G.R. No.

L-64398 November 6, 1990

JOSE CHING SUI YONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT (THIRD CIVIL CASES DIVISION) AND INTERCONTINENTAL
DISTRIBUTORS (P.I.) CORPORATION, ROBERTO SUAREZ, and INTERCONTINENTAL FILM DISTRIBUTORS,
(H.K.) LTD., respondents.
PADILLA, J.:
This is a petition for review on certiorari of the decision of the respondent Intermediate Appellate Court (now Court of
Appeals) in AC-G.R. CV No. 58527, dated 14 June 1983 1 affirming in toto the decision of the lower court rendered in
favor of private respondents.
The antecedent facts that gave rise to this case are as follows:
Petitioner bought from a certain Norberto Concepcion for the total sum of P75,000.00 seven (7) foreign
cinematographic films, as evidenced by four (4) receipts of payment duly signed by said Norberto Concepcion who was
allegedly the authorized agent and representative of private respondent Intercontinental Film Distributors (P.I.)
Corporation and its managing director, respondent Roberto Suarez.
It was stated in the said receipts that private respondents Intercontinental Film Distributors (P.I.) Corporation
(Intercontinental (P.I.), for brevity) and Roberto Suarez agreed that all the seven (7) films would be sent and delivered
directly to petitioner upon their arrival in the Philippines. However, the films were not delivered to petitioner despite
repeated demands, as a result of which, the latter filed an action for replevin with damages before the Court of First
Instance of Rizal, Branch XXII, docketed as Civil Case No. 12578. 2
Upon petitioner's filing of the necessary bond in the amount of P150,000. 00, the court a quo issued a writ of seizure
ordering the Sheriff of Manila to take immediate possession of the seven (7) films. Six (6) films were seized by the
Sheriff of Manila from the Board of Censors, while the seventh film was seized by Special Sheriff Gregorio Guido. All the
seven (7) cinematographic films had been delivered by Intercontinental (P.I.) to the Board of Censors prior to their
seizure.
Informed of the seizure of the seven (7) films by the Sheriffs, Intercontinental Film Distributors (H.K.) Ltd
(Intercontinental (H.K.), for brevity) filed a third-party claim, alleging ownership and asserting the right to possess the
said seven (7) cinematographic films, and stating in its claim that the value of the said films was P250,000.00. Notified
by the Sheriff of the third-party claim, petitioner filed an ex-parte motion to quash the third-party claim and for the
delivery of the said films to him (petitioner), instead of filing an indemnity bond as required by the Sheriff. The ex-parte
motion was granted and the films were delivered to the petitioner. Subsequently, Intercontinental (H.K.) filed a motion
praying to the Court that it be allowed to intervene in the case as party defendant, which motion was granted. It did
intervene as defendant-intervenor and filed its answer to the complaint.
After trial on the merits, the court a quo dismissed the complaint and set aside the writ of seizure it had issued earlier.
The dispositive part of the lower court's decision, 3 which respondent appellate court later affirmed in toto reads as
follows:
WHEREFORE, judgment is rendered:
1. Dismissing plaintiff s complaint, and the writ of seizure issued by this Court in favor of the plaintiff is
hereby set aside;
2. Ordering plaintiff to return to defendants and intervenor the seven (7) cinematographic films, namely,
Venus in Furs; Girl with Hungry Eyes; Free Love Confidential, Cool It Baby; Mondo Mod; Secret Sex

Lives of Romeo and Juliet; Mantis in Lace, in the same condition as they were taken by and delivered to
plaintiff on December 22, 1969 and in the event that delivery cannot be made, plaintiff shall pay
defendants and intervenor the sum of P250,000.00 representing the value of said seven (7)
cinematographic films; and
3. Sentencing plaintiff to pay defendants and defendant intervenor the sum of P10,000.00 a day as
damages commencing from December 23, 1969 until the aforesaid seven (7) cinematographic films are
delivered or returned to defendants and defendant-intervenor or the sum of P250,000.00 is fully paid to
defendants and defendant-intervenor, and to pay further the amount of P10,000.00 by way of attorney's
fees.
With costs of suit against the plaintiff.
SO ORDERED.
As already stated, the Court of Appeals affirmed the above judgment in its entirety. Not satisfied, petitioner interposed
the present petition for review, raising the following issues:
(a) whether or not the plaintiff has a valid cause of action against the defendants and the defendantintervenor;
(b) whether or not Norberto Concepcion is the authorized agent and representative of the defendant
Intercontinental Film Distributors (P.I.) Corporation and its Managing Director, defendant Roberto Suarez;
(c) whether or not the award of damages of P10,000.00 a day commencing from December 23, 1969
until the aforesaid seven (7) cinematographic films are delivered or returned to defendants and
defendant-intervenor or the sum of P250,000.00 is fully paid to defendants and defendant-intervenor and
to pay further the amount of P10,000.00 by way of attorney's fees, are supported by evidence and the
law on the matter. 4
At the outset, it would appear that the above-stated issues involve a review mainly of factual findings of respondent
appellate court. We have repeatedly held that in a petition for review on certiorari only legal questions should be raised
before this Court and that findings of fact of the Court of Appeals are conclusive on the parties and on this Court, absent
any showing of grave error or abuse of discretion. 5
We note further that the issues raised and the arguments adduced by petitioner in the present petition for review are
reiterations of those submitted by him to the Court of Appeals. The first two (2) issues were resolved by the appellate
court to which we agree in this wise:
A study of the evidence viz a viz (sic) the arguments supporting the errors imputed to the trial court in its
decision appealed from convinces Us that the trial court did not err in holding "the plaintiff-appellant as
plainly has no cause of action against defendants and defendant-intervenor" as it found that Norberto
Concepcion was not the duly authorized agent or representative of the Intercontinental Film Distributors
(P.I.) Corporation and Roberto Suarez, the Managing Director, (who) denied having authorized Norberto
Concepcion to enter into contract with the plaintiff-appellant.
Let it be admitted that the cause of action of the plaintiff-appellant in his complaint for replevin (to take
possession of the seven cinematographic films) is based on the alleged sales of the films in question to
plaintiff-appellant by defendants thru Norberto Concepcion for the total sum of P75,000 as evidenced by
Exhibits "A", "B", "C" and "D" and the alleged agency instituted by Roberto Suarez in favor of Norberto
Concepcion as shown by said Exhibits.

