G.R. No.

L-23749 April 29, 1977

FAUSTINO
CRUZ, plaintiff-appellant,
vs.
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA,
INC., defendants-appellees.

BARREDO, J.:
Appeal from the order dated August 13, 1964 of the Court of First
Instance of Quezon City in Civil Case No. Q-7751, Faustino Cruz vs. J.M.
Tuason & Co., Inc., and Gregorio Araneta, Inc., dismissing the complaint
of appellant Cruz for the recovery of improvements he has made on
appellees' land and to compel appellees to convey to him 3,000 square
meters of land on three grounds: (1) failure of the complaint to state a
cause of action; (2) the cause of action of plaintiff is unenforceable under
the Statute of Frauds; and (3) the action of the plaintiff has already
prescribed.
Actually, a perusal of plaintiff-appellant's complaint below shows that he
alleged two separate causes of action, namely: (1) that upon request of
the Deudors (the family of Telesforo Deudor who laid claim on the land in
question on the strength of an "informacion posesoria" ) plaintiff made
permanent improvements valued at P30,400.00 on said land having an
area of more or less 20 quinones and for which he also incurred
expenses in the amount of P7,781.74, and since defendants-appellees
are being benefited by said improvements, he is entitled to
reimbursement from them of said amounts and (2) that in 1952,
defendants availed of plaintiff's services as an intermediary with the
Deudors to work for the amicable settlement of Civil Case No. Q-135,
then pending also in the Court of First Instance of Quezon City, and
involving 50 quinones of land, of Which the 20 quinones aforementioned
form part, and notwithstanding his having performed his services, as in
fact, a compromise agreement entered into on March 16, 1963 between
the Deudors and the defendants was approved by the court, the latter
have refused to convey to him the 3,000 square meters of land occupied
by him, (a part of the 20 quinones above) which said defendants had
promised to do "within ten years from and after date of signing of the
compromise agreement", as consideration for his services.

Within the Period allowed by the rules, the defendants filed separate
motions to dismiss alleging three Identical grounds: (1) As regards that
improvements made by plaintiff, that the complaint states no cause of
action, the agreement regarding the same having been made by plaintiff
with the Deudors and not with the defendants, hence the theory of
plaintiff based on Article 2142 of the Code on unjust enrichment is
untenable; and (2) anent the alleged agreement about plaintiffs services
as intermediary in consideration of which, defendants promised to convey
to him 3,000 square meters of land, that the same is unenforceable under
the Statute of Frauds, there being nothing in writing about it, and, in any
event, (3) that the action of plaintiff to compel such conveyance has
already prescribed.
Plaintiff opposed the motion, insisting that Article 2142 of the applicable
to his case; that the Statute of Frauds cannot be invoked by defendants,
not only because Article 1403 of the Civil Code refers only to "sale of real
property or of an interest therein" and not to promises to convey real
property like the one supposedly promised by defendants to him, but also
because, he, the plaintiff has already performed his part of the
agreement, hence the agreement has already been partly executed and
not merely executory within the contemplation of the Statute; and that his
action has not prescribed for the reason that defendants had ten years to
comply and only after the said ten years did his cause of action accrue,
that is, ten years after March 16, 1963, the date of the approval of the
compromise agreement, and his complaint was filed on January 24,
1964.
Ruling on the motion to dismiss, the trial court issued the herein
impugned order of August 13, 1964:
In the motion, dated January 31, 1964, defendant
Gregorio Araneta, Inc. prayed that the complaint against it
be dismissed on the ground that (1) the claim on which
the action is founded is unenforceable under the provision
of the Statute of Frauds; and (2) the plaintiff's action, if
any has already prescribed. In the other motion of
February 11, 1964, defendant J. M. Tuason & Co., Inc.
sought the dismissal of the plaintiffs complaint on the
ground that it states no cause of action and on the
Identical grounds stated in the motion to dismiss of

defendant Gregorio Araneta, Inc. The said motions are

duly opposed by the plaintiff.
From the allegations of the complaint, it appears that, by
virtue of an agreement arrived at in 1948 by the plaintiff
and the Deudors, the former assisted the latter in
clearing, improving, subdividing and selling the large tract
of land consisting of 50 quinones covered by
the informacion posesoria in the name of the late
Telesforo Deudor and incurred expenses, which are
valued approximately at P38,400.00 and P7,781.74,
respectively; and, for the reasons that said improvements
are being used and enjoyed by the defendants, the
plaintiff is seeking the reimbursement for the services and
expenses stated above from the defendants.
Defendant J. M. Tuason & Co., Inc. claimed that, insofar
as the plaintiffs claim for the reimbursement of the
amounts of P38,400.00 and P7,781.74 is concerned, it is
not a privy to the plaintiff's agreement to assist the
Deudors n improving the 50 quinones. On the other hand,
the plaintiff countered that, by holding and utilizing the
improvements introduced by him, the defendants are
unjustly enriching and benefiting at the expense of the
plaintiff; and that said improvements constitute a lien or
charge of the property itself
On the issue that the complaint insofar as it claims the
reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the
Court is of the opinion that the same is well-founded. It is
found that the defendants are not parties to the supposed
express contract entered into by and between the plaintiff
and the Deudors for the clearing and improvement of the
50 quinones. Furthermore in order that the alleged
improvement may be considered a lien or charge on the
property, the same should have been made in good faith
and under the mistake as to the title. The Court can take
judicial notice of the fact that the tract of land supposedly
improved by the plaintiff had been registered way back in
1914 in the name of the predecessors-in-interest of

defendant J. M. Tuason & Co., Inc. This fact is confirmed

in the decision rendered by the Supreme Court on July
31, 1956 in Case G. R. No. L-5079 entitled J.M. Tuason &
Co. Inc. vs. Geronimo Santiago, et al., Such being the
case, the plaintiff cannot claim good faith and mistake as
to the title of the land.
On the issue of statute of fraud, the Court believes that
same is applicable to the instant case. The allegation in
par. 12 of the complaint states that the defendants
promised and agreed to cede, transfer and convey unto
the plaintiff the 3,000 square meters of land in
consideration of certain services to be rendered then. it is
clear that the alleged agreement involves an interest in
real property. Under the provisions of See. 2(e) of Article
1403 of the Civil Code, such agreement is not
enforceable as it is not in writing and subscribed by the
party charged.
On the issue of statute of limitations, the Court holds that
the plaintiff's action has prescribed. It is alleged in par. 11
of the complaint that, sometime in 1952, the defendants
approached the plaintiff to prevail upon the Deudors to
enter to a compromise agreement in Civil Case No. Q135 and allied cases. Furthermore, par. 13 and 14 of the
complaint alleged that the plaintiff acted as emissary of
both parties in conveying their respective proposals and
couter-proposals until the final settlement was effected on
March 16, 1953 and approved by Court on April 11, 1953.
In the present action, which was instituted on January 24,
1964, the plaintiff is seeking to enforce the supposed
agreement entered into between him and the defendants
in 1952, which was already prescribed.
WHEREFORE, the plaintiffs complaint is hereby ordered
DISMISSED without pronouncement as to costs.
SO ORDERED. (Pp. 65-69, Rec. on Appeal,)
On August 22, 1964, plaintiff's counsel filed a motion for reconsideration
dated August 20, 1964 as follows:

Plaintiff through undersigned counsel and to this

Honorable Court, respectfully moves to reconsider its
Order bearing date of 13 August 1964, on the following
grounds:
1. THAT THE COMPLAINT STATES A SUFFICIENT
CAUSE OF ACTION AGAINST DEFENDANTS IN SO
FAR AS PLAINTIFF'S CLAIM PAYMENT OF SERVICES
AND REIMBURSEMENT OF HIS EXPENSES, IS
CONCERNED;
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE
3,000 SQ. MS., THE SAME HAS NOT PRESCRIBED
AND THE STATUTE OF FRAUDS IS NOT APPLICABLE
THERETO;
ARGUMENT
Plaintiff's complaint contains two (2) causes of action
the first being an action for sum of money in the amount
of P7,781.74 representing actual expenses and
P38,400.00 as reasonable compensation for services in
improving the 50 quinones now in the possession of
defendants. The second cause of action deals with the
3,000 sq. ms. which defendants have agreed to transfer
into Plaintiff for services rendered in effecting the
compromise between the Deudors and defendants;
Under its order of August 3, 1964, this Honorable Court
dismissed the claim for sum of money on the ground that
the complaint does not state a cause of action against
defendants. We respectfully submit:
1. THAT THE COMPLAINT STATES A SUFFICIENT
CAUSE OF ACTION AGAINST DEFENDANTS IN SO
FAR AS PLAINTIFF'S CLAIM FOR PAYMENT OF
SERVICES AND REIMBURSEMENT OF HIS EXPENSES
IS CONCERNED.
Said this Honorable Court (at p. 2, Order):

ORDER
xxx xxx xxx
On the issue that the complaint, in so far as it claims the
reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the
Court is of the opinion that the same is well-founded. It is
found that the defendants are not parties to the supposed
express contract entered into by and between the plaintiff
and the Deudors for the clearing and improvement of the
50 quinones. Furthermore, in order that the alleged
improvement may he considered a lien or charge on the
property, the same should have been made in good faith
and under the mistake as to title. The Court can take
judicial notice of the fact that the tract of land supposedly
improved by the plaintiff had been registered way back in
1914 in the name of the predecessors-in-interest of
defendant J. M. Tuason & Co., Inc. This fact is confirmed
in the decision rendered by the Supreme Court on July
31, 1956 in case G. R. No. L-5079 entitled 'J M. Tuason &
Co., Inc. vs, Geronimo Santiago, et al.' Such being the
case, the plaintiff cannot claim good faith and mistake as
to the title of the land.
The position of this Honorable Court (supra) is that the
complaint does not state a cause of action in so far as the
claim for services and expenses is concerned because
the contract for the improvement of the properties was
solely between the Deudors and plaintiff, and defendants
are not privies to it. Now, plaintiff's theory is that
defendants are nonetheless liable since they are utilizing
and enjoying the benefit's of said improvements. Thus
under paragraph 16 of "he complaint, it is alleged:
(16) That the services and personal
expenses of plaintiff mentioned in
paragraph 7 hereof were rendered and in
fact paid by him to improve, as they in fact
resulted in considerable improvement of
the 50 quinones, and defendants being

now in possession of and utilizing said

improvements should reimburse and pay
plaintiff for such services and expenses.
Plaintiff's cause of action is premised inter alia, on the
theory of unjust enrichment under Article 2142 of the civil
Code:
ART. 2142. Certain lawful voluntary and
unilateral acts give rise to the juridical
relation of quasi-contract to the end that
no one shill be unjustly enriched or
benefited at the expense of another.

The Statute of Frauds is CLEARLY inapplicable to this

case:
At page 2 of this Honorable Court's order dated 13 August
1964, the Court ruled as follows:
ORDER
xxx xxx xxx
On the issue of statute of fraud, the Court
believes that same is applicable to the
instant Case, The allegation in par. 12 of
the complaint states that the defendants
promised and agree to cede, transfer and
convey unto the plaintiff, 3,000 square
meters of land in consideration of certain
services to be rendered then. It is clear
that the alleged agreement involves an
interest in real property. Under the
provisions of Sec. 2(e) of Article 1403 of
the Civil Code, such agreement is not
enforceable as it is not in writing and
subscribed by the party charged.

In like vein, Article 19 of the same Code enjoins that:

ART. 19. Every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
every-one his due and observe honesty and good faith.
We respectfully draw the attention of this Honorable Court
to the fact that ARTICLE 2142 (SUPRA) DEALS WITH
QUASI-CONTRACTS or situations WHERE THERE IS
NO CONTRACT BETWEEN THE PARTIES TO THE
ACTION. Further, as we can readily see from the title
thereof (Title XVII), that the Same bears the designation
'EXTRA CONTRACTUAL OBLIGATIONS' or obligations
which do not arise from contracts. While it is true that
there was no agreement between plaintiff and defendants
herein for the improvement of the 50 quinones since the
latter are presently enjoying and utilizing the benefits
brought about through plaintiff's labor and expenses,
defendants should pay and reimburse him therefor under
the principle that 'no one may enrich himself at the
expense of another.' In this posture, the complaint states
a cause of action against the defendants.
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE
3,000 SQ. MS. THE SAME HAS NOT PRESCRIBED
AND THE STATUTE OF FRAUDS IS NOT APPLICABLE
THERETO.

To bring this issue in sharper focus, shall reproduce not

only paragraph 12 of the complaint but also the other
pertinent paragraphs therein contained. Paragraph 12
states thus:
C O M P LAI N T
xxx xxx xxx
12). That plaintiff conferred with the aforesaid
representatives of defendants several times and on these
occasions, the latter promised and agreed to cede,
transfer and convey unto plaintiff the 3,000 sq. ms. (now
known as Lots 16-B, 17 and 18) which plaintiff was then

occupying and continues to occupy as of this writing, for

and in consideration of the following conditions:
(a) That plaintiff succeed in convincing the
DEUDORS to enter into a compromise
agreement and that such agreement be
actually entered into by and between the
DEUDORS and defendant companies;
(b) That as of date of signing the
compromise agreement, plaintiff shall be
the owner of the 3,000 sq. ms. but the
documents evidencing his title over this
property shall be executed and delivered
by defendants to plaintiff within ten (10)
years from and after date of signing of the
compromise agreement;
(c) That plaintiff shall, without any
monetary expense of his part, assist in
clearing the 20 quinones of its occupants;
13). That in order to effect a compromise between the
parties. plaintiff not only as well acted as emissary of both
parties in conveying their respective proposals and
counter- proposals until succeeded in convinzing the
DEUDORS to settle with defendants amicably. Thus, on
March 16, 1953,a Compromise Agreement was entered
into by and between the DEUDORS and the defendant
companies; and on April 11, 1953, this agreement was
approved by this Honorable Court;
14). That in order to comply with his other obligations
under his agreement with defendant companies, plaintiff
had to confer with the occupants of the property, exposing
himself to physical harm, convincing said occupants to
leave the premises and to refrain from resorting to
physical violence in resisting defendants' demands to
vacate;

That plaintiff further assisted defendants'

employees in the actual demolition and
transferof all the houses within the
perimeter of the 20 quinones until the end
of 1955, when said area was totally
cleared and the houses transferred to
another
area
designated
by
the
defendants as 'Capt. Cruz Block' in
Masambong, Quezon City. (Pars. 12, 13
and 14, Complaint; Emphasis supplied)
From the foregoing, it is clear then the agreement
between the parties mentioned in paragraph 12 (supra) of
the complaint has already been fully EXECUTED ON
ONE PART, namely by the plaintiff. Regarding the
applicability of the statute of frauds (Art. 1403, Civil
Code), it has been uniformly held that the statute of
frauds IS APPLICABLE ONLY TO EXECUTORY
CONTRACTS BUT NOT WHERE THE CONTRACT HAS
BEEN PARTLY EXECUTED:
SAME ACTION TO ENFORCE. The
statute of frauds has been uniformly
interpreted to be applicable to executory
and not to completed or contracts.
Performance of the contracts takes it out
of the operation of the statute. ...
The statute of the frauds is not applicable
to contracts which are either totally or
partially performed, on the theory that
there is a wide field for the commission of
frauds in executory contracts which can
only be prevented by requiring them to be
in writing, a facts which is reduced to a
minimum in executed contracts because
the intention of the parties becomes
apparent buy their execution and
execution, in mots cases, concluded the
right
the
parties.
...
The partial
performance may be proved by either

documentary or oral evidence. (At pp.

564-565, Tolentino's Civil Code of the
Philippines, Vol. IV, 1962 Ed.; Emphasis
supplied).

15). That in or about the middle of

1963, after all the conditions stated in
paragraph 12 hereof had been fulfilled
and fully complied with, plaintiff demanded
of said defendants that they execute the
Deed of Conveyance in his favor and
deliver the title certificate in his name,
over the 3,000 sq. ms. but defendants
failed and refused and continue to fail and
refuse to heed his demands. (par. 15,
complaint; Emphasis supplied).

Authorities in support of the foregoing rule are legion.

