Académique Documents
Professionnel Documents
Culture Documents
MORELAND, J.:
Since the petitioner, by clear proof of facts not Appellant invokes Article 1467 of the New Civil
disputed by the respondent, manufacturers sash, Code to bolster its contention that in filing orders for
windows and doors only for special customers and windows and doors according to specifications, it
upon their special orders and in accordance with did not sell, but merely contracted for particular
the desired specifications of the persons ordering pieces of work or "merely sold its services".
the same and not for the general market: since the
doors ordered by Don Toribio Teodoro & Sons,
Inc., for instance, are not in existence and which Said article reads as follows:
never would have existed but for the order of the
party desiring it; and since petitioner's contractual
relation with his customers is that of a contract for a A contract for the delivery at a certain price of an
piece of work or since petitioner is engaged in the article which the vendor in the ordinary course of
sale of services, it follows that the petitioner should his business manufactures or procures for the
be taxed under section 191 of the Tax Code and general market, whether the same is on hand at the
NOT under section 185 of the same Code." time or not, is a contract of sale, but if the goods
(Appellant's brief, p. 11-12). are to be manufactured specially for the customer
and upon his special order, and not for the general
market, it is contract for a piece of work.
But the argument rests on a false foundation. Any
builder or homeowner, with sufficient money, may
order windows or doors of the kind manufactured It is at once apparent that the Oriental Sash Factory
by this appellant. Therefore it is not true that it did not merely sell its services to Don Toribio
serves special customers only or confines its Teodoro & Co. (To take one instance) because it
services to them alone. And anyone who sees, and also sold the materials. The truth of the matter is
likes, the doors ordered by Don Toribio Teodoro & that it sold materials ordinarily manufactured by it
Sons Inc. may purchase from appellant doors of the sash, panels, mouldings to Teodoro & Co.,
same kind, provided he pays the price. Surely, the although in such form or combination as suited the
appellant will not refuse, for it can easily duplicate fancy of the purchaser. Such new form does not
or even mass-produce the same doors-it is divest the Oriental Sash Factory of its character as
mechanically equipped to do so. manufacturer. Neither does it take the transaction
out of the category of sales under Article 1467
above quoted, because although the Factory does
That the doors and windows must meet desired not, in the ordinary course of its business,
specifications is neither here nor there. If these manufacture and keep on stock doors of the kind
specifications do not happen to be of the kind sold to Teodoro, it could stock and/or probably had
habitually manufactured by appellant special in stock the sash, mouldings and panels it used
forms for sash, mouldings of panels it would not therefor (some of them at least).
accept the order and no sale is made. If they do,
the transaction would be no different from a
purchasers of manufactured goods held is stock for In our opinion when this Factory accepts a job that
sale; they are bought because they meet the requires the use of extraordinary or additional
specifications desired by the purchaser. equipment, or involves services not generally
performed by it-it thereby contracts for a piece of
work filing special orders within the meaning of
Nobody will say that when a sawmill cuts lumber in Article 1467. The orders herein exhibited were not
accordance with the peculiar specifications of a shown to be special. They were merely orders for
customer-sizes not previously held in stock for sale work nothing is shown to call them special
to the public-it thereby becomes an employee or requiring extraordinary service of the factory.
servant of the customer,1 not the seller of lumber.
The same consideration applies to this sash
manufacturer. The thought occurs to us that if, as alleged-all the
work of appellant is only to fill orders previously
made, such orders should not be called special
The Oriental Sash Factory does nothing more than work, but regular work. Would a factory do
sell the goods that it mass-produces or habitually business performing only special, extraordinary or
makes; sash, panels, mouldings, frames, cutting peculiar merchandise?
them to such sizes and combining them in such
forms as its customers may desire.
Anyway, supposing for the moment that the
transactions were not sales, they were neither
On the other hand, petitioner's idea of being a lease of services nor contract jobs by a contractor.
contractor doing construction jobs is untenable. But as the doors and windows had been admittedly
Sales Cases (2017-2018) ni Treeng
"manufactured" by the Oriental Sash Factory, such
transactions could be, and should be taxed as
"transfers" thereof under section 186 of the
National Revenue Code.
Pursuant to the contract dated September 10, 1962 In its reply, petitioner argued that Article 1571 of the
between petitioner and private respondent, the Civil Code providing for a six-month prescriptive
former undertook to fabricate, furnish and install the period is applicable to a contract for a piece of work
air-conditioning system in the latters building along by virtue of Article 1714, which provides that such a
Buendia Avenue, Makati in consideration of contract shall be governed by the pertinent
P210,000.00. Petitioner was to furnish the provisions on warranty of title and against hidden
materials, labor, tools and all services required in defects and the payment of price in a contract of
order to so fabricate and install said system. The sale.[6]
system was completed in 1963 and accepted by
private respondent, who paid in full the contract
price. The trial court denied the motion to dismiss. In its
answer to the complaint, petitioner reiterated its
claim of prescription as an affirmative defense. It
On September 2, 1965, private respondent sold the alleged that whatever defects might have been
building to the National Investment and discovered in the air-conditioning system could
Development Corporation (NIDC). The latter took have been caused by a variety of factors, including
possession of the building but on account of NIDCs ordinary wear and tear and lack of proper and
noncompliance with the terms and conditions of the regular maintenance. It pointed out that during the
deed of sale, private respondent was able to secure one-year period that private respondent withheld
judicial rescission thereof. The ownership of the final payment, the system was subjected to very
building having been decreed back to private rigid inspection and testing and corrections or
Sales Cases (2017-2018) ni Treeng
modifications effected by petitioner. It interposed a the owner and whether the hidden defects in the
compulsory counterclaim suggesting that the installation could have been discovered by simple
complaint was filed to offset the adverse effects of inspection, involve questions of fact which have
the judgment in Civil Case No. 71494, Court of First been passed upon by the appellate court.
Instance of Manila, involving the same parties,
wherein private respondent was adjudged to pay
petitioner the balance of the unpaid contract price The Courts Ruling
for the air-conditioning system installed in another
building of private respondent, amounting to
P138,482.25. The Supreme Court reviews only errors of law in
petitions for review on certiorari under Rule 45. It is
not the function of this Court to re-examine the
Thereafter, private respondent filed an ex-parte findings of fact of the appellate court unless said
motion for preliminary attachment on the strength of findings are not supported by the evidence on
petitioners own statement to the effect that it had record or the judgment is based on a
sold its business and was no longer doing business misapprehension of facts.[7]
in Manila. The trial court granted the motion and,
upon private respondents posting of a bond of
P50,000.00, ordered the issuance of a writ of The Court has consistently held that the factual
attachment. findings of the trial court, as well as the Court of
Appeals, are final and conclusive and may not be
reviewed on appeal. Among the exceptional
In due course, the trial court rendered a decision circumstances where a reassessment of facts
finding that petitioner failed to install certain parts found by the lower courts is allowed are when the
and accessories called for by the contract, and conclusion is a finding grounded entirely on
deviated from the plans of the system, thus speculation, surmises or conjectures; when the
reducing its operational effectiveness to the extent inference made is manifestly absurd, mistaken or
that 35 window-type units had to be installed in the impossible; when there is grave abuse of discretion
building to achieve a fairly desirable room in the appreciation of facts; when the judgment is
temperature. On the question of prescription, the premised on a misapprehension of facts; when the
trial court ruled that the complaint was filed within findings went beyond the issues of the case and
the ten-year prescriptive period although the the same are contrary to the admissions of both
contract was one for a piece of work, because it appellant and appellee. After a careful study of the
involved the installation of an air-conditioning case at bench, we find none of the above grounds
system which the defendant itself manufactured, present to justify the re-evaluation of the findings of
fabricated, designed and installed. fact made by the courts below.[8]
Petitioner appealed to the Court of Appeals, which We see no valid reason to discard the factual
affirmed the decision of the trial court. Hence, it conclusions of the appellate court. x x x (I)t is not
instituted the instant petition. the function of this Court to assess and evaluate all
over again the evidence, testimonial and
documentary, adduced by the parties, particularly
The Submissions of the Parties where, such as here, the findings of both the trial
court and the appellate court on the matter
coincide.[9] (Italics supplied)
In the instant Petition, petitioner raised three
issues. First, it contended that private respondents
acceptance of the work and his payment of the Hence, the first two issues will not be resolved as
contract price extinguished any liability with respect they raise questions of fact.
to the defects in the air-conditioning system.
Second, it claimed that the Court of Appeals erred
when it held that the defects in the installation were Thus, the only question left to be resolved is that of
not apparent at the time of delivery and acceptance prescription. In their submissions, the parties
of the work considering that private respondent was argued lengthily on the nature of the contract
not an expert who could recognize such defects. entered into by them, viz., whether it was one of
Third, it insisted that, assuming arguendo that there sale or for a piece of work.
were indeed hidden defects, private respondents
complaint was barred by prescription under Article
1571 of the Civil Code, which provides for a six- Article 1713 of the Civil Code defines a contract for
month prescriptive period. a piece of work thus:
Private respondent, on the other hand, averred that By the contract for a piece of work the contractor
the issues raised by petitioner, like the question of binds himself to execute a piece of work for the
whether there was an acceptance of the work by employer, in consideration of a certain price or
Sales Cases (2017-2018) ni Treeng
compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
Art. 1714. If the contractor agrees to produce the
work from material furnished by him, he shall
deliver the thing produced to the employer and
A contract for a piece of work, labor and materials
transfer dominion over the thing. This contract shall
may be distinguished from a contract of sale by the
be governed by the following articles as well as by
inquiry as to whether the thing transferred is one
the pertinent provisions on warranty of title and
not in existence and which would never have
against hidden defects and the payment of price in
existed but for the order of the person desiring
a contract of sale.
it.[10] In such case, the contract is one for a piece
of work, not a sale. On the other hand, if the thing
subject of the contract would have existed and
Art. 1715. The contractor shall execute the work in
been the subject of a sale to some other person
such a manner that it has the qualities agreed upon
even if the order had not been given, then the
and has no defects which destroy or lessen its
contract is one of sale.[11]
value or fitness for its ordinary or stipulated use.
Should the work be not of such quality, the
employer may require that the contractor remove
Thus, Mr. Justice Vitug[12] explains that
the defect or execute another work. If the contractor
fails or refuses to comply with this obligation, the
employer may have the defect removed or another
A contract for the delivery at a certain price of an work executed, at the contractors cost.
article which the vendor in the ordinary course of
his business manufactures or procures for the
general market, whether the same is on hand at the
The provisions on warranty against hidden defects,
time or not is a contract of sale, but if the goods are
referred to in Art. 1714 above-quoted, are found in
to be manufactured specially for the customer and
Articles 1561 and 1566, which read as follows:
upon his special order, and not for the general
market, it is a contract for a piece of work (Art.
1467, Civil Code). The mere fact alone that certain
Art. 1561. The vendor shall be responsible for
articles are made upon previous orders of
warranty against the hidden defects which the thing
customers will not argue against the imposition of
sold may have, should they render it unfit for the
the sales tax if such articles are ordinarily
use for which it is intended, or should they diminish
manufactured by the taxpayer for sale to the public
its fitness for such use to such an extent that, had
(Celestino Co vs. Collector, 99 Phil. 841).
the vendee been aware thereof, he would not have
acquired it or would have given a lower price for it;
but said vendor shall not be answerable for patent
To Tolentino, the distinction between the two
defects or those which may be visible, or for those
contracts depends on the intention of the parties.
which are not visible if the vendee is an expert who,
Thus, if the parties intended that at some future
by reason of his trade or profession, should have
date an object has to be delivered, without
known them.
considering the work or labor of the party bound to
deliver, the contract is one of sale. But if one of the
parties accepts the undertaking on the basis of
xxx xxx xxx
some plan, taking into account the work he will
employ personally or through another, there is a
contract for a piece of work.[13]
Art. 1566. The vendor is responsible to the vendee
for any hidden faults or defects in the thing sold,
even though he was not aware thereof.
Clearly, the contract in question is one for a piece
of work. It is not petitioners line of business to
manufacture air-conditioning systems to be sold off-
the-shelf. Its business and particular field of This provision shall not apply if the contrary has
expertise is the fabrication and installation of such been stipulated, and the vendor was not aware of
systems as ordered by customers and in the hidden faults or defects in the thing sold.
accordance with the particular plans and
specifications provided by the customers. Naturally,
the price or compensation for the system The remedy against violations of the warranty
manufactured and installed will depend greatly on against hidden defects is either to withdraw from
the particular plans and specifications agreed upon the contract (redhibitory action) or to demand a
with the customers. proportionate reduction of the price (accion quanti
minoris), with damages in either case.[14]
GROUND FLOOR:
8. Liquid receiver not provided by sight glass.
A. RIGHT WING:
B. LEFT WING:
Defects Noted:
Defects Noted:
SO ORDERED.
Sales Cases (2017-2018) ni Treeng
JACINTO UY DIO and NORBERTO UY, they did not sign the document denominated as
petitioners, "Commercial Letter of Credit and Application." Also,
they were not asked to execute any suretyship to
vs.
guarantee its payment. Neither did METROBANK
HON. COURT OF APPEALS and nor UTEFS inform them that the 1979 Letter of
METROPOLITAN BANK AND TRUST COMPANY, Credit has been opened and the Continuing
respondents. Suretyships separately executed in February, 1977
shall guarantee its payment (Appellees brief, pp. 2-
3; rollo, p. 28).
Continuing Suretyship Agreements signed by the
petitioners set off this present controversy.
The 1979 letter of credit (Exhibit "B") was
negotiated. METROBANK paid Planters Products
Petitioners assail the 22 June 1989 Decision of the the amount of P815,600.00 which payment was
Court in CA-G.R. CV No. 17724 1 which reversed covered by a Bill of Exchange (Exhibit "C"), dated 4
the 2 December 1987 Decision of Branch 45 of the June 1979, in favor of (Original Records, p. 331).
Regional Trial Court (RTC) of Manila in a collection
suit entitled "Metropolitan Bank and Trust Company
vs. Uy Tiam, doing business under the name of Pursuant to the above commercial transaction,
"UY TIAM ENTERPRISES & FREIGHT UTEFS executed and delivered to METROBANK
SERVICES," Jacinto Uy Dio and Norberto Uy" and and Trust Receipt (Exh. "D"), dated 4 June 1979,
docketed as Civil Case No. 82-9303. They likewise whereby the former acknowledged receipt in trust
challenge public respondent's Resolution of 21 from the latter of the aforementioned goods from
August 1989 2 denying their motion for the Planters Products which amounted to P815,
reconsideration of the former. 600.00. Being the entrusted, the former agreed to
deliver to METROBANK the entrusted goods in the
event of non-sale or, if sold, the proceeds of the
The impugned Decision of the Court summarizes sale thereof, on or before September 2, 1979.
the antecedent facts as follows:
Having been granted a period of fifteen (15) days d) There is no sufficient and credible showing
from receipt of the order dated March 7, 1986 that Dio and Uy were fully informed of the import
within which to file the answer, sureties-defendants of the Continuing Suretyships when they affixed
filed their responsive pleading which merely their signatures thereon that they are thereby
rehashed the arguments in their motion to dismiss securing all future obligations which Uy Tiam may
and maintained that they are entitled to the benefit contract the plaintiff. On the contrary, Dio and Uy
of excussion (Original Records, pp. 88-93). categorically testified that they signed the blank
forms in the office of Uy Tiam at 623 Asuncion
Street, Binondo, Manila, in obedience to the
On February 23, 1987, plaintiff filed a motion to instruction of Uy Tiam, their former employer. They
dismiss the complaint against defendant Uy Tiam denied having gone to the office of the plaintiff to
on the ground that it has no information as to the subscribe to the documents (October 1, 1987, tsn,
heirs or legal representatives of the latter who died pp. 5-7, 14; October 15, 1987, tsn, pp. 3-8, 13-16).
sometime in December, 1986, which motion was (Records, pp. 333-334). 3
granted on the following day (Ibid., pp. 180-182).
Thus, by express mandate of the Continuing Such theory aligned with sec. 510 of the Code of
Suretyship Agreements which they had signed, Civil Procedure which was subsequently
petitioners separately bound themselves to pay recognized in the Rules of Court (Rule 53, section
interest, expenses, attorney's fees and costs. The 6) and with Article 1108 of the Civil Code (now Art.
last two items are pegged at not less than ten 2209 of the New Civil Code).
percent (10%) of the amount due.
In conducting researches and studies of social On July 12, 1993, the respondent court rendered
organizations and cultural values thru its Institute of the questioned decision which dispositively reads:
Philippine Culture, is the Ateneo de Manila
University performing the work of an independent
contractor and thus taxable within the purview of WHEREFORE, in view of the foregoing,
then Section 205 of the National Internal Revenue respondents decision is SET ASIDE. The
Code levying a three percent contractors tax? This deficiency contractors tax assessment in the
question is answered by the Court in the negative amount of P46,516.41 exclusive of surcharge and
as it resolves this petition assailing the Decision[1] interest for the fiscal year ended March 31, 1978 is
of the Respondent Court of Appeals[2] in CA-G.R. hereby CANCELED. No pronouncement as to cost.
SP No. 31790 promulgated on April 27, 1994
affirming that of the Court of Tax Appeals.[3]
SO ORDERED.
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In fine, these may be reduced to a single issue: Is
Ateneo de Manila University, through its auxiliary
Petitioner contends that the respondent court erred unit or branch -- the Institute of Philippine Culture --
in holding that private respondent is not an performing the work of an independent contractor
independent contractor within the purview of and, thus, subject to the three percent contractors
Section 205 of the Tax Code. To petitioner, the tax levied by then Section 205 of the National
term independent contractor, as defined by the Internal Revenue Code?
Code, encompasses all kinds of services rendered
for a fee and that the only exceptions are the
following: The Courts Ruling
b. Individuals occupation tax under Section 12 of The parts of then Section 205 of the National
the Local Tax Code (under the old Section 182 [b] Internal Revenue Code germane to the case before
of the Tax Code); and us read:
c. Regional or area headquarters established in the SEC. 205. Contractors, proprietors or operators of
Philippines by multinational corporations, including dockyards, and others. -- A contractors tax of three
their alien executives, and which headquarters do per centum of the gross receipts is hereby imposed
not earn or derive income from the Philippines and on the following:
which act as supervisory, communication and
coordinating centers for their affiliates, subsidiaries
or branches in the Asia Pacific Region (Section 205
xxxxxxxxx
of the Tax Code).
An examination of the Commissioners Written For another, it bears stressing that private
Formal Offer of Evidence in the Court of Tax respondent is a non-stock, non-profit educational
Appeals shows that only the following documentary corporation. The fact that it accepted sponsorship
evidence was presented: for IPCs unfunded projects is merely incidental.
For, the main function of the IPC is to undertake
research projects under the academic agenda of
Exhibit 1 BIR letter of authority no. 331844 the private respondent. Moreover, the records do
not show that in accepting sponsorship of research
2 Examiners Field Audit Report work, IPC realized profits from such work. On the
3 Adjustments to Sales/Receipts contrary, the evidence shows that for about 30
years, IPC had continuously operated at a loss,
4 Letter-decision of BIR Commissioner which means that sponsored funds are less than
actual expenses for its research projects. That IPC
Bienvenido A. Tan Jr.
has been operating at a loss loudly bespeaks of the
fact that education and not profit is the motive for
undertaking the research projects.
