ARTICLE 1347 1379

1. LONDRES VS. CA
[G.R. No. 136427. December 17, 2002]
SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES
QUINTIA, ROBERTO V. FUENTES, LEOPOLDO V. FUENTES, OSCAR V.
FUENTES and MARILOU FUENTES ESPLANA petitioners, vs. THE COURT
OF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,
THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS,
ELENA ALOVERA SANTOS and CONSOLACION ALIVIO ALOVERA,
respondents.
DECISION
CARPIO, J.:
Before us is a petition for review on certiorari[1] of the March 17, 1997
Decision[2] and the November 16, 1998 Resolution[3] of the Court of Appeals
in CA-G.R. CV No. 35540 entitled Londres vs. Alovera. The assailed decision
affirmed the validity of the Absolute Sale dated April 24, 1959 vesting
ownership of two parcels of land, Lots 1320 and 1333, to private respondents.
The same decision also ordered public respondents to pay just compensation
to private respondents. The questioned resolution denied the motion for
reconsideration of petitioners.
The Antecedent Facts
The present case stemmed from a battle of ownership over Lots 1320 and
1333 both located in Barrio Baybay, Roxas City, Capiz. Paulina Arcenas
(Paulina for brevity) originally owned these two parcels of land. After Paulinas
death, ownership of the lots passed to her daughter, Filomena VidaI (Filomena
for brevity). The surviving children of Filomena, namely, Sonia Fuentes
Londres (Sonia for brevity), Armando V. Fuentes, Chi-Chita Fuentes Quintia,
Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana
(petitioners for brevity) now claim ownership over Lots 1320 and 1333.
On the other hand, private respondents Consolacion Alivio Alovera
(Consolacion for brevity) and Elena Alovera Santos (Elena for brevity) anchor
their right of ownership over Lots 1320 and 1333 on the Absolute Sale
executed by Filomena on April 24, 1959 (Absolute Sale for brevity). Filomena
sold the two lots in favor of Consolacion and her husband, Julian Alovera
(Julian for brevity). Elena is the daughter of Consolacion and Julian
(deceased).
On March 30, 1989, petitioners filed a complaint for the declaration of nullity of
contract, damages and just compensation. Petitioners sought to nullify the

Absolute Sale conveying Lots 1320 and 1333 and to recover just
compensation from public respondents Department of Public Works and
Highways (DPWH for brevity) and Department of Transportation and
Communication (DOTC for brevity). The case was raffled to the Regional Trial
Court, Branch 18, Roxas City, Capiz and docketed as Civil Case No. V-5668.
In their Complaint, petitioners claimed that as the surviving children of
Filomena, they are the owners of Lots 1320 and 1333. Petitioners claimed that
these two lots were never sold to Julian. Petitioners doubt the validity of the
Absolute Sale because it was tampered. The cadastral lot number of the
second lot mentioned in the Absolute Sale was altered to read Lot 1333 when
it was originally written as Lot 2034. Petitioners pointed out that Lot 2034,
situated in Barrio Culasi, Roxas City, Capiz, was also owned by their
grandmother, Paulina.
Petitioners alleged that it was only recently that they learned of the claim of
private respondents when Consolacion filed a petition for the judicial
reconstitution of the original certificates of title of Lots 1320 and 1333 with the
Capiz Cadastre.[4] Upon further inquiry, petitioners discovered that there
exists a notarized Absolute Sale executed on April 24, 1959 registered only on
September 22, 1982 in the Office of the Register of Deeds of Roxas City. The
private respondents copy of the Absolute Sale was tampered so that the
second parcel of lot sold, Lot 2034 would read as Lot 1333. However, the
Records Management and Archives Office kept an unaltered copy of the
Absolute Sale. This other copy shows that the objects of the sale were Lots
1320 and 2034.
In their Answer, private respondents maintained that they are the legal owners
of Lots 1333 and 1320. Julian purchased the lots from Filomena in good faith
and for a valid consideration. Private respondents explained that Julian was
deaf and dumb and as such, was placed in a disadvantageous position
compared to Filomena. Julian had to rely on the representation of other
persons in his business transactions. After the sale, Julian and Consolacion
took possession of the lots. Up to now, the spouses successors-in-interest are
in possession of the lots in the concept owners. Private respondents claimed
that the alteration in the Absolute Sale was made by Filomena to make it
conform to the description of the lot in the Absolute Sale. Private respondents
filed a counterclaim with damages.
The cross-claim of petitioners against public respondents was for the recovery
of just compensation. Petitioners claimed that during the lifetime of Paulina,
public respondents took a 3,200-square meter portion of Lot 1320. The land
was used as part of the Arnaldo Boulevard in Roxas City without any payment
of just compensation. In 1988, public respondents also appropriated a 1,786square meter portion of Lot 1333 as a vehicular parking area for the Roxas
City Airport. Sonia, one of the petitioners, executed a deed of absolute sale in

favor of the Republic of the Philippines over this portion of Lot 1333. According
to petitioners, the vendee agreed to pay petitioners P214,320.00. Despite
demands, the vendee failed to pay the stipulated amount.
Public respondents in their Answer raised the following defenses: (1) they have
no capacity to sue and be sued since they have no corporate personality
separate and distinct from the Government; (2) they cannot comply with their
undertaking since ownership over the portions of land is disputed by private
respondents and until the issue of ownership is settled, petitioners have no
cause of action against public respondents; and (3) they are not proper parties
since they were not parties to the Absolute Sale sought to be nullified.

SO ORDERED.[6]
On November 16, 1998, the Court of Appeals denied the respective motions
for reconsideration of petitioners and private respondents. The dispositive
portion of the resolution reads:
WHEREFORE, for lack of merit, the two motions for reconsideration are
hereby DENIED.
SO ORDERED.[7]
The Ruling of the Trial Court

On May 28, 1991, the trial court issued its decision upholding the validity of the
Absolute Sale. The dispositive portion of the decision reads:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:
1. Declaring the Absolute Sale executed by Filomina Vidal in favor of spouses
Julian Alovera and Consolacion Alivio on April 24, 1959 over subject Lots 1320
and 1333 (Exh. 4) valid and effective;
2. Declaring private defendants Consolacion Alivio Alovera and Elena Alovera
Santos legal owners of subject Lots 1320 and 1333;
3. Ordering public defendants Department of Public Works and Highways and
Department of Transportation and Communications to pay jointly and severally
private defendants Consolacion Alivio Alovera and Elena Alovera Santos just
compensation of the 3,200-square meter portion taken by the government from
subject Lot 1320 used as part of the Arnaldo Boulevard in Roxas City, and the
1,786-square meter portion also taken by the government from subject Lot
1333 to be used as vehicle parking area of the Roxas City Airport; and
4. Ordering the dismissal of the complaint for lack of merit.
The cross-claim of private defendants against public defendants and private
defendants counterclaim for damages against the plaintiffs are likewise
ordered dismissed. Costs against plaintiffs.
SO ORDERED.[5]
Petitioners and private respondents appealed. On March 17, 1997, the Court
of Appeals promulgated its decision affirming the decision of the trial court,
thus:
PREMISES CONSIDERED, the decision appealed from is hereby AFFIRMED.

The trial court ruled that the Absolute Sale is valid based on the following facts:
First, the description of subject Lot 1333, as appearing in the Absolute Sale
dated April 24, 1959 executed by Filomena Vidal in favor of spouses Julian
Alovera and Consolacion Alivio (Exhs. 24 and 24-A), reads:
2) A parcel of land (Lot No. 1333 of the Cadastral Survey of Capiz), with the
improvements thereon, situated in the Barrio of Baybay, Municipality of Capiz
(now Roxas City). Bounded on the N. by the property of Nemesio Fuentes; on
the S. by the property of Rufo Arcenas; on the E. by the property of Mateo
Arcenas; and on the W. by the property of Valeriano Arcenas; containing an
area of Eighteen Thousand Five Hundred Fifty Seven (18,557) square meters,
more or less. This parcel of land is all rice land and the boundaries thereon are
visible consisting of stone monuments erected thereon by the Bureau of
Lands. It is declared under Tax Dec. No. 336 in the name of Filomena Vidal
and assessed at P930.00.
In the Absolute Sale executed by the same parties on the same date, the
above-quoted description is the same except the lot number, i.e., instead of
the figure 1333 what is written therein is the figure 1320;
Second, subject Lot 1333 is situated in Barangay Baybay, Roxas City,
whereas Lot 2034 which is the second lot subject of the questioned absolute
sale is situated in Barangay Culasi, Roxas City as evidenced by a certified
true/xerox copy of a sketch plan (Exh. 29) thereby indicating that said Lot 2034
in said Barangay Culasi (Exh. 29-A).
Third, Lot 2034 was previously owned by Jose Altavas (Exhs, 38 and 38-A)
and later is owned in common by Libertad Altavas Conlu, et al. (Exhs. 37 and
37-A) and there is no convincing evidence showing that this lot was ever
owned, at one time or another, by Paulina Arcenas or by Filomena Vidal or by
plaintiffs, or their predecessors-in-interest;

Fourth, the two lots have been the subject of the transactions made by their
former owner, Filomena Vidal, with some persons, including spouses Julian
Alovera and defendant Consolacion Alivio;
Fifth, the subject two lots have been continuously worked on since the early
1950s up to the present by Alejandro Berlandino, and later by his son, Zosimo
Berlandino, who were instituted therein as tenants by Julian Alovera and the
private defendants;
Sixth, these two lots have never been in the possession of the plaintiffs.[8]
The trial court further noted that while petitioners and private respondents
claimed that Lots 1320 and 1333 are titled, both failed to account for the
certificates of title. The trial court then concluded that there is merely a
disputable presumption that Lots 1320 and 1333 are titled and covered by
certificates of title. The trial court further declared that ownership over the two
lots can still be acquired by ordinary prescription as in this case.
Private respondents and their predecessors-in-interest have been in
continuous possession of Lots 1320 and 1333 for nearly 30 years in good faith
and with just title. The tax declarations issued in the name of Consolacion and
the real estate taxes paid by private respondents are strong evidence of
ownership over Lots 1320 and 1333. Petitioners late filing of the complaint, 30
years after the execution of the Absolute Sale or seven years after the
registration of the same, was considered by the trial court as laches.

The Court of Appeals sustained the factual findings of the trial court,
specifically the six points enumerated by the trial court establishing Lots 1320
and 1333 as the objects of the Absolute Sale. Applying Article 1370 of the Civil
Code,[9] the Court of Appeals agreed with the trial court that there could be no
room for interpretation as to the intention of the parties on the objects of their
contract.
The Court of Appeals upheld the ruling of the trial court that private
respondents are not entitled to attorneys fees and damages. The Court of
Appeals opined that while there might have been incipient greed when the
DPWH and DOTC notified petitioners of the just compensation from the
government, there was, however, no evidence that petitioners filed the
complaint in bad faith. There was nothing in the records to indicate that
petitioners had actual or constructive knowledge of the sale of the two lots to
Julian. The document on file with the Records Management archives Office
alluded to a parcel of land denominated as Lot 2034 which is different from the
property in question, Lot 1333. It was only during the hearing of the case that
it was made clear through the presentation of evidence that the lot referred to
in the Absolute Sale was Lot 1333, not Lot 2034, in addition to Lot 1320.
The Issues
Petitioners thus interposed this appeal, raising the following errors allegedly
committed by the Court of Appeals:

The trial court gave more credence to the explanation of private respondents
as to why the Absolute Sale was altered. Consolacion noticed that the lot
number of the second parcel of and sold to them by Filomena under the
Absolute Sale appeared to be Lot 2034 and not Lot 1333. Together with her
husband, Julian, Consolacion went to Filomena. It was Filomena who erased
Lot 2034 in the deed of sale and changed it to Lot 1333. However, the copies
of the document in the custody of the Notary Public were not correspondingly
corrected. Consequently, the copies kept by the Records Management and
Archives Office still referred to the second parcel of land sold as Lot 2034.

I.

Based on its factual findings, the trial court held that private respondents are
the legal owners of Lots 1320 and 1333. Private respondents are therefore
entitled to just compensation for the portions of land taken by public
respondents from the two lots. However, the trial court ruled that private
respondents could not recover attorneys fees since there was no indication
that the complaint was maliciously filed and intended to prejudice private
respondents. The trial court held that petitioners filed the action in good faith,
believing that they were the real owners of the two lots.

II.

The Ruling of the Court of Appeals

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF

DISCRETION IN NOT REVERSING THE DECISION OF THE TRIAL COURT,
INSOFAR AS IT DECLARED VALID AND EFFECTIVE AN ABSOLUTE SALE,
PURPORTEDLY EXECUTED BY FILOMENA VIDAL, PREDECESSOR-ININTEREST OF PETITIONERS, IN FAVOR OF PRIVATE RESPONDENT
CONSOLACION ALIVIO AND HER SPOUSE, JULIAN ALOVERA, ON 24
APRIL 1959, OVER SUBJECT LOTS 1320 AND 1333.

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF

DISCRETION IN NOT REVERSING THE DECISION OF THE TRIAL COURT,
INSOFAR AS IT DECLARED PRIVATE RESPONDENTS LEGAL OWNERS
OF SUBJECT LOTS 1320 AND 1333.
Ill.

