FIRST DIVISION [G.R. No. 128991. April 12, 2000] YOLANDA ROSELLO-BENTIR, SAMUEL ORMIDA !

"# $%ARITO ORMIDA, petitioners, vs. %ONORABLE MATEO M. LEANDA, i" &i' (!p!(i)* !' r+'i#i", -.#,+ o/ RT$, T!(lo0!" $i)*, Br!"(& 8, !"# LEYTE GUL1 TRADERS, IN$.,respondents. DE$ISION 2A UNAN, J.3 Reformation of an instrument is that remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mista e has been committed! "#$ It is predicated on the equitable maxim that equity treats as done that which ou%ht to be done! "&$ The rationale of the doctrine is that it would be un'ust and unequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meetin% of the minds of the parties! "($ )owe*er+ an action for reformation must be brou%ht within the period prescribed by law+ otherwise+ it will be barred by the mere lapse of time! The issue in this case is whether or not the complaint for reformation filed by respondent ,eyte -ulf Traders+ Inc! has prescribed and in the ne%ati*e+ whether or not it is entitled to the remedy of reformation sou%ht! Oldmiso On .ay #/+ #00&+ respondent ,eyte -ulf Traders+ Inc! 1herein referred to as respondent corporation2 filed a complaint for reformation of instrument+ specific performance+ annulment of conditional sale and dama%es with prayer for writ of in'unction a%ainst petitioners 3olanda Rosello45entir and the spouses Samuel and 6harito 7ormida! The case was doc eted as 6i*il 6ase No! 0&48/499 and raffled to :ud%e 7edro S! ;spina+ RT6+ Tacloban 6ity+ 5ranch <! Respondent corporation alle%ed that it entered into a contract of lease of a parcel of land with petitioner 5entir for a period of twenty 1&82 years startin% .ay /+ #0=9! >ccordin% to respondent corporation+ the lease was extended for another four 1?2 years or until .ay (#+ #00&! On .ay /+ #090+ petitioner 5entir sold the leased premises to petitioner spouses Samuel 7ormada and 6harito 7ormada! Respondent corporation questioned the sale alle%in% that it had a ri%ht of first refusal! Rebuffed+ it filed 6i*il 6ase No! 0&48/499 see in% the reformation of the expired contract of lease on the %round that its lawyer inad*ertently omitted to incorporate in the contract of lease executed in #0=9+ the *erbal a%reement or understandin% between the parties that in the e*ent petitioner 5entir leases or sells the lot after the expiration of the lease+ respondent corporation has the ri%ht to equal the hi%hest offer! Ncm In due time+ petitioners filed their answer alle%in% that the inad*ertence of the lawyer who prepared the lease contract is not a %round for reformation! They further contended that respondent corporation is %uilty of laches for not brin%in% the case for reformation of the lease contract within the prescripti*e period of ten 1#82 years from its execution! Respondent corporation then filed its reply and on No*ember #9+ #00&+ filed a motion to admit amended complaint! Said motion was %ranted by the lower court! "?$ Thereafter+ petitioners filed a motion to dismiss reiteratin% that the complaint should be dismissed on the %round of prescription!

On December #/+ #00/+ the trial court throu%h :ud%e 7edro S! ;spina issued an order dismissin% the complaint premised on its findin% that the action for reformation had already prescribed! The order reads@ Sc'uris ORD;R Resol*ed here is the defendantsA .OTION TO DIS.ISS 7,>INTIFFAS complaint on %round of prescription of action! It is claimed by plaintiff that he and defendant 5entir entered into a contract of lease of a parcel of land on .ay /+ #0=9 for a period of &8 years 1and renewed for an additional ? years thereafter2 with the *erbal a%reement that in case the lessor decides to sell the property after the lease+ she shall %i*e the plaintiff the ri%ht to equal the offers of other prospecti*e buyers! It was claimed that the lessor *iolated this ri%ht of first refusal of the plaintiff when she sureptitiously 1sic2 sold the land to co4defendant 7ormida on .ay /+ #090 under a Deed of 6onditional Sale! 7laintiffAs ri%ht was further *iolated when after disco*ery of the final sale+ plaintiff ordered to equal the price of co4defendant 7ormida was refused and a%ain defendant 5entir surreptitiously executed a final deed of sale in fa*or of co4defendant 7ormida in December ##+ #00#! The defendant 5entir denies that she bound herself to %i*e the plaintiff the ri%ht of first refusal in case she sells the property! 5ut assumin% for the sa e of ar%ument that such ri%ht of first refusal was made+ it is now contended that plaintiffAs cause of action to reform the contract to reflect such ri%ht of first refusal+ has already prescribed after #8 years+ counted from .ay /+ #099 when the contract of lease incepted! 6ounsel for defendant cited 6onde *s! .ala%a+ ,4 0?8/ :uly (#+ #0/= and Ramos *s! 6ourt of >ppeals+ #98 S6R> =(/+ where the Supreme 6ourt held that the prescripti*e period for reformation of a written contract is ten 1#82 years under >rticle ##?? of the 6i*il 6ode! This 6ourt sustains the position of the defendants that this action for reformation of contract has prescribed and hereby orders the dismissal of the case! SO ORD;R;D!"/$ On December &0+ #00/+ respondent corporation filed a motion for reconsideration of the order dismissin% the complaint! :uris On :anuary ##+ #00=+ respondent corporation filed an ur%ent ex-parte motion for issuance of an order directin% the petitioners+ or their representati*es or a%ents to refrain from ta in% possession of the land in question! 6onsiderin% that :ud%e 7edro S! ;spina+ to whom the case was raffled for resolution+ was assi%ned to the RT6+ .alolos+ 5ulacan+ 5ranch #0+ :ud%e Roberto >! Na*idad was desi%nated in his place! .ani an On .arch &9+ #00=+ upon motion of herein petitioners+ :ud%e Na*idad inhibited himself from hearin% the case! 6onsequently+ the case was re4raffled and assi%ned to RT6+ Tacloban 6ity+ 5ranch 9+ presided by herein respondent 'ud%e .ateo .! ,eanda! On .ay #8+ #00=+ respondent 'ud%e issued an order re*ersin% the order of dismissal on the %rounds that the action for reformation had not yet prescribed and the dismissal was Bpremature and precipitateB+ denyin% respondent corporation of its ri%ht to procedural due process! The order reads@ Suprema ORD;R

Stated briefly+ the principal ob'ecti*es of the twin motions submitted by the plaintiffs+ for resolution are@ 1#2 for the reconsideration of the Order of #/ December #00/ of the 6ourt 1RT6+ 5r! <2+ dismissin% this case+ on the sole %round of prescription of one 1#2 of the fi*e 1/2 causes of action of plaintiff in its complaint for BreformationB of a contract of leaseC and+ 1&2 for issuance by this 6ourt of an Order prohibitin% the defendants and their pri*ies4in4 interest+ from ta in% possession of the leased premises+ until a final court order issues for their exercise of dominical or possessory ri%ht thereto! The records of this case re*eal that co4defendant 5;NT;R 13olanda2 and plaintiff ,eyte -ulf Traders Incorporation+ represented by 6hairman 5enito >n%+ entered into a contract of lease of a parcel of land+ denominated as ,ot No! 9<94D+ located at Sa% ahan District+ Tacloban 6ity+ on 8/ .ay #0=9+ for a period of twenty 1&82 years+ 1later renewed for an additional two 1&2 years2! Included in said co*enant of lease is the *erbal understandin% and a%reement between the contractin% parties+ that when the defendant 1as lessor2 will sell the sub'ect property+ the plaintiff as 1lessee2 has the Bri%ht of first refusalB+ that is+ the ri%ht to equal the offer of any other prospecti*e third4party buyer! This a%reement 1sic2 is made apparent by para%raph ? of the lease a%reement statin%@ B?! I.7ROV;.;NT! The lessee shall ha*e the ri%ht to erect on the leased premises any buildin% or structure that it may desire without the consent or appro*al of the ,essor x x x pro*ided that any impro*ements existin% at the termination of the lease shall remain as the property of the ,essor without ri%ht to reimbursement to the ,essee of the cost or *alue thereof!B That the fore%oin% pro*ision has been included in the lease a%reement if only to con*ince the defendant4lessor that plaintiff desired a priority ri%ht to acquire the property 1ibid2 by purchase+ upon expiration of the effecti*ity of the deed of lease! In the course of the interplay of se*eral procedural mo*es of the parties herein+ the defendants filed their motion to admit their amended answer to plaintiffAs amended complaint! 6orrespondin%ly+ the plaintiff filed its opposition to said motion! The former court branch admitted the amended answer+ to which order of admission+ the plaintiff seasonably filed its motion for reconsideration! 5ut+ before the said motion for reconsideration was acted upon by the court+ the latter issued an Order on #/ December #00/+ DIS.ISSIN- this case on the lone %round of prescription of the cause of action of plaintiffAs complaint on BreformationB of the lease contract+ without anymore considerin% the remainin% cause of action+ *iD!@ 1a2 on Specific 7erformanceC 1b2 an >nnulment of Sale and TitleC 1c2 on Issuance of a Erit of In'unction+ and 1d2 on Dama%es! Eith due respect to the 'udicial opinion of the )onorable 7residin% :ud%e of 5ranch < of this 6ourt+ the undersi%ned+ to whom this case was raffled to after the inhibition of :ud%e Roberto Na*idad+ as actin% ma%istrate of 5ranch <+ feels not necessary any more to discuss at len%th that e*en the cause of action for BreformationB has not+ as yet+ prescribed! To the mind of this 6ourt+ the dismissal order ad*erted to abo*e+ was ob*iously premature and precipitate+ thus resultin% denial upon the ri%ht of plaintiff that procedural due process! The other remainin% four 1?2 causes of action of the complaint must ha*e been deliberated upon before that court acted hastily in dismissin% this case! E);R;FOR;+ in the interest of substantial 'ustice+ the Order of the court+ 15ranch <+ RT62 dismissin% this case+ is hereby ordered R;6ONSID;R;D and S;T >SID;!

,et+ therefore+ the motion of plaintiff to reconsider the Order admittin% the amended answer and the .otion to Dismiss this case 1ibid2+ be set for hearin% on .ay &?+ #00=+ at 9@(8 oAcloc in the mornin%! Ser*ice of notices must be effected upon parties and counsel as early as possible before said scheduled date! 6oncomitantly+ the defendants and their pri*ies4in4interest or a%ents+ are hereby ST;RN,3 E>RN;D not to enter+ in the meantime+ the liti%ated premises+ before a final court order issues %rantin% them dominical as well as possessory ri%ht thereto! To the motion or petition for contempt+ filed by plaintiff+ thru >tty! 5artolome 6! ,awsin+ the defendants may+ if they so desire+ file their answer or re'oinder thereto+ before the said petition will be set for hearin%! The latter are %i*en ten 1#82 days to do so+ from the date of their receipt of a copy of this Order! SO ORD;R;D!"=$ On :une #8+ #00=+ respondent 'ud%e issued an order for status quo ante+ en'oinin% petitioners to desist from occupyin% the property!"<$ >%%rie*ed+ petitioners herein filed a petition for certiorari to the 6ourt of >ppeals see in% the annulment of the order of respondent court with prayer for issuance of a writ of preliminary in'unction and temporary restrainin% order to restrain respondent 'ud%e from further hearin% the case and to direct respondent corporation to desist from further possessin% the liti%ated premises and to turn o*er possession to petitioners! On :anuary #<+ #00<+ the 6ourt of >ppeals+ after findin% no error in the questioned order nor %ra*e abuse of discretion on the part of the trial court that would amount to lac + or in excess of 'urisdiction+ denied the petition and affirmed the questioned order! "9$ > reconsideration of said decision was+ li ewise+ denied on >pril #=+ #00<!"0$ Thus+ the instant petition for re*iew based on the followin% assi%ned errors+ viz@ =!8# T); 6OFRT OF >77;>,S ;RR;D IN )O,DIN- T)>T >N >6TION FOR R;FOR.>TION IS 7RO7;R >ND :FSTIFI;D FND;R T); 6IR6F.ST>N6;S OF T); 7R;S;NT 6>S;C =!8& T); 6OFRT OF >77;>,S ;RR;D IN )O,DIN- T)>T T); >6TION FOR R;FOR.>TION )>S NOT 3;T 7R;S6RI5;DC =!8( T); 6OFRT OF >77;>,S ;RR;D IN )O,DIN- T)>T >N O7TION TO 5F3 IN > 6ONTR>6T OF ,;>S; IS R;VIV;D FRO. T); I.7,I;D R;N;E>, OF SF6) ,;>S;C >ND+ =!8? T); 6OFRT OF >77;>,S ;RR;D IN )O,DIN- T)>T > ST>TFS GFO >NT; ORD;R IS NOT >N IN:FN6TIV; R;,I;F T)>T S)OF,D 6O.7,3 EIT) T); 7ROVISIONS OF RF,; /9 OF T); RF,;S OF 6OFRT!"#8$ The petition has merit! Scsdaad The core issue that merits our consideration is whether the complaint for reformation of instrument has prescribed! Sdaad The remedy of reformation of an instrument is %rounded on the principle of equity where+ in order to express the true intention of the contractin% parties+ an instrument already executed is allowed by law to be reformed! The ri%ht of reformation is necessarily an in*asion or limitation of the parol e*idence rule since+ when a writin% is reformed+ the result is that an oral

a%reement is by court decree made le%ally effecti*e! "##$6onsequently+ the courts+ as the a%encies authoriDed by law to exercise the power to reform an instrument+ must necessarily exercise that power sparin%ly and with %reat caution and Dealous care! .oreo*er+ the remedy+ bein% an extraordinary one+ must be sub'ect to limitations as may be pro*ided by law! Our law and 'urisprudence set such limitations+ amon% which is laches! > suit for reformation of an instrument may be barred by lapse of time! The prescripti*e period for actions based upon a written contract and for reformation of an instrument is ten 1#82 years under >rticle ##?? of the 6i*il 6ode!"#&$ 7rescription is intended to suppress stale and fraudulent claims arisin% from transactions li e the one at bar which facts had become so obscure from the lapse of time or defecti*e memory!"#($ In the case at bar+ respondent corporation had ten 1#82 years from #0=9+ the time when the contract of lease was executed+ to file an action for reformation! Sadly+ it did so only on .ay #/+ #00& or twenty4four 1&?2 years after the cause of action accrued+ hence+ its cause of action has become stale+ hence+ time4barred! Sdaamiso In holdin% that the action for reformation has not prescribed+ the 6ourt of >ppeals upheld the rulin% of the Re%ional Trial 6ourt that the #84year prescripti*e period should be rec oned not from the execution of the contract of lease in #0=9+ but from the date of the alle%ed ?4year extension of the lease contract after it expired in #099! 6onsequently+ when the action for reformation of instrument was filed in #00& it was within ten 1#82 years from the extended period of the lease! 7ri*ate respondent theoriDed+ and the 6ourt of >ppeals a%reed+ that the extended period of lease was an Bimplied new leaseB within the contemplation of >rticle #=<8 of the 6i*il 6ode+"#?$ under which pro*ision+ the other terms of the ori%inal contract were deemed re*i*ed in the implied new lease! Ee do not a%ree! First+ if+ accordin% to respondent corporation+ there was an a%reement between the parties to extend the lease contract for four 1?2 years after the ori%inal contract expired in #099+ then >rt! #=<8 would not apply as this pro*ision spea s of an implied new lease 1tacita reconduccion2 where at the end of the contract+ the lessee continues to en'oy the thin% leased Bwith the acquiescence of the lessorB+ so that the duration of the lease is Bnot for the period of the ori%inal contract+ but for the time established in >rticle #=9& and #=9<!B In other words+ if the extended period of lease was expressly a%reed upon by the parties+ then the term should be exactly what the parties stipulated+ not more+ not less! Second+ e*en if the supposed ?4year extended lease be considered as an implied new lease under >rt! #=<8+ Bthe other terms of the ori%inal contractB contemplated in said pro*ision are only those terms which are %ermane to the lesseeAs ri%ht of continued en'oyment of the property leased !"#/$ The prescripti*e period of ten 1#82 years pro*ided for in >rt! ##?? "#=$ applies by operation of law+ not by the will of the parties! Therefore+ the ri%ht of action for reformation accrued from the date of execution of the contract of lease in #0=9! ;*en if we were to assume for the sa e of ar%ument that the instant action for reformation is not time4barred+ respondent corporationAs action will still not prosper! Fnder Section #+ Rule =? of the New Rules of 6ourt+"#<$ an action for the reformation of an instrument is instituted as a special ci*il action for declaratory relief! Since the purpose of an action for declaratory relief is to secure an authoritati*e statement of the ri%hts and obli%ations of the parties for their %uidance in the enforcement thereof+ or compliance therewith+ and not to settle issues arisin% from an alle%ed breach thereof+ it may be entertained only before the breach or *iolation of the law or contract to which it refers! "#9$ )ere+ respondent corporation brou%ht the present action for reformation after an alle%ed breach or *iolation of the contract was already committed by petitioner 5entir! 6onsequently+ the remedy of reformation no lon%er lies! Ncmmis Ee no lon%er find it necessary to discuss the other issues raised considerin% that the same are predicated upon our affirmati*e resolution on the issue of the prescription of the action for reformation!

4%ERE1ORE, the petition is hereby -R>NT;D! The Decision of the 6ourt of >ppeals dated :anuary #<+ #00< is R;V;RS;D and S;T >SID;! The Order of the Re%ional Trial 6ourt of Tacloban 6ity+ 5ranch <+ dated December #/+ #00/ dismissin% the action for reformation is R;INST>T;D! Scncm SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

FIRST DIVISION

[G.R. No. 156720. -."+ 80, 2006]

E);R;FOR;+ premises considered+ 'ud%ment is hereby rendered in fa*or of the plaintiff and a%ainst the defendants and orderin%@ #! the subdi*ision of the sub'ect property between the said plaintiff and defendants in equal shares with one4half of the property+ includin% the portion occupied by the spouses Se*erino and Nati*idad Tuliao to be awarded to the plaintiffC &! the cancellation of Transfer 6ertificates of Title Nos! N4#//#&&+ N4#//#&(+ N4 #//#&? of the Re%istry of Deeds of GueDon 6ityC (! the defendants to pay to the plaintiff 7/8+888!88 as attorneyAs fees! SO ORD;R;D!"/$ The trial court upheld the sale between ;u%enia and 6oncepcion! It ruled that the sale was consummated when both contractin% parties complied with their respecti*e obli%ations! ;u%enia transferred possession by deli*erin% the property to 6oncepcion who in turn paid the purchase price! It also declared that the transfer of the property did not *iolate the Statute of Frauds because a fully executed contract does not fall within its co*era%e! On appeal by the respondents+ the 6ourt of >ppeals re*ersed the decision of the trial court+ and declared the sale null and *oid! >pplyin% >rticle #&? of the Family 6ode+ the 6ourt of >ppeals ruled that since the sub'ect property is con'u%al+ the written consent of >ntonio must be obtained for the sale to be *alid! It also ordered the spouses 7adua to return the amount of 7#88+888!88 to petitioners plus interest!"=$ The sole issue for resolution in this petition for re*iew is whether there was a *alid contract of sale between ;u%enia and 6oncepcion! > contract of sale is perfected by mere consent+ upon a meetin% of the minds on the offer and the acceptance thereof based on sub'ect matter+ price and terms of payment! "<$ In this case+ there was a perfected contract of sale between ;u%enia and 6oncepcion! The records show that ;u%enia offered to sell a portion of the property to 6oncepcion+ who accepted the offer and a%reed to pay 7#88+888!88 as consideration! The contract of sale was consummated when both parties fully complied with their respecti*e obli%ations! ;u%enia deli*ered the property to 6oncepcion+ who in turn+ paid ;u%enia the price of One )undred Thousand 7esos 17#88+888!882+ as e*idenced by the receipt which reads@ R;6;I7T Recei*ed the amount of ON; )FNDR;D T)OFS>ND 7;SOS 17#88+888!882 as payment for the lot on 9/4> Durian St!+ 7ro'ect &+ GueDon 6ity+ from .rs! 6oncepcion R! >inDa+ on >pril+ #09<! IIIIIII1S%d!2IIIIII .rs!! ;u%enia >! 7adua"9$

$ON$E $ION R. AIN9A, '.0')i).)+# 0* &+r l+,!l &+ir', DR. NATI:IDAD A. TULIAO, $ORA9ON A. -ALE$O !"# LILIA A. OLAYON, petitioners, vs. S OUSES ANTONIO ADUA !"# EUGENIA ADUA, respondents. DE$ISION YNARES-SANTIAGO, J.3 This petition for re*iew on certiorari assails the February &?+ &88? decision of the 6ourt of >ppeals in 6>4-!R! 6V No! <8&(0+ "#$ and its September &9+ &88? resolution+ denyin% reconsideration thereof!"&$ In her complaint for partition of real property+ annulment of titles with dama%es+ "($ 6oncepcion >inDa 16oncepcion2 alle%ed that respondent4spouses ;u%enia 1;u%enia2 and >ntonio 7adua 1>ntonio2 owned a &#=!?8 sq! m! lot with an unfinished residential house located at No! 9/4> Durian corner 7a'o Sts!+ 5aran%ay Guirino &46+ 7ro'ect &+ GueDon 6ity+ co*ered by Transfer 6ertificate of Title No! &<#0(/! Sometime in >pril #09<+ she bou%ht one4half of an undi*ided portion of the property from her dau%hter+ ;u%enia and the latterAs husband+ >ntonio+ for One )undred Thousand 7esos 17#88+888!882! No Deed of >bsolute Sale was executed to e*idence the transaction+ but cash payment was recei*ed by the respondents+ and ownership was transferred to 6oncepcion throu%h physical deli*ery to her attorney4in4fact and dau%hter+ Nati*idad Tuliao 1Nati*idad2! 6oncepcion authoriDed Nati*idad and the latterAs husband+ 6eferino Tuliao 16eferino2 to occupy the premises+ and ma e impro*ements on the unfinished buildin%! Thereafter+ 6oncepcion alle%ed that without her consent+ respondents caused the subdi*ision of the property into three portions and re%istered it in their names under T6T Nos! N4#//#&&+ N4#//#&( and N4#//#&? in *iolation of the restrictions annotated at the bac of the title! On the other hand+ >ntonio a*erred that he bou%ht the property in #098 and introduced impro*ements thereon! 5etween #090 and #008+ he and his wife+ ;u%enia+ allowed Nati*idad and 6eferino to occupy the premises temporarily! In #00?+ they caused the subdi*ision of the property and three 1(2 separate titles were issued! Thereafter+ >ntonio requested Nati*idad to *acate the premises but the latter refused and claimed that 6oncepcion owned the property! >ntonio thus filed an e'ectment suit on >pril #+ #000! 6oncepcion+ represented by Nati*idad+ also filed on .ay ?+ #000 a ci*il case for partition of real property and annulment of titles with dama%es! >ntonio claimed that his wife+ ;u%enia+ admitted that 6oncepcion offered to buy one third 1#H(2 of the property who %a*e her small amounts o*er se*eral years which totaled 7#88+888!88 by #09< and for which she si%ned a receipt! On :anuary 0+ &88#+ the Re%ional Trial 6ourt of GueDon 6ity+ 5ranch 9/+ rendered 'ud%ment"?$ in fa*or of 6oncepcion+ the dispositi*e portion of which states@

The *erbal contract of sale between ;u%enia and 6oncepcion did not *iolate the pro*isions of the Statute of Frauds that a contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writin% and subscribed by the party char%ed or his a%ent! "0$ Ehen a *erbal contract has been completed+ executed or partially consummated+ as in this case+ its enforceability will not be barred by the Statute of Frauds+ which applies only to an executory a%reement! "#8$ Thus+ where one party has performed his obli%ation+ oral e*idence will be admitted to pro*e the a%reement! "##$ In the instant case+ the oral contract of sale between ;u%enia and 6oncepcion was e*idenced by a receipt si%ned by ;u%enia! >ntonio also stated that his wife admitted to him that she sold the property to 6oncepcion! It is undisputed that the sub'ect property was con'u%al and sold by ;u%enia in >pril #09< or prior to the effecti*ity of the Family 6ode on >u%ust (+ #099+ >rticle &/? of which repealed Title V+ 5oo I of the 6i*il 6ode pro*isions on the property relations between husband and wife! )owe*er+ >rticle &/= thereof limited its retroacti*e effect only to cases where it would not pre'udice or impair *ested or acquired ri%hts in accordance with the 6i*il 6ode or other laws! In the case at bar+ *ested ri%hts of 6oncepcion will be impaired or pre'udiced by the application of the Family 6odeC hence+ the pro*isions of the 6i*il 6ode should be applied! In e!ipe v. "eirs o# $!don, et a!. +"#&$ the le%al effect of a sale of con'u%al properties by the wife without the consent of the husband was clarified+ to wit@ The le%al %round which deser*es attention is the le%al effect of a sale of lands belon%in% to the con'u%al partnership made by the wife without the consent of the husband! It is useful at this point to re4state some elementary rules@ The husband is the administrator of the con'u%al partnership! 1>rt! #=/+ 6i*il 6ode2 Sub'ect to certain exceptions+ the husband cannot alienate or encumber any real property of the con'u%al partnership without the wifeAs consent! 1>rt! #==+ %dem!2 >nd the wife cannot bind the con'u%al partnership without the husbandAs consent+ except in cases pro*ided by law! 1>rt! #<&+ %dem!2! In the instant case+ -imena+ the wife+ sold lands belon%in% to the con'u%al partnership without the consent of the husband and the sale is not co*ered by the phrase Jexcept in cases pro*ided by law!K The 6ourt of >ppeals described the sale as Jin*alidK L a term which is imprecise when used in relation to contracts because the 6i*il 6ode uses specific names in desi%natin% defecti*e contracts+ namely@ rescissi&!e 1>rts! #(98 et seq!2+ voida&!e 1>rts! #(08 et seq!2+ unen#orcea&!e 1>rts! #?8(+ et seq!2+ and void or inexistent 1>rts! #?80 et seq!2! T&+ '!l+ ;!#+ 0* Gi;+"! i' (+r)!i"l* ! #+/+()i<+ (o")r!() 0.) o/ =&!) (!)+,or*> T&+ !"'=+r3 i) i' ! <oi#!0l+ (o")r!(). >ccordin% to >rt! #(08 of the 6i*il 6ode+ amon% the *oidable contracts are J"T$hose where one of the parties is incapable of %i*in% consent to the contract!K 17ar! #!2 In the instant case -imena had no capacity to %i*e consent to the contract of sale! The capacity to %i*e consent belon%ed not e*en to the husband alone but to both spouses! T&+ <i+= )&!) )&+ (o")r!() ;!#+ 0* Gi;+"! i' ! <oi#!0l+ (o")r!() i' '.ppor)+# 0* )&+ l+,!l pro<i'io" )&!) (o")r!()' +")+r+# 0* )&+ &.'0!"# =i)&o.) )&+ (o"'+") o/ )&+ =i/+

=&+" '.(& (o"'+") i' r+?.ir+#, !r+ !"".ll!0l+ !) &+r i"')!"(+ #.ri", )&+ ;!rri!,+ !"# =i)&i" )+" *+!r' /ro; )&+ )r!"'!()io" ?.+')io"+#. @Ar). 1A8, $i<il $o#+B. -imenaAs contract is not rescissible for in such a contract all the essential elements are untainted but -imenaAs consent was tainted! Neither can the contract be classified as unenforceable because it does not fit any of those described in >rt! #?8( of the 6i*il 6ode! >nd finally+ the contract cannot be *oid or inexistent because it is not one of those mentioned in >rt! #?80 of the 6i*il 6ode! 5y process of elimination+ it must perforce be a *oidable contract! The *oidable contract of -imena was sub'ect to annulment by her husband only durin% the marria%e because he was the *ictim who had an interest in the contract! -imena+ who was the party responsible for the defect+ could not as for its annulment! Their children could not li ewise see the annulment of the contract while the marria%e subsisted because they merely had an inchoate ri%ht to the lands sold! 1;mphasis supplied2 The consent of both ;u%enia and >ntonio is necessary for the sale of the con'u%al property to be *alid! >ntonioAs consent cannot be presumed! "#($ ;xcept for the self4ser*in% testimony of petitioner Nati*idad+ there is no e*idence that >ntonio participated or consented to the sale of the con'u%al property! ;u%enia alone is incapable of %i*in% consent to the contract! Therefore+ in the absence of >ntonioAs consent+ the disposition made by ;u%enia is *oidable!"#?$ The contract of sale between ;u%enia and 6oncepcion bein% an oral contract+ the action to annul the same must be commenced within six years from the time the ri%ht of action accrued!"#/$ ;u%enia sold the property in >pril #09< hence >ntonio should ha*e as ed the courts to annul the sale on or before >pril #00(! No action was commenced by >ntonio to annul the sale+ hence his ri%ht to see its annulment was extin%uished by prescription! ;*en assumin% that the ten 1#824year prescripti*e period under >rt! #<( should apply+ >ntonio is still barred from institutin% an action to annul the sale because since >pril #09<+ more than ten 1#82 years had already lapsed without any such action bein% filed! In sum+ the sale of the con'u%al property by ;u%enia without the consent of her husband is *oidable! It is bindin% unless annulled! >ntonio failed to exercise his ri%ht to as for the annulment within the prescribed period+ hence+ he is now barred from questionin% the *alidity of the sale between his wife and 6oncepcion! 4%ERE1ORE+ the petition is -R>NT;D! The decision dated February &?+ &88? of the 6ourt of >ppeals in 6>4-!R! 6V No! <8&(0 and its resolution dated September &9+ &88? are R;V;RS;D and S;T >SID;! The decision dated :anuary 0+ &88# of the Re%ional Trial 6ourt of GueDon 6ity+ 5ranch 9/+ in 6i*il 6ase No! G4004(</&0+ is R;INST>T;D! SO ORDERED. Davide, Jr., C.J. (Chairman), 'uisum&ing, Carpio, and $zcuna, JJ., concur.

Republic of the 7hilippines Supreme 6ourt

.anila T%IRD DI:ISION -AIME ABALOS !"# S OUSES 1ELIC SALA9AR !"# $ONSUELO SALA9AR, GLI$ERIO ABALOS, %EIRS O1 ADUILINO ABALOS, "!;+l*3 SEGUNDA BAUTISTA, ROGELIO ABALOS, DOLORES A. ROSARIO, 1ELI$IDAD ABALOS, ROBERTO ABALOS, -UANITO ABALOS, TITA ABALOS, LITA A. DELA $RU9 AND %EIRS O1 ADUILINA ABALOS, "!;+l*3 ARTURO BRA:O, URITA B. MENDO9A, LOURDES B. AGANON, $ONSUELO B. SALA9AR, RIMA B. DELOS SANTOS, T%ELMA A OSTOL !"# GLE$ERIO ABALOS, 7etitioners+ 4 versus 4 ro;.l,!)+#3 %EIRS O1 :I$ENTE TORIO, "!;+l*3 UBLIO TORIO, LIBORIO TORIO, :I$TORINA TORIO, ANGEL TORIO, LADISLAO TORIO, RIMO TORIO !"# NORBERTO December #?+ &8## TORIO, Respondents! x44444444444444444444444444444444444444444444444444444444444444444444444444444444444444444x DE$ISION ERALTA, J.3 5efore the 6ourt is a petition for re*iew on certiorari see in% to set aside the Decision # dated :une (8+ &88= and Resolution& dated No*ember #(+ &88= by the 6ourt of >ppeals 16>2 in 6>4 -!R! S7 No! 0#99<! The assailed Decision re*ersed and set aside the Decision (dated :une #?+ &88/ of the Re%ional Trial 6ourt 1RT62 of ,in%ayen+ 7an%asinan+ 5ranch =0+ while the questioned Resolution denied petitionersN .otion for Reconsideration! The factual and procedural antecedents of the case are as follows@ On :uly &?+ #00=+ herein respondents filed a 6omplaint for Reco*ery of 7ossession and Dama%es with the .unicipal Trial 6ourt 1.T62 of 5inmaley+ 7an%asinan a%ainst :aime >balos 1:aime2 and the spouses Felix and 6onsuelo SalaDar! Respondents contended that@ they are the children and heirs of one Vicente Torio 1Vicente2 who died intestate on September ##+ #0<(C at the time of the death of Vicente+ he left behind a parcel of land measurin% &+0/8 square meters+ more or less+ which is located at San Isidro Norte+ 5inmaley+ 7an%asinanC durin% the lifetime of Vicente and throu%h his tolerance+ :aime and the Spouses SalaDar were allowed to stay and build their respecti*e houses on the sub'ect parcel of landC e*en after the death of Vicente+ herein respondents allowed :aime and the Spouses SalaDar to remain on the disputed lotC howe*er+ in #09/+ respondents as ed :aime and the Spouses SalaDar to *acate the G.R. No. 1A6777 r+'+")3

sub'ect lot+ but they refused to heed the demand of respondents forcin% respondents to file the complaint!? :aime and the Spouses SalaDar filed their >nswer with 6ounterclaim+ denyin% the material alle%ations in the 6omplaint and assertin% in their Special and >ffirmati*e Defenses that@ respondentsN cause of action is barred by acquisiti*e prescriptionC the court a quo has no 'urisdiction o*er the nature of the action and the persons of the defendantsC the absolute and exclusi*e owners and possessors of the disputed lot are the deceased predecessors of defendantsC defendants and their predecessors4in4interest had been in actual+ continuous and peaceful possession of the sub'ect lot as owners since time immemorialC defendants are faithfully and reli%iously payin% real property taxes on the disputed lot as e*idenced by Real 7roperty Tax ReceiptsC they ha*e continuously introduced impro*ements on the said land+ such as houses+ trees and other inds of ornamental plants which are in existence up to the time of the filin% of their >nswer!/ On the same date as the filin% of defendantsN >nswer with 6ounterclaim+ herein petitioners filed their >nswer in Inter*ention with 6ounterclaim! ,i e the defendants+ herein petitioners claimed that their predecessors4in4interest were the absolute and exclusi*e owners of the land in questionC that petitioners and their predecessors had been in possession of the sub'ect lot since time immemorial up to the presentC they ha*e paid real property taxes and introduced impro*ements thereon!= >fter the issues were 'oined+ trial ensued! On December #8+ &88(+ the .T6 issued a Decision+ the dispositi*e portion of which reads as follows@ E);R;FOR;+ in *iew of the fore%oin% consideration"s$+ the 6ourt ad'ud%ed the case in fa*or of the plaintiffs and a%ainst the defendants and defendants4inter*enors are ordered to turn o*er the land in question to the plaintiffs 1,ot Nos! 9=0 and 9<8+ 6ad! ?=<4D! 5inmaley 6adastre located in 5r%y! San Isidro Norte+ 5inmaley+ 7an%asinan with an area of &+0/8 sq! m!+ more or less+ bounded and described in para%raph ( of the 6omplaint"2$C orderin% the defendants and defendants4inter*enors to remo*e their respecti*e houses standin% on the land in disputeC further orderin% the defendants and defendants4inter*enors+ either sin%ly or 'ointly to pay the plaintiffs land rent in the amount of 7#&+888!88 per year to be rec oned startin% the year #00= until defendants and defendants4inter*enors will finally *acate the premisesC furthermore+ defendants and defendants4inter*enors are also ordered to pay+ either sin%ly or 'ointly+ the amount of 7#8+888!88 as and by way of attorneyNs fees and costs of suit! SO ORD;R;D!< :aime and the Spouses SalaDar appealed the Decision of the .T6 with the RT6 of ,in%ayen+ 7an%asinan!9 )erein petitioners+ who were inter*enors+ did not file an appeal! In its Decision dated :une #?+ &88/+ the RT6 ruled in fa*or of :aime and the Spouses SalaDar+ holdin% that they ha*e acquired the sub'ect property throu%h prescription! >ccordin%ly+ the RT6 dismissed herein respondentsN complaint!

V;,>S6O+ :R!+ J., Chairperson 7;R>,T>+ >5>D+ .;NDOM>+ and 7;R,>S45;RN>5;+ JJ.

>%%rie*ed+ herein respondents filed a petition for re*iew with the 6> assailin% the Decision of the RT6! On :une (8+ &88=+ the 6> promul%ated its questioned Decision+ the dispositi*e portion of which reads+ thus@ E);R;FOR;+ the petition is -R>NT;D! The Decision dated :une #?+ &88/ of the Re%ional Trial 6ourt+ 5ranch =0+ ,in%ayen+ 7an%asinan is hereby R;V;RS;D and S;T >SID;! In its stead+ a new one is entered reinstatin% the Decision dated December #8+ &88( of the .unicipal Trial 6ourt of 5inmaley+ 7an%asinan! SO ORD;R;D!0 :aime and the Spouses SalaDar filed a .otion for Reconsideration+ but the same was denied by the 6> in its Resolution dated No*ember #(+ &88=! )ence+ the instant petition based on a sole assi%nment of error+ to wit@ T); 6OFRT OF >77;>,S ;RR;D IN NOT >77R;6I>TIN- T)>T T); 7;TITION;RS );R;IN >R; NOE T); >5SO,FT; >ND ;O6,FSIV; OEN;RS OF T); ,>ND IN GF;STION 53 VIRTF; OF >6GFISITIV; 7R;S6RI7TION!#8 The main issue raised by petitioners is whether they and their predecessors4in4interest possessed the disputed lot in the concept of an owner+ or whether their possession is by mere tolerance of respondents and their predecessors4in4interest! 6orollarily+ petitioners claim that the due execution and authenticity of the deed of sale upon which respondentsN predecessors4 in4interest deri*ed their ownership were not pro*en durin% trial! The petition lac s merit! 7reliminarily+ the 6ourt a%rees with the obser*ation of respondents that some of the petitioners in the instant petition were the inter*enors## when the case was filed with the .T6! Records would show that they did not appeal the Decision of the .T6! #& The settled rule is that failure to perfect an appeal renders the 'ud%ment final and executory! #( )ence+ insofar as the inter*enors in the .T6 are concerned+ the 'ud%ment of the .T6 had already become final and executory! It also bears to point out that the main issue raised in the instant petition+ which is the character or nature of petitionersN possession of the sub'ect parcel of land+ is factual in nature! Settled is the rule that questions of fact are not re*iewable in petitions for re*iew on certiorari under Rule ?/ of the Rules of 6ourt! #?Section # of Rule ?/ states that petitions for re*iew on certiorari Jshall raise only questions of law which must be distinctly set forth!K Doubtless+ the issue of whether petitioners possess the sub'ect property as owners+ or whether they occupy the same by mere tolerance of respondents+ is a question of fact! Thus+ it is not re*iewable!

Nonetheless+ the 6ourt has+ at times+ allowed exceptions from the abo*ementioned restriction! >mon% the reco%niDed exceptions are the followin%@ 1a2 Ehen the findin%s are %rounded entirely on speculation+ surmises+ or con'ecturesC 1&2 Ehen the inference made is manifestly mista en+ absurd+ or impossibleC 1c2 Ehen there is %ra*e abuse of discretionC 1d2 Ehen the 'ud%ment is based on a misapprehension of factsC 1e2 Ehen the findin%s of facts are conflictin%C 1#2 Ehen in ma in% its findin%s the 6> went beyond the issues of the case+ or its findin%s are contrary to the admissions of both the appellant and the appelleeC 1g2 Ehen the 6>As findin%s are contrary to those by the trial courtC 1h2 Ehen the findin%s are conclusions without citation of specific e*idence on which they are basedC 1i2 Ehen the facts set forth in the petition as well as in the petitionerAs main and reply briefs are not disputed by the respondentC 1(2 Ehen the findin%s of fact are premised on the supposed absence of e*idence and contradicted by the e*idence on recordC or 1)2 Ehen the 6> manifestly o*erloo ed certain rele*ant facts not disputed by the parties+ which+ if properly considered+ would 'ustify a different conclusion! #/ In the present case+ the findin%s of fact of the .T6 and the 6> are in conflict with those of the RT6! >fter a re*iew of the records+ howe*er+ the 6ourt finds that the petition must fail as it finds no error in the findin%s of fact and conclusions of law of the 6> and the .T6! 7etitioners claim that they ha*e acquired ownership o*er the disputed lot throu%h ordinary acquisiti*e prescription! >cquisiti*e prescription of dominion and other real ri%hts may be ordinary or extraordinary!#= Ordinary acquisiti*e prescription requires possession in %ood faith and with 'ust title for ten 1#82 years! #< Eithout %ood faith and 'ust title+ acquisiti*e prescription can only be extraordinary in character which requires uninterrupted ad*erse possession for thirty 1(82 years!#9 7ossession Jin %ood faithK consists in the reasonable belief that the person from whom the thin% is recei*ed has been the owner thereof+ and could transmit his ownership! #0 There is J'ust titleK when the ad*erse claimant came into possession of the property throu%h one of the modes reco%niDed by law for the acquisition of ownership or other real ri%hts+ but the %rantor was not the owner or could not transmit any ri%ht!&8 In the instant case+ it is clear that durin% their possession of the property in question+ petitioners ac nowled%ed ownership thereof by the immediate predecessor4in4interest of respondents! This is clearly shown by the Tax Declaration in the name of :aime for the year #09? wherein it contains a statement admittin% that :aimeNs house was built on the land of Vicente+ respondentsN immediate predecessor4in4interest! &# 7etitioners ne*er disputed such an ac nowled%ment! Thus+ ha*in% nowled%e that they nor their predecessors4in4interest are not the owners of the disputed lot+ petitionersN possession could not be deemed as possession in %ood faith as to enable them to acquire the sub'ect land by ordinary prescription! In this

respect+ the 6ourt a%rees with the 6> that petitionersN possession of the lot in question was by mere tolerance of respondents and their predecessors4in4interest! >cts of possessory character executed due to license or by mere tolerance of the owner are inadequate for purposes of acquisiti*e prescription!&& 7ossession+ to constitute the foundation of a prescripti*e ri%ht+ must be en concepto de due*o+ or+ to use the common law equi*alent of the term+ that possession should be ad*erse+ if not+ such possessory acts+ no matter how lon%+ do not start the runnin% of the period of prescription!&( .oreo*er+ the 6> correctly held that e*en if the character of petitionersN possession of the sub'ect property had become ad*erse+ as e*idenced by their declaration of the same for tax purposes under the names of their predecessors4in4interest+ their possession still falls short of the required period of thirty 1(82 years in cases of extraordinary acquisiti*e prescription! Records show that the earliest Tax Declaration in the name of petitioners was in #0<?! Rec oned from such date+ the thirty4year period was completed in &88?! )owe*er+ herein respondentsN complaint was filed in #00=+ effecti*ely interruptin% petitionersN possession upon ser*ice of summons on them!&? Thus+ petitionersA possession also did not ripen into ownership+ because they failed to meet the required statutory period of extraordinary prescription! This 6ourt has held that the e*idence relati*e to the possession upon which the alle%ed prescription is based+ must be clear+ complete and conclusi*e in order to establish the prescription!&/ In the present case+ the 6ourt finds no error on the part of the 6> in holdin% that petitioners failed to present competent e*idence to pro*e their alle%ed %ood faith in neither possessin% the sub'ect lot nor their ad*erse claim thereon! Instead+ the records would show that petitionersN possession was by mere tolerance of respondents and their predecessors4 in4interest! Finally+ as to the issue of whether the due execution and authenticity of the deed of sale upon which respondents anchor their ownership were not pro*en+ the 6ourt notes that petitioners did not raise this matter in their >nswer as well as in their 7re4Trial 5rief! It was only in their 6omment to respondentsN 7etition for Re*iew filed with the 6> that they raised this issue! Settled is the rule that points of law+ theories+ issues+ and ar%uments not adequately brou%ht to the attention of the trial court need not be+ and ordinarily will not be+ considered by a re*iewin% court!&= They cannot be raised for the first time on appeal! To allow this would be offensi*e to the basic rules of fair play+ 'ustice and due process! &< ;*en %rantin% that the issue of due execution and authenticity was properly raised+ the 6ourt finds no co%ent reason to depart from the findin%s of the 6>+ to wit@ xxxx 5ased on the fore%oin%+ respondents ":aime >balos and the Spouses Felix and 6onsuelo SalaDar$ ha*e not inherited the disputed land because the same was shown to ha*e already been *alidly sold to .arcos Torio+ who+ thereupon+ assi%ned the same to his son Vicente+ the father of petitioners "herein respondents$! > *alid sale was amply established and the said *alidity subsists because the deed e*idencin% the same was duly notariDed! There is no doubt that the deed of sale was duly ac nowled%ed before a notary public! >s a notariDed document+ it has in its fa*or the presumption of re%ularity and it carries the e*identiary wei%ht conferred upon it with respect to its due execution! It is admissible in

e*idence without further proof of its authenticity and is entitled to full faith and credit upon its face!&9 Indeed+ settled is the rule in our 'urisdiction that a notariDed document has in its fa*or the presumption of re%ularity+ and to o*ercome the same+ there must be e*idence that is clear+ con*incin% and more than merely preponderantC otherwise+ the document should be upheld!&0In the instant case+ petitionersN bare denials will not suffice to o*ercome the presumption of re%ularity of the assailed deed of sale! E);R;FOR;+ the petition is DENIED! The assailed Decision and Resolution of the 6ourt of >ppeals in 6>4-!R! S7 No! 0#99< areA11IRMED! SO ORDERED!

1IRST DI:ISION $ELERINO E. MER$ADO, 7etitioner+ G.R. No. 187109 7resent@ 6ORON>+ C.J., Chairperson+ ,;ON>RDO4D; 6>STRO+ 5;RS>.IN+ D;, 6>STI,,O+ and VI,,>R>.>+ :R!+ JJ. 7romul%ated@

occupied by .acarioAs house! [9] )is claim has since been modified to an alle%ed encroachment of only (0 sq! m! that he claims must be returned to him! )e a*ers that he is entitled to own and possess #<# sq! m! of ,ot No! //&+ ha*in% inherited #?&!/ sq! m! from his mother Sal*acion and bou%ht &9!/ sq! m! from his aunt >spren! >ccordin% to him+ his motherAs inheritance is #?&!/ sq! m!+ that is+ ##? sq! m! from Doroteo plus &9!/ sq! m! from Dionisia! Since the area he occupies is only #(& sq! m!+ [10] he claims that respondents encroach on his share by (0 sq! m![11] +he case #or respondents Respondents a%ree that DoroteoAs fi*e children each inherited ##? sq! m! of ,ot No! //&! )owe*er+ .acarioAs share increased when he recei*ed DionisiaAs share! .acarioAs increased share was then sold to his son Ro%er+ respondentsA husband and father! Respondents claim that they ri%htfully possess the land they occupy by *irtue of acquisiti*e prescription and that there is no basis for petitionerAs claim of encroachment! [12] +he tria! court,s decision On .ay #/+ &88=+ the Re%ional Trial 6ourt 1RT62 ruled in fa*or of petitioner and held that he is entitled to #<# sq! m! The RT6 found that petitioner inherited #?&!/ sq! m! from his mother Sal*acion and bou%ht &9!/ sq! m! from his aunt >spren! The RT6 computed that Sal*acion+ >spren+ Isabel and .acario each inherited #?&!/ sq! m! of ,ot No! //&! ;ach inherited ##? sq! m! from Doroteo and &9!/ sq! m! from Dionisia! The RT6 further ruled that .acario was not entitled to &&9 sq! m! Thus+ respondents must return (0 sq! m! to petitioner who occupies only #(& sq! m![18] There bein% no public document to pro*e DionisiaAs donation+ the RT6 also held that .acarioAs #0?9 affida*it is *oid and is an in*alid repudiation of the shares of his sisters Sal*acion+ >spren+ and Isabel in DionisiaAs share! >ccordin%ly+ .acario cannot acquire said shares by prescription! The RT6 further held that the oral partition of ,ot No! //& by DoroteoAs heirs did not include DionisiaAs share and that partition should ha*e been the main action! Thus+ the RT6 ordered partition and deferred the transfer of possession of the (0 sq! m! pendin% partition![17] The dispositi*e portion of the RT6 decision reads@ E);R;FOR;+ in *iew of the fore%oin% premises+ the court issues the followin% ORD;R+ thus 4 a2 7artially declarin% the nullity of the Deed of >bsolute Sale of 7roperty dated >u%ust 0+ #0<< x x x executed by .acario ;spinocilla+ 5etty ;! -ullaba and Saida ;! -abelo in fa*or of Ro%er ;spinocilla+ insofar as it affects the portion or the share belon%in% to Sal*acion ;spinocilla+ mother of "petitioner+$ relati*e to the property left by Dionisia ;spinocilla+ includin% "Tax Declaration$ No! #(==< and other documents of the same nature and character which emanated from the said saleC b2 To lea*e as is the Deeds of >bsolute Sale of .ay ##+ #09( and .arch 9+ #09/+ it ha*in% been determined that they did not in*ol*e the portion belon%in% to "petitioner$ x x x! c2 To effect an effecti*e and real partition amon% the heirs for purposes of determinin% the exact location of the share 1##? sq! m!2 of the late Dionisia ;spinocilla to%ether with the &9!/ sq! m! belon%in% to "petitionerAs$ mother Sal*acion+ as well as+ the exact location of the (0 sq! m! portion belon%in% to the "petitioner$ bein% encroached by the "respondents$+ with the assistance of the 6ommissioner 1;n%r! Fundano2 appointed by this court! d2 To hold in abeyance the transfer of possession of the (0 sq! m! portion to the "petitioner$ pendin% the completion of the real partition abo*e4mentioned! [16]

4 *ersus 4

BELENE ES INO$ILLAEE AND 1ERDINAND ES INO$ILLA, Respondents!

February #+ &8#& F- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - F DE$ISION :ILLARAMA, -R., J.3 +he case 7etitioner 6elerino ;! .ercado appeals the Decision [1] dated >pril &9+ &889 and Resolution[2] dated :uly &&+ &889 of the 6ourt of >ppeals 16>2 in 6>4-!R! 6V No! 9<?98! The 6> dismissed petitionerAs complaint[8] for reco*ery of possession+ quietin% of title+ partial declaration of nullity of deeds and documents+ and dama%es+ on the %round of prescription! +he antecedent #acts Doroteo ;spinocilla owned a parcel of land+ ,ot No! //&+ with an area of /<8 sq! m!+ located at .a%saysay >*enue+ Mone /+ 5ulan+ Sorso%on! >fter he died+ his fi*e children+ Sal*acion+ >spren+ Isabel+ .acario+ and Dionisia di*ided ,ot No! //& equally amon% themsel*es! ,ater+ Dionisia died without issue ahead of her four siblin%s+ and .acario too possession of DionisiaAs share! In an affida*it of transfer of real property [7] dated No*ember #+ #0?9+ .acario claimed that Dionisia had donated her share to him in .ay #0?/! Thereafter+ on >u%ust 0+ #0<<+ .acario and his dau%hters 5etty -ullaba and Saida -abelo sold[6] &&/ sq! m! to his son Ro%er ;spinocilla+ husband of respondent 5elen ;spinocilla and father of respondent Ferdinand ;spinocilla! On .arch 9+ #09/+ Ro%er ;spinocilla sold[5] ##? sq! m! to 6aridad >tienDa! 7er actual sur*ey of ,ot No! //&+ respondent 5elen ;spinocilla occupies #80 sq! m!+ 6aridad >tienDa occupies #&8 sq! m!+ 6aroline 3u occupies &80 sq! m!+ and petitioner+ Sal*acionNs son+ occupies #(& sq! m! [A] +he case #or petitioner 7etitioner sued the respondents to reco*er two portions@ an area of &9!/ [8] sq! m! which he bou%ht from >spren and another &9!/ sq! m! which alle%edly belon%ed to him but was

+he C$ decision On appeal+ the 6> re*ersed the RT6 decision and dismissed petitionerAs complaint on the %round that extraordinary acquisiti*e prescription has already set in in fa*or of respondents! The 6> found that DoroteoAs four remainin% children made an oral partition of ,ot No! //& after DionisiaAs death in #0?/ and occupied specific portions! The oral partition terminated the co4ownership of ,ot No! //& in #0?/! Said partition also included DionisiaAs share because the lot was di*ided into four parts only! >nd since petitionerAs complaint was filed only on :uly #(+ &888+ the 6> concluded that prescription has set in! [15] The 6> disposed the appeal as follows@ E);R;FOR;+ the appeal is -R>NT;D! The assailed .ay #/+ &88= Decision of the Re%ional Trial 6ourt 1RT62 of 5ulan+ Sorso%on is hereby R;V;RS;D and S;T >SID;! The 6omplaint of the "petitioner$ is hereby DIS.ISS;D! No costs![1A] +he instant petition The core issue to be resol*ed is whether petitionerAs action to reco*er the sub'ect portion is barred by prescription! 7etitioner confirms oral partition of ,ot No! //& by DoroteoNs heirs+ but claims that his share increased from ##? sq! m! to #<# sq! m! and that respondents encroached on his share by (0 sq! m! Since an oral partition is *alid+ the correspondin% sur*ey ordered by the RT6 to identify the (0 sq! m! that must be returned to him could be made! [18] 7etitioner also alle%es that .acario committed fraud in acquirin% his shareC hence+ any e*idence adduced by him to 'ustify such acquisition is inadmissible! 7etitioner concludes that if a person obtains le%al title to property by fraud or concealment+ courts of equity will impress upon the title a so4called constructi*e trust in fa*or of the defrauded party! [19] +he Court,s ru!ing Ee affirm the 6> rulin% dismissin% petitionerAs complaint on the %round of prescription! 7rescription+ as a mode of acquirin% ownership and other real ri%hts o*er immo*able property+ is concerned with lapse of time in the manner and under conditions laid down by law+ namely+ that the possession should be in the concept of an owner+ public+ peaceful+ uninterrupted+ and ad*erse! >cquisiti*e prescription of real ri%hts may be ordinary or extraordinary! Ordinary acquisiti*e prescription requires possession in %ood faith and with 'ust title for #8 years! In extraordinary prescription+ ownership and other real ri%hts o*er immo*able property are acquired throu%h uninterrupted ad*erse possession for (8 years without need of title or of %ood faith![20] )ere+ petitioner himself admits the ad*erse nature of respondentsA possession with his assertion that .acarioAs fraudulent acquisition of DionisiaAs share created a constructi*e trust! In a constructi*e trust+ there is neither a promise nor any fiduciary relation to spea of and the so4called trustee 1.acario2 neither accepts any trust nor intends holdin% the property for the beneficiary 1Sal*acion+ >spren+ Isabel2! The relation of trustee and cestui que trust does not in fact exist+ and the holdin% of a constructi*e trust is for the trustee himself+ and therefore+ at all times ad*erse! [21] 7rescription may super*ene e*en if the trustee does not repudiate the relationship![22] Then+ too+ respondentsA uninterrupted ad*erse possession for // years of #80 sq! m! of ,ot No! //& was established! .acario occupied DionisiaAs share in #0?/ althou%h his claim that Dionisia donated it to him in #0?/ was only made in a #0?9 affida*it! Ee also a%ree with

the 6> that .acarioAs possession of DionisiaAs share was public and ad*erse since his other co4owners+ his three other sisters+ also occupied portions of ,ot No! //&! Indeed+ the #0<< sale made by .acario and his two dau%hters in fa*or of his son Ro%er confirms the ad*erse nature of .acarioAs possession because said sale of &&/ sq! m! [28] was an act of ownership o*er .acarioAs ori%inal share and DionisiaAs share! In #09/+ Ro%er also exercised an act of ownership when he sold ##? sq! m! to 6aridad >tienDa! It was only in the year &888+ upon receipt of the summons to answer petitionerAs complaint+ that respondentsA peaceful possession of the remainin% portion 1#80 sq! m!2 was interrupted! 5y then+ howe*er+ extraordinary acquisiti*e prescription has already set in in fa*or of respondents! That the RT6 found .acarioAs #0?9 affida*it *oid is of no moment! ;xtraordinary prescription is unconcerned with .acarioAs title or %ood faith! >ccordin%ly+ the RT6 erred in rulin% that .acario cannot acquire by prescription the shares of Sal*acion+ >spren+ and Isabel+ in DionisiaAs ##?4sq! m! share from ,ot No! //&! .oreo*er+ the 6> correctly dismissed petitionerAs complaint as an action for recon*eyance based on an implied or constructi*e trust prescribes in #8 years from the time the ri%ht of action accrues! [27] This is the other ind of prescription under the6i*il 6ode+ called extincti*e prescription+ where ri%hts and actions are lost by the lapse of time! [26] 7etitionerAs action for reco*ery of possession ha*in% been filed // years after .acario occupied DionisiaAs share+ it is also barred by extincti*e prescription! The 6> while condemnin% .acarioAs fraudulent act of depri*in% his three sisters of their shares in DionisiaAs share+ equally emphasiDed the fact that .acarioAs sisters wasted their opportunity to question his acts! 4%ERE1ORE+ we DENY the petition for re*iew on certiorari for lac of merit and A11IRM the assailed Decision dated >pril &9+ &889 and Resolution dated :uly &&+ &889 of the 6ourt of >ppeals in 6>4-!R! 6V No! 9<?98! No pronouncement as to costs! SO ORDERED.

Republic of the 7hilippines SF7R;.; 6OFRT .anila

FIRST DIVISION -!R! No! #&08#9 No*ember #/+ &88#

6>R.;,IT> ,;>PO+ assisted by her husband -R;-ORIO 6F>6)ON+ petitioner+ *s! 6OFRT OF >77;>,S and );R.O-;N;S F;RN>NDO+ respondents! 7>RDO+ J!@ The 6ase The case is a petition for re*iew on certiorari of the decision # of the 6ourt of >ppeals affirmin% that of the Re%ional Trial 6ourt+ .alolos+ 5ranch < & orderin% petitioner ,eaQo to pay respondent )ermo%enes Fernando the sum of 7#9(+=9<!<8 correspondin% to her outstandin% obli%ations under the contract to sell+ with interest and surchar%es due thereon+ attorneyNs fees and costs!-./phi-.n0t The Facts On No*ember #(+ #09/+ )ermo%enes Fernando+ as *endor and 6armelita ,eaQo+ as *endee executed a contract to sell in*ol*in% a piece of land+ ,ot No! 9<=45+ with an area of ?(# square meters+ located at Sto! 6risto+ 5aliua%+ 5ulacan! ( In the contract+ 6armelita ,eaQo bound herself to pay )ermo%enes Fernando the sum of one hundred se*en thousand and se*en hundred and fifty pesos 17#8<+</8!882 as the total purchase price of the lot! The manner of payin% the total purchase price was as follows@ BThe sum of T;N T)OFS>ND S;V;N )FNDR;D S;V;NT3 FIV; 17#8+<</!882 7;SOS+ shall be paid at the si%nin% of this contract as DOEN 7>3.;NT+ the balance of NIN;T3 SIO T)OFS>ND NIN; )FNDR;D S;V;NT3 FIV; 7;SOS 170=+0</!882 shall be paid within a period of T;N 1#82 years at a monthly amortiDation of 7#+<?<!(8 to be%in from December <+ #09/ with interest at ei%hteen per cent 1#9R2 per annum based on balances!B ? The contract also pro*ided for a %race period of one month within which to ma e payments+ to%ether with the one correspondin% to the month of %race! Should the month of %race expire without the installments for both months ha*in% been satisfied+ an interest of #9R per annum will be char%ed on the unpaid installments!/ Should a period of ninety 1082 days elapse from the expiration of the %race period without the o*erdue and unpaid installments ha*in% been paid with the correspondin% interests up to that date+ respondent Fernando+ as *endor+ was authoriDed to declare the contract cancelled and to dispose of the parcel of land+ as if the contract had not been entered into! The payments made+ to%ether with all the impro*ements made on the premises+ shall be considered as rents paid for the use and occupation of the premises and as liquidated dama%es! = >fter the execution of the contract+ 6armelita ,eaQo made se*eral payments in lump sum!< Thereafter+ she constructed a house on the lot *alued at 7988+888!88! 9 The last payment that she made was on >pril #+ #090! On September #=+ #00#+ the trial court rendered a decision in an e'ectment case 0 earlier filed by respondent Fernando orderin% petitioner ,eaQo to *acate the premises and to pay 7&/8!88 per month by way of compensation for the use and occupation of the property from .ay &<+ #00# until she *acated the premises+ attorneyNs fees and costs of the suit! #8 On >u%ust &?+ #00(+ the trial court issued a writ of execution which was duly ser*ed on petitioner ,eaQo! On September &<+ #00(+ petitioner ,eaQo filed with the Re%ional Trial 6ourt of .alolos+ 5ulacan a complaint for specific performance with preliminary in'unction! ## 7etitioner ,eaQo

assailed the *alidity of the 'ud%ment of the municipal trial court #& for bein% *iolati*e of her ri%ht to due process and for bein% contrary to the a*owed intentions of Republic >ct No! =//& re%ardin% protection to buyers of lots on installments! 7etitioner ,eaQo deposited 7#9+888!88 with the cler of court+ Re%ional Trial 6ourt+ 5ulacan+ to co*er the balance of the total cost of ,ot 9<=45!#( On No*ember ?+ #00(+ after petitioner ,eaQo posted a cash bond of 7/8+888!88+ #? the trial court issued a writ of preliminary in'unction #/ to stay the enforcement of the decision of the municipal trial court!#= On February =+ #00/+ the trial court rendered a decision+ the dispositi*e portion of which reads@ BE);R;FOR;+ 'ud%ment is hereby rendered as follows@ B#! The preliminary in'unction issued by this court per its order dated No*ember ?+ #00( is hereby made permanentC B&! Orderin% the plaintiff to pay to the defendant the sum of 7#8(+808!<8 correspondin% to her outstandin% obli%ations under the contract to sell 1;xhibit B>B L ;xhibit B5B2 consistin% of the principal of said obli%ation to%ether with the interest and surchar%es due thereon as of February &9+ #00?+ plus interest thereon at the rate of #9R per annum in accordance with the pro*ision of said contract to be computed from .arch #+ #00?+ until the same becomes fully paidC B(! Orderin% the defendant to pay to plaintiff the amount of 7#8+888 as and by way of attorneyNs feesC B?! Orderin% the defendant to pay to plaintiff the costs of the suit in 6i*il 6ase No! #=98 aforementioned! BSO ORD;R;D! B.alolos+ 5ulacan+ February =+ #00/!