None of the foregoing evidence even comes close
to purport to be contracts between private
respondent and third parties.[12]
Then, too, granting arguendo that IPC made profits
from the sponsored research projects, the fact still
remains that there is no proof that part of such
Moreover, the Court of Tax Appeals accurately and earnings or profits was ever distributed as
correctly declared that the funds received by the dividends to any stockholder, as in fact none was
Ateneo de Manila University are technically not a so distributed because they accrued to the benefit
fee. They may however fall as gifts or donations of the private respondent which is a non-profit
which are tax-exempt as shown by private educational institution.[14]
respondents compliance with the requirement of
Section 123 of the National Internal Revenue Code
providing for the exemption of such gifts to an
Therefore, it is clear that the funds received by
educational institution.[13]
Ateneos Institute of Philippine Culture are not given
in the concept of a fee or price in exchange for the
performance of a service or delivery of an object.
Respondent Court of Appeals elucidated on the Rather, the amounts are in the nature of an
ruling of the Court of Tax Appeals: endowment or donation given by IPCs benefactors
solely for the purpose of sponsoring or funding the
research with no strings attached. As found by the
To our mind, private respondent hardly fits into the two courts below, such sponsorships are subject to
definition of an independent contractor. IPCs terms and conditions. No proprietary or
commercial research is done, and IPC retains the
ownership of the results of the research, including
For one, the established facts show that IPC, as a the absolute right to publish the same. The
unit of the private respondent, is not engaged in copyrights over the results of the research are
business. Undisputedly, private respondent is owned by Ateneo and, consequently, no portion
mandated by law to undertake research activities to thereof may be reproduced without its
maintain its university status. In fact, the research permission.[15] The amounts given to IPC,
activities being carried out by the IPC is focused therefore, may not be deemed, it bears stressing,
not on business or profit but on social sciences as fees or gross receipts that can be subjected to
studies of Philippine society and culture. Since it the three percent contractors tax.
can only finance a limited number of IPCs research
projects, private respondent occasionally accepts
sponsorship for unfunded IPC research projects It is also well to stress that the questioned
from international organizations, private transactions of Ateneos Institute of Philippine
foundations and governmental agencies. However, Culture cannot be deemed either as a contract of
such sponsorships are subject to private sale or a contract for a piece of work. By the
respondents terms and conditions, among which contract of sale, one of the contracting parties
are, that the research is confined to topics obligates himself to transfer the ownership of and to
consistent with the private respondents academic deliver a determinate thing, and the other to pay
agenda; that no proprietary or commercial purpose therefor a price certain in money or its
research is done; and that private respondent equivalent.[16] By its very nature, a contract of sale
retains not only the absolute right to publish but requires a transfer of ownership. Thus, Article 1458
also the ownership of the results of the research of the Civil Code expressly makes the obligation to
conducted by the IPC. Quite clearly, the transfer ownership as an essential element of the
aforementioned terms and conditions belie the contract of sale, following modern codes, such as
allegation that private respondent is a contractor or the German and the Swiss. Even in the absence of
is engaged in business. this express requirement, however, most writers,
Sales Cases (2017-2018) ni Treeng
including Sanchez Roman, Gayoso, Valverde,
Ruggiero, Colin and Capitant, have considered
32. University status may be withdrawn, after due
such transfer of ownership as the primary purpose
notice and hearing, for failure to maintain
of sale. Perez and Alguer follow the same view,
satisfactorily the standards and requirements
stating that the delivery of the thing does not mean
therefor.[20]
a mere physical transfer, but is a means of
transmitting ownership. Transfer of title or an
agreement to transfer it for a price paid or promised
to be paid is the essence of sale.[17] In the case of Petitioners contention that it is the Institute of
a contract for a piece of work, the contractor binds Philippine Culture that is being taxed and not the
himself to execute a piece of work for the employer, Ateneo is patently erroneous because the former is
in consideration of a certain price or compensation. not an independent juridical entity that is separate
x x x If the contractor agrees to produce the work and distinct from the latter.
from materials furnished by him, he shall deliver the
thing produced to the employer and transfer
dominion over the thing. x x x.[18] Ineludably, Factual Findings and Conclusions of the Court of
whether the contract be one of sale or one for a Tax Appeals
piece of work, a transfer of ownership is involved
Affirmed by the Court of Appeals Generally
and a party necessarily walks away with an
Conclusive
object.[19] In the case at bench, it is clear from the
evidence on record that there was no sale either of
objects or services because, as adverted to earlier,
there was no transfer of ownership over the In addition, we reiterate that the Court of Tax
research data obtained or the results of research Appeals is a highly specialized body specifically
projects undertaken by the Institute of Philippine created for the purpose of reviewing tax cases.
Culture. Through its expertise, it is undeniably competent to
determine the issue of whether[21] Ateneo de
Manila University may be deemed a subject of the
three percent contractors tax through the evidence
Furthermore, it is clear that the research activity of
presented before it. Consequently, as a matter of
the Institute of Philippine Culture is done in
principle, this Court will not set aside the conclusion
pursuance of maintaining Ateneos university status
reached by x x x the Court of Tax Appeals which is,
and not in the course of an independent business
by the very nature of its function, dedicated
of selling such research with profit in mind. This is
exclusively to the study and consideration of tax
clear from a reading of the regulations governing
problems and has necessarily developed an
universities:
expertise on the subject unless there has been an
abuse or improvident exercise of authority x x x.[22]
This point becomes more evident in the case
31.In addition to the legal requisites an institution before us where the findings and conclusions of
must meet, among others, the following both the Court of Tax Appeals and the Court of
requirements before an application for university Appeals appear untainted by any abuse of
status shall be considered: authority, much less grave abuse of discretion.
Thus, we find the decision of the latter affirming that
of the former free from any palpable error.
xxxxxxxxx
A The University.
SO ORDERED.
Sales Cases (2017-2018) ni Treeng
Distinguished from Agency to Sell pending to be served to Mr. Parsons, such
order shall enjoy the advantage of the
ANDRES QUIROGA, plaintiff-appellant, alteration if the price thereby be lowered,
vs. but shall not be affected by said alteration if
PARSONS HARDWARE CO., defendant-appellee. the price thereby be increased, for, in this
latter case, Mr. Quiroga assumed the
Alfredo Chicote, Jose Arnaiz and Pascual B. obligation to invoice the beds at the price at
Azanza for appellant. which the order was given.
Crossfield & O'Brien for appellee.
(F) Mr. Parsons binds himself not to sell any
AVANCEA, J.: other kind except the "Quiroga" beds.
On January 24, 1911, in this city of manila, a ART. 2. In compensation for the expenses
contract in the following tenor was entered into by of advertisement which, for the benefit of
and between the plaintiff, as party of the first part, both contracting parties, Mr. Parsons may
and J. Parsons (to whose rights and obligations the find himself obliged to make, Mr. Quiroga
present defendant later subrogated itself), as party assumes the obligation to offer and give the
of the second part: preference to Mr. Parsons in case anyone
should apply for the exclusive agency for
CONTRACT EXECUTED BY AND any island not comprised with the Visayan
BETWEEN ANDRES QUIROGA group.
AND J. PARSONS, BOTH
MERCHANTS ESTABLISHED IN ART. 3. Mr. Parsons may sell, or establish
MANILA, FOR THE EXCLUSIVE branches of his agency for the sale of
SALE OF "QUIROGA" BEDS IN "Quiroga" beds in all the towns of the
THE VISAYAN ISLANDS. Archipelago where there are no exclusive
agents, and shall immediately report such
ARTICLE 1. Don Andres Quiroga grants the action to Mr. Quiroga for his approval.
exclusive right to sell his beds in the
Visayan Islands to J. Parsons under the ART. 4. This contract is made for an
following conditions: unlimited period, and may be terminated by
either of the contracting parties on a
(A) Mr. Quiroga shall furnish beds of his previous notice of ninety days to the other
manufacture to Mr. Parsons for the latter's party.
establishment in Iloilo, and shall invoice
them at the same price he has fixed for Of the three causes of action alleged by the plaintiff
sales, in Manila, and, in the invoices, shall in his complaint, only two of them constitute the
make and allowance of a discount of 25 per subject matter of this appeal and both substantially
cent of the invoiced prices, as commission amount to the averment that the defendant violated
on the sale; and Mr. Parsons shall order the the following obligations: not to sell the beds at
beds by the dozen, whether of the same or higher prices than those of the invoices; to have an
of different styles. open establishment in Iloilo; itself to conduct the
agency; to keep the beds on public exhibition, and
(B) Mr. Parsons binds himself to pay Mr. to pay for the advertisement expenses for the
Quiroga for the beds received, within a same; and to order the beds by the dozen and in no
period of sixty days from the date of their other manner. As may be seen, with the exception
shipment. of the obligation on the part of the defendant to
order the beds by the dozen and in no other
manner, none of the obligations imputed to the
(C) The expenses for transportation and
defendant in the two causes of action are expressly
shipment shall be borne by M. Quiroga, and
set forth in the contract. But the plaintiff alleged that
the freight, insurance, and cost of unloading
the defendant was his agent for the sale of his beds
from the vessel at the point where the beds
in Iloilo, and that said obligations are implied in a
are received, shall be paid by Mr. Parsons.
contract of commercial agency. The whole
question, therefore, reduced itself to a
(D) If, before an invoice falls due, Mr. determination as to whether the defendant, by
Quiroga should request its payment, said reason of the contract hereinbefore transcribed,
payment when made shall be considered as was a purchaser or an agent of the plaintiff for the
a prompt payment, and as such a deduction sale of his beds.
of 2 per cent shall be made from the amount
of the invoice.
In order to classify a contract, due regard must be
given to its essential clauses. In the contract in
The same discount shall be made on the question, what was essential, as constituting its
amount of any invoice which Mr. Parsons cause and subject matter, is that the plaintiff was to
may deem convenient to pay in cash. furnish the defendant with the beds which the latter
might order, at the price stipulated, and that the
(E) Mr. Quiroga binds himself to give notice defendant was to pay the price in the manner
at least fifteen days before hand of any stipulated. The price agreed upon was the one
alteration in price which he may plan to determined by the plaintiff for the sale of these
make in respect to his beds, and agrees beds in Manila, with a discount of from 20 to 25 per
that if on the date when such alteration cent, according to their class. Payment was to be
takes effect he should have any order made at the end of sixty days, or before, at the
Sales Cases (2017-2018) ni Treeng
plaintiff's request, or in cash, if the defendant so defendant the beds that it wanted; and that the
preferred, and in these last two cases an additional defendant received its commission for the beds
discount was to be allowed for prompt payment. sold by the plaintiff directly to persons in Iloilo. But
These are precisely the essential features of a all this, at the most only shows that, on the part of
contract of purchase and sale. There was the both of them, there was mutual tolerance in the
obligation on the part of the plaintiff to supply the performance of the contract in disregard of its
beds, and, on the part of the defendant, to pay their terms; and it gives no right to have the contract
price. These features exclude the legal conception considered, not as the parties stipulated it, but as
of an agency or order to sell whereby the they performed it. Only the acts of the contracting
mandatory or agent received the thing to sell it, and parties, subsequent to, and in connection with, the
does not pay its price, but delivers to the principal execution of the contract, must be considered for
the price he obtains from the sale of the thing to a the purpose of interpreting the contract, when such
third person, and if he does not succeed in selling interpretation is necessary, but not when, as in the
it, he returns it. By virtue of the contract between instant case, its essential agreements are clearly
the plaintiff and the defendant, the latter, on set forth and plainly show that the contract belongs
receiving the beds, was necessarily obliged to pay to a certain kind and not to another. Furthermore,
their price within the term fixed, without any other the return made was of certain brass beds, and
consideration and regardless as to whether he had was not effected in exchange for the price paid for
or had not sold the beds. them, but was for other beds of another kind; and
for the letter Exhibit L-1, requested the plaintiff's
It would be enough to hold, as we do, that the prior consent with respect to said beds, which
contract by and between the defendant and the shows that it was not considered that the defendant
plaintiff is one of purchase and sale, in order to had a right, by virtue of the contract, to make this
show that it was not one made on the basis of a return. As regards the shipment of beds without
commission on sales, as the plaintiff claims it was, previous notice, it is insinuated in the record that
for these contracts are incompatible with each these brass beds were precisely the ones so
other. But, besides, examining the clauses of this shipped, and that, for this very reason, the plaintiff
contract, none of them is found that substantially agreed to their return. And with respect to the so-
supports the plaintiff's contention. Not a single one called commissions, we have said that they merely
of these clauses necessarily conveys the idea of an constituted a discount on the invoice price, and the
agency. The words commission on sales used in reason for applying this benefit to the beds sold
clause (A) of article 1 mean nothing else, as stated directly by the plaintiff to persons in Iloilo was
in the contract itself, than a mere discount on the because, as the defendant obligated itself in the
invoice price. The word agency, also used in contract to incur the expenses of advertisement of
articles 2 and 3, only expresses that the defendant the plaintiff's beds, such sales were to be
was the only one that could sell the plaintiff's beds considered as a result of that advertisement.
in the Visayan Islands. With regard to the remaining
clauses, the least that can be said is that they are In respect to the defendant's obligation to order by
not incompatible with the contract of purchase and the dozen, the only one expressly imposed by the
sale. contract, the effect of its breach would only entitle
the plaintiff to disregard the orders which the
The plaintiff calls attention to the testimony of defendant might place under other conditions; but if
Ernesto Vidal, a former vice-president of the the plaintiff consents to fill them, he waives his right
defendant corporation and who established and and cannot complain for having acted thus at his
managed the latter's business in Iloilo. It appears own free will.
that this witness, prior to the time of his testimony,
had serious trouble with the defendant, had For the foregoing reasons, we are of opinion that
maintained a civil suit against it, and had even the contract by and between the plaintiff and the
accused one of its partners, Guillermo Parsons, of defendant was one of purchase and sale, and that
falsification. He testified that it was he who drafted the obligations the breach of which is alleged as a
the contract Exhibit A, and, when questioned as to cause of action are not imposed upon the
what was his purpose in contracting with the defendant, either by agreement or by law.
plaintiff, replied that it was to be an agent for his
beds and to collect a commission on sales. The judgment appealed from is affirmed, with costs
However, according to the defendant's evidence, it against the appellant. So orde
was Mariano Lopez Santos, a director of the
corporation, who prepared Exhibit A. But, even
supposing that Ernesto Vidal has stated the truth,
his statement as to what was his idea in contracting
with the plaintiff is of no importance, inasmuch as
the agreements contained in Exhibit A which he
claims to have drafted, constitute, as we have said,
a contract of purchase and sale, and not one of
commercial agency. This only means that Ernesto
Vidal was mistaken in his classification of the
contract. But it must be understood that a contract
is what the law defines it to be, and not what it is
called by the contracting parties.
First, it is contended that the Quotation and the The facts do not bear out these contentions.
General Conditions of Sale on the dorsal side
thereof do not necessarily lead to the conclusion
that NAGATA CO., and not SCHMID, was the real The first contention disregards the circumstances
seller in the case of the twelve (12) generators in surrounding the second transaction as
that: distinguished from those surrounding the first
transaction, as noted above.
Second, it is asserted that the acts of SCHMID after Note that in contrast to its act of replacing the three
it was informed of the defect in the generators were (3) generators subject of the first transaction,
indicative of its awareness that it was the vendor SCHMID did not replace any of the twelve (12)
Sales Cases (2017-2018) ni Treeng
generators, but merely rendered assistance to both
RJL TINES and NAGATA CO. so that the latter
The Quotation (Exhibit A is in writing. It is the
could repair the defective generators.
repository of the contract between RJL MARTINEZ
and SCHMID. Notably, nowhere is it stated therein
that SCHMID did bind itself to answer for the
The proposal of NAGATA CO. rejected by SCHMID
defects of the things sold. There being no allegation
that the latter undertake the repair of the nine (9)
nor any proof that the Quotation does not express
other defective generators, with the former
the true intent and agreement of the contracting
supplying the replacement parts free of charge and
parties, extrinsic parol evidence of warranty will be
subsequently reimbursing the latter for labor costs
to no avail [See Rule 123, Sec. 22.]
[Exhibit "I"], cannot support the conclusion that
SCHMID is vendor of the generators of the second
transaction or was acting "within the purview of a
The trial court, however, relied on the testimony of
seller."
Patrocinio Balagtas, the head of the Electrical
Department of RJL MARTINEZ, to support the
finding that SCHMID did warrant the twelve (12)
Finally, the afore-quoted penal provision in the
generators against defects.
Corporation Law finds no application to SCHMID
and its officers and employees relative to the
transactions in the instant case. What the law
Upon careful examination of Balagtas' testimony,
seeks to prevent, through said provision, is the
what is at once apparent is that Balagtas failed to
circumvention by foreign corporations of licensing
disclose the nature or terms and conditions of the
requirements through the device of employing local
warranty allegedly given by SC Was it a warranty
representatives. An indentor, acting in his own
that the generators would be fit for the fishing
name, is not, however, covered by the above-
business of the buyer? Was it a warranty that the
quoted provision. In fact, the provision of the Rules
generators to be delivered would meet the
and Regulations implementing the Omnibus
specifications indicated in the Quotation?
Investments Code quoted above, which was copied
Considering the different kinds of warranties that
from the Rules implementing Republic Act No.
may be contracted, unless the nature or terms and
5455, recognizes the distinct role of an indentor,
conditions of the warranty are known, it would not
such that when a foreign corporation does business
be possible to determine whether there has been a
through such indentor, the foreign corporation is not
breach thereof.
deemed doing business in the Philippines.
ATTY. AQUINO:
The Court's inquiry, therefore, shifts to a
determination of whether or not SCHMID expressly
bound itself to warrant that the twelve (12) Misleading, your Honor.
generators are free of any hidden defects.
Atty. CATRAL:
Again, we consider the facts.
Sales Cases (2017-2018) ni Treeng
I am asking the witness. REVERSED. The complaint of RJL Martinez
Fishing Corporation is hereby DISMISSED. No
costs.
COURT:
SO ORDERED.
He has the right to ask that question because he is
on cross. Moreover, if I remember, he mentioned
something like that. Witness may answer.
Since no settlement was reached at pre-trial, the "On the other hand, the claim of defendant
trial court heard the case on the merits. Victorias Milling Company that the purchase price
of the 25,000 bags of sugar purchased by St.
Therese Merchandising covered by SLDR No. 1214
has not been fully paid is supported only by the
As earlier stated, the trial court rendered its
testimony of Arnulfo Caintic, witness for defendant
judgment favoring private respondent CSC, as
Victorias Milling Company. The Court notes that the
follows:
testimony of Arnulfo Caintic is merely a sweeping
barren assertion that the purchase price has not
been fully paid and is not corroborated by any
"WHEREFORE, in view of the foregoing, the Court positive evidence. There is an insinuation by
hereby renders judgment in favor of the plaintiff and Arnulfo Caintic in his testimony that the postdated
against defendant Victorias Milling Company: checks issued by the buyer in payment of the
purchased price were dishonored. However, said
witness failed to present in Court any dishonored
"1) Ordering defendant Victorias Milling Company check or any replacement check. Said witness
to deliver to the plaintiff 23,000 bags of refined likewise failed to present any bank record showing
sugar due under SLDR No. 1214; that the checks issued by the buyer, Teresita Ng
Go, in payment of the purchase price of the sugar
covered by SLDR No. 1214 were dishonored."[10]
"2) Ordering defendant Victorias Milling Company
to pay the amount of P920,000.00 as unrealized
profits, the amount of P800,000.00 as exemplary Petitioner appealed the trial courts decision to the
damages and the amount of P1,357,000.00, which Court of Appeals.
is 10% of the acquisition value of the undelivered
bags of refined sugar in the amount of
P13,570,000.00, as attorney's fees, plus the costs. On appeal, petitioner averred that the dealings
between it and STM were part of a series of
transactions involving only one account or one
"SO ORDERED."[9] general contract of sale. Pursuant to this contract,
STM or any of its authorized agents could withdraw
bags of sugar only against cleared checks of STM.