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF

DISCRETION IN NOT REVERSING THE DECISION OF THE TRIAL COURT,
INSOFAR AS IT RULED THAT THE COMPENSATION FOR PORTIONS OF
THE SUBJECT LOTS TAKEN BY THE PUBLIC RESPONDENTS BE PAID
TO THE PRIVATE RESPONDENTS AND NOT TO THE PETITIONERS.
IV.
THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF
DISCRETION IN NOT REVERSING THE DECISION OF THE TRIAL COURT,
INSOFAR AS IT DISMISSED THE COMPLAINT IN CIVIL CASE NO. V-5668,
RTC-ROXAS CITY, BRANCH 18.[10]
The Courts Ruling
At the outset, it must be pointed out that this petition was seasonably filed,
contrary to private respondents contention that it was filed one day late.
Petitioners had until January 17, 1999 to file this petition, which was a Sunday.
Since the last day for filing this petition fell on a Sunday, the time to file the
petition would not have run until the next working day.[11] Petitioners filed the
petition the next working day, January 18, 1999. Plainly then, the petition was
filed on time.
The petition, however, must fail on substantive grounds.
Petitioners implore the Court to declare the Absolute Sale void for failing to
identify with certainty the two parcels of land sold by Filomena, their mother,
to private respondents. However, there is no valid ground for annulling the
Absolute Sale. The Absolute Sale is clear as to the first parcel of lot sold, which
is Lot 1320. What raises some doubt is the identity of the second parcel of lot
sold, Is it Lot 2034 as indicated in the registered copy of the Absolute Sale?
Or is it Lot 1333 as made to appear in the copy of the Absolute Sale of private
respondents?
In civil cases, the party with the burden of proof must establish his case by a
preponderance of evidence.[12] By preponderance of evidence is meant that
the evidence as a whole adduced by one side is superior to that of the
other.[13] Petitioners have the burden of proving that Lot 2034 was the real
object of the Absolute Sale and the alteration of the same instrument was
unauthorized, warranting the absolute nullification of the sale. The trial court
and the Court of Appeals found the evidence of private respondents far more
convincing in explaining the alteration in their copy of the Absolute Sale. Both
courts ruled that the correction was made by the parties to reflect the true
object of the sale, which was Lot 1333, not Lot 2034. In arriving at this
conclusion, the two courts considered contemporaneous and subsequent acts

that indicate that what Filomena actually sold to private respondents were Lots
1320 and 1333. These factual findings are binding upon the Court.[14]
As a rule, the appellate jurisdiction of the Court is limited only to question of
law.[15] There is a question of law in a given case when the doubt or difference
arises as to what the law is given a certain set of facts, and there is a question
of fact when the doubt arises as to the truth or the falsity of the alleged
facts.[16] No exceptional circumstances are present in this case that would
justify a re-evaluation of the factual findings of the trial court and the Court of
Appeals, findings that are duly supported by evidence of record.
Petitioners insist that there is serious doubt as to the identity of the objects of
the Absolute Sale because the descriptions of Lots 1320 and 1333 in the
Absolute Sale do not correspond to the technical descriptions of the two lots
as found by the Bureau of Lands. Petitioners direct the Courts attention to
these discrepancies:
TECHNICAL DESCRIPTION[17]
Lot 1320, Cad-I 33,
C-01 Capiz Cadastre, Ap-06-004023

A PARCEL OF LAND (Lot 1320, Cad-133, C-01, Capiz Cadastre, Ap-06004023, situated in the barrio of Baybay, municipality of Capiz (Now Roxas
City), province of Capiz, island of Panay.
Bounded on the NE., along line 1-2 by Lot 1327; along line 2-3 by Lot 1328;
along line 3-4 by Lot 1329; on the E., along line 4-5 by Lot 1326; on and the
S., along line 5-6 by Lot 1325; along lines 6-7-8 by Lot 1321; on the W., along
line 8-9 by Lot 1295; on the NW., along lines 9-10-11 by Lot 1319; along line
11-12 by Lot 1318; along line 12-13 by Lot 1328; on the NE., along line 13-1
by Lot 1327, all of Cad-133, Capiz Cadastre.
Beginning at point marked 1 on plan being N. 88-28 W., 651.78 meters from
BBM No. 12, Cad-133, Capiz Cadastre, thence
N. 85-01 E., 23.00 m. to point 2;
N. 83-40E., 19.03m. to point 4;
S. 84-22W., 61.31 m. to point 6;
S. 83-00 W., 145.33 m. to point 8;
N. 87-42 E., 26.49 m. to point 10;
N. 83-07 E., 31.86 m. to point 12;
N. 83-09 E., 76.04 m. to point 13;
S. 07-04E., 41. 88 m. to point 1.
Point of beginning;

Containing an area of TWENTY FIVE THOUSAND SEVEN HUNDRED

SEVENTY FIVE (25,775) SQUARE METERS, more or less.

DESCRIPTION PER ABSOLUTE SALE

A PARCEL OF LAND (Lot 1333, Cad-133, C-01, Capiz Cadastre, Ap-06004022, situated in the barrio of Baybay, municipality of Capiz (now Roxas
City), province of Capiz, island of Panay.
Bounded on the SE., along line 1-2 by Lot 1330; on the W., & NW., along
lines2-3-4-5 by Lot 1329; on the NW., along line 5-6 by Lot 1334; along line 67 by Lot 1335; on the NE., & SE., along lines 7-8-1 by Lot 1332; all of Cad133, Capiz Cadastre.
Beginning at a point marked 1 on plan being N. 78-44., 326.64 meters from
BBM No. 12, Cad-133, Capiz Cadastre, thence

1) A parcel of land (Lot No. 1320 of the Cadastral Survey of Capiz), with the
improvements thereon, situated in the Barrio of Baybay, Municipality of
Capiz(now Roxas City).

S. 81-42 W., 59.67 meters to point 2;

Bounded on the N. by the property of Matea Arcenas; on the S. by the property

of Roque Severino; on the E. by the property of Matea Arcenas; the W. by the
property of Damaso Arches;
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containing an area of THIRTY THOUSAND NINE HUNDRED FORTY FOUR
(30,944) SQUARE METERS, more or less. This parcel of land is all rice land
and the boundaries thereon are visible consisting of stone monuments erected
thereon by the Bureau of Lands. It is declared under Tax Dec. No. 4338 in the
name of Filomena Vidal and assessed at P1,550.00.

N. 82-34 E., 84.29 meters to point 4;

N. 07-36 W., 46.62 meters to point 3;

N. 09-13 W., 40-05 meters to point 5;

N. 82-57 E., 59.24 meters to point 6;
N. 81-48 E., 18.71 meters to point 7;
S. 03-30 E., 95.46 meters to point 8;
S. 82-57 W., 94.35 meters to point 1;
Point of beginning.

Containing an area of TEN THOUSAND EIGHT HUNDRED SIXTY less.

DESCRIPTION PER ABSOLUTE SALE

2) A parcel of land (Lot No. 1333 of the Cadastral Survey of Capiz), with the
Improvements thereon, situated in the Barrio of Baybay, Municipality of Capiz
(now Roxas City).
TECHNICAL DESCRIPTION[18]
Lot 1333, Cad-I 33, C-01
Capiz Cadastre, Ap-06-004022

Bounded on the N. by the property of Nemesio Fuentes; on the S. by the

property of Rufo Arcenas; on the E. by the property of Matea Arcenas; and on
the W. by the property of Valeriano Arcenas;

the two lots are sufficiently designated in the Absolute Sale, leaving no room
to doubt the identity of the objects of the sale.
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Petitioners anchor their right of ownership over Lots 1320 and 1333 as the sole
heirs of their mother, Filomena, who previously owned the lots. However,
Filomena had already ceded her right of ownership over Lots 1320 and 1333
to private respondents when she executed the Absolute Sale. A sale of real
property is a contract transferring dominion and other real rights in the thing
sold.[22] Proof of the conveyance of ownership is the fact that from the time of
the sale, or after more than 30 years, private respondents have been in
possession of Lots 1320 and 1333. Petitioners on the other hand have never
been in possession of the two lots.

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containing an area of EIGHTEEN THOUSAND FIVE HUNDRED FIFTY

(10,860) SQUARE METERS, more or SEVEN (18,557) SQUARE METERS,
more or less. This parcel of land is all rice land and the boundaries thereon are
visible consisting of stone monuments erected thereon by the Bureau of
Lands. It is declared under Tax Dec. No. 4336 in the name of Filomena Vidal
and assessed at P930.00.

We are not persuaded. Petitioners rely on the technical descriptions of Lots

1320 and 1333 that were issued by the Bureau of Lands on November 8, 1988.
It must be pointed out that when private respondents and Filomena executed
the sale in 1959, they based the description of the two lots on the tax
declarations of Filomena. Early tax declarations are, more often than not,
based on approximation or estimation rather than on computation.[19] This is
understandably so because of the absence then of technical knowledge in the
accurate measurement of lands.[20] What really defines a piece of land is not
the area mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits.[21] In this case, the boundaries of

Filomena died sometime in 1985[23] and petitioners instituted the complaint

four years after Filomenas death. It is unthinkable for Filomena to have allowed
private respondents to enjoy ownership of Lots 1320 and 1333 if she never
really intended to sell the two lots to private respondents or if she had Lot 2034
in mind when she signed the Absolute Sale. In the first place, Lot 2034 could
not have been contemplated by the parties since this parcel of land was never
owned by Filomena, or by her mother, Paulina. Secondly, Lot 2034 does not
fit the description of the second parcel of lot mentioned in the Absolute Sale.
The Absolute Sale describes the second lot as located in Barangay Baybay,
Roxas City. Lot 2034 is situated in Barangay Culasi, Roxas City.
In resolving the similar case of Atilano vs. Atilano,[24] where there was also a
mistake in the designation of the lot number sold, the Court took into account
facts and circumstances to uncover the true intentions of the parties. The Court
held that when one sells or buys real property, one sells or buys the property
as he sees it, in its actual setting and by its physical metes and bounds, and
not by the mere lot number assigned to it in the certificate of title. As long as
the true intentions of the parties are evident, the mistake will not vitiate the
consent of the parties, or affect the validity and binding effect of the contract
between them. In this case, the evidence shows that the designation of the
second parcel of land sold as Lot 2034 was merely an oversight or a
typographical error. The intention of the parties to the Absolute Sale became
unmistakably clear when private respondents, as vendees, took possession of
Lots 1320 and 1333 in the concept of owners without the objection of
Filomena, the vendor.
Petitioners harp on the fact that the notarized and registered copy of the
Absolute Sale should have, been correspondingly corrected. Petitioners
believe that the notarized and archived copy should prevail. We disagree. A
contract of sale is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the price.[25] Being
consensual, a contract of sale has the force of law between the contracting
parties and they are expected to abide in good faith with their respective

contractual commitments.[26] Article 1358 of the Civil Code, which requires

certain contracts to be embodied in a public instrument, is only for
convenience, and registration of the instrument is needed only to adversely
affect third parties.[27] Formal requirements are, therefore, for the purpose of
binding or informing third parties.[28] Non-compliance with formal
requirements does not adversely affect the validity of the contract or the
contractual rights and obligations of the parties.[29]

Filomena who filed the complaint against private respondents. Even assuming
that Consolacions testimony was within the purview of the Dead Mans Statute,
the fact that the counsel of petitioners failed to timely object to the admissibility
of Consolacions testimony is a waiver of the prohibition.[31] The waiver was
made more evident when the counsel of petitioners cross-examined
Consolacion.[32] Petitioners cannot now invoke the rule they knowingly
waived.

Petitioners fault the trial court for declaring that Lots 1333 and 1320 can be
acquired by prescription even though these lots are already covered by
certificates of title. The real issue in this case is the true intentions of the parties
to the Absolute Sale, not adverse possession. The decisions of the trial court
and the Court of Appeals are clear on this point. In fact, the Court of Appeals
no longer dealt with the issue of acquisitive prescription since it was already
convinced that private respondents right over Lots 1333 and 1320 emanates
from the Absolute Sale.

From the time of the execution of the Absolute Sale on April 24, 1959, private
respondents became the owners of Lots 1320 and 1333. The expropriation of
any portion of the two lots from the time of the execution of the Absolute Sale
would necessarily entitle private respondents to the payment of just
compensation. We cannot, however, agree with the trial court and the Court of
Appeals that public respondents could be ordered to pay private respondents
just compensation in the same suit. Public respondents were impleaded in this
case when petitioners filed a cross-claim against them for just compensation.
The cross-claim should have been dismissed, as it does not comply with
Section 7 of Rule 6 of the 1988 Rules of Court. The rule provides:

In a desperate bid to compel the Court to disregard the evidence of private

respondents, petitioners question the admissibility of the testimony of
Consolacion on the ground that it violates the Dead Mans Statute. Petitioners
contend that Consolacions testimony as to how the alteration of the Absolute
Sale took place should have been disregarded since at the time that
Consolacion testified, death had already sealed the lips of Filomena,
precluding petitioners from refuting Consolacions version.
The contention is without basis. The Dead Mans Statute then embodied in
Section 20 (a) of Rule 130 of the 1988 Rules of Court provides:

SEC. 7. Cross-claim. A cross-claim is any claim by one party against a coparty arising out of the transaction or occurrence that is the subject matter
either of the original action or of a counterclaim therein. Such cross-claim may
include a claim that the party against whom it is asserted is or may be liable to
the cross-claimant for all or part of a claim asserted in the action against the
cross-claimant.
Based on the foregoing rule, the cross-claim is proper only when:

SEC. 20. Disqualification by reason of interest or relationship. - The following

persons cannot testify as to matters in which they are interested, directly or
indirectly, as herein enumerated:

1. It arises out of the subject matter of the complaint.

(a) Parties or assignors of parties to a case, or persons in whose behalf a case

is prosecuted, against an executor or administrator or other representative of
a deceased person, or against a person of unsound mind, upon a claim or
demand against the estate of such deceased person or against such person
of unsound mind, cannot testify as to any matter of fact occurring before the
death of such deceased person or before such person became of unsound
mind;

3. The cross-claimant stands to be prejudiced by the filing of the action against

him.[33]

xxx
The foregoing prohibition applies to a case against the administrator or
representative of an estate upon a claim against the estate of the deceased
person.[30] The present case was not filed against the administrator of the
estate, nor was it filed upon claims against the estate since it was the heirs of

2. It is filed against a co-party.

The three requisites are absent in this case. The cross-claim for just
compensation is a new matter raising a new cause of action that must be
litigated in a separate action, not in the same action for the nullification of
contract. The purpose of a cross-claim is to avoid multiplicity of suits.[34]
Multiplicity of suits should be avoided if the filing of a separate and independent
action to recover a claim would entail proving exactly the same claim in an
existing action.[35] However, when the causes of action are distinct and
separate from each other, as in this case, the independent interest should be
pursued in another proceeding.[36] Also, petitioners and public respondents
are not co-parties as they are not co-plaintiffs. Lastly, petitioners, as cross-

claimants, would not be prejudiced by the filing of the action since they are the
plaintiffs in this case.
At any rate, private respondents are not left without any recourse. They can
file their claim for compensation with the proper government agency. Public
respondent DPWH in its Comment points out that it is now public respondent
DOTC that has jurisdiction over the claim for compensation since the portions
of the properties subject of this case were taken to form part of the parking
area of the Roxas Airport.[37] In the same Comment, public respondent DPWH
concedes that they have never denied their obligation from the very beginning
of this case.[38] Public respondents were only constrained to withhold
payment of just compensation as the reel owners of the lots In question were
yet to be declared by the Court. Since the issue of ownership has been settled,
private respondents can now rightfully claim just compensation for the portions
of Lots 1320 and 1333 taken by the government after the execution of the
Absolute Sale.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 35540
is hereby AFFIRMED with the MODIFICATION that the cross-claim against
public respondents is DISMISSED. Costs against petitioners.
SO ORDERED.

