otion orEeconsideration with Cpposition to etitioners 4otionor tension o Time to &ompl* with the ecision o theM&0N.M11N

$( Issu(s

Jence, +eore us is the instant petition with theollowin% issues<

1. "hether or not the &ourt o 0ppeals, in issuin% the assailed 1@#e+ruar* ;;5 ecision and 31 0u%ust;;5 Eesolution in &0-$.E. S Do.@131, has decided )uestions o law ina wa* not in accord with law and with











Throu%h its assailed 0u%ust 31, ;;5 Eesolution,the &0 denied petitioners 4otion or Eeconsideration,and ndin% that respondent dul* eerted eforts tocompl* with its ecision and a valid consi%nation wasmade +* respondent, it %ranted the re)uested 1;-da*etension o time to compl* with the #e+ruar* 1@, ;;5ecision and her motion or consi%nation. The fallo o

said Eesolution reads<

IN #IEW %F $HE F%REG%ING, themotion or etension to compl* with theecision is here+* GRAN$E, themotion or reconsiderationis ENIE and the motion orconsi%nation is GRAN$E. MetitionerNG.. San ie%o, (nc. is here+* ordered

to receive the pa*ment o MrespondentNEosario T. 0lzul and to issue, in heravor, the correspondin% eed o Sale.M1N

a wa* not in accord with law and withthe applica+le decisions o theJonora+le &ourt?

. "hether or not the &ourt o 0ppeals committed patent %rave a+use

o discretion andor acted without or inecess o =urisdiction in %rantin%respondent 0lzuls su+se)uent motionor etension o time to compl* withthe 1@ #e+ruar* ;;5 decision andmotion or consi%nation? and

3. "hether or not the 1@ #e+ruar*;;5 ecision and 31 0u%ust;;5 Eesolution o the &ourt o 0ppealsin &0-$.E. S Do. @131 ou%ht to +eannulled and set aside, or +ein%contrar* to law and =urisprudence.M13N

$( Couts Ru/*g

Cn the procedural issue, petitioner G.. San ie%o, (nc.assails the suBcienc* o respondent 0lzuls &0 petitionas the latter, in violation o the rules, alle%edl* lac!edthe essential and relevant pleadin%s led with theJ:AEG and the C.

Section 8 o Eule 3, 1997 Eules o &ivil rocedurepertinentl* provides<

C+viousl*, the main reason or the prescri+edattachments is to acilitate the review and evaluation o the petition +* ma!in% readil* availa+le to the &0 all theorders, resolutions, decisions, pleadin%s, transcripts,documents, and pieces o evidence that are materialand relevant to the issues presented in the petitionwithout rel*in% on the case records o the lowercourt. The rule is the reviewin% court can determine themerits o the petition solel* on the +asis o thesu+missions +* the partiesM1N without the use o the

records o the court a 7uo. (t is a act that it ta!esseveral months +eore the records are elevated to thehi%her court, thus the resultin% dela* in the review o th titi Th tt h t ll ti l d









S&. 8. Contents of t'e petition.Thepetition or review shall /c2 +eaccompanied +* a clearl* le%i+leduplicate ori%inal or a certied truecop* o the award, =ud%ment, nal

order or resolution appealed rom,to%ether with (t/(+ tu( o)/(s o0 su >t(/> )ot/o*s o0 t((o+ (0((+ to t((/* >*+ot( su))ot/*g )>)(s? /mphasis supplied.2

The a+ove proviso eplicitl* re)uires the ollowin% to +eappended to a petition< 12 clearl* le%i+le duplicateori%inal or a certied true cop* o the award, =ud%ment,nal order, or resolution appealed rom? 2 certied truecopies o such material portions o the record reerred toin the petition? and 32 other supportin% papers.

the petition. The attachment o all essential andnecessar* papers and documents is mandator*?otherwise, the petition can +e re=ected outri%ht underSec. 7 o Eule 3 o the Eules o &ourt, which provides<

9et of failure to ompl# it'

re7uirements.The ailure o thepetitioner to compl* with an* o theore%oin% re)uirements re%ardin% thepa*ment o the doc!et and other lawulees, the deposit or costs, proo o service o the petition, and thecontents o and the documents whichshould accompan* the petition shall+e suBcient %round or the dismissalthereo.

To prevent premature dismissals, there)uirements under Sec. 8 on the contents o thepetition have to +e elucidated.

#irst, there can +e no )uestion that onl* theaward, =ud%ment, or nal order or resolution issued +*the lower court or a%enc* and appealed rom has to +ecertied as true.

The second set o attachments reers to thecertied true copies o such material portions o the

record reerred to therein.

the merits o the %rounds put orward +* the petitioner.4oreover, the processin% time or the review andresolution o the petition is %reatl* a++reviated, there+*o+viatin% intolera+le dela*s.

:astl*, it has to +e eplained whether the materialportions o the records have to +e certied as true +*the cler! o court or hisher dul* authorizedrepresentative as provided in Sec. 8 o Eule 3. ( strictl*

re)uired, the rule to re)uire attachment o certied truecopies o the material portions will surel* ma!e thepreparation o the petition more tedious, cum+ersome,



4aterial is dened as important? more or lessnecessar*? havin% inPuence or efect? %oin% to themerits? havin% to do with matter, as distin%uished romorm.M15N Thus, material portions o the records are thoseparts o the records that are relevant and directl* +earon the issues and ar%uments raised and discussed inthe petition.The* ma* include an* o the pleadin%s that

are su+=ect o an* issue, documentar* evidence,transcripts o testimonial evidence, and parts o therecords pertinent and relevant to the %roundssupportin% the petition. The attachment o the materialportions is su+=ect to the )ualication that these arereerred to or cited in the petition.Thus, onl* thematerial parts specied in the petition have to +eappended and that would +e suBcient compliance withthe rule as to orm.

(t would +e prudent however or the petitioner to attachall parts o the records which are relevant, necessar*, orimportant in whatever wa* to +e a+le to reach theresolution o the issues o the petition. The availa+ilit*o such documents to the ponente and mem+ers o aivision can easil* provide the su+stance and support to

p p pand epensive. (t should thereore +e construed thatmerel* clear and le%i+le copies o the material portionswill suBce. The rules on the diferent modes o appealrom the lower courts or )uasi-=udicial a%encies to the&0 reveal that it is onl* Eule 3 that specicall* statesthat the material portions to +e appended to thepetition should +e certied true copies. Eule 1 o

course does not re)uire attachment o the pertinentrecords since the entire records are elevated to the&0. Eule on petition or review rom the trial court inaid o its appellate =urisdiction to the &0 spea!s o plaincopies o the material portions o the record as wouldsupport the alle%ations o the petition. M18N ven Eule 5on appeal +* certiorari rom the &0 to this &ourt simpl*spea!s o material portions o the records withoutindicatin% that these should +e certied truecopies. Eule 8 on ori%inal cases to this &ourt onl*

re)uires plain copies o the material portions o therecords. #inall*, Eule 85 on special civil actions re)uiresonl* copies o relevant and pertinent pleadin%s anddocuments.

#rom the ore%oin% premises, the inescapa+leconclusion is that onl* plain and clear copies o thematerial portions o the records are re)uired under Sec.3 o Eule 3.This ndin% is +uttressed +* our rulin%in Cada#ona v. CA, where it was held that onl*

=ud%ments or nal orders o the lower courts are neededto +e certied true copies or duplicate ori%inals. M17N Thereis no plausi+le reason wh* a diferent treatment orstricter re)uirement should +e applied to petitionsunder Eule 3.

The last re)uirement is the attachment o other

Sec. 7 o Eule 3 does not prescri+e outri%ht re=ection o the petition i it is not accompanied +* the re)uireddocuments +ut simpl* %ives the discretion to the &0 todetermine whether such +reach constitutes a suBcient%round or dismissal. 0pparentl*, petitioner was not a+leto convince the &0 that the alle%ed missin%attachments deprived said court o the ull opportunit*and acilit* in eaminin% and resolvin% the petition. (thas not +een satisactoril* shown that the pleadin%sled +* petitioner with the )uasi-=udicial a%encies have

material +earin% or importance to the &0 petition. Suchpleadin%s could have +een attached to the comment o respondent and hence, no pre=udice would +esufered Thus the &0 did not eercise its discretion in









supportin% papers. 0%ain, it is onl* in Eule 3 that weencounter the re)uirement o annein% supportin%papers to the petition. This can +e interpreted to meanother documents, pictures, and pieces o evidence *ot0o/*g )>ts o0 t( (o+s o the lower court ora%enc* that can +olster and shore up the petition. "hilenot so specied in Sec. 3 o Eule 3, it is inar%ua+le that

said papers must also +e relevant and material to thepetition? otherwise, the attachments would +e meresurplusa%es and devoid o use and value.

etitioner claims respondents petition in &0-$.E. S Do.@131 ailed to attach material documents o therecords o the J:AEG and the C. The* cr* oul thatnone o the pleadin%s led with the J:AEG and the Cound their wa* into the &0 petition. (t pra*s that the &0petition should have +een dismissed under Sec. 7 o Eule 3 due to the lac! o needed attachments.

etitioners postulation must ail.

sufered. Thus, the &0 did not eercise its discretion inan ar+itrar* or oppressive manner +* %ivin% due courseto the petition.

(n addition, it was noted in Cusi-Hernandez v. 1iaz thatthe &0 Eevised (nternal Eules provide certain Pei+ilit*

in the su+mission o additional documents<

"hen a petition does not have thecomplete annees or the re)uirednum+er o copies, the &hie o the

Kudicial Eecords ivision shall re)uirethe petitioner to complete the anneesor le the necessar* num+er o copieso the petition +eore doc!etin% thecase. leadin%s improperl* led in

court shall +e returned to the sender +*the &hie o the Kudicial Eecordsivision.M1@N

(n Rosa ap 8aras, et al. v. Judge +smael ;./aldado, et al., the &ourt preerred the determination o cases on the merits over technicalit* or proceduralimperections so that the ends o =ustice would +eserved +etter, thus<

0t the same time, the Eules o &ourtencoura%e a readin% o the proceduralre)uirements in a manner that will help

secure and not deeat =ustice. Thus<

Dow we will address the main issuewhether respondent0lzul is still entitled to consi%nation despite the lapse o the period provided +* the &ourt in $.E. Do. 1;9;7@entitled u v. Court of Appeals.

etitioner stresses the act that respondent 0lzul did notcompl* with this &ourts Kune 17,1998 EesolutionM;N which %ave a non-etendi+le periodo thirt* /3;2 da*s rom entr* o =ud%ment within which







Section 8. &onstruction.TheseEules shall +e li+erall*construed in order to promotetheir o+=ective o securin% a =ust,speed* and inepensivedisposition o ever* action andproceedin%.

0s epressed in Al"erto vs. Court of Appeals, /w2hat should %uide =udicialaction is the principle that a part*-liti%ant is to +e %iven the ullestopportunit* to esta+lish the merits o his complaint or deense rather than orhim to lose lie, li+ert*, honor or

propert* on technicalities. /T2herules o procedure should +e viewed asmere tools desi%ned to acilitate theattainment o =ustice. Their strict andri%id application, which would result intechnicalities that tend to rustraterather than promote su+stantial =ustice,must alwa*s +e eschewed.M19N

o thirt* /3;2 da*s rom entr* o =ud%ment within whichto ma!e ull pa*ment or the su+=ect properties. Theentr* o =ud%ment shows that the ecem+er 8, 1995EesolutionM1N in $.E. Do. 1;9;7@ +ecame nal andeecutor* on Kul* , 1998. Eespondent 0lzul receivedthrou%h counsel a cop* o the entr* o =ud%menton 0u%ust 1, 1998. Thus, respondent haduntil Septem+er ;, 1998 within which to ma!e the ullpa*ment.

