FIRST DIVISION

MULTI-REALTY DEVELOPMENT

G.R. No. 146726

CORPORATION,
Petitioner,

Present:

PANGANIBAN, C.J.,
- versus - Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
THE MAKATI TUSCANY

CHICO-NAZARIO, JJ.

CONDOMINIUM
CORPORATION,
Respondent.
Promulgated:

June 16, 2006

x-----------------------------------------------------------------------------------------x

DECISION
CALLEJO, SR., J.:

Before this Court is a petition for review on certiorari of the Decision1[1] of

the Court of Appeals in CA-G.R. CV No. 44696 dismissing the appeal of MultiRealty Development Corporation on the ground of prescription.

Multi-Realty is a domestic corporation engaged in the real estate business,

and the construction and development of condominiums. It developed, among
others, the Ritz Towers Condominium, and the former Galeria de Magallanes, both
built in the Municipality (now city) of Makati.

In the 1970s, Multi-Realty constructed a 26-storey condominium at the

corner of Ayala Avenue and Fonda Street in Makati City, known as the Makati
Tuscany Condominium Building (Makati Tuscany, for short). The building was
one of the Philippines first condominium projects, making it necessary for MultiRealty and the government agencies concerned with the project, to improve and
formulate rules and regulations governing the project as construction progressed.

Makati Tuscany consisted of 160 condominium units, with 156 units from
the 2nd to the 25th floors, and 4 penthouse units in the 26th floor. Two hundred
seventy (270) parking slots were built therein for apportionment among its unit
owners. One hundred sixty-four (164) of the parking slots were so allotted, with
each unit at the 2nd to the 25th floors being allotted one (1) parking slot each, and
each penthouse unit with two slots. Eight (8) other parking slots, found on the
ground floor of the Makati Tuscany were designated as guest parking slots, while
the remaining 98 were to be retained by Multi-Realty for sale to unit owners who
would want to have additional slots.

According to Multi-Realty, the intention to allocate only 8 parking slots to

the Makati Tuscanys common areas was reflected in its color-coded ground floor
plan, upper basement plan and lower basement plan prepared by its architect, C.D.
Arguelles and Associates. These plans, which depict common areas as yellow
zones and areas reserved for unit owners as red zones, clearly show that, of the 270
parkings slots, 262 were designated red zones, and only 8 first-floor parking slots
were designated yellow zones or common areas.

Pursuant to Republic Act No. 4726, otherwise known as the Condominium

Act, the Makati Tuscany Condominium Corporation (MATUSCO) was organized
and established to manage the condominium units.

In 1975, Multi-Realty executed a Master Deed and Declaration of

Restrictions2[2] (Master Deed, for short) of the Makati Tuscany. Sections 5 and 7
provide:

SEC. 5. Accessories to Units. To be considered as part of each unit and

reserved for the exclusive use of its owner are the balconies adjacent thereto and
the parking lot or lots which are to be assigned to each unit.
xxxx
SEC. 7. The Common Areas. The common elements or areas of the Makati
Tuscany shall comprise of all the parts of the project other than the units,
including without limitation the following:

xxxx
(d) All driveways, playgrounds, garden areas and PARKING AREAS
OTHER THAN THOSE ASSIGNED TO EACH UNIT UNDER SEC. 5
ABOVE;3[3]

The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty
executed a Deed of Transfer in favor of MATUSCO over these common areas.
However, the Master Deed and the Deed of Transfer did not reflect or specify the
ownership of the 98 parking slots. Nevertheless, Multi-Realty sold 26 of them in
1977 to 1986 to condominium unit buyers who needed additional parking slots.
MATUSCO did not object, and certificates of title were later issued by the Register
of Deeds in favor of the buyers. MATUSCO issued Certificates of Management
covering the condominium units and parking slots which Multi-Realty had sold.

At a meeting of MATUSCOs Board of Directors on March 13, 1979, a

resolution was approved, authorizing its President, Jovencio Cinco, to negotiate
terms under which MATUSCO would buy 36 of the unallocated parking slots from
Multi-Realty. During another meeting of the Board of Directors on June 14, 1979,
Cinco informed the Board members of Multi-Realtys proposal to sell all of the
unassigned parking lots at a discounted price of P15,000.00 per lot, or some 50%
lower than the then prevailing price of P33,000.00 each. The Board agreed to hold
in abeyance any decision on the matter to enable all its members to ponder upon
the matter.

In the meantime, the fair market value of the unallocated parking slots
reached P250,000.00 each, or a total of P18,000,000.00 for the 72 slots.

In September 1989, Multi-Realty, through its President, Henry Sy, who was
also a member of the Board of Directors of MATUSCO, requested that two MultiRealty executives be allowed to park their cars in two of Makati Tuscanys
remaining 72 unallocated parking slots. In a letter, through its counsel, MATUSCO
denied the request, asserting, for the first time, that the remaining unallocated
parking slots were common areas owned by it. In another letter, MATUSCO
offered, by way of goodwill gesture, to allow Multi-Realty to use two unallocated
parking slots, which offer was rejected by the latter.

On April 26, 1990, Multi-Realty, as plaintiff, filed a complaint, docketed as

Civil Case No. 90-1110, against MATUSCO, as defendant, for Damages and/or
Reformation of Instrument with prayer for temporary restraining order and/or
preliminary injunction. The case was raffled to Branch 59 of the Makati RTC.

Multi-Realty alleged therein that it had retained ownership of the 98

unassigned parking slots. Considering, however, that Makati Tuscany was one of
its first condominium projects in the Philippines, this was not specified in Section
7(d) of the Master Deed since the documentation and the terms and conditions
therein were all of first impression. It was further alleged that the mistake was

discovered for the first time when MATUSCO rejected its request to allow its
(Multi-Realtys) executives to park their cars in two of the unassigned parking lots.

In its Answer with counterclaim, MATUSCO alleged that Multi-Realty had

no cause of action against it for reformation of their contract. By its own
admission, Multi-Realty sold various parking slots to third parties despite its
knowledge that the parking areas, other than those mentioned in Sec. 5 of the
Master Deed, belonged to MATUSCO. MATUSCO prayed that judgment be
rendered in its favor dismissing the complaint; and, on its counterclaim, to order
the plaintiff to render an accounting of the proceeds of the sale of the parking slots
other than those described in Sec. 5 of the Master Deed; to pay actual damages
equivalent to the present market value of the parking areas other than those
described in Sec. 5 of the Master Deed, amounting to no less than P250,000.00 per
slot plus reasonable rentals thereon at no less than P400.00 per slot per month from
date of sale until payment by plaintiff to defendant of the market value of these
parking areas.

After trial, the RTC rendered a decision, the dispositive portion of which
reads:

Premises considered, this case is dismissed. Defendants counterclaim is,

likewise, dismissed, the same not being compulsory and no filing fee having been
paid. Plaintiff is, however, ordered to pay defendant attorneys fees in the amount
of P50,000.00.
Cost against plaintiff.

SO ORDERED.4[4]

The trial court ruled that Multi-Realty failed to prove any ground for the
reformation of its agreement with MATUSCO relative to the ownership of the
common areas. There is no evidence on record to prove that the defendant acted
fraudulently or inequitably to the prejudice of the plaintiff, and the latter was
estopped, by deed, from claiming that it owned the common areas. It also held that
the defendant was not estopped from assailing plaintiffs ownership over the
disputed parking slots.

Multi-Realty appealed the decision to the CA via a petition under Rule 41 of

the Rules of Court, contending that:

THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT AND

DISALLOWING THE PLAINTIFF-APPELLANT FROM REFORMING THE
MASTER DEED BECAUSE:
I
THERE IS VALID GROUND FOR REFORMATION OF THE
MASTER DEED SINCE THE MASTER DEED DID NOT
REFLECT THE TRUE INTENTION OF THE PARTIES
REGARDING THE OWNERSHIP OF THE EXTRA NINETYEIGHT PARKING [SLOTS] DUE TO MISTAKE.
II
THE REGISTRATION OF THE MASTER DEED WITH THE
REGISTER OF DEEDS DID NOT MAKE PLAINTIFFAPPELLANT GUILTY OF ESTOPPEL BY DEED.
III
4

THE TRIAL COURT ERRED IN FINDING THAT

DEFENDANT-APPELLEE IS NOT ESTOPPED FROM
QUESTIONING THE OWNERSHIP OF PLAINTIFFAPPELLANT OVER THE DISPUTED PARKING LOTS.5[5]

In support of its appeal, Multi-Realty reiterated its contentions in the trial

court, insisting that it had adduced evidence to prove all the requisites for the
reformation of Section 7(d) of the Master Deed under Article 1359 of the New
Civil Code. It was never its intention to designate the 98 unassigned parking slots
as common areas, and, as shown by the evidence on record, this was known to
MATUSCO. Under Article 1364 of the New Civil Code, an instrument may be
reformed if, due to lack of skill on the part of the drafter, the deed fails to express
the true agreement or intention of the parties therein. Since MATUSCO knew that
it (Multi-Realty) owned the 98 parking slots when the Master Deed was executed,
its registration did not make Multi-Realty guilty of estoppel by deed. In fact,
MATUSCO failed to object to the sale of some of the parking slots to third parties.
It was also pointed out that Multi-Realty remained in possession thereof.

Multi-Realty further claimed that the trial court erred in not declaring that
MATUSCO was estopped from assailing the ownership over the parking slots, as it
not only conformed to the sale of some of the unassigned parking slots but likewise
failed to assail the ownership thereon for a period of 11 years. It insisted that the
sale of the said parking slots was made in accord with law, morals and public order,
and that MATUSCOs claim of ownership of the unassigned parking slots was
merely an afterthought.
5

MATUSCO, for its part, appealed the trial courts dismissal of its
counterclaim.

On Multi-Realtys appeal, MATUSCO countered that the 270 parking slots

were to be apportioned as follows:

1 parking lot for each ordinary unit 2 parking lots for each of the 4 Penthouse
Apartment Units

156
-

of the remaining 106 parking lots, 34 parking lots were designated and
allocated as part of common areas which would be allocated purely for
visitors, while the remaining 72 units would become part of the
Condominium Corporations income-earning common areas
106
---2706[6]

====

It was further averred that Multi-Realty, through Henry Sy, executed the
Master Deed in July 1975 and the Deed of Transfer in 1977, in which the
ownership of the common areas was unconditionally transferred to MATUSCO;
Multi-Realty sold 26 of the 34 parking slots in bad faith, which had been allocated
purposely for visitors of unit owners, amounting to millions of pesos; the action for
reformation has no legal basis because the transfer of the 106 unassigned parking

slots which form part of the common areas is contrary to Section 16 7[7] of the
Condominium Act.

MATUSCO further pointed out that the unassigned parking slots could be
transferred only by the affirmative votes of all the members of Multi-Realty, and
that the Master Deed and the Deed of Transfer were prepared by the latter with the
assistance of its renowned lawyers. If there was a mistake in the drafting of the
Master Deed in 1975, the deed should have been corrected in 1977 upon the
execution of the Deed of Transfer. With the social and economic status of Henry
Sy, Multi-Realtys President, it is incredible that the Master Deed and the Deed of
Transfer failed to reflect the true agreement of the parties. MATUSCO went on to
state that Multi-Realty failed to adduce a preponderance of evidence to prove the
essential requirements for reformation of the questioned documents. Even if there
was a mistake in drafting the deeds, reformation could not be given due course
absent evidence that defendant-appellee acted fraudulently or inequitably.

On its claim of ownership over the unassigned parking slots, MATUSCO

averred that it is not estopped to do so because the sales thereof were illegal, and it
had no knowledge that Multi-Realty had been selling the same. Having acted
fraudulently and illegally, Multi-Realty cannot invoke estoppel against it.

On the RTC decision dismissing its counterclaim, MATUSCO averred that

said decision is erroneous, as it had adduced evidence to prove its entitlement to
said counterclaim.

In reply, Multi-Realty averred that MATUSCOs counterclaim had already

prescribed because it was filed only in 1990, long after the period therefor had
elapsed in 1981.

