G.R. No.
L-15645 January 31, 1964
PAZ P. ARRIETA and VITALIADO
ARRIETA, plaintiffs-appellees,
vs.
NATIONAL RICE AND CORN
CORPORATION, defendant-appellant,
MANILA UNDERWRITERS INSURANCE CO.,
INC., defendant-appellee.
Teehankee and Carreon for plaintiffs-appellees.
The Government Corporate Counsel for defendant-
appellant.
Isidro A. Vera for defendant-appellee.
REGALA, J.:
This is an appeal of the defendant-appellant NARIC
from the decision of the trial court dated February
20, 1958, awarding to the plaintiffs-appellees the
amount of $286,000.00 as damages for breach of
contract and dismissing the counterclaim and third
party complaint of the defendant-appellant NARIC.
In accordance with Section 13 of Republic Act No.
3452, "the National Rice and Corn Administration
(NARIC) is hereby abolished and all its assets,
liabilities, functions, powers which are not
inconsistent with the provisions of this Act, and all
personnel are transferred "to the Rice and Corn
Administration (RCA).
All references, therefore, to the NARIC in this
decision must accordingly be adjusted and read as
RCA pursuant to the aforementioned law.
On May 19, 1952, plaintiff-appellee participated in
the public bidding called by the NARIC for the
supply of 20,000 metric tons of Burmese rice. As her
bid of $203.00 per metric ton was the lowest, she
was awarded the contract for the same. Accordingly,
on July 1, 1952, plaintiff-appellee Paz P. Arrieta and
the appellant corporation entered into a Contract of
Sale of Rice, under the terms of which the former
obligated herself to deliver to the latter 20,000
metric tons of Burmess Rice at $203.00 per metric
ton, CIF Manila. In turn, the defendant corporation
committed itself to pay for the imported rice "by
means of an irrevocable, confirmed and assignable
letter of credit in U.S. currency in favor of the
plaintiff-appellee and/or supplier in Burma,
immediately." Despite the commitment to pay
immediately "by means of an irrevocable, confirmed
and assignable Letter of Credit," however, it was
only on July 30, 1952, or a full month from the
execution of the contract, that the defendant
corporation, thru its general manager, took the first
to open a letter of credit by forwarding to the
Philippine National Bank its Application for
Commercial Letter Credit. The application was
accompanied by a transmittal letter, the relevant
paragraphs of which read:
In view of the fact that we do not have
sufficient deposit with your institution with
which to cover the amount required to be
deposited as a condition for the opening of
letters of credit, we will appreciate it if this
application could be considered special
case.
We understand that our supplier, Mrs. Paz P.
Arrieta, has a deadline to meet which is
August 4, 1952, and in order to comply
therewith, it is imperative that the L/C be
opened prior to that date. We would
therefore request your full cooperation on
this matter.
On the same day, July 30, 1952, Mrs. Paz P. Arrieta
thru counsel, advised the appellant corporation of
the extreme necessity for the immediate opening of
the letter credit since she had by then made a
tender to her supplier in Rangoon, Burma,
"equivalent to 5% of the F.O.B. price of 20,000 tons
at $180.70 and in compliance with the regulations in
Rangoon this 5% will be confiscated if the required
letter of credit is not received by them before August
4, 1952."
On August 4, 1952, the Philippine National Bank
informed the appellant corporation that its
application, "for a letter of credit for $3,614,000.00
in favor of Thiri Setkya has been approved by the
Board of Directors with the condition that marginal
cash deposit be paid and that drafts are to be paid
upon presentment." (Exh. J-pl.; Exh. 10-def., p. 19,
Folder of Exhibits). Furthermore, the Bank
represented that it "will hold your application in
abeyance pending compliance with the above
stated requirement."
As it turned out, however, the appellant corporation
not in any financial position to meet the condition.
As matter of fact, in a letter dated August 2, 1952,
the NARIC bluntly confessed to the appellee its
dilemma: "In this connection, please be advised that
our application for opening of the letter of credit has
been presented to the bank since July 30th but the
latter requires that we first deposit 50% of the value
of the letter amounting to aproximately
$3,614,000.00 which we are not in a position to
meet." (Emphasis supplied. Exh. 9-Def.; Exh. 1-Pe.,
p. 18, Folder of Exhibits)
Consequently, the credit instrument applied for was
opened only on September 8, 1952 "in favor of Thiri
Setkya, Rangoon, Burma, and/or assignee for
$3,614,000.00," (which is more than two months
from the execution of the contract) the party named
by the appellee as beneficiary of the letter of credit.
1wph1.t
As a result of the delay, the allocation of appellee's
supplier in Rangoon was cancelled and the 5%
deposit, amounting to 524,000 kyats or
approximately P200,000.00 was forfeited. In this
connection, it must be made of record that although
the Burmese authorities had set August 4, 1952, as
the deadline for the remittance of the required letter
of credit, the cancellation of the allocation and the
confiscation of the 5% deposit were not effected
until August 20, 1952, or, a full half month after the
expiration of the deadline. And yet, even with the
15-day grace, appellant corporation was unable to
make good its commitment to open the disputed
letter of credit.
The appellee endeavored, but failed, to restore the
cancelled Burmese rice allocation. When the futility
of reinstating the same became apparent, she
offered to substitute Thailand rice instead to the
defendant NARIC, communicating at the same time
that the offer was "a solution which should be
beneficial to the NARIC and to us at the same time."
(Exh. X-Pe., Exh. 25Def., p. 38, Folder of
Exhibits). This offer for substitution, however, was
rejected by the appellant in a resolution dated
November 15, 1952.
On the foregoing, the appellee sent a letter to the
appellant, demanding compensation for the
damages caused her in the sum of $286,000.00,
U.S. currency, representing unrealized profit. The
demand having been rejected she instituted this
case now on appeal.
At the instance of the NARIC, a counterclaim was
filed and the Manila Underwriters Insurance
Company was brought to the suit as a third party
defendant to hold it liable on the performance bond
it executed in favor of the plaintiff-appellee.
We find for the appellee.
It is clear upon the records that the sole and
principal reason for the cancellation of the allocation
contracted by the appellee herein in Rangoon,
Burma, was the failure of the letter of credit to be
opened with the contemplated period. This failure
must, therefore, be taken as the immediate cause
for the consequent damage which resulted. As it is
then, the disposition of this case depends on a
determination of who was responsible for such
failure. Stated differently, the issue is whether
appellant's failure to open immediately the letter of
credit in dispute amounted to a breach of the
contract of July 1, 1952 for which it may be held
liable in damages.
Appellant corporation disclaims responsibility for the
delay in the opening of the letter of credit. On the
contrary, it insists that the fault lies with the
appellee. Appellant contends that the disputed
negotiable instrument was not promptly secured
because the appellee , failed to seasonably furnish
data necessary and required for opening the same,
namely, "(1) the amount of the letter of credit, (2) the
person, company or corporation in whose favor it is
to be opened, and (3) the place and bank where it
may be negotiated." Appellant would have this Court
believe, therefore, that had these informations been
forthwith furnished it, there would have been no
delay in securing the instrument.
Appellant's explanation has neither force nor merit.
In the first place, the explanation reaches into an
area of the proceedings into which We are not at
liberty to encroach. The explanation refers to a
question of fact. Nothing in the record suggests any
arbitrary or abusive conduct on the part of the trial
judge in the formulation of the ruling. His conclusion
on the matter is sufficiently borne out by the
evidence presented. We are denied, therefore, the
prerogative to disturb that finding, consonant to the
time-honored tradition of this Tribunal to hold trial
judges better situated to make conclusions on
questions of fact. For the record, We quote
hereunder the lower court's ruling on the point:
The defense that the delay, if any in opening
the letter of credit was due to the failure of
plaintiff to name the supplier, the amount
and the bank is not tenable. Plaintiff stated
in Court that these facts were known to
defendant even before the contract was
executed because these facts were
necessarily revealed to the defendant before
she could qualify as a bidder. She stated too
that she had given the necessary data
immediately after the execution of Exh. "A"
(the contract of July 1, 1952) to Mr.
GABRIEL BELMONTE, General Manager of
the NARIC, both orally and in writing and
that she also pressed for the opening of the
letter of credit on these occasions. These
statements have not been controverted and
defendant NARIC, notwithstanding its
previous intention to do so, failed to present
Mr. Belmonte to testify or refute this. ...
Secondly, from the correspondence and
communications which form part of the record of this
case, it is clear that what singularly delayed the
opening of the stipulated letter of credit and which,