It made the following observations: SLDR No. 21214M was only one of 22 SLDRs
issued to STM and since the latter had already
withdrawn its full quota of sugar under the said
Sales Cases (2017-2018) ni Treeng
SLDR, CSC was already precluded from seeking "(1) Deliver to plaintiff-appellee 23,000 bags of
delivery of the 23,000 bags of sugar. refined sugar under SLDR No. 1214M;
Private respondent CSC countered that the sugar "(2) Pay costs of suit.
purchases involving SLDR No. 1214M were
separate and independent transactions and that the
details of the series of purchases were contained in "SO ORDERED."[12]
a single statement with a consolidated summary of
cleared check payments and sugar stock
withdrawals because this a more convenient The appellate court explained the rationale for the
system than issuing separate statements for each modification as follows:
purchase.
SO ORDERED.
Sales Cases (2017-2018) ni Treeng
The imported cement plant machinery and
equipment arrived from Japan and were released to
Art. 1245. Dation in payment, whereby property
TCC under a trust receipt agreement.
is alienated to the creditor in satisfaction of a Subsequently, Toyo Menka Kaisha, Ltd. made the
debt in money, shall be governed by the law of corresponding drawings against the L/C as
sales scheduled. TCC, however, failed to remit and/or
pay the corresponding amount covered by the
drawings. Thus, on May 19, 1968, pursuant to the
trust receipt agreement, PNB notified TCC of its
PHILIPPINE NATIONAL BANK, petitioner, intention to repossess, as it later did, the imported
machinery and equipment for failure of TCC to
vs.
settle its obligations under the L/C. 5
HON. GREGORIO G. PINEDA, in his capacity as
Presiding Judge of the Court of First Instance
of Rizal, Branch XXI and TAYABAS CEMENT In the meantime, the personal accounts of the
COMPANY, INC., respondents. spouses Arroyo, which included another loan of
P160,000.00 secured by a real estate mortgage
over parcels of agricultural land known as Hacienda
The Chief Legal Counsel for petitioner. Bacon located in Isabela, Negros Occidental, had
likewise become due. The spouses Arroyo having
Ortille Law Office for private respondent. failed to satisfy their obligations with PNB, the latter
decided to foreclose the real estate mortgages
executed by the spouses Arroyo in its favor.
In this petition for certiorari, petitioner Philippine
National Bank (PNB) seeks to annul and set aside
the orders dated March 4, 1977 and May 31, 1977 On July 18, 1975, PNB filed with the City Sheriff of
rendered in Civil Case No. 24422 1 of the Court of Quezon City a petition for extra-judicial foreclosure
First Instance of Rizal, Branch XXI, respectively under Act 3138, as amended by Act 4118 and
granting private respondent Tayabas Cement under Presidential Decree No. 385 of the real
Company, Inc.'s application for a writ of preliminary estate mortgage over the properties known as the
injunction to enjoin the foreclosure sale of certain La Vista property covered by TCT No. 55323. 6
properties in Quezon City and Negros Occidental PNB likewise filed a similar petition with the City
and denying petitioner's motion for reconsideration Sheriff of Bacolod, Negros Occidental with respect
thereof. to the mortgaged properties located at Isabela,
Negros Occidental and covered by OCT No. RT
1615.
In 1963, Ignacio Arroyo, married to Lourdes Tuason
Arroyo (the Arroyo Spouses), obtained a loan of
P580,000.00 from petitioner bank to purchase 60% The foreclosure sale of the La Vista property was
of the subscribed capital stock, and thereby acquire scheduled on August 11, 1975. At the auction sale,
the controlling interest of private respondent PNB was the highest bidder with a bid price of
Tayabas Cement Company, Inc. (TCC). 2 As P1,000,001.00. However, when said property was
security for said loan, the spouses Arroyo executed about to be awarded to PNB, the representative of
a real estate mortgage over a parcel of land the mortgagor-spouses objected and demanded
covered by Transfer Certificate of Title No. 55323 from the PNB the difference between the bid price
of the Register of Deeds of Quezon City known as of P1,000,001.00 and the indebtedness of
the La Vista property. P499,060.25 of the Arroyo spouses on their
personal account. It was the contention of the
spouses Arroyo's representative that the
Thereafter, TCC filed with petitioner bank an foreclosure proceedings referred only to the
application and agreement for the establishment of personal account of the mortgagor spouses without
an eight (8) year deferred letter of credit (L/C) for reference to the account of TCC.
$7,000,000.00 in favor of Toyo Menka Kaisha, Ltd.
of Tokyo, Japan, to cover the importation of a
cement plant machinery and equipment. To remedy the situation, PNB filed a supplemental
petition on August 13, 1975 requesting the Sheriff's
Office to proceed with the sale of the subject real
Upon approval of said application and opening of properties to satisfy not only the amount of
an L/C by PNB in favor of Toyo Menka Kaisha, Ltd. P499,060.25 owed by the spouses Arroyos on their
for the account of TCC, the Arroyo spouses personal account but also the amount of
executed the following documents to secure this P35,019,901.49 exclusive of interest, commission
loan accommodation: Surety Agreement dated charges and other expenses owed by said spouses
August 5, 1964 3 and Covenant dated August 6, as sureties of TCC. 7 Said petition was opposed by
1964. 4 the spouses Arroyo and the other bidder, Jose L.
Araneta.
Sales Cases (2017-2018) ni Treeng
On September 12, 1975, Acting Clerk of Court and
Ex-Officio Sheriff Diana L. Dungca issued a
Private respondent TCC counters with the
resolution finding that the questions raised by the
argument that P.D. No. 385 does not apply to the
parties required the reception and evaluation of
case at bar, firstly because no foreclosure
evidence, hence, proper for adjudication by the
proceedings have been instituted against it by PNB
courts of law. Since said questions were prejudicial
and secondly, because its account under the L/C
to the holding of the foreclosure sale, she ruled that
has been fully satisfied with the repossession of the
her "Office, therefore, cannot properly proceed with
imported machinery and equipment by PNB.
the foreclosure sale unless and until there be a
court ruling on the aforementioned issues." 8
III
Respondent appealed the decision to the Court of
Appeals. On April 19, 2001, the appellate court
rendered a decision,[10] the dispositive portion of
which reads: THE HONORABLE COURT OF APPEALS ERRED
IN REVERSING THE DECISION OF THE TRIAL
COURT AND IN ORDERING PAYMENT OF
INTERESTS AND ATTORNEYS FEES.[14]
WHEREFORE, finding merit in this appeal, the
court REVERSES the appealed Decision and
enters judgment ordering defendant-appellee
Sonny Lo to pay the plaintiff-appellant KJS ECO- The petition is without merit.
FORMWORK SYSTEM PHILIPPINES, INC. Three
Hundred Thirty Five Thousand Four Hundred Sixty-
Two and 14/100 (P335,462.14) with legal interest of An assignment of credit is an agreement by virtue
6% per annum from January 10, 1991 (filing of the of which the owner of a credit, known as the
Complaint) until fully paid and attorneys fees assignor, by a legal cause, such as sale, dacion en
equivalent to 10% of the amount due and costs of pago, exchange or donation, and without the
the suit. consent of the debtor, transfers his credit and
accessory rights to another, known as the
assignee, who acquires the power to enforce it to
SO ORDERED.[11] the same extent as the assignor could enforce it
against the debtor.[15]
I
Sales Cases (2017-2018) ni Treeng
solvency of the debtor, in specified Appeals of attorneys fees is without factual basis.
circumstances.[18] No evidence or testimony was presented to
substantiate this claim. Attorneys fees, being in the
nature of actual damages, must be duly
Hence, it may well be that the assignment of credit, substantiated by competent proof.
which is in the nature of a sale of personal
property,[19] produced the effects of a dation in
payment which may extinguish the obligation.[20] WHEREFORE, in view of the foregoing, the
However, as in any other contract of sale, the Decision of the Court of Appeals dated April 19,
vendor or assignor is bound by certain warranties. 2001 in CA-G.R. CV No. 47713, ordering petitioner
More specifically, the first paragraph of Article 1628 to pay respondent the sum of P335,462.14 with
of the Civil Code provides: legal interest of 6% per annum from January 10,
1991 until fully paid is AFFIRMED with
MODIFICATION. Upon finality of this Decision, the
The vendor in good faith shall be responsible for rate of legal interest shall be 12% per annum,
the existence and legality of the credit at the time of inasmuch as the obligation shall thereafter become
the sale, unless it should have been sold as equivalent to a
doubtful; but not for the solvency of the debtor,
unless it has been so expressly stipulated or unless
the insolvency was prior to the sale and of common
knowledge.
c). Actual expenses representing the Whether or not the parties are entitled to
filing fee and other charges and their claim for damages.9
expenses to be incurred during the
prosecution of this case. The Case for Petitioner
Further prays for such other relief and Agrifina and Felicidad were classmates at the
remedies just and equitable under the University of Pangasinan. Felicidad's husband,
premises.4 Rico, also happened to be a distant relative of
Agrifina. Upon Felicidad's prodding, Agrifina agreed
Agrifina appended a copy of the Counter-Affidavit to lend money to Felicidad. According to Felicidad,
executed by Felicidad in I.S. No. 93-334, as well as Agrifina would be earning interests higher than
copies of the promissory notes and those given by the bank for her money. Felicidad
told Agrifina that since she (Felicidad) was engaged
Sales Cases (2017-2018) ni Treeng
in the sale of dry goods at the GP Shopping Merlinda Gelacio 17,200.00 August 29
Arcade, she would use the money to buy bonnels Total P284,659.00
and thread.10 Thus, Agrifina lent a total sum
of P773,000.00 to Felicidad, and each loan
Agrifina narrated that Felicidad showed to her the
transaction was covered by either a promissory
way to the debtors' houses to enable her to collect
note or an acknowledgment receipt.11Agrifina
from them. One of the debtors, Helen Cabang, did
stated that she had lost the receipts signed by
not execute any promissory note but conformed to
Felicidad for the following
the Deed of Assignment of Credit which Felicidad
amounts: P100,000.00, P34,000.00
executed in favor of Agrifina.27 Eliza Abance
and P2,000.00.12 The particulars of the transactions
conformed to the deed of assignment for and in
are as follows:
behalf of her sister, Fely Cirilo.28 Edna Papat-iw
was not able to affix her signature on the deed of
According to Agrifina, Felicidad was able to pay
assignment nor sign the promissory note because
only her loans amounting to P122,600.00.14 she was in Taipei, Taiwan.29
In July 1990, Felicidad gave to Agrifina City Trust Following the execution of the deeds of assignment
Bank Check No. 126804 dated August 25, 1990 in
and promissory notes, Agrifina was able to collect
the amount of P50,000.00 as partial the total amount of P301,000.00 from Felicidad's
payment.15 However, the check was dishonored for
debtors.30 In April 1990, she tried to collect the
having been drawn against insufficient
balance of Felicidad's account, but the latter told
funds.16 Agrifina then filed a criminal case against her to wait until her debtors had money.31 When
Felicidad in the Office of the City Prosecutor. An
Felicidad reneged on her promise, Agrifina filed a
Information for violation of Batas Pambansa Bilang
complaint in the Office of the Barangay Captain for
22 was filed against Felicidad, docketed as
the collection of P773,000.00. However, no
Criminal Case No. 11181-R. After trial, the court
settlement was arrived at.32
ordered Felicidad to pay P50,000.00. Felicidad
complied and paid the face value of the check.17
The Case for Respondents
In the meantime, Agrifina learned that Felicidad had
Felicidad testified that she and her friend Agrifina
re-loaned the amounts to other
had been engaged in the money-lending
borrowers.18 Agrifina sought the assistance of Atty.
business.33 Agrifina would lend her money with
Torres G. A-ayo who advised her to require
monthly interest,34 and she, in turn, would re-lend
Felicidad to execute deeds of assignment over
the money to borrowers at a higher interest rate.
Felicidad's debtors. The lawyer also suggested that
Their business relationship turned sour when
Felicidad's debtors execute promissory notes in
Agrifina started complaining that she (Felicidad)
Agrifina's favor, to "turn over" their loans from
was actually earning more than Agrifina.35 Before
Felicidad. This arrangement would facilitate
the respective maturity dates of her debtors' loans,
collection of Felicidad's account. Agrifina agreed to
Agrifina asked her to pay her account since Agrifina
the proposal.19 Agrifina, Felicidad, and the latter's
needed money to buy a house and lot in Manila.
debtors had a conference20 where Atty. A-ayo
However, she told Agrifina that she could not pay
explained that Agrifina could apply her collections
yet, as her debtors' loan payments were not yet
as payments of Felicidad's account.21
due.36 Agrifina then came to her store every
afternoon to collect from her, and persuaded her to
From August 7, 1990 to October, 1990, Felicidad go to Atty. Torres G. A-ayo for legal advice.37 The
executed deeds of assignment of credits
lawyer suggested that she indorse the accounts of
(obligations)22 duly notarized by Atty. A-ayo, in
her debtors to Agrifina so that the latter would be
which Felicidad transferred and assigned to
the one to collect from her debtors and she would
Agrifina the total amount of P546,459.00 due from
no longer have any obligation to Agrifina.38 She
her debtors.23 In the said deeds, Felicidad then executed deeds of assignment in favor of
confirmed that her debtors were no longer indebted
Agrifina covering the sums of money due from her
to her for their respective loans. For her part,
debtors. She signed the deeds prepared by Atty. A-
Agrifina conformed to the deeds of assignment
ayo in the presence of Agrifina.39 Some of the
relative to the loans of Virginia Morada and
debtors signed the promissory notes which were
Corazon Dalisay.24 She was furnished copies of the likewise prepared by the lawyer. Thereafter,
deeds as well as the promissory notes.25
Agrifina personally collected from Felicidad's
debtors.40Felicidad further narrated that she
The following debtors of Felicidad executed received P250,000.00 from one of her debtors, Rey
promissory notes where they obliged themselves to Rivera, and remitted the payment to Agrifina.41
pay directly to Agrifina:
Agrifina testified, on rebuttal, that she did not enter
Debtors Account Date of Instrument
into a re-lending business Datewith
Payable
Felicidad. When she
Juliet & Tommy Tibong P50,000.00 August 7, asked
1990 Felicidad
November 4, 1990her
to consolidate andloans in one
document, the February 4, 1991
latter told her to seek the assistance
42
Corazon Dalisay 8,000.00 August 7, of Atty. A-ayo.
1990 No The lawyer suggested that
date
Rita Chomacog Felicidad
4,480.00 August 8, 1990 assign her credits
September 23, in order to help her
1990
collect her loans.43 She agreed to the deeds of
Antoinette Manuel 12,000.00 October 19, 1990 March 30, 1991
assignment to help Felicidad collect from the
Rosemarie Bandas 8,000.00 August 8, debtors.
1990 44 February 3, 1991
Fely Cirilo 63,600.00 September 13, 1990 No date
Virginia Morada 62,379.00 August 9, 1990 February 9, 1991
Carmelita Casuga 59,000.00 August 28, 1990 February 28, 1991
Sales Cases (2017-2018) ni Treeng
On January 20, 2003, the trial court rendered its The appellate court sustained the trial court's ruling
Decision45 in favor of Agrifina. The fallo of the that Felicidad's obligation to Agrifina had not been
decision reads: novated by the deeds of assignment and
promissory notes executed in the latter's favor.
WHEREFORE, judgment is rendered in Although Agrifina was subrogated as a new creditor
favor of the plaintiff and against the in lieu of Felicidad, Felicidad's obligation to Agrifina
defendants ordering the latter to pay the under the loan transaction remained; there was no
plaintiffs (sic) the following amounts: intention on their part to novate the original
obligation. Nonetheless, the appellate court held
1. P472,000 as actual obligation with the that the legal effects of the deeds of assignment
stipulated interest of 6% per month from could not be totally disregarded. The assignments
May 11, 1999 until the said obligation is fully of credits were onerous, hence, had the effect of
paid. However, the amount of P50,000 shall payment, pro tanto, of the outstanding obligation.
be deducted from the total accumulated The fact that Agrifina never repudiated or rescinded
interest for the same was already paid by such assignments only shows that she had
the defendant as admitted by the plaintiff in accepted and conformed to it. Consequently, she
her complaint, cannot collect both from Felicidad and her
individual debtors without running afoul to the
2. P25,000 as attorney's fees, principle of unjust enrichment. Agrifina's primary
recourse then is against Felicidad's individual
3. [T]o pay the costs. debtors on the basis of the deeds of assignment
and promissory notes.
SO ORDERED.46
The CA further declared that the deeds of
assignment executed by Felicidad had the effect of
The trial court ruled that Felicidad's obligation had
payment of her outstanding obligation to Agrifina in
not been novated by the deeds of assignment and
the amount of P585,659.00. It ruled that, since an
the promissory notes executed by Felicidad's
assignment of credit is in the nature of a sale, the
borrowers. It explained that the documents did not
assignors remained liable for the warranties as they
contain any express agreement to novate and
are responsible for the existence and legality of the
extinguish Felicidad's obligation. It declared that the
credit at the time of the assignment.
deeds and notes were separate contracts which
could stand alone from the original indebtedness of
Felicidad. Considering, however, Agrifina's Both parties moved to have the decision
admission that she was able to collect from reconsidered,49 but the appellate court denied both
Felicidad's debtors the total amount motions on December 21, 2004.50
of P301,000.00, this should be deducted from the
latter's accountability.47 Hence, the balance, Agrifina, now petitioner, filed the instant petition,
exclusive of interests, amounted to P472,000.00. contending that
On appeal, the CA affirmed with modification the 1. The Honorable Court of Appeals erred in
decision of the RTC and stated that, based on the ruling that the deeds of assignment in favor
promissory notes and acknowledgment receipts of petitioner has the effect of payment of the
signed by Felicidad, the appellants secured loans original obligation even as it ruled out that
from the appellee in the total principal amount of the original obligation and the assigned
only P637,000.00, not P773,000.00 as declared by credit are distinct and separate and can
the trial court. The CA found that, other than stand independently from each other;
Agrifina's bare testimony that she had lost the
promissory notes and acknowledgment receipts, 2. The Honorable Court of Appeals erred in
she failed to present competent documentary passing upon issues raised for the first time
evidence to substantiate her claim that Felicidad on appeal; and
had, likewise, borrowed the amounts
of P100,000.00, P34,000.00, and P2,000.00. Of 3. The Honorable Court of Appeals erred in
the P637,000.00 total account, P585,659.00 was resolving fact not in issue.51
covered by the deeds of assignment and
promissory notes; hence, the balance of Felicidad's Petitioner avers that the appellate court erred in
account amounted to only P51,341.00. The fallo of ruling that respondents' original obligation
the decision reads: amounted to only P637,000.00 (instead
of P773,000.00) simply because she lost the
WHEREFORE, in view of the foregoing, the promissory notes/receipts which evidenced the
decision dated January 20, 2003 of the loans executed by respondent Felicidad Tibong.