2. CONSTANTINO v. SANDIGANBAYAN
G.R. No. 140656

September 13, 2007

MAYOR FELIPE K. CONSTANTINO, petitioner,

vs.
HON. SANDIGANBAYAN (FIRST DIVISION) and THE PEOPLE OF THE
PHILIPPINES, respondents.
x-----------------------------------------------------------------------------x
G.R. No. 154482

September 13, 2007

NORBERTO N. LINDONG, petitioner,

vs.
PEOPLE OF THE PHILIPPINES and SANDIGANBAYAN, respondents.
DECISION
TINGA, J.:
Before us are two (2) consolidated petitions, the determination of both rests
ultimately on whether Felipe K. Constantino (Constantino), mayor of
Malungon, Sarangani Province, was indeed guilty beyond reasonable doubt of
violating Section 3(e) of Republic Act No. 3019 (R.A. No. 3019), otherwise
known as The Anti-Graft and Corrupt Practices Act.
In G.R. No. 140656, Constantino filed a petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, assailing the 15 November 1999
decision1 and the 15 March 2000 resolution2 of the Sandiganbayan (First
Division) in Criminal Case No. 23433 finding him and his co-accused,
petitioner Norberto N. Lindong (Lindong) guilty beyond reasonable doubt of
violating Section 3(e) of R.A. No. 3019.
On the other hand, G.R. No. 154482 is a petition for certiorari with prayer for
preliminary injunction under Rule 65 of the 1997 Rules of Civil Procedure, filed
by Lindong questioning three (3) orders3 of the Sandiganbayan (First Division)
relative to the execution of judgment against him also in Criminal Case No.
23433.
The Antecedents
In an Information dated 31 July 1996, Constantino, in his capacity as mayor of
Malungon, Sarangani Province, together with his co-accused Lindong, was
charged with violation of Section 3 (e) of R.A. No. 3019 before the
Sandiganbayan, to wit:

That on or about February 28, 1996, in Davao City, Philippines, and within the
jurisdiction of this Honorable Court, accused Felipe K. Constantino, a public
officer, being then the Mayor of the Municipality of Malungon, Sarangani
Province, committing the crime herein-charged in relation to, while in the
performance and taking advantage of his official functions, with evident bad
faith, manifest partiality or through gross inexcusable negligence, and
conspiring and confederating with accused Norberto N. Lindong, President
and Chairman of the Board of the Norlovanian Corporation, Davao City, did
then and there wil[l]fully, unlawfully and criminally enter into a Lease
Agreement for the rental of various heavy equipments (sic) for a period of six
(6) years for and in consideration of the sum of PESOS: TWO HUNDRED
FIFTY-SEVEN THOUSAND ONE HUNDRED ELEVEN and 11/100
(P257,111.11) per month or a total consideration of PESOS: EIGHTEEN
MILLION FIVE HUNDRED ELEVEN THOUSAND NINE HUNDRED NINETYNINE and 92/100 (P18,511,999.92) and a guaranty deposit of PESOS: ONE
MILLION SEVEN HUNDRED EIGHTY THOUSAND (P1,780,000.00) contrary
to the express mandate of Resolution No. 2, series of 1995, of the Municipal
Planning and Development Council implementing Sangguniang Bayan
Resolution No. 198, series of 1995 and Sangguniang Bayan Resolution No.
21 dated February 22, 1996 authorizing the Municipal Mayor of Malungon to
enter into an agreement for the purchase of heavy equipments (sic) on a fiveyear term basis for and in consideration of the amount of PESOS: TWO
MILLION TWO HUNDRED THOUSAND (P2,200,000.00) per year or a total
consideration of only PESOS: ELEVEN MILLION (P11,000,000.00), thus,
giving said Norlovanian Corporation, which was fully paid for the Guaranty
Deposit and was actually paid heavy equipment rentals for the period March 5
to May 6,
1996 in the aggregate sum of PESOS: TWO MILLION ONE HUNDRED
SEVENTY-SEVEN THOUSAND NINETY and 91/100 (P2,177,090.91),
unwarranted benefits and advantage and causing undue injury to the
government.
CONTRARY TO LAW.4
Both accused pleaded not guilty to the charge. In the ensuing trial, the
prosecution presented Nazario B. Tomanan (Tomanan), Commission on Audit
(COA) Auditor III of the COA Regional Office No. XI. In rebuttal, it presented
Benjamin C. Asgapo (Asgapo), councilor of Malungon, Sarangani Province
and one of the complainants below. The prosecution sought to establish the
facts as follows:
The Municipality of Malungon listed as one of its priority programs, the
acquisition of a fleet of heavy equipment needed by the municipality in its
development projects.5 For this purpose, it appropriated an amount of P2.2

Million per annum for a period of five (5) years beginning in 1996 for the
amortization of such purchase.6 Pursuant thereto, the municipality conducted
two (2) public biddings for suppliers of the required fleet of heavy equipment.
Both attempts, however, failed. Hence, the Sangguniang Bayan instead
passed Resolution No. 21 on 22 February 1996, authorizing petitioner
Constantino to enter into a negotiated contract for the lease/purchase of the
needed fleet of heavy equipment.7
On 28 February 1996, Constantino entered into a Lease Agreement8 with
Norlovanian Corporation, represented by Lindong. The agreement required,
among others, the municipality to provide Norlovanian Corporation with a
guaranty deposit. The following day, Lindong appeared before the
Sangguniang Bayan to discuss the Lease Agreement. Not one of the members
of the Sanggunian questioned the legality of the agreement.9
The seven (7) units of heavy equipment subject of the agreement were thus
delivered to the municipality on 4 March 1996.10 On 6 March 1996, the
Municipality of Malungon paid Norlovanian Corporation a total amount of
P2,177,090.91 representing the guaranty deposit as well as the rental for the
period of 5 March 1996 to 5 April 1996 and partial rental for the period of 5
April 1996 to 6 May 1996.11
Thereafter, on 18 April 1996, the Sangguniang Bayan unanimously passed
Resolution No. 3812 requesting petitioner to operate the newly acquired fleet
of heavy equipment. The municipality subsequently utilized the fleet.13
However, only five (5) days later, or on 23 April 1996, Sanggunian members
Benjamin C. Asgapo, Rafael J. Suson, Sr. (Suson), Leo G. Ingay (Ingay),
Pablo V. Octavio (Octavio) and Wilfredo P. Espinosa (Espinosa), and Vice
Mayor Primitiva L. Espinosa (Vice Mayor Espinosa) filed a formal complaint
against petitioners Constantino and Lindong for violation of R.A. No. 3019.
On 6 June 1996, the Sangguniang Bayan passed Resolution No. 47, urging
the municipality to "stop all forms of unauthorized payment/expenditure
relative to the illegally acquired pool of heavy equipment by the Municipality of
Malungon."14
In particular, Tomanan testified that he was directed by the COA Regional
Office XI to conduct a special and comprehensive audit of the municipality of
Malungon for the period of 1 May 1995 to 31 May 199615 in view of a complaint
filed by certain officials therein. In January 1997, Tomanan submitted his report
detailing the following adverse findings relative to the purchase of the subject
fleet of heavy equipment: (a) the lease/purchase contract was
disadvantageous to the municipal government because of the rigid terms and
conditions therein required of the municipality before the latter could acquire
ownership over the pool of heavy equipment; (b) Norlovanian Corporation had

no proof of ownership of the fleet of equipment as the audit revealed that title
to the equipment was in the name of Lindong; (c) the lease/purchase
procedure violated Sections 27 and 28 of the Rules and Regulations on Supply
and Property Management in Local Governments;16 and (d) the
lease/purchase procedure utilized by the municipality was uneconomical and
resulted to a wastage of P9,658,000.00 of government funds.17
Asgapo, on the other hand, testified that he was present during the 29
February 1996 meeting where Lindong appeared before the Sanggunian. The
witness asserted that the lease contract was never concurred in by the
municipal council as required by Resolution No. 21. He admitted, however,
that neither was there any resolution passed opposing, objecting to or rejecting
the lease contract. Moreover, Asgapo alleged that at the time he first obtained
a copy of the lease contract from the municipal treasurer on 6 March 1996, he
did not see the Undertaking dated 28 February 199618 attached or annexed
thereto. He was only able to get a copy of the latter document about three (3)
or four (4) days thereafter, following an inquiry with the provincial auditor.19
The defense presented Lindong as its sole witness. According to Lindong, after
negotiations between himself and petitioner Constantino, together with some
members of the Sanggunian, the parties agreed to a lease/purchase scheme
in accordance with the mandate of Resolution No. 21. They agreed that since
the municipality did not have sufficient funds to buy the fleet of heavy
equipment outright at P8.9 Million, the latter would purchase the subject
equipment on installment basis but with allowance for Norlovanian Corporation
to recover some incremental cost. Thus, on the very same day, 28 February
1996, Lindong as representative of Norlovanian Corporation and Constantino
as representative of the municipality entered into the lease/purchase
agreement. They contemporaneously executed the Lease Agreement and
Undertaking in the presence of the members of the Sanggunian who
accompanied the mayor.20
Lindong further testified that he attended the municipal council meeting on 29
February 1996 to provide the members thereof with a copy of the lease
contract and to explain the transaction. Moreover, he explained that
notwithstanding the fact that the main agreement was captioned only as a
"Lease Agreement," the same being a standard pre-printed form of his
corporation, the intent of the parties was to enter into a lease/purchase
agreement. Hence, he clarified that the Undertaking he executed bound him
to convey ownership over the fleet of heavy equipment to the municipality upon
the full payment thereof.21
Finally, Lindong averred that more than two (2) months after he delivered the
fleet of equipment to the municipality, he received a Certificate of Concurrence
dated 9 May 1996 issued by Nemesio Liray, Chairman of the Committee of
Finance of the Sangguniang Bayan, certifying that the Lease Agreement was

concurred in by the members of the Committee on 29 February 1996.

Likewise, he received a Certification dated 17 May 1996 from the PreQualification, Bids and Awards Committee of the Municipality of Malungon,
that the members thereof approved, concurred in and signed the contract of
lease between the municipality and Norlovanian Corporation.22
Finding that the prosecution had proven beyond reasonable doubt the guilt of
Constantino and Lindong of the offense as charged, the Sandiganbayan
rendered the assailed decision sentencing them both, thus:
WHEREFORE, judgment is hereby rendered finding accused FELIPE K.
CONSTANTINO and NORBERTO N. LINDONG GUILTY beyond reasonable
doubt of the crime of violation of Section 3 (e) of R.A. No. 3019, otherwise
known as "The Anti-Graft and Corrupt Practices Act," and said accused are
hereby sentenced, as follows:
(a) to suffer an indeterminate sentence of imprisonment for a period of six (6)
years and one (1) month as minimum to twelve (12) years and one (1) month
as maximum;
(b) to suffer perpetual disqualification from public office;
(c) to jointly and severally indemnify the Municipality of Malungon, Province of
Sarangani the sum of Two Million One Hundred Seventy-Seven Thousand [sic]
and 91/1000 [sic] Pesos (P2,177,090.91), representing the amount actually
paid to Norlovanian Corporation, with interest at the legal rate computed from
March 6, 1996 until fully paid; and
(d) to pay the costs of suit.
SO ORDERED.23
The Sandiganbayan held that neither manifest partiality nor evident bad faith
attended the commission of the offense. However, it found that petitioner
Constantino caused undue injury to the Municipality of Malungon through his
gross inexcusable negligence in executing only a lease agreement over the
fleet of heavy equipment. Anent Lindong, the graft court upheld his culpability
as co-conspirator of Constantino despite its finding that the latter violated the
anti-graft law through negligence only. The Sandiganbayan ratiocinated that
since the law violated is a special law, proof that he intended to commit the
particular offense was not essential, as it otherwise would have been for a
felony punishable by the Revised Penal Code. The Sandiganbayan ruled that
it was sufficient for the prosecution to have proven, as it did, that Lindong
allowed or failed to prevent Constantino from entering into an agreement which
was clearly contrary to law. Thus, even if petitioner was found guilty of causing
undue injury to the municipality through gross inexcusable negligence, the

anti-graft court concluded that his co-conspirator could likewise be held

liable.24
It appears that during trial, both accused were represented by the same
counsel. However, after judgment was rendered against them, Constantino
and Lindong filed separate appeals to the Supreme Court which have taken
disparate routes. On 25 April 2006, during the pendency of his present appeal,
Constantino passed away.25
Lindong himself likewise filed a petition for review on certiorari, docketed as
G.R. No. 142379, to seek a reversal of the Sandiganbayan decision finding
him guilty as Constantinos co-conspirator. On 10 July 2000, this Court denied
Lindongs petition for failure to state the material date of receipt of the assailed
decision of the Sandiganbayan. His subsequent attempts for reconsideration
proved futile. On 25 July 2001, the Court issued the Entry of Judgment in the
case.
Thereafter, the Sandiganbayan (First Division) issued three (3) orders relative
to the execution of judgment against Lindong, all of which are assailed by the
latter, in his petition for certiorari in G.R. No. 154482, for having been issued
with grave abuse of discretion. The Sandiganbayan issued on 16 May 2002
the first challenged order which directed petitioner Lindong to appear before it
in person for the execution of judgment. On 6 June 2002, the respondent court
issued a resolution, the second assailed order herein, denying Lindongs
urgent motion to defer execution of judgment. The third assailed order, a
resolution issued on 3 July 2002, directed the issuance of a bench warrant
against petitioner Lindong and the confiscation of his cash bond for provisional
liberty pending appeal, and required him to surrender his person to the court
and explain why judgment should not be rendered against the cash bond.
With the demise of Constantino during the pendency of his appeal, the same
should normally be regarded as moot and academic following the norm that
the death of the accused marks the extinction of his criminal liability.26
However, the present two petitions are so intertwined that the absolution of
Constantino is ultimately determinative of the absolution of Lindong. Indeed,
the exoneration of Constantino will necessarily signify the injustice of carrying
out the penalty imposed on Lindong. Thus, the Court in this instance has to
ascertain the merits of Constantinos appeal to prevent a developing
miscarriage of justice against Lindong.
The "moot and academic" principle is not a magical formula that can
automatically dissuade the courts in resolving a case. Courts will decide cases,
otherwise moot and academic, if: First, there is a grave violation of the
Constitution;27 Second, the exceptional character of the situation and the
paramount public interest is involved;28 Third, when constitutional issue raised
requires formulation of controlling principles to guide the bench, the bar, and

the public;29 and Fourth, the case is capable of repetition yet evading
review.30 In the instant case, the exceptional character of the appeals of
Constantino and Lindong in relation to each other, as well as the higher interest
of justice, requires that the Court determine the merits of the petition and not
dismiss the same outright on the ground of mootness.
The Ruling of the Court

has acted with manifest partiality, evident bad faith or gross inexcusable
negligence.32
There are two (2) modes of committing the offense, thus: (1) the public officer
caused any undue injury to any party, including the government; or (2) the
public officer gave any private party unwarranted benefits, advantage or
preference in the discharge of his functions.33 An accused may be charged
under either mode34 or under both should both modes concur.35