in turn, caused the cancellation of the allocation in
Burma, was the inability of the appellant corporation
to meet the condition importation by the Bank for
granting the same. We do not think the appellant
corporation can refute the fact that had it been able
to put up the 50% marginal cash deposit demanded
by the bank, then the letter of credit would have
been approved, opened and released as early as
August 4, 1952. The letter of the Philippine National
Bank to the NARIC was plain and explicit that as of
the said date, appellant's "application for a letter of
credit ... has been approved by the Board of
Directors with the condition that 50% marginal cash
deposit be paid and that drafts are to be paid upon
presentment." (Emphasis supplied)
The liability of the appellant, however, stems not
alone from this failure or inability to satisfy the
requirements of the bank. Its culpability arises from
its willful and deliberate assumption of contractual
obligations even as it was well aware of its financial
incapacity to undertake the prestation. We base this
judgment upon the letter which accompanied the
application filed by the appellant with the bank, a
part of which letter was quoted earlier in this
decision. In the said accompanying
correspondence, appellant admitted and owned that
it did "not have sufficient deposit with your institution
(the PNB) with which to cover the amount required
to be deposited as a condition for the opening of
letters of credit. ... .
A number of logical inferences may be drawn from
the aforementioned admission. First, that the
appellant knew the bank requirements for opening
letters of credit; second, that appellant also knew it
could not meet those requirement. When, therefore,
despite this awareness that was financially
incompetent to open a letter of credit immediately,
appellant agreed in paragraph 8 of the contract to
pay immediately "by means of an irrevocable,
confirm and assignable letter of credit," it must be
similarly held to have bound itself to answer for all
and every consequences that would result from the
representation. aptly observed by the trial court:
... Having called for bids for the importation
of rice involving millions, $4,260,000.00 to
be exact, it should have a certained its
ability and capacity to comply with the
inevitably requirements in cash to pay for
such importation. Having announced the
bid, it must be deemed to have impliedly
assured suppliers of its capacity and facility
to finance the importation within the required
period, especially since it had imposed the
supplier the 90-day period within which the
shipment of the rice must be brought into
the Philippines. Having entered in the
contract, it should have taken steps
immediately to arrange for the letter of credit
for the large amount involved and inquired
into the possibility of its issuance.
In relation to the aforequoted observation of the trial
court, We would like to make reference also to
Article 11 of the Civil Code which provides:
Those who in the performance of their
obligation are guilty of fraud, negligence, or
delay, and those who in any manner
contravene the tenor thereof, are liable in
damages.
Under this provision, not only debtors guilty of fraud,
negligence or default in the performance of
obligations a decreed liable; in general, every debtor
who fails in performance of his obligations is bound
to indemnify for the losses and damages caused
thereby (De la Cruz Seminary of Manila, 18 Phil.
330; Municipality of Moncada v. Cajuigan, 21 Phil.
184; De la Cavada v. Diaz, 37 Phil. 982; Maluenda
& Co. v. Enriquez, 46 Phil. 916; Pasumil v. Chong,
49 Phil. 1003; Pando v. Gimenez, 54 Phil. 459;
Acme Films v. Theaters Supply, 63 Phil. 657). The
phrase "any manner contravene the tenor" of the
obligation includes any illicit act which impairs the
strict and faithful fulfillment of the obligation or every
kind or defective performance. (IV Tolentino, Civil
Code of the Philippines, citing authorities, p. 103.)
The NARIC would also have this Court hold that the
subsequent offer to substitute Thailand rice for the
originally contracted Burmese rice amounted to a
waiver by the appellee of whatever rights she might
have derived from the breach of the contract. We
disagree. Waivers are not presumed, but must be
clearly and convincingly shown, either by express
stipulation or acts admitting no other reasonable
explanation. (Ramirez v. Court of Appeals, 52 O.G.
779.) In the case at bar, no such intent to waive has
been established.
We have carefully examined and studied the oral
and documentary evidence presented in this case
and upon which the lower court based its award.
Under the contract, the NARIC bound itself to buy
20,000 metric tons of Burmese rice at "$203.00 U.S.
Dollars per metric ton, all net shipped weight, and all
in U.S. currency, C.I.F. Manila ..." On the other
hand, documentary and other evidence establish
with equal certainty that the plaintiff-appellee was
able to secure the contracted commodity at the cost
price of $180.70 per metric ton from her supplier in
Burma. Considering freights, insurance and charges
incident to its shipment here and the forfeiture of the
5% deposit, the award granted by the lower court is
fair and equitable. For a clearer view of the equity of
the damages awarded, We reproduce below the
testimony of the appellee, adequately supported by
the evidence and record:
Q. Will you please tell the court, how much
is the damage you suffered?
A. Because the selling price of my rice is
$203.00 per metric ton, and the cost price of
my rice is $180.00 We had to pay also $6.25
for shipping and about $164 for insurance.
So adding the cost of the rice, the freight,
the insurance, the total would be about
$187.99 that would be $15.01 gross profit
per metric ton, multiply by 20,000 equals
$300,200, that is my supposed profit if I
went through the contract.
The above testimony of the plaintiff was a general
approximation of the actual figures involved in the
transaction. A precise and more exact
demonstration of the equity of the award herein is
provided by Exhibit HH of the plaintiff and Exhibit 34
of the defendant, hereunder quoted so far as
germane.
It is equally of record now that as shown in
her request dated July 29, 1959, and other
communications subsequent thereto for the
opening by your corporation of the required
letter of credit, Mrs. Arrieta was supposed to
pay her supplier in Burma at the rate of One
Hundred Eighty Dollars and Seventy Cents
($180.70) in U.S. Currency, per ton plus
Eight Dollars ($8.00) in the same currency
per ton for shipping and other handling
expenses, so that she is already assured of
a net profit of Fourteen Dollars and Thirty
Cents ($14.30), U.S., Currency, per ton or a
total of Two Hundred and Eighty Six
Thousand Dollars ($286,000.00), U.S.
Currency, in the aforesaid transaction. ...
Lastly, herein appellant filed a counterclaim
asserting that it has suffered, likewise by way of
unrealized profit damages in the total sum of
$406,000.00 from the failure of the projected
contract to materialize. This counterclaim was
supported by a cost study made and submitted by
the appellant itself and wherein it was illustrated
how indeed had the importation pushed thru, NARIC
would have realized in profit the amount asserted in
the counterclaim. And yet, the said amount of
P406,000.00 was realizable by appellant despite a
number of expenses which the appellee under the
contract, did not have to incur. Thus, under the cost
study submitted by the appellant, banking and
unloading charges were to be shouldered by it,
including an Import License Fee of 2% and
superintendence fee of $0.25 per metric ton. If the
NARIC stood to profit over P400 000.00 from the
disputed transaction inspite of the extra
expenditures from which the herein appellee was
exempt, we are convicted of the fairness of the
judgment presently under appeal.
In the case of Engel v. Velasco & Co., 47 Phil. 115,
We ruled that in an action for recovery of damages
for breach of contract, even if the obligation
assumed by the defendant was to pay the plaintiff a
sum of money expressed in American currency, the
indemnity to be allowed should be expressed in
Philippine currency at the rate of exchange at the
time of the judgment rather than at the rate of
exchange prevailing on the date of defendant's
breach. This ruling, however, can neither be applied
nor extended to the case at bar for the same was
laid down when there was no law against stipulating
foreign currencies in Philippine contracts. But now
we have Republic Act No. 529 which expressly
declares such stipulations as contrary to public
policy, void and of no effect. And, as We already
pronounced in the case of Eastboard Navigation,
Ltd. v. Juan Ysmael & Co., Inc., G.R. No. L-9090,
September 10, 1957, if there is any agreement to
pay an obligation in a currency other than Philippine
legal tender, the same is null and void as contrary to
public policy (Republic Act 529), and the most that
could be demanded is to pay said obligation in
Philippine currency "to be measured in the
prevailing rate of exchange at the time the obligation
was incurred (Sec. 1, idem)."
UPON ALL THE FOREGOING, the decision
appealed from is hereby affirmed, with the sole
modification that the award should be converted into
the Philippine peso at the rate of exchange
prevailing at the time the obligation was incurred or
on July 1, 1952 when the contract was executed.
The appellee insurance company, in the light of this
judgment, is relieved of any liability under this suit.
No pronouncement as to costs.