0ter three /32 unsuccessul tenders o pa*ment,respondent 0lzul made no consi%nation o the amountto the court o ori%in. (t was onl* on 4arch 1, 199@ ora+out a *ear and a hal later that respondent ofered toconsi%n said amount in an action or consi%nment+eore the J:AEG. Eel*in% on the case o t. 1omini

Corporation v. +ntermediate Appellate Court ,MN petitioner stron%l* asserts that upon its reusal toaccept the tendered pa*ment, respondent ou%ht tohave consi%ned it with the court o ori%in also within the3;-da* period or within a reasona+le timethereater. Eespondent ailed to do this as she waitedor a *ear and a hal +eore institutin% the instant action

or specic perormance and consi%nment +eore theJ:AEG.

4oreover, petitioner ar%ues that respondents dela* o a*ear and a hal to pursue ull pa*ment must +ere%arded as a waiver on her part to claim whateverresidual remedies she mi%ht still have or theenorcement o the Kune 17, 1998 Eesolution in $.E. Do.1;9;7@.

etitioner urther contends that even i the action+eore the J:AEG was made on time, that is, within the3; da* period still it is atall* deective as respondent

Cn the other hand, respondent contends that the Kune17, 1998 Eesolution o this &ourt should not +econstrued a%ainst her ina+ilit* to efect pa*ment due tothe o+stinate and un=ust reusal +* petitionerasupervenin% circumstance +e*ond hercontrol. Eespondent underscores that within the 3;-da*period, she repeatedl* attempted to efect the pa*mentto no avail. 4oreover, the much dela*ed response o petitioner em+odied in its Kanuar* 1,199@ letterM3N conrmin% its reusal was +ased onuntena+le, +aseless, and contrived %rounds.











3;-da* period, still it is atall* deective as respondentdid not deposit an* amount with the J:AEG whichviolated the rules or consi%nment which re)uire actualdeposit o the amount alle%edl* due with the proper

=udicial authorit*.

remised upon these considerations, petitioner aultsthe appellate court or its %rant o respondents petitionor review which nullied the denial +* the J:AEG0r+iter, J:AEG #irst ivision, and the C o respondentsaction.

4oreover, she ar%ues that the ecem+er 8, 1995Eesolution in $.E. Do. 1;9;7@ %rantin% her proprietar*ri%hts over the su+=ect lots has lon% +ecome nal andeecutor*.

0nent the issue o laches and estoppel, respondentstron%l* contends that such do not appl* in the instantcase as incontroverti+le circumstances show that shehas relentlessl* pursued the protection andenorcement o her ri%hts over the disputed lots or overa )uarter o a centur*.

0ter a careul stud* o the actual milieu, applica+lelaws, and =urisprudence, we nd the petition

meritorious.

R(s)o*+(*t Au >s >o+(+ (g> /gts o?(su@J(t )o)(t/(s

(n $.E. Do. 1;9;7@, ndin% no reversi+le error on thepart o the &0, we denied "ilson . Hus petition and

B d th ll t t li th t + t

(n our Kune 17, 1998 Eesolution, we clearl* speciedthirt* /3;2 da*s rom entr* o =ud%ment or respondentto promptl* efect the ull pa*ment o the +alance o thepurchase price or the su+=ect properties, thus<

"e however a%ree with the o+servationmade +* movants that *o t/( //t>s s(t @B t( (s)o*+(*t Cout o0 A))(>s in its assailed ecision or the

private respondent herein, Eosario0lzul, to pa* G.. San ie%o, (nc., theori%inal owner o the properties inli i i /0 /



aBrmed the appellate courts rulin% that as +etween"ilson . Hu, the Ientura spouses, petitioner G.. Sanie%o, (nc., and respondent 0lzul, respondent hasinchoate proprietar* ri%hts over the disputed lots. W(u)(+ t( CA u/*g +(>/*g >s *u >*+ ?o/+t( t/t(s /ssu(+ /* t( *>( o0 t( #(*tu>s)ous(s >*+ (/*st>t/*g t( /* t( *>( o0 .E.

S>* /(go, I*., /t t( o(s)o*+/*g *ot/(so0 lis endens >**ot>t(+ o* t( /* 0>?o o0 (s)o*+(*t u*t/ su t/( t>t o*(s/) o0 t(su@J(t )>(s o0 >*+ /s t>*s0((+ to(s)o*+(*t Ros>/o Au.

(t is thus clear that ( >o+(+ (s)o*+(*t Au()(t>*t /gts o?( t( +/s)ut(+ ots, @ut su/s o*+/t/o*(+ o* t( )>B(*t o0 t( @>>*( o0 t( )u>s( )/(. Javin% +een conceded suchri%hts, respondent had the o+li%ation to pa* theremainin% +alance to vest a+solute title and ri%hts o ownership in his name over the su+=ect properties.

liti%ation. $o (t/0B su o?(s/gt,)/?>t( (s)o*+(*t Ros>/o $. Au/s ((@B g/?(* > *o*-(t(*+/@()(/o+ o0 t/tB 83' +>Bs 0o(*tB o0 Ju+g(*t, /t/* / to>( 0u )>B(*t 0o t()o)(t/(s /* Du(st/o*.MN /mphasis

supplied.2

$( *o*-o)/>*( /t ou u*( 1;, 1996R(sout/o* /s 0>t> to (s)o*+(*t Aus >t/o* 0oo*s/g*>t/o* >*+ s)(/ )(0o>*(

Anortunatel*, respondent ailed to efect such ullpa*ment o the +alance o the purchase price or thesu+=ect properties.

No o*s/g*>t/o* /t/* t( 3'-+>B )(/o+ o >t >(>so*>@( t/( t((>0t(

(t is clear as da* that respondent did not attempt norpursue consi%nation within the 3;-da* period %iven toher in accordance with the prescri+ed le%alprocedure. She received a cop* o the entr* o =ud%ment

on 0u%ust 1, 1998 and had 3; da*s or until Septem+er;, 1998 to pa* the +alance o the purchase price topetitioner. She made a tender o pa*ment on 0u%ust 9,1998 0u%ust 3; 1998 and Septem+er @ 1998 all o

prior tender o pa*ment. (t should +edistin%uished rom tender o pa*ment. Tender is the antecedent o consi%nation, that is, an actpreparator* to the consi%nation, whichis the principal, and rom which arederived the immediate conse)uenceswhich the de+tor desires or see!s too+tain. Tender o pa*ment ma* +eetra=udicial, while consi%nation isnecessaril* =udicial, and the priorit* o the rst is the attempt to ma!e aprivate settlement +eore proceedin% tothe solemnities o





1998, 0u%ust 3;, 1998, and Septem+er @, 1998, all o which were reused +* petitioner possi+l* +ecause thelatter is o the view that it is not +ound +* theDovem+er 7, 199 ecision in &0-$.E. &I Do. 33819nor the ecem+er 8, 1995 Eesolution in $.E. Do.1;9;7@, and the act that respondent has oreited herri%hts to the lots +ecause o her ailure to pa* the

monthl* amortizations.

(t must +e +orne in mind however that a mere tender o pa*ment is not enou%h to etin%uish ano+li%ation. (n Meat 8a2ing Corporation of t'e 8'ilippines v. andigan"a#an, we distin%uishedconsi%nation rom tender o pa*ment and reiterated therule that +oth must +e validl* done in order to efect theetin%uishment o the o+li%ation, thus<

&onsi%nation is the act o depositin%the thin% due with the court or =udicialauthorities whenever the creditorcannot accept or reuses to acceptpa*ment, and it %enerall* re)uires a

the solemnities o consi%nation. $(*+( >*+o*s/g*>t/o*, (( ?>/+B >+(,)o+u(s t( ((t o0 )>B(*t>*+ (t/*gu/s(s t( o@/g>t/o*.M5N /mphasis supplied.2

There is no dispute that a valid tender o pa*ment had+een made +* respondent. 0+sent however a validconsi%nation, mere tender will not suBce to etin%uishher o+li%ation and consummate the ac)uisition o thesu+=ect properties.

(n t. 1omini Corporation involvin% the pa*ment o theinstallment +alance or the purchase o a lot similar tothe case at +ar, where a period has +een =udiciall*directed to efect the pa*ment, the &ourt held that avalid consi%nation is made when the amount isconsi%ned with the court within the re)uired period orwithin a reasona+le time thereater. "e ruled as ollows<

#irst o all, the decision o the then&ourt o 0ppeals which waspromul%ated on Ccto+er 1, 19@1, is)uite clear when it ordered thepa*ment o the +alance o thepurchase price or the disputed lotwithin 8; da*s romreceipt 'ereof meanin% rom thereceipt o the decision +* the

respondents. (t is an admitted act thatthe respondents received a cop* o thedecision on Ccto+er 3;, 19@1. Jence,

&onsiderin% the maniestation, datedDovem+er 11, 1998, led +* counselor private respondent Eosario T. 0lzul,statin% that private respondenttendered to G.. San ie%o, (nc. thepa*ment o the sum o 1@7,3@;.;;representin% the +alance o thepurchase price o the properties whichare the su+=ect o this liti%ation, +utG.. San ie%o, (nc., reused to acceptthe same, the Cout (so?(+to REFER t( >s( to t( out o0 o/g/*, 0o >))o)/>t( >t/o*.M7N







the* had up to ecem+er 9, 19@1 toma!e the pa*ment. U)o* (0us> @Bt( )(t/t/o*( to ((/?( su)>B(*t, t( )o)( )o(+u(>s 0o t( (s)o*+(*t to o*s/g*t( s>( /t t( out >so /t/*t( 6'-+>B )(/o+ o /t/* >

(>so*>@( t/( t((>0t(.M8N /mphasis supplied.2

The records also reveal that respondent ailed to efectconsi%nation within a reasona+le time ater the 3;-da*period which epired on Septem+er ;, 1998. (nstead o consi%nin% the amount with the court o ori%in,respondent led her Dovem+er 11, 1998 4aniestationinormin% this &ourt o petitioners un=ust reusal o thetender o pa*ment. "e acted avora+l* to it +* issuin%our Kanuar* @, 1997 Eesolution which ordered, thus<

Eespondent still ailed to ta!e the cue +* her inaction toconsi%n the amount with the court o ori%in. Andou+tedl*, pursuin% the action or

consi%nation on 4arch 1, 199@ or over a *ear ater the&ourt issued its Kanuar* @, 1997 Eesolution is wa*+e*ond a reasona+le time thereater. (ndeed, we haveaccorded respondent, throu%h said Eesolution, all theopportunit* to pursue consi%nation with the court o ori%in and *et, respondent ailed to ma!e a validconsi%nation. This is alread* inecusa+le ne%lect on thepart o respondent.

No ?>/+ o*s/g*>t/o* >+(

"e a%ree with petitioners assertion that even%rantin% arguendo that the instant case or consi%nationwas instituted within the 3;-da* period or within areasona+le time thereater, it would still not accord

respondent relie as no valid consi%nation wasmade. &ertainl*, the records show that there was novalid consi%nation made +* respondent +eore theJ:AEG as she did not deposit the amount with the)uasi-=udicial +od* as re)uired +* law and the rules.

ertinentl*, the rst para%raph o 0rticle 15@ o the&ivil &ode provides that MNo*s/g*>t/o* s> @(>+( @B +()os/t/*g t( t/*gs +u( >t t( +/s)os>

o0 Ju+//> >uto/tB, +eore whom the tender o pa*ment shall +e proved, in a proper case, and theannouncement o the consi%nation in other cases/emphasis supplied2

not let without a remed*. (t is +asic that consi%nation isan availa+le remed*, and respondent, with the aid o her counsel, could have easil* availed o such course o action sanctioned under the &ivil &ode.