G.R. No. 140656

Petitioner Constantino impugned his conviction and asserted that the
Sandiganbayan erred in convicting him based on its finding that he violated
Resolution No. 21 by entering into a "Lease Agreement" with the Norlovanian
Corporation and for his failure to sign the accompanying "Undertaking."
Likewise, he argued that the evidence adduced by the prosecution was
insufficient to overcome the constitutional presumption of innocence in his
favor. Finally, Constantino contended that it was error for the Sandiganbayan
to disregard the findings of the Supreme Court en banc in the earlier case of
Constantino v. Hon. Ombudsman Desierto.31
Constantinos petition would have been granted and he would have been
absolved of criminal liability had he been still alive today. This is why it is so.
Section 3(e) of R.A. No. 3019 provides:
SEC. 3. Corrupt practices of public officers. In addition to acts or omissions
of public officers already penalized by existing law, the following shall
constitute corrupt practices of any public officer and are hereby declared to be
unlawful:
xxxx
(e) Causing any undue injury to any party, including the Government, or giving
any private party any unwarranted benefits, advantage, or preference in the
discharge of his official, administrative or judicial functions through manifest
partiality, evident bad faith or gross inexcusable negligence. This provision
shall apply to officers and employees of offices or government corporations
charged with the grant of licenses or permits or other concessions.
In order to be liable for violating the law, the following elements must concur:
(1) the accused is a public officer or a private person charged in conspiracy
with the former; (2) he or she causes undue injury to any party, whether the
government or a private party; (3) the said public officer commits the prohibited
acts during the performance of his or her official duties or in relation to his or
her public positions; (4) such undue injury is caused by giving unwarranted
benefits, advantage or preference to such parties; and (5) the public officer

Additionally, Section 3(e) poses the standard of manifest partiality, evident bad
faith or gross inexcusable negligence before liability can be had under the
provision. Manifest partiality is characterized by a clear, notorious or plain
inclination or predilection to favor one side rather than the other.36 Evident
bad faith connotes a manifest deliberate intent on the part of the accused to
do wrong or cause damage.37 Gross inexcusable negligence is defined as
negligence characterized by the want of even slight care, acting or omitting to
act in a situation where there is a duty to act, not inadvertently but willfully and
intentionally with a conscious indifference to consequences insofar as other
persons may be affected.38 Mere bad faith or partiality and negligence per se
are not enough for one to be held liable under the law since the act of bad faith
or partiality must in the first place be evident or manifest, respectively, while
the negligent deed should both be gross and inexcusable.39
As discussed previously, the Sandiganbayan held that manifest partiality could
not be rightfully imputed to Constantino.40 The prosecution did not present
proof that he was actuated with malice or fraud sufficient to meet the
requirement of proof beyond reasonable doubt.41 However, the respondent
court found that Constantinos act of entering into a purportedly pure lease
agreement instead of a lease/purchase agreement was a flagrant violation of
Resolution No. 21. In view of the rigid terms of the subject contract to which
Constantino assented, coupled by his failure to secure the concurrence of the
Sangguniang Bayan before entering into the agreement, the Sandiganbayan
found that his conduct constituted gross inexcusable negligence.42 Likewise,
the anti-graft court ruled that Constantinos acts resulted in undue injury to the
Municipality of Malungon.43 Notably, in the course of trial, the prosecution
admitted that it had no proof that unwarranted benefits and advantage had
been given to Norlovanian Corporation.44
Undoubtedly, the standard of culpability imposed by Section 3 of R.A. No. 3019
is quite high which, in this case, was not hurdled by the evidence presented
against Constantino. Verily, the prosecution failed to satisfy the requisite proof
to demonstrate Constantinos guilt beyond reasonable doubt. While
Constantino should have exercised more prudence when he transacted with
Norlovanian Corporation, he could not however be held liable for "gross
inexcusable negligence" as contemplated in R.A. No. 3019. Indeed, in the
earlier case of Constantino v. Desierto,45 the Court had already made an

express finding that petitioner Constantino did not violate the mandate of
Resolution No. 21 but instead merely carried out its directive.
That case was a special civil action for certiorari filed by Constantino to seek
the invalidation of the resolution of the Ombudsman finding him guilty of grave
misconduct prejudicial to the best interest of the service and/or gross neglect
of duty, and on that account, dismissing him from service. The controversy
arose from the same transaction entered into between Constantino and
Norlovanian Corporation and involved the same subject matter as in the case
at bar. The administrative complaint was initiated through a letter-complaint
and joint affidavit signed by Vice Mayor Espinosa and to it was appended a
certification signed by the Vice Mayor and Councilors Suson, Ingay, Asgapo,
Espinosa and Octavio.
In exonerating Constantino from the administrative charges, the Court found
that the evidence against him was inadequate to warrant his dismissal from
service on the grounds of grave misconduct, conduct prejudicial to the best
interest of the service and gross neglect of duty. More particularly, we made
the following pronouncements:
The explicit terms of Resolution No. 21, Series of 1996 clearly authorized
Mayor Constantino to "lease/purchase one (1) fleet of heavy equipment"
composed of seven (7) generally described units, through a "negotiated
contract." That resolution, as observed at the outset, contained no parameters
as of rate of rental, period of lease, purchase price. Pursuant thereto, Mayor
Constantino, representing the Municipality of Malungon, and Norberto
Lindong, representing the Norlovanian Corporation, executed two written
instruments of the same date and occasion, viz.:
One an agreement(on a standard printed form) dated Febr[ua]ry 28, 1996
for the lease by the corporation to the municipality of heavy equipment of the
number and description required by Resolution no. 21, and
Two an undertaking for the subsequent conveyance and transfer of
ownership of the equipment to the municipality at the end of the term of the
lease.
That the Members of the Sangguniang Bayan knew of this "lease/purchase" is
evident from Resolution No. 38, Series of 1996 unanimously enacted by them
shortly after delivery of the equipment. In that resolution they (1) declared that
"the Municipal Government ** has just acquired its fleet of heavy equipment
leased/purchased from the Norlovanian Corporation," and (2) requested
Mayor Constantino "to operate the newly acquired heavy equipment **
leased/purchase from the Norlovanian Corporation." The Resolution is
consistent with the allegations of Mayor Constantino which in any event are
not denied by the Councilors or Vice-Mayor Espinosa that:

1) the equipment was delivered to the Municipality by Norlovanian Corporation

on February 28, 1996 and duly inspected by Councilors Guilley, Ruez, Nallos
and Liray, as well as the Municipal Engineer and the Municipal Treasurer;
2) prior to the delivery of the units, the Vice Mayor and other Members of the
Sanguniang Bayan had opportunity to read the "Lease Agreement" as well as
the "Undertaking" but then raised no objections thereto;
3) neither did they raise any objections (a) at the session of the Municipal
Council on February 29, 1996, when Norberto Lindong explained the terms of
the "negotiated contract" of "lease/purchase," or (b) at the time that the units
were delivered and inspected by designated minicipal officials.
Now, it is germane to advert to the deplorable inaccuracies in the Joint Affidavit
of private respondents (P.L. Espinosa, Suson, Sr., Ingay, W. P. Espinosa,
Octavio, Asgapo) submitted as part of their complaint in the Ombudsmans
Office. The affidavit contains a clearly distorted version of Resolution No. 21
of February 22, 1996. In that document of the affiants described Resolution
No. 21 as authorizing Mayor Constantino "to purchase and acquire ** heavy
equipments (sic) to be paid within five (5) years at the yearly amortization of
P2.2 million **." This is a misleading reading of Resolution No. 21. As the most
cursory perusal of that resolution at once discloses, what the Mayor was
thereby empowered to do was "to enter into a negotiated contract" in the
Municipalitys behalf with "interested parties," in line with the expressed wish
of the Municipality to "lease/purchase one (1) fleet of heavy equipment **"
not simply to "purchase and acquire" said equipment (as complainant
Councilors aver). Neither does Resolution No. 21 state (contrary to
complainants description of it) that the price shall be "paid within five (5) years
at the yearly amortization of P2.2 million **;" indeed, as already above
stressed, the resolution is completely silent as regards any terms and
conditions of the "negotiated contract" that the Mayor was assigned to execute
in the towns behalf. Such obvious distortions cannot but erode the
complainant councilors credibility and bona fides.
It is also relevant to draw attention to the flagrantly inaccurate statements and
inferences about the Mayors "negotiated contract" regarding the heavy
equipment, contained in Resolution No. 47 approved only by four (4) Members
of the Municipal Council at its session of June 6, 1996 (the four (4) being
Councilors Octavio, Espinosa, Asgapo and Ingay). That Resolution No. 47, it
will be recalled, stopped all "rental payment/expenditures relative to the pool
of heavy equipment of the Norlovanian Company." The stoppage was based
on prior resolutions of the Council allegedly setting down the terms under
which the heavy equipment should be acquired, and which terms were
supposedly violated by the Mayor. but unaccountably and again indicative
of bad faith, if not malice, on the part of private respondents Resolution No.

47 made absolutely no reference to two (2) resolution which on their face justify
the Mayors contract with Norlovanian Corporation, to wit: (1) Resolution No.
21 which, having been enacted after the cited resolutions, must be deemed to
have superseded them, and which, to repeat, motivated and constitutes the
justification for the lease-purchase agreement entered into by the Mayor and
Norlovanian Corporation, and (2) Resolution No. 38 in which the Councilors
not only expressly aknowledged that "the municipal government ** (had) just
acquired its fleet of heavy equipment leased/purchased from the Norlovanian
Corporation," but also "requested ** (the) Mayor ** to operate the newly
acquired heavy equipment of the municipality leased/purchased from the
Norlovanian Corporation."
In light of the forego[i]ng facts, which appear to the Court to be quite apparent
on the record, it is difficult to perceive how the Office of the Ombudsman could
have arrived at a conclusion of any wrongdoing by the Mayor in relation to the
transaction in question. It is difficult to see how the transaction between the
Mayor and Norlovanian Corporation entered into pursuant to Resolution No.
21 and tacitly accepted and approved by the town Council through its
Resolution No. 38 could be deemed an infringement of the same Resolution
No. 21. In truth, an examination of the pertinent writings (the resolution, the
two (2) instruments constituting the negotiated contract, and the certificate of
delivery) unavoidably confirms their integrity and congruity. It is in fine, difficult
to see how those pertinent written instrument, could establish a prima facie
case to warrant the preventive suspension of Mayor Constantino. A person
with the most elementary grasp of the English language would, from merely
scanning those material documents, at once realize that the Mayor had done
nothing but carry out the expressed wishes of the Sangguniang Bayan.
xxxx
The investigator also opined that Resolution No. 21 should be interpreted in
light of other official documents, executed a year earlier. He [Graft Prosecutor
Buena] does not explain why he did not adopt the more obvious construction
of Resolution No. 21 indicated by the elementary doctrine that it is within the
power and prerogative of the town council to repeal its prior acts, either
expressly, or by the passage of essentially inconsistent resolutions. When the
town council passed Resolution No. 21 without any mention whatever of those
prior official documents respecting the acquisition to heavy equipment, the
evident intention was to supersede them and to have such acquisition
governed solely by Resolution No. 21. This conclusion is strongly supported
by the fact that the Sanggunian expressly admitted in the Second Whereas
Clause of its Resolution No. 21 that there had been a "failure of bidders to
submit bids despite of two biddings ... public announcement" [sic] the two
biddings being obviously related to said earlier official acts of the town council.
The conclusion is further bolstered by the fact that the Council (with full
awareness of said "negotiated contract,") and of the delivery of equipment

thereunder, had requested the Mayor to put the equipment into operation for
the town projects. The Court is thus satisfied that it was in fact the Councils
intention, which it expressed in clear language, to confer on the Mayor ample
discretion to execute a "negotiated contract" with any interested party, without
regard to any official acts of the Council prior to Resolution No. 21.
It is also difficult to see why the patent inaccuracies in the affidavit-complaint
and Resolution No. 47 were ignored as difficult to understand how the
execution of two writings to embody one contract of "lease/purchase" could be
regarded as fatally defective, and even indicative of a criminal conspiracy, or
why said two writings should be interpreted in such a way as to magnify their
seeming inconsistencies. The fundamental and familiar legal principle which
the Office of the Ombudsman ignored is that it is perfectly legitimate for a
bilateral contract to be embodied in two or more separate writings, and that in
such an event the writings should be read and interpreted together in such a
way as to eliminate seeming inconsistencies and render the parties intention
effectual.
The statement in the appealed Resolution as to the absence of prior consent
of the Council to the "negotiated contract" executed by Mayor Constantino and
Norlovanian Corporation flies in the teeth of the evidence; there is
unrebutted proof that the heavy equipment delivered to the Municipality
pursuant to the contract, was inspected by designated councilors and
municipal officers; that shortly thereafter, the negotiated contract composed
of two documents was explained and discussed at the session of the town
Council of February 29, 1996; and that afterwards the Council requested
Mayor Constantino to put the equipment into operation. (Emphasis supplied)46
Although the instant case involves a criminal charge whereas Constantino
involved an administrative charge, still the findings in the latter case are
binding herein because the same set of facts are the subject of both cases.
What is decisive is that the issues already litigated in a final and executory
judgment preclude by the principle of bar by prior judgment, an aspect of the
doctrine of res judicata, and even under the doctrine of "law of the case,"
the re-litigation of the same issue in another action.47 It is well established that
when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, it should be
conclusive upon the parties and those in privity with them.48 The dictum
therein laid down became the law of the case and what was once irrevocably
established as the controlling legal rule or decision continues to be binding
between the same parties as long as the facts on which the decision was
predicated continue to be the facts of the case before the court. Hence, the
binding effect and enforceability of that dictum can no longer be resurrected
anew since such issue had already been resolved and finally laid to rest, if not
by the principle of res judicata, at least by conclusiveness of judgment.49