The trial court, however, found and We agree that plaintiff-appellant failed to prove that Norberto
Concepcion was the duly authorized agent or representative of the Intercontinental Films Distributors
(P.I.) Corporation and Roberto Suarez. In fact, the lower court went further stating that Exhibits "A", "B",
"C" and "D" are fictitious contracts, a forgery undertaken merely to promote the scheme of the plaintiffappellant to take possession of the cinematographic films in question. On the other hand, the
Intercontinental Films Distributors (H.K.) Ltd., intervenors, has established that it owns the said films. ... 6
We agree with the foregoing findings and conclusions. As private respondents correctly observed, despite petitioner's
claim that he paid Norberto Concepcion, the alleged agent of Roberto Suarez, the sum of P75,000.00 as evidenced by
the four (4) receipts of payment, and despite the trial court's suggestion that Norberto Concepcion be included as a
defendant, petitioner failed to implead said Norberto Concepcion. Neither was Concepcion presented as a witness.
Thus, the court a quo correctly resolved that:
... The failure of Concepcion to testify and clear the doubt that surrounded the alleged execution by
Suarez of the receipt Exhibit E, considerably weakened the claim of plaintiff that defendants and
defendant-intervenor sold to him the films in question for which Concepcion was duly authorized by
defendant and intervenor, and the proceeds of the sale was later turned allegedly over by Concepcion to
Suarez. ... 7
In short, the failure of petitioner to produce the person to whom he allegedly paid P75,000.00 for the seven (7) films,
rendered his claim untenable. For, when a party has it in his possession or power to produce the best evidence of which
the case in its nature is susceptible and withholds it, the fair presumption is that the evidence is withheld for some
sinister motive and that its production would thwart his evil or fraudulent lent purpose. 8
However, we resolve the third issue raised by petitioner, in his favor.
The sole basis for the award of damages against the petitioner is the alleged unrealized profits of private respondents
for the non-screening of the seven (7) films. We believe that respondent court committed grave abuse of discretion in
arriving at the amount of P10,000.00 a day as unrealized profits suffered by private respondents due to the filing of the
present action by the petitioner. As correctly averred by petitioner, the films had yet to be passed by the Board of
Censors and being "bold" or so called "bomba" films, there was the probability that some scenes therein would have
been cut or censored or the films totally banned, as in the case of one of the films.
Besides, no document or proof was presented to prove that private respondents really lost such amount daily for nonexhibition of the films to the public by reason of the action instituted by petitioner. The amount of P10,000.00 a day as
alleged unrealized profit was arrived at by mere speculation and conjecture by respondent court. Hence, the award of
damages for the anticipated loss of profits is unwarranted.
It is a settled rule that in order for damages to be recovered, the best evidence obtainable by the injured party must be
presented. 9 Actual or compensatory damages cannot be presumed, but must be duly proved, and proved with a
reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have been suffered and on evidence of the actual amount
thereof. If the proof is flimsy and unsubstantial, no damages will be awarded. 10
WHEREFORE, the appealed decision is hereby AFFIRMED with the modification that the award of damages in the
amount of P10,000. 00 a day for alleged unrealized profits is eliminated. Costs against petitioner.
SO ORDERED.
[G.R. No. 118342. January 5, 1998]
DEVELOPMENT BANK OF
CUBA, respondents.

THE

PHILIPPINES, petitioner,

vs.