&onsiderin% the tenor o our Kune 17, 1998 Eesolution,respondent ou%ht to have o*s/g*(+ the amount withthe court o ori%in within the non-etendi+le period o 3; da*s that was accorded her or within a reasona+le

time thereater.





/emphasis supplied2.

(t is true enou%h that respondent tendered pa*ment topetitioner three /32 times throu%h a Solid+an! 4ana%ers&hec! Do. 118 in the amount o h 1@7,3@;M@N on0u%ust 9 and 3;, 1998 and Septem+er @, 1998. (t istrue li!ewise that petitioner reused to accept it +ut notwithout %ood reasons. etitioner was not impleaded as apart* +* the Ientura spouses in the 4ala+on &it* ET&case or )uietin% o title a%ainst "ilson Hu nor in theappealed case to the &0 nor in $.E. Do. 1;9;7@.

etitioner is o the view that there was no =urisdictionac)uired over its person and hence, it is not +ound +*

the nal =ud%ment and Kune 17, 1998 Eesolution in $.E.Do. 1;9;7@. Secondl*, petitioner +elieved thatrespondent 0lzul has lost her ri%hts over the su+=ect lot+* the rescission o the sale in her avor due to thelatters ailure to pa* the installments and also as aresult o her transerees ailure to pa* the a%reedamortizations. 0nd even in the ace o the reusal +*petitioner to accept tender o pa*ment, respondent is

0s cited earlier, consi%nation is the act o depositin% the thin% due with the court or =udicialauthorities whenever the creditor cannot accept orreuses to accept pa*ment and it %enerall* re)uires aprior tender o pa*ment.M9N (t is o no moment i thereusal to accept pa*ment +e reasona+le or not. (ndeed,consi%nation is the remed* or an un=ust reusal toaccept pa*ment. The rst para%raph o 0rt. 158 o the&ivil &ode precisel* provides that MiN the creditor towhom tender o pa*ment has +een made (0us(s/tout Just >us( to >()t /t, t( +(@to s>@( ((>s(+ 0o (s)o*s/@//tB @B t(o*s/g*>t/o* o0 t( t/*g o su +u( /emphasissupplied2.

The proper and valid consi%nation o the amountdue with the court o ori%in, which shall =udiciall*pronounce the validit* o the consi%nation and declarethe de+tor to +e released rom hisher responsi+ilit*,shall etin%uish the correspondin% o+li%ation.

4oreover, in order that consi%nation ma* +eefective, the de+tor must show that< /12 there was ade+t due? /2 the consi%nation o the o+li%ation had+een made +ecause the creditor to whom tender o pa*ment was made reused to accept it, or +ecauseshe was a+sent or incapacitated, or +ecause severalpersons claimed to +e entitled to receive the amountdue or +ecause the title to the o+li%ation had +een lost?/32 previous notice o the consi%nation had +een %ivento the person interested in the perormance o theo+li%ation? /2 the amount due was placed at thedisposal o the court? and /52 ater the consi%nation had+een made, the person interested was notied o theaction.M3;N

"JE#CE, the appealed decision ishere+* EIES 0D ST 0S(, andthe complaint therein is ordereddismissed. Transer &erticates o TitleDos. D-19, D-193, D-19, and D-195, all o the Ee%ister o eeds o 4etro 4anila, istrict (((, 4ala+onGranch, in the names o plaintifs-appellees &arlos D. Ientura and Sandra

:. Ientura are here+* declared null andvoid, and the titles o ownershipreinstated in the name o G.. San









ac o

Eespondent did not compl* with the provisions o law particularl* with the ourth and th re)uirementsspecied a+ove or a valid consi%nation. (n hercomplaint or consi%nation and specic perormance,

respondent onl* pra*ed that she +e allowed to ma!e theconsi%nation without placin% or depositin% the amountdue at the disposal o the court o ori%in. Ieril*,respondent made no valid consi%nation.

The ri%hts o petitioner and respondent over the 1,75s)uare meter lot su+=ect o this petition will +edetermined +* the si%nicance and efects o theecem+er 8, 1995 Eesolution rendered in $.E. Do.1;9;7@ entitled u v. Court of Appeals.M31N

The su+=ect matter o $.E. Do. 1;9;7@ is the Dovem+er7, 199 ecision rendered in &0-$.E. &I Do. 33819entitled Carlos N. entura and andra 0. entura v.Rosario 5. Alzul, et al., the fallo o which reads<

ie%o, (nc., with the correspondin%notices o lis pendens thereinannotated in avor o deendant-appellant until such time thatownership o the su+=ect parcels o landis transerred to herein deendant-appellant Eosario 0lzul. &osts a%ainst

plaintif-appellees.

SC CEE.M3N

Cn ecem+er 8, 1995, this &ourt issued the Eesolution

in $.E. Do. 1;9;7@ wherein it ound no reversi+le errorin the actions o the &0 in its aore)uoted disposition in&0-$.E. &I Do. 33819, and resolved to den* the petitionor lac! o merit. Cn #e+ruar* 5, 1998, this &ourt deniedwith nalit* the 4otion or Eeconsideration led +*petitioner "ilson Hu.

Jowever, on Kune 17, 1998, this &ourt, in resolvin% the4otion or Eeconsideration o private respondentsSpouses &arlos and Sandra Ientura, %ranted respondent0lzul a non-etendi+le period o thirt* /3;2 da*s romentr* o =ud%ment, within which to ma!e ull pa*mentor the properties in )uestion.M33N

The )uestion iscan the &ourt, the &0, or the 4ala+on&it* ET& order petitioner G.. San ie%o, (nc. to accept

the tender o pa*ment made +* respondent 0lzulV

enitel*, the* cannot. The reason is that petitionerwas not impleaded as a part* in the 4ala+on &it* ET&civil case, &0-$.E. &I Do. 33819, nor in $.E. Do. 1;9;7@and hence is not under the =urisdiction o saidcourts. "hat were determined and decided in the &0ecision in &0-$.E. &I Do. 33819 were the annulmento the titles o spouses &arlos and Sandra Ientura, thereinstatement o said titles to the name o petitioner,and the declaration that the ownership o the lotssu+=ect o said titles will +e transerred torespondent. There is no directive to respondent %rantin%her the ri%ht to pa* the +alance o the price topetitioner and, more importantl*, there is no order orpetitioner to accept the pa*ment. The dispositive










p p p * por fallo o the decision is what actuall* constitutes the

=ud%ment or resolution o the court that can +e thesu+=ect o eecution. "here there is a conPict +etweenthe dispositive portion o the decision and its +od*, thedispositive portion controls irrespective o what appearsin the +od* o the decision.M3N Such +ein% the case,petitioner is not dut* +ound to accept an* tender o pa*ment rom respondent precisel* +ecause such di!tatis a+sent in the fallo o the &0 ecision which wasaBrmed +* this &ourt in its ecem+er 8, 1995Eesolution in $.E. Do. 1;9;7@.

The lacuna in the &0 ecision was sou%ht to +ecorrected in its Kune 17, 1998 Eesolution in $.E. Do.1;9;7@ where respondent was %iven a non-etendi+le

period o thirt* /3;2 da*s rom entr* o =ud%ment, withinwhich to ma!e ull pa*ment or the properties in)uestion. ursuant to this Eesolution, what wasesta+lished was the ri%ht o respondent to pa* the+alance o the purchase price within 3; da*s. 0%ain, the)uer* iscan this &ourt, the &0, or the trial court compelpetitioner to accept the tender o pa*ment romrespondentV

The answer is no. The reason is o+vious as =urisdictionwas never ac)uired over the person o petitioner. Theaction or )uietin% o title is characterized as 7uasi inrem. (n Realt# ales 9nterprise, +n. v. +ntermediate

Appellate Court , it was held that<

Suits to )uiet title are not technicall*

suits in rem, nor are the*, strictl*spea!in%, in personam, +ut +ein%a%ainst the person in respect o the res,these proceedin%s are characterized

part o petitioner to accept the pa*ment romrespondent. (t is the settled doctrine that a writ o eecution must conorm to the =ud%ment and i it isdiferent rom or eceeds the terms o the =ud%ment,then it is a nullit*.M38N

(n addition, Sec. 1;, Eule 39 provides the procedure oreecution o =ud%ments or specic acts, thus<

Sec. 1;. 9eution of Gudgments for spei at .3a4 Conve#ane, deliver# of







these proceedin%s are characterizedas 7uasi in rem. /4caniel v. 4clv*,1;@ So. @; M198N.2 $( Ju+g(*t /*su )o((+/*gs /s o*us/?(o*B @(t((* t( )>t/(s. /mphasissupplied.2M35N

Dot +ein% impleaded as a necessar* or indispensa+lepart*, petitioner is not +ound +* the dispositions in the&0 ecision in &0-$.E. &I Do. 33819 and theEesolutions o this &ourt in $.E. Do. 1;9;7@. 4oreover,there is no eplicit and clear directive or petitioner toaccept the pa*ment o the +alance o the price.

(t is or this reason that respondent cannot as! or a writo eecution rom the trial court where the complaintwas ori%inall* instituted as said court has no =urisdictionover the person o petitioner. ven i a writ is issued, itshould conorm to the =ud%ment, and the fallo o the &0ecision does not impose the dut* or o+li%ation on the

deeds, or ot'er spei atsO vestingtitle.( a =ud%ment directs a part* toeecute a conve*ance o land orpersonal propert*, or to deliver deedsor other documents, or to perorm an*other specic act in connectiontherewith, and the part* ails to compl*within the time specied, the court ma*direct the act to +e done at the cost o the diso+edient part* +* some otherperson appointed +* the court and theact when so done shall have li!e efectas i done +* the part*. ( real orpersonal propert* is situated within thehilippines, the court in lieu o directin%a conve*ance thereo ma* +* an orderdivest the title o an* part* and vest itin others, which shall have the orceand efect o a conve*ance eecuted indue orm o law.

The rule mentions the directive to a part*. (t is thereoreessential that the person tas!ed to perorm the specicact is impleaded as a part* to the case. Ctherwise, the

=ud%ment cannot +e eecuted. (n the case at +ar,petitioner should have +een impleaded as a part* so asto compel it to accept pa*ment and eecute the deed o sale over the disputed lots in avor o respondent. 0spetitioner was not impleaded as a part*, then the &0ecision in &0-$.E. &I Do. 33819 as aBrmed in $.E. Do.1;9;7@ cannot +e enorced a%ainst it.

The cause o action availa+le to respondent is to le anaction or consi%nation a%ainst petitioner which she did

meanin% rom the receipt o thedecision +* the respondents. (t is anadmitted act that the respondentsreceived a cop* o the decisionon Ccto+er 3;, 19@1. Jence, the* hadup to ecem+er 9, 19@1 to ma!e thepa*ment. Apon reusal +* thepetitioner to receive such pa*ment, theproper procedure was or therespondent to consi%n the same withthe court also within the 8;-da* periodor within a reasona+le timethereater. The act that eforts weremade +* the petitioner to reach an





action or consi%nation a%ainst petitioner which she did+* re%isterin% a complaint or consi%nation +eore theJ:AEG on 4arch 1, 199@. Anortunatel*, it was ledwa* +e*ond the 3;-da* period which lapsedon Septem+er ;, 1998 or immediatel* thereater.Gecause o the ailure o respondent to efect pa*mentto petitioner within the 3;-da* period or soon thereater,

her ri%hts to +u* the disputed lots have +een oreited,lost, and etin%uished.

(n t. 1omini Corporation, which is su+stantiall* similarto the case at +ar, we eplained the procedure when apart* is directed to pa* the +alance o the purchaseprice +ased on a court decision, thus<

#irst o all, the decision o the then&ourt o 0ppeals which waspromul%ated on Ccto+er 1, 19@1, is)uite clear when it ordered thepa*ment o the +alance o thepurchase price or the disputed lotwithin 8; da*s rom receipt 'ereof ,

* pa%reement with the respondents aterthe promul%ation o the decision didnot in an*wa* afect the nalit* o the

=ud%ment. This was clearl* emphasizedin the order o the appellate courton 4a* 8, 19@.