Thus Mr. Justice Moran in his 'Comments on the Rules of
Court', Vol. III, 1974 Ed., at p. 167, states:
2 THE STATUTE OF FRAUDS IS
APPLICABLE ONLY TO EXECUTORY
CONTRACTS: CONTRACTS WHICH
ARE EITHER TOTALLY OR PARTIALLY
PERFORMED ARE WITHOUT THE
STATUE. The statute of frauds is
applicable only to executory contracts. It is
neither
applicable
to
executed
contracts nor
to
contracts
partially
performed. The reason is simple. In
executory contracts there is a wide field
for fraud because unless they be in writing
there is no palpable evidence of the
intention of the contracting parties. The
statute has been enacted to prevent fraud.
On the other hand the commission of
fraud in executed contracts is reduced to
minimum in executed contracts because
(1) the intention of the parties is made
apparent by the execution and (2)
execution concludes, in most cases, the
rights of the parties. (Emphasis supplied)
Under paragraphs 13 and 14 of the complaint (supra) one
can readily see that the plaintiff has fulfilled ALL his
obligation under the agreement between him defendants
concerning the 3,000 sq. ms. over which the latter had
agreed to execute the proper documents of transfer. This
fact is further projected in paragraph 15 of the complaint
where plaintiff states;

In view of the foregoing, we respectfully submit that this

Honorable court erred in holding that the statute of frauds
is applicable to plaintiff's claim over the 3,000 sq. ms.
There having been full performance of the contract on
plaintiff's part, the same takes this case out of the context
of said statute.
Plaintiff's Cause of Action had NOT Prescribed:
With all due respect to this Honorable court, we also
submit that the Court committed error in holding that this
action has prescribed:
ORDER
xxx xxx xxx
On the issue of the statute of limitations,
the Court holds that the plaintiff's action
has prescribed. It is alleged in par. III of
the complaint that, sometime in 1952, the
defendants approached the plaintiff to
prevail upon the Deudors to enter into a
compromise agreement in Civil Case No.
Q-135 and allied cases. Furthermore,
pars. 13 and 14 of the complaint alleged
that plaintiff acted as emissary of both
parties in conveying their respective
proposals and counter-proposals until the

final settlement was affected on March 16,

1953 and approved by the Court on April
11, 1953. In the present actin, which was
instituted on January 24, 1964, the plaintiff
is seeking to enforce the supposed
agreement entered into between him and
the defendants in 1952, which has already
proscribed. (at p. 3, Order).
The present action has not prescribed, especially when
we consider carefully the terms of the agreement between
plaintiff and the defendants. First, we must draw the
attention of this Honorable Court to the fact that this is an
action to compel defendants to execute a Deed of
Conveyance over the 3,000 sq. ms. subject of their
agreement. In paragraph 12 of the complaint, the terms
and conditions of the contract between the parties are
spelled out. Paragraph 12 (b) of the complaint states:
(b) That as of date of signing the
compromise agreement, plaintiff shall be
the owner of the 3,000 sq. ms. but the
documents evidencing his title over this
property shall be executed and delivered
by defendants to plaintiff within ten (10)
years from and after date of signing of the
compromise
agreement.
(Emphasis
supplied).
The compromise agreement between defendants and the
Deudors which was conclude through the efforts of
plaintiff, was signed on 16 March 1953. Therefore, the
defendants had ten (10) years signed on 16 March 1953.
Therefore, the defendants had ten (10) years from said
date within which to execute the deed of conveyance in
favor of plaintiff over the 3,000 sq. ms. As long as the 10
years period has not expired, plaintiff had no right to
compel defendants to execute the document and the
latter were under no obligation to do so. Now, this 10-year
period elapsed on March 16, 1963. THEN and ONLY
THEN does plaintiff's cause of action plaintiff on March

17, 1963. Thus, under paragraph 15, of the complaint

(supra) plaintiff made demands upon defendants for the
execution of the deed 'in or about the middle of 1963.
Since the contract now sought to be enforced was not
reduced to writing, plaintiff's cause of action expires on
March 16, 1969 or six years from March 16, 1963 WHEN
THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil
Code).
In this posture, we gain respectfully submit that this
Honorable Court erred in holding that plaintiff's action has
prescribed.
P R AY E R
WHEREFORE, it is respectfully prayed that " Honorable
Court reconsider its Order dated August 13, 1964; and
issue another order denying the motions to dismiss of
defendants G. Araneta, Inc. and J. M. Tuason Co. Inc. for
lack of merit. (Pp. 70-85, Record on Appeal.)
Defendants filed an opposition on the main ground that "the arguments
adduced by the plaintiff are merely reiterations of his arguments
contained in his Rejoinder to Reply and Opposition, which have not only
been refuted in herein defendant's Motion to Dismiss and Reply but
already passed upon by this Honorable Court."
On September 7, 1964, the trial court denied the motion for
reconsiderations thus:
After considering the plaintiff's Motion for Reconsideration
of August 20, 1964 and it appearing that the grounds
relied upon in said motion are mere repetition of those
already resolved and discussed by this Court in the order
of August 13, 1964, the instant motion is hereby denied
and the findings and conclusions arrived at by the Court
in its order of August 13, 1964 are hereby reiterated and
affirmed.

SO ORDERED. (Page 90, Rec. on Appeal.)

Under date of September 24, 1964, plaintiff filed his record on appeal.
In his brief, appellant poses and discusses the following assignments of
error:
I. THAT THE LOWER COURT ERRED IN DISMISSING
THE COMPLAINT ON THE GROUND THAT
APPELLANT'S CLAIM OVER THE 3,000 SQ. MS. IS
ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE
OF FRAUDS;
II. THAT THE COURT A QUO FURTHER COMMITTED
ERROR IN DISMISSING APPELLANT'S COMPLAINT
ON THE GROUND THAT HIS CLAIM OVER THE 3,000
SQ. MS. IS ALLEGEDLY BARRED BY THE STATUTE OF
LIMITATIONS; and

writing, and subscribed by the party charged, or by his

agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of
its contents:
(a) An agreement that by its terms is not to
be performed within a year from the
making thereof;
(b) A special promise to answer for the
debt, default, or miscarriage of another;
(c) An agreement made in consideration of
marriage, other than a mutual promise to
marry;

We agree with appellant that the Statute of Frauds was erroneously

applied by the trial court. It is elementary that the Statute refers to
specific kinds of transactions and that it cannot apply to any that is not
enumerated therein. And the only agreements or contracts covered
thereby are the following:

(d) An agreement for the sale of goods,

chattels or things in action, at a price not
less than five hundred pesos, unless the
buyer accept and receive part of such
goods and chattels, or the evidences, or
some of them of such things in action, or
pay at the time some part of the purchase
money; but when a sale is made by
auction and entry is made by the
auctioneer in his sales book, at the time of
the sale, of the amount and kind of
property sold, terms of sale, price, names
of the purchasers and person on whose
account the sale is made, it is a sufficient
memorandum:

(1) Those entered into in the name of another person by

one who has been given no authority or legal
representation, or who has acted beyond his powers;

(e) An agreement for the leasing for a

longer period than one year, or for the sale
of real property or of an interest therein:

(2) Those do not comply with the Statute of Frauds as set

forth in this number, In the following cases an agreement
hereafter made shall be unenforceable by action, unless
the same, or some note or memorandum thereof, be in

(f) a representation as to the credit of a

third person.

III. THAT THE LOWER COURT ERRED IN DISMISSING

THE COMPLAINT FOR FAILURE TO STATE A CAUSE
OF ACTION IN SO FAR AS APPELLANT'S CLAIM FOR
REIMBURSEMENT OF
EXPENSES AND
FOR
SERVICES RENDERED IN THE IMPROVEMENT OF
THE FIFTY (50) QUINONES IS CONCERNED.

(3) Those where both parties are incapable of giving

consent to a contract. (Art. 1403, civil Code.)
In the instant case, what appellant is trying to enforce is the delivery to
him of 3,000 square meters of land which he claims defendants promised
to do in consideration of his services as mediator or intermediary in
effecting a compromise of the civil action, Civil Case No. 135, between
the defendants and the Deudors. In no sense may such alleged contract
be considered as being a "sale of real property or of any interest therein."
Indeed, not all dealings involving interest in real property come under the
Statute.
Moreover, appellant's complaint clearly alleges that he has already
fulfilled his part of the bargains to induce the Deudors to amicably settle
their differences with defendants as, in fact, on March 16, 1963, through
his efforts, a compromise agreement between these parties was
approved by the court. In other words, the agreement in question has
already been partially consummated, and is no longer merely executory.
And it is likewise a fundamental principle governing the application of the
Statute that the contract in dispute should be purely executory on the part
of both parties thereto.
We cannot, however, escape taking judicial notice, in relation to the
compromise agreement relied upon by appellant, that in several cases
We have decided, We have declared the same rescinded and of no
effect. In J. M. Tuason & Co., Inc. vs. Bienvenido Sanvictores, 4 SCRA
123, the Court held:
It is also worthy of note that the compromise between
Deudors and Tuason, upon which Sanvictores predicates
his right to buy the lot he occupies, has been validly
rescinded and set aside, as recognized by this Court in its
decision in G.R. No. L-13768, Deudor vs. Tuason,
promulgated on May 30, 1961.
We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio
Macalindong, 6 SCRA 938. Thus, viewed from what would be the ultimate
conclusion of appellant's case, We entertain grave doubts as to whether
or not he can successfully maintain his alleged cause of action against
defendants, considering that the compromise agreement that he invokes
did not actually materialize and defendants have not benefited therefrom,

not to mention the undisputed fact that, as pointed out by appellees,

appellant's other attempt to secure the same 3,000 square meters via the
judicial enforcement of the compromise agreement in which they were
supposed to be reserved for him has already been repudiated by the
courts. (pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.)
As regards appellant's third assignment of error, We hold that the
allegations in his complaint do not sufficiently Appellants' reliance. on
Article 2142 of Civil Code is misplaced. Said article provides:
Certain lawful, voluntary and unilateral acts give rise to
the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense
of another.
From the very language of this provision, it is obvious that a presumed
qauasi-contract cannot emerge as against one party when the subject
mater thereof is already covered by an existing contract with another
party. Predicated on the principle that no one should be allowed to
unjustly enrich himself at the expense of another, Article 2124 creates the
legal fiction of a quasi-contract precisely because of the absence of any
actual agreement between the parties concerned. Corollarily, if the one
who claims having enriched somebody has done so pursuant to a
contract with a third party, his cause of action should be against the latter,
who in turn may, if there is any ground therefor, seek relief against the
party benefited. It is essential that the act by which the defendant is
benefited must have been voluntary and unilateral on the part of the
plaintiff. As one distinguished civilian puts it, "The act is voluntary.
because the actor in quasi-contracts is not bound by any pre-existing
obligation to act. It is unilateral, because it arises from the sole will of the
actor who is not previously bound by any reciprocal or bilateral
agreement. The reason why the law creates a juridical relations and
imposes certain obligation is to prevent a situation where a person is able
to benefit or take advantage of such lawful, voluntary and unilateral acts
at the expense of said actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748,
1969 ed.) In the case at bar, since appellant has a clearer and more
direct recourse against the Deudors with whom he had entered into an
agreement regarding the improvements and expenditures made by him
on the land of appellees. it Cannot be said, in the sense contemplated in
Article 2142, that appellees have been enriched at the expense of
appellant.

In the ultimate. therefore, Our holding above that appellant's first two
assignments of error are well taken cannot save the day for him. Aside
from his having no cause of action against appellees, there is one plain
error of omission. We have found in the order of the trial court which is as
good a ground as any other for Us to terminate this case favorably to
appellees. In said order Which We have quoted in full earlier in this
opinion, the trial court ruled that "the grounds relied upon in said motion
are mere repetitions of those already resolved and discussed by this
Court in the order of August 13, 1964", an observation which We fully
share. Virtually, therefore. appellant's motion for reconsideration was
ruled to be pro-forma. Indeed, a cursory reading of the record on appeal
reveals that appellant's motion for reconsideration above-quoted
contained exactly the same arguments and manner of discussion as his
February 6, 1964 "Opposition to Motion to Dismiss" of defendant
Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal) as well as his
February 17, 1964 "Opposition to Motion to Dismiss of Defendant J. M.
Tuason & Co." (pp. 33-45, Rec. on Appeal and his February 29, 1964
"Rejoinder to Reply Oil Defendant J. M. Tuason & Co." (pp. 52-64, Rec.
on Appeal) We cannot see anything in said motion for reconsideration
that is substantially different from the above oppositions and rejoinder he
had previously submitted and which the trial court had already
considered when it rendered its main order of dismissal. Consequently,
appellant's motion for reconsideration did not suspend his period for
appeal. (Estrada vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as this
point was covered by appellees' "Opposition to Motion for
Reconsideration" (pp. 8689), hence, within the frame of the issues below,
it is within the ambit of Our authority as the Supreme Court to consider
the same here even if it is not discussed in the briefs of the parties.
(Insular Life Assurance Co., Ltd. Employees Association-NATU vs.
Insular Life Assurance Co., Ltd. [Resolution en banc of March 10, 1977 in
G. R. No. L-25291).
Now, the impugned main order was issued on August 13, 1964, while the
appeal was made on September 24, 1964 or 42 days later. Clearly, this is
beyond the 30-day reglementary period for appeal. Hence, the subject
order of dismissal was already final and executory when appellant filed
his appeal.
WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No
costs.

G.R. No. L-9188 December 4, 1914

GUTIERREZ
HERMANOS, plaintiff-appellee,
vs.
ENGRACIO ORENSE, defendant-appellant.

TORRES, J.:
Appeal through bill of exceptions filed by counsel for the appellant from
the judgment on April 14, 1913, by the Honorable P. M. Moir, judge,
wherein he sentenced the defendant to make immediate delivery of the
property in question, through a public instrument, by transferring and
conveying to the plaintiff all his rights in the property described in the
complaint and to pay it the sum of P780, as damages, and the costs of
the suit.
On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint,
afterwards amended, in the Court of First Instance of Albay against

Engacio Orense, in which he set forth that on and before February 14,
1907, the defendant Orense had been the owner of a parcel of land, with
the buildings and improvements thereon, situated in the pueblo of
Guinobatan, Albay, the location, area and boundaries of which were
specified in the complaint; that the said property has up to date been
recorded in the new property registry in the name of the said Orense,
according to certificate No. 5, with the boundaries therein given; that, on
February 14, 1907, Jose Duran, a nephew of the defendant, with the
latter's knowledge and consent, executed before a notary a public
instrument whereby he sold and conveyed to the plaintiff company, for
P1,500, the aforementioned property, the vendor Duran reserving to
himself the right to repurchase it for the same price within a period of four
years from the date of the said instrument; that the plaintiff company had
not entered into possession of the purchased property, owing to its
continued occupancy by the defendant and his nephew, Jose Duran, by
virtue of a contract of lease executed by the plaintiff to Duran, which
contract was in force up to February 14, 1911; that the said instrument of
sale of the property, executed by Jose Duran, was publicly and freely
confirmed and ratified by the defendant Orense; that, in order to perfect
the title to the said property, but that the defendant Orense refused to do
so, without any justifiable cause or reason, wherefore he should be
compelled to execute the said deed by an express order of the court, for
Jose Duran is notoriously insolvent and cannot reimburse the plaintiff
company for the price of the sale which he received, nor pay any sum
whatever for the losses and damages occasioned by the said sale, aside
from the fact that the plaintiff had suffered damage by losing the present
value of the property, which was worth P3,000; that, unless such deed of
final conveyance were executed in behalf of the plaintiff company, it
would be injured by the fraud perpetrated by the vendor, Duran, in
connivance with the defendant; that the latter had been occupying the
said property since February 14, 1911, and refused to pay the rental
thereof, notwithstanding the demand made upon him for its payment at
the rate of P30 per month, the just and reasonable value for the
occupancy of the said property, the possession of which the defendant
likewise refused to deliver to the plaintiff company, in spite of the
continuous demands made upon him, the defendant, with bad faith and
to the prejudice of the firm of Gutierrez Hermanos, claiming to have rights
of ownership and possession in the said property. Therefore it was
prayed that judgment be rendered by holding that the land and
improvements in question belong legitimately and exclusively to the
plaintiff, and ordering the defendant to execute in the plaintiff's behalf the

said instrument of transfer and conveyance of the property and of all the
right, interest, title and share which the defendant has therein; that the
defendant be sentenced to pay P30 per month for damages and rental of
the property from February 14, 1911, and that, in case these remedies
were not granted to the plaintiff, the defendant be sentenced to pay to it
the sum of P3,000 as damages, together with interest thereon since the
date of the institution of this suit, and to pay the costs and other legal
expenses.
The demurrer filed to the amended complaint was overruled, with
exception on the part of the defendant, whose counsel made a general
denial of the allegations contained in the complaint, excepting those that
were admitted, and specifically denied paragraph 4 thereof to the effect
that on February 14, 1907, Jose Duran executed the deed of sale of the
property in favor of the plaintiff with the defendant's knowledge and
consent.1awphil.net
As the first special defense, counsel for the defendant alleged that the
facts set forth in the complaint with respect to the execution of the deed
did not constitute a cause of action, nor did those alleged in the other
form of action for the collection of P3,000, the value of the realty.
As the second special defense, he alleged that the defendant was the
lawful owner of the property claimed in the complaint, as his ownership
was recorded in the property registry, and that, since his title had been
registered under the proceedings in rem prescribed by Act No. 496, it
was conclusive against the plaintiff and the pretended rights alleged to
have been acquired by Jose Duran prior to such registration could not
now prevail; that the defendant had not executed any written power of
attorney nor given any verbal authority to Jose Duran in order that the
latter might, in his name and representation, sell the said property to the
plaintiff company; that the defendant's knowledge of the said sale was
acquired long after the execution of the contract of sale between Duran
and Gutierrez Hermanos, and that prior thereto the defendant did not
intentionally and deliberately perform any act such as might have induced
the plaintiff to believe that Duran was empowered and authorized by the
defendant and which would warrant him in acting to his own detriment,
under the influence of that belief. Counsel therefore prayed that the
defendant be absolved from the complaint and that the plaintiff be
sentenced to pay the costs and to hold his peace forever.