COURT

OF

APPEALS

and

LYDIA

[G.R. No. 118367. January 5, 1998]

LYDIA P. CUBA, petitioner, vs. COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and
AGRIPINA P. CAPERAL, respondents.
DECISION
DAVIDE, JR., J.:
These two consolidated cases stemmed from a complaint [1] filed against the Development Bank of the Philippines
(hereafter DBP) and Agripina Caperal filed by Lydia Cuba (hereafter CUBA) on 21 May 1985 with the Regional Trial
Court of Pangasinan, Branch 54. The said complaint sought (1) the declaration of nullity of DBPs appropriation of
CUBAs rights, title, and interests over a 44-hectare fishpond located in Bolinao, Pangasinan, for being violative of
Article 2088 of the Civil Code; (2) the annulment of the Deed of Conditional Sale executed in her favor by DBP; (3) the
annulment of DBPs sale of the subject fishpond to Caperal; (4) the restoration of her rights, title, and interests over the
fishpond; and (5) the recovery of damages, attorneys fees, and expenses of litigation.
After the joinder of issues following the filing by the parties of their respective pleadings, the trial court conducted a
pre-trial where CUBA and DBP agreed on the following facts, which were embodied in the pre-trial order:[2]
1. Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated May 13, 1974
from the Government;
2. Plaintiff Lydia P. Cuba obtained loans from the Development Bank of the Philippines in the amounts
of P109,000.00; P109,000.00; and P98,700.00 under the terms stated in the Promissory Notes dated
September 6, 1974; August 11, 1975; and April 4, 1977;
3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold
Rights;
4. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the terms of the
Promissory Notes;
5. Without foreclosure proceedings, whether judicial or extra-judicial, defendant DBP appropriated the
Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question;
6. After defendant DBP has appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in
question, defendant DBP, in turn, executed a Deed of Conditional Sale of the Leasehold Rights in favor of
plaintiff Lydia Cuba over the same fishpond in question;
7.

In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the Manager DBP, Dagupan
City dated November 6, 1979 and December 20, 1979. DBP thereafter accepted the offer to repurchase
in a letter addressed to plaintiff dated February 1, 1982;

8.

After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new Fishpond Lease
Agreement No. 2083-A dated March 24, 1980 was issued by the Ministry of Agriculture and Food in favor
of plaintiff Lydia Cuba only, excluding her husband;

9.

Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale;

10. After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional Sale, she entered
with the DBP a temporary arrangement whereby in consideration for the deferment of the Notarial

Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain payments as stated
in temporary Arrangement dated February 23, 1982;
11. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act dated March 13, 1984, and which
was received by plaintiff Lydia Cuba;
12. After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights of the fishpond in
question;
13. That after defendant DBP took possession of the Leasehold Rights over the fishpond in question, DBP
advertised in the SUNDAY PUNCH the public bidding dated June 24, 1984, to dispose of the property;
14. That the DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal on
August 16, 1984;
15. Thereafter, defendant Caperal was awarded Fishpond Lease Agreement No. 2083-A on December 28,
1984 by the Ministry of Agriculture and Food.
Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the pre-trial order. [3]
Trial was thereafter had on other matters.
The principal issue presented was whether the act of DBP in appropriating to itself CUBAs leasehold rights over
the fishpond in question without foreclosure proceedings was contrary to Article 2088 of the Civil Code and, therefore,
invalid. CUBA insisted on an affirmative resolution. DBP stressed that it merely exercised its contractual right under the
Assignments of Leasehold Rights, which was not a contract of mortgage. Defendant Caperal sided with DBP.
The trial court resolved the issue in favor of CUBA by declaring that DBPs taking possession and ownership of the
property without foreclosure was plainly violative of Article 2088 of the Civil Code which provides as follows:
ART. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.
It disagreed with DBPs stand that the Assignments of Leasehold Rights were not contracts of mortgage because (1)
they were given as security for loans, (2) although the fishpond land in question is still a public land, CUBAs leasehold
rights and interest thereon are alienable rights which can be the proper subject of a mortgage; and (3) the intention of
the contracting parties to treat the Assignment of Leasehold Rights as a mortgage was obvious and unmistakable;
hence, upon CUBAs default, DBPs only right was to foreclose the Assignment in accordance with law.
The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights for being a clear case
of pactum commissorium expressly prohibited and declared null and void by Article 2088 of the Civil Code. It then
concluded that since DBP never acquired lawful ownership of CUBAs leasehold rights, all acts of ownership and
possession by the said bank were void. Accordingly, the Deed of Conditional Sale in favor of CUBA, the notarial
rescission of such sale, and the Deed of Conditional Sale in favor of defendant Caperal, as well as the Assignment of
Leasehold Rights executed by Caperal in favor of DBP, were also void and ineffective.
As to damages, the trial court found ample evidence on record that in 1984 the representatives of DBP ejected
CUBA and her caretakers not only from the fishpond area but also from the adjoining big house; and that when CUBAs
son and caretaker went there on 15 September 1985, they found the said house unoccupied and destroyed and
CUBAs personal belongings, machineries, equipment, tools, and other articles used in fishpond operation which were
kept in the house were missing. The missing items were valued at about P550,000. It further found that when CUBA
and her men were ejected by DBP for the first time in 1979, CUBA had stocked the fishpond with 250,000 pieces of
bangus fish (milkfish), all of which died because the DBP representatives prevented CUBAs men from feeding the