Secondl*, even i we rec!on the 8;-da*period rom the date o the nalit* o the decision as interpreted +* theappellate court, such nalit* should +ecounted rom 4arch 5, 19@, which wasthe date the decision +ecame nal asindicated in the entr* o =ud%ment andnot rom 0u%ust 8, 19@ which is the

date the entr* was made. The date o analit* o a decision is entirel* distinctrom the date o its entr* and the dela*in the latter does not afect theefectivit* o the ormer as such iscounted rom the epiration o theperiod to appeal.M37N

(n the aorecited case, the lot owner was made apart* to the case and the =ud%ment o the court was orthe plaintif to pa* to the lot owner the +alance o thepurchase price within 8; da*s rom receipt o theecision. ven assumin% arguendo that petitioner G..San ie%o, (nc., thou%h not a part* in the complaint or)uietin% o title, can +e compelled to receive thepurchase price, still, the reusal to receive the mone*re)uires respondent 0lzul to ollow the procedure in t.

1omini Corporation and consi%n the mone* with thecourt o ori%in. Javin% ailed in this respect,respondents ri%hts to the propert* have +een oreited

lt t ithi th i+ d ti

=urisprudence. The &0s holdin% that the non-consi%nation o the amount due is merel* a procedurallapse on the part o respondents counsel is misplacedand is contrar* to settled =urisprudence. lainl*,respondents ri%hts over the su+=ect propert* are nowlost and oreited.

Javin% resolved the core issue on the validit* o theconsi%nation, the &ourt sees no urther need to discuss

the remainin% issues raised in the petition.





as a result o non-pa*ment within the prescri+ed timerame.

The &0 relied on =ustice and e)uit* in %rantin% anadditional period o ve /52 da*s rom receipt o the

#e+ruar* 1@, ;;5 ecision in &0-$.E. S Do. @131 topa* the +alance due or the sale o the our lots.M3@N "hile we commiserate with the pli%ht o respondent,the &0 rulin% will not prevail over the esta+lished aiomthat e)uit* is applied onl* in the a+sence o and nevera%ainst statutor* law or =udicial rules o procedure.M39N #or all its conceded merits, e)uit* is availa+le onl* inthe a+sence o law and not as its replacement. M;N )uit*as an eceptional etenuatin% circumstance does notavor, nor ma* it +e used to reward, the indolent. This

&ourt will not allow a part*, in %uise o e)uit*, to +enetrom respondents own ne%li%ence.M1N

(n the li%ht o the ore%oin% considerations, we nd thatthe %rant o respondents petition in &0-$.E. S Do.@131 and the reco%nition o the +elated consi%nationo the amount nd no support nor +asis in law, rule, or

P(t/t/o*( to (/@us( )>B(*ts

Jowever, respondent had made pa*ments over thesu+=ect properties +ased on her a%reement withpetitioner. So as not to enrich itsel at the epense o respondent, petitioner is o+li%ed to reim+urserespondent whatever amount was paid +* her in orm o monthl* amortizations. Cn the other hand, i respondentis in possession o the su+=ect properties, she and allpersons claimin% under her should surrender thepossession to petitioner.

WHEREF%RE, the petition is GRAN$E, the #e+ruar*1@, ;;5 ecision and 0u%ust 31, ;;5 Eesolution o the &0 are RE#ERSE and SE$ ASIE, and theSeptem+er 1@, ;;3 Eesolution and ecem+er , ;;3Crder o the C are here+* REINS$A$E. etitioneris %RERE to reim+urse respondent whatever amountthe latter has paid or the su+=ect properties per the&ontract to Sell Do. @87. etitioner is ECLARE to +e

the true and le%al owner o :ots Dos. 5, 8, 7, and @,Gloc! 1@, 0urora Su+division, 4a*silo, 4ala+on &it*. TheEe%ister o eeds o 4anila, istrict (((, 4ala+on &it*Granch is %RERE to cancel Transer &erticates o

Title Dos. D-19, D-193, D-19, and D-195 in thenames o spouses &arlos D. Ientura and Sandra :.Ientura and re%ister the same in the name o petitioner. The lis pendens in avor o respondentannotated on the Transer &erticates o Title over thesu+=ect properties is here+* LIF$E, and the Ee%ister o eeds or 4etro 4anila, istrict (((is IREC$E to CANCEL said lis pendens. Eespondentand all persons claimin% under her are %RERE tovacate the su+=ect properties and surrender them to

GUERRER%, J.:

The decision su+=ect o the present petition or review

holds the view that there was su+stantial compliance

with the re)uisites o consi%nation and so ruled in avor

o private respondent, Ee%ino #rancisco, Kr., lessee o the

+uildin% owned +* petitioner lessor, Soledad Soco in the

case or ille%al detainer ori%inall* led in the &it* &ourt

o &e+u &it*, declarin% the pa*ments o the rentals valid

and efective, dismissed the complaint and ordered thelessor to pa* the lessee moral and eemplar* dama%es

in the amount o 1;,;;;.;; and the urther sum o

3 ;;; ;; as attorne*>s ees











petitioner within sit* /8;2 da*s rom nalit* o this =ud%ment. Do pronouncement as to costs.

G.R. No. L-5&961 u*( 2&, 19&3

S%LEA S%C%, petitioner,

vs.

H%N. FRANCIS MILI$AN$E, I*u@(*t P(s/+/*g u+g( o0 t( Cout o0 F/st I*st>*( o0 C(@u,>* <II, C(@u C/tB >*+ REGIN% FRANCISC%,

R., respondents.

C'ua & Assoiates 0a ;<e 3olla"orating ounsel4and Andales, Andales & Assoiates 0a ;<e for

petitioner.

6ranis M. Zosa for private respondent.

3,;;;.;; as attorne* s ees.

"e do not a%ree with the )uestioned decision. "e hold

that the essential re)uisites o a valid consi%nation must

+e complied with ull* and strictl* in accordance with

the law, 0rticles 158 to 181, Dew &ivil &ode. That

these 0rticles must +e accorded a mandator*construction is clearl* evident and plain rom the ver*

lan%ua%e o the codal provisions themselves which

re)uire a+solute compliance with the essential

re)uisites therein provided. Su+stantial compliance is

not enou%h or that would render onl* a director*

construction to the law. The use o the words 'shall' and

'must' which are imperative, operatin% to impose a

dut* which ma* +e enorced, positivel* indicate that all

the essential re)uisites o a valid consi%nation must +ecomplied with. The &ivil &ode 0rticles epressl* and

eplicitl* direct what must +e essentiall* done in order

that consi%nation shall +e valid and efectual. Thus, the

law provides<

157. (n order that the consi%nation o the

thin% due ma* release the o+li%or, it must

rst "e announedto the persons interested

in the ulllment o the o+li%ation.

The consi%nation shall +e inefectual i it is

not made stritl# in onsonane with the

provisions which re%ulate pa*ment.

0rt. 15@. &onsi%nation s'all "e made +*

depositin% the thin%s due at the disposal o

=udicial authorit*, +eore whom the tender o

pa*ment s'all "e proved in a proper case

(n the meantime, the action derived rom

the ori%inal o+li%ation shall +e held in

a+e*ance.

"e have a lon% line o esta+lished precedents and

doctrines that sustain the mandator* nature o the

a+ove provisions. The decision appealed rom must,

thereore, +e reversed.

The antecedent acts are su+stantiall* recited in the

decision under review, as ollows<

(t appears rom the evidence that the



pa*ment s'all "e proved, in a proper case,

and the announcement o the consi%nation

in other cases.

The consi%nation havin% +een made, the

interested parties s'all also "e

notied thereo.

0rt. 19. The pa*ment o de+ts in

mone* s'all "e made in the currenc*

stipulated, and i it is not possi+le to deliver

such currenc*, then in the currenc* which is

le%al tender in the hilippines.

The deliver* o promissor* notes pa*a+le to

order, or +ills o echan%e or othermercantile documentss'all produe the

efect o pa*ment onl* when the* have

+een cashed, or when throu%h the ault o

the creditor the* have +een impaired.

(t appears rom the evidence that the

plaintif-appellee-Soco, or short-and the

>deendant-appellant-#rancisco, or +revit*-

entered into a contract o lease on Kanuar*

17, 1973, where+* Soco leased her

commercial +uildin% and lot situated at

4analili Street, &e+u &it*, to #rancisco or amonthl* rental o @;;.;; or a period o 1;

*ears renewa+le or another 1; *ears at the

option o the lessee. The terms o the

contract are em+odied in the &ontract o

:ease /hi+it '0' or Soco and hi+it ''

or #rancisco2. (t can readil* +e discerned

rom hi+it '0' that para%raphs 1; and 11

appear to have +een cancelled while in

hi+it '' onl* para%raph 1; has +eencancelled. &laimin% that para%raph 11 o the

&ontract o :ease was in act not part o the

contract +ecause it was cancelled, Soco

led &ivil &ase Do. E-1881 in the &ourt o

#irst (nstance o &e+u see!in% the

annulment andor reormation o the

&ontract o :ease. ...

Sometime +eore the lin% o &ivil &ase Do.

E-1881 #rancisco noticed that Soco did not

an*more send her collector or the pa*ment

o rentals and at times there were pa*ments

made +ut no receipts were issued. This

situation prompted #rancisco to write Soco

the letter dated #e+ruar* 7, 1975 /hi+it'3'2 which the latter received as shown in

hi+it '3-0'. 0ter writin% this letter,

#rancisco sent his pa*ment or rentals +*

dated Dovem+er 3, 197@ /hi+it 'G'2 to

#rancisco servin% notice to the latter >to

vacate the premises leased.> (n answer to

this letter, #rancisco throu%h his law*er

inormed Soco and her law*er that all

pa*ments o rental due her were in act paid

+* &ommercial Gan! and Trust &ompan*

throu%h the &ler! o &ourt o the &it* &ourt

o &e+u /hi+it ' 1 '2. espite this

eplanation, Soco led this instant case o(lle%al etainer on Kanuar* @, 1979. ...

ursuant to his letter dated #e+ruar* 7



#rancisco sent his pa*ment or rentals +*

chec!s issued +* the &ommercial Gan! and

Trust &ompan*. C+viousl*, these pa*ments

in chec!s were received +ecause Soco

admitted that prior to 4a*, 1977, deendant

had +een reli%iousl* pa*in% the rental. ....

1. The actual +ac!%round settin% o this

case clearl* indicates that soon ater Soco

learned that #rancisco su+-leased a portion

o the +uildin% to D0&(0, at a monthl*

rental o more than 3,;;;.;; which is

denitel* ver* much hi%her than what

#rancisco was pa*in% to Soco under the

&ontract o :ease, the latter elt that she

was on the losin% end o the leasea%reement so she tried to loo! or wa*s and

means to terminate the contract. ...

(n view o this alle%ed non-pa*ment o rental

o the leased premises +e%innin% 4a*,

1977, Soco throu%h her law*er sent a letter

. ursuant to his letter dated #e+ruar* 7,

1975/hi+it'3'2 and or reasons stated

therein, #rancisco paid his monthl* rentals

to Soco +* issuin% chec!s o the &ommercial

Gan! and Trust &ompan* where he had a

chec!in% account. Cn 4a* 13, 1975,

#rancisco wrote the Iice-resident o&omtrust, &e+u Granch /hi+it ''2

re)uestin% the latter to issue chec!s to Soco

in the amount o @;.;; ever* 1;th o the

month, o+viousl* or pa*ment o his

monthl* rentals. This re)uest o #rancisco

was complied with +* &omtrust in its letter

dated Kune , 1975 /hi+it '5'2. C+viousl*,

these pa*ments +* chec!s throu%h

&omtrust were received +* Soco rom Kune,

1975 to 0pril, 1977 +ecause Soco admitted

that an rentals due her were paid ecept the

rentals +e%innin% 4a*, 1977. "hile Soco

alle%ed in her direct eamination that >since

4a*, 1977 he /meanin% #rancisco2 stopped

pa*in% the monthl* rentals> /TSD, alicte, p.

