G.R. No.

201167

February 27, 2013

GOTESCO PROPERTIES, INC., JOSE C. GO, EVELYN GO,

LOURDES G. ORTIGA, GEORGE GO, and VICENTE
GO, Petitioners,
vs.
SPOUSES
EUGENIO
and
ANGELINA
FAJARDO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this Petition for Review on Certiorari under Rule 45
of the Rules of Court is the July 22, 2011 Decision 1and
February 29, 2012 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 112981, which affirmed with modification the
August 27, 2009 Decision3 of the Office of the President (OP).
The Facts
On January 24, 1995, respondent-spouses Eugenio and
Angelina Fajardo (Sps. Fajardo) entered into a Contract to
Sell4 (contract) with petitioner-corporation Gotesco Properties,
Inc. (GPI) for the purchase of a 100-square meter lot identified
as Lot No. 13, Block No.6, Phase No. IV of Evergreen
Executive Village, a subdivision project owned and developed
by GPI located at Deparo Road, Novaliches, Caloocan City.
The subject lot is a portion of a bigger lot covered by Transfer
Certificate of Title (TCT) No. 2442205 (mother title).
Under the contract, Sps. Fajardo undertook to pay the
purchase price of P126,000.00 within a 10-year period,
including interest at the rate of nine percent (9%) per annum.
GPI, on the other hand, agreed to execute a final deed of sale
(deed) in favor of Sps. Fajardo upon full payment of the
stipulated consideration. However, despite its full payment of
the purchase price on January 17, 20006 and subsequent
demands,7 GPI failed to execute the deed and to deliver the
title and physical possession of the subject lot. Thus, on May 3,
2006, Sps. Fajardo filed before the Housing and Land Use
Regulatory Board-Expanded National Capital Region Field
Office (HLURBENCRFO) a complaint8 for specific performance
or rescission of contract with damages against GPI and the
members of its Board of Directors namely, Jose C. Go, Evelyn
Go, Lourdes G. Ortiga, George Go, and Vicente Go (individual
petitioners), docketed as HLURB Case No. REM-05030613319.
Sps. Fajardo averred that GPI violated Section 209 of
Presidential Decree No. 95710 (PD 957) due to its failure to
construct and provide water facilities, improvements,
infrastructures and other forms of development including water
supply and lighting facilities for the subdivision project. They
also alleged that GPI failed to provide boundary marks for each
lot and that the mother title including the subject lot had no
technical description and was even levied upon by the Bangko
Sentral ng Pilipinas (BSP) without their knowledge. They thus
prayed that GPI be ordered to execute the deed, to deliver the
corresponding certificate of title and the physical possession of
the subject lot within a reasonable period, and to develop
Evergreen Executive Village; or in the alternative, to cancel
and/or rescind the contract and refund the total payments
made plus legal interest starting January 2000.

For their part, petitioners maintained that at the time of the

execution of the contract, Sps. Fajardo were actually aware
that GPI's certificate of title had no technical description
inscribed on it. Nonetheless, the title to the subject lot was free
from any liens or encumbrances. 11 Petitioners claimed that the
failure to deliver the title to Sps. Fajardo was beyond their
control12 because while GPI's petition for inscription of technical
description (LRC Case No. 4211) was favorably granted13 by
the Regional Trial Court of Caloocan City, Branch 131 (RTCCaloocan), the same was reversed14 by the CA; this caused the
delay in the subdivision of the property into individual lots with
individual titles. Given the foregoing incidents, petitioners thus
argued that Article 1191 of the Civil Code (Code) the
provision on which Sps. Fajardo anchor their right of rescission
remained inapplicable since they were actually willing to
comply with their obligation but were only prevented from doing
so due to circumstances beyond their control. Separately,
petitioners pointed out that BSP's adverse claim/levy which
was annotated long after the execution of the contract had
already been settled.
The Ruling of the HLURB-ENCRFO
On February 9, 2007, the HLURB-ENCRFO issued a
Decision15 in favor of Sps. Fajardo, holding that GPIs
obligation to execute the corresponding deed and to deliver the
transfer certificate of title and possession of the subject lot
arose and thus became due and demandable at the time Sps.
Fajardo had fully paid the purchase price for the subject lot.
Consequently, GPIs failure to meet the said obligation
constituted a substantial breach of the contract which perforce
warranted its rescission. In this regard, Sps. Fajardo were
given the option to recover the money they paid to GPI in the
amount of P168,728.83, plus legal interest reckoned from date
of extra-judicial demand in September 2002 until fully paid.
Petitioners were likewise held jointly and solidarily liable for the
payment of moral and exemplary damages, attorney's fees and
the costs of suit.
The Ruling of the HLURB Board of Commissioners
On appeal, the HLURB Board of Commissioners affirmed the
above ruling in its August 3, 2007 Decision, 16 finding that the
failure to execute the deed and to deliver the title to Sps.
Fajardo amounted to a violation of Section 25 of PD 957 which
therefore, warranted the refund of payments in favor of Sps.
Fajardo.
The Ruling of the OP
On further appeal, the OP affirmed the HLURB rulings in its
August 27, 2009 Decision.17 In so doing, it emphasized the
mandatory tenor of Section 25 of PD 957 which requires the
delivery of title to the buyer upon full payment and found that
GPI unjustifiably failed to comply with the same.
The Ruling of the CA
On petition for review, the CA affirmed the above rulings with
modification, fixing the amount to be refunded to Sps. Fajardo
at the prevailing market value of the property 18 pursuant to the
ruling in Solid Homes v. Tan (Solid Homes).19
The Petition

Petitioners insist that Sps. Fajardo have no right to rescind the

contract considering that GPI's inability to comply therewith
was due to reasons beyond its control and thus, should not be
held liable to refund the payments they had received. Further,
since the individual petitioners never participated in the acts
complained of nor found to have acted in bad faith, they should
not be held liable to pay damages and attorney's fees.
The Court's Ruling
The petition is partly meritorious.
A. Sps. Fajardos right to rescind
It is settled that in a contract to sell, the seller's obligation to
deliver the corresponding certificates of title is simultaneous
and reciprocal to the buyer's full payment of the purchase
price.20 In this relation, Section 25 of PD 957, which regulates
the subject transaction, imposes on the subdivision owner or
developer the obligation to cause the transfer of the
corresponding certificate of title to the buyer upon full payment,
to wit:
Sec. 25. Issuance of Title. The owner or developer shall
deliver the title of the lot or unit to the buyer upon full
payment of the lot or unit. No fee, except those required for
the registration of the deed of sale in the Registry of Deeds,
shall be collected for the issuance of such title. In the event a
mortgage over the lot or unit is outstanding at the time of the
issuance of the title to the buyer, the owner or developer shall
redeem the mortgage or the corresponding portion thereof
within six months from such issuance in order that the title over
any fully paid lot or unit may be secured and delivered to the
buyer in accordance herewith. (Emphasis supplied.)
In the present case, Sps. Fajardo claim that GPI breached the
contract due to its failure to execute the deed of sale and to
deliver the title and possession over the subject lot,
notwithstanding the full payment of the purchase price made
by Sps. Fajardo on January 17, 200021 as well as the latters
demand for GPI to comply with the aforementioned obligations
per the letter22 dated September 16, 2002. For its part,
petitioners proffer that GPI could not have committed any
breach of contract considering that its purported noncompliance was largely impelled by circumstances beyond its
control i.e., the legal proceedings concerning the subdivision of
the property into individual lots. Hence, absent any substantial
breach, Sps. Fajardo had no right to rescind the contract.
The Court does not find merit in petitioners contention.
A perusal of the records shows that GPI acquired the subject
property on March 10, 1992 through a Deed of Partition and
Exchange23 executed between it and Andres Pacheco
(Andres), the former registered owner of the property. GPI was
issued TCT No. 244220 on March 16, 1992 but the same did
not bear any technical description.24 However, no plausible
explanation was advanced by the petitioners as to why the
petition for inscription (docketed as LRC Case No. 4211) dated
January 6, 2000,25 was filed only after almost eight (8) years
from the acquisition of the subject property.
Neither did petitioners sufficiently explain why GPI took no
positive action to cause the immediate filing of a new petition
for inscription within a reasonable time from notice of the July
15, 2003 CA Decision which dismissed GPIs earlier petition

based on technical defects, this notwithstanding Sps. Fajardo's

full payment of the purchase price and prior demand for
delivery of title. GPI filed the petition before the RTC-Caloocan,
Branch 122 (docketed as LRC Case No. C-5026) only
on November 23, 2006,26 following receipt of the letter27 dated
February 10, 2006 and the filing of the complaint on May 3,
2006, alternatively seeking refund of payments. While the
court a quodecided the latter petition for inscription in its
favor,28 there is no showing that the same had attained finality
or that the approved technical description had in fact been
annotated on TCT No. 244220, or even that the subdivision
plan had already been approved.
Moreover, despite petitioners allegation29 that the claim of BSP
had been settled, there appears to be no cancellation of the
annotations30 in GPIs favor. Clearly, the long delay in the
performance of GPI's obligation from date of demand on
September 16, 2002 was unreasonable and unjustified. It
cannot therefore be denied that GPI substantially breached its
contract to sell with Sps. Fajardo which thereby accords the
latter the right to rescind the same pursuant to Article 1191 of
the Code, viz:
ART. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with
articles 1385 and 1388 and the Mortgage Law.
B. Effects of rescission
At this juncture, it is noteworthy to point out that rescission
does not merely terminate the contract and release the parties
from further obligations to each other, but abrogates the
contract from its inception and restores the parties to their
original
positions
as
if
no
contract
has
been
made.31 Consequently, mutual restitution, which entails the
return of the benefits that each party may have received as a
result of the contract, is thus required. 32 To be sure, it has been
settled that the effects of rescission as provided for in Article
1385 of the Code are equally applicable to cases under Article
1191, to wit:
xxxx
Mutual restitution is required in cases involving rescission
under Article 1191. This means bringing the parties back to
their original status prior to the inception of the contract. Article
1385 of the Civil Code provides, thus:
1wphi1

ART. 1385. Rescission creates the obligation to return the

things which were the object of the contract, together with
their fruits, and the price with its interest; consequently, it
can be carried out only when he who demands rescission
can return whatever he may be obligated to restore.