RTC, Baguio City, Branch 61 in Civil Case She insists that the issue of whether Felicidad
No. 4370-R is hereby MODIFIED. owed her less than P773,000.00 was not raised by
Defendants-appellants are hereby ordered respondents during pre-trial and in their appellate
to pay the balance of the total indebtedness brief; the appellate court was thus proscribed from
in the amount of P51,341.00 plus the taking cognizance of the issue.
stipulated interest of 6% per month from
May 11, 1999 until the finality of this Petitioner avers that respondents failed to deny, in
decision. their verified answer, that they had secured
the P773,000.00 loan; hence, respondents are
SO ORDERED.48 deemed to have admitted the allegation in the
complaint that the loans secured by respondent
Sales Cases (2017-2018) ni Treeng
from her amounted to P773,000.00. As gleaned petitioner for the balance of their loan account
from the trial court's pre-trial order, the main issue inclusive of interests. Respondents also insist that
is whether or not she should be made to pay this petitioner failed to prove that she (petitioner) was
amount. merely authorized to collect the accounts of the
original debtors so as to to facilitate the payment of
Petitioner further maintains that the CA erred in respondents' loan obligation.
deducting the total amount of P585,659.00 covered
by the deeds of assignment executed by Felicidad The Issues
and the promissory notes executed by the latter's
debtors, and that the balance of respondents' The threshold issues are: (1) whether respondent
account was only P51,341.00. Moreover, the Felicidad Tibong borrowed P773,000.00 from
appellate court's ruling that there was no novation petitioner; and (2) whether the obligation of
runs counter to its holding that the primary recourse respondents to pay the balance of their loans,
was against Felicidad's debtors. Petitioner avers including interest, was partially extinguished by the
that of the 11 deeds of assignment and promissory execution of the deeds of assignment in favor of
notes, only two bore her signature.52 She insists petitioner, relative to the loans of Edna Papat-iw,
that she is not bound by the deeds which she did Helen Cabang, Antoinette Manuel, and Fely Cirilo
not sign. By assigning the obligation to pay in the total amount of P371,000.00.
petitioner their loan accounts, Felicidad's debtors
merely assumed the latter's obligation and became The Ruling of the Court
co-debtors to petitioner. Respondents were not
released from their obligation under their loan We have carefully reviewed the brief of
transactions, and she had the option to demand respondents as appellants in the CA, and find that,
payment from them or their debtors. Citing the indeed, they had raised the issue of whether they
ruling of this Court in Magdalena Estates, Inc. v. received P773,000.00 by way of loans from
Rodriguez,53 petitioner insists that the first debtor is petitioner. They averred that, as gleaned from the
not released from responsibility upon reaching an documentary evidence of petitioner in the RTC, the
agreement with the creditor. The payment by a third total amount they borrowed was only P673,000.00.
person of the first debtor's obligation does not They asserted that petitioner failed to adduce
constitute novation, and the creditor can still concrete evidence that they received P773,000.00
enforce the obligation against the original debtor. from her.55
Petitioner also cites the ruling of this Court
in Guerrero v. Court of Appeals.54 We agree, however, with petitioner that the
appellate court erred in reversing the finding of the
In their Comment on the petition, respondents aver RTC simply because petitioner failed to present any
that by virtue of respondent Felicidad's execution of document or receipt signed by Felicidad.
the deeds of assignment, and the original debtors'
execution of the promissory notes (along with their Section 10, Rule 8 of the Rules of Civil Procedure
conformity to the deeds of assignment with requires a defendant to "specify each material
petitioner's consent), their loan accounts with allegation of fact the truth of which he does not
petitioner amounting to P585,659.00 had been admit and, whenever practicable, x x x set forth the
effectively extinguished. Respondents point out that substance of the matters upon which he relies to
this is in accordance with Article 1291, paragraph 2, support his denial.56
of the Civil Code. Thus, the original debtors of
respondents had been substituted as petitioner's
Section 11, Rule 8 of the same Rules provides that
new debtors.
allegations of the complaint not specifically denied
are deemed admitted.57
Respondents counter that petitioner had been
subrogated to their right to collect the loan accounts
The purpose of requiring the defendant to make a
of their debtors. In fact, petitioner, as the new
specific denial is to make him disclose the matters
creditor of respondents' former debtors had been
alleged in the complaint which he succinctly intends
able to collect the latter's loan accounts which
to disprove at the trial, together with the matter
amounted to P301,000.00. The sums received by
which he relied upon to support the denial. The
respondents' debtors were the same loans which
parties are compelled to lay their cards on the
they obliged to pay to petitioner under the
table.58
promissory notes executed in petitioner's favor.
A denial is not made specific simply because it is
Respondents aver that their obligation to petitioner
so qualified by the defendant. A general denial
cannot stand or exist separately from the original
does not become specific by the use of the word
debtors' obligation to petitioner as the new creditor.
"specifically." When matters of whether the
If allowed to collect from them as well as from their
defendant alleges having no knowledge or
original debtors, petitioner would be enriching
information sufficient to form a belief are plainly and
herself at the expense of respondents. Thus,
necessarily within the defendant's knowledge, an
despite the fact that petitioner had
alleged "ignorance or lack of information" will not be
collected P172,600.00 from respondents
considered as a specific denial. Section 11, Rule 8
and P301,000.00 from the original debtors,
of the Rules also provides that material averments
petitioner still sought to collect P773,000.00 from
in the complaint other than those as to the amount
them in the RTC. Under the deeds of assignment
of unliquidated damages shall be deemed admitted
executed by Felicidad and the original debtors'
when not specifically denied.59 Thus, the answer
promissory notes, the original debtors' accounts
should be so definite and certain in its allegations
were assigned to petitioner who would be the new
that the pleader's adversary should not be left in
creditor. In fine, respondents are no longer liable to
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doubt as to what is admitted, what is denied, and of P100,000.00 in the counter-affidavit of
what is covered by denials of knowledge as respondent Felicidad, which was appended to the
sufficient to form a belief.60 complaint as Annex "A." In fine, respondents had
admitted the existence of their P773,000.00 loan
In the present case, petitioner alleged the following from petitioner.
in her complaint:
We agree with the finding of the CA that petitioner
2. That defendants are indebted to the had no right to collect from respondents the total
plaintiff in the principal amount of SEVEN amount of P301,000.00, which includes more
HUNDRED SEVENTY-THREE THOUSAND than P178,980.00 which respondent Felicidad
PESOS (P773,000.00) Philippine Currency collected from Tibong, Dalisay, Morada,
with a stipulated interest which are broken Chomacog, Cabang, Casuga, Gelacio, and Manuel.
down as follows. The said principal amounts Petitioner cannot again collect the same amount
was admitted by the defendants in their from respondents; otherwise, she would be
counter-affidavit submitted before the court. enriching herself at their expense. Neither can
Such affidavit is hereby attached as Annex petitioner collect from respondents more
"A;"61 than P103,500.00 which she had already collected
from Nimo, Cantas, Rivera, Donguis, Fernandez
xxxx and Ramirez.
H) The sum of THIRTY FOUR THOUSAND There is no longer a need for the Court to still
PESOS (P34,000.00) with interest at six resolve the issue of whether respondents'
(6%) per cent per month and payable on obligation to pay the balance of their loan account
October 19, 1989, however[,] the receipt for to petitioner was partially extinguished by the
the meantime cannot be recovered as it was promissory notes executed by Juliet Tibong,
misplaced by the plaintiff but the letter of Corazon Dalisay, Rita Chomacog, Carmelita
defendant FELICIDAD TIBONG is hereby Casuga, Merlinda Gelacio and Antoinette Manuel
attached as Annex "H" for the appreciation because, as admitted by petitioner, she was able to
of the Honorable court; collect the amounts under the notes from said
debtors and applied them to respondents'
I) The sum of ONE HUNDRED THOUSAND accounts.
PESOS (P100,000.00) with interest at five
(5%) percent per month, obtained on July Under Article 1231(b) of the New Civil Code,
14, 1989 and payable on October 14, 1989. novation is enumerated as one of the ways by
Such receipt was lost but admitted by the which obligations are extinguished. Obligations
defendants in their counter-affidavit as may be modified by changing their object or
attached [to] this complaint and marked as principal creditor or by substituting the person of
Annex "A" mentioned in paragraph one (1); the debtor.63 The burden to prove the defense that
x x x62 an obligation has been extinguished by novation
falls on the debtor.64 The nature of novation was
In their Answer, respondents admitted that they had extensively explained in Iloilo Traders Finance, Inc.
secured loans from petitioner. While the allegations v. Heirs of Sps. Oscar Soriano, Jr.,65 as follows:
in paragraph 2 of the complaint were specifically
denied, respondents merely averred that petitioner Novation may either be extinctive or
and respondent Felicidad entered into an modificatory, much being dependent on the
agreement for the lending of money to interested nature of the change and the intention of the
borrowers at a higher interest rate. Respondents parties. Extinctive novation is never
failed to declare the exact amount of the loans they presumed; there must be an express
had secured from petitioner. They also failed to intention to novate; in cases where it is
deny the allegation in paragraph 2 of the complaint implied, the acts of the parties must clearly
that respondent Felicidad signed and submitted a demonstrate their intent to dissolve the old
counter-affidavit in I.S. No. 93-334 where she obligation as the moving consideration for
admitted having secured loans from petitioner in the emergence of the new one. Implied
the amount of P773,000.00. Respondents, likewise, novation necessitates that the
failed to deny the allegation in paragraph 2(h) of the incompatibility between the old and new
complaint that respondents had secured obligation be total on every point such that
a P34,000.00 loan payable on October 19, 1989, the old obligation is completely superseded
evidenced by a receipt which petitioner had by the new one. The test of incompatibility is
misplaced. Although respondents specifically whether they can stand together, each one
denied in paragraph 2.11 of their Answer the having an independent existence; if they
allegations in paragraph 2(I) of the complaint, they cannot and are irreconciliable, the
merely alleged that "they have not received sums subsequent obligation would also extinguish
of money from the plaintiff without any receipt the first.
therefor."
An extinctive novation would thus have the
Respondents, likewise, failed to specifically deny twin effects of, first, extinguishing an
another allegation in the complaint that they had existing obligation and, second, creating a
secured a P100,000.00 loan from petitioner on July new one in its stead. This kind of novation
14, 1989; that the loan was payable on October 14, presupposes a confluence of four essential
1989; and evidenced by a receipt which petitioner requisites: (1) a previous valid obligation; (2)
claimed to have lost. Neither did respondents deny an agreement of all parties concerned to a
the allegation that respondents admitted their loan new contract; (3) the extinguishment of the
Sales Cases (2017-2018) ni Treeng
old obligation; and (4) the birth of a valid assignor, by a legal cause, such as sale, dation in
new obligation. Novation is merely payment, exchange or donation, and without the
modificatory where the change brought consent of the debtor, transfers his credit and
about by any subsequent agreement is accessory rights to another, known as the
merely incidental to the main obligation assignee, who acquires the power to enforce it to
(e.g., a change in interest rates or an the same extent as the assignor could enforce it
extension of time to pay); in this instance, against the debtor.73 It may be in the form of sale,
the new agreement will not have the effect but at times it may constitute a dation in payment,
of extinguishing the first but would merely such as when a debtor, in order to obtain a release
supplement it or supplant some but not all of from his debt, assigns to his creditor a credit he has
its provisions.66 (Citations Omitted) against a third person.74
Novation which consists in substituting a new In Vda. de Jayme v. Court of Appeals,75 the Court
debtor (delegado) in the place of the original one held that dacion en pago is the delivery and
(delegante) may be made even without the transmission of ownership of a thing by the debtor
knowledge or against the will of the latter but not to the creditor as an accepted equivalent of the
without the consent of the creditor. Substitution of performance of the obligation. It is a special mode
the person of the debtor may be effected of payment where the debtor offers another thing to
by delegacion, meaning, the debtor offers, and the the creditor who accepts it as equivalent of
creditor (delegatario), accepts a third person who payment of an outstanding debt. The undertaking
consents to the substitution and assumes the really partakes in one sense of the nature of sale,
obligation. Thus, the consent of those three that is, the creditor is really buying the thing or
persons is necessary.67 In this kind of novation, it is property of the debtor, payment for which is to be
not enough to extend the juridical relation to a third charged against the debtor's obligation. As such,
person; it is necessary that the old debtor be the essential elements of a contract of sale,
released from the obligation, and the third person namely, consent, object certain, and cause or
or new debtor take his place in the consideration must be present. In its modern
relation.68 Without such release, there is no concept, what actually takes place in dacion en
novation; the third person who has assumed the pago is an objective novation of the obligation
obligation of the debtor merely becomes a co- where the thing offered as an accepted equivalent
debtor or a surety. If there is no agreement as to of the performance of an obligation is considered
solidarity, the first and the new debtor are as the object of the contract of sale, while the debt
considered obligated jointly.69 is considered as the purchase price. In any case,
common consent is an essential prerequisite, be it
In Di Franco v. Steinbaum,70 the appellate court sale or novation, to have the effect of totally
ruled that as to the consideration necessary to extinguishing the debt or obligation.76
support a contract of novation, the rule is the same
as in other contracts. The consideration need not The requisites for dacion en pago are: (1) there
be pecuniary or even beneficial to the person must be a performance of the prestation in lieu of
promising. It is sufficient if it be a loss of an payment (animo solvendi) which may consist in the
inconvenience, such as the relinquishment of a delivery of a corporeal thing or a real right or a
right or the discharge of a debt, the postponement credit against the third person; (2) there must be
of a remedy, the discontinuance of a suit, or some difference between the prestation due and
forbearance to sue. that which is given in substitution (aliud pro alio);
and (3) there must be an agreement between the
In City National Bank of Huron, S.D. v. Fuller,71 the creditor and debtor that the obligation is
Circuit Court of Appeals ruled that the theory of immediately extinguished by reason of the
novation is that the new debtor contracts with performance of a prestation different from that
the old debtor that he will pay the debt, and also due.77
to the same effect with the creditor, while the
latter agrees to accept the new debtor for the All the requisites for a valid dation in payment are
old. A novation is not made by showing that the present in this case. As gleaned from the deeds,
substituted debtor agreed to pay the debt; it must respondent Felicidad assigned to petitioner her
appear that he agreed with the creditor to do credits "to make good" the balance of her
so. Moreover, the agreement must be based on obligation. Felicidad testified that she executed the
the consideration of the creditor's agreement to deeds to enable her to make partial payments of
look to the new debtor instead of the old. It is her account, since she could not comply with
not essential that acceptance of the terms of the petitioner's frenetic demands to pay the account in
novation and release of the debtor be shown by cash. Petitioner and respondent Felicidad agreed to
express agreement. Facts and circumstances relieve the latter of her obligation to pay the
surrounding the transaction and the subsequent balance of her account, and for petitioner to collect
conduct of the parties may show acceptance as the same from respondent's debtors.
clearly as an express agreement, albeit implied.72
Admittedly, some of respondents' debtors, like
We find in this case that the CA correctly found that Edna Papat-iw, were not able to affix their
respondents' obligation to pay the balance of their conformity to the deeds. In an assignment of credit,
account with petitioner was extinguished, pro tanto, however, the consent of the debtor is not essential
by the deeds of assignment of credit executed by for its perfection; the knowledge thereof or lack of it
respondent Felicidad in favor of petitioner. affecting only the efficaciousness or
inefficaciousness of any payment that might have
An assignment of credit is an agreement by virtue been made. The assignment binds the debtor upon
of which the owner of a credit, known as the acquiring knowledge of the assignment but he is
Sales Cases (2017-2018) ni Treeng
entitled, even then, to raise against the assignee there is no agreement that the first debtor would be
the same defenses he could set up against the released from responsibility. Thus, the creditor can
assignor78 necessary in order that assignment may still enforce the obligation against the original
fully produce legal effects. Thus, the duty to pay debtor.
does not depend on the consent of the debtor. The
purpose of the notice is only to inform that debtor In the present case, petitioner and respondent
from the date of the assignment. Payment should Felicidad agreed that the amounts due from
be made to the assignee and not to the original respondents' debtors were intended to "make good
creditor. in part" the account of respondents. Case law is
that, an assignment will, ordinarily, be interpreted or
The transfer of rights takes place upon perfection of construed in accordance with the rules of
the contract, and ownership of the right, including construction governing contracts generally, the
all appurtenant accessory rights, is acquired by the primary object being always to ascertain and carry
assignee79 who steps into the shoes of the original out the intention of the parties. This intention is to
creditor as subrogee of the latter80 from that be derived from a consideration of the whole
amount, the ownership of the right is acquired by instrument, all parts of which should be given
the assignee. The law does not require any formal effect, and is to be sought in the words and
notice to bind the debtor to the assignee, all that language employed.83
the law requires is knowledge of the assignment.
Even if the debtor had not been notified, but came Indeed, the Court must not go beyond the rational
to know of the assignment by whatever means, the scope of the words used in construing an
debtor is bound by it. If the document of assignment, words should be construed according
assignment is public, it is evidence even against a to their ordinary meaning, unless something in the
third person of the facts which gave rise to its assignment indicates that they are being used in a
execution and of the date of the latter. The transfer special sense. So, if the words are free from
of the credit must therefore be held valid and ambiguity and expressed plainly the purpose of the
effective from the moment it is made to appear in instrument, there is no occasion for interpretation;
such instrument, and third persons must recognize but where necessary, words must be interpreted in
it as such, in view of the authenticity of the the light of the particular subject matter.84 And
document, which precludes all suspicion of fraud surrounding circumstances may be considered in
with respect to the date of the transfer or order to understand more perfectly the intention of
assignment of the credit.81 the parties. Thus, the object to be accomplished
through the assignment, and the relations and
As gleaned from the deeds executed by respondent conduct of the parties may be considered in
Felicidad relative to the accounts of her other construing the document.
debtors, petitioner was authorized to collect the
amounts of P6,000.00 from Cabang, Although it has been said that an ambiguous or
and P63,600.00 from Cirilo. They obliged uncertain assignment should be construed most
themselves to pay petitioner. Respondent strictly against the assignor, the general rule is that
Felicidad, likewise, unequivocably declared that any ambiguity or uncertainty in the meaning of an
Cabang and Cirilo no longer had any obligation to assignment will be resolved against the party who
her. prepared it; hence, if the assignment was prepared
by the assignee, it will be construed most strictly
Equally significant is the fact that, since 1990, when against him or her.85 One who chooses the words
respondent Felicidad executed the deeds, by which a right is given ought to be held to the
petitioner no longer attempted to collect from strict interpretation of them, rather than the other
respondents the balance of their accounts. It was who only accepts them.86
only in 1999, or after nine (9) years had elapsed
that petitioner attempted to collect from Considering all the foregoing, we find that
respondents. In the meantime, petitioner had respondents still have a balance on their account to
collected from respondents' debtors the amount petitioner in the principal amount of P33,841.00, the
of P301,000.00. difference between their loan of P773,000.00
less P585,659.00, the payment of respondents'
While it is true that respondent Felicidad likewise other debtors amounting to P103,500.00, and
authorized petitioner in the deeds to collect the the P50,000.00 payment made by respondents.
debtors' accounts, and for the latter to pay the
same directly, it cannot thereby be considered that IN LIGHT OF ALL THE FOREGOING, the petition
respondent merely authorized petitioner to collect is DENIED. The Decision and Resolution of the
the accounts of respondents' debtors and for her to Court of Appeals
apply her collections in partial payments of their are AFFIRMED with MODIFICATION in that the
accounts. It bears stressing that petitioner, as balance of the principal account of the respondents
assignee, acquired all the rights and remedies to the petitioner is P33,841.00. No costs.
passed by Felicidad, as assignee, at the time of the
assignment.82 Such rights and remedies include the SO ORDERED.
right to collect her debtors' obligations to her.