8, Jearin% o Ccto+er , 19792, *et on

cross eamination she admitted that +eore

the lin% o her complaint in the instant

case, she !new that pa*ments or monthl*

rentals were deposited with the &ler! o

&ourt ecept rentals or the months o 4a*,

Kune, Kul* and 0u%ust, 1977. ...

ressin% her point, Soco alle%ed that >wepersonall* demanded rom n%r. #rancisco

or the months o 4a*, Kune, Kul* and

0u%ust +ut n%r #rancisco did not pa* or

/c2 hi+it '@'-e+it 4emo dated Kul* 11,

1977 or 198.1; as pa*ment or Kul*,

1977?

/d2 hi+it '9'-e+it 4emo dated 0u%ust 1;,

1977 or 98. 1; as pa*ment or 0u%ust,

1977.

These pa*ments are urther +olstered +*

the certication issued +* &omtrust dated

Ccto+er 9, 1979 /hi+it '13'2. (ndeed the

&ourt is convinced that pa*ments or rentals




0u%ust, +ut n%r. #rancisco did not pa* or

the reason that he had no unds availa+le at

that time.> /TSD-alicte, p. @, Jearin%

Ccto+er , 19792. This alle%ation o Soco is

denied +* #rancisco +ecause per his

instructions, the &ommercial Gan! and Trust

&ompan*, &e+u Granch, in act, issuedchec!s in avor o Soco representin%

pa*ments or monthl* rentals or the

months o 4a*, Kune, Kul* and 0u%ust, 1977

as shown in e+it 4emorandum issued +*

&omtrust as ollows<

/a2 hi+it '8'-e+it 4emo dated 4a* 11,

1977 or 98.1; as pa*ment or 4a*, 1977?

/+2 hi+it'7'-e+it 4emo dated Kune l5,

197 7or 98.1; as pa*ment or Kune,

1977?


0u%ust, 1977 were made +* #rancisco to

Soco thru &omtrust and deposited with the

&ler! o &ourt o the &it* &ourt o &e+u.

There is no need to determine whether

pa*ments +* consi%nation were made rom

Septem+er, 1977 up to the lin% o thecomplaint in Kanuar*, 1979 +ecause as

earlier stated Soco admitted that the rentals

or these months were deposited with the

&ler! o &ourt. ...

Ta!in% into account the actual +ac!%round

settin% o this case, the &ourt holds that

there was in act a tender o pa*ment o the

rentals made +* #rancisco to Soco throu%h&omtrust and since these pa*ments were

not accepted +* Soco evidentl* +ecause o

her intention to evict #rancisco, +* all

means, culminatin% in the lin% o &ivil &ase

E-1881, #rancisco was impelled to deposit

the rentals with the &ler! o &ourt o the

&it* &ourt o &e+u. Soco was notied o this

deposit +* virtue o the letter o 0tt*.

ampio 0+arientos dated Kune 9, 1977

/hi+it '1;'2 and the letter o 0tt*. ampio

0+arientos dated Kul* 8. 1977 /hi+it ' 1'2

as well as in the answer o #rancisco in &ivil

&ase E-1881 /hi+it '1'2 particularl*

para%raph 7 o the Special and 0Brmative

eenses. She was urther notied o these

pa*ments +* consi%nation in the letter o0tt*. 4enchavez dated Dovem+er @, 197@

/hi+it ' 1 '2. There was thereore

su+stantial compliance o the re)uisites o

period rom 4a*, 1977 to 0u%ust, 19@;, and

startin% with the month o Septem+er, 19@;,

to pa* to the plaintif or one /12 *ear a

monthl* rental o l,;7.;78 and an

additional amount o 5 per cent o said

amount, and or so much amount ever*

month thereater e)uivalent to the rental o

the month o ever* precedin% *ear plus 5

percent o same monthl* rental until the

deendant shall nall* vacate said premisesand possession thereo wholl* restored to

the plaintif-all plus le%al interest rom date

o lin% o the complaint?



su+stantial compliance o the re)uisites o

consi%nation, hence his pa*ments were

valid and efective. &onse)uentl*, #rancisco

cannot +e e=ected rom the leased premises

or non-pa*ment o rentals. ...

0s indicated earlier, the a+ove decision othe &ourt o #irst (nstance reversed the

=ud%ment o the &it* &ourt o &e+u, Granch

11, the dispositive portion o the latter

readin% as ollows<

"JE#CE, =ud%ment is here+* rendered

in avor o the plaintif, orderin% the

deendant, Ee%ino #rancisco, Kr.<

/12 To vacate immediatel* the premises in

)uestion, consistin% o a +uildin% located at

4analili St., &e+u &it*?

/2 To pa* to the plaintif the sum o

;,9;.8 or the rentals, coverin% the

o lin% o the complaint?


9,;;;.;; or attorne*>s ee?


5,;;;.;; or dama%es and incidentalliti%ation epenses? and

/52 To pa* the &osts.

SCCEE.

&e+u &it*, hilippines, Dovem+er 1, 19@;.

/S$.4CDT

0ctin%

0ccordin% to the ndin%s o act made +* the &it* &ourt,

the deendant #rancisco had reli%iousl* paid to the

plaintif Soco the correspondin% rentals accordin% to the

terms o the :east &ontract while en=o*in% the leased

premises until one da* the plaintif had to demand upon

the deendant or the pa*ment o the rentals or the

month o 4a*, 1977 and o the succeedin% months. The

plaintif also demanded upon the deendant to vacate

the premises and rom that time he ailed or reused to

vacate his possession thereo? that +e%innin% with the

month o 4a*, 1977 until at present, the deendant has

not made valid pa*ments o rentals to the plaintif who,

as a conse)uence, has not received an* rental pa*mentrom the deendant or an*+od* else? that or the months

o 4a* to 0u%ust, 1977, evidence shows that the

plaintif throu%h her dau%hter Teolita Soco and sales%irl

1977 +* #ilomeno Soon, messen%er o the #0E

&orporation contained cash mone*, chec!, mone* order,

or an* other orm o note o value, hence there could

never +e an* tender o pa*ment, and even %rantin% that

there was, +ut plaintif reused to accept it without an*

reason, still no consi%nation or 4a*, 1977 rental could

+e considered in avor o the deendant unless evidence

is presented to esta+lish that he actuall* made rental

deposit with the court in cash mone* and prior and

su+se)uent to such deposit, he notied the plaintifthereo.

Dotwithstandin% the contradictor* ndin%s o act and



plaintif throu%h her dau%hter, Teolita Soco and sales%irl,

Iilma 0ron%, went to the oBce or residence o

deendant at Sancian%!o St., &e+u &it*, on various

occasions to efect pa*ment o rentals +ut were una+le

to collect on account o the deendant>s reusal to pa*?

that deendant contended that pa*ments o rental thru

chec!s or said our months were made to the plaintif+ut the latter reused to accept them? that in 1975,

deendant authorized the &ommercial Gan! and Trust

&ompan* to issue chec!s to the plaintif char%ea+le

a%ainst his +an! account, or the pa*ment o said

rentals, and the deliver* o said chec!s was coursed +*

the +an! thru the messen%erial services o the #0E

&orporation, +ut the plaintif reused to accept them and

+ecause o such reusal, deendant instructed said +an!

to ma!e consi%nation with the &ler! o &ourt o the &it*

&ourt o &e+u as re%ard said rentals or 4a* to 0u%ust,

1977 and or su+se)uent months.

The &it* &ourt urther ound that there is no showin%

that the letter alle%edl* delivered to the plaintif in 4a*,

Dotwithstandin% the contradictor* ndin%s o act and

the resultin% opposite conclusions o law +* the &it*

&ourt and the &ourt o #irst (nstance, +oth are a%reed,

however, that the case presents the issue o whether

the lessee ailed to pa* the monthl* rentals +e%innin%

4a*, 1977 up to the time the complaint or eviction was

led on Kanuar* @, 1979. This issue in turn revolves onwhether the consi%nation o the rentals was valid or not

to dischar%e efectivel* the lessee>s o+li%ation to pa*

the same. The &it* &ourt ruled that the consi%nation

was not valid. The &ourt o #irst (nstance, on the other

hand, held that there was su+stantial compliance with

the re)uisites o the law on consi%nation.

:et us eamine the law and consider Cur =urisprudence

on the matter, aside rom the codal provisions alread*cited herein.

0ccordin% to 0rticle 158, Dew &ivil &ode, i the creditor

to whom tender o pa*ment has +een made reuses

without =ust cause to accept it, the de+tor shall +e

released rom responsi+ilit* +* the consi%nation o the

thin% or sum due. &onsi%nation alone shall produce the

same efect in the ollowin% cases< /12 "hen the creditor

is a+sent or un!nown, or does not appear at the place o

pa*ment? /2 "hen he is incapacitated to receive the

pa*ment at the time it is due? /32 "hen, without =ust

cause, he reuses to %ive a receipt? /2 "hen two or

more persons claim the same ri%ht to collect? /52 "hen

the title o the o+li%ation has +een lost.

&onsi%nation is the act o depositin% the thin% due with

the court or =udicial authorities whenever the creditor

cannot accept or reuses to accept pa*ment and it

%enerall* re)uires a prior tender o pa*ment. /:im!a!o

"ithout the notice rst announced to the persons

interested in the ulllment o the o+li%ation, the

consi%nation as a pa*ment is void. /:im!a!o vs.

Teodoro, 7 hil. 3132,

(n order to +e valid, the tender o pa*ment must +e

made in lawul currenc*. "hile pa*ment in chec! +* the

de+tor ma* +e accepta+le as valid, i no prompt

o+=ection to said pa*ment is made /es+arats vs. Ida.

de 4ortera, :-915, 4a* 5, 19582 the act that in

previous *ears pa*ment in chec! was accepted does not

place its creditor in estoppel rom re)uirin% the de+tor

to pa* his o+li%ation in cash /S* vs. uemio, :-1;57,



%enerall* re)uires a prior tender o pa*ment. /:im!a!o

vs. Teodoro, 7 hil. 3132.

(n order that consi%nation ma* +e efective, the de+tor

must rst compl* with certain re)uirements prescri+ed

+* law. The de+tor must show /12 that there was a de+t

due? /2 that the consi%nation o the o+li%ation had+een made +ecause the creditor to whom tender o

pa*ment was made reused to accept it, or +ecause he

was a+sent or incapacitated, or +ecause several

persons claimed to +e entitled to receive the amount

due /0rt. 1178, &ivil &ode2? /32 that previous notice o

the consi%nation had +een %iven to the person

interested in the perormance o the o+li%ation /0rt.

1177, &ivil &ode2? /2 that the amount due was placed

at the disposal o the court /0rt. 117@, &ivil &ode2? and/52 that ater the consi%nation had +een made the

person interested was notied thereo /0rt. 117@, &ivil

&ode2. #ailure in an* o these re)uirements is enou%h

%round to render a consi%nation inefective. /Kose once

de :eon vs. Santia%o S*=uco, (nc., 9; hil. 3112.

to pa* his o+li%ation in cash /S* vs. uemio, : 1;57,

Sept. 3;, 195@2. Thus, the tender o a chec! to pa* or

an o+li%ation is not a valid tender o pa*ment thereo

/es+arats vs. Ida. de 4ortera, supra2. See 0nnotation,

The 4echanics o &onsi%nation +* 0tt*. S. Ta+ios, 1;

S&E0 17-179.