Neither shall rescission take place when the things which are
the object of the contract are legally in the possession of third
persons who did not act in bad faith.
In this case, indemnity for damages may be demanded from
the person causing the loss.
This Court has consistently ruled that this provision
applies to rescission under Article 1191:
Since Article 1385 of the Civil Code expressly and clearly
states that "rescission creates the obligation to return the
things which were the object of the contract, together with their
fruits, and the price with its interest," the Court finds no
justification to sustain petitioners position that said Article 1385
does not apply to rescission under Article 1191. x x
x33 (Emphasis supplied; citations omitted.)
In this light, it cannot be denied that only GPI benefited from
the contract, having received full payment of the contract price
plus interests as early as January 17, 2000, while Sps. Fajardo
remained prejudiced by the persisting non-delivery of the
subject lot despite full payment. As a necessary consequence,
considering the propriety of the rescission as earlier discussed,
Sps. Fajardo must be able to recover the price of the property
pegged at its prevailing market value consistent with the
Courts pronouncement in Solid Homes,34 viz:
Indeed, there would be unjust enrichment if respondents Solid
Homes, Inc. & Purita Soliven are made to pay only the
purchase price plus interest. It is definite that the value of the
subject property already escalated after almost two decades
from the time the petitioner paid for it. Equity and justice
dictate that the injured party should be paid the market
value of the lot, otherwise, respondents Solid Homes, Inc.
& Purita Soliven would enrich themselves at the expense
of herein lot owners when they sell the same lot at the
present market value. Surely, such a situation should not be
countenanced for to do so would be contrary to reason and
therefore, unconscionable. Over time, courts have recognized
with almost pedantic adherence that what is inconvenient or
contrary to reason is not allowed in law. (Emphasis supplied.)
On this score, it is apt to mention that it is the intent of PD 957
to protect the buyer against unscrupulous developers,
operators
and/or
sellers
who
reneged
on
their
obligations.35 Thus, in order to achieve this purpose, equity and
justice dictate that the injured party should be afforded full
recompense and as such, be allowed to recover the prevailing
market value of the undelivered lot which had been fully paid
for.
1wphi1

C. Moral and exemplary damages, attorneys fees and

costs of suit
Furthermore, the Court finds that there is proper legal basis to
accord moral and exemplary damages and attorney's fees,
including costs of suit. Verily, GPIs unjustified failure to comply
with its obligations as above-discussed caused Sps. Fajardo
serious anxiety, mental anguish and sleepless nights, thereby
justifying the award of moral damages. In the same vein, the
payment of exemplary damages remains in order so as to
prevent similarly minded subdivision developers to commit the
same transgression. And finally, considering that Sps. Fajardo
were constrained to engage the services of counsel to file this
suit, the award of attorneys fees must be likewise sustained.

D. Liability of individual Petitioners

However, the Court finds no basis to hold individual petitioners
solidarily liable with petitioner GPI for the payment of damages
in favor of Sps. Fajardo since it was not shown that they acted
maliciously or dealt with the latter in bad faith. Settled 1s the
rule that in the absence of malice and bad faith, as in this case,
officers of the corporation cannot be made personally liable for
liabilities of the corporation which, by legal fiction, has a
personality separate and distinct from its officers, stockholders,
and members.36
WHEREFORE, the assailed July 22, 2011 Decision and
February 29, 2012 Resolution of the Court of Appeals in CAG.R. SP No. 112981 are hereby AFFIRMED WITH
MODIFICATION, absolving individual petitioners Jose C. Go,
Evelyn Go, Lourdes G. Ortiga, George Go, and Vicente Go
from personal liability towards respondent-spouses Eugenio
and Angelina Fajardo.
SO ORDERED.
G.R. No. 188986

March 20, 2013

GALILEO A. MAGLASANG, doing business under the

name
GL
Enterprises, Petitioner,
vs.
NORTHWESTERN INC., UNIVERSITY, Respondent.
DECISION
SERENO, CJ.:
Before this Court is a Rule 45 Petition, seeking a review of the
27 July 2009 Court of Appeals (CA) Decision in CA-G.R. CV
No. 88989,1 which modified the Regional Trial Court (RTC)
Decision of 8 January 2007 in Civil Case No. Q-04-53660. 2 The
CA held that petitioner substantially breached its contracts with
respondent for the installation of an integrated bridge system
(IBS).
The antecedent .facts are as follows:3
On 10 June 2004, respondent Northwestern University
(Northwestern), an educational institution offering maritimerelated courses, engaged the services of a Quezon City-based
firm, petitioner GL Enterprises, to install a new IBS in Laoag
City. The installation of an IBS, used as the students training
laboratory, was required by the Commission on Higher
Education (CHED) before a school could offer maritime
transportation programs.4
Since its IBS was already obsolete, respondent required
petitioner to supply and install specific components in order to
form the most modern IBS that would be acceptable to CHED
and would be compliant with the standards of the International
Maritime Organization (IMO). For this purpose, the parties
executed two contracts.
The first contract partly reads:5
That in consideration of the payment herein mentioned to be
made by the First Party (defendant), the Second Party agrees
to furnish, supply, install and integrate the most modern

INTEGRATED BRIDGE SYSTEM located at Northwestern

University MOCK BOAT in accordance with the general
conditions, plans and specifications of this contract.
The second contract essentially contains the same terms and
conditions as follows:6
That in consideration of the payment herein mentioned to be
made by the First Party (defendant), the Second Party agrees
to furnish, supply, install & integrate the most modern
INTEGRATED BRIDGE SYSTEM located at Northwestern
University MOCK BOAT in accordance with the general
conditions, plans and specifications of this contract.
TOTAL
COST:
(Emphasis in the original)

PhP

270,000.00

Common to both contracts are the following provisions: (1) the

IBS and its components must be compliant with the IMO and
CHED standard and with manuals for simulators/major
equipment; (2) the contracts may be terminated if one party
commits a substantial breach of its undertaking; and (3) any
dispute under the agreement shall first be settled mutually
between the parties, and if settlement is not obtained, resort
shall be sought in the courts of law.
Subsequently, Northwestern paid P1 million as down payment
to GL Enterprises. The former then assumed possession of
Northwesterns old IBS as trade-in payment for its service.
Thus, the balance of the contract price remained at P1.97
million.7
Two months after the execution of the contracts, GL
Enterprises technicians delivered various materials to the
project site. However, when they started installing the
components, respondent halted the operations. GL Enterprises
then asked for an explanation.8
Northwestern justified the work stoppage upon its finding that
the delivered equipment were substandard.9 It explained
further that GL Enterprises violated the terms and conditions of
the contracts, since the delivered components (1) were old; (2)
did not have instruction manuals and warranty certificates; (3)
contained indications of being reconditioned machines; and (4)
did not meet the IMO and CHED standards. Thus,
Northwestern demanded compliance with the agreement and
suggested that GL Enterprises meet with the formers
representatives to iron out the situation.
Instead of heeding this suggestion, GL Enterprises filed on 8
September 2004 a Complaint10 for breach of contract and
prayed for the following sums: P1.97 million, representing the
amount that it would have earned, had Northwestern not
stopped it from performing its tasks under the two contracts; at
least P100,000 as moral damages; at least P100,000 by way
of exemplary damages; at least P100,000 as attorneys fees
and litigation expenses; and cost of suit. Petitioner alleged that
Northwestern breached the contracts by ordering the work
stoppage and thus preventing the installation of the materials
for the IBS.
Northwestern denied the allegation. In its defense, it asserted
that since the equipment delivered were not in accordance with
the specifications provided by the contracts, all succeeding
works would be futile and would entail unnecessary expenses.
Hence, it prayed for the rescission of the contracts and made a

compulsory counterclaim for actual, moral, and exemplary

damages, and attorneys fees.
The RTC held both parties at fault. It found that Northwestern
unduly halted the operations, even if the contracts called for a
completed project to be evaluated by the CHED. In turn, the
breach committed by GL Enterprises consisted of the delivery
of substandard equipment that were not compliant with IMO
and CHED standards as required by the agreement.
Invoking the equitable principle that "each party must bear its
own loss," the trial court treated the contracts as impossible of
performance without the fault of either party or as having been
dissolved by mutual consent. Consequently, it ordered mutual
restitution, which would thereby restore the parties to their
original positions as follows:11
Accordingly, plaintiff is hereby ordered to restore to the
defendant all the equipment obtained by reason of the First
Contract and refund the downpayment of P1,000,000.00 to the
defendant; and for the defendant to return to the plaintiff the
equipment and materials it withheld by reason of the noncontinuance of the installation and integration project. In the
event that restoration of the old equipment taken from
defendant's premises is no longer possible, plaintiff is hereby
ordered to pay the appraised value of defendant's old
equipment at P1,000,000.00. Likewise, in the event that
restoration of the equipment and materials delivered by the
plaintiff to the defendant is no longer possible, defendant is
hereby ordered to pay its appraised value at P1,027,480.00.
Moreover, plaintiff is likewise ordered to restore and return all
the equipment obtained by reason of the Second Contract, or if
restoration or return is not possible, plaintiff is ordered to pay
the value thereof to the defendant.
SO ORDERED.
Aggrieved, both parties appealed to the CA. With each of them
pointing a finger at the other party as the violator of the
contracts, the appellate court ultimately determined that GL
Enterprises was the one guilty of substantial breach and liable
for attorneys fees.
The CA appreciated that since the parties essentially sought to
have an IBS compliant with the CHED and IMO standards, it
was GL Enterprises delivery of defective equipment that
materially and substantially breached the contracts. Although
the contracts contemplated a completed project to be
evaluated by CHED, Northwestern could not just sit idly by
when it was apparent that the components delivered were
substandard.
The CA held that Northwestern only exercised ordinary
prudence to prevent the inevitable rejection of the IBS
delivered by GL Enterprises. Likewise, the appellate court
disregarded petitioners excuse that the equipment delivered
might not have been the components intended to be installed,
for it would be contrary to human experience to deliver
equipment from Quezon City to Laoag City with no intention to
use it.
This time, applying Article 1191 of the Civil Code, the CA
declared the rescission of the contracts. It then proceeded to
affirm the RTCs order of mutual restitution. Additionally, the