After the hearing of the case and an examination of the evidence

introduced by both parties, the court rendered the judgment
aforementioned, to which counsel for the defendant excepted and moved
for a new trial. This motion was denied, an exception was taken by the
defendant and, upon presentation of the proper bill of exceptions, the
same was approved, certified and forwarded to the clerk of his court.

of repurchase to Gutierrez Hermanos, counsel for this firm filed a

complainant praying, among other remedies, that the defendant Orense
be compelled to execute a deed for the transfer and conveyance to the
plaintiff company of all the right, title and interest with Orense had in the
property sold, and to pay to the same the rental of the property due from
February 14, 1911.itc-alf

This suit involves the validity and efficacy of the sale under right of
redemption of a parcel of land and a masonry house with the nipa roof
erected thereon, effected by Jose Duran, a nephew of the owner of the
property, Engracio Orense, for the sum of P1,500 by means of a notarial
instrument executed and ratified on February 14, 1907.

Notwithstanding the allegations of the defendant, the record in this case

shows that he did give his consent in order that his nephew, Jose Duran,
might sell the property in question to Gutierrez Hermanos, and that he did
thereafter confirm and ratify the sale by means of a public instrument
executed before a notary.

After the lapse of the four years stipulated for the redemption, the
defendant refused to deliver the property to the purchaser, the firm of
Gutierrez Hermanos, and to pay the rental thereof at the rate of P30 per
month for its use and occupation since February 14, 1911, when the
period for its repurchase terminated. His refusal was based on the
allegations that he had been and was then the owner of the said property,
which was registered in his name in the property registry; that he had not
executed any written power of attorney to Jose Duran, nor had he given
the latter any verbal authorization to sell the said property to the plaintiff
firm in his name; and that, prior to the execution of the deed of sale, the
defendant performed no act such as might have induced the plaintiff to
believe that Jose Duran was empowered and authorized by the
defendant to effect the said sale.

It having been proven at the trial that he gave his consent to the said
sale, it follows that the defendant conferred verbal, or at least implied,
power of agency upon his nephew Duran, who accepted it in the same
way by selling the said property. The principal must therefore fulfill all the
obligations contracted by the agent, who acted within the scope of his
authority. (Civil Code, arts. 1709, 1710 and 1727.)

The plaintiff firm, therefore, charged Jose Duran, in the Court of First
Instance of the said province, with estafa, for having represented himself
in the said deed of sale to be the absolute owner of the aforesaid land
and improvements, whereas in reality they did not belong to him, but to
the defendant Orense. However, at the trial of the case Engracio Orense,
called as a witness, being interrogated by the fiscal as to whether he and
consented to Duran's selling the said property under right of redemption
to the firm of Gutierrez Hermanos, replied that he had. In view of this
statement by the defendant, the court acquitted Jose Duran of the charge
of estafa.

Article 1259 of the Civil Code prescribes: "No one can contract in the
name of another without being authorized by him or without his legal
representation according to law.

As a result of the acquittal of Jose Duran, based on the explicit testimony

of his uncle, Engacio Orense, the owner of the property, to the effect that
he had consented to his nephew Duran's selling the property under right

Even should it be held that the said consent was granted subsequently to
the sale, it is unquestionable that the defendant, the owner of the
property, approved the action of his nephew, who in this case acted as
the manager of his uncle's business, and Orense'r ratification produced
the effect of an express authorization to make the said sale. (Civil Code,
arts. 1888 and 1892.)

A contract executed in the name of another by one who has

neither his authorization nor legal representation shall be void,
unless it should be ratified by the person in whose name it was
executed before being revoked by the other contracting party.
The sworn statement made by the defendant, Orense, while testifying as
a witness at the trial of Duran for estafa, virtually confirms and ratifies the
sale of his property effected by his nephew, Duran, and, pursuant to
article 1313 of the Civil Code, remedies all defects which the contract
may have contained from the moment of its execution.

The sale of the said property made by Duran to Gutierrez Hermanos was
indeed null and void in the beginning, but afterwards became perfectly
valid and cured of the defect of nullity it bore at its execution by the
confirmation solemnly made by the said owner upon his stating under
oath to the judge that he himself consented to his nephew Jose Duran's
making the said sale. Moreover, pursuant to article 1309 of the Code, the
right of action for nullification that could have been brought became
legally extinguished from the moment the contract was validly confirmed
and ratified, and, in the present case, it is unquestionable that the
defendant did confirm the said contract of sale and consent to its
execution.

objection. Therefore the principal is bound to abide by the consequences

of his agency as though it had actually been given in writing (Conlu vs.
Araneta and Guanko, 15 Phil. Rep., 387; Gallemit vs. Tabiliran, 20 Phil.
Rep., 241; Kuenzle & Streiff vs. Jiongco, 22 Phil. Rep., 110.)

On the testimony given by Engacio Orense at the trial of Duran for estafa,
the latter was acquitted, and it would not be just that the said testimony,
expressive of his consent to the sale of his property, which determined
the acquittal of his nephew, Jose Duran, who then acted as his business
manager, and which testimony wiped out the deception that in the
beginning appeared to have been practiced by the said Duran, should not
now serve in passing upon the conduct of Engracio Orense in relation to
the firm of Gutierrez Hermanos in order to prove his consent to the sale
of his property, for, had it not been for the consent admitted by the
defendant Orense, the plaintiff would have been the victim of estafa.

The judgment appealed from in harmony with the law and the merits of
the case, and the errors assigned thereto have been duly refuted by the
foregoing considerations, so it should be affirmed.

The repeated and successive statements made by the defendant Orense

in two actions, wherein he affirmed that he had given his consent to the
sale of his property, meet the requirements of the law and legally excuse
the lack of written authority, and, as they are a full ratification of the acts
executed by his nephew Jose Duran, they produce the effects of an
express power of agency.

The judgment appealed from is hereby affirmed, with the costs against
the appellant.
Arellano, C.J., Johnson, Carson, Moreland and Araullo, JJ., concur.

If the defendant Orense acknowledged and admitted under oath that he

had consented to Jose Duran's selling the property in litigation to
Gutierrez Hermanos, it is not just nor is it permissible for him afterward to
deny that admission, to the prejudice of the purchaser, who gave P1,500
for the said property.
The contract of sale of the said property contained in the notarial
instrument of February 14, 1907, is alleged to be invalid, null and void
under the provisions of paragraph 5 of section 335 of the Code of Civil
Procedure, because the authority which Orense may have given to Duran
to make the said contract of sale is not shown to have been in writing and
signed by Orense, but the record discloses satisfactory and conclusive
proof that the defendant Orense gave his consent to the contract of sale
executed in a public instrument by his nephew Jose Duran. Such consent
was proven in a criminal action by the sworn testimony of the principal
and presented in this civil suit by other sworn testimony of the same
principal and by other evidence to which the defendant made no

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO,
TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and
SANTIAGO ASEJO, respondents.

SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of
controversy and a wellspring of enormous conflict that has led not only to
protracted legal entanglements but to even more bitter consequences,
like strained relationships and even the forfeiture of lives. It is a question
that likewise reflects a tragic commentary on prevailing social and cultural
values and institutions, where, as one observer notes, wealth and its
accumulation are the basis of self-fulfillment and where property is held
as sacred as life itself. "It is in the defense of his property," says this
modern thinker, that one "will mobilize his deepest protective devices,
and anybody that threatens his possessions will arouse his most
passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the
burden of reconstructing the social order is shouldered by the political
leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our
responsibility is to give them that relief pursuant to the decree of law.
The antecedent facts are quoted from the decision 2 appealed from:

he was able to secure title in his name alone also, so that OCT. No.
21137 in the name of his mother was transferred to his name, that was in
1955; that was why after some efforts of compromise had failed, his halfbrothers and sisters, herein plaintiffs, filed present case for partition with
accounting on the position that he was only a trustee on an implied trust
when he redeemed,-and this is the evidence, but as it also turned out that
one of plaintiffs, Emeteria Asejo was occupying a portion, defendant
counterclaimed for her to vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant in
his position that he was and became absolute owner, he was not a
trustee, and therefore, dismissed case and also condemned plaintiff
occupant, Emeteria to vacate; it is because of this that plaintiffs have
come here and contend that trial court erred in:
I. ... declaring the defendant absolute owner of the property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion of
the property to vacate the land, p. 1 Appellant's brief.
which can be reduced to simple question of whether or not on the basis
of evidence and law, judgment appealed from should be maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for
the plaintiffs-appellants, the private respondents herein. The petitioner
now appeals, by way of certiorari, from the Court's decision.

xxx xxx xxx

... [T]he land in question Lot 14694 of Cadastral Survey of Albay located
in Legaspi City with an area of some 11,325 sq. m. originally belonged to
one Felisa Alzul as her own private property; she married twice in her
lifetime; the first, with one Bernabe Adille, with whom she had as an only
child, herein defendant Rustico Adille; in her second marriage with one
Procopio Asejo, her children were herein plaintiffs, now, sometime in
1939, said Felisa sold the property in pacto de retro to certain 3rd
persons, period of repurchase being 3 years, but she died in 1942
without being able to redeem and after her death, but during the period of
redemption, herein defendant repurchased, by himself alone, and after
that, he executed a deed of extra-judicial partition representing himself to
be the only heir and child of his mother Felisa with the consequence that

We required the private respondents to file a comment and thereafter,

having given due course to the petition, directed the parties to file their
briefs. Only the petitioner, however, filed a brief, and the private
respondents having failed to file one, we declared the case submitted for
decision.
The petition raises a purely legal issue: May a co-owner acquire
exclusive ownership over the property held in common?
Essentially, it is the petitioner's contention that the property subject of
dispute devolved upon him upon the failure of his co-heirs to join him in
its redemption within the period required by law. He relies on the
provisions of Article 1515 of the old Civil Article 1613 of the present Code,

giving the vendee a retro the right to demand redemption of the entire
property.

ART. 1456. If property is acquired through mistake or fraud, the person

obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.

There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to
his share alone. 5 While the records show that the petitioner redeemed
the property in its entirety, shouldering the expenses therefor, that did not
make him the owner of all of it. In other words, it did not put to end the
existing state of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his
right to collect reimbursement from the remaining co-owners. 6 There is
no doubt that redemption of property entails a necessary expense. Under
the Civil Code:
ART. 488. Each co-owner shall have a right to compel the other coowners to contribute to the expenses of preservation of the thing or right
owned in common and to the taxes. Any one of the latter may exempt
himself from this obligation by renouncing so much of his undivided
interest as may be equivalent to his share of the expenses and taxes. No
such waiver shall be made if it is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of coownership. While a vendee a retro, under Article 1613 of the Code, "may
not be compelled to consent to a partial redemption," the redemption by
one co-heir or co-owner of the property in its totality does not vest in him
ownership over it. Failure on the part of all the co-owners to redeem it
entitles the vendee a retro to retain the property and consolidate title
thereto in his name. 7 But the provision does not give to the redeeming
co-owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title
over the parcel in his name terminate the existing co-ownership. While
his half-brothers and sisters are, as we said, liable to him for
reimbursement as and for their shares in redemption expenses, he
cannot claim exclusive right to the property owned in common.
Registration of property is not a means of acquiring ownership. It
operates as a mere notice of existing title, that is, if there is one.
The petitioner must then be said to be a trustee of the property on behalf
of the private respondents. The Civil Code states:

We agree with the respondent Court of Appeals that fraud attended the
registration of the property. The petitioner's pretension that he was the
sole heir to the land in the affidavit of extrajudicial settlement he executed
preliminary to the registration thereof betrays a clear effort on his part to
defraud his brothers and sisters and to exercise sole dominion over the
property. The aforequoted provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the
property, did so either on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Article 2144 of the Civil
Code, or for his exclusive benefit, in which case, he is guilty of fraud, and
must act as trustee, the private respondents being the beneficiaries,
under the Article 1456. The evidence, of course, points to the second
alternative the petitioner having asserted claims of exclusive ownership
over the property and having acted in fraud of his co-heirs. He cannot
therefore be said to have assume the mere management of the property
abandoned by his co-heirs, the situation Article 2144 of the Code
contemplates. In any case, as the respondent Court itself affirms, the
result would be the same whether it is one or the other. The petitioner
would remain liable to the Private respondents, his co-heirs.
This Court is not unaware of the well-established principle that
prescription bars any demand on property (owned in common) held by
another (co-owner) following the required number of years. In that event,
the party in possession acquires title to the property and the state of coownership is ended . 8 In the case at bar, the property was registered in
1955 by the petitioner, solely in his name, while the claim of the private
respondents was presented in 1974. Has prescription then, set in?
We hold in the negative. Prescription, as a mode of terminating a relation
of co-ownership, must have been preceded by repudiation (of the coownership). The act of repudiation, in turn is subject to certain conditions:
(1) a co-owner repudiates the co-ownership; (2) such an act of
repudiation is clearly made known to the other co-owners; (3) the
evidence thereon is clear and conclusive, and (4) he has been in
possession through open, continuous, exclusive, and notorious
possession of the property for the period required by law. 9
The instant case shows that the petitioner had not complied with these
requisites. We are not convinced that he had repudiated the co-

ownership; on the contrary, he had deliberately kept the private

respondents in the dark by feigning sole heirship over the estate under
dispute. He cannot therefore be said to have "made known" his efforts to
deny the co-ownership. Moreover, one of the private respondents,
Emeteria Asejo, is occupying a portion of the land up to the present, yet,
the petitioner has not taken pains to eject her therefrom. As a matter of
fact, he sought to recover possession of that portion Emeteria is
occupying only as a counterclaim, and only after the private respondents
had first sought judicial relief.
It is true that registration under the Torrens system is constructive notice
of title, 10 but it has likewise been our holding that the Torrens title does
not furnish a shield for fraud. 11 It is therefore no argument to say that the
act of registration is equivalent to notice of repudiation, assuming there
was one, notwithstanding the long-standing rule that registration operates
as a universal notice of title.
For the same reason, we cannot dismiss the private respondents' claims
commenced in 1974 over the estate registered in 1955. While actions to
enforce a constructive trust prescribes in ten years, 12 reckoned from the
date of the registration of the property, 13 we, as we said, are not
prepared to count the period from such a date in this case. We note the
petitioner's sub rosa efforts to get hold of the property exclusively for
himself beginning with his fraudulent misrepresentation in his unilateral
affidavit of extrajudicial settlement that he is "the only heir and child of his
mother Feliza with the consequence that he was able to secure title in his
name also." 14 Accordingly, we hold that the right of the private
respondents commenced from the time they actually discovered the
petitioner's act of defraudation. 15 According to the respondent Court of
Appeals, they "came to know [of it] apparently only during the progress of
the litigation." 16 Hence, prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must
be pleaded either in a motion to dismiss or in the answer otherwise it is
deemed waived, 17 and here, the petitioner never raised that defense. 18
There are recognized exceptions to this rule, but the petitioner has not
shown why they apply.
WHEREFORE, there being no reversible error committed by the
respondent Court of Appeals, the petition is DENIED. The Decision
sought to be reviewed is hereby AFFIRMED in toto. No pronouncement
as to costs.

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style
"IRENE'S WEARING APPAREL," petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and
COURT OF APPEALS, respondents.
CORTES, J.:
Assailed in this petition for review on certiorari is the judgment of the
Court of Appeals, which, applying the doctrine of solutio indebiti, reversed
the decision of the Regional Trial Court, Branch CV, Quezon City by
deciding in favor of private respondent.
Petitioner, using the business name "Irene's Wearing Apparel," was
engaged in the manufacture of ladies garments, children's wear, men's
apparel and linens for local and foreign buyers. Among its foreign buyers
was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the
United States.
In the course of the business transaction between the two, FACETS from
time to time remitted certain amounts of money to petitioner in payment
for the items it had purchased. Sometime in August 1980, FACETS
instructed the First National State Bank of New Jersey, Newark, New
Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to
petitioner via Philippine National Bank, Sta. Cruz Branch, Manila
(hereinafter referred to as PNB).
Acting on said instruction, FNSB instructed private respondent
Manufacturers Hanover and Trust Corporation to effect the abovementioned transfer through its facilities and to charge the amount to the
account of FNSB with private respondent. Although private respondent
was able to send a telex to PNB to pay petitioner $10,000.00 through the
Pilipinas Bank, where petitioner had an account, the payment was not
effected immediately because the payee designated in the telex was only
"Wearing Apparel." Upon query by PNB, private respondent sent PNB
another telex dated August 27, 1980 stating that the payment was to be
made to "Irene's Wearing Apparel." On August 28, 1980, petitioner
received the remittance of $10,000.00 through Demand Draft No. 225654
of the PNB.