Tender o pa*ment must +e distin%uished rom

consi%nation. Tender is the antecedent o consi%nation,

that is, an act preparator* to the consi%nation, which is

the principal, and rom which are derived the immediate

conse)uences which the de+tor desires or see!s to

o+tain. Tender o pa*ment ma* +e etra=udicial, while

consi%nation is necessaril* =udicial, and the priorit* o

the rst is the attempt to ma!e a private settlement

+eore proceedin% to the solemnities o consi%nation. /@4anresa 352.

Eeviewin% careull* the evidence presented +*

respondent lessee at the trial o the case to prove his

compliance with all the re)uirements o a valid tender o

pa*ment and consi%nation and rom which the

respondent Kud%e +ased his conclusion that there was

su+stantial compliance with the law on consi%nation, "e

note rom the assailed decision herein+eore )uoted

that these evidences are< hi+it 1;, the letter o 0tt*.

ampio 0+arintos dated Kune 9, 1977< hi+it 1, letter

o 0tt*. ampio 0+arintos dated Kul* 8, 1977? hi+it 1,

the 0nswer o respondent #rancisco in &ivil &ase E-

1881, particularl* para%raph 7 o the Special and

0Brmative eenses? and hi+it 1, letter o 0tt*. ric

4enchavez dated Dovem+er @, 197@. 0ll theseevidences, accordin% to respondent Kud%e, proved that

petitioner lessor was notied o the deposit o the

monthl* rentals

(t appears that twice *ou reused

acceptance o the said pa*ment made +*

m* client.

(t appears urther that m* client had called

*our oBce several times and let a messa%e

or *ou to %et this pa*ment o rental +ut

until the present *ou have not sent

some+od* to %et it.

(n this connection, thereore, in +ehal o m*

client, *ou are here+* re)uested to please

%et and claim the rental pa*ment



monthl* rentals.

"e have anal*zed and scrutinized closel* the a+ove

ehi+its and "e nd that the respondent Kud%e>s

conclusion is maniestl* wron% and +ased on

misapprehension o acts. Thus-

/12 hi+it 1; reads< /see p. 17, Eecords2

Kune 9, 1977

4iss Soledad Soco

Soledad Soco Eetazo

. $ullas St., &e+u &it*

ear 4iss Soco<

This is in connection with the pa*ment o

rental o m* client, n%r. Ee%ino #rancisco,

Kr., o *our +uildin% situated at 4analili St.,

&e+u &it*.

% p *

aorestated rom the CBce o m* client at

Ta%alo% Jotel and Eestaurant, Sancian%!o

St., &e+u &it*. within three /32 da*s rom

receipt hereo otherwise we would +e

constrained to ma!e a consi%nation o the

same with the &ourt in accordance with law.

Jopin% or *our cooperation on this matter,

we remain.

Ier

*

tru

l*

*ours

,

/S

$

.2

0

4(C

0.

0G

0E(

DT

CS

&o

unsel

or

n

/2 hi+it 1 /see p. 37, Eecords2 states<

Kul* 8,

4iss Soledad Soco

Soledad Soco Eeta

. $ullas St., &e+u &it*

ear 4iss Soco<

This is to advise and inorm *ou that m*client, n%r. Ee%ino #rancisco, Kr., has

consi%ned to *ou, throu%h the &ler! o

& &i & & + & + &i h



n

%r.

E

$(

DC

#E

0D&(S

&C

, Kr.

"e ma* a%ree that the a+ove ehi+it proves tender o

pa*ment o the particular monthl* rental reerred to /the

letter does not, however, indicate or what month and

also the intention to deposit the rental with the court,

which is the rst notice. Gut certainl*, it is no proo otender o pa*ment o other or su+se)uent monthl*

rentals. Deither is it proo that notice o the actual

deposit or consi%nation was %iven to the lessor, which is

the second notice re)uired +* law.

&ourt, &it* &ourt o &e+u, &e+u &it*, the

total amount o l,@5.;, as evidenced +*

cashier>s chec!s Do. 7@39 and 79;7

issued +* the &ommercial Gan! and Trust

&ompan* /&GT&2 &e+u &it* Granch, dated

4a* 11, 1977 and Kune 15, 1977

respectivel* and pa*a+le to *our order,

under CBcial Eeceipt Do. ;38938 dated

Kul* 8,1977.

This amount represents pa*ment o the

rental o *our +uildin% situated at 4analili

St., &e+u &it* which m* client, n%r. Ee%ino

#rancisco, Kr., is rentin%. Hou can withdraw

the said amount rom the &ler! o &ourt,&it* &ourt o &e+u, &e+u &it* at an* time.

lease +e urther notied that all

su+se)uent monthl* rentals will +e

deposited to the &ler! o &ourt, &it* &ourt o

&e+u, &e+u &it*.

Ier

*tru

l*

*o

urs

,

/S

$

.2

0

4

&C

, KE.

The a+ove evidence is, o course, proo o notice to the

lessor o the deposit or consi%nation o onl* t'e to

pa#ments +* cashier>s chec!s indicated therein. Gut

surel*, it does not prove an* other deposit nor the

notice thereo to the lessor. (t is not even proo o the

tender o pa*ment that would have preceded the

consi%nation.

/32 hi+it 1, para%raph 7 o the 0nswer /see p. 8,



(C

0.

0G

0E(

DT

CS

&o

un

sel

or

D

$E

.

E$(

DC

#E

0D

&(S

Eecords2 alle%es<

7. That ever since, deendant had +een

reli%iousl* pa*in% his rentals without an*

dela* which, however, the plaintif had in so

man* occasions reused to accept o+viousl*in the hope that she ma* declare non-

pa*ment o rentals and claim it as a %round

or the cancellation o the contract o lease.

This, ater seein% the improvements in the

area which were efected, at no small

epense +* the deendant. To preserve

deendant>s ri%hts and to show %ood aith in

up to date pa*ment o rentals, deendant

had authorized his +an! to issue re%ularl*cashier>s chec! in avor o the plaintif as

pa*ment o rentals which the plaintif had

+een acceptin% durin% the past *ears and

even or the months o Kanuar* up to 4a* o

this *ear, 1977 wa* past plaintif>s claim o

lease epiration. #or the months o Kune and

Kul*, however, plaintif a%ain started

reusin% to accept the pa*ments in %oin%+ac! to her previous strate%* which orced

the deendant to consi%n his monthl* rental

with the &it* &ler! o &ourt and which is

now the present state o afairs in so ar as

pa*ment o rentals is concerned. These

events onl* %oes to show that the wil*

plaintif had thou%ht o this mischievous

scheme onl* ver* recentl* and led hereinmalicious and unounded complaint.

The a+ove ehi+it which is lited rom &ivil &ase Do. E-

(t is not true that m* client has not paid the

rentals as claimed in *our letter. 0s a mattero act, he has +een reli%iousl* pa*in% the

rentals in advance. a*ment was made +*

&ommercial Gan! and Trust &ompan* to the

&ler! o &ourt, &e+u &it*. 0ttached herewith

is the receipt o pa*ment made +* him or

the month o Dovem+er, 197@ which is

dated Dovem+er 18, 197@.

Hou can chec! this up with the &it* &ler! o

&ourt or satisaction.



1881 +etween the parties or annulment o the lease

contract, is sel-servin%. The statements therein are

mere alle%ations o conclusions which are not

evidentiar*.

/2 hi+it 1 /see p. 15, Eecords2 is )uoted thus<

Dovem+er @,

197@

0tt*. :uis I. iores

Suite 5;, SSS Gld%.

Kones 0venue, &e+u &it*

ear &ompa]ero<

Hour letter dated Dovem+er 3, 197@ which

was addressed to m* client, n%r. Ee%ino

#rancisco, Kr. has +een reerred to me or

repl*.

Ee%ards.

/S$.

4D&

&ouns

Ee%in#ranci

377-G

Kun)u

&e+u

/new

0%ain, hi+it 1 merel* proves rental deposit or the

particular month o Dovem+er, 197@ and no other. (t is

no proo o tender o pa*ment to the lessor, not evenproo o notice to consi%n. "e hold that the +est

evidence o the rental deposits with the &ler! o &ourt

are the oBcial receipts issued +* the &ler! o &ourt.

These the respondent lessee utterl* ailed to present

and produce durin% the trial o the case. 0s pointed out

in petitioner>s 4emorandum, no sin%le oBcial receipt

was presented in the trial court as nowhere in the

ormal ofer o ehi+its or lessee #rancisco can a sin%leoBcial receipt o an* deposit made +e ound /pp. @-9,

4emorandum or etitioner? pp. 183-18, Eecords2.

Summin% up Cur review o the a+ove our /2 ehi+its,

"e hold that the respondent lessee has utterl* ailed to

prove the ollowin% re)uisites o a valid consi%nation<

#irst, tender o pa*ment o the monthl* rentals to the

lessor ecept that indicated in the Kune 9, l977 :etter,

hi+it 1;. (n the ori%inal records o the case, "e note

that the certication, hi+it 11 o #ilemon Soon,

messen%er o the #0E &orporation, certi*in% that the

There is no actual +asis or the lower court>s ndin%

that the lessee had tendered pa*ment o the monthl*rentals, thru his +an!, citin% the lessee>s letter /h. 2

re)uestin% the +an! to issue chec!s in avor o Soco in

the amount o @;.;; ever* 1;th o each month and to

deduct the ull amount and service ee rom his current

account, as well as hi+it 5, letter o the Iice resident

a%reein% with the re)uest. Gut scrutinizin% careull*

hi+it , this is what the lessee also wrote< 'lease

immediatel* noti* us ever*time *ou have the chec!read* so we ma* send some+od* over to %et it. ' 0nd

this is eactl* what the +an! a%reed< 'lease +e advised

that we are in conormit* to the a+ove arran%ement



letter o Soledad Soco sent last 4a* 1; +* &ommercial

Gan! and Trust &o. was mar!ed ETS /return to sender2

or the reason that the addressee reused to receive it,

was re=ected +* the court or +ein% immaterial,

irrelevant and impertinent per its Crder dated

Dovem+er ;, 19@;. /See p. 117, &#( Eecords2.

Second, respondent lessee also ailed to prove the rst

notice to the lessor prior to consi%nation, ecept the

pa*ment reerred to in hi+it 1;.

(n this connection, the purpose o the notice is in order

to %ive the creditor an opportunit* to reconsider his

un=ustied reusal and to accept pa*ment there+*

avoidin% consi%nation and the su+se)uent liti%ation. This previous notice is essential to the validit* o the

consi%nation and its lac! invalidates the same.

/&a+anos vs. &alo, 1; hil. 1;5@? :im!a!o vs. Teodoro,

7 hil. 3132.

* %

with the understandin% that *ou shall send some+od*

over to pic! up the cashier>s chec! rom us.' /hi+it ,

see p. 3;, Cri%inal Eecords? hi+it 5, p. 31, Cri%inal

Eecords2

videntl*, rom this arran%ement, it was the lessee>sdut* to send someone to %et the cashier>s chec! rom

the +an! and lo%icall*, the lessee has the o+li%ation to

ma!e and tender the chec! to the lessor. This the lessee

ailed to do, which is atal to his deense.

Third, respondent lessee li!ewise ailed to prove the

second notice, that is ater consi%nation has +een

made, to the lessor ecept the consi%nation reerred to

in hi+it 1 which are the cashier>s chec! Dos. 7@39and 79;7 &GT& dated 4a* 11, 1977 and Kune 15, 1977

under CBcial Eeceipt Do. ;389 dated Kul* 8, 1977.