On August 21, 2000, the CA rendered its decision dismissing Multi-Realtys

appeal on the ground that its action below had already prescribed. The dispositive
portion of the decision reads:

WHEREFORE, foregoing premises considered, the appeal having no

merit in fact and in law, is hereby ORDERED DISMISSED, and the judgment of
the trial court is MODIFIED by deleting the award of attorneys fees not having
been justified but AFFIRMED as to its Order dismissing both the main complaint
of plaintiff-appellant and the counterclaim of defendant-appellant. With costs
against both parties.8[8]

The appellate court ruled that it was justified in dismissing Multi-Realtys

appeal on the ground of prescription as it was clothed with ample authority to
review the lower courts rulings even those not assigned as errors on appeal,
especially if the consideration of the matter is necessary to arrive at a just decision
of the case, and to avoid dispensing piecemeal justice. The CA cited the rulings of
this Court in Servicewide Specialists, Inc. v. Court of Appeals,9[9] and Dinio v.
Laguesma.10[10]
Multi-Realty filed a motion for reconsideration of the decision, contending
that:

THIS HONORABLE COURT VIOLATED SECTION 8 OF RULE 51 OF THE

RULES OF COURT TO MRDCS SUBSTANTIAL AND UNFAIR PREJUDICE
BY RESOLVING MRDCS APPEAL ON THE GROUND OF PRESCRIPTION,
EVEN THOUGH NEITHER PARTY HAD ASSIGNED OR ARGUED AS AN
ERROR THE TRIAL COURTS FAILURE TO DISMISS THE ACTION FILED
BY MRDC BELOW AS PRESCRIBED.
THIS HONORABLE COURT ERRED IN COUNTING THE RUNNING OF
THE PRESCRIPTIVE PERIOD FROM THE DATE OF EXECUTION OF THE
MASTER
DEED
IN
1975,
BECAUSE
UNDER
ARTICLE 1150 OF THE CIVIL CODE, AND THE SUPREME COURTS
DECISIONS IN TORMON VS. CUTANDA, AND VELUZ VS. VELUZ, MRDCS
PERIOD TO FILE A SUIT FOR REFORMATION ONLY BEGAN RUNNING
IN 1989, AFTER DEFENDANT-APPELLANT MAKATI TUSCANY
CONDOMINIUM CORPORATIONS REPUDIATION OF THE PARTIES TRUE
AGREEMENT GAVE RISE TO MRDCS RIGHT OF ACTION.11[11]
9
10
11

Multi-Realty further averred that the appellate court misapplied Rule 51,
Section 8 of the 1997 Rules of Court as well as the ruling of this Court in the
Servicewide Specialists case. It pointed out that, when it filed its Brief, as appellee,
Rule 51, Section 7 of the 1964 Rules of Court was still in effect, under which an
error which does not affect the jurisdiction over the subject matter will not be
considered unless stated in the assignment of error and properly assigned in the
Brief, as the court may pass upon plain and clerical errors only. Multi-Realty
insisted that the parties did not raise the issue of whether its action had already
prescribed when it filed its complaint in their pleadings below and in the
respondents Brief. It claimed that it was deprived of its right to due process when
the appellate court denied its appeal based on a ruling of this Court under the 1997
Rules of Civil Procedure. It insisted that the ruling of this Court in Servicewide
Specialist, Inc. was promulgated when the 1997 Rules of Civil Procedure was in
effect.

On January 18, 2001, the CA issued a Resolution denying Multi-Realtys

motion for reconsideration. The appellate court cited the ruling of this Court in
Rosello-Bentir v. Hon. Leanda,12[12] to support its ruling that the action of
petitioner had already prescribed when it was filed with the RTC. Multi-Realty
received its copy of said Order of denial on January 29, 2001.

Multi-Realty, now petitioner, filed the instant petition for review on

certiorari, alleging that:
12

THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF

SUBSTANCE IN A MANNER INCONSISTENT WITH LAW, AND
DEPARTED WITH UNFAIRLY PREJUDICIAL EFFECT FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS LAID DOWN IN SECTION 8 OF
RULE 51 OF THE RULES OF COURT WHEN IT DISMISSED MULTIREALTYS APPEAL ON THE BASIS OF PRESCRIPTION, EVEN THOUGH
NEITHER PARTY RAISED [NOR] DISCUSSED THE TRIAL COURTS
FAILURE TO ENFORCE THE ALLEGEDLY APPLICABLE TIME BAR AS
AN ERROR IN THEIR BRIEFS.

THE HONORABLE COURT OF APPEALS DECIDED A MATTER OF

SUBSTANCE IN A MANNER PROBABLY NOT IN ACCORD WITH
ARTICLE 1150 OF THE CIVIL CODE, WHEN IT DISREGARDED THIS
HONORABLE COURTS RULINGS IN TORMON V. CUTANDA AND VELUZ
V. VELUZ, AND RULED THAT THE PRESCRIPTIVE PERIOD APPLICABLE
TO
AN
ACTION
FOR
REFORMATION
BEGINS TO RUN FROM THE DATE THE INSTRUMENT TO BE
REFORMED IS EXECUTED, RATHER THAN FROM THE DATE ON WHICH
THE TRUE AGREEMENT THE REFORMATION IS MEANT TO EXPRESS IS
VIOLATED.
THE HONORABLE COURT OF APPEALS OVERLOOKED RELEVANT
FACTS SUSTAINING A DECISION ALLOWING REFORMATION OF THE
MASTER DEED WHEN IT FAILED TO REVERSE THE TRIAL COURTS
DECISION AND FIND THAT MATUSCOS CONSISTENT RECOGNITION
OF, AND PARTICIPATION IN, THE SALES OF UNALLOCATED PARKING
SLOTS MADE BY MULTI-REALTY, AND ITS EFFORTS TO BUY THE
UNALLOCATED PARKING SLOTS FROM MULTI-REALTY, ESTOP IT
FROM ASSERTING TITLE TO THE UNALLOCATED PARKING SLOTS. 13
[13]

The Court is to resolve two issues: (1) whether the CA erred in dismissing
petitioners appeal on the ground of prescription; and (2) whether petitioners action
had already prescribed when it was filed in 1990.

13

On the issue of prescription, petitioner asserts that under Article 1150 in

relation to Article 1144 of the New Civil Code, its action for reformation of the
Master Deed accrued only in 1989, when respondent, by overt acts, made known
its intention not to abide by their true agreement; since the complaint below was
filed in 1990, the action was filed within the prescriptive period therefor. Petitioner
cites the rulings of this Court in Tormon v. Cutanda,14[14] Veluz v. Veluz,15[15] and
Espaol v. Chairman, Philippine Veterans Administration16[16] to bolster its claim.

In its comment on the petition, respondent avers that, as held by this Court in
Rosello-Bentir v. Hon. Leanda,17[17] the prescriptive period for the petitioner to
file its complaint commenced in 1975, upon the execution of the Master Deed in its
favor. Considering that the action was filed only in 1990, the same, by then, had
already prescribed.

On the first issue, we sustain petitioners contention that the CA erred in

dismissing its appeal solely on its finding that when petitioner filed its complaint
below in 1990, the action had already prescribed. It bears stressing that in
respondents answer to petitioners complaint, prescription was not alleged as an
affirmative defense. Respondent did not raise the issue throughout the proceedings
14
15
16
17

in the RTC. Indeed, the trial court did not base its ruling on the prescription of
petitioners action; neither was this matter assigned by respondent as an error of the
RTC in its brief as defendant-appellant in the CA.
Settled is the rule that no questions will be entertained on appeal unless they
have been raised below. Points of law, theories, issues and arguments not
adequately brought to the attention of the lower court need not be considered by
the reviewing court as they cannot be raised for the first time on appeal. Basic
considerations of due process impel this rule.18[18]

Truly, under Section 7, Rule 51 of the 1964 Rules of Court, no error which
does not affect the jurisdiction over the subject matter will be considered unless
stated in the assignment of errors and properly argued in the brief, save as the
Court, at its option, may pass upon plain errors not specified, and clerical errors.
Even at that time, the appellate court was clothed with ample authority to review
matters even if not assigned as errors in their appeal if it finds that their
consideration is necessary in arriving at a just decision of the case. 19[19] It had
ample authority to review and resolve matters not assigned and specified as errors
by either of the parties on appeal if it found that the matter was essential and
indispensable in order to arrive at a just decision of the case. It has broad
discretionary power, in the resolution of a controversy, to take into consideration
matters on record unless the parties fail to submit to the court specific questions for
determination. Where the issues already raised also rest on other issues not
specifically presented, as long as the latter issues bear relevance and close relation
18
19

to the former and as long as they arise from matters on record, the appellate court
has authority to include them in its discussion of the controversy as well as to pass
upon them. In brief, in those cases wherein questions not particularly raised by the
parties surface as necessary for the complete adjudication of the rights and
obligations of the parties and such questions fall within the issues already framed
by the parties, the interests of justice dictate that the court consider and resolve
them.20[20]

When the appeals of the petitioner and that of the respondent were submitted
to the CA for decision, the 1997 Rules of Civil Procedure was already in effect.
Section 8, Rule 51 of said Rules, reads:

SEC. 8. Questions that may be decided. No error which does not affect the
jurisdiction over the subject matter or the validity of the judgment appealed from
or the proceedings therein will be considered unless stated in the assignment of
errors, or closely related to or dependent on an assigned error and properly argued
in the brief, save as the court may pass upon plain errors and clerical errors.

This provision was taken from the former rule with the addition of errors affecting
the validity of the judgment or closely related to or dependent on an assigned
error.21[21] The authority of the appellate court to resolve issues not raised in the
briefs of the parties is even broader.

20
21

Nevertheless, given the factual backdrop of the case, it was inappropriate for
the CA, motu proprio, to delve into and resolve the issue of whether petitioners
action had already prescribed. The appellate court should have proceeded to
resolve petitioners appeal on its merits instead of dismissing the same on a ground
not raised by the parties in the RTC and even in their pleadings in the CA.

Even if we sustain the ruling of the CA that it acted in accordance with the Rules of
Court in considering prescription in denying petitioners appeal, we find and so rule
that it erred in holding that petitioners action had already prescribed when it was
filed in the RTC on April 26, 1990.

Prescription is rightly regarded as a statute of repose whose object is to

suppress fraudulent and stale claims from springing up at great distances of time
and surprising the parties or their representatives when the facts have become
obscure from the lapse of time or the defective memory or death or removal of
witnesses. The essence of the statute of limitations is to prevent fraudulent claims
arising from unwarranted length of time and not to defeat actions asserted on the
honest belief that they were sufficiently submitted for judicial determination. 22[22]
Our laws do not favor property rights hanging in the air, uncertain, over a long
span of time.23[23]

22
23

Article 1144 of the New Civil Code provides that an action upon a written contract
must be brought within ten (10) years from the time the right of action accrues:

Art. 1144. The following actions must be brought within ten years from
the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

In relation thereto, Article 1150 of the New Civil Code provides that the time
for prescription of all actions, when there is no special provision which ordains
otherwise, shall be counted from the day they may be brought. It is the legal
possibility of bringing the action that determines the starting point for the
computation of the period of prescription.24[24]

The term right of action is the right to commence and maintain an action. In
the law of pleadings, right of action is distinguished from a cause of action in that
the former is a remedial right belonging to some persons while the latter is a formal
statement of the operational facts that give rise to such remedial right. The former
is a matter of right and depends on the substantive law while the latter is a matter
of statute and is governed by the law of procedure. The right of action springs from
the cause of action, but does not accrue until all the facts which constitute the
cause of action have occurred.25[25]
24

A cause of action must always consist of two elements: (1) the plaintiffs
primary right and the defendants corresponding primary duty, whatever may be the
subject to which they relate person, character, property or contract; and (2) the
delict or wrongful act or omission of the defendant, by which the primary right and
duty have been violated.26[26]

To determine when all the facts which constitute a cause of action for
reformation of an instrument may be brought and when the right of the petitioner
to file such action accrues, the second paragraph of Section 1, Rule 63, must be
considered because an action for the reformation of an instrument may be brought
under said Rule:

SECTION 1. Who may file petition. Any person interested under a deed,
will, contract or other written instrument, whose rights are affected by a statute,
executive order or regulation, ordinance, or any other governmental regulation
may, before breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction or validity arising,
and for a declaration of his rights or duties, thereunder.
An action for the reformation of an instrument, to quiet title to real
property or remove clouds therefrom, or to consolidate ownership under Article
1607 of the Civil Code, may be brought under this Rule (emphasis supplied).