In the premises, however, a minor modification must

be effected in the dispositive portion of the decision
appeal from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine
Peso. Republic Act 529 specifically requires the
discharge of obligations only "in any coin or
currency which at the time of payment is legal
tender for public and private debts." In view of that
law, therefore, the award should be converted into
and expressed in Philippine Peso.

This brings us to a consideration of what rate of

exchange should apply in the conversion here
decreed. Should it be at the time of the breach, at
the time the obligation was incurred or at the rate of
exchange prevailing on the promulgation of this
decision.
G.R. No. L-20552 May 20, 1966
FILIPINAS LIFE ASSURANCE CO., ET
AL., petitioners,
vs.
GONZALO P. NAVA, respondent.
Araneta, Mendoza and Papa for petitioners.
Bengzon, Villegas and Zarraga and G. Advincula for
respondent.
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the
Court of Appeals which affirms that of the court a
quo (1) rescinding the insurance contracts entered
into between plaintiff and defendants; (2) ordering
defendant Filipinas Life Assurance Co. to pay
plaintiff the amount of P32,072.60 as the total
amount paid by said plaintiff on his insurance
policies; and (3) ordering defendant Insular Life
Assurance Co., Ltd. to pay plaintiff the amount of
P2,574.00 as the total amount paid by plaintiff on
account of his insurance policy.
On January 1, 1936, plaintiff and defendant Insular
Life Assurance Co., Ltd. entered into a contract of
life insurance with a face value of P5,000.00 for
which the insurer issued Policy No. 58999.
On February 28, 1939, plaintiff and defendant
Filipinas Life Assurance Co. entered into 17
separate contracts of life insurance for which the
insurer issued 17 life insurance policies, one of said
policies having a face value of P10,000.00 while the
rest a face value of P5,000.00 each, or a total of
P90,000.00. Each and everyone of the 18 policies
issued by defendants to plaintiff contains a loan
clause of the following tenor:
Policy loans. After three full years' premiums
have been paid upon this Policy, if no
premium payment is in default, the
Company, subject to its then existing rules,
will advance on proper assignment and
delivery of this Policy and on the sole
security thereof a sum equal to, or at the
option of the owner less than, the cash
value specified in the Schedule of Policy
Values, less any existing indebtedness on or
secured by this Policy and any unpaid
balance of the premium for the current
policy-year; provided interest at six per
centum per annum on the whole amount of
the loan is paid in advance to the end of the
current policy-year. At the end of the current
policy-year interest at the same rate for one
year in advance will be due and payable,
and annually thereafter, and if not so paid
will be added to the principal and bear the
same rate of interest. Failure to repay any
such loan or interest shall not avoid this
Policy unless the total indebtedness shall
equal or exceed the full amount of the loan
value available hereunder.
Any indebtedness on this Policy shall first be
deducted from any money payable or in any
settlement under this Policy.
On account of the policies abovementioned, plaintiff
had so far paid to defendant Insular Life Assurance
Co., Ltd. the following amounts: from 1936 to
December, 1941, P1,544.40, and from January,
1942 to January, 1945, P1,029.60, or a total of
P2,574.00; and to defendant Filipinas Life
Assurance Co. plaintiff had paid the following
amounts: from February, 1939 to December, 1941,
P13,976.40, and from January, 1942 to January,
1945, P18,096.20, or a total of P32,072.60. In other
words, the total amount paid by plaintiff to
defendants on the 18 policies before the war and
during the Japanese occupation is P34,646.60.
On April 28, 1948, plaintiff applied to defendants for
a loan in the sum of P5,000.00 in line with the loan
clause contained in said policies, but defendants
refused to grant the loan on the excuse that certain
regulations issued by the Insurance Commissioner
on May 20, 1946 required the insurance companies
to withhold the payments on premiums made during
the Japanese occupation because the same shall
be subject to future adjustments " as soon as
debtor-creditor relationship is established" and
because of such process of "withholding" plaintiff
was not entitled to borrow any amount until such
adjustment has been made.
On September 30, 1948, plaintiff called the attention
of the insurance companies to the decision of our
Supreme Court in the case of Haw Pia v. China
Banking Corporation1 establishing and recognizing
the relationship of debtor and creditor with respect
to payments in fiat currency made during the
Japanese occupation on pre-war obligations, but in
spite of that fact the insurance companies refused to
give to plaintiff the loan he solicited giving as reason
the excuse that said decision of our Supreme Court
was not applicable to transactions undertaken
during Japanese occupation when they relate to life
insurance policies. On February 4, 1949, plaintiff
reiterated his request for his much-needed loan of
P5,000.00, and as said request was again refused
by the insurance companies notwithstanding the
fact that the total amount of the cash surrender
values of the 18 policies issued in his favor reached
the sum of P9,468.29, plaintiff commenced the
present action on February 10, 1949 before the
Court of First Instance of Manila praying for the
rescission of the abovementioned 18 policies and
for the refund to him of all the premiums so far paid
by him to defendants in the amount of P31,633.80,
plus 6% interest thereon as damages, and the costs
of action.
On November 28, 1951, defendants passed a
resolution which was approved by the Insurance
Commissioner, giving full credit to all premium
payments made by their policyholders in fiat
currency during the Japanese occupation on
account of pre-war policies for which reason they
filed an amended answer offering to pay plaintiff the
amount of P9,468.29 which represents the
aggregate cash surrender values of all the policies
in question as of February 10, 1949, but apparently
this offer was refused.
After trial, the court a quo rendered judgment the
dispositive part of which already appears recited in
the early part of this decision. This is the decision
that was later affirmed by the Court of Appeals in its
decision of November 14, 1962, from which
defendants interposed the present petition for
review.
In the present petition for review, petitioners now
contend that the Court of Appeals erred (1) in ruling
that as a consequence of the decision in the Haw
Pia case petitioners violated the loan clause
contained in the insurance policies thereby entitling
respondent to their rescission; (2) in ruling that by
virtue of Article 1295 of the old Civil Code petitioners
should refund to defendant all the premiums paid on
his insurance policies as a consequence of their
rescission; and (3) in not ruling that, even if
respondent is entitled to the rescission of said
insurance policies, he can only recover their cash
surrender value at the time the complaint was filed
on February 10, 1949.
The issues raised will be the subject of separate
consideration.
1. It is contended that the failure of petitioners to
give to respondent the loan of P5,000.00 applied for
by him on April 28, 1948 was justified in view of
certain regulations issued by the Insurance
Commissioner on May 20, 1946 which, among other
things, provide that the amount corresponding to
occupation premiums paid on pre-war policies as
well as those paid on pre-war loans should be
withheld subject to adjustment "as soon as debtor-
creditor relationship is established", for which
reason petitioners were not in a position to grant the
loan considering the amount of the fiat currency
employed by respondent to pay the premiums
during the Japanese occupation, and since this
eventuality has not yet occurred it stands to reason
that petitioners cannot be made responsible to
respondent for their alleged non-compliance with
the loan clause contained in the insurance policies
issued to respondent.
But, as correctly stated by the Court of Appeals,
even assuming the validity of the regulations issued
by the Insurance Commissioner which required the
withholding of the payments made in fiat currency of
the premiums on insurance policies issued before
the war subject to whatever adjustment that may be
made after the relationship between debtor and
creditor shall have been established, the fact
however is that such requirement has already lost