They were able to purchase a secondhand taxi, On August 30, 2004, the IBP-NCLA received the
and Atty. Vitan helped him with all the legal matters reply23 dated July 30, 2004, submitted by Atty.
concerning this purchase. Regrettably, their other Vitan who explained that he had already settled his
plans were put on hold, because the lawyer obligation. He maintained that he had in fact
Sales Cases (2017-2018) ni Treeng
executed, in complainant's favor, a Deed of First, the story involving a certain Evelyn Estur was
Absolute Sale over his 203-square-meter clearly a mere afterthought, conjured simply to
residential property in Sta. Maria, Bulacan. He escape his liability. If it were true that it was she
clarified that "[their] understanding was that who owed the money, he should have mentioned
[complainant] ha[d] the option to use, mortgage or this alleged fact in his letter to the IBP NCLA
sell [the property] and return to me the excess of deputy director. Instead, respondent was
the proceeds after obtaining his money represented completely silent about Estur and merely asserted
by my six (6) dishonored checks."24 Interestingly, that he had already settled his debt with
respondent attached the Deed of Absolute Sale in complainant.
which he was the vendee and complainant the
vendor.25 It appears that this was the second Deed Second, the promise of Atty. Vitan to settle his
of Absolute Sale, also referred to in the obligations on particular dates is contained in two
Complaint.26 handwritten notes signed by him and worded as
follows:
Only after the IBP investigating commissioner had
rendered her Report and Recommendation27 did "I undertake to settle the financial
Atty. Vitan submit his Answer to the Letter- obligations of P100,000 plus before the
Complaint. He called the second document a end of the year."35
"Counter Deed of Sale," executed as a "sort of
collateral/security for the account of [his] liaison "Mar:
officer [Evelyn Estur]."28 He admitted having given
several postdated checks amounting to P100,000, "We will settle on July 12, 2004, on or
supposedly to guarantee the indebtedness of Estur before said date."36
to complainant. Atty. Vitan argued for the first time
that it was she who had incurred the debts, and that The wordings of these promissory notes disclose
he had acted only as a "character reference and/or that he had a personal obligation to complainant,
guarantor."29 He maintained that he had given in to without any mention of Estur at all. If it were true
the one-sided transactions, because he was that Atty. Vitan had executed those notes for the
"completely spellbound by complainant's seeming account of his liaison officer, he should have used
sincerity and kindness."30 To corroborate his words to that effect. As a lawyer, he was aware that
statements, he attached Estur's Affidavit.31 the preparation of promissory notes was not a
"mere formality;" it had legal consequences. It is
Report of the Investigating Commissioner quite far-fetched for a lawyer to assume the role of
guarantor, without saying so in the notes.
In her Report and Recommendation, Commissioner
San Juan recommended that Atty. Vitan be A lawyer may be disciplined for evading the
suspended until his restitution of the amount he had payment of a debt validly incurred.37 In this case,
borrowed. She held that respondent, having taken the failure of Atty. Vitan to pay his debt for over
advantage of complainant and thus shown three years despite repeated demands puts in
dishonesty and untrustworthiness, did not deserve question his standing as a member of the bar.
to retain his membership in the bar. Worse, he made several promises to pay his debt
promptly, but reneged on all of them. He even
On November 24, 2005, the Supreme Court started to hide from complainant according to the
received the IBP Resolution adopting, with latter .38
modification, the Report and Recommendation of
the investigating commissioner. Failure to honor just debts, particularly from clients,
constitutes dishonest conduct that does not speak
The Court's Ruling well of a member of the bar.39 It is vital that a
lawyer's conduct be kept beyond reproach and
We agree with the findings of the IBP Board of above suspicion at all times. Rule 1.01 of the Code
Governors, but reduce the period of suspension to of Professional Responsibility clearly provides that
six months. lawyers must not engage in unlawful, immoral or
deceitful conduct. They must comport themselves
Respondent's Administrative Liability in a manner that will secure and preserve the
respect and confidence of the public for the legal
Lawyers are instruments for the administration of profession.40
justice. They are expected to maintain not only
legal proficiency but also a high standard of ethics, Atty. Vitan contends that his obligation was already
honesty, integrity and fair dealing. In this way, the extinguished, because he had allegedly sold his
people's faith and confidence in the judicial system Bulacan property to complainant.41 Basically,
is ensured.32 respondent is asserting that what had transpired
was a dation in payment. Governed by the law on
In the present case, Atty. Vitan undoubtedly owed sales, it is a transaction that takes place when a
money to complainant. In a letter33 to IBP Deputy piece of property is alienated to the creditor in
Director de la Cruz, respondent admitted having satisfaction of a debt in money.42 It involves
incurred the P100,000 loan. It was only in his delivery and transmission of ownership of a thing --
Answer34 that the lawyer suddenly denied that he by the debtor to the creditor -- as an accepted
had personally incurred this obligation. This time, equivalent of the performance of the obligation.43
he pointed to his employee, Estur, as the true
debtor. We find his version of the facts implausible. Going over the records of this case, we find the
contention of Atty. Vitan undeserving of credence.
Sales Cases (2017-2018) ni Treeng
The records reveal that he did not really intend to "Rule 1.01 A lawyer shall not engage in
sell and relinquish ownership over his property in unlawful, dishonest, immoral or deceitful
Sta. Maria, Bulacan, notwithstanding the execution conduct."
of a Deed of Absolute Sale in favor of complainant.
The second Deed of Absolute Sale, which Any wrongdoing, whether professional or
reconveyed the property to respondent, is proof nonprofessional, indicating unfitness for the
that he had no such intention. This second Deed, profession justifies disciplinary action.48
which he referred to as his "safety net,"44 betrays
his intention to counteract the effects of the first one There is yet another reason to find Atty. Vitan
. administratively liable. In his letter of July 30, 2004,
was an admission that the personal checks he
In a manner of speaking, Atty. Vitan was taking issued in favor of complainant had all been
back with his right hand what he had given with his dishonored.49 Whether those checks were issued
left. The second Deed of Absolute Sale returned for the account of respondent or of Estur is not
the parties right back where they started, as if there important. The fact remains that the lawyer
were no sale in favor of complainant to begin with. knowingly issued worthless checks and thus
In effect, on the basis of the second Deed of Sale, revealed his disposition to defraud complainant.
respondent took back and asserted his ownership
over the property despite having allegedly sold it. The act of a lawyer in issuing a check without
Thus, he fails to convince us that there was a bona sufficient funds to cover them -- or, worse, drawn
fide dation in payment or sale that took place against a closed account --constitutes such willful
between the parties; that is, that there was an dishonesty and unethical conduct as to undermine
extinguishment of obligation. the public confidence in the law and in
lawyers.50 The act also manifests a low regard for
It appears that the true intention of the parties was the Oath taken by the lawyer upon joining the
to use the Bulacan property to facilitate payment. profession, whose image should be held in high
They only made it appear that the title had been esteem, not seriously and irreparably tarnished.51
transferred to complainant to authorize him to sell
or mortgage the property.45 Atty. Vitan himself Moreover, the inimical effect of the issuance of
admitted in his letter dated July 30, 2004, that their worthless checks has been recognized by this
intention was to convert the property into cash, so Court in an earlier case, from which we quote:
that payment could be obtained by complainant and
the excess returned to respondent.46The records, "[T]he effect [of issuance of worthless
however, do not show that the proceeds derived checks] transcends the private interests of
were sufficient to discharge the obligation of the the parties directly involved in the
lawyer fully; thus, he is still liable to the extent of transaction and touches the interests of the
the deficiency. community at large. The mischief it creates
is not only a wrong to the payee or holder,
We hasten to add, however, that this administrative but also an injury to the public since the
case is not the proper venue for us to determine the circulation of valueless commercial papers
extent of the remaining liability. This Court will not can very well pollute the channels of trade
act as a collection agency from faltering debtors, and commerce, injure the banking system
when the amount of the indebtedness is indefinite and eventually hurt the welfare of society
and disputed.47 and the public interest."52
Nevertheless, the records satisfactorily reveal the We have also held that the deliberate failure to pay
failure of respondent to live up to his duties as a just debts and the issuance of worthless checks
lawyer in consonance with the strictures of the constitute gross misconduct,53 for which a lawyer
Lawyer's Oath, the Code of Professional may be sanctioned with one year's suspension
Responsibility, and the Canons of Professional from the practice of law,54or a suspension of six
Ethics, thereby degrading not only his person but months upon partial payment of the obligation.55
his profession as well. So far, we find that his lack
of sincerity in fulfilling his obligations is revealed by In the instant case, complainant himself admits that
his acts of issuing promissory notes and reneging respondent had already paid the amounts covered
on them; executing a simulated Deed of Absolute by the January and February checks.56 Thus, there
Sale; and breaking his promise to redeem the has been a partial payment that justifies a
property from the mortgagee. modification of IBP's recommended penalty.
The repeated failure of Atty. Vitan to fulfill his WHEREFORE, Atty. Jeremias R. Vitan is hereby
promise puts in question his integrity and character. found guilty of gross misconduct
Indeed, not only his integrity as an individual but, and SUSPENDED from the practice of law for six
more important, his stature as a member of the bar (6) months, effective upon his receipt of this
is affected by his acts of welching on his promises Decision, with the warning that a repetition of the
and misleading complainant. Canon 1 and Rule same or any other misconduct will be dealt with
1.01 of the Code of Professional Responsibility more severely.
explicitly state thus:
Let a copy of this Decision be entered in
"CANON 1 A lawyer shall uphold the respondent's record as a member of the Bar, and
constitution, obey the laws of the land and notice served on the Integrated Bar of the
promote respect for law and legal Philippines and on the Office of the Court
processes.
Sales Cases (2017-2018) ni Treeng
Administrator for circulation to all courts in the
country.
SO ORDERED.
Sales Cases (2017-2018) ni Treeng
FILINVEST LAND, G.R. No.138980
INC., Notwithstanding three
P e t i t i o n e r, Present: extensions granted by plaintiff to
defendant Pacific, the latter failed to
PUNO, finish the contracted works. (Annexes
Chairman, G, I and K, Complaint). On 16
- versus - AUSTRIA- October 1979, plaintiff wrote
MARTINEZ, defendant Pacific advising the latter
CALLEJO, SR., of its intention to takeover the project
TINGA and and to hold said defendant liable for
HON. COURT OF CHICO- all damages which it had incurred
APPEALS, NAZARIO, JJ. and will incur to finish the project.
PHILIPPINE (Annex L, Complaint).
AMERICAN
GENERAL Promulgated: On 26 October 1979, plaintiff
INSURANCE submitted its claim against defendant
COMPANY, and September 20, Philamgen under its performance
PACIFIC EQUIPMENT 2005 and guarantee bond (Annex M,
CORPORATION, Complaint) but Philamgen refused to
R e s p o n d e n t s. acknowledge its liability for the simple
x------------------------------------ reason that its principal, defendant
--------------x Pacific, refused to acknowledge
liability therefore. Hence, this action.
may have been committed by the lower courts.[7] We We are not swayed.
rule; hence, we are restrained from conducting There is no question that the penalty
further scrutiny of the findings of fact made by the of P15,000.00 per day of delay was mutually agreed
trial court which have been affirmed by the Court of upon by the parties and that the same is sanctioned
Appeals. Verily, factual findings of the trial court, by law. A penal clause is an accessory undertaking
especially when affirmed by the Court of Appeals, to assume greater liability in case of breach.[10] It is
are binding and conclusive on the Supreme attached to an obligation in order to insure
Court.[8] Thus, it is settled that: performance[11] and has a double function: (1) to
Filinvest contends that the subject penalty difference between penalty and liquidated damages
clause falls under the second type, i.e., the principal insofar as legal results are concerned and that either
purpose for its inclusion was to provide for payment may be recovered without the necessity of proving
of actual anticipated and liquidated damages rather actual damages and both may be reduced when
the project on time, it (Filinvest) could have sold the Finally, Filinvest advances the argument that while it
lots sooner and earned its projected income that may be true that courts may mitigate the amount of
would have been used for its other projects. liquidated damages agreed upon by the parties on
Unfortunately for Filinvest, the above-quoted contemplates a situation where the full amount of
doctrine is inapplicable to herein case. The Supreme damages is payable in case of total breach of
Court in Laureano instructed that a distinction contract. In the instant case, as the penalty clause
between a penalty clause imposed essentially as was agreed upon to answer for delay in the
penalty in case of breach and a penalty clause completion of the project considering that time is of
imposed as indemnity for damages should be the essence, the parties thus clearly contemplated
made in cases where there has been neither partial the payment of accumulated liquidated damages
nor irregular compliance with the terms of the despite, and precisely because of, partial
contract. In cases where there has been partial or performance.[20] In effect, it is Filinvests position that
irregular compliance, as in this case, there will be no the first part of Article 1229 on partial performance
substantial difference between a penalty and should not apply precisely because, in all likelihood,
liquidated damages insofar as legal results are the penalty clause would kick in in situations where
concerned.[18] The distinction is thus more apparent Pecorp had already begun work but could not finish
than real especially in the light of certain provisions it on time, thus, it is being penalized for delay in its
as well that the penalty was unconscionable. Before we write finis to this legal contest that
Otherwise stated, the Court of Appeals affirmed the had spanned across two and a half decades, we
reduction of the penalty not simply because there take note of Pecorps own grievance. From its
was partial compliance per se on the part of Pecorp Comment and Memorandum, Pecorp, likewise,
with what was incumbent upon it but, more seeks affirmative relief from this Court by praying
fundamentally, because it deemed the penalty that not only should the instant case be dismissed
unconscionable in the light of for lack of merit, but that Filinvest should likewise be
Pecorps 94.53% completion rate. made to pay what the Court Commissioner found
In Ligutan v. Court of Appeals,[22] we pointed was due defendant in the total amount
out that the question of whether a penalty is of P2,976,663.65 plus 12% interest from 1979 until
reasonable or iniquitous can be partly subjective and full payment thereof plus attorneys fees.[24] Pecorp,
partly objective as its resolution would depend on however, cannot recover that which it seeks as we
such factors as, but not necessarily confined to, the had already denied, in a Resolution dated 21 June
type, extent and purpose of the penalty, the nature 2000, its own petition for review of the 27 May
of the obligation, the mode of breach and its 1999 decision of the Court of Appeals. Thus, as far
consequences, the supervening realities, the as Pecorp is concerned, the ruling of the Court of
standing and relationship of the parties, and the like, Appeals has already attained finality and can no
In herein case, there has been substantial Decision of the Court of Appeals dated 27 May
compliance in good faith on the part of Pecorp which 1999 is AFFIRMED. No pronouncement as to costs.
3. WHETHER THE BUYER HAS A RIGHT This Agreement, made and executed by and
TO ENFORCE AN ORAL CONTRACT OF between:
SALE AFTER THE PORTION SOLD IS
SEGREGATED BY AGREEMENT OF THE EUGENIA T. PRIMERO, a Filipino of legal age and
PARTIES. residing in Camague, Iligan City (hereinafter called
the OWNER)
4. WHETHER THE SELLER IS BOUND BY
THE HANDWRITTEN RECEIPTS - and -
PREPARED AND SIGNED BY HER
EXPRESSLY INDICATING PAYMENTS OF IRENE P. MONTECALVO, Filipino of legal age and
LOTS. presently residing at Sabayle St., Iligan City
(hereinafter [called] the INTERESTED PARTY);
Sales Cases (2017-2018) ni Treeng
WITNESSETH: (Signed) (Signed)
We cannot sustain the contention of the petitioners. Lastly, petitioners argue that the courts below erred
The primal issue to be resolved is whether the in imposing a P2,500.00 monthly rental from 1985
parties subsequently entered into a contract of sale onwards, since said amount is far greater than the
over the segregated 293-square meter portion of last agreed monthly rental (December 1984)
Lot No. 263. It is a fundamental principle that for a of P500.00.
Sales Cases (2017-2018) ni Treeng
In its Decision, the CA affirmed the ruling of the
RTC "that the trial court had authority to fix a
reasonable value for the continued use and
occupancy of the leased premises after the
termination of the lease contract, and that it was not
bound by the stipulated rental in the contract of
lease since it is equally settled that upon
termination or expiration of the contract of lease,
the rental stipulated therein may no longer be the
reasonable value for the use and occupation of the
premises as a result of the change or rise in values.
Moreover, the trial court can take judicial notice of
the general increase in rentals of real estate
especially of business establishments".49 The
appellate court likewise held that the petitioners
failed to discharge their burden to show that the
said price was exorbitant or
unconscionable.50 Hence, the CA found no reason
to disturb the trial court's decision ordering the
petitioners to pay P2,500.00 as monthly
rentals.51 The appellate court further held that "to
deprive Eugenia of the rentals due her as the
owner-lessor of the subject property would result to
unjust enrichment on the part of Irene."52
SO ORDERED.
G. THE COURT OF
APPEALS SERIOUSLY ERRED Furthermore, the petitioner claims that the
AND ABUSED ITS DISCRETION IN
DENYING THE PETITIONERS respondent is liable to pay interest at the rate of 6%
CLAIM FOR MORAL AND per month on her unpaid installment of 805,000.00
EXEMPLARY DAMAGES AND from the date of the delinquency, December 31,
ATTORNEYS FEES AGAINST THE
RESPONDENT. 1991, because she obligated herself to do so.
xxx
Art. 1479. A promise to buy
and sell a determinate thing for a
Sale, by its very nature, is a price certain is reciprocally
consensual contract because it is demandable.
perfected by mere consent. The
essential elements of a contract of
sale are the following:
An accepted unilateral
promise to buy or to sell a
determinate thing for a price certain is
a) Consent or meeting binding upon the promissor if the
of the minds, that promise is supported by a
is, consent to consideration distinct from the price.
transfer ownership
in exchange for
the price;
A contract to sell may thus be
b) Determinate defined as a bilateral contract
subject matter; whereby the prospective seller, while
and expressly reserving the ownership of
the subject property despite delivery
c) Price certain in thereof to the prospective buyer,
money or its binds himself to sell the said property
equivalent. exclusively to the prospective buyer
upon fulfillment of the condition
agreed upon, that is, full payment of
Under this definition, a the purchase price.
Contract to Sell may not be
considered as a Contract of Sale
because the first essential element is A contract to sell as defined
lacking. In a contract to sell, the hereinabove, may not even be
prospective seller explicitly reserves considered as a conditional contract
the transfer of title to the prospective of sale where the seller may likewise
buyer, meaning, the prospective reserve title to the property subject of
seller does not as yet agree or the sale until the fulfillment of a
consent to transfer ownership of the suspensive condition, because in a
property subject of the contract to sell conditional contract of sale, the first
until the happening of an event, element of consent is present,
which for present purposes we shall although it is conditioned upon the
take as the full payment of the happening of a contingent event
purchase price. What the seller which may or may not occur. If the
agrees or obliges himself to do is to suspensive condition is not fulfilled,
fulfill his promise to sell the subject the perfection of the contract of sale
property when the entire amount of is completely abated. However, if the
the purchase price is delivered to suspensive condition is fulfilled, the
him. In other words, the full payment contract of sale is thereby perfected,
of the purchase price partakes of a such that if there had already been
suspensive condition, the non- previous delivery of the property
fulfillment of which prevents the subject of the sale to the buyer,
obligation to sell from arising and, ownership thereto automatically
Sales Cases (2017-2018) ni Treeng
transfers to the buyer by operation of In this case, the contract entitled
law without any further act having to Deed of Conditional Sale is actually a
be performed by the seller. contract to sell. The contract
stipulated that as soon as the full
consideration of the sale has been
In a contract to sell, upon the paid by the vendee, the
fulfillment of the suspensive condition corresponding transfer documents
which is the full payment of the shall be executed by the vendor to
purchase price, ownership will not the vendee for the portion sold.
automatically transfer to the buyer Where the vendor promises to
although the property may have been execute a deed of absolute sale upon
previously delivered to him. The the completion by the vendee of the
prospective seller still has to convey payment of the price, the contract is
title to the prospective buyer by only a contract to sell. The aforecited
entering into a contract of absolute stipulation shows that the vendors
sale. reserved title to the subject property
until full payment of the purchase
price.