fish. At the conservative price of P3.00 per fish, the gross value would have been P690,000, and after deducting 25%
of said value as reasonable allowance for the cost of feeds, CUBA suffered a loss of P517,500. It then set the
aggregate of the actual damages sustained by CUBA at P1,067,500.
The trial court further found that DBP was guilty of gross bad faith in falsely representing to the Bureau of Fisheries
that it had foreclosed its mortgage on CUBAs leasehold rights. Such representation induced the said Bureau to
terminate CUBAs leasehold rights and to approve the Deed of Conditional Sale in favor of CUBA. And considering that
by reason of her unlawful ejectment by DBP, CUBA suffered moral shock, degradation, social humiliation, and serious
anxieties for which she became sick and had to be hospitalized the trial court found her entitled to moral and
exemplary damages. The trial court also held that CUBA was entitled to P100,000 attorneys fees in view of the
considerable expenses she incurred for lawyers fees and in view of the finding that she was entitled to exemplary
damages.
In its decision of 31 January 1990, [4] the trial court disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff:
1. DECLARING null and void and without any legal effect the act of defendant Development Bank of the
Philippines in appropriating for its own interest, without any judicial or extra-judicial foreclosure, plaintiffs
leasehold rights and interest over the fishpond land in question under her Fishpond Lease Agreement No. 2083
(new);
2. DECLARING the Deed of Conditional Sale dated February 21, 1980 by and between the defendant
Development Bank of the Philippines and plaintiff (Exh. E and Exh. 1) and the acts of notarial rescission of the
Development Bank of the Philippines relative to said sale (Exhs. 16 and 26) as void and ineffective;
3. DECLARING the Deed of Conditional Sale dated August 16, 1984 by and between the Development Bank of
the Philippines and defendant Agripina Caperal (Exh. F and Exh. 21), the Fishpond Lease Agreement No.
2083-A dated December 28, 1984 of defendant Agripina Caperal (Exh. 23) and the Assignment of Leasehold
Rights dated February 12, 1985 executed by defendant Agripina Caperal in favor of the defendant
Development Bank of the Philippines (Exh. 24) as void ab initio;
4. ORDERING defendant Development Bank of the Philippines and defendant Agripina Caperal, jointly and
severally, to restore to plaintiff the latters leasehold rights and interests and right of possession over the
fishpond land in question, without prejudice to the right of defendant Development Bank of the Philippines to
foreclose the securities given by plaintiff;
5. ORDERING defendant Development Bank of the Philippines to pay to plaintiff the following amounts:
a) The sum of ONE MILLION SIXTY-SEVEN THOUSAND FIVE HUNDRED PESOS (P1,067,500.00), as and
for actual damages;
b) The sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as moral damages;
c) The sum of FIFTY THOUSAND (P50,000.00) PESOS, as and for exemplary damages;
d) And the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, as and for attorneys fees;
6. And ORDERING defendant Development Bank of the Philippines to reimburse and pay to defendant Agripina
Caperal the sum of ONE MILLION FIVE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED TEN PESOS
AND SEVENTY-FIVE CENTAVOS (P1,532,610.75) representing the amounts paid by defendant Agripina
Caperal to defendant Development Bank of the Philippines under their Deed of Conditional Sale.

CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. The former sought an
increase in the amount of damages, while the latter questioned the findings of fact and law of the lower court.
In its decision [5] of 25 May 1994, the Court of Appeals ruled that (1) the trial court erred in declaring that the deed
of assignment was null and void and that defendant Caperal could not validly acquire the leasehold rights from DBP; (2)
contrary to the claim of DBP, the assignment was not a cession under Article 1255 of the Civil Code because DBP
appeared to be the sole creditor to CUBA - cession presupposes plurality of debts and creditors; (3) the deeds of
assignment represented the voluntary act of CUBA in assigning her property rights in payment of her debts, which
amounted to a novation of the promissory notes executed by CUBA in favor of DBP; (4) CUBA was estopped from
questioning the assignment of the leasehold rights, since she agreed to repurchase the said rights under a deed of
conditional sale; and (5) condition no. 12 of the deed of assignment was an express authority from CUBA for DBP to sell
whatever right she had over the fishpond. It also ruled that CUBA was not entitled to loss of profits for lack of evidence,
but agreed with the trial court as to the actual damages ofP1,067,500. It, however, deleted the amount of exemplary
damages and reduced the award of moral damages from P100,000 to P50,000 and attorneys fees, from P100,000
to P50,000.
The Court of Appeals thus declared as valid the following: (1) the act of DBP in appropriating Cubas leasehold
rights and interest under Fishpond Lease Agreement No. 2083; (2) the deeds of assignment executed by Cuba in favor
of DBP; (3) the deed of conditional sale between CUBA and DBP; and (4) the deed of conditional sale between DBP
and Caperal, the Fishpond Lease Agreement in favor of Caperal, and the assignment of leasehold rights executed by
Caperal in favor of DBP. It then ordered DBP to turn over possession of the property to Caperal as lawful holder of the
leasehold rights and to pay CUBA the following amounts: (a) P1,067,500 as actual damages; P50,000 as moral
damages; and P50,000 as attorneys fees.
Since their motions for reconsideration were denied,[6] DBP and CUBA filed separate petitions for review.
In its petition (G.R. No. 118342), DBP assails the award of actual and moral damages and attorneys fees in favor
of CUBA.
Upon the other hand, in her petition (G.R. No. 118367), CUBA contends that the Court of Appeals erred (1) in not
holding that the questioned deed of assignment was a pactum commissorium contrary to Article 2088 of the Civil Code;
(b) in holding that the deed of assignment effected a novation of the promissory notes; (c) in holding that CUBA was
estopped from questioning the validity of the deed of assignment when she agreed to repurchase her leasehold rights
under a deed of conditional sale; and (d) in reducing the amounts of moral damages and attorneys fees, in deleting the
award of exemplary damages, and in not increasing the amount of damages.
We agree with CUBA that the assignment of leasehold rights was a mortgage contract.
It is undisputed that CUBA obtained from DBP three separate loans totalling P335,000, each of which was covered
by a promissory note. In all of these notes, there was a provision that: In the event of foreclosure of the mortgage
securing this notes, I/We further bind myself/ourselves, jointly and severally, to pay the deficiency, if any. [7]
Simultaneous with the execution of the notes was the execution of Assignments of Leasehold Rights [8] where
CUBA assigned her leasehold rights and interest on a 44-hectare fishpond, together with the improvements
thereon. As pointed out by CUBA, the deeds of assignment constantly referred to the assignor (CUBA) as borrower;
the assigned rights, as mortgaged properties; and the instrument itself, as mortgage contract. Moreover, under
condition no. 22 of the deed, it was provided that failure to comply with the terms and condition of any of the loans shall
cause all other loans to become due and demandable and all mortgages shall be foreclosed. And, condition no. 33
provided that if foreclosure is actually accomplished, the usual 10% attorneys fees and 10% liquidated damages of the
total obligation shall be imposed. There is, therefore, no shred of doubt that a mortgage was intended.
Besides, in their stipulation of facts the parties admitted that the assignment was by way of security for the payment
of the loans; thus:

3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold Rights.
In Peoples Bank & Trust Co. vs. Odom,[9] this Court had the occasion to rule that an assignment to guarantee an
obligation is in effect a mortgage.
We find no merit in DBPs contention that the assignment novated the promissory notes in that the obligation to pay
a sum of money the loans (under the promissory notes) was substituted by the assignment of the rights over the
fishpond (under the deed of assignment). As correctly pointed out by CUBA, the said assignment merely
complemented or supplemented the notes; both could stand together. The former was only an accessory to the
latter. Contrary to DBPs submission, the obligation to pay a sum of money remained, and the assignment merely
served as security for the loans covered by the promissory notes. Significantly, both the deeds of assignment and the
promissory notes were executed on the same dates the loans were granted. Also, the last paragraph of the assignment
stated: The assignor further reiterates and states all terms, covenants, and conditions stipulated in the promissory note
or notes covering the proceeds of this loan, making said promissory note or notes, to all intent and purposes, an integral
part hereof.
Neither did the assignment amount to payment by cession under Article 1255 of the Civil Code for the plain and
simple reason that there was only one creditor, the DBP. Article 1255 contemplates the existence of two or more
creditors and involves the assignment of all the debtors property.
Nor did the assignment constitute dation in payment under Article 1245 of the civil Code, which reads: Dation in
payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law
on sales. It bears stressing that the assignment, being in its essence a mortgage, was but a security and not a
satisfaction of indebtedness.[10]
We do not, however, buy CUBAs argument that condition no. 12 of the deed of assignment constituted pactum
commissorium. Said condition reads:
12. That effective upon the breach of any condition of this assignment, the Assignor hereby appoints the Assignee his
Attorney-in-fact with full power and authority to take actual possession of the property above-described, together with all
improvements thereon, subject to the approval of the Secretary of Agriculture and Natural Resources, to lease the same
or any portion thereof and collect rentals, to make repairs or improvements thereon and pay the same, to sell or
otherwise dispose of whatever rights the Assignor has or might have over said property and/or its improvements and
perform any other act which the Assignee may deem convenient to protect its interest. All expenses advanced by the
Assignee in connection with purpose above indicated which shall bear the same rate of interest aforementioned are
also guaranteed by this Assignment. Any amount received from rents, administration, sale or disposal of said property
may be supplied by the Assignee to the payment of repairs, improvements, taxes, assessments and other incidental
expenses and obligations and the balance, if any, to the payment of interest and then on the capital of the indebtedness
secured hereby. If after disposal or sale of said property and upon application of total amounts received there shall
remain a deficiency, said Assignor hereby binds himself to pay the same to the Assignee upon demand, together with all
interest thereon until fully paid. The power herein granted shall not be revoked as long as the Assignor is indebted to
the Assignee and all acts that may be executed by the Assignee by virtue of said power are hereby ratified.
The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by way of security
for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the
creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.[11]
Condition no. 12 did not provide that the ownership over the leasehold rights would automatically pass to DBP
upon CUBAs failure to pay the loan on time. It merely provided for the appointment of DBP as attorney-in-fact with
authority, among other things, to sell or otherwise dispose of the said real rights, in case of default by CUBA, and to
apply the proceeds to the payment of the loan. This provision is a standard condition in mortgage contracts and is in
conformity with Article 2087 of the Civil Code, which authorizes the mortgagee to foreclose the mortgage and alienate
the mortgaged property for the payment of the principal obligation.