Meanwhile, on August 25, 1980, after learning about the delay in the
remittance of the money to petitioner, FACETS informed FNSB about the
situation. On September 8, 1980, unaware that petitioner had already
received the remittance, FACETS informed private respondent about the
delay and at the same time amended its instruction by asking it to effect
the payment through the Philippine Commercial and Industrial Bank
(hereinafter referred to as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner
had already received the remittance of $10,000.00 from PNB instructed
the PCIB to pay $10,000.00 to petitioner. Hence, on September 11, 1980,
petitioner received a second $10,000.00 remittance.
Private respondent debited the account of FNSB for the second
$10,000.00 remittance effected through PCIB. However, when FNSB
discovered that private respondent had made a duplication of the
remittance, it asked for a recredit of its account in the amount of
$10,000.00. Private respondent complied with the request.
Private respondent asked petitioner for the return of the second
remittance of $10,000.00 but the latter refused to pay. On May 12, 1982 a
complaint was filed with the Regional Trial Court, Branch CV, Quezon
City which was decided in favor of petitioner as defendant. The trial court
ruled that Art. 2154 of the New Civil Code is not applicable to the case
because the second remittance was made not by mistake but by
negligence and petitioner was not unjustly enriched by virtue thereof
[Record, p. 234]. On appeal, the Court of Appeals held that Art. 2154 is
applicable and reversed the RTC decision. The dispositive portion of the
Court of Appeals' decision reads as follows:
WHEREFORE, the appealed decision is hereby
REVERSED and SET ASIDE and another one entered in
favor of plaintiff-appellant and against defendant-appellee
Domelita (sic) M. Andres, doing business under the name
and style "Irene's Wearing Apparel" to reimburse and/or
return to plaintiff-appellant the amount of $10,000.00, its
equivalent in Philippine currency, with interests at the
legal rate from the filing of the complaint on May 12, 1982
until the whole amount is fully paid, plus twenty percent
(20%) of the amount due as attomey's fees; and to pay
the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]
Thereafter, this petition was filed. The sole issue in this case is whether
or not the private respondent has the right to recover the second
$10,000.00 remittance it had delivered to petitioner. The resolution of this
issue would hinge on the applicability of Art. 2154 of the New Civil Code
which provides that:
Art. 2154. If something received when there is no right to
demand it, and it was unduly delivered through mistake,
the obligation to return it arises.
This provision is taken from Art. 1895 of the Spanish Civil Code which
provided that:
Art. 1895. If a thing is received when there was no right to
claim it and which, through an error, has been unduly
delivered, an obligation to restore it arises.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr.
Justice Bocobo explained the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code
abovequoted, is therefore applicable. This legal provision,
which determines the quasi-contract of solution indebiti, is
one of the concrete manifestations of the ancient principle
that no one shall enrich himself unjustly at the expense of
another. In the Roman Law Digest the maxim was
formulated thus: "Jure naturae acquum est, neminem
cum alterius detrimento et injuria fieri locupletiorem." And
the Partidas declared: "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Such axiom has grown
through the centuries in legislation, in the science of law
and in court decisions. The lawmaker has found it one of
the helpful guides in framing statutes and codes. Thus, it
is unfolded in many articles scattered in the Spanish Civil
Code. (See for example, articles, 360, 361, 464, 647, 648,
797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil

Code.) This time-honored aphorism has also been

adopted by jurists in their study of the conflict of rights. It
has been accepted by the courts, which have not
hesitated to apply it when the exigencies of right and
equity demanded its assertion. It is a part of that affluent
reservoir of justice upon which judicial discretion draws
whenever the statutory laws are inadequate because they
do not speak or do so with a confused voice. [at p. 632.]
For this article to apply the following requisites must concur: "(1) that he
who paid was not under obligation to do so; and, (2) that payment was
made by reason of an essential mistake of fact" [City of Cebu v. Piccio,
110 Phil. 558, 563 (1960)].
It is undisputed that private respondent delivered the second $10,000.00
remittance. However, petitioner contends that the doctrine of solutio
indebiti, does not apply because its requisites are absent.
First, it is argued that petitioner had the right to demand and therefore to
retain the second $10,000.00 remittance. It is alleged that even after the
two $10,000.00 remittances are credited to petitioner's receivables from
FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it
is argued that the last $10,000.00 remittance being in payment of a preexisting debt, petitioner was not thereby unjustly enriched.
The contention is without merit.
The contract of petitioner, as regards the sale of garments and other
textile products, was with FACETS. It was the latter and not private
respondent which was indebted to petitioner. On the other hand, the
contract for the transmittal of dollars from the United States to petitioner
was entered into by private respondent with FNSB. Petitioner, although
named as the payee was not privy to the contract of remittance of dollars.
Neither was private respondent a party to the contract of sale between
petitioner and FACETS. There being no contractual relation between
them, petitioner has no right to apply the second $10,000.00 remittance
delivered by mistake by private respondent to the outstanding account of
FACETS.
Petitioner next contends that the payment by respondent bank of the
second $10,000.00 remittance was not made by mistake but was the

result of negligence of its employees. In connection with this the Court of

Appeals made the following finding of facts:
The fact that Facets sent only one remittance of
$10,000.00 is not disputed. In the written interrogatories
sent to the First National State Bank of New Jersey
through the Consulate General of the Philippines in New
York, Adelaide C. Schachel, the investigation and
reconciliation clerk in the said bank testified that a request
to remit a payment for Facet Funwear Inc. was made in
August, 1980. The total amount which the First National
State Bank of New Jersey actually requested the plaintiffappellant Manufacturers Hanover & Trust Corporation to
remit to Irene's Wearing Apparel was US $10,000.00.
Only one remittance was requested by First National
State Bank of New Jersey as per instruction of Facets
Funwear (Exhibit "J", pp. 4-5).
That there was a mistake in the second remittance of US
$10,000.00 is borne out by the fact that both remittances
have the same reference invoice number which is 263 80.
(Exhibits "A-1- Deposition of Mr. Stanley Panasow" and
"A-2-Deposition of Mr. Stanley Panasow").
Plaintiff-appellant made the second remittance on the
wrong assumption that defendant-appellee did not receive
the first remittance of US $10,000.00. [Rollo, pp. 26-27.]

Appeals is limited to reviewing and revising the errors of

law imputed to it, its findings of fact being conclusive"
[Chan v. Court of Appeals, G.R. No. L-27488, June 30,
1970, 33 SCRA 737, reiterating a long line of decisions].
This Court has emphatically declared that "it is not the
function of the Supreme Court to analyze or weigh such
evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed
by the lower court" [Tiongco v. De la Merced, G.R. No. L24426, July 25, 1974, 58 SCRA 89; Corona v. Court of
Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA
865; Baniqued v. Court of Appeals, G. R. No. L-47531,
February 20, 1984, 127 SCRA 596]. "Barring, therefore, a
showing that the findings complained of are totally devoid
of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion,
such findings must stand, for this Court is not expected or
required to examine or contrast the oral and documentary
evidence submitted by the parties" [Santa Ana, Jr. v.
Hernandez, G.R. No. L-16394, December 17, 1966, 18
SCRA 9731. [at pp. 144-145.]
Petitioner invokes the equitable principle that when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must
be borne by the one whose negligence was the proximate cause of the
loss.

It is evident that the claim of petitioner is anchored on the appreciation of

the attendant facts which petitioner would have this Court review. The
Court holds that the finding by the Court of Appeals that the second
$10,000.00 remittance was made by mistake, being based on substantial
evidence, is final and conclusive. The rule regarding questions of fact
being raised with this Court in a petition for certiorari under Rule 45 of the
Revised Rules of Court has been stated in Remalante v. Tibe, G.R. No.
59514, February 25, 1988, 158 SCRA 138, thus:

The rule is that principles of equity cannot be applied if there is a

provision of law specifically applicable to a case [Phil. Rabbit Bus Lines,
Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat,
Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587;
Rural Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18,
1985, 135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the
Court in the case of De Garcia v. Court of Appeals, G.R. No. L-20264,
January 30, 1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L18536, March 31, 1965, 13 SCRA 486, held:

The rule in this jurisdiction is that only questions of law

may be raised in a petition for certiorari under Rule 45 of
the Revised Rules of Court. "The jurisdiction of the
Supreme Court in cases brought to it from the Court of

... The common law principle that where one of two

innocent persons must suffer by a fraud perpetrated by
another, the law imposes the loss upon the party who, by
his misplaced confidence, has enabled the fraud to be

committed, cannot be applied in a case which is covered

by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and a
statutory provision, the latter must prevail in this
jurisdiction. [at p. 135.]
Having shown that Art. 2154 of the Civil Code, which embodies the
doctrine of solutio indebiti, applies in the case at bar, the Court must
reject the common law principle invoked by petitioner.
Finally, in her attempt to defeat private respondent's claim, petitioner
makes much of the fact that from the time the second $10,000.00
remittance was made, five hundred and ten days had elapsed before
private respondent demanded the return thereof. Needless to say, private
respondent instituted the complaint for recovery of the second
$10,000.00 remittance well within the six years prescriptive period for
actions based upon a quasi-contract [Art. 1145 of the New Civil Code].
WHEREFORE, the petition is DENIED and the decision of the Court of
Appeals is hereby AFFIRMED.

prove their case

facts. 1wph1.t

not

covered

by

this

stipulation

of

Defendants' counterclaim is hereby dismissed for not having

been substantiated."
On August 11, 1958, the plaintiff Gonzalo Puyat & Sons, Inc., filed an
action for refund of Retail DealerlsTaxes paid by it, corresponding to the
first Quarter of 1950 up to the third Quarter of 1956, amounting to
P33,785.00, against the City of Manila and its City Treasurer.The case
was submitted on the following stipulation of facts, to wit--

G.R. No. L-17447

"1. That the plaintiff is a corporation duly organized and existing

according to the laws of the Philippines, with offices at Manila;
while defendant City Manila is a Municipal Corporation duly
organized in accordance with the laws of the Philippines, and
defendant Marcelino Sarmiento is the dulyqualified incumbent
City Treasurer of Manila;

April 30, 1963

"2. That plaintiff is engaged in the business of manufacturing and

selling all kinds of furniture at its factory at 190 Rodriguez-Arias,
San Miguel, Manila, and has a display room located at 604-606
Rizal Avenue, Manila, wherein it displays the various kind of
furniture manufactured by it and sells some goods imported by it,
such as billiard balls, bowling balls and other accessories;

GONZALO PUYAT & SONS, INC., plaintiff-appelle,

vs.
CITY OF MANILA AND MARCELO SARMIENTO, as City Treasurer of
Manila, defendants-appellants
PAREDES, J.:

"3. That acting pursuant to the provisions of Sec. 1. group II, of

Ordinance No. 3364, defendant City Treasurer of Manilaassessed
from plaintiff retail dealer's tax corresponding to the quarters
hereunder stated on the sales of furniture manufactured and sold
by it at its factory site, all of which assessments plaintiff paid
without protest in the erroneous belief that it was liable therefor,
on the dates and in the amount enumerated herein below:

This is an appeal from the judgment of the CFI of Manila, the dispostive
portion of which reads:
"xxx Of the payments made by the plaintiff, only that made on
October 25, 1950 in the amount of P1,250.00 has prescribed
Payments made in 1951 and thereafter are still recoverable since
the extra-judicial demand made on October 30, 1956 was well
within the six-year prescriptive period of the New CivilCode.
In view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiff, ordering the defendants to refund
the amount of P29,824.00, without interest. No costs.
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this Honorable
Court, without prejudice to the parties adducing other evidence to

O.R. No.

Amount
Assessed
and Paid.

436271X

P1,255.00

Period

Date Paid

First Quarter 1950

Jan.
1950

Second
1950

Apr. 25, 1950 215895X

Quarter

25,

1,250.00

Third Quarter 1950

Jul. 25, 1950

243321X

1,250.00

Fourth Quarter 1950

Oct. 25, 1950 271165X

1,250.00

(Follows the assessment for different quarters in 1951, 1952,

1953, 1954 and 1955, fixing the same amount quarterly.) x x x..

First Quarter 1956

Jan.
1956

823047X

1,250.00

Second
1956

Apr. 25, 1956 855949X

1,250.00

Jul. 25, 1956

1,250.00

Quarter

Third Quarter 1956

T O TAL

25,

880789X

.............

P33,785.00
===========

"4. That plaintiff, being a manufacturer of various kinds of

furniture, is exempt from the payment of taxes imposed under the
provisions of Sec. 1, Group II, of Ordinance No. 3364,which took
effect on September 24, 1956, on the sale of the various kinds of
furniture manufactured by it pursuant to the provisions of Sec.
18(n) of Republic Act No. 409 (Revised Charter of Manila), as
restated in Section 1 of Ordinance No.3816.
"5. That, however, plaintiff, is liable for the payment of taxes
prescribed in Section 1, Group II or Ordinance No. 3364mas
amended by Sec. 1, Group II of Ordinance No. 3816, which took
effect on September 24, 1956, on the sales of imported billiard
balls, bowling balls and other accessories at its displayroom. The
taxes paid by the plaintiff on the sales of said article are as
follows:
xxx

xxx

xxx

"6. That on October 30, 1956, the plaintiff filed with defendant City
Treasurer of Manila, a formal request for refund of the retail
dealer's taxes unduly paid by it as aforestated in paragraph 3,
hereof.

"7. That on July 24, 1958, the defendant City Treasurer of

Maniladefinitely denied said request for refund.
"8. Hence on August 21, 1958, plaintiff filed the present
complaint.
"9. Based on the above stipulation of facts, the legal issues to be
resolved by this Honorable Court are: (1) the period of
prescription applicable in matters of refund of municipal taxes
errenously paid by a taxpayer and (2) refund of taxes not paid
under protest. x x x."
Said judgment was directly appealed to this Court on two dominant
issues to wit: (1) Whether or not the amounts paid by plaintiff-appelle, as
retail dealer's taxes under Ordinance 1925, as amended by Ordinance
No. 3364of the City of Manila, without protest, are refundable;(2)
Assuming arguendo, that plaintiff-appellee is entitled to the refund of the
retail taxes in question, whether or not the claim for refund filed in
October 1956, in so far as said claim refers to taxes paid from 1950 to
1952 has already prescribed. .
Under the first issue, defendants-appellants contend tht the taxes in
question were voluntarily paid by appellee company and since, in this
jurisdiction, in order that a legal basis arise for claim of refund of taxes
erroneously assessed, payment thereof must be made under protest, and
this being a condition sine qua non, and no protest having been made, -verbally or in writing, therebyindicating that the payment was voluntary,
the action must fail. Cited in support of the above contention, are the
cases of Zaragoza vs. Alfonso, 46 Phil. 160-161, and Gavino v.
Municipality of Calapan, 71 Phil. 438..
In refutation of the above stand of appellants, appellee avers tht the
payments could not have been voluntary.At most, they were paid
"mistakenly and in good faith"and "without protest in the erroneous belief
that it was liable thereof." Voluntariness is incompatible with protest and
mistake. It submits that this is a simple case of "solutio indebiti"..
Appellants do not dispute the fact that appellee-companyis exempted
from the payment of the tax in question.This is manifest from the reply of
appellant City Treasurer stating that sales of manufactured products at
the factory site are not taxable either under the Wholesalers Ordinance or
under the Retailers' Ordinance. With this admission, it would seem clear
that the taxes collected from appellee were paid, thru an error or mistake,

which places said act of payment within the pale of the new Civil Code
provision on solutio indebiti. The appellant City of Manila, at the very
start, notwithstanding the Ordinance imposing the Retailer's Tax, had no
right to demand payment thereof..
"If something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligationto retun it arises" (Art.
2154, NCC)..
Appelle categorically stated that the payment was not voluntarily made,
(a fact found also by the lower court),but on the erronoues belief, that
they were due. Under this circumstance, the amount paid, even without
protest is recoverable. "If the payer was in doubt whether the debt was
due, he may recover if he proves that it was not due" (Art. 2156, NCC).
Appellee had duly proved that taxes were not lawfully due. There is,
therefore, no doubt that the provisions of solutio indebtiti, the new Civil
Code, apply to the admitted facts of the case..
With all, appellant quoted Manresa as saying: "x x x De la misma opinion
son el Sr. Sanchez Roman y el Sr. Galcon, et cual afirma que si la paga
se hizo por error de derecho, ni existe el cuasi-contrato ni esta obligado a
la restitucion el que cobro, aunque no se debiera lo que se pago"
(Manresa, Tomo 12, paginas 611-612). This opinion, however, has
already lost its persuasiveness, in view of the provisions of the Civil
Code, recognizing "error de derecho" as a basis for the quasi-contract, of
solutio indebiti. .
"Payment by reason of a mistake in the contruction or application of a
doubtful or difficult question of law may come within the scope of the
preceding article" (Art. 21555)..
There is no gainsaying the fact that the payments made by appellee was
due to a mistake in the construction of a doubtful question of law. The
reason underlying similar provisions, as applied to illegal taxation, in the
United States, is expressed in the case of Newport v. Ringo, 37 Ky. 635,
636; 10 S.W. 2, in the following manner:.
"It is too well settled in this state to need the citation of authority that if
money be paid through a clear mistake of law or fact, essentially affecting
the rights of the parties, and which in law or conscience was not payable,
and should not be retained by the party receiving it, it may be recovered.
Both law and sound morality so dictate. Especially should this be the rule
as to illegal taxation. The taxpayer has no voice in the impositionof the