B1s%d!2 :ud%eB#<

D>NI,O

>!

.>N>,>ST>S

On February &#+ #00/+ respondent Fernando filed a motion for reconsideration #9 and the supplement#0 thereto! The trial court increased the amount of 7#8(+808!<8 to 7#9(+=9<!88 and ordered petitioner ,eaQo ordered to pay attorneyNs fees! &8 >ccordin% to the trial court+ the transaction between the parties was an absolute sale+ ma in% petitioner ,eaQo the owner of the lot upon actual and constructi*e deli*ery thereof! Respondent Fernando+ the seller+ was di*ested of ownership and cannot reco*er the same unless the contract is rescinded pursuant to >rticle #/0& of the 6i*il 6ode which requires a 'udicial or notarial demand! Since there had been no rescission+ petitioner ,eaQo+ as the owner in possession of the property+ cannot be e*icted! On the issue of delay+ the trial court held@ BEhile the said contract pro*ides that the whole purchase price is payable within a ten4year period+ yet the same contract clearly specifies that the purchase price shall be payable in monthly installments for which the correspondin% penalty shall be imposed in case of default! The plaintiff certainly cannot i%nore the bindin% effect of such stipulation by merely assertin% that the ten4year period for payment of the whole purchase price has not yet lapsed! In other

words+ the plaintiff has clearly defaulted in the payment of the amortiDations due under the contract as recited in the statement of account 1;xhibit B&B2 and she should be liable for the payment of interest and penalties in accordance with the stipulations in the contract pertainin% thereto!B&# The trial court disre%arded petitioner ,eaQos claim that she made a downpayment of 7#8+888!88+ at the time of the execution of the contract! The trial court relied on the statement of account && and the summary&( prepared by respondent Fernando to determine petitioner ,eaQoNs liability for the payment of interests and penalties! The trial court held that the consi%nation made by petitioner ,eaQo in the amount of 7#9+888!88 did not produce any le%al effect as the same was not done in accordance with >rticles ##<=+ ##<< and ##<9 of the 6i*il 6ode! In time+ petitioner ,eaQo appealed the decision to the 6ourt of >ppeals! &? On :anuary &&+ #00<+ 6ourt of >ppeals promul%ated a decision affirmin% that of the Re%ional Trial 6ourt in toto!&/ On February ##+ #00<+ petitioner ,eaQo filed a motion for reconsideration! &= On >pril #9+ #00<+ the 6ourt of >ppeals denied the motion!&< )ence+ this petition!&9 The Issues The issues to be resol*ed in this petition for re*iew are 1#2 whether the transaction between the parties in an absolute sale or a conditional saleC 1&2 whether there was a proper cancellation of the contract to sellC and 1(2 whether petitioner was in delay in the payment of the monthly amortiDations! The 6ourtNs Rulin% 6ontrary to the findin%s of the trial court+ the transaction between the parties was a conditional sale not an absolute sale! The intention of the parties was to reser*e the ownership of the land in the seller until the buyer has paid the total purchase price! 6onsider the followin%@ First+ the contract to sell ma es the sale+ cession and con*eyance Bsub'ect to conditionsB set forth in the contract to sell!&0 Second+ what was transferred was the possession of the property+ not ownership! The possession is e*en limited by the followin%@ 1#2 that the *endee may continue therewith Bas lon% as the V;ND;; complies with all the terms and conditions mentioned+ and 1&2 that the buyer may not sell+ cede+ assi%n+ transfer or mort%a%e or in any way encumber any ri%ht+ interest or equity that she may ha*e or acquire in and to the said parcel of land nor to lease or to sublease it or %i*e possession to another person without the written consent of the seller! (8 Finally+ the ownership of the lot was not transferred to 6armelita ,eaQo! >s the land is co*ered by a torrens title+ the act of re%istration of the deed of sale was the operati*e act that could transfer ownership o*er the lot!(# There is not e*en a deed that could be re%istered since the contract pro*ides that the seller will execute such a deed Bupon complete payment by the V;ND;; of the total purchase price of the propertyB with the stipulated interest! (& In a contract to sell real property on installments+ the full payment of the purchase price is a positi*e suspensi*e condition+ the failure of which is not considered a breach+ casual or serious+ but simply an e*ent that pre*ented the obli%ation of the *endor to con*ey title from acquirin% any obli%atory force!(( The transfer of ownership and title would occur after full payment of the price!(?

In the case at bar+ petitioner ,eaQoNs non4payment of the installments after >pril #+ #090+ pre*ented the obli%ation of respondent Fernando to con*ey the property from arisin%! In fact+ it brou%ht into effect the pro*ision of the contract on cancellation! 6ontrary to the findin%s of the trial court+ >rticle #/0& of the 6i*il 6ode is inapplicable to the case at bar!(/)owe*er+ any attempt to cancel the contract to sell would ha*e to comply with the pro*isions of Republic >ct No! =//&+ the BRealty Installment 5uyer 7rotection >ct!B R!>! No! =//& reco%niDes in conditional sales of all inds of real estate 1industrial+ commercial+ residential2 the ri%ht of the seller to cancel the contract upon non4payment of an installment by the buyer+ which is simply an e*ent that pre*ents the obli%ation of the *endor to con*ey title from acquirin% bindin% force!(= The law also pro*ides for the ri%hts of the buyer in case of cancellation! Thus+ Sec! ( 1b2 of the law pro*ides that@ BIf the contract is cancelled+ the seller shall refund to the buyer the cash surrender *alue of the payments on the property equi*alent to fifty percent of the total payments made and+ after fi*e years of installments+ an additional fi*e percent e*ery year but not to exceed ninety percent of the total payment made@ Provided+ That the actual cancellation of the contract shall ta e place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender *alue to the buyer!B ";mphasis supplied$ The decision in the e'ectment case(< operated as the notice of cancellation required by Sec! (1b2! >s petitioner ,eaQo was not %i*en then cash surrender *alue of the payments that she made+ there was still no actual cancellation of the contract! 6onsequently+ petitioner ,eaQo may still reinstate the contract by updatin% the account durin% the %race period and before actual cancellation!(9 Should petitioner ,eaQo wish to reinstate the contract+ she would ha*e to update her accounts with respondent Fernando in accordance with the statement of account (0 which amount was 7#9(+=9<!88!?8 On the issue of whether petitioner ,eaQo was in delay in payin% the amortiDations+ we rule that while the contract pro*ided that the total purchase price was payable within a ten4year period+ the same contract specified that the purchase price shall be paid in monthly installments for which the correspondin% penalty shall be imposed in case of default! 7etitioner ,eaQo cannot i%nore the pro*ision on the payment of monthly installments by claimin% that the ten4year period within which to pay has not elapsed! >rticle ##=0 of the 6i*il 6ode pro*ides that in reciprocal obli%ations+ neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him! From the moment one of the parties fulfills his obli%ation+ delay by the other be%ins!-./phi-.n0t In the case at bar+ respondent Fernando performed his part of the obli%ation by allowin% petitioner ,eaQo to continue in possession and use of the property! 6learly+ when petitioner ,eaQo did not pay the monthly amortiDations in accordance with the terms of the contract+ she was in delay and liable for dama%es! ?# )owe*er+ we a%ree with the trial court that the default committed by petitioner ,eaQo in respect of the obli%ation could be compensated by the interest and surchar%es imposed upon her under the contract in question! ?& It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and lea*e no doubt upon the intention of the contractin% parties+ the literal meanin% of its stipulation shall control!?( Thus+ as there is no ambi%uity in the lan%ua%e of the contract+ there is no room for construction+ only compliance!

The Fallo IN VI;E E);R;OF+ we D;N3 the petition and >FFIR. the decision of the 6ourt of >ppeals?? in toto! No costs! SO ORD;R;D! Davide, Jr., Puno, 1apunan, and Ynares-Santiago, JJ., concur!

S;6OND DIVISION "-!R! No! #&<=0/! December (+ &88#$ );IRS OF ,FIS 5>6FS+ namely@ 6,>R> R;S.> 5>6FS+ ROGF; R! 5>6FS+ SR!+ S>TFRNINO R! 5>6FS+ 7RIS6I,> VD>! D; 6>5>N;RO+ 6>R.;,IT> 5! SFGFI5+ 5;RN>RDIT> 5! 6>RD;N>S+ R>F, R! 5>6FS+ .;D>RDO R! 5>6FS+ >NS;,.> 5! >,5>N+ RI6>RDO R! 5>6FS+ F;,I6ISI.> 5! :FDI6O+ and DO.INI6I>N> 5!

T>N->,+ petitioners, vs! )ON! 6OFRT OF >77;>,S and S7OFS;S F>FSTINO DFR>3 and VI6TORI>N> DFR>3+ respondents! D;6ISION GFISF.5IN-, J!@ This petition assails the decision dated No*ember &0+ #00=+ of the 6ourt of >ppeals in 6>4 -!R! 6V No! (</==+ affirmin% the decision dated >u%ust (+ #00#+ of the Re%ional Trial 6ourt of 6ebu 6ity+ 5ranch =+ in 6i*il 6ase No! 6;5490(/! The facts+ as culled from the records+ are as follows@ On :une #+ #09?+ ,uis 5acus leased to pri*ate respondent Faustino Duray a parcel of a%ricultural land in 5ulacao+ Talisay+ 6ebu! Desi%nated as ,ot No! (==#4>4(454&+ it had an area of (+88& square meters+ co*ered by Transfer 6ertificate of Title No! ?99==! The lease was for six years+ endin% .ay (#+ #008! The contract contained an option to buy clause! Fnder said option+ the lessee had the exclusi*e and irre*ocable ri%ht to buy &+888 square meters of the property within fi*e years from a year after the effecti*ity of the contract+ at 7&88 per square meter! That rate shall be proportionately ad'usted dependin% on the peso rate a%ainst the FS dollar+ which at the time of the execution of the contract was fourteen pesos! "#$ 6lose to the expiration of the contract+ ,uis 5acus died on October #8+ #090! Thereafter+ on .arch #/+ #008+ the Duray spouses informed Roque 5acus+ one of the heirs of ,uis 5acus+ that they were willin% and ready to purchase the property under the option to buy clause! They requested Roque 5acus to prepare the necessary documents+ such as a Special 7ower of >ttorney authoriDin% him to enter into a contract of sale+ "&$ on behalf of his sisters who were then abroad! On .arch (8+ #008+ due to the refusal of petitioners to sell the property+ Faustino DurayAs ad*erse claim was annotated by the Re%ister of Deeds of 6ebu+ at the bac of T6T No! =(&=0+ co*erin% the se%re%ated &+888 square meter portion of ,ot No! (==#4>4(454&4>! "($ Subsequently+ on >pril /+ #008+ Duray filed a complaint for specific performance a%ainst the heirs of ,uis 5acus with the 2upon +agapama3apa o# 4aranga35ulacao+ as in% that he be allowed to purchase the lot specifically referred to in the lease contract with option to buy! >t the hearin%+ Duray presented a certification "?$ from the mana%er of Standard 6hartered 5an + 6ebu 6ity+ addressed to ,uis 5acus+ statin% that at the request of .r! ,awrence -lauber+ a ban client+ arran%ements were bein% made to allow Faustino Duray to borrow funds of approximately 7<88+888 to enable him to meet his obli%ations under the contract with ,uis 5acus!"/$ )a*in% failed to reach an a%reement before the 2upon+ on >pril &<+ #008+ pri*ate respondents filed a complaint for specific performance with dama%es a%ainst petitioners before the Re%ional Trial 6ourt+ prayin% that the latter+ 1a2 execute a deed of sale o*er the sub'ect property in fa*or of pri*ate respondentsC 1b2 recei*e the payment of the purchase priceC and 1c2 pay the dama%es! On the other hand+ petitioners alle%ed that before ,uis 5acusA death+ pri*ate respondents con*eyed to them the formerAs lac of interest to exercise their option because of insufficiency of funds+ but they were surprised to learn of pri*ate respondentsA demand! In turn+ they requested pri*ate respondents to pay the purchase price in full but the latter refused! They further alle%ed that pri*ate respondents did not deposit the money as required by the 2upon and instead presented a ban certification which cannot be deemed le%al tender!

On October (8+ #008+ pri*ate respondents manifested in court that they caused the issuance of a cashierAs chec in the amount of 7=/8+888"=$ payable to petitioners at anytime upon demand! On >u%ust (+ #00#+ the Re%ional Trial 6ourt ruled in fa*or of pri*ate respondents+ the dispositi*e portion of which reads@ 7remises considered+ the court finds for the plaintiffs and orders the defendants to specifically perform their obli%ation in the option to buy and to execute a document of sale o*er the property co*ered by Transfer 6ertificate of Title S T4=(&=0 upon payment by the plaintiffs to them in the amount of Six )undred Se*enty4Fi*e Thousand Six )undred Se*enty4Fi*e 17=</+=</!882 7esos within a period of thirty 1(82 days from the date this decision becomes final! SO ORD;R;D!"<$ Fnsatisfied+ petitioners appealed to the respondent 6ourt of >ppeals which denied the appeal on No*ember &0+ #00=+ on the %round that the pri*ate respondents exercised their option to buy the leased property before the expiration of the contract of lease! It held@ !!! >fter a careful re*iew of the entire records of this case+ we are con*inced that the plaintiffs4 appellees *alidly and effecti*ely exercised their option to buy the sub'ect property! >s opined by the lower court+ Jthe readiness and preparedness of the plaintiff on his part+ is manifested by his cautionary letters+ the prepared ban certification lon% before the date of .ay (#+ #008+ the final day of the option+ and his filin% of this suit before said date! If the plaintiff4appellee Francisco Duray had no intention to purchase the property+ he would not ha*e bothered to write those letters to the defendant4appellants 1which were all recei*ed by them2 and neither would he be interested in ha*in% his ad*erse claim annotated at the bac of the T!6!T! of the sub'ect property+ two 1&2 months before the expiration of the lease! .oreo*er+ he e*en went to the extent of see in% the help of the ,upon Ta%apamayapa to compel the defendants4 appellants to reco%niDe his ri%ht to purchase the property and for them to perform their correspondin% obli%ation!"9$ xxx Ee therefore find no merit in this appeal! E);R;FOR;+ the decision appealed from is hereby >FFIR.;D! "0$ )ence+ this petition where petitioners a*er that the 6ourt of >ppeals %ra*ely erred and abused its discretion in@ I! !!!F7)O,DIN- T); TRI>, 6OFRTAS RF,IN- IN T); S7;6IFI6 7;RFOR.>N6; 6>S; 53 ORD;RIN- 7;TITION;RS 1D;F;ND>NTS T);R;IN2 TO ;O;6FT; > DO6F.;NT OF S>,; OV;R T); 7RO7;RT3 IN GF;STION 1EIT) T6T NO! T4 =(&=02 TO T);. IN T); >.OFNT OF 7=</+=</!88 EIT)IN T)IRT3 1(82 D>3S FRO. T); D>T; T); D;6ISION 5;6O.;S FIN>,C II! !!!DISR;->RDIN- ,;->, 7RIN6I7,;S+ S7;6IFI6 7ROVISIONS OF ,>E >ND :FRIS7RFD;N6; IN F7)O,DIN- T); D;6ISION OF T); TRI>, 6OFRT TO T); ;FF;6T T)>T 7RIV>T; R;S7OND;NTS )>D ;O;R6IS;D T);IR RI-)T OF O7TION TO 5F3 ON TI.;C T)FS T); 7R;S;NT>TION OF T); 6;RTIFI6>TION OF T); 5>NT .>N>-;R OF > 5>NT D;7OSIT IN T); N>.; OF >NOT);R 7;RSON FOR ,O>N TO R;S7OND;NTS E>S ;GFIV>,;NT TO > V>,ID T;ND;R OF 7>3.;NT >ND > SFFFI6I;NT 6O.7,>IN6; 1SI62 OF > 6ONDITION FOR T); ;O;R6IS; OF T); O7TION TO 5F3C >ND

III U F7)O,DIN- T); TRI>, 6OFRTAS RF,IN- T)>T T); 7R;S;NT>TION OF > 6>S);RAS 1SI62 6);6T 53 T); R;S7OND;NTS IN T); >.OFNT OF 7=&/+888!88 ;V;N >FT;R T); T;R.IN>TION OF T); TRI>, ON T); .;RITS EIT) 5OT) 7>RTI;S >,R;>D3 )>VIN- R;ST;D T);IR 6>S;+ E>S STI,, V>,ID 6O.7,I>N6; OF T); 6ONDITION FOR T); 7RIV>T; R;S7OND;NTSA 17,>INTIFFS T);R;IN2 ;O;R6IS; OF RI-)T OF O7TION TO 5F3 >ND )>D > FOR6; OF V>,ID >ND FF,, T;ND;R OF 7>3.;NT EIT)IN T); >-R;;D 7;RIOD!"#8$ 7etitioners insist that they cannot be compelled to sell the disputed property by *irtue of the nonfulfillment of the obli%ation under the option contract of the pri*ate respondents! 7ri*ate respondents first a*er that petitioners are unclear if Rule =/ or Rule ?/ of the Rules of 6ourt %o*ern their petition+ and that petitioners only raised questions of facts which this 6ourt cannot properly entertain in a petition for re*iew! They claim that e*en assumin% that the instant petition is one under Rule ?/+ the same must be denied for the 6ourt of >ppeals has correctly determined that they had *alidly exercised their option to buy the leased property before the contract expired! In response+ petitioners state that pri*ate respondents erred in initially classifyin% the instant petition as one under Rule =/ of the Rules of 6ourt! They ar%ue that the petition is one under Rule ?/ where errors of the 6ourt of >ppeals+ whether e*identiary or le%al in nature+ may be re*iewed! Ee a%ree with pri*ate respondents that in a petition for re*iew under Rule ?/+ only questions of law may be raised! "##$ )owe*er+ a close readin% of petitionersA ar%uments re*eal the followin% le%al issues which may properly be entertained in the instant petition@ a2 Ehen pri*ate respondents opted to buy the property co*ered by the lease contract with option to buy+ were they already required to deli*er the money or consi%n it in court before petitioner executes a deed of transferV b2 Did pri*ate respondents incur in delay when they did not deli*er the purchase price or consi%n it in court on or before the expiration of the contractV On the first issue+ petitioners contend that pri*ate respondents failed to comply with their obli%ation because there was neither actual deli*ery to them nor consi%nation in court or with the .unicipal+ 6ity or 7ro*incial Treasurer of the purchase price before the contract expired! 7ri*ate respondentsA ban certificate statin% that arran%ements were bein% made by the ban to release 7<88+888 as a loan to pri*ate respondents cannot be considered as le%al tender that may substitute for deli*ery of payment to petitioners nor was it a consi%nation! Obli%ations under an option to buy are reciprocal obli%ations! "#&$ The performance of one obli%ation is conditioned on the simultaneous fulfillment of the other obli%ation! "#($ In other words+ in an option to buy+ the payment of the purchase price by the creditor is contin%ent upon the execution and deli*ery of a deed of sale by the debtor! In this case+ when pri*ate respondents opted to buy the property+ their obli%ation was to ad*ise petitioners of their decision and their readiness to pay the price! They were not yet obli%ed to ma e actual payment! Only upon petitionersA actual execution and deli*ery of the deed of sale were they required to pay! >s earlier stated+ the latter was contin%ent upon the former! In 5ietes vs. Court o# $ppea!s, ?= S6R> =/? 1#0<&2, we held that notice of the creditorAs decision to exercise his option to buy need not be coupled with actual payment of the price+ so lon% as this is deli*ered to the owner of the property upon performance of his part of the a%reement! 6onsequently+ since the obli%ation was not yet due+ consi%nation in court of the purchase price was not yet required!

6onsi%nation is the act of depositin% the thin% due with the court or 'udicial authorities whene*er the creditor cannot accept or refuses to accept payment and it %enerally requires a prior tender of payment! In instances+ where no debt is due and owin%+ consi%nation is not proper!"#?$ Therefore+ petitionersA contention that pri*ate respondents failed to comply with their obli%ation under the option to buy because they failed to actually deli*er the purchase price or consi%n it in court before the contract expired and before they execute a deed+ has no le% to stand on! 6orollary+ pri*ate respondents did not incur in delay when they did not yet deli*er payment nor ma e a consi%nation before the expiration of the contract! In reciprocal obli%ations+ neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him! Only from the moment one of the parties fulfills his obli%ation+ does delay by the other be%in!"#/$ In this case+ pri*ate respondents+ as early as .arch #/+ #008+ communicated to petitioners their intention to buy the property and they were at that time underta in% to meet their obli%ation before the expiration of the contract on .ay (#+ #008! )owe*er+ petitioners refused to execute the deed of sale and it was their demand to pri*ate respondents to first deli*er the money before they would execute the same which prompted pri*ate respondents to institute a case for specific performance in the 2upong +agapama3apa and then in the RT6! On October (8+ #008+ after the case had been submitted for decision but before the trial court rendered its decision+ pri*ate respondents issued a cashierAs chec in petitionersA fa*or purportedly to bolster their claim that they were ready to pay the purchase price! The trial court considered this in pri*ate respondentsA fa*or and we belie*e that it ri%htly did so+ because at the time the chec was issued+ petitioners had not yet executed a deed of sale nor expressed readiness to do so! >ccordin%ly+ as there was no compliance yet with what was incumbent upon petitioners under the option to buy+ pri*ate respondents had not incurred in delay when the cashierAs chec was issued e*en after the contract expired! E);R;FOR;+ the instant petition is D;NI;D! The decision dated No*ember &0+ #00= of the 6ourt of >ppeals is hereby >FFIR.;D! 6osts a%ainst petitioners! SO ORD;R;D! 4e!!osi!!o, (Chairman), 6endoza, and De 2eon, Jr., JJ., concur. 4uena, J., on official lea*e.

Republic of the 7hilippines SU REME $OURT .anila FIRST DIVISION G.R. No. 125088 -.l* 12, 2005

ANTONIO R. $ORTES @i" &i' (!p!(i)* !' A#;i"i')r!)or o/ )&+ +')!)+ o/ $l!ro S. $or)+'B, petitioner+ *s! %ON. $OURT O1 A EALS !"# :ILLA ES ERAN9A DE:ELO MENT $OR ORATION, respondents! D;6ISION YNARES-SANTIAGO, J.3 The instant petition for re*iew see s the re*ersal of the :une #(+ #00= Decision # of the 6ourt of >ppeals in 6>4-!R! 6V No! ?<9/=+ settin% aside the :une &?+ #00( Decision & of the Re%ional Trial 6ourt of .a ati+ 5ranch #(9+ which rescinded the contract of sale entered into by petitioner >ntonio 6ortes 16ortes2 and pri*ate respondent Villa ;speranDa De*elopment 6orporation 16orporation2! The antecedents show that for the purchase price of 7(+<88+888!88+ the 6orporation as buyer+ and 6ortes as seller+ entered into a contract of sale o*er the lots co*ered by Transfer 6ertificate of Title 1T6T2 No! (###(4>+ T6T No! (#0#(4> and T6T No! (&8#(4>+ located at 5aclaran+ 7araQaque+ .etro .anila! On *arious dates in #09(+ the 6orporation ad*anced to 6ortes the total sum of 7#+&#(+888!88! Sometime in September #09(+ the parties executed a deed of absolute sale containin% the followin% terms@( #! Fpon execution of this instrument+ the Vendee shall pay unto the Vendor sum of TEO .I,,ION >ND TEO )FNDR;D T)OFS>ND 17&+&88+888!882 7;SOS+ 7hilippine 6urrency+ less all ad*ances paid by the Vendee to the Vendor in connection with the saleC &! The balance of ON; .I,,ION >ND FIV; )FNDR;D T)OFS>ND "7#+/88+888!88$ 7;SOS+ 7hil! 6urrency shall be payable within ON; 1#2 3;>R from date of execution of this instrument+ payment of which shall be secured by an irre*ocable standby letter of credit to be issued by any reputable local ban in% institution acceptable to the Vendor! xxxx ?! >ll expense for the re%istration of this document with the Re%ister of Deeds concerned+ includin% the transfer tax+ shall be di*ided equally between the Vendor and the Vendee! 7ayment of the capital %ains shall be exclusi*ely for the account of the VendorC /R commission of .arcosa SancheD to be deducted upon si%nin% of sale! ? Said Deed was retained by 6ortes for notariDation! On :anuary #?+ #09/+ the 6orporation filed the instant case / for specific performance see in% to compel 6ortes to deli*er the T6Ts and the ori%inal copy of the Deed of >bsolute Sale! >ccordin% to the 6orporation+ despite its readiness and ability to pay the purchase price+ 6ortes refused deli*ery of the sou%ht documents! It thus prayed for the award of dama%es+ attorneyNs fees and liti%ation expenses arisin% from 6ortesN refusal to deli*er the same documents! In his >nswer with counterclaim+ = 6ortes claimed that the ownerNs duplicate copy of the three T6Ts were surrendered to the 6orporation and it is the latter which refused to pay in full the a%reed down payment! )e added that portion of the sub'ect property is occupied by his lessee who a%reed to *acate the premises upon payment of disturbance fee! )owe*er+ due to the 6orporationNs failure to pay in full the sum of 7&+&88+888!88+ he in turn failed to fully pay the disturbance fee of the lessee who now refused to pay monthly rentals! )e thus prayed that the 6orporation be ordered to pay the outstandin% balance plus interest and in the alternati*e+ to

cancel the sale and forfeit the 7#+&#(+888!88 partial down payment+ with dama%es in either case! On :une &?+ #00(+ the trial court rendered a decision rescindin% the sale and directed 6ortes to return to the 6orporation the amount of 7#+&#(+888!88+ plus interest! It ruled that pursuant to the contract of the parties+ the 6orporation should ha*e fully paid the amount of 7&+&88+888!88 upon the execution of the contract! It stressed that such is the law between the parties because the 6orporation failed to present e*idence that there was another a%reement that modified the terms of payment as stated in the contract! >nd+ ha*in% failed to pay in full the amount of 7&+&88+888!88 despite 6ortesN deli*ery of the Deed of >bsolute Sale and the T6Ts+ rescission of the contract is proper! In its motion for reconsideration+ the 6orporation contended that the trial court failed to consider their a%reement that it would pay the balance of the down payment when 6ortes deli*ers the T6Ts! The motion was+ howe*er+ denied by the trial court holdin% that the rescission should stand because the 6orporation did not act on the offer of 6ortesN counsel to deli*er the T6Ts upon payment of the balance of the down payment! Thus@ The 6ourt finds no merit in the "6orporationNs$ .otion for Reconsideration! >s stated in the decision sou%ht to be reconsidered+ "6ortesN$ counsel at the pre4trial of this case+ proposed that if "the 6orporation$ completes the down payment a%reed upon and ma e arran%ement for the payment of the balances of the purchase price+ "6ortes$ would si%n the Deed of Sale and turn o*er the certificate of title to the "6orporation$! "The 6orporation$ did nothin% to comply with its underta in% under the a%reement between the parties! E);R;FOR;+ in *iew of the fore%oin% considerations+ the .otion for Reconsideration is hereby D;NI;D! SO ORD;R;D!< On appeal+ the 6ourt of >ppeals re*ersed the decision of the trial court and directed 6ortes to execute a Deed of >bsolute Sale con*eyin% the properties and to deli*er the same to the 6orporation to%ether with the T6Ts+ simultaneous with the 6orporationNs payment of the balance of the purchase price of 7&+?9<+888!88! It found that the parties a%reed that the 6orporation will fully pay the balance of the down payment upon 6ortesN deli*ery of the three T6Ts to the 6orporation! The records show that no such deli*ery was made+ hence+ the 6orporation was not remiss in the performance of its obli%ation and therefore 'ustified in not payin% the balance! The decretal portion thereof+ pro*ides@ E);R;FOR;+ premises considered+ "the 6orporationNs$ appeal is -R>NT;D! The decision appealed from is hereby R;V;RS;D and S;T >SID; and a new 'ud%ment rendered orderin% "6ortes$ to execute a deed of absolute sale con*eyin% to "the 6orporation$ the parcels of land sub'ect of and described in the deed of absolute sale+ ;xhibit D! Simultaneously with the execution of the deed of absolute sale and the deli*ery of the correspondin% ownerNs duplicate copies of T6T Nos! (###(4>+ (#0(#4> and (&8#(4> of the Re%istry of Deeds for the 7ro*ince of RiDal+ .etro .anila+ District IV+ "the 6orporation$ shall pay "6ortes$ the balance of the purchase price of 7&+?9<+888!88! >s a%reed upon in para%raph ? of the Deed of >bsolute Sale+ ;xhibit D+ under terms and conditions+ B>ll expenses for the re%istration of this document 1the deed of sale2 with the Re%ister of Deeds concerned+ includin% the transfer tax+ shall be di*ided equally between "6ortes and the 6orporation$! 7ayment of the capital %ains shall be exclusi*ely for the account of the VendorC /R commission of .arcosa SancheD to be deducted upon si%nin% of sale!B There is no pronouncement as to costs! SO ORD;R;D!9

6ortes filed the instant petition prayin% that the decision of the trial court rescindin% the sale be reinstated! There is no doubt that the contract of sale in question %a*e rise to a reciprocal obli%ation of the parties! Reciprocal obli%ations are those which arise from the same cause+ and which each party is a debtor and a creditor of the other+ such that the obli%ation of one is dependent upon the obli%ation of the other! They are to be performed simultaneously+ so that the performance of one is conditioned upon the simultaneous fulfillment of the other! 0 >rticle ##0# of the 6i*il 6ode+ states@ >RT! ##0#! The power to rescind obli%ations is implied in reciprocal ones+ in case one of the obli%ors should not comply with what is incumbent upon him! xxxx >s to when said failure or delay in performance arise+ >rticle ##=0 of the same 6ode pro*ides that L >RT! ##=0 xxxx In reciprocal obli%ations+ neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him! 1ro; )&+ ;o;+") o"+ o/ )&+ p!r)i+' /.l/ill' &i' o0li,!)io", #+l!* 0* )&+ o)&+r 0+,i"'! 1;mphasis supplied2 The issue therefore is whether there is delay in the performance of the partiesN obli%ation that would 'ustify the rescission of the contract of sale! To resol*e this issue+ we must first determine the true a%reement of the parties! The settled rule is that the decisi*e factor in e*aluatin% an a%reement is the intention of the parties+ as shown not necessarily by the terminolo%y used in the contract but by their conduct+ words+ actions and deeds prior to+ durin% and immediately after executin% the a%reement! >s such+ therefore+ documentary and parol e*idence may be submitted and admitted to pro*e such intention!#8 In the case at bar+ the stipulation in the Deed of >bsolute Sale was that the 6orporation shall pay in full the 7&+&88+888!88 down payment upon execution of the contract! )owe*er+ as correctly noted by the 6ourt of >ppeals+ the transcript of steno%raphic notes re*eal 6ortesN admission that he a%reed that the 6orporationNs full payment of the sum of 7&+&88+888!88 would depend upon his deli*ery of the T6Ts of the three lots! In fact+ his main defense in the >nswer is that+ he performed what is incumbent upon him by deli*erin% to the 6orporation the T6Ts and the carbon duplicate of the Deed of >bsolute Sale+ but the latter refused to pay in full the down payment!## 7ertinent portion of the transcript+ reads@ "G$ Now+ why did you deli*er these three titles to the plaintiff despite the fact that it has not been paid in full the a%reed down paymentV > Eell+ the bro er told me that the down payment will be %i*en if I surrender the titles! G Do you mean to say that the plaintiff a%reed to pay in full the down payment of 7&+&88+888!88 pro*ided you surrender or entrust to the plaintiff the titlesV > 3es+ sir!#&

Ehat further confirmed the a%reement to deli*er the T6Ts is the testimony of 6ortes that the title of the lots will be transferred in the name of the 6orporation upon full payment of the 7&+&88+888!88 down payment! Thus L >TT3! >NT>R>N G Of course+ you ha*e it transferred in the name of the plaintiff+ the titleV > Fpon full payment! xxxx >TT3! S>RT; G Ehen you said upon full payment+ are you referrin% to the a%reed down payment of 7&+&88+888!88V > 3es+ sir!#( 5y a%reein% to transfer title upon full payment of 7&+&88+888!88+ 6ortesN impliedly a%reed to deli*er the T6Ts to the 6orporation in order to effect said transfer! )ence+ the phrase Bexecution of this instrumentB #? as appearin% in the Deed of >bsolute Sale+ and which e*ent would %i*e rise to the 6orporationNs obli%ation to pay in full the amount of 7&+&88+888!88+ can not be construed as referrin% solely to the si%nin% of the deed! The meanin% of BexecutionB in the instant case is not limited to the si%nin% of a contract but includes as well the performance or implementation or accomplishment of the partiesN a%reement! #/ Eith the transfer of titles as the correspondin% reciprocal obli%ation of payment+ 6ortesN obli%ation is not only to affix his si%nature in the Deed+ but to set into motion the process that would facilitate the transfer of title of the lots+ i.e!+ to ha*e the Deed notariDed and to surrender the ori%inal copy thereof to the 6orporation to%ether with the T6Ts! )a*in% established the true a%reement of the parties+ the 6ourt must now determine whether 6ortes deli*ered the T6Ts and the ori%inal Deed to the 6orporation! The 6ourt of >ppeals found that 6ortes ne*er surrendered said documents to the 6orporation! 6ortes testified that he deli*ered the same to .anny SancheD+ the son of the bro er+ and that .anny told him that her mother+ .arcosa SancheD+ deli*ered the same to the 6orporation! G Do you ha*e any proof to show that you ha*e indeed surrendered these titles to the plaintiffV > 3es+ sir! G I am showin% to you a receipt dated October &0+ #09(+ what relation has this receipt with that receipt that you ha*e mentionedV > That is the receipt of the real estate bro er when she recei*ed the titles! G On top of the printed name is .anny SancheD+ there is a si%nature+ do you now who is that .anny SancheDV > That is the son of the bro er! xxxx G .ay we now the full name of the real estate bro erV > .arcosa SancheD xxxx

G Do you now if the bro er or .arcosa SancheD indeed deli*ered the titles to the plaintiffV > That is what "s$he told me! She %a*e them to the plaintiff! x x x x!#= >TT3! >NT>R>N G >re you really sure that the title is in the hands of the plaintiffV xxxx G It is in the hands of the bro er but there is no showin% that it is in the hands of the plaintiffV > 3es+ sir! 6OFRT G )ow do you now that it was deli*ered to the plaintiff by the son of the bro erV > The bro er told me that she deli*ered the title to the plaintiff! >TT3! >NT>R>N G Did she not show you any receipt that she deli*ered to ".r!$ Dra%on #< the title without any receiptV > I ha*e not seen any receipt! G So+ therefore+ you are not sure whether the title has been deli*ered to the plaintiff or not! It is only upon the alle%ation of the bro erV > 3es+ sir!#9 )owe*er+ .arcosa SancheDNs unrebutted testimony is that+ she did not recei*e the T6Ts! She also denied nowled%e of deli*ery thereof to her son+ .anny+ thus@ G The defendant+ >ntonio 6ortes testified durin% the hearin% on .arch ##+ #09= that he alle%edly %a*e you the title to the property in question+ is it trueV > I did not recei*e the title! G )e li ewise said that the title was deli*ered to your son+ do you now about thatV > I do not now anythin% about that!#0 Ehat further stren%thened the findin%s of the 6ourt of >ppeals that 6ortes did not surrender the sub'ect documents was the offer of 6ortesN counsel at the pre4trial to deli*er the T6Ts and the Deed of >bsolute Sale if the 6orporation will pay the balance of the down payment! Indeed+ if the said documents were already in the hands of the 6orporation+ there was no need for 6ortesN counsel to ma e such offer! Since 6ortes did not perform his obli%ation to ha*e the Deed notariDed and to surrender the same to%ether with the T6Ts+ the trial court erred in concludin% that he performed his part in the contract of sale and that it is the 6orporation alone that was remiss in the performance of its obli%ation! >ctually+ both parties were in delay! 6onsiderin% that their obli%ation was reciprocal+ performance thereof must be simultaneous! The mutual inaction of 6ortes and the 6orporation therefore %a*e rise to a compensation morae or default on the part of both parties because neither has completed their part in their reciprocal obli%ation! &8 6ortes is yet to deli*er the ori%inal copy of the notariDed Deed and the T6Ts+ while the 6orporation is yet to pay in

full the a%reed down payment of 7&+&88+888!88! This mutual delay of the parties cancels out the effects of default+&# such that it is as if no one is %uilty of delay!&& Ee find no merit in 6ortesN contention that the failure of the 6orporation to act on the proposed settlement at the pre4trial must be construed a%ainst the latter! 6ortes ar%ued that with his counselNs offer to surrender the ori%inal Deed and the T6Ts+ the 6orporation should ha*e consi%ned the balance of the down payment! This ar%ument would ha*e been correct if 6ortes actually surrendered the Deed and the T6Ts to the 6orporation! Eith such deli*ery+ the 6orporation would ha*e been placed in default if it chose not to pay in full the required down payment! Fnder >rticle ##=0 of the 6i*il 6ode+ from the moment one of the parties fulfills his obli%ation+ delay by the other be%ins! Since 6ortes did not perform his part+ the pro*ision of the contract requirin% the 6orporation to pay in full the down payment ne*er acquired obli%atory force! .oreo*er+ the 6orporation could not be faulted for not automatically heedin% to the offer of 6ortes! For one+ its complaint has a prayer for dama%es which it may not want to wai*e by a%reein% to the offer of 6ortesN counsel! For another+ the pre*ious representation of 6ortes that the T6Ts were already deli*ered to the 6orporation when no such deli*ery was in fact made+ is enou%h reason for the 6orporation to be more cautious in dealin% with him! The 6ourt of >ppeals therefore correctly ordered the parties to perform their respecti*e obli%ation in the contract of sale+ i.e., for 6ortes to+ amon% others+ deli*er the necessary documents to the 6orporation and for the latter to pay in full+ not only the down payment+ but the entire purchase price! >nd since the 6orporation did not question the 6ourt of >ppealNs decision and e*en prayed for its affirmance+ its payment should ri%htfully consist not only of the amount of 709<+888!88+ representin% the balance of the 7&+&88+888!88 down payment+ but the total amount of 7&+?9<+888!88+ the remainin% balance in the 7(+<88+888!88 purchase price! 4%ERE1ORE+ the petition is DENIED and the :une #(+ #00= Decision of the 6ourt of >ppeals in 6>4-!R! 6V No! ?<9/=+ is A11IRMED! SO ORDERED! Pangani&an, C.J., $ustria-6artinez, Ca!!e(o, Sr., Chico-5azario, J.J., concur!

Republic of the 7hilippines SU REME $OURT .anila G.R. No. 181205 O()o0+r 9, 2009

within the stipulated period on October (#+ #009 or >pril (8+ #000+ the last day of the six4 month %race period! > few days shy of three years later+ .e%aworld+ by notice dated >pril &(+ &88& 1notice of turno*er2+ informed Tanseco that the unit was ready for inspection preparatory to deli*ery!( Tanseco replied throu%h counsel+ by letter of .ay =+ &88&+ that in *iew of .e%aworldAs failure to deli*er the unit on time+ she was demandin% the return of7#?+&9#+<(#!<8 representin% the total installment payment she had made+ with interest at #&R per annum from >pril (8+ #000+ the expiration of the six4month %race period! Tanseco pointed out that none of the excepted causes of delay existed! ? )er demand ha*in% been unheeded+ Tanseco filed on :une /+ &88& with the )ousin% and ,and Fse Re%ulatory 5oardAs 1),FR52 ;xpanded National 6apital Re%ion Field Office a complaint a%ainst .e%aworld for rescission of contract+ refund of payment+ and dama%es! / In its >nswer+ .e%aworld attributed the delay to the #00< >sian financial crisis which was beyond its controlC and ar%ued that default had not set in+ Tanseco not ha*in% made any 'udicial or extra'udicial demand for deli*ery before receipt of the notice of turno*er! = 5y Decision of .ay &9+ &88(+< the ),FR5 >rbiter dismissed TansecoAs complaint for lac of cause of action+ findin% that .e%aworld had effected deli*ery by the notice of turno*er before Tanseco made a demand! Tanseco was thereupon ordered to pay .e%aworld the balance of the purchase price+ plus 7&/+888 as moral dama%es+7&/+888 as exemplary dama%es+ and 7&/+888 as attorneyAs fees! On appeal by Tanseco+ the ),FR5 5oard of 6ommissioners+ by Decision of No*ember &9+ &88(+9 sustained the ),FR5 >rbiterAs Decision on the %round of laches for failure to demand rescission when the ri%ht thereto accrued! It deleted the award of dama%es+ howe*er! TansecoAs .otion for Reconsideration ha*in% been denied+ 0 she appealed to the Office of the 7resident which dismissed the appeal by Decision of >pril &9+ &88= #8 for failure to show that the findin%s of the ),FR5 were tainted with %ra*e abuse of discretion! )er .otion for Reconsideration ha*in% been denied by Resolution dated >u%ust (8+ &88=+ ## Tanseco filed a 7etition for Re*iew under Rule ?( with the 6ourt of >ppeals! #& 5y Decision of September &9+ &88<+ #( the appellate court %ranted TansecoAs petition+ disposin% thus@ 4%ERE1ORE, premises considered+ petition is hereby GRANTED and the assailed .ay &9+ &88( decision of the ),FR5 Field Office+ the No*ember &9+ &88( decision of the ),FR5 5oard of 6ommissioners in ),FR5 6ase No! R;.4>48(8<##48#=&+ the >pril &9+ &88= Decision and >u%ust (8+ &88= Resolution of the Office of the 7resident in O!7! 6ase No! 8/4I4(#9+ are hereby RE:ERSED and SET ASIDE and a new one entered@ 1#2 RES$INDING+ as prayed for by T>NS;6O+ the a%%rie*ed party+ the contract to buy and sellC 1&2 DIRE$TING .;->EOR,D TO AY T>NS;6O the amount she had paid totalin% 7#?+&9#+<(#!<8 with Twel*e 1#&R2 7ercent interest per annum from October (#+ #009C 1(2 ORDERING .;->EOR,D TO AY T>NS;6O 7&88+888!88 by way of

MEGA4ORLD GLOBUS ASIA, IN$., 7etitioner+ *s! MILA S. TANSE$O, Respondent! D;6ISION $AR IO MORALES, J.: On :uly <+ #00/+ petitioner .e%aworld -lobus >sia+ Inc! 1.e%aworld2 and respondent .ila S! Tanseco 1Tanseco2 entered into a 6ontract to 5uy and Sell # a &&? square4meter 1more or less2 condominium unit at a pre4sellin% pro'ect+ BThe Salcedo 7ar +B located alon% Senator -il 7uyat >*enue+ .a ati 6ity! The purchase price was 7#=+98&+8(<!(&+ to be paid as follows@ 1#2 (8R less the reser*ation fee of 7#88+888+ or7?+0?8+=##!#0+ by postdated chec payable on :uly #?+ #00/C 1&2 70+&?#+#&8!/8 throu%h (8 equal monthly installments of 7(89+8(<!(/ from >u%ust #?+ #00/ to :anuary #?+ #009C and 1(2 the balance of 7&+/&8+(8/!=( onOctober (#+ #009+ the stipulated deli*ery date of the unitC pro*ided that if the construction is completed earlier+ Tanseco would pay the balance within se*en days from receipt of a notice of turno*er! Section ? of the 6ontract to 5uy and Sell pro*ided for the construction schedule as follows@ ?! $ONSTRU$TION S$%EDULE G The construction of the 7ro'ect and the unitHs herein purchased shall be completed and deli*ered not later than October (#+ #009 with additional %race period of six 1=2 months within which to complete the 7ro'ect and the unitHs+ barrin% delays due to fire+ earthqua es+ the elements+ acts of -od+ war+ ci*il disturbances+ stri es or other labor disturbances+ %o*ernment and economic controls ma in% it+ amon% others+ impossible or difficult to obtain the necessary materials+ acts of third person+ or any other cause or conditions beyond the control of the S;,,;R! In this e*ent+ the completion and deli*ery of the unit are deemed extended accordin%ly without liability on the part of the S;,,;R! The fore%oin% notwithstandin%+ the S;,,;R reser*es the ri%ht to withdraw from this transaction and refund to the 5F3;R without interest the amounts recei*ed from him under this contract if for any reason not attributable to S;,,;R+ such as but not limited to fire+ storms+ floods+ earthqua es+ rebellion+ insurrection+ wars+ coup de etat+ ci*il disturbances or for other reasons beyond its control+ the 7ro'ect may not be completed or it can only be completed at a financial loss to the S;,,;R! In any e*ent+ all construction on or of the 7ro'ect shall remain the property of the S;,,;R! 1Fnderscorin% supplied2 Tanseco paid all installments due up to :anuary+ #009+ lea*in% unpaid the balance of 7&+/&8+(8/!=( pendin% deli*ery of the unit!& .e%aworld+ howe*er+ failed to deli*er the unit

exemplary dama%esC 1?2 ORDERING .;->EOR,D TO AY T>NS;6O 7&88+888!88 as attorneyAs feesC and 1/2 ORDERING.;->EOR,D TO AY T>NS;6O the cost of suit! 1;mphasis in the ori%inalC underscorin% supplied2 The appellate court held that under >rticle ##=0 of the 6i*il 6ode+ no 'udicial or extra'udicial demand is needed to put the obli%or in default if the contract+ as in the herein partiesA contract+ states the date when the obli%ation should be performedC that time was of the essence because Tanseco relied on .e%aworldAs promise of timely deli*ery when she a%reed to part with her moneyC that the delay should be rec oned from October (#+ #009+ there bein% no force ma'eure to warrant the application of the >pril (8+ #000 alternati*e dateC and that specific performance could not be ordered in lieu of rescission as the ri%ht to choose the remedy belon%s to the a%%rie*ed party! The appellate court awarded Tanseco exemplary dama%es on a findin% of bad faith on the part of .e%aworld in forcin% her to accept its lon%4delayed deli*eryC and attorneyAs fees+ she ha*in% been compelled to sue to protect her ri%hts! Its .otion for Reconsideration ha*in% been denied by Resolution of :anuary 9+ &889+#? .e%aworld filed the present 7etition for Re*iew on 6ertiorari+ echoin% its position before the ),FR5+ addin% that Tanseco had not shown any basis for the award of dama%es and attorneyAs fees!#/ Tanseco+ on the other hand+ maintained her position too+ and citin% .e%aworldAs bad faith which became e*ident when it insisted on ma in% the deli*ery despite the lon% delay+#= insisted that she deser*ed the award of dama%es and attorneyAs fees! >rticle ##=0 of the 6i*il 6ode pro*ides@ >rt! ##=0! Those obli%ed to deli*er or to do somethin% incur in delay from the time the obli%ee 'udicially or extra'udicially demands from them the fulfillment of their obli%ation! )owe*er+ the demand by the creditor shall not be necessary in order that delay may exist@ 1#2 Ehen the obli%ation or the law expressly so declaresC or 1&2 Ehen from the nature and the circumstances of the obli%ation it appears that the desi%nation of the time when the thin% is to be deli*ered or the ser*ice is to be rendered was a controllin% moti*e for the establishment of the contractC or 1(2 Ehen demand would be useless+ as when the obli%or has rendered it beyond his power to perform! In reciprocal obli%ations+ neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him! From the moment one of the parties fulfills his obli%ation+ delay by the other be%ins! 1Fnderscorin% supplied2

The 6ontract to 5uy and Sell of the parties contains reciprocal obli%ations+ i!e!+ to complete and deli*er the condominium unit on October (#+ #009 or six months thereafter on the part of .e%aworld+ and to pay the balance of the purchase price at or about the time of deli*ery on the part of Tanseco! 6ompliance by .e%aworld with its obli%ation is determinati*e of compliance by Tanseco with her obli%ation to pay the balance of the purchase price! .e%aworld ha*in% failed to comply with its obli%ation under the contract+ it is liable therefor!#< That .e%aworldAs sendin% of a notice of turno*er preceded TansecoAs demand for refund does not abate her cause! For demand would ha*e been useless+ .e%aworld admittedly ha*in% failed in its obli%ation to deli*er the unit on the a%reed date! >rticle ##<? of the 6i*il 6ode pro*ides@ >rt! ##<?! ;xcept in cases expressly specified by the law+ or when it is otherwise declared by stipulation+ or when the nature of the obli%ation requires the assumption of ris + no person shall be responsible for those e*ents which could not be foreseen+ or which+ thou%h foreseen+ were ine*itable!#9 The 6ourt cannot %eneraliDe the #00< >sian financial crisis to be unforeseeable and beyond the control of a business corporation! > real estate enterprise en%a%ed in the pre4sellin% of condominium units is concededly a master in pro'ections on commodities and currency mo*ements+ as well as business ris s! The fluctuatin% mo*ement of the 7hilippine peso in the forei%n exchan%e mar et is an e*eryday occurrence+ hence+ not an instance of caso fortuito!#0 .e%aworldAs excuse for its delay does not thus lie! >s for .e%aworldAs ar%ument that TansecoAs claim is considered barred by laches on account of her belated demand+ it does not lie too! ,aches is a creation of equity and its application is controlled by equitable considerations!&8 It bears notin% that Tanseco reli%iously paid all the installments due up to :anuary+ #009+ whereas .e%aworld rene%ed on its obli%ation to deli*er within the stipulated period! > circumspect wei%hin% of equitable considerations thus tilts the scale of 'ustice in fa*or of Tanseco! 7ursuant to Section &( of 7residential Decree No! 0/<&# which reads@ Sec! &(! Non4Forfeiture of 7ayments! 4 No installment payment made by a buyer in a subdi*ision or condominium pro'ect for the lot or unit he contracted to buy shall be forfeited in fa*or of the owner or de*eloper when the buyer+ after due notice to the owner or de*eloper+ desists from further payment due to the failure of the owner or de*eloper to de*elop the subdi*ision or condominium pro'ect accordin% to the appro*ed plans and within the time limit for complyin% with the same! Such buyer may+ at his option+ be reimbursed the total amount paid includin%amortiDation inte rests but excludin% delinquency interests+ with interest thereon at the le%al rate! 1;mphasis and underscorin% supplied2+ Tanseco is+ as thus prayed for+ entitled to be reimbursed the total amount she paid .e%aworld!

Ehile the appellate court correctly awarded 7#?+&9#+<(#!<8 then+ the interest rate should+ howe*er+ be =R per annum accruin% from the date of demand on .ay =+ &88&+ and then #&R per annum from the time this 'ud%ment becomes final and executory+ conformably with ;astern Shippin% ,ines+ Inc! *! 6ourt of >ppeals!&& The award of 7&88+888 attorneyAs fees and of costs of suit is in order too+ the parties ha*in% stipulated in the 6ontract to 5uy and Sell that these shall be borne by the losin% party in a suit based thereon+&( not to mention that Tanseco was compelled to retain the ser*ices of counsel to protect her interest! >nd so is the award of exemplary dama%es! Eith pre4sellin% *entures mushroomin% in the metropolis+ there is an increasin% need to correct the insidious practice of real estate companies of profferin% all sorts of empty promises to entice innocent buyers and ensure the profitability of their pro'ects! The 6ourt finds the appellate courtAs award of 7&88+888 as exemplary dama%es excessi*e+ howe*er! ;xemplary dama%es are imposed not to enrich one party or impo*erish another but to ser*e as a deterrent a%ainst or as a ne%ati*e incenti*e to curb socially deleterious actions!&? The 6ourt finds that 7#88+888 is reasonable in this case! Finally+ since >rticle ##0#&/ of the 6i*il 6ode does not apply to a contract to buy and sell+ the suspensi*e condition of full payment of the purchase price not ha*in% occurred to tri%%er the obli%ation to con*ey title+cancellation+ not rescission+ of the contract is thus the correct remedy in the premises!&= E);R;FOR;+ the challen%ed Decision of the 6ourt of >ppeals is+ in li%ht of the fore%oin%+ >FFIR.;D with .ODIFI6>TION! >s modified+ the dispositi*e portion of the Decision reads@ The :uly <+ #00/ 6ontract to 5uy and Sell between the parties is cancelled! 7etitioner+ .e%aworld -lobus >sia+ Inc!+ is directed to pay respondent+ .ila S! Tanseco+ the amount of 7#?+&9#+<(#!<8+ to bear =R interest per annum startin% .ay =+ &88& and #&R interest per annum from the time the 'ud%ment becomes final and executoryC and to pay 7&88+888 attorneyAs fees+ 7#88+888 exemplary dama%es+ and costs of suit! 6osts a%ainst petitioner! SO ORD;R;D!

Republic of the 7hilippines SF7R;.; 6OFRT .anila T)IRD DIVISION GENERAL MILLING $OR ORATION, 7etitioner+ G.R. No. 198A28 7resent@ 4 *ersus 4 6>R7IO+ J!+W V;,>S6O+ :R!+ 6hairperson+ ,;ON>RDO4D; 6>STRO+WW >5>D+ and .;NDOM>+ JJ! 7romul%ated@

existin% thereon+ situated in the 5arrioHs of 5anaybanay+ .unicipality of ,ipa 6ity+ 7ro*ince of 5atan%as+ 7hilippines+ hisHherHtheir titleHs thereto bein% e*idenced by Transfer 6ertificateHs No!Hs T40&#? of the Re%istry of Deeds for the 7ro*ince of 5atan%as in the amount of TEO )FNDR;D FIFT;;N T)OFS>ND 17 &#/+888!882+ 7hilippine 6urrency+ which the maximum credit line payable within a x x x day term and to secure the payment of the same plus interest of twel*e percent 1#&R2 per annum! Spouses Ramos e*entually were unable to settle their account with -.6! They alle%ed that they suffered business losses because of the ne%li%ence of -.6 and its *iolation of the -rowers 6ontract!"($ On .arch (#+ #00<+ the counsel for -.6 notified Spouses Ramos that -.6 would institute foreclosure proceedin%s on their mort%a%ed property! "?$ On .ay <+ #00<+ -.6 filed a 7etition for ;xtra'udicial Foreclosure of .ort%a%e! On :une #8+ #00<+ the property sub'ect of the foreclosure was subsequently sold by public auction to -.6 after the required postin% and publication! "/$ It was foreclosed for 7h7 0(/+99&+8</+ an amount representin% the losses on chic s and feeds exclusi*e of interest at #&R per annum and attorneyAs fees! "=$ To complicate matters+ on October &<+ #00<+ -.6 informed the spouses that its >%ribusiness Di*ision had closed its business and poultry operations! "<$ On .arch (+ &888+ Spouses Ramos filed a 6omplaint for >nnulment andHor Declaration of Nullity of the ;xtra'udicial Foreclosure Sale with Dama%es! They contended that the extra'udicial foreclosure sale on :une #8+ #00< was null and *oid+ since there was no compliance with the requirements of postin% and publication of notices under >ct No! (#(/+ as amended+ or $n $ct to 7egu!ate the Sa!e o# Propert3 under Specia! Po/ers %nserted in or $nnexed to 7ea! :state 6ortgages! They li ewise claimed that there was no sheriffAs affida*it to pro*e compliance with the requirements on postin% and publication of notices! It was further alle%ed that the Deed of Real ;state .ort%a%e had no fixed term! > prayer for moral and exemplary dama%es and attorneyAs fees was also included in the complaint! "9$ ,ibrado Ramos alle%ed that+ when the property was foreclosed+ -.6 did not notify him at all of the foreclosure!"0$ Durin% the trial+ the parties a%reed to limit the issues to the followin%@ 1#2 the *alidity of the Deed of Real ;state .ort%a%eC 1&2 the *alidity of the extra'udicial foreclosureC and 1(2 the party liable for dama%es!"#8$ In its >nswer+ -.6 ar%ued that it repeatedly reminded Spouses Ramos of their liabilities under the -rowers 6ontract! It ar%ued that it was compelled to foreclose the mort%a%e because of Spouses RamosA failure to pay their obli%ation! -.6 insisted that it had obser*ed all the requirements of postin% and publication of notices under >ct No! (#(/! "##$

S S. LIBRADO RAMOS !"# REMEDIOS RAMOS, Respondents!

:uly &8+ &8## x44444444444444444444444444444444444444444444444444444444444444444444444444444444444444444x DE$ISION :ELAS$O, -R., J.3 T&+ $!'+ This is a petition for re*iew of the >pril #/+ &8#8 Decision of the 6ourt of >ppeals 16>2 in 6>4-!R! 6R4)!6! No! 9/?88 entitled Spouses 2i&rado 7amos 8 7emedios 7amos v. 9enera! 6i!!ing Corporation, et a!. + which affirmed the .ay (#+ &88/ Decision of the Re%ional Trial 6ourt 1RT62+ 5ranch #& in ,ipa 6ity+ in 6i*il 6ase No! 8848#&0 for >nnulment andHor Declaration of Nullity of ;xtra'udicial Foreclosure Sale with Dama%es! T&+ 1!()' On >u%ust &?+ #090+ -eneral .illin% 6orporation 1-.62 entered into a -rowers 6ontract with spouses ,ibrado and Remedios Ramos 1Spouses Ramos2! Fnder the contract+ -.6 was to supply broiler chic ens for the spouses to raise on their land in 4aranga3 5anaybanay+ ,ipa 6ity+ 5atan%as!"#$ To %uarantee full compliance+ the -rowers 6ontract was accompanied by a Deed of Real ;state .ort%a%e o*er a piece of real property upon which their con'u%al home was built! The spouses further a%reed to put up a surety bond at the rate of 7h7 &8+888 per #+888 chic s deli*ered by -.6! The Deed of Real ;state .ort%a%e extended to Spouses Ramos a maximum credit line of 7h7 &#/+888 payable within an indefinite period with an interest of twel*e percent 1#&R2 per annum! "&$ The Deed of Real ;state .ort%a%e contained the followin% pro*ision@ E);R;>S+ the .ORT->-ORHS hasHha*e a%reed to %uarantee and secure the full and faithful compliance of ".ORT->-ORSA$obli%ationHs with the .ORT->-;; by a First Real ;state .ort%a%e in fa*or of the .ORT->-;;+ o*er a # parcel of land and the impro*ements

T&+ R.li", o/ )&+ Tri!l $o.r) )oldin% in fa*or of Spouses Ramos+ the trial court ruled that the Deed of Real ;state .ort%a%e was *alid e*en if its term was not fixed! Since the duration of the term was made to depend exclusi*ely upon the will of the debtors4spouses+ the trial court cited 'urisprudence and said that Jthe obli%ation is not due and payable until an action is commenced by the mort%a%ee

a%ainst the mort%a%or for the purpose of ha*in% the court fix the date on and after which the instrument is payable and the date of maturity is fixed in pursuance thereto!K "#&$ The trial court held that the action of -.6 in mo*in% for the foreclosure of the spousesA properties was premature+ because the latterAs obli%ation under their contract was not yet due! The trial court awarded attorneyAs fees because of the premature action ta en by -.6 in filin% extra'udicial foreclosure proceedin%s before the obli%ation of the spouses became due!

of :oseph Dominise+ the principal witness of defendant4appellant -.6+ that demands were sent to spouses Ramos+ the documentary e*idence pro*es otherwise! > perusal of the letters presented and offered as e*idence by defendant4appellant -.6 did not JdemandK but only request spouses Ramos to %o to the office of -.6 to JdiscussK the settlement of their account!
"#/$

>ccordin% to the 6>+ howe*er+ the RT6 erroneously awarded attorneyAs fees to Spouses Ramos+ since the presumption of %ood faith on the part of -.6 was not o*erturned! The 6> disposed of the case as follows@

The RT6 ruled+ thus@ E);R;FOR;+ premises considered+ 'ud%ment is rendered as follows@ #! The ;xtra4:udicial Foreclosure 7roceedin%s under doc et no! 8#8<40< is hereby declared null and *oidC &! The Deed of Real ;state .ort%a%e is hereby declared *alid and le%al for all intents and puposesC (! Defendant4corporation -eneral .illin% 6orporation is ordered to pay Spouses ,ibrado and Remedios Ramos attorneyAs fees in the total amount of 7 /<+888!88 representin% acceptance fee of 7(8+888!88 and 7(+888!88 appearance fee for nine 102 trial dates or a total appearance fee of 7 &<+888!88C ?! The claims for moral and exemplary dama%es are denied for lac of merit!