its legal effect and value when on April 9, 1948 our
Supreme Court rendered its decision in the Haw Pia
case wherein it was declared, among others, that all
payments made in fiat currency during the
Japanese occupation in relation with any contractual
obligation executed before the war were valid to all
intents and purposes, and yet petitioners apparently
did not give any importance to such decision for in
their opinion it does not have any application to
transactions which have any relation to payment of
premiums on life insurance policies. In other words,
petitioners maintain that the Haw Pia case did not
settle the question of valuation or premium
payments in Japanese military notes during the war
on life insurance policies because what said case
merely settled was the validity of payments in fiat
currency by a debtor to a creditor. Stated in another
way, petitioners are of the opinion that the Haw Pia
case did not settle the question of the valuation or
premium payments in Japanese military notes
during the war on life insurance policies because
the insured is by no means a debtor of the insurer,
nor is the insurer his creditor, considering that there
is absolutely no obligation on his part to pay the
premiums.
There is no merit in this contention. In the Haw Pia
case it was ruled in a clear manner that payments
made in Japanese military notes on account of
contractual obligations entered into before the war
are valid payments for all legal intents and
purposes, and this ruling was reiterated in other
similar cases.2 And it cannot be denied that a life
insurance policy involves a contractual obligation
wherein the insured becomes duty bound to pay the
premiums agreed upon, lest he runs the risk of
having his insurance policy lapse if he fails to pay
such premiums. The fact that if the insured had paid
in full the premiums corresponding to the first three
years of the life of his policy he cannot be
considered delinquent that would cause the lapse of
his policy if the same contains an automatic
premium payment clause cannot divest such policy
of its contractual nature, for the result of such failure
would only be for him to pay later the premium plus
the corresponding interest depending upon the
condition of the policy. But certainly it does not
cease to be a contractual liability insofar as the
payment of that premium is concerned for whether
he likes it or not that premium has to be paid lest he
allows the lapse of his policy. Consequently, the
payment of premiums on the life insurance policies
made by herein respondent before and during the
war up to the time he applied for the loan in
question with petitioners should be considered
likewise as valid payments upon the theory that
such insurance policies are in the nature of a
contractual obligation within the meaning of the civil
law. In effect, therefore, those payments were made
by a debtor to a creditor within the meaning of the
requirement of the regulations of the Insurance
Commissioner and as such they can offer no
excuse to petitioners for refusing to grant the loan
as contemplated in the loan clause embodied in the
policies in question. 1wph1.t
The fact, however, is that the oft-repeated
regulations of the Insurance Commissioner are of
doubtful validity if their effect is to suspend the
effectivity of a provision or clause embodied in a
valid insurance policy for that would partake of the
nature of a regulation the effect of which would be to
infringe or impair a contractual obligation in violation
of Section 1(10), Article III, of our Constitution. In the
case of Lim, et al. vs. Register of Deeds of
Rizal,3this Court has held that an administrative
official has no power to issue a circular or a
regulation the effect for that would be violative of our
Constitution.
It is, therefore, clear from the foregoing that the
petitioners violated the loan clause embodied in
each of the 18 life insurance policies issued to
respondent to rescind all said policies under Section
69 of the Insurance Act, which provides: "The
violation of a material warranty, or other material
provision of a policy, on the part of either party
thereto, entitles the other to rescind."
The citation that petitioners make from Vance on
Insurance to the effect that "The general rule is that
a breach of the agreement to make the loan does
not entitle the insured to rescind the contract," is not
controlling in this jurisdiction. Firstly, it was not
shown that the insurance laws in the states where
said ruling prevails contain a provision identical to
Section 69 of our Insurance Law we quoted above,
and secondly, the rule cited by Vance is not a rule
uniformly followed by all states in the United States,
for on this matter there is a marked divergence of
opinion. In fact, in a case that occured in the State
of Texas, held that the insured had the right to ask
for the rescission of said contract and ordered the
insurer to refund all premiums paid by him.4
2. Petitioners likewise contend that even if
respondent is entitled to rescind the policies in
question he is not entitled to recover all premiums
paid by him to petitioners on account of the 18 life
insurance policies question but merely to their cash
surrender value upon the theory that the respondent
had fully enjoyed the protection of the insurance on
his life during the period of the policies to the extent
that during that time petitioners had assumed the
risk of the death of said respondent. Petitioners in
effect lay stress on the fact that had respondent
died in the meantime they would have paid total
sum of P95,000.00 on account of his policies.
This contention has no basis. Considering that our
Insurance Law does not contain an express
provision as to what the court should do in cases of
rescission of an insurance policy under Section 69,
the provision that should apply is that embodied in
Article 1225 of the old Civil Code, as postulated in
Article 16 of the same Code, which provides that on
matters which are not governed by special laws the
provisions of said Code shall supplement its
deficiency. And said Article 1295 provides:
ART. 1295. Rescission makes necessary the
return of the things which were the subject-
matter of the contract, with their fruits, and
of the price paid, with interest thereon. ...xxx
We find, therefore, correct the ruling of the Court of
Appeals which orders petitioners to refund to
respondent all premiums paid by him up to the filing
of the action amounting to P34,644.60.
Petitioners, however, insist that the correct ruling is
not what the Court of Appeals has stated but what is
hereinafter quoted because such is the weight of
authority on that matter. Said the petitioners:
"Recovery of the full amount of the premium after
the insurer has sustained for sometime the risk of
the insurance and the insured has enjoyed the
benefit of protection is obviously unjust and is so
recognized by the better authorities."
Again we find this statement incorrect, for according
to American Law Reports Annotated, the ruling
above quoted merely represents the minority rule in
the United States, the majority rule being that the
insured can recover all premiums paid, in some
cases with interest in case of wrongful cancellation,
repudiation, termination or rescission of the contract
of life insurance.5
Nor do we find tenable the contention that because
respondent cannot restore to petitioners the "value
of the benefit of protection" which he might have
received under the 18 life insurance policies in
question he is not entitled to rescind them under the
provision of Article 1295 of the old Civil Code,
because it should be here stated that said article
only contemplates a transaction whether material
things are involved, and do not refer to intangible
ones which cannot be the subject of restoration, for
to interpret it otherwise would be to defeat the law
itself with the result that rescission can never be had
under Section 69 of our Insurance Law. And it
cannot be denied that petitioners had in turn already
derived material benefits from the use of premiums
paid to them by respondent before, during and after
the last war from which they must have realized
huge profits, and in this light alone petitioners
cannot claim prejudice or unfairness if they are
ordered to refund the premiums paid by
respondents.
3. Anent this issue, petitioners point out that the
Court of Appeals erred in not ruling that even if
respondent is entitled to the rescission of his 18 life
insurance policies he can only recover legally and
equitably their cash surrender value at the time the
complaint was filed on February 10, 1949.