burden. He has the right to presume that the taxing power has been
lawfully exercised. He should not be required to know more than those in
authority over him, nor should he suffer loss by complying with what he
bona fide believe to be his duty as a good citizen. Upon the contrary, he
should be promoted to its ready performance by refunding to him any
legal exaction paid by him in ignorance of its illegality; and, certainly, in
such a case, if be subject to a penalty for nonpayment, his compliance
under belief of its legality, and without awaitinga resort to judicial
proceedings should not be regrded in law as so far voluntary as to affect
his right of recovery.".
"Every person who through an act or performance by another, or any
other means, acquires or comes into possession of something at the
expense of the latter without just or legal grounds, shall return the same
to him"(Art. 22, Civil Code). It would seems unedifying for the
government, (here the City of Manila), that knowing it has no right at all to
collect or to receive money for alleged taxes paid by mistake, it would be
reluctant to return the same. No one should enrich itself unjustly at the
expense of another (Art. 2125, Civil Code)..
Admittedly, plaintiff-appellee paid the tax without protest.Equally admitted
is the fact that section 76 of the Charter of Manila provides that "No court
shall entertain any suit assailing the validity of tax assessed under this
article until the taxpayer shall have paid, under protest the taxes
assessed against him, xx". It should be noted, however, that the article
referred to in said section is Article XXI, entitled Department of
Assessment and the sections thereunder manifestly show that said article
and its sections relate to asseessment, collection and recovery of real
estate taxes only. Said section 76, therefor, is not applicable to the case
at bar, which relates to the recover of retail dealer taxes..
In the opinion of the Secretary of Justice (Op. 90,Series of 1957, in a
question similar to the case at bar, it was held that the requiredment of
protest refers only to the payment of taxes which are directly imposed by
the charter itself, that is, real estate taxes, which view was sustained by
judicial and administrative precedents, one of which is the case of
Medina, et al., v. City of Baguio, G.R. No. L-4269, Aug. 29, 1952. In other
words, protest is not necessary for the recovery of retail dealer's taxes,
like the present, because they are not directly imposed by the charter. In
the Medina case, the Charter of Baguio (Chap. 61, Revised Adm. Code),
provides that "no court shall entertain any suit assailing the validity of a
tax assessed unde this charter until the tax-payer shall have paid, under
protest, the taxes assessed against him (sec.25474[b], Rev. Adm. Code),
a proviso similar to section 76 of the Manila Charter. The refund of

specific taxes paid under a void ordinance was ordered, although it did
not appear that payment thereof was made under protest..
In a recent case, We said: "The appellants argue that the sum the refund
of which is sought by the appellee, was not paid under protest and hence
is not refundable. Again, the trial court correctly held that being
unauthorized, it is not a tax assessed under the Charter of the Appellant
City of Davao and for that reason, no protest is necessary for a claim or
demand for its refund" (Citing the Medina case, supra; East Asiatic Co.,
Ltd. v. City of Davao, G.R. No. L-16253, Aug. 21, 1962). Lastly, being a
case of solutio indebiti, protest is not required as a condition sine qua non
for its application..
The next issue in discussion is that of prescription. Appellants maintain
that article 1146 (NCC), which provides for a period of four (4) years
(upon injury to the rights of the plaintiff), apply to the case. On the other
hand, appellee contends that provisions of Act 190 (Code of Civ.
Procedure) should apply, insofar as payments made before the effectivity
of the New Civil Code on August 30, 1950, the period of which is ten (10)
years, (Sec. 40,Act No. 190; Osorio v. Tan Jongko, 51 O.G. 6211) and
article 1145 (NCC), for payments made after said effectivity, providing for
a period of six (6) years (upon quasi-contracts like solutio indebiti). Even
if the provisionsof Act No. 190 should apply to those payments made
before the effectivity of the new Civil Code, because "prescription already
runnig before the effectivity of this Code shall be governed by laws
previously in force x x x" (art. 1116, NCC), for payments made after said
effectivity,providing for a period of six (6) years (upon quasi-contracts like
solutio indebiti). Even if the provisions of Act No. 190should apply to
those payments made before the effectivity of the new Civil Code,
because "prescription already running before the effectivity of of this
Code shall be govern by laws previously in force xxx " (Art. 1116, NCC),
Still payments made before August 30, 1950 are no longer recoverable in
view of the second paragraph of said article (1116), which provides:"but if
since the time this Code took effect the entire period herein required for
prescription should elapse the present Code shall be applicable even
though by the former laws a longer period might be required". Anent the
payments made after August 30, 1950, it is abvious that the action has
prescribed with respect to those made before October 30, 1950 only,
considering the fact that the prescription of action is interrupted xxx when
is a writteen extra-judicial demand x x x" (Art. 1155, NCC), and the
written demand in the case at bar was made on October 30, 1956
(Stipulation of Facts).MODIFIED in the sense that only payments made
on or after October 30, 1950 should be refunded, the decision appealed
from is affirmed, in all other respects. No costs. .

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion,Dizon, Regala

and
Makalintal,
JJ.,
concur.
Padilla,
Reyes,
J.B.L.,
and
Barrera,
JJ., too
no
part.
Decision affirmed.

Petitioner Joseph Saludaga was a sophomore law student of respondent

Far Eastern University (FEU) when he was shot by Alejandro Rosete
(Rosete), one of the security guards on duty at the school premises on
August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes
Medical Foundation (FEU-NRMF) due to the wound he
sustained.6 Meanwhile, Rosete was brought to the police station where
he explained that the shooting was accidental. He was eventually
released considering that no formal complaint was filed against him.
Petitioner thereafter filed a complaint for damages against respondents
on the ground that they breached their obligation to provide students with
a safe and secure environment and an atmosphere conducive to
learning. Respondents, in turn, filed a Third-Party Complaint 7 against
Galaxy Development and Management Corporation (Galaxy), the agency
contracted by respondent FEU to provide security services within its
premises and Mariano D. Imperial (Imperial), Galaxy's President, to
indemnify them for whatever would be adjudged in favor of petitioner, if
any; and to pay attorney's fees and cost of the suit. On the other hand,
Galaxy and Imperial filed a Fourth-Party Complaint against AFP General
Insurance.8
G.R. No. 179337

April 30, 2008

JOSEPH SALUDAGA, petitioner,

vs.
FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his
capacity as President of FEU, respondents.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court assails the June 29, 2007 Decision 2 of the Court of Appeals in CAG.R. CV No. 87050, nullifying and setting aside the November 10, 2004
Decision3 of the Regional Trial Court of Manila, Branch 2, in Civil Case
No. 98-89483 and dismissing the complaint filed by petitioner; as well as
its August 23, 2007 Resolution4 denying the Motion for Reconsideration.5
The antecedent facts are as follows:

On November 10, 2004, the trial court rendered a decision in favor of

petitioner, the dispositive portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered
ordering:
1. FEU and Edilberto de Jesus, in his capacity as
president of FEU to pay jointly and severally Joseph
Saludaga the amount of P35,298.25 for actual damages
with 12% interest per annum from the filing of the
complaint until fully paid; moral damages of P300,000.00,
exemplary damages of P500,000.00, attorney's fees of
P100,000.00 and cost of the suit;
2. Galaxy Management and Development Corp. and its
president, Col. Mariano Imperial to indemnify jointly and
severally 3rd party plaintiffs (FEU and Edilberto de Jesus
in his capacity as President of FEU) for the abovementioned amounts;

3. And the 4th party complaint is dismissed for lack of

cause of action. No pronouncement as to costs.
SO ORDERED.9
Respondents appealed to the Court of Appeals which rendered the
assailed Decision, the decretal portion of which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision
dated November 10, 2004 is hereby REVERSED and SET
ASIDE. The complaint filed by Joseph Saludaga against appellant
Far Eastern University and its President in Civil Case No. 9889483 is DISMISSED.

BEING A PARTY TO IT, IS NOT BOUND BY THE SAME UNDER

THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN
SELECTING GALAXY AS THE AGENCY WHICH WOULD
PROVIDE SECURITY SERVICES WITHIN THE PREMISES OF
RESPONDENT FEU.11
Petitioner is suing respondents for damages based on the alleged breach
of student-school contract for a safe learning environment. The pertinent
portions of petitioner's Complaint read:

THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER

CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT:

6.0. At the time of plaintiff's confinement, the defendants or any of

their representative did not bother to visit and inquire about his
condition. This abject indifference on the part of the defendants
continued even after plaintiff was discharged from the hospital
when not even a word of consolation was heard from them.
Plaintiff waited for more than one (1) year for the defendants to
perform their moral obligation but the wait was fruitless. This
indifference and total lack of concern of defendants served to
exacerbate plaintiff's miserable condition.

5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;

xxxx

5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR

THE INJURY RESULTING FROM A GUNSHOT WOUND
SUFFERED BY THE PETITIONER FROM THE HANDS OF NO
LESS THAN THEIR OWN SECURITY GUARD IN VIOLATION
OF THEIR BUILT-IN CONTRACTUAL OBLIGATION TO
PETITIONER, BEING THEIR LAW STUDENT AT THAT TIME, TO
PROVIDE HIM WITH A SAFE AND SECURE EDUCATIONAL
ENVIRONMENT;

11.0. Defendants are responsible for ensuring the safety of its

students while the latter are within the University premises. And
that should anything untoward happens to any of its students
while they are within the University's premises shall be the
responsibility of the defendants. In this case, defendants, despite
being legally and morally bound, miserably failed to protect
plaintiff from injury and thereafter, to mitigate and compensate
plaintiff for said injury;

5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT

PETITIONER WHILE HE WAS WALKING ON HIS WAY TO THE
LAW LIBRARY OF RESPONDENT FEU IS NOT THEIR
EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY
SERVICES
BETWEEN
GALAXY
AND
FEU
NOTWITHSTANDING THE FACT THAT PETITIONER, NOT

12.0. When plaintiff enrolled with defendant FEU, a contract was

entered into between them. Under this contract, defendants are
supposed to ensure that adequate steps are taken to provide an
atmosphere conducive to study and ensure the safety of the
plaintiff while inside defendant FEU's premises. In the instant
case, the latter breached this contract when defendant allowed
harm to befall upon the plaintiff when he was shot at by, of all

SO ORDERED.10
Petitioner filed a Motion for Reconsideration which was denied; hence,
the instant petition based on the following grounds:

people, their security guard who was tasked to maintain peace

inside the campus.12
In Philippine School of Business Administration v. Court of Appeals,13 we
held that:
When an academic institution accepts students for enrollment,
there is established a contract between them, resulting in bilateral
obligations which both parties are bound to comply with. For its
part, the school undertakes to provide the student with an
education that would presumably suffice to equip him with the
necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by
the school's academic requirements and observe its rules and
regulations.
Institutions of learning must also meet the implicit or "built-in"
obligation of providing their students with an atmosphere that
promotes or assists in attaining its primary undertaking of
imparting knowledge. Certainly, no student can absorb the
intricacies of physics or higher mathematics or explore the realm
of the arts and other sciences when bullets are flying or grenades
exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the
school must ensure that adequate steps are taken to maintain
peace and order within the campus premises and to prevent the
breakdown thereof.14
It is undisputed that petitioner was enrolled as a sophomore law student
in respondent FEU. As such, there was created a contractual obligation
between the two parties. On petitioner's part, he was obliged to comply
with the rules and regulations of the school. On the other hand,
respondent FEU, as a learning institution is mandated to impart
knowledge and equip its students with the necessary skills to pursue
higher education or a profession. At the same time, it is obliged to ensure
and take adequate steps to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of
the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief.15 In the instant case, we find that, when
petitioner was shot inside the campus by no less the security guard who

was hired to maintain peace and secure the premises, there is a prima
facie showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting
incident was a fortuitous event because they could not have reasonably
foreseen nor avoided the accident caused by Rosete as he was not their
employee;16and that they complied with their obligation to ensure a safe
learning environment for their students by having exercised due diligence
in selecting the security services of Galaxy.
After a thorough review of the records, we find that respondents failed to
discharge the burden of proving that they exercised due diligence in
providing a safe learning environment for their students. They failed to
prove that they ensured that the guards assigned in the campus met the
requirements stipulated in the Security Service Agreement. Indeed,
certain documents about Galaxy were presented during trial; however, no
evidence as to the qualifications of Rosete as a security guard for the
university was offered.
Respondents also failed to show that they undertook steps to ascertain
and confirm that the security guards assigned to them actually possess
the qualifications required in the Security Service Agreement. It was not
proven that they examined the clearances, psychiatric test results, 201
files, and other vital documents enumerated in its contract with Galaxy.
Total reliance on the security agency about these matters or failure to
check the papers stating the qualifications of the guards is negligence on
the part of respondents. A learning institution should not be allowed to
completely relinquish or abdicate security matters in its premises to the
security agency it hired. To do so would result to contracting away its
inherent obligation to ensure a safe learning environment for its students.
Consequently, respondents' defense of force majeure must fail. In order
for force majeure to be considered, respondents must show that no
negligence or misconduct was committed that may have occasioned the
loss. An act of God cannot be invoked to protect a person who has failed
to take steps to forestall the possible adverse consequences of such a
loss. One's negligence may have concurred with an act of God in
producing damage and injury to another; nonetheless, showing that the
immediate or proximate cause of the damage or injury was a fortuitous
event would not exempt one from liability. When the effect is found to be

partly the result of a person's participation - whether by active

intervention, neglect or failure to act - the whole occurrence is humanized
and removed from the rules applicable to acts of God.17
Article 1170 of the Civil Code provides that those who are negligent in the
performance of their obligations are liable for damages. Accordingly, for
breach of contract due to negligence in providing a safe learning
environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have
satisfactorily proven during the trial the existence of the factual basis of
the damages and its causal connection to defendant's acts.18
In the instant case, it was established that petitioner spent P35,298.25 for
his hospitalization and other medical expenses. 19 While the trial court
correctly imposed interest on said amount, however, the case at bar
involves an obligation arising from a contract and not a loan or
forbearance of money. As such, the proper rate of legal interest is six
percent (6%) per annum of the amount demanded. Such interest shall
continue to run from the filing of the complaint until the finality of this
Decision.20 After this Decision becomes final and executory, the
applicable rate shall be twelve percent (12%) per annum until its
satisfaction.
The other expenses being claimed by petitioner, such as transportation
expenses and those incurred in hiring a personal assistant while
recuperating were however not duly supported by receipts. 21 In the
absence thereof, no actual damages may be awarded. Nonetheless,
temperate damages under Art. 2224 of the Civil Code may be recovered
where it has been shown that the claimant suffered some pecuniary loss
but the amount thereof cannot be proved with certainty. Hence, the
amount of P20,000.00 as temperate damages is awarded to petitioner.
As regards the award of moral damages, there is no hard and fast rule in
the determination of what would be a fair amount of moral damages since
each case must be governed by its own peculiar circumstances. 22 The
testimony of petitioner about his physical suffering, mental anguish, fright,
serious anxiety, and moral shock resulting from the shooting
incident23 justify the award of moral damages. However, moral damages
are in the category of an award designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer. The
award is not meant to enrich the complainant at the expense of the

defendant, but to enable the injured party to obtain means, diversion, or

amusements that will serve to obviate the moral suffering he has
undergone. It is aimed at the restoration, within the limits of the possible,
of the spiritual status quo ante, and should be proportionate to the
suffering inflicted. Trial courts must then guard against the award of
exorbitant damages; they should exercise balanced restrained and
measured objectivity to avoid suspicion that it was due to passion,
prejudice, or corruption on the part of the trial court. 24 We deem it just and
reasonable under the circumstances to award petitioner moral damages
in the amount of P100,000.00.
Likewise, attorney's fees and litigation expenses in the amount of
P50,000.00 as part of damages is reasonable in view of Article 2208 of
the Civil Code.25 However, the award of exemplary damages is deleted
considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with
respondent FEU. In Powton Conglomerate, Inc. v. Agcolicol,26 we held
that:
[A] corporation is invested by law with a personality separate and
distinct from those of the persons composing it, such that, save
for certain exceptions, corporate officers who entered into
contracts in behalf of the corporation cannot be held personally
liable for the liabilities of the latter. Personal liability of a corporate
director, trustee or officer along (although not necessarily) with
the corporation may so validly attach, as a rule, only when - (1)
he assents to a patently unlawful act of the corporation, or when
he is guilty of bad faith or gross negligence in directing its affairs,
or when there is a conflict of interest resulting in damages to the
corporation, its stockholders or other persons; (2) he consents to
the issuance of watered down stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his
written objection thereto; (3) he agrees to hold himself personally
and solidarily liable with the corporation; or (4) he is made by a
specific provision of law personally answerable for his corporate
action.27

None of the foregoing exceptions was established in the instant case;

hence, respondent De Jesus should not be held solidarily liable with
respondent FEU.

watchmen is such agency, and not the client, since the latter has
no hand in selecting the security guards. Thus, the duty to
observe the diligence of a good father of a family cannot be
demanded from the said client:

Incidentally, although the main cause of action in the instant case is the
breach of the school-student contract, petitioner, in the alternative, also
holds respondents vicariously liable under Article 2180 of the Civil Code,
which provides:

[I]t is settled in our jurisdiction that where the security

agency, as here, recruits, hires and assigns the work of its
watchmen or security guards, the agency is the employer
of such guards or watchmen. Liability for illegal or harmful
acts committed by the security guards attaches to the
employer agency, and not to the clients or customers of
such agency. As a general rule, a client or customer of a
security agency has no hand in selecting who among the
pool of security guards or watchmen employed by the
agency shall be assigned to it; the duty to observe the
diligence of a good father of a family in the selection of
the guards cannot, in the ordinary course of events, be
demanded from the client whose premises or property are
protected by the security guards.