E);R;FOR;+ and in *iew of the fore%oin% considerations+ the Decision of the Re%ional Trial 6ourt of ,ipa 6ity+ 5ranch #&+ dated .ay &#+ &88/ is hereby >FFIR.;D with .ODIFI6>TION by deletin% the award of attorneyAs fees to plaintiffs4appellees spouses ,ibrado Ramos and Remedios Ramos!"#=$ )ence+ Ee ha*e this appeal! T&+ I''.+' >! E);T);R "T); 6>$ .>3 6ONSID;R ISSF;S NOT >,,;-;D >ND DIS6FSS;D IN T); ,OE;R 6OFRT >ND ,IT;EIS; NOT R>IS;D 53 T); 7>RTI;S ON >77;>,+ T);R;FOR; )>D D;6ID;D T); 6>S; NOT IN >66ORD EIT) ,>E >ND >77,I6>5,; D;6ISIONS OF T); SF7R;.; 6OFRT! 5! E);T);R "T); 6>$ ;RR;D IN RF,IN- T)>T 7;TITION;R -.6 .>D; NO D;.>ND TO R;S7OND;NT S7OFS;S FOR T); FF,, 7>3.;NT OF T);IR O5,I->TION 6ONSID;RIN- T)>T T); ,;TT;R D>T;D .>R6) (#+ #00< OF 7;TITION;R -.6 TO R;S7OND;NT S7OFS;S IS T>NT>.OFNT TO > FIN>, D;.>ND TO 7>3+ T);R;FOR; IT D;7>RT;D FRO. T); >66;7T;D >ND FSF>, 6OFRS; OF :FDI6I>, 7RO6;;DIN-S!"#<$ T&+ R.li", o/ )&i' $o.r) $!" )&+ $A (o"'i#+r ;!))+r' "o) !ll+,+#> -.6 asserts that since the issue on the existence of the demand letter was not raised in the trial court+ the 6>+ by considerin% such issue+ *iolated the basic requirements of fair play+ 'ustice+ and due process!"#9$ In their 6omment+"#0$ respondents4spouses a*er that the 6> has ample authority to rule on matters not assi%ned as errors on appeal if these are indispensable or necessary to the 'ust resolution of the pleaded issues! In Diamonon v. Department o# 2a&or and :mp!o3ment +"&8$ Ee explained that an appellate court has a broad discretionary power in wai*in% the lac of assi%nment of errors in the followin% instances@

IT IS SO ORD;R;D!"#($ T&+ R.li", o/ )&+ App+ll!)+ $o.r) On appeal+ -.6 ar%ued that the trial court erred in@ 1#2 declarin% the extra'udicial foreclosure proceedin%s null and *oidC 1&2 orderin% -.6 to pay Spouses Ramos attorneyAs feesC and 1(2 not awardin% dama%es in fa*or of -.6! The 6> sustained the decision of the trial court but anchored its rulin% on a different %round! 6ontrary to the findin%s of the trial court+ the 6> ruled that the requirements of postin% and publication of notices under >ct No! (#(/ were complied with! The 6>+ howe*er+ still found that -.6As action a%ainst Spouses Ramos was premature+ as they were not in default when the action was filed on .ay <+ #00<!"#?$

The 6> ruled@ In this case+ a careful scrutiny of the e*idence on record shows that defendant4 appellant -.6 made no demand to spouses Ramos for the full payment of their obli%ation! Ehile it was alle%ed in the >nswer as well as in the >ffida*it constitutin% the direct testimony

1a2 -rounds not assi%ned as errors but affectin% the 'urisdiction of the court o*er the sub'ect matterC 1b2 .atters not assi%ned as errors on appeal but are e*idently plain or clerical errors within contemplation of lawC 1c2 .atters not assi%ned as errors on appeal but consideration of which is necessary in arri*in% at a 'ust decision and complete resolution of the case or to ser*e the interests of a 'ustice or to a*oid dispensin% piecemeal 'usticeC 1d2 .atters not specifically assi%ned as errors on appeal but raised in the trial court and are matters of record ha*in% some bearin% on the issue submitted which the parties failed to raise or which the lower court i%noredC 1e2 .atters not assi%ned as errors on appeal but closely related to an error assi%nedC 1f2 .atters not assi%ned as errors on appeal but upon which the determination of a question properly assi%ned+ is dependent! 7ara%raph 1c2 abo*e applies to the instant case+ for there would be a 'ust and complete resolution of the appeal if there is a rulin% on whether the Spouses Ramos were actually in default of their obli%ation to -.6! 4!' )&+r+ './/i(i+") #+;!"#> Ee now %o to the second issue raised by -.6! -.6 asserts error on the part of the 6> in findin% that no demand was made on Spouses Ramos to pay their obli%ation! On the contrary+ it claims that its .arch (#+ #00< letter is a in to a demand! Ee disa%ree! There are three requisites necessary for a findin% of default! irst+ the obli%ation is demandable and liquidatedC second+ the debtor delays performanceC and third+ the creditor 'udicially or extra'udicially requires the debtorAs performance! "&#$ >ccordin% to the 6>+ -.6 did not ma e a demand on Spouses Ramos but merely requested them to %o to -.6As office to discuss the settlement of their account! In spite of the lac of demand made on the spouses+ howe*er+ -.6 proceeded with the foreclosure proceedin%s! Neither was there any pro*ision in the Deed of Real ;state .ort%a%e allowin% -.6 to extra'udicially foreclose the mort%a%e without need of demand!

>s the contract in the instant case carries no such pro*ision on demand not bein% necessary for delay to exist+ Ee a%ree with the appellate court that -.6 should ha*e first made a demand on the spouses before proceedin% to foreclose the real estate mort%a%e! Deve!opment 4an) o# the Phi!ippines v. 2icuanan finds application to the instant case@ The issue of whether demand was made before the foreclosure was effected is essential! If demand was made and duly recei*ed by the respondents and the latter still did not pay+ then they were already in default and foreclosure was proper! )owe*er+ if demand was not made+ then the loans had not yet become due and demandable! This meant that respondents had not defaulted in their payments and the foreclosure by petitioner was premature! 1or+(lo'.r+ i' <!li# o"l* =&+" )&+ #+0)or i' i" #+/!.l) i" )&+ p!*;+") o/ &i' o0li,!)io" !"&&$ In turn+ whether or not demand was made is a question of fact! "&($ This petition filed under Rule ?/ of the Rules of 6ourt shall raise only questions of law! For a question to be one of law+ it must not in*ol*e an examination of the probati*e *alue of the e*idence presented by the liti%ants or any of them! The resolution of the issue must rest solely on what the law pro*ides on the %i*en set of circumstances! Once it is clear that the issue in*ites a re*iew of the e*idence presented+ the question posed is one of fact! "&?$ It need not be reiterated that this 6ourt is not a trier of facts! "&/$ Ee will defer to the factual findin%s of the trial court+ because petitioner -.6 has not shown any circumstances ma in% this case an exception to the rule! 4%ERE1ORE+ the petition is DENIED! The 6> Decision in 6>4-!R! 6R4)!6! No! 9/?88 is A11IRMED! SO ORDERED.

Indeed+ >rticle ##=0 of the 6i*il 6ode on delay requires the followin%@ Those obli%ed to deli*er or to do somethin% incur in delay from the time the obli%ee 'udicially or extra'udicially demands from them the fulfilment of their obli%ation! )owe*er+ the demand by the creditor shall not be necessary in order that delay may exist@ 1#2 Ehen the obli%ation or the law expressly so declaresC x x x

$RU9 <' GRUS E i" p#/ /or;!)

S;6OND DIVISION [G.R. No. 126685. M!r(& 15, 2000] RUDENTIAL BAN2, petitioner, vs. $OURT O1 A EALS !"# LETI$IA TU ASI:ALEN9UELA Hoi"+# 0* &.'0!"# 1r!"(i'(o :!l+"I.+l!, respondents. E#-p;-i' DE$ISION DUISUMBING, J.3 This appeal by certiorari under Rule ?/ of the Rules of 6ourt see s to annul and set aside the Decision dated :anuary (#+ #00=+ and the Resolution dated :uly &+ #00<+ of the 6ourt of >ppeals in 6> -!R! 6V No! (//(&+ which re*ersed the 'ud%ment of the Re%ional Trial 6ourt of ValenDuela+ .etro .anila+ 5ranch #<#+ in 6i*il 6ase No! &0#(4V499+ dismissin% the pri*ate respondentNs complaint for dama%es!"#$ In settin% aside the trial courtNs decision+ the 6ourt of >ppeals disposed as follows@ BE);R;FOR;+ the appealed decision is hereby R;V;RS;D and S;T >SID; and+ another rendered orderin% the appellee ban to pay appellant the sum of 7#88+888!88 by way of moral dama%esC 7/8+888!88 by way of exemplary dama%es+ 7/8+888!88 for and as attorneyNs feesC and to pay the costs! :'s4c SO ORD;R;D!B"&$ The facts of the case on record are as follows@ 7ri*ate respondent ,eticia Tupasi4ValenDuela opened Sa*in%s >ccount No! /<?? and 6urrent >ccount No! 8#8#=4( in the ValenDuela 5ranch of petitioner 7rudential 5an + with automatic transfer of funds from the sa*in%s account to the current account! On :une #+ #099+ herein pri*ate respondent deposited in her sa*in%s account 6hec No! ===5 1#8?/=# of e*en date2 the amount of 7(/+&<#!=8+ drawn a%ainst the 7hilippine 6ommercial International 5an 176I52! Ta in% into account that deposit and a series of withdrawals+ pri*ate respondent as of :une &#+ #099 had a balance of 7(/+00(!?9 in her sa*in%s account and 7<<=!0( in her current account+ or total deposits of 7(=+<<8!?#+ with petitioner! Sc4'' Thereafter+ pri*ate respondent issued 7rudential 5an 6hec No! 09((0/ in the amount of 7##+/88!88 post4dated :une &8+ #099+ in fa*or of one 5elen ,e%aspi! It was issued to ,e%aspi as payment for 'ewelry which pri*ate respondent had purchased! ,e%aspi+ who was in 'ewelry trade+ endorsed the chec to one 7hilip ,huillier+ a businessman also in the 'ewelry business! Ehen ,huillier deposited the chec in his account with the 76I5+ 7asay 5ranch+ it was dishonored for bein% drawn a%ainst insufficient funds! ,huillierNs secretary informed the secretary of ,e%aspi of the dishonor! The latter told the former to redeposit the chec ! ,e%aspiNs secretary tried to contact pri*ate respondent but to no a*ail!

Fpon her return from the pro*ince+ pri*ate respondent was surprised to learn of the dishonor of the chec ! She went to the ValenDuela 5ranch of 7rudential 5an on :uly ?+ #099+ to inquire why her chec was dishonored! She approached one >lbert >n%eles Reyes+ the officer in char%e of current account+ and requested him for the led%er of her current account! 7ri*ate respondent disco*ered a debit of 7(88!88 penalty for the dishonor of her 7rudential 6hec No! 09((0/! She as ed why her chec was dishonored when there were sufficient funds in her account as reflected in her passboo ! Reyes told her that there was no need to re*iew the passboo because the ban led%er was the best proof that she did not ha*e sufficient funds! Then+ he abruptly faced his typewriter and started typin%! S4'c' ,ater+ it was found out that the chec in the amount of 7(/+&<#!=8 deposited by pri*ate respondent on :une #+ #099+ was credited in her sa*in%s account only on :une &?+ #099+ or after a period of &( days! Thus the 7##+/88!88 chec was redeposited by ,huillier on :une &?+ #099+ and properly cleared on :une &<+ #099! 5ecause of this incident+ the ban tried to mollify pri*ate respondent by explainin% to ,e%aspi and ,huillier that the ban was at fault! Since this was not the first incident pri*ate respondent had experienced with the ban + pri*ate respondent was unmo*ed by the ban Ns apolo%ies and she commenced the present suit for dama%es before the RT6 of ValenDuela! >fter trial+ the court rendered a decision on >u%ust (8+ #00#+ dismissin% the complaint of pri*ate respondent+ as well as the counterclaim filed by the defendant+ now petitioner! Fndeterred+ pri*ate respondent appealed to the 6ourt of >ppeals! On :anuary (#+ #00=+ respondent appellate court rendered a decision in her fa*or+ settin% aside the trial courtNs decision and orderin% herein petitioner to pay pri*ate respondent the sum of 7#88+888!88 by way of moral dama%esC 7/8+888!88 exemplary dama%esC 7/8+888!88 for and as attorneyNs feesC and to pay the costs!"($ 7etitioner filed a timely motion for reconsideration but it was denied! )ence+ this petition+ raisin% the followin% issues@ I! E);T);R OR NOT T); R;S7OND;NT 6OFRT OF >77;>,S >6T;D EIT) -R>V; >5FS; OF DIS6R;TION >.OFNTIN- TO ,>6T OF :FRISDI6TION IN D;VI>TIN- FRO. ;ST>5,IS);D :FRIS7RFD;N6; IN R;V;RSIN- T); DIS.ISS>, :FD-.;NT OF T); TRI>, 6OFRT >ND INST;>D >E>RD;D .OR>, D>.>-;S+ ;O;.7,>R3 D>.>-;S >ND >TTORN;3NS F;;S! Supr4eme II! E);T);R OR NOT T); R;S7OND;NT 6OFRT OF >77;>,S >6T;D IN -R>V; >5FS; OF DIS6R;TION >.OFNTIN- TO ,>6T OF :FRISDI6TION E);R;+ ;V;N IN T); >5S;N6; OF ;VID;N6; >S FOFND 53 T); TRI>, 6OFRT+ >E>RD;D .OR>, D>.>-;S IN T); >.OFNT OF 7#88+888!88! III! E);T);R OR NOT T); R;S7OND;NT 6OFRT OF >77;>,S >6T;D IN -R>V; >5FS; OF DIS6R;TION >.OFNTIN- TO ,>6T OF :FRISDI6TION+ E);R;+ ;V;N

IN T); >5S;N6; OF ;VID;N6; >S FOFND 53 T); TRI>, 6OFRT+ >E>RD;D 7/8+888!88 53 E>3 OF ;O;.7,>R3 D>.>-;S! 6o4urt IV! E);T);R OR NOT T); R;S7OND;NT 6OFRT OF >77;>,S >6T;D EIT) -R>V; >5FS; OF DIS6R;TION E);R; ;V;N IN T); >5S;N6; OF ;VID;N6;+ >E>RD;D >TTORN;3NS F;;S! Simply stated+ the issue is whether the respondent court erred and %ra*ely abused its discretion in awardin% moral and exemplary dama%es and attorneyNs fees to be paid by petitioner to pri*ate respondent! 7etitioner claims that %enerally the factual findin%s of the lower courts are final and bindin% upon this 6ourt! )owe*er+ there are exceptions to this rule! One is where the trial court and the 6ourt of >ppeals had arri*ed at di*erse factual findin%s! "?$ 7etitioner faults the respondent court from de*iatin% from the basic rule that findin% of facts by the trial court is entitled to %reat wei%ht+ because the trial court had the opportunity to obser*e the deportment of witness and the e*aluation of e*idence presented durin% the trial! 7etitioner contends that the appellate court %ra*ely abused its discretion when it awarded dama%es to the plaintiff+ e*en in the face of lac of e*idence to pro*e such dama%es+ as found by the trial court! Firstly+ petitioner questions the award of moral dama%es! It claims that pri*ate respondent did not suffer any dama%e upon the dishonor of the chec ! 7etitioner a*ers it acted in %ood faith! It was an honest mista e on its part+ accordin% to petitioner+ when mispostin% of pri*ate respondentNs deposit on :une #+ #099+ happened! Further+ petitioner contends that pri*ate respondent may not BclaimB dama%es because the petitionerNs mana%er and other employee had profusely apolo%iDed to pri*ate respondent for the error! They offered to ma e restitution and apolo%y to the payee of the chec + ,e%aspi+ as well as the alle%ed endorsee+ ,huillier! Re%rettably+ it was pri*ate respondent who declined the offer and alle%edly said+ that there was nothin% more to it+ and that the matter had been put to rest! "/$:le4x' >dmittedly+ as found by both the respondent appellate court and the trial court+ petitioner ban had committed a mista e! It misposted pri*ate respondentNs chec deposit to another account and delayed the postin% of the same to the proper account of the pri*ate respondent! The mista e resulted to the dishonor of the pri*ate respondentNs chec ! The trial court found Bthat the mispostin% of plaintiffAs chec deposit to another account and the delayed postin% of the same to the account of the plaintiff is a clear proof of lac of super*ision on the part of the defendant ban !B"=$Similarly+ the appellate court also found that Bwhile it may be true that the ban Ns ne%li%ence in dishonorin% the properly funded chec of appellant mi%ht not ha*e been attended with malice and bad faith+ as appellee "ban $ submits+ ne*ertheless+ it is the result of lac of due care and caution expected of an employee of a firm en%a%ed in so sensiti*e and accurately demandin% tas as ban in%!B"<$ In Simex International 1.anila2+ Inc+ *s! 6ourt of >ppeals , -;< SC7$ <=>, <=? (-@@>), and 5an of 7hilippine Islands *s! I>6+ et al! , A>= SC7$ B>;, B-A-B-< (-@@A), this 6ourt had occasion to stress the fiduciary nature of the relationship between a ban and its depositors

and the extent of dili%ence expected of the former in handlin% the accounts entrusted to its care+ thus@ ,ex4'uris BIn e*ery case+ the depositor expects the ban to treat his account with the utmost fidelity+ whether such account consists only of a few hundred pesos or of millions! The ban must record e*ery sin%le transaction accurately+ down to the last centa*o+ and as promptly as possible! This has to be done if the account is to reflect at any %i*en time the amount of money the depositor can dispose of as he sees fit+ confident that the ban will deli*er it as and to whome*er he directs! > blunder on the part of ban + such as the dishonor of a chec without %ood reason+ can cause the depositor not a little embarrassment if not also financial loss and perhaps e*en ci*il and criminal liti%ation! The point is that as a business affected with public interest and because of the nature of its functions+ the ban is under obli%ation to treat the account of its depositors with meticulous care+ always ha*in% in mind the fiduciary nature of their relationship! x x xB In the recent case of Phi!ippine 5ationa! 4an) vs. Court o# $ppea!s +"9$ we held that Ba ban is under obli%ation to treat the accounts of its depositors with meticulous care whether such account consists only of a few hundred pesos or of millions of pesos! Responsibility arisin% from ne%li%ence in the performance of e*ery ind of obli%ation is demandable! Ehile petitionerNs ne%li%ence in this case may not ha*e been attended with malice and bad faith+ ne*ertheless+ it caused serious anxiety+ embarrassment and humiliationB! )ence we ruled that the offended party in said case was entitled to reco*er reasonable moral dama%es! ;*en if malice or bad faith was not sufficiently pro*ed in the instant case+ the fact remains that petitioner has committed a serious mista e! It dishonored the chec issued by the pri*ate respondent who turned out to ha*e sufficient funds with petitioner! The ban Ns ne%li%ence was the result of lac of due care and caution required of mana%ers and employees of a firm en%a%ed in so sensiti*e and demandin% business as ban in%! >ccordin%ly+ the award of moral dama%es by the respondent 6ourt of >ppeals could not be said to be in error nor in %ra*e abuse of its discretion! :uri4smis There is no hard4and4fast rule in the determination of what would be a fair amount of moral dama%es since each case must be %o*erned by its own peculiar facts! The yardstic should be that it is not palpably and scandalously excessi*e! In our *iew+ the award of 7#88+888!88 is reasonable+ considerin% the reputation and social standin% of pri*ate respondent ,eticia T! ValenDuela!"0$ The law allows the %rant of exemplary dama%es by way of example for the public %ood! "#8$ The public relies on the ban sN sworn profession of dili%ence and meticulousness in %i*in% irreproachable ser*ice! The le*el of meticulousness must be maintained at all times by the ban in% sector! )ence+ the 6ourt of >ppeals did not err in awardin% exemplary dama%es! In our *iew+ howe*er+ the reduced amount of 7&8+888!88 is more appropriate! :'4'uris The award of attorneyNs fees is also proper when exemplary dama%es are awarded and since pri*ate respondent was compelled to en%a%e the ser*ices of a lawyer and incurred expenses to

protect her interest!"##$ The standards in fixin% attorneyNs fees are@ 1#2 the amount and the character of the ser*ices renderedC 1&2 labor+ time and trouble in*ol*edC 1(2 the nature and importance of the liti%ation and business in which the ser*ices were renderedC 1?2 the responsibility imposedC 1/2 the amount of money and the *alue of the property affected by the contro*ersy or in*ol*ed in the employmentC 1=2 the s ill and the experience called for in the performance of the ser*icesC 1<2 the professional character and the social standin% of the attorneyC 192 the results secured+ it bein% a reco%niDed rule that an attorney may properly char%e a much lar%er fee when it is contin%ent than when it is not! "#&$ In this case+ all the aforementioned wei%hed+ and considerin% that the amount in*ol*ed in the contro*ersy is only 7(=+<<8!?#+ the total deposit of pri*ate respondent which was misposted by the ban + we find the award of respondent court of 7/8+888!88 for attorneyNs fees+ excessi*e and reduce the same to 7(8+888!88! 4%ERE1ORE+ the assailed D;6ISION of the 6ourt of >ppeals is hereby >FFIR.;D+ with .ODIFI6>TION! The petitioner is ordered to pay 7#88+888!88 by way of moral dama%es in fa*or of pri*ate respondent ,eticia T! ValenDuela! It is further ordered to pay her exemplary dama%es in the amount of 7&8+888!88 and 7(8+888!88+ attorneyNs fees! : sm 6osts a%ainst petitioner! SO ORDERED. 4e!!osi!!o, (Chairman), 6endoza, 4uena, and De 2eon, Jr., JJ., concur.

FIRST DIVISION [G.R. No. 171958. 1+0r.!r* 12, 2001] T%E INTERNATIONAL $OR ORATE BAN2 @"o= UNION BAN2 O1 T%E %ILI INESB, petitioner, vs. S S. 1RAN$IS S. GUE$O !"# MA. LU9 E. GUE$O, respondents. DE$ISION 2A UNAN, J.3 The respondents -ueco Spouses obtained a loan from petitioner International 6orporate 5an 1now Fnion 5an of the 7hilippines2 to purchase a car L a Nissan Sentra #=88 ?DR+ #090 .odel! In consideration thereof+ the Spouses executed promissory notes which were payable in monthly installments and chattel mort%a%e o*er the car to ser*e as security for the notes! The Spouses defaulted in payment of installments! 6onsequently+ the 5an filed on >u%ust <+ #00/ a ci*il action doc eted as 6i*il 6ase No! =/940/ for JSum of .oney with 7rayer for a Erit of Reple*inK"#$ before the .etropolitan Trial 6ourt of 7asay 6ity+ 5ranch ?/! "&$ On >u%ust &/+ #00/+ Dr! Francis -ueco was ser*ed summons and was fetched by the sheriff and representati*e of the ban for a meetin% in the ban premises! Desi Tomas+ the 5an As >ssistant Vice 7resident demanded payment of the amount of 7#9?+888!88 which represents the unpaid balance for the car loan! >fter some ne%otiations and computation+ the amount was lowered to 7#/?+888!88+ )owe*er+ as a result of the non4payment of the reduced amount on that date+ the car was detained inside the ban As compound! On >u%ust &9+ #00/+ Dr! -ueco went to the ban and tal ed with its >dministrati*e Support+ >uto ,oansH6redit 6ard 6ollection )ead+ :efferson Ri*era! The ne%otiations resulted in the further reduction of the outstandin% loan to 7#/8+888!88! On >u%ust &0+ #00/+ Dr! -ueco deli*ered a mana%erAs chec in the amount of 7#/8+888!88 but the car was not released because of his refusal to si%n the :oint .otion to Dismiss! It is the contention of the -ueco spouses and their counsel that Dr! -ueco need not si%n the motion for 'oint dismissal considerin% that they had not yet filed their >nswer! 7etitioner+ howe*er+ insisted that the 'oint motion to dismiss is standard operatin% procedure in their ban to effect a compromise and to preclude future filin% of claims+ counterclaims or suits for dama%es! >fter se*eral demand letters and meetin%s with ban representati*es+ the respondents -ueco spouses initiated a ci*il action for dama%es before the .etropolitan Trial 6ourt of GueDon 6ity+ 5ranch ((! The .etropolitan Trial 6ourt dismissed the complaint for lac of merit! "($ On appeal to the Re%ional Trial 6ourt+ 5ranch &&< of GueDon 6ity+ the decision of the .etropolitan Trial 6ourt was re*ersed! In its decision+ the RT6 held that there was a meetin% of the minds between the parties as to the reduction of the amount of indebtedness and the release of the car but said a%reement did not include the si%nin% of the 'oint motion to dismiss

as a condition sine qua non for the effecti*ity of the compromise! The court further ordered the ban @ #! to return immediately the sub'ect car to the appellants in %ood wor in% conditionC >ppellee may deposit the .ana%erAs chec L the proceeds of which ha*e lon% been under the control of the issuin% ban in fa*or of the appellee since its issuance+ whereas the funds ha*e lon% been paid by appellants to secure said .ana%erAs 6hec + o*er which appellants ha*e no controlC &! to pay the appellants the sum of 7/8+888!88 as moral dama%esC 7&/+888!88 as exemplary dama%es+ and 7&/+888!88 as attorneyAs fees+ and (! to pay the cost of suit! In other respect+ the decision of the .etropolitan Trial 6ourt 5ranch (( is hereby >FFIR.;D!"?$ The case was ele*ated to the 6ourt of >ppeals+ which on February #<+ &888+ issued the assailed decision+ the decretal portion of which reads@ E);R;FOR;+ premises considered+ the petition for re*iew on certiorari is hereby D;NI;D and the Decision of the Re%ional Trial 6ourt of GueDon 6ity+ 5ranch &&<+ in 6i*il 6ase No! G40<4(##<=+ for lac of any re*ersible error+ is >FFIR.;D in toto! 6osts a%ainst petitioner! SO ORD;R;D!"/$ The 6ourt of >ppeals essentially relied on the respect accorded to the finality of the findin%s of facts by the lower court and on the latterNs findin% of the existence of fraud which constitutes the basis for the award of dama%es! The petitioner comes to this 6ourt by way of petition for re*iew on certiorari under Rule ?/ of the Rules of 6ourt+ raisin% the followin% assi%ned errors@ I T); 6OFRT OF >77;>,S ;RR;D IN )O,DIN- T)>T T);R; E>S NO >-R;;.;NT EIT) R;S7;6T TO T); ;O;6FTION OF T); :OINT .OTION TO DIS.ISS >S > 6ONDITION FOR T); 6O.7RO.IS; >-R;;.;NT! II T); 6OFRT OF >77;>,S ;RR;D IN -R>NTIN- .OR>, >ND ;O;.7,>R3 D>.>-;S >ND >TTORN;3AS F;;S IN F>VOR OF T); R;S7OND;NTS! III T); 6OFRT OF >77;>,S ;RR;D IN )O,DIN- T)>T T); 7;TITION;R R;TFRN T); SF5:;6T 6>R TO T); R;S7OND;NTS+ EIT)OFT .>TIN- >N3 7ROVISION

FOR T); ISSF>N6; OF T); N;E .>N>-;RASH6>S)I;RAS 6);6T 53 T); R;S7OND;NTS IN F>VOR OF T); 7;TITION;R IN ,I;F OF T); ORI-IN>, 6>S)I;RAS 6);6T T)>T >,R;>D3 5;6>.; ST>,;!"=$ >s to the first issue+ we find for the respondents! The issue as to what constitutes the terms of the oral compromise or any subsequent no*ation is a question of fact that was resol*ed by the Re%ional Trial 6ourt and the 6ourt of >ppeals in fa*or of respondents! It is well settled that the findin%s of fact of the lower court+ especially when affirmed by the 6ourt of >ppeals+ are bindin% upon this 6ourt!"<$ Ehile there are exceptions to this rule+ "9$ the present case does not fall under any one of them+ the petitionerAs claim to the contrary+ notwithstandin%! 5ein% an affirmati*e alle%ation+ petitioner has the burden of e*idence to pro*e his claim that the oral compromise entered into by the parties on >u%ust &9+ #00/ included the stipulation that the parties would 'ointly file a motion to dismiss! This petitioner failed to do! Notably+ e*en the .etropolitan Trial 6ourt+ while rulin% in fa*or of the petitioner and thereby dismissin% the complaint+ did not ma e a factual findin% that the compromise a%reement included the condition of the si%nin% of a 'oint motion to dismiss! The 6ourt of >ppeals made the factual findin%s in this wise@ In support of its claim+ petitioner presented the testimony of .r! :efferson Ri*era who related that respondent Dr! -ueco was aware that the si%nin% of the draft of the :oint .otion to Dismiss was one of the conditions set by the ban for the acceptance of the reduced amount of indebtedness and the release of the car! 1TSN+ October &(+ #00=+ pp! #<4&#+ Rollo+ pp! #9+ /2! Respondents+ howe*er+ maintained that no such condition was e*er discussed durin% their meetin% of >u%ust &9+ #00/ 1Rollo+ p! (&2! The trial court+ whose factual findin%s are entitled to respect since it has the Xopportunity to directly obser*e the witnesses and to determine by their demeanor on the stand the probati*e *alue of their testimoniesA 17eople *s! 3adao+ et al! &#= S6R> #+ < "#00&$2+ failed to ma e a cate%orical findin% on the issue! In dismissin% the claim of dama%es of the respondents+ it merely obser*ed that respondents are not entitled to indemnity since it was their un'ustified reluctance to si%n of the :oint .otion to Dismiss that delayed the release of the car! The trial court opined+ thus@ X>s re%ards the third issue+ plaintiffsA claim for dama%es is una*ailin%! First+ the plaintiffs could ha*e a*oided the rentin% of another car and could ha*e a*oided this liti%ation had he si%ned the :oint .otion to Dismiss! Ehile it is true that herein defendant can unilaterally dismiss the case for collection of sum of money with reple*in+ it is equally true that there is nothin% wron% for the plaintiff to affix his si%nature in the :oint .otion to Dismiss+ for after all+ the dismissal of the case a%ainst him is for his own %ood and benefit! In fact+ the si%nin% of the :oint .otion to Dismiss %i*es the plaintiff three 1(2 ad*anta%es! First+ he will reco*er his car! Second+ he will pay his obli%ation to the ban on its reduced amount of 7#/8+888!88 instead of its ori%inal claim of 7#9?+09/!80! >nd third+ the case a%ainst him will be dismissed! 7laintiffs+ li ewise+ are not entitled to the award of moral dama%es and exemplary

dama%es as there is no showin% that the defendant ban acted fraudulently or in bad faith!A 1Rollo+ p! #/2 The 6ourt has noted+ howe*er+ that the trial court+ in its findin%s of facts+ clearly indicated that the a%reement of the parties on >u%ust &9+ #00/ was merely for the lowerin% of the price+ hence 4 Xxxx On >u%ust &9+ #00/+ ban representati*e :efferson Ri*era and plaintiff entered into an oral compromise a%reement+ whereby the ori%inal claim of the ban of 7#9?+09/!80 was reduced to 7#/8+888!88 and that upon payment of which+ plaintiff was informed that the sub'ect motor *ehicle would be released to him!A 1Rollo+ p! #&2 The lower court+ on the other hand+ expressly made a findin% that petitioner failed to include the aforesaid si%nin% of the :oint .otion to Dismiss as part of the a%reement! In dismissin% petitionerAs claim+ the lower court declared+ thus@ XIf it is true+ as the appellees alle%e+ that the si%nin% of the 'oint motion was a condition sine qua non for the reduction of the appellantsA obli%ation+ it is only reasonable and lo%ical to assume that the 'oint motion should ha*e been shown to Dr! -ueco in the >u%ust &9+ #00/ meetin%! Ehy Dr! -ueco was not %i*en a copy of the 'oint motion that day of >u%ust &9+ #00/+ for his family or le%al counsel to see to be brou%ht si%ned+ to%ether with the 7#/8+888!88 in mana%erAs chec form to be submitted on the followin% day on >u%ust &0+ #00/V 1sic2 "I$s a question whereby the answer up to now eludes this 6ourtAs comprehension! The appellees would li e this 6ourt to belie*e that Dr! -ueco was informed by .r! Ri*era of the ban requirement of si%nin% the 'oint motion on >u%ust &9+ #00/ but he did not bother to show a copy thereof to his family or le%al counsel that day >u%ust &9+ #00/! This part of the theory of appellee is too complicated for any simple oral a%reement! The idea of a :oint .otion to Dismiss bein% si%ned as a condition to the pushin% throu%h a deal surfaced only on >u%ust &0+ #00/! XThis 6ourt is not con*inced by the appelleesA posturin%! Such claim rests on too slender a frame+ bein% inconsistent with human experience! 6onsiderin% the effect of the si%nin% of the :oint .otion to Dismiss on the appellantsA substanti*e ri%ht+ it is more in accord with human experience to expect Dr! -ueco+ upon bein% shown the :oint .otion to Dismiss+ to refuse to pay the .ana%erAs 6hec and for the ban to refuse to accept the mana%erNs chec ! The only lo%ical explanation for this inaction is that Dr! -ueco was not shown the :oint .otion to Dismiss in the meetin% of >u%ust &9+ #00/+ bolsterin% his claim that its si%nin% was ne*er put into consideration in reachin% a compromise!A xxx! "0$ Ee see no reason to re*erse! >nent the issue of award of dama%es+ we find the claim of petitioner meritorious! In findin% the petitioner liable for dama%es+ both the Re%ional Trial 6ourt and the 6ourt of >ppeals ruled that there was fraud on the part of the petitioner! The 6> thus declared@

The lower courtNs findin% of fraud which became the basis of the award of dama%es was li ewise sufficiently pro*en! Fraud under >rticle ##<8 of the 6i*il 6ode of the 7hilippines+ as amended is the Xdeliberate and intentional e*asion of the normal fulfillment of obli%ationA Ehen petitioner refused to release the car despite respondentNs tender of payment in the form of a mana%erNs chec + the former intentionally e*aded its obli%ation and thereby became liable for moral and exemplary dama%es+ as well as attorneyAs fees! "#8$ Ee disa%ree! Fraud has been defined as the deliberate intention to cause dama%e or pre'udice! It is the *oluntary execution of a wron%ful act+ or a willful omission+ nowin% and intendin% the effects which naturally and necessarily arise from such act or omissionC the fraud referred to in >rticle ##<8 of the 6i*il 6ode is the deliberate and intentional e*asion of the normal fulfillment of obli%ation!"##$ Ee fail to see how the act of the petitioner ban in requirin% the respondent to si%n the 'oint motion to dismiss could constitute as fraud! True+ petitioner may ha*e been remiss in informin% Dr! -ueco that the si%nin% of a 'oint motion to dismiss is a standard operatin% procedure of petitioner ban ! )owe*er+ this can not in anyway ha*e pre'udiced Dr! -ueco! The motion to dismiss was in fact also for the benefit of Dr! -ueco+ as the case filed by petitioner a%ainst it before the lower court would be dismissed with pre'udice! The whole point of the parties enterin% into the compromise a%reement was in order that Dr! -ueco would pay his outstandin% account and in return petitioner would return the car and drop the case for money and reple*in before the .etropolitan Trial 6ourt! The 'oint motion to dismiss was but a natural consequence of the compromise a%reement and simply stated that Dr! -ueco had fully settled his obli%ation+ hence+ the dismissal of the case! 7etitionerNs act of requirin% Dr! -ueco to si%n the 'oint motion to dismiss can not be said to be a deliberate attempt on the part of petitioner to rene%e on the compromise a%reement of the parties! It should+ li ewise+ be noted that in cases of breach of contract+ moral dama%es may only be awarded when the breach was attended by fraud or bad faith! "#&$ The law presumes %ood faith! Dr! -ueco failed to present an iota of e*idence to o*ercome this presumption! In fact+ the act of petitioner ban in lowerin% the debt of Dr! -ueco from 7#9?+888!88 to 7#/8+888!88 is indicati*e of its %ood faith and sincere desire to settle the case! If respondent did suffer any dama%e+ as a result of the withholdin% of his car by petitioner+ he has only himself to blame! Necessarily+ the claim for exemplary dama%es must fail! In no way+ may the conduct of petitioner be characteriDed as Jwanton+ fraudulent+ rec less+ oppressi*e or male*olent!K"#($ Ee+ li ewise+ find for the petitioner with respect to the third assi%ned error! In the meetin% of >u%ust &0+ #00/+ respondent Dr! -ueco deli*ered a mana%erAs chec representin% the reduced amount of 7#/8+888!88! Said chec was %i*en to .r! Ri*era+ a representati*e of respondent ban ! )owe*er+ since Dr! -ueco refused to si%n the 'oint motion to dismiss+ he was made to execute a statement to the effect that he was withholdin% the payment of the chec ! "#?$ Subsequently+ in a letter addressed to .s! Desi Tomas+ *ice president of the ban + dated September ?+ #00/+ Dr! -ueco instructed the ban to disre%ard the Xhold orderK letter and demanded the immediate release of his car+ "#/$ to which the former replied that the condition of si%nin% the 'oint motion to dismiss must be satisfied and that they had ept the chec which

could be claimed by Dr! -ueco anytime! "#=$ Ehile there is contro*ersy as to whether the document e*idencin% the order to hold payment of the chec was formally offered as e*idence by petitioners+"#<$ it appears from the pleadin%s that said chec has not been encashed! The decision of the Re%ional Trial 6ourt+ which was affirmed in toto by the 6ourt of >ppeals+ orders the petitioner@ #! to return immediately the sub'ect car to the appellants in %ood wor in% condition! >ppellee may deposit the .ana%erAs 6hec L the proceeds of which ha*e lon% been under the control of the issuin% ban in fa*or of the appellee since its issuance+ whereas the funds ha*e lon% been paid by appellants to secure said .ana%erAs 6hec o*er which appellants ha*e no control!"#9$ Respondents would ma e us hold that petitioner should return the car or its *alue and that the latter+ because of its own ne%li%ence+ should suffer the loss occasioned by the fact that the chec had become stale!"#0$ It is their position that deli*ery of the mana%erAs chec produced the effect of payment"&8$ and+ thus+ petitioner was ne%li%ent in optin% not to deposit or use said chec ! Rudimentary sense of 'ustice and fair play would not countenance respondentsA position! > stale chec is one which has not been presented for payment within a reasonable time after its issue! It is *alueless and+ therefore+ should not be paid! Fnder the ne%otiable instruments law+ an instrument not payable on demand must be presented for payment on the day it falls due! Ehen the instrument is payable on demand+ presentment must be made within a reasonable time after its issue! In the case of a bill of exchan%e+ presentment is sufficient if made within a reasonable time after the last ne%otiation thereof! "&#$ > chec must be presented for payment within a reasonable time after its issue+ "&&$ and in determinin% what is a Jreasonable time+K re%ard is to be had to the nature of the instrument+ the usa%e of trade or business with respect to such instruments+ and the facts of the particular case!"&($ The test is whether the payee employed such dili%ence as a prudent man exercises in his own affairs!"&?$ This is because the nature and theory behind the use of a chec points to its immediate use and payability! In a case+ a chec payable on demand which was lon% o*erdue by about two and a half 1&4#H&2 years was considered a stale chec ! "&/$ Failure of a payee to encash a chec for more than ten 1#82 years undoubtedly resulted in the chec becomin% stale! "&=$ Thus+ e*en a delay of one 1#2 wee "&<$ or two 1&2 days+"&9$ under the specific circumstances of the cited cases constituted unreasonable time as a matter of law! In the case at bar+ howe*er+ the chec in*ol*ed is not an ordinary bill of exchan%e but a mana%erAs chec ! > mana%erAs chec is one drawn by the ban As mana%er upon the ban itself! It is similar to a cashierAs chec both as to effect and use! > cashierAs chec is a chec of the ban As cashier on his own or another chec ! In effect+ it is a bill of exchan%e drawn by the cashier of a ban upon the ban itself+ and !((+p)+# in ad*ance by the act of its issuance! "&0$ It is really the ban As own chec and may be treated as a promissory note with the ban as a ma er!"(8$ The chec becomes the primary obli%ation of the ban which issues it and constitutes its written promise to pay upon demand! The mere issuance of it is considered an

acceptance thereof! If treated as promissory note+ the drawer would be the ma er and in which case the holder need not pro*e presentment for payment or present the bill to the drawee for acceptance!"(#$ ;*en assumin% that presentment is needed+ failure to present for payment within a reasonable time will result to the dischar%e of the drawer only to the extent of the loss caused by the delay!"(&$ Failure to present on time+ thus+ does not totally wipe out all liability! In fact+ the le%al situation amounts to an ac nowled%ment of liability in the sum stated in the chec ! In this case+ the -ueco spouses ha*e not alle%ed+ much less shown that they or the ban which issued the mana%erAs chec has suffered dama%e or loss caused by the delay or non4 presentment! Definitely+ the ori%inal obli%ation to pay certainly has not been erased! It has been held that+ if the chec had become stale+ it becomes imperati*e that the circumstances that caused its non4presentment be determined! "(($ In the case at bar+ there is no doubt that the petitioner ban held on the chec and refused to encash the same because of the contro*ersy surroundin% the si%nin% of the 'oint motion to dismiss! Ee see no bad faith or ne%li%ence in this position ta en by the 5an ! 4%ERE1ORE, premises considered+ the petition for re*iew is %i*en due course! The decision of the 6ourt of >ppeals affirmin% the decision of the Re%ional Trial 6ourt is S;T >SID;! Respondents are further ordered to pay the ori%inal obli%ation amountin% to 7#/8+888!88 to the petitioner upon surrender or cancellation of the mana%erAs chec in the latterAs possession+ afterwhich+ petitioner is to return the sub'ect motor *ehicle in %ood wor in% condition! SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur!

Republic of the 7hilippines SU REME $OURT .anila S;6OND DIVISION G.R. No. L-66800 M!r(& 16, 1990 1RAN2LIN G. GA$AL !"# $ORA9ON M. GA$AL, )&+ l!))+r !''i')+# 0* &+r &.'0!"#, 1RAN2LIN G. GA$AL,petitioners+ *s! %ILI INE AIR LINES, IN$., !"# T%E %ONORABLE EDRO SAMSON $. ANIMAS, i" &i' (!p!(i)* !' RESIDING -UDGE o/ )&+ $OURT O1 1IRST INSTAN$E O1 SOUT% $OTABATO, BRAN$% I, respondents! Cicente $. 6ira&ueno #or petitioners. Siguion 7e3na, 6onteci!!o 8 Dngsia)o #or private respondent.

Y(</+888 and six 1=2 armalites+ otherwise they will blow up the plane if their demands will not be met by the %o*ernment and 7hilippine >ir ,ines! .eanwhile+ the passen%ers were not ser*ed any food nor water and it was only on .ay &(+ a Sunday+ at about #@88 oNcloc in the afternoon that they were ser*ed #H? slice of a sandwich and #H#8 cup of 7>, water! >fter that+ relati*es of the hi'ac ers were allowed to board the plane but immediately after they ali%hted therefrom+ an armored car bumped the stairs! That commenced the battle between the military and the hi'ac ers which led ultimately to the liberation of the sur*i*in% crew and the passen%ers+ with the final score of ten 1#82 passen%ers and three 1(2 hi'ac ers dead on the spot and three 1(2 hi'ac ers captured! 6ity Fiscal Fran lin -! -acal was unhurt! .rs! 6oraDon .! -acal suffered in'uries in the course of her 'umpin% out of the plane when it was peppered with bullets by the army and after two 1&2 hand %renades exploded inside the plane! She was hospitaliDed at -eneral Santos Doctors )ospital+ -eneral Santos 6ity+ for two 1&2 days+ spendin% 7&?/!=8 for hospital and medical expenses+ >ssistant 6ity Fiscal 5onifacio S! >nisla% also escaped unhurt but .rs! >nisla% suffered a fracture at the radial bone of her left elbow for which she was hospitaliDed and operated on at the San 7edro )ospital+ Da*ao 6ity+ and therefore+ at Da*ao Re%ional )ospital+ Da*ao 6ity+ spendin% 7?+/88!88! ;lma de -uDman died because of that battle! )ence+ the action of dama%es instituted by the plaintiffs demandin% the followin% dama%es+ to wit@ 6i*il 6ase No! #<8# Z 6ity Fiscal Fran lin -! -acal and .rs! 6oraDon .! -acal Z actual dama%es@ 7&?/!=8 for hospital and medical expenses of .rs -acalC 79+00/!88 for their personal belon%in%s which were lost and not reco*eredC 7/8+888!88 each for moral dama%esC and 7/+888!88 for attorneyNs fees+ apart from the prayer for an award of exemplary dama%es 1Record+ pp! ?4=+ 6i*il 6ase No! #<8#2! 6i*il 6ase No! #<<( Z xxx xxx xxx 6i*il 6ase No! #<0< Z xxx xxx xxx The trial court+ on >u%ust &=+ #098+ dismissed the complaints findin% that all the dama%es sustained in the premises were attributed to #orce ma(eure! On September #&+ #098 the spouses Fran lin -! -acal and 6oraDon .! -acal+ plaintiffs in 6i*il 6ase No! #<8#+ filed a notice of appeal with the lower court on pure questions of law 17o!!o+ p! //2 and the petition for re*iew on certiorari was filed with this 6ourt on October &8+ #098 17o!!o+ p! (82!

ARAS, J.: This is a+ petition for re*iew on certiorari of the decision of the 6ourt of First Instance of South 6otabato+ 5ranch #+E promul%ated on >u%ust &=+ #098 dismissin% three 1(2 consolidated cases for dama%es@ 6i*il 6ase No! #<8#+ 6i*il 6ase No! #<<( and 6i*il 6ase No! #<0< 17o!!o+ p! (/2! The facts+ as found by respondent court+ are as follows@ 7laintiffs Fran lin -! -acal and his wife+ 6oraDon .! -acal+ 5onifacio S! >nisla% and his wife+ .ansueta ,! >nisla%+ and the late ;lma de -uDman+ were then passen%ers boardin% defendantNs 5>6 #4## at Da*ao >irport for a fli%ht to .anila+ not nowin% that on the same fli%ht+ .acalino%+ Taurac 7endatum nown as 6ommander Mapata+ Nasser Omar+ ,ilin% 7usuan Radia+ Dimanton% Dimarosin% and .i e Randa+ all of .arawi 6ity and members of the .oro National ,iberation Front 1.N,F2+ were their co4passen%ers+ three 1(2 armed with %renades+ two 1&2 with !?/ caliber pistols+ and one with a !&& caliber pistol! Ten 1#82 minutes after ta e off at about &@(8 in the afternoon+ the hi'ac ers brandishin% their respecti*e firearms announced the hi'ac in% of the aircraft and directed its pilot to fly to ,ibya! Eith the pilot explainin% to them especially to its leader+ 6ommander Mapata+ of the inherent fuel limitations of the plane and that they are not rated for international fli%hts+ the hi'ac ers directed the pilot to fly to Sabah! Eith the same explanation+ they relented and directed the aircraft to land at Mamboan%a >irport+ Mamboan%a 6ity for refuelin%! The aircraft landed at (@88 oNcloc in the afternoon of .ay &#+ #0<= at Mamboan%a >irport! Ehen the plane be%an to taxi at the runway+ it was met by two armored cars of the military with machine %uns pointed at the plane+ and it stopped there! The rebels thru its commander demanded that a D64aircraft ta e them to ,ibya with the 7resident of the defendant company as hosta%e and that they be %i*en

The 6ourt %a*e due course to the petition 1 7o!!o+ p! #?<2 and both parties filed their respecti*e briefs but petitioner failed to file reply brief which was noted by the 6ourt in the resolution dated .ay (+ #09& 17o!!o+ p! #9(2! 7etitioners alle%ed that the main cause of the unfortunate incident is the %ross+ wanton and inexcusable ne%li%ence of respondent >irline personnel in their failure to fris the passen%ers adequately in order to disco*er hidden weapons in the bodies of the six 1=2 hi'ac ers! They claimed that despite the pre*alence of s y'ac in%+ 7>, did not use a metal detector which is the most effecti*e means of disco*erin% potential s y'ac ers amon% the passen%ers 1 7o!!o+ pp! =4<2! Respondent >irline a*erred that in the performance of its obli%ation to safely transport passen%ers as far as human care and foresi%ht can pro*ide+ it has exercised the utmost dili%ence of a *ery cautious person with due re%ard to all circumstances+ but the security chec s and measures and sur*eillance precautions in all fli%hts+ includin% the inspection of ba%%a%es and car%o and fris in% of passen%ers at the Da*ao >irport were performed and rendered solely by military personnel who under appropriate authority had assumed exclusi*e 'urisdiction o*er the same in all airports in the 7hilippines! Similarly+ the ne%otiations with the hi'ac ers were a purely %o*ernment matter and a military operation+ handled by and sub'ect to the absolute and exclusi*e 'urisdiction of the military authorities! )ence+ it concluded that the accident that befell R746##=# was caused by fortuitous e*ent+ #orce ma(eure and other causes beyond the control of the respondent >irline! The determinati*e issue in this case is whether or not hi'ac in% or air piracy durin% martial law and under the circumstances obtainin% herein+ is a caso #ortuito or #orce ma(eure which would exempt an aircraft from payment of dama%es to its passen%ers whose li*es were put in 'eopardy and whose personal belon%in%s were lost durin% the incident! Fnder the 6i*il 6ode+ common carriers are required to exercise extraordinary dili%ence in their *i%ilance o*er the %oods and for the safety of passen%ers transported by them+ accordin% to all the circumstances of each case 1>rticle #<((2! They are presumed at fault or to ha*e acted ne%li%ently whene*er a passen%er dies or is in'ured 17hilippine >irlines+ Inc! *! National ,abor Relations 6ommission+ #&? S6R> /9( "#09($2 or for the loss+ destruction or deterioration of %oods in cases other than those enumerated in >rticle #<(? of the 6i*il 6ode 1;astern Shippin% ,ines+ Inc! *! Intermediate >ppellate 6ourt+ #/8 S6R> ?=( "#09<$2! The source of a common carrierNs le%al liability is the contract of carria%e+ and by enterin% into said contract+ it binds itself to carry the passen%ers safely as far as human care and foresi%ht can pro*ide! There is breach of this obli%ation if it fails to exert extraordinary dili%ence accordin% to all the circumstances of the case in exercise of the utmost dili%ence of a *ery cautious person 1Isaac *! >mmen Transportation 6o!+ #8# 7hil! #8?= "#0/<$C :untilla *! Fontanar+ #(= S6R> =&? "#09/$2! It is the duty of a common carrier to o*ercome the presumption of ne%li%ence 17hilippine National Railways *! 6ourt of >ppeals+ #(0 S6R> 9< "#09/$2 and it must be shown that the

carrier had obser*ed the required extraordinary dili%ence of a *ery cautious person as far as human care and foresi%ht can pro*ide or that the accident was caused by a fortuitous e*ent 1;strada *! 6onsolacion+ <# S6R> /&( "#0<=$2! Thus+ as ruled by this 6ourt+ no person shall be responsible for those Be*ents which could not be foreseen or which thou%h foreseen were ine*itable! 1>rticle ##<?+ 6i*il 6ode2! The term is synonymous with caso #ortuito 1,asam *! Smith+ ?/ 7hil! =/< "#0&?$2 which is of the same sense as B #orce ma(eureB 1Eords and 7hrases 7ermanent ;dition+ Vol! #<+ p! (=&2! In order to constitute a caso #ortuito or #orce ma(eure that would exempt a person from liability under >rticle ##<? of the 6i*il 6ode+ it is necessary that the followin% elements must concur@ 1a2 the cause of the breach of the obli%ation must be independent of the human will 1the will of the debtor or the obli%or2C 1b2 the e*ent must be either unforeseeable or una*oidableC 1c2 the e*ent must be such as to render it impossible for the debtor to fulfill his obli%ation in a normal mannerC and 1d2 the debtor must be free from any participation in+ or a%%ra*ation of the in'ury to the creditor 1,asam *! Smith+ ?/ 7hil! =/< "#0&?$C >ustria *! 6ourt of >ppeals+ (0 S6R> /&< "#0<#$C ;strada *! 6onsolacion+ supraC VasqueD *! 6ourt of >ppeals+ #(9 S6R> //( "#09/$C :uan F! Na pil [ Sons *! 6ourt of >ppeals+ #?? S6R> /0= "#09=$2! Caso #ortuito or #orce ma(eure+ by definition+ are extraordinary e*ents not foreseeable or a*oidable+ e*ents that could not be foreseen+ or which+ thou%h foreseen+ are ine*itable! It is+ therefore+ not enou%h that the e*ent should not ha*e been foreseen or anticipated+ as is commonly belie*ed+ but it must be one impossible to foresee or to a*oid! The mere difficulty to foresee the happenin% is not impossibility to foresee the same 1Republic *! ,uDon Ste*edorin% 6orporation+ &# S6R> &<0 "#0=<$2! >pplyin% the abo*e %uidelines to the case at bar+ the failure to transport petitioners safely from Da*ao to .anila was due to the s y'ac in% incident sta%ed by six 1=2 passen%ers of the same plane+ all members of the .oro National ,iberation Front 1.N,F2+ without any connection with pri*ate respondent+ hence+ independent of the will of either the 7>, or of its passen%ers! Fnder normal circumstances+ 7>, mi%ht ha*e foreseen the s y'ac in% incident which could ha*e been a*oided had there been a more thorou%h fris in% of passen%ers and inspection of ba%%a%es as authoriDed by R!>! No! =&(/! 5ut the incident in question occurred durin% .artial ,aw where there was a military ta e4o*er of airport security includin% the fris in% of passen%ers and the inspection of their lu%%a%e preparatory to boardin% domestic and international fli%hts! In fact military ta e4o*er was specifically announced on October &8+ #0<( by -eneral :ose ,! Rancudo+ 6ommandin% -eneral of the 7hilippine >ir Force in a letter to 5ri%! -en! :esus Sin%son+ then Director of the 6i*il >eronautics >dministration 1 7o!!o+ pp! <#4<&2 later confirmed shortly before the hi'ac in% incident of .ay &#+ #0<= by ,etter of Instruction No! (00 issued on >pril &9+ #0<= 17o!!o+ p! <&2! Otherwise stated+ these e*ents rendered it impossible for 7>, to perform its obli%ations in a nominal manner and ob*iously it cannot be faulted with ne%li%ence in the performance of duty ta en o*er by the >rmed Forces of the 7hilippines to the exclusion of the former! Finally+ there is no dispute that the fourth element has also been satisfied! 6onsequently the existence of #orce ma(eure has been established exemptin% respondent 7>, from the payment

of dama%es to its passen%ers who suffered death or in'uries in their persons and for loss of their ba%%a%es! 7R;.IS;S 6ONSID;R;D+ the petition is hereby DIS.ISS;D for lac of merit and the decision of the 6ourt of First Instance of South 6otabato+ 5ranch I is hereby >FFIR.;D! SO ORD;R;D! 6e!encio-"errera, Padi!!a, Sarmiento and 7ega!ado, JJ., concur.

Republic of the 7hilippines SU REME $OURT .anila FIRST DIVISION

7ri*ate respondent chose to return to 6ebu but was not accommodated because he chec ed4in as passen%er No! 0 on Fli%ht ?<<! )e insisted on bein% %i*en priority o*er the confirmed passen%ers in the accommodation+ but the Station >%ent refused pri*ate respondentNs demand explainin% that the latterNs predicament was not due to 7>,Ns own doin% but to be a #orce ma(eure! 7 7ri*ate respondent tried to stop the departure of Fli%ht /=8 as his personal belon%in%s+ includin% a pac a%e containin% a camera which a certain .iwa from :apan as ed him to deli*er to .rs! Fe Obid of -in%oo% 6ity+ were still on board! )is plea fell on deaf ears! 7>, then issued to pri*ate respondent a free tic et to Ili%an city+ which the latter recei*ed under protest! 6 7ri*ate respondent was left at the airport and could not e*en hitch a ride in the Ford Fiera loaded with 7>, personnel! 5 7>, neither pro*ided pri*ate respondent with transportation from the airport to the city proper nor food and accommodation for his stay in 6otabato 6ity! The followin% day+ pri*ate respondent purchased a 7>, tic et to Ili%an 6ity! )e informed 7>, personnel that he would not use the free tic et because he was filin% a case a%ainst 7>,! A In Ili%an 6ity+ pri*ate respondent hired a car from the airport to Tolambu%an+ ,anao del Norte+ reachin% ODamiD 6ity by crossin% the bay in a launch! 8 )is personal effects includin% the camera+ which were *alued at 7&+888!88 were no lon%er reco*ered! On #( :anuary #0<<+ 7>, filed its answer denyin% that it un'ustifiably refused to accommodate pri*ate respondent!9 It alle%ed that there was simply no more seat for pri*ate respondent on Fli%ht /=8 since there were only six 1=2 seats a*ailable and the priority of accommodation on Fli%ht /=8 was based on the chec 4in sequence in 6ebuC that the first six 1=2 priority passen%ers on Fli%ht ?<< chose to ta e Fli%ht /=8C that its Station >%ent explained in a courteous and polite manner to all passen%ers the reason for 7>,Ns inability to transport all of them bac to 6ebuC that the stranded passen%ers a%reed to a*ail of the options and had their respecti*e tic ets exchan%ed for their onward tripsC that it was only the pri*ate respondent who insisted on bein% %i*en priority in the accommodationC that pieces of chec ed4in ba%%a%e and had carried items of the ODamiD 6ity passen%ers were remo*ed from the aircraftC that the reason for their pilotNs inability to land at ODamis 6ity airport was because the runway was wet due to rains thus posin% a threat to the safety of both passen%ers and aircraftC and+ that such reason of #orce ma(eure was a *alid 'ustification for the pilot to bypass ODamiD 6ity and proceed directly to 6otabato 6ity! On ? :une #09#+ the trial court rendered its decision 10 the dispositi*e portion of which states@ E);R;FOR;+ 'ud%ment is hereby rendered in fa*or of the plaintiff and a%ainst the defendant 7hilippine >ir,ines+ Inc! orderin% the latter to pay@ 1#2 >s actual dama%es+ the sum of Two )undred 7esos 17&88!882 representin% plaintiffNs expenses for transportation+ food and accommodation durin% his stranded stay at 6otabato 6ityC the sum of Forty4;i%ht 7esos 17?9!882 representin% his fli%ht fare from 6otabato 6ity to Ili%an cityC the sum of Fi*e )undred 7esos 17/88!882 representin% plaintiffNs transportation

G.R. No. L-82519 S+p)+;0+r 16, 1998 %ILI INE AIRLINES, IN$., petitioner+ *s! $OURT O1 A EALS !"# EDRO 9A ATOS, respondents! 2eighton 7. 2iazon #or petitioner. 4a!mes 2. Dcampo #or private respondent.

BELLOSILLO, J.: This petition for re*iew in certiorari see s to annul and set aside the decision of the then Intermediate >ppellant 6ourt+ 1 now 6ourt of >ppeals+ dated &9 February #09/+ in >64-!R! 6V No! =0(&< 1B7edro Mapatos *! 7hilippine >irlines+ Inc!B2 affirmin% the decision of the then 6ourt of first Instance+ now Re%ional Trial 6ourt+ declarin% 7hilippine >irlines+ Inc!+ liable in dama%es for breach of contract! On &/ No*ember #0<=+ pri*ate respondent filed a complaint for dama%es for breach of contract of carria%e 2a%ainst 7hilippine >irlines+ Inc! 17>,2+ before the then 6ourt of First Instance+ now Re%ional Trial 6ourt+ of .isamis Occidental+ at ODamiD 6ity! >ccordin% to him+ on & >u%ust #0<=+ he was amon% the twenty4one 1&#2 passen%ers of 7>, Fli%ht ?<< that too off from 6ebu bound for ODamiD 6ity! The routin% of this fli%ht was 6ebu4ODamiD4 6otabato! Ehile on fli%ht and 'ust about fifteen 1#/2 minutes before landin% at ODamiD 6ity+ the pilot recei*ed a radio messa%e that the airport was closed due to hea*y rains and inclement weather and that he should proceed to 6otabato 6ity instead! Fpon arri*al at 6otabato 6ity+ the 7>, Station >%ent informed the passen%ers of their options to return to 6ebu on fli%ht /=8 of the same day and thence to ODamiD 6ity on ? >u%ust #0</+ or ta e the next fli%ht to 6ebu the followin% day+ or remain at 6otabato and ta e the next a*ailable fli%ht to ODamiD 6ity on / >u%ust #0</! 8 The Station >%ent li ewise informed them that Fli%ht /=8 bound for .anila would ma e a stop4o*er at 6ebu to brin% some of the di*erted passen%ersC that there were only six 1=2 seats a*ailable as there were already confirmed passen%ers for .anilaC and+ that the basis for priority would be the chec 4in sequence at 6ebu!

expenses from Ili%an 6ity to ODamiD 6ityC and the sum of Fi*e Thousand 7esos 17/+888!882 as loss of business opportunities durin% his stranded stay in 6otabato 6ityC 1&2 >s moral dama%es+ the sum of Fifty Thousand 7esos 17/8+888!882 for plaintiffNs hurt feelin%s+ serious anxiety+ mental an%uish and un ind and discourteous treatment perpetrated by defendantNs employees durin% his stay as stranded passen%er in 6otabato 6ityC 1(2 >s exemplary dama%es+ the sum of Ten Thousand 7esos 17#8+888!882 to set a precedent to the defendant airline that it shall pro*ide means to %i*e comfort and con*enience to stranded passen%ersC 1?2 The sum of Three Thousand 7esos 17(+888!882 as attorneyNs feesC 1/2 To pay the costs of this suit! 7>, appealed to the 6ourt of >ppeals which on &9 February #09/+ findin% no re*ersible error+ affirmed the 'ud%ment of the court a quo! 11 7>, then sou%ht recourse to this 6ourt by way of a petition for re*iew on certiorari 12 upon the followin% issues@ 1#2 6an the 6ourt of >ppeals render a decision findin% petitioner 1then defendant4appellant in the court below2 ne%li%ent and+ consequently+ liable for dama%es on a question of substance which was neither raised on a question nor pro*ed at the trialV 1&2 6an the 6ourt of >ppeals award actual and moral dama%es contrary to the e*idence and established 'urisprudenceV 18 >n assiduous examination of the records yields no *alid reason for re*ersal of the 'ud%ment on appealC only a modification of its disposition! In its petition+ 7>, *i%orously maintains that pri*ate respondentNs principal cause of action was its alle%ed denial of pri*ate respondentNs demand for priority o*er the confirmed passen%ers on Fli%ht /=8! ,i ewise+ 7>, points out that the complaint did not impute to 7>, ne%lect in failin% to attend to the needs of the di*erted passen%ersC and+ that the question of ne%li%ence was not and ne*er put in issue by the pleadin%s or pro*ed at the trial! 6ontrary to the abo*e ar%uments+ pri*ate respondentNs amended complaint touched on 7>,Ns indifference and inattention to his predicament! The pertinent portion of the amended complaint 17 reads@ #8! That by *irtue of the refusal of the defendant throu%h its a%ent in 6otabato to accommodate 1sic2 and allow the plaintiff to ta e and board the plane bac to 6ebu+ and by accomodatin% 1sic2 and allowin% passen%ers from 6otabato for 6ebu in his stead and place+ thus forcin% the plaintiff a%ainst his will+ to be left and stranded in 6otabato+ exposed to the peril and dan%er of muslim rebels plunderin% at the time+ the plaintiff+ as a consequence+ 1ha*e2 suffered mental an%uish+ mental torture+ social humiliation+ bismirched reputation and wounded feelin%+ all amountin% to a conser*ati*e amount of thirty thousand 17(8+888!882 7esos!