25
26

Such a petition is a special civil action determinative of the rights of the

parties to the case. It is permitted on the theory that courts should be allowed to
act, not only when harm is actually done and rights jeopardized by physical
wrongs or physical attack upon existing legal relations, but also when challenge,
refusal, dispute or denial thereof is made amounting to a live controversy. The
uncertainty and insecurity which may thereby be avoided may hamper or disturb
the freedom of the parties to transact business or to make improvements on their
property rights. A situation is thus created when a judicial declaration may serve to
prevent a dispute from ripening into violence or destruction.27[27]

The concept and meaning of the term cause of action in proceedings for
declaratory relief, vis--vis an ordinary civil action, is broadened. It is not, as in
ordinary civil action, the wrong or delict by which the plaintiffs rights are violated,
but it is extended to a mere denial, refusal or challenge raising at least an
uncertainty or insecurity which is injurious to plaintiffs rights.28[28]

For a petition for declaratory relief to prosper, the following conditions sine
qua non must concur: (1) there must be a justiciable controversy; (2) the
controversy must be between persons whose interests are adverse; (3) the party

27
28

seeking declaratory relief must have a legal interest in the controversy; and (4) the
issue involved must be ripe for judicial determination.29[29]

To controvert is to dispute; to deny, to oppose or contest; to take issue on. 30

[30] The controversy must be definite and concrete, touching on the legal relations
of the parties having adverse legal interests. It must be a real and substantial
controversy admitting of specific relief through a decree of a conclusive character
as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.31[31]

The fact that the plaintiffs desires are thwarted by its own doubts, or by the
fears of others, does not confer a cause of action. No defendant has wronged the
plaintiff or has threatened to do so.32[32] However, the doubt becomes a justiciable
controversy when it is translated into a claim of right which is actually
contested.33[33] As explained by this Court, a dispute between the parties is
justiciable when there is an active antagonistic assertion of a legal right on one side

29
30
31
32
33

and a denial thereof on the other, concerning a real, not merely a theoretical
question or issue.34[34]
In sum, one has a right of action to file a complaint/petition for reformation
of an instrument when his legal right is denied, challenged or refused by another;
or when there is an antagonistic assertion of his legal right and the denial thereof
by another concerning a real question or issue; when there is a real, definitive and
substantive controversy between the parties touching on their legal relations having
adverse legal interests. This may occur shortly after the execution of the instrument
or much later.35[35]

A party to an instrument is under no obligation to seek a reformation of an

instrument while he is unaware that any opposition will be made to carry out the
actual agreement.36[36] The statute of limitations does not begin to run against an
equitable cause of action for the reformation of an instrument because of mistake
until the mistake has been discovered or ought to have been discovered.37[37] The
mere recording of a deed does not charge the grantor with constructive notice of a
mistake therein, but is to be considered with other facts and circumstances in

34
35
36
37

determining whether the grantor be charged with notice actual or constructive. 38

[38]

In State ex rel. Pierce County v. King County,39[39] the appellate court ruled
that:

In equitable actions for reformation on the ground of mistake the rule on

the question of when the period of limitation or laches commences to run is as
stated by this Court in State v. Lorenz, 22 Wash. 289, 60 P. 644, 647:
* * * that the statute did not begin to run against the right of appellant to reform
the deed [because of a mistake therein] until the assertion on the part of
respondents of their adverse claim.
In Chebalgoity v. Branum, 16 Wash.2d 251, 133 P.2d 288, 290, we said:
Nor is his right to maintain it [an action for reformation grounded on mistake]
impaired by lapse of time, for the bar of the statue of limitations does not begin to
run until the assertion of an adverse claim against the party seeking reformation.
The rule is also stated in 53 C.J. 1003, reformation of instruments, as follows:
[ 155] C. Time for Bringing Action. An action to reform an instrument may be
brought as soon as the cause of action accrues. * * * On the other hand, a party to
an instrument is under no obligation to seek its correction before his cause of
action is finally vested or while he is unaware that any opposition will be made in
carrying out the actual agreement, where for a long time the rights and duties of
the parties are the same under the writing and under the terms which it is alleged
were intended, and the failure to take any action toward reformation until his right
vests or opposition is manifest does not prejudice his suit.40[40]

38
39
40

In this case, before petitioner became aware of respondents denial of its right under
their true contract, petitioner could not be expected to file an action for the
reformation of the Master Deed. As Justice Jose BL Reyes, ratiocinated in Tormon
v. Cutanda:41[41]

It follows that appellants cause of action arose only when the appellees made
known their intention, by overt acts, not to abide by the true agreement; and the
allegations of the complaint establish that this happened when the appellees
executed the affidavit of consolidation of the title allegedly acquired by appellees
under the fictitious pacto de retro sale. It was then, and only then, that the
appellants cause of action arose to enforce the true contract and have the apparent
one reformed or disregarded, and the period of extinctive prescription began to
run against her. Since the consolidation affidavit was allegedly made only in
September 1960, and the complaint was filed in Court the following November
1960, just two months afterward, the action of appellant had not prescribed.42[42]

The Courts ruling in the Tormon case was reiterated in Veluz v. Veluz.43[43]

In the more recent case of Naga Telephone Co., Inc. v. Court of Appeals,44
[44] the Court made the following declaration:

41
42
43
44

Article 1144 of the New Civil Code provides, inter alia, that an action
upon a written contract must be brought within ten (10) years from the time the
right of action accrues. Clearly, the ten (10) years period is to be reckoned from
the time the right of action accrues which is not necessarily the date of execution
of the contract. As correctly ruled by respondent court, private respondents right
of action arose sometime during the latter part of 1982 or in 1983 when according
to Atty. Luis General, Jr. x x x, he was asked by (private respondents) Board of
Directors to study said contract as it already appeared disadvantageous to (private
respondent) (p. 31, tsn, May 8, 1989). Private respondents cause of action to ask
for reformation of said contract should thus be considered to have arisen only in
1982 or 1983, and from 1982 to January 2, 1989 when the complaint in this case
was filed, ten (10) years had not yet elapsed.45[45]

This ruling was reiterated in Pilipinas Shell Petroleum Corporation v. John

Bordman Ltd. of Iloilo, Inc., 46[46] where the Court declared that the cause of action
of respondent therein arose upon its discovery of the short deliveries with certainty,
since prior thereto, it had no indication that it was not getting what it was paying
for. The Court declared that before then, there was yet no issue to speak of, and as
such, respondent could not have brought an action against petitioner. It was
stressed that it was only after the discovery of the short deliveries that respondent
got into position to bring an action for specific performance. Thus, the Court
declared that the action was brought within the prescriptive period.47[47]

45
46
47

In the present case, petitioner executed the Master Deed in 1975. However,
petitioner had no doubt about its ownership of the unassigned parking lots, and
even sold some of them. Respondent did not even object to these sales, and even
offered to buy some of the parking slots. Respondent assailed petitioners
ownership only in 1989 and claimed ownership of the unassigned parking slots,
and it was then that petitioner discovered the error in the Master Deed; the dispute
over the ownership of the parking slots thereafter ensued. It was only then that
petitioners cause of action for a reformation of the Master Deed accrued. Since
petitioner filed its complaint in 1990, the prescriptive period had not yet elapsed.

The CA erred in relying on the ruling of this Court in Rosello-Bentir v. Hon.

Leanda.48[48] In that case, the Leyte Gulf Traders, Inc. leased a parcel of land
owned by Yolando Rosello-Bentir. The lease agreement was entered into on May 5,
1968 and was for a period of 20 years. The parties therein agreed, inter alia, that:

4. IMPROVEMENT. The lessee shall have the right to erect on the leased
premises any building or structure that it may desire without the consent or
approval of the Lessor x x x provided that any improvements existing at the
termination of the lease shall remain as the property of the Lessor without right to
reimbursement to the Lessee of the cost or value thereof.49[49]

On May 5, 1989, the lessor Rosello-Bentir sold the property and the corporation
questioned the sale, alleging that they had a verbal agreement that the lessor has
the right to equal the offers of prospective buyers of the property. It insisted,
48
49

however, that the said agreement was inadvertently omitted in the contract. On
May 15, 1992, the corporation filed a complaint for reformation of instrument,
specific performance, annulment of conditional sale and damages with a prayer for
a writ of preliminary injunction, alleging that the contract of lease failed to reflect
the true agreement of the parties.

In his answer to the complaint, the lessor alleged that the corporation was
guilty of laches for not bringing the case for reformation of the lease contract
within the prescriptive period of 10 years from its execution. On December 15,
1995, the trial court issued an Order dismissing the complaint on the ground that
the action had already prescribed. Plaintiff filed a motion for the reconsideration of
the Order and, on May 10, 1996, the trial court granted the motion and set aside its
Order, this time, declaring that its Order dated December 15, 1995 dismissing the
complaint was premature and precipitate and denied the corporation its right to due
process. The trial court declared that, aside from plaintiffs cause of action for
reformation of lease contract, plaintiff had other causes of action such as specific
performance, annulment of conditional sale and damages, which must first be
resolved before the trial on the merits of its case.

On appeal to the CA, the lessor alleged that the RTC committed grave abuse
of discretion amounting to excess or lack of jurisdiction in setting aside the
December 15, 1995 Order of the RTC. For its part, the CA rendered judgment
dismissing the petition for certiorari on its finding that the complaint had not yet
prescribed when it was filed in the court below. The CA declared that the

prescriptive period for the action for reformation of the lease contract should be
reckoned not from the execution of the contract of lease in 1968, but from the date
of the four-year extension of the lease contract after it expired in 1988. According
to the CA, the extended period of the lease was an implied new lease within the
contemplation of Article 1670 of the New Civil Code under which provision, the
other terms of the original contract were deemed revived in the implied new lease.

However, we reversed this CA decision and declared that the action for
reformation of the lease contract was inappropriate because petitioner had already
breached the deed.50[50] Even supposing that the four-year extended lease could be
considered as an implied new lease under Article 1670 of the New Civil Code, the
other terms contemplated therein were only those terms which are germane to the
lessees right of continued enjoyment of the leased property. We concluded that the
prescriptive period of 10 years, as provided for in Article 1144 of the Civil Code,
applies by operation of law and not by the will of the parties, and that, therefore,
the right of action for reformation accrues from the date of the execution of the
contract of lease in 1968.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

Decision of the Court of Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The
Court of Appeals is directed to resolve petitioners appeal with reasonable dispatch.
No costs.

50

ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

C E R T I F I C AT I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified

that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

FIRST DIVISION
[G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING
CORPORATION and LAMBERT M. EROLES, respondents.

DECISION
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim,
FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver
Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further
claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting its
evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.

The trial court, in its order of 30 April 1996,i[1] granted the motion to dismiss, explaining thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his
own affirmative allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that defendant
is a common carrier.
x x xx x x

xxx

Accordingly, the application of the law on common carriers is not warranted and the presumption
of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of
goods during transport under 1735 of the Civil Code is not availing.
Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which transports the cargo are the laws on obligation
and contract of the Civil Code as well as the law on quasi delicts.
Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi
delict provides for some presumption of negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation.
Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation.
Hence, the presumption of negligence is not obtaining.

Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendants driver was the one negligent, defendant cannot be made liable for the damages of the
subject cargoes.ii[2]
The subsequent motion for reconsideration having been denied,iii[3] plaintiff interposed an appeal
to the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined under the law and existing jurisprudence; and (b)
in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999, iv[4] discoursed, among other things, that "x x x in order for the presumption of negligence provided for under the law governing common
carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a
common carrier. Should the appellant fail to prove that the appellee is a common carrier, the
presumption would not arise; consequently, the appellant would have to prove that the carrier
was negligent.
"x x xx x x

xxx

"Because it is the appellant who insists that the appellees can still be considered as a common
carrier, despite its `limited clientele, (assuming it was really a common carrier), it follows that it
(appellant) has the burden of proving the same. It (plaintiff-appellant) `must establish his case by
a preponderance of evidence, which means that the evidence as a whole adduced by one side is
superior to that of the other. (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA
175). This, unfortunately, the appellant failed to do -- hence, the dismissal of the plaintiffs
complaint by the trial court is justified.
"x x x x x x

xxx

"Based on the foregoing disquisitions and considering the circumstances that the appellee
trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal, the inevitable conclusion is that the
appellee is a private carrier.
"x x x x x x

xxx

"x x x the lower court correctly ruled that 'the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of a common carrier in case of
loss, damage or deterioration of good[s] during transport under [article] 1735 of the Civil Code is
not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and should not be disturbed unless for strong and
valid reasons."v[5]