appellate court granted P50,000 to Northwestern by way of

attorneys fees.
Before this Court, petitioner rehashes all the arguments he had
raised in the courts a quo.12 He maintains his prayer for actual
damages equivalent to the amount that he would have earned,
had respondent not stopped him from performing his tasks
under the two contracts; moral and exemplary damages;
attorneys fees; litigation expenses; and cost of suit.
Hence, the pertinent issue to be resolved in the instant appeal
is whether the CA gravely erred in (1) finding substantial
breach on the part of GL Enterprises; (2) refusing petitioners
claims for damages, and (3) awarding attorneys fees to
Northwestern.
RULING OF THE COURT
Substantial Breaches of the Contracts
Although the RTC and the CA concurred in ordering restitution,
the courts a quo, however, differed on the basis thereof. The
RTC applied the equitable principle of mutual fault, while the
CA applied Article 1191 on rescission.
The power to rescind the obligations of the injured party is
implied in reciprocal obligations, such as in this case. On this
score, the CA correctly applied Article 1191, which provides
thus:
The power to rescind obligations is implied in reciprocal ones,
in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
The two contracts require no less than substantial breach
before they can be rescinded. Since the contracts do not
provide for a definition of substantial breach that would
terminate the rights and obligations of the parties, we apply the
definition found in our jurisprudence.
This Court defined in Cannu v. Galang13 that substantial, unlike
slight or casual breaches of contract, are fundamental
breaches that defeat the object of the parties in entering into
an agreement, since the law is not concerned with trifles.14
The question of whether a breach of contract is substantial
depends upon the attending circumstances.15
In the case at bar, the parties explicitly agreed that the
materials to be delivered must be compliant with the CHED
and IMO standards and must be complete with manuals. Aside
from these clear provisions in the contracts, the courts a quo
similarly found that the intent of the parties was to replace the
old IBS in order to obtain CHED accreditation for
Northwesterns maritime-related courses.

According to CHED Memorandum Order (CMO) No. 10, Series

of 1999, as amended by CMO No. 13, Series of 2005, any
simulator used for simulator-based training shall be capable of
simulating the operating capabilities of the shipboard
equipment concerned. The simulation must be achieved at a
level of physical realism appropriate for training objectives;
include the capabilities, limitations and possible errors of such
equipment; and provide an interface through which a trainee
can interact with the equipment, and the simulated
environment.
Given these conditions, it was thus incumbent upon GL
Enterprises to supply the components that would create an IBS
that would effectively facilitate the learning of the students.
However, GL Enterprises miserably failed in meeting its
responsibility. As contained in the findings of the CA and the
RTC, petitioner supplied substandard equipment when it
delivered components that (1) were old; (2) did not have
instruction manuals and warranty certificates; (3) bore
indications of being reconditioned machines; and, all told, (4)
might not have met the IMO and CHED standards. Highlighting
the defects of the delivered materials, the CA quoted
respondents testimonial evidence as follows:16
Q: In particular which of these equipment of CHED
requirements were not complied with?
A: The Radar Ma'am, because they delivered only 10-inch PPI,
that is the monitor of the Radar. That is 16-inch and the
gyrocompass with two (2) repeaters and the history card. The
gyrocompass - there is no marker, there is no model, there is
no serial number, no gimbal, no gyroscope and a bulb to work
it properly to point the true North because it is very important to
the Cadets to learn where is the true North being indicated by
the Master Gyrocompass.
xxxx
Q: Mr. Witness, one of the defects you noted down in this
history card is that the master gyrocompass had no gimbals,
gyroscope and balls and was replaced with an ordinary electric
motor. So what is the Implication of this?
A: Because those gimbals, balls and the gyroscope it let the
gyrocompass to work so it will point the true North but they
being replaced with the ordinary motor used for toys so it will
not indicate the true North.
Q: So what happens if it will not indicate the true North?
A: It is very big problem for my cadets because they must, to
learn into school where is the true North and what is that
equipment to be used on board.
Q: One of the defects is that the steering wheel was that of an
ordinary automobile. And what is the implication of this?
A: Because. on board Maam, we are using the real steering
wheel and the cadets will be implicated if they will notice that
the ship have the same steering wheel as the car so it is not
advisable for them.

Q:. And another one is that the gyrocompass repeater was only
refurbished and it has no serial number. What is wrong with
that?
A: It should be original Maam because this gyro repeater, it
must to repeat also the true North being indicated by the
Master Gyro Compass so it will not work properly, I dont know
it will work properly. (Underscoring supplied)
Evidently, the materials delivered were less likely to pass the
CHED standards, because the navigation system to be
installed might not accurately point to the true north; and the
steering wheel delivered was one that came from an
automobile, instead of one used in ships. Logically, by no
stretch of the imagination could these form part of the most
modern IBS compliant with the IMO and CHED standards.
Even in the instant appeal, GL Enterprises does not refute that
the equipment it delivered was substandard. However, it
reiterates its rejected excuse that Northwestern should have
made an assessment only after the completion of the
IBS.17 Thus, petitioner stresses that it was Northwestern that
breached the agreement when the latter halted the installation
of the materials for the IBS, even if the parties had
contemplated a completed project to be evaluated by CHED.
However, as aptly considered by the CA, respondent could not
just "sit still and wait for such day that its accreditation may not
be granted by CHED due to the apparent substandard
equipment installed in the bridge system." 18 The appellate court
correctly emphasized that, by that time, both parties would
have incurred more costs for nothing.

With respect to attorney's fees, Article 2208 of the Civil Code

allows the grant thereof when the court deems it just and
equitable that attorney's fees should be recovered. An award of
attorney's fees is proper if one was forced to litigate and incur
expenses to protect one's rights and interest by reason of an
unjustified act or omission on the part of the party from whom
the award is sought.23
Since we affirm the CA's finding that it was not Northwestern
but GL Enterprises that breached the contracts without
justification, it follows that the appellate court correctly awarded
attorneys fees to respondent. Notably, this litigation could have
altogether been avoided if petitioner heeded respondent's
suggestion to amicably settle; or, better yet, if in the first place
petitioner delivered the right materials as required by the
contracts.
IN VIEW THEREOF, the assailed 27 July 2009 Decision of the
Court of Appeals in CA-G.R. CV No. 88989 is hereby
AFFIRMED.
SO ORDERED.
OPTIMUM
DEVELOPMENT
BANK, Petitioner,
vs.
SPOUSES BENIGNO V. JOVELLANOS and LOURDES R.
JOVELLANOS, Respondents.
DECISION
PERLAS-BERNABE, J.:

Given that petitioner, without justification, supplied substandard

components for the new IBS, it is thus clear that its violation
was not merely incidental, but directly related to the essence of
the agreement pertaining to the installation of an IBS compliant
with the CHED and IMO standards.
Consequently, the CA correctly found substantial breach on the
part of petitioner.
In contrast, Northwesterns breach, if any, was characterized
by the appellate court as slight or casual. 21 By way of negative
definition, a breach is considered casual if it does not
fundamentally defeat the object of the parties in entering into
an agreement. Furthermore, for there to be a breach to begin
with, there must be a "failure, without legal excuse, to perform
any promise which forms the whole or part of the contract."22

Assailed in this petition for review on certiorari are the

Decision dated May 29, 2009 and Resolution dated August
10, 2009 of the Court of Appeals (CA) in CA-G.R. SP No.
104487 which reversed the Decision dated December 27,
2007 of the Regional Trial Court of Caloocan City, Branch 128
(RTC) in Civil Case No. C-21867 that, in turn, affirmed the
Decision dated June 8, 2007 of the Metropolitan Trial Court,
Branch 53 of that same city (MeTC) in Civil Case No. 06-28830
ordering respondents-spouses Benigno and Lourdes
Jovellanos (Sps. Jovellanos) to, inter alia, vacate the premises
of the property subject of this case.
1

The Facts
On April 26, 2005, Sps. Jovellanos entered into a Contract to
Sell with Palmera Homes, Inc. (Palmera Homes) for the
purchase of a residential house and lot situated in Block 3, Lot
14, Villa Alegria Subdivision, Caloocan City (subject property)
for a total consideration of P1,015,000.00. Pursuant to the
contract, Sps. Jovellanos took possession of the subject
property upon a down payment of P91,500.00, undertaking to
pay the remaining balance of the contract price in equal
monthly installments of P13,107.00 for a period of 10 years
starting June 12, 2005.
6

Here, as discussed, the stoppage of the installation was

justified. The action of Northwestern constituted a legal excuse
to prevent the highly possible rejection of the IBS. Hence, just
as the CA concluded, we find that Northwestern exercised
ordinary prudence to avert a possible wastage of time, effort,
resources and also of theP2.9 million representing the value of
the new IBS.

Actual Damages, Moral and Exemplary Damages, and

Attorney's Fees
As between the parties, substantial breach can clearly be
attributed to GL Enterprises. Consequently, it is not the injured
party who can claim damages under Article 1170 of the Civil
Code. For this reason, we concur in the result of the CA's
Decision denying petitioner actual damages in the form of lost
earnings, as well as moral and exemplary damages.

On August 22, 2006, Palmera Homes assigned all its rights,

title and interest in the Contract to Sell in favor of petitioner
Optimum Development Bank (Optimum) through a Deed of
Assignment of even date.
8

1wphi1

On April 10, 2006, Optimum issued a Notice of Delinquency

and Cancellation of Contract to Sell for Sps. Jovellanoss
9

failure to pay their monthly installments despite several written

and verbal notices.

(b) the jurisdiction of the MeTC over the complaint for

unlawful detainer.

10

22

In a final Demand Letter dated May 25, 2006, Optimum

required Sps. Jovellanos to vacate and deliver possession of
the subject property within seven (7) days which, however,
remained unheeded. Hence, Optimum filed, on November 3,
2006, a complaint for unlawful detainer before the MeTC,
docketed as Civil Case No. 06-28830. Despite having been
served with summons, together with a copy of the
complaint, Sps. Jovellanos failed to file their answer within the
prescribed reglementary period, thus prompting Optimum to
move for the rendition of judgment.

The CA Ruling

Thereafter, Sps. Jovellanos filed their opposition with motion to

admit answer, questioning the jurisdiction of the court, among
others. Further, they filed a Motion to Reopen and Set the
Case for Preliminary Conference, which the MeTC denied.