Eespondent lessee, attemptin% to prove compliance

with the re)uisites o valid consi%nation, presented the

representative o the &ommercial Gan! and Trust &o.,

d%ar Cca]ada, Gan! &omptroller, who unortunatel*

+elied respondent>s claim. "e )uote +elow ecerptsrom his testimon*, as ollows<

0TTH. :A(S (CES<

"hat month did *ou sa* *ou

made ,*ou started ma!in% the

depositV "hen *ou rst

deposited the chec! to the &ler!

o &ourtV

0 The pa*ment o cashier>s

h ! i 4i S l d d

0 Hes.

Hou were issued the receipts

o those chec!sV

0 "ell, we have an

ac!nowled%ment letter to +e

si%ned +* the one who received

the chec!.

Hou mean *ou were issued, or*ou were not issued an* oBcial

receiptV 4* )uestion is whether

i d B i l



chec! in avor o 4iss Soledad

Soco was coursed thru the &it*

&ler! o &ourt rom the letter o

re)uest +* our client Ee%ino

#rancisco, Kr., dated Septem+er

@, 1977. #rom that time on,+ased on his re)uest, we

delivered the chec! direct to the

&it* &ler! o &ourt.

"hat date, what month was

that, *ou rst delivered the

chec! to the &ler! o &ourt.V

0 "e started Septem+er 1,1977.

Septem+er 1977 up to the

present time, *ou delivered the

cashier>s chec! to the &it* &ler!

o &ourtV

*ou were issued an* oBcial

receiptV So, were *ou issued, or

*ou were not issuedV

0 "e were not issued.

Cn Septem+er, 1977, ater

*ou deposited the mana%er>s

chec! or that month with the

&ler! o &ourt, did *ou serve

notice upon Soledad Soco that

the deposit was made on such

amount or the month o

Septem+er, 1977 and now to

the &ler! o &ourtV id *ou ordid *ou notV

0 "ell, we onl* act on

somethin% upon the re)uest o

our client.

lease answer m* )uestion. (

!now that *ou are actin% uponinstruction o *our client. 4*

)uestion was-ater *ou made

the deposit o the mana%er>s

chec! whether or not *ou

notied Soledad Soco that such

mana%er>s chec! was deposited

in the &ler! o &ourt rom the

month o Septem+er, 1977V

0 "e are not +ound to.

!i h h

0 ( did not.

Hou did not also noti* Soledad

Soco or the month ecem+er,

1977, so also rom Kanuar*,

#e+ruar*, 4arch, 0pril, 4a*,

Kune, Kul* until ecem+er, 197@,

*ou did not also noti* 4iss

Soledad Soco all the deposits o

the mana%er>s chec! which *ou

said *ou deposited with the

&ler! o &ourt in ever* end o

the monthV So also rom each



( am not as!in% whether *ou

are +ound to or not. (>mas!in%

whether *ou did or *ou did notV

0 ( did not.

0lri%ht, or Ccto+er, 1977,

ater havin% made a deposit or

that particular month, did *ou

noti* 4iss Soledad Soco that

the deposit was in the &ler! o

&ourtV

0 Do, we did not.

Dow, on Dovem+er, 1977, did

*ou noti* Soledad Soco that

*ou deposited the mana%er>s

chec! to the &it* &ler! o &ourt

or that monthV

and ever* month rom Kanuar*

1979 up to ecem+er 1979, *ou

did not also serve notice upon

Soledad Socco o the deposit in

the &ler! o &ourt, is that

correctV

0 Hes.

So also in Kanuar* 19@; up to

this month 19@;, *ou did not

instructed +* *our client 4r. and

4rs. Ee%ino #rancisco, =r. to

ma!e also serve notice upon

Soledad Soco o the 4ana%er>schec! which *ou said *ou

deposited to the &ler! o &ourtV

0 ( did not.

Dow, *ou did not ma!e such

notices +ecause *ou were notsuch notices ater the deposits

*ou made, is that correctV

0 Hes, sir.

Dow, rom 1977, Septem+er

up to the present time, +eore

the deposit was made with the

&ler! o &ourt, did *ou serve

notice to Soledad Soco that a

deposit was %oin% to +e made in

h d thV

that such notication should +e

made +eore the deposit andater the deposit was made, is

that correctV

0 Do, ( did not. /Testimon* o

Ccanada pp. 3-1, Jearin% on

Kune 3, 19@;2.

Eecapitulatin% the a+ove testimon* o the Gan!

&omptroller, it is clear that the +an! did not send notice

to Soco that the chec!s will +e deposited in

consi%nation with the &ler! o &ourt /the rst notice2

d l th + ! did t d ti t S th t th



each and ever* monthV

0 Dot.

(n other words, rom

Septem+er 1977 up to the

present time, *ou did not noti*

Soledad Soco that *ou were

%oin% to ma!e the deposit with

the &ler! o &ourt, and *ou did

not also noti* Soledad Soco

ater the deposit was made, that

a deposit has +een made in

each and ever* month durin%

that period, is that correctV

0 Hes

0nd the reason was +ecause

*ou were not instructed +* 4r.

and 4rs. Ee%ino #rancisco, Kr.

and also, the +an! did not send notice to Soco that the

chec!s were in act deposited /the second notice2

+ecause no instructions were %iven +* its depositor, the

lessee, to this efect, and this lac! o notices started

rom Septem+er, 1977 to the time o the trial, that is

Kune 3, 19@;.

The reason or the notication to the persons interested

in the ulllment o the o+li%ation ater consi%nation had

+een made, which is separate and distinct rom the

notication which is made prior to the consi%nation, is

stated in &a+anos vs. &alo, $.E. Do. :-1;97, Ccto+er

3;, 195@, 1; hil. 1;5@. thus< 'There should +e notice

to the creditor prior and ater consi%nation as re)uired

+* the &ivil &ode. The reason or this is o+vious,namel*, to ena+le the creditor to withdraw the %oods or

mone* deposited. (ndeed, it would +e un=ust to ma!e

him sufer the ris! or an* deterioration, depreciation or

loss o such %oods or mone* +* reason o lac! o

!nowled%e o the consi%nation.'

0nd the ourth re)uisite that respondent lessee ailed to

prove is the actual deposit or consi%nation o themonthl* rentals ecept the two cashier>s chec!s reerred

to in hi+it 1. 0s indicated earlier, not a sin%le cop* o

the oBcial receipts issued +* the &ler! o &ourt was

presented at the trial o the case to prove the actual

deposit or consi%nation. "e nd, however, reerence to

some 5 copies o oBcial receipts issued +* the &ler! o

&ourt mar!ed 0nnees 'G-1 ' to 'G-;' to the 4otion or

Eeconsideration o the Crder %rantin% eecutionpendin% appeal led +* deendant #rancisco in the &it*

&ourt o &e+u /pp, 15;-19, &#( Cri%inal Eecords2 as

well as in the 4otion or Eeconsideration o the &#(

deposited on Dovem+er ;, 1979 /0nne 'G-15', p. 189,

Cri%inal &#( Eecords2 and under CBcial Eeceipt Do.1897159Z, the rental deposit or Kul* under &hec! Do.

7987 was deposited on Dovem+er ;, 1979 /0nne

'G-18', p. 17;, Cri%inal &#( Eecords2. (ndeed, these two

rental deposits were made on Dovem+er ;, 1979, two

*ears late and ater the lin% o the complaint or ille%al

detainer.

The decision under review cites hi+its 8, 7, @ and 9,

the e+it 4emorandum issued +* &omtrust Gan!

deductin% the amounts o the chec!s therein indicated

rom the account o the lessee, to prove pa*ment o the



decision, led +* plaintif lessor /pp. 39-5;, Eecords,

mar!ed 0nne ' '2 the alle%ation that 'there was no

receipt at all showin% that deendant #rancisco has

deposited with the &ler! o &ourt the monthl* rentals

correspondin% to the months o 4a* and Kune, 1977.

0nd or the months o Kul* and 0u%ust, 1977, the rentalswere onl* deposited with the &ler! o &ourt on ;

Dovem+er 1979 /or more than two *ears later2.'... The

deposits o these monthl* rentals or Kul* and 0u%ust,

1977 on ; Dovem+er 1979, is ver* si%nicant +ecause

on Ccto+er 1979, plaintif Soco had testied +eore

the trial court that deendant had not paid the monthl*

rentals or these months. Thus, deendant had to ma!e

a hurried deposit on the ollowin% month to repair his

ailure. ' /pp. 3-, Eecords2.

"e have veried the truth o the a+ove claim or

alle%ation and "e nd that indeed, under CBcial

Eeceipt Do. 1897181Z, the rental deposit or 0u%ust,

1977 in cashier>s chec! Do. 5;7@ dated @-1;-77 was

monthl* rentals. Gut these e+it 4emorandums are

merel* internal +an!in% practices or oBce procedures

involvin% the +an! and its depositor which is not +indin%

upon a third person such as the lessor. "hat is

important is whether the chec!s were pic!ed up +* the

lessee as per the arran%ement indicated in hi+its and 5 wherein the lessee had to pic! up the chec!s

issued +* &GT& or to send some+od* to pic! them up,

and lo%icall*, or the lessee to tender the same to the

lessor. Cn this vital point, the lessee misera+l* ailed to

present an* proo that he complied with the

arran%ement.

"e, thereore, nd and rule that the lessee has ailed to

prove tender o pa*ment ecept that in h. 1;? he hasailed to prove the rst notice to the lessor prior to

consi%nation ecept that %iven in h. 1;? he has ailed

to prove the second notice ater consi%nation ecept the

two made in h. 1? and he has ailed to pa* the

rentals or the months o Kul* and 0u%ust, 1977 as o the

time the complaint was led or the eviction o the

lessee. "e hold that the evidence is clear, competentand convincin% showin% that the lessee has violated the

terms o the lease contract and he ma*, thereore, +e

=udiciall* e=ected.

The other matters raised in the appeal are o no

moment. The motion to dismiss led +* respondent on

the %round o 'want o specic assi%nment o errors in

the appellant>s +rie, or o pa%e reerences to the

records as re)uired in Section 18/d2 o Eule 8,' is

without merit. The petition itsel has attached the

decision sou%ht to +e reviewed. Goth etition and

d h i i i h

error properl* assi%ned or upon which the

determination o the )uestioned raised +*the error properl* assi%ned is dependent,

will +e considered +* the appellate court

notwithstandin% the ailure to assi%n it as an

error.' /Crti%as, Kr. vs. :uthansa $erman

0irlines, :-@773, Kune 3;, 1975, 8 S&E0

81;2

Ander Section 5 o Eule 53, the appellate

court is authorized to consider a plain error,

althou%h it was not specicall* assi%ned +*

appellants.' /ila% vs. Jeirs o Eesurreccion,

8 hil 8 92



4emorandum o the petitioner contain the summar*

statement o acts? the* discuss the essential re)uisites

o a valid consi%nation? the erroneous conclusion o the

respondent Kud%e in reversin% the decision o the &it*

&ourt, his %rave a+use o discretion which, the

petitioner ar%ues, 'has so ar departed rom theaccepted and usual course o =udicial proceedin% in the

matter o appl*in% the law and =urisprudence on the

matter.' The 4emorandum urther cites other +asis or

petitioner>s plea.