To substantiate this aspect of apathy+ pri*ate respondent testified 16 > I did not e*en notice that I was I thin the last passen%er or the last person out of the 7>, employees and army personnel that were left there! I did not notice that when I was already outside of the buildin% after our con*ersation! G Ehat did you do nextV > I banished 1sic2 because it seems that there was a war not far from the airport! The sound of %uns and the soldiers were plenty! G >fter that what did you doV > I tried to loo for a transportation that could brin% me down to the 6ity of 6otabato! G Eere you able to %o thereV > I was at about <@88 oNcloc in the e*enin% more or less and it was a pri*ate 'eep that I boarded! I was e*en questioned why I and who am 1 sic2 I then! Then I explained my side that I am 1sic2 stranded passen%er! Then they brou%ht me downtown at 6otabato! G Durin% your con*ersation with the .ana%er were you not offered any *ehicle or transportation to 6otabato airport downtownV > In fact I told him 1.ana%er2 now I am by4passed passen%er here which is not my destination what can you offer me! Then they answered+ Bit is not my fault! ,et us for%et that!B G In other words when the .ana%er told you that offer was there a *ehicle readyV > Not yet! Not lon% after that the Ford Fiera loaded with 7>, personnel was passin% by %oin% to the 6ity of 6otabato and I stopped it to ta e me a ride because there was no more a*ailable transportation but I was not accommodated! Si%nificantly+ 7>, did not seem to mind the introduction of e*idence which focused on its alle%ed ne%li%ence in carin% for its stranded passen%ers! Eell4settled is the rule in e*idence that the protest or ob'ection a%ainst the admission of e*idence should be presented at the time the e*idence is offered+ and that the proper time to ma e protest or ob'ection to the admissibility of e*idence is when the question is presented to the witness or at the time the answer thereto is %i*en! 15 There bein% no ob'ection+ such e*idence becomes property of the case and all the parties are amenable to any fa*orable or unfa*orable effects resultin% from the e*idence! 1A 7>, instead attempted to rebut the aforequoted testimony! In the process+ it failed to substantiate its counter alle%ation for want of concrete proof 18 Z >tty! Rubin O! Ri*era Z 7>,Ns counsel@

G 3ou said 7>, refused to help you when you were in 6otabato+ is that ri%htV 7ri*ate respondent@ > 3es! G Did you as them to help you re%ardin% any offer of transportation or of any other matter as ed of themV > 3es+ he 17>, 7;RSONN;,2 said what isV It is not our fault! G >re you not aware that one fellow passen%er e*en claimed that he was %i*en )otel accommodation because they ha*e no moneyV xxx xxx xxx > No+ sir+ that was ne*er offered to me! I said+ I tried to stop them but they were already ridin% that 7>, pic 4up 'eep+ and I was not accommodated! )a*in% 'oined in the issue o*er the alle%ed lac of care it exhibited towards its passen%ers+ 7>, cannot now turn around and fei%n surprise at the outcome of the case! Ehen issues not raised by the pleadin%s are tried by express or implied consent of the parties+ they shall be treated in all respects as if they had been raised in the pleadin%s! 19 Eith re%ard to the award of dama%es affirmed by the appellate court+ 7>, ar%ues that the same is unfounded! It asserts that it should not be char%ed with the tas of loo in% after the passen%ersN comfort and con*enience because the di*ersion of the fli%ht was due to a fortuitous e*ent+ and that if made liable+ an added burden is %i*en to 7>, which is o*er and beyond its duties under the contract of carria%e! It submits that %rantin% arguendo that ne%li%ence exists+ 7>, cannot be liable in dama%es in the absence of fraud or bad faithC that pri*ate respondent failed to apprise 7>, of the nature of his trip and possible business lossesC and+ that pri*ate respondent himself is to be blamed for unreasonably refusin% to use the free tic et which 7>, issued! The contract of air carria%e is a peculiar one! 5ein% imbued with public interest+ the law requires common carriers to carry the passen%ers safely as far as human care and foresi%ht can pro*ide+ usin% the utmost dili%ence of *ery cautious persons+ with due re%ard for all the circumstances! 20 In $ir rance v! Carrascoso+ 21 we held that Z > contract to transport passen%ers is quite different in ind and de%ree from any other contractual relation! >nd this+ because of the relation which an air carrier sustains with the public! Its business is mainly with the tra*ellin% public! %t invites peop!e to avai! o# the com#orts and advantages it o##ers! The contract of air carria%e+ therefore+ %enerates a relation attended with a public duty ! ! ! ! 1 emphasis supplied2! The position ta en by 7>, in this case clearly illustrates its failure to %rasp the exactin% standard required by law! Fndisputably+ 7>,Ns di*ersion of its fli%ht due to inclement weather

was a fortuitous e*ent! Nonetheless+ such occurrence did not terminate 7>,Ns contract with its passen%ers! 5ein% in the business of air carria%e and the sole one to operate in the country+ 7>, is deemed equipped to deal with situations as in the case at bar! Ehat we said in one case once a%ain must be stressed+ i!e!+ the relation of carrier and passen%er continues until the latter has been landed at the port of destination and has left the carrierNs premises! 22 )ence+ 7>, necessarily would still ha*e to exercise extraordinary dili%ence in safe%uardin% the comfort+ con*enience and safety of its stranded passen%ers until they ha*e reached their final destination! On this score+ 7>, %rossly failed considerin% the then on%oin% battle between %o*ernment forces and .uslim rebels in 6otabato 6ity and the fact that the pri*ate respondent was a stran%er to the place! >s the appellate court correctly ruled Z Ehile the failure of plaintiff in the first instance to reach his destination at ODamis 6ity in accordance with the contract of carria%e was due to the closure of the airport on account of rain and inclement weather which was radioed to defendant #/ minutes before landin%+ it has not been disputed by defendant airline that ODamis 6ity has no all4weather airport and has to cancel its fli%ht to ODamis 6ity or by4pass it in the e*ent of inclement weather! Tnowin% this fact+ it becomes the duty of defendant to pro*ide all means of comfort and con*enience to its passen%ers when they would ha*e to be left in a stran%e place in case of such by4passin%! The steps ta en by defendant airline company towards this end has not been put in e*idence+ especially for those < others who were not accommodated in the return trip to 6ebu+ only = of the &# ha*in% been so accommodated! It appears that plaintiff had to lea*e on the next fli%ht & days later! If the cause of non4fulfillment of the contract is due to a fortuitous e*ent+ it has to be the sole and only cause 1>rt! #<// 66!+ >rt! #<(( 6!6!2 Since part of the failure to comply with the obli%ation of common carrier to deli*er its passen%ers safely to their destination lay in the defendantNs failure to pro*ide comfort and con*enience to its stranded passen%ers usin% extra4ordinary dili%ence+ the cause of non4fulfillment is not solely and exclusi*ely due to fortuitous e*ent+ but due to somethin% which defendant airline could ha*e pre*ented+ defendant becomes liable to plaintiff! 28 Ehile we find 7>, remiss in its duty of extendin% utmost care to pri*ate respondent while bein% stranded in 6otabato 6ity+ there is no sufficient basis to conclude that 7>, failed to inform him about his non4accommodation on Fli%ht /=8+ or that it was inattenti*e to his queries relati*e thereto! On ( >u%ust #0</+ the Station >%ent reported to his 5ranch .ana%er in 6otabato 6ity that Z (! Of the fifteen stranded passen%ers two pax elected to ta e F?<9 on >u%ust 8/+ three pax opted to ta e F??& >u%ust 8(! The remainin% ten 1#82 includin% sub'ect requested that they be instead accommodated 1sic2 on F??= 65O4I-N the followin% day where they intended to ta e the surface transportation to OM6! .r! 7edro Mapatos had by then been *ery *ocal and boiceterous 1sic2 at the counter and we tactfully mana%ed to steer him inside the Station >%entNs office! .r! 7edro Mapatos then adamantly insisted that all the di*erted passen%ers should ha*e been %i*en priority o*er the ori%inatin% passen%ers of F/=8 whether confirmed or otherwise! Ee explained our policies and after awhile he seemed pacified and thereafter too his tic et 1in4lieued 1sic2 to 65O4I-N+ 6O6ON basis2+ at the counter in the presence of fi*e

other passen%ers who were waitin% for their tic ets too! The rest of the di*erted pax had left earlier after bein% assured their tic ets will be ready the followin% day! 27 >foresaid Report bein% an entry in the course of business is prima #acie e*idence of the facts therein stated! 7ri*ate respondent+ apart from his testimony+ did not offer any contro*ertin% e*idence! If indeed 7>, omitted to %i*e information about the options a*ailable to its di*erted passen%ers+ it would ha*e been delu%ed with complaints! 5ut+ only pri*ate respondent complained Z >tty! Ri*era 1for 7>,2 G I understand from you .r! Mapatos that at the time you were waitin% at 6otabato >irport for the decision of 7>,+ you were not informed of the decision until after the airplane left is that correctV > 3es! 6OFRT@ G Ehat do you mean by ByesBV 3ou meant you were not informedV > 3es+ I was not informed of their decision+ that they will only accommodate few passen%ers! G >side from you there were many other stranded passen%ersV > I belie*ed+ yes! G >nd you want us to belie*e that 7>, did not explain 1to2 any of these passen%ers about the decision re%ardin% those who will board the aircraft bac to 6ebuV > No+ Sir! G Despite these facts .r! Mapatos did any of the other passen%ers complained 1 sic2 re%ardin% that incidentV xxx xxx xxx > There were plenty of ar%ument and I was one of those tal in% about my case! G Did you hear anybody complained 1sic2 that he has not been informed of the decision before the plane left for 6ebuV > No! 26 >dmittedly+ pri*ate respondentNs insistence on bein% %i*en priority in accommodation was unreasonable considerin% the fortuitous e*ent and that there was a sequence to be obser*ed in the boo in%+ i!e!+ in the order the passen%ers chec ed4in at their port of ori%in! )is

intransi%ence in fact was the main cause for his ha*in% to stay at the airport lon%er than was necessary! >tty! Ri*era@ G >nd+ you were sayin% that despite the fact that accordin% to your testimony there were at least #= passen%ers who were stranded there in 6otabato airport accordin% to your testimony+ and later you said that there were no other people left there at that time+ is that correctV > 3es+ I did not see anyone there around! I thin I was the only ci*ilian who was left there! G Ehy is it that it too you lon% time to lea*e that placeV > 5ecause I was ar%uin% with the 7>, personnel! 25 >nent the plaint that 7>, employees were disrespectful and inattenti*e toward pri*ate respondent+ the records are bereft of e*idence to support the same! Thus+ the rulin% of respondent 6ourt of >ppeals in this re%ard is without basis! 2A On the contrary+ pri*ate respondent was attended to not only by the personnel of 7>, but also by its .ana%er!B 28 In the li%ht of these findin%s+ we find the award of moral dama%es of Fifty Thousand 7esos 17/8+888!882 unreasonably excessi*eC hence+ we reduce the same to Ten Thousand 7esos 17#8+888!882! 6onformably herewith+ the award of exemplary dama%es is also reduced to fi*e Thousand 7esos 1/+888!882! .oral dama%es are not intended to enrich the pri*ate respondent! They are awarded only to enable the in'ured party to obtain means+ di*ersion or amusements that will ser*e to alle*iate the moral sufferin% he has under%one by reason of the defendantNs culpable action! 29 Eith re%ard to the award of actual dama%es in the amount of 7/+888!88 representin% pri*ate respondentNs alle%ed business losses occasioned by his stay at 6otabato 6ity+ we find the same unwarranted! 7ri*ate respondentNs testimony that he had a scheduled business Btransaction of shar li*er oil supposedly to ha*e been consummated on >u%ust (+ #0</ in the mornin%B and that Bsince 1pri*ate respondent2 was out for nearly two wee s I missed to buy about #8 barrels of shar li*er oil+B 80 are purely speculati*e! >ctual or compensatory dama%es cannot be presumed but must be duly pro*ed with reasonable de%ree of certainty! > court cannot rely on speculation+ con'ecture or %uesswor as to the fact and amount of dama%es+ but must depend upon competent proof that they ha*e suffered and on e*idence of the actual amount thereof! 81 E);R;FOR; the decision appealed from is >FFIR.;D with modification howe*er that the award of moral dama%es of Fifty Thousand 7esos 17/8+888!882 is reduced to Ten Thousand 7esos 17#8+888!882 while the exemplary dama%es of Ten Thousand 7esos 17#8+888!882 is also reduced to Fi*e Thousand 7esos 17/+888!882! The award of actual dama%es in the amount Fi*e Thousand 7esos 17/+888!882 representin% business losses occasioned by pri*ate respondentNs bein% stranded in 6otabato 6ity is deleted! SO ORD;R;D!

Republic of the 7hilippines SU REME $OURT .anila T)IRD DIVISION

=! >nother factor and perhaps the most li ely reason for the dislod%in% of the roofin% structural trusses is the improper anchora%e of the said trusses to the roof beams! The #H&N diameter steel bars embedded on the concrete roof beams which ser*e as truss anchora%e are not bolted nor nailed to the trusses! Still+ there are other steel bars which were not e*en bent to the trusses+ thus+ those trusses are not anchored at all to the roof beams! It then recommended that Bto a*oid any further loss and dama%e to li*es+ limbs and property of persons li*in% in the *icinity+B the fourth floor of sub'ect school buildin% be declared as a Bstructural haDard!B In their 6omplaint 5 before the Re%ional Trial 6ourt of 7asay 6ity+ 5ranch ##<+ for dama%es based on cu!pa aqui!iana+ pri*ate respondents alle%ed that the dama%e to their house rendered the same uninhabitable+ forcin% them to stay temporarily in othersN houses! >nd so they sou%ht to reco*er from petitioner 7##<+##=!88+ as actual dama%es+ 7#+888+888!88+ as moral dama%es+ 7(88+888!88+ as exemplary dama%es and 7#88+888!88+ for and as attorneyNs feesC plus costs! In its >nswer+ petitioner a*erred that sub'ect school buildin% had withstood se*eral de*astatin% typhoons and other calamities in the past+ without its roofin% or any portion thereof %i*in% wayC that it has not been remiss in its responsibility to see to it that said school buildin%+ which houses school children+ faculty members+ and employees+ is Bin tip4top conditionBC and furthermore+ typhoon BSalin%B was Ban act of -od and therefore beyond human controlB such that petitioner cannot be answerable for the dama%es wrou%ht thereby+ absent any ne%li%ence on its part! The trial court+ %i*in% credence to the ocular inspection report to the effect that sub'ect school buildin% had a Bdefecti*e roofin% structure+B found that+ while typhoon BSalin%B was accompanied by stron% winds+ the dama%e to pri*ate respondentsN houses Bcould ha*e been a*oided if the construction of the roof of "petitionerNs$ buildin% was not faulty!B The dispositi*e portion of the lower courtNs decision A reads+ thus@ E);R;FOR;+ in *iew of the fore%oin%+ the 6ourt renders 'ud%ment 1 sic2 in fa*or of the plaintiff 1sic2 and a%ainst the defendants+ 1sic2 orderin% the latter to pay 'ointly and se*erally the former as follows@ a2 7##<+##=!88+ as actual dama%es+ plus liti%ation expensesC b2 7#+888+888!88 as moral dama%esC c2 7#88+888!88 as attorneyNs feesC d2 6osts of the instant suit! The claim for exemplary dama%es is denied for the reason that the defendants 1 sic2 did in a wanton fraudulent+ rec less+ oppressi*e or male*olent manner! In its appeal to the 6ourt of >ppeals+ petitioner assi%ned as errors+ 8 that@

G.R. No. 125889 -.l* 10, 1998 SOUT%EASTERN $OLLEGE IN$., petitioner+ *s! $OURT O1 A EALS, -UANITA DE -ESUS :DA. DE DIMAANO, EMERITA DIMAANO, REMEDIOS DIMAANO, $ONSOLA$ION DIMAANO !"# MILAGROS DIMAANO, respondents!

URISIMA, J.: 7etition for re*iew under Rule ?/ of the Rules of 6ourt see in% to set aside the Decision 1 promul%ated on :uly (#+ #00=+ and Resolution 2 dated September #&+ #00= of the 6ourt of >ppeals 8 in 6>4-!R! No! ?#?&&+ entitled B:uanita de :esus *da! de Dimaano+ et a!! *s! Southeastern 6olle%e+ Inc!B+ which reduced the moral dama%es awarded below from 7#+888+888!88 to 7&88+888!88! 7 The Resolution under attac denied petitionerNs motion for reconsideration! 7ri*ate respondents are owners of a house at (&= 6olle%e Road+ 7asay 6ity+ while petitioner owns a four4storey school buildin% alon% the same 6olle%e Road! On October ##+ #090+ at about =@(8 in the mornin%+ a powerful typhoon BSalin%B hit .etro .anila! 5uffeted by *ery stron% winds+ the roof of petitionerNs buildin% was partly ripped off and blown away+ landin% on and destroyin% portions of the roofin% of pri*ate respondentsN house! >fter the typhoon had passed+ an ocular inspection of the destroyed buildin% was conducted by a team of en%ineers headed by the city buildin% official+ ;n%r! :esus ,! Reyna! 7ertinent aspects of the latterNs Report 6 dated October #9+ #090 stated+ as follows@ /! One of the factors that may ha*e led to this calamitous e*ent is the formation of the buildin% in the area and the %eneral direction of the wind! Situated in the peripheral lot is an almost F4 shaped formation of ?4storey buildin%! Thus+ with the stron% winds ha*in% a westerly direction+ the %eneral formation of the buildin% becomes a bi% funnel4li e structure+ the one situated alon% 6olle%e Road+ recei*in% the hea*iest impact of the stron% winds! )ence+ there are portions of the roofin%+ those located on both ends of the buildin%+ which remained intact after the storm!

I T); TRI>, 6OFRT ;RR;D IN )O,DIN- T)>T T37)OON BS>,IN-B+ >S >N >6T OF -OD+ IS NOT BT); SO,; >ND >5SO,FT; R;>SONB FOR T); RI77IN-4OFF OF T); S.>,, 7ORTION OF T); ROOF OF SOFT);>ST;RNNS FOFR 1?2 STOR;3 S6)OO, 5FI,DIN-! II T); TRI>, 6OFRT ;RR;D IN )O,DIN- T)>T BT); 6ONSTRF6TION OF T); ROOF OF D;F;ND>NTNS S6)OO, 5FI,DIN- E>S F>F,T3B NOTEIT)ST>NDINT); >D.ISSION T)>T T);R; E;R; T37)OONS 5;FOR; 5FT NOT >S -R>V; >S T37)OON BS>,IN-B E)I6) IS T); DIR;6T >ND 7ROOI.>T; 6>FS; OF T); IN6ID;NT! III T); TRI>, 6OFRT ;RR;D IN >E>RDIN- >6TF>, >ND .OR>, D>.>-;S >S E;,, >S >TTORN;3NS F;;S >ND ,ITI->TION ;O7;NS;S >ND 6OSTS OF SFIT TO DI.>>NOS E);N T);3 )>V; NOT IN6FRR;D >6TF>, D>.>-;S >T >,, >S DI.>>NOS )>V; >,R;>D3 SO,D T);IR 7RO7;RT3+ >N INT;RV;NIN;V;NT T)>T R;ND;RS T)IS 6>S; .OOT >ND >6>D;.I6! IV T); TRI>, 6OFRT ;RR;D IN ORD;RIN- T); ISSF>N6; OF T); ERIT OF ;O;6FTION INS7IT; OF T); 7;RF;6TION OF SOFT);>ST;RNNS >77;>, E);N T);R; IS NO 6O.7;,,IN- R;>SON FOR T); ISSF>N6; T);R;TO! >s mentioned earlier+ respondent 6ourt of >ppeals affirmed with modification the trial courtNs disposition by reducin% the award of moral dama%es from 7#+888+888!88 to 7&88+888!88! )ence+ petitionerNs resort to this 6ourt+ raisin% for resolution the issues of@ #! Ehether or not the award of actual dama%es " sic$ to respondent Dimaanos on the basis of speculation or con'ecture+ without proof or receipts of actual dama%e+ " sic$ le%ally feasible or 'ustified! &! Ehether or not the award of moral dama%es to respondent Dimaanos+ with the latter ha*in% suffered+ actual dama%e has le%al basis! (! Ehether or not respondent Dimaanos who are no lon%er the owner of the property+ sub'ect matter of the case+ durin% its pendency+ has the ri%ht to pursue their complaint a%ainst petitioner when the case was already moot and academic by the sale of the property to third party! ?! Ehether or not the award of attorneyNs fees when the case was already moot academic " sic$ le%ally 'ustified!

/! Ehether or not petitioner is liable for dama%e caused to others by typhoon BSalin%B bein% an act of -od! =! Ehether or not the issuance of a writ of execution pendin% appeal+ ex-parte or without hearin%+ has support in law! The pi*ot of inquiry here+ determinati*e of the other issues+ is whether the dama%e on the roof of the buildin% of pri*ate respondents resultin% from the impact of the fallin% portions of the school buildin%Ns roof ripped off by the stron% winds of typhoon BSalin%B+ was+ within le%al contemplation+ due to fortuitous e*entV If so+ petitioner cannot be held liable for the dama%es suffered by the pri*ate respondents! This conclusion finds support in >rticle ##<? of 6i*il 6ode+ which pro*ides@ >rt ##<?! ;xcept in cases expressly specified by the law+ or when it is otherwise declared by stipulation+ or when the nature of the obli%ation requires the assumption of ris + no person shall be responsible for those e*ents which could not be foreseen+ or which+ thou%h foreseen+ were ine*itable! The antecedent of fortuitous e*ent or caso #ortuito is found in the Partidas which defines it as Ban e*ent which ta es place by accident and could not ha*e been foreseen!B 9 ;scriche elaborates it as Ban unexpected e*ent or act of -od which could neither be foreseen nor resisted!B 10 6i*ilist >rturo .! Tolentino adds that B"f$ortuitous e*ents may be produced by two %eneral causes@ 1#2 by nature+ such as earthqua es+ storms+ floods+ epidemics+ fires+ etc! and 1&2 by the act of man+ such as an armed in*asion+ attac by bandits+ %o*ernmental prohibitions+ robbery+ etc!B 11 In order that a fortuitous e*ent may exempt a person from liability+ it is necessary that he be free from any pre*ious ne%li%ence or misconduct by reason of which the loss may ha*e been occasioned! 12 >n act of -od cannot be in*o ed for the protection of a person who has been %uilty of %ross ne%li%ence in not tryin% to forestall its possible ad*erse consequences! Ehen a personNs ne%li%ence concurs with an act of -od in producin% dama%e or in'ury to another+ such person is not exempt from liability by showin% that the immediate or proximate cause of the dama%es or in'ury was a fortuitous e*ent! Ehen the effect is found to be partly the result of the participation of man Z whether it be from acti*e inter*ention+ or ne%lect+ or failure to act Z the whole occurrence is hereby humaniDed+ and remo*ed from the rules applicable to acts of -od! 18 In the case under consideration+ the lower court accorded full credence to the findin% of the in*esti%atin% team that sub'ect school buildin%Ns roofin% had Bno sufficient anchora%e to hold it in position especially when battered by stron% winds!B 5ased on such findin%+ the trial court imputed ne%li%ence to petitioner and ad'ud%ed it liable for dama%es to pri*ate respondents! >fter a thorou%h study and e*aluation of the e*idence on record+ this 6ourt belie*es otherwise+ notwithstandin% the %eneral rule that factual findin%s by the trail court+ especially when affirmed by the appellate court+ are bindin% and conclusi*e upon this 6ourt! 17 >fter a careful

scrutiny of the records and the pleadin%s submitted by the parties+ we find exception to this rule and hold that the lower courts misappreciated the e*idence proffered! There is no question that a typhoon or storm is a fortuitous e*ent+ a natural occurrence which may be foreseen but is una*oidable despite any amount of foresi%ht+ dili%ence or care! 16 In order to be exempt from liability arisin% from any ad*erse consequence en%endered thereby+ there should ha*e been no human participation amountin% to a ne%li%ent act! 15 In other wordsC the person see in% exoneration from liability must not be %uilty of ne%li%ence! Ne%li%ence+ as commonly understood+ is conduct which naturally or reasonably creates undue ris or harm to others! It may be the failure to obser*e that de%ree of care+ precaution+ and *i%ilance which the circumstances 'ustify demand+ 1A or the omission to do somethin% which a prudent and reasonable man+ %uided by considerations which ordinarily re%ulate the conduct of human affairs+ would do! 18 From these premises+ we proceed to determine whether petitioner was ne%li%ent+ such that if it were not+ the dama%e caused to pri*ate respondentsN house could ha*e been a*oidedV >t the outset+ it bears emphasiDin% that a person claimin% dama%es for the ne%li%ence of another has the burden of pro*in% the existence of fault or ne%li%ence causati*e of his in'ury or loss! The facts constituti*e of ne%li%ence must be affirmati*ely established by competent e*idence+ 19 not merely by presumptions and conclusions without basis in fact! 7ri*ate respondents+ in establishin% the culpability of petitioner+ merely relied on the aforementioned report submitted by a team which made an ocu!ar inspection of petitionerNs school buildin% after the typhoon! >s the term imparts+ an ocu!ar inspection is one by means of actual si%ht or *iewin%! 20 Ehat is *isual to the eye throu%h+ is not always reflecti*e of the real cause behind! For instance+ one who hears a %unshot and then sees a wounded person+ cannot always definitely conclude that a third person shot the *ictim! It could ha*e been self4inflicted or caused accidentally by a stray bullet! The relationship of cause and effect must be clearly shown! In the present case+ other than the said ocular inspection+ no in*esti%ation was conducted to determine the real cause of the partial unroofin% of petitionerNs school buildin%! 7ri*ate respondents did not e*en show that the plans+ specifications and desi%n of said school buildin% were deficient and defecti*e! Neither did they pro*e any substantial de*iation from the appro*ed plans and specifications! Nor did they conclusi*ely establish that the construction of such buildin% was basically flawed! 21 On the other hand+ petitioner elicited from one of the witnesses of pri*ate respondents+ city buildin% official :esus Reyna+ that the ori%inal plans and desi%n of petitionerNs school buildin% were appro*ed prior to its construction! ;n%r! Reyna admitted that it was a le%al requirement before the construction of any buildin% to obtain a permit from the city buildin% official 1city en%ineer+ prior to the passa%e of the 5uildin% >ct of #0<<2! In li e manner+ after construction of the buildin%+ a certification must be secured from the same official attestin% to the readiness for occupancy of the edifice! )a*in% obtained both buildin% permit and certificate of occupancy+ these are+ at the *ery least+ prima #acie e*idence of the re%ular and proper construction of sub'ect school buildin%! 22

Furthermore+ when part of its roof needed repairs of the dama%e inflicted by typhoon BSalin%B+ the same city official %a*e the %o4si%nal for such repairs Z without any de*iation from the ori%inal desi%n Z and subsequently+ authoriDed the use of the entire fourth floor of the same buildin%! These only pro*e that sub'ect buildin% suffers from no structural defect+ contrary to the report that its BF4shapedB form was Bstructurally defecti*e!B )a*in% %i*en his unqualified imprimatur+ the city buildin% official is presumed to ha*e properly performed his duties 28 in connection therewith! In addition+ petitioner presented its *ice president for finance and administration who testified that an annual maintenance inspection and repair of sub'ect school buildin% were re%ularly underta en! 7etitioner was e*en willin% to present its maintenance super*isor to attest to the extent of such re%ular inspection but pri*ate respondents a%reed to dispense with his testimony and simply stipulated that it would be corroborati*e of the *ice presidentNs narration! .oreo*er+ the city buildin% official+ who has been in the city %o*ernment ser*ice since #0<?+ admitted in open court that no complaint re%ardin% any defect on the same structure has e*er been lod%ed before his office prior to the institution of the case at bench! It is a matter of 'udicial notice that typhoons are common occurrences in this country! If sub'ect school buildin%Ns roofin% was not firmly anchored to its trusses+ ob*iously+ it could not ha*e withstood lon% years and se*eral typhoons e*en stron%er than BSalin%!B In li%ht of the fore%oin%+ we find no clear and con*incin% e*idence to sustain the 'ud%ment of the appellate court! Ee thus hold that petitioner has not been shown ne%li%ent or at fault re%ardin% the construction and maintenance of its school buildin% in question and that typhoon BSalin%B was the proximate cause of the dama%e suffered by pri*ate respondentsN house! Eith this disposition on the pi*otal issue+ pri*ate respondentsN claim for actual and moral dama%es as well as attorneyNs fees must fail! 27 7etitioner cannot be made to answer for a purely fortuitous e*ent! 26 .ore so because no bad faith or willful act to cause dama%e was alle%ed and pro*en to warrant moral dama%es! 7ri*ate respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred!25 It is not enou%h that the dama%e be capable of proof but must be actually pro*ed with a reasonable de%ree of certainty+ pointin% out specific facts that afford a basis for measurin% whate*er compensatory dama%es are borne! 2A 7ri*ate respondents merely submitted an estimated amount needed for the repair of the roof their sub'ect buildin%! Ehat is more+ whether the Bnecessary repairsB were caused ON,3 by petitionerNs alle%ed ne%li%ence in the maintenance of its school buildin%+ or included the ordinary wear and tear of the house itself+ is an essential question that remains indeterminable! The 6ourt deems unnecessary to resol*e the other issues posed by petitioner! >s re%ards the sixth issue+ howe*er+ the writ of execution issued on >pril #+ #00( by the trial court is hereby nullified and set aside! 7ri*ate respondents are ordered to reimburse any amount or return to petitioner any property which they may ha*e recei*ed by *irtue of the enforcement of said writ!

E);R;FOR;+ the petition is -R>NT;D and the challen%ed Decision is R;V;RS;D! The complaint of pri*ate respondents in 6i*il 6ase No! <(#? before the trial court a quo is ordered DIS.ISS;D and the writ of execution issued on >pril #+ #00( in said case is S;T >SID;! >ccordin%ly+ pri*ate respondents are ORD;R;D to return to petitioner any amount or property recei*ed by them by *irtue of said writ! 6osts a%ainst the pri*ate respondents! SO ORD;R;D! 5arvasa, C.J., 7omero and 1apunan, JJ., concur.

Republic of the 7hilippines SU REME $OURT .anila S;6OND DIVISION G.R. No. 17A827 M!* 26, 2007

%ILI INE $OMMUNI$ATIONS SATELLITE $OR ORATION, petitioner+ *s! GLOBE TELE$OM, IN$. @/or;+rl* Glo0+ M(J!* $!0l+ !"# R!#io $orpor!)io"B, respondents! x44444444444444444444444444444x GLOBE TELE$OM, IN$., petitioner+ *s! %ILI INE $OMMUNI$ATION SATELLITE $OR ORATION, respondent! D;6ISION TINGA, J.: 5efore the 6ourt are two Petitions #or 7evie/ assailin% the Decision of the 6ourt of >ppeals+ dated &< February &88#+ in 6>4-!R! 6V No! =(=#0!# The facts of the case are undisputed! For se*eral years prior to #00#+ -lobe .c ay 6able and Radio 6orporation+ now -lobe Telecom+ Inc! 1-lobe2+ had been en%a%ed in the coordination of the pro*ision of *arious communication facilities for the military bases of the Fnited States of >merica 1FS2 in 6lar >ir 5ase+ >n%eles+ 7ampan%a and Subic Na*al 5ase in 6ubi 7oint+ Mambales! The said communication facilities were installed and confi%ured for the exclusi*e use of the FS Defense 6ommunications >%ency 1FSD6>2+ and for security reasons+ were operated only by its personnel or those of >merican companies contracted by it to operate said facilities! The FSD6> contracted with said >merican companies+ and the latter+ in turn+ contracted with -lobe for the use of the communication facilities! -lobe+ on the other hand+ contracted with local ser*ice pro*iders such as the 7hilippine 6ommunications Satellite 6orporation 17hilcomsat2 for the pro*ision of the communication facilities! On 8< .ay #00#+ 7hilcomsat and -lobe entered into an >%reement whereby 7hilcomsat obli%ated itself to establish+ operate and pro*ide an I5S Standard 5 earth station 1earth station2 within 6ubi 7oint for the exclusi*e use of the FSD6>! & The term of the contract was for =8 months+ or fi*e 1/2 years!( In turn+ -lobe promised to pay 7hilcomsat monthly rentals for each leased circuit in*ol*ed!?

>t the time of the execution of the >%reement+ both parties new that the .ilitary 5ases >%reement between the Republic of the 7hilippines and the FS 1R74FS .ilitary 5ases >%reement2+ which was the basis for the occupancy of the 6lar >ir 5ase and Subic Na*al 5ase in 6ubi 7oint+ was to expire in #00#! Fnder Section &/+ >rticle OVIII of the #09< 6onstitution+ forei%n military bases+ troops or facilities+ which include those located at the FS Na*al Facility in 6ubi 7oint+ shall not be allowed in the 7hilippines unless a new treaty is duly concurred in by the Senate and ratified by a ma'ority of the *otes cast by the people in a national referendum when the 6on%ress so requires+ and such new treaty is reco%niDed as such by the FS -o*ernment! Subsequently+ 7hilcomsat installed and established the earth station at 6ubi 7oint and the FSD6> made use of the same! On #= September #00#+ the Senate passed and adopted Senate Resolution No! #?#+ expressin% its decision not to concur in the ratification of the Treaty of Friendship+ 6ooperation and Security and its Supplementary >%reements that was supposed to extend the term of the use by the FS of Subic Na*al 5ase+ amon% others! / The last two para%raphs of the Resolution state@ FINDIN- that the Treaty constitutes a defecti*e framewor for the continuin% relationship between the two countries in the spirit of friendship+ cooperation and so*erei%n equality@ Now+ therefore+ be it Resol*ed by the Senate+ as it is hereby resol*ed+ To express its decision not to concur in the ratification of the Treaty of Friendship+ 6ooperation and Security and its Supplementary >%reements+ at the same time reaffirmin% its desire to continue friendly relations with the %o*ernment and people of the Fnited States of >merica! = On (# December #00#+ the 7hilippine -o*ernment sent a 5ote Cer&a!e to the FS -o*ernment throu%h the FS ;mbassy+ notifyin% it of the 7hilippinesA termination of the R74FS .ilitary 5ases >%reement! The 5ote Cer&a!estated that since the R74FS .ilitary 5ases >%reement+ as amended+ shall terminate on (# December #00&+ the withdrawal of all FS military forces from Subic Na*al 5ase should be completed by said date! In a letter dated 8= >u%ust #00&+ -lobe notified 7hilcomsat of its intention to discontinue the use of the earth station effecti*e 89 No*ember #00& in *iew of the withdrawal of FS military personnel from Subic Na*al 5ase after the termination of the R74FS .ilitary 5ases >%reement! -lobe in*o ed as basis for the letter of termination Section 9 1Default2 of the >%reement+ which pro*ides@ Neither party shall be held liable or deemed to be in default for any failure to perform its obli%ation under this >%reement if such failure results directly or indirectly from force ma'eure or fortuitous e*ent! ;ither party is thus precluded from performin% its obli%ation until such force ma'eure or fortuitous e*ent shall terminate! For the purpose of this para%raph+ force ma'eure shall mean circumstances beyond the control of the party in*ol*ed includin%+ but not limited to+ any law+ order+ re%ulation+ direction or request of the -o*ernment of the 7hilippines+ stri es or other labor difficulties+ insurrection riots+ national emer%encies+ war+ acts of public enemies+ fire+ floods+ typhoons or other catastrophies or acts of -od!

7hilcomsat sent a reply letter dated #8 >u%ust #00& to -lobe+ statin% that Bwe expect "-lobe$ to now its commitment to pay the stipulated rentals for the remainin% terms of the >%reement e*en after "-lobe$ shall ha*e discontinue"d$ the use of the earth station after No*ember 89+ #00&!B< 7hilcomsat referred to Section < of the >%reement+ statin% as follows@ <! DIS6ONTINF>N6; OF S;RVI6; Should "-lobe$ decide to discontinue with the use of the earth station after it has been put into operation+ a written notice shall be ser*ed to 7)I,6O.S>T at least sixty 1=82 days prior to the expected date of termination! Notwithstandin% the non4use of the earth station+ "-lobe$ shall continue to pay 7)I,6O.S>T for the rental of the actual number of T# circuits in use+ but in no case shall be less than the first two 1&2 T# circuits+ for the remainin% life of the a%reement! )owe*er+ should 7)I,6O.S>T ma e use or sell the earth station sub'ect to this a%reement+ the obli%ation of "-lobe$ to pay the rental for the remainin% life of the a%reement shall be at such monthly rate as may be a%reed upon by the parties! 9 >fter the FS military forces left Subic Na*al 5ase+ 7hilcomsat sent -lobe a letter dated &? No*ember #00( demandin% payment of its outstandin% obli%ations under the >%reement amountin% to FSY?+0#8+#(=!88 plus interest and attorneyAs fees! )owe*er+ -lobe refused to heed 7hilcomsatAs demand! On &< :anuary #00/+ 7hilcomsat filed with the Re%ional Trial 6ourt of .a ati a Comp!aint a%ainst -lobe+ prayin% that the latter be ordered to pay liquidated dama%es under the >%reement+ with le%al interest+ exemplary dama%es+ attorneyAs fees and costs of suit! The case was raffled to 5ranch /0 of said court! -lobe filed an $ns/er to the Comp!aint, insistin% that it was constrained to end the >%reement due to the termination of the R74FS .ilitary 5ases >%reement and the non4ratification by the Senate of the Treaty of Friendship and 6ooperation+ which e*ents constituted #orce ma(eure under the >%reement! -lobe explained that the occurrence of said e*ents exempted it from payin% rentals for the remainin% period of the >%reement! On 8/ :anuary #000+ the trial court rendered its Decision, the dispositi*e portion of which reads@ E);R;FOR;+ premises considered+ 'ud%ment is hereby rendered as follows@ #! Orderin% the defendant to pay the plaintiff the amount of Ninety Two Thousand Two )undred Thirty ;i%ht FS Dollars 1FSY0&+&(9!882 or its equi*alent in 7hilippine 6urrency 1computed at the exchan%e rate pre*ailin% at the time of compliance or payment2 representin% rentals for the month of December #00& with interest thereon at the le%al rate of twel*e percent 1#&R2 per annum startin% December #00& until the amount is fully paidC &! Orderin% the defendant to pay the plaintiff the amount of Three )undred Thousand 17(88+888!882 7esos as and for attorneyAs feesC (! Orderin% the DIS.ISS>, of defendantAs counterclaim for lac of meritC and

?! Eith costs a%ainst the defendant! SO ORD;R;D!0 5oth parties appealed the trial courtAs Decision to the 6ourt of >ppeals! 7hilcomsat claimed that the trial court erred in rulin% that@ 1#2 the non4ratification by the Senate of the Treaty of Friendship+ 6ooperation and Security and its Supplementary >%reements constitutes #orce ma(eure which exempts -lobe from complyin% with its obli%ations under the >%reementC 1&2 -lobe is not liable to pay the rentals for the remainder of the term of the >%reementC and 1(2 -lobe is not liable to 7hilcomsat for exemplary dama%es! -lobe+ on the other hand+ contended that the RT6 erred in holdin% it liable for payment of rent of the earth station for December #00& and of attorneyAs fees! It explained that it terminated 7hilcomsatAs ser*ices on 89 No*ember #00&C hence+ it had no reason to pay for rentals beyond that date! On &< February &88#+ the 6ourt of >ppeals promul%ated its Decision dismissin% 7hilcomsatAs appeal for lac of merit and affirmin% the trial courtAs findin% that certain e*ents constitutin% #orce ma(eure under Section 9 the >%reement occurred and 'ustified the non4 payment by -lobe of rentals for the remainder of the term of the >%reement! The appellate court ruled that the non4ratification by the Senate of the Treaty of Friendship+ 6ooperation and Security+ and its Supplementary >%reements+ and the termination by the 7hilippine -o*ernment of the R74FS .ilitary 5ases >%reement effecti*e (# December #00# as stated in the 7hilippine -o*ernmentAs 5ote Cer&a!e to the FS -o*ernment+ are acts+ directions+ or requests of the -o*ernment of the 7hilippines which constitute #orce ma(eure! In addition+ there were circumstances beyond the control of the parties+ such as the issuance of a formal order by 6dr! Ealter 6orliss of the FS Na*y+ the issuance of the letter notification from >TT and the complete withdrawal of all FS military forces and personnel from 6ubi 7oint+ which pre*ented further use of the earth station under the >%reement! )owe*er+ the 6ourt of >ppeals ruled that althou%h -lobe sou%ht to terminate 7hilcomsatAs ser*ices by 89 No*ember #00&+ it is still liable to pay rentals for the December #00&+ amountin% to FSY0&+&(9!88 plus interest+ considerin% that the FS military forces and personnel completely withdrew from 6ubi 7oint only on (# December #00&! #8 5oth parties filed their respecti*e Petitions #or 7evie/ assailin% the Decision of the 6ourt of >ppeals! In G.R. No. 17A827+## petitioner 7hilcomsat raises the followin% assi%nments of error@ >! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D IN >DO7TIN- > D;FINITION OF D7C: 6$J:E7:DIFF;R;NT FRO. E)>T ITS ,;->, D;FINITION FOFND IN >RTI6,; ##<? OF T); 6IVI, 6OD;+ 7ROVID;S+ SO >S TO ;O;.7T -,O5; T;,;6O. FRO. 6O.7,3IN- EIT) ITS O5,I->TIONS FND;R T); SF5:;6T >-R;;.;NT!

5! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D IN RF,IN- T)>T -,O5; T;,;6O. IS NOT ,I>5,; TO 7)I,6O.S>T FOR R;NT>,S FOR T); R;.>ININT;R. OF T); >-R;;.;NT+ D;S7IT; T); 6,;>R T;NOR OF S;6TION < OF T); >-R;;.;NT! 6! T); )ONOR>5,; O6FRT OF >77;>,S ;RR;D IN D;,;TIN- T); TRI>, 6OFRTAS >E>RD OF >TTORN;3AS F;;S IN F>VOR OF 7)I,6O.S>T! D! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D IN RF,IN- T)>T -,O5; T;,;6O. IS NOT ,I>5,; TO 7)I,6O.S>T FOR ;O;.7,>R3 D>.>-;S! #& 7hilcomsat ar%ues that the termination of the R74FS .ilitary 5ases >%reement cannot be considered a fortuitous e*ent because the happenin% thereof was foreseeable! >lthou%h the >%reement was freely entered into by both parties+ Section 9 should be deemed ineffecti*e because it is contrary to >rticle ##<? of the 6i*il 6ode! 7hilcomsat posits the *iew that the *alidity of the partiesA definition of #orce ma(eure in Section 9 of the >%reement as Bcircumstances beyond the control of the party in*ol*ed includin%+ but not limited to+ any law+ order+ re%ulation+ direction or request of the -o*ernment of the 7hilippines+ stri es or other labor difficulties+ insurrection riots+ national emer%encies+ war+ acts of public enemies+ fire+ floods+ typhoons or other catastrophies or acts of -od+B should be deemed sub'ect to >rticle ##<? which defines fortuitous e*ents as e*ents which could not be foreseen+ or which+ thou%h foreseen+ were ine*itable!#( 7hilcomsat further claims that the 6ourt of >ppeals erred in holdin% that -lobe is not liable to pay for the rental of the earth station for the entire term of the >%reement because it runs counter to what was plainly stipulated by the parties in Section < thereof! .oreo*er+ said rulin% is inconsistent with the appellate courtAs pronouncement that -lobe is liable to pay rentals for December #00& e*en thou%h it terminated 7hilcomsatAs ser*ices effecti*e 89 No*ember #00&+ because the FS military and personnel completely withdrew from 6ubi 7oint only in December #00&! 7hilcomsat points out that it was -lobe which proposed the fi*e4year term of the >%reement+ and that the other pro*isions of the >%reement+ such as Section ?!##? thereof+ e*ince the intent of -lobe to be bound to pay rentals for the entire fi*e4year term!#/ 7hilcomsat also maintains that contrary to the appellate courtAs findin%s+ it is entitled to attorneyAs fees and exemplary dama%es!#= In its Comment to 7hilcomsatAs Petition, -lobe asserts that Section 9 of the >%reement is not contrary to >rticle ##<? of the 6i*il 6ode because said pro*ision does not prohibit parties to a contract from pro*idin% for other instances when they would be exempt from fulfillin% their contractual obli%ations! -lobe also claims that the termination of the R74FS .ilitary 5ases >%reement constitutes #orce ma(eure and exempts it from complyin% with its obli%ations under the >%reement!#< On the issue of the propriety of awardin% attorneyAs fees and exemplary dama%es to 7hilcomsat+ -lobe maintains that 7hilcomsat is not entitled thereto because in refusin% to pay rentals for the remainder of the term of the >%reement+ -lobe only acted in accordance with its ri%hts!#9

In G.R. No. 17A887+#0 -lobe+ the petitioner therein+ contends that the 6ourt of >ppeals erred in findin% it liable for the amount of FSY0&+&(9!88+ representin% rentals for December #00&+ since 7hilcomsatAs ser*ices were actually terminated on 89 No*ember #00&! &8 In its Comment+ 7hilcomsat claims that -lobeAs petition should be dismissed as it raises a factual issue which is not co%niDable by the 6ourt in a petition for re*iew on certiorari!&# On #/ >u%ust &88#+ the 6ourt 7hilcomsatAs Petition in G.R. No. issued a 7eso!ution %i*in% due course to

17A827 and required the parties to submit their respecti*e memoranda! && Similarly+ on &8 >u%ust &88#+ the 6ourt issued a 7eso!ution %i*in% due course to the Petition filed by -lobe inG.R. No. 17A887 and required both parties to submit their memoranda!&( 7hilcomsat and -lobe thereafter filed their respecti*e Conso!idated 6emoranda in the two cases, reiteratin% their ar%uments in their respecti*e petitions! The 6ourt is tas ed to resol*e the followin% issues@ 1#2 whether the termination of the R74FS .ilitary 5ases >%reement+ the non4ratification of the Treaty of Friendship+ 6ooperation and Security+ and the consequent withdrawal of FS military forces and personnel from 6ubi 7oint constitute #orce ma(eure which would exempt -lobe from complyin% with its obli%ation to pay rentals under its >%reement with 7hilcomsatC 1&2 whether -lobe is liable to pay rentals under the >%reement for the month of December #00&C and 1(2 whether 7hilcomsat is entitled to attorneyAs fees and exemplary dama%es! No re*ersible error was committed by the 6ourt of >ppeals in issuin% the assailed DecisionF hence the petitions are denied! There is no merit is 7hilcomsatAs ar%ument that Section 9 of the >%reement cannot be %i*en effect because the enumeration of e*ents constitutin% #orce ma(eure therein unduly expands the concept of a fortuitous e*ent under >rticle ##<? of the 6i*il 6ode and is therefore in*alid! In support of its position+ 7hilcomsat contends that under >rticle ##<? of the 6i*il 6ode+ an e*ent must be unforeseen in order to exempt a party to a contract from complyin% with its obli%ations therein! It insists that since the expiration of the R74FS .ilitary 5ases >%reement+ the non4ratification of the Treaty of Friendship+ 6ooperation and Security and the withdrawal of FS military forces and personnel from 6ubi 7oint were not unforeseeable+ but were possibilities nown to it and -lobe at the time they entered into the >%reement+ such e*ents cannot exempt -lobe from performin% its obli%ation of payin% rentals for the entire fi*e4year term thereof! )owe*er+ >rticle ##<?+ which exempts an obli%or from liability on account of fortuitous e*ents or #orce ma(eure+ refers not only to e*ents that are unforeseeable+ 0.) !l'o )o )&o'+ =&i(& !r+ /or+'++!0l+, 0.) i"+<i)!0l+3

>rt! ##<?! ;xcept in cases specified by the law+ or when it is otherwise declared by stipulation+ or when the nature of the obli%ation requires the assumption of ris + no person shall be responsible for those e*ents which+ could not be foreseen+ or which+ thou%h foreseen were ine*itable! > fortuitous e*ent under >rticle ##<? may either be an Bact of -od+B or natural occurrences such as floods or typhoons+&? or an Bact of man+B such as riots+ stri es or wars! &/ 7hilcomsat and -lobe a%reed in Section 9 of the >%reement that the followin% e*ents shall be deemed e*ents constitutin% #orce ma(eure@ #! >ny law+ order+ re%ulation+ direction or request of the 7hilippine -o*ernmentC &! Stri es or other labor difficultiesC (! InsurrectionC ?! RiotsC /! National emer%enciesC =! EarC <! >cts of public enemiesC 9! Fire+ floods+ typhoons or other catastrophies or acts of -odC 0! Other circumstances beyond the control of the parties! 6learly+ the fore%oin% are either unforeseeable+ or foreseeable but beyond the control of the parties! There is nothin% in the enumeration that runs contrary to+ or expands+ the concept of a fortuitous e*ent under >rticle ##<?! Furthermore+ under >rticle #(8=&= of the 6i*il 6ode+ parties to a contract may establish such stipulations+ clauses+ terms and conditions as they may deem fit+ as lon% as the same do not run counter to the law+ morals+ %ood customs+ public order or public policy! &< >rticle ##/0 of the 6i*il 6ode also pro*ides that B"o$bli%ations arisin% from contracts ha*e the force of law between the contractin% parties and should be complied with in %ood faith!B&9 6ourts cannot stipulate for the parties nor amend their a%reement where the same does not contra*ene law+ morals+ %ood customs+ public order or public policy+ for to do so would be to alter the real intent of the parties+ and would run contrary to the function of the courts to %i*e force and effect thereto!&0 Not bein% contrary to law+ morals+ %ood customs+ public order+ or public policy+ Section 9 of the >%reement which 7hilcomsat and -lobe freely a%reed upon has the force of law between them!(8

In order that -lobe may be exempt from non4compliance with its obli%ation to pay rentals under Section 9+ the concurrence of the followin% elements must be established@ 1#2 the e*ent must be independent of the human willC 1&2 the occurrence must render it impossible for the debtor to fulfill the obli%ation in a normal mannerC and 1(2 the obli%or must be free of participation in+ or a%%ra*ation of+ the in'ury to the creditor! (# The 6ourt a%rees with the 6ourt of >ppeals and the trial court that the abo*ementioned requisites are present in the instant case! 7hilcomsat and -lobe had no control o*er the non4 renewal of the term of the R74FS .ilitary 5ases >%reement when the same expired in #00#+ because the prero%ati*e to ratify the treaty extendin% the life thereof belon%ed to the Senate! Neither did the parties ha*e control o*er the subsequent withdrawal of the FS military forces and personnel from 6ubi 7oint in December #00&@ Ob*iously the non4ratification by the Senate of the R74FS .ilitary 5ases >%reement 1and its Supplemental >%reements2 under its Resolution No! #?#! 1 :xhi&it GAG2 on September #=+ #00# is beyond the control of the parties! This resolution was followed by the sendin% on December (#+ #00# o"f$ a KNo)+ :+r0!l+K 1:xhi&it G<G2 by the 7hilippine -o*ernment to the FS -o*ernment notifyin% the latter of the formerAs termination of the R74FS .ilitary 5ases >%reement 1as amended2 on (# December #00& and that accordin%ly+ the withdrawal of all F!S! military forces from Subic Na*al 5ase should be completed by said date! Subsequently+ defendant "-lobe$ recei*ed a formal order from 6dr! Ealter F! 6orliss II 6ommander FSN dated :uly (#+ #00& and a notification from >TT dated :uly &0+ #00& to terminate the pro*ision of T#s ser*ices 1*ia an I5S Standard 5 ;arth Station2 effecti*e No*ember 89+ #00&! 7laintiff "7hilcomsat$ was furnished with copies of the said order and letter by the defendant on >u%ust 8=+ #00&! Resolution No! #?# of the 7hilippine Senate and the Note Verbale of the 7hilippine -o*ernment to the FS -o*ernment are acts+ direction or request of the -o*ernment of the 7hilippines and circumstances beyond the control of the defendant! The formal order from 6dr! Ealter 6orliss of the FSN+ the letter notification from >TT and the complete withdrawal of all the military forces and personnel from 6ubi 7oint in the year4end #00& are also acts and circumstances beyond the control of the defendant! 6onsiderin% the fore%oin%+ the 6ourt finds and so holds that the afore4narrated circumstances constitute Bforce ma'eure or fortuitous e*ent1s2 as defined under para%raph 9 of the >%reement! U From the fore%oin%+ the 6ourt finds that the defendant is exempted from payin% the rentals for the facility for the remainin% term of the contract! >s a consequence of the termination of the R74FS .ilitary 5ases >%reement 1as amended2 the continued stay of all FS .ilitary forces and personnel from Subic Na*al 5ase would no lon%er be allowed+ hence+ plaintiff would no lon%er be in any position to render the ser*ice it was obli%ated under the >%reement! To put it blantly 1sic2+ since the FS military forces and

personnel left or withdrew from 6ubi 7oint in the year end December #00&+ there was no lon%er any necessity for the plaintiff to continue maintainin% the I5S facilityU! (& 1;mphasis in the ori%inal!2 The aforementioned e*ents made impossible the continuation of the >%reement until the end of its fi*e4year term without fault on the part of either party! The 6ourt of >ppeals was thus correct in rulin% that the happenin% of such fortuitous e*ents rendered -lobe exempt from payment of rentals for the remainder of the term of the >%reement! .oreo*er+ it would be un'ust to require -lobe to continue payin% rentals e*en thou%h 7hilcomsat cannot be compelled to perform its correspondin% obli%ation under the >%reement! >s noted by the appellate court@ Ee also point out the sheer inequity of 7)I,6O.S>TAs position! 7)I,6O.S>T would li e to char%e -,O5; rentals for the balance of the lease term without there bein% any correspondin% telecommunications ser*ice sub'ect of the lease! It will be %rossly unfair and iniquitous to hold -,O5; liable for lease char%es for a ser*ice that was not and could not ha*e been rendered due to an act of the %o*ernment which was clearly beyond -,O5;As control! The bindin% effect of a contract on both parties is based on the principle that the obli%ations arisin% from contracts ha*e the force of law between the contractin% parties+ and there must be mutuality between them based essentially on their equality under which it is repu%nant to ha*e one party bound by the contract while lea*in% the other party free therefrom 1Allied Banking Corporation v. Court of Appeals, 284 SCRA 35 2U!(( Eith respect to the issue of whether -lobe is liable for payment of rentals for the month of December #00&+ the 6ourt li ewise affirms the appellate courtAs rulin% that -lobe should pay the same! >lthou%h -lobe alle%ed that it terminated the >%reement with 7hilcomsat effecti*e 89 No*ember #00& pursuant to the formal order issued by 6dr! 6orliss of the FS Na*y+ the date when they actually ceased usin% the earth station sub'ect of the >%reement was not established durin% the trial!(? )owe*er+ the trial court found that the FS military forces and personnel completely withdrew from 6ubi 7oint only on (# December #00&! (/ Thus+ until that date+ the FSD6> had control o*er the earth station and had the option of usin% the same! Furthermore+ 7hilcomsat could not ha*e remo*ed or rendered ineffecti*e said communication facility until after (# December #00& because 6ubi 7oint was accessible only to FS na*al personnel up to that time! )ence+ the 6ourt of >ppeals did not err when it affirmed the trial courtAs rulin% that -lobe is liable for payment of rentals until December #00&! Neither did the appellate court commit any error in holdin% that 7hilcomsat is not entitled to attorneyAs fees and exemplary dama%es! The award of attorneyAs fees is the exception rather than the rule+ and must be supported by factual+ le%al and equitable 'ustifications! (= In pre*iously decided cases+ the 6ourt awarded attorneyAs fees where a party acted in %ross and e*ident bad faith in refusin% to satisfy the other partyAs claims and compelled the former to liti%ate to protect his ri%htsC (< when the action

filed is clearly unfounded+(9 or where moral or exemplary dama%es are awarded! (0 )owe*er+ in cases where both parties ha*e le%itimate claims a%ainst each other and no party actually pre*ailed+ such as in the present case where the claims of both parties were sustained in part+ an award of attorneyAs fees would not be warranted! ?8 ;xemplary dama%es may be awarded in cases in*ol*in% contracts or quasi4contracts+ if the errin% party acted in a wanton+ fraudulent+ rec less+ oppressi*e or male*olent manner! ?# In the present case+ it was not shown that -lobe acted wantonly or oppressi*ely in not heedin% 7hilcomsatAs demands for payment of rentals! It was established durin% the trial of the case before the trial court that -lobe had *alid %rounds for refusin% to comply with its contractual obli%ations after #00&! E);R;FOR;+ the Petitions are D;NI;D for lac of merit! The assailed Decision of the 6ourt of >ppeals in 6>4-!R! 6V No! =(=#0 is >FFIR.;D! SO ORD;R;D! PunoH, 'uisum&ing, $ustria-6artinez, and Ca!!e(o, Sr., JJ., concur!