Petitioner's motion for reconsideration was likewise denied;vi[6] hence, the instant petition,vii[7]
raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS
DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE
CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN
ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT
CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for hire or
compensation, offering their services to the public,viii[8] whether to the public in general or to a
limited clientele in particular, but never on an exclusive basis.ix[9] The true test of a common
carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee.x[10] Given accepted standards, GPS scarcely
falls within the term common carrier.
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.xi[11] The law, recognizing the
obligatory force of contracts,xii[12] will not permit a party to be set free from liability for any kind
of misperformance of the contractual undertaking or a contravention of the tenor thereof.xiii[13] A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee that
may include his expectation interest, which is his interest in having the benefit of his bargain by
being put in as good a position as he would have been in had the contract been performed, or his
reliance interest, which is his interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not been
made; or his restitution interest, which is his interest in having restored to him any benefit that he
has conferred on the other party.xiv[14] Indeed, agreements can accomplish little, either for their

makers or for society, unless they are made the basis for action.xv[15] The effect of every
infraction is to create a new duty, that is, to make recompense to the one who has been injured by
the failure of another to observe his contractual obligationxvi[16] unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that of the diligence of a
good father of a family or, exceptionally by stipulation or by law such as in the case of common
carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him
from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it
and petitioners assured, and admits that the cargoes it has assumed to deliver have been lost or
damaged while in its custody. In such a situation, a default on, or failure of compliance with, the
obligation in this case, the delivery of the goods in its custody to the place of destination - gives
rise to a presumption of lack of care and corresponding liability on the part of the contractual
obligor the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage
between petitioners principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have assumed
their personality or their juridical position.xvii[17] Consonantly with the axiom res inter alios acta
aliis neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioners
civil action against the driver can only be based on culpa aquiliana, which, unlike culpa
contractual, would require the claimant for damages to prove negligence or fault on the part of
the defendant.xviii[18]
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant
liable where the thing which caused the injury complained of is shown to be under the latters
management and the accident is such that, in the ordinary course of things, cannot be expected to
happen if those who have its management or control use proper care. It affords reasonable
evidence, in the absence of explanation by the defendant, that the accident arose from want of
care.xix[19] It is not a rule of substantive law and, as such, it does not create an independent ground
of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it
furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of
negligence. The maxim simply places on the defendant the burden of going forward with the
proof.xx[20] Resort to the doctrine, however, may be allowed only when (a) the event is of a kind
which does not ordinarily occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the
plaintiff.xxi[21] Thus, it is not applicable when an unexplained accident may be attributable to one
of several causes, for some of which the defendant could not be responsible.xxii[22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.xxiii[23] Nevertheless, the requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to apply, should be understood as

being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant
shall be deemed to have waived the right to present evidence.xxiv[24] Thus, respondent corporation
may no longer offer proof to establish that it has exercised due care in transporting the cargoes of
the assured so as to still warrant a remand of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only
insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court
and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the
damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.

i
ii
iiiFIRST DIVISION

TERESITA DIO,

G.R. No. 169578

Petitioner,
Present:
PANGANIBAN, C.J., Chairperson,

- versus -

YNARES-SANTIAGO,

AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
ST. FERDINAND MEMORIAL
PARK, INC. and MILDRED F.
Promulgated:
TANTOCO,
Respondents.
November 30, 2006
x--------------------------------------------------x
DECISION
CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari assailing the Decision[1] of the

Court of Appeals (CA) in CA-G.R. CV No. 52311 which affirmed the decision of the
Regional Trial Court (RTC), Branch 57 of Lucena City, in Civil Case No. 86-152.
Likewise sought to be reversed and set aside is the resolution of the appellate court
denying reconsideration of the assailed decision.

On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a

memorial lot from the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City. The
36-square-meter memorial lot is particularly described as Block 2, Section F, Lot 15.
The purchase was evidenced by a Pre-Need Purchase Agreement[2] dated December 11,
1973 and denominated as Contract No. 384. She obliged herself to abide by all such
rules and regulations governing the SFMPI dated May 25, 1972.

SFMPI issued a Deed of Sale and Certificate of Perpetual Care[3] dated April 1,
1974 denominated as Contract No. 284. The ownership of Dio over the property was
made subject to the rules and regulations of SFMPI, as well as the government,
including all amendments, additions and modifications that may later be adopted. Rule
69 of the Rules reads:

Rule 69. Mausoleum building and memorials should be constructed by the Park
Personnel. Lot Owners cannot contract other contractors for the construction of the
said buildings and memorial, however, the lot owner is free to give their own design
for the mausoleum to be constructed, as long as it is in accordance with the park
standards. The construction shall be under the close supervision of the Park
Superintendent.

Meanwhile, the mortal remains of Dios husband and father were interred in the lot
at her own expense, without the knowledge and intervention of SFMPI. She engaged the
services of a private contractor for the fabrication of niches and improvements on her
lot. In August 1974, the remains of Dios daughter were likewise interred in the niche

constructed on the lot, again without the knowledge and intervention of SFMPI.

In 1986, Dio decided to build a mausoleum on the lot. In September that year, she
caused the preparation of a design-plan for the construction of a mausoleum and the
bidding out of the project.

In the early part of October 1986, Dio informed SFMPI, through its president and
controlling stockholder, Mildred F. Tantoco, that she was planning to build a mausoleum
on her lot and sought the approval thereof. Dio even showed to Tantoco the plans and
project specifications accomplished by her private contractor at an estimated cost of
P60,000.00. The plans and specifications were approved, but Tantoco insisted that the
mausoleum be built by it or its agents at a minimum cost of P100,000.00 as provided in
Rule 69 of the Rules and Regulations the SFMPI issued on May 25, 1972. The total
amount excluded certain specific designs in the approved plan which if included would
cost Dio much more. In a letter[4] dated October 13, 1986, Dio, through counsel,
demanded that she be allowed to construct the mausoleum within 10 days, otherwise,
she would be impelled to file the necessary action/s against SFMPI and Tantoco.

On October 17, 1986, SFMPI wrote Dio informing her that under Rule 69 of
SFMPI Rules and Regulations, she was prohibited from engaging an outside contractor
for the construction of buildings, improvements and memorials. A lot owner was only
allowed to submit a preferred design as long as it is in accordance with park standards.

On December 23, 1986, Dio filed a Complaint for Injunction with Damages[5]
against SFMPI and Tantoco before the RTC of Lucena City. She averred that she was
not aware of Rule 69 of the SFMPI Rules and Regulations; the amount of P100,000.00
as construction cost of the mausoleum was unconscionable and oppressive. She prayed
that, after trial, judgment be rendered in her favor, granting a final injunction perpetually
restraining defendants from enforcing the invalid Rule 69 of SFMPIs Rules for
Memorial Work in the Mausoleum of the Park or from refusing or preventing the
construction of any improvement upon her property in the park.[6] The court issued a
cease and desist order against defendants.

In their answer with counterclaim, defendants averred that the construction of a

mausoleum on plaintiffs lot at a minimum cost of P100,000.00 was not oppressive and
unconscionable. They averred that the estimated amount was commensurate to the plan
and specified expensive materials to be used in the construction from which defendants
did not expect any unreasonable gain. They stressed that Rule 69 was made in good faith
and was adopted prior to plaintiffs purchase of the lot in question. They insisted that
plaintiff was aware of the existence of Rule 69 when the Pre-Need Purchase Agreement
and Deed of Sale was executed, that plaintiff made no protest thereto, and was therefore
estopped from questioning its application and enforcement.

Plaintiff testified that when she bought the memorial lot from defendant, she
transferred the remains of her father and husband on the said property. In August 1974,
her daughter Serconsicion died and was likewise buried in the memorial lot.[7] She
narrated that she wanted a mausoleum to be constructed over the niches of her loved
ones to protect the remains of her dead relatives. She requested Engr. Alex Tan to

prepare a plan for a mausoleum. The blueprint for the mausoleum was estimated at
P60,000.00. Thereafter, plaintiff informed defendant Tantoco of her intention to build a
mausoleum on her lot. Tantoco retorted that plaintiff could not hire an outside contractor
to build a mausoleum.[8] Plaintiff was initially surprised by Tantocos statement because
she knew that their contract did not provide for such stipulation. Tantoco then offered to
construct the mausoleum but at the lowest cost of P100,000.00, excluding the stainless
name and the Coloroof.[9] She also testified that when she bought the lot on December
11, 1973, the agreement was that she would cause the construction of the niche and all
improvements necessary for the tombs. When asked by the court if the witness had read
the rules and regulations stated in the Pre-Need Purchase Agreement and the Deed of
Sale and Certificate of Perpetual Care, she answered in the negative.[10]

Plaintiff presented National Bureau of Investigation (NBI) Document Examiner

Bienvenido Albacea to prove that the rules and regulations of SFMPI were not yet in
existence on May 25, 1972. The witness declared that, as a document examiner since
1976, he examines documents being questioned to determine their authenticity and
source. Papers are likewise examined to check if there is any forgery, and photographed
to compare the original from the photocopy. He declared that he conducted a laboratory
examination and analysis of the original of the rules and regulations of defendant and
subjected the same under stereoscopic microscope. He used measuring test plates to
calibrate the size of the typewriter, the horizontal and vertical pitch and slots of the
typewriter used in the document. He concluded that the date May 25, 1972 was an
intercalation on page one of defendants rules and regulations and were not typed in one
and the same occasion as the other provisions on the document.[11]

On cross-examination, Albacea admitted that it was possible that the date May 25,
1972 was typed on the same day when the other entries in the rules and regulations were
typed. He also admitted that the date could have been typed after the whole page one
was removed from the typewriter.[12] He produced test plates, a photograph
enlargement, and the laboratory analysis result of the original specimens, as well as the
carbon duplicate of SFMPI Rules and Regulations.

On August 3, 1995, the trial court rendered judgment in favor of defendants.[13]

The dispositive portion of the decision reads:

WHEREFORE, premises considered, this Court hereby renders Judgment

against the plaintiff and in favor of the defendants. Consequently, [the] instant
Complaint is hereby DISMISSED.
No pronouncement on award of damages could be made as the same has not
been sufficiently proven.
SO ORDERED.[14]

The trial court rejected the claim of plaintiff that defendants failed to inform her
of the rules and regulations of SFMPI. The court declared that she even informed them
of her intention to construct a mausoleum. According to the court a quo, this was proof
that plaintiff was fully aware of the rules and regulations of the memorial park;
otherwise, she would not have sought the permission of defendants of her intention to
build a mausoleum. Plaintiff was obliged to abide by the terms and conditions of the
Pre-Need Purchase Agreement and the Deed of Sale and the rules and regulations issued
by defendant SFMPI.

On appeal, the CA affirmed the decision of the trial court.[15] The appellate court
ratiocinated that when the parties executed the Pre-Need Purchase Agreement, Dio
agreed to be bound not only by the existing rules and regulations for the use and
governance of the cemetery, but also future ones.

Aggrieved, Dio, now petitioner, filed the present petition for review on certiorari,
alleging that:

I.

THE APPELLATE COURT ERRED IN RULING THAT THE DATE MAY 25,
1972 COULD NOT HAVE BEEN A BELATED ATTEMPT TO SHOW THAT
RULE 69 WAS ADOPTED PRIOR TO PETITIONERS PURCHASE OF THE
MEMORIAL LOT BECAUSE IT WAS POSSIBLE THAT SAID DATE COULD
HAVE BEEN TYPED RIGHT AFTER THE DOCUMENT CONTAINING RULE
69 WAS PREPARED.

II. THE APPELLATE COURT ERRED IN RULING THAT PETITIONER WAS

BOUND NOT ONLY BY RULES EXISTING AT THE TIME OF THE
PURCHASE OF THE MEMORIAL LOT BUT ALSO BY THOSE THAT MAY BE
ADOPTED BY RESPONDENTS AFTER THE PURCHASE.
III. THE APPELLATE COURT ERRED IN RULING THAT PETITIONER WAS
BOUND BY THE RULES BECAUSE SHE VOLUNTARILY ENTERED INTO
THE SALE AND PURCHASE OF THE MEMORIAL LOT.
IV. THE APPELLATE COURT ERRED IN SUSTAINING THE VALIDITY OF RULE
69 DESPITE THE FACT THAT IT WAS VOID FOR BEING CONTRARY TO
LAW, MORALS, PUBLIC ORDER, AND PUBLIC POLICY.
V. THE APPELLATE COURT ERRED IN NOT ORDERING RESPONDENTS TO
PAY PETITIONER DAMAGES AS PRAYED FOR IN HER COMPLAINT AND
PROVED DURING THE TRIAL.[16]

The issues are whether or not petitioner had knowledge of Rule 69 of SFMPI
Rules and Regulations for memorial works in the mausoleum areas of the park when the
Pre-Need Purchase Agreement and the Deed of Sale was executed; and whether the said
rule is valid and binding upon petitioner.

Petitioner argues that respondents failed to prove that respondent SFMPI

approved the rules and regulations on May 25, 1972, before she purchased the lot.
Petitioner avers that as testified to by NBI Document Examiner Albacea, the rules and
regulations were not drafted on May 25, 1972. In any event, she never consented to
comply with the memorial park rules and regulations, and all amendments, additions,
and modifications thereto. Petitioner further avers that the questioned Rule 69 is
unreasonable and oppressive, therefore, void for being contrary to law, morals, public
order, and public policy. Petitioner additionally denies being in estoppel as she never
made any admission or representation in the contracts she signed, which, according to
petitioner, were both contracts of adhesion.

Respondents, on the other hand, contend that petitioners plea for injunction had
become moot and academic because petitioner had already caused the completion of
said mausoleum as early as July 8, 1997, in patent violation of the trial and appellate
courts orders to cease and desist construction. Moreover, petitioner presented NBI
Document Examiner Albacea as a witness, and is thus barred from assailing the
probative weight thereof. Respondents maintain that the Pre-Need Purchase Agreement
as well as the Deed of Sale and Certificate of Perpetual Care are not contracts of
adhesion, and petitioner could have easily refused to enter into said contracts if she truly
had concerns regarding any of the stipulations therein. Rule 69 of the SFMPI Rules and

Regulations does not permanently deprive the owners of their right to use their own
property; hence, the rule is not oppressive or unconscionable.