It may be true that the basis of administrative liability differs from criminal
liability as the purpose of administrative proceedings on the one hand is mainly
to protect the public service, based on the time-honored principle that a public
office is a public trust. On the other hand, the purpose of the criminal
prosecution is the punishment of crime.50 However, the dismissal by the Court
of the administrative case against Constantino based on the same subject
matter and after examining the same crucial evidence operates to dismiss the
criminal case because of the precise finding that the act from which liability is
anchored does not exist.
It is likewise clear from the decision of the Court in Constantino that the level
of proof required in administrative cases which is substantial evidence was not
mustered therein. The same evidence is again before the Court in connection
with the appeal in the criminal case. Ineluctably, the same evidence cannot
with greater reason satisfy the higher standard in criminal cases such as the
present case which is evidence beyond reasonable doubt.
The elementary principle is that it is perfectly legitimate for a bilateral contract
to be embodied in two or more separate writings, and that in such an event the
writings should be read and interpreted together in such a way as to eliminate
seeming inconsistencies and render the intention of the parties effectual.51 In
construing a written contract, the reason behind and the circumstances
surrounding its execution are of paramount importance to place the interpreter
in the situation occupied by the parties concerned at the time the writing was
executed.52 Construction of the terms of a contract, which would amount to
impairment or loss of right, is not favored. Conservation and preservation, not
waiver, abandonment or forfeiture of a right, is the rule.53 In case of doubts in
contracts, the same should be settled in favor of the greatest reciprocity of
interests.54
G.R. No. 154482
Lindong ascribes grave abuse of discretion on the part of respondent court in
issuing the challenged orders. He argues that the Sandiganbayan erred in not
holding in abeyance the execution of judgment against him in light of the
pending petition for review by his co-accused before this Court of the same
decision for which he was convicted. Should the decision be set aside by the
Supreme Court, petitioner Lindong contends, he will be benefited to the extent
that there can no longer be any judgment to legally execute against both
himself and Constantino.

functions, or that he or she is a private individual in conspiracy with such public

officer. In the instant case, the essential acquittal of Constantino, as presaged
in G.R. No. 140656 and presented in the disquisition, renders an absence in
the critical requisite of a public officer with whom Lindong, the private
individual, allegedly conspired to commit the crime charged.
Hence, we now have before us an incongruous situation where execution of
judgment has been entered against a private person accused with conspiring
with a public officer for violation of the anti-graft law, but at the same time said
public officer would unequivocably be entitled to exoneration had he not died
in the meantime. Yet, it is utterly illogical to absolve Constantino who entered
into the contract on behalf of the government and send the private person to
prison.
The case of Marcos v. Sandiganbayan (1st Division)55 is instructive. Here, the
Court granted the motion for reconsideration filed by former First Lady Imelda
Marcos and acquitted her of the charge of violating Section 3(g) of R.A. No.
3019. Her acquittal was based on the finding that she signed the subject lease
agreement not as a public officer, but as a private person. Thus, the Court
found that the first element of the offense, i.e., that the accused is a public
officer, was lacking. However, the acquittal of the former First Lady was taken
in conjunction with the acquittal of the public officer with whom she was
accused.56
The case of Go v. The Fifth Division, Sandiganbayan, et al.57 further
elucidates the matter as illustrated in Marcos, to wit:
x x x [T]he acquittal of the former First Lady should be taken in the context of
the Courts Decision dated January 29, 1198, in Dans, Jr. v. People, which the
former First Lady sought to reconsider and, finding merit in her motion, gave
rise to the Courts Resolution in Marcos. In Dans, the Information filed against
the former First Lady and Jose P. Dans, Jr., then Minister of Transportation
and Communications, for violation of Section 3(g) of R[.]A[.] [No.] 3019, alleged
that they were both public officers and, conspiring with each other, entered into
the subject lease agreement covering the LRTA property with the PGHFI, a
private entity, under terms and conditions manifestly and grossly
disadvantageous to the government.

The virtual acquittal of Constantino inevitably puts a welcome end to the

tribulations of Lindong. Thus, we grant the petition.

The Court in its original decision affirmed the former First Ladys conviction for
violation of Section 3(g) of R[.]A[.] [No.] 3019 but acquitted her co-accused,
Dans, Jr., of the said offense. As stated earlier, upon the former First Ladys
motion for reconsideration, the Court reversed her conviction in its Resolution
in Marcos.

One of the essential elements for violating Section 3(e) of R.A. No. 3019 is that
the respondent is a public officer discharging administrative, judicial or official

It can be gleaned from the entire context of Marcos and Dans that the reversal
of the former First Ladys conviction was based on the fact that it was later held

that she signed the subject lease agreement as a private person, not a public
officer. However, this acquittal should also be taken in conjunction with the fact
that the public officer with whom she had supposedly conspired, her coaccused Dans, had earlier been acquitted. In other words, the element that the
accused is a public officer, was totally wanting in the former First Ladys case
because Dans, the public officer with whom she had allegedly conspired in
committing Section 3(g) of R[.]A[.] [No.] 3019, had already been acquitted.
Obviously, the former First Lady could not be convicted, on her own as a
private person, of the same offense. (Emphasis supplied)
It is therefore apparent that in light of the prevailing milieu in the instant case,
we cannot sustain the execution of judgment against Lindong. The reversal of
the decision of the Sandiganbayan in Criminal Case No. 23433 makes it legally
absurd to execute any such judgment against him.
Moreover, Rule 122, Section 11(a) of the Revised Rules of Criminal Procedure
operates in his favor. The Rule provides:
SEC. 11. Effect of appeal by any of several accused.
(a) An appeal taken by one or more of several accused shall not affect those
who did not appeal, except insofar as the judgment of the appellate court is
favorable and applicable to the latter.
Although the rule states that a favorable judgment shall benefit those who did
not appeal, we have held that a literal interpretation of the phrase "did not
appeal" will not give justice to the purpose of the provision. It should be read
in its entirety and should not be myopically construed so as to defeat its reason,
i.e., to benefit an accused who did not join in the appeal of his co-accused in
case where the appellate judgment is favorable.58
In fact, the Court has at various times applied the foregoing provision without
regard to the filing or non-filing of an appeal by a co-accused, so long as the
judgment was favorable to him. In such cases, the co-accused already
withdrew his appeal,59 failed to file an appellants brief,60 or filed a notice of
appeal with the trial court but eventually withdrew the same.61 Even more, in
these cases, all the accused appealed from the judgment of conviction but for
one reason or another, their conviction had already become final and
executory. Nevertheless, the Court still applied to them the favorable judgment
in favor of their co-accused.62 Therefore, we cannot find a reason to treat
Lindong differently, especially so in this case where the public officer accused
of violating the anti-graft law has been acquitted, and the appeal by Lindong
was dismissed on a technicality.

WHEREFORE, the petition in G.R. No. 140656, although meritorious, is

DENIED on the ground of mootness. The petition in G.R. No. 154482 is
GRANTED. The challenged orders of the
Sandiganbayan in Criminal Case No. 23433 are NULLIFIED and SET ASIDE.
The Sandiganbayan is permanently enjoined from executing said orders.
SO ORDERED.

3. ESCANO v. ORTIGAS
SECOND DIVISION
SALVADOR P. ESCAO G. R. No. 151953
and MARIO M. SILOS,
Petitioners,
Present:
QUISUMBING,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
RAFAEL ORTIGAS, JR., VELASCO, JR., JJ.
Respondent.
Promulgated:

of the same loan by other stockholders and officers of Falcon, acting in their
personal and individual capacities. One Guaranty[4] was executed by
petitioner Salvador Escao (Escao), while the other[5] by petitioner Mario M.
Silos (Silos), Ricardo C. Silverio (Silverio), Carlos L. Inductivo (Inductivo) and
Joaquin J. Rodriguez (Rodriguez).
Two years later, an agreement developed to cede control of Falcon to Escao,
Silos and Joseph M. Matti (Matti). Thus, contracts were executed whereby
Ortigas, George A. Scholey, Inductivo and the heirs of then already deceased
George T. Scholey assigned their shares of stock in Falcon to Escao, Silos
and Matti.[6] Part of the consideration that induced the sale of stock was a
desire by Ortigas, et al., to relieve themselves of all liability arising from their
previous joint and several undertakings with Falcon, including those related to
the loan with PDCP. Thus, an Undertaking dated 11 June 1982 was executed
by the concerned parties,[7] namely: with Escao, Silos and Matti identified in
the document as SURETIES, on one hand, and Ortigas, Inductivo and the
Scholeys as OBLIGORS, on the other. The Undertaking reads in part:

June 29, 2007

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

3.
That whether or not SURETIES are able to immediately cause PDCP
and PAIC to release OBLIGORS from their said guarantees [sic], SURETIES
hereby irrevocably agree and undertake to assume all of OBLIGORs said
guarantees [sic] to PDCP and PAIC under the following terms and conditions:

DECISION
TINGA, J.:
The main contention raised in this petition is that petitioners are not under
obligation to reimburse respondent, a claim that can be easily debunked. The
more perplexing question is whether this obligation to repay is solidary, as
contended by respondent and the lower courts, or merely joint as argued by
petitioners.

On 28 April 1980, Private Development Corporation of the Philippines

(PDCP)[1] entered into a loan agreement with Falcon Minerals, Inc. (Falcon)
whereby PDCP agreed to make available and lend to Falcon the amount of
US$320,000.00, for specific purposes and subject to certain terms and
conditions.[2] On the same day, three stockholders-officers of Falcon, namely:
respondent Rafael Ortigas, Jr. (Ortigas), George A. Scholey and George T.
Scholey executed an Assumption of Solidary Liability whereby they agreed to
assume in [their] individual capacity, solidary liability with [Falcon] for the due
and punctual payment of the loan contracted by Falcon with PDCP.[3] In the
meantime, two separate guaranties were executed to guarantee the payment

a. Upon receipt by any of [the] OBLIGORS of any demand from PDCP and/or
PAIC for the payment of FALCONs obligations with it, any of [the] OBLIGORS
shall immediately inform SURETIES thereof so that the latter can timely take
appropriate measures;
b. Should suit be impleaded by PDCP and/or PAIC against any and/or all of
OBLIGORS for collection of said loans and/or credit facilities, SURETIES
agree to defend OBLIGORS at their own expense, without prejudice to any
and/or all of OBLIGORS impleading SURETIES therein for contribution,
indemnity, subrogation or other relief in respect to any of the claims of PDCP
and/or PAIC; and

c.
In the event that any of [the] OBLIGORS is for any reason made to pay
any amount to PDCP and/or PAIC, SURETIES shall reimburse OBLIGORS for
said amount/s within seven (7) calendar days from such payment;

4. OBLIGORS hereby waive in favor of SURETIES any and all fees which may
be due from FALCON arising out of, or in connection with, their said
guarantees[sic].[8]
Falcon eventually availed of the sum of US$178,655.59 from the credit line
extended by PDCP. It would also execute a Deed of Chattel Mortgage over its
personal properties to further secure the loan. However, Falcon subsequently
defaulted in its payments. After PDCP foreclosed on the chattel mortgage,
there remained a subsisting deficiency of P5,031,004.07, which Falcon did not
satisfy despite demand.[9]
On 28 April 1989, in order to recover the indebtedness, PDCP filed a complaint
for sum of money with the Regional Trial Court of Makati (RTC) against Falcon,
Ortigas, Escao, Silos, Silverio and Inductivo. The case was docketed as Civil
Case No. 89-5128. For his part, Ortigas filed together with his answer a crossclaim against his co-defendants Falcon, Escao and Silos, and also manifested
his intent to file a third-party complaint against the Scholeys and Matti.[10] The
cross-claim lodged against Escao and Silos was predicated on the 1982
Undertaking, wherein they agreed to assume the liabilities of Ortigas with
respect to the PDCP loan.
Escao, Ortigas and Silos each sought to seek a settlement with PDCP. The
first to come to terms with PDCP was Escao, who in December of 1993,
entered into a compromise agreement whereby he agreed to pay the bank
P1,000,000.00. In exchange, PDCP waived or assigned in favor of Escao onethird (1/3) of its entire claim in the complaint against all of the other defendants
in the case.[11] The compromise agreement was approved by the RTC in a
Judgment[12] dated 6 January 1994.
Then on 24 February 1994, Ortigas entered into his own compromise
agreement[13] with PDCP, allegedly without the knowledge of Escao, Matti
and Silos. Thereby, Ortigas agreed to pay PDCP P1,300,000.00 as full
satisfaction of the PDCPs claim against Ortigas,[14] in exchange for PDCPs
release of Ortigas from any liability or claim arising from the Falcon loan
agreement, and a renunciation of its claims against Ortigas.
In 1995, Silos and PDCP entered into a Partial Compromise Agreement
whereby he agreed to pay P500,000.00 in exchange for PDCPs waiver of its
claims against him.[15]
In the meantime, after having settled with PDCP, Ortigas pursued his claims
against Escao, Silos and Matti, on the basis of the 1982 Undertaking. He
initiated a third-party complaint against Matti and Silos,[16] while he
maintained his cross-claim against Escao. In 1995, Ortigas filed a motion for
Summary Judgment in his favor against Escao, Silos and Matti. On 5 October
1995, the RTC issued the Summary Judgment, ordering Escao, Silos and Matti

to pay Ortigas, jointly and severally, the amount of P1,300,000.00, as well as

P20,000.00 in attorneys fees.[17] The trial court ratiocinated that none of the
third-party defendants disputed the 1982 Undertaking, and that the mere
denials of defendants with respect to non-compliance of Ortigas of the terms
and conditions of the Undertaking, unaccompanied by any substantial fact
which would be admissible in evidence at a hearing, are not sufficient to raise
genuine issues of fact necessary to defeat a motion for summary judgment,
even if such facts were raised in the pleadings.[18] In an Order dated 7 March
1996, the trial court denied the motion for reconsideration of the Summary
Judgment and awarded Ortigas legal interest of 12% per annum to be
computed from 28 February 1994.[19]