Republic of the 7hilippines SU REME $OURT .anila T%IRD DI:ISION G.R. No. 16951A A.,.') 8, 200A

then requested petitioner Sicam to prepare the pawned 'ewelry for withdrawal on No*ember =+ #09< but petitioner Sicam failed to return the 'ewelry! On September &9+ #099+ respondent ,ulu 'oined by her husband+ 6esar :or%e+ filed a complaint a%ainst petitioner Sicam with the Re%ional Trial 6ourt of .a ati see in% indemnification for the loss of pawned 'ewelry and payment of actual+ moral and exemplary dama%es as well as attorneyNs fees! The case was doc eted as 6i*il 6ase No! 994&8(/! 7etitioner Sicam filed his >nswer contendin% that he is not the real party4in4interest as the pawnshop was incorporated on >pril &8+ #09< and nown as $gencia de R!6! Sicam+ IncC that petitioner corporation had exercised due care and dili%ence in the safe eepin% of the articles pled%ed with it and could not be made liable for an e*ent that is fortuitous! Respondents subsequently filed an >mended 6omplaint to include petitioner corporation! Thereafter+ petitioner Sicam filed a .otion to Dismiss as far as he is concerned considerin% that he is not the real party4in4interest! Respondents opposed the same! The RT6 denied the motion in an Order dated No*ember 9+ #090!/ >fter trial on the merits+ the RT6 rendered its Decision = dated :anuary #&+ #00(+ dismissin% respondentsA complaint as well as petitionersA counterclaim! The RT6 held that petitioner Sicam could not be made personally liable for a claim arisin% out of a corporate transactionC that in the >mended 6omplaint of respondents+ they asserted that Bplaintiff pawned assorted 'ewelries in defendantsN pawnshopBC and that as a consequence of the separate 'uridical personality of a corporation+ the corporate debt or credit is not the debt or credit of a stoc holder! The RT6 further ruled that petitioner corporation could not be held liable for the loss of the pawned 'ewelry since it had not been rebutted by respondents that the loss of the pled%ed pieces of 'ewelry in the possession of the corporation was occasioned by armed robberyC that robbery is a fortuitous e*ent which exempts the *ictim from liability for the loss+ citin% the case of $ustria v. Court o# $ppea!sC< and that the partiesA transaction was that of a pled%or and pled%ee and under >rt! ##<? of the 6i*il 6ode+ the pawnshop as a pled%ee is not responsible for those e*ents which could not be foreseen! Respondents appealed the RT6 Decision to the 6>! In a Decision dated .arch (#+ &88(+ the 6> re*ersed the RT6+ the dispositi*e portion of which reads as follows@ E);R;FOR;+ premises considered+ the instant >ppeal is -R>NT;D+ and the Decision dated :anuary #&+ #00(+of the Re%ional Trial 6ourt of .a ati+ 5ranch =&+ is hereby R;V;RS;D and S;T >SID;+ orderin% the appellees to pay appellants the actual *alue of the lost 'ewelry amountin% to 7&<&+888!88+ and attorneyN fees of 7&<+&88!88!9 In findin% petitioner Sicam liable to%ether with petitioner corporation+ the 6> applied the doctrine of piercin% the *eil of corporate entity reasonin% that respondents were misled into thin in% that they were dealin% with the pawnshop owned by petitioner Sicam as all the

ROBERTO $. SI$AM !"# AGEN$IA #+ R.$. SI$AM, IN$., petitioners+ *s! LULU :. -ORGE !"# $ESAR -ORGE, respondents! DE$ISION AUSTRIA-MARTINE9, J.3 5efore us is a 7etition for Re*iew on Certiorari filed by Roberto 6! Sicam+ :r! 1petitioner Sicam2 and $gencia deR!6! Sicam+ Inc! 1petitioner corporation2 see in% to annul the Decision# of the 6ourt of >ppeals dated .arch (#+ &88(+ and its Resolution & dated >u%ust 9+ &88(+ in 6> -!R! 6V No! /==((! It appears that on different dates from September to October #09<+ ,ulu V! :or%e 1respondent ,ulu2 pawned se*eral pieces of 'ewelry with $gencia de R! 6! Sicam located at No! #< >%uirre >*e!+ 5F )omes 7araQaque+ .etro .anila+ to secure a loan in the total amount of 7/0+/88!88! On October #0+ #09<+ two armed men entered the pawnshop and too away whate*er cash and 'ewelry were found inside the pawnshop *ault! The incident was entered in the police blotter of the Southern 7olice District+ 7araQaque 7olice Station as follows@ In*esti%ation shows that at abo*e TD7O+ while *ictims were inside the office+ two 1&2 male unidentified persons entered into the said office with %uns drawn! Suspects1sic2 1#2 went strai%ht inside and po ed his %un toward Romeo Sicam and thereby tied him with an electric wire while suspects 1sic2 1&2 po ed his %un toward Di*ina .ata and Isabelita Rodri%ueD and ordered them to lay 1sic2 face flat on the floor! Suspects as ed forcibly the case and assorted pawned 'ewelries items mentioned abo*e! Suspects after ta in% the money and 'ewelries fled on board a .arson Toyota unidentified plate number!( 7etitioner Sicam sent respondent ,ulu a letter dated October #0+ #09< informin% her of the loss of her 'ewelry due to the robbery incident in the pawnshop! On No*ember &+ #09<+ respondent ,ulu then wrote a letter? to petitioner Sicam expressin% disbelief statin% that when the robbery happened+ all 'ewelry pawned were deposited with Far ;ast 5an near the pawnshop since it had been the practice that before they could withdraw+ ad*ance notice must be %i*en to the pawnshop so it could withdraw the 'ewelry from the ban ! Respondent ,ulu

pawnshop tic ets issued to them bear the words B $gencia de R!6! SicamBC and that there was no indication on the pawnshop tic ets that it was the petitioner corporation that owned the pawnshop which explained why respondents had to amend their complaint impleadin% petitioner corporation! The 6> further held that the correspondin% dili%ence required of a pawnshop is that it should ta e steps to secure and protect the pled%ed items and should ta e steps to insure itself a%ainst the loss of articles which are entrusted to its custody as it deri*es earnin%s from the pawnshop trade which petitioners failed to doC that $ustria is not applicable to this case since the robbery incident happened in #0=# when the criminality had not as yet reached the le*els attained in the present dayC that they are at least %uilty of contributory ne%li%ence and should be held liable for the loss of 'ewelriesC and that robberies and hold4ups are foreseeable ris s in that those en%a%ed in the pawnshop business are expected to foresee! The 6> concluded that both petitioners should be 'ointly and se*erally held liable to respondents for the loss of the pawned 'ewelry! 7etitionersA motion for reconsideration was denied in a Resolution dated >u%ust 9+ &88(! )ence+ the instant petition for re*iew with the followin% assi%nment of errors@ T); 6OFRT OF >77;>,S ;RR;D >ND E);N IT DID+ IT O7;N;D ITS;,F TO R;V;RS>,+ E);N IT >DO7T;D FN6RITI6>,,3 1IN F>6T IT R;7RODF6;D >S ITS OEN EIT)OFT IN T); .;>NTI.; >6TNOE,;D-IN- IT2 E)>T T); R;S7OND;NTS >R-F;D IN T);IR 5RI;F+ E)I6) >R-F.;NT E>S 7>,7>5,3 FNSFST>IN>5,;! T); 6OFRT OF >77;>,S ;RR;D+ >ND E);N IT DID+ IT O7;N;D ITS;,F TO R;V;RS>, 53 T)IS )ONOR>5,; 6OFRT+ E);N IT >->IN >DO7T;D FN6RITI6>,,3 15FT EIT)OFT >6TNOE,;D-IN- IT2 T); SF5.ISSIONS OF T); R;S7OND;NTS IN T);IR 5RI;F EIT)OFT >DDIN- >N3T)IN- .OR; T);R;TO D;S7IT; T); F>6T T)>T T); S>ID >R-F.;NT OF T); R;S7OND;NTS 6OF,D NOT )>V; 5;;N SFST>IN;D IN VI;E OF FNR;5FTT;D ;VID;N6; ON R;6ORD!0 >nent the first assi%ned error+ petitioners point out that the 6>As findin% that petitioner Sicam is personally liable for the loss of the pawned 'ewelries is Ba *irtual and uncritical reproduction of the ar%uments set out on pp! /4= of the >ppellantsA brief!B #8 7etitioners ar%ue that the reproduced ar%uments of respondents in their >ppellantsA 5rief suffer from infirmities+ as follows@ 1#2 Respondents conclusi*ely asserted in para%raph & of their >mended 6omplaint that >%encia de R!6! Sicam+ Inc! is the present owner of >%encia de R!6! Sicam 7awnshop+ and therefore+ the 6> cannot rule a%ainst said conclusi*e assertion of respondentsC

1&2 The issue resol*ed a%ainst petitioner Sicam was not amon% those raised and liti%ated in the trial courtC and 1(2 5y reason of the abo*e infirmities+ it was error for the 6> to ha*e pierced the corporate *eil since a corporation has a personality distinct and separate from its indi*idual stoc holders or members! >nent the second error+ petitioners point out that the 6> findin% on their ne%li%ence is li ewise an unedited reproduction of respondentsA brief which had the followin% defects@ 1#2 There were unrebutted e*idence on record that petitioners had obser*ed the dili%ence required of them+ i!e+ they wanted to open a *ault with a nearby ban for purposes of safe eepin% the pawned articles but was discoura%ed by the 6entral 5an 1652 since 65 rules pro*ide that they can only store the pawned articles in a *ault inside the pawnshop premises and no other placeC 1&2 7etitioners were ad'ud%ed ne%li%ent as they did not ta e insurance a%ainst the loss of the pled%ed 'elweries+ but it is 'udicial notice that due to hi%h incidence of crimes+ insurance companies refused to co*er pawnshops and ban s because of hi%h probability of losses due to robberiesC 1(2 In "ernandez v. Chairman, Commission on $udit 1#<0 S6R> (0+ ?/4?=2+ the *ictim of robbery was exonerated from liability for the sum of money belon%in% to others and lost by him to robbers! Respondents filed their 6omment and petitioners filed their Reply thereto! The parties subsequently submitted their respecti*e .emoranda! Ee find no merit in the petition! To be%in with+ althou%h it is true that indeed the 6> findin%s were exact reproductions of the ar%uments raised in respondentsA 1appellantsA2 brief filed with the 6>+ we find the same to be not fatally infirmed! Fpon examination of the Decision+ we find that it expressed clearly and distinctly the facts and the law on which it is based as required by Section 9+ >rticle VIII of the 6onstitution! The discretion to decide a case one way or another is broad enou%h to 'ustify the adoption of the ar%uments put forth by one of the parties+ as lon% as these are le%ally tenable and supported by law and the facts on records! ## Our 'urisdiction under Rule ?/ of the Rules of 6ourt is limited to the re*iew of errors of law committed by the appellate court! -enerally+ the findin%s of fact of the appellate court are deemed conclusi*e and we are not duty4bound to analyDe and calibrate all o*er a%ain the e*idence adduced by the parties in the court a quo!#& This rule+ howe*er+ is not without exceptions+ such as where the factual findin%s of the 6ourt of >ppeals and the trial court are conflictin% or contradictory#( as is obtainin% in the instant case! )owe*er+ after a careful examination of the records+ we find no 'ustification to absol*e petitioner Sicam from liability!

The 6> correctly pierced the *eil of the corporate fiction and ad'ud%ed petitioner Sicam liable to%ether with petitioner corporation! The rule is that the *eil of corporate fiction may be pierced when made as a shield to perpetrate fraud andHor confuse le%itimate issues! #? The theory of corporate entity was not meant to promote unfair ob'ecti*es or otherwise to shield them!#/ Notably+ the e*idence on record shows that at the time respondent ,ulu pawned her 'ewelry+ the pawnshop was owned by petitioner Sicam himself! >s correctly obser*ed by the 6>+ in all the pawnshop receipts issued to respondent ,ulu in September #09<+ all bear the words B$gencia de R! 6! Sicam+B notwithstandin% that the pawnshop was alle%edly incorporated in >pril #09<! The receipts issued after such alle%ed incorporation were still in the name of B$gencia de R! 6! Sicam+B thus ine*itably misleadin%+ or at the *ery least+ creatin% the wron% impression to respondents and the public as well+ that the pawnshop was owned solely by petitioner Sicam and not by a corporation! ;*en petitionersA counsel+ >tty! .arcial T! 5al%os+ in his letter #= dated October #/+ #09< addressed to the 6entral 5an + expressly referred to petitioner Sicam as the proprietor of the pawnshop notwithstandin% the alle%ed incorporation in >pril #09<! Ee also find no merit in petitionersN ar%ument that since respondents had alle%ed in their >mended 6omplaint that petitioner corporation is the present owner of the pawnshop+ the 6> is bound to decide the case on that basis! Section ? Rule #&0 of the Rules of 6ourt pro*ides that an admission+ *erbal or written+ made by a party in the course of the proceedin%s in the same case+ does not require proof! The admission may be contradicted only by showin% that it was made throu%h palpable mista e or that no such admission was made! Thus+ the %eneral rule that a 'udicial admission is conclusi*e upon the party ma in% it and does not require proof+ admits of two exceptions+ to wit@ 1#2 when it is shown that such admission was made throu%h palpable mista e+ and 1&2 when it is shown that no such admission was in fact made! T&+ l!))+r +F(+p)io" !llo=' o"+ )o (o")r!#i() !" !#;i''io" 0* #+"*i", )&!) &+ ;!#+ '.(& !" !#;i''io".#< The 6ommittee on the Re*ision of the Rules of 6ourt explained the second exception in this wise@ x x x if a party in*o es an BadmissionB by an ad*erse party+ but cites the admission Bout of context+B then the one ma in% the BadmissionB may show that he made no BsuchB admission+ or )&!) &i' !#;i''io" =!' )!J+" o.) o/ (o")+F). F F F )&!) )&+ p!r)* (!" !l'o '&o= )&!) &+ ;!#+ "o K'.(& !#;i''io"K, i.e., "o) i" )&+ '+"'+ i" =&i(& )&+ !#;i''io" i' ;!#+ )o !pp+!r.

That is the reason for the modifier BsuchB because if the rule simply states that the admission may be contradicted by showin% that Bno admission was made+B the rule would not really be pro*idin% for a contradiction of the admission but 'ust a denial! #9 1;mphasis supplied2! Ehile it is true that respondents alle%ed in their >mended 6omplaint that petitioner corporation is the present owner of the pawnshop+ they did so only because petitioner Sicam alle%ed in his >nswer to the ori%inal complaint filed a%ainst him that he was not the real party4 in4interest as the pawnshop was incorporated in >pril #09<! .oreo*er+ a readin% of the >mended 6omplaint in its entirety shows that respondents referred to both petitioner Sicam and petitioner corporation where they 1respondents2 pawned their assorted pieces of 'ewelry and ascribed to both the failure to obser*e due dili%ence commensurate with the business which resulted in the loss of their pawned 'ewelry! .ar edly+ respondents+ in their Opposition to petitionersA .otion to Dismiss >mended 6omplaint+ insofar as petitioner Sicam is concerned+ a*erred as follows@ Roberto 6! Sicam was named the defendant in the ori%inal complaint because the pawnshop tic ets in*ol*ed in this case did not show that the R!6! Sicam 7awnshop was a corporation! In para%raph # of his >nswer+ he admitted the alle%ations in para%raph # and & of the 6omplaint! )e merely added Bthat defendant is not now the real party in interest in this case!B It was defendant SicamNs omission to correct the pawnshop tic ets used in the sub'ect transactions in this case which was the cause of the instant action! )e cannot now as for the dismissal of the complaint a%ainst him simply on the mere alle%ation that his pawnshop business is now incorporated! It is a matter of defense+ the merit of which can only be reached after consideration of the e*idence to be presented in due course! #0 Fnmista ably+ the alle%ed admission made in respondentsN >mended 6omplaint was ta en Bout of contextB by petitioner Sicam to suit his own purpose! Ineluctably+ the fact that petitioner Sicam continued to issue pawnshop receipts under his name and not under the corporationNs name militates for the piercin% of the corporate *eil! Ee li ewise find no merit in petitionersN contention that the 6> erred in piercin% the *eil of corporate fiction of petitioner corporation+ as it was not an issue raised and liti%ated before the RT6! 7etitioner Sicam had alle%ed in his >nswer filed with the trial court that he was not the real party4in4interest because since >pril &8+ #09<+ the pawnshop business initiated by him was incorporated and nown as $gencia deR!6! Sicam! In the pre4trial brief filed by petitioner Sicam+ he submitted that as far as he was concerned+ the basic issue was whether he is the real party in interest a%ainst whom the complaint should be directed! &8 In fact+ he subsequently mo*ed for the dismissal of the complaint as to him but was not fa*orably acted upon by the trial court! .oreo*er+ the issue was squarely passed upon+ althou%h erroneously+ by the trial court in its Decision in this manner@

x x x The defendant Roberto Sicam+ :r li ewise denies liability as far as he is concerned for the reason that he cannot be made personally liable for a claim arisin% from a corporate transaction! This 6ourt sustains the contention of the defendant Roberto 6! Sicam+ :r! The amended complaint itself asserts that Bplaintiff pawned assorted 'ewelries in defendantNs pawnshop!B It has been held that B as a consequence of the separate 'uridical personality of a corporation+ the corporate debt or credit is not the debt or credit of the stoc holder+ nor is the stoc holderNs debt or credit that of a corporation!&# 6learly+ in *iew of the alle%ed incorporation of the pawnshop+ the issue of whether petitioner Sicam is personally liable is inextricably connected with the determination of the question whether the doctrine of piercin% the corporate *eil should or should not apply to the case! The next question is whether petitioners are liable for the loss of the pawned articles in their possession! 7etitioners insist that they are not liable since robbery is a fortuitous e*ent and they are not ne%li%ent at all! Ee are not persuaded! >rticle ##<? of the 6i*il 6ode pro*ides@ >rt! ##<?! ;xcept in cases expressly specified by the law+ or when it is otherwise declared by stipulation+ or when the nature of the obli%ation requires the assumption of ris + no person shall be responsible for those e*ents which could not be foreseen or which+ thou%h foreseen+ were ine*itable! Fortuitous e*ents by definition are extraordinary e*ents not foreseeable or a*oidable! It is therefore+ not enou%h that the e*ent should not ha*e been foreseen or anticipated+ as is commonly belie*ed but it must be one impossible to foresee or to a*oid! The mere difficulty to foresee the happenin% is not impossibility to foresee the same! && To constitute a fortuitous e*ent+ the followin% elements must concur@ 1a2 the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obli%ations must be independent of human willC 1b2 it must be impossible to foresee the e*ent that constitutes the caso #ortuito or+ if it can be foreseen+ it must be impossible to a*oidC 1c2 the occurrence must be such as to render it impossible for the debtor to fulfill obli%ations in a normal mannerC and+ 1d2 the obli%or must be free from any participation in the a%%ra*ation of the in'ury or loss! &( The burden of pro*in% that the loss was due to a fortuitous e*ent rests on him who in*o es it!&? >nd+ in order for a fortuitous e*ent to exempt one from liability+ it is necessary that one has committed no ne%li%ence or misconduct that may ha*e occasioned the loss! &/

It has been held that an act of -od cannot be in*o ed to protect a person who has failed to ta e steps to forestall the possible ad*erse consequences of such a loss! OneNs ne%li%ence may ha*e concurred with an act of -od in producin% dama%e and in'ury to anotherC nonetheless+ showin% that the immediate or proximate cause of the dama%e or in'ury was a fortuitous e*ent would not exempt one from liability! Ehen the effect is found to be partly the result of a personNs participation 44 whether by acti*e inter*ention+ ne%lect or failure to act 44 the whole occurrence is humaniDed and remo*ed from the rules applicable to acts of -od! &= 7etitioner Sicam had testified that there was a security %uard in their pawnshop at the time of the robbery! )e li ewise testified that when he started the pawnshop business in #09(+ he thou%ht of openin% a *ault with the nearby ban for the purpose of safe eepin% the *aluables but was discoura%ed by the 6entral 5an since pawned articles should only be stored in a *ault inside the pawnshop! The *ery measures which petitioners had alle%edly adopted show that to them the possibility of robbery was not only foreseeable+ but actually foreseen and anticipated! 7etitioner SicamAs testimony+ in effect+ contradicts petitionersA defense of fortuitous e*ent! .oreo*er+ petitioners failed to show that they were free from any ne%li%ence by which the loss of the pawned 'ewelry may ha*e been occasioned! Robbery per se+ 'ust li e carnappin%+ is not a fortuitous e*ent! It does not foreclose the possibility of ne%li%ence on the part of herein petitioners! In Co v. Court o# $ppea!s+&< the 6ourt held@ It is not a defense for a repair shop of motor *ehicles to escape liability simply because the dama%e or loss of a thin% lawfully placed in its possession was due to carnappin%! 6arnappin% per se cannot be considered as a fortuitous e*ent! T&+ /!() )&!) ! )&i", =!' ."l!=/.ll* !"# /or(+/.ll* )!J+" /ro; !"o)&+rL' ri,&)/.l po''+''io", !' i" (!'+' o/ (!r"!ppi",, #o+' "o) !.)o;!)i(!ll* ,i<+ ri'+ )o ! /or).i)o.' +<+"). To 0+ (o"'i#+r+# !' '.(&, (!r"!ppi", +")!il' ;or+ )&!" )&+ ;+r+ /or(+/.l )!Ji", o/ !"o)&+rL' prop+r)*. I) ;.') 0+ pro<+# !"# +')!0li'&+# )&!) )&+ +<+") =!' !" !() o/ Go# or =!' #o"+ 'ol+l* 0* )&ir# p!r)i+' !"# )&!) "+i)&+r )&+ (l!i;!") "or )&+ p+r'o" !ll+,+# )o 0+ "+,li,+") &!' !"* p!r)i(ip!)io". I" !((or#!"(+ =i)& )&+ R.l+' o/ E<i#+"(+, )&+ 0.r#+" o/ pro<i", )&!) )&+ lo'' =!' #.+ )o ! /or).i)o.' +<+") r+')' o" &i; =&o i"<oJ+' i) M =&i(& i" )&i' (!'+ i' )&+ pri<!)+ r+'po"#+"). )owe*er+ other than the police report of the alle%ed carnappin% incident+ no other e*idence was presented by pri*ate respondent to the effect that the incident was not due to its fault! > police report of an alle%ed crime+ to which only pri*ate respondent is pri*y+ does not suffice to establish the carnappin%! Neither does it pro*e that there was no fault on the part of pri*ate respondent notwithstandin% the partiesN a%reement at the pre4trial that the car was carnapped! 6arnappin% does not foreclose the possibility of fault or ne%li%ence on the part of pri*ate respondent!&9 :ust li e in Co+ petitioners merely presented the police report of the 7araQaque 7olice Station on the robbery committed based on the report of petitionersN employees which is not sufficient to establish robbery! Such report also does not pro*e that petitioners were not at fault!

On the contrary+ by the *ery e*idence of petitioners+ the 6> did not err in findin% that petitioners are %uilty of concurrent or contributory ne%li%ence as pro*ided in >rticle ##<8 of the 6i*il 6ode+ to wit@ >rt! ##<8! Those who in the performance of their obli%ations are %uilty of fraud+ ne%li%ence+ or delay+ and those who in any manner contra*ene the tenor thereof+ are liable for dama%es! &0 >rticle &#&( of the 6i*il 6ode pro*ides that with re%ard to pawnshops and other establishments which are en%a%ed in ma in% loans secured by pled%es+ the special laws and re%ulations concernin% them shall be obser*ed+ and subsidiarily+ the pro*isions on pled%e+ mort%a%e and antichresis! The pro*ision on pled%e+ particularly >rticle &800 of the 6i*il 6ode+ pro*ides that the creditor shall ta e care of the thin% pled%ed with the dili%ence of a %ood father of a family! This means that petitioners must ta e care of the pawns the way a prudent person would as to his own property! In this connection+ >rticle ##<( of the 6i*il 6ode further pro*ides@ >rt! ##<(! The fault or ne%li%ence of the obli%or consists in the omission of that dili%ence which is required by the nature of the obli%ation and corresponds with the circumstances of the persons+ of time and of the place! Ehen ne%li%ence shows bad faith+ the pro*isions of >rticles ##<# and &&8#+ para%raph & shall apply! If the law or contract does not state the dili%ence which is to be obser*ed in the performance+ that which is expected of a %ood father of a family shall be required! Ee expounded in Cruz v. 9angan(8 that ne%li%ence is the omission to do somethin% which a reasonable man+ %uided by those considerations which ordinarily re%ulate the conduct of human affairs+ would doC or the doin% of somethin% which a prudent and reasonable man would not do!(# It is want of care required by the circumstances! > re*iew of the records clearly shows that petitioners failed to exercise reasonable care and caution that an ordinarily prudent person would ha*e used in the same situation! 7etitioners were %uilty of ne%li%ence in the operation of their pawnshop business! 7etitioner Sicam testified+ thus@ 6ourt@ G! Do you ha*e security %uards in your pawnshopV >! 3es+ your honor! G! Then how come that the robbers were able to enter the premises when accordin% to you there was a security %uardV >! Sir+ if these robbers can rob a ban + how much more a pawnshop!

G! I am as in% you how were the robbers able to enter despite the fact that there was a security %uardV >! >t the time of the incident which happened about #@88 and &@88 oNcloc in the afternoon and it happened on a Saturday and e*erythin% was quiet in the area 5F )omes 7araQaque they pretended to pawn an article in the pawnshop+ so one of my employees allowed him to come in and it was only when it was announced that it was a hold up! G! Did you come to now how the *ault was openedV >! Ehen the pawnshop is official 1sic2 open your honor the pawnshop is partly open! The combination is off! G! No one open 1sic2 the *ault for the robbersV >! No one your honor it was open at the time of the robbery! G! It is clear now that at the time of the robbery the *ault was open the reason why the robbers were able to %et all the items pawned to you inside the *ault! >! 3es sir!(& re*ealin% that there were no security measures adopted by petitioners in the operation of the pawnshop! ;*idently+ no sufficient precaution and *i%ilance were adopted by petitioners to protect the pawnshop from unlawful intrusion! There was no clear showin% that there was any security %uard at all! Or if there was one+ that he had sufficient trainin% in securin% a pawnshop! Further+ there is no showin% that the alle%ed security %uard exercised all that was necessary to pre*ent any untoward incident or to ensure that no suspicious indi*iduals were allowed to enter the premises! In fact+ it is e*en doubtful that there was a security %uard+ since it is quite impossible that he would not ha*e noticed that the robbers were armed with caliber ! ?/ pistols each+ which were alle%edly po ed at the employees! (( Si%nificantly+ the alle%ed security %uard was not presented at all to corroborate petitioner SicamNs claimC not one of petitionersN employees who were present durin% the robbery incident testified in court! Furthermore+ petitioner SicamNs admission that the *ault was open at the time of robbery is clearly a proof of petitionersN failure to obser*e the care+ precaution and *i%ilance that the circumstances 'ustly demanded! 7etitioner Sicam testified that once the pawnshop was open+ the combination was already off! 6onsiderin% petitioner SicamNs testimony that the robbery too place on a Saturday afternoon and the area in 5F )omes 7araQaque at that time was quiet+ there was more reason for petitioners to ha*e exercised reasonable foresi%ht and dili%ence in protectin% the pawned 'ewelries! Instead of ta in% the precaution to protect them+ they let open the *ault+ pro*idin% no difficulty for the robbers to cart away the pawned articles! Ee+ howe*er+ do not a%ree with the 6> when it found petitioners ne%li%ent for not ta in% steps to insure themsel*es a%ainst loss of the pawned 'ewelries!

Fnder Section #< of 6entral 5an 6ircular No! (<?+ Rules and Re%ulations for 7awnshops+ which too effect on :uly #(+ #0<(+ and which was issued pursuant to 7residential Decree No! ##?+ 7awnshop Re%ulation >ct+ it is pro*ided that pawns pled%ed must be insured+ to wit@ Sec! #<! Insurance of Office 5uildin% and 7awns4 The place of business of a pawnshop and the pawns pled%ed to it must be insured !,!i"') /ir+ !"# !,!i"') 0.r,l!r* as well as for the latter1sic2+ by an insurance company accredited by the Insurance 6ommissioner! )owe*er+ this Section was subsequently amended by 65 6ircular No! <=? which too effect on October #+ #098+ to wit@ Sec! #< Insurance of Office 5uildin% and 7awns L The office buildin%Hpremises and pawns of a pawnshop must be insured !,!i"') /ir+! 1emphasis supplied2! where the requirement that insurance a%ainst bur%lary was deleted! Ob*iously+ the 6entral 5an considered it not feasible to require insurance of pawned articles a%ainst bur%lary! The robbery in the pawnshop happened in #09<+ and considerin% the abo*e4quoted amendment+ there is no statutory duty imposed on petitioners to insure the pawned 'ewelry in which case it was error for the 6> to consider it as a factor in concludin% that petitioners were ne%li%ent! Ne*ertheless+ the preponderance of e*idence shows that petitioners failed to exercise the dili%ence required of them under the 6i*il 6ode! The dili%ence with which the law requires the indi*idual at all times to %o*ern his conduct *aries with the nature of the situation in which he is placed and the importance of the act which he is to perform! (? Thus+ the cases of$ustria v. Court o# $ppea!s+(/ "ernandez v. Chairman, Commission on $udit(= and Cruz v. 9angan(< cited by petitioners in their pleadin%s+ where the *ictims of robbery were exonerated from liability+ find no application to the present case! In $ustria+ .aria >bad recei*ed from -uillermo >ustria a pendant with diamonds to be sold on commission basis+ but which >bad failed to subsequently return because of a robbery committed upon her in #0=#! The incident became the sub'ect of a criminal case filed a%ainst se*eral persons! >ustria filed an action a%ainst >bad and her husband 1>bads2 for reco*ery of the pendant or its *alue+ but the >bads set up the defense that the robbery extin%uished their obli%ation! The RT6 ruled in fa*or of >ustria+ as the >bads failed to pro*e robberyC or+ if committed+ that .aria >bad was %uilty of ne%li%ence! The 6>+ howe*er+ re*ersed the RT6 decision holdin% that the fact of robbery was duly established and declared the >bads not responsible for the loss of the 'ewelry on account of a fortuitous e*ent! Ee held that for the >bads to be relie*ed from the ci*il liability of returnin% the pendant under >rt! ##<? of the 6i*il 6ode+ it would only be sufficient that the unforeseen e*ent+ the robbery+ too place without any concurrent fault on the debtorAs part+ and this can be done by preponderance of e*idenceC that to be free from liability for reason of fortuitous e*ent+ the debtor must+ in addition to the casus itself+ be free of any concurrent or contributory fault or ne%li%ence! (9

Ee found in $ustria that under the circumstances pre*ailin% at the time the Decision was promul%ated in #0<#+ the 6ity of .anila and its suburbs had a hi%h incidence of crimes a%ainst persons and property that rendered tra*el after ni%htfall a matter to be sedulously a*oided without suitable precaution and protectionC that the conduct of .aria >bad in returnin% alone to her house in the e*enin% carryin% 'ewelry of considerable *alue would ha*e been ne%li%ence per se and would not exempt her from responsibility in the case of robbery! )owe*er we did not hold >bad liable for ne%li%ence since+ the robbery happened ten years pre*iouslyC i!e!+ #0=#+ when criminality had not reached the le*el of incidence obtainin% in #0<#! In contrast+ the robbery in this case too place in #09< when robbery was already pre*alent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby ban for safe eepin%! .oreo*er+ unli e in $ustria+ where no ne%li%ence was committed+ we found petitioners ne%li%ent in securin% their pawnshop as earlier discussed! In "ernandez+ Teodoro )ernandeD was the OI6 and special disbursin% officer of the Ternate 5each 7ro'ect of the 7hilippine Tourism in 6a*ite! In the mornin% of :uly #+ #09(+ a Friday+ he went to .anila to encash two chec s co*erin% the wa%es of the employees and the operatin% expenses of the pro'ect! )owe*er for some reason+ the processin% of the chec was delayed and was completed at about ( p!m! Ne*ertheless+ he decided to encash the chec because the pro'ect employees would be waitin% for their pay the followin% dayC otherwise+ the wor ers would ha*e to wait until :uly /+ the earliest time+ when the main office would open! >t that time+ he had two choices@ 1#2 return to Ternate+ 6a*ite that same afternoon and arri*e early e*enin%C or 1&2 ta e the money with him to his house in .arilao+ 5ulacan+ spend the ni%ht there+ and lea*e for Ternate the followin% day! )e chose the second option+ thin in% it was the safer one! Thus+ a little past ( p!m!+ he too a passen%er 'eep bound for 5ulacan! Ehile the 'eep was on ;pifanio de los Santos >*enue+ the 'eep was held up and the money ept by )ernandeD was ta en+ and the robbers 'umped out of the 'eep and ran! )ernandeD chased the robbers and cau%ht up with one robber who was subsequently char%ed with robbery and pleaded %uilty! The other robber who held the stolen money escaped! The 6ommission on >udit found )ernandeD ne%li%ent because he had not brou%ht the cash proceeds of the chec s to his office in Ternate+ 6a*ite for safe eepin%+ which is the normal procedure in the handlin% of funds! Ee held that )ernandeD was not ne%li%ent in decidin% to encash the chec and brin%in% it home to .arilao+ 5ulacan instead of Ternate+ 6a*ite due to the lateness of the hour for the followin% reasons@ 1#2 he was mo*ed by unselfish moti*e for his co4employees to collect their wa%es and salaries the followin% day+ a Saturday+ a non4wor in%+ because to encash the chec on :uly /+ the next wor in% day after :uly #+ would ha*e caused discomfort to laborers who were dependent on their wa%es for sustenanceC and 1&2 that choosin% .arilao as a safer destination+ bein% nearer+ and in *iew of the comparati*e haDards in the trips to the two places+ said decision seemed lo%ical at that time! Ee further held that the fact that two robbers attac ed him in broad dayli%ht in the 'eep while it was on a busy hi%hway and in the presence of other passen%ers could not be said to be a result of his imprudence and ne%li%ence! Fnli e in "ernandez where the robbery happened in a public utility+ the robbery in this case too place in the pawnshop which is under the control of petitioners! 7etitioners had the means

to screen the persons who were allowed entrance to the premises and to protect itself from unlawful intrusion! 7etitioners had failed to exercise precautionary measures in ensurin% that the robbers were pre*ented from enterin% the pawnshop and for eepin% the *ault open for the day+ which pa*ed the way for the robbers to easily cart away the pawned articles! In Cruz+ Dr! Filonila O! 6ruD+ 6amana*a District Director of Technolo%ical ;ducation and S ills De*elopment >uthority 1T;SD>2+ boarded the ,i%ht Rail Transit 1,RT2 from Sen! 7uyat >*enue to .onumento when her handba% was slashed and the contents were stolen by an unidentified person! >mon% those stolen were her wallet and the %o*ernment4issued cellular phone! She then reported the incident to the police authoritiesC howe*er+ the thief was not located+ and the cellphone was not reco*ered! She also reported the loss to the Re%ional Director of T;SD>+ and she requested that she be freed from accountability for the cellphone! The Resident >uditor denied her request on the %round that she lac ed the dili%ence required in the custody of %o*ernment property and was ordered to pay the purchase *alue in the total amount of 7?+&(9!88! The 6O> found no sufficient 'ustification to %rant the request for relief from accountability! Ee re*ersed the rulin% and found that ridin% the ,RT cannot per se be denounced as a ne%li%ent act more so because 6ruDAs mode of transit was influenced by time and money considerationsC that she boarded the ,RT to be able to arri*e in 6aloocan in time for her ( pm meetin%C that any prudent and rational person under similar circumstance can reasonably be expected to do the sameC that possession of a cellphone should not hinder one from boardin% the ,RT coach as 6ruD did considerin% that whether she rode a 'eep or bus+ the ris of theft would ha*e also been presentC that because of her relati*ely low position and pay+ she was not expected to ha*e her own *ehicle or to ride a taxicabC she did not ha*e a %o*ernment assi%ned *ehicleC that placin% the cellphone in a ba% away from co*etous eyes and holdin% on to that ba% as she did is ordinarily sufficient care of a cellphone while tra*elin% on board the ,RTC that the records did not show any specific act of ne%li%ence on her part and ne%li%ence can ne*er be presumed! Fnli e in the Cruz case+ the robbery in this case happened in petitionersN pawnshop and they were ne%li%ent in not exercisin% the precautions 'ustly demanded of a pawnshop! E);R;FOR;+ except for the insurance aspect+ the Decision of the 6ourt of >ppeals dated .arch (#+ &88( and its Resolution dated >u%ust 9+ &88(+ are A11IRMED! 6osts a%ainst petitioners! SO ORDERED! Ynares-Santiago, Chairperson, Chico-5azario, 5achura, JJ., concur!

FIRST DIVISION [G.R. No. 118180. S+p)+;0+r 20, 1995]

of 7?+?<8!(= shall be payable three months from the date of the execution of the documents and all subsequent amortiDation shall be due and payable e*ery quarter thereafter! xxx xxx xxx

DE:ELO MENT BAN2 O1 T%E %ILI INES, petitioner, vs. $OURT O1 A EALS, Sp'. NORMY D. $AR IO !"# $ARMEN ORDUISAN Sp'. ROLANDO D. $AR IO !"# RA1AELA :ILLANUE:AN Sp'. ELISEO D. $AR IO !"# ANUN$IA$ION #+l ROSARION LU9 $. REYES, MARIO $. REYES, -ULIET REYES-RUBIN,respondents. DE$ISION ADILLA, J.3 This is a petition for re*iew on certiorari under Rule ?/ of the Rules of 6ourt which see s to set aside the decision"#$ of the 6ourt of >ppeals 16>2 dated &9 February #00? in 6!>!4-!R! 6V No! (<#/9+ as well as the resolution dated ## >u%ust #00? denyin% petitionerNs motion for reconsideration! The facts are undisputed@ 7ri*ate respondents were the ori%inal owners of a parcel of a%ricultural land co*ered by T6T No! T4#?(&+ situated in 5arrio 6apucao+ODamis 6ity+ with an area of ##(+=0/ square meters+ more or less! On (8 .ay #0<<+ pri*ate respondents mort%a%ed said land to petitioner! Ehen pri*ate respondents defaulted on their obli%ation+ petitioner foreclosed the mort%a%e on the land and emer%ed as sole bidder in the ensuin% auction sale! 6onsequently+ Transfer 6ertificate of Title No! T4#80#( was e*entually issued in petitionerNs name! On = >pril #09?+ petitioner and pri*ate respondents entered into a Deed of 6onditional Sale wherein petitioner a%reed to recon*ey the foreclosed property to pri*ate respondents! The pertinent stipulations of the Deed pro*ided that@ BE);R;>S+ the V;NDOR acquired a parcel of land in an auction sale by the 6ity Sheriff of ODamiD 6ity+ pursuant to >ct (#(/+ as amended+ and sub'ect to the redemption period pursuant to 6> #?#+ described as follows@ xxx xxx xxx

That+ upon completion of the payment herein stipulated and a%reed+ the Vendor a%rees to deli*er to the VendeeHs1+2 his heirs+ administrators and assi%ns1+2 a %ood and sufficient deed of con*eyance co*erin% the property+ sub'ect matter of this deed of conditional sale+ in accordance with the pro*isions of law!B 1;xh! B>B+ p! /+ Records2 "&$ On = >pril #008+ upon completin% the payment of the full repurchase price+ pri*ate respondents demanded from petitioner the execution of a Deed of 6on*eyance in their fa*or! 7etitioner then informed pri*ate respondents that the prestation to execute and deli*er a deed of con*eyance in their fa*or had become le%ally impossible in *iew of Sec! = of Rep! >ct ==/< 1the 6omprehensi*e >%rarian Reform ,aw or 6>R,2 appro*ed #8 :une #099+ and Sec! # of ;!O! ?8< issued #8 :une #008! >%%rie*ed+ pri*ate respondents filed a complaint for specific performance with dama%es a%ainst petitioner before the Re%ional Trial 6ourt ofODamis 6ity+ 5ranch OV! Durin% the pre4 trial+ the trial court narrowed down the issue to whether or not Sec! = of the 6>R, 1Rep! >ct ==/<2 had rendered le%ally impossible compliance by petitioner with its obli%ation to execute a deed of con*eyance of the sub'ect land in fa*or of pri*ate respondents! The trial court ordered both parties to file their separate memorandum and deemed the case submitted for decision thereafter! On (8 :anuary #00&+ the trial court rendered 'ud%ment+ the dispositi*e part of which reads@ BE);R;FOR;+ 'ud%ment is rendered orderin% defendant to execute and deli*er unto plaintiffs a deed of final sale of the land sub'ect of their deed of conditional sale 4 ,ot /&/04>+ to pay plaintiffs 7#8+888!88 as nominal dama%es+ 7/+888!88 as attorneyNs fees+ 7(+888!88 as litis expenses and costs!B"($ The trial court held that petitioner interpreted the fourth para%raph of Sec! =+ Rep! >ct ==/< literally in con'unction with Sec! # of ;!O! ?8<! The fourth para%raph of Sec! =+ Rep! >ct ==/< states that@ BFpon the effecti*ity of this >ct+ any sale disposition+ lease+ mana%ement contract or transfer of possession of pri*ate lands executed by the ori%inal landowner in *iolation of this act shall be null and *oidC 7ro*ided+ howe*er+ that those executed prior to this act shall be *alid only when re%istered with the Re%ister of Deeds after the effecti*ity of this >ct! Thereafter+ all Re%ister of Deeds shall inform the D>R within (&8 days of any transaction in*ol*in% a%ricultural lands in excess of fi*e hectares!B while Sec! # of ;!O! ?8< states that@

E);R;>S+ the V;ND;;S offered to repurchase and the V;NDOR a%reed to sell the abo*e4 described property+ sub'ect to the terms and stipulations as hereinafter stipulated+ for the sum of S;V;NT3 T)R;; T)OFS>ND S;V;N )FNDR;D ON,3 17<(+<88!882+ with a down payment of 79+088!88 and the balance of 7=?+988 shall be payable in six 1=2 years on equal quarterly amortiDation plan at #9R interest per annum! The first quarterly amortiDation

BSec! #! >ll %o*ernment instrumentalities but not limited to x x x financial institutions such as the D57 x x x shall immediately execute deeds of transfer in fa*or of the Republic of the 7hilippines as represented by the Department of >%rarian Reform and surrender to the department all landholdin%s suitable for a%riculture!B The court a quo noted that Sec! = of Rep! >ct ==/<+ ta en in its entirety+ is a pro*ision dealin% primarily with retention limits in a%ricultural land allowed the landowner and his family and that the fourth para%raph+ which nullifies any sale x x x by the ori%inal landowner in *iolation of the >ct+ does not co*er the sale by petitioner 1not the ori%inal land owner2 to pri*ate respondents! On the other hand+ accordin% to the trial court+ ;!O! ?8< too effect on #8 :une #008! 5ut pri*ate respondents completed payment of the price for the property+ ob'ect of the conditional sale+ as early as = >pril #008! )ence+ with the fulfillment of the condition for the sale+ the land co*ered thereby+ was detached from the mass of foreclosed properties held by D57+ and+ therefore+ fell beyond the ambit or reach of ;!O! ?8<! Dissatisfied+ petitioner appealed to the 6ourt of >ppeals 16>2+ still insistin% that its obli%ation to execute a Deed of Sale in fa*or of pri*ate respondents had become a le%al impossibility and that the non4impairment clause of the 6onstitution must yield to the demands of police power! On &9 February #00?+ the 6> rendered 'ud%ment dismissin% petitionerNs appeal on the basis of the followin% disquisitions@ BIt is a rule that if the obli%ation depends upon a suspensi*e condition+ the demandability as well as the acquisition or effecti*ity of the ri%hts arisin% from the obli%ation is suspended pendin% the happenin% or fulfillment of the fact or e*ent which constitutes the condition! Once the e*ent which constitutes the condition is fulfilled resultin% in the effecti*ity of the obli%ation+ its effects retroact to the moment when the essential elements which %a*e birth to the obli%ation ha*e ta en place 19.anresa+ /th ;d! 5 ! #+ pa! ((2! >pplyin% this precept to the case+ the full payment by the appellee on >pril =+ #008 retroacts to the time the contract of conditional sale was executed on >pril =+ #09?! From that time+ all elements of the contract of sale were present! 6onsequently+ the contract of sale was perfected! >s such+ the said sale does not come under the co*era%e of R!>! ==/<! It is li ewise interestin% to note that despite the mandate of Sec! #+ R!>! ==/<+ appellant continued to accept the payments made by the appellee until it was fully paid on >pril =+ #008! >ll that the appellant has to do now is to execute the final deed of sale in fa*or of the appellee! To follow the line of ar%ument of the appellant would only result in an unconscionable in'ury to the appellee! Obli%ations arisin% from contracts ha*e the force of law between the contractin% parties and should be complied with in %ood faith 1 !avio 6acasaet 8 $ssociates, %nc. vs. Commission on $udit+ #<( S6R> (/&2! -oin% now to ;!O! ?8<+ Ee hold that the same can neither affect appellantNs obli%ation under the deed of conditional sale! Fnder the said law+ appellant is required to transfer to the

Republic of the 7hilippines Nall lands foreclosedN effecti*e :une #8+ #008! Fnder the facts obtainin%+ the sub'ect property has ceased to belon% to the mass of foreclosed property fallin% within the reach of said law! >s earlier explained+ the property has already been sold to herein appellees e*en before the said ;!O! has been enacted! On this same reason+ Ee therefore need not del*e on the applicability of D57 6ircular No! ##!B "?$ In the present petition for re*iew on certiorari+ petitioner still insists on its position that Rep! >ct ==/<+ ;!O! ?8< and D57 6ircular No! ## rendered its obli%ation to execute a Deed of Sale to pri*ate respondents Ba le%al impossibility!B "/$ 7etitioner also questions the award of attorneyNs fees+ nominal dama%es+ and costs in fa*or of pri*ate respondents+ as not in accord with law and the e*idence!"=$ Ee rule in fa*or of pri*ate respondents! In conditional obli%ations+ the acquisition of ri%hts+ as well as the extin%uishment or loss of those already acquired+ shall depend upon the happenin% of the e*ent which constitutes the condition!"<$ The deed of conditional sale between petitioner and pri*ate respondents was executed on = >pril #09?! 7ri*ate respondents had reli%iously paid the a%reed installments on the property until they completed payment on = >pril #008! 7etitioner+ in fact+ allowed pri*ate respondents to fulfill the condition of effectin% full payment+ and in*o ed Section = of Rep! >ct ==/< only after pri*ate respondents+ ha*in% fully paid the repurchase price+ demanded the execution of a Deed of Sale in their fa*or! It will be noted that Rep! >ct ==/< was enacted on #8 :une #099! Followin% petitionerNs ar%ument in this case+ its prestation to execute the deed of sale was rendered le%ally impossible by Section = of said law! In other words+ the deed of conditional sale was extin%uished by a super*enin% e*ent+ %i*in% rise to an impossibility of performance! Ee re'ect petitionerNs contention as we rule 4 as the trial court and 6> ha*e correctly ruled 4 that neither Sec! = of Rep! >ct ==/< nor Sec! # of ;!O! ?8< was intended to impair the obli%ation of contract petitioner had much earlier concluded with pri*ate respondents! .ore specifically+ petitioner cannot in*o e the last para%raph of Sec! = of Rep! >ct ==/< to set aside its obli%ations already existin% prior to its enactment! In the first place+ said last para%raph clearly deals with Bany sale+ lease+ mana%ement contract or transfer or possession of pri*ate lands executed by the ori%inal land owner!B The ori%inal owner in this case is not the petitioner but the pri*ate respondents! 7etitioner acquired the land throu%h foreclosure proceedin%s but a%reed thereafter to recon*ey it to pri*ate respondents+ albeit conditionally! >s earlier stated+ Sec! = of Rep! >ct ==/< in its entirety deals with retention limits allowed by law to small landowners! Since the property here in*ol*ed is more or less ten 1#82 hectares+ it is then within the 'urisdiction of the Department of >%rarian Reform 1D>R2 to determine whether or not the property can be sub'ected to a%rarian reform! 5ut this necessitates an entirely different proceedin%!

The 6>R, 1Rep! >ct ==/<2 was not intended to ta e away property without due process of law! Nor is it intended to impair the obli%ation of contracts! In the same manner must ;!O! ?8< be re%arded! It was enacted two 1&2 months after pri*ate respondents had le%ally fulfilled the condition in the contract of conditional sale by the payment of all installments on their due dates! These laws cannot ha*e retroacti*e effect unless there is an express pro*ision in them to that effect!"9$ >s to petitionerNs contention+ howe*er+ that the 6> erred in affirmin% the trial courtNs decision awardin% nominal dama%es+ and attorneyNs fees to pri*ate respondents+ we rule in fa*or of petitioner! It appears that the core issue in this case+ bein% a pure question of law+ did not reach the trial sta%e as the case was submitted for decision after pre4trial! The award of attorneyNs fees under >rticle &&89 of the 6i*il 6ode is more of an exception to the %eneral rule that it is not sound policy to place a penalty on the ri%ht to liti%ate! Ehile 'udicial discretion in the award of attorneyNs fees is not entirely left out+ the same+ as a rule+ must ha*e a factual+ le%al or equitable 'ustification! The matter cannot and should not be left to speculation and con'ecture!"0$ >s aptly stated in the 6iraso! case@ Bx x x The matter of attorneyNs fees cannot be touched once and only in the dispositi*e portion of the decision! The text itself must expressly state the reason why attorneyNs fees are bein% awarded! The court+ after readin% throu%h the text of the appealed decision+ finds the same bereft of any findin%s of fact and law to 'ustify the award of attorneyNs fees! The matter of such fees was touched but once and appears only in the dispositi*e portion of the decision! Simply put+ the text of the decision did not state the reason why attorneyNs fees are bein% awarded+ and for this reason+ the 6ourt finds it necessary to disallow the same for bein% con'ectural!B"#8$ Ehile D57 committed e%re%ious error in interpretin% Sec! = of R> ==/<+ the same is not equi*alent to %ross and e*ident bad faith when it refused to execute the deed of sale in fa*or of pri*ate respondents! For the same reasons stated abo*e+ the award of nominal dama%es in the amount of 7#8+888!88 should also be deleted! The amount of 7(+888!88 as liti%ation expenses and costs a%ainst petitioner must remain! 4%ERE1ORE+ premises considered+ the petition is hereby D;NI;D+ and the decision of the 6> is hereby >FFIR.;D+ for lac of any re*ersible error+ with the .ODIFI6>TION that attorneyNs fees and nominal dama%es awarded to pri*ate respondents are hereby D;,;T;D! SO ORDERED. 4e!!osi!!o, Citug, 1apunan, and "ermosisima, Jr., JJ., concur.

Republic of the 7hilippines SU REME $OURT .anila FIRST DIVISION

National )ousin% >uthority 1N)>2 to exchan%e the donated property with another land owned by the latter! In its answer petitioner alle%ed that the ri%ht of pri*ate respondents to file the action had prescribedC that it did not *iolate any of the conditions in the deed of donation because it ne*er used the donated property for any other purpose than that for which it was intendedC and+ that it did not sell+ transfer or con*ey it to any third party! On (# .ay #00#+ the trial court held that petitioner failed to comply with the conditions of the donation and declared it null and *oid! The court a quo further directed petitioner to execute a deed of the recon*eyance of the property in fa*or of the heirs of the donor+ namely+ pri*ate respondents herein! 7etitioner appealed to the 6ourt of >ppeals which on #9 :une #00( ruled that the annotations at the bac of petitionerNs certificate of title were resolutory conditions breach of which should terminate the ri%hts of the donee thus ma in% the donation re*ocable! The appellate court also found that while the first condition mandated petitioner to utiliDe the donated property for the establishment of a medical school+ the donor did not fix a period within which the condition must be fulfilled+ hence+ until a period was fixed for the fulfillment of the condition+ petitioner could not be considered as ha*in% failed to comply with its part of the bar%ain! Thus+ the appellate court rendered its decision re*ersin% the appealed decision and remandin% the case to the court of ori%in for the determination of the time within which petitioner should comply with the first condition annotated in the certificate of title! 7etitioner now alle%es that the 6ourt of >ppeals erred@ 1a2 in holdin% that the quoted annotations in the certificate of title of petitioner are onerous obli%ations and resolutory conditions of the donation which must be fulfilled non4compliance of which would render the donation re*ocableC 1b2 in holdin% that the issue of prescription does not deser*e BdisquisitionCB and+ 1c2 in remandin% the case to the trial court for the fixin% of the period within which petitioner would establish a medical colle%e! 2 Ee find it difficult to sustain the petition! > clear perusal of the conditions set forth in the deed of donation executed by Don Ramon ,opeD+ Sr!+ %i*es us no alternati*e but to conclude that his donation was onerous+ one executed for a *aluable consideration which is considered the equi*alent of the donation itself+ e!%!+ when a donation imposes a burden equi*alent to the *alue of the donation! > %ift of land to the 6ity of .anila requirin% the latter to erect schools+ construct a childrenNs play%round and open streets on the land was considered an onerous donation! 8 Similarly+ where Don Ramon ,opeD donated the sub'ect parcel of land to petitioner but imposed an obli%ation upon the latter to establish a medical colle%e thereon+ the donation must be for an onerous consideration! Fnder >rt! ##9# of the 6i*il 6ode+ on conditional obli%ations+ the acquisition of ri%hts+ as well as the extin%uishment or loss of those already acquired+ shall depend upon the happenin% of the e*ent which constitutes the condition! Thus+ when a person donates land to another on the condition that the latter would build upon the land a school+ the condition imposed was not a

G.R. No. 11212A -.l* 1A, 1996 $ENTRAL %ILI INE UNI:ERSITY, petitioner+ *s! $OURT O1 A EALS, REMEDIOS 1RAN$O, 1RAN$IS$O N. LO E9, $E$ILIA . :DA. DE LO E9, REDAN LO E9 AND REMARENE LO E9, respondents.

BELLOSILLO, J.: 6;NTR>, 7)I,I77IN; FNIV;RSIT3 filed this petition for re*iew on certiorari of the decision of the 6ourt of >ppeals which re*ersed that of the Re%ional Trial 6ourt of Iloilo 6ity directin% petitioner to recon*ey to pri*ate respondents the property donated to it by their predecessor4in4interest! Sometime in #0(0+ the late Don Ramon ,opeD+ Sr!+ who was then a member of the 5oard of Trustees of the 6entral 7hilippine 6olle%e 1now 6entral 7hilippine Fni*ersity "67F$2+ executed a deed of donation in fa*or of the latter of a parcel of land identified as ,ot No! (#<?454# of the subdi*ision plan 7sd4##??+ then a portion of ,ot No! (#<?45+ for which Transfer 6ertificate of Title No! T4(0#84> was issued in the name of the donee 67F with the followin% annotations copied from the deed of donation Z #! The land described shall be utiliDed by the 67F exclusi*ely for the establishment and use of a medical colle%e with all its buildin%s as part of the curriculumC &! The said colle%e shall not sell+ transfer or con*ey to any third party nor in any way encumber said landC (! The said land shall be called BR>.ON ,O7;M 6>.7FSB+ and the said colle%e shall be under obli%ation to erect a cornerstone bearin% that name! >ny net income from the land or any of its par s shall be put in a fund to be nown as the BR>.ON ,O7;M 6>.7FS FFNDB to be used for impro*ements of said campus and erection of a buildin% thereon! 1 On (# .ay #090+ pri*ate respondents+ who are the heirs of Don Ramon ,opeD+ Sr!+ filed an action for annulment of donation+ recon*eyance and dama%es a%ainst 67F alle%in% that since #0(0 up to the time the action was filed the latter had not complied with the conditions of the donation! 7ri*ate respondents also ar%ued that petitioner had in fact ne%otiated with the

condition precedent or a suspensi*e condition but a resolutory one! 7 It is not correct to say that the schoolhouse had to be constructed before the donation became effecti*e+ that is+ before the donee could become the owner of the land+ otherwise+ it would be in*adin% the property ri%hts of the donor! The donation had to be *alid before the fulfillment of the condition! 6 If there was no fulfillment or compliance with the condition+ such as what obtains in the instant case+ the donation may now be re*o ed and all ri%hts which the donee may ha*e acquired under it shall be deemed lost and extin%uished! The claim of petitioner that prescription bars the instant action of pri*ate respondents is una*ailin%! The condition imposed by the donor+ i.e.+ the buildin% of a medical school upon the land donated+ depended upon the exclusi*e will of the donee as to when this condition shall be fulfilled! Ehen petitioner accepted the donation+ it bound itself to comply with the condition thereof! Since the time within which the condition should be fulfilled depended upon the exclusi*e will of the petitioner+ it has been held that its absolute acceptance and the ac nowled%ment of its obli%ation pro*ided in the deed of donation were sufficient to pre*ent the statute of limitations from barrin% the action of pri*ate respondents upon the ori%inal contract which was the deed of donation! 5 .oreo*er+ the time from which the cause of action accrued for the re*ocation of the donation and reco*ery of the property donated cannot be specifically determined in the instant case! > cause of action arises when that which should ha*e been done is not done+ or that which should not ha*e been done is done! A In cases where there is no special pro*ision for such computation+ recourse must be had to the rule that the period must be counted from the day on which the correspondin% action could ha*e been instituted! It is the le%al possibility of brin%in% the action which determines the startin% point for the computation of the period! In this case+ the startin% point be%ins with the expiration of a reasonable period and opportunity for petitioner to fulfill what has been char%ed upon it by the donor! The period of time for the establishment of a medical colle%e and the necessary buildin%s and impro*ements on the property cannot be quantified in a specific number of years because of the presence of se*eral factors and circumstances in*ol*ed in the erection of an educational institution+ such as %o*ernment laws and re%ulations pertainin% to education+ buildin% requirements and property restrictions which are beyond the control of the donee! Thus+ when the obli%ation does not fix a period but from its nature and circumstances it can be inferred that a period was intended+ the %eneral rule pro*ided in >rt! ##0< of the 6i*il 6ode applies+ which pro*ides that the courts may fix the duration thereof because the fulfillment of the obli%ation itself cannot be demanded until after the court has fixed the period for compliance therewith and such period has arri*ed! 8 This %eneral rule howe*er cannot be applied considerin% the different set of circumstances existin% in the instant case! .ore than a reasonable period of fifty 1/82 years has already been allowed petitioner to a*ail of the opportunity to comply with the condition e*en if it be burdensome+ to ma e the donation in its fa*or fore*er *alid! 5ut+ unfortunately+ it failed to do

so! )ence+ there is no more need to fix the duration of a term of the obli%ation when such procedure would be a mere technicality and formality and would ser*e no purpose than to delay or lead to an unnecessary and expensi*e multiplication of suits! 9 .oreo*er+ under >rt! ##0# of the 6i*il 6ode+ when one of the obli%ors cannot comply with what is incumbent upon him+ the obli%ee may see rescission and the court shall decree the same unless there is 'ust cause authoriDin% the fixin% of a period! In the absence of any 'ust cause for the court to determine the period of the compliance+ there is no more obstacle for the court to decree the rescission claimed! Finally+ since the questioned deed of donation herein is basically a %ratuitous one+ doubts referrin% to incidental circumstances of a %ratuitous contract should be resol*ed in fa*or of the least transmission of ri%hts and interests! 10 Records are clear and facts are undisputed that since the execution of the deed of donation up to the time of filin% of the instant action+ petitioner has failed to comply with its obli%ation as donee! 7etitioner has slept on its obli%ation for an unreasonable len%th of time! )ence+ it is only 'ust and equitable now to declare the sub'ect donation already ineffecti*e and+ for all purposes+ re*o ed so that petitioner as donee should now return the donated property to the heirs of the donor+ pri*ate respondents herein+ by means of recon*eyance! E);R;FOR;+ the decision of the Re%ional Trial 6ourt of Iloilo+ 5r! (?+ of (# .ay #00# is R;INST>T;D and >FFIR.;D+ and the decision of the 6ourt of >ppeals of #9 :une #00( is accordin%ly .ODIFI;D! 6onsequently+ petitioner is directed to recon*ey to pri*ate respondents ,ot No! (#<?454# of the subdi*ision plan 7sd4##?? co*ered by Transfer 6ertificate of Title No! T4(0#84> within thirty 1(82 days from the finality of this 'ud%ment! 6osts a%ainst petitioner! SO ORD;R;D! 'uiason and 1apunan, JJ., concur.

Republic of the 7hilippines SU REME $OURT .anila T)IRD DIVISION

*endee 1p! =?+ 7o!!o2 while respondent court practically a%reed with the trial court except as to the amount to be paid to petitioners and the refund to pri*ate respondent are concerned 1p! ?=+ 7o!!o2! There is no dispute that the sum of 7(+888!88 listed as first installment was recei*ed by :uan -alicia+ Sr! >ccordin% to petitioners+ of the 7#8+888!88 to be paid within ten days from execution of the instrument+ only 70+<8<!88 was tendered to+ and recei*ed by+ them on numerous occasions from .ay &0+ #0</+ up to No*ember (+ #0<0! 6oncernin% pri*ate respondentNs assumption of the *endorsN obli%ation to the 7hilippine Veterans 5an + the *endee paid only the sum of 7=+0&=!?# while the difference the indebtedness came from 6elerina ,abu%uin 1p! <(+ 7o!!o2! .oreo*er+ petitioners asserted that not a sin%le centa*o of the 7&<+888!88 representin% the remainin% balance was paid to them! 5ecause of the apprehension that the heirs of :uan -alicia+ Sr! are disa*owin% the contract in ed by their predecessor+ pri*ate respondent filed the complaint for specific performance! In addressin% the issue of whether the conditions of the instrument were performed by herein pri*ate respondent as *endee+ the )onorable -odofredo RilloraDa+ 7residin% :ud%e of 5ranch (# of the Re%ional Trial 6ourt+ Third :udicial Re%ion stationed at -uimba+ Nue*a ;ci'a+ decided to uphold pri*ate respondentNs theory on the basis of constructi*e fulfillment under >rticle ##9= and estoppel throu%h acceptance of piecemeal payments in line with >rticle #&(/ of the 6i*il 6ode! >nent the 7#8+888!88 specified as second installment+ the lower court counted a%ainst the *endors the candid statement of :osefina Taya% who sat on the witness stand and made the admission that the chec issued as payment thereof was nonetheless paid on a sta%%ered basis when the chec was dishonored 1TSN+ September #+ #09(+ pp! (4?C p! (+ DecisionC p! ==+ 7o!!o2! Re%ardin% the third condition+ the trial court noted that plaintiff below paid more than 7=+888!88 to the 7hilippine Veterans 5an but Ce!erina 2a&uguin+ the sister and co4 *endor of :uan -alicia+ Sr! paid 7(+<<9!<< which circumstance was construed to be a ploy under >rticle ##9= of the 6i*il 6ode that Bprematurely pre*ented plaintiff from payin% the installment fullyB and Bfor the purpose of withdrawin% the title to the lotB! The acceptance by petitioners of the *arious payments e*en beyond the periods a%reed upon+ was percei*ed by the lower court as tantamount to faithful performance of the obli%ation pursuant to >rticle #&(/ of the 6i*il 6ode! Furthermore+ the trial court noted that pri*ate respondent consi%ned 7#9+/&8!88+ an amount sufficient to offset the remainin% balance+ lea*in% the sum of 7#+(#/!88 to be credited to pri*ate respondent! On September #&+ #09?+ 'ud%ment was rendered@ #! Orderin% the defendants Z heirs of :uan -alicia+ to execute the Deed of Sale of their undi*ided ON; )>,F 1#H&2 portion of ,ot No! ##(8+ -uimba 6adastre+ co*ered by T6T No! NT4#&8/=(+ in fa*or of plaintiff >lbri%ido ,ey*a+ with an equal fronta%e facin% the national road upon finality of 'ud%mentC that+ in their default+ the 6ler of 6ourt II+ is hereby ordered to execute the deed of con*eyance in line with the pro*isions of Section #8+ Rule (0 of the Rules of 6ourtC

G.R. No. 95068 M!r(& 8, 1998 -OSE1INA TAYAG, RI$ARDO GALI$IA, TERESITA GALI$IA, E:ELYN GALI$IA, -UAN GALI$IA, -R. !"# RODRIGO GALI$IA, petitioners+ *s! $OURT O1 A EALS !"# ALBRIGIDO LEY:A, respondents! acundo +. 4autista #or petitioners. Jesus +. 9arcia #or private respondent.