Inasmuch as this contention is but a corollary to the

conclusion we have reached in the discussion of the
preceding assignment of error, we believe that
further refutation thereof is unnecessary.

Wherefore, the decision appealed from is affirmed.

Cost against petitioners.
G.R. No. L-3869 January 31, 1952
S. DAVIS WINSHIP, plaintiff-appellant,
vs.
PHILIPPINE TRUST COMPANY, defendant-
appellee.
PARAS, J.:
Prior to December, 1941, the Eastern Isles Import
corporation organized under and existing by virtue
of the laws of the Philippines, all of the capital stock
of which was and has been owned by American
citizens, except one share with a par value of P100
in the name of Antonia Sevilla and one share with a
par value of P100 in the name of Edmund A.
Schwesinger, had a current account deposit with the
Philippine Trust Company, and as of December 29,
1941, the balance in favor of said depositor was
P51,410.91. Prior to December, 1941, the Eastern
Isles, Inc., a corporation organized under and
existing by virtue of the laws of the Philippines, all of
the capital stock of which was and has been owned
by American citizens, except one share with a par
value of P100 in the name of F. Capistrano, had a
current account deposit with the Philippine Trust
Company, and as of December 29, 1941, the
balance in favor of said depositor was P34,827.74.
The Eastern Isles, Incorporated made a withdrawal
of P204.37 which was debited to said account on
June 10, 1942.
On October 4, 1943, the Japanese Military
Administration in the Philippines issued an order
requiring all deposit accounts of the hostile people
(including corporations) to be transferred to the
Bank of Taiwan, as the depository of the Japanese
Military Administration, which order the Philippine
Trust Company was specifically directed to comply
with. On September 29, 1944, in compliance with
said order, the Philippine Trust Company transferred
and paid the credit balances of the current account
deposits of the Eastern Isles Import Corporation and
of the Eastern Isles, Inc. to the Bank of Taiwan.
The pre-war current deposit accounts of the Eastern
Isles Import Corporation and of the Eastern Isles,
Inc. were subsequently transferred to S. Davis
Winship who, on August 12, 1947, presented to the
Philippine Trust Company checks Nos. A-79212 and
H-579401 covering the aforesaid deposits. The
Philippine Trust Company, however, refused to pay
said checks, whereupon, on September 6, 1947, S.
Davis Winship instituted the present action against
the Philippine Trust Company in the Court of First
Instance of Manila, to recover upon the first cause
of action the sum of P51,410.91 and under the
second cause of action the sum of P34,827.74.
current deposit accounts in question to the Bank of
Taiwan as the depository of the Bureau of Enemy
Property Custody of the Japanese Military
Administration. After trial, the Court of First Instance
of Manila rendered a decision upholding the
contention of the defendant and accordingly
dismissing the complaint. From this decision plaintiff
appealed. In the case of Everett Steamship
Corporation vs. Bank of the Philippine Islands, 84
Phil., 202; 47 O.G., No. 1 p. 165, we made the
following pronouncement: This Court having ruled in
the Haw Pia case that the collection by the Bank of
Taiwan of the China Banking Corporation's credit
from the latter's debtor, by order of the Japanese
Military Administration, was not a confiscation but a
mere sequestration of enemy's private personal
property, and therefore the payment by the plaintiff
to the Bank of Taiwan was valid and released his
obligation to the defendant bank, it follows that the
Bank of Taiwan of plaintiff's deposit, and by order of
the Japanese Military Administration, was valid and
released the defendant's obligation to the plaintiff.'
In view of this pronouncement, we have to affirm the
appealed judgment. As it has been stipulated by the
parties that the defendant transferred the deposits in
question to the Bank of Taiwan in compliance with
the order of the Japanese Military Administration,
the defendant was released from any obligation to
the depositors or their transferee. Appellant's
contention that there is no positive showing that the
transfer was made by the Philippine Trust Company
in compliance with the order of the Japanese
Military Administration, and its logical effect is to
make such act binding on said company. At any
rate, the defendant corporation has not impugned its
validity.
In the case of Filipinas Compaia de Seguros vs.
Christern Henefeld and Co., Inc., Phil., 54, we held
that the nationality of a private corporation is
determined by the character or citizenship of its
controlling stockholders; and this pronouncement is
of course decisive as to the hostile character of the
Eastern Isles, Inc., as far as the Japanese Military
Administration was concerned, it being conceded
that the controlling stockholders of said corporations
were American citizens.
Wherefore, the appealed judgment is affirmed, with
costs against the appellant. So ordered.