Art. 2180. The obligation imposed by Article 2176 is demandable

not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
xxxx

xxxx

The responsibility treated of in this article shall cease when the

persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.

The fact that a client company may give instructions or directions

to the security guards assigned to it, does not, by itself, render
the client responsible as an employer of the security guards
concerned and liable for their wrongful acts or omissions.31

We agree with the findings of the Court of Appeals that respondents

cannot be held liable for damages under Art. 2180 of the Civil Code
because respondents are not the employers of Rosete. The latter was
employed by Galaxy. The instructions issued by respondents' Security
Consultant to Galaxy and its security guards are ordinarily no more than
requests commonly envisaged in the contract for services entered into by
a principal and a security agency. They cannot be construed as the
element of control as to treat respondents as the employers of Rosete. 28
As held in Mercury Drug Corporation v. Libunao:29
In Soliman, Jr. v. Tuazon,30 we held that where the security
agency recruits, hires and assigns the works of its watchmen or
security guards to a client, the employer of such guards or

We now come to respondents' Third Party Claim against Galaxy.

In Firestone Tire and Rubber Company of the Philippines v.
Tempengko,32 we held that:
The third-party complaint is, therefore, a procedural device
whereby a 'third party' who is neither a party nor privy to the act
or deed complained of by the plaintiff, may be brought into the
case with leave of court, by the defendant, who acts as third-party
plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect
of the plaintiff's claim. The third-party complaint is actually
independent of and separate and distinct from the plaintiff's
complaint. Were it not for this provision of the Rules of Court, it
would have to be filed independently and separately from the

original complaint by the defendant against the third-party. But the

Rules permit defendant to bring in a third-party defendant or so to
speak, to litigate his separate cause of action in respect of
plaintiff's claim against a third-party in the original and principal
case with the object of avoiding circuitry of action and
unnecessary proliferation of law suits and of disposing
expeditiously in one litigation the entire subject matter arising
from one particular set of facts.33
Respondents and Galaxy were able to litigate their respective claims and
defenses in the course of the trial of petitioner's complaint. Evidence duly
supports the findings of the trial court that Galaxy is negligent not only in
the selection of its employees but also in their supervision. Indeed, no
administrative sanction was imposed against Rosete despite the shooting
incident; moreover, he was even allowed to go on leave of absence
which led eventually to his disappearance.34 Galaxy also failed to monitor
petitioner's condition or extend the necessary assistance, other than the
P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make
good their pledge to reimburse petitioner's medical expenses.
For these acts of negligence and for having supplied respondent FEU
with an unqualified security guard, which resulted to the latter's breach of
obligation to petitioner, it is proper to hold Galaxy liable to respondent
FEU for such damages equivalent to the above-mentioned amounts
awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with
Galaxy for being grossly negligent in directing the affairs of the security
agency. It was Imperial who assured petitioner that his medical expenses
will be shouldered by Galaxy but said representations were not fulfilled
because they presumed that petitioner and his family were no longer
interested in filing a formal complaint against them.35
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of
the Court of Appeals in CA-G.R. CV No. 87050 nullifying the Decision of
the trial court and dismissing the complaint as well as the August 23,
2007 Resolution denying the Motion for Reconsideration are REVERSED
and SET ASIDE. The Decision of the Regional Trial Court of Manila,
Branch 2, in Civil Case No. 98-89483 finding respondent FEU liable for
damages for breach of its obligation to provide students with a safe and

secure
learning
atmosphere,
followingMODIFICATIONS:

is AFFIRMED with

the

a. respondent Far Eastern University (FEU) is ORDERED to pay

petitioner actual damages in the amount of P35,298.25, plus 6% interest
per annum from the filing of the complaint until the finality of this
Decision. After this decision becomes final and executory, the applicable
rate shall be twelve percent (12%) per annum until its satisfaction;
b. respondent FEU is also ORDERED to pay petitioner temperate
damages in the amount of P20,000.00; moral damages in the amount of
P100,000.00; and attorney's fees and litigation expenses in the amount of
P50,000.00;
c. the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De Jesus is DISMISSED.
The counterclaims of respondents are likewise DISMISSED.
Galaxy Development and Management Corporation (Galaxy) and its
president, Mariano D. Imperial are ORDEREDto jointly and severally pay
respondent FEU damages equivalent to the above-mentioned amounts
awarded to petitioner.
SO ORDERED.

G.R. No. L-3756

June 30, 1952

SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO

DE
FILIPINAS, plaintiff-appellee,
vs.
NATIONAL COCONUT CORPORATION, defendant-appellant.
LABRADOR, J.:
This is an action to recover the possession of a piece of real property
(land and warehouses) situated in Pandacan Manila, and the rentals for
its occupation and use. The land belongs to the plaintiff, in whose name
the title was registered before the war. On January 4, 1943, during the
Japanese military occupation, the land was acquired by a Japanese
corporation by the name of Taiwan Tekkosho for the sum of P140,00, and
thereupon title thereto issued in its name (transfer certificate of title No.
64330, Register of Deeds, Manila). After liberation, more specifically on
April 4, 1946, the Alien Property Custodian of the United States of
America took possession, control, and custody thereof under section 12
of the Trading with the Enemy Act, 40 Stat., 411, for the reason that it
belonged to an enemy national. During the year 1946 the property was
occupied by the Copra Export Management Company under a
custodianship agreement with United States Alien Property Custodian
(Exhibit G), and when it vacated the property it was occupied by the
defendant herein. The Philippine Government made representations with
the Office Alien Property Custodian for the use of property by the
Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31, 1947, the
defendant was authorized to repair the warehouse on the land, and
actually spent thereon the repairs the sum of P26,898.27. In 1948,

defendant leased one-third of the warehouse to one Dioscoro Sarile at a

monthly rental of P500, which was later raised to P1,000 a month. Sarile
did not pay the rents, so action was brought against him. It is not shown,
however, if the judgment was ever executed.
Plaintiff made claim to the property before the Alien Property Custodian of
the United States, but as this was denied, it brought an action in court
(Court of First Instance of Manila, civil case No. 5007, entitled "La
Sagrada Orden Predicadores de la Provinicia del Santisimo Rosario de
Filipinas," vs. Philippine Alien Property Administrator, defendant, Republic
of the Philippines, intervenor) to annul the sale of property of Taiwan
Tekkosho, and recover its possession. The Republic of the Philippines
was allowed to intervene in the action. The case did not come for trial
because the parties presented a joint petition in which it is claimed by
plaintiff that the sale in favor of the Taiwan Tekkosho was null and void
because it was executed under threats, duress, and intimidation, and it
was agreed that the title issued in the name of the Taiwan Tekkosho be
cancelled and the original title of plaintiff re-issued; that the claims, rights,
title, and interest of the Alien Property Custodian be cancelled and held
for naught; that the occupant National Coconut Corporation has until
February 28, 1949, to recover its equipment from the property and vacate
the premises; that plaintiff, upon entry of judgment, pay to the Philippine
Alien Property Administration the sum of P140,000; and that the
Philippine Alien Property Administration be free from responsibility or
liability for any act of the National Coconut Corporation, etc. Pursuant to
the agreement the court rendered judgment releasing the defendant and
the intervenor from liability, but reversing to the plaintiff the right to
recover from the National Coconut Corporation reasonable rentals for the
use and occupation of the premises. (Exhibit A-1.)
The present action is to recover the reasonable rentals from August,
1946, the date when the defendant began to occupy the premises, to the
date it vacated it. The defendant does not contest its liability for the
rentals at the rate of P3,000 per month from February 28, 1949 (the date
specified in the judgment in civil case No. 5007), but resists the claim
therefor prior to this date. It interposes the defense that it occupied the
property in good faith, under no obligation whatsoever to pay rentals for
the use and occupation of the warehouse. Judgment was rendered for
the plaintiff to recover from the defendant the sum of P3,000 a month, as
reasonable rentals, from August, 1946, to the date the defendant vacates
the premises. The judgment declares that plaintiff has always been the

owner, as the sale of Japanese purchaser was void ab initio; that the
Alien Property Administration never acquired any right to the property, but
that it held the same in trust until the determination as to whether or not
the owner is an enemy citizen. The trial court further declares that
defendant can not claim any better rights than its predecessor, the Alien
Property Administration, and that as defendant has used the property and
had subleased portion thereof, it must pay reasonable rentals for its
occupation.
Against this judgment this appeal has been interposed, the following
assignment of error having been made on defendant-appellant's behalf:
The trial court erred in holding the defendant liable for rentals or
compensation for the use and occupation of the property from the
middle of August, 1946, to December 14, 1948.
1. Want to "ownership rights" of the Philippine Alien Property
Administration did not render illegal or invalidate its grant to the
defendant of the free use of property.
2. the decision of the Court of First Instance of Manila declaring
the sale by the plaintiff to the Japanese purchaser null and void
ab initio and that the plaintiff was and has remained as the legal
owner of the property, without legal interruption, is not conclusive.
3. Reservation to the plaintiff of the right to recover from the
defendant corporation not binding on the later;
4. Use of the property for commercial purposes in itself alone
does not justify payment of rentals.
5. Defendant's possession was in good faith.
6. Defendant's possession in the nature of usufruct.
In reply, plaintiff-appellee's counsel contends that the Philippine Allien
Property Administration (PAPA) was a mere administrator of the owner
(who ultimately was decided to be plaintiff), and that as defendant has
used it for commercial purposes and has leased portion of it, it should be

responsible therefore to the owner, who had been deprived of the

possession for so many years. (Appellee's brief, pp. 20, 23.)
We can not understand how the trial court, from the mere fact that
plaintiff-appellee was the owner of the property and the defendantappellant the occupant, which used for its own benefit but by the express
permission of the Alien Property Custodian of the United States, so easily
jumped to the conclusion that the occupant is liable for the value of such
use and occupation. If defendant-appellant is liable at all, its obligations,
must arise from any of the four sources of obligations, namley, law,
contract or quasi-contract, crime, or negligence. (Article 1089, Spanish
Civil Code.) Defendant-appellant is not guilty of any offense at all,
because it entered the premises and occupied it with the permission of
the entity which had the legal control and administration thereof, the
Allien Property Administration. Neither was there any negligence on its
part. There was also no privity (of contract or obligation) between the
Alien Property Custodian and the Taiwan Tekkosho, which had secured
the possession of the property from the plaintiff-appellee by the use of
duress, such that the Alien Property Custodian or its permittee
(defendant-appellant) may be held responsible for the supposed illegality
of the occupation of the property by the said Taiwan Tekkosho. The Allien
Property Administration had the control and administration of the property
not as successor to the interests of the enemy holder of the title, the
Taiwan Tekkosho, but by express provision of law (Trading with the
Enemy Act of the United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither
is it a trustee of the former owner, the plaintiff-appellee herein, but a
trustee of then Government of the United States (32 Op. Atty. Gen. 249;
50 U.S.C.A. 283), in its own right, to the exclusion of, and against the
claim or title of, the enemy owner. (Youghioheny & Ohio Coal Co. vs.
Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From
August, 1946, when defendant-appellant took possession, to the late of
judgment on February 28, 1948, Allien Property Administration had the
absolute control of the property as trustee of the Government of the
United States, with power to dispose of it by sale or otherwise, as though
it were the absolute owner. (U.S vs. Chemical Foundation [C.C.A. Del.
1925], 5 F. [2d], 191; 50 U.S.C.A., 283.) Therefore, even if defendantappellant were liable to the Allien Property Administration for rentals,
these would not accrue to the benefit of the plaintiff-appellee, the owner,
but to the United States Government.

But there is another ground why the claim or rentals can not be made
against defendant-appellant. There was no agreement between the Alien
Property Custodian and the defendant-appellant for the latter to pay
rentals on the property. The existence of an implied agreement to that
effect is contrary to the circumstances. The copra Export Management
Company, which preceded the defendant-appellant, in the possession
and use of the property, does not appear to have paid rentals therefor, as
it occupied it by what the parties denominated a "custodianship
agreement," and there is no provision therein for the payment of rentals
or of any compensation for its custody and or occupation and the use.
The Trading with the Enemy Act, as originally enacted, was purely a
measure of conversation, hence, it is very unlikely that rentals were
demanded for the use of the property. When the National coconut
Corporation succeeded the Copra Export Management Company in the
possession and use of the property, it must have been also free from
payment of rentals, especially as it was Government corporation, and
steps where then being taken by the Philippine Government to secure the
property for the National Coconut Corporation. So that the circumstances
do not justify the finding that there was an implied agreement that the
defendant-appellant was to pay for the use and occupation of the
premises at all.
The above considerations show that plaintiff-appellee's claim for rentals
before it obtained the judgment annulling the sale of the Taiwan Tekkosho
may not be predicated on any negligence or offense of the defendantappellant, or any contract, express or implied, because the Allien
Property Administration was neither a trustee of plaintiff-appellee, nor a
privy to the obligations of the Taiwan Tekkosho, its title being based by
legal provision of the seizure of enemy property. We have also tried in
vain to find a law or provision thereof, or any principle in quasi contracts
or equity, upon which the claim can be supported. On the contrary, as
defendant-appellant entered into possession without any expectation of
liability for such use and occupation, it is only fair and just that it may not
be held liable therefor. And as to the rents it collected from its lessee, the
same should accrue to it as a possessor in good faith, as this Court has
already expressly held. (Resolution, National Coconut Corporation vs.
Geronimo, 83 Phil. 467.)
Lastly, the reservation of this action may not be considered as vesting a
new right; if no right to claim for rentals existed at the time of the
reservation, no rights can arise or accrue from such reservation alone.

Wherefore, the part of the judgment appealed from, which sentences

defendant-appellant to pay rentals from August, 1946, to February 28,
1949, is hereby reversed. In all other respects the judgment is affirmed.
Costs of this appeal shall be against the plaintiff-appellee.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, and Bautista
Angelo, JJ, concur.

G.R. No. L-36840 May 22, 1973

PEOPLE'S CAR INC., plaintiff-appellant,
vs.
COMMANDO SECURITY SERVICE AGENCY, defendant-appellee.

TEEHANKEE, J.:
In this appeal from the adverse judgment of the Davao court of first
instance limiting plaintiff-appellant's recovery under its complaint to the

sum of P1,000.00 instead of the actual damages of P8,489.10 claimed

and suffered by it as a direct result of the wrongful acts of defendant
security agency's guard assigned at plaintiff's premises in pursuance of
their "Guard Service Contract", the Court finds merit in the appeal and
accordingly reverses the trial court's judgment.
The appeal was certified to this Court by a special division of the Court of
Appeals on a four-to-one vote as per its resolution of April 14, 1973 that
"Since the case was submitted to the court a quo for decision on the
strength of the stipulation of facts, only questions of law can be involved
in the present appeal."
The Court has accepted such certification and docketed this appeal on
the strength of its own finding from the records that plaintiff's notice of
appeal was expressly to this Court (not to the appellate court)" on pure
questions of law" 1 and its record on appeal accordingly prayed that" the
corresponding records be certified and forwarded to the Honorable Supreme
Court." 2 The trial court so approved the same 3 on July 3, 1971 instead of
having required the filing of a petition for review of the judgment sought to be
appealed from directly with this Court, in accordance with the provisions of
Republic Act 5440. By some unexplained and hitherto undiscovered error of
the clerk of court, furthermore, the record on appeal was erroneously
forwarded to the appellate court rather than to this Court.
The parties submitted the case for judgment on a stipulation of facts.
There is thus no dispute as to the factual bases of plaintiff's complaint for
recovery of actual damages against defendant, to wit, that under the
subsisting "Guard Service Contract" between the parties, defendantappellee as a duly licensed security service agency undertook in
consideration of the payments made by plaintiff to safeguard and protect
the business premises of (plaintiff) from theft, pilferage, robbery,
vandalism and all other unlawful acts of any person or person prejudicial
to the interest of (plaintiff)." 4
On April 5, 1970 at around 1:00 A.M., however, defendant's security
guard on duty at plaintiff's premises, "without any authority, consent,
approval, knowledge or orders of the plaintiff and/or defendant brought
out of the compound of the plaintiff a car belonging to its customer, and
drove said car for a place or places unknown, abandoning his post as
such security guard on duty inside the plaintiff's compound, and while so
driving said car in one of the City streets lost control of said car, causing