MELO, J.: The deed of con*eyance executed on .ay &9+ #0</ by :uan -alicia+ Sr!+ prior to his demise in #0<0+ and 6elerina ,abu%uin+ in fa*or of >lbri%ido ,ey*a in*ol*in% the undi*ided one4half portion of a piece of land situated at 7oblacion+ -uimba+ Nue*a ;ci'a for the sum of 7/8+888!88 under the followin% terms@ #! The sum of 7;SOS@ T)R;; T)OFS>ND 17(+888!882 is );R;53 ac nowled%ed to ha*e been paid upon the execution of this a%reementC &! The sum of 7;SOS@ T;N T)OFS>ND 17#8+888!882 shall be paid within ten 1#82 days from and after the execution of this a%reementC (! The sum of 7;SOS@ T;N T)OFS>ND 17#8+888!882 represents the V;NDORSN indebtedness with the 7hilippine Veterans 5an which is hereby assumed by the V;ND;;C and ?! The balance of 7;SOS@ TE;NT3 S;V;N T)OFS>ND 17&<+888!88!2 shall be paid within one 1#2 year from and after the execution of this instrument! 1p! /(+ 7o!!o2 is the sub'ect matter of the present liti%ation between the heirs of :uan -alicia+ Sr! who assert breach of the conditions as a%ainst pri*ate respondentNs claim anchored on full payment and compliance with the stipulations thereof! The court of ori%in which tried the suit for specific performance filed by pri*ate respondent on account of the herein petitionersN reluctance to abide by the co*enant+ ruled in fa*or of the

&! Orderin% the defendants+ heirs of :uan -alicia+ 'ointly and se*erally to pay attorneyNs fees of 7=+888!88 and the further sum of 7(+888!88 for actual and compensatory dama%esC (! Orderin% 6elerina ,abu%uin and the other defendants herein to surrender to the 6ourt the ownerNs duplicate of T6T No! NT4#&8/=(+ pro*ince of Nue*a ;ci'a+ for the use of plaintiff in re%isterin% the portion+ sub'ect matter of the instant suitC ?! Orderin% the withdrawal of the amount of 7#9+/&8!88 now consi%ned with the 6ourt+ and the amount of 7#<+&8?!</ be deli*ered to the heirs of :uan -alicia as payment of the balance of the sale of the lot in question+ the defendants herein after deductin% the amount of attorneyNs fees and dama%es awarded to the plaintiff hereof and the deli*ery to the plaintiff of the further sum of 7#+(#/!&/ excess or o*er payment and+ defendants to pay the cost of the suit! 1p! =0+ 7o!!o2 and followin% the appeal interposed with respondent court+ :ustice Dayrit with whom :ustices 7urisima and >ldecoa+ :r! concurred+ modified the fourth para%raph of the decretal portion to read@ ?! Orderin% the withdrawal of the amount of 7#9+/88!88 now consi%ned with the 6ourt+ and that the amount of 7#=+9<8!/& be deli*ered to the heirs of :uan -alicia+ Sr! as payment to the unpaid balance of the sale+ includin% the reimbursement of the amount paid to 7hilippine Veterans 5an + minus the amount of attorneyNs fees and dama%es awarded in fa*or of plaintiff! The excess of 7#+=?0!?9 will be returned to plaintiff! The costs a%ainst defendants! 1p! /#+ 7o!!o2 >s to how the fore%oin% directi*e was arri*ed at+ the appellate court declared@ Eith respect to the fourth condition stipulated in the contract+ the period indicated therein is deemed modified by the parties when the heirs of :uan -alicia+ Sr! accepted payments without ob'ection up to No*ember (+ #0<0! On the basis of receipts presented by appellee commencin% from >u%ust 9+ #0</ up to No*ember (+ #0<0+ a total amount of 7#(+089!&/ has been paid+ thereby lea*in% a balance of 7#(+80#!</! Said unpaid balance plus the amount reimbursable to appellant in the amount of 7(+<<9!<< will lea*e an unpaid total of 7#=+9<8!/&! Since appellee consi%ned in court the sum of 7#9+/88!88+ he is entitled to %et the excess of 7#+=&0!?9! Thus+ when the heirs of :uan -alicia+ Sr! 1obli%ees2 accepted the performance+ nowin% its incompleteness or irre%ularity and without expressin% any protest or ob'ection+ the obli%ation is deemed fully complied with 1>rticle #&(/+ 6i*il 6ode2! 1p! /8+ 7o!!o2 7etitioners are of the impression that the decision appealed from+ which a%reed with the conclusions of the trial court+ is *ulnerable to attac via the recourse before Fs on the principal supposition that the full consideration of the a%reement to sell was not paid by pri*ate respondent and+ therefore+ the contract must be rescinded! The su%%estion of petitioners that the co*enant must be cancelled in the li%ht of pri*ate respondentNs so4called breach seems to o*erloo petitionersN demeanor who+ instead of immediately filin% the case precisely to rescind the instrument because of non4compliance+

allowed pri*ate respondent to effect numerous payments posterior to the %race periods pro*ided in the contract! This apathy of petitioners who e*en permitted pri*ate respondent to ta e the initiati*e in filin% the suit for specific performance a%ainst them+ is a in to wai*er or abandonment of the ri%ht to rescind normally conferred by >rticle ##0# of the 6i*il 6ode! >s aptly obser*ed by :ustice -utierreD+ :r! in $nge!es vs. Ca!asanz 1#(/ S6R> (&( "#09/$C ? Paras+ 6i*il 6ode of the 7hilippines >nnotated+ Twelfth ;d! "#090$+ p! &8(@ ! ! ! Ee a%ree with the plaintiffs4appellees that when the defendants4appellants+ instead of a*ailin% of their alle%ed ri%ht to rescind+ ha*e accepted and recei*ed delayed payments of installments+ thou%h the plaintiffs4appellees ha*e been in arrears beyond the %race period mentioned in para%raph = of the contract+ the defendants4appellants ha*e wai*ed+ and are now estopped from exercisin% their alle%ed ri%ht of rescission ! ! ! In Deve!opment 4an) o# the Phi!ippines vs. Sarandi 1/ 6>R 1&/2 9##C 9#<49#9C cited in ? Padi!!a+ 6i*il 6ode >nnotated+ Se*enth ;d! "#09<$+ pp! &#&4&#(2 a similar opinion was expressed to the effect that@ In a perfected contract of sale of land under an a%reed schedule of payments+ while the parties may mutually obli%e each other to compel the specific performance of the monthly amortiDation plan+ and upon failure of the buyer to ma e the payment+ the seller has the ri%ht to as for a rescission of the contract under >rt! ##0# of the 6i*il 6ode+ this shall be deemed wai*ed by acceptance of posterior payments! 5oth the trial and appellate courts were+ therefore+ correct in sustainin% the claim of pri*ate respondent anchored on estoppel or wai*er by acceptance of delayed payments under >rticle #&(/ of the 6i*il 6ode in that@ Ehen the obli%ee accepts the performance+ nowin% its incompleteness or irre%ularity+ and without expressin% any protest or ob'ection+ the obli%ation is deemed fully complied with! considerin% that the heirs of :uan -alicia+ Sr! accommodated pri*ate respondent by acceptin% the latterNs delayed payments not only beyond the %race periods but also durin% the pendency of the case for specific performance 1p! &<+ .emorandum for petitionersC p! #==+ 7o!!o2! Indeed+ the ri%ht to rescind is not absolute and will not be %ranted where there has been substantial compliance by partial payments 1? Caguioa+ 6omments and 6ases on 6i*il ,aw+ First ;d! "#0=9$ p! #(&2! 5y and lar%e+ petitionersN actuation is susceptible of but one construction Z that they are now estopped from rene%in% from their commitment on account of acceptance of benefits arisin% from o*erdue accounts of pri*ate respondent! Now+ as to the issue of whether payments had in fact been made+ there is no doubt that the second installment was actually paid to the heirs of :uan -alicia+ Sr! due to :osefina Taya%Ns admission in (udicio that the sum of 7#8+888!88 was fully liquidated! It is thus erroneous for petitioners to suppose that Bthe e*idence in the records do not support this conclusionB 1p! #9+ .emorandum for 7etitionersC p! #/<+ 7o!!o2! > contrario+ when the court of ori%in+ as well as the appellate court+ emphasiDed the fran representation alon% this line of :osefina Taya% before the trial court 1TSN+ September l+ #09(+ pp! (4?C p! /+ Decision in 6>4-!R! 6V No!

#(((0+ p! /8+ 7o!!oC p! (+ Decision in 6i*il 6ase No! =9#4-+ p! ==+ 7o!!o2+ petitioners chose to remain completely mute e*en at this sta%e despite the opportunity accorded to them+ for clarification! 6onsequently+ the pre'udicial aftermath of :osefina Taya%Ns spontaneous reaction may no lon%er be obliterated on the basis of estoppel 1 $rtic!e -B<-+ 6i*il 6odeCSection B, 7u!e -A@F Section A(a), 7u!e -<-+ Re*ised Rules on ;*idence2! Insofar as the third item of the contract is concerned+ it may be recalled that respondent court applied >rticle ##9= of the 6i*il 6ode on constructi*e fulfillment which petitioners claim should not ha*e been appreciated because they are the obli%ees while the proviso in point spea s of the obli%or! 5ut+ petitioners must concede that in a reciprocal obli%ation li e a contract of purchase+ 1>n% *s! 6ourt of >ppeals+ #<8 S6R> &9= "#090$C ? Paras, supra+ at p! &8#2+ both parties are mutually obli%ors and also obli%ees 1? Padi!!a, supra, at p! #0<2+ and an3 of the contractin% parties may+ upon non4fulfillment by the other pri*y of his part of the prestation+ rescind the contract or see fulfillment 1 $rtic!e --@-+ 6i*il 6ode2! In short+ it is puerile for petitioners to say that they are the only obli%ees under the contract since they are also bound as obli%ors to respect the stipulation in permittin% pri*ate respondent to assume the loan with the 7hilippine Veterans 5an which petitioners impeded when they paid the balance of said loan! >s *endors+ they are supposed to execute the final deed of sale upon full payment of the balance as determined hereafter! ,astly+ petitioners ar%ue that there was no *alid tender of payment nor consi%nation of the sum of 7#9+/&8!88 which they ac nowled%e to ha*e been deposited in court on :anuary &&+ #09# fi*e years after the amount of 7&<+888!88 had to be paid 1p! &(+ .emorandum for 7etitionersC p! #=&+ 7o!!o2! >%ain this su%%estion i%nores the fact that consi%nation alone produced the effect of payment in the case at bar because it was established below that two or more heirs of :uan -alicia+ Sr! claimed the same ri%ht to collect 1 $rtic!e -AI=+ 1?2+ 6i*il 6odeC pp! ?4/+ Decision in 6i*il 6ase No! =9#4-C pp! =<4=9+ 7o!!o2! .oreo*er+ petitioners did not bother to refute the e*idence on hand that+ aside from the 7#9+/&8!88 1not 7#9+/88!88 as computed by respondent court2 which was consi%ned+ pri*ate respondent also paid the sum of 7#(+089!&/ 1;xhibits BFB to B66BC p! /8+ 7o!!o2! These two fi%ures representin% pri*ate respondentNs payment of the fourth condition amount to 7(&+?&9!&/+ less the 7(+<<9!<< paid by petitioners to the ban + will lead us to the sum of 7&9+=?0!?9 or a refund of 7#+=?0!?9 to pri*ate respondent as o*erpayment of the 7&<+888!88 balance! E);R;FOR;+ the petition is hereby DIS.ISS;D and the decision appealed from is hereby >FFIR.;D with the sli%ht modification of 7ara%raph ? of the dispositi*e thereof which is thus amended to read@ ?! orderin% the withdrawal of the sum of 7#9+/&8!88 consi%ned with the Re%ional Trial 6ourt+ and that the amount of 7#=+9<8!/& be deli*ered by pri*ate respondent with le%al rate of interest until fully paid to the heirs of :uan -alicia+ Sr! as balance of the sale includin% reimbursement of the sum paid to the 7hilippine Veterans 5an + minus the attorneyNs fees and dama%es awarded in fa*or of pri*ate respondent! The excess of 7#+=?0!?9 shall be returned to pri*ate respondent also with le%al interest until fully paid by petitioners! Eith costs a%ainst petitioners!

SO ORD;R;D! e!iciano, 4idin, Davide, Jr! and 7omero, JJ., concur! 9utierrez, Jr., J., is on !eave!

S;6OND DIVISION [G.R. No. 189628. M!* 25, 2006] S S. 1ELI E AND LETI$IA $ANNU, petitioners, vs. S S. GIL AND 1ERNANDINA GALANG AND NATIONAL %OME MORTGAGE 1INAN$E $OR ORATION, respondents. DE$ISION $%I$O-NA9ARIO, J.3 5efore Fs is a 7etition for Re*iew on Certiorari which see s to set aside the decision "#$ of the 6ourt of >ppeals dated (8 September #009 which affirmed with modification the decision of 5ranch #(/ of the Re%ional Trial 6ourt 1RT62 of .a ati 6ity+ dismissin% the complaint for Specific 7erformance and Dama%es filed by petitioners+ and its Resolution "&$ dated && :uly #000 denyin% petitionersA motion for reconsideration! > complaint"($ for Specific 7erformance and Dama%es was filed by petitioners4spouses Felipe and ,eticia 6annu a%ainst respondents4spouses -il and Fernandina -alan% and the National )ome .ort%a%e Finance 6orporation 1N).F62 before 5ranch #(/ of the RT6 of .a ati+ on &? :une #00(! The case was doc eted as 6i*il 6ase No! 0(4&8=0! The facts that %a*e rise to the aforesaid complaint are as follows@ Respondents4spouses -il and Fernandina -alan% obtained a loan from Fortune Sa*in%s [ ,oan >ssociation for 7#<(+988!88 to purchase a house and lot located at 7ulan% ,upa+ ,as 7iQas+ with an area of #/8 square meters co*ered by Transfer 6ertificate of Title 1T6T2 No! T4 9/8/ in the names of respondents4spouses! To secure payment+ a real estate mort%a%e was constituted on the said house and lot in fa*or of Fortune Sa*in%s [ ,oan >ssociation! In early #008+ N).F6 purchased the mort%a%e loan of respondents4spouses from Fortune Sa*in%s [ ,oan >ssociation for 7#<(+988!88! Respondent Fernandina -alan% authoriDed"?$ her attorney4in4fact+ >delina R! Timban%+ to sell the sub'ect house and lot! 7etitioner ,eticia 6annu a%reed to buy the property for 7#&8+888!88 and to assume the balance of the mort%a%e obli%ations with the N).F6 and with 6;RF Realty "/$ 1the De*eloper of the property2! Of the 7#&8+888!88+ the followin% payments were made by petitioners@ Date :uly #0+ #008 .arch #(+ #00# >mount 7aid 7?8+888!88"=$ #/+888!88"<$ >pril =+ #00# No*ember &9+ #00# Total Thus+ lea*in% a balance of 7?/+888!88! > Deed of Sale with >ssumption of .ort%a%e Obli%ation "#8$ dated &8 >u%ust #008 was made and entered into by and between spouses Fernandina and -il -alan% 1*endors2 and spouses ,eticia and Felipe 6annu 1*endees2 o*er the house and lot in question which contains+ inter a!ia+ the followin%@ NOE+ T);R;FOR;+ for and in consideration of the sum of TEO )FNDR;D FIFT3 T)OFS>ND 7;SOS 17&/8+888!882+ 7hilippine 6urrency+ receipt of which is hereby ac nowled%ed by the Vendors and the assumption of the mort%a%e obli%ation+ the Vendors hereby sell+ cede and transfer unto the Vendees+ their heirs+ assi%ns and successor in interest the abo*e4described property to%ether with the existin% impro*ement thereon! It is a special condition of this contract that the Vendees shall assume and continue with the payment of the amortiDation with the National )ome .ort%a%e Finance 6orporation Inc! in the outstandin% balance of 7IIIIIIIIIIIIIII+ as of IIIIIIIIII and shall comply with and abide by the terms and conditions of the mort%a%e document dated Feb! &<+ #090 and identified as Doc! No! 9&+ 7a%e #9+ 5oo VII+ S! of #090 of Notary 7ublic for GueDon 6ity .arites Sto! Tomas >lonDo+ as if the Vendees are the ori%inal si%natories! 7etitioners immediately too possession and occupied the house and lot! 7etitioners made the followin% payments to the N).F6@ Date :uly 0+ #008 .arch #&+ #00# February ?+ #00& .arch (#+ #00( >pril #0+ #00( >pril &<+ #00( >mount 7 #?+(#&!?< 9+888!88 #8+888!88 =+888!88 #8+888!88 <+888!88 7 //+(#&!?< Receipt No! D4/8(09="##$ D4<&0?<9"#&$ D4000#&<"#($ ;4/=(<?0"#?$ ;4/9&?(&"#/$ ;4=#9(&="#=$ #/+888!88"9$ /+888!88"0$ 7</+888!88

7etitioners paid the JequityK or second mort%a%e to 6;RF Realty! "#<$ Despite requests from >delina R! Timban% and Fernandina -alan% to pay the balance of 7?/+888!88 or in the alternati*e to *acate the property in question+ petitioners refused to do so! In a letter"#9$ dated &0 .arch #00(+ petitioner ,eticia 6annu informed .r! Fermin T! >rDa%a+ Vice 7resident+ Fund .ana%ement -roup of the N).F6+ that the ownership ri%hts o*er the land co*ered by T6T No! T49/8/ in the names of respondents4spouses had been ceded and transferred to her and her husband per Deed of Sale with >ssumption of .ort%a%e+ and that they were obli%ated to assume the mort%a%e and pay the remainin% unpaid loan balance! 7etitionersA formal assumption of mort%a%e was not appro*ed by the N).F6! "#0$ 5ecause the 6annus failed to fully comply with their obli%ations+ respondent Fernandina -alan%+ on &# .ay #00(+ paid 7&((+0/<!=? as full payment of her remainin% mort%a%e loan with N).F6!"&8$ 7etitioners opposed the release of T6T No! T49/8/ in fa*or of respondents4spouses insistin% that the sub'ect property had already been sold to them! 6onsequently+ the N).F6 held in abeyance the release of said T6T! Thereupon+ a 6omplaint for Specific 7erformance and Dama%es was filed as in%+ amon% other thin%s+ that petitioners 1plaintiffs therein2 be declared the owners of the property in*ol*ed sub'ect to reimbursements of the amount made by respondents4spouses 1defendants therein2 in preterminatin% the mort%a%e loan with N).F6! Respondent N).F6 filed its >nswer! "&#$ It claimed that petitioners ha*e no cause of action a%ainst it because they ha*e not submitted the formal requirements to be considered assi%nees and successors4in4interest of the property under liti%ation! In their >nswer+"&&$ respondents4spouses alle%ed that because of petitioners4spousesA failure to fully pay the consideration and to update the monthly amortiDations with the N).F6+ they paid in full the existin% obli%ations with N).F6 as an initial step in the rescission and annulment of the Deed of Sale with >ssumption of .ort%a%e! In their counterclaim+ they maintain that the acts of petitioners in not fully complyin% with their obli%ations %i*e rise to rescission of the Deed of Sale with >ssumption of .ort%a%e with the correspondin% dama%es! >fter trial+ the lower court rendered its decision ratiocinatin%@ On the basis of the e*idence on record+ testimonial and documentary+ this 6ourt is of the *iew that plaintiffs ha*e no cause of action either a%ainst the spouses -alan% or the N).F6! 7laintiffs ha*e admitted on record they failed to pay the amount of 7?/+888!88 the balance due to the -alan%s in consideration of the Deed of Sale Eith >ssumption of .ort%a%e Obli%ation 1;xhs! J6K and J(K2! 6onsequently+ this is a breach of contract and e*idently a failure to comply with obli%ation arisin% from contracts! ! ! In this case+ N).F6 has not been duly informed due to lac of formal requirements to ac nowled%e plaintiffs as le%al assi%nees+ or

le%itimate tranferees and+ therefore+ successors4in4interest to the property+ plaintiffs should ha*e no le%al personality to claim any ri%ht to the same property! "&($ The decretal portion of the decision reads@ 7remises considered+ the fore%oin% complaint has not been pro*en e*en by preponderance of e*idence+ and+ as such+ plaintiffs ha*e no cause of action a%ainst the defendants herein! The abo*e4entitled case is ordered dismissed for lac of merit! :ud%ment is hereby rendered by way of counterclaim+ in fa*or of defendants and a%ainst plaintiffs+ to wit@ #! Orderin% the Deed of Sale Eith >ssumption of .ort%a%e Obli%ation 1;xhs! J6K and J(K2 rescinded and hereby declared the same as nullified without pre'udice for defendants4 spouses -alan% to return the partial payments made by plaintiffsC and the plaintiffs are ordered+ on the other hand+ to return the physical and le%al possession of the sub'ect property to spouses -alan% by way of mutual restitutionC &! To pay defendants spouses -alan% and N).F6+ each the amount of 7#8+888!88 as liti%ation expenses+ 'ointly and se*erallyC (! and ?! /! To pay attorneyAs fees to defendants in the amount of 7&8+888!88+ 'ointly and se*erallyC

The costs of suit! No moral and exemplary dama%es awarded!"&?$

> .otion for Reconsideration"&/$ was filed+ but same was denied! 7etitioners appealed the decision of the RT6 to the 6ourt of >ppeals! On (8 September #009+ the 6ourt of >ppeals disposed of the appeal as follows@ Obli%ations arisin% from contract ha*e the force of law between the contractin% parties and should be complied in %ood faith! The terms of a written contract are bindin% on the parties thereto! 7laintiffs4appellants therefore are under obli%ation to pay defendants4appellees spouses -alan% the sum of 7&/8+888!88+ and to assume the mort%a%e! Records show that upon the execution of the 6ontract of Sale or on :uly #0+ #008 plaintiffs4 appellants paid defendants4appellees spouses -alan% the amount of only 7?8+888!88! The next payment was made by plaintiffs4appellants on .arch #(+ #00# or ei%ht 192 months after the execution of the contract! 7laintiffs4appellants paid the amount of 7/+888!88! The next payment was made on >pril =+ #00# for 7#/+888!88 and on No*ember &9+ #00#+ for another 7#/+888!88!

From #00# until the present+ no other payments were made by plaintiffs4appellants to defendants4appellees spouses -alan%! Out of the 7&/8+888!88 purchase price which was supposed to be paid on the day of the execution of contract in :uly+ #008 plaintiffs4appellants ha*e paid+ in thespan of ei%ht 192 years+ from #008 to present+ the amount of only 7</+888!88! 7laintiffs4appellants should ha*e paid the 7&/8+888!88 at the time of the execution of contract in #008! ;i%ht 192 years ha*e already lapsed and plaintiffs4appellants ha*e not yet complied with their obli%ation! Ee consider this breach to be substantial! The tender made by plaintiffs4appellants after the filin% of this case+ of the .ana%erial 6hec in the amount of 7&<9+0/<!88 dated :anuary &?+ #00? cannot be considered as an effecti*e mode of payment! 7erformance or payment may be effected not by tender of payment alone but by both tender and consi%nation! It is consi%nation which is essential in order to extin%uish plaintiffs4 appellants obli%ation to pay the balance of the purchase price! In addition+ plaintiffs4appellants failed to comply with their obli%ation to pay the monthly amortiDations due on the mort%a%e! In the span of three 1(2 years from #008 to #00(+ plaintiffs4appellants made only six payments! The payments made by plaintiffs4appellants are not e*en sufficient to answer for the arreara%es+ interests and penalty char%es! On account of these circumstances+ the rescission of the 6ontract of Sale is warranted and 'ustified! !!! E);R;FOR;+ fore%oin% considered+ the appealed decision is hereby >FFIR.;D with modification! Defendants4appellees spouses -alan% are hereby ordered to return the partial payments made by plaintiff4appellants in the amount of 7#(/+888!88! No pronouncement as to cost!"&=$ The motion for reconsideration"&<$ filed by petitioners was denied by the 6ourt of >ppeals in a Resolution"&9$ dated && :uly #000! )ence+ this 7etition for Certiorari! 7etitioners raise the followin% assi%nment of errors@ #! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D E);N IT );,D T)>T 7;TITION;RSA 5R;>6) OF T); O5,I->TION E>S SF5ST>NTI>,!

&! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D E);N IN ;FF;6T IT );,D T)>T T);R; E>S NO SF5ST>NTI>, 6O.7,I>N6; EIT) T); O5,I->TION TO 7>3 T); .ONT),3 >.ORTIM>TION EIT) N).F6! (! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D E);N IT F>I,;D TO 6ONSID;R T); OT);R F>6TS >ND 6IR6F.ST>N6;S T)>T .I,IT>T; >->INST R;S6ISSION! ?! T); )ONOR>5,; 6OFRT OF >77;>,S ;RR;D E);N IT F>I,;D TO 6ONSID;R T)>T T); >6TION FOR R;S6ISSION IS SF5SIDI>R3!"&0$ 5efore discussin% the errors alle%edly committed by the 6ourt of >ppeals+ it must be stated a priori that the latter made a misappreciation of e*idence re%ardin% the consideration of the property in liti%ation when it relied solely on the Deed of Sale with >ssumption of .ort%a%e executed by the respondents4spouses -alan% and petitioners4spouses 6annu! >s abo*e4quoted+ the consideration for the house and lot stated in the Deed of Sale with >ssumption of .ort%a%e is 7&/8+888!88+ plus the assumption of the balance of the mort%a%e loan with N).F6! )owe*er+ after %oin% o*er the record of the case+ more particularly the >nswer of respondents4spouses+ the e*idence shows the consideration therefor is 7#&8+888!88+ plus the payment of the outstandin% loan mort%a%e with N).F6+ and of the JequityK or second mort%a%e with 6;RF Realty 1De*eloper of the property2! "(8$ Nowhere in the complaint and answer of the petitioners4spouses 6annu and respondents4 spouses -alan% shows that the consideration is J7&/8+888!88!K In fact+ what is clear is that of the 7#&8+888!88 to be paid to the latter+ only 7</+888!88 was paid to >delina Timban%+ the spouses -alan%As attorney4in4fact! This debun s the pro*ision in the Deed of Sale with >ssumption of .ort%a%e that the amount of 7&/8+888!88 has been recei*ed by petitioners! Inasmuch as the Deed of Sale with >ssumption of .ort%a%e failed to express the true intent and a%reement of the parties re%ardin% its consideration+ the same should not be fully relied upon! The fore%oin% facts lead us to hold that the case on hand falls within one of the reco%niDed exceptions to the parole e*idence rule! Fnder the Rules of 6ourt+ a party may present e*idence to modify+ explain or add to the terms of the written a%reement if he puts in issue in his pleadin%+ amon% others+ its failure to express the true intent and a%reement of the parties thereto!"(#$ In the case at bar+ when respondents4spouses enumerated in their >nswer the terms and conditions for the sale of the property under liti%ation+ which is different from that stated in the Deed of Sale with >ssumption with .ort%a%e+ they already put in issue the matter of consideration! Since there is a difference as to what the true consideration is+ this 6ourt has admitted e*idence a!iunde to explain such inconsistency! Thus+ the 6ourt has loo ed into the pleadin%s and testimonies of the parties to thresh out the discrepancy and to clarify the intent of the parties!

>s re%ards the computation"(&$ of petitioners as to the brea down of the 7&/8+888!88 consideration+ we find the same to be self4ser*in% and unsupported by e*idence! On the first assi%ned error+ petitioners ar%ue that the 6ourt erred when it ruled that their breach of the obli%ation was substantial! Settled is the rule that rescission or+ more accurately+ resolution+ "(($ of a party to an obli%ation under >rticle ##0#"(?$ is predicated on a breach of faith by the other party that *iolates the reciprocity between them!"(/$ >rticle ##0# reads@ >rt! ##0#! The power to rescind obli%ations is implied in reciprocal ones+ in case one of the obli%ors should not comply with what is incumbent upon him! The in'ured party may choose between the fulfillment and the rescission of the obli%ation+ with the payment of dama%es in either case! )e may also see rescission+ e*en after he has chosen fulfillment+ if the latter should become impossible! The court shall decree the rescission claimed+ unless there be 'ust cause authoriDin% the fixin% of a period! Rescission will not be permitted for a sli%ht or casual breach of the contract! Rescission may be had only for such breaches that are substantial and fundamental as to defeat the ob'ect of the parties in ma in% the a%reement! "(=$ The question of whether a breach of contract is substantial depends upon the attendin% circumstances "(<$ and not merely on the percenta%e of the amount not paid! In the case at bar+ we find petitionersA failure to pay the remainin% balance of 7?/+888!88 to be substantial! ;*en assumin% arguendo that only said amount was left out of the supposed consideration of 7&/8+888!88+ or ei%hteen 1#9R2 percent thereof+ this percenta%e is still substantial! Ta en to%ether with the fact that the last payment made was on &9 No*ember #00#+ ei%hteen months before the respondent Fernandina -alan% paid the outstandin% balance of the mort%a%e loan with N).F6+ the intention of petitioners to rene%e on their obli%ation is utterly clear! 6itin% 6assive Construction, %nc. v. %ntermediate $ppe!!ate Court +"(9$ petitioners as that they be %ranted additional time to complete their obli%ation! Fnder the facts of the case+ to %i*e petitioners additional time to comply with their obli%ation will be puttin% premium on their blatant non4compliance of their obli%ation! They had all the time to do what was required of them 1i.e!+ pay the 7?/+888!88 balance and to properly assume the mort%a%e loan with the N).F62+ but still they failed to comply! Despite demands for them to pay the balance+ no payments were made!"(0$ The fact that petitioners tendered a .ana%erAs 6hec to respondents4spouses -alan% in the amount of 7&<9+0/<!88 se*en months after the filin% of this case is of no moment! Tender of payment does not by itself produce le%al payment+ unless it is completed by consi%nation!

"?8$

Their failure to fulfill their obli%ation %a*e the respondents4spouses -alan% the ri%ht to rescission! >nent the second assi%ned error+ we find that petitioners were not reli%ious in payin% the amortiDation with the N).F6! >s admitted by them+ in the span of three years from #008 to #00(+ their payments co*ered only thirty months! "?#$ This+ indeed+ constitutes another breach or *iolation of the Deed of Sale with >ssumption of .ort%a%e! On top of this+ there was no formal assumption of the mort%a%e obli%ation with N).F6 because of the lac of appro*al by the N).F6"?&$ on account of petitionersA non4submission of requirements in order to be considered as assi%neesHsuccessors4in4interest o*er the property co*ered by the mort%a%e obli%ation!"?($ On the third assi%ned error+ petitioners claim there was no clear e*idence to show that respondents4spouses -alan% demanded from them a strict andHor faithful compliance of the Deed of Sale with >ssumption of .ort%a%e! Ee do not a%ree! There is sufficient e*idence showin% that demands were made from petitioners to comply with their obli%ation! >delina R! Timban%+ attorney4in4fact of respondents4spouses+ per instruction of respondent Fernandina -alan%+ made constant follow4ups after the last payment made on &9 No*ember #00#+ but petitioners did not pay! "??$ Respondent Fernandina -alan% stated in her >nswer"?/$ that upon her arri*al from >merica in October #00&+ she demanded from petitioners the complete compliance of their obli%ation by payin% the full amount of the consideration 17#&8+888!882 or in the alternati*e to *acate the property in question+ but still+ petitioners refused to fulfill their obli%ations under the Deed of Sale with >ssumption of .ort%a%e! Sometime in .arch #00(+ due to the fact that full payment has not been paid and that the monthly amortiDations with the N).F6 ha*e not been fully updated+ she made her intentions clear with petitioner ,eticia 6annu that she will rescind or annul the Deed of Sale with >ssumption of .ort%a%e! Ee li ewise rule that there was no wai*er on the part of petitioners to demand the rescission of the Deed of Sale with >ssumption of .ort%a%e! The fact that respondents4spouses accepted+ throu%h their attorney4in4fact+ payments in installments does not constitute wai*er on their part to exercise their ri%ht to rescind the Deed of Sale with >ssumption of .ort%a%e! >delina Timban% merely accepted the installment payments as an accommodation to petitioners since they ept on promisin% they would pay! )owe*er+ after the lapse of considerable time 1#9 months from last payment2 and the purchase price was not yet fully paid+ respondents4spouses exercised their ri%ht of rescission when they paid the outstandin% balance of the mort%a%e loan with N).F6! It was only after petitioners stopped payin% that respondents4spouses mo*ed to exercise their ri%ht of rescission! 7etitioners cite the case of $nge!es v. Ca!asanz"?=$ to support their claim that respondents4 spouses wai*ed their ri%ht to rescind! Ee cannot apply this case since it is not on all fours with the case before us! First+ in $nge!es+ the breach was only sli%ht and casual which is not true in the case before us! Second+ in $nge!es+ the buyer had already paid more than the

principal obli%ation+ while in the instant case+ the buyers 1petitioners2 did not pay 7?/+888!88 of the 7#&8+888!88 they were obli%ated to pay! Ee find petitionersA statement that there is no e*idence of pre'udice or dama%e to 'ustify rescission in fa*or of respondents4spouses to be unfounded! The dama%e suffered by respondents4spouses is the effect of petitionersA failure to fully comply with their obli%ation+ that is+ their failure to pay the remainin% 7?/+888!88 and to update the amortiDations on the mort%a%e loan with the N).F6! 7etitioners ha*e in their possession the property under liti%ation! )a*in% parted with their house and lot+ respondents4spouses should be fully compensated for it+ not only monetarily+ but also as to the terms and conditions a%reed upon by the parties! This did not happen in the case before us! 6itin% Seva v. 4er/in 8 Co., %nc.+"?<$ petitioners ar%ue that no rescission should be decreed because there is no e*idence on record that respondent Fernandina -alan% is ready+ willin% and able to comply with her own obli%ation to restore to them the total payments they made! They added that no alle%ation to that effect is contained in respondents4spousesA >nswer! Ee find this ar%ument to be misleadin%! First+ the facts obtainin% in Seva case do not fall squarely with the case on hand! In the former+ the failure of one party to perform his obli%ation was the fault of the other party+ while in the case on hand+ failure on the part of petitioners to perform their obli%ation was due to their own fault! Second+ what is stated in the boo of :ustice ;d%ardo ,! 7aras is J"i$t 1referrin% to the ri%ht to rescind or resol*e2 can be demanded only if the plaintiff is ready+ willin% and able to comply with his own obli%ation+ and the other is not!K In other words+ if one party has complied or fulfilled his obli%ation+ and the other has not+ then the former can exercise his ri%ht to rescind! In this case+ respondents4spouses complied with their obli%ation when they %a*e the possession of the property in question to petitioners! Thus+ they ha*e the ri%ht to as for the rescission of the Deed of Sale with >ssumption of .ort%a%e! On the fourth assi%ned error+ petitioners+ relyin% on >rticle #(9( of the 6i*il 6ode+ maintain that the 6ourt of >ppeals erred when it failed to consider that the action for rescission is subsidiary! Their reliance on >rticle #(9( is misplaced! The subsidiary character of the action for rescission applies to contracts enumerated in >rticles #(9#"?9$ of the 6i*il 6ode! The contract in*ol*ed in the case before us is not one of those mentioned therein! The pro*ision that applies in the case at bar is >rticle ##0#! In the concurrin% opinion of :ustice :ose 5!,! Reyes in Eniversa! ood Corp. v. Court o# $ppea!s+"?0$ rescission under >rticle ##0# was distin%uished from rescission under >rticle #(9#! :ustice :!5!,! Reyes said@

! ! ! The rescission on account of breach of stipulations is not predicated on in'ury to economic interests of the party plaintiff but on the breach of faith by the defendant+ that *iolates the reciprocity between the parties! It is not a subsidiary action+ and >rticle ##0# may be scanned without disclosin% anywhere that the action for rescission thereunder is subordinated to anythin% other than the culpable breach of his obli%ations by the defendant! This rescission is a principal action retaliatory in character+ it bein% un'ust that a party be held bound to fulfill his promises when the other *iolates his! >s expressed in the old ,atin aphorism@ J 5on servanti #idem, non est #ides servanda!K )ence+ the reparation of dama%es for the breach is purely secondary! On the contrary+ in the rescission by reason of !esion or economic pre'udice+ the cause of action is subordinated to the existence of that pre'udice+ because it is the raison d 0tre as well as the measure of the ri%ht to rescind! )ence+ where the defendant ma es %ood the dama%es caused+ the action cannot be maintained or continued+ as expressly pro*ided in >rticles #(9( and #(9?! 5ut the operation of these two articles is limited to the cases of rescission for !esion enumerated in >rticle #(9# of the 6i*il 6ode of the 7hilippines+ and does not apply to cases under >rticle ##0#! From the fore%oin%+ it is clear that rescission 1JresolutionK in the Old 6i*il 6ode2 under >rticle ##0# is a principal action+ while rescission under >rticle #(9( is a subsidiary action! The former is based on breach by the other party that *iolates the reciprocity between the parties+ while the latter is not! In the case at bar+ the reciprocity between the parties was *iolated when petitioners failed to fully pay the balance of 7?/+888!88 to respondents4spouses and their failure to update their amortiDations with the N).F6! 7etitioners maintain that inasmuch as respondents4spouses -alan% were not %ranted the ri%ht to unilaterally rescind the sale under the Deed of Sale with >ssumption of .ort%a%e+ they should ha*e first as ed the court for the rescission thereof before they fully paid the outstandin% balance of the mort%a%e loan with the N).F6! They claim that such payment is a unilateral act of rescission which *iolates existin% 'urisprudence! In +an v. Court o# $ppea!s+"/8$ this court said@ ! ! ! "T$he power to rescind obli%ations is implied in reciprocal ones in case one of the obli%ors should not comply with what is incumbent upon him is clear from a readin% of the 6i*il 6ode pro*isions! )owe*er+ it is equally settled that+ in the absence of a stipulation to the contrary+ this power must be in*o ed 'udiciallyC it cannot be exercised solely on a partyAs own 'ud%ment that the other has committed a breach of the obli%ation! Ehere there is nothin% in the contract empowerin% the petitioner to rescind it without resort to the courts+ the petitionerAs action in unilaterally terminatin% the contract in this case is un'ustified! It is e*ident that the contract under consideration does not contain a pro*ision authoriDin% its extra'udicial rescission in case one of the parties fails to comply with what is incumbent upon him! This bein% the case+ respondents4spouses should ha*e as ed for 'udicial inter*ention to

obtain a 'udicial declaration of rescission! 5e that as it may+ and considerin% that respondents4 spousesA >nswer 1with affirmati*e defenses2 with 6ounterclaim see s for the rescission of the Deed of Sale with >ssumption of .ort%a%e+ it behoo*es the court to settle the matter once and for all than to ha*e the case re4liti%ated a%ain on an issue already heard on the merits and which this court has already ta en co%niDance of! )a*in% found that petitioners seriously breached the contract+ we+ therefore+ declare the same is rescinded in fa*or of respondents4 spouses! >s a consequence of the rescission or+ more accurately+ resolution of the Deed of Sale with >ssumption of .ort%a%e+ it is the duty of the court to require the parties to surrender whate*er they may ha*e recei*ed from the other! The parties should be restored to their ori%inal situation!"/#$ The record shows petitioners paid respondents4spouses the amount of 7</+888!88 out of the 7#&8+888!88 a%reed upon! They also made payments to N).F6 amountin% to 7//+(#&!?<! >s to the petitionersA alle%ed payment to 6;RF Realty of 7?=+=#=!<8+ except for petitioner ,eticia 6annuAs bare alle%ation+ we find the same not to be supported by competent e*idence! >s a %eneral rule+ one who pleads payment has the burden of pro*in% it! "/&$ )owe*er+ since it has been admitted in respondents4spousesA >nswer that petitioners shall assume the second mort%a%e with 6;RF Realty in the amount of 7(/+888!88+ and that >delina Timban%+ respondents4spousesA *ery own witness+ testified "/($ that same has been paid+ it is but proper to return this amount to petitioners! The three amounts total 7#=/+(#&!?< 44 the sum to be returned to petitioners! 4%ERE1ORE+ premises considered+ the decision of the 6ourt of >ppeals is hereby >FFIR.;D with .ODIFI6>TION! Spouses -il and Fernandina -alan% are hereby ordered to return the partial payments made by petitioners in the amount of 7#=/+(#&!?<! Eith costs! SO ORDERED. Puno, $cting C.J., (Chairman), $ustria-6artinez, and Ca!!e(o, Sr., JJ., concur. +inga, J., out of the country!

Republic of the 7hilippines SU REME $OURT .anila 1IRST DI:ISION G.R. No. 17A596 S+p)+;0+r 18, 200A

,astly+ petitioner asserted that when respondent ceased payin% her installments+ her status of buyer was automatically transformed to that of a lessee! Therefore+ she continued to possess the property by mere tolerance of 7atricio and+ subsequently+ of petitioner! On the other hand+ respondent alle%ed that she paid her monthly installments reli%iously+ until sometime in #098 when 7atricio chan%ed his mind and offered to refund all her payments pro*ided she would surrender the house! She refused! 7atricio then started harassin% her and be%an demolishin% the house portion by portion! Respondent admitted that she failed to pay some installments after December #0<0+ but that she resumed payin% in #098 until her balance dwindled to 7/+=/8! She claimed that despite se*eral months of delay in payment+ 7atricio ne*er sued for e'ectment and e*en accepted her late payments! Respondent also a*erred that on September #?+ #09#+ she and 7atricio si%ned an a%reement 1;xh! &2 whereby he consented to the suspension of respondentAs monthly payments until December #09#! )owe*er+ e*en before the lapse of said period+ 7atricio resumed demolishin% respondentAs house+ promptin% her to lod%e a complaint with the 4aranga3 6aptain who ad*ised her that she could continue suspendin% payment e*en beyond December (#+ #09# until 7atricio returned all the materials he too from her house! This 7atricio failed to do until his death! Respondent did not deny that she still owed 7atricio 7/+=/8+ but claimed that she did not resume payin% her monthly installment because of the unlawful acts committed by 7atricio+ as well as the filin% of the e'ectment case a%ainst her! She denied ha*in% any nowled%e of the 1asunduan of No*ember #9+ #0<0! 7atricio and his wife died on September #<+ #00& and on October #<+ #00?+ respecti*ely! 7etitioner became their sole successor4in4interest pursuant to a wai*er by the other heirs! On .arch /+ #00<+ respondent recei*ed a letter from petitionerAs counsel dated February &?+ #00< demandin% that she *acate the premises within fi*e days on the %round that her possession had become unlawful! Respondent i%nored the demand! The Punong 4aranga3 failed to settle the dispute amicably! On >pril 9+ #00<+ petitioner filed a 6omplaint for unlawful detainer a%ainst respondent with the .unicipal Trial 6ourt 1.T62 of -ui%uinto+ 5ulacan prayin% that+ after hearin%+ 'ud%ment be rendered orderin% respondent to immediately *acate the sub'ect property and surrender it to petitionerC forfeitin% the amount of 7#&+0/8 in fa*or of petitioner as rentalsC orderin% respondent to pay petitioner the amount of 7(+888 under the 1asunduan and the amount of 7/88 per month from :anuary #098 until she *acates the property+ and to pay petitioner attorneyAs fees and the costs! On December &&+ #009+ the .T6 rendered a decision in fa*or of petitioner! It stated that althou%h the 6ontract to Sell pro*ides for a rescission of the a%reement upon failure of the *endee to pay any installment+ what the contract actually allows is properly termed a resolution under >rt! ##0# of the 6i*il 6ode!

MANUEL $. AGTALUNAN, petitioner+ *s! RU1INA DELA $RU9 :DA. DE MAN9ANO, respondent! DE$ISION A9$UNA, J.3 This is a petition for re*iew on certiorari under Rule ?/ of the Rules of 6ourt of the 6ourt of >ppealsA 16>2 Decision promul%ated on October (8+ &888 and its Resolution dated .arch &(+ &88# denyin% petitionerAs motion for reconsideration! The Decision of the 6> affirmed the Decision of the Re%ional Trial 6ourt 1RT62 of .alolos+ 5ulacan+ dated :une &/+ #000 dismissin% the case of unlawful detainer for lac of merit! The facts are as follows@ On :uly #0+ #0<?+ 7atricio 7a%talunan 17atricio2+ petitionerAs stepfather and predecessor4in4 interest+ entered into a 6ontract to Sell with respondent+ wife of 7atricioAs former mechanic+ Teodoro .anDano+ whereby the former a%reed to sell+ and the latter to buy+ a house and lot which formed half of a parcel of land+ co*ered by Transfer 6ertificate of Title 1T6T2 No! T4 #88&0 1now T6T No! RT/00&0 "T4&/?<<($2+ with an area of &(= square meters! The consideration of 7#<+988 was a%reed to be paid in the followin% manner@ 7#+/88 as downpayment upon execution of the 6ontract to Sell+ and the balance to be paid in equal monthly installments of 7#/8 on or before the last day of each month until fully paid! It was also stipulated in the contract that respondent could immediately occupy the house and lotC that in case of default in the payment of any of the installments for 08 days after its due date+ the contract would be automatically rescinded without need of 'udicial declaration+ and that all payments made and all impro*ements done on the premises by respondent would be considered as rentals for the use and occupation of the property or payment for dama%es suffered+ and respondent was obli%ed to peacefully *acate the premises and deli*er the possession thereof to the *endor! 7etitioner claimed that respondent paid only 7#&+0/8! She alle%edly stopped payin% after December #0<0 without any 'ustification or explanation! .oreo*er+ in a B 1asunduanB# dated No*ember #9+ #0<0+ respondent borrowed7(+888 from 7atricio payable in one year either in one lump sum payment or by installments+ failin% which the balance of the loan would be added to the principal sub'ect of the monthly amortiDations on the land!

The .T6 held that respondentAs failure to pay not a few installments caused the resolution or termination of the 6ontract to Sell! The last payment made by respondent was on :anuary 0+ #098 1;xh! <#2! Thereafter+ respondentAs ri%ht of possession ipso #acto ceased to be a le%al ri%ht+ and became possession by mere tolerance of 7atricio and his successors4in4interest! Said tolerance ceased upon demand on respondent to *acate the property! The dispositi*e portion of the .T6 Decision reads@ Eherefore+ all the fore%oin% considered+ 'ud%ment is hereby rendered+ orderin% the defendant@ a! to *acate the property co*ered by Transfer 6ertificate of Title No! T4#88&0 of the Re%ister of Deeds of 5ulacan 1now T6T No! RT4/00&0 of the Re%ister of Deeds of 5ulacan2+ and to surrender possession thereof to the plaintiffC b! to pay the plaintiff the amount of 7##(+/88 representin% rentals from :anuary #098 to the presentC c! to pay the plaintiff such amount of rentals+ at 7/88Hmonth+ that may become due after the date of 'ud%ment+ until she finally *acates the sub'ect propertyC d! to pay to the plaintiff the amount of 7&/+888 as attorneyAs fees! SO ORD;R;D!& On appeal+ the RT6 of .alolos+ 5ulacan+ in a Decision dated :une &/+ #000+ re*ersed the decision of the .T6 and dismissed the case for lac of merit! >ccordin% to the RT6+ the a%reement could not be automatically rescinded since there was deli*ery to the buyer! > 'udicial determination of rescission must be secured by petitioner as a condition precedent to con*ert the possession de #acto of respondent from lawful to unlawful! The dispositi*e portion of the RT6 Decision states@ E);R;FOR;+ 'ud%ment is hereby rendered re*ersin% the decision of the .unicipal Trial 6ourt of -ui%uinto+ 5ulacan and the e'ectment case instead be dismissed for lac of merit! ( The motion for reconsideration and motion for execution filed by petitioner were denied by the RT6 for lac of merit in an Order dated >u%ust #8+ #000! Thereafter+ petitioner filed a petition for re*iew with the 6>! In a Decision promul%ated on October (8+ &888+ the 6> denied the petition and affirmed the Decision of the RT6! The dispositi*e portion of the Decision reads@ E);R;FOR;+ the petition for re*iew on certiorari is Denied! The assailed Decision of the Re%ional Trial 6ourt of .alolos+ 5ulacan dated &/ :une #000 and its Order dated #8 >u%ust #000 are hereby >FFIR.;D!

SO ORD;R;D! ? The 6> found that the parties+ as well as the .T6 and RT6 failed to ad*ert to and to apply Republic >ct 1R!>!2 No! =//&+ more commonly referred to as the .aceda ,aw+ which is a special law enacted in #0<& to protect buyers of real estate on installment payments a%ainst onerous and oppressi*e conditions! The 6> held that the 6ontract to Sell was not *alidly cancelled or rescinded under Sec! ( 1b2 of R!>! No! =//&+ and reco%niDed respondentAs ri%ht to continue occupyin% unmolested the property sub'ect of the contract to sell! The 6> denied petitionerAs motion for reconsideration in a Resolution dated .arch &(+ &88#! )ence+ this petition for re*iew on certiorari! 7etitioner contends that@ >! Respondent Dela 6ruD must bear the consequences of her deliberate withholdin% of+ and refusal to pay+ the monthly payment! The 6ourt of >ppeals erred in allowin% Dela 6ruD who acted in bad faith from benefitin% under the .aceda ,aw! 5! The 6ourt of >ppeals erred in resol*in% the issue on the applicability of the .aceda ,aw+ which issue was not raised in the proceedin%s a quo! 6! >ssumin% arguendo that the RT6 was correct in rulin% that the .T6 has no 'urisdiction o*er a rescission case+ the 6ourt of >ppeals erred in not remandin% the case to the RT6 for trial!/ 7etitioner submits that the .aceda ,aw supports and reco%niDes the ri%ht of *endors of real estate to cancel the sale outside of court+ without need for a 'udicial declaration of rescission+ citin% 2uzon 4ro)erage Co., %nc., v. 6aritime 4ui!ding Co., %nc.= 7etitioner contends that respondent also had more than the %race periods pro*ided under the .aceda ,aw within which to pay! Fnder Sec! ( < of the said law+ a buyer who has paid at least two years of installments has a %race period of one month for e*ery year of installment paid! 5ased on the amount of 7#&+0/8 which respondent had already paid+ she is entitled to a %race period of six months within which to pay her unpaid installments after December+ #0<0! Respondent was %i*en more than six months from :anuary #098 within which to settle her unpaid installments+ but she failed to do so! 7etitionerAs demand to *acate was sent to respondent in February #00<! There is nothin% in the .aceda ,aw+ petitioner asserts+ which %i*es the buyer a ri%ht to pay arreara%es after the %race periods ha*e lapsed+ in the e*ent of an in*alid demand for rescission! The .aceda ,aw only pro*ides that actual cancellation shall ta e place after (8 days from receipt of the notice of cancellation or demand for rescission and upon full payment of the cash surrender *alue to the buyer!

7etitioner contends that his demand letter dated February &?+ #00< should be considered the notice of cancellation since the demand letter informed respondent that she had Blon% ceased to ha*e any ri%ht to possess the premises in question due to "her$ failure to pay without 'ustifiable cause!B In support of his contention+ he cited 2a3ug v. %ntermediate $ppe!!ate Court9 which held that Bthe additional formality of a demand on "the sellerAs$ part for rescission by notarial act would appear+ in the premises+ to be merely circuitous and consequently superfluous!B )e stated that in 2a3ug+ the seller already made a written demand upon the buyer! In addition+ petitioner asserts that whate*er cash surrender *alue respondent is entitled to ha*e been applied and must be applied to rentals for her use of the house and lot after December+ #0<0 or after she stopped payment of her installments! 7etitioner ar%ues that assumin% 7atricio accepted respondentAs delayed installments in #09#+ such act cannot pre*ent the cancellation of the 6ontract to Sell! Installments after #09# were still unpaid and the applicable %race periods under the .aceda ,aw on the unpaid installments ha*e lon% lapsed! Respondent cannot be allowed to hide behind the .aceda ,aw! She acted with bad faith and must bear the consequences of her deliberate withholdin% of and refusal to ma e the monthly payments! 7etitioner also contends that the applicability of the .aceda ,aw was ne*er raised in the proceedin%s belowC hence+ it should not ha*e been applied by the 6> in resol*in% the case! The 6ourt is not persuaded! The 6> correctly ruled that R!> No! =//&+ which %o*erns sales of real estate on installment+ is applicable in the resolution of this case! This case ori%inated as an action for unlawful detainer! Respondent is alle%ed to be ille%ally withholdin% possession of the sub'ect property after the termination of the 6ontract to Sell between 7atricio and respondent! It is+ therefore+ incumbent upon petitioner to pro*e that the 6ontract to Sell had been cancelled in accordance with R!>! No! =//&! The pertinent pro*ision of R!>! No! =//& reads@ Sec! (! In all transactions or contracts in*ol*in% the sale or financin% of real estate on installment payments+ includin% residential condominium apartments but excludin% industrial lots+ commercial buildin%s and sales to tenants under Republic >ct Numbered Thirty4ei%ht hundred forty4four as amended by Republic >ct Numbered Sixty4three hundred ei%hty4nine+ where the buyer has paid at least two years of installments+ the buyer is entitled to the followin% ri%hts in case he defaults in the payment of succeedin% installments@ 1a2 To pay+ without additional interest+ the unpaid installments due within the total %race period earned by him+ which is hereby fixed at the rate of one month %race period for e*ery one year of installment payments made@ 7ro*ided+ That this ri%ht shall be exercised by the buyer only once in e*ery fi*e years of the life of the contract and its extensions+ if any!

1b2 I/ )&+ (o")r!() i' (!"(+ll+#, )&+ '+ll+r '&!ll r+/."# )o )&+ 0.*+r )&+ (!'& '.rr+"#+r <!l.+ o/ )&+ p!*;+")' o" )&+ prop+r)* equi*alent to fifty percent of the total payments made and+ after fi*e years of installments+ an additional fi*e percent e*ery year but not to exceed ninety percent of the total payments made@ !rovided, T&!) )&+ !().!l (!"(+ll!)io" o/ )&+ (o")r!() '&!ll )!J+ pl!(+ !/)+r )&ir)* #!*' /ro; r+(+ip) 0* )&+ 0.*+r o/ )&+ "o)i(+ o/ (!"(+ll!)io" or )&+ #+;!"# /or r+'(i''io" o/ )&+ (o")r!() 0* ! "o)!ri!l !() !"# .po" /.ll p!*;+") o/ )&+ (!'& '.rr+"#+r <!l.+ )o )&+ 0.*+r!0 R!>! No! =//&+ otherwise nown as the BRealty Installment 5uyer 7rotection >ct+B reco%niDes in conditional sales of all inds of real estate 1industrial+ commercial+ residential2 the ri%ht of the seller to cancel the contract upon non4payment of an installment by the buyer+ which is simply an e*ent that pre*ents the obli%ation of the *endor to con*ey title from acquirin% bindin% force!#8 The 6ourt a%rees with petitioner that the cancellation of the 6ontract to Sell may be done outside the court particularly when the buyer a%rees to such cancellation! )owe*er+ the cancellation of the contract by the seller must be in accordance with Sec! ( 1b2 of R!>! No! =//&+ which requires a notarial act of rescission and the refund to the buyer of the full payment of the cash surrender *alue of the payments on the property! >ctual cancellation of the contract ta es place after (8 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender *alue to the buyer! 5ased on the records of the case+ the 6ontract to Sell was not *alidly cancelled or rescinded under Sec! ( 1b2 of R!>! No! =//&! First+ 7atricio+ the *endor in the 6ontract to Sell+ died on September #<+ #00& without cancelin% the 6ontract to Sell! Second+ petitioner also failed to cancel the 6ontract to Sell in accordance with law! 7etitioner contends that he has complied with the requirements of cancellation under Sec! ( 1b2 of R!>! No! =//&! )e asserts that his demand letter dated February &?+ #00< should be considered as the notice of cancellation or demand for rescission by notarial act and that the cash surrender *alue of the payments on the property has been applied to rentals for the use of the house and lot after respondent stopped payment after :anuary #098! The 6ourt+ howe*er+ finds that the letter ## dated February &?+ #00<+ which was written by petitionerAs counsel+ merely made formal demand upon respondent to *acate the premises in question within fi*e days from receipt thereof since she had Blon% ceased to ha*e any ri%ht to possess the premises x x x due to "her$ failure to pay without 'ustifiable cause the installment payments x x x!B 6learly+ the demand letter is not the same as the notice of cancellation or demand for rescission 0* ! "o)!ri!l !()required by R!> No! =//&! 7etitioner cannot rely on 2a3ug v. %ntermediate $ppe!!ate Court#& to support his contention that the demand letter was sufficient compliance! 2a3ug held that Bthe additional formality of a demand on "the sellerAs$ part for

rescission by notarial act would appear+ in the premises+ to be merely circuitous and consequently superfluousB since the seller therein filed an action for !"".l;+") o/ (o")r!(), which is a indred concept of rescission by notarial act! #( ;*idently+ the case of unlawful detainer filed by petitioner does not exempt him from complyin% with the said requirement! In addition+ Sec! ( 1b2 of R!>! No! =//& requires refund of the cash surrender *alue of the payments on the property to the buyer before cancellation of the contract! The pro*ision does not pro*ide a different requirement for contracts to sell which allow possession of the property by the buyer upon execution of the contract li e the instant case! )ence+ petitioner cannot insist on compliance with the requirement by assumin% that the cash surrender *alue payable to the buyer had been applied to rentals of the property after respondent failed to pay the installments due! There bein% no *alid cancellation of the 6ontract to Sell+ the 6> correctly reco%niDed respondentAs ri%ht to continue occupyin% the property sub'ect of the 6ontract to Sell and affirmed the dismissal of the unlawful detainer case by the RT6! The 6ourt notes that this case has been pendin% for more than ten years! 5oth parties prayed for other reliefs that are 'ust and equitable under the premises! )ence+ the ri%hts of the parties o*er the sub'ect property shall be resol*ed to finally dispose of that issue in this case! 6onsiderin% that the 6ontract to Sell was not cancelled by the *endor+ 7atricio+ durin% his lifetime or by petitioner in accordance with R!>! No! =//& when petitioner filed this case of unlawful detainer after && years of continuous possession of the property by respondent who has paid the substantial amount of 7#&+(88 out of the purchase price of 7#<+988+ the 6ourt a%rees with the 6> that it is only ri%ht and 'ust to allow respondent to pay her arrears and settle the balance of the purchase price! For respondentAs delay in the payment of the installments+ the 6ourt+ in its discretion+ and applyin% >rticle &&80#?of the 6i*il 6ode+ may award interest at the rate of =R per annum #/ on the unpaid balance considerin% that there is no stipulation in the 6ontract to Sell for such interest! For purposes of computin% the le%al interest+ the rec onin% period should be the filin% of the complaint for unlawful detainer on >pril 9+ #00<! 5ased on respondentAs e*idence#= of payments made+ the .T6 found that respondent paid a total of 7#&+(88 out of the purchase price of 7#<+988! )ence+ respondent still has a balance of 7/+/88+ plus le%al interest at the rate of =R per annum on the unpaid balance startin% >pril 9+ #00<! The third issue is disre%arded since petitioner assails an inexistent rulin% of the RT6 on the lac of 'urisdiction of the .T6 o*er a rescission case when the instant case he filed is for unlawful detainer!

4%ERE1ORE+ the Decision of the 6ourt of >ppeals dated October (8+ &888 sustainin% the dismissal of the unlawful detainer case by the RT6 is A11IRMED with the followin% MODI1I$ATIONS@ #! Respondent Rufina Dela 6ruD Vda! de .anDano shall pay petitioner .anuel 6! 7a%talunan the balance of the purchase price in the amount of Fi*e Thousand Fi*e )undred 7esos 17/+/882 plus interest at =R per annum from >pril 9+ #00< up to the finality of this 'ud%ment+ and thereafter+ at the rate of #&R per annumC &! Fpon payment+ petitioner .anuel 6! 7a%talunan shall execute a Deed of >bsolute Sale of the sub'ect property and deli*er the certificate of title in fa*or of respondent Rufina Dela 6ruD Vda! de .anDanoC and (! In case of failure to pay within =8 days from finality of this Decision+ respondent Rufina Dela 6ruD Vda! de .anDano shall immediately *acate the premises without need of further demand+ and the downpayment and installment payments of 7#&+(88 paid by her shall constitute rental for the sub'ect property! No costs! SO ORDERED. Puno, C.J., Chairperson, Sandova!-9utierrez, Corona, 9arcia, JJ., concur!

S;6OND DIVISION [G.R. No. 101A28. M!* 11, 2000] INDUSTRIAL MANAGEMENT INTERNATIONAL DE:ELO MENT $OR . @INIMA$OB, petitioner, vs. NATIONAL LABOR RELATIONS $OMMISSION, @1o.r)& Di<i'io"B $+0. $i)*, !"# ENRIDUE SULIT, SO$ORRO MA%INAY, ESMERALDO EGARIDO, TITA BA$USMO, GINO NIERE, :IRGINIA BA$US, ROBERTO NEMEN9O, DARIO GO, !"# ROBERTO ALEGARBES, respondents. DE$ISION BUENA, J.3 This is a petition for certiorari assailin% the Resolution dated September ?+ #00# issued by the National ,abor Relations 6ommission in R>54VII48<##49? on the alle%ed %round that it committed a %ra*e abuse of discretion amountin% to lac of 'urisdiction in upholdin% the >lias Erit of ;xecution issued by the ,abor >rbiter which de*iated from the dispositi*e portion of the Decision dated .arch #8+ #09<+ thereby holdin% that the liability of the six respondents in the case below is solidary despite the absence of the word BsolidaryB in the dispositi*e portion of the Decision+ when their liability should merely be 'oint! S4'c' The factual antecedents are undisputed@ Supr4eme In September #09?+ pri*ate respondent ;nrique Sulit+ Socorro .ahinay+ ;smeraldo 7e%arido+ Tita 5acusmo+ -ino Niere+ Vir%inia 5acus+ Roberto NemenDo+ Dario%o+ and Roberto >le%arbes filed a complaint with the Department of ,abor and ;mployment+ Re%ional >rbitration 5ranch No! VII in 6ebu 6ity a%ainst Filipinas 6arbon .inin% 6orporation+ -erardo Sicat+ >ntonio -onDales+ 6hiu 6hin -in+ ,o Tuan 6hin+ and petitioner Industrial .ana%ement De*elopment 6orporation 1INI.>6O2+ for payment of separation pay and unpaid wa%es! Sc4'' In a Decision dated .arch #8+ #09<+ ,abor >rbiter 5onifacio 5! Tumama held that@ BR;S7ONSIV;+ to all the fore%oin%+ 'ud%ment is hereby entered+ orderin% respondents Filipinas 6arbon and .inin% 6orp! -erardo Sicat+ >ntonio -onDalesHIndustrial .ana%ement De*elopment 6orp! 1INI.>6O2+ 6hiu 6hin -in and ,o Tuan 6hin+ to pay complainants ;nrique Sulit+ the total award of 79&+988!88C ;S.;R>,DO 7;->RIDO the full award of 7#0+/=/!88C Roberto NemenDo the total sum of 7&0+=&(!=8 and D>RIO -O the total award of 7=+/00!<#+ or the total a%%re%ate award of ON; )FNDR;D T)IRT34;I-)T T)OFS>ND FIV; )FNDR;D ;I-)T34;I-)T 7;SOS >ND (#H#88 17#(9+/99!(#2 to be deposited with this 6ommission within ten 1#82 days from receipt of this Decision for appropriate disposition! >ll other claims are hereby Dismiss 1sic2 for lac of merit! :'s4c BSO ORD;R;D! B6ebu 6ity+ 7hilippines! B#8 .arch #09<!B8"#$ No appeal was filed within the re%lementary period thus+ the abo*e Decision became final and executory! On :une #=+ #09<+ the ,abor >rbiter issued a writ of execution but it was returned unsatisfied! On >u%ust &=+ #09<+ the ,abor >rbiter issued an >lias Erit of ;xecution which ordered thus@ ;d4pm4is

BNOE T);R;FOR;+ by *irtue of the powers *ested in me by law+ you are hereby commanded to proceed to the premises of respondents >ntonio -onDalesHIndustrial .ana%ement De*elopment 6orporation 1INI.>6O2 situated at 5aran%ay ,ahu%+ 6ebu 6ity+ in front of ,a 6uracha Restaurant+ !"#Oor to Filipinas 6arbon and .inin% corporation and -erardo Sicat at ?th Floor Fni*ersal R;45ld%! #8= 7aseo de Roxas+ ,e%aspi Villa%e+ .a ati .etro .anila and at 7hilippine National 5an + ;scolta+ .anila respecti*ely+ and collect the a%%re%ate award of ON; )FNDR;D T)IRT34;I-)T T)OFS>ND FIV; )FNDR;D ;I-)T34;I-)T 7;SOS >ND T)IRT3 ON; 6;NT>VOS 17#(9+/99!(#2 and thereafter turn o*er said amount to complainants ;NRIGF; SF,IT+ ;S.;R>,DO 7;->RIDO+ RO5;RTO N;.;NMO >ND D>RIO -O or to this Office for appropriate disposition! Should you fail to collect the said sum in cash+ you are hereby authoriDed to cause the satisfaction of the same on the mo*able or immo*able property1s2 of respondents not exempt from execution! 3ou are to return this writ sixty 1=2 1sic2 days from your receipt hereof+ to%ether with your correspondin% report! B3ou may collect your le%al expenses from the respondents as pro*ided for by law! BSO ORD;R;D!B"&$ On September (+ #09<+ petitioner filed a B.otion to Guash >lias Erit of ;xecution and Set >side Decision+B"($ alle%in% amon% others that the alias writ of execution altered and chan%ed the tenor of the decision by chan%in% the liability of therein respondents from 'oint to solidary+ by the insertion of the words B>NDHORB between B>ntonio -onDalesHIndustrial .ana%ement De*elopment 6orporation and Filipinas 6arbon and .inin% 6orporation+ et al!B )owe*er+ in an order dated September #?+ #09<+ the ,abor >rbiter denied the motion! .is4oedp On October &+ #09<+ petitioner appealed"?$ the ,abor >rbiterAs Order dated September #?+ #09< to the respondent N,R6! .is4edp The respondent N,R6 dismissed the appeal in a Decision "/$ dated >u%ust (#+ #099+ the pertinent portions of which read@ BIn matters affectin% labor ri%hts and labor 'ustice+ we ha*e always adopted the liberal approach which fa*ors the exercise of labor ri%hts and which is beneficial to labor as a means to %i*e full meanin% and import to the constitutional mandate to afford protection to labor! 6onsiderin% the factual circumstances in this case+ there is no doubt in our mind that the respondents herein are called upon to pay+ 'ointly and se*erally+ the claims of the complainants as was the lattersA prayers! Inasmuch as respondents herein ne*er contro*erted the claims of the complainants below+ there is no reason why complainantsA prayer should not be %ranted! Further+ in line with the powers %ranted to the 6ommission under >rticle &#9 1c2 of the ,abor code+ Xto wai*e any error+ defect or irre%ularity whether in substance or in formA in a proceedin% before Fs+ Ee hold that the Erit of ;xecution be %i*en due course in all respects!B;d4p On :uly (#+ #090+ petitioner filed a B.otion To 6ompel Sheriff To >ccept 7ayment Of 7&(+#09!8/ Representin% One Sixth 7ro Rata Share of Respondent INI.>6O >s Full and Final Satisfaction of :ud%ment >s to Said Respondent!B"=$ The pri*ate respondents opposed the motion! In an Order"<$ dated >u%ust #/+ #090+ the ,abor >rbiter denied the motion rulin% thus@ BE);R;FOR;+ responsi*e to the fore%oin% respondent INI.>6OAs .otions are hereby D;NI;D! The Sheriff of this Office is order 1sic2 to accept INI.>6OAs tender payment 1sic2 of the sum of 7&(+#09!8/+ as partial satisfaction of the 'ud%ment and to proceed with the enforcement of the >lias Erit of ;xecution of the le*ied properties+ now issued by this Office+ for the full and final satisfaction of the monetary award %ranted in the instant case!