From the Summary Judgment, recourse was had by way of appeal to the Court
of Appeals. Escao and Silos appealed jointly while Matti appealed by his
lonesome. In a Decision[20] dated 23 January 2002, the Court of Appeals
dismissed the appeals and affirmed the Summary Judgment. The appellate
court found that the RTC did not err in rendering the summary judgment since
the three appellants did not effectively deny their execution of the 1982
Undertaking. The special defenses that were raised, payment and excussion,
were characterized by the Court of Appeals as appear[ing] to be merely sham
in the light of the pleadings and supporting documents and affidavits.[21] Thus,
it was concluded that there was no genuine issue that would still require the
rigors of trial, and that the appealed judgment was decided on the bases of the
undisputed and established facts of the case.
Hence, the present petition for review filed by Escao and Silos.[22] Two main
issues are raised. First, petitioners dispute that they are liable to Ortigas on
the basis of the 1982 Undertaking, a document which they do not disavow and
have in fact annexed to their petition. Second, on the assumption that they are
liable to Ortigas under the 1982 Undertaking, petitioners argue that they are
jointly liable only, and not solidarily. Further assuming that they are liable,
petitioners also submit that they are not liable for interest and if at all, the
proper interest rate is 6% and not 12%.
Interestingly, petitioners do not challenge, whether in their petition or their
memorandum before the Court, the appropriateness of the summary judgment
as a relief favorable to Ortigas. Under Section 3, Rule 35 of the 1997 Rules of
Civil Procedure, summary judgment may avail if the pleadings, supporting
affidavits, depositions and admissions on file show that, except as to the
amount of damages, there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law. Petitioner have
not attempted to demonstrate before us that there existed a genuine issue as

to any material fact that would preclude summary judgment. Thus, we affirm
with ease the common rulings of the lower courts that summary judgment is
an appropriate recourse in this case.
The vital issue actually raised before us is whether petitioners were correctly
held liable to Ortigas on the basis of the 1982 Undertaking in this Summary
Judgment. An examination of the document reveals several clauses that make
it clear that the agreement was brought forth by the desire of Ortigas, Inductivo
and the Scholeys to be released from their liability under the loan agreement
which release was, in turn, part of the consideration for the assignment of their
shares in Falcon to petitioners and Matti. The whereas clauses manifest that
Ortigas had bound himself with Falcon for the payment of the loan with PDCP,
and that amongst the consideration for OBLIGORS and/or their principals
aforesaid selling is SURETIES relieving OBLIGORS of any and all liability
arising from their said joint and several undertakings with FALCON.[23] Most
crucial is the clause in Paragraph 3 of the Undertaking wherein petitioners
irrevocably agree and undertake to assume all of OBLIGORs said guarantees
[sic] to PDCP x x x under the following terms and conditions.[24]
At the same time, it is clear that the assumption by petitioners of Ortigass
guarantees [sic] to PDCP is governed by stipulated terms and conditions as
set forth in sub-paragraphs (a) to (c) of Paragraph 3. First, upon receipt by any
of OBLIGORS of any demand from PDCP for the payment of Falcons
obligations with it, any of OBLIGORS was to immediately inform SURETIES
thereof so that the latter can timely take appropriate measures. Second, should
any and/or all of OBLIGORS be impleaded by PDCP in a suit for collection of
its loan, SURETIES agree[d] to defend OBLIGORS at their own expense,
without prejudice to any and/or all of OBLIGORS impleading SURETIES
therein for contribution, indemnity, subrogation or other relief[25] in respect to
any of the claims of PDCP. Third, if any of the OBLIGORS is for any reason
made to pay any amount to [PDCP], SURETIES [were to] reimburse
OBLIGORS for said amount/s within seven (7) calendar days from such
payment.[26]

Petitioners claim that, contrary to paragraph 3(c) of the Undertaking, Ortigas

was not made to pay PDCP the amount now sought to be reimbursed, as
Ortigas voluntarily paid PDCP the amount of P1.3 Million as an amicable
settlement of the claims posed by the bank against him. However, the subject
clause in paragraph 3(c) actually reads [i]n the event that any of OBLIGORS
is for any reason made to pay any amount to PDCP x x x[27] As pointed out
by Ortigas, the phrase for any reason reasonably includes any extra-judicial
settlement of obligation such as what Ortigas had undertaken to pay to PDCP,

as it is indeed obvious that the phrase was incorporated in the clause to render
the eventual payment adverted to therein unlimited and unqualified.
The interpretation posed by petitioners would have held water had the
Undertaking made clear that the right of Ortigas to seek reimbursement
accrued only after he had delivered payment to PDCP as a consequence of a
final and executory judgment. On the contrary, the clear intent of the
Undertaking was for petitioners and Matti to relieve the burden on Ortigas and
his fellow OBLIGORS as soon as possible, and not only after Ortigas had been
subjected to a final and executory adverse judgment.

Paragraph 1 of the Undertaking enjoins petitioners to exert all efforts to cause

PDCP x x x to within a reasonable time release all the OBLIGORS x x x from
their guarantees [sic] to PDCP x x x[28] In the event that Ortigas and his fellow
OBLIGORS could not be released from their guaranties, paragraph 2 commits
petitioners and Matti to cause the Board of Directors of Falcon to make a call
on its stockholders for the payment of their unpaid subscriptions and to pledge
or assign such payments to Ortigas, et al., as security for whatever amounts
the latter may be held liable under their guaranties. In addition, paragraph 1
also makes clear that nothing in the Undertaking shall prevent OBLIGORS, or
any one of them, from themselves negotiating with PDCP x x x for the release
of their said guarantees [sic].[29]
There is no argument to support petitioners position on the import of the phrase
made to pay in the Undertaking, other than an unduly literalist reading that is
clearly inconsistent with the thrust of the document. Under the Civil Code, the
various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly.[30]
Likewise applicable is the provision that if some stipulation of any contract
should admit of several meanings, it shall be understood as bearing

that import which is most adequate to render it effectual.[31] As a means to

effect the general intent of the document to relieve Ortigas from liability to
PDCP, it is his interpretation, not that of petitioners, that holds sway with this
Court.
Neither do petitioners impress us of the non-fulfillment of any of the other
conditions set in paragraph 3, as they claim. Following the general assertion
in the petition that Ortigas violated the terms of the Undertaking, petitioners

add that Ortigas paid PDCP BANK the amount of P1.3 million without
petitioners ESCANO and SILOSs knowledge and consent.[32] Paragraph 3(a)
of the Undertaking does impose a requirement that any of the OBLIGORS shall
immediately inform SURETIES if they received any demand for payment of
FALCONs obligations to PDCP, but that requirement is reasoned so that the
[SURETIES] can timely take appropriate measures[33] presumably to settle
the obligation without having to burden the OBLIGORS. This notice
requirement in paragraph 3(a) is markedly way off from the suggestion of
petitioners that Ortigas, after already having been impleaded as a defendant
in the collection suit, was obliged under the 1982 Undertaking to notify them
before settling with PDCP.

The other arguments petitioners have offered to escape liability to Ortigas are
similarly weak.

At the same time, the Undertaking did not preclude Ortigas from relieving his
distress through a settlement with the creditor bank. Indeed, paragraph 1 of
the Undertaking expressly states that nothing herein shall prevent OBLIGORS,
or any one of them, from themselves negotiating with PDCP x x x for the
release of their said guarantees [sic].[36] Simply put, the Undertaking did not
bar Ortigas from pursuing his own settlement with PDCP. Neither did the
Undertaking bar Ortigas from recovering from petitioners whatever amount he
may have paid PDCP through his own settlement. The stipulation that if
Ortigas was for any reason made to pay any amount to PDCP[,] x x x
SURETIES shall reimburse OBLIGORS for said amount/s within seven (7)
calendar days from such payment[37] makes it clear that petitioners remain
liable to reimburse Ortigas for the sums he paid PDCP.

We now turn to the set of arguments posed by petitioners, in the alternative,

that is, on the assumption that they are indeed liable.

Petitioners impugn Ortigas for having settled with PDCP in the first place. They
note that Ortigas had, in his answer, denied any liability to PDCP and had
alleged that he signed the Assumption of Solidary Liability not in his personal
capacity, but as an officer of Falcon. However, such position, according to
petitioners, could not be justified since Ortigas later voluntarily paid PDCP the
amount of P1.3 Million. Such circumstances, according to petitioners,
amounted to estoppel on the part of Ortigas.

Petitioners submit that they could only be held jointly, not solidarily, liable to
Ortigas, claiming that the Undertaking did not provide for express solidarity.
They cite Article 1207 of the New Civil Code, which states in part that [t]here
is a solidary liability only when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity.

Even as we entertain this argument at depth, its premises are still erroneous.
The Partial Compromise Agreement between PDCP and Ortigas expressly
stipulated that Ortigass offer to pay PDCP was conditioned without [Ortigass]
admitting liability to plaintiff PDCP Banks complaint, and to terminate and
dismiss the said case as against Ortigas solely.[34] Petitioners profess it is
unthinkable for Ortigas to have voluntarily paid PDCP without admitting his
liability,[35] yet such contention based on assumption cannot supersede the
literal terms of the Partial Compromise Agreement.

Ortigas in turn argues that petitioners, as well as Matti, are jointly and severally
liable for the Undertaking, as the language used in the agreement clearly
shows that it is a surety agreement[38] between the obligors (Ortigas group)
and the sureties (Escao group). Ortigas points out that the Undertaking uses
the word SURETIES although the document, in describing the parties. It is
further contended that the principal objective of the parties in executing the
Undertaking cannot be attained unless petitioners are solidarily liable because
the total loan obligation can not be paid or settled to free or release the
OBLIGORS if one or any of the SURETIES default from their obligation in the
Undertaking.[39]

Petitioners further observe that Ortigas made the payment to PDCP after he
had already assigned his obligation to petitioners through the 1982
Undertaking. Yet the fact is PDCP did pursue a judicial claim against Ortigas
notwithstanding the Undertaking he executed with petitioners. Not being a
party to such Undertaking, PDCP was not precluded by a contract from
pursuing its claim against Ortigas based on the original Assumption of Solidary
Liability.

In case, there is a concurrence of two or more creditors or of two or more

debtors in one and the same obligation, Article 1207 of the Civil Code states
that among them, [t]here is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires
solidarity. Article 1210 supplies further caution against the broad interpretation

of solidarity by providing: The indivisibility of an obligation does not necessarily

give rise to solidarity. Nor does solidarity of itself imply indivisibility.
These Civil Code provisions establish that in case of concurrence of two or
more creditors or of two or more debtors in one and the same obligation, and
in the absence of express and indubitable terms characterizing the obligation
as solidary, the presumption is that the obligation is only joint. It thus becomes
incumbent upon the party alleging that the obligation is indeed solidary in
character to prove such fact with a preponderance of evidence.
The Undertaking does not contain any express stipulation that the petitioners
agreed to bind themselves jointly and severally in their obligations to the
Ortigas group, or any such terms to that effect. Hence, such obligation
established in the Undertaking is presumed only to be joint. Ortigas, as the
party alleging that the obligation is in fact solidary, bears the burden to
overcome the presumption of jointness of obligations. We rule and so hold that
he failed to discharge such burden.

Ortigas places primary reliance on the fact that the petitioners and Matti
identified themselves in the Undertaking as SURETIES, a term repeated no
less than thirteen (13) times in the document. Ortigas claims that such manner
of identification sufficiently establishes that the obligation of petitioners to him
was joint and solidary in nature.
The term surety has a specific meaning under our Civil Code. Article 2047
provides the statutory definition of a surety agreement, thus:
Art. 2047. By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter should
fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the
contract is called a suretyship. [Emphasis supplied][40]
As provided in Article 2047 in a surety agreement the surety undertakes to be
bound solidarily with the principal debtor. Thus, a surety agreement is an
ancillary contract as it presupposes the existence of a principal contract. It
appears that Ortigass argument rests solely on the solidary nature of the
obligation of the surety under Article 2047. In tandem with the nomenclature
SURETIES accorded to petitioners and Matti in the Undertaking, however, this
argument can only be viable if the obligations established in the

Undertaking do partake of the nature of a suretyship as defined under Article

2047 in the first place. That clearly is not the case here, notwithstanding the
use of the nomenclature SURETIES in the Undertaking.
Again, as indicated by Article 2047, a suretyship requires a principal debtor to
whom the surety is solidarily bound by way of an ancillary obligation of
segregate identity from the obligation between the principal debtor and the
creditor. The suretyship does bind the surety to the creditor, inasmuch as the
latter is vested with the right to proceed against the former to collect the credit
in lieu of proceeding against the principal debtor for the same obligation.[41]
At the same time, there is also a legal tie created between the surety and the
principal debtor to which the creditor is not privy or party to. The moment the
surety fully answers to the creditor for the obligation created by the principal
debtor, such obligation is extinguished.[42] At the same time, the surety may
seek reimbursement from the principal debtor for the amount paid, for the
surety does in fact become subrogated to all the rights and remedies of the
creditor.[43]

Note that Article 2047 itself specifically calls for the application of the
provisions on joint and solidary obligations to suretyship contracts.[44] Article
1217 of the Civil Code thus comes into play, recognizing the right of
reimbursement from a co-debtor (the principal debtor, in case of suretyship) in
favor of the one who paid (i.e., the surety).[45] However, a significant
distinction still lies between a joint and several debtor, on one hand, and a
surety on the other. Solidarity signifies that the creditor can compel any one of
the joint and several debtors or the surety alone to answer for the entirety of
the principal debt. The difference lies in the respective faculties of the joint and
several debtor and the surety to seek reimbursement for the sums they paid
out to the creditor.
Dr. Tolentino explains the differences between a solidary co-debtor and a
surety:
A guarantor who binds himself in solidum with the principal debtor under the
provisions of the second paragraph does not become a solidary co-debtor to
all intents and purposes. There is a difference between a solidary co-debtor
and a fiador in solidum (surety). The latter, outside of the liability he assumes
to pay the debt before the property of the principal debtor has been exhausted,
retains all the other rights, actions and benefits which pertain to him by reason
of the fiansa; while a solidary co-debtor has no other rights than those
bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the Civil Code.