DBP, however, exceeded the authority vested by condition no. 12 of the deed of assignment. As admitted by it
during the pre-trial, it had [w]ithout foreclosure proceedings, whether judicial or extrajudicial, appropriated the
[l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in question. Its contention that it limited itself to mere
administration by posting caretakers is further belied by the deed of conditional sale it executed in favor of CUBA. The
deed stated:
WHEREAS, the Vendor [DBP] by virtue of a deed of assignment executed in its favor by the herein vendees [Cuba
spouses] the former acquired all the rights and interest of the latter over the above-described property;

The title to the real estate property [sic] and all improvements thereon shall remain in the name of the Vendor until after
the purchase price, advances and interest shall have been fully paid. (Emphasis supplied).
It is obvious from the above-quoted paragraphs that DBP had appropriated and taken ownership of CUBAs
leasehold rights merely on the strength of the deed of assignment.
DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of appropriating the
leasehold rights. As stated earlier, condition no. 12 did not provide that CUBAs default would operate to vest in DBP
ownership of the said rights. Besides, an assignment to guarantee an obligation, as in the present case, is virtually a
mortgage and not an absolute conveyance of title which confers ownership on the assignee.[12]
At any rate, DBPs act of appropriating CUBAs leasehold rights was violative of Article 2088 of the Civil Code,
which forbids a creditor from appropriating, or disposing of, the thing given as security for the payment of a debt.
The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop her from
questioning DBPs act of appropriation. Estoppel is unavailing in this case. As held by this Court in some cases,
[13]
estoppel cannot give validity to an act that is prohibited by law or against public policy. Hence, the appropriation of
the leasehold rights, being contrary to Article 2088 of the Civil Code and to public policy, cannot be deemed validated by
estoppel.
Instead of taking ownership of the questioned real rights upon default by CUBA, DBP should have foreclosed the
mortgage, as has been stipulated in condition no. 22 of the deed of assignment. But, as admitted by DBP, there was no
such foreclosure. Yet, in its letter dated 26 October 1979, addressed to the Minister of Agriculture and Natural
Resources and coursed through the Director of the Bureau of Fisheries and Aquatic Resources, DBP declared that it
had foreclosed the mortgage and enforced the assignment of leasehold rights on March 21, 1979 for failure of said
spouses [Cuba spouces] to pay their loan amortizations.[14] This only goes to show that DBP was aware of the
necessity of foreclosure proceedings.
In view of the false representation of DBP that it had already foreclosed the mortgage, the Bureau of Fisheries
cancelled CUBAs original lease permit, approved the deed of conditional sale, and issued a new permit in favor of
CUBA. Said acts which were predicated on such false representation, as well as the subsequent acts emanating from
DBPs appropriation of the leasehold rights, should therefore be set aside. To validate these acts would open the
floodgates to circumvention of Article 2088 of the Civil Code.
Even in cases where foreclosure proceedings were had, this Court had not hesitated to nullify the consequent
auction sale for failure to comply with the requirements laid down by law, such as Act No. 3135, as amended. [15] With
more reason that the sale of property given as security for the payment of a debt be set aside if there was no prior
foreclosure proceeding.
Hence, DBP should render an accounting of the income derived from the operation of the fishpond in question and
apply the said income in accordance with condition no. 12 of the deed of assignment which provided: Any amount
received from rents, administration, may be applied to the payment of repairs, improvements, taxes, assessment,

and other incidental expenses and obligations and the balance, if any, to the payment of interest and then on the capital
of the indebtedness.
We shall now take up the issue of damages.
Article 2199 provides:
Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.
Actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty.
A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must
depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of
the actual amount thereof.[17] It must point out specific facts which could afford a basis for measuring whatever
compensatory or actual damages are borne.[18]
[16]