Accordingly, it concluded that the subject matter is one which is

incapable of pecuniary estimation and thus, within the
jurisdiction of the RTC.

11

12

13

14

The MeTC Ruling

In an Amended Decision dated May 29, 2009, the CA

reversed and set aside the RTCs decision, ruling to dismiss
the complaint for lack of jurisdiction. It found that the
controversy does not only involve the issue of possession but
also the validity of the cancellation of the Contract to Sell and
the determination of the rights of the parties thereunder as well
as the governing law, among others, Republic Act No. (RA)
6552.
23

24

25

Undaunted, Optimum moved for reconsideration which was

denied in a Resolution dated August 10, 2009. Hence, the
instant petition, submitting that the case is one for unlawful
detainer, which falls within the exclusive original jurisdiction of
the municipal trial courts, and not a case incapable of
pecuniary estimation cognizable solely by the regional trial
courts.
26

In a Decision dated June 8, 2007, the MeTC ordered Sps.

Jovellanos to vacate the subject property and pay Optimum
reasonable compensation in the amount of P5,000.00 for its
use and occupation until possession has been surrendered. It
held that Sps. Jovellanoss possession of the said property
was by virtue of a Contract to Sell which had already been
cancelled for non-payment of the stipulated monthly installment
payments. As such, their "rights of possession over the subject
property necessarily terminated or expired and hence, their
continued possession thereof constitute[d] unlawful detainer."
15

16

Dissatisfied, Sps. Jovellanos appealed to the RTC, claiming

that Optimum counsel made them believe that a compromise
agreement was being prepared, thus their decision not to
engage the services of counsel and their concomitant failure to
file an answer.

The Courts Ruling

The petition is meritorious. What is determinative of the nature
of the action and the court with jurisdiction over it are the
allegations in the complaint and the character of the relief
sought, not the defenses set up in an answer.
27

A complaint sufficiently alleges a cause of action for unlawful

detainer if it recites that:

17

They also assailed the jurisdiction of the MeTC, claiming that

the case did not merely involve the issue of physical
possession but rather, questions arising from their rights under
a contract to sell which is a matter that is incapable of
pecuniary estimation and, therefore, within the jurisdiction of
the RTC.
18

The RTC Ruling

In a Decision dated December 27, 2007, the RTC affirmed the
MeTCs judgment, holding that the latter did not err in refusing
to admit Sps. Jovellanos s belatedly filed answer considering
the mandatory period for its filing. It also affirmed the MeTCs
finding that the action does not involve the rights of the
respective parties under the contract but merely the recovery
of possession by Optimum of the subject property after the
spouses default.
19

20

Aggrieved, Sps. Jovellanos moved for reconsideration which

was, however, denied in a Resolution dated June 27, 2008.
Hence, the petition before the CA reiterating that the RTC
erred in affirming the decision of the MeTC with respect to:

(a) initially, possession of the property by the

defendant was by contract with or by tolerance of the
plaintiff;
(b) eventually, such possession became illegal upon
notice by plaintiff to defendant of the termination of
the latter's right of possession;
(c) thereafter, defendant remained in possession of
the property and deprived plaintiff of the enjoyment
thereof; and
(d) within one year from the last demand on
defendant to vacate the property, plaintiff instituted the
complaint for ejectment.
28

Corollarily, the only issue to be resolved in an unlawful detainer

case is physical or material possession of the property
involved, independent of any claim of ownership by any of the
parties involved.
29

21

(a) the non-admission of their answer to the

complaint; and

In its complaint, Optimum alleged that it was by virtue of the

April 26, 2005 Contract to Sell that Sps. Jovellanos were
allowed to take possession of the subject property. However,
since the latter failed to pay the stipulated monthly
installments, notwithstanding several written and verbal notices
made upon them, it cancelled the said contract as per the
Notice of Delinquency and Cancellation dated April 10, 2006.

When Sps. Jovellanos refused to vacate the subject property

despite repeated demands, Optimum instituted the present
action for unlawful detainer on November 3, 2006, or within
one year from the final demand made on May 25, 2006.
While the RTC upheld the MeTCs ruling in favor of Optimum,
the CA, on the other hand, declared that the MeTC had no
jurisdiction over the complaint for unlawful detainer, reasoning
that the case involves a matter which is incapable of pecuniary
estimation i.e., the validity of the cancellation of the Contract
to Sell and the determination of the rights of the parties under
the contract and law and hence, within the jurisdiction of the
RTC. The Court disagrees. Metropolitan Trial Courts are
conditionally vested with authority to resolve the question of
ownership raised as an incident in an ejectment case where
the determination is essential to a complete adjudication of the
issue of possession. Concomitant to the ejectment courts
authority to look into the claim of ownership for purposes of
resolving the issue of possession is its authority to interpret the
contract or agreement upon which the claim is premised. Thus,
in the case of Oronce v. CA, wherein the litigants opposing
claims for possession was hinged on whether their written
agreement reflected the intention to enter into a sale or merely
an equitable mortgage, the Court affirmed the propriety of the
ejectment courts examination of the terms of the agreement in
question by holding that, "because metropolitan trial courts are
authorized to look into the ownership of the property in
controversy in ejectment cases, it behooved MTC Branch 41 to
examine the bases for petitioners claim of ownership that
entailed interpretation of the Deed of Sale with Assumption of
Mortgage." Also, in Union Bank of the Philippines v. Maunlad
Homes, Inc. (Union Bank), citing Sps. Refugia v. CA, the
Court declared that MeTCs have authority to interpret contracts
in unlawful detainer cases, viz.:
30

or termination of the Contract to Sell between them. Indeed, it

was well within the jurisdiction of the MeTC to consider the
terms of the parties agreement in order to ultimately determine
the factual bases of Optimums possessory claims over the
subject property. Proceeding accordingly, the MeTC held that
Sps. Jovellanoss non-payment of the installments due had
rendered the Contract to Sell without force and effect, thus
depriving the latter of their right to possess the property subject
of said contract. The foregoing disposition aptly squares with
existing jurisprudence. As the Court similarly held in the Union
Bank case, the sellers cancellation of the contract to sell
necessarily extinguished the buyers right of possession over
the property that was the subject of the terminated agreement.
36

37

Verily, in a contract to sell, the prospective seller binds himself

to sell the property subject of the agreement exclusively to the
prospective buyer upon fulfillment of the condition agreed upon
which is the full payment of the purchase price but reserving to
himself the ownership of the subject property despite delivery
thereof to the prospective buyer.
38

31

32

33

34

35

The authority granted to the MeTC to preliminarily resolve the

issue of ownership to determine the issue of possession
ultimately allows it to interpret and enforce the contract or
agreement between the plaintiff and the defendant. To deny the
MeTC jurisdiction over a complaint merely because the issue
of possession requires the interpretation of a contract will
effectively rule out unlawful detainer as a remedy. As stated, in
an action for unlawful detainer, the defendants right to possess
the property may be by virtue of a contract, express or implied;
corollarily, the termination of the defendants right to possess
would be governed by the terms of the same contract.
Interpretation of the contract between the plaintiff and the
defendant is inevitable because it is the contract that initially
granted the defendant the right to possess the property; it is
this same contract that the plaintiff subsequently claims was
violated or extinguished, terminating the defendants right to
possess. We ruled in Sps. Refugia v. CA that where the
resolution of the issue of possession hinges on a determination
of the validity and interpretation of the document of title or any
other contract on which the claim of possession is premised,
the inferior court may likewise pass upon these issues.
The MeTCs ruling on the rights of the parties based on its
interpretation of their contract is, of course, not conclusive, but
is merely provisional and is binding only with respect to the
issue of possession. (Emphases supplied; citations omitted)
In the case at bar, the unlawful detainer suit filed by Optimum
against Sps. Jovellanos for illegally withholding possession of
the subject property is similarly premised upon the cancellation

The full payment of the purchase price in a contract to sell is a

suspensive condition, the non-fulfillment of which prevents the
prospective sellers obligation to convey title from becoming
effective, as in this case. Further, it is significant to note that
given that the Contract to Sell in this case is one which has for
its object real property to be sold on an installment basis, the
said contract is especially governed by and thus, must be
examined under the provisions of RA 6552, or the "Realty
Installment Buyer Protection Act", which provides for the rights
of the buyer in case of his default in the payment of succeeding
installments. Breaking down the provisions of the law, the
Court, in the case of Rillo v. CA, explained the mechanics of
cancellation under RA 6552 which are based mainly on the
amount of installments already paid by the buyer under the
subject contract, to wit:
39

40

41

Given the nature of the contract of the parties, the respondent

court correctly applied Republic Act No. 6552. Known as the
Maceda Law, R.A. No. 6552 recognizes in conditional sales of
all kinds of real estate (industrial, commercial, residential) the
right of the seller to cancel the contract upon non-payment of
an installment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from
acquiring binding force. It also provides the right of the buyer
on installments in case he defaults in the payment of
succeeding installments, viz.:
(1) Where he has paid at least two years of installments,
(a) To pay, without additional interest, the unpaid installments
due within the total grace period earned by him, which is
hereby fixed at the rate of one month grace period for every
one year of installment payments made:
Provided, That this right shall be exercised by the buyer only
once in every five years of the life of the contract and its
extensions, if any. (b) If the contract is cancelled, the seller
shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total
payments made and, after five years of installments, an
additional five per cent every year but not to exceed ninety per
cent of the total payments made:
Provided, That the actual cancellation of the contract shall take
place after cancellation or the demand for rescission of the

contract by a notarial act and upon full payment of the cash

surrender value to the buyer.
Down payments, deposits or options on the contract shall be
included in the computation of the total number of installments
made.

FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE

NETWORK
INC., Petitioners,
vs.
SPOUSES
CONRADO
AND
MARIA
VICTORIA
RONQUILLO, Respondents.
DECISION

(2) Where he has paid less than two years in installments, Sec.
4. x x x the seller shall give the buyer a grace period of not less
than sixty days from the date the installment became due. If
the buyer fails to pay the installments due at the expiration of
the grace period, the seller may cancel the contract after thirty
days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act.
(Emphasis and underscoring supplied)
Pertinently, since Sps. Jovellanos failed to pay their stipulated
monthly installments as found by the MeTC, the Court
examines Optimums compliance with Section 4 of RA 6552,
as above-quoted and highlighted, which is the provision
applicable to buyers who have paid less than two (2) yearsworth of installments. Essentially, the said provision provides
for three (3) requisites before the seller may actually cancel the
subject contract: first, the seller shall give the buyer a 60-day
grace period to be reckoned from the date the installment
became due; second, the seller must give the buyer a notice
of cancellation/demand for rescission by notarial act if the
buyer fails to pay the installments due at the expiration of the
said grace period; and third, the seller may actually cancel the
contract only after thirty (30) days from the buyers receipt of
the said notice of cancellation/demand for rescission by
notarial act. In the present case, the 60-day grace period
automatically operated in favor of the buyers, Sps. Jovellanos,
and took effect from the time that the maturity dates of the
installment payments lapsed. With the said grace period
having expired bereft of any installment payment on the part of
Sps. Jovellanos, Optimum then issued a notarized Notice of
Delinquency and Cancellation of Contract on April 10, 2006.
Finally, in proceeding with the actual cancellation of the
contract to sell, Optimum gave Sps. Jovellanos an additional
thirty (30) days within which to settle their arrears and reinstate
the contract, or sell or assign their rights to another.

PEREZ, J.:
Before the Court is a petition for review on certiorari under
Rule 45 of the 1997 Rules .of Civil Procedure assailing the
Decision of the Court of Appeals in CA-G.R. SP No. 100450
which affirmed the Decision of the Office of the President in
O.P. Case No. 06-F-216.
1

As culled from the records, the facts are as follow:

Petitioner Fil-Estate Properties, Inc. is the owner and
developer of the Central Park Place Tower while co-petitioner
Fil-Estate Network, Inc. is its authorized marketing agent.
Respondent Spouses Conrado and Maria Victoria Ronquillo
purchased from petitioners an 82-square meter condominium
unit at Central Park Place Tower in Mandaluyong City for a preselling contract price of FIVE MILLION ONE HUNDRED
SEVENTY-FOUR THOUSAND ONLY (P5,174,000.00). On 29
August 1997, respondents executed and signed a Reservation
Application Agreement wherein they deposited P200,000.00 as
reservation fee. As agreed upon, respondents paid the full
downpayment of P1,552,200.00 and had been paying
the P63,363.33 monthly amortizations until September 1998.

42

43

44

It was only after the expiration of the thirty day (30) period did
Optimum treat the contract to sell as effectively cancelled
making as it did a final demand upon Sps. Jovellanos to vacate
the subject property only on May 25, 2006. Thus, based on the
foregoing, the Court finds that there was a valid and effective
cancellation of the Contract to Sell in accordance with Section
4 of RA 6552 and since Sps. Jovellanos had already lost their
right to retain possession of the subject property as a
consequence of such cancellation, their refusal to vacate and
turn over possession to Optimum makes out a valid case for
unlawful detainer as properly adjudged by the MeTC.
WHEREFORE, the petition is GRANTED. The Decision dated
May 29, 2009 and Resolution dated August 10, 2009 of the
Court of Appeals in CA-G.R. SP No. 104487 are SET ASIDE.
The Decision dated June 8, 2007 of Metropolitan Trial Court,
Branch 53, Caloocan City in Civil Case No. 06-28830 is hereby
REINSTATED.
SO ORDERED.
G.R. No. 185798

January 13, 2014

Upon learning that construction works had stopped,

respondents likewise stopped paying their monthly
amortization. Claiming to have paid a total of P2,198,949.96 to
petitioners, respondents through two (2) successive letters,
demanded a full refund of their payment with interest. When
their demands went unheeded, respondents were constrained
to file a Complaint for Refund and Damages before the
Housing and Land Use Regulatory Board (HLURB).
Respondents
prayed
for
reimbursement/refund
of P2,198,949.96
representing
the
total
amortization
payments, P200,000.00 as and by way of moral damages,
attorneys fees and other litigation expenses.
On 21 October 2000, the HLURB issued an Order of Default
against petitioners for failing to file their Answer within the
reglementary period despite service of summons.
2

Petitioners filed a motion to lift order of default and attached

their position paper attributing the delay in construction to the
1997 Asian financial crisis. Petitioners denied committing fraud
or misrepresentation which could entitle respondents to an
award of moral damages.
On 13 June 2002, the HLURB, through Arbiter Atty. Joselito F.
Melchor, rendered judgment ordering petitioners to jointly and
severally pay respondents the following amount:
a) The amount of TWO MILLION ONE HUNDRED
NINETY-EIGHT THOUSAND NINE HUNDRED
FORTY NINE PESOS & 96/100 (P2,198,949.96) with
interest thereon at twelve percent (12%) per annum to
be computed from the time of the complainants
demand for refund on October 08, 1998 until fully
paid,

b)
ONE
HUNDRED
THOUSAND
(P100,000.00) as moral damages,

PESOS

c) FIFTY THOUSAND PESOS (P50,000.00) as

attorneys fees,

THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN

AFFIRMING THE DECISION OF THE HOUSING AND LAND
USE REGULATORY BOARD ORDERING PETITIONERSAPPELLANTS TO PAY P10,000.00 AS ADMINISTRATIVE
FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS
TO SUPPORT SUCH FINDING.
8

d) The costs of suit, and

e) An administrative fine of TEN THOUSAND PESOS
(P10,000.00) payable to this Office fifteen (15) days
upon receipt of this decision, for violation of Section
20 in relation to Section 38 of PD 957.
3

The Arbiter considered petitioners failure to develop the

condominium project as a substantial breach of their obligation
which entitles respondents to seek for rescission with payment
of damages. The Arbiter also stated that mere economic
hardship is not an excuse for contractual and legal delay.
Petitioners appealed the Arbiters Decision through a petition
for review pursuant to Rule XII of the 1996 Rules of Procedure
of HLURB. On 17 February 2005, the Board of Commissioners
of the HLURB denied the petition and affirmed the Arbiters
Decision. The HLURB reiterated that the depreciation of the
peso as a result of the Asian financial crisis is not a fortuitous
event which will exempt petitioners from the performance of
their contractual obligation.
4

Petitioners filed a motion for reconsideration but it was

denied on 8 May 2006. Thereafter, petitioners filed a Notice of
Appeal with the Office of the President. On 18 April 2007,
petitioners appeal was dismissed by the Office of the
President for lack of merit. Petitioners moved for a
reconsideration but their motion was denied on 26 July 2007.
5

On 30 July 2008, the Court of Appeals denied the petition for

review for lack of merit. The appellate court echoed the
HLURB
Arbiters
ruling
that
"a
buyer
for
a
condominium/subdivision unit/lot unit which has not been
developed
in
accordance
with
the
approved
condominium/subdivision plan within the time limit for
complying with said developmental requirement may opt for
reimbursement under Section 20 in relation to Section 23 of
Presidential Decree (P.D.) 957 x x x." The appellate court
supported the HLURB Arbiters conclusion, which was affirmed
by the HLURB Board of Commission and the Office of the
President, that petitioners failure to develop the condominium
project is tantamount to a substantial breach which warrants a
refund of the total amount paid, including interest. The
appellate court pointed out that petitioners failed to prove that
the Asian financial crisis constitutes a fortuitous event which
could excuse them from the performance of their contractual
and statutory obligations. The appellate court also affirmed the
award of moral damages in light of petitioners unjustified
refusal to satisfy respondents claim and the legality of the
administrative fine, as provided in Section 20 of Presidential
Decree No. 957.
9

Petitioners sought reconsideration but it was denied in a

Resolution dated 11 December 2008 by the Court of Appeals.
10

Petitioners sought relief from the Court of Appeals through a

petition for review under Rule 43 containing the same
arguments they raised before the HLURB and the Office of the
President:
I.
THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN
AFFIRMING THE DECISION OF THE HONORABLE
HOUSING AND LAND USE REGULATORY BOARD AND
ORDERING PETITIONERS-APPELLANTS TO REFUND
RESPONDENTS-APPELLEES THE SUM OF P2,198,949.96
WITH 12% INTEREST FROM 8 OCTOBER 1998 UNTIL
FULLY PAID, CONSIDERING THAT THE COMPLAINT
STATES NO CAUSE OF ACTION AGAINST PETITIONERSAPPELLANTS.
II.
THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN
AFFIRMING THE DECISION OF THE OFFICE BELOW
ORDERING
PETITIONERS-APPELLANTS
TO
PAY
RESPONDENTS-APPELLEES THE SUM OF P100,000.00 AS
MORAL DAMAGES AND P50,000.00 AS ATTORNEYS FEES
CONSIDERING THE ABSENCE OF ANY FACTUAL OR
LEGAL BASIS THEREFOR.
III.

Aggrieved, petitioners filed the instant petition advancing

substantially the same grounds for review:
A.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT
AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF
THE PRESIDENT WHICH SUSTAINED RESCISSION AND
REFUND IN FAVOR OF THE RESPONDENTS DESPITE
LACK OF CAUSE OF ACTION.
B.
GRANTING FOR THE SAKE OF ARGUMENT THAT THE
PETITIONERS ARE LIABLE UNDER THE PREMISES, THE
HONORABLE COURT OF APPEALS ERRED WHEN IT
AFFIRMED THE HUGE AMOUNT OF INTEREST OF TWELVE
PERCENT (12%).
C.
THE HONORABLE COURT OF APPEALS LIKEWISE ERRED
WHEN IT AFFIRMED IN TOTO THE DECISION OF THE
OFFICE OF THE PRESIDENT INCLUDING THE PAYMENT
OF P100,000.00 AS MORAL DAMAGES, P50,000.00 AS
ATTORNEYS FEES AND P10,000.00 AS ADMINISTRATIVE
FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS
TO SUPPORT SUCH CONCLUSIONS.
11

Petitioners insist that the complaint states no cause of action

because they allegedly have not committed any act of
misrepresentation amounting to bad faith which could entitle
respondents to a refund. Petitioners claim that there was a

mere delay in the completion of the project and that they only
resorted to "suspension and reformatting as a testament to
their commitment to their buyers." Petitioners attribute the
delay to the 1997 Asian financial crisis that befell the real
estate industry. Invoking Article 1174 of the New Civil Code,
petitioners maintain that they cannot be held liable for a
fortuitous event.
Petitioners contest the payment of a huge amount of interest
on account of suspension of development on a project. They
liken their situation to a bank which this Court, in Overseas
Bank v. Court of Appeals, adjudged as not liable to pay
interest on deposits during the period that its operations are
ordered suspended by the Monetary Board of the Central
Bank.
12

Lastly, petitioners aver that they should not be ordered to pay

moral damages because they never intended to cause delay,
and again blamed the Asian economic crisis as the direct,
proximate and only cause of their failure to complete the
project. Petitioners submit that moral damages should not be
awarded unless so stipulated except under the instances
enumerated in Article 2208 of the New Civil Code. Lastly,
petitioners refuse to pay the administrative fine because the
delay in the project was caused not by their own deceptive
intent to defraud their buyers, but due to unforeseen
circumstances beyond their control.
Three issues are presented for our resolution: 1) whether or
not the Asian financial crisis constitute a fortuitous event which
would justify delay by petitioners in the performance of their
contractual obligation; 2) assuming that petitioners are liable,
whether or not 12% interest was correctly imposed on the
judgment award, and 3) whether the award of moral damages,
attorneys fees and administrative fine was proper.