Further, Chua v. Court of
Appeals, cited this distinction
between a contract of sale and a xxx
contract to sell:
1. 200,000.00
payable on or
Thus, the Court fully agrees with the CA before January
when it resolved: Considering, however, that the 31, 1991;
Deed of Conditional Sale was not cancelled by 2. 200,000.00
Vendor Reyes (petitioner) and that out of the total payable on or
before June 30,
purchase price of the subject property in the amount
1991;
of 4,200,000.00, the remaining unpaid balance of
3. 800,000.00
Tuparan (respondent) is only 805,000.00, a
payable on or
substantial amount of the purchase price has before Decemb
already been paid. It is only right and just to allow er 31, 1991;
Sales Cases (2017-2018) ni Treeng
Note: All the installments shall unpaid purchase price. The Court agrees with the
not bear any interest.
courts below that the respondent showed her
sincerity and willingness to comply with her
d) 2,000,000.00 obligation when she offered to pay the petitioner the
outstanding balance of the mortgage
amount of 751,000.00.
obligation as of November 15,
1990 which is hereby assumed by the
Second Party.
On the issue of interest, petitioner failed to
substantiate her claim that respondent made a
xxx
personal commitment to pay a 6% monthly interest
3. That the Third Party
on the 805,000.00 from the date of
hereby acknowledges receipts from
the Second Party P278,078.13 as delinquency, December 31, 1991. As can be
partial payment of the loan obligation gleaned from the contract, there was a stipulation
of First Party in order to reduce the
stating that: All the installments shall not bear
account to only 2,000,000.00 as of
November 15, 1990 to be assumed interest. The CA was, however, correct in imposing
by the Second Party effective interest at the rate of 6% per annum starting from the
November 15, 1990.[12] filing of the complaint on September 11, 1992.
GODOFREDO
February 28, 2007 RECEIVED FROM MR.
CAGUIAT,
GODOFREDO CAGUIAT THE
Respondent. AMOUNT OF ONE HUNDRED
THOUSAND PESOS (P100,000.00)
AS PARTIAL PAYMENT OF
x------------------------------------------------------------------- OUR LOT SITUATED IN LAS PIAS,
-----------------------------------x M.M. COVERED BY TCT NO. T-
9905 AND WITH AN AREA OF 439
SQUARE METERS.
D E C I S I O N
MR. CAGUIAT PROMISED TO PAY
THE BALANCE OF THE
PURCHASE PRICE ON OR
SANDOVAL-GUTIERREZ, J.: BEFORE MARCH 23, 1990, AND
THAT WE WILL EXECUTE AND
SIGN THE FINAL DEED
OF SALE ON THIS DATE.
In San Miguel Properties Philippines, Inc. v. happening of a future and uncertain event, so that if
Spouses Huang,[13] we held that the stages of a the suspensive condition does not take place, the
contract of sale are: (1) negotiation, covering the parties would stand as if the conditional obligation
period from the time the prospective contracting had never existed. The suspensive condition is
parties indicate interest in the contract to the time the commonly full payment of the purchase price.[15]
there can be no other interpretation than that they First, ownership over the property was
agreed to a conditional contract of sale, retained by petitioners and was not to pass to
consummation of which is subject only to the full respondent until full payment of the purchase
payment of the purchase price. price. Thus, petitioners need not push through with
the sale should respondent fail to remit the balance
Sales Cases (2017-2018) ni Treeng
of the purchase price before the deadline on March SO ORDERED.
23, 1990. In effect, petitioners have the right to
rescind unilaterally the contract the moment
respondent fails to pay within the fixed period.[18]
Thereafter, respondents took possession of payment of the lot. Joaquin Pacson agreed to pay,
the subject property. They constructed an 80 by 32- but told her to return after four days as his daughter,
feet building and a steel-matting fence around the Catalina Pacson, would have to go over the
property to house their truck body-building shop numerous receipts to determine the balance to be
paid. When Julie Nabus returned after four days,
Sales Cases (2017-2018) ni Treeng
Joaquin sent her and his daughter, Catalina, to Atty.
Elizabeth Rillera for the execution of the deed of
On March 26, 1984, Catalina Pacson filed an
absolute sale. Since Julie was a widow with a minor
affidavit-complaint regarding the padlocking incident
daughter, Atty. Rillera required Julie Nabus to return
of their repair shop with the police station at La
in four days with the necessary documents, such as
Trinidad, Benguet.
the deed of extrajudicial settlement, the transfer
certificate of title in the names of Julie Nabus and
minor Michelle Nabus, and the guardianship papers On March 28, 2008, respondents Joaquin
of Michelle. However, Julie Nabus did not return. and Julia Pacson filed with the Regional Trial Court
of La Trinidad, Benguet (trial court) a
[21]
Complaint for Annulment of Deeds, with damages
Getting suspicious, Catalina Pacson went to
and prayer for the issuance of a writ of preliminary
the Register of Deeds of
injunction.[22] They sought the annulment of (1) the
the Province of Benguet and asked for a copy of the
Extra-judicial Settlement of Estate, insofar as their
title of the land. She found that it was still in the
right to the 1,000-square-meter lot subject of the
name of Julie and Michelle Nabus.
Deed of Conditional Sale[23] was affected; (2) TCT
No. T-17718 issued in the names of Julie and
After a week, Catalina Pacson heard a rumor Michelle Nabus; and (3) the Deed of Absolute
that the lot was already sold to petitioner Betty Sale[24] in favor of Betty Tolero and the transfer
Tolero. Catalina Pacson and Atty. Rillera went to the certificates of title issued pursuant thereto. They
Register of Deeds of the Province of Benguet, and also prayed for the award of actual, moral and
found that Julie Nabus and her minor daughter, exemplary damages, as well as attorneys fees.
Michelle Nabus, represented by the formers mother
as appointed guardian by a court order dated
In their Answer,[25] Julie and Michelle Nabus
October 29, 1982, had executed a Deed of Absolute
alleged that respondent Joaquin Pacson did not
Sale in favor of Betty Tolero on March 5, 1984,
proceed with the conditional sale of the subject
covering the whole lot comprising 1,665 square
property when he learned that there was a pending
meters.[15] The property was described in the deed
case over the whole property. Joaquin proposed
of sale as comprising four lots: (1) Lot A-2-A, with an
that he would rather lease the property with a
area of 832 square meters; (2) Lot A-2-B, 168
monthly rental of P2,000.00 and apply the sum
square meters; (3) Lot A-2-C, 200 square meters;
of P13,000.00 as rentals, since the amount was
and (4) Lot A-2-D, 465 square meters. Lots A-2-A
already paid to the bank and could no longer be
and A-2-B, with a combined area of 1,000 square
withdrawn. Hence, he did not affix his signature to
meters, correspond to the lot previously sold to
the second page of a copy of the Deed of
Joaquin and Julia Pacson in the Deed of Conditional
Conditional Sale.[26] Julie Nabus alleged that in
Sale.
March 1994, due to her own economic needs and
those of her minor daughter, she sold the property
Catalina Pacson and Atty. Rillera also found to Betty Tolero, with authority from the court.
that the Certificate of Title over the property in the
name of Julie and Michelle Nabus was cancelled
During the hearing on the merits, Julie Nabus
on March 16, 1984, and four titles to the fours lots
testified that she sold the property to Betty Tolero
were issued in the name of Betty Tolero, namely:
because she was in need of money. She stated that
TCT No. T-18650[16] for Lot A-2-A; TCT No.
she was free to sell the property because the Deed
18651[17] for Lot A-2-B; TCT No. T-
of Conditional Sale executed in favor of the Spouses
18652[18] for Lot A-2-C; and T-18653[19] for Lot A-2-
Pacson was converted into a contract of lease. She
D.
claimed that at the time when the Deed of
Conditional Sale was being explained to them by the
On March 22, 1984, the gate to the repair notary public, Joaquin Pacson allegedly did not like
shop of the Pacsons was padlocked. A sign was the portion of the contract stating that there was a
[20]
displayed on the property stating No Trespassing. pending case in court involving the subject
Sales Cases (2017-2018) ni Treeng
property. Consequently, Joaquin Pacson did not the property, Julie Nabus informed her that the
continue to sign the document; hence, the second Pacsons were merely renting the property. She did
[27]
page of the document was unsigned. Thereafter, not bother to verify if that was true, because the
it was allegedly their understanding that the Pacsons were no longer in the property for two
Pacsons would occupy the property as lessees and years before she bought it.
whatever amount paid by them would be considered
rentals.
In a Decision dated September 30, 1993, the
trial court ruled in favor of respondents. The
Betty Tolero put up the defense that she was dispositive portion of the Decision reads:
a purchaser in good faith and for value. She testified
WHEREFORE, premises
that it was Julie Nabus who went to her house and considered, judgment is hereby
offered to sell the property consisting of two lots with rendered in favor of the plaintiffs,
a combined area of 1,000 square meters. She ordering defendant Betty Tolero to
execute a deed of absolute sale in
consulted Atty. Aurelio de Peralta before she agreed favor of the Spouses Joaquin and
to buy the property. She and Julie Nabus brought to Julia Pacson over the lots covered by
Atty. De Peralta the pertinent papers such as TCT Transfer Certificates of Title Nos. T-
18650 and T-18651 upon payment to
No. T-17718 in the names of Julie and Michelle her by the plaintiffs of the sum
Nabus, the guardianship papers of Michelle Nabus of P57,544.[8]4 representing the
and the blueprint copy of the survey plan showing balance due for the full payment of
the property subject of this case. In
the two lots. After examining the documents addition to the execution of a deed of
and finding that the title was clean, Atty. De Peralta absolute sale, defendant Betty Tolero
gave her the go-signal to buy the property. shall surrender to the plaintiffs her
owners duplicate copy of Transfer
Certificates of Title Nos. T-18650 and
Tolero testified that upon payment of the T-18651.
Tolero also testified that as the new owner, were: (1) Was the Deed of Conditional Sale
she was surprised and shocked to receive the between the Spouses Pacson and the Nabuses
Complaint filed by the Spouses Pacson. She converted into a contract of lease? and (2) Was
admitted that she knew very well the Spouses Betty Tolero a buyer in good faith?
V
In the Decision dated November 28, 2003, THAT THE [COURT OF
the Court of Appeals affirmed the trial courts APPEALS] ERRED IN FINDING
BETTY TOLERO [AS] A BUYER
decision, but deleted the award of attorneys [WHO] FAILED TO TAKE STEPS IN
fees. The dispositive portion of the Decision reads: INQUIRING FROM THE
[RESPONDENTS] THE STATUS OF
Sales Cases (2017-2018) ni Treeng
THE PROPERTY IN QUESTION even if Tolero was aware of the previous deed of
BEFORE HER PURCHASE,
CONTRARY TO FACTS conditional sale.
ESTABLISHED BY EVIDENCE.
Further, Chua v. Court of Appeals[39] cited Joaquin Pacson sent Julie Nabus and his daughter,
this distinction between a contract of sale and a Catalina, to Atty. Elizabeth Rillera for the execution
contract to sell: of the deed of sale. Since Bate Nabus had already
died, and was survived by Julie and their minor
In a contract of sale, the title daughter, Atty. Rillera required Julie Nabus to return
to the property passes to the vendee in four days with the necessary documents such as
upon the delivery of the thing sold; in
a contract to sell, ownership is, by the deed of extrajudicial settlement, the transfer
agreement, reserved in the vendor certificate of title in the names of Julie Nabus and
and is not to pass to the vendee until
full payment of the purchase minor Michelle Nabus, and the guardianship papers
price. Otherwise stated, in a contract of Michelle. However, Julie Nabus did not return.
of sale, the vendor loses ownership
As vendees given possession of the subject
over the property and cannot recover
it until and unless the contract is property, the ownership of which was still with the
resolved or rescinded; whereas, in a vendors, the Pacsons should have protected their
contract to sell, title is retained by the
vendor until full payment of the interest and inquired from Julie Nabus why she did
price. In the latter contract, payment not return and then followed through with full
of the price is a positive suspensive
condition, failure of which is not a payment of the purchase price and the execution of
breach but an event that prevents the the deed of absolute sale. The Spouses Pacson had
obligation of the vendor to convey
the legal remedy of consigning their payment to the
title from becoming effective.[40]
court; however, they did not do so. A rumor that the
property had been sold to Betty Tolero prompted
It is not the title of the contract, but its them to check the veracity of the sale with the
express terms or stipulations that determine the kind Register of Deeds of the Province of Benguet. They
of contract entered into by the parties. In this found out that on March 5, 1984, Julie Nabus sold
case, the contract entitled Deed of Conditional the same property to Betty Tolero through a Deed
Sale is actually a contract to sell. The contract of Absolute Sale, and new transfer certificates of
stipulated that as soon as the full consideration of title to the property were issued to Tolero.
the sale has been paid by the
vendee, the corresponding transfer Thus, the Spouses Pacson filed this case for
documents shall be executed by the vendor to the annulment of the contract
the vendee for the portion sold.[41] Where the vendor of absolute sale executed in favor of Betty Tolero
promises to execute a deed of absolute sale upon and the transfer certificates of title issued in her
the completion by the vendee of the payment of the name.
[42]
price, the contract is only a contract to sell. The
aforecited stipulation shows that the vendors Unfortunately for the Spouses Pacson, since
reserved title to the subject property until full the Deed of Conditional Sale executed in their favor
payment of the purchase price. was merely a contract to sell, the obligation of the
seller to sell becomes demandable only upon the
If respondents paid the Spouses Nabus in happening of the suspensive condition.[43] The full
accordance with the stipulations in the Deed of payment of the purchase price is the positive
Conditional Sale, the consideration would have suspensive condition, the failure of which is not a
been fully paid in June 1983. Thus, during the last breach of contract, but simply an event that
week of January 1984, Julie Nabus prevented the obligation of the vendor to convey
approached Joaquin Pacson to ask for the full title from acquiring binding force.[44] Thus, for its
payment of the lot. Joaquin Pacson agreed to pay, non-fulfilment, there is no contract to speak of, the
but told her to return after four days as his daughter, obligor having failed to perform the suspensive
Catalina Pacson, would have to go over the condition which enforces a juridical relation.[45] With
Sales Cases (2017-2018) ni Treeng
this circumstance, there can be no rescission or or invaded by the defendant, may be
vindicated or recognized, and not for
fulfilment of an obligation that is still non-existent, the purpose of indemnifying the
the suspensive condition not having occurred as plaintiff for any loss suffered by him.
yet.[46] Emphasis should be made that the breach Art. 2222. The court may
contemplated in Article 1191 of the New Civil Code award nominal damages in every
obligation arising from any source
is the obligors failure to comply with an obligation
enumerated in article 1157, or in
already extant, not a failure of a condition to render every case where any property right
binding that obligation.[47] has been invaded.
The Spouses Pacson, however, have the WHEREFORE, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No.
right to the reimbursement of their payments to the
44941, dated November 28, 2003,
Nabuses, and are entitled to the award of nominal
is REVERSED and SET ASIDE. Judgment is hereby
damages. The Civil Code provides:
rendered upholding the validity of the sale of the
subject property made by petitioners Julie Nabus
Art. 2221. Nominal damages
are adjudicated in order that a right of and Michelle Nabus in favor of petitioner Betty
the plaintiff, which has been violated Tolero, as well as the validity of Transfer Certificates
Sales Cases (2017-2018) ni Treeng
of Title Nos. T-18650 and T-18651 issued in the
name of Betty Tolero. Petitioners Julie Nabus and
Michelle Nabus
are ORDERED to REIMBURSE respondents
spouses Joaquin and Julia Pacson the sum of One
Hundred Twelve Thousand Four Hundred Fifty-Five
Pesos and Sixteen Centavos (P112,455.16), and to
pay Joaquin and Julia Pacson nominal damages in
the amount of Ten Thousand Pesos (P10,000.00),
with annual interest of twelve percent (12%) until full
payment of the amounts due to Joaquin and Julia
Pacson.
No costs.
Sales Cases (2017-2018) ni Treeng
ACE FOODS, INC., Petitioner, pull out the said [products] but had failed to do so
vs. up to now."
MICRO PACIFIC TECHNOLOGIES CO.,
LTD.1, Respondent. Eventually, or on October 16, 2002, ACE Foods
lodged a Complaint15 against MTCL before the
DECISION RTC, praying that the latter pull out from its
premises the subject products since MTCL
PERLAS-BERNABE, J.: breached its "after delivery services" obligations to
it, particularly, to: (a) install and configure the
Assailed in this petition for review on certiorari2are subject products; (b) submit a cost benefit study to
the Decision3 dated October 21, 2011 and justify the purchase of the subject products; and (c)
Resolution4 dated February 8, 2012 of the Court of train ACE Foodss technicians on how to use and
Appeals (CA) in CA-G.R. CV No. 89426 which maintain the subject products. 16 ACE Foods
reversed and set aside the Decision5 dated likewise claimed that the subject products MTCL
February 28, 2007 of the Regional Trial Court of delivered are defective and not working.17
Makati, Branch 148 (RTC) in Civil Case No. 02-
1248, holding petitioner ACE Foods, Inc. (ACE For its part, MTCL, in its Answer with
Foods) liable to respondent Micro Pacific Counterclaim,18 maintained that it had duly
Technologies Co., Ltd. (MTCL) for the payment of complied with its obligations to ACE Foods and that
Cisco Routers and Frame Relay Products (subject the subject products were in good working
products) amounting to P646,464.00 pursuant to a condition when they were delivered, installed and
perfected contract of sale. configured in ACE Foodss premises. Thereafter,
MTCL even conducted a training course for ACE
The Facts Foodss representatives/employees; MTCL,
however, alleged that there was actually no
ACE Foods is a domestic corporation engaged in agreement as to the purported "after delivery
the trading and distribution of consumer goods in services." Further, MTCL posited that ACE Foods
wholesale and retail bases,6 while MTCL is one refused and failed to pay the purchase price for the
engaged in the supply of computer hardware and subject products despite the latters use of the
equipment.7 same for a period of nine (9) months. As such,
MTCL prayed that ACE Foods be compelled to pay
On September 26, 2001, MTCL sent a letter- the purchase price, as well as damages related to
proposal8 for the delivery and sale of the subject the transaction.19
products to be installed at various offices of ACE
Foods. Aside from the itemization of the products The RTC Ruling
offered for sale, the said proposal further provides
for the following terms, viz.:9 On February 28, 2007, the RTC rendered a
Decision, 20 directing MTCL to remove the subject
TERMS : Thirty (30) days upon delivery products from ACE Foodss premises and pay
actual damages and attorney fees in the amounts
VALIDITY : Prices are based on current dollar rate of P200,000.00 and P100,000.00, respectively.21
and subject to changes without prior notice.