(n Cur mind, the errors in the appealed decision are

suBcientl* stated and assi%ned. 4oreover, under Cur

rulin%s, "e have stated that<

This &ourt is clothed with ample authorit* to

review matters, even i the* are not

assi%ned as errors in the appeal, i it nds

that their consideration is necessar* in

arrivin% at a =ust decision o the case. 0lso,

an unassi%ned error closel* related to an

78 hil. 892

0ppellants need not ma!e specic

assi%nment o errors provided the* discuss

at len%th and assail in their +rie the

correctness o the trial court>s ndin%sre%ardin% the matter. Said discussion

warrants the appellate court to rule upon

the point +ecause it su+stantiall* complies

with Section 7, Eule 51 o the Eevised Eules

o &ourt, intended merel* to compel the

appellant to speci* the )uestions which he

wants to raise and +e disposed o in his

appeal. 0 clear discussion re%ardin% an error

alle%edl* committed +* the trial courtaccomplishes the purpose o a particular

assi%nment o error.' /&a+rera vs. Gelen, 95

hil. 5? 4i%uel vs &ourt o 0ppeals, :-

;7, Cct. 3;, 1989, 9 S&E0 78;-773,

cited in 4oran, &omments on the Eules o

&ourt, Iol. 11, 197; ed., p. 532.

leadin%s as well as remedial laws should +e

construed li+erall* in order that the liti%ants

ma* have ample opportunit* to prove their

respective claims, and that a possi+le denial

o su+stantial =ustice, due to le%al

technicalities, ma* +e avoided.'

/&oncepcion, et al. vs. The a*atas state

(mprovement &o., (nc., 1;3 hil. 1; 172.

"JE#CE, (D I(" C# 0:: TJ #CE$C(D$, the

decision o the &ourt o #irst (nstance o &e+u 1th

is en%a%ed in the sale, distri+ution and repair o motor

vehicles - or the ollowin% =o+ repair services andsuppl* o parts<

- Gleed in=ection pump and all nozzles?

- 0d=ust valve tappet?

- &han%e oil and lter?

- Cpen up and service our wheel +ra!es, clean andad=ust?

- :u+ricate accelerator lin!a%es?



decision o the &ourt o #irst (nstance o &e+u, 1th

Kudicial istrict, Granch L(( is here+* EIES and ST

0S(, and the derision o the &it* &ourt o &e+u,

Granch (( is here+* reinstated, with costs in avor o the

petitioner.

G.R. No. 124922. u*( 22, 199&

IMM" C%, +o/*g @us/*(ss u*+( t( *>( T stB(RAG%N ME$AL MANUFAC$URING,P(t/t/o*(, ?s. C%UR$ %F APPEALS >*+R%AWA" M%$%R SALES C%RP%RA$I%N,R(s)o*+(*ts.

E C I S I % N

MAR$INE=, J.!

Cn Kul* 1@, 199;, petitioner entrusted his Dissan

pic!-up car 19@@ modelM1N to private respondent - which

% ?

- Eeplace aircon +elt? and

- Eeplace +atter*MN

rivate respondent undertoo! to return the vehicleon Kul* 1, 199; ull* serviced and supplied in

accordance with the =o+ contract. 0ter petitioner paid in

ull the repair +ill in the amount o 1,397.;;,M3N private

respondent issued to him a %ate pass or the release o

the vehicle on said date. Gut came Kul* 1, 199;, the

latter could not release the vehicle as its +atter* was

wea! and was not *et replaced. :et with no option,

petitioner himsel +ou%ht a new +atter* near+* and

delivered it to private respondent or installation on thesame da*. Jowever, the +atter* was not installed and

the deliver* o the car was rescheduled to Kul* , 199;

or three /32 da*s later. "hen petitioner sou%ht to

reclaim his car in the aternoon o Kul* , 199;, he was

told that it was carnapped earlier that mornin% while

+ein% road-tested +* private respondents emplo*ee

alon% edro $il and erez Streets in aco, 4anila.rivate respondent said that the incident was reported

to the police.

Javin% ailed to recover his car and its accessories

or the value thereo, petitioner led a suit or dama%es

a%ainst private respondent anchorin% his claim on the

latters alle%ed ne%li%ence. #or its part, private

respondent contended that it has no lia+ilit* +ecause

the car was lost as a result o a ortuitous event - the

carnappin%. urin% pre-trial, the parties a%reed that<

/T2he cost o the Dissan ic! up our /2 door when the

in the perormance o its o+li%ation and held it lia+le to

petitioner or the value o the lost vehicle and itsaccessories plus interest and attorne*s ees.M8N Cn

appeal, the &ourt o 0ppeals /&02 reversed the rulin% o

the lower court and ordered the dismissal o petitioners

dama%e suit.M7N The &0 ruled that< /12 the trial court was

limited to resolvin% the issue o ne%li%ence as a%reed

durin% pre-trial? hence it cannot pass on the issue o

dela*? and /2 the vehicle was lost due to a ortuitous

event.

(n a petition or review to this &ourt, the principal

)uer* raised is whether a repair shop can +e held lia+le

th l t hi l hil th i i

http://sc.judiciary.gov.ph/jurisprudence/1998/jun1998/124922.htm#_edn1












/T2he cost o the Dissan ic!-up our /2 door when the

plaintif purchased it rom the deendant is 33,5;;.;;

ecludin% accessories which were installed in the

vehicle +* the plaintif consistin% o our /2 +rand new

tires, ma%wheels, stereo spea!er, amplier which

amount all in all to ;,;;;.;;. (t is a%reed that thevehicle was lost on Kul* , 199; approimatel* two /2

*ears and ve /52 months rom the date o the

purchase. (t was a%reed that the plaintif paid the

deendant the cost o service and repairs as earl* as Kul*

1, 199; in the amount o 1,397.;; which amount was

received and dul* receipted +* the deendant

compan*. (t was also a%reed that the present value o a

+rand new vehicle o the same t*pe at this time

is 5,;;;.;; without accessories.MN

The* li!ewise a%reed that the sole issue or trial was

who +etween the parties shall +ear the loss o the

vehicle which necessitates the resolution o whether

private respondent was indeed ne%li%ent.M5N 0ter trial,

the court a 7uo ound private respondent %uilt* o dela*

or the loss o a customers vehicle while the same is in

its custod* or repair or other =o+ servicesV

The &ourt resolves the )uer* in avor o the

customer. #irst, on the technical aspect involved.

&ontrar* to the &0s pronouncement, the rule that thedetermination o issues at a pre-trial conerence +ars

the consideration o other issues on

appeal, ecept those that ma* involve privile%e or

impeachin% matter,M@N is inapplica+le to this case. The

)uestion o dela*, thou%h not specicall* mentioned as

an issue at the pre-trial ma* +e tac!led +* the court

considerin% that it is necessaril* intertwined and

intimatel* connected with the principal issue a%reed

upon +* the parties, i.e. who will +ear the loss andwhether there was ne%li%ence. etitioners imputation o

ne%li%ence to private respondent is premised on dela*

which is the ver* +asis o the ormers complaint. Thus, it

was unavoida+le or the court to resolve the case,

particularl* the )uestion o ne%li%ence without

considerin% whether private respondent was %uilt* o

dela* in the perormance o its o+li%ation.

Cn the merits. (t is a not a deense or a repair shop

o motor vehicles to escape lia+ilit* simpl* +ecause the

dama%e or loss o a thin% lawull* placed in its

possession was due to carnappin%. &arnappin% per

se cannot +e considered as a ortuitous event. The act

that a thin% was unlawull* and orceull* ta!en rom

anothers ri%htul possession, as in cases o carnappin%,

does not automaticall* %ive rise to a ortuitous event. To

+e considered as such, carnappin% entails more than

the mere orceul ta!in% o anothers propert*. (t must +e

proved and esta+lished that the event was an act o

ven assumin% arguendo that carnappin% was dul*

esta+lished as a ortuitous event, still privaterespondent cannot escape lia+ilit*. 0rticle 1185 M11N o the

Dew &ivil &ode ma!es an o+li%or who is %uilt* o dela*

responsi+le even or a ortuitous event until he has

efected the deliver*. (n this case, private respondent

was alread* in dela* as it was supposed to deliver

petitioners car three /32 da*s +eore it was lost.

etitioners a%reement to the rescheduled deliver* does

not deeat his claim as private respondent had alread*

+reached its o+li%ation. 4oreover, such accession

cannot +e construed as waiver o petitioners ri%ht to

hold private respondent lia+le +ecause the car was

+l d h i i h d i + l











proved and esta+lished that the event was an act o

$od or was done solel* +* third parties and that neither

the claimant nor the person alle%ed to +e ne%li%ent has

an* participation.M9N (n accordance with the Eules o

evidence, the +urden o provin% that the loss was due to

a ortuitous event rests on him who invo!es itM1;N

- whichin this case is the private respondent. Jowever, other

than the police report o the alle%ed carnappin%

incident, no other evidence was presented +* private

respondent to the efect that the incident was not due

to its ault. 0 police report o an alle%ed crime, to which

onl* private respondent is priv*, does not suBce to

esta+lished the carnappin%. Deither does it prove that

there was no ault on the part o private respondent

notwithstandin% the parties a%reement at the pre-trialthat the car was carnapped. &arnappin% does not

oreclose the possi+ilit* o ault or ne%li%ence on the

part o private respondent.

unusa+le and thus, petitioner had no option +ut to leave

it.

0ssumin% urther that there was no dela*, still

wor!in% a%ainst private respondent is the le%al

presumption under 0rticle 185 that its possession o the thin% at the time it was lost was due to its ault.M1N This presumption is reasona+le since he who has the

custod* and care o the thin% can easil* eplain the

circumstances o the loss. The vehicle owner has no

dut* to show that the repair shop was at ault. 0ll that

petitioner needs to prove, as claimant, is the simple act

that private respondent was in possession o the vehicle

at the time it was lost. (n this case, private respondents

possession at the time o the loss is undisputed.&onse)uentl*, the +urden shits to the possessor who

needs to present controvertin% evidence suBcient

enou%h to overcome that presumption. 4oreover, the

eemptin% circumstances - earth)ua!e, Pood, storm or

other natural calamit* - when the presumption o ault is

not applica+leM13N do not concur in this case. 0ccordin%l*,

havin% ailed to re+ut the presumption and since thecase does not all under the eceptions, private

respondent is answera+le or the loss.

(t must li!ewise +e emphasized that pursuant to

0rticles 117 and 18 o the Dew &ivil &ode, lia+ilit*

attaches even i the loss was due to a ortuitous event i

the nature o the o+li%ation re)uires the assumption o

ris!.M1N &arnappin% is a normal +usiness ris! or those

en%a%ed in the repair o motor vehicles. #or =ust as the

owner is eposed to that ris! so is the repair shop since

the car was entrusted to it. That is wh*, repair shops are

re)uired to rst re%ister with the epartment o Trade

to provide securit* to a motor vehicle owner would

leave the latter at the merc* o the ormer. 4oreover, onthe assumption that private respondents repair +usiness

is dul* re%istered, it presupposes that its shop is

covered +* insurance rom which it ma* recover the

loss. ( private respondent can recover rom its insurer,

then it would +e un=ustl* enriched i it will not

compensate petitioner to whom no ault can +e

attri+uted. Ctherwise, i the shop is not re%istered, then

the presumption o ne%li%ence applies.

Cne last thin%. "ith respect to the value o the lost

vehicle and its accessories or which the repair shop is

lia+le it should +e +ased on the air mar!et value that













re)uired to rst re%ister with the epartment o Trade

and (ndustr* /T(2M15N and to secure an insurance polic*

or the shop coverin% the propert* entrusted +* its

customer or repair, service or maintenance as a pre-

re)uisite or such re%istrationaccreditation.M18N Iiolation

o this statutor* dut* constitutes ne%li%ence per se.M17N Javin% ta!en custod* o the vehicle, private

respondent is o+li%ed not onl* to repair the vehicle +ut

lia+le, it should +e +ased on the air mar!et value that

the propert* would command at the time it was

entrusted to it or such other value as a%reed upon +*

the parties su+se)uent to the loss. Such recovera+le

value is air and reasona+le considerin% that the value

o the vehicle depreciates. This value ma* +e recoveredwithout pre=udice to such other dama%es that a

claimant is entitled under applica+le laws







oblicon cases 3rd set

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