BSO ORD;R;D!B ;d4psc 7etitioner appealed the abo*e Order of the ,abor >rbiter but this was a%ain dismissed by the respondent N,R6 in its Resolution"9$ dated September ?+ #00# which held that@ BThe ar%uments of respondent on the finality of the dispositi*e portion of the decision in this case is beside the point! Ehat is important is that the 6ommission has ruled that the Erit of ;xecution issued by the ,abor >rbiter in this case is proper! It is not really correct to say that said Erit of ;xecution *aried the terms of the 'ud%ment! >t most+ considerin% the nature of labor proceedin%s there was+ an ambi%uity in said dispositi*e portion which was subsequently clarified by the ,abor >rbiter and the 6ommission in the incidents which were initiated by INI.>6O itself! 5y sheer technicality and unfounded assertions+ INI.>6O would now reopen the issue which was already resol*ed a%ainst it! It is not in eepin% with the established rules of practice and procedure to allow this attempt of INI.>6O to delay the final disposition of this case! BE);R;FOR;+ in *iew of all the fore%oin%+ this appeal is DIS.ISS;D and the Order appealed from is hereby >FFIR.;D! Sce4dp BEith double costs a%ainst appellant!B Dissatisfied with the fore%oin%+ petitioner filed the instant case+ alle%in% that the respondent N,R6 committed %ra*e abuse of discretion in affirmin% the Order of the ,abor >rbiter dated >u%ust #/+ #090+ which declared the liability of petitioner to be solidary! The only issue in this petition is whether petitionerAs liability pursuant to the Decision of the ,abor >rbiter dated .arch #8+ #09<+ is solidary or not!6alrs4pped Fpon careful examination of the pleadin%s filed by the parties+ the 6ourt finds that petitioner INI.>6OAs liability is not solidary but merely 'oint and that the respondent N,R6 acted with %ra*e abuse of discretion in upholdin% the ,abor >rbiterAs >lias Erit of ;xecution and subsequent Orders to the effect that petitionerAs liability is solidary! > solidary or 'oint and se*eral obli%ation is one in which each debtor is liable for the entire obli%ation+ and each creditor is entitled to demand the whole obli%ation! "0$ In a 'oint obli%ation each obli%or answers only for a part of the whole liability and to each obli%ee belon%s only a part of the correlati*e ri%hts!"#8$ Eell4entrenched is the rule that solidary obli%ation cannot li%htly be inferred! "##$ There is a solidary liability only when the obli%ation expressly so states+ when the law so pro*ides or when the nature of the obli%ation so requires!"#&$ In the dispositi*e portion of the ,abor >rbiter+ the word BsolidaryB does not appear! The said #a!!o expressly states the followin% respondents therein as liable+ namely@ Filipinas 6arbon and .inin% 6orporation+ -erardo Sicat+ >ntonio -onDales+ Industrial .ana%ement De*elopment 6orporation 1petitioner INI.>6O2+ 6hiu 6hin -in+ and ,o Tuan 6hin! Nor can it be inferred therefrom that the liability of the six 1=2 respondents in the case below is solidary+ thus their liability should merely be 'oint! .oreo*er+ it is already a well4settled doctrine in this 'urisdiction that+ when it is not pro*ided in a 'ud%ment that the defendants are liable to pay 'ointly and se*erally a certain sum of money+ none of them may be compelled to satisfy in full said 'ud%ment! In "riental Co##er$ial Co. vs. A%eto and &a%anag'(3) this 6ourt held@ BIt is of no consequence that+ under the contract of suretyship executed by the parties+ the obli%ation contracted by the sureties was 'oint and se*eral in character! The final 'ud%ment+

which superseded the action for the enforcement of said contract+ declared the obli%ation to be merely 'oint+ and the same cannot be executed otherwise!B "#?$ -rantin% that the ,abor >rbiter has committed a mista e in failin% to indicate in the dispositi*e portion that the liability of respondents therein is solidary+ the correction 44 which is substantial 44 can no lon%er be allowed in this case because the 'ud%ment has already become final and executory! Scc4alr It is an elementary principle of procedure that the resolution of the court in a %i*en issue as embodied in the dispositi*e part of a decision or order is the controllin% factor as to settlement of ri%hts of the parties!"#/$ Once a decision or order becomes final and executory+ it is remo*ed from the power or 'urisdiction of the court which rendered it to further alter or amend it! "#=$ It thereby becomes immutable and unalterable and any amendment or alteration which substantially affects a final and executory 'ud%ment is null and *oid for lac of 'urisdiction+ includin% the entire proceedin%s held for that purpose! "#<$ >n order of execution which *aries the tenor of the 'ud%ment or exceeds the terms thereof is a nullity! "#9$ None of the parties in the case before the ,abor >rbiter appealed the Decision dated .arch #8+ #09<+ hence the same became final and executory! It was+ therefore+ remo*ed from the 'urisdiction of the ,abor >rbiter or the N,R6 to further alter or amend it! Thus+ the proceedin%s held for the purpose of amendin% or alterin% the dispositi*e portion of the said decision are null and *oid for lac of 'urisdiction! >lso+ the >lias Erit of ;xecution is null and *oid because it *aried the tenor of the 'ud%ment in that it sou%ht to enforce the final 'ud%ment a%ainst B>ntonio -onDalesHIndustrial .ana%ement De*elopment 6orp! 1INI.>6O2 !"#Oor Filipinas 6arbon and .inin% 6orp! and -erardo Sicat+B which ma es the liability solidary! 6a4lrsc 4%ERE1ORE+ the petition is hereby -R>NT;D! The Resolution dated September ?+ #00# of the respondent National ,abor Relations is hereby declared NF,, and VOID! The liability of the respondents in R>54VII48<##49? pursuant to the Decision of the ,abor >rbiter dated .arch #8+ #09< should be+ as it is hereby+ considered 'oint and petitionerAs payment which has been accepted considered as full satisfaction of its liability+ without pre'udice to the enforcement of the award+ a%ainst the other fi*e 1/2 respondents in the said case! Sppedsc SO ORDERED. 4e!!osi!!o, (Chairman), 6endoza, and 'uisum&ing, JJ., concur! De 2eon, Jr., J., on lea*e!

S;6OND DIVISION [G.R. No. 177187. No<+;0+r 11, 2008] MARI:ELES S%I YARD $OR ., petitioner, vs. %ON. $OURT O1 A EALS, LUIS REGONDOLA, MANUELIT GATALAN, ORES$A AGA ITO, NOEL ALBADBAD, ROGELIO INTUAN, DANILO $RISOSTOMO, ROMULO MA$ALINAO, NESTOR 1ERER, RI$2Y $UESTA, ROLLY ANDRADA, LARRY ROGOLA, 1RAN$IS$O LENOGON, AUGUSTO DUINTO, AR1E BERAMO, BONI1A$IO TRINIDAD, AL1REDO AS$ARRAGA, ERNESTO MAGNO, %ONORARIO %ORTE$IO, NELBERT INEDA, GLEN ESTI ULAR, 1RAN$IS$O $OM UESTO, ISABELITO $ORTE9, MATURAN ROSAURO, SAMSON $ANAS, 1EBIEN ISI , -ESUS RI ARI , AL1REDO SIENES, ADOLAR ALBERT, %ONESTO $ABANILLAS, AM ING $ASTILLO !"# EL4IN RE:ILLA,respondents. DE$ISION DUISUMBING, J.3 For re*iew on certiorari is the Resolution+"#$ dated December &0+ #000+ of the 6ourt of >ppeals in 6>4-!R! S7 No! //?#=+ which dismissed outri%ht the petition for certiorari of .ari*eles Shipyard 6orp!+ due to a defecti*e certificate of non4forum shoppin% and non4 submission of the required documents to accompany said petition! .ari*eles Shipyard 6orp!+ had filed a special ci*il action for certiorari with the 6ourt of >ppeals to nullify the resolution"&$ of the National ,abor Relations 6ommission 1N,R62+ dated >pril &&+ #000+ in N,R6 N6R 6ase No! 88480488/??840=4>+ which affirmed the ,abor >rbiterAs decision+ "($ dated .ay &&+ #009+ holdin% petitioner 'ointly and se*erally liable with ,on%est Force In*esti%ation and Security >%ency+ Inc!+ for the underpayment of wa%es and o*ertime pay due to the pri*ate respondents! ,i ewise challen%ed in the instant petition is the resolution "?$ of the 6ourt of >ppeals+ dated :uly #&+ &888+ denyin% petitionerAs motion for reconsideration! The facts+ as culled from records+ are as follows@ Sometime on October #00(+ petitioner .ari*eles Shipyard 6orporation en%a%ed the ser*ices of ,on%est Force In*esti%ation and Security >%ency+ Inc! 1hereinafter+ J,on%est ForceK2 to render security ser*ices at its premises! 7ursuant to their a%reement+ ,on%est Force deployed its security %uards+ the pri*ate respondents herein+ at the petitionerAs shipyard in .ari*eles+ 5ataan! >ccordin% to petitioner+ it reli%iously complied with the terms of the security contract with ,on%est Force+ promptly payin% its bills and the contract rates of the latter! )owe*er+ it found the ser*ices bein% rendered by the assi%ned %uards unsatisfactory and inadequate+ causin% it to terminate its contract with ,on%est Force on >pril #00/! "/$ ,on%est Force+ in turn+ terminated the employment of the security %uards it had deployed at petitionerAs shipyard! On September &+ #00=+ pri*ate respondents filed a case for ille%al dismissal+ underpayment of wa%es pursuant to the 7N7SOSI>47>D7>O rates+ non4payment of o*ertime pay+ premium pay for holiday and rest day+ ser*ice incenti*e lea*e pay+ #( th month pay and attorneyAs fees+ a%ainst both ,on%est Force and petitioner+ before the ,abor >rbiter! Doc eted as N,R6 N6R 6ase No! 88480488/??840=4>+ the case sou%ht the %uardsA reinstatement with full bac wa%es and without loss of seniority ri%hts! For its part+ ,on%est Force filed a cross4claim "=$ a%ainst the petitioner! ,on%est Force admitted that it employed pri*ate respondents and assi%ned them as security %uards at the premises of petitioner from October #=+ #00( to >pril (8+ #00/+ renderin% a #& hours duty per shift for the said period! It li ewise admitted its liability as to the non4payment of the alle%ed

wa%e differential in the total amount of 7&+=#9+8&/ but passed on the liability to petitioner alle%in% that the ser*ice fee paid by the latter to it was way below the 7N7SOSI> and 7>D7>O rate+ thus+ Jcontrary to the mandatory and prohibiti*e laws because the ri%ht to proper compensation and benefits pro*ided under the existin% labor laws cannot be wai*ed nor compromised!K The petitioner denied any liability on account of the alle%ed ille%al dismissal+ stressin% that no employer4employee relationship existed between it and the security %uards! It further pointed out that it would be the hei%ht of in'ustice to ma e it liable a%ain for monetary claims which it had already paid! >nent the cross4claim filed by ,on%est Force a%ainst it+ petitioner prayed that it be dismissed for lac of merit! 7etitioner a*erred that ,on%est Force had benefited from the contract+ it was now estopped from questionin% said a%reement on the %round that it had made a bad deal! On .ay &&+ #009+ the ,abor >rbiter decided N,R6 N6R 6ase No! 88480488/??840=4>+ to wit@ E);R;FOR;+ conformably with the fore%oin%+ 'ud%ment is hereby rendered orderin% the respondents as follows@ #! D;6,>RIN- respondents ,on%est Force In*esti%ation [ Security .ari*eles Shipyard 6orporation 'ointly and se*erally liable to pay the complainants representin% underpayment of wa%es and o*ertime pay in of 7&+<88+=&(!?8 based on the 7>D7>O rates of pay co*erin% the period #00( up to >pril &0+ #00/ bro en down as follows@ FND;R7>3.;NT OF E>-;S@ 7;RIOD 6OV;R;D R>T;S 19 hrs! duty2 Oct! #=4Dec! #/H0( 1& mos!2 Dec! .ar! /+<8/!88 (#H0? 1(!/ mos!2 >pr! Dec! ##+/&8!88 (#H0? 10 mos!2 :an! >pr! /+/0<!<8 &0H0/ 1(!0< mos!2 TOT>, FND;R7>3.;NTS 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 7&(+<0&!<8 #4 <+&&8!88 /+9#8 #+?#8!88 #4 <+808!88 /+9#8 #+&98!88 #=H0(4 =+=(8!88 /+888 #+=(8!88 .ONT),3 7>D7>O S>,>R3 FOR T); R;6;IV;D 7/+?9/!88 7;RIOD 7/+888 >6TF>, Ea%e DIFF;R;NTI>,S 7 ?9/!88 70<8!88 FND;R7>3.;NT >%ency+ Inc! and money claims of the total amount from October #=+

OV;RTI.;@ Oct! #=4Dec! #/H0( 7/+?9/ x & 1& mos!2 Dec! #=H0(4.ar! (#H0? 1(!/ mos!2 >pr! #4Dec! (#H0? 10 mos!2 :an! #4>pr! &0H0/ 1(!0< mos!2 & =+=(8 x (!/ & <+808 x 0 & <+&&8 x (!0< & \ #?+((#!<8 \ (#+08/!88 \ ##+=8&!/8 \ 7 /+?9/!88

&(! .aturan Rosauro &?! Samson 6anas &/! Febien Isip &=! :esus Riparip &<! >lfredo Sienes &9! >dolar >lbert &0! 6abanillas )onesto (8! 6astillo >mpin% (#! Re*illa ;lwin

1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2

9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 7 &+<88+=&(!08

TOT>, OV;RTI.;4 4 4 4 4 4 4 4 4 7=(+(&?!&8 Sub4Total of Fnderpayments and O*ertimeUUUUUU 79<+##=!08 #! ,uis Re%ondula &! .anolito 6atalan (! Oresca >%apito ?! Noel >libadbad /! Ro%elio 7intuan =! Danilo 6risostomo <! Romulo .acalinao 9! Nestor Ferrer 0! Ric y 6uesta #8! >ndrada Ric y ##! ,arry Ro%ola #&! Francisco ,eno%on #(! >u%osto Guinto #?! >rfe 5eramo #/! 5onifacio Trinidad #=! >lfredo >Dcarra%a #<! ;rnesto .a%no #9! )onario )ortecio #0! Nelbert 7ineda &8! -len ;stipular 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 1the same2 7 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08 9<+##=!08

-R>ND TOT>,

&! D;6,>RIN- both respondents liable to pay complainants attorneyAs fees equi*alent to ten 1#8R2 percent of the total award reco*ered or the sum of7&<8+8=&!(?! (! ORD;RIN- respondent ,on%est Force In*esti%ation [ Security >%ency+ Inc! to reinstate all the herein complainants to their former or equi*alent positions without loss of seniority ri%hts and pri*ile%es with full bac wa%es which as computed as of the date of this decision are as follows@ 5ac wa%es@ #8H#= L #&H#/H0( \& mos! 7 /+?9/!88 x & mos! #&H#=H0( L (H(#H0?\(!/ mos! 7 =+=(8!88 x (!/ mos! ?H# L #&H(#H0? \ 0 mos! 7 <+808!88 x 0 mos! #H# L ?H&0H0/ \ (!0< mos! 7 <+&&8!88 x (!0< mos! TOT>, #! ,uis Re%ondula &! .anolito 6atalan (! Oresca >%apito ?! Noel >libadbad /! Ro%elio 7intuan =! Danilo 6risostomo <! Romulo .acalinao 9! Nestor Ferrer 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 \ &9+==(!?8 7 #&=+=9?!?8"<$ 7 #&=+=9?!?8"9$ #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 \ =(+9#8!88 \ &(+&8/!88 \ 7 #8+0<8!88

&#! Francisco 6ompuesto 1the same2 &&! Isabelito 6ortes 1the same2

0! Ric y 6uesta #8! >ndrada Rolly ##! ,arry Ro%ola #&! Francisco ,eno%on #(! >u%osto Guinto #?! >rfe 5eramo #/! 5onifacio Trinidad #=! >lfredo >Dcarra%a #<! ;rnesto .a%no #9! )onario )ortecio #0! Nelbert 7ineda &8! -len ;stipular

1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2

#&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 #&=+=9?!?8 7(+0&<+&#=!?8"0$

6>4-!R! S7 No! //?#=! The 6ourt of >ppeals+ howe*er+ denied due course to the petition and dismissed it outri%ht for the followin% reasons@ #! The *erification and certification on non4forum shoppin% is si%ned not by duly authoriDed officer of petitioner corporation+ but by counsel 1Section #+ Rule =/+ #00< Rules of 6i*il 7rocedure2! &! The petition is unaccompanied by copies of rele*ant and pertinent documents+ particularly the motion for reconsideration filed before the N,R6 1Section #+ Rule =/+ #00< Rules of 6i*il 7rocedure2!"#&$ The petitioner then mo*ed for reconsideration of the order of dismissal! The appellate court denied the motion+ pointin% out that under pre*ailin% case law subsequent compliance with formal requirements for filin% a petition as prescribed by the Rules+ does not ipso #acto warrant a reconsideration! In any e*ent+ it found no %ra*e abuse of discretion on the part of the N,R6 to %rant the writ of certiorari! )ence+ this present petition before us! 7etitioner submits that T); 6OFRT OF >77;>,S -R>V;,3 ;RR;D@ #! U!IN DIS.ISSIN- T); 7;TITION >ND D;N3IN- T); .OTION FOR R;6ONSID;R>TION D;S7IT; T); F>6T T)>T 7;TITION;R SF5ST>NTI>,,3 6O.7,I;D EIT) T); R;GFIR;.;NTS OF S;6TION #+ RF,; =/+ #00< RF,;S OF 6IVI, 7RO6;DFR;! &! U!IN RF,IN- T)>T 7;TITION;R E>S NOT D;NI;D DF; 7RO6;SS OF ,>E! (! U!IN >FFIR.IN- T); D;6ISION OF T); N>TION>, ,>5OR R;,>TIONS 6O..ISSION T)>T J,ON-;ST FOR6;K >ND 7;TITION;R >R; :OINT,3 >ND S;V;R>,,3 ,I>5,; FOR 7>3.;NT OF E>-;S >ND OV;RTI.; 7>3 D;S7IT; T); 6,;>R S)OEIN- T)>T 7;TITION;R )>V; >,R;>D3 7>ID T); S;6FRIT3 S;RVI6;S T)>T E>S R;ND;R;D 53 7RIV>T; R;S7OND;NTS! ?! UE);N IT F>I,;D TO RF,; T)>T ON,3 J,ON-;ST FOR6;K S)OF,D 5; SO,;,3 >ND F,TI.>T;,3 ,I>5,; IN T); INST>NT 6>S;! "#($ Ee find the issues for our resolution to be@ 1#2 Eas it error for the 6ourt of >ppeals to sustain its order of dismissal of petitionerAs special ci*il action for certiorari+ notwithstandin% subsequent compliance with the requirements under the Rules of 6ourt by the petitionerV 1&2 Did the appellate court err in not holdin% that petitioner was denied due process of law by the N,R6V and 1(2 Did the appellate court %rie*ously err in findin% petitioner 'ointly and se*erally liable with ,on%est Force for the payment of wa%e differentials and o*ertime pay owin% to the pri*ate respondentsV On the #irst issue+ the 6ourt of >ppeals in dismissin% 6>4-!R! S7 No! //?#= obser*ed that@ 1#2 the *erification and certification of non4forum shoppin% was not si%ned by any duly authoriDed officer of petitioner but merely by petitionerAs counselC and 1&2 the petition was not accompanied by a copy of motion for reconsideration filed before the N,R6+ thus *iolatin% Section #+"#?$ Rule =/ of the Rules of 6ourt! )ence+ a dismissal was proper under Section (+ "#/$ Rule ?= of the Rules! In assailin% the appellate courtAs rulin%+ the petitioner appeals to our sense of compassion and ind consideration! It submits that the certification si%ned by its counsel and attached to its petition filed with the 6ourt of >ppeals is substantial compliance with the requirement! .oreo*er+ petitioner calls our attention to the fact that when it filed its motion for reconsideration before the 6ourt of >ppeals+ a 'oint *erification and certification of non4

&#! Francisco 6ompuesto 1same2 &&! Isabelito 6ortes &(! .aturan Rosauro &?! Samson 6anas &/! Febien Isip &=! :esus Riparip &<! >lfredo Sienes &9! >dolar >lbert &0! 6abanillas )onesto (8! 6astillo >mpin% (#! Re*illa ;lwin 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2 1same2

-R>ND TOT>,

?! ORD;RIN- said ,on%est Force In*esti%ation [ Security >%ency+ Inc! to pay attorneyAs fees equi*alent to ten 1#8R2 percent of the total award reco*ered representin% bac wa%es in the amount of 7(0&+<&#!=?!"#8$ /! DIS.ISSIN- all other claims for lac of le%al basis! SO ORD;R;D!"##$ 7etitioner appealed the fore%oin% to the N,R6 in N,R6 N6R 6ase No! 88480488/??840=4>! The labor tribunal+ howe*er+ affirmed in toto the decision of the ,abor >rbiter! 7etitioner mo*ed for reconsideration+ but this was denied by the N,R6! The petitioner then filed a special ci*il action for certiorari assailin% the N,R6 'ud%ment for ha*in% been rendered with %ra*e abuse of discretion with the 6ourt of >ppeals+ doc eted as

forum shoppin% duly si%ned by its 7ersonnel .ana%er"#=$ and a copy of the .otion for Reconsideration"#<$ filed before the N,R6 were attached therein! Thus+ petitioner prays that we ta e a liberal stance to promote the ends of 'ustice! 7etitionerAs plea for liberality+ howe*er+ cannot be %ranted by the 6ourt for reasons herein elucidated! It is settled that the requirement in the Rules that the certification of non4forum shoppin% should be executed and si%ned by the plaintiff or the principal means that counsel cannot si%n said certification unless clothed with special authority to do so! "#9$ The reason for this is that the plaintiff or principal nows better than anyone else whether a petition has pre*iously been filed in*ol*in% the same case or substantially the same issues! )ence+ a certification si%ned by counsel alone is defecti*e and constitutes a *alid cause for dismissal of the petition! "#0$ In the case of natural persons+ the Rule requires the parties themsel*es to si%n the certificate of non4 forum shoppin%! )owe*er+ in the case of the corporations+ the physical act of si%nin% may be performed+ on behalf of the corporate entity+ only by specifically authoriDed indi*iduals for the simple reason that corporations+ as artificial persons+ cannot personally do the tas themsel*es! "&8$ In this case+ not only was the ori%inally appended certification si%ned by counsel+ but in its motion for reconsideration+ still petitioner utterly failed to show that .s! Rosanna I%nacio+ its 7ersonnel .ana%er who si%ned the *erification and certification of non4forum shoppin% attached thereto+ was duly authoriDed for this purpose! It cannot be %ainsaid that obedience to the requirements of procedural rule is needed if we are to expect fair results therefrom! Ftter disre%ard of the rules cannot 'ustly be rationaliDed by har in% on the policy of liberal construction!"&#$ Thus+ on this point+ no error could be *alidly attributed to respondent 6ourt of >ppeals! It did not err in dismissin% the petition for non4compliance with the requirements %o*ernin% the certification of non4forum shoppin%! >nent the second issue+ petitioner a*ers that there was denial of due process of law when the ,abor >rbiter failed to ha*e the case tried on the merits! 7etitioner adds that the >rbiter did not obser*e the mandatory lan%ua%e of the then Sec! /1b2 Rule V 1now Section ##+ per amendment in Resolution No! 8#48&+ Series of &88&2 of the N,R6 New Rules of 7rocedure which pro*ided that@ If the ,abor >rbiter finds no necessity of further hearin% after the parties ha*e submitted their position papers and supportin% documents+ he shall issue an Order to that effect and shall inform the parties+ statin% the reasons therefor! U"&&$ 7etitionerAs contention+ in our *iew+ lac s sufficient basis! Eell settled is the rule that the essence of due process is simply an opportunity to be heard+ or+ as applied to administrati*e proceedin%s+ an opportunity to explain oneAs side or an opportunity to see a reconsideration of the action or rulin% complained of! "&($ Not all cases require a trial4type hearin%! The requirement of due process in labor cases before a ,abor >rbiter is satisfied when the parties are %i*en the opportunity to submit their position papers to which they are supposed to attach all the supportin% documents or documentary e*idence that would pro*e their respecti*e claims+ in the e*ent the ,abor >rbiter determines that no formal hearin% would be conducted or that such hearin% was not necessary! "&?$ In any e*ent+ as found by the N,R6+ petitioner was %i*en ample opportunity to present its side in se*eral hearin%s conducted before the ,abor >rbiter and in the position papers and other supportin% documents that it had submitted! Ee find that such opportunity more than satisfies the requirement of due process in labor cases! On the third issue+ petitioner ar%ues that it should not be held 'ointly and se*erally liable with ,on%est Force for underpayment of wa%es and o*ertime pay because it had been reli%iously and promptly payin% the bills for the security ser*ices sent by ,on%est Force and that these are

in accordance with the statutory minimum wa%e! >lso+ petitioner contends that it should not be held liable for o*ertime pay as pri*ate respondents failed to present proof that o*ertime wor was actually performed! ,astly+ petitioner claims that the 6ourt of >ppeals failed to render a decision that finally disposed of the case because it did not specifically rule on the immediate recourse of pri*ate respondents+ that is+ the matter of reimbursement between petitioner and ,on%est Force in accordance with :ag!e Securit3 $genc3 %nc. v. 527C + "&/$ and Phi!ippine isheries Deve!opment $uthorit3 v. 527C!"&=$ 7etitionerAs liability is 'oint and se*eral with that of ,on%est Force+ pursuant to >rticles #8=+ #8< and #80 of the ,abor 6ode which pro*ide as follows@ AR*. (+,. C"-*RAC*"R "R S.BC"-*RAC*"R L Ehene*er an employer enters into a contract with another person for the performance of the formerAs wor + the employees of the contractor and of the latterAs subcontractor+ if any+ shall be paid in accordance with the pro*isions of this 6ode! In the e*ent that the contractor or subcontractor fails to pay the wa%es of his employees in accordance with this 6ode+ the employer shall be 'ointly and se*erally liable with his contractor or subcontractor to such employees to the extent of the wor performed under the contract+ in the same manner and extent that he is liable to employees directly employed by him! xxx AR*. (+ . /-0/R1C* 1&!2"31R! L The pro*isions of the immediately precedin% >rticle shall li ewise apply to any person+ partnership+ association or corporation which+ not bein% an employer+ contracts with an independent contractor for the performance of any wor + tas + 'ob or pro'ect! AR*. (+4. S"2/0AR3 2/AB/2/*3! L The pro*isions of existin% laws to the contrary notwithstandin%+ e*ery employer or indirect employer shall be held responsible with his contractor or subcontractor for any *iolation of any pro*ision of this 6ode! For purposes of determinin% the extent of their ci*il liability under this 6hapter+ they shall be considered as direct employers! In this case+ when petitioner contracted for security ser*ices with ,on%est Force as the security a%ency that hired pri*ate respondents to wor as %uards for the shipyard corporation+ petitioner became an indirect employer of pri*ate respondents pursuant to >rticle #8< abo*ecited! Followin% >rticle #8=+ when the a%ency as contractor failed to pay the %uards+ the corporation as principal becomes 'ointly and se*erally liable for the %uardsA wa%es! This is mandated by the ,abor 6ode to ensure compliance with its pro*isions+ includin% payment of statutory minimum wa%e! The security a%ency is held liable by *irtue of its status as direct employer+ while the corporation is deemed the indirect employer of the %uards for the purpose of payin% their wa%es in the e*ent of failure of the a%ency to pay them! This statutory scheme %i*es the wor ers the ample protection consonant with labor and social 'ustice pro*isions of the #09< 6onstitution!"&<$ 7etitioner cannot e*ade its liability by claimin% that it had reli%iously paid the compensation of %uards as stipulated under the contract with the security a%ency! ,abor standards are enacted by the le%islature to alle*iate the pli%ht of wor ers whose wa%es barely meet the spiralin% costs of their basic needs! ,abor laws are considered written in e*ery contract! Stipulations in *iolation thereof are considered null! Similarly+ le%islated wa%e increases are deemed amendments to the contract! Thus+ employers cannot hide behind their contracts in order to e*ade their 1or their contractorsA or subcontractorsA2 liability for noncompliance with the statutory minimum wa%e! "&9$

)owe*er+ we must emphasiDe that the solidary liability of petitioner with that of ,on%est Force does not preclude the application of the 6i*il 6ode pro*ision on the ri%ht of reimbursement from his co4debtor by the one who paid! "&0$ >s held in De! 7osario 8 Sons 2ogging :nterprises, %nc. v. 527C, "(8$ the 'oint and se*eral liability imposed on petitioner is without pre'udice to a claim for reimbursement by petitioner a%ainst the security a%ency for such amounts as petitioner may ha*e to pay to complainants+ the pri*ate respondents herein! The security a%ency may not see exculpation by claimin% that the principalAs payments to it were inadequate for the %uardsA lawful compensation! >s an employer+ the security a%ency is char%ed with nowled%e of labor lawsC and the adequacy of the compensation that it demands for contractual ser*ices is its principal concern and not any otherAs!"(#$ On the issue of the propriety of the award of o*ertime pay despite the alle%ed lac of proof thereof+ suffice it to state that such in*ol*es a determination and e*aluation of facts which cannot be done in a petition for re*iew! Eell established is the rule that in an appeal *ia certiorari+ only questions of law may be re*iewed! "(&$ One final point! Fpon re*iew of the award of bac wa%es and attorneyAs fees+ we disco*ered certain errors that happened in the addition of the amount of indi*idual bac wa%es that resulted in the erroneous total amount of bac wa%es and attorneyAs fees! These errors ou%ht to be properly rectified now! Thus+ the correct sum of indi*idual bac wa%es should be 125,578.70 instead of 7#&=+=9?!?8+ while the correct sum of total bac wa%es awarded and attorneyAs fees should be 8,925,100.70 and 892,510.07+ instead of 7(+0&<+&#=!?8 and 7(0&+<&#!=?+ respecti*ely! 4%ERE1ORE+ the Resolution of the 6ourt of >ppeals in 6>4-!R! S7 No! //?#= is >FFIR.;D with .ODIFI6>TION! 7etitioner and ,on%est Force are held liable 'ointly and se*erally for underpayment of wa%es and o*ertime pay of the security %uards+ without pre'udice to petitionerAs ri%ht of reimbursement from ,on%est Force In*esti%ation and Security >%ency+ Inc! The amounts payable to complainin% security %uards+ herein pri*ate respondents+ by way of total bac wa%es and attorneyAs fees are hereby set at 7(+0&=+#88!?8 and 7(0&+=#8!8?+ respecti*ely! 6osts a%ainst petitioner! SO ORDERED. 4e!!osi!!o, (Chairman), $ustria-6artinez, Ca!!e(o, Sr., and +inga, JJ., concur.

Republic of the 7hilippines SU REME $OURT .anila FIRST DIVISION G.R. No. 17AA91 S+p)+;0+r 8, 2005

dama%es amountin% to 7&/8+888!88 for ;strella and 7(88+888!88 for FletcherC 1/2 that they suffered physical discomfort+ serious anxiety+ fri%ht and mental an%uish+ besmirched reputation and wounded feelin%s+ moral shoc + and lifelon% social humiliationC 1=2 that defendants failed to act with 'ustice+ %i*e respondents their due+ obser*e honesty and %ood faith which entitles them to claim for exemplary dama%eC and 1<2 that they are entitled to a reasonable amount of attorneyNs fees and liti%ation expenses! 6D67 filed its >nswer= which was later amended to include a third4party complaint a%ainst 7hilippine 7hoenix Surety and Insurance+ Inc! 17hoenix2!< On February 0+ #00(+ the trial court rendered a decision findin% 6D67 and 5,T5 and their employees liable for dama%es+ the dispositi*e portion of which+ states@ E);R;FOR;+ 'ud%ment is rendered@ In the 6omplaint L #! In fa*or of the plaintiffs and a%ainst the defendants 5,T5+ Eilfredo Datin%uinoo+ 6onstruction and De*elopment 6orporation of the 7hilippines 1now 7N662 and ;spiridion 7ayunan+ :r!+ orderin% said defendants+ 'ointly and se*erally to pay the plaintiffs the sum of 7<0+&/?!?( as actual dama%es and to pay the sum of 7#8+888!88 as attorneyNs fees or a total of 790+&/?!?(C &! In addition+ defendant 6onstruction and De*elopment 6orporation of the 7hilippines and defendant ;spiridion 7ayunan+ :r!+ shall pay the plaintiffs the amount of Fifty Thousand 17/8+888!882 7esos to plaintiff Rachel Fletcher and Twenty Fi*e Thousand 17&/+888!882 7esos to plaintiff Rebecca ;strellaC (! On the counterclaim of 5,T5 6o! and Eilfredo Datin%uinoo L Dismissin% the counterclaimC ?! On the crossclaim a%ainst 6onstruction and De*elopment 6orporation of the 7hilippines 1now 7N662 and ;spiridion 7ayunan+ :r! L Dismissin% the crossclaimC /! On the counterclaim of 6onstruction and De*elopment 6orporation of the 7hilippines 1now 7N662 L Dismissin% the counterclaimC =! On the crossclaim a%ainst 5,T5 L Dismissin% the crossclaimC <! On the Third 7arty 6omplaint by 6onstruction and De*elopment 6orporation of the 7hilippines a%ainst 7hilippine 7hoenix Surety and Insurance+ Incorporated L Dismissin% the Third 7arty 6omplaint! SO ORD;R;D!9 The trial court held that 5,T5+ as a common carrier+ was bound to obser*e extraordinary dili%ence in the *i%ilance o*er the safety of its passen%ers! It must carry the passen%ers safely as far as human care and foresi%ht pro*ide+ usin% the utmost dili%ence of *ery cautious persons+ with a due re%ard for all the circumstances! Thus+ where a passen%er dies or is in'ured+ the carrier is presumed to ha*e been at fault or has acted ne%li%ently! 5,T5Ns inability to carry respondents to their destination %a*e rise to an action for breach of contract of

$ONSTRU$TION DE:ELO MENT $OR ORATION O1 T%E %ILI INES, petitioner+ *s! REBE$$A G. ESTRELLA, RA$%EL E. 1LET$%ER, %ILI INE %OENIC SURETY P INSURAN$E IN$., BATANGAS LAGUNA TAYABAS BUS $O., !"# 4IL1REDO DATINGUINOO, respondents! D;6ISION YNARES-SANTIAGO, J.3 This petition for re*iew assails the .arch &0+ &88# Decision of the 6ourt of >ppeals in 6>4 -!R! 6V No! ?=90=+ which affirmed with modification the February 0+ #00( Decision & of the Re%ional Trial 6ourt of .anila+ 5ranch #(+ in 6i*il 6ase No! R49&4&#(<+ findin% 5atan%as ,a%una Tayabas 5us 6o! 15,T52 and 6onstruction De*elopment 6orporation of the 7hilippines 16D672 liable for dama%es! The antecedent facts are as follows@ On December &0+ #0<9+ respondents Rebecca -! ;strella and her %randdau%hter+ Rachel ;! Fletcher+ boarded in San 7ablo 6ity+ a 5,T5 bus bound for 7asay 6ity! )owe*er+ they ne*er reached their destination because their bus was rammed from behind by a tractor4truc of 6D67 in the South ;xpressway! The stron% impact pushed forward their seats and pinned their nees to the seats in front of them! They re%ained consciousness only when rescuers created a hole in the bus and extricated their le%s from under the seats! They were brou%ht to the .a ati .edical 6enter where the doctors dia%nosed their in'uries to be as follows@ .edical 6ertificate of Rebecca ;strella Fracture+ left tibia mid (rd ,acerated wound+ chin 6ontusions with abrasions+ left lower le% Fracture+ =th and <th ribs+ ri%ht( .edical 6ertificate of Rachel Fletcher ;xtensi*e lacerated wounds+ ri%ht le% posterior aspect popliteal area and antero4lateral aspect mid lower le% with se*erance of muscles! 7artial amputation 5T left le% with se*erance of %astro4soleus and antero4lateral compartment of lower le%! Fracture+ open comminuted+ both tibial? Thereafter+ respondents filed a 6omplaint/ for dama%es a%ainst 6D67+ 5,T5+ ;spiridion 7ayunan+ :r! and Eilfredo Datin%uinoo before the Re%ional Trial 6ourt of .anila+ 5ranch #(! They alle%ed 1#2 that 7ayunan+ :r! and Datin%uinoo+ who were the dri*ers of 6D67 and 5,T5 buses+ respecti*ely+ were ne%li%ent and did not obey traffic lawsC 1&2 that 5,T5 and 6D67 did not exercise the dili%ence of a %ood father of a family in the selection and super*ision of their employeesC 1(2 that 5,T5 allowed its bus to operate nowin% that it lac ed proper maintenance thus exposin% its passen%ers to %ra*e dan%erC 1?2 that they suffered actual
#

carria%e while its failure to rebut the presumption of ne%li%ence made it liable to respondents for the breach!0 Re%ardin% 6D67+ the trial court found that the tractor4truc it owned bumped the 5,T5 bus from behind! ;*idence showed that 6D67Ns dri*er was rec less and dri*in% *ery fast at the time of the incident! The %ross ne%li%ence of its dri*er raised the presumption that 6D67 was ne%li%ent either in the selection or in the super*ision of its employees which it failed to rebut thus ma in% it and its dri*er liable to respondents! #8 Fnsatisfied with the award of dama%es and attorneyNs fees by the trial court+ respondents mo*ed that the decision be reconsidered but was denied! Respondents ele*ated the case ## to the 6ourt of >ppeals which affirmed the decision of the trial court but modified the amount of dama%es+ the dispositi*e portion of which pro*ides@ E);R;FOR;+ the assailed decision dated October <+ #00( of the Re%ional Trial 6ourt+ 5ranch #(+ .anila is hereby >FFIR.;D with the followin% .ODIFI6>TION@ #! The interest of six 1=2 percent per annum on the actual dama%es of 7<0+(/?!?( should commence to run from the time the 'udicial demand was made or from the filin% of the complaint on February ?+ #098C &! Thirty 1(82 percent of the total amount reco*ered is hereby awarded as attorneyNs feesC (! Defendants4appellants 6onstruction and De*elopment 6orporation of the 7hilippines 1now 7N662 and ;spiridion 7ayunan+ :r! are ordered to pay plaintiff4appellants Rebecca ;strella and Rachel Fletcher the amount of Twenty Thousand 17&8+888!882 each as exemplary dama%es and 798+888!88 by way of moral dama%es to Rachel Fletcher! SO ORD;R;D!#& The 6ourt of >ppeals held that the actual or compensatory dama%e sou%ht by respondents for the in'uries they sustained in the form of hospital bills were already liquidated and were ascertained! >ccordin%ly+ the =R interest per annum should commence to run from the time the 'udicial demand was made or from the filin% of the complaint and not from the date of 'ud%ment! The 6ourt of >ppeals also awarded attorneyNs fees equi*alent to (8R of the total amount reco*ered based on the retainer a%reement of the parties! The appellate court also held that respondents are entitled to exemplary and moral dama%es! Finally+ it affirmed the rulin% of the trial court that the claim of 6D67 a%ainst 7hoenix had already prescribed! )ence+ this petition raisin% the followin% issues@ I E);T);R OR NOT T); 6OFRT OF >77;>,S -R>V;,3 ;RR;D IN NOT )O,DINR;S7OND;NTS 5,T5 >NDHOR ITS DRIV;R EI,FR;DO D>TIN-FINOO SO,;,3 ,I>5,; FOR T); D>.>-;S SFST>IN;D 53 );R;IN R;S7OND;NTS F,;T6);R >ND ;STR;,,>! II E);T);R OR NOT T); 6OFRT OF >77;>,S -R>V;,3 ;RR;D IN >E>RDIN;O6;SSIV; OR FNFOFND;D D>.>-;S+ >TTORN;3NS F;;S >ND ,;->, INT;R;ST TO R;S7OND;NTS F,;T6);R >ND ;STR;,,>! III

E);T);R OR NOT T); 6OFRT OF >77;>,S -R>V;,3 ;RR;D IN NOT )O,DINR;S7OND;NT 7)O;NIO ,I>5,; FND;R ITS INSFR>N6; 7O,I63 ON T); -ROFND OF 7R;S6RI7TION! The issues for resolution are as follows@ 1#2 whether 5,T5 and its dri*er Eilfredo Datin%uinoo are solely liable for the dama%es sustained by respondentsC 1&2 whether the dama%es+ attorneyNs fees and le%al interest awarded by the 6> are excessi*e and unfoundedC 1(2 whether 6D67 can reco*er under its insurance policy from 7hoenix! 7etitioner contends that since it was made solidarily liable with 5,T5 for actual dama%es and attorneyNs fees in para%raph # of the trial courtNs decision+ then it should no lon%er be held liable to pay the amounts stated in para%raph & of the same decision! 7etitioner claims that the liability for actual dama%es and attorneyNs fees is based on culpa contractual+ thus+ only 5,T5 should be held liable! >s re%ards para%raph & of the trial courtNs decision+ petitioner claims that it is ambi%uous and arbitrary because the dispositi*e portion did not state the basis and nature of such award! Respondents+ on the other hand+ ar%ue that petitioner is also at fault+ hence+ it was properly 'oined as a party! There may be an action arisin% out of one incident where questions of fact are common to all! Thus+ the cause of action based on cu!pa aqui!iana in the ci*il suit they filed a%ainst it was *alid! The petition lac s merit! The case filed by respondents a%ainst petitioner is an action for cu!pa aqui!iana or quasi4delict under >rticle &#<= of the 6i*il 6ode! #( In this re%ard+ >rticle &#98 pro*ides that the obli%ation imposed by >rticle &#<= is demandable for the acts or omissions of those persons for whom one is responsible! 6onsequently+ an action based on quasi4delict may be instituted a%ainst the employer for an employeeNs act or omission! The liability for the ne%li%ent conduct of the subordinate is direct and primar3+ but is sub'ect to the defense of due dili%ence in the selection and super*ision of the employee! #? In the instant case+ the trial court found that petitioner failed to pro*e that it exercised the dili%ence of a %ood father of a family in the selection and super*ision of 7ayunan+ :r! The trial court and the 6ourt of >ppeals found petitioner solidarily liable with 5,T5 for the actual dama%es suffered by respondents because of the in'uries they sustained! It was established that 7ayunan+ :r! was dri*in% rec lessly because of the s id mar s as shown in the s etch of the police in*esti%ator! It is well4settled in a&re, Jr. v. Court o# $ppea!s +#/ that the owner of the other *ehicle which collided with a common carrier is solidarily liable to the in'ured passen%er of the same! Ee held+ thus@ The same rule of liability was applied in situations where the ne%li%ence of the dri*er of the bus on which plaintiff was ridin% concurred with the ne%li%ence of a third party who was the dri*er of another *ehicle+ thus causin% an accident! In $nuran v. 4u*o+ 4atangas 2aguna +a3a&as 4us Co. v. %ntermediate $ppe!!ate Court+ and 6etro 6ani!a +ransit Corporation v. Court o# $ppea!s+ )&+ 0.' (o;p!"*, i)' #ri<+r, )&+ op+r!)or o/ )&+ o)&+r <+&i(l+ !"# )&+ #ri<+r o/ )&+ <+&i(l+ =+r+ Hoi")l* !"# '+<+r!ll* &+l# li!0l+ )o )&+ i"H.r+# p!''+",+r or )&+ l!))+rL' &+ir'. The basis of this allocation of liability was explained in Ci!uan v. Court o# $ppea!s+ thus@ Nor '&o.l# i) ;!J+ !"* #i//+r+"(+ )&!) )&+ li!0ili)* o/ p+)i)io"+r [0.' o="+r] 'pri",' /ro; (o")r!() =&il+ )&!) o/ r+'po"#+")' [o="+r !"# #ri<+r o/ o)&+r <+&i(l+] !ri'+' /ro; 5uasi6deli$t.>s early as #0#(+ we already ruled in -utierreD vs! -utierreD+ /= 7hil! #<<+

that in case of in'ury to a passen%er due to the ne%li%ence of the dri*er of the bus on which he was ridin% and of the dri*er of another *ehicle+ the dri*ers as well as the owners of the two *ehicles are 'ointly and se*erally liable for dama%es! x x x xxxx >s in the case of 42+4+ pri*ate respondents in this case and her co4plaintiffs did not sta e out their claim a%ainst the carrier and the dri*er exclusi*ely on one theory+ much less on that of breach of contract alone! A/)+r !ll, i) =!' p+r;i))+# /or )&+; )o !ll+,+ !l)+r"!)i<+ (!.'+' o/ !()io" !"# Hoi" !' ;!"* p!r)i+' !' ;!* 0+ li!0l+ o" '.(& (!.'+' o/ !()io" 'o lo", !' pri<!)+ r+'po"#+") !"# &+r (o-pl!i")i//' #o "o) r+(o<+r )=i(+ /or )&+ '!;+ i"H.r*. Ehat is clear from the cases is the intent of the plaintiff there to reco*er from both the carrier and the dri*er+ thus 'ustifyin% the holdin% that the carrier and the dri*er were 'ointly and se*erally liable because their separate and distinct acts concurred to produce the same in'ury!#=1;mphasis supplied2 In a B'ointB obli%ation+ each obli%or answers only for a part of the whole liabilityC in a BsolidaryB or B'oint and se*eralB obli%ation+ the relationship between the acti*e and the passi*e sub'ects is so close that each of them must comply with or demand the fulfillment of the whole obli%ation! In 2a#arge Cement v. Continenta! Cement Corporation +#< we reiterated that 'oint tort feasors are 'ointly and se*erally liable for the tort which they commit! 6itin% Jorcester v. Dcampo+#9 we held that@ x x x The difficulty in the contention of the appellants is that they fail to reco%niDe that the basis of the present action is tort! They fail to reco%niDe the uni*ersal doctrine that each 'oint tort feasor is not only indi*idually liable for the tort in which he participates+ but is also 'ointly liable with his tort feasors! x x x It may be stated as a %eneral rule that 'oint tort feasors are all the persons who command+ insti%ate+ promote+ encoura%e+ ad*ise+ countenance+ cooperate in+ aid or abet the commission of a tort+ or who appro*e of it after it is done+ if done for their benefit! They are each liable as principals+ to the same extent and in the same manner as if they had performed the wron%ful act themsel*es! x x x :oint tort feasors are 'ointly and se*erally liable for the tort which they commit! The persons in'ured may sue all of them or any number less than all! ;ach is liable for the whole dama%es caused by all+ and all to%ether are 'ointly liable for the whole dama%e! It is no defense for one sued alone+ that the others who participated in the wron%ful act are not 'oined with him as defendantsC nor is it any excuse for him that his participation in the tort was insi%nificant as compared to that of the others! x x x :oint tort feasors are not liable pro rata! The dama%es can not be apportioned amon% them+ except amon% themsel*es! They cannot insist upon an apportionment+ for the purpose of each payin% an aliquot part! They are 'ointly and se*erally liable for the whole amount! x x x > payment in full for the dama%e done+ by one of the 'oint tort feasors+ of course satisfies any claim which mi%ht exist a%ainst the others! There can be but satisfaction! The release of one of the 'oint tort feasors by a%reement %enerally operates to dischar%e all! x x x Of course the court durin% trial may find that some of the alle%ed tort feasors are liable and that others are not liable! The courts may release some for lac of e*idence while condemnin% others of the alle%ed tort feasors! >nd this is true e*en thou%h they are char%ed 'ointly and se*erally!#0 7etitionerNs claim that para%raph & of the dispositi*e portion of the trial courtNs decision is ambi%uous and arbitrary and also entitles respondents to reco*er twice is without basis! In the

body of the trial courtNs decision+ it was clearly stated that petitioner and its dri*er 7ayunan+ :r!+ are 'ointly and solidarily liable for moral dama%es in the amount of 7/8+888!88 to respondent Fletcher and 7&/+888!88 to respondent ;strella! &8 .oreo*er+ there could be no double reco*ery because the award in para%raph & is for moral dama%es while the award in para%raph # is for actual dama%es and attorneyNs fees! 7etitioner next claims that the dama%es+ attorneyNs fees+ and le%al interest awarded by the 6ourt of >ppeals are excessi*e! .oral dama%es may be reco*ered in quasi4delicts causin% physical in'uries! &# The award of moral dama%es in fa*or of Fletcher and ;strella in the amount of 798+888!88 must be reduced since pre*ailin% 'urisprudence fixed the same at 7/8+888!88! && Ehile moral dama%es are not intended to enrich the plaintiff at the expense of the defendant+ the award should nonetheless be commensurate to the sufferin% inflicted! &( The 6ourt of >ppeals correctly awarded respondents exemplary dama%es in the amount of 7&8+888!88 each! ;xemplary dama%es may be awarded in addition to moral and compensatory dama%es!&? >rticle &&(# of the 6i*il 6ode also states that in quasi4delicts+ exemplary dama%es may be %ranted if the defendant acted with %ross ne%li%ence! &/ In this case+ petitionerNs dri*er was dri*in% rec lessly at the time its truc rammed the 5,T5 bus! 7etitioner+ who has direct and primary liability for the ne%li%ent conduct of its subordinates+ was also found ne%li%ent in the selection and super*ision of its employees! In De! 7osario v. Court o# $ppea!s+&= we held+ thus@ >RT! &&&0 of the 6i*il 6ode also pro*ides that such dama%es may be imposed+ by way of example or correction for the public %ood! Ehile exemplary dama%es cannot be reco*ered as a matter of ri%ht+ they need not be pro*ed+ althou%h plaintiff must show that he is entitled to moral+ temperate or compensatory dama%es before the court may consider the question of whether or not exemplary dama%es should be awarded! ;xemplary Dama%es are imposed not to enrich one party or impo*erish another but to ser*e as a deterrent a%ainst or as a ne%ati*e incenti*e to curb socially deleterious actions! Re%ardin% attorneyNs fees+ we held in Traders Royal 5an ;mployees Fnion4Independent *! National ,abor Relations 6ommission+&< that@ There are two commonly accepted concepts of attorneyNs fees+ the so4called ordinary and extraordinary! In its ordinary concept+ an attorneyNs fee is the reasonable compensation paid to a lawyer by his client for the le%al ser*ices he has rendered to the latter! The basis of this compensation is the fact of his employment by and his a%reement with the client! I" i)' +F)r!or#i"!r* (o"(+p), !" !))or"+*L' /++ i' !" i"#+;"i)* /or #!;!,+' or#+r+# 0* )&+ (o.r) )o 0+ p!i# 0* )&+ lo'i", p!r)* i" ! li)i,!)io". The basis of this is any of the cases pro*ided by law where such award can be made+ such as those authoriDed in >rticle &&89+ 6i*il 6ode+ and i' p!*!0l+ "o) )o )&+ l!=*+r 0.) )o )&+ (li+"), ."l+'' )&+* &!<+ !,r++# )&!) )&+ !=!r# '&!ll p+r)!i" )o )&+ l!=*+r !' !##i)io"!l (o;p+"'!)io" or !' p!r) )&+r+o/.&9 1;mphasis supplied2 In the instant case+ the 6ourt of >ppeals correctly awarded attorneyNs fees and other expenses of liti%ation as they may be reco*ered as actual or compensatory dama%es when exemplary dama%es are awardedC when the defendant acted in %ross and e*ident bad faith in refusin% to satisfy the plaintiffNs *alid+ 'ust and demandable claimC and in any other case where the court deems it 'ust and equitable that attorneyNs fees and expenses of liti%ation should be reco*ered! &0 Re%ardin% the imposition of le%al interest at the rate of =R from the time of the filin% of the complaint+ we held in:astern Shipping 2ines, %nc. v. Court o# $ppea!s +(8 that when an

obli%ation+ re%ardless of its source+ i.e!+ law+ contracts+ quasi4contracts+ delicts or quasi4delicts is breached+ the contra*enor can be held liable for payment of interest in the concept of actual and compensatory dama%es+(# sub'ect to the followin% rules+ to wit L #! Ehen the obli%ation is breached+ and it consists in the payment of a sum of money+ i!e!+ a loan or forbearance of money+ the interest due should be that which may ha*e been stipulated in writin%! Furthermore+ the interest due shall itself earn le%al interest from the time it is 'udicially demanded! In the absence of stipulation+ the rate of interest shall be #&R per annum to be computed from default+ i!e!+ from 'udicial or extra'udicial demand under and sub'ect to the pro*isions of >rticle ##=0 of the 6i*il 6ode! &! Ehen an obli%ation+ not constitutin% a loan or forbearance of money+ is breached+ an interest on the amount of dama%es awarded may be imposed at the discretion of the court at the rate of =R per annum. No interest+ howe*er+ shall be ad'ud%ed on unliquidated claims or dama%es except when or until the demand can be established with reasonable certainty! >ccordin%ly+ where the demand is established with reasonable certainty+ the interest shall be%in to run from the time the claim is made 'udicially or extra'udicially 1>rt! ##=0+ 6i*il 6ode2 but when such certainty cannot be so reasonably established at the time the demand is made+)&+ i")+r+') '&!ll 0+,i" )o r." o"l* /ro; )&+ #!)+ )&+ H.#,;+") o/ )&+ (o.r) i' ;!#+ @!) =&i(& )i;+ )&+ ?.!")i/i(!)io" o/ #!;!,+' ;!* 0+ #++;+# )o &!<+ 0++" r+!'o"!0l* !'(+r)!i"+#B! The actual base for the computation of le%al interest shall+ in any case+ be on the amount finally ad'ud%ed! (! 4&+" )&+ H.#,;+") o/ )&+ (o.r) !=!r#i", ! '.; o/ ;o"+* 0+(o;+' /i"!l !"# +F+(.)or*, )&+ r!)+ o/ l+,!l i")+r+'), =&+)&+r )&+ (!'+ /!ll' ."#+r p!r!,r!p& 1 or p!r!,r!p& 2, !0o<+, '&!ll 0+ 12Q p+r !"".; /ro; '.(& /i"!li)* .")il i)' '!)i'/!()io", )&i' i")+ri; p+rio# 0+i", #++;+# )o 0+ 0* )&+" !" +?.i<!l+") )o ! /or0+!r!"(+ o/ (r+#i).(& 1;mphasis supplied2 >ccordin%ly+ the le%al interest of =R shall be%in to run on February 0+ #00( when the trial court rendered 'ud%ment and not on February ?+ #098 when the complaint was filed! This is because at the time of the filin% of the complaint+ the amount of the dama%es to which plaintiffs may be entitled remains unliquidated and un nown+ until it is definitely ascertained+ assessed and determined by the court and only upon presentation of proof thereon! ((From the time the 'ud%ment becomes final and executory+ the interest rate shall be #&R until its satisfaction! >nent the last issue of whether petitioner can reco*er under its insurance policy from 7hoenix+ we affirm the findin%s of both the trial court and the 6ourt of >ppeals+ thus@ >s re%ards the liability of 7hoenix+ the court a quo correctly ruled that defendant4appellant 6D67Ns claim a%ainst 7hoenix already prescribed pursuant to Section (9? of 7!D! =#&+ as amended+ which pro*ides@ >ny person ha*in% any claim upon the policy issued pursuant to this chapter shall+ without any unnecessary delay+ present to the insurance company concerned a written notice of claim settin% forth the nature+ extent and duration of the in'uries sustained as certified by a duly licensed physician! Notice of claim must be filed within six months from date of the accident+ otherwise+ the claim shall be deemed wai*ed! >ction or suit for reco*ery of dama%e due to loss or in'ury must be brou%ht in proper cases+ with the 6ommissioner or 6ourts within one year from denial of the claim+ otherwise+ the claimantNs ri%ht of action shall prescribe! 1>s amended by 7D #9#?+ 57 9<?!2(?

The law is clear and lea*es no room for interpretation! > written notice of claim must be filed within six months from the date of the accident! Since petitioner ne*er made any claim within six months from the date of the accident+ its claim has already prescribed! 4%ERE1ORE, the instant petition is DENIED. The Decision of the 6ourt of >ppeals in 6>4-!R! 6V No! ?=90= dated .arch &0+ &88#+ which modified the Decision of the Re%ional Trial 6ourt of .anila+ 5ranch #(+ in 6i*il 6ase No! R49&4&#(<+ is A11IRMED =i)& )&+ MODI1I$ATIONS that petitioner is held 'ointly and se*erally liable to pay 1#2 actual dama%es in the amount of 7<0+(/?!?(C 1&2 moral dama%es in the amount of 7/8+888!88 each for Rachel Fletcher and Rebecca ;strellaC 1(2 exemplary dama%es in the amount of 7&8+888!88 each for Rebecca ;strella and Rachel FletcherC and 1?2 thirty percent 1(8R2 of the total amount reco*ered as attorneyNs fees! The total amount ad'ud%ed shall earn interest at the rate of =R per annum from the date of 'ud%ment of the trial court until finality of this 'ud%ment! From the time this Decision becomes final and executory and the 'ud%ment amount remains unsatisfied+ the same shall earn interest at the rate of #&R per annum until its satisfaction! SO ORDERED. Pangani&an, C.J., Chairperson, $ustria-6artinez, Ca!!e(o, Sr., Chico-5azario, J.J., concur!