In the present case, the trial court awarded in favor of CUBA P1,067,500 as actual damages consisting
of P550,000 which represented the value of the alleged lost articles of CUBA and P517,500 which represented the
value of the 230,000 pieces of bangus allegedly stocked in 1979 when DBP first ejected CUBA from the fishpond and
the adjoining house. This award was affirmed by the Court of Appeals.
We find that the alleged loss of personal belongings and equipment was not proved by clear evidence. Other than
the testimony of CUBA and her caretaker, there was no proof as to the existence of those items before DBP took over
the fishpond in question. As pointed out by DBP, there was not inventory of the alleged lost items before the loss which
is normal in a project which sometimes, if not most often, is left to the care of other persons. Neither was a single
receipt or record of acquisition presented.
Curiously, in her complaint dated 17 May 1985, CUBA included losses of property as among the damages
resulting from DBPs take-over of the fishpond. Yet, it was only in September 1985 when her son and a caretaker went
to the fishpond and the adjoining house that she came to know of the alleged loss of several articles. Such claim for
losses of property, having been made before knowledge of the alleged actual loss, was therefore speculative. The
alleged loss could have been a mere afterthought or subterfuge to justify her claim for actual damages.
With regard to the award of P517,000 representing the value of the alleged 230,000 pieces of bangus which died
when DBP took possession of the fishpond in March 1979, the same was not called for. Such loss was not duly proved;
besides, the claim therefor was delayed unreasonably. From 1979 until after the filing of her complaint in court in May
1985, CUBA did not bring to the attention of DBP the alleged loss. In fact, in her letter dated 24 October 1979, [19] she
declared:
1. That from February to May 1978, I was then seriously ill in Manila and within the same period I neglected the
management and supervision of the cultivation and harvest of the produce of the aforesaid fishpond thereby resulting to
the irreparable loss in the produce of the same in the amount of about P500,000.00 to my great damage and prejudice
due to fraudulent acts of some of my fishpond workers.
Nowhere in the said letter, which was written seven months after DBP took possession of the fishpond, did CUBA
intimate that upon DBPs take-over there was a total of 230,000 pieces of bangus, but all of which died because of
DBPs representatives prevented her men from feeding the fish.
The award of actual damages should, therefore, be struck down for lack of sufficient basis.
In view, however, of DBPs act of appropriating CUBAs leasehold rights which was contrary to law and public
policy, as well as its false representation to the then Ministry of Agriculture and Natural Resources that it had foreclosed
the mortgage, an award of moral damages in the amount of P50,000 is in order conformably with Article 2219(10), in

relation to Article 21, of the Civil Code. Exemplary or corrective damages in the amount of P25,000 should likewise be
awarded by way of example or correction for the public good. [20] There being an award of exemplary damages,
attorneys fees are also recoverable.[21]
WHEREFORE, the 25 May 1994 Decision of the Court of Appeals in CA-G.R. CV No. 26535 is hereby
REVERSED, except as to the award of P50,000 as moral damages, which is hereby sustained. The 31 January 1990
Decision of the Regional Trial Court of Pangasinan, Branch 54, in Civil Case No. A-1574 is MODIFIED setting aside the
finding that condition no. 12 of the deed of assignment constituted pactum commissorium and the award of actual
damages; and by reducing the amounts of moral damages from P100,000 to P50,000; the exemplary damages,
from P50,000 to P25,000; and the attorneys fees, from P100,000 to P20,000. The Development Bank of the
Philippines is hereby ordered to render an accounting of the income derived from the operation of the fishpond in
question.
Let this case be REMANDED to the trial court for the reception of the income statement of DBP, as well as the
statement of the account of Lydia P. Cuba, and for the determination of each partys financial obligation to one another.
SO ORDERED.
G.R. No. L-48895

July 16, 1943

In re Guardianship of Luis Ribaya. ADELA CARBONELL VDA. DE RIBAYA, petitioner-appellant,

vs.
AGUSTINA R. VDA. DE RIBAYA, oppositor-appellee.
Ramon Imperial for appellant.
A.R. Ronin for appellee.
OZAETA, J.:
Adela Carbonell Vda. de Ribaya (now Mrs. Ricardo Mirasol), the mother and judicial guardian of the minor Luis Ribaya,
appeals from certain orders of the Court of First Instance of Albay (1) approving her accounts as such guardian and
ordering her to deposit the balance of P1,574.30 in favor of said minor in the Legaspi branch of the Philippine National
Bank, and (2) removing her as such guardian and appointing in her stead Agustina Vda. de Ribaya, paternal
grandmother and said minor.
Vicente Ribaya died intestate on September 29, 1935, leaving as his only legal heirs his minor son Luis and his widow
Adela Carbonell. No intestate proceeding has been instituted for the settlement of the estate. On July 21, 1936, Adela
Carbonell applied for her appointment as guardian of the person and property of her minor son Luis Ribaya, stating in
her application that said minor had property worth about P10,000. On July 25, 1936, the court appointed her guardian of
the person and property of said minor.
On August 7, 1937, in compliance with an order of the court, the guardian presented her first annual account, which
shows an income of P1,500.55 for the period from August 2, 1936, to July 12, 1937, and expenses of P1453.11 during
the same period, leaving a balance of P47.44 in favor of the minor. Agustina Vda. de Ribaya, grandmother of the minor,
opposed the approval of said account on the ground that various items of income, which she specified, had not been
included or accounted for therein. On January 4, 1940, the guardian presented her second annual account covering the
period up to December 31, 1939, and which, including the balance of the first account, showed a total balance of
P1,574.30 in favor of the minor. Agustina R. Vda. de Ribaya, in a writing entitled "Motion," manifested to the court (1)
that the expenses appearing in said No. 2 account of the guardian were excessive; (2) that the said guardian had
contracted a second marriage with Mr. Ricardo Mirasol, and that consequently (sic) the usufruct which she had as
widow on sixty hectares of coconut land situated in the barrios of Cullat, Pistola, Tinampo, and Allang, municipalities of
Oas and Ligao, should be considered terminated; and (3) that, it appearing from the guardian's accounts that there