The second paragraph of [Article 2047] is practically equivalent to the contract

of suretyship. The civil law suretyship is, accordingly, nearly synonymous with
the common law guaranty; and the civil law relationship existing between the
co-debtors liable in solidum is similar to the common law suretyship.[46]
In the case of joint and several debtors, Article 1217 makes plain that the
solidary debtor who effected the payment to the creditor may claim from his
co-debtors only the share which corresponds to each, with the interest for the
payment already made. Such solidary debtor will not be able to recover from
the co-debtors the full amount already paid to the creditor, because the right
to recovery extends only to the proportional share of the other co-debtors, and
not as to the particular proportional share of the solidary debtor who already
paid. In contrast, even as the surety is solidarily bound with the principal debtor
to the creditor, the surety who does pay the creditor has the right to recover
the full amount paid, and not just any proportional share, from the principal
debtor or debtors. Such right to full reimbursement falls within the other rights,
actions and benefits which pertain to the surety by reason of the subsidiary
obligation assumed by the surety.
What is the source of this right to full reimbursement by the surety? We find
the right under Article 2066 of the Civil Code, which assures that [t]he
guarantor who pays for a debtor must be indemnified by the latter, such
indemnity comprising of, among others, the total amount of the debt.[47]
Further, Article 2067 of the Civil Code likewise establishes that [t]he guarantor
who pays is subrogated by virtue thereof to all the rights which the creditor had
against the debtor.[48]
Articles 2066 and 2067 explicitly pertain to guarantors, and one might argue
that the provisions should not extend to sureties, especially in light of the
qualifier in Article 2047 that the provisions on joint and several obligations
should apply to sureties. We reject that argument, and instead adopt Dr.
Tolentinos observation that [t]he reference in the second paragraph of [Article
2047] to the provisions of Section 4, Chapter 3, Title I, Book IV, on solidary or
several obligations, however, does not mean that suretyship is withdrawn from
the applicable provisions governing guaranty.[49] For if that were not the
implication, there would be no material difference between the surety as
defined under Article 2047 and the joint and several debtors, for both classes
of obligors would be governed by exactly the same rules and limitations.
Accordingly, the rights to indemnification and subrogation as established and
granted to the guarantor by Articles 2066 and 2067 extend as well to sureties
as defined under Article 2047. These rights granted to the surety who pays
materially differ from those granted under Article 1217 to the solidary debtor
who pays, since the indemnification that pertains to the latter extends only [to]
the share which corresponds to each [co-debtor]. It is for this reason that the

Court cannot accord the conclusion that because petitioners are identified in
the Undertaking as SURETIES, they are consequently joint and severally liable
to Ortigas.
In order for the conclusion espoused by Ortigas to hold, in light of the general
presumption favoring joint liability, the Court would have to be satisfied that
among the petitioners and Matti, there is one or some of them who stand as
the principal debtor to Ortigas and another as surety who has the right to full
reimbursement from the principal debtor or debtors. No suggestion is made by
the parties that such is the case, and certainly the Undertaking is not revelatory
of such intention. If the Court were to give full fruition to the use of the term
SURETIES as conclusive indication of the existence of a surety agreement
that in turn gives rise to a solidary obligation to pay Ortigas, the necessary
implication would be to lay down a corresponding set of rights and obligations
as between the SURETIES which petitioners and Matti did not clearly intend.
It is not impossible that as between Escao, Silos and Matti, there was an
agreement whereby in the event that Ortigas were to seek reimbursement from
them per the terms of the Undertaking, one of them was to act as surety and
to pay Ortigas in full, subject to his right to full reimbursement from the other
two obligors. In such case, there would have been, in fact, a surety agreement
which evinces a solidary obligation in favor of Ortigas. Yet if there was indeed
such an agreement, it does not appear on the record. More consequentially,
no such intention is reflected in the Undertaking itself, the very document that
creates the conditional obligation that petitioners and Matti reimburse Ortigas
should he be made to pay PDCP. The mere utilization of the term SURETIES
could not work to such effect, especially as it does not appear who exactly is
the principal debtor whose obligation is assured or guaranteed by the surety.
Ortigas further argues that the nature of the Undertaking requires solidary
obligation of the Sureties, since the Undertaking expressly seeks to reliev[e]
obligors of any and all liability arising from their said joint and several
undertaking with [F]alcon, and for the sureties to irrevocably agree and
undertake to assume all of obligors said guarantees to PDCP.[50] We do not
doubt that a finding of solidary liability among the petitioners works to the
benefit of Ortigas in the facilitation of these goals, yet the Undertaking itself
contains no stipulation or clause that establishes petitioners obligation to
Ortigas as solidary. Moreover, the aims adverted to by Ortigas do not by
themselves establish that the nature of the obligation requires solidarity. Even
if the liability of petitioners and Matti were adjudged as merely joint, the full
relief and reimbursement of Ortigas arising from his payment to PDCP would
still be accomplished through the complete execution of such a judgment.
Petitioners further claim that they are not liable for attorneys fees since the
Undertaking contained no such stipulation for attorneys fees, and that the

situation did not fall under the instances under Article 2208 of the Civil Code
where attorneys fees are recoverable in the absence of stipulation.
We disagree. As Ortigas points out, the acts or omissions of the petitioners led
to his being impleaded in the suit filed by PDCP. The Undertaking was
precisely executed as a means to obtain the release of Ortigas and the
Scholeys from their previous obligations as sureties of Falcon, especially
considering that they were already divesting their shares in the corporation.
Specific provisions in the Undertaking obligate petitioners to work for the
release of Ortigas from his surety agreements with Falcon. Specific provisions
likewise mandate the immediate repayment of Ortigas should he still be made
to pay PDCP by reason of the guaranty agreements from which he was
ostensibly to be released through the efforts of petitioners. None of these
provisions were complied with by petitioners, and Article 2208(2) precisely
allows for the recovery of attorneys fees [w]hen the defendants act or omission
has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest.
Finally, petitioners claim that they should not be liable for interest since the
Undertaking does not contain any stipulation for interest, and assuming that
they are liable, that the rate of interest should not be 12% per annum, as
adjudged by the RTC.
The seminal ruling in Eastern Shipping Lines, Inc. v. Court of Appeals[51] set
forth the rules with respect to the manner of computing legal interest:

I. When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for damages. The provisions under Title XVIII on Damages of the Civil
Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence
of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time quantification of damages may
be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.

3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[52]
Since what was the constituted in the Undertaking consisted of a payment in
a sum of money, the rate of interest thereon shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand. The interest
rate imposed by the RTC is thus proper. However, the computation should be
reckoned from judicial or extrajudicial demand. Per records, there is no
indication that Ortigas made any extrajudicial demand to petitioners and Matti
after he paid PDCP, but on 14 March 1994, Ortigas made a judicial demand
when he filed a Third-Party Complaint praying that petitioners and Matti be
made to reimburse him for the payments made to PDCP. It is the filing of this
Third Party Complaint on 14 March 1994 that should be considered as the date
of judicial demand from which the computation of interest should be
reckoned.[53] Since the RTC held that interest should be computed from 28
February 1994, the appropriate redefinition should be made.

WHEREFORE, the Petition is GRANTED in PART. The Order of the Regional

Trial Court dated 5 October 1995 is MODIFIED by declaring that petitioners
and Joseph M. Matti are only jointly liable, not jointly and severally, to
respondent Rafael Ortigas, Jr. in the amount of P1,300,000.00. The Order of
the Regional Trial Court dated 7 March 1996 is MODIFIED in that the legal
interest of 12% per annum on the amount of P1,300,000.00 is to be computed
from 14 March 1994, the date of judicial demand, and not from 28 February
1994 as directed in the Order of the lower court. The assailed rulings are
affirmed in all other respects. Costs against petitioners.
SO ORDERED.

4. ALMIRA v. CA
[G.R. No. 115966. March 20, 2003]
JUANA ALMIRA, RENATO GARCIA, ROGELIO GARCIA, RODOLFO
GARCIA, ROSITA GARCIA, RHODORA GARCIA, ROSALINDA GARCIA,
ROLANDO GARCIA and RAFAEL GARCIA Represented in this suit by
EDGARDO ALVAREZ, petitioners, vs. COURT OF APPEALS AND
FEDERICO BRIONES, respondents.
DECISION
AZCUNA, J.:
Before us is a petition for review on certiorari assailing the decision rendered
by the Court of Appeals in C.A. G.R. CV No. 40954[1] which reversed the
decision of the Regional Trial Court, Branch 32, of San Pedro, Laguna that
rescinded the Kasunduan ng Pagbibilihan[2] entered into between petitioners
and private respondent over a portion of a parcel of land situated in Sta. Rosa,
Laguna.
The facts of the case are as follows:
Petitioners are the wife and the children of the late Julio Garcia who inherited
from his mother, Maria Alibudbud, a portion of a 90,655 square-meter property
denominated as Lot 1642 of the Sta. Rosa Estate in Barangay Caingin, Sta.
Rosa, Laguna and covered by TCT No. RT-1076. Lot 1642 was co-owned and
registered in the names of three persons with the following shares: Vicente de
Guzman (), Enrique Hemedes (1/4), and Francisco Alibudbud, the father of
Maria Alibudbud (). Although there was no separate title in the name of Julio
Garcia, there were tax declarations in his name to the extent of his
grandfathers share covering an area of 21,460 square meters. On July 5,
1984, petitioners, as heirs of Julio Garcia, and respondent Federico Briones
entered into a Kasunduan ng Pagbibilihan (Kasunduan for brevity) over the
21,460 square-meter portion for the sum of P150,000.00. Respondent paid
P65,000.00 upon execution of the contract while the balance of P85,000.00
was made payable within six (6) months from the date of the execution of the
instrument. At the time of the execution of the Kasunduan, petitioners allegedly
informed respondent that TCT No. RT-1076 was in the possession of their
cousin, Conchalina Alibudbud who having bought Vicente de Guzmans share,
owned the bigger portion of Lot 1642. This notwithstanding, respondent
willingly entered into the Kasunduan provided that the full payment of the
purchase price will be made upon delivery to him of the title.[3]
The Kasunduan provides:
Na ang UNANG BAHAGI ay siyang magkakamayari (co-owners), bilang
tagapagmana ng yumaong Julio Garcia sa isang lagay na lupang taniman ng

palay, matatagpuan sa nayon ng Caingin, Santa Rosa, Laguna, may buong

lawak na 21,460 metrong parisukat, humigit kumulang, na lalong makikilala sa
mga katangiang inilalahad sa pahayag ng Buwis Bilang 3472 na ganito ang
natutunguhan: Mga kahanggan: Hilaga-1641-Nazario Lauriles; Timog-Barique
Hemedez; Silangan- Vicente de Guzman; at Kanluran-Francisco Alibudbod;
hinalagahan para sa pagbabayad ng buwis pampamahalaan ng P12,720.00;
at kasalukuyang may nabibinbing kahilingan sa hukuman upang magkaroon
ng sariling titulo; nalilibot ng batong mohon na nagsisilbing hanganan sa bawat
sulok.
Na ang UNANG BAHAGI ay inialok sa IKALAWANG BAHAGI upang bilihin
ang lupang nabanggit sa kabuuang halagang ISANG DAAN AT LIMAMPUNG
LIBONG (P150,000.00) PISO, Salaping Pilipino, at ang IKALAWANG BAHAGI
ay sumangayon na bilhin ang naulit na lupa batay sa sumusunod na mga
pasubali at Kasunduan:
(1) Na pinatutunayan ng UNANG BAHAGI na tinanggap nila sa buong
kasiyahan ng kalooban buhat sa IKALAWANG BAHAGI ang halagang
ANIMNAPU AT LIMANG LIBONG (P65,000.00) PISO, salaping Pilipino, bilang
paunang bayad, at ang nalalabing WALUMPU AT LIMANG LIBONG
(85,000.00) PISO, ay babayaran ng IKALAWANG BAHAGI sa UNANG
BAHAGI sa loob ng anim na buwan simula sa takda ng kasulatang ito, sa
pasubali na ang kaukulang titulo sa lupang nabanggit ay maipagkakaloob ng
UNANG BAHAGI;
(2) Na ang UNANG BAHAGI ang siyang mananagot tungkol sa anumang
kasulatang inihanda ukol sa pagbibilihang ito, gayundin sa gastos sa notaryo
publiko, capital gains tax at pagpapatala ng kasulatan sa lalawigan ng Laguna;
(3) Na ang UNANG BAHAGI ay lalagda sa isang Kasulatan ng Bilihang
Tuluyan matapos na mabayarang lahat ng IKALAWANG BAHAGI ang
kaukulang kabuuang halaga ng lupang nabanggit.
Respondent took possession of the property subject of the Kasunduan and
made various payments to petitioners amounting to P58,500.00. However,
upon failure of petitioners to deliver to him a separate title to the property in
the name of Julio Garcia, he refused to make further payments, prompting
petitioners to file a civil action before the Regional Trial Court of San Pedro,
Laguna, Branch 32, on May 13, 1991 for (a) rescission of the Kasunduan; (b)
return by respondent to petitioners of the possession of the subject parcel of
land; and (c) payment by respondent of damages in favor of petitioners.
Petitioners alleged that respondent was bound to pay the balance of the
purchase price within six (6) months from the date of the execution of the
Kasunduan and upon delivery to him of TCT No. RT-1076. Petitioners claimed
that they approached respondent several times to deliver TCT No. RT-1076

but respondent told them that he did not have money to pay the balance of the
purchase price.[4] Respondent, on the other hand, filed a counterclaim for
damages and averred that he refused to make further payments because of
petitioners failure to deliver to him a separate title in the name of Julio Garcia.
On November 26, 1992, the trial court rendered a decision, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant decreeing the rescission of the Kasunduan ng
Pagbibilihan dated July 5, 1984 and ordering the defendant to return and
restore possession of the property subject of the Kasunduan ng Pagbibilihan
to the plaintiffs. For paucity of evidence, no judgment can be rendered on the
other reliefs prayed for in the complaint.
On the other hand, plaintiffs are hereby ordered to refund to the defendant the
downpayment of P65,000.00 and the partial payment of the balance totaling
to P58,500.00 plus legal interest. Defendants counterclaim is hereby
dismissed for lack of merit. Costs against defendant.[5]
In its decision, the trial court noted that proceedings for the issuance of a
separate title covering the property subject of sale entail time and the parties
could not have intended delivery by petitioners to respondent of a separate
title in the name of Julio Garcia as a condition for respondents payment of the
full purchase price within six months from the time of the execution of the
Kasunduan. Said court observed that even if petitioners were obliged to deliver
a separate title in the name of Julio Garcia to respondent, the latter appeared
to have insufficient funds to settle his obligation as indicated by the fact that
his payments amounting to P58,500.00 were made in trickles, having been
given on thirty-nine occasions within a span of two years from the time of the
execution of the Kasunduan. It concluded that respondent refused to complete
payment of the full purchase price not because of the failure of petitioners to
deliver a separate title in the name of Julio Garcia but because respondent
simply did not have sufficient funds at hand.
The Court of Appeals, however, noting that the Kasunduan made no reference
to TCT No. RT-1076, reversed the decision of the trial court, and dismissed
the complaint. The appellate court opined that the parties intended to refer to
a separate title over the 21,460 square meter lot when the Kasunduan
mentioned a kaukulang titulo ng lupang nabanggit since it was the portion
which was covered by a separate tax declaration in the name of Julio Garcia
and it was the portion that petitioners could sell. The appellate court noted that
the actuations of the parties subsequent to the execution of the Kasunduan
confirmed respondents claim that a separate title to the property subject of the
Kasunduan should be delivered to him. Nevertheless, respondents
counterclaim for damages was dismissed on the ground that the filing of the