The petition is denied for lack of merit.

Time and again the Court has emphasized that findings of facts of lower courts,
particularly when affirmed by the appellate court, are deemed final and conclusive. The
Supreme Court cannot go over such findings on appeal, especially when they are borne
out by the records or are based on substantial evidence. It is not the function of this
Court to analyze or weigh the evidence all over again, unless there is a showing that the
findings of the lower court are entirely devoid of support or are glaringly erroneous as to
constitute palpable error or grave abuse of discretion.[17]

The reason for the rule is that the trial court is in a better position to examine the
demeanor of the witnesses while testifying. Our jurisdiction is in principle limited to
reviewing errors of law that might have been committed by the CA. A fortiori, as in this
case, where the factual findings of the trial court are affirmed in toto by the CA, there is
great reason for not disturbing such findings and for regarding them as not reviewable
by this Court.[18] There are also settled exceptions to this rule: (1) when the factual
findings of the CA and the trial court are contradictory; (2) when the conclusion is a
finding grounded entirely on speculation, surmises, or conjectures; (3) when the
inference made by the CA from its findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5)

when the appellate court, in making its findings, went beyond the issues of the case and
such findings are contrary to the admissions of both appellant and appellee; (6) when the
judgment of the CA is premised on a misapprehension of facts; (7) when the CA failed
to notice certain relevant facts which, if properly considered, would justify a different
conclusion; (8) when the findings of fact are themselves conflicting; (9) when the
findings of fact are conclusions without citation of the specific evidence on which they
are based; and (10) when the findings of fact of the CA are premised on the absence of
evidence but such findings are contradicted by the evidence on record.[19] In the case at
bar, none of these exceptions is present which would warrant a review of the factual
findings of the courts below.

Under the Pre-Need Purchase Agreement executed by petitioner and respondents,

the parties covenanted that upon the completion of all payments by the purchaser, the
seller would convey to the purchaser a certificate of ownership to the aforesaid
interment property for the interment of human remains only. The certificate of SFMPI
now existing or which may hereafter be adopted for the government of said cemetery
and said certificate shall be in the form used by the seller, a copy of which petitioner
acknowledged she had examined and approved. Petitioner agreed to abide by all such
rules and regulations governing SFMPI,[20] among them Rule 69 which prevents lot
owners from contract[ing] other contractors for the construction of the said buildings
and memorial but gives the owners free rein to give their own design for the mausoleum
to be constructed, as long as it is in accordance with the park standards.

Under the Deed of Sale and Certificate of Perpetual Care, petitioner agreed to be
bound not only by the existing rules but also by future rules and regulations that may

be adopted by respondent SFMPI. It is also stated in the said rules and regulations kept
in the office of respondent which could be inspected by petitioner at any time:

2.
The PURCHASER, his heirs, successors and assigns, shall have, hold
and use the property subject to the rules and regulations of SELLER for the government
of the cemetery now in force and those which may hereafter be adopted. A copy of said
rules and regulations and all amendments, additions and modifications thereto is kept in
the office of the SELLER and is subject to inspection by the PURCHASER at all times
during normal office hours. Said rules and regulations and all amendments, additions,
and modifications thereto are hereby incorporated herein and made integral parts
hereof by reference as if set forth herein in full.[21]

Thus, when petitioner executed the Pre-Need Purchase Agreement and conformed
to the Deed of Sale, it was with full knowledge of the terms and conditions thereof,
including the rules and regulations issued by respondent SFMPI. Hence, petitioner is
precluded from asserting that she had no knowledge of said rules and regulations, and
that she never consented to comply with them. More importantly, petitioner cannot feign
ignorance of said rules. In law, whatever fairly puts a person on inquiry is sufficient
notice, where the means of knowledge are at hand, which if pursued by the proper
inquiry, the full truth might have been ascertained.[22] In this case, the appellate court
declared:

x x x [k]knowledge will be imputed and may be implied from circumstances where the
circumstances known to one concerning a matter in which he is interested are sufficient
to require him, as an honest and prudent person, to investigate concerning the rights of
others in the same matter, and diligent investigation will lead to discovery of any right
conflicting with his own.[23]

For its part, the trial court made the following findings:

Plaintiffs allegation that she was not aware of the said Rules and Regulations
lacks credence. Admittedly, in her Complaint and during the trial, plaintiff testified that
she informed the defendants of her intention to construct a mausoleum. Even counsel for
the plaintiff, who is the son of the plaintiff, informed the Court during the trial in this
case that her mother, the plaintiff herein, informed the defendants of her plan to
construct and erect a mausoleum. This act of the plaintiff clearly shows that she was
fully aware of the said rules and regulations otherwise she should not consult, inform
and seek permission from the defendants of her intention to build a mausoleum if she is
not barred by the rules and regulations to do the same. When she signed the contract
between [sic] the defendants, she is [sic] estopped to question and attack the legality of
said contract later on. (Emphasis supplied)[24]

Petitioner is obliged to abide by the terms and conditions of the Pre-Need

Purchase Agreement and the Deed of Sale, as well as said rules and regulations which
formed integral parts of said deeds.

Basic is the principle that contracts, once perfected, bind both contracting parties.
[25] The parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided these are not contrary to law, morals, good customs,
public order, or public policy. It follows that obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith.
[26]

We quote with approval the ruling of the trial court:

The appellants ownership of the memorial lot was subject to the rules and
regulations legally and validly restricting her enjoyment and use of the property. Art.
428, Civil Code, states that the owner has the right to enjoy and dispose of a thing
without other limitations than those established by law. It is recognized that the
limitations include those that are imposed by the will of the transmitting owner, that is,
the transmitting owner transfers his property by whatever title and imposes on the
acquirer whatever limitations he wishes as long as the limitations are not contrary to the
nature of ownership and not prohibited by law (e.g., servitudes, encumbrances,
prohibition against alienation).
Otherwise stated, the appellant should adhere to and comply with the terms and
conditions of the pre-need purchase agreement and the deed of sale and certificate of
perpetual care. Her perceived disadvantage does not amount to her deprivation of
property or other rights without due process of law considering that she had voluntarily
entered into the purchase and considering also that she remains free to exercise her right
as property owner, under which she can build a mausoleum provided she does so in
accordance with the memorial parks standards and rules common to all owners of lots.
[27]

Petitioner is an experienced businesswoman. She doubtlessly dealt with numerous

documents, and is therefore presumed to know the import thereof. It cannot be further
emphasized that it behooves every contracting party to learn and know the contents of an
instrument before signing and agreeing to it.[28]

We are not persuaded by petitioners claim that Rule 69 of respondents rules and
regulations is unreasonable and oppressive because the provision unduly restricts her
right of ownership over the property. Rule 69 of the said rules and regulations is neither
excessive nor despotic. The rule itself specifies that the lot owner is free to give their
own design for the mausoleum to be constructed, as long as it is in accordance with the
park standards. Clearly, the rule allows the construction of a mausoleum but with certain
restrictions. Moreover, as the proprietor of the entire memorial park, the formulation of a
reasonable set of rules and regulations is within the power of the management of
respondent SFMPI. It is noteworthy that the same rule permits petitioner, or any other

buyer of memorial lot, to use the property for the purpose for which it was
contemplated.

A contract of adhesion, wherein one party imposes a readymade form of contract

on the other, is not strictly against the law.[29] A contract of adhesion is as binding as
ordinary contracts, the reason being that the party who adheres to the contract is free to
reject it entirely.[30] Contrary to petitioners contention, not every contract of adhesion is
an invalid agreement. As we had the occasion to state in Development Bank of the
Philippines v. Perez:[31]

x x x In discussing the consequences of a contract of adhesion, we held in Rizal

Commercial Banking Corporation v. Court of Appeals:
It bears stressing that a contract of adhesion is just as binding as
ordinary contracts. It is true that we have, on occasion, struck down such
contracts as void when the weaker party is imposed upon in dealing with
the dominant bargaining party and is reduced to the alternative of taking
it or leaving it, completely deprived of the opportunity to bargain on
equal footing, Nevertheless, contracts of adhesion are not invalid per se;
they are not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent.[32]

The validity or enforceability of the impugned contracts will have to be

determined by the peculiar circumstances obtaining in each case and the situation of the
parties concerned. Indeed, Article 24 of the New Civil Code provides that [in] all
contractual, property or other relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental weakness, tender age, or
other handicap, the courts must be vigilant for his protection.[33] In this case, however,

there is no reason for the Court to apply the rule on stringent treatment towards contracts
of adhesion. To reiterate, not only is petitioner educated, she is likewise a well-known
and experienced businesswoman; thus, she cannot claim to be the weaker or
disadvantaged party in the subject contracts so as to call for a strict interpretation against
respondents. Moreover, she executed the Pre-Need Purchase Agreement and Deed of
Sale without any complaint or protest. She assailed Rule 69 of the Rules and
Regulations of respondent SFMPI only when respondents rejected her request to cause
the construction of the mausoleum.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. CV No. 52311 dated May 10, 2005, and the Resolution dated
September 6, 2005, are AFFIRMED. Costs against petitioner.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice

Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

C E R T I F I C AT I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

THIRD DIVISION
[G.R. No. 161003. May 6, 2005]

FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY ARNAIZ, ROLLY

ARNAIZ, DOMINGO SALARDA, JULIO CAHILIG and NICANOR LABUEN, petitioners, vs.
RIZALINO UY, respondent.
DECISION
PANGANIBAN, J.:
Rights may be waived through a compromise agreement, notwithstanding a final judgment that has
already settled the rights of the contracting parties. To be binding, the compromise must be shown to
have been voluntarily, freely and intelligently executed by the parties, who had full knowledge of the
judgment. Furthermore, it must not be contrary to law, morals, good customs and public policy.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the May 31, 2000
Decision[2] and the October 30, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR SP No.
53581. The challenged Decision disposed as follows:
WHEREFORE, having found that public respondent NLRC committed grave abuse of discretion, the
Court hereby SETS ASIDE the two assailed Resolutions and REINSTATES the order of the Labor
Arbiter dated February 27, 1998.[4]
The assailed Resolution denied reconsideration.
The Facts
The CA relates the facts in this wise:
As a final consequence of the final and executory decision of the Supreme Court in Rizalino P. Uy v.
National Labor Relations Commission, et. al. (GR No. 117983, September 6, 1996) which affirmed
with modification the decision of the NLRC in NLRC Case No. V-0427-93, hearings were conducted
[in the National Labor Relations Commission Sub-Regional Arbitration Branch in Iloilo City] to
determine the amount of wage differentials due the eight (8) complainants therein, now [petitioners].
As computed, the award amounted to P1,487,312.69 x x x.
On February 3, 1997, [petitioners] filed a Motion for Issuance of Writ of Execution.
On May 19, 1997, [respondent] Rizalino Uy filed a Manifestation requesting that the cases be
terminated and closed, stating that the judgment award as computed had been complied with to the
satisfaction of [petitioners]. Said Manifestation was also signed by the eight (8) [petitioners]. Together
with the Manifestation is a Joint Affidavit dated May 5, 1997 of [petitioners], attesting to the receipt of
payment from [respondent] and waiving all other benefits due them in connection with their complaint.
xxxxxxxxx

On June 3, 1997, [petitioners] filed an Urgent Motion for Issuance of Writ of Execution wherein they
confirmed that each of them received P40,000 from [respondent] on May 2, 1997.
On June 9, 1997, [respondent] opposed the motion on the ground that the judgment award had been
fully satisfied. In their Reply, [petitioners] claimed that they received only partial payments of the
judgment award.
xxxxxxxxx
On October 20, 1997, six (6) of the eight (8) [petitioners] filed a Manifestation requesting that the cases
be considered closed and terminated as they are already satisfied of what they have received (a total of
P320,000) from [respondent]. Together with said Manifestation is a Joint Affidavit in the local dialect,
dated October 20, 1997, of the six (6) [petitioners] attesting that they have no more collectible amount
from [respondent] and if there is any, they are abandoning and waiving the same.
On February 27, 1998, the Labor Arbiter issued an order denying the motion for issuance of writ of
execution and [considered] the cases closed and terminated x x x.
On appeal, the [National Labor Relations Commission (hereinafter NLRC)] reversed the Labor Arbiter
and directed the immediate issuance of a writ of execution, holding that a final and executory judgment
can no longer be altered and that quitclaims and releases are normally frowned upon as contrary to
public policy.[5]
Ruling of the Court of Appeals
The CA held that compromise agreements may be entered into even after a final judgment.[6] Thus,
petitioners validly released respondent from any claims, upon the voluntary execution of a waiver
pursuant to the compromise agreement.[7]
The appellate court denied petitioners motion for reconsideration for having been filed out of time.[8]
Hence, this Petition.[9]
The Issues
Petitioners raise the following issues for our consideration:
1. Whether or not the final and executory judgment of the Supreme Court could be subject to
compromise settlement;
2. Whether or not the petitioners affidavit waiving their awards in [the] labor case executed
without the assistance of their counsel and labor arbiter is valid;
3. Whether or not the ignorance of the jurisprudence by the Court of Appeals and its erroneous
counting of the period to file [a] motion for reconsideration constitute a denial of the petitioners
right to due process.[10]