In its answer, the defendant Philippine trust

Company invoked the order of the Japanese Military [G.R. No. L-2001. February 14, 1907. ]
Administration by virtue of which it transferred the
SALVADOR PANGANIBAN, Plaintiff-Appellee, v.
AGUSTIN CUEVAS, Defendant-Appellant.
Del-Pan, Ortigas, & Fisher, for Appellant.
Isabelo Artacho, for Appellee.
SYLLABUS
1. REALTY; SALE WITH RIGHT OF
REPURCHASE. P. on the 10th day of December,
1897, made a conditional sale of a certain lot and
camarin to G. for the sum of 1,300 pesos, on
condition that P. might repurchase the property
within six months, and, in case of his failure to do so
within the said period, G. might become the
absolute owner of the property by paying to P. the
additional sum of 200 pesos. On the 1st of August,
1900, G. sold the said property to C. under the
same conditions existing between the former and P.
Later, in the month of August, 1900, C. obtained
judicial possession of the said property, depositing
the said 200 pesos in the court. In the month of
May, 1898. P. attempted to effect the repurchase of
the said property, but by reason of the fact that G.
was absent from his place of residence he was
unable to do so. The revolutionary government in
1898 seize said property. On the 12th day of
November, 1898, P. brought an action against C. to
recover said property. Held, That P. had the right to
repurchase said property of C. by paying to the
latter the amount of the original contract and that C.
was obliged to execute to P. a deed of resale.
2. CIVIL CODE, ARTICLE 1164. This article,
according to which "Payment made in good faith to
the person who is in possession of the credit shall
released the debtor," is in no wise applicable to a
case in which the payment was made to one who
had done nothing more than to make an
attachment, without being in actual possession, for
attachment, not having the character of confiscation,
does not deprive the real, lawful owner of any of the
rights of ownership. chanrobles virtual lawlibrary
3. CIVIL CODE, ARTICLE 1163. The article,
which provides that Payment made to a third person
hall also be valid in so far as it may have been
beneficial to the creditor," can not be invoked
without conclusive proof of the benefit to the
creditor, and especially when there is not the
slighted evidence that the third person, to whom
payment was made, had any claim whatever to the
creditors right.
4. INCREASE IN THE SELLING PRICE FOR AN
ABSOLUTE SALE UNDER AN AGREEMENT OF
"PACTO DE RETRO." The agreement regarding
the increase in the price over the price fixed for the
conditional sale (should the same become
irrevocable) is a new agreement in diem as to the
definite sale price, and without the payment of the
stipulated amount., the ownership is not irrevocably
transferred. chanrobles virtual lawlibrary
DECISION
ARELLANO, C.J. :
This is an appeal from a judgment of the Court of
First Instance of the Province of Pangasinan,
wherein it was held that the land and camarin in
question were the property of Salvador Panganiban,
and the defendant, Agustin Cuevas, was ordered to
return the said property to the plaintiff, Panganiban,
and to pay the costs of proceedings, the court
reserving to the said plaintiff the right to bring an
action for damages against the defendant and
holding that the deposit in the hands of the clerk,
amounting to 200 pesos, Mexican currency, made
by Cuevas was improperly made, which said sum
the court ordered refunded to the said Cuevas. This
case was tried in accordance with the provisions of
the former Code of Civil Procedure, and it
appears:chanrob1es virtual 1aw library
(1) That on the 10th of December, 1897, Salvador
Panganiban was the owner of a camarin and lot, the
camarin being of bamboo nipa construction, divided
into five apartments, each apartment having two
doors opening on the front, the whole property being
more specifically described in the instrument
executed by the said Panganiban, wherein he sold
and transferred the same to one Francisco
Gonzales for the sum of 1,300 pesos, it having been
stipulated therein, among other things: "Seventh.
The vendor reserves the right to repurchase the
property within six months from date, after
complying with the obligations mentioned in article
1518 of the Civil Code, and in case of his failure to
do so within the tome stipulated, the vendee will pay
to him the additional sum of 200 pesos and will
become the absolute owner of the property and the
vendee may dispose of the same, as long as the
condition subsequent continues to exist with the
limitations provided by the Mortgage Law, of the
provisions of which he has been duly informed."
(Record, p. 45.) This deed was recorded in the
Register of Property on the 13th of August, 1900.
(2) That on the let of August, 1900, Francisco
Gonzales sold the property to Agustin Cuevas for
the same price, the following statement appearing in
the deed of sale: "Second. That the vendor
(Panganiban) reserves to himself the right to
repurchase the property thus sold within the period
of six months from the tenth of December, 1897, for
the same price, thirteen hundred pesos, and in case
he fails to do so, the said Gonzales will pay to the
vendor, Salvador Panganiban, the additional sum of
two hundred pesos . . . ." (Record, p. 49.) This
instrument was recorded on the same date as the
instrument executed on the 13th of August,
1900. chanroblesvirtuallawlibrary