exists a balance of P1,574.30 in favor the minor, the said amount should be ordered deposited in the Legaspi branch of
the Philippine National Bank.
On April 5, 1940, the court passed upon the said two accounts of the guardian and resolved that, although it found
some of the items of the expenses to be excessive, it approved the same with a balance of P1,574.30 in favor of the
minor, and ordered the guardian to deposit said balance within ten days in the Legaspi branch of the Philippine National
Bank. Regarding the motion for the extinction of the widow's usufruct on sixty hectares of coconut land, the court in the
same order required her to show cause within five days why all the fruits of the said sixty hectares of land should not be
credited in favor of the minor in view of the fact that she had contracted a second marriage. Instead of complying with
the said order the guardian, through her counsel, filed a motion on June 13, 1940, asking that the effectivity of said
order be suspended pending negotiations for amicable settlement with the oppositor, and announcing her intention to
present an amended account. On July 8, 1940, the court entered an order (a) denying the petition for suspension of the
order of April 5, 1940, and (b) declaring extinguished the usufructuary right of the widow over the paraphernal properties
of her deceased husband, on account of her having contracted a second marriage.
On July 22, 1940, the guardian through her counsel filed a motion for the reconsideration of the last-mentioned order. In
the meantime, and on July 17 of the same year, the oppositor Agustina R. Vda. de Ribaya had filed a motion for the
removal of Adela Carbonell as guardian of the property of the minor, on the grounds that her management and
administration had been wasteful and extravagant, and that she had refused to obey the order of the court of April 5,
1940, to deposit the sum of P1,574.30 with the Philippine National Bank.
On August 30, 1940, the court resolved the guardian's motion for reconsideration and the oppositor's motion for removal
and substitution of said guardian by denying the first and granting the second. With respect, however, to the
usufructuary right of the widow, the court declared that the same should be resolved in an interstate proceeding in
accordance with articles 834-839 of the Civil Code.
From the three orders of the court above-mentioned, dated respectively April 5, July 8, and August 30, 1940, Adela
Carbonell appealed, but the court allowed the appeal only as to the last-mentioned order and declared that those of
April 5 and July 8 had become final.
The order of the court of April 5, 1940, was notified to appellant on April 20, 1940. She did not file her motion to suspend
its effectivity until June 13, 1940, that is to say, after the lapse of 54 days. The court was, therefore, right in declaring
said order final and unappealable.
As to the order of July 8, 1940, whereby the widow's usufruct was declared extinguished, the same was set aside by the
court in its order of August 30, 1940, by declaring that the matter should be resolved in an intestate proceeding. Hence
it only remains for us to review the last-mentioned order whereby the appellant was removed as guardian of the
property of the minor Luis Ribaya, and Agustina Vda. de Ribaya was appointed in her stead.
We deduce from the record that the deceased Vicente Ribaya left considerable properties and assets and some debts,
and that without instituting intestate proceedings his widow Adela Carbonell appears to have assigned to herself the
usufruct of some sixty hectares of coconut land belonging to the deceased, leaving the rest of the decedent's assets
with the liabilities to his only son, the minor in question. For the guidance of the parties and of the trial court, we declare
such extrajudicial settlement void and of the no legal effect. The widow, as legal heir of her deceased husband, could
not validly enter into an agreement with herself as natural guardian of her minor son for the determination and
apportionment of their respective shares in the inheritance. Moreover, the widow's usufructuary share cannot be
determined until after the debts of the estate are liquidated. It is imperative that she institute intestate proceedings in
court so that the debts may be paid and the net assets distributed to the heirs in accordance with law. The right of the
widow is governed by the second paragraph of article 834 of the Civil Code, which reads as follows:
If only one legitimate child or descendant survives, the widower or widow shall have the usufruct of the third
available for betterment, such child or descendant to have the naked ownership until, on the death of the
surviving spouse, the whole title is merged in him.

The record of this case evinces a conflict of interests between the appellant and the minor as heirs of the deceased.
This fact alone, independently of the five grounds specified by the trial court in its order substituting the appellant as
guardian of the property of the minor, suggests the property and advisability of relieving appellant as such guardian.
(Gabriel vs. Sotelo, 2 Off. Gaz., 172.)
The appellant also assigns as error the refusal of the trial court to allow her to present an additional account and a final
account before her removal as guardian. We note in this connection that the two accounts she presented to the court as
well as her proposed additional account consist mostly of items that should be presented to and passed upon by the
court in the administration and settlement of the intestate of the deceased rather than in this guardianship proceeding.
As to the final account, the trial court in the order appealed from did not refuse to allow the appellants to present it. On
the contrary, it is understood that before the appellant could be relieved as guardian of the property of her ward and her
bond cancelled, she has to present a final account covering the period from January 1, 1940, to the date on which she
delivers the properties of the ward to the new guardian.
The order of August 30, 1940, is affirmed with the direction made in the body of this decision regarding the institution by
the appellant of intestate proceedings for the settlement and adjudication of the estate of the deceased Vicente Ribaya,
Appellant shall pay the costs.