Section 23. Non-Forfeiture of Payments. No installment

payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited
in favor of the owner or developer when the buyer, after due
notice to the owner or developer, desists from further payment
due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved
plans and within the time limit for complying with the same.
Such buyer may, at his option, be reimbursed the total amount
paid including amortization interests but excluding delinquency
interests, with interest thereon at the legal rate. (Emphasis
supplied).
1wphi1

Conformably with these provisions of law, respondents are

entitled to rescind the contract and demand reimbursement for
the payments they had made to petitioners.
Notably, the issues had already been settled by the Court in
the case of Fil-Estate Properties, Inc. v. Spouses
Go promulgated on 17 August 2007, where the Court stated
that the Asian financial crisis is not an instance of caso fortuito.
Bearing the same factual milieu as the instant case, G.R. No.
165164 involves the same company, Fil-Estate, albeit about a
different condominium property. The company likewise
reneged on its obligation to respondents therein by failing to
develop the condominium project despite substantial payment
of the contract price. Fil-Estate advanced the same argument
that the 1997 Asian financial crisis is a fortuitous event which
justifies the delay of the construction project. First off, the Court
classified the issue as a question of fact which may not be
raised in a petition for review considering that there was no
variance in the factual findings of the HLURB, the Office of the
President and the Court of Appeals. Second, the Court cited
the previous rulings of Asian Construction and Development
Corporation v. Philippine Commercial International Bank and
Mondragon Leisure and Resorts Corporation v. Court of
Appeals holding that the 1997 Asian financial crisis did not
constitute a valid justification to renege on obligations. The
Court expounded:
13

14

15

It is apparent that these issues were repeatedly raised by

petitioners in all the legal fora. The rulings were consistent that
first, the Asian financial crisis is not a fortuitous event that
would excuse petitioners from performing their contractual
obligation; second, as a result of the breach committed by
petitioners, respondents are entitled to rescind the contract and
to be refunded the amount of amortizations paid including
interest and damages; and third, petitioners are likewise
obligated to pay attorneys fees and the administrative fine.
This petition did not present any justification for us to deviate
from the rulings of the HLURB, the Office of the President and
the Court of Appeals.
Indeed, the non-performance of petitioners obligation entitles
respondents to rescission under Article 1191 of the New Civil
Code which states:
Article 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
More in point is Section 23 of Presidential Decree No. 957, the
rule governing the sale of condominiums, which provides:

Also, we cannot generalize that the Asian financial crisis in

1997 was unforeseeable and beyond the control of a business
corporation. It is unfortunate that petitioner apparently met with
considerable difficulty e.g. increase cost of materials and labor,
even before the scheduled commencement of its real estate
project as early as 1995. However, a real estate enterprise
engaged in the pre-selling of condominium units is concededly
a master in projections on commodities and currency
movements and business risks. The fluctuating movement of
the Philippine peso in the foreign exchange market is an
everyday occurrence, and fluctuations in currency exchange
rates happen everyday, thus, not an instance of caso fortuito.
16

The aforementioned decision becomes a precedent to future

cases in which the facts are substantially the same, as in this
case. The principle of stare decisis, which means adherence to
judicial precedents, applies.
In said case, the Court ordered the refund of the total
amortizations paid by respondents plus 6% legal interest
computed from the date of demand. The Court also awarded
attorneys fees. We follow that ruling in the case before us.
The resulting modification of the award of legal interest is, also,
in line with our recent ruling in Nacar v. Gallery
Frames, embodying the amendment introduced by the
Bangko Sentral ng Pilipinas Monetary Board in BSP-MB
17

Circular No. 799 which pegged the interest rate at 6%

regardless of the source of obligation.
We likewise affirm the award of attorneys fees because
respondents were forced to litigate for 14 years and incur
expenses to protect their rights and interest by reason of the
unjustified act on the part of petitioners. The imposition
of P10,000.00 administrative fine is correct pursuant to Section
38 of Presidential Decree No. 957 which reads:
18

Section 38. Administrative Fines. The Authority may prescribe

and impose fines not exceeding ten thousand pesos for
violations of the provisions of this Decree or of any rule or
regulation thereunder. Fines shall be payable to the Authority
and enforceable through writs of execution in accordance with
the provisions of the Rules of Court.
Finally, we sustain the award of moral damages. In order that
moral damages may be awarded in breach of contract cases,
the defendant must have acted in bad faith, must be found
guilty of gross negligence amounting to bad faith, or must have
acted in wanton disregard of contractual obligations. The
Arbiter found petitioners to have acted in bad faith when they
breached their contract, when they failed to address
respondents grievances and when they adamantly refused to
refund respondents' payment.
19

In fine, we find no reversible error on the merits in the

impugned Court of Appeals' Decision and Resolution.
WHEREFORE, the petition is PARTLY GRANTED. The
appealed Decision is AFFIRMED with the MODIFICATION that
the legal interest to be paid is SIX PERCENT (6%) on the
amount due computed from the time of respondents' demand
for refund on 8 October 1998.
SO ORDERED.
G.R. No. 72275 November 13, 1991
PACIFIC
BANKING
CORPORATION, petitioner,
vs.
HON INTERMEDIATE APPELLATE COURT AND ROBERTO
REGALA, JR., respondents.
Ocampo, Dizon & Domingo for petitioner.

Celia Regala for brevity), applied for and

obtained from the plaintiff the issuance and
use of Pacificard credit card (Exhs. "A", "Al",), under the Terms and Conditions
Governing the Issuance and Use of
Pacificard (Exh. "B" and hereinafter referred
to as Terms and Conditions), a copy of which
was issued to and received by the said
defendant on the date of the application and
expressly agreed that the use of the
Pacificard is governed by said Terms and
Conditions. On the same date, the
defendant-appelant Robert Regala, Jr.,
spouse of defendant Celia Regala, executed
a "Guarantor's Undertaking" (Exh. "A-1-a") in
favor of the appellee Bank, whereby the
latter agreed "jointly and severally of Celia
Aurora Syjuco Regala, to pay the Pacific
Banking Corporation upon demand, any and
all indebtedness, obligations, charges or
liabilities due and incurred by said Celia
Aurora Syjuco Regala with the use of the
Pacificard, or renewals thereof, issued in her
favor by the Pacific Banking Corporation". It
was also agreed that "any changes of or
novation in the terms and conditions in
connection with the issuance or use of the
Pacificard, or any extension of time to pay
such obligations, charges or liabilities shall
not in any manner release me/us from
responsibility hereunder, it being understood
that I fully agree to such charges, novation or
extension, and that this understanding is a
continuing one and shall subsist and bind me
until the liabilities of the said Celia Syjuco
Regala have been fully satisfied or paid.
Plaintiff-appellee Pacific Banking Corporation
has contracted with accredited business
establishments to honor purchases of goods
and/or services by Pacificard holders and the
cost thereof to be advanced by the plaintiffappellee for the account of the defendant
cardholder, and the latter undertook to pay
any statements of account rendered by the
plaintiff-appellee for the advances thus made
within thirty (30) days from the date of the
statement, provided that any overdue
account shall earn interest at the rate of 14%
per annum from date of default.

Angara, Concepcion, Regala & Cruz for private respondent.

MEDIALDEA, J.:p
This is a petition for review on certiorari of the decision (pp 2131, Rollo) of the Intermediate Appellate Court (now Court of
Appeals) in AC-G.R. C.V. No. 02753, 1 which modified the decision of the trial
court against herein private respondent Roberto Regala, Jr., one of the defendants in the case for sum
of money filed by Pacific Banking Corporation.

The facts of the case as adopted by the respondent appellant

court from herein petitioner's brief before said court are as
follows:
On October 24, 1975, defendant Celia
Syjuco Regala (hereinafter referred to as

The defendant Celia Regala, as such

Pacificard holder, had purchased goods
and/or services on credit (Exh. "C", "C-l" to
"C-112") under her Pacificard, for which the
plaintiff advanced the cost amounting to
P92,803.98 at the time of the filing of the
complaint.
In view of defendant Celia Regala's failure to
settle her account for the purchases made
thru the use of the Pacificard, a written
demand (Exh. "D") was sent to the latter and
also to the defendant Roberto Regala, Jr.
(Exh. " ") under his "Guarantor's
Undertaking."