complaint for rescission was not attended by malice, there being an honest
difference of opinion between the parties as to the interpretation of the
Kasunduan.
Feeling aggrieved by the aforesaid decision, petitioners filed before us the
instant petition for certiorari, raising issues which may essentially be
summarized as follows: (1) whether payment of the balance of the purchase
price is conditioned upon delivery of a separate title in the name of Julio Garcia;
(2) whether petitioners are entitled to rescind the Kasunduan for failure of
respondent to complete payment of the purchase price; and (3) whether the
Court of Appeals should have dismissed respondents appeal for failure to
comply with Circular 28-91.
Petitioners contend that the Kasunduan never made a reference to a title in
the name of Julio Garcia and that there was nothing in the actuations of the
parties which would indicate that full payment of the purchase price is
conditioned upon the delivery to respondent of said title. Petitioners allege that
respondent refused to give further payments not because of their failure to
deliver a separate title in the name of Julio Garcia but because he simply did
not have sufficient funds to complete payment of the purchase price.
Petitioners ask for rescission of the Kasunduan pursuant to Article 1191 of the
Civil Code on the ground that respondent failed to complete payment of the
purchase price. They further aver that the appellate court should have
dismissed respondents appeal in the first place for failure of respondent to
comply with Circular No. 28-91[6] requiring parties to submit a certification of
non-forum shopping in petitions filed before the Supreme Court and the Court
of Appeals. Petitioners lament that although they raised the issue regarding
respondents procedural lapse early on at the appellate court, the latter still
entertained respondents appeal.
As a rule, our jurisdiction in cases brought before us from the Court of Appeals
under Rule 45 of the Rules of Court is limited to reviewing errors of law. Factual
findings of the appellate court are generally binding on us.[7] However, this
principle is subject to certain exceptions such as the situation in this case
where the trial court and the appellate court arrived at diverse factual
findings.[8]
The subject of conflicting interpretations between the parties pertains to the
provision in the Kasunduan which states:
(1) Na pinatutunayan ng UNANG BAHAGI na tinanggap nila sa buong
kasiyahan ng kalooban buhat sa IKALAWANG BAHAGI ang halagang
ANIMNAPU AT LIMANG LIBO (P65,000.00) PISO, Salaping Pilipino, bilang
paunang bayad, at ang nalalabing WALUMPU AT LIMANG LIBONG
(85,000.00) PISO ay babayaran ng IKALAWANG BAHAGI sa UNANG
BAHAGI sa loob ng anim na buwan simula sa takda ng kasulatang ito, sa

pasubali na ang kaukulang titulo ng lupang nabanggit ay maipagkakaloob ng

UNANG BAHAGI sa IKALAWANG BAHAGI
Petitioners allege that the kaukulang titulo ng lupang nabanggit refers to TCT
No. RT-1076 and not to a separate title in the name of Julio Garcia. Petitioners
stress the implausibility of delivering the separate title to respondent within six
(6) months from the time of the execution of the Kasunduan considering that
issuance of the title required prior settlement of the estates of Francisco
Alibudbud, Vicente de Guzman and Enrique Hemedes; partition of Lot 1642;
and segregation of the portion pertaining to the share acquired by Julio Garcia.
Respondent, for his part, insists that the kaukulang titulo ng lupang nabanggit
refers to a separate title in the name of Julio Garcia. He argues that he only
acceded to the Kasunduan upon having been assured by petitioners that they
would be able to deliver to him a separate title in the name of Julio Garcia.
Petitioners allegedly told respondent that there was a pending petition in the
court of Bian for the issuance of a separate title to the subject property.[9]
It is basic in the interpretation and construction of contracts that the literal
meaning of the stipulations shall control if the terms of the contract are clear
and leave no doubt on the intention of the contracting parties. However, if the
terms of the agreement are ambiguous, resort is made to contract
interpretation which is the determination of the meaning attached to written or
spoken words that make the contract.[10] To ascertain the true intention of the
parties, their subsequent or contemporaneous actions must be principally
considered.
The tenor of the correspondence between petitioners and respondent shows
that the parties intended that a separate title to the property in the name of
Julio Garcia shall be delivered to respondent as a condition for the latters
payment of the balance of the purchase price. Thus, petitioner Juana Almiras
letter dated July 24, 1986 to respondent reads:
Ang totoo po ngayon ay kailangan naming ang halagang LABING LIMANG
LIBO (P15,000.00) PISO, yan po ang dahilan kung bakit kami ay sumulat sa
inyo, sapagkat sa mga unang naghawak at nag-ayos ng papeles ng lupang ito
ay hindi nila naayos at hindi nila natapos, kaya po kami ay nakakita at malaki
po ang nagastos naming sa una na walang nangyari, kaya nga itong huli ay
lalong lumaki
Unawain po naman ninyo kami sa halagang kailangan naming para sa huling
gumagawa ng Titulo ng lupa para naman po maayos na ito.[11]
Respondent signified his willingness to pay the balance of the purchase price
but reminded petitioners of their obligation to deliver title to the property in the
following reply:

Hindi lingid sa inyong kaalaman na sa ilalim ng naubit na Kasunduan ng

Pagbibilihan ay maliwanag ang inyong tungkulin na ipagkaboob sa amin ang
kaukulang titulo ng lupa sa boob ng anim (6) na buwan simula sa takda ng
nasabing kasulatan at kami naman ay nahahandang magbayad ng lahat ng
nalababing kabayaran x x x at tuwing kayo ay kukuha ng pera ang lagi niyong
idinadahilan ay ang diumano ay paglalakad tungkol sa titulo. x x x[12]
Had the parties intended that petitioners deliver TCT No. RT-1076 instead of
a separate title in the name of Julio Garcia to respondent, then there would
have been no need for petitioners to ask for partial sums on the ground that
this would be used to pay for the processing of the title to the property.
Petitioners had only to present the existing title, TCT No. RT-1076, to
respondent and demand the balance of the purchase price. This, petitioners
did not do. Instead, they were content to ask small sums from respondent on
thirty-nine occasions for two years before filing an action in court for rescission
of the Kasunduan another five years later. It is readily discernible from the
tenor of various receipts[13] issued by petitioners that the sums given by
respondent on these thirty-nine occasions were made upon request of
petitioners seeking respondents indulgence. A letter[14] dated October 11,
1984 and addressed to respondents father, Tata Omy, whom respondent
authorized to give payments during the time he was working abroad reads:
Tata Omy,
Ako si Rogelio A. Garcia ang sumulat nito at ang maydala ay si Rolando Garcia
na kapatid kong bunso at ito ay pinagawa ng aking ina si Juana Garcia. Ang
dahilan ay mayroon silang nabiling t.v. 17 inches at ngayon ay naririto sa amin.
Kaya ako ay labis na nahihiya sa inyo ni Viring ngunit ano ang magagawa ko
para diyan kaya kayo na ang bahalang magpasensiya sa amin. Ang kailangan
nila ay halagang P800.00 at para mabili nila ang T. V. + P200.00
Ang gumagalang,
(Sgd.) Rogelio Garcia
Received: P1,000.00
By( Sgd). Rosita Garcia
There is thus no basis to conclude that insufficiency of funds rather than failure
of petitioners to deliver a separate title in the name of Julio Garcia prevented
respondent from completing payment of the purchase price.
That the parties agreed on delivery of a separate title in the name of Julio
Garcia as a condition for respondents payment of the balance of the purchase
price is bolstered by the fact that there was already an approved subdivision
plan of the 21,460 square-meter lot years before petitioners filed an action in
court for rescission.[15] The parties evidently assumed petitioners would be

able to deliver a separate title in the name of Julio Garcia to respondent within
six (6) months from the time of the execution of the Kasunduan since there
was already a pending petition in court for the issuance of a separate title to
21,460 square-meter lot at that time. Unfortunately, the petitioners were not
able to secure a separate title in the name of Julio Garcia within the stipulated
period.
Finally, we note that, as quoted earlier, the Kasunduan itself in its opening
paragraph refers to the subject property being sold as buong lawak na 21,640
metrong parisukat, x x x at sa kasalukuyan may nabibinbing kahilingan sa
hukuman upang magkaroon ng sariling titulo; x x x. The next paragraph of the
Kasunduan, therefore, which speaks of ang kaukulang titulo sa lupang
nabanggit, clearly refers to the separate title being applied for, even without
resort to extraneous evidence.
Petitioners, however, insist that it was respondents counsel who prepared the
Kasunduan and any ambiguity therein should be construed against
respondent pursuant to Article 1377 of the Civil Code which states that the
interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.
We find no reason to apply Article 1377 of the Civil Code in this case where
the evident intention of the parties can be readily discerned by their
subsequent and contemporaneous acts. While it is true that the Kasunduan
was prepared by the counsel of respondent, there is no indication that
respondent took unfair advantage of petitioners when he had the terms of the
Kasunduan drawn by his counsel. Petitioners freely assented to the
Kasunduan which is written entirely in a language spoken and understood by
both parties. That petitioners were fully aware of the terms of the Kasunduan
is evidenced by their attempts to comply with their obligation by securing a
subdivision plan and technical description[16] of the property subject of sale.
Having ruled that the kaukulang titulo ng lupang nabanggit refers to a separate
title in the name of Julio Garcia, we proceed to the issue as to whether
petitioners may rescind the Kasunduan pursuant to Article 1191 of the Civil
Code for failure of respondent to give full payment of the balance of the
purchase price.
The rights of the parties are governed by the terms and the nature of the
contract they enter into. Hence, although the nature of the Kasunduan was
never placed in dispute by both parties, it is necessary to ascertain whether
the Kasunduan is a contract to sell or a contract of sale before the issue as to
whether petitioners may ask for rescission of the contract may be resolved. In
a contract to sell, ownership is, by agreement, reserved to the vendor and is
not to pass until full payment of the purchase price; whereas, in contract of
sale, title to the property passes to the vendee upon delivery of the thing

sold.[17] Non-payment by the vendee in a contract of sale entitles the vendor

to demand specific performance or rescission of the contract, with damages,
under Article 1191 of the Civil Code.
Although both parties have consistently referred to the Kasunduan as a
contract to sell, a careful reading of the provisions of the Kasunduan reveals
that it is a contract of sale. A deed of sale is absolute in nature in the absence
of any stipulation reserving title to the vendor until full payment of the purchase
price. In such cases ownership of the thing sold passes to the vendee upon
actual or constructive delivery thereof.[18] There is nothing in the Kasunduan
which expressly provides that petitioners retain title or ownership of the
property, until full payment of the purchase price. The absence of such
stipulation in the Kasunduan coupled with the fact that respondent took
possession of the property upon the execution of the Kasunduan indicate that
the parties have contemplated a contract of absolute sale.
Stated otherwise, there was a perfected contract of sale. The parties agreed
on the sale of a determinate object, i.e., 21, 460 square meters of Lot 1642,
covered by a tax declaration in the name of Julio Garcia, and the price certain
therefor, without any reservation of title on the part of petitioners. Ownership
was effectively conveyed by petitioners to respondent, who was given
possession of the property. The delivery of a separate title in the name of Julio
Garcia was a condition imposed on respondents obligation to pay the balance
of the purchase price. It was not a condition imposed on the perfection of the
contract of sale. In Laforteza v. Machuca,[19] we stated that the fact that the
obligation to pay the balance of the purchase price was made subject to the
condition that the seller first deliver the reconstituted title of the property does
not make the agreement a contract to sell for such condition is not inconsistent
with a contract of sale.
Addressing now the issue as to whether rescission of the Kasunduan by
petitioners may prosper, we rule in the negative. The power to rescind is only
given to the injured party. The injured party is the party who has faithfully
fulfilled his obligation or is ready and willing to perform with his obligation. In
the case at bar, petitioners were not ready, willing and able to comply with their
obligation to deliver a separate title in the name of Julio Garcia to respondent.
Therefore, they are not in a position to ask for rescission of the Kasunduan.
Moreover, respondents obligation to pay the balance of the purchase price
was made subject to delivery by petitioners of a separate title in the name of
Julio Garcia within six (6) months from the time of the execution of the
Kasunduan, a condition with which petitioners failed to comply. Failure to
comply with a condition imposed on the performance of an obligation gives the
other party the option either to refuse to proceed with the sale or to waive that
condition under Article 1545 of the Civil Code.[20] Hence, it is the respondent
who has the option either to refuse to proceed with the sale or to waive the

performance of the condition imposed on his obligation to pay the balance of

the purchase price.
It follows that, not having established that they were ready, able and willing to
comply with their obligation to deliver to respondent a separate title in the name
of Julio Garcia, petitioners may not ask for rescission of the Kasunduan nor
recover damages.
As regards the issue that the appellate court should have dismissed
respondents appeal for failure of respondent to comply with Circular No. 2891 requiring the submission of a certificate of non-forum shopping in petitions
filed before us and the Court of Appeals, suffice it to say that when technicality
deserts its function of being an aid to justice, the courts are justified in
exempting from its operations a particular case.[21] Procedural rules are
intended to insure the orderly conduct of litigation, because of the higher
objective they seek, which is to protect the parties substantive rights.[22]
WHEREFORE, the petition is DENIED and the decision rendered by the Court
of Appeals in CA G.R. No. 40954 entitled, Juana Almira, et al., plaintiffsappellees v. Federico Briones, defendant-appellant is AFFIRMED. No costs.
SO ORDERED.