the same to fall into a ditch along J.P. Laurel St., Davao City by reason of
which the plaintiff's complaint for qualified theft against said driver, was
blottered in the office of the Davao City Police Department." 5
As a result of these wrongful acts of defendant's security guard, the car of
plaintiff's customer, Joseph Luy, which had been left with plaintiff for
servicing and maintenance, "suffered extensive damage in the total
amount of P7,079." 6 besides the car rental value "chargeable to defendant"
in the sum of P1,410.00 for a car that plaintiff had to rent and make available
to its said customer to enable him to pursue his business and occupation for
the period of forty-seven (47) days (from April 25 to June 10, 1970) that it
took plaintiff to repair the damaged car, 7 or total actual damages incurred by
plaintiff in the sum of P8,489.10.
Plaintiff claimed that defendant was liable for the entire amount under
paragraph 5 of their contract whereunder defendant assumed "sole
responsibility for the acts done during their watch hours" by its guards,
whereas defendant contended, without questioning the amount of the
actual damages incurred by plaintiff, that its liability "shall not exceed one
thousand (P1,000.00) pesos per guard post" under paragraph 4 of their
contract.
The parties thus likewise stipulated on this sole issue submitted by them
for adjudication, as follows:
Interpretation of the contract, as to the extent of the
liability of the defendant to the plaintiff by reason of the
acts of the employees of the defendant is the only issue
to be resolved.
The defendant relies on Par. 4 of the contract to support
its contention while the plaintiff relies on Par. 5 of the
same contract in support of its claims against the
defendant. For ready reference they are quoted
hereunder:'Par. 4. Party of the Second Part
(defendant) through the negligence of its guards, after an
investigation has been conducted by the Party of the First
Part (plaintiff) wherein the Party of the Second Part has
been duly represented shall assume full responsibilities
for any loss or damages that may occur to any property of
the Party of the First Part for which it is accountable,

during the watch hours of the Party of the Second Part,

provided the same is reported to the Party of the Second
Part within twenty-four (24) hours of the occurrence,
except where such loss or damage is due to force
majeure, provided however that after the proper
investigation to be made thereof that the guard on post is
found negligent and that the amount of the loss shall not
exceed ONE THOUSAND (P1,000.00) PESOS per guard
post.'
'Par. 5 The party of the Second Part assumes the
responsibility for the proper performance by the guards
employed, of their duties and (shall) be solely responsible
for the acts done during their watch hours, the Party of
the First Part being specifically released from any and all
liabilities to the former's employee or to the third parties
arising from the acts or omissions done by the guard
during
their
tour
of
duty.' ... 8
The trial court, misreading the above-quoted contractual provisions, held
that "the liability of the defendant in favor of the plaintiff falls under
paragraph 4 of the Guard Service Contract" and rendered judgment
"finding the defendant liable to the plaintiff in the amount of P1,000.00
with costs."
Hence, this appeal, which, as already indicated, is meritorious and must
be granted.
Paragraph 4 of the contract, which limits defendant's liability for the
amount of loss or damage to any property of plaintiff to "P1,000.00 per
guard post," is by its own terms applicable only for loss or damage
'through thenegligence of its guards ... during the watch hours" provided
that the same is duly reported by plaintiff within 24 hours of the
occurrence and the guard's negligence is verified after proper
investigation with the attendance of both contracting parties. Said
paragraph is manifestly inapplicable to the stipulated facts of record,
which involve neither property of plaintiff that has been lost or damaged
at its premises nor mere negligence of defendant's security guard on
duty.

Here, instead of defendant, through its assigned security guards,

complying with its contractual undertaking 'to safeguard and protect the
business premises of (plaintiff) from theft, robbery, vandalism and all
other unlawful acts of any person or persons," defendant's own guard on
duty unlawfully and wrongfully drove out of plaintiffs premises a
customer's car, lost control of it on the highway causing it to fall into a
ditch, thereby directly causing plaintiff to incur actual damages in the total
amount of P8,489.10.
Defendant is therefore undoubtedly liable to indemnify plaintiff for the
entire damages thus incurred, since under paragraph 5 of their contract it
"assumed the responsibility for the proper performance by the guards
employed of their duties and (contracted to) be solely responsible for the
acts done during their watch hours" and "specifically released (plaintiff)
from any and all liabilities ... to the third parties arising from the acts or
omissions done by the guards during their tour of duty." As plaintiff had
duly discharged its liability to the third party, its customer, Joseph Luy, for
the undisputed damages of P8,489.10 caused said customer, due to the
wanton and unlawful act of defendant's guard, defendant in turn was
clearly liable under the terms of paragraph 5 of their contract to indemnify
plaintiff in the same amount.
The trial court's approach that "had plaintiff understood the liability of the
defendant to fall under paragraph 5, it should have told Joseph Luy,
owner of the car, that under the Guard Service Contract, it was not liable
for the damage but the defendant and had Luy insisted on the liability of
the plaintiff, the latter should have challenged him to bring the matter to
court. If Luy accepted the challenge and instituted an action against the
plaintiff, it should have filed a third-party complaint against the
Commando Security Service Agency. But if Luy instituted the action
against the plaintiff and the defendant, the plaintiff should have filed a
crossclaim against the latter," 9 was unduly technical and unrealistic and
untenable.
Plaintiff was in law liable to its customer for the damages caused the
customer's car, which had been entrusted into its custody. Plaintiff
therefore was in law justified in making good such damages and relying
in turn on defendant to honor its contract and indemnify it for such
undisputed damages, which had been caused directly by the unlawful
and wrongful acts of defendant's security guard in breach of their
contract. As ordained in Article 1159, Civil Code, "obligations arising from

contracts have the force of law between the contracting parties and
should be complied with in good faith."
Plaintiff in law could not tell its customer, as per the trial court's view, that
"under the Guard Service Contract it was not liable for the damage but
the defendant" since the customer could not hold defendant to account
for the damages as he had no privity of contract with defendant. Such an
approach of telling the adverse party to go to court, notwithstanding his
plainly valid claim, aside from its ethical deficiency among others, could
hardly create any goodwill for plaintiff's business, in the same way that
defendant's baseless attempt to evade fully discharging its contractual
liability to plaintiff cannot be expected to have brought it more business.
Worse, the administration of justice is prejudiced, since the court dockets
are unduly burdened with unnecessary litigation.
ACCORDINGLY, the judgment appealed from is hereby reversed and
judgment is hereby rendered sentencing defendant-appellee to pay
plaintiff-appellant the sum of P8,489.10 as and by way of reimbursement
of the stipulated actual damages and expenses, as well as the costs of
suit in both instances. It is so ordered.
Makalintal, Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and
Esguerra, JJ., concur.

G.R. No. L-12191

October 14, 1918

JOSE CANGCO, plaintiff-appellant,

vs.
MANILA RAILROAD CO., defendant-appellee.

FISHER, J.:
At the time of the occurrence which gave rise to this litigation the plaintiff,
Jose Cangco, was in the employment of Manila Railroad Company in the
capacity of clerk, with a monthly wage of P25. He lived in the pueblo of
San Mateo, in the province of Rizal, which is located upon the line of the
defendant railroad company; and in coming daily by train to the
company's office in the city of Manila where he worked, he used a pass,
supplied by the company, which entitled him to ride upon the company's
trains free of charge. Upon the occasion in question, January 20, 1915,
the plaintiff arose from his seat in the second class-car where he was
riding and, making, his exit through the door, took his position upon the
steps of the coach, seizing the upright guardrail with his right hand for
support.
On the side of the train where passengers alight at the San Mateo station
there is a cement platform which begins to rise with a moderate gradient
some distance away from the company's office and extends along in front
of said office for a distance sufficient to cover the length of several
coaches. As the train slowed down another passenger, named Emilio
Zuiga, also an employee of the railroad company, got off the same car,
alighting safely at the point where the platform begins to rise from the
level of the ground. When the train had proceeded a little farther the
plaintiff Jose Cangco stepped off also, but one or both of his feet came in
contact with a sack of watermelons with the result that his feet slipped
from under him and he fell violently on the platform. His body at once
rolled from the platform and was drawn under the moving car, where his
right arm was badly crushed and lacerated. It appears that after the
plaintiff alighted from the train the car moved forward possibly six meters
before it came to a full stop.

The accident occurred between 7 and 8 o'clock on a dark night, and as

the railroad station was lighted dimly by a single light located some
distance away, objects on the platform where the accident occurred were
difficult to discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform
where the plaintiff alighted is found in the fact that it was the customary
season for harvesting these melons and a large lot had been brought to
the station for the shipment to the market. They were contained in
numerous sacks which has been piled on the platform in a row one upon
another. The testimony shows that this row of sacks was so placed of
melons and the edge of platform; and it is clear that the fall of the plaintiff
was due to the fact that his foot alighted upon one of these melons at the
moment he stepped upon the platform. His statement that he failed to
see these objects in the darkness is readily to be credited.
The plaintiff was drawn from under the car in an unconscious condition,
and it appeared that the injuries which he had received were very
serious. He was therefore brought at once to a certain hospital in the city
of Manila where an examination was made and his arm was amputated.
The result of this operation was unsatisfactory, and the plaintiff was then
carried to another hospital where a second operation was performed and
the member was again amputated higher up near the shoulder. It
appears in evidence that the plaintiff expended the sum of P790.25 in the
form of medical and surgical fees and for other expenses in connection
with the process of his curation.
Upon August 31, 1915, he instituted this proceeding in the Court of First
Instance of the city of Manila to recover damages of the defendant
company, founding his action upon the negligence of the servants and
employees of the defendant in placing the sacks of melons upon the
platform and leaving them so placed as to be a menace to the security of
passenger alighting from the company's trains. At the hearing in the Court
of First Instance, his Honor, the trial judge, found the facts substantially
as above stated, and drew therefrom his conclusion to the effect that,
although negligence was attributable to the defendant by reason of the
fact that the sacks of melons were so placed as to obstruct passengers
passing to and from the cars, nevertheless, the plaintiff himself had failed
to use due caution in alighting from the coach and was therefore
precluded form recovering. Judgment was accordingly entered in favor of
the defendant company, and the plaintiff appealed.

It can not be doubted that the employees of the railroad company were
guilty of negligence in piling these sacks on the platform in the manner
above stated; that their presence caused the plaintiff to fall as he alighted
from the train; and that they therefore constituted an effective legal cause
of the injuries sustained by the plaintiff. It necessarily follows that the
defendant company is liable for the damage thereby occasioned unless
recovery is barred by the plaintiff's own contributory negligence. In
resolving this problem it is necessary that each of these conceptions of
liability, to-wit, the primary responsibility of the defendant company and
the contributory negligence of the plaintiff should be separately
examined.
It is important to note that the foundation of the legal liability of the
defendant is the contract of carriage, and that the obligation to respond
for the damage which plaintiff has suffered arises, if at all, from the
breach of that contract by reason of the failure of defendant to exercise
due care in its performance. That is to say, its liability is direct and
immediate, differing essentially, in legal viewpoint from that presumptive
responsibility for the negligence of its servants, imposed by article 1903
of the Civil Code, which can be rebutted by proof of the exercise of due
care in their selection and supervision. Article 1903 of the Civil Code is
not applicable to obligations arising ex contractu, but only to extracontractual obligations or to use the technical form of expression, that
article relates only toculpa aquiliana and not to culpa contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104
of the Civil Code, clearly points out this distinction, which was also
recognized by this Court in its decision in the case of Rakes vs. Atlantic,
Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093
Manresa clearly points out the difference between "culpa, substantive
and independent, which of itself constitutes the source of an obligation
between persons not formerly connected by any legal tie"
and culpa considered as an accident in the performance of an obligation
already existing . . . ."
In the Rakes case (supra) the decision of this court was made to rest
squarely upon the proposition that article 1903 of the Civil Code is not
applicable to acts of negligence which constitute the breach of a contract.
Upon this point the Court said:

The acts to which these articles [1902 and 1903 of the Civil Code]
are applicable are understood to be those not growing out of preexisting duties of the parties to one another. But where relations
already formed give rise to duties, whether springing from
contract or quasi-contract, then breaches of those duties are
subject to article 1101, 1103, and 1104 of the same code.
(Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at
365.)
This distinction is of the utmost importance. The liability, which, under the
Spanish law, is, in certain cases imposed upon employers with respect to
damages occasioned by the negligence of their employees to persons to
whom they are not bound by contract, is not based, as in the English
Common Law, upon the principle of respondeat superior if it were, the
master would be liable in every case and unconditionally but upon the
principle announced in article 1902 of the Civil Code, which imposes
upon all persons who by their fault or negligence, do injury to another, the
obligation of making good the damage caused. One who places a
powerful automobile in the hands of a servant whom he knows to be
ignorant of the method of managing such a vehicle, is himself guilty of an
act of negligence which makes him liable for all the consequences of his
imprudence. The obligation to make good the damage arises at the very
instant that the unskillful servant, while acting within the scope of his
employment causes the injury. The liability of the master is personal and
direct. But, if the master has not been guilty of any negligence whatever
in the selection and direction of the servant, he is not liable for the acts of
the latter, whatever done within the scope of his employment or not, if the
damage done by the servant does not amount to a breach of the contract
between the master and the person injured.
It is not accurate to say that proof of diligence and care in the selection
and control of the servant relieves the master from liability for the latter's
acts on the contrary, that proof shows that the responsibility has never
existed. As Manresa says (vol. 8, p. 68) the liability arising from extracontractual culpa is always based upon a voluntary act or omission
which, without willful intent, but by mere negligence or inattention, has
caused damage to another. A master who exercises all possible care in
the selection of his servant, taking into consideration the qualifications
they should possess for the discharge of the duties which it is his
purpose to confide to them, and directs them with equal diligence,
thereby performs his duty to third persons to whom he is bound by no

contractual ties, and he incurs no liability whatever if, by reason of the

negligence of his servants, even within the scope of their employment,
such third person suffer damage. True it is that under article 1903 of the
Civil Code the law creates a presumption that he has been negligent in
the selection or direction of his servant, but the presumption is rebuttable
and yield to proof of due care and diligence in this respect.
The supreme court of Porto Rico, in interpreting identical provisions, as
found in the Porto Rico Code, has held that these articles are applicable
to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20
Porto Rico Reports, 215.)
This distinction was again made patent by this Court in its decision in the
case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an
action brought upon the theory of the extra-contractual liability of the
defendant to respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment. The Court,
after citing the last paragraph of article 1903 of the Civil Code, said:
From this article two things are apparent: (1) That when an injury
is caused by the negligence of a servant or employee there
instantly arises a presumption of law that there was negligence
on the part of the master or employer either in selection of the
servant or employee, or in supervision over him after the
selection, or both; and (2) that that presumption is juris
tantum and not juris et de jure, and consequently, may be
rebutted. It follows necessarily that if the employer shows to the
satisfaction of the court that in selection and supervision he has
exercised the care and diligence of a good father of a family, the
presumption is overcome and he is relieved from liability.
This theory bases the responsibility of the master ultimately on
his own negligence and not on that of his servant. This is the
notable peculiarity of the Spanish law of negligence. It is, of
course, in striking contrast to the American doctrine that, in
relations with strangers, the negligence of the servant in
conclusively the negligence of the master.
The opinion there expressed by this Court, to the effect that in case of
extra-contractual culpa based upon negligence, it is necessary that there
shall have been some fault attributable to the defendant personally, and

that the last paragraph of article 1903 merely establishes a rebuttable

presumption, is in complete accord with the authoritative opinion of
Manresa, who says (vol. 12, p. 611) that the liability created by article
1903 is imposed by reason of the breach of the duties inherent in the
special relations of authority or superiority existing between the person
called upon to repair the damage and the one who, by his act or
omission, was the cause of it.
On the other hand, the liability of masters and employers for the negligent
acts or omissions of their servants or agents, when such acts or
omissions cause damages which amount to the breach of a contact, is
not based upon a mere presumption of the master's negligence in their
selection or control, and proof of exercise of the utmost diligence and
care in this regard does not relieve the master of his liability for the
breach of his contract.
Every legal obligation must of necessity be extra-contractual or
contractual. Extra-contractual obligation has its source in the breach or
omission of those mutual duties which civilized society imposes upon it
members, or which arise from these relations, other than contractual, of
certain members of society to others, generally embraced in the concept
of status. The legal rights of each member of society constitute the
measure of the corresponding legal duties, mainly negative in character,
which the existence of those rights imposes upon all other members of
society. The breach of these general duties whether due to willful intent or
to mere inattention, if productive of injury, give rise to an obligation to
indemnify the injured party. The fundamental distinction between
obligations of this character and those which arise from contract, rests
upon the fact that in cases of non-contractual obligation it is the wrongful
or negligent act or omission itself which creates the vinculum juris,
whereas in contractual relations the vinculum exists independently of the
breach of the voluntary duty assumed by the parties when entering into
the contractual relation.
With respect to extra-contractual obligation arising from negligence,
whether of act or omission, it is competent for the legislature to elect
and our Legislature has so elected whom such an obligation is
imposed is morally culpable, or, on the contrary, for reasons of public
policy, to extend that liability, without regard to the lack of moral
culpability, so as to include responsibility for the negligence of those
person who acts or mission are imputable, by a legal fiction, to others

who are in a position to exercise an absolute or limited control over them.