(3) That on the said 13th of August, 1900, Cuevas
Asked for and was granted, in ex parte proceedings,
the judicial possession of the property on the 14th of
the said month, notice thereof having been given to
those who occupied the various apartments, among
them Panganibans wife in the latters absence.
(Record, pp. 52-55.) Subsequently, on the 10th of
August, he attempted to pay Panganiban the sum of
200 pesos, which he deposited in court, and
Cuevas, in a petition presented to the said court
stated: ". . . I have succeeded to all the rights of the
former purchaser, Francisco Gonzales, and desiring
to acquire the ownership of the property irrevocably,
I deposit the additional sum of two hundred pesos
which my grantor undertook to pay . . ." (Record, p.
133.) This sum Panganiban refused to receive.
(Record, p. 135.)
(4) That on the 1st of October of the same year,
1900, Cuevas brought an action for ejectment
against Panganiban. (Record, pp. 138141.)
(5) And that on the 12th of the same month
Panganiban filed a complaint in this action for the
recovery of possession, the proceedings in the
action for ejectment having been suspended.
(Record, pp. 27-39.)
Such are the antecedents of the present case.
The complaint contains the following
allegation:chanrob1es virtual 1aw library
(1) That in the month of May, 1898, Panganiban
attempted to effect the repurchase of the property,
but the creditor, Gonzales, being absent from his
place of residence on account of the war, he was
unable to do so, nor was he able to deposit the
purchase price with the clerk of the court for the
same reason; and (2) that the revolution broke out
that time and the land and improvements in
question were seizes by the Filipino government
from Francisco Gonzales, the property having been
redeemed by Panganiban from the Filipino
government on the 12th of November, 1898. These
facts the plaintiff attempted to prove by the records
of the proceedings relating to the said seizure and
repurchase, which records he attached to his
complaint and made a part thereof, and further by
the receipt of the purchase price paid to the
revolutionary government which had seized the land
from Gonzales.
The defendant, Cuevas, objected to the introduction
of evidence upon these points, admitting the facts,
and stated:" (1) That both parties were bound by the
terms of the contract which is the basis of this
action: (2) that there is no doubt that the deposit
alleged to have been made by the plaintiff could not
have been made: and (3) that the other facts
alleged by the plaintiff, even though they were fully
established, such as the fact that Panganiban was
absent from the town . . ., that Hison was then
commissioned by the Filipino government to resell
the property, and other facts of minor importance,
would not change the essence of the
question . . . .," (Record, p.
120.) chanroblesvirtualawlibrary
From the evidence of record we draw the following
conclusions:chanrob1es virtual 1aw library
The appellee alleges, and the appellant admits, that
the property in question was repurchased (properly
or improperly) by the appellee from the revolutionary
government. The first, second, third, and sixth
assignments of error refer to this point. The fact was
established by the original document appearing on
page 180 of the record and by the testimony of the
witnesses for the appellee, uncontradicted by
the Appellant.
It is a fact admitted by the appellant that the
property of Francisco Gonzales was seized by the
revolutionary government and subsequently
returned to him by the latter.
Several witnesses testified, and their testimony
appears uncontradicted by the appellant, that when
the property seized from Francisco Gonzales,
among the same the house and lot in question, was
returned to him, the latter property was retained by
the revolutionary government without any protest on
his part, and that on November, 1898, the said
house and lot was resold to Panganiban by the
revolutionary government some time before
Gonzalezs property was returned to him. cralawnad
It is an evident fact that from November, 1898, until
the 15th of August, 1900, when Cuevas took judicial
possession of the property by an ex parte
proceeding, Panganiban had been in the quiet and
peaceful possession of the property. This fact was
established by the testimony of the witnesses
referred to and by the judicial proceedings
introduced in evidence in this case, from which it
appears that when the occupants of the various
apartments of Panganibans house were notified of
the judicial possession given to Cuevas, Faustina
Terrado, "who occupied one of the apartments of
the said house," was else notified, as the "wife of
Salvador Panganiban, who was absent when the
notice was served upon the said occupant."
(Record, p. 54.)
If Panganiban had not been absent and had simply
objected to the possession sought by Cuevas, the
latter could not have been given possession of the
premises in such an ex parte proceedings as that
instituted by him for this purpose, and it would have
necessary for Cuevas to bring an ordinary action,
everything remaining as it was prior to the institution
of such ex parte proceeding.
It was sufficient to restore everything to its former
condition in order to preserve the regularity and
consistency required in judicial proceedings by the
old Code of Civil Procedure, which provided that the
proper action in such cases should be a plenary
action for possession. chanroblesvirtual|awlibrary
Panganiban was in possession of the property in
question from November, 1898, until the 14th of
August, 1900 that is to say, for more than a year
quietly and peacefully, with title in good faith. He
could not therefore, be called upon to surrender the
said possession, particularly in view of the fact that
he had not acquired the same by forcible or unlawful
means. Cuevas or Gonzales had a right to deposit
the 200 pesos in court and attempt to acquire in a
separate action the ownership of the property in
question by virtue of the stipulation contained in the
deed.
In view of the fact that all these rights and actions
have been discussed in these proceedings, this
court, by virtue of the authority and powers vested in
it, will now proceed to decide all the questions
raised on this appeal.
The first question relates to the repurchase made by
the appellee, as to which the appellant claims that
the Court of First Instance erred in deciding that the
sale made by the revolutionary government was
valid and that all the obligations incurred by
Panganiban in favor of Gonzales had been
extinguished as the result of the repurchase.
(Assignments of error 1, 2, 3, and 6.) The appellee
in his complaint relied, however, for the validity and
efficacy of the said sale upon article 1164 and
paragraph 2, article 1163, of the Civil Code, and his
brief filed in this court he relies upon the provisions
of paragraph 3, article 1203, and articles 1209,
1210,1249 and 1253 of the same code.
Article 1164 of the Civil Code provides that "a
payment made in good faith to the person who is in
possession of the credit shall release the debtor,"
and article 1163, paragraph 2, reads as follows: "A
payment made to a third person shall also be valid
in so far as it may have been beneficial to the
creditor."cralaw virtua1aw library
But the revolutionary government to which the
payment was made not in possession of the credit;
it did nothing but seize the property of the vendor,
including the house and lot in question. Seizure is
not, in itself, a confiscation. The appellee in his brief
admits that there was no confiscation. The reason
why the seizure was made does not appear. A
seizure or embargo is nothing but a prohibition
enjoining the owner from disposing of his property.
By the mere embargo of a property the owner does
not lose his title thereto. The authorities (lawful or
unlawful) who, legally or illegally, order the seizure
do not become the owners of the same. What the
vendor in this case did was to attempt to reacquire
the ownership of the property transferred to the
vendee from a third person to whom the property
had not been transferred by the said vendee in any
manner whatsoever. Therefore, the vendor from a
person who was not the owner of the same. This is
obvious. chanrobles virtual lawlibrary
If the revolutionary government, by reason of the
seizure or the embargo, did not acquire the title to
the property or vested in the vendee, neither could
the purchaser have acquired from the latter, even
though an embargo, the credit which the said
vendee had under the right of redemption in case
such redemption should take place; the property of
the vendee thus seized had included the right to
demand the stipulated price for the repurchase,
perhaps the payment of such price to the person
rightfully entitled to it under the embargo would have
been proper. But there was nothing, it is alleged, but
an embargo of the real estate of the vendee
including the property in question. So that article
1164 of the Civil Code is not applicable to the case
at bar, nor is paragraph 2 of article 1163 applicable
to this case, because their is nothing in the record to
show that a payment made by Panganiban to the
revolutionary government was for the benefit of
Gonzales. "That the creditor was benefited by the
payment made to a third person by his debtor can
not be presumed, and must, therefore, be