The Courts Ruling

The Petition has no merit.
First Issue:
Validity of the Compromise Agreement
A compromise agreement is a contract whereby the parties make reciprocal concessions in order to
resolve their differences and thus avoid or put an end to a lawsuit.[11] They adjust their difficulties in the
manner they have agreed upon, disregarding the possible gain in litigation and keeping in mind that
such gain is balanced by the danger of losing.[12] Verily, the compromise may be either extrajudicial (to
prevent litigation) or judicial (to end a litigation).[13]
A compromise must not be contrary to law, morals, good customs and public policy; and must have
been freely and intelligently executed by and between the parties.[14] To have the force of law between
the parties,[15] it must comply with the requisites and principles of contracts.[16] Upon the parties, it has
the effect and the authority of res judicata, once entered into.[17]
When a compromise agreement is given judicial approval, it becomes more than a contract binding
upon the parties. Having been sanctioned by the court, it is entered as a determination of a controversy
and has the force and effect of a judgment.[18] It is immediately executory and not appealable, except
for vices of consent or forgery.[19] The nonfulfillment of its terms and conditions justifies the issuance
of a writ of execution; in such an instance, execution becomes a ministerial duty of the court.[20]
Following these basic principles, apparently unnecessary is a compromise agreement after final
judgment has been entered. Indeed, once the case is terminated by final judgment, the rights of the
parties are settled. There are no more disputes that can be compromised.
Compromise Agreements
after Final Judgment
The Court is tasked, however, to determine the legality of a compromise agreement after final
judgment, not the prudence of entering into one. Petitioners vehemently argue that a compromise of a
final judgment is invalid under Article 2040 of the Civil Code, which we quote:[21]
Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed
upon, either or both parties being unaware of the existence of the final judgment, the compromise may
be rescinded.
Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a
compromise. (Bold types supplied)
The first paragraph of Article 2040 refers to a scenario in which either or both of the parties are
unaware of a courts final judgment at the time they agree on a compromise. In this case, the law allows
either of them to rescind the compromise agreement. It is evident from the quoted paragraph that such
an agreement is not prohibited or void or voidable. Instead, a remedy to impugn the contract, which is
an action for rescission, is declared available.[22] The law allows a party to rescind a compromise

agreement, because it could have been entered into in ignorance of the fact that there was already a
final judgment. Knowledge of a decisions finality may affect the resolve to enter into a compromise
agreement.
The second paragraph, though irrelevant to the present case, refers to the instance when the courts
decision is still appealable or otherwise subject to modification. Under this paragraph, ignorance of the
decision is not a ground to rescind a compromise agreement, because the parties are still unsure of the
final outcome of the case at this time.
Petitioners argument, therefore, fails to convince. Article 2040 of the Civil Code does not refer to the
validity of a compromise agreement entered into after final judgment. Moreover, an important
requisite, which is lack of knowledge of the final judgment, is wanting in the present case.
Supported by Case Law
The issue involving the validity of a compromise agreement notwithstanding a final judgment is not
novel. Jesalva v. Bautista[23] upheld a compromise agreement that covered cases pending trial, on
appeal, and with final judgment.[24] The Court noted that Article 2040 impliedly allowed such
agreements; there was no limitation as to when these should be entered into.[25] Palanca v. Court of
Industrial Relations[26] sustained a compromise agreement, notwithstanding a final judgment in which
only the amount of back wages was left to be determined. The Court found no evidence of fraud or of
any showing that the agreement was contrary to law, morals, good customs, public order, or public
policy.[27]
Gatchalian v. Arlegui[28] upheld the right to compromise prior to the execution of a final judgment. The
Court ruled that the final judgment had been novated and superseded by a compromise agreement.[29]
Also, Northern Lines, Inc. v. Court of Tax Appeals[30] recognized the right to compromise final and
executory judgments, as long as such right was exercised by the proper party litigants.[31]
Rovero v. Amparo,[32] which petitioners cited, did not set any precedent that all compromise agreements
after final judgment were invalid. In that case, the customs commissioner imposed a fine on an
importer, based on the appraised value of the goods illegally brought to the country. The latters appeal,
which eventually reached this Court, was denied. Despite a final judgment, the customs commissioner
still reappraised the value of the goods and effectively reduced the amount of fine. Holding that he had
no authority to compromise a final judgment, the Court explained:
It is argued that the parties to a case may enter into a compromise about even a final judgment rendered
by a court, and it is contended x x x that the reappraisal ordered by the Commissioner of Customs and
sanctioned by the Department of Finance was authorized by Section 1369 of the [Revised
Administrative Code]. The contention may be correct as regards private parties who are the
owners of the property subject-matter of the litigation, and who are therefore free to do with
what they own or what is awarded to them, as they please, even to the extent of renouncing the
award, or condoning the obligation imposed by the judgment on the adverse party. Not so,
however, in the present case. Here, the Commissioner of Customs is not a private party and is not the
owner of the money involved in the fine based on the original appraisal. He is a mere agent of the
Government and acts as a trustee of the money or property in his hands or coming thereto by virtue of a
favorable judgment. Unless expressly authorized by his principal or by law, he is not authorized to

accept anything different from or anything less than what is adjudicated in favor of the Government.[33]
(Bold types supplied)
Compliance with the
Rule on Contracts
There is no justification to disallow a compromise agreement, solely because it was entered into after
final judgment. The validity of the agreement is determined by compliance with the requisites and
principles of contracts, not by when it was entered into. As provided by the law on contracts, a valid
compromise must have the following elements: (1) the consent of the parties to the compromise, (2) an
object certain that is the subject matter of the compromise, and (3) the cause of the obligation that is
established.[34]
In the present factual milieu, compliance with the elements of a valid contract is not in issue.
Petitioners do not challenge the factual finding that they entered into a compromise agreement with
respondent. There are no allegations of vitiated consent. Neither was there any proof that the agreement
was defective or could be characterized as rescissible,[35] voidable,[36] unenforceable,[37] or void.[38]
Instead, petitioners base their argument on the sole fact that the agreement was executed despite a final
judgment, which the Court had previously ruled to be allowed by law.
Petitioners voluntarily entered into the compromise agreement, as shown by the following facts: (1)
they signed respondents Manifestation (filed with the labor arbiter) that the judgment award had been
satisfied;[39] (2) they executed a Joint Affidavit dated May 5, 1997, attesting to the receipt of payment
and the waiver of all other benefits due them;[40] and (3) 6 of the 8 petitioners filed a Manifestation with
the labor arbiter on October 20, 1997, requesting that the cases be terminated because of their receipt of
payment in full satisfaction of their claims.[41] These circumstances also reveal that respondent has
already complied with its obligation pursuant to the compromise agreement. Having already benefited
from the agreement, estoppel bars petitioners from challenging it.
Advantages of Compromise
A reciprocal concession inherent in a compromise agreement assures benefits for the contracting
parties. For the defeated litigant, obvious is the advantage of a compromise after final judgment.
Liability arising from the judgment may be reduced. As to the prevailing party, a compromise
agreement assures receipt of payment. Litigants are sometimes deprived of their winnings because of
unscrupulous mechanisms meant to delay or evade the execution of a final judgment.
The advantages of a compromise agreement appear to be recognized by the NLRC in its Rules of
Procedure. As part of the proceedings in executing a final judgment, litigants are required to attend a
pre-execution conference to thresh out matters relevant to the execution.[42] In the conference, any
agreement that would settle the final judgment in a particular manner is necessarily a compromise.
Novation of an Obligation
The principle of novation supports the validity of a compromise after final judgment. Novation, a mode
of extinguishing an obligation,[43] is done by changing the object or principal condition of an
obligation, substituting the person of the debtor, or surrogating a third person in the exercise of the

rights of the creditor.[44]

For an obligation to be extinguished by another, the law requires either of these two conditions: (1) the
substitution is unequivocally declared, or (2) the old and the new obligations are incompatible on every
point.[45] A compromise of a final judgment operates as a novation of the judgment obligation, upon
compliance with either requisite.[46] In the present case, the incompatibility of the final judgment with
the compromise agreement is evident, because the latter was precisely entered into to supersede the
former.
Second Issue:
Validity of the Waiver
Having ruled on the validity of the compromise agreement in the present suit, the Court now turns its
attention to the waiver of claims or quitclaim executed by petitioners. The subject waiver was their
concession when they entered into the agreement. They allege, however, that the absence of their
counsel and the labor arbiter when they executed the waiver invalidates the document.
Not Determinative
of the Waivers Validity
The presence or the absence of counsel when a waiver is executed does not determine its validity.
There is no law requiring the presence of a counsel to validate a waiver. The test is whether it was
executed voluntarily, freely and intelligently; and whether the consideration for it was credible and
reasonable.[47] Where there is clear proof that a waiver was wangled from an unsuspecting or a gullible
person, the law must step in to annul such transaction.[48] In the present case, petitioners failed to
present any evidence to show that their consent had been vitiated.
The law is silent with regard to the procedure for approving a waiver after a case has been terminated.
[49] Relevant, however, is this reference to the NLRCs New Rules of Procedure:
Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be
reduced to writing and signed by the parties and their respective counsel, or authorized representative,
if any,[50] before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily
entered into by the parties and after having explained to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before
whom the case is pending shall be approved by him, if after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and conditions of the settlement and that it
was entered into freely and voluntarily by them and the agreement is not contrary to law, morals, and
public policy.[51]
This provision refers to proceedings in a mandatory/conciliation conference during the initial stage of
the litigation. Such provision should be made applicable to the proceedings in the pre-execution
conference, for which the procedure for approving a waiver after final judgment is not stated. There is
no reason to make a distinction between the proceedings in mandatory/conciliation and those in pre-

execution conferences.
The labor arbiters absence when the waivers were executed was remedied upon compliance with the
above procedure. The Court observes that the arbiter made searching questions during the preexecution conference to ascertain whether petitioners had voluntarily and freely executed the waivers.
[52] Likewise, there was evidence that they made an intelligent choice, considering that the contents of
the written waivers had been explained to them.[53] The labor arbiters absence when those waivers were
executed does not, therefore, invalidate them.
The Court declines to rule on the allegation that respondents counsels encroached upon the professional
employment of petitioners lawyer when they facilitated the waivers.[54] The present action is not the
proper forum in which to raise any charge of professional misconduct. More important, petitioners
failed to present any supporting evidence.
The third issue, which refers to the timely filing of petitioners Motion for Reconsideration filed with
the CA, will no longer be discussed because this Courts decision has resolved the case on the merits.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

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xxiv[G.R. No. 143360. September 5, 2002]

EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM, MARISSA ENANO,

MYRNA TAMAYO and FELIX OLEDAN, respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the
injuries and damages caused by the negligence of the driver, in spite of the fact that the vehicle may
have already been the subject of an unregistered Deed of Sale in favor of another person. Unless
registered with the Land Transportation Office, the sale -- while valid and binding between the parties
-- does not affect third parties, especially the victims of accidents involving the said transport
equipment. Thus, in the present case, petitioner, which is the registered owner, is liable for the acts of
the driver employed by its former lessee who has become the owner of that vehicle by virtue of an
unregistered Deed of Sale.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12, 2000
Decision[1] of the Court of Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of the
Decision reads as follows:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. The
assailed decision, dated May 5, 1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case
No. 95-73522, is hereby AFFIRMED with MODIFICATION that the award of attorneys fees is
DELETED.[3]
On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila (Branch 14)
had earlier disposed in this wise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant
Equitable Leasing Corporation ordering said defendant to pay to the plaintiffs the following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and its contents, and funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.[4]
The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of
Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned

to death under the engine of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo, and
Respondent Felix Oledans daughter, Felmarie Oledan. Injured were Respondent Oledan himself,
Respondent Marissa Enano, and two sons of Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and
multiple physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila,
Branch 12.[5]
Upon verification with the Land Transportation Office, respondents were furnished a copy of Official
Receipt No. 62204139[6] and Certificate of Registration No. 08262797,[7] showing that the registered
owner of the tractor was Equitable Leasing Corporation/leased to Edwin Lim. On April 15, 1995,
respondents filed against Raul Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation
(Equitable) a Complaint[8] for damages docketed as Civil Case No. 95-73522 in the RTC of Manila,
Branch 14.
The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul Tutor, Ecatine and
Edwin Lim from the Complaint, because they could not be located and served with summonses.[9] On
the other hand, in its Answer with Counterclaim,[10] petitioner alleged that the vehicle had already been
sold to Ecatine and that the former was no longer in possession and control thereof at the time of the
incident. It also claimed that Tutor was an employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral
damages and attorneys fees to respondents. It held that since the Deed of Sale between petitioner and
Ecatine had not been registered with the Land Transportation Office (LTO), the legal owner was still
Equitable.[11] Thus, petitioner was liable to respondents.[12]
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner was still to be legally deemed the owner/operator of the
tractor, even if that vehicle had been the subject of a Deed of Sale in favor of Ecatine on December 9,
1992. The reason cited by the CA was that the Certificate of Registration on file with the LTO still
remained in petitioners name.[13] In order that a transfer of ownership of a motor vehicle can bind third
persons, it must be duly recorded in the LTO.[14]
The CA likewise upheld respondents claim for moral damages against petitioner because the appellate
court considered Tutor, the driver of the tractor, to be an agent of the registered owner/operator.[15]
Hence, this Petition.[16]
Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:
I
Whether or not the Court of Appeals and the trial court gravely erred when they decided and held that
petitioner [was] liable for damages suffered by private respondents in an action based on quasi delict

for the negligent acts of a driver who [was] not the employee of the petitioner.
II
Whether or not the Court of Appeals and the trial court gravely erred when they awarded moral
damages to private respondents despite their failure to prove that the injuries they suffered were
brought by petitioners wrongful act.[17]
This Courts Ruling
The Petition has no merit.
First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be held liable for the damages sustained by respondents and that
arose from the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine
at the time of the accident. Not having employed Raul Tutor, the driver of the vehicle, it could not have
controlled or supervised him.[18]
We are not persuaded. In negligence cases, the aggrieved party may sue the negligent party under (1)
Article 100[19] of the Revised Penal Code, for civil liability ex delicto; or (2) under Article 2176[20] of
the Civil Code, for civil liability ex quasi delicto.[21]
Furthermore, under Article 103 of the Revised Penal Code, employers may be held subsidiarily liable
for felonies committed by their employees in the discharge of the latters duties.[22] This liability
attaches when the employees who are convicted of crimes committed in the performance of their work
are found to be insolvent and are thus unable to satisfy the civil liability adjudged.[23]
On the other hand, under Article 2176 in relation to Article 2180[24] of the Civil Code, an action
predicated on quasi delict may be instituted against the employer for an employees act or omission. The
liability for the negligent conduct of the subordinate is direct and primary, but is subject to the defense
of due diligence in the selection and supervision of the employee.[25] The enforcement of the judgment
against the employer for an action based on Article 2176 does not require the employee to be insolvent,
since the liability of the former is solidary -- the latter being statutorily considered a joint tortfeasor.[26]
To sustain a claim based on quasi delict, the following requisites must be proven: (a) damage suffered
by the plaintiff, (b) fault or negligence of the defendant, and (c) connection of cause and effect between
the fault or negligence of the defendant and the damage incurred by the plaintiff.[27]
These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat[28]
that the offended party cannot recover damages twice for the same act or omission or under both
causes.[29] Since these two civil liabilities are distinct and independent of each other, the failure to
recover in one will not necessarily preclude recovery in the other.[30]
In the instant case, respondents -- having failed to recover anything in the criminal case -- elected to
file a separate civil action for damages, based on quasi delict under Article 2176 of the Civil Code.[31]
The evidence is clear that the deaths and the injuries suffered by respondents and their kins were due to

the fault of the driver of the Fuso tractor.

Dated June 4, 1991, the Lease Agreement[32] between petitioner and Edwin Lim stipulated that it is the
intention of the parties to enter into a FINANCE LEASE AGREEMENT.[33] Under such scheme,
ownership of the subject tractor was to be registered in the name of petitioner, until the value of the
vehicle has been fully paid by Edwin Lim.[34] Further, in the Lease Schedule,[35] the monthly rental for
the tractor was stipulated, and the term of the Lease was scheduled to expire on December 4, 1992.
After a few months, Lim completed the payments to cover the full price of the tractor.[36] Thus, on
December 9, 1992, a Deed of Sale[37] over the tractor was executed by petitioner in favor of Ecatine
represented by Edwin Lim. However, the Deed was not registered with the LTO.
We hold petitioner liable for the deaths and the injuries complained of, because it was the registered
owner of the tractor at the time of the accident on July 17, 1994.[38] The Court has consistently ruled
that, regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as
the public and third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation.[39] In contemplation of law, the owner/operator of record is the employer
of the driver, the actual operator and employer being considered as merely its agent.[40] The same
principle applies even if the registered owner of any vehicle does not use it for public service.[41]
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for
the deaths and the injuries arising from the negligence of the driver.[42]
The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has
already been superseded by the sale. In any event, it does not bind third persons. The rationale for this
rule has been aptly explained in Erezo v. Jepte,[43] which we quote hereunder:
x x x. The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or with very scant means of identification. It is
to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for
damages or injuries caused on public highways.[44]
Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is misplaced.[45] First, in
FGU Insurance, the registered vehicle owner, which was engaged in a rent-a-car business, rented out
the car. In this case, the registered owner of the truck, which is engaged in the business of financing
motor vehicle acquisitions, has actually sold the truck to Ecatine, which in turn employed Tutor.
Second, in FGU Insurance, the registered owner of the vehicle was not held responsible for the
negligent acts of the person who rented one of its cars, because Article 2180 of the Civil Code was not
applicable. We held that no vinculum juris as employer and employee existed between the owner and
the driver.[46] In this case, the registered owner of the tractor is considered under the law to be the
employer of the driver, while the actual operator is deemed to be its agent.[47] Thus, Equitable, the
registered owner of the tractor, is -- for purposes of the law on quasi delict -- the employer of Raul
Tutor, the driver of the tractor. Ecatine, Tutors actual employer, is deemed as merely an agent of
Equitable.[48]

True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered owner as
EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But the lease agreement between
Equitable and Lim has been overtaken by the Deed of Sale on December 9, 1992, between petitioner
and Ecatine. While this Deed does not affect respondents in this quasi delict suit, it definitely binds
petitioner because, unlike them, it is a party to it.
We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should not
prejudice respondents, who have the legal right to rely on the legal principle that the registered vehicle
owner is liable for the damages caused by the negligence of the driver. Petitioner cannot hide behind its
allegation that Tutor was the employee of Ecatine. This will effectively prevent respondents from
recovering their losses on the basis of the inaction or fault of petitioner in failing to register the sale.
The non-registration is the fault of petitioner, which should thus face the legal consequences thereof.
Second Issue:
Moral Damages
Petitioner further claims that it is not liable for moral damages, because respondents failed to establish
or show the causal connection or relation between the factual basis of their claim and their wrongful act
or omission, if any. [49]
Moral damages are not punitive in nature, but are designed to compensate[50] and alleviate in some way
the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury unjustly caused a person.[51] Although
incapable of pecuniary computation, moral damages must nevertheless be somehow proportional to and
in approximation of the suffering inflicted.[52] This is so because moral damages are in the category of
an award designed to compensate the claimant for actual injury suffered, not to impose a penalty on the
wrongdoer.[53]
Viewed as an action for quasi delict, the present case falls squarely within the purview of Article 2219
(2),[54] which provides for the payment of moral damages in cases of quasi delict.[55] Having established
the liability of petitioner as the registered owner of the vehicle,[56] respondents have satisfactorily
shown the existence of the factual basis for the award[57] and its causal connection to the acts of Raul
Tutor, who is deemed as petitioners employee.[58] Indeed, the damages and injuries suffered by
respondents were the proximate result of petitioners tortious act or omission.[59]
Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the
amount of indemnity being left to the discretion of the court.[60] The evidence gives no ground for
doubt that such discretion was properly and judiciously exercised by the trial court.[61] The award is in
fact consistent with the rule that moral damages are not intended to enrich the injured party, but to
alleviate the moral suffering undergone by that party by reason of the defendants culpable action.[62]
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.
Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.

Sandoval-Gutierrez, J., on leave.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. DANILO CATUBIG y HORIO, accusedappellant.

DECISION
VITUG, J.:
In an information, dated 29 January 1998, the accused, Danilo Catubig y Horio, was charged with the
crime of rape before the Regional Trial Court, Branch 78, of Malolos, Bulacan; viz:
The undersigned Asst. Provincial Prosecutor on complaint of the offended party Dannilyn Catubig y
Lazaro accuses Danilo Catubig y Horio of the crime of rape, penalized under the provisions of Art. 335
of the Revised Penal Code, committed as follows:
That on or about the 27th day of November, 1997, in the municipality of San Jose del Monte, province
of Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused,
did then and there wilfully, unlawfully and feloniously, by means of force, threats and intimidation and
with lewd design have carnal knowledge of the said offended party against her will.[1]
When arraigned on 16 July 1998, accused Catubig, represented by counsel de oficio, pleaded not guilty
to the offense charged; forthwith, trial ensued.
The case for the prosecution was laid bare in Appellees Brief submitted by the Office of the Solicitor
General.
On November 27, 1997, at around 4:00 oclock in the afternoon, private complainant Dannilyn Catubig,
who was born on August 9, 1985, and her four (4) younger siblings were watching television in the sala
of their house located at Sunlife Subdivision, San Jose del Monte, Bulacan.
After an hour, Dannilyns father, herein appellant Danilo Catubig, arrived and told Dannilyns siblings to
proceed, as in fact they did proceed, to her aunts house which is just located nearby. Thereafter,
appellant told Dannilyn to go inside a room and to lie down on the bed. After Dannilyn had complied,
appellant removed Dannilyns shorts and panty, while appellant, after removing his brief and t-shirt,
[laid] on top of Dannilyn. Afraid of appellant who beat and raped her in the past, Dannilyn was not able
to resist appellant who succeeded in inserting his penis into Dannilyns vagina.
However, Dannilyns aunt, who got suspicious of what appellant was doing to Dannilyn, informed the
latters mother, Jocelyn Catubig, about the said suspicion. Thus, when confronted by her mother,
Dannilyn was forced to reveal that she was indeed raped by appellant. The sexual assault was reported
to the San Jose del Monte Police Station where Dannilyns sworn statement was subsequently taken on
December 3, 1997.

Upon the request of the police authorities, Dannilyn was examined on December 1, 1997 by Dr.
Wilfredo E. Tiera, Medico-Legal Officer of the National Bureau of Investigation, who found out that
Dannilyns healed laceration in the hymen was caused by sexual intercourse.[2]
The accused denied the accusation against him. He claimed that the rape charge was brought about only
because of the ill-will between him, on the one hand, and his wife and daughter Dannilyn, on the other
hand, following a quarrel. On 27 November 1997, he asseverated, he had fought with his wife, hitting
her and his daughter. His wife then threatened him that it was the last time that she would allow him to
harm her and that he would regret what he did. True to her foreboding, the next day, he was arrested
and a complaint for rape was filed against him.
On 11 December 1998, the Regional Trial Court rendered a decision holding the accused guilty of the
crime of rape; it adjudged:
WHEREFORE, in view of the foregoing, the Court hereby finds accused DANILO CATUBIG Y
HORIO GUILTY beyond reasonable doubt of the crime of Rape defined and penalized under Article
335 of the Revised Penal Code, as amended by Republic Act No. 7659, and hereby sentences him to
suffer the penalty of DEATH, and to pay private complainant Dannilyn Catubig the amount of Fifty
Thousand Pesos (P50,000.00) as moral damages.[3]
With the imposition of the death penalty by the trial court, the records were elevated to this Court for
automatic review.
In his brief, appellant submitted thusly:
1.The lower court erred in finding the accused guilty of the crime of rape in violation of Article 335 of
the Revised Penal Code as amended by Republic Act 7659.
2.
The lower court erred in not taking into consideration the fact that the information was
defective for failure to state that the accused is the father of the victim and that the victim was under 18
years [of] age at the time of the commission of the alleged rape.[4]
Private complainant Dannilyn Catubig narrated how she was repeatedly abused by her own father; she
testified:
Q

Now, after your sisters and brother [went] to the house of your aunt, what did your father do?

He instructed me to go inside the room.

How many rooms were there in your house?

Only one.

Did you go to the room per instruction?

Yes, sir.

And what happened inside the room?

My father entered the room.

And when your father entered the room, what did he do next?

He removed my short [pants] and my panty.

What was your position at that time when your father removed your short pants and panty?

I was lying.

When you entered the room, did you lie immediately?

No, I just sat.

Q
How come as you claimed a while ago, you were lying when your father removed your short
pants and panty?
A

Once I entered the room, I was sitting then he removed my short [pants] and panty.

Q
You said upon entering the room, you sat and while sitting, all of a sudden your father removed
your short pants and panty while already lying at that time, how come you were lying when according
to you, you were sitting inside the room?
A

I was sitting first and he instructed me to lie down.