The legislature which adopted our Civil Code has elected to limit extracontractual liability with certain well-defined exceptions to cases in
which moral culpability can be directly imputed to the persons to be
charged. This moral responsibility may consist in having failed to exercise
due care in the selection and control of one's agents or servants, or in the
control of persons who, by reason of their status, occupy a position of
dependency with respect to the person made liable for their conduct.
The position of a natural or juridical person who has undertaken by
contract to render service to another, is wholly different from that to which
article 1903 relates. When the sources of the obligation upon which
plaintiff's cause of action depends is a negligent act or omission, the
burden of proof rests upon plaintiff to prove the negligence if he does
not his action fails. But when the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff, and it is alleged that
plaintiff has failed or refused to perform the contract, it is not necessary
for plaintiff to specify in his pleadings whether the breach of the contract
is due to willful fault or to negligence on the part of the defendant, or of
his servants or agents. Proof of the contract and of its nonperformance is
sufficientprima facie to warrant a recovery.
As a general rule . . . it is logical that in case of extra-contractual
culpa, a suing creditor should assume the burden of proof of its
existence, as the only fact upon which his action is based; while
on the contrary, in a case of negligence which presupposes the
existence of a contractual obligation, if the creditor shows that it
exists and that it has been broken, it is not necessary for him to
prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the breach of a
contract to show that the breach was due to the negligent conduct of
defendant or of his servants, even though such be in fact the actual
cause of the breach, it is obvious that proof on the part of defendant that
the negligence or omission of his servants or agents caused the breach
of the contract would not constitute a defense to the action. If the
negligence of servants or agents could be invoked as a means of
discharging the liability arising from contract, the anomalous result would
be that person acting through the medium of agents or servants in the
performance of their contracts, would be in a better position than those
acting in person. If one delivers a valuable watch to watchmaker who

contract to repair it, and the bailee, by a personal negligent act causes its
destruction, he is unquestionably liable. Would it be logical to free him
from his liability for the breach of his contract, which involves the duty to
exercise due care in the preservation of the watch, if he shows that it was
his servant whose negligence caused the injury? If such a theory could
be accepted, juridical persons would enjoy practically complete immunity
from damages arising from the breach of their contracts if caused by
negligent acts as such juridical persons can of necessity only act through
agents or servants, and it would no doubt be true in most instances that
reasonable care had been taken in selection and direction of such
servants. If one delivers securities to a banking corporation as collateral,
and they are lost by reason of the negligence of some clerk employed by
the bank, would it be just and reasonable to permit the bank to relieve
itself of liability for the breach of its contract to return the collateral upon
the payment of the debt by proving that due care had been exercised in
the selection and direction of the clerk?
This distinction between culpa aquiliana, as the source of an obligation,
and culpa contractual as a mere incident to the performance of a contract
has frequently been recognized by the supreme court of Spain.
(Sentencias of June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared that plaintiff's
action arose ex contractu, but that defendant sought to avail himself of
the provisions of article 1902 of the Civil Code as a defense. The Spanish
Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing
obligation, by fault or negligence, such as those to which article
1902 of the Civil Code relates, but of damages caused by the
defendant's failure to carry out the undertakings imposed by the
contracts . . . .
A brief review of the earlier decision of this court involving the liability of
employers for damage done by the negligent acts of their servants will
show that in no case has the court ever decided that the negligence of
the defendant's servants has been held to constitute a defense to an
action for damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that
the owner of a carriage was not liable for the damages caused by the
negligence of his driver. In that case the court commented on the fact that

no evidence had been adduced in the trial court that the defendant had
been negligent in the employment of the driver, or that he had any
knowledge of his lack of skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6
Phil. Rep., 215), the plaintiff sued the defendant for damages caused by
the loss of a barge belonging to plaintiff which was allowed to get adrift by
the negligence of defendant's servants in the course of the performance
of a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69)
that if the "obligation of the defendant grew out of a contract made
between it and the plaintiff . . . we do not think that the provisions of
articles 1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff
sued the defendant to recover damages for the personal injuries caused
by the negligence of defendant's chauffeur while driving defendant's
automobile in which defendant was riding at the time. The court found
that the damages were caused by the negligence of the driver of the
automobile, but held that the master was not liable, although he was
present at the time, saying:
. . . unless the negligent acts of the driver are continued for a
length of time as to give the owner a reasonable opportunity to
observe them and to direct the driver to desist therefrom. . . . The
act complained of must be continued in the presence of the
owner for such length of time that the owner by his acquiescence,
makes the driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage &
Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion
as to the liability of the defendant upon article 1903, although the facts
disclosed that the injury complaint of by plaintiff constituted a breach of
the duty to him arising out of the contract of transportation. The express
ground of the decision in this case was that article 1903, in dealing with
the liability of a master for the negligent acts of his servants "makes the
distinction between private individuals and public enterprise;" that as to
the latter the law creates a rebuttable presumption of negligence in the
selection or direction of servants; and that in the particular case the
presumption of negligence had not been overcome.

It is evident, therefore that in its decision Yamada case, the court treated
plaintiff's action as though founded in tort rather than as based upon the
breach of the contract of carriage, and an examination of the pleadings
and of the briefs shows that the questions of law were in fact discussed
upon this theory. Viewed from the standpoint of the defendant the
practical result must have been the same in any event. The proof
disclosed beyond doubt that the defendant's servant was grossly
negligent and that his negligence was the proximate cause of plaintiff's
injury. It also affirmatively appeared that defendant had been guilty of
negligence in its failure to exercise proper discretion in the direction of
the servant. Defendant was, therefore, liable for the injury suffered by
plaintiff, whether the breach of the duty were to be regarded as
constituting culpa aquiliana or culpa contractual. As Manresa points out
(vol. 8, pp. 29 and 69) whether negligence occurs an incident in the
course of the performance of a contractual undertaking or its itself the
source of an extra-contractual undertaking obligation, its essential
characteristics are identical. There is always an act or omission
productive of damage due to carelessness or inattention on the part of
the defendant. Consequently, when the court holds that a defendant is
liable in damages for having failed to exercise due care, either directly, or
in failing to exercise proper care in the selection and direction of his
servants, the practical result is identical in either case. Therefore, it
follows that it is not to be inferred, because the court held in the Yamada
case that defendant was liable for the damages negligently caused by its
servants to a person to whom it was bound by contract, and made
reference to the fact that the defendant was negligent in the selection and
control of its servants, that in such a case the court would have held that
it would have been a good defense to the action, if presented squarely
upon the theory of the breach of the contract, for defendant to have
proved that it did in fact exercise care in the selection and control of the
servant.
The true explanation of such cases is to be found by directing the
attention to the relative spheres of contractual and extra-contractual
obligations. The field of non- contractual obligation is much more broader
than that of contractual obligations, comprising, as it does, the whole
extent of juridical human relations. These two fields, figuratively speaking,
concentric; that is to say, the mere fact that a person is bound to another
by contract does not relieve him from extra-contractual liability to such
person. When such a contractual relation exists the obligor may break
the contract under such conditions that the same act which constitutes

the source of an extra-contractual obligation had no contract existed

between the parties.
The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe means of
entering and leaving its trains (civil code, article 1258). That duty, being
contractual, was direct and immediate, and its non-performance could not
be excused by proof that the fault was morally imputable to defendant's
servants.
The railroad company's defense involves the assumption that even
granting that the negligent conduct of its servants in placing an
obstruction upon the platform was a breach of its contractual obligation to
maintain safe means of approaching and leaving its trains, the direct and
proximate cause of the injury suffered by plaintiff was his own
contributory negligence in failing to wait until the train had come to a
complete stop before alighting. Under the doctrine of comparative
negligence announced in the Rakes case (supra), if the accident was
caused by plaintiff's own negligence, no liability is imposed upon
defendant's negligence and plaintiff's negligence merely contributed to
his injury, the damages should be apportioned. It is, therefore, important
to ascertain if defendant was in fact guilty of negligence.

We are of the opinion that the correct doctrine relating to this subject is
that expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as
follows:
The test by which to determine whether the passenger has been
guilty of negligence in attempting to alight from a moving railway
train, is that of ordinary or reasonable care. It is to be considered
whether an ordinarily prudent person, of the age, sex and
condition of the passenger, would have acted as the passenger
acted under the circumstances disclosed by the evidence. This
care has been defined to be, not the care which may or should be
used by the prudent man generally, but the care which a man of
ordinary prudence would use under similar circumstances, to
avoid injury." (Thompson, Commentaries on Negligence, vol. 3,
sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in
Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this; Was
there anything in the circumstances surrounding the plaintiff at the time
he alighted from the train which would have admonished a person of
average prudence that to get off the train under the conditions then
existing was dangerous? If so, the plaintiff should have desisted from
alighting; and his failure so to desist was contributory negligence.
1awph!l.net

It may be admitted that had plaintiff waited until the train had come to a
full stop before alighting, the particular injury suffered by him could not
have occurred. Defendant contends, and cites many authorities in
support of the contention, that it is negligence per se for a passenger to
alight from a moving train. We are not disposed to subscribe to this
doctrine in its absolute form. We are of the opinion that this proposition is
too badly stated and is at variance with the experience of every-day life.
In this particular instance, that the train was barely moving when plaintiff
alighted is shown conclusively by the fact that it came to stop within six
meters from the place where he stepped from it. Thousands of person
alight from trains under these conditions every day of the year, and
sustain no injury where the company has kept its platform free from
dangerous obstructions. There is no reason to believe that plaintiff would
have suffered any injury whatever in alighting as he did had it not been
for defendant's negligent failure to perform its duty to provide a safe
alighting place.

As the case now before us presents itself, the only fact from which a
conclusion can be drawn to the effect that plaintiff was guilty of
contributory negligence is that he stepped off the car without being able
to discern clearly the condition of the platform and while the train was yet
slowly moving. In considering the situation thus presented, it should not
be overlooked that the plaintiff was, as we find, ignorant of the fact that
the obstruction which was caused by the sacks of melons piled on the
platform existed; and as the defendant was bound by reason of its duty
as a public carrier to afford to its passengers facilities for safe egress
from its trains, the plaintiff had a right to assume, in the absence of some
circumstance to warn him to the contrary, that the platform was clear. The
place, as we have already stated, was dark, or dimly lighted, and this
also is proof of a failure upon the part of the defendant in the
performance of a duty owing by it to the plaintiff; for if it were by any
possibility concede that it had right to pile these sacks in the path of
alighting passengers, the placing of them adequately so that their
presence would be revealed.

As pertinent to the question of contributory negligence on the part of the

plaintiff in this case the following circumstances are to be noted: The
company's platform was constructed upon a level higher than that of the
roadbed and the surrounding ground. The distance from the steps of the
car to the spot where the alighting passenger would place his feet on the
platform was thus reduced, thereby decreasing the risk incident to
stepping off. The nature of the platform, constructed as it was of cement
material, also assured to the passenger a stable and even surface on
which to alight. Furthermore, the plaintiff was possessed of the vigor and
agility of young manhood, and it was by no means so risky for him to get
off while the train was yet moving as the same act would have been in an
aged or feeble person. In determining the question of contributory
negligence in performing such act that is to say, whether the
passenger acted prudently or recklessly the age, sex, and physical
condition of the passenger are circumstances necessarily affecting the
safety of the passenger, and should be considered. Women, it has been
observed, as a general rule are less capable than men of alighting with
safety under such conditions, as the nature of their wearing apparel
obstructs the free movement of the limbs. Again, it may be noted that the
place was perfectly familiar to the plaintiff as it was his daily custom to get
on and of the train at this station. There could, therefore, be no
uncertainty in his mind with regard either to the length of the step which
he was required to take or the character of the platform where he was
alighting. Our conclusion is that the conduct of the plaintiff in undertaking
to alight while the train was yet slightly under way was not characterized
by imprudence and that therefore he was not guilty of contributory
negligence.
The evidence shows that the plaintiff, at the time of the accident, was
earning P25 a month as a copyist clerk, and that the injuries he has
suffered have permanently disabled him from continuing that
employment. Defendant has not shown that any other gainful occupation
is open to plaintiff. His expectancy of life, according to the standard
mortality tables, is approximately thirty-three years. We are of the opinion
that a fair compensation for the damage suffered by him for his
permanent disability is the sum of P2,500, and that he is also entitled to
recover of defendant the additional sum of P790.25 for medical attention,
hospital services, and other incidental expenditures connected with the
treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered

plaintiff for the sum of P3,290.25, and for the costs of both instances. So
ordered.
Arellano, C.J., Torres, Street and Avancea, JJ., concur.

G. R. No. 34840, September 23, 1931

NARCISO GUTIERREZ, PLAINTIFF AND APPELLEE, VS. BONIFACIO
GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ,
ABELARDO VELASCO, AND SATURNINO CORTEZ, DEFENDANTS
AND APPELLANTS.
DECISION
MALCOLM, J.:
This is an action brought by the plaintiff in the Court of First Instance of
Manila against the five defendants, to recover damages in the amount
of P10,000, for physical injuries suffered as a result of an automobile
accident. On judgment being rendered as prayed for by the plaintiff,
both sets of defendants appealed.
On February 2,1930, a passenger truck and an automobile of private
ownership collided while attempting to pass each other on the Talon
bridge on the Manila South Road in the municipality of Las Pias,
Province of Rizal. The truck was driven by the chauffeur Abelardo
Velasco, and was owned by Saturnino Cortez. The automobile was
being operated by Bonifacio Gutierrez, a lad 18 years of age, and was
owned by Bonifacio's father and mother, Mr. and Mrs. Manuel Gutierrez.
At the time of the collision, the father was not in the car, but the mother,
together with several other members of the Gutierrez family, seven in all,
were accommodated therein. A passenger in the autobus, by the name

of Narciso Gutierrez, was en route from San Pablo, Laguna, to Manila.

The collision between the bus and the automobile resulted in Narciso
Gutierrez suffering a fractured right leg which required medical
attendance for a considerable period of time, and which even at the date
of the trial appears not to have healed properly.
It is conceded that the collision was caused by negligence pure and
simple. The difference between the parties is that, while the plaintiff
blames both sets of defendants, and the owner of the passenger truck
blames the automobile, and the owner of the automobile, in turn, blames
the truck. We have given close attention to these highly debatable
points, and having done so, a majority of the court are of the opinion
that the findings of the trial judge on all controversial questions of fact find
sufficient support in the record, and so should be maintained. With this
general statement set down, we turn to consider the respective legal
obligations of the defendants.
In amplification of so much of the above pronouncement as concerns
the Gutierrez family, it may be explained that the youth Bonifacio was
an incompetent chauffeur, that he was driving at an excessive rate of
speed, and that, on approaching the bridge and the truck, he lost his
head and so contributed by his negligence to the accident. The guaranty
given by the father at the time the son was granted a license to operate
motor vehicles made the father responsible for the acts of his son.
Based on these facts, pursuant to the provisions of article 1903 of the
Civil Code, the father alone and not the minor or the mother, would be
liable for the damages caused by the minor.
We are here dealing with the civil law liability of parties for obligations
which arise from fault or negligence. At the same time, we believe that,
as has been done in other cases, we can take cognizance of the
common law rule on the same subject. In the United States, it is
uniformly held that the head of a house, the owner of an automobile, who
maintains it for the general use of his family is liable for its negligent
operation by one of his children, whom he designates or permits to run it,
where the car is occupied and being used at the time of the injury for the

pleasure of other members of the owner's family than the child driving it.
The theory of the law is that the running of the machine by a child to carry
other members of the family is within the scope of the owner's
business, so that he is liable for the negligence of the child because of
the relationship of master and servant. (Huddy On Automobiles, 6th
ed., sec. 660; Missell vs. Hayes [1914], 91 Atl., 322.)
The liability of Saturnino Cortez, the owner of the truck, and of his
chauffeur Abelardo Velasco rests on a different basis, namely, that of
contract which, we think, has been sufficiently demonstrated by the
allegations of the complaint, not controverted, and the evidence. The
reason for this conclusion reaches to the findings of the trial court
concerning the position of the truck on the bridge, the speed in operating
the machine, and the lack of care employed by the chauffeur. While
these facts are not as clearly evidenced as are those which convict the
other defendant, we nevertheless hesitate to disregard the points
emphasized by the trial judge. In its broader aspects, the case is one
of two drivers approaching a narrow bridge from opposite directions, with
neither being willing to slow up and give the right of way to the other,
with the inevitable result of a collision and an accident.
The defendants Velasco and Cortez further contend that there existed
contributory negligence on the part of the plaintiff, consisting principally of
his keeping his foot outside the truck, which occasioned his injury. In
this connection, it is sufficient to state that, aside from the fact that the
defense of contributory negligence was not pleaded, the evidence
bearing out this theory of the case is contradictory in the extreme and
leads us far afield into speculative matters.
The last subject for consideration relates to the amount of the award.
The appellee suggests that the amount could justly be raised to
P16,517, but naturally is not serious in asking for this sum, since no
appeal was taken by him from the judgment. The other parties unite in
challenging the award of P10,000, as excessive. All facts considered,
including actual expenditures and damages for the injury to the leg of the
plaintiff, which may cause him permanent lameness, in connection with

other adjudications of this court, lead us to conclude that a total sum for
the plaintiff of P5,000 would be fair and reasonable. The difficulty in
approximating the damages by monetary compensation is well
elucidated by the divergence of opinion among the members of the
court, three of whom have inclined to the view that P3,000 would be
amply sufficient, while a fourth member has argued that P7,500 would
be none too much.
In consonance with the foregoing rulings, the judgment appealed from
will be modified, and the plaintiff will have judgment in his favor against

the defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino

Cortez, jointly and severally, for the sum of P5,000, and the costs of
both instances.
Avancea, C. J., Johnson, Street, Villamor, Ostrand,
Romualdez, and Imperial, JJ., concur.