A complaint was subsequently filed in Court

for defendant's (sic) repeated failure to settle
their obligation. Defendant Celia Regala was
declared in default for her failure to file her
answer within the reglementary period.
Defendant-appellant Roberto Regala, Jr., on
the other hand, filed his Answer with
Counterclaim admitting his execution of the
"Guarantor's Understanding", "but with the
understanding that his liability would be
limited to P2,000.00 per month."
In view of the solidary nature of the liability of
the parties, the presentation of evidence exparte as against the defendant Celia Regala
was jointly held with the trial of the case as
against defendant Roberto Regala.
After the presentation of plaintiff's testimonial
and documentary evidence, fire struck the
City Hall of Manila, including the court where
the instant case was pending, as well as all
its records.
Upon
plaintiff-appellee's
petition
for
reconstitution, the records of the instant case
were duly reconstituted. Thereafter, the case
was set for pre-trial conference with respect
to the defendant-appellant Roberto Regala
on plaintiff-appellee's motion, after furnishing
the latter a copy of the same. No opposition
thereto having been interposed by
defendant-appellant, the trial court set the
case for pre-trial conference. Neither did said
defendant-appellant nor his counsel appear
on the date scheduled by the trial court for
said conference despite due notice.
Consequently, plaintiff-appellee moved that
the defendant-appellant Roberto Regala he
declared as in default and that it be allowed
to present its evidence ex-parte, which
motion was granted. On July 21, 1983,
plaintiff-appellee presented its evidence exparte. (pp. 23-26, Rollo)
After trial, the court a quo rendered judgment on December 5,
1983, the dispositive portion of which reads:
WHEREFORE, the Court renders judgment
for the plaintiff and against the defendants
condemning the latter, jointly and severally,
to pay said plaintiff the amount of
P92,803.98, with interest thereon at 14% per
annum, compounded annually, from the time
of demand on November 17, 1978 until said
principal amount is fully paid; plus 15% of
the principal obligation as and for attorney's
fees and expense of suit; and the costs.
The counterclaim of defendant Roberto
Regala, Jr. is dismissed for lack of merit.

On August 12, 1985, respondent appellate court rendered

judgment modifying the decision of the trial court. Private
respondent Roberto Regala, Jr. was made liable only to the
extent of the monthly credit limit granted to Celia Regala, i.e.,
at P2,000.00 a month and only for the advances made during
the one year period of the card's effectivity counted from
October 29, 1975 up to October 29, 1976. The dispositive
portion of the decision states:
WHEREFORE, the judgment of the trial
court dated December 5, 1983 is modified
only as to appellant Roberto Regala, Jr., so
as to make him liable only for the purchases
made by defendant Celia Aurora Syjuco
Regala with the use of the Pacificard from
October 29, 1975 up to October 29, 1976 up
to the amount of P2,000.00 per month only,
with interest from the filing of the complaint
up to the payment at the rate of 14% per
annum without pronouncement as to costs.
(p. 32, Rollo)
A motion for reconsideration was filed by Pacific Banking
Corporation which the respondent appellate court denied for
lack of merit on September 19, 1985 (p. 33, Rollo).
On November 8, 1985, Pacificard filed this petition. The
petitioner contends that while the appellate court correctly
recognized Celia Regala's obligation to Pacific Banking Corp.
for the purchases of goods and services with the use of a
Pacificard credit card in the total amount of P92,803.98 with
14% interest per annum, it erred in limiting private respondent
Roberto Regala, Jr.'s liability only for purchases made by Celia
Regala with the use of the card from October 29, 1975 up to
October 29, 1976 up to the amount of P2,000.00 per month
with 14% interest from the filing of the complaint.
There is merit in this petition.
The pertinent portion of the "Guarantor's Undertaking" which
private respondent Roberto Regala, Jr. signed in favor of
Pacific Banking Corporation provides:
I/We, the undersigned, hereby agree, jointly
and severally with Celia Syjuco Regala to
pay the Pacific Banking Corporation upon
demand any
and
all
indebtedness,
obligations, charges or liabilities due and
incurred by said Celia Syjuco Regala with
the use of the Pacificard or renewals thereof
issued in his favor by the Pacific Banking
Corporation. Any changes of or Novation in
the terms and conditions in connection with
the issuance or use of said Pacificard, or any
extension of time to pay such obligations,
charges or liabilities shall not in any manner
release me/us from the responsibility
hereunder, it being understood that the
undertaking is a continuing one and shall
subsist and bind me/us until all the liabilities
of the said Celia Syjuco Regala have been
fully satisfied or paid. (p. 12,Rollo)

SO ORDERED. (pp. 22-23, Rollo)

The defendants appealed from the decision of the court a
quo to the Intermediate Appellate Court.

The undertaking signed by Roberto Regala, Jr. although

denominated "Guarantor's Undertaking," was in substance a
contract of surety. As distinguished from a contract of guaranty
where the guarantor binds himself to the creditor to fulfill the

obligation of the principal debtor only in case the latter should

fail to do so, in a contract of suretyship, the surety binds
himself solidarily with the principal debtor (Art. 2047, Civil Code
of the Philippines).

The application by respondent court of the ruling in

Government v. Tizon, supra is misplaced. It was held in that
case that:
. . . although the defendants bound
themselves in solidum, the liability of the
Surety under its bond would arise only if its
co-defendants, the principal obligor, should
fail to comply with the contract. To
paraphrase the ruling in the case of
Municipality of Orion vs. Concha, the liability
of the Surety is "consequent upon the
liability" of Tizon, or "so dependent on that of
the principal debtor" that the Surety "is
considered in law as being the same party
as the debtor in relation to whatever is
adjudged, touching the obligation of the
latter"; or the liabilities of the two defendants
herein "are so interwoven and dependent as
to be inseparable." Changing the expression,
if the defendants are held liable, their liability
to pay the plaintiff would be solidary, but the
nature of the Surety's undertaking is such
that it does not incur liability unless and until
the principal debtor is held liable.

We need not look elsewhere to determine the nature and

extent of private respondent Roberto Regala, Jr.'s undertaking.
As a surety he bound himself jointly and severally with the
debtor Celia Regala "to pay the Pacific Banking Corporation
upon demand, any and all indebtedness, obligations, charges
or liabilities due and incurred by said Celia Syjuco Regala with
the use of Pacificard or renewals thereof issued in (her) favor
by Pacific Banking Corporation." This undertaking was also
provided as a condition in the issuance of the Pacificard to
Celia Regala, thus:
5. A Pacificard is issued to a Pacificardholder against the joint and several signature
of a third party and as such, the Pacificard
holder and the guarantor assume joint and
several liabilities for any and all amount
arising out of the use of the Pacificard. (p.
14, Rollo)
The respondent appellate court held that "all the other rights of
the guarantor are not thereby lost by the guarantor becoming
liable solidarily and therefore a surety." It further ruled that
although the surety's liability is like that of a joint and several
debtor, it does not make him the debtor but still the guarantor
(or the surety), relying on the case of Government of the
Philippines v. Tizon. G.R. No. L-22108, August 30, 1967, 20
SCRA 1182. Consequently, Article 2054 of the Civil Code
providing for a limited liability on the part of the guarantor or
debtor still applies.
It is true that under Article 2054 of the Civil Code, "(A)
guarantor may bind himself for less, but not for more than the
principal debtor, both as regards the amount and the onerous
nature of the conditions. 2 It is likewise not disputed by the parties that the credit limit
granted to Celia Regala was P2,000.00 per month and that Celia Regala succeeded in using the card
beyond the original period of its effectivity, October 29, 1979. We do not agree however, that Roberto
Jr.'s liability should be limited to that extent. Private respondent Roberto Regala, Jr., as surety of his
wife, expressly bound himself up to the extent of the debtor's (Celia) indebtedness likewise expressly
waiving any "discharge in case of any change or novation of the terms and conditions in connection
with the issuance of the Pacificard credit card." Roberto, in fact, made his commitment as a surety a
continuing one, binding upon himself until all the liabilities of Celia Regala have been fully paid. All
these were clear under the "Guarantor's Undertaking" Roberto signed, thus:

. . . Any changes of or novation in the terms

and conditions in connection with the
issuance or use of said Pacificard, or any
extension of time to pay such obligations,
charges or liabilities shall not in any manner
release me/us from the responsibility
hereunder, it being understood that the
undertaking is a continuing one and shall
subsist and bind me/us until all the liabilities
of the said Celia Syjuco Regala have been
fully satisfied or paid. (p. 12, supra;
emphasis supplied)
Private respondent Roberto Regala, Jr. had been made aware
by the terms of the undertaking of future changes in the terms
and conditions governing the issuance of the credit card to his
wife and that, notwithstanding, he voluntarily agreed to be
bound as a surety. As in guaranty, a surety may secure
additional and future debts of the principal debtor the amount
of which is not yet known (see Article 2053, supra).

A guarantor or surety does not incur liability unless the

principal debtor is held liable. It is in this sense that a surety,
although solidarily liable with the principal debtor, is different
from the debtor. It does not mean, however, that the surety
cannot be held liable to the same extent as the principal
debtor. The nature and extent of the liabilities of a guarantor or
a surety is determined by the clauses in the contract of
suretyship(see PCIB v. CA, L-34959, March 18, 1988, 159
SCRA 24).
ACCORDINGLY, the petition is GRANTED. The questioned
decision of respondent appellate court is SET ASIDE and the
decision of the trial court is REINSTATED.
SO ORDERED.
INDUSTRIAL MANAGEMENT INTERNATIONAL
DEVELOPMENT CORP. (INIMACO), petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION,
This is a petition for certiorari assailing the Resolution
dated September 4, 1991 issued by the National Labor
Relations Commission in RAB-VII-0711-84 on the
alleged ground that it committed a grave abuse of
discretion amounting to lack of jurisdiction in upholding
the Alias Writ of Execution issued by the Labor Arbiter
which deviated from the dispositive portion of the
Decision dated March 10, 1987, thereby holding that
the liability of the six respondents in the case below is
solidary despite the absence of the word "solidary" in
the dispositive portion of the Decision, when their
liability should merely be joint. S-jcj
The factual antecedents are undisputed: Supr-eme
In September 1984, private respondent Enrique Sulit,
Socorro Mahinay, Esmeraldo Pegarido, Tita Bacusmo,
Gino Niere, Virginia Bacus, Roberto Nemenzo, Dariogo,
and Roberto Alegarbes filed a complaint with the
Department of Labor and Employment, Regional