Q
While you were sitting inside the room and you were instructed by your father to lie, what
comes to your mind?
A

That he will rape me.

How did you come to know that?

He was raping me before, doing that before.

In other words, that was not the first time your father raped you on that particular date?

No, sir.

When was the first time, if you remember?

When I was still in grade 1.

How many times were you raped by your father?

I can no longer remember how many it was - several.

When was the last time your father raped you?

November 27.

Now, when your father removed your short pants and panty, what did he do next?

He removed his brief and shirt.

After removing his brief and shirt, what did he do?

He [laid] on top me.

When your father [laid] on top of you, what did he do?

He was inserting his penis to my vagina.

At this juncture, may we make of record that witness starts to cry.

How did you know your father inserted his penis to your vagina?

I can feel it and it is painful.

That was the time when your father was already lying on top of you?

Yes, sir.

And what was the movement of the body of your father while he was lying on top of you?

Push and pull movement.

For how long did your father stay on top of you doing that push and pull movement?

That must be about 1 hour, but my aunt arrived.

Aside from the pain, what else did you feel?

Mahapdi at parang may pumipitik sa loob ng ari ko.

Did you not try to resist?

No, because I am afraid of him.

You are afraid of your father?

Yes, sir.

Afraid of what?

Because he was beating us, hitting us.

Why, what was the reason why your father was hitting you?

To threaten us.

For what purpose?

Whenever my mother sided with us, my father and mother engaged in a fight.

In this case, you were raped and sexually abused by your father, what made you afraid of him?

Because we were afraid of my father since childhood.[5]

Dannilyn has given her testimony in a plain, categorical, spontaneous and frank manner, remaining
consistent throughout, and there is hardly anything on record that can cast doubt on her sincerity. The
revelations of an innocent child whose chastity has been abused, coupled with her willingness to face
police investigation and to undergo the trouble and humiliation of a public trial, should merit credence
unless strong justifications dictate otherwise. Indeed, it would take a most senseless kind of depravity
for a young daughter to just make up a story which could put her own father to an undeserved
indictment and to even possibly face death in the hands of the law.[6]
When rape is committed against ones own daughter, the moral ascendancy and influence of the father,
that necessarily flows from his parental authority, can sufficiently cow the child to submission and can
rightly be held to substitute for the requisite violence or intimidation that, normally, would be
characterized by physical acts and uttered threats made on the victim.
The trite defenses of alibi and denial proferred by appellant cannot prevail over the positive and
categorical statements of private complainant. Alibi is often viewed with suspicion and received with
caution not only because it is inherently weak and unreliable but also because it is easy to fabricate. In
order that this defense can prosper, it must be convincing to preclude any doubt on the physical
impossibility of the presence of the accused at the locus criminis at the time of the incident. These
conditions have not been met in the case at bar.
The contention of appellant that his wife and daughter Dannilyn have accused him merely because of
his violent ways is much too flimsy to be believed. The mere resentment of a wife and daughter is not
so compelling as to have motivated them to wrongly lodge a complaint for a crime much more serious
than might, if at all, be expected.
It is likewise a settled doctrine that the assessment made by the trial court on the credibility of
witnesses deserves great regard and weight on appeal. The rule is not without reason; the trial judge has
a unique position of hearing first hand the witnesses and observing their deportment, conduct and
attitude during the course of the testimony in open court. There is no valid reason to now ignore this
long accepted jurisprudence in this instance.
This Court, however, finds the second assignment of error impressed with merit.

Article 335 of the Revised Penal Code, as amended by Section 11 of Republic Act No. 7659, at times
also referred to as the Death Penalty Law, states in part:
Art. 335. When and how rape is committed. x x x
xxx

xxx

xxx

The death penalty shall also be imposed if the crime of rape is committed with any of the following
attendant circumstances:
1.
When the victim is under eighteen (18) years of age and the offender is a parent, ascendant,
step-parent, guardian, relative by consanguinity or affinity within the third civil degree, or the
common-law spouse of the parent of the victim.
The concurrence of the minority of the victim and her relationship to the offender are special qualifying
circumstances that are needed to be alleged in the complaint or information for the penalty of death to
be decreed.[7] The Constitution guarantees to be inviolable the right of an accused to be informed of
the nature and cause of the accusation against him.[8] It is a requirement that renders it essential for
every element of the offense with which he is charged to be properly alleged in the complaint or
information.
Here, the information failed to state the minority of the victim and her relationship with the offender,
both special qualifying circumstances under Republic Act No. 7659, and for want of such allegations,
the trial court erred in imposing the death penalty on the accused.[9] Appellant could only thus be
convicted under Article 335 of the Revised Penal Code, as amended, of simple rape punishable by
reclusion perpetua.
Anent the award of damages, the trial court has correctly awarded P50,000.00 moral damages, an
award that rests on the jural foundation that the crime of rape necessarily brings with it shame, mental
anguish, besmirched reputation, moral shock and social humiliation to the offended party.[10] In
addition, the offended party deserves to receive the amount of P50,000.00 civil indemnity,[11] the
equivalent of compensatory damages, and exemplary damages in the amount of P25,000.00.
An apparent discord in the award of exemplary damages in simple and qualified rape cases perhaps
deserves more than just a passing remark.
The Civil Code of the Philippines provides, in respect to exemplary or corrective damages, thusly:
ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.
ART. 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed
when the crime was committed with one or more aggravating circumstances. Such damages are
separate and distinct from fines and shall be paid to the offended party.
ART. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.

ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
ART. 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether
or not they should be adjudicated.
ART. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show
that he is entitled to moral, temperate or compensatory damages before the court may consider the
question of whether or not exemplary damages should be awarded. In case liquidated damages have
been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be
recovered, nevertheless, before the court may consider the question of granting exemplary in addition
to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or
compensatory damages were it not for the stipulation for liquidated damages.
ART. 2235. A stipulation whereby exemplary damages are renounced in advance shall be null and void.
The attendance of aggravating circumstances in the perpetration of the crime serves to increase the
penalty (the criminal liability aspect),[12] as well as to justify an award of exemplary or corrective
damages (the civil liability aspect),[13] moored on the greater perversity of the offender manifested in
the commission of the felony such as may be shown by (1) the motivating power itself, (2) the place of
commission, (3) the means and ways employed, (4) the time, or (5) the personal circumstances of the
offender or the offended party or both. There are various types of aggravating circumstances, among
them, the ordinary and the qualifying. Relationship is an alternative circumstance under Article 15 of
the Revised Penal Code.
Art. 15. Their concept. --Alternative circumstances are those which must be taken into consideration as
aggravating or mitigating according to the nature and effects of the crime and other conditions
attending its commission. They are relationship, intoxication, and degree of instruction and education
of the offender.
The alternative circumstance of relationship shall be taken into consideration when the offended party
is the spouse, ascendant, descendant, legitimate, natural, or adopted brother or sister, or relative by
affinity in the same degree of the offender.
As a rule, relationship is held to be aggravating in crimes against chastity, such as rape and acts of
lasciviousness, whether the offender is a higher or a lower degree relative of the offended party.[14]
Under Section 11 of Republic Act No. 7659, amending Article 335 of the Revised Penal Code, the
death penalty is to be imposed in rape cases when the victim is under eighteen (18) years of age and the
offender is a parent, ascendant, step-parent, guardian, relative by consanguinity or affinity within the
third civil degree, or the common-law spouse of the parent of the victim. The Court has since held that
the circumstances enumerated by the amendatory law are to be regarded as special qualifying
(aggravating) circumstances. Somehow doubts linger on whether relationship may then be considered
to warrant an award for exemplary damages where it is used to qualify rape as a heinous crime, thereby
becoming an element thereof, as would subject the offender to the penalty of death. Heretofore, the
Court has not categorically laid down a specific rule, preferring instead to treat the issue on a case to
case basis.

In People vs. Fundano,[15] People vs. Ramos,[16] People vs. Medina,[17] People vs. Dimapilis,[18]
People vs. Calayca,[19] People vs. Tabion,[20] People vs. Bayona,[21] People vs. Bayya,[22] and
People vs. Nuez,[23] along with still other cases, the Court has almost invariably appreciated
relationship as an ordinary aggravating circumstance in simple rape and thereby imposed exemplary
damages upon the offender whether or not the offense has been committed prior to or after the
effectivity of Republic Act No. 7659. Exceptionally, as in People vs. Decena,[24] People vs. Perez,[25]
People vs. Perez,[26] and People vs. Ambray,[27] the Court has denied the award of exemplary
damages following the effectivity of that law. In qualified rape cases, such as in People vs. Magdato,
[28] People vs. Arizapa,[29] and People vs. Alicante,[30] the Court decreed the payment of exemplary
damages to the offended party but it did not so do as in People vs. Alba,[31] People vs. Mengote,[32]
and People vs. Maglente.[33]
It may be time for the Court to abandon its pro hac vice stance and provide, for the guidance of the bar
and the bench, a kind of standard on the matter.
Also known as punitive or vindictive damages, exemplary or corrective damages are intended to serve
as a deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of
the rights of an injured or a punishment for those guilty of outrageous conduct. These terms are
generally, but not always, used interchangeably. In common law, there is preference in the use of
exemplary damages when the award is to account for injury to feelings and for the sense of indignity
and humiliation suffered by a person as a result of an injury that has been maliciously and wantonly
inflicted,[34] the theory being that there should be compensation for the hurt caused by the highly
reprehensible conduct of the defendant - associated with such circumstances as willfulness,
wantonness, malice, gross negligence or recklessness, oppression, insult or fraud or gross fraud[35]that intensifies the injury. The terms punitive or vindictive damages are often used to refer to those
species of damages that may be awarded against a person to punish him for his outrageous conduct. In
either case, these damages are intended in good measure to deter the wrongdoer and others like him
from similar conduct in the future.[36]
The term aggravating circumstances used by the Civil Code, the law not having specified otherwise, is
to be understood in its broad or generic sense. The commission of an offense has a two-pronged effect,
one on the public as it breaches the social order and the other upon the private victim as it causes
personal sufferings, each of which is addressed by, respectively, the prescription of heavier punishment
for the accused and by an award of additional damages to the victim. The increase of the penalty or a
shift to a graver felony underscores the exacerbation of the offense by the attendance of aggravating
circumstances, whether ordinary or qualifying, in its commission. Unlike the criminal liability which is
basically a State concern, the award of damages, however, is likewise, if not primarily, intended for the
offended party who suffers thereby. It would make little sense for an award of exemplary damages to
be due the private offended party when the aggravating circumstance is ordinary but to be withheld
when it is qualifying. Withal, the ordinary or qualifying nature of an aggravating circumstance is a
distinction that should only be of consequence to the criminal, rather than to the civil, liability of the
offender. In fine, relative to the civil aspect of the case, an aggravating circumstance, whether ordinary
or qualifying, should entitle the offended party to an award of exemplary damages within the unbridled
meaning of Article 2230 of the Civil Code.
Relevantly, the Revised Rules on Criminal Procedure, made effective on 01 December 2000, requires
aggravating circumstances, whether ordinary or qualifying, to be stated in the complaint or information.

Sections 8 and 9 of Rule 110 of the Rules of Court now provide:

Sec. 8. Designation of the offense. - The complaint or information shall state the designation of the
offense given by the statute, aver the acts or omissions constituting the offense, and specify its
qualifying and aggravating circumstances. If there is no designation of the offense, reference shall
be made to the section or subsection of the statute punishing it.
Sec. 9. Cause of the accusations. - The acts or omissions complained of as constituting the offense and
the qualifying and aggravating circumstances must be stated in ordinary and concise language
and not necessarily in the language used in the statute but in terms sufficient to enable a person of
common understanding to know what offense is being charged as well as its qualifying and
aggravating circumstances and for the court to pronounce judgment.
A court would thus be precluded from considering in its judgment the attendance of qualifying or
aggravating circumstances if the complaint or information is bereft of any allegation of the presence of
such circumstances.
The retroactive application of procedural rules, nevertheless, cannot adversely affect the rights of the
private offended party that have become vested prior to the effectivity of said rules. Thus, in the case at
bar, although relationship has not been alleged in the information, the offense having been committed,
however, prior to the effectivity of the new rules, the civil liability already incurred by appellant
remains unaffected thereby.
WHEREFORE, the decision of the court a quo is AFFIRMED with MODIFICATION in that
appellant Danilo Catubig y Horio is found guilty only of simple rape and not in its qualified form, and
he is hereby sentenced to suffer the penalty of reclusion perpetua and to pay complainant Dannilyn
Catubig P50,000.00 civil indemnity, P50,000.00 moral damages and P25,000.00 exemplary damages.
Costs de oficio.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena,
Gonzaga-Reyes, Ynares-Santiago, De leon, Jr., and Sandoval-Gutierrez, JJ., concur.
Puno J., in the result.