At the outset, it observed that the agreement
DELIVERY : Immediate delivery for items on stock, between ACE Foods and MTCL is in the nature of a
otherwise thirty (30) to forty-five days upon receipt contract to sell. Its conclusion was based on the
of [Purchase Order] fine print of the Invoice Receipt which expressly
indicated that "title to sold property is reserved in
MICROPACIFIC TECHNOLOGIES CO., LTD. until
WARRANTY : One (1) year on parts and services.
full compliance of the terms and conditions of
Accessories not included in warranty.
above and payment of the price," noting further that
in a contract to sell, the prospective seller explicitly
On October 29, 2001, ACE Foods accepted reserves the transfer of title to the prospective
MTCLs proposal and accordingly issued Purchase buyer, and said transfer is conditioned upon the full
Order No. 10002310 (Purchase Order) for the payment of the purchase price.22 Thus,
subject products amounting to P646,464.00 notwithstanding the execution of the Purchase
(purchase price). Thereafter, or on March 4, 2002, Order and the delivery and installation of the
MTCL delivered the said products to ACE Foods as subject products at the offices of ACE Foods, by
reflected in Invoice No. 7733 11 (Invoice Receipt). express stipulation stated in the Invoice Receipt
The fine print of the invoice states, inter alia, that issued by MTCL and signed by ACE
"[t]itle to sold property is reserved in Foods, i.e., the title reservation stipulation, it is still
MICROPACIFIC TECHNOLOGIES CO., LTD. until the former who holds title to the products until full
full compliance of the terms and conditions of payment of the purchase price therefor. In this
above and payment of the price"12(title reservation relation, it noted that the full payment of the price is
stipulation). After delivery, the subject products a positive suspensive condition, the non-payment
were then installed and configured in ACE Foodss of which prevents the obligation to sell on the part
premises. MTCLs demands against ACE Foods to of the seller/vendor from materializing at all.23 Since
pay the purchase price, however, remained title remained with MTCL, the RTC therefore
unheeded.13 Instead of paying the purchase price, directed it to withdraw the subject products from
ACE Foods sent MTCL a Letter14 dated September ACE Foodss premises. Also, in view of the
19, 2002, stating that it "ha[s] been returning the foregoing, the RTC found it unnecessary to delve
[subject products] to [MTCL] thru [its] sales into the allegations of breach since the non-
representative Mr. Mark Anteola who has agreed to happening of the aforesaid suspensive
Sales Cases (2017-2018) ni Treeng
condition ipso jure prevented the obligation to sell Art. 1458. By the contract of sale one of the
from arising.24 contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and
Dissatisfied, MTCL elevated the matter on appeal.25 the other to pay therefor a price certain in
money or its equivalent.
The CA Ruling
A contract of sale may be absolute or conditional.
26
In a Decision dated October 21, 2011, the CA (Emphasis supplied)
reversed and set aside the RTCs ruling, ordering
ACE Foods to pay MTCL the amount Corollary thereto, a contract of sale is classified as
of P646,464.00, plus legal interest at the rate of 6% a consensual contract, which means that the sale
per annum to be computed from April 4, 2002, and is perfected by mere consent. No particular form is
attorneys fees amounting to P50,000.00.27 required for its validity. Upon perfection of the
contract, the parties may reciprocally demand
It found that the agreement between the parties is performance, i.e., the vendee may compel transfer
in the nature of a contract of sale, observing that of ownership of the object of the sale, and the
the said contract had been perfected from the time vendor may require the vendee to pay the thing
ACE Foods sent the Purchase Order to MTCL sold.36
which, in turn, delivered the subject products
covered by the Invoice Receipt and subsequently In contrast, a contract to sell is defined as a
installed and configured them in ACE Foodss bilateral contract whereby the prospective seller,
premises.28 Thus, considering that MTCL had while expressly reserving the ownership of the
already complied with its obligation, ACE Foodss property despite delivery thereof to the prospective
corresponding obligation arose and was then duty buyer, binds himself to sell the property exclusively
bound to pay the agreed purchase price within to the prospective buyer upon fulfillment of the
thirty (30) days from March 5, 2002.29 In this light, condition agreed upon, i.e., the full payment of the
the CA concluded that it was erroneous for ACE purchase price. A contract to sell may not even be
Foods not to pay the purchase price therefor, considered as a conditional contract of
despite its receipt of the subject products, because sale where the seller may likewise reserve title to
its refusal to pay disregards the very essence of the property subject of the sale until the fulfillment
reciprocity in a contract of sale.30 The CA also of a suspensive condition, because in a conditional
dismissed ACE Foodss claim regarding MTCLs contract of sale, the first element of consent is
failure to perform its "after delivery services" present, although it is conditioned upon the
obligations since the letter-proposal, Purchase happening of a contingent event which may or may
Order and Invoice Receipt do not reflect any not occur.37
agreement to that effect.31
In this case, the Court concurs with the CA that the
Aggrieved, ACE Foods moved for reconsideration parties have agreed to a contract of sale and not to
which was, however, denied in a a contract to sell as adjudged by the RTC. Bearing
Resolution 32 dated February 8, 2012, hence, this in mind its consensual nature, a contract of sale
petition. had been perfected at the precise moment ACE
Foods, as evinced by its act of sending MTCL the
The Issue Before the Court Purchase Order, accepted the latters proposal to
sell the subject products in consideration of the
The essential issue in this case is whether ACE purchase price of P646,464.00. From that point in
Foods should pay MTCL the purchase price for the time, the reciprocal obligations of the parties i.e.,
subject products. on the one hand, of MTCL to deliver the said
products to ACE Foods, and, on the other hand, of
The Courts Ruling ACE Foods to pay the purchase price therefor
within thirty (30) days from delivery already arose
and consequently may be demanded. Article 1475
The petition lacks merit.
of the Civil Code makes this clear:
A contract is what the law defines it to be, taking
Art. 1475. The contract of sale is perfected at the
into consideration its essential elements, and not
moment there is a meeting of minds upon the thing
what the contracting parties call it.33 The real nature
which is the object of the contract and upon the
of a contract may be determined from the express
price.
terms of the written agreement and from the
contemporaneous and subsequent acts of the
contracting parties. However, in the construction or From that moment, the parties may reciprocally
interpretation of an instrument, the intention of the demand performance, subject to the provisions of
parties is primordial and is to be pursued. The the law governing the form of contracts.
denomination or title given by the parties in their
contract is not conclusive of the nature of its At this juncture, the Court must dispel the notion
contents.34 that the stipulation anent MTCLs reservation of
ownership of the subject products as reflected in
The very essence of a contract of sale is the the Invoice Receipt, i.e., the title reservation
transfer of ownership in exchange for a price stipulation, changed the complexion of the
paid or promised. 35 This may be gleaned from transaction from a contract of sale into a contract to
Article 1458 of the Civil Code which defines a sell. Records are bereft of any showing that the
contract of sale as follows: said stipulation novated the contract of sale
between the parties which, to repeat, already
existed at the precise moment ACE Foods
Sales Cases (2017-2018) ni Treeng
accepted MTCLs proposal. To be sure, novation, in
its broad concept, may either be extinctive or
modificatory. It is extinctive when an old obligation
is terminated by the creation of a new obligation
that takes the place of the former; it is merely
modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory
agreement. In either case, however, novation is
never presumed, and the animus novandi, whether
totally or partially, must appear by express
agreement of the parties, or by their acts that are
too clear and unequivocal to be mistaken.38
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Sales Cases (2017-2018) ni Treeng
OLIVAREZ REALTY CORPORATION and DR. C. [Olivarez Realty Corporation] assumes the
PABLO R. OLIVAREZ, Petitioner, responsibility of taking necessary legal action thru
vs. Court to have the claim/title TCT T-18493 of
BENJAMIN CASTILLO, Respondent. Philippine Tourism Authority over the above-
described property be nullified and voided; with the
DECISION full assistance of [Castillo][.]10
In their answer,18 Olivarez Realty Corporation and On January 25, 2005, Dr. Olivarez and Olivarez
Dr. Olivarez admitted that the corporation only Realty Corporation filed their objections to the
paid P2,500,000.00 ofthe purchase price. In their request for admission,28 stating that they
defense, defendants alleged that Castillo failed to "reiterate[d] the allegations [and denials] in their
"fully assist"19 the corporation in filing an action [answer]."29
against the Philippine Tourism Authority. Neither
did Castillo clear the property of the tenants within The trial court conducted pre-trial conference on
six months from the signing of the deed of December 17, 2005.
conditional sale. Thus, according to defendants, the
corporation had "all the legal right to withhold the
On March 8, 2006, Castillo filed a motion for
subsequent payments to [fully pay] the purchase
summary judgment and/or judgment on the
price."20
pleadings.30 He argued that Olivarez Realty
Corporation and Dr. Olivarez "substantially
Olivarez Realty Corporation and Dr. Olivarez admitted the material allegations of [his]
prayedthat Castillos complaint be dismissed. By complaint,"31 specifically:
way of compulsory counterclaim, they prayed
for P100,000.00 litigation expenses
1. That the corporation failed to fully pay the
and P50,000.00 attorneys fees.21
purchase price for his property;32
Castillo replied to the counterclaim,22 arguing that
2. That the corporation failed to file an
Olivarez Realty Corporation and Dr. Olivarez had
action to void the Philippine Tourism
no right to litigation expenses and attorneys fees.
Authoritys title to his property;33and
According to Castillo, the deed of conditional sale
clearly states that the corporation "assume[d] the
responsibility of taking necessary legal 3. That the corporation failed to clear the
action"23 against the Philippine Tourism Authority, property of the tenants and pay them
yet the corporation did not file any case. Also, the disturbance compensation.34
corporation did not pay the tenants disturbance
compensation. For the corporations failure to fully Should judgment on the pleadings beimproper,
pay the purchase price, Castillo claimed that hehad Castillo argued that summary judgment may still be
"all the right to pray for the rescission of the rendered asthere is no genuine issue as to any
[contract],"24 and he "should not be held liable . . . material fact.35 He cited Philippine National Bank v.
for any alleged damages by way of litigation Noahs Ark Sugar Refinery36 as authority.
expenses and attorneys fees."25
Castillo attached to his motion for summary
On January 10, 2005, Castillo filed a request for judgment and/or judgment on the pleadings his
admission,26 requesting Dr. Olivarez to admit under affidavit37 and the affidavit of a Marissa
oath the genuineness of the deed of conditional Magsino38 attesting to the truth of the material
sale and Transfer Certificate of Title No. T-19972. allegations of his complaint.
He likewise requested Dr. Olivarez to admit the
truth of the following factual allegations: Olivarez Realty Corporation and Dr. Olivarez
opposed39 the motion for summary judgment and/or
1. That Dr. Olivarez is the president of judgment on the pleadings, arguing that the motion
Olivarez Realty Corporation; was "devoid of merit."40 They reiterated their claim
that the corporation withheld further payments of
Sales Cases (2017-2018) ni Treeng
the purchase price because "there ha[d] been no In their comment on the reply
favorable decision voiding the title of the Philippine memorandum,57 Olivarez Realty Corporation and
Tourism Authority."41 They added that Castillo sold Dr. Olivarez reiterated their arguments that certain
the property to another person and that the sale provisions of the deed of conditional sale were
was allegedly litigated in Quezon City.42 ambiguous and that the complaint prayed for
irreconcilable reliefs.58
Considering that a title adverse to that of Castillos
existed, Olivarez Realty Corporation and Dr. As to the additional issues raised in the
Olivarez argued that the case should proceed to supplemental memorandum, defendants argued
trial and Castillo be required to prove that his title to that issues not raised and evidence not identified
the property is "not spurious or fake and that he and premarked during pre-trial may still be raised
had not sold his property to another person."43 and presented during trial for good cause shown.
Olivarez Realty Corporation and Dr. Olivarez
In reply to the opposition to the motion for summary prayed that Castillos complaint be dismissed for
judgment and/or judgment on the lack of merit.59
pleadings,44 Castillo maintained that Olivarez
Realty Corporation was responsible for the filing of Ruling of the trial court
an action against the Philippine Tourism Authority.
Thus, the corporation could not fault Castillo for not The trial court found that Olivarez Realty
suing the PhilippineTourism Authority.45The Corporation and Dr. Olivarezs answer
corporation illegally withheld payments of the "substantially [admitted the material allegations of
purchase price. Castillos] complaint and [did] not . . . raise any
genuine issue [as to any material fact]."60
As to the claim that the case should proceed to trial
because a title adverse to his title existed, Castillo Defendants admitted that Castillo owned the parcel
argued that the Philippine Tourism Authoritys title of land covered by Transfer Certificate of Title No.
covered another lot, not his property.46 T-19972. They likewise admitted the genuineness
of the deed of conditional sale and that the
During the hearing on August 3, 2006, Olivarez corporation only paid P2,500,000.00 of the agreed
Realty Corporation and Dr. Olivarez prayed that purchase price.61
they be given 30 days to file a supplemental
memorandum on Castillos motion for summary According to the trial court, the corporation was
judgment and/or judgment on the pleadings.47 responsible for suing the Philippine Tourism
Authority and for paying the tenants disturbance
The trial court granted the motion. Itgave Castillo compensation. Since defendant corporation neither
20 days to reply to the memorandum and the filed any case nor paid the tenants disturbance
corporation and Dr. Olivarez 15 days to respond to compensation, the trial court ruled that defendant
Castillos reply.48 corporation had no right to withhold payments from
Castillo.62
In their supplemental memorandum,49 Olivarez
Realty Corporation and Dr. Olivarez argued that As to the alleged ambiguity of paragraphs E and F
there was "an obvious ambiguity"50 as to which of the deed of conditional sale, the trial court ruled
should occur first the payment of disturbance that Castillo and his witness, Marissa Magsino,
compensation to the tenants or the clearing of the "clearly established"63 in their affidavits that the
property of the tenants.51 This ambiguity, according deed of conditional sale was a contract of
to defendants, is a genuine issue and "oughtto be adhesion. The true agreement between the parties
threshed out in a full blown trial."52 was that the corporation would both clear the land
of the tenants and pay them disturbance
Olivarez Realty Corporation and Dr. Olivarez added compensation.
that Castillo prayed for irreconcilable reliefs of
reformation of instrument and rescission of With these findings, the trial court ruled that
contract.53 Thus, Castillos complaint should be Olivarez Realty Corporation breached the contract
dismissed. ofconditional sale.1wphi1 In its decision64 dated
April 23, 2007, the trial court ordered the deed of
Castillo replied54 to the memorandum, arguing that conditional sale rescinded and the P2,500,000.00
there was no genuine issue requiring trial of the forfeited in favor of Castillo "as damages under
case. According to Castillo, "common sense Article 1191 of the Civil Code."65
dictates . . . that the legitimate tenants of the
[property] shall not vacate the premises without The trial court declared Olivarez Realty Corporation
being paid any disturbance compensation . . and Dr. Olivarez solidarily liable to Castillo for
."55 Thus, the payment of disturbance 500,000.00 as moral damages, P50,000.00 as
compensation should occur first before clearing the exemplary damages, and P50,000.00 as costs of
property of the tenants. suit.66
With respect to the other issuesraised in the Ruling of the Court of Appeals
supplemental memorandum, specifically, that
Castillo sold the property to another person, he Olivarez Realty Corporation and Dr. Olivarez
argued that these issues should not be entertained appealed to the Court of Appeals.67
for not having been presented during pre-trial.56
In its decision68 dated July 20, 2010, the Court of
Appeals affirmed in totothe trial courts decision.
Sales Cases (2017-2018) ni Treeng
According to the appellate court, the trial court "did Rosario Torres failed to clear the land of the
not err in its finding that there is no genuine tenants.
controversy as to the facts involved [in this
case]."69 The trial court, therefore, correctly Similar to Castillo, Torres filed a motion for
rendered summary judgment.70 summary judgment, which the trial court granted.
On appeal, the Court of Appeals set aside the trial
As to the trial courts award of damages, the courts summary judgment and remanded the case
appellatecourt ruled that a court may award to the trial court for further proceedings.81 The
damages through summary judgment "if the parties Court of Appeals ruled that the material allegations
contract categorically [stipulates] the respective of the complaint "were directly disputed by [the
obligations of the parties in case of default."71 As corporation and Dr. Olivarez] in their
found by the trial court,paragraph I of the deed of answer"82 when they argued that they refused to
conditional sale categorically states that "in case pay because Torres failed to clear the land of the
[the deed of conditional sale] is cancelled, any tenants.
improvementintroduced by [Olivarez Realty
Corporation] on the property shall be forfeited With the Court of Appeals decision in
infavor of [Castillo]."72 Considering that Olivarez Torres,Olivarez Realty Corporation and Dr.
Realty Corporation illegally retained possession of Olivarez argue that this case should likewise be
the property, Castillo forewent rentto the property remanded to the trial court for further proceedings
and "lost business under the equipoise rule.
opportunities."73 The P2,500,000.00 down
payment, according to the appellate court, Petitioners maintain that Castillo availed himself of
shouldbe forfeited in favor of Castillo. Moral and the irreconcilable reliefs of reformation of
exemplary damages and costs ofsuit were properly instrument and rescission of contract.83 Thus, the
awarded. trial court should have dismissed the case outright.
On August 11, 2010, Olivarez RealtyCorporation Petitioners likewise argue that the trial court had no
and Dr. Olivarez filed their motion for jurisdiction to decide the case as Castillo failed
reconsideration,74 arguing that the trial court topay the correct docket fees.84 Petitioners argue
exceeded its authority in forfeiting that Castillo should have paid docket fees based on
the P2,500,000.00 down payment and the propertys fair market value since Castillos
awarding P500,000.00 in moral damages to complaint is a real action.85
Castillo. They argued that Castillo only prayed for a
total of P500,000.00 as actual and moral damages In his comment,86 Castillo maintains that there are
in his complaint.75 Appellants prayed that the Court no genuine issues as to any material fact inthis
of Appeals "take a second hard look"76 at the case case. The trial court, therefore, correctly rendered
and reconsider its decision. summary judgment.
In the resolution77 dated March 18, 2011, the Court As to petitioners claim that the trial court had no
of Appeals denied the motion for reconsideration. jurisdiction to decide the case, Castillo argues that
he prayed for rescission of contract in his
Proceedings before this court complaint. This action is incapable of pecuniary
estimation, and the Clerk of Court properly
Olivarez Realty Corporation and Dr. Olivarez filed computed the docket fees based on this
their petition for review on certiorari78 with this prayer.87 Olivarez Realty Corporation and Dr.
court. Petitionersargue that the trial court and the Olivarez replied,88reiterating their arguments in the
Court of Appeals erred in awarding damages to petition for review on certiorari.
Castillo. Under Section 3, Rule 35 of the 1997
Rules ofCivil Procedure, summary judgment may The issues for our resolution are the following:
be rendered except as to the amountof damages.
Thus, the Court of Appeals "violated the procedural I. Whether the trial court erred in rendering
steps in rendering summary judgment."79 summary judgment;
Petitioners reiterate that there are genuine issues II. Whether proper docket fees were paid in
ofmaterial fact to be resolved in this case. Thus, a this case.
full-blown trial is required, and the trial court
prematurely decided the case through summary The petition lacks merit.
judgment. They cite Torres v. Olivarez Realty
Corporation and Dr. Pablo Olivarez,80 a case
I
decided by the Ninth Division of the Court of
The trial court correctly rendered
Appeals.
summary judgment, as there were no
In Torres, Rosario Torres was the registeredowner
genuine issues of material fact in this case
of a parcel of land covered by Transfer Certificate
of Title No. T-19971. Under a deed of conditional
sale, she sold her property to OlivarezRealty Trial "is the judicial examination and determination
Corporation for P17,345,900.00. When the of the issues between the parties to the
corporation failed to fully pay the purchase price, action."89 During trial, parties "present their
she sued for rescission of contractwith damages. In respective evidence of their claims and
their answer, the corporation and Dr. Olivarez defenses."90 Parties to an action have the right "to a
argued thatthey discontinued payment because plenary trial of the case"91 to ensure that they were
Sales Cases (2017-2018) ni Treeng
given a right to fully present evidence on their Considering that Olivarez RealtyCorporation and
respective claims. Dr. Olivarezs answer tendered an issue, Castillo
properly availed himself of a motion for summary
There are instances, however, whentrial may be judgment.
dispensed with. Under Rule 35 of the 1997 Rules of
Civil Procedure, a trial court may dispense with trial However, the issues tendered by Olivarez Realty
and proceed to decide a case if from the pleadings, Corporation and Dr. Olivarezs answer are not
affidavits, depositions, and other papers on file, genuine issues of material fact. These are issues
there is no genuine issue as to any material fact. In that can be resolved judiciously by plain resort to
such a case, the judgment issued is called a the pleadings, affidavits, depositions, and other
summary judgment. papers on file; otherwise, these issues are sham,
fictitious, or patently unsubstantial.