Republic of the 7hilippines SU REME $OURT .anila G.R. No. 1802A7 S+p)+;0+r 7, 2009

E);R;FOR;+ premises considered+ it is hereby ordered that plaintiff 5an of the 7hilippine Islands pay Spouses Vir%ilio and -lynna 6rystal the amount of 7(#0+###!(/ representin% the excess amount of the proceeds of the foreclosure sale o*er the recomputed obli%ation of the defendants+ plus interest of #&R per annum+ from the " sic$ :uly &#+ #00< until the same is fully paid! SO ORD;R;D!? 1;mphasis in the ori%inalC italics and underscorin% supplied2 On appeal+ the 6ourt of >ppeals affirmed the trial courtAs decision but deleted the award of interest on the7(#0+###!(/ to be returned by respondent to petitioners!/ The parties filed their respecti*e motions for reconsideration = which were denied!< They thereupon filed their respecti*e petitions for re*iew on certiorari before this 6ourt! 5y Resolution of :anuary &(+ &889+ 9 the 6ourt denied respondentAs petition+ doc eted as -!R! No! #98#&0+ for failure to sufficiently show that the appellate court committed any re*ersible error in the challen%ed decision and resolution! Eith respect to herein petitionersA petition 0 sub'ect of the present Decision+ petitioners question only the deletion by the appellate court of the imposition by the trial court of interest on the amount to be refunded to them by respondent!#8 Respondent+ in its 6omment+ posits that it is not obli%ed to pay petitioners any Bsurplus+B## citin% Dio *! :apor#&which held@ Ee note that the BsurplusB was the result of the computation by the 6ourt of >ppeals of respondentsA outstandin% liability based on a reduced interest rate of #&R per annum and the reduced penalty rate of #R per month! The court a quo then proceeded to apply our rulin% in Sulit *! 6ourt of >ppeals+ to the effect that in case of surplus in the purchase price+ the mort%a%ee is liable for such surplus as actually comes into his hands+ but where he sells on credit instead of cash+ he must still account for the proceeds as if the price were paid in cash+ for such surplus stands in the place of the land itself with respect to liens thereon or *ested ri%hts therein particularly those of the mort%a%or or his assi%ns! In the instant case+ howe*er+ there is no BsurplusB to spea of! In ad'ustin% the interest and penalty rates to equitable and conscionable le*els+ what this 6ourt did was merely to reflect the true price of the land in the foreclosure sale! The amount of the petitionerAs bid merely represented the true amount of the mort%a%eeAs debt! No surplus in the purchase price was thus created to which the respondents as the mort%a%ors ha*e a *ested ri%ht! #( 1;mphasis and underscorin% supplied2 The petition is impressed with merit! Section ? of Rule =9 of the Rules of 6i*il 7rocedure mandates that@ "t$he amount realiDed from the foreclosure sale of the mort%a%ed property shall+ after deductin% the costs of the sale+ be paid to the person foreclosin% the mort%a%e+ and when there shall be any balance or residue+ after payin% off the mort%a%e debt due+ the same shall be paid to 'unior encumbrancers in the order of priority+ to be ascertained by the court+ or if there be no encumbrances or )&+r+ 0+ ! 0!l!"(+ or r+'i#.+ !/)+r p!*;+") )o )&+;, )&+" )o )&+ ;or),!,or or &i' #.l* !.)&oriI+# !,+"), or )o )&+ p+r'o" +")i)l+# )o i). 1;mphasis+ italics and underscorin% supplied2 In the present case+ the appellate court affirmed the trial courtAs findin%+ after a recomputation4 reduction of the amount of petitionersA outstandin% obli%ation+ that there was an excess amount of the proceeds of the foreclosure sale that must be returned to petitioners!

:IRGILIO $. $RYSTAL !"# GLYNNA 1. $RYSTAL, 7etitioners+ *s! BAN2 O1 T%E %ILI INE ISLANDS, Respondent! D;6ISION $AR IO MORALES, J.: On September /+ #00/+ Vir%ilio 6! 6rystal and -lynna F! 6rystal 1petitioners2 obtained a 7(+888+888 loan from 6itytrust 5an in% 6orporation 16itytrust2 to secure which they mort%a%ed a parcel of land located in the 5anilad ;state+ 6ebu 6ity! In #00=+ the 5an of the 7hilippine Islands 1respondent2 mer%ed with and absorbed 6itytrust! 7etitioners failed to settle their loan+ drawin% respondent to extra4'udicially foreclose the mort%a%e! The mort%a%ed property was sold at public auction on :uly &#+ #00< to respondent which was the hi%hest bidder for 7/+=8?+888! The amount was applied to the mort%a%e obli%ation! Respondent subsequently filed on .arch #0+ &88# before the Re%ional Trial 6ourt 1RT62 of 6ebu 6ity a complaint a%ainst petitioners+ for collection of deficiency of mort%a%e obli%ation and dama%es+ alle%in% that x x x "O$n the date of the auction the mort%a%e obli%ation amounted to 7=+?08+=&(!#9 so there was a resultin%deficiency of 799=+=&(!#9 due the plaintiff from the defendants+ the same to earn stipulated interest of &<R per annum from :uly &#+ #00< to :anuary #+ &88# and at &8R per annum from :anuary #+ &88# to .arch #/+ &88#! >fter the auction sale on :uly &#+ #00<+ plaintiff incurred expenses for SheriffAs commissions+ capital %ains tax+ documentary stamp tax+ real estate taxes and other expenses incidental to the transfer of the certificate of title to the plaintiff all in all amountin% to 7#+==/+0?=!=0 which defendants are liable to plaintiff x x x! 7laintiffAs total claim+ therefore+ for deficiency as alle%ed in the precedin% para%raph and for other contractual liability as alle%ed in this para%raph+ is 7(+?&/+(9=!&< x x x!# 1Fnderscorin% supplied2 In their >nswer+& petitioners contended that respondent *iolated the Truth in ,endin% >ct by not disclosin% that it was char%in% them &<R per annum in interestC and that the extra'udicial foreclosure was ille%al because the mort%a%ed property was not foreclosed for the correct amount! They thus prayed that the extra'udicial foreclosure be declared null and *oid or+ in the alternati*e+ that the excess of their 7(+888+888 principal obli%ation plus interest at #&R per annum be ordered returned to them and that respondent pay them attorneyAs fees and expenses of liti%ation! 5ranch &8 of the 6ebu 6ity RT6+ by Decision of September &<+ &88?+ reduced petitionersA total outstandin% obli%ation to 7/+&9?+999!=/( after findin% that the interests+ penalty char%es and liquidated dama%es were exorbitant and the attorneyAs fees unreasonable! >fter deductin% the said reduced amount of 7/+&9?+999!=/ from the 7/+=8?+888!88 proceeds of the foreclosure sale to thus yield a remainder of 7(#0+###!(/+ the trial court disposed@

RespondentAs reliance on Dio thus fails! It must thus return to petitioners the residue or excess amount of7(#0+###!(/!-avvphiThe only issue in the present case is in fact whether the excess amount of 7(#0+###!(/ should earn le%al interest+ the 'ud%ment directin% respondent to refund such excess ha*in% been laid to rest when+ as reflected abo*e+ the 6ourt denied respondentAs petition in -!R! No! #98#&0! The 6ourt resol*es the issue in the affirmati*e! Ehile it is settled that the imposition of le%al interest on monetary awards is sub'ect to the sound discretion of the court which+ if properly exercised+ will not be disturbed on appeal+#? the appellate court inexplicably deleted the award in the dispositive portion of its assailed Decision+ without indicatin% in any portion of the Decision the reason therefor!-avvphiThe 6ourt finds well4ta en the imposition by the trial court of le%al interest on the excess amount+ not+ howe*er+ at #&R per annum+ but at =R+ and to be computed as 2C1 %ndustries %nc. v. P!anters Deve!opment 4an)#/ teaches+ *iD@ Fnder the principle of un'ust enrichment 4 nemo cum alterius detrimento locupletari potest 4 no person shall be allowed to enrich himself un'ustly at the expense of others! This principle of equity has been enshrined in our 6i*il 6ode+ >rticle && of which pro*ides@ >rt! &&! ;*ery person who throu%h an act of performance by another+ or any other means+ acquires or comes into possession of somethin% at the expense of the latter without 'ust or le%al %round+ shall return the same to him! Ee ha*e held that there is un'ust enrichment when a person un'ustly retains a benefit to the loss of another+ or when a person retains the money or property of another a%ainst the fundamental principles of 'ustice+ equity and %ood conscience! xxxx "T$his 6ourt finds the respondent ban liable not only for retainin% the excess of the bid price or the surplus money in the sum of 7#+90(+0#=!=<+ but also for payin% the interest thereon at the rate of =R per annum from the time of the filin% of the complaint until finality of 'ud%ment! Once the 'ud%ment becomes final and executory+ the interest of #&R per annum+ should be imposed+ to be computed from the time the 'ud%ment becomes final and executory until fully satisfied! 1Italics in the ori%inalC emphasis and underscorin% supplied2 The imposition of =R interest per annum is thus to be computed from the time the trial court rendered 'ud%ment on September &<+ &88?+ and not from :uly &#+ #00< 1the date of the auction sale2 as held by the trial court+ nor from the filin% of the complaint on .arch #0+ &88# since it was respondent which filed the complaint 1for collection of deficiency of mort%a%e obli%ation2!#= >nd after the finality of this Decision+ the 'ud%ment award inclusi*e of interest shall bear interest of #&R per annum until full satisfaction thereof! E);R;FOR;+ the petition is -R>NT;D! The Decision of the 6ourt of >ppeals in 6>4-!R! 6;5 6V No! 88/?= dated February &9+ &88< is .ODIFI;D in that respondent+ 5an of the 7hilippine Islands+ is ordered to return to petitioners the amount of 7(#0+###!(/ representin% the excess amount or residue of the proceeds of the foreclosure sale+ to bear interest at =R per annum computed from the time the trial court rendered its 'ud%ment on September &<+ &88? until the finality of this Decision! ,e%al interest of #&R per annum shall be imposed on the 'ud%ment award inclusi*e of interest from the finality of this Decision until full satisfaction thereof! No pronouncement as to costs!

SO ORD;R;D!

T)IRD DIVISION [G.R. No. 16A780. M!* 5, 2006] RY$E $OR ORATION @/or;+rl* RY$E $OR ORATIONB, petitioner, vs. %ILI INE AMUSEMENT $OR ORATION, respondent. DE$ISION ANGANIBAN, J.: In le%al contemplation+ the termination of a contract is not equi*alent to its rescission! Ehen an a%reement is terminated+ it is deemed *alid at inception! 7rior to termination+ the contract binds the parties+ who are thus obli%ed to obser*e its pro*isions! )owe*er+ when it is rescinded+ it is deemed inexistent+ and the parties are returned to their status quo ante! )ence+ there is mutual restitution of benefits recei*ed! The consequences of termination may be anticipated and pro*ided for by the contract! >s lon% as the terms of the contract are not contrary to law+ morals+ %ood customs+ public order or public policy+ they shall be respected by courts! The 'udiciary is not authoriDed to ma e or modify contractsC neither may it rescue parties from disad*anta%eous stipulations! 6ourts+ howe*er+ are empowered to reduce iniquitous or unconscionable liquidated dama%es+ indemnities and penalties a%reed upon by the parties! T&+ $!'+ 5efore us is a 7etition for Re*iew"#$ under Rule ?/ of the Rules of 6ourt+ assailin% the .ay &&+ &88& Decision"&$ of the 6ourt of >ppeals 16>2 in 6>4-R 6V No! /#=&0 and its .arch ?+ &88( Resolution"($ denyin% petitionerAs .otion for Reconsideration! The assailed Decision disposed thus@ J4%ERE1ORE+ in *iew of the fore%oin%+ 'ud%ment is hereby rendered as follows@ 1#2 In 6i*il 6ase No! 0(4=9&==+ the appealed decision"+$ is >FFIR.;D with .ODIFI6>TION"+$ orderin% "Respondent$ 7hilippine >musement and -amin% 6orporation to pay "7etitioner$ 7ryce 7roperties 6orporation the total amount of7=9<+&90!/8 as actual dama%es representin% the accrued rentals for the quarter September to No*ember #00( with interest and penalty at the rate of two percent 1&R2 per month from date of filin% of the complaint until the amount shall ha*e been fully paid+ and the sum of 7/8+888!88 as attorneyAs feesC 1&2 In 6i*il 6ase No! 0(4=9((<+ the appealed decision is R;V;RS;D and S;T >SID; and a new 'ud%ment is rendered orderin% "7etitioner$ 7ryce 7roperties 6orporation to reimburse "Respondent$ 7hilippine >musement and -amin% 6orporation the amount of 7=9<+&90!/8 representin% the ad*anced rental deposits+ which amount may be compensated by "7etitioner$ 7ryce 7roperties 6orporation with its award in 6i*il 6ase No! 0(4=9&== in the equal amount of 7=9<+&90!/8!K"?$ T&+ 1!()' >ccordin% to the 6>+ the facts are as follows@ JSometime in the first half of #00&+ representati*es from 7ryce 7roperties 6orporation 1776 for bre*ity2 made representations with the 7hilippine >musement and -amin% 6orporation 17>-6OR2 on the possibility of settin% up a casino in 7ryce 7laDa )otel in 6a%ayan de Oro 6ity! ">$ series of ne%otiations followed! 7>-6OR representati*es went to 6a%ayan de Oro 6ity to determine the pulse of the people whether the presence of a casino would be welcomed by the residents! Some local %o*ernment officials showed een interest in the casino RO ERTIES AND GAMING

operation and expressed the *iew that possible problems were surmountable! ne%otiations culminated with 776As counter4letter proposal dated October #?+ #00&!

Their

JOn No*ember ##+ #00&+ the parties executed a 6ontract of ,ease x x x in*ol*in% the ballroom of the )otel for a period of three 1(2 years startin% December #+ #00& and until No*ember (8+ #00/! On No*ember #(+ #00&+ they executed an addendum to the contract x x x which included a lease of an additional #888 square meters of the hotel %rounds as li*in% quarters and play%round of the casino personnel! 7>-6OR ad*ertised the start of their casino operations on December #9+ #00&! JEay bac in #008+ the San%%unian% 7anlun%sod of 6a%ayan de Oro 6ity passed Resolution No! &&0/ x x x dated No*ember #0+ #008 declarin% as a matter of policy to prohibit andHor not to allow the establishment of a %amblin% casino in 6a%ayan de Oro 6ity! Resolution No! &=<( x x x dated October #0+ #00& 1or a month before the contract of lease was executed2 was subsequently passed reiteratin% with *i%or and *ehemence the policy of the 6ity under Resolution No! &&0/+ series of #008+ bannin% casinos in 6a%ayan de Oro 6ity! On December <+ #00&+ the San%%unian% 7anlun%sod of 6a%ayan de Oro 6ity enacted Ordinance No! ((/( x x x prohibitin% the issuance of business permits and cancelin% existin% business permits to any establishment for usin%+ or allowin% to be used+ its premises or any portion thereof for the operation of a casino! JIn the afternoon of December #9+ #00& and 'ust hours before the actual formal openin% of casino operations+ a public rally in front of the hotel was sta%ed by some local officials+ residents and reli%ious leaders! 5arricades were placed "which$ pre*ented some casino personnel and hotel %uests from enterin% and exitin% from the )otel! 7>-6OR was constrained to suspend casino operations because of the rally! >n a%reement between 776 and 7>-6OR+ on one hand+ and representati*es of the rallyists+ on the other+ e*entually ended the rally on the &8th of December+ #00&! JOn :anuary ?+ #00(+ Ordinance No! ((</40( x x x was passed by the San%%unian% 7anlun%sod of 6a%ayan de Oro 6ity+ prohibitin% the operation of casinos and pro*idin% for penalty for *iolation thereof! On :anuary <+ #00(+ 776 filed a 7etition for 7rohibition with 7reliminary In'unction x x x a%ainst then public respondent 6a%ayan de Oro 6ity andHor .ayor 7ablo 7! .a%ta'as x x x before the 6ourt of >ppeals+ doc eted as 6> -!R! S7 No! &09/# prayin% inter a!ia+ for the declaration of unconstitutionality of Ordinance No! ((/(! 7>-6OR inter*ened in said petition and further assailed Ordinance No! ??</40( as bein% *iolati*e of the non4impairment of contracts and equal protection clauses! On .arch (#+ #00(+ the 6ourt of >ppeals promul%ated its decision x x x+ the dispositi*e portion of which reads@ XIN VI;E OF >,, T); FOR;-OIN-+ Ordinance No! ((/( and Ordinance No! ((</40( are hereby D;6,>R;D FN6ONSTITFTION>, and VOID and the respondents and all other persons actin% under their authority and in their behalf are 7;R.>N;NT,3 ;N:OIN;D from enforcin% those ordinances! XSO ORD;R;D!A J>%%rie*ed by the decision+ then public respondents 6a%ayan de Oro 6ity+ et al! ele*ated the case to the Supreme 6ourt in -!R! No! ###80<+ where+ in an ;n 5anc Decision dated :uly &8+ #00? x x x+ the Supreme 6ourt denied the petition and affirmed the decision of the 6ourt of >ppeals! JIn the meantime+ 7>-6OR resumed casino operations on :uly #/+ #00(+ a%ainst which+ howe*er+ another public rally was held! 6asino operations continued for some time+ but were later on indefinitely suspended due to the incessant demonstrations! 7er *erbal ad*ice x x x

from the Office of the 7resident of the 7hilippines+ 7>-6OR decided to stop its casino operations in 6a%ayan de Oro 6ity! 7>-6OR stopped its casino operations in the hotel prior to September+ #00(! In two Statements of >ccount dated September #+ #00( x x x+ 776 apprised 7>-6OR of its outstandin% account for the quarter September # to No*ember (8+ #00(! 776 sent 7>-6OR another ,etter dated September (+ #00( x x x as a follow4up to the partiesA earlier conference! 776 sent 7>-6OR another ,etter dated September #/+ #00( x x x statin% its 5oard of DirectorsA decision to collect the full rentals in case of pre4termination of the lease! J7>-6OR sent 776 a letter dated September &8+ #00( x x x "statin%$ that it was not amenable to the payment of the full rentals citin% as reasons unforeseen le%al and other circumstances which pre*ented it from complyin% with its obli%ations! 7>-6OR further stated that it had no other alternati*e but to pre4terminate the lease a%reement due to the relentless and *ehement opposition to their casino operations! In a letter dated October #&+ #00( x x x+ 7>-6OR as ed 776 to refund the total of 7#+?(<+/9&!&/ representin% the reimbursable rental deposits and expenses for the permanent impro*ement of the )otelAs par in% lot! In a letter dated No*ember /+ #00( x x x+ 7>-6OR formally demanded from 776 the payment of its claim for reimbursement! JOn No*ember #/+ #00( x x x+ 776 filed a case for sum of money in the Re%ional Trial 6ourt of .anila doc eted as 6i*il 6ase No! 0(4=9&==! On No*ember #0+ #00(+ 7>-6OR also filed a case for sum of money in the Re%ional Trial 6ourt of .anila doc eted as 6i*il 6ase No! 0(4 =9((<! JIn a letter dated No*ember &/+ #00(+ 776 informed 7>-6OR that it was terminatin% the contract of lease due to 7>-6ORAs continuin% breach of the contract and further stated that it was exercisin% its ri%hts under the contract of lease pursuant to >rticle &8 1a2 and 1c2 thereof! JOn February &+ #00?+ 776 filed a supplemental complaint x x x in 6i*il 6ase No! 0(4=9&==+ which the trial court admitted in an Order dated February ##+ #00?! In an Order dated >pril &<+ #00?+ 6i*il 6ase No! 0(4=9(<< was ordered consolidated with 6i*il 6ase No! 0(4=9&==! These cases were 'ointly tried by the court a quo! On >u%ust #<+ #00/+ the court a quo promul%ated its decision! 5oth parties appealed!K"/$ In its appeal+ 776 faulted the trial court for the followin% reasons@ #2 failure of the court to award actual and moral dama%esC &2 the /8 percent reduction of the amount 776 was claimin%C and (2 the courtAs rulin% that the & percent penalty was to be imposed from the date of the promul%ation of the Decision+ not from the date stipulated in the 6ontract! On the other hand+ 7>-6OR criticiDed the trial court for the latterAs failure to rule that the 6ontract of ,ease had already been terminated as early as September &#+ #00(+ or at the latest+ on October #?+ #00(+ when 776 recei*ed 7>-6ORAs letter dated October #&+ #00(! The %amin% corporation added that the trial court erred in #2 failin% to consider that 776 was entitled to a*ail itself of the pro*isions of >rticle OO only when 776 was the party terminatin% the 6ontractC &2 not findin% that there were *alid+ 'ustifiable and %ood reasons for terminatin% the 6ontractC and (2 dismissin% the 6omplaint of 7>-6OR in 6i*il 6ase No! 0(4 =9((< for lac of merit+ and not findin% 776 liable for the reimbursement of 7>-6ORAS cash deposits and of the *alue of impro*ements! R.li", o/ )&+ $o.r) o/ App+!l' irst+ on the appeal of 7>-6OR+ the 6> ruled that the 7>-6ORAS pretermination of the 6ontract of ,ease was un'ustified! The appellate court explained that public demonstrations and rallies could not be considered as fortuitous e*ents that would exempt the %amin%

corporation from complyin% with the latterAs contractual obli%ations! Therefore+ the 6ontract continued to be effecti*e until 776 elected to terminate it on No*ember &/+ #00(! Re%ardin% the contentions of 776+ the 6> held that under >rticle #=/0 of the 6i*il 6ode+ 776 had the ri%ht to as for 1#2 rescission of the 6ontract and indemnification for dama%esC or 1&2 only indemnification plus the continuation of the 6ontract! These two remedies were alternati*e+ not cumulati*e+ ruled the 6>! >s 7>-6OR had admitted its failure to pay the rentals for September to No*ember #00(+ 776 correctly exercised the option to terminate the lease a%reement! 7re*iously+ the 6ontract remained effecti*e+ and 776 could collect the accrued rentals! )owe*er+ from the time it terminated the 6ontract on No*ember &/+ #00(+ 776 could no lon%er demand payment of the remainin% rentals as part of actual dama%es+ the 6> added! Denyin% the claim for moral dama%es+ the 6> pointed out the failure of 776 to show that 7>-6OR had acted in %ross or e*ident bad faith in failin% to pay the rentals from September to No*ember #00(! Such failure was shown especially by the fact that 776 still had in hand three 1(2 months ad*ance rental deposits of 7>-6OR! The former could ha*e simply applied this deposit to the unpaid rentals+ as pro*ided in the 6ontract! Neither did 776 adequately show that its reputation had been besmirched or the hotelAs %oodwill eroded by the establishment of the casino and the public protests! Finally+ as to the claimed reimbursement for par in% lot impro*ement+ the 6> held that 7>-6OR had not presented official receipts to pro*e the latterAs alle%ed expenses! The appellate court+ howe*er+ upheld the trial courtAs award to 776 of 7/8+888 attorneyAs fees! )ence this 7etition!"=$ I''.+' In their .emorandum+ petitioner raised the followin% issues@ J.>IN ISSF;@ JDid the )onorable 6ourt of >ppeals commit x x x %ra*e and re*ersible error by holdin% that 7ryce was not entitled to future rentals or lease payments for the unexpired period of the 6ontract of ,ease between 7ryce and 7>-6ORV JSub4Issues@ J#! Eere the pro*isions of Sections &81a2 and &81c2 of the 6ontract of ,ease relati*e to the ri%ht of 7R36; to terminate the 6ontract for cause and to moreo*er collect rentals from 7>-6OR correspondin% to the remainin% term of the lease *alid and bindin%V J&! Did not >rticle #=/0 of the 6i*il 6ode supersede Sections &81a2 and &81c2 of the 6ontract+ 7R36; ha*in% XrescindedA the 6ontract of ,easeV J(! Do the case of 7ios, et a!. vs. Jacinto Pa!ma :nterprises, et a! ! and the other cases cited by 7>-6OR support its position that 7R36; was not entitled to future rentalsV J?! Eould the collection by 7R36; of future rentals not %i*e rise to un'ust enrichmentV

J/! 6ould we not ha*e XharmoniDedA >rticle #=/0 of the 6i*il 6ode and >rticle &8 of the 6ontract of ,easeV J=! Is it not a basic rule that the law+ i!e! >rticle #=/0+ is deemed written in contracts+ particularly in the 7R36;47>-6OR 6ontract of ,easeVK "<$ T&+ $o.r)R' R.li",

The 7etition is partly meritorious! M!i" I''.+3 Colle$tion of Re#aining Rentals 776 anchors its ri%ht to collect future rentals upon the pro*isions of the 6ontract! ,i ewise+ it ar%ues that termination+ as defined under the 6ontract+ is different from the remedy of rescission prescribed under >rticle #=/0 of the 6i*il 6ode! On the other hand+ 7>-6OR contends+ as the 6> ruled+ that >rticle #=/0 of the 6i*il 6ode %o*ernsC hence+ 776 is alle%edly no lon%er entitled to future rentals+ because it chose to rescindthe 6ontract! Contra$t !rovisions Clear and Binding >rticle ##/0 of the 6i*il 6ode pro*ides that Jobli%ations arisin% from contracts ha*e the force of law between the contractin% parties and should be complied with in %ood faith!K "9$ In deference to the ri%hts of the parties+ the law "0$ allows them to enter into stipulations+ clauses+ terms and conditions they may deem con*enientC that is+ as lon% as these are not contrary to law+ morals+ %ood customs+ public order or public policy! ,i ewise+ it is settled that if the terms of the contract clearly express the intention of the contractin% parties+ the literal meanin% of the stipulations would be controllin%!"#8$ In this case+ >rticle OO of the partiesA 6ontract of ,ease pro*ides in part as follows@ JOO! 5R;>6) OR D;F>F,T Ja2 The ,;SS;; a%rees that all the terms+ conditions andHor co*enants herein contained shall be deemed essential conditions of this contract+ and in the event o# de#au!t or &reach o# an3 o# such terms, conditions andKor covenants + or should the ,;SS;; become ban rupt+ or insol*ent+ or compounds with his creditors+ the 2:SSD7 sha!! have the right to terminate and cance! this contract by %i*in% them fifteen 1#/ days2 prior notice deli*ered at the leased premises or posted on the main door thereof! Fpon such termination or cancellation+ the ,;SSOR may forthwith loc the premises and exclude the ,;SS;; therefrom+ forcefully or otherwise+ without incurrin% any ci*il or criminal liability! Durin% the fifteen 1#/2 days notice+ the ,;SS;; may pre*ent the termination of lease by curin% the e*ents or causes of termination or cancellation of the lease! Jb2 xxx xxx xxx

the primary law between the parties+ it %o*erns the ad'udication of their ri%hts and obli%ations! > court has no alternati*e but to enforce the contractual stipulations in the manner they ha*e been a%reed upon and written! "#&$ It is well to recall that courts+ be they trial or appellate+ ha*e no power to ma e or modify contracts! "#($ Neither can they sa*e parties from disad*anta%eous pro*isions! *er#ination or Res$ission7 Eell4ta en is petitionerAs insistence that it had the ri%ht to as for J termination plus the full payment of future rentalsK under the pro*isions of the 6ontract+ rather than 'ust rescission under >rticle #=/0 of the 6i*il 6ode! This 6ourt is not unmindful of the fact that termination andrescission are terms that ha*e been used loosely and interchan%eably in the past! 5ut distinctions ou%ht to be made+ especially in this contro*ersy+ in which the terms mean differently and lead to equally different consequences! The term JrescissionK is found in #2 >rticle ##0#"#?$ of the 6i*il 6ode+ the %eneral pro*ision on rescission of reciprocal obli%ationsC &2 >rticle #=/0+ "#/$ which authoriDes rescission as an alternati*e remedy+ insofar as the ri%hts and obli%ations of the lessor and the lessee in contracts of lease are concernedC and (2 >rticle #(98 "#=$ with re%ard to the rescission of contracts! In his 6oncurrin% Opinion in Eniversa! ood Corporation v. C$,"#<$ :ustice :! 5! ,! Reyes differentiated rescission under >rticle ##0# from that under >rticle #(9# et seq! as follows@ Jx x x! The rescission on account of breach of stipulations is not predicated on in'ury to economic interests of the party plaintiff but on the breach of faith by the defendant+ that *iolates the reciprocity between the parties! It is not a subsidiary action+ and >rticle ##0# may be scanned without disclosin% anywhere that the action for rescission thereunder is subordinated to anythin% other than the culpable breach of his obli%ations to the defendant! This rescission is a principal action retaliatory in character+ it bein% un'ust that a party be held bound to fulfill his promises when the other *iolates his! >s expressed in the old ,atin aphorism@ L5on servanti #idem, non est #ides servanda., )ence+ the reparation of dama%es for the breach is purely secondary! JOn the contrary+ in rescission by reason of lesion or economic pre'udice+ the cause of action is subordinated to the existence of that pre'udice+ because it is the raison dAetre as well as the measure of the ri%ht to rescind! x x x!K"#9$ Rele*antly+ it has been pointed out that reso!ution was ori%inally used in >rticle ##&? of the old 6i*il 6ode+ and that the term became the basis for rescission under >rticle ##0# 1and+ conformably+ also >rticle #=/02!"#0$ Now+ as to the distinction between termination 1or cance!!ation2 and rescission 1more properly+ reso!ution2+ "ui&onhoa v. C$"&8$ held that+ where the action prayed for the payment of rental arreara%es+ the a%%rie*ed party actually sou%ht the partial enforcement of a lease contract! Thus+ the remedy was not rescission+ but termination or cancellation+ of the contract! The 6ourt explained@ Jx x x! 5y the alle%ations of the complaint+ the -o'occosA aim was to cancel or terminate the contract because they sou%ht its partial enforcement in prayin% for rental arreara%es! There is a distinction in law between cancellation of a contract and its rescission! +o rescind is to dec!are a contract void in its inception and to put an end to it as though it never /ere. %t is not mere!3 to terminate it and re!ease parties #rom #urther o&!igations to each other &ut to a&rogate it #rom the &eginning and restore the parties to re!ative positions /hich the3 /ou!d have occupied had no contract ever &een made!

Jc2 .oreo*er+ the 2:SS:: sha!! &e #u!!3 !ia&!e to the 2:SSD7 #or the renta!s corresponding to the remaining term o# the !ease as /e!! as #or an3 and a!! damages + actual or consequential resultin% from such default and termination of this contract! Jd2 xxx xxx x x x!K 1Italics supplied2

The abo*e pro*isions lea*e no doubt that the parties ha*e co*enanted #2 to %i*e 776 the ri%ht to terminate and cancel the 6ontract in the e*ent of a default or breach by the lesseeC and &2 to ma e 7>-6OR fully liable for rentals for the remainin% term of the lease+ despite the exercise of such ri%ht to terminate! 7lainly+ the parties ha*e *oluntarily bound themsel*es to require strict compliance with the pro*isions of the 6ontract by stipulatin% that a default or breach+ amon% others+ shall %i*e the lessee the termination option+ coupled with the lessorAs liability for rentals for the remainin% term of the lease! For sure+ these stipulations are *alid and are not contrary to law+ morals+ %ood customs+ public order or public policy! Neither is there anythin% ob'ectionable about the inclusion in the 6ontract of mandatory pro*isions concernin% the ri%hts and obli%ations of the parties! "##$ 5ein%

Jx x x! +he termination or cance!!ation o# a contract /ou!d necessari!3 entai! en#orcement o# its terms prior to the dec!aration o# its cance!!ation in the same /a3 that &e#ore a !essee is e(ected under a !ease contract, he has to #u!#i!! his o&!igations thereunder that had accrued prior to his e(ectment! )owe*er+ termination of a contract need not under%o 'udicial inter*ention! x x x!K"&#$ 1Italics supplied2 Rescission has li ewise been defined as the Junma in% of a contract+ or its undoing #rom the &eginning, and not mere!3 its termination.K7escission may be effected by both parties by mutual a%reementC or unilaterally by one of them declarin% a rescission of contract without the consent of the other+ if a le%ally sufficient %round exists or if a decree of rescission is applied for before the courts!"&&$ On the other hand+termination refers to an Jend in time or existenceC a close+ cessation or conclusion!K Eith respect to a lease or contract+ it means an endin%+ usually before the end of the anticipated term of such lease or contract+ that may be effected by mutual a%reement or by one party exercisin% one of its remedies as a consequence of the default of the other!"&($ Thus+ mutual restitution is required in a rescission 1or resolution2+ in order to brin% bac the parties to their ori%inal situation prior to the inception of the contract! "&?$ >pplyin% this principle to this case+ it means that 776 would re4acquire possession of the leased premises+ and 7>-6OR would %et bac the rentals it paid the former for the use of the hotel space! In contrast+ the parties in a case of termination are not restored to their ori%inal situationC neither is the contract treated as if it ne*er existed! 7rior to its termination+ the parties are obli%ed to comply with their contractual obli%ations! Only a#ter the contract has been cancelled will they be released from their obli%ations! In this case+ the actions and pleadin%s of petitioner show that it ne*er intended to rescind the ,ease 6ontract from the be%innin%! This fact was e*ident when it first sou%ht to collect the accrued rentals from September to No*ember #00( because+ as pre*iously stated+ it actually demanded the enforcement of the ,ease 6ontract prior to termination! >ny intent to rescind was not shown+ e*en when it abro%ated the 6ontract on No*ember &/+ #00(+ because such abro%ation was not the rescission pro*ided for under >rticle #=/0! 8uture Rentals >s to the remainin% sub4issue of future rentals+ 7ios v. Jacinto"&/$ is inapplicable+ because the remedy resorted to by the lessors in that case was rescission+ not termination! The ri%hts and obli%ations of the parties in 7ios were %o*erned by >rticle #=/0 of the 6i*il 6odeC hence+ the 6ourt held that the dama%es to which the lessor was entitled could not ha*e extended to the lesseeAs liability for future rentals! Fpon the other hand+ future rentals cannot be claimed as compensation for the use or en'oyment of anotherAs property after the termination of a contract! Ee stress that by abro%atin% the 6ontract in the present case+ 776 released 7>-6OR from the latterAs future obli%ations+ which included the payment of rentals! To %rant that ri%ht to the former is to un'ustly enrich it at the latterAs expense! )owe*er+ it appears that Section OO 1c2 was intended to be a penalty clause! That fact is manifest from a readin% of the mandatory pro*ision under subpara%raph 1a2 in con'unction with subpara%raph 1c2 of the 6ontract! > penal clause is Jan accessory obli%ation which the parties attach to a principal obli%ation for the purpose of insurin% the performance thereof by imposin% on the debtor a special prestation 1%enerally consistin% in the payment of a sum of money2 in case the obli%ation is not fulfilled or is irre%ularly or inadequately fulfilled!K "&=$

Guite common in lease contracts+ this clause functions to stren%then the coerci*e force of the obli%ation and to pro*ide+ in effect+ for what could be the liquidated dama%es resultin% from a breach!"&<$ There is nothin% immoral or ille%al in such indemnityHpenalty clause+ absent any showin% that it was forced upon or fraudulently foisted on the obli%or! "&9$ In obli%ations with a penal clause+ the %eneral rule is that the penalty ser*es as a substitute for the indemnity for dama%es and the payment of interests in case of noncomplianceC that is+ if there is no stipulation to the contrary+ "&0$ in which case proof of actual dama%es is not necessary for the penalty to be demanded! "(8$ There are exceptions to the aforementioned rule+ howe*er+ as enumerated in para%raph # of >rticle #&&= of the 6i*il 6ode@ #2 when there is a stipulation to the contrary+ &2 when the obli%or is sued for refusal to pay the a%reed penalty+ and (2 when the obli%or is %uilty of fraud! In these cases+ the purpose of the penalty is ob*iously to punish the obli%or for the breach! )ence+ the obli%ee can reco*er from the former not only the penalty+ but also other dama%es resultin% from the nonfulfillment of the principal obli%ation! "(#$ In the present case+ the first exception applies because >rticle OO 1c2 pro*ides that+ aside from the payment of the rentals correspondin% to the remainin% term of the lease+ the lessee shall also be liable Jfor any and all dama%es+ actual or consequential+ resultin% from such default and termination of this contract!K )a*in% entered into the 6ontract *oluntarily and with full nowled%e of its pro*isions+ 7>-6OR must be held bound to its obli%ations! It cannot e*ade further liability for liquidated dama%es! Redu$tion of !enalt9 In certain cases+ a stipulated penalty may ne*ertheless be equitably reduced by the courts! "(&$ This power is explicitly sanctioned by >rticles #&&0 and &&&< of the 6i*il 6ode+ which we quote@ J>rt! #&&0! The 'ud%e shall equitably reduce the penalty when the principal obli%ation has been partly or irre%ularly complied with by the debtor! ;*en if there has been no performance+ the penalty may also be reduced by the courts if it is iniquitous or unconscionable!K J>rt! &&&<! ,iquidated dama%es+ whether intended as an indemnity or a penalty+ shall be equitably reduced if they are iniquitous or unconscionable!K The question of whether a penalty is reasonable or iniquitous is addressed to the sound discretion of the courts! To be considered in fixin% the amount of penalty are factors such as 44 but not limited to 44 the type+ extent and purpose of the penaltyC the nature of the obli%ationC the mode of the breach and its consequencesC the super*enin% realitiesC the standin% and relationship of the partiesC and the li e!"(($ In this case+ 7>-6ORAs breach was occasioned by e*ents that+ althou%h not fortuitous in law+ were in fact real and pressin%! From the 6>As factual findin%s+ which are not contested by either party+ we find that 7>-6OR conducted a series of ne%otiations and consultations before enterin% into the 6ontract! It did so not only with the 776+ but also with local %o*ernment officials+ who assured it that the problems were surmountable! ,i ewise+ 7>-6OR too pains to contest the ordinances"(?$ before the courts+ which consequently declared them unconstitutional! On top of these de*elopments+ the %amin% corporation was ad*ised by the Office of the 7resident to stop the %ames in 6a%ayan de Oro 6ity+ promptin% the former to cease operations prior to September #00(! >lso worth mentionin% is the 6>As findin% that 7>-6ORAs casino operations had to be suspended for days on end since their start in December #00&C and indefinitely from :uly #/+ #00(+ upon the ad*ice of the Office of 7resident+ until the formal cessation of operations in

September #00(! Needless to say+ these interruptions and stoppa%es meant that 7>-6OR suffered a tremendous loss of expected re*enues+ not to mention the fact that it had fully operated under the 6ontract only for a limited time! Ehile petitionerAs ri%ht to a stipulated penalty is affirmed+ we consider the claim for future rentals to the tune of 7<+8(<+9(/!?8 to be hi%hly iniquitous! The amount should be equitably reduced! Ender the circumstances+ the ad*anced rental deposits in the sum of 7=9<+&90!/8 should be sufficient penalty for respondentAs breach! 4%ERE1ORE+ the 7etition is 97$5+:D in part! The assailed Decision and Resolution are hereby 6DD% %:D to include the payment of penalty! >ccordin%ly+ respondent is ordered to pay petitioner the additional amount of 7=9<+&90!/8 as penalty+ which may be set off or applied a%ainst the formerAs ad*anced rental deposits! .eanwhile+ the 6>As award to petitioner of actual dama%es representin% the accrued rentals for September to No*ember #00( 44 with interest and penalty at the rate of two percent 1&R2 per month+ from the date of filin% of the 6omplaint until the amount shall ha*e been fully paid 44 as well as the 7/8+888 award for attorneyAs fees+ is $ %76:D! No costs! SO ORDERED. Sandova!-9utierrez, Corona, Carpio-6ora!es, and 9arcia, JJ., concur.

T)IRD DIVISION ;R.IND> F! F,OR;NTINO+ 7etitioner+ -!R! No! #<&(9? 7resent@ 3N>R;S4S>NTI>-O+ 6hairperson+ >FSTRI>4.>RTIN;M+ 6)I6O4N>M>RIO+ N>6)FR>+ and R;3;S+ JJ.

7etitioner is doin% business under the business name J;mpanada Royale+K a sole proprietorship en%a%ed in the retail ofempanada with outlets in different malls and business establishments within .etro .anila!"?$ Respondent+ on the other hand+ is a domestic corporation en%a%ed in the business of leasin% stalls and commercial store spaces located inside S. .alls found all throu%hout the country! "/$ On 9 .arch #000+ petitioner and respondent executed three 6ontracts of ,ease containin% similar terms and conditions o*er the cart4type stalls at S. North ;dsa and S. Southmall and a store space at S. .e%amall! The term of each contract is for a period of four months and may be renewed upon a%reement of the parties! "=$ Fpon the expiration of the ori%inal 6ontracts of ,ease+ the parties a%reed to renew the same by extendin% their terms until (# .arch &888!"<$ 7romul%ated@

- versus -

SF7;RV>,F;+ IN6!+ Respondent! September #&+ &88< x4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4x D;6ISION 6)I6O4N>M>RIO+ J.M 5efore this 6ourt is a 7etition for Re*iew on Certiorari under Rule ?/ of the Re*ised Rules of 6ourt+ filed by petitioner;rminda F! Florentino+ see in% to re*erse and set aside the Decision+"#$ dated #8 October &88( and the Resolution+"&$ dated #0 >pril &88= of the 6ourt of >ppeals in 6>4-!R! 6V No! <(9/(! The appellate court+ in its assailed Decision and Resolution+ modified the Decision dated (8 >pril &88# of the Re%ional Trial 6ourt 1RT62 of .a ati+ 5ranch /<+ in 6i*il 6ase No! 884#8#/+ findin% the respondent Super*alue+ Inc!+ liable for the sum of 7#0&+888!88+ representin% the security deposits made by the petitioner upon the commencement of their 6ontract of ,ease! The dispositi*e portion of the assailed appellate courtAs Decision thus reads@ E);R;FOR;+ premises considered+ the appeal is 7>RT,3 -R>NT;D! The >pril (8+ &88# Decision of the Re%ional Trial 6ourt of.a ati+ 5ranch /< is therefore .ODIFI;D to wit@ 1a2 the portion orderin% the "herein respondent$ to pay the amount of 7#0&+888!88 representin% the security deposits and 7/8+888!88 as attorneyAs fees in fa*or of the "herein petitioner$ as well as %i*in% "respondent$ the option to reimburse "petitioner$ ] of the *alue of the impro*ements introduced by the "petitioner$ on the leased "premises$ should "respondent$ choose to appropriate itself or require the "petitioner$ to remo*e the impro*ements+ is hereby R;V;RS;D and S;T >SID;C and 1b2 the portion orderin% the return to "petitioner$ the properties seiDed by "respondent$ after the former settled her obli%ation with the latter is howe*er .>INT>IN;D!"($ The factual and procedural antecedents of the instant petition are as follows@

5efore the expiration of said 6ontracts of ,ease+ or on ? February &888+ petitioner recei*ed two letters from the respondent+ both dated #? :anuary &888+ transmitted throu%h facsimile transmissions!"9$ In the first letter+ petitioner was char%ed with *iolatin% Section 9 of the 6ontracts of ,ease by not openin% on #= December #000 and &= December #000!"0$ Respondent also char%ed petitioner with sellin% a new *ariety of empanada called Jmini4 em&utidoK and of increasin% the price of her merchandise from 7&8!88 to 7&&!88+ without the prior appro*al of the respondent!"#8$ Respondent obser*ed that petitioner was frequently closin% earlier than the usual mall hours+ either because of non4deli*ery or delay in the deli*ery of stoc s to her outlets+ a%ain in *iolation of the terms of the contract! > stern warnin% was thus %i*en to petitioner to refrain from committin% similar infractions in the future in order to a*oid the termination of the lease contract!"##$ In the second letter+ respondent informed the petitioner that it will no lon%er renew the 6ontracts of ,ease for the three outlets+ upon their expiration on (# .arch &888!"#&$ In a letter4reply dated ## February &888+ petitioner explained that the Jmini4 em&utidoK is not a new *ariety of empanada but had similar fillin%s+ taste and in%redients as those of por empanadaC only+ its siDe was reduced in order to ma e it more affordable to the buyers! "#($ Such explanation notwithstandin%+ respondent still refused to renew its 6ontracts of ,ease with the petitioner! To the contrary+ respondent too possession of the store space in S. .e%amall and confiscated the equipment and personal belon%in%s of the petitioner found therein after the expiration of the lease contract! "#?$ In a letter dated 9 .ay &888+ petitioner demanded that the respondent release the equipment and personal belon%in%s it seiDed from the S. .e%amall store space and return the security deposits+ in the sum of 7#0&+888!88+ turned o*er by the petitioner upon si%nin% of the 6ontracts of ,ease! On #/ :une &888+ petitioner sent respondent another letter reiteratin% her pre*ious demands+ but the latter failed or refused to comply therewith! "#/$ On #< >u%ust &888+ an action for Specific 7erformance+ Sum of .oney and Dama%es was filed by the petitioner a%ainst the respondent before the RT6 of .a ati+ 5ranch /<!"#=$

In her 6omplaint doc eted as 6i*il 6ase No! 884#8#/+ petitioner alle%ed that the respondent made *erbal representations that the 6ontracts of ,ease will be renewed from time to time and+ throu%h the said representations+ the petitioner was induced to introduce impro*ements upon the store space at S. .e%amall in the sum of 7&88+888!88+ only to find out a year later that the respondent will no lon%er renew her lease contracts for all three outlets! "#<$ In addition+ petitioner alle%ed that the respondent+ without 'ustifiable cause and without pre*ious demand+ refused to return the security deposits in the amount of 7#0&+888!88!"#9$

,astly+ the "respondent$ may choose either to reimburse the "petitioner$ one half 1#H&2 of the *alue of the impro*ements introduced by the plaintiff at S. .e%amall should "respondent$ choose to appropriate the impro*ements to itself or require the "petitioner$ to remo*e the impro*ements+ e*en thou%h the principal thin% may suffer dama%e thereby! "7etitioner$ shall not+ howe*er+ cause anymore impairment upon the said leased premises than is necessary! The other dama%es claimed by the plaintiff are denied for lac of merit! >%%rie*ed+ the respondent appealed the ad*erse RT6 :ud%ment to the 6ourt of >ppeals!

Further+ petitioner claimed that the respondent seiDed her equipment and personal belon%in%s found inside the store space in S. .e%amall after the lease contract for the said outlet expired and despite repeated written demands from the petitioner+ respondent continuously refused to return the seiDed items! "#0$ 7etitioner thus prayed for the award of actual dama%es in the sum of 7?<&+888!88+ representin% the sum of security deposits+ cost of impro*ements and the *alue of the personal properties seiDed! 7etitioner also as ed for the award of 7(88+888!88 as moral dama%esC 7/8+888!88 as exemplary dama%esC and 798+888!88 as attorneyAs fees and expenses of liti%ation!"&8$ For its part+ respondent countered that petitioner committed se*eral *iolations of the terms of their 6ontracts of ,ease by not openin% from #= December #000 to &= December #000+ and by introducin% a new *ariety of empanada without the prior consent of the respondent+ as mandated by the pro*ision of Section & of the 6ontract of ,ease! Respondent also alle%ed that petitioner infrin%ed the lease contract by frequently closin% earlier than the a%reed closin% hours! Respondent finally a*erred that petitioner is liable for the amount 7#8=+?<?!80+ representin% the penalty for sellin% a new *ariety of empanada+ electricity and water bills+ and rental ad'ustment+ amon% other char%es incidental to the lease a%reements! Respondent claimed that the seiDure of petitionerAs personal belon%in%s and equipment was in the exercise of its retainin% lien+ considerin% that the petitioner failed to settle the said obli%ations up to the time the complaint was filed! "&#$ 6onsiderin% that petitioner already committed se*eral breaches of contract+ the respondent thus opted not to renew its 6ontracts of ,ease with her anymore! The security deposits were made in order to ensure faithful compliance with the terms of their lease a%reementsC and since petitioner committed se*eral infractions thereof+ respondent was 'ustified in forfeitin% the security deposits in the latterAs fa*or! On (8 >pril &88#+ the RT6 rendered a :ud%ment"&&$ in fa*or of the petitioner and found that the physical ta eo*er by the respondent of the leased premises and the seiDure of petitionerAs equipment and personal belon%in%s without prior notice were ille%al! The decretal part of the RT6 :ud%ment reads@ E);R;FOR;+ premises duly considered+ 'ud%ment is hereby rendered orderin% the "herein respondent$ to pay "herein petitioner$ the amount of 7#0&+888!88 representin% the security deposits made by the "petitioner$ and 7/8+888!88 as and for attorneyAs fees! The "respondent$ is li ewise ordered to return to the "petitioner$ the *arious properties seiDed by the former after settlin% her account with the "respondent$!

In a Decision"&($ dated #8 October &88(+ the 6ourt of >ppeals modified the RT6 :ud%ment and found that the respondent was 'ustified in forfeitin% the security deposits and was not liable to reimburse the petitioner for the *alue of the impro*ements introduced in the leased premises and to pay for attorneyAs fees! In modifyin% the findin%s of the lower court+ the appellate court declared that in *iew of the breaches of contract committed by the petitioner+ the respondent is 'ustified in forfeitin% the security deposits! .oreo*er+ since the petitioner did not obtain the consent of the respondent before she introduced impro*ements on the S. .e%amall store space+ the respondent has therefore no obli%ation to reimburse the petitioner for the amount expended in connection with the said impro*ements! "&?$ The 6ourt of >ppeals+ howe*er+ maintained the order of the trial court for respondent to return to petitioner her properties after she has settled her obli%ations to the respondent! The appellate court denied petitionerAs .otion for Reconsideration in a Resolution "&/$ dated #0 >pril &88=! )ence+ this instant 7etition for Re*iew on Certiorari'2,) filed by the petitioner assailin% the 6ourt of >ppeals Decision! For the resolution of this 6ourt are the followin% issues@ I! Ehether or not the respondent is liable to return the security deposits to the petitions!

II! Ehether or not the respondent is liable to reimburse the petitioner for the sum of the impro*ements she introduced in the leased premises! III! Ehether or not the respondent is liable for attorneyAs fees! "&<$

The appellate court+ in findin% that the respondent is authoriDed to forfeit the security deposits+ relied on the pro*isions of Sections / and #9 of the 6ontract of ,ease+ to wit@ Section /! D;7OSIT! T&+ LESSEE '&!ll ;!J+ ! (!'& #+po'i) i" )&+ '.; o/ SICTY T%OUSAND ESOS @ 50,000.00B +?.i<!l+") )o )&r++ @8B ;o")&' r+") !' '+(.ri)* /or )&+ /.ll !"# /!i)&/.l p+r/or;!"(+ )o +!(& !"# +<+r* )+r;, pro<i'io", (o<+"!") !"# (o"#i)io" o/ )&i' l+!'+ !"# "o) !' ! pr+-p!*;+") o/ r+"). If at any time durin% the term of this lease the rent is increased"+$ the ,;SS;; on demand shall ma e an additional deposit equal to the increase in rent! The ,;SSOR shall not be required to eep the deposit separate from its %eneral funds and the deposit shall not be entitled to interest! The deposit shall remain intact durin% the entire term and shall not be applied as payment for any monetary obli%ations of the ,;SS;; under this contract! If the ,;SS;; shall faithfully perform e*ery pro*ision of this lease"+$ the deposit shall be refunded to the ,;SS;; upon the expiration of this ,ease and upon satisfaction of all monetary obli%ation to the ,;SSOR! xxxx

Section #9! T;R.IN>TION! A"* 0r+!(&, "o"-p+r/or;!"(+ or "o"-o0'+r<!"(+ o/ )&+ )+r;' !"# (o"#i)io"' &+r+i" pro<i#+# '&!ll (o"')i).)+ #+/!.l) =&i(& '&!ll 0+ './/i(i+") ,ro."# )o )+r;i"!)+ )&i' l+!'+, i)' +F)+"'io" or r+"+=!l! In which e*ent+ the ,;SSOR shall demand that ,;SS;; immediately *acate the premises+ and LESSOR '&!ll /or/+i) i" i)' /!<or )&+ #+po'i) )+"#+r+# =i)&o.) pr+H.#i(+ )o !"* '.(& o)&+r !ppropri!)+ !()io" !' ;!* 0+ l+,!ll* !.)&oriI+#.[28] Since it was already established by the trial court that the petitioner was %uilty of committin% se*eral breaches of contract+ the 6ourt of >ppeals decreed that she cannot therefore ri%htfully demand the return of the security deposits for the same are deemed forfeited by reason of e*ident contractual *iolations! It is undisputed that the abo*e4quoted pro*ision found in all 6ontracts of ,ease is in the nature of a penal clause to ensure petitionerAs faithful compliance with the terms and conditions of the said contracts! > penal clause is an accessory underta in% to assume %reater liability in case of breach! It is attached to an obli%ation in order to insure performance and has a double function@ 1#2 to pro*ide for liquidated dama%es+ and 1&2 to stren%then the coerci*e force of the obli%ation by the threat of %reater responsibility in the e*ent of breach! "&0$ The obli%or would then be bound to pay the stipulated indemnity without the necessity of proof of the existence and the measure of dama%es caused by the breach! "(8$ >rticle #&&= of the 6i*il 6ode states@ >rt! #&&=! In obli%ations with a penal clause+ the penalty shall substitute the indemnity for dama%es and the payment of interests in case of noncompliance+ if there is no stipulation to the contrary! Ne*ertheless+ dama%es shall be paid if the obli%or refuses to pay the penalty or is %uilty of fraud in the fulfillment of the obli%ation! The penalty may be enforced only when it is demandable in accordance with the pro*isions of this 6ode! >s a %eneral rule+ courts are not at liberty to i%nore the freedoms of the parties to a%ree on such terms and conditions as they see fit as lon% as they are not contrary to law+ morals+ %ood customs+ public order or public policy! Ne*ertheless+ courts may equitably reduce a stipulated penalty in the contracts in two instances@ 1#2 if the principal obli%ation has been partly or irre%ularly complied withC and 1&2 e*en if there has been no compliance if the penalty is iniquitous or unconscionable in accordance with >rticle #&&0 of the 6i*il 6ode which clearly pro*ides@ >rt! #&&0! The 'ud%e shall equitably reduce the penalty when the principal obli%ation has been partly or irre%ularly complied with by the debtor! ;*en if there has been no performance+ the penalty may also be reduced by the courts if it is iniquitous or unconscionable! "(#$ In ascertainin% whether the penalty is unconscionable or not+ this court set out the followin% standard in 2igutan v. Court o# $ppea!s,'32) to wit@ The question of whether a penalty is reasonable or iniquitous can be partly sub'ecti*e and partly ob'ecti*e! Its resolution would depend on such factor as+ but not necessarily confined to+ the type+ extent and purpose of the penalty+ the nature of the obli%ation+ the mode of breach and its consequences+ the super*enin% realities+ the standin% and relationship of the parties+

and the li e+ the application of which+ by and lar%e+ is addressed to the sound discretion of the court! xxx! In the instant case+ the forfeiture of the entire amount of the security deposits in the sum of 7#0&+888!88 was excessi*e and unconscionable considerin% that the %ra*ity of the breaches committed by the petitioner is not of such de%ree that the respondent was unduly pre'udiced thereby! It is but equitable therefore to reduce the penalty of the petitioner to /8R of the total amount of security deposits! It is in the exercise of its sound discretion that this court tempered the penalty for the breaches committed by the petitioner to /8R of the amount of the security deposits! The forfeiture of the entire sum of 7#0&+888!88 is clearly a usurious and iniquitous penalty for the trans%ressions committed by the petitioner! The respondent is therefore under the obli%ation to return the /8R of7#0&+888!88 to the petitioner! Turnin% now to the liability of the respondent to reimburse the petitioner for one4half of the expenses incurred for the impro*ements on the leased store space at S. .e%amall+ the followin% pro*ision in the 6ontracts of ,ease will enli%hten us in resol*in% this issue@ Section ##! >,T;R>TIONS+ >DDITIONS+ I.7ROV;.;NTS+ ;T6! The ,;SS;; shall not ma e any alterations+ additions+ or impro*ements without the prior written consent of ,;SSORC and all alterations+ additions or impro*ements made on the leased premises+ except mo*able or fixtures put in at ,;SS;;As expense and which are remo*able+ without defacin% the buildin%s or dama%in% its floorin%s+ shall become,;SSORAs property without compensationHreimbursement but the ,;SSOR reser*es the ri%ht to require the remo*al of the said alterations+ additions or impro*ements upon expiration of the lease! The fore%oin% pro*ision in the 6ontract of ,ease mandates that before the petitioner can introduce any impro*ement on the leased premises+ she should first obtain respondentAs consent! In the case at bar+ it was not shown that petitioner pre*iously secured the consent of the respondent before she made the impro*ements on the leased space in S. .e%amall! It was not e*en alle%ed by the petitioner that she obtained such consent or she at least attempted to secure the same! On the other hand+ the petitioner asserted that respondent alle%edly misrepresented to her that it would renew the terms of the contracts from time to time after their expirations+ and that the petitioner was so induced thereby that she expended the sum of 7&88+888!88 for the impro*ement of the store space leased!
"(($

This ar%ument was squarely addressed by this court in ernandez v. Court o# $ppea!s, thus@

The 6ourt ruled that the stipulation of the parties in their lease contract Jto be renewableK at the option of both parties stresses that the faculty to renew was %i*en not to the lessee alone nor to the lessor by himself but to the two simultaneouslyC hence+ both must a%ree to renew if a new contract is to come about! 7etitionerAs contention that respondents had *erbally a%reed to extend the lease indefinitely is inadmissible to qualify the terms of the written contract under the parole e*idence rule+ and unenforceable under the statute of frauds!"(?$

.oreo*er+ it is consonant with human experience that lessees+ before occupyin% the leased premises+ especially store spaces located inside malls and bi% commercial establishments+ would reno*ate the place and introduce impro*ements thereon accordin% to the needs and nature of their business and in harmony with their trademar desi%ns as part of their mar etin% ploy to attract customers! 6ertainly+ no inducement or misrepresentation from the lessor is necessary for this purpose+ for it is not only a matter of necessity that a lessee should re4desi%n its place of business but a business strate%y as well! In rulin% that the respondent is liable to reimburse petitioner one half of the amount of impro*ements made on the leased store space should it choose to appropriate the same+ the RT6 relied on the pro*ision of >rticle #=<9 of the 6i*il 6ode which pro*ides@ >rt! #=<9! If the lessee ma es+ in %ood faith+ useful impro*ements which are suitable to the use for which the lease is intended+ without alterin% the form or substance of the property leased+ the lessor upon the termination of the lease shall pay the lessee one4half of the *alue of the impro*ements at that time! Should the lessor refuse to reimburse said amount+ the lessee may remo*e the impro*ements+ e*en thou%h the principal thin% may suffer dama%e thereby! )e shall not+ howe*er+ cause any more impairment upon the property leased than is necessary! Ehile it is true that under the abo*e4quoted pro*ision of the 6i*il 6ode+ the lessor is under the obli%ation to pay the lessee one4half of the *alue of the impro*ements made should the lessor choose to appropriate the impro*ements+ >rticle #=<9 howe*er should be read to%ether with >rticle ??9 and >rticle /?= of the same statute+ which pro*ide@ >rt! ??9! The owner of the land on which anythin% has been built+ sown or planted in %ood faith+ shall ha*e the ri%ht to appropriate as his own the wor s+ sowin% or plantin%+ after payment of the indemnity pro*ided for in articles /?= and /?9+ or to obli%e the one who built or planted to pay the price of the land+ and the one who sowed+ the proper rent! )owe*er+ the builder or planter cannot be obli%ed to buy the land if its *alue is considerably more than that of the buildin% or trees! In such case+ he shall pay reasonable rent+ if the owner of the land does not choose to appropriate the buildin% or trees after proper indemnity! The parties shall a%ree upon the terms of the lease and in case of disa%reement+ the court shall fix the terms thereof! xxxx >rt! /?=! Necessary expenses shall be refunded to e*ery possessorC but only possessor in %ood faith may retain the thin% until he has been reimbursed therefor! Fseful expenses shall be refunded only to the possessor in %ood faith with the same ri%ht of retention+ the person who has defeated him in the possession ha*in% the option of refundin% the amount of the expenses or of payin% the increase in *alue which the thin% may ha*e acquired by reason thereof! Thus+ to be entitled to reimbursement for impro*ements introduced on the property+ the petitioner must be considered a builder in %ood faith! Further+ >rticles ??9 and /?= of the 6i*il 6ode+ which allow full reimbursement of useful impro*ements and retention of the premises until reimbursement is made+ apply only to a possessor in %ood faith+ i.e., one who builds on land with the belief that he is the owner thereof! > builder in %ood faith is one who is unaware of any flaw in his title to the land at the time he builds on it! "(/$ In this case+ the petitioner cannot claim that she was not aware of any flaw in her title or was under the belief

that she is the owner of the sub'ect premises for it is a settled fact that she is merely a lessee thereof! In 9eminiano v. Court o# $ppea!s,'3,) this 6ourt was emphatic in declarin% that lessees are not possessors or builders in %ood faith+ thus@ B+i", ;+r+ l+''++', )&+ pri<!)+ r+'po"#+")' J"+= )&!) )&+ir o((.p!)io" o/ )&+ pr+;i'+' =o.l# (o")i".+ o"l* /or )&+ li/+ o/ )&+ l+!'+. l!i"l*, )&+* (!""o) 0+ (o"'i#+r+# !' po''+''or' "or 0.il#+r' i" ,oo# /!i)&! In a plethora of cases+ this 6ourt has held that >rticle ??9 of the 6i*il 6ode+ in relation to >rticle /?= of the same 6ode+ which allows full reimbursement of useful impro*ements and retention of the premises until reimbursement is made+ applies only to a possessor in %ood faith+ i.e!+ one who builds on land with the belief that he is the owner thereof! I) #o+' "o) !ppl* =&+r+ o"+L' o"l* i")+r+') i' )&!) o/ ! l+''++ ."#+r ! r+")!l (o")r!()N o)&+r=i'+, i) =o.l# !l=!*' 0+ i" )&+ po=+r o/ )&+ )+"!") )o Ki;pro<+K &i' l!"#lor# o.) o/ &i' prop+r)*. Since petitionerAs interest in the store space is merely that of the lessee under the lease contract+ she cannot therefore be considered a builder in %ood faith! 6onsequently+ respondent may appropriate the impro*ements introduced on the leased premises without any obli%ation to reimburse the petitioner for the sum expended! >nent the claim for attorneyAs fees+ we resol*e to li ewise deny the award of the same! >ttorneyAs fees may be awarded when a party is compelled to liti%ate or to incur expenses to protect its interest by reason of un'ustified act of the other! "(<$ In the instant petition+ it was not shown that the respondent un'ustifiably refused to %rant the demands of the petitioner so as to compel the latter to initiate le%al action to enforce her ri%ht! >s we ha*e found herein+ there is basis for respondentAs refusal to return to petitioner the security deposits and to reimburse the costs of the impro*ements in the leased premises! The award of attorneyAs fees is therefore not proper in the instant case! 4%ERE1ORE+ premises considered+ the instant 7etition is ARTLY GRANTED! The 6ourt of >ppeals Decision dated #8 October &88( in 6>4-!R! 6V No! <(9/( is hereby A11IRMED with the MODI1I$ATION that the respondent may forfeit only /8R of the total amount of the security deposits in the sum of 7#0&+888!88+ and must return the remainin% /8R to the petitioner! No costs! SO ORD;R;D!