Arbitration Branch No. VII in Cebu City against Filipinas

Carbon Mining Corporation, Gerardo Sicat, Antonio
Gonzales, Chiu Chin Gin, Lo Kuan Chin, and petitioner
Industrial Management Development Corporation
(INIMACO), for payment of separation pay and unpaid
wages. Sc-jj
In a Decision dated March 10, 1987, Labor Arbiter
Bonifacio B. Tumamak held that:
"RESPONSIVE, to all the foregoing,
judgment is hereby entered, ordering
respondents Filipinas Carbon and
Mining Corp. Gerardo Sicat, Antonio
Gonzales/Industrial Management
Development Corp. (INIMACO), Chiu
Chin Gin and Lo Kuan Chin, to pay
complainants Enrique Sulit, the total
award of P82,800.00; ESMERALDO
PEGARIDO the full award of
P19,565.00; Roberto Nemenzo the total
sum of P29,623.60 and DARIO GO the
total award of P6,599.71, or the total
aggregate award of ONE HUNDRED
THIRTY-EIGHT THOUSAND FIVE
HUNDRED EIGHTY-EIGHT PESOS AND
31/100 (P138,588.31) to be deposited
with this Commission within ten (10)
days from receipt of this Decision for
appropriate disposition. All other claims
are hereby Dismiss (sic) for lack of
merit. Jjs-c
"SO ORDERED.
"Cebu City, Philippines.
"10 March 1987."0[1]
No appeal was filed within the reglementary period
thus, the above Decision became final and executory.
On June 16, 1987, the Labor Arbiter issued a writ of
execution but it was returned unsatisfied. On August
26, 1987, the Labor Arbiter issued an Alias Writ of
Execution which ordered thus: Ed-pm-is
"NOW THEREFORE, by virtue of the
powers vested in me by law, you are
hereby commanded to proceed to the
premises of respondents Antonio
Gonzales/Industrial Management
Development Corporation (INIMACO)
situated at Barangay Lahug, Cebu City,
in front of La Curacha
Restaurant, and/or to Filipinas Carbon
and Mining corporation and Gerardo
Sicat at 4th Floor Universal RE-Bldg.
106 Paseo de Roxas, Legaspi Village,
Makati Metro Manila and at Philippine
National Bank, Escolta, Manila
respectively, and collect the aggregate
award of ONE HUNDRED THIRTY-EIGHT
THOUSAND FIVE HUNDRED EIGHTYEIGHT PESOS AND THIRTY ONE
CENTAVOS (P138,588.31) and
thereafter turn over said amount to

complainants ENRIQUE SULIT,

ESMERALDO PEGARIDO, ROBERTO
NEMENZO AND DARIO GO or to this
Office for appropriate disposition.
Should you fail to collect the said sum
in cash, you are hereby authorized to
cause the satisfaction of the same on
the movable or immovable property(s)
of respondents not exempt from
execution. You are to return this writ
sixty (6) (sic) days from your receipt
hereof, together with your
corresponding report.
"You may collect your legal expenses
from the respondents as provided for
by law.
"SO ORDERED."[2]
On September 3, 1987, petitioner filed a "Motion to
Quash Alias Writ of Execution and Set Aside
Decision,"[3] alleging among others that the alias writ of
execution altered and changed the tenor of the
decision by changing the liability of therein
respondents from joint to solidary, by the insertion of
the words "AND/OR" between "Antonio
Gonzales/Industrial Management Development
Corporation and Filipinas Carbon and Mining
Corporation, et al." However, in an order dated
September 14, 1987, the Labor Arbiter denied the
motion. Mis-oedp
On October 2, 1987, petitioner appealed [4] the Labor
Arbiters Order dated September 14, 1987 to the
respondent NLRC. Mis-edp
The respondent NLRC dismissed the appeal in a
Decision[5] dated August 31, 1988, the pertinent
portions of which read:
"In matters affecting labor rights and
labor justice, we have always adopted
the liberal approach which favors the
exercise of labor rights and which is
beneficial to labor as a means to give
full meaning and import to the
constitutional mandate to afford
protection to labor. Considering the
factual circumstances in this case,
there is no doubt in our mind that the
respondents herein are called upon to
pay, jointly and severally, the claims of
the complainants as was the latters
prayers. Inasmuch as respondents
herein never controverted the claims of
the complainants below, there is no
reason why complainants prayer
should not be granted. Further, in line
with the powers granted to the
Commission under Article 218 (c) of the
Labor code, to waive any error, defect
or irregularity whether in substance or
in form in a proceeding before Us, We
hold that the Writ of Execution be given
due course in all respects." Ed-p

On July 31, 1989, petitioner filed a "Motion To Compel

Sheriff To Accept Payment Of P23,198.05 Representing
One Sixth Pro Rata Share of Respondent INIMACO As
Full and Final Satisfaction of Judgment As to Said
Respondent."[6] The private respondents opposed the
motion. In an Order[7] dated August 15, 1989, the Labor
Arbiter denied the motion ruling thus:
"WHEREFORE, responsive to the
foregoing respondent INIMACOs
Motions are hereby DENIED. The Sheriff
of this Office is order (sic) to accept
INIMACOs tender payment (sic) of the
sum of P23,198.05, as partial
satisfaction of the judgment and to
proceed with the enforcement of the
Alias Writ of Execution of the levied
properties, now issued by this Office,
for the full and final satisfaction of the
monetary award granted in the instant
case.
"SO ORDERED." Ed-psc
Petitioner appealed the above Order of the Labor
Arbiter but this was again dismissed by the respondent
NLRC in its Resolution[8] dated September 4, 1991
which held that:
"The arguments of respondent on the
finality of the dispositive portion of the
decision in this case is beside the point.
What is important is that the
Commission has ruled that the Writ of
Execution issued by the Labor Arbiter
in this case is proper. It is not really
correct to say that said Writ of
Execution varied the terms of the
judgment. At most, considering the
nature of labor proceedings there was,
an ambiguity in said dispositive portion
which was subsequently clarified by
the Labor Arbiter and the Commission
in the incidents which were initiated by
INIMACO itself. By sheer technicality
and unfounded assertions, INIMACO
would now reopen the issue which was
already resolved against it. It is not in
keeping with the established rules of
practice and procedure to allow this
attempt of INIMACO to delay the final
disposition of this case.
"WHEREFORE, in view of all the
foregoing, this appeal is DISMISSED
and the Order appealed from is hereby
AFFIRMED. Sce-dp
"With double costs against appellant."
Dissatisfied with the foregoing, petitioner filed the
instant case, alleging that the respondent NLRC
committed grave abuse of discretion in affirming the
Order of the Labor Arbiter dated August 15, 1989,
which declared the liability of petitioner to be solidary.

The only issue in this petition is whether petitioners

liability pursuant to the Decision of the Labor Arbiter
dated March 10, 1987, is solidary or not. Calrs-pped
Upon careful examination of the pleadings filed by the
parties, the Court finds that petitioner INIMACOs
liability is not solidary but merely joint and that the
respondent NLRC acted with grave abuse of discretion
in upholding the Labor Arbiters Alias Writ of Execution
and subsequent Orders to the effect that petitioners
liability is solidary.
A solidary or joint and several obligation is one in which
each debtor is liable for the entire obligation, and each
creditor is entitled to demand the whole obligation.[9] In
a joint obligation each obligor answers only for a part
of the whole liability and to each obligee belongs only a
part of the correlative rights.[10]
Well-entrenched is the rule that solidary obligation
cannot lightly be inferred.[11] There is a solidary liability
only when the obligation expressly so states, when the
law so provides or when the nature of the obligation so
requires.[12]
In the dispositive portion of the Labor Arbiter, the word
"solidary" does not appear. The said fallo expressly
states the following respondents therein as liable,
namely: Filipinas Carbon and Mining Corporation,
Gerardo Sicat, Antonio Gonzales, Industrial
Management Development Corporation (petitioner
INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor can it
be inferred therefrom that the liability of the six (6)
respondents in the case below is solidary, thus their
liability should merely be joint.
Moreover, it is already a well-settled doctrine in this
jurisdiction that, when it is not provided in a judgment
that the defendants are liable to pay jointly and
severally a certain sum of money, none of them may
be compelled to satisfy in full said judgment.
In Oriental Commercial Co. vs. Abeto and
Mabanag[13] this Court held:
"It is of no consequence that, under the
contract of suretyship executed by the
parties, the obligation contracted by
the sureties was joint and several in
character. The final judgment, which
superseded the action for the
enforcement of said contract, declared
the obligation to be merely joint, and
the same cannot be executed
otherwise."[14]
Granting that the Labor Arbiter has committed a
mistake in failing to indicate in the dispositive portion
that the liability of respondents therein is solidary, the
correction -- which is substantial -- can no longer be
allowed in this case because the judgment has already
become final and executory. Scc-alr
It is an elementary principle of procedure that the
resolution of the court in a given issue as embodied in
the dispositive part of a decision or order is the

controlling factor as to settlement of rights of the

parties.[15] Once a decision or order becomes final and
executory, it is removed from the power or jurisdiction
of the court which rendered it to further alter or amend
it.[16] It thereby becomes immutable and unalterable
and any amendment or alteration which substantially
affects a final and executory judgment is null and void
for lack of jurisdiction, including the entire proceedings
held for that purpose.[17] An order of execution which
varies the tenor of the judgment or exceeds the terms
thereof is a nullity.[18]
None of the parties in the case before the Labor Arbiter
appealed the Decision dated March 10, 1987, hence
the same became final and executory. It was, therefore,
removed from the jurisdiction of the Labor Arbiter or
the NLRC to further alter or amend it. Thus, the
proceedings held for the purpose of amending or
altering the dispositive portion of the said decision are
null and void for lack of jurisdiction. Also, the Alias Writ
of Execution is null and void because it varied the tenor
of the judgment in that it sought to enforce the final
judgment against "Antonio Gonzales/Industrial
Management Development Corp.
(INIMACO) and/or Filipinas Carbon and Mining Corp.
and Gerardo Sicat," which makes the liability
solidary. Ca-lrsc
WHEREFORE, the petition is hereby GRANTED. The
Resolution dated September 4, 1991 of the respondent
National Labor Relations is hereby declared NULL and
VOID. The liability of the respondents in RAB-VII-071184 pursuant to the Decision of the Labor Arbiter dated
March 10, 1987 should be, as it is hereby, considered
joint and petitioners payment which has been
accepted considered as full satisfaction of its liability,
without prejudice to the enforcement of the award,
against the other five (5) respondents in the said
case. Sppedsc
SO ORDERED.