A motion for summary judgment is filed either by
the claimant or the defending party.92 The trial court Petitioner corporation refused to fully pay the
then hears the motion for summary judgment. If purchase price because no court case was filed to
indeed there are no genuine issues of material fact, void the Philippine Tourism Authoritys title on the
the trial court shall issue summary judgment. property. However, paragraph C of the deed of
Section 3, Rule 35 of the 1997 Rules of Civil conditional sale is clear that petitioner Olivarez
Procedure provides: Realty Corporation is responsible for initiating court
action against the Philippine Tourism Authority:
SEC. 3. Motion and proceedings thereon. The
motion shall be served at least ten (10) days C. [Olivarez Realty Corporation] assumes the
beforethe time specified for the hearing. The responsibility of taking necessary legal action thru
adverse party may serve opposing affidavits, Court to have the claim/title TCT T-18493 of
depositions, or admission at least three (3) days Philippine Tourism Authority over the above-
before the hearing. After the hearing, the judgment described property be nullified and voided; with the
sought shall be rendered forthwith ifthe pleadings, full assistance of [Castillo].98
supporting affidavits, depositions, and admissions
on file, showthat, except as to the amount of Castillos alleged failureto "fully assist"99 the
damages, there is no genuine issue as to any corporation in filing the case is not a defense. As
material fact and that the moving party is entitled to the trial court said, "how can [Castillo] assist [the
a judgment as a matter of law. corporation] when [the latter] did not file the action
[in the first place?]"100
An issue of material fact exists if the answer or
responsive pleading filed specifically denies the Neither can Olivarez Realty Corporation argue that
material allegations of fact set forth in the complaint it refused to fully pay the purchase price due to the
or pleading. If the issue offact "requires the Philippine Tourism Authoritys adverse claim on the
presentation of evidence, it is a genuine issue of property. The corporation knew of this adverse
fact."93 However, if the issue "could be resolved claim when it entered into a contract of conditional
judiciously by plain resort"94 to the pleadings, sale. It even obligated itself under paragraph C of
affidavits, depositions, and other paperson file, the the deed of conditional sale to sue the Philippine
issue of fact raised is sham, and the trial court may Tourism Authority. This defense, therefore, is
resolve the action through summary judgment. sham.
A summary judgment is usually distinguished from Contrary to petitioners claim, there is no "obvious
a judgment on the pleadings. Under Rule 34 of the ambiguity"101 as to which should occur first the
1997 Rules of Civil Procedure, trial may likewise be payment of the disturbance compensation or the
dispensed with and a case decided through clearing of the land within six months from the
judgment on the pleadings if the answer filed fails signing of the deed of conditional sale. The
to tender an issue or otherwise admits the material obligations must be performed simultaneously. In
allegations of the claimants pleading.95 this case, the parties should have coordinated to
ensure that tenants on the property were paid
Judgment on the pleadings is proper when the disturbance compensation and were made to
answer filed fails to tender any issue, or otherwise vacate the property six months after the signingof
admitsthe material allegations in the the deed of conditional sale.
complaint.96 On the other hand, in a summary
judgment, the answer filed tenders issues as On one hand, pure obligations, or obligations
specific denials and affirmative defenses are whose performance do not depend upon a future or
pleaded, but the issues raised are sham, fictitious, uncertainevent, or upon a past event unknown to
or otherwise not genuine.97 the parties, are demandable at once.102 On the
other hand, obligations with a resolutory period also
In this case, Olivarez Realty Corporation admitted take effect at once but terminate upon arrival of the
that it did not fully pay the purchase price as agreed day certain.103
upon inthe deed of conditional sale. As to why it
withheld payments from Castillo, it set up the Olivarez Realty Corporations obligation to pay
following affirmative defenses: First, Castillo did not disturbance compensation is a pure obligation. The
filea case to void the Philippine Tourism Authoritys performance of the obligation to pay disturbance
title to the property; second,Castillo did not clear compensation did not depend on any condition.
the land of the tenants; third, Castillo allegedly sold Moreover, the deed of conditional sale did not give
the property to a third person, and the subsequent the corporation a period to perform the obligation.
sale is currently being litigated beforea Quezon City As such, the obligation to pay disturbance
court.
Sales Cases (2017-2018) ni Treeng
compensation was demandable at once. Olivarez Since Olivarez Realty Corporation illegally withheld
RealtyCorporation should have paid the tenants payments of the purchase price, Castillo is entitled
disturbance compensation upon execution of the to cancel his contract with petitioner corporation.
deed of conditional sale. However, we properly characterize the parties
contract as a contract to sell, not a contract of
With respect to Castillos obligation to clear the land conditional sale.
of the tenants within six months from the signing of
the contract, his obligation was an obligation with a In both contracts to sell and contracts of conditional
resolutory period. The obligation to clear the land of sale, title to the property remains with the seller
the tenants took effect at once, specifically, upon until the buyer fully pays the purchase price.110 Both
the parties signing of the deed of conditional sale. contracts are subject to the positive suspensive
Castillo had until October 2, 2000, six months from condition of the buyers full payment of the
April 5, 2000 when the parties signed the deed of purchase price.111
conditional sale, to clear the land of the tenants.
In a contract of conditional sale, the buyer
Olivarez Realty Corporation, therefore, had no right automatically acquires title to the property upon full
to withhold payments of the purchase price. As the payment of the purchase price.112 This transfer of
trial court ruled, Olivarez Realty Corporation "can title is "by operation of law without any further act
only claim non-compliance [of the obligation to having to be performed by the seller."113 In a
clear the land of the tenants in] October 2000."104 It contract to sell, transfer of title to the prospective
said: buyer is not automatic.114 "The prospective seller
[must] convey title to the property [through] a deed
. . . it is clear that defendant [Olivarez Realty of conditional sale."115
Corporation] should have paid the installments on
the P5 million downpayment up to October 8, 2000, The distinction is important to determine the
or a total of P4,500,000.00. That is the agreement applicable laws and remedies in case a party does
because the only time that defendant [corporation] not fulfill his or her obligations under the contract. In
can claim non-compliance of the condition is after contracts of conditional sale, our laws on sales
October, 2000 and so it has the clear obligation under the Civil Code of the Philippines apply. On
topay up to the October 2000 the agreed the other hand, contracts to sell are not governed
installments. Since it paid only 2,500,000.00, then a by our law on sales116 but by the Civil Code
violation of the contract has already been provisions on conditional obligations.
committed. . . .105
Specifically, Article 1191 of the Civil Code on the
The claim that Castillo sold the property to another right to rescind reciprocal obligations does not
is fictitious and was made in bad faith to prevent apply to contracts to sell.117 As this court explained
the trial court from rendering summary judgment. in Ong v. Court of Appeals,118 failure to fully pay the
Petitioners did not elaborate on this defense and purchase price in contracts to sell is not the breach
insisted on revealing the identity of the buyer only of contract under Article 1191.119 Failure to fully pay
during trial.106 Even in their petition for review on the purchase price is "merely an event which
certiorari, petitioners never disclosed the name of prevents the [sellers] obligation to convey title from
this alleged buyer. Thus, as the trial court ruled, this acquiring binding force."120 This is because "there
defense did not tender a genuine issue of fact, with can be no rescission of an obligation that is still
the defense "bereft of details."107 nonexistent, the suspensive condition not having
[happened]."121
Castillos alleged prayer for the irreconcilable reliefs
of rescission of contract and reformation of In this case, Castillo reserved his title to the
instrument is not a ground to dismiss his complaint. property and undertook to execute a deed of
A plaintiff may allege two or more claims in the absolute sale upon Olivarez Realty Corporations
complaint alternatively or hypothetically, either in full payment of the purchase price.122 Since Castillo
one cause of action or in separate causes of action still has to execute a deed of absolute sale to
per Section 2, Rule 8 of the 1997 Rules of Civil Olivarez RealtyCorporation upon full payment of
Procedure.108 It is the filing of two separatecases the purchase price, the transfer of title is
for each of the causes of action that is prohibited notautomatic. The contract in this case is a contract
since the subsequently filed case may be to sell.
dismissed under Section 4, Rule 2 of the 1997
Rules of Civil Procedure109 on splitting causes of As this case involves a contract tosell, Article 1191
action. of the Civil Code of the Philippines does not apply.
The contract to sell is instead cancelled, and the
As demonstrated, there are no genuineissues of parties shall stand as if the obligation to sell never
material fact in this case. These are issues that can existed.123
be resolved judiciously by plain resort to the
pleadings, affidavits, depositions, and other papers Olivarez Realty Corporation shall return the
on file. As the trial court found, Olivarez Realty possession of the property to Castillo. Any
Corporation illegally withheld payments of the improvement that Olivarez Realty Corporation may
purchase price. The trial court did not err in have introduced on the property shall be forfeited in
rendering summary judgment. favor of Castillo per paragraph I of the deed of
conditional sale:
II
Castillo is entitled to cancel the contract I. Immediately upon signing thisContract, [Olivarez
of conditional sale Realty Corporation] shall be entitled to occupy,
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possess and develop the subject property. In case reputation, wounded feelings, moral shock, social
this Contract is cancelled, any improvement humiliation, and similar injury.128
introduced by [Olivarez Realty Corporation] on the
property shall be forfeited in favor of [Castillo.]124 As for exemplary damages, they are awarded in
addition to moral damages by way of example or
As for prospective sellers, thiscourt generally correction for the public good.129 Specifically in
orders the reimbursement of the installments contracts, exemplary damages may be awarded if
paidfor the property when setting aside contracts to the defendant acted in a wanton,
sell.125 This is true especially ifthe propertys fraudulent,reckless, oppressive, or malevolent
possession has not been delivered to the manner.130
prospective buyer prior to the transfer of title.
Under the deed of conditional sale, Olivarez Realty
In this case, however, Castillo delivered the Corporation may only suspend the monthly down
possession of the property to Olivarez Realty payment in case Castillo fails to clear the land of
Corporation prior to the transfer of title. We cannot the tenants six months from the signing of the
order the reimbursement of the installments paid. instrument. Yet, even before the sixth month
arrived, Olivarez Realty Corporation withheld
In Gomez v. Court of Appeals,126 the City of Manila payments for Castillos property. It evenused as a
and Luisa Gomez entered into a contract to sell defense the fact that no case was filed against the
over a parcel of land. The city delivered the PhilippineTourism Authority when, under the deed
propertys possession to Gomez. She fully paid the of conditional sale, Olivarez Realty Corporation was
purchase price for the property but violated the clearly responsible for initiating action against the
terms of the contract to sell by renting out the Philippine Tourism Authority. These are oppressive
property to other persons. This court set aside the and malevolent acts, and we find Castillo entitled
contract to sell for her violation of the terms of the to P500,000.00 moral damages and P50,000.00
contract to sell. It ordered the installments paid exemplary damages:
forfeited in favor of the City of Manila "as
reasonable compensation for [Gomezs] use of the Plaintiff Castillo is entitled to moral damages
[property]"127 for eight years. because of the evident bad faith exhibited by
defendants in dealing with him regarding the sale of
In this case, Olivarez Realty Corporation failed to his lot to defendant [Olivarez Realty Corporation].
fully pay the purchase price for the property. It only He suffered much prejudice due to the failure of
paid P2,500,000.00 out of the P19,080,490.00 defendants to pay him the balance of purchase
agreed purchase price. Worse, petitioner price which he expected touse for his needs which
corporation has been in possession of Castillos caused him wounded feelings, sorrow, mental
property for 14 years since May 5, 2000 and has anxiety and sleepless nights for which defendants
not paid for its use of the property. should pay P500,000.00 as moral damages more
than six (6) years had elapsed and defendants
Similar to the ruling in Gomez, we order illegally and unfairly failed and refused to pay their
the P2,500,000.00 forfeited in favor of Castillo as legal obligations to plaintiff, unjustly taking
reasonable compensation for Olivarez Realty advantage of a poor uneducated man like plaintiff
Corporations use of the property. causing much sorrow and financial difficulties.
Moral damages in favor of plaintiff is clearly justified
III . . . [Castillo] is also entitled to P50,000.00 as
Olivarez Realty Corporation is liable for exemplary damages to serve as a deterrent to
moral and exemplary damages and other parties to a contract to religiously comply with
attorneys fees their prestations under the contract.131
We note that the trial court erred in rendering We likewise agree that Castillo is entitled to
summary judgment on the amount of damages. attorneys fees in addition to the exemplary
Under Section 3, Rule 35 of the 1997 Rules of Civil damages.132 Considering that Olivarez Realty
Procedure, summary judgment may be rendered, Corporation refused to satisfy Castillosplainly valid,
except as to the amount of damages. just, and demandable claim,133 the award
of P50,000.00 as attorneys fees is in order.
In this case, the trial court erred in forfeiting However, we find that Dr. Pablo R.Olivarez is not
the P2,500,000.00 in favor of Castillo as damages solidarily liable with Olivarez Realty Corporation for
under Article 1191 of the Civil Code of the the amount of damages.
Philippines. As discussed, there is nobreach of
contract under Article 1191 in this case. Under Article 1207 of the Civil Code of the
Philippines, there is solidary liability only when the
The trial court likewise erred inrendering summary obligation states it or when the law or the nature of
judgment on the amount of moral and exemplary the obligation requires solidarity.134 In case of
damages and attorneys fees. corporations, they are solely liable for their
obligations.135 The directors or trustees and officers
are not liable with the corporation even if it is
Nonetheless, we hold that Castillois entitled to
through their acts that the corporation incurred the
moral damages, exemplary damages, and
obligation. This is because a corporation is
attorneys fees.
separate and distinct from the persons comprising
it.136
Moral damages may be awarded in case the
claimant experienced physical suffering, mental
As an exception to the rule, directors or trustees
anguish, fright, serious anxiety, besmirched
and corporate officers may be solidarily liable with
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the corporation for corporate obligations if they Comments on the Rules of Court, 1970 Ed, p. 55;
acted "in bad faith or with gross negligence in Lapitan vs. Scandia, Inc., L-24668, July 31, 1968,
directing the corporate affairs."137 24 SCRA 479, 781-483).
In this case, we find that Castillo failed to prove with Consequently, the fee for docketing it is P200, an
preponderant evidence that it was through Dr. amount already paid by plaintiff, now respondent
Olivarezs bad faith or gross negligence that Matilda Lim.1wphi1 (She should pay also the two
Olivarez Realty Corporation failed to fully pay the pesos legal research fund fee, if she has not paid it,
purchase price for the property. Dr. Olivarezs as required in Section 4 of Republic Act No. 3870,
alleged act of making Castillo sign the deed of the charter of the U.P. Law Center).
conditional sale without explaining to the latter the
deeds terms in Tagalog is not reason to hold Dr. Thus, although eventually the result may be the
Olivarez solidarily liable with the corporation. recovery of land, it is the nature of the action as
Castillo had a choice not to sign the deed of one for rescission of contract which is controlling.
conditional sale. He could have asked that the deed The Court of Appeals correctly applied these cases
of conditional sale be written in Tagalog. Thus, to the present one. As it said:
Olivarez Realty Corporation issolely liable for the
moral and exemplary damages and attorneys fees We would like to add the observations that since
to Castillo. the action of petitioners [private respondents]
against private respondents [petitioners] is solely
IV for annulment or rescission which is not susceptible
The trial court acquired jurisdiction over of pecuniary estimation, the action should not be
Castillos action as he paid the correct confused and equated with the "value of the
docket fees property" subject of the transaction; that by the very
nature of the case, the allegations, and specific
Olivarez Realty Corporation and Dr. Olivarez prayer in the complaint, sans any prayer for
claimed that the trial court had no jurisdiction to recovery of money and/or value of the transaction,
take cognizance of the case. In the reply/motion to or for actual or compensatory damages, the
dismiss the complaint138 they filed with the Court of assessment and collection of the legal fees should
Appeals, petitioners argued that Castillo failed to not be intertwined with the merits of the case and/or
pay the correct amount of docket fees. Stating that what may be its end result; and that to sustain
this action is a real action, petitioners argued that private respondents' [petitioners'] position on what
the docket fee Castillo paid should have been the respondent court may decide after all, then the
based on the fair market value of the property. In assessment should be deferred and finally
this case, Castillo only paid 4,297.00, which is assessed only after the court had finally decided
insufficient "if the real nature of the action was the case, which cannot be done because the rules
admitted and the fair market value of the property require that filing fees should be based on what is
was disclosed and made the basis of the amount of alleged and prayed for in the face of the complaint
docket fees to be paid to the court."139 Thus, and paid upon the filing of the complaint.142
according to petitioners, the case should be
dismissed for lack of jurisdiction. Although we discussed that there isno rescission of
contract to speak of in contracts of conditional sale,
Castillo countered that his action for rescission is we hold that an action to cancel a contract to sell,
an action incapable of pecuniary estimation. Thus, similar to an action for rescission of contract of
the Clerk of Court of the Regional Trial Court of sale, is an action incapable of pecuniary estimation.
Tanauan City did not err in assessing the docket Like any action incapable of pecuniary estimation,
fees based on his prayer. an action to cancel a contract to sell "demands an
inquiry into other factors"143 aside from the amount
We rule for Castillo. In De Leon v. Court of of money to be awarded to the claimant.
Appeals,140 this court held that an action for Specifically in this case, the trial court principally
rescission of contract of sale of real property is an determined whether Olivarez Realty Corporation
action incapable of pecuniary estimation. In De failed to pay installments of the propertys purchase
Leon, the action involved a real property. price as the parties agreed upon in the deed of
Nevertheless, this court held that "it is the nature of conditional sale. The principal natureof Castillos
the action as one for rescission of contract which is action, therefore, is incapable of pecuniary
controlling."141 Consequently, the docket fees to be estimation.
paid shall be for actions incapableof pecuniary
estimation, regardless if the claimant may All told, there is no issue that the parties in this
eventually recover the real property. This court case entered into a contract to sell a parcel of land
said: and that Olivarez Realty Corporation failed to fully
pay the installments agreed upon.Consequently,
. . . the Court in Bautista v.Lim, held that an action Castillo is entitled to cancel the contract to sell.
for rescission of contract is one which cannot be
estimated and therefore the docket fee for its filing WHEREFORE, the petition for review on certiorari
should be the flat amount of P200.00 as then fixed is DENIED. The Court of Appeals decision dated
in the former Rule 141, 141, 5(10). Said this July 20, 2010 and in CA-G.R. CV No. 91244 is
Court: AFFIRMEDwith MODIFICATION.
We hold that Judge Dalisay did not err in The deed of conditional sale dated April 5, 2000 is
considering Civil Case No. V-144 as basically one declared CANCELLED. Petitioner Olivarez Realty
for rescission or annulment of contract which is not Corporation shall RETURN to respondent Benjamin
susceptible of pecuniary estimation (1 Moran's Castillo the possession of the property covered by
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Transfer Certificate of Title No. T-19972 together
with all the improvements that petitioner corporation
introduced on the property. The amount
of P2,500,000.00 is FORFEITED in favor of
respondent Benjamin Castillo as reasonable
compensation for the use of petitioner Olivarez
Realty Corporation of the property.
SO ORDERED.