satisfactorily established by the person interested in
proving this fact." Manresa, 8 Civil Code, 257.)
Finally assuming, without deciding, that the payment
of the 1,300 pesos in question to the revolutionary
government was properly made, yet it does not
appear that the deed of sale had been canceled that
is to say, that no other deed of repurchase canceling
the said deed of sale had been executed in short,
the obligation the payment of which was necessary
to redeem the property was not canceled. This is
also one of the conclusions arrived at by the court
below in the decision. A credit is not extinguished
against the will of creditor except by the judgment of
a court or by the expiration of the period prescribed
by the statue of limitations. chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
Paragraph 3 of article 1203 provides that
"obligations may be modified by subrogating a third
person to the rights of the creditor." Article 1209
provides that "the subrogation of a third person to
the rights of a creditor can not be presumed except
in the cases expressly mentioned in the code, it
being necessary in other cases to prove such
subrogation clearly in order that it may be effective."
Paragraph 3 of article 1210 provides that "when the
person who is interested in the fulfillment of the
obligation pays, subrogation shall be presumed."
Article 1249 provides that "presumptions are not
admissible, except when the fact from which they
are to be deduced is fully proved." And article 1253
provides that "in order that presumptions, not
established by law, may be admitted as means of
evidence, it is indispensable that between the fact
demonstrated and the one it is desired to deduce
there should exist a precise and direct connection
according to the rules of human judgment." All these
provisions of law are relied upon by the appellee in
his brief in support of the following proposition: "All
the facts above set out, and particularly those
relating to the embargo and the deposit of the
property of Gonzales and the return of the same
after redemption, established the presumption of the
existence of an obligation on the part of Gonzales in
favor of the so called Philippine government either
for war taxes or some other indebtedness . . ."
(Brief, p. 9.)
But no other fact except the embargo of Gonzalezs
property and the return of the same to Panganiban
having been proved, the contention of the appellee
is absolutely contrary to the provision of article 1209
of the Civil Code above
quoted. chanroblesvirtuallawlibrary:red
In conclusion, we hold that the court below
committed the errors pointed out by the appellant
under the first, second, third, and sixth
assignments.
The payment made by Panganiban to the
revolutionary government of the 1,300 pesos which
he should have paid to Francisco Gonzales in order
to redeem the property, could not have extinguished
the obligation incurred by him in favor of the latter.
The supreme court of Spain, in a judgment rendered
on the 28th of February, 1896, said: "The payment
of the debt in order to extinguish the obligation must
be made to the person or persons in whose favor it
was incurred or to his or their duly authorized agent.
It follows, therefore, that the payment made to a
third person, even through error and in good faith,
shall not release the debtor of the obligation to pay
and will not deprive the creditor of his right to
demand payment. If it becomes impossible to
recover what was unduly paid, any loss resulting
therefrom shall be borne by the deceived debtor,
who is the only one responsible for his own acts
unless there is a stipulation to the contrary or unless
the creditor himself is responsible for the wrongful
payment."cralaw virtua1aw library
The fourth and fifth assignments of error relate to
the second question, in so far as the appellant
claims that the court below erred in holding that
neither Gonzales nor Cuevas ever had a title to the
property in question, they not having paid as
stipulated in the contract the additional 200 pesos,
and in holding that the irrevocability of the sale
depended upon the payment of the said additional
sum of 200 pesos. The question arises whether
there were one or two conditions stipulated in the
contract which should be complied with in order to
make the conditional sale irrevocable. The appellant
contends that there was only one condition
stipulated, to wit, the lapse of a period of six
months, whereas the appellee claims that there
were two conditions, viz, the lapse of the period of
six months and the payment of 200 pesos in
addition to the purchase price.
This question may be decided as a matter of fact by
reference to appellants own statement as set out in
the third paragraph of this decision, wherein he is
quoted as saying: "Desiring to acquire the
ownership of the property irrevocably, I deposit the
additional sum of two hundred pesos. . . ." So that
prior to that deposit he had the conviction of he had
not as yet acquired the ownership of the property
irrevocably. And as a matter of law, first, by the
terms of the agreement itself, according to which,
after setting forth the true conditions, to wit, the
lapse of the time provided therein and the additional
payment of 200 pesos, the appellant, referring to the
acquisition of the ownership in an irrevocable
manner, stipulated as follows: "Shall pay the sum of
two hundred pesos in addition to the sum already
stated, the vendee acquiring the ownership of the
property irrevocably;" and, second, because the
agreement to pay an additional sum of 200 pesos
presupposes that the first conditional sale was
made in consideration of the sum of 1.300 pesos,
but the consideration for the irrevocable and definite
sale was 1,500 pesos; and it is well known that
where property is sold, the consideration therefor
being paid at the time of the sale, title does not pass
to the vendee unless the property is actually
delivered and the purchase price actually received.
There can be no question, therefore, that up to the
10th of August, 1900, when Cuevas deposited the
200 pesos in court for the purpose, as stated, of
acquiring the ownership irrevocably, the property
could have been redeemed.
The third question is whether after the deposit of the
200 pesos on August 10, 1900, the vendor lost his
right to repurchase the property.
The provisions of the Civil Code relating to this
subject are as follows:jgc:chanrobles.com.ph
"Consignation shall be made by depositing the
things due at the disposal of the judicial authorities
before whom the tender shall be proved in a proper
case and the notice of the consignation in other
cases." (Art. 1178.) There is nothing in the record to
show that Cuevas tendered the payment of the 200
pesos in question to Panganiban or that he gave
notice of his intention to deposit the said sum in
court in case said tender was refused by
Panganiban. According to article 1176, "If the
creditor to whom the tender of payment has been
made should refuse to accept it, without reason, the
debtor shall remain released from all liability by the
consignation of the thing due," and, further, that "the
same effect shall be produced by the consignation
alone when made in the absence of the creditor, or
when the latter shall be incapacitated to accept the
payment when it is due, and when several persons
claim to have a right to collect it, or when the
instrument mentioning the obligation has been
mislaid." There being no evidence of anything
except the consignation and the plaintiff Panganiban
not being either absent or incapacitated so that the
consignation alone could have produced the effect
of releasing the debtor, it follows that the
consignation made by Cuevas did not produce the
effect which it would have produced had it been
made as provided in the code. It is therefore evident
that Cuevas never complied with the condition
stipulated in the contract in order to acquire the
ownership irrevocably.

It appears, therefore, from the facts as established

in this case:chanrob1es virtual 1aw library

(1) That Salvador Panganiban did not comply with

the condition stipulated in the contract in order to
reacquire the ownership of the property sold by him
on condition of redemption, for the reason that he
did not pay the price agreed upon to the creditor or
to his duly authorized agent or to the person entitled
to receive the same for the creditor.

(2) That Agustin Cuevas did not comply with the

other condition imposed upon him (or upon
Gonzales) by the terms of the contract in order to
acquire the ownership of the property irrevocably, as
he did not make the additional payment agreed
upon for the definite sale of the property in such a
manner as would have relieved him of this liability
under the law. chanrobles virtual lawlibrary

So that even after the 10th of August, 1900, and up

to the present date, the redemption of the property
could have been effected and the parties could have
enforced their respective rights as though nothing
had been done, for nothing was done in the manner
prescribed by law so as to have sufficient force to
create a juridical status or become res adjudicata.

The judgment of the court below is accordingly

reversed without special provision as to costs. And
being of the opinion that this action was brought for
the purpose of securing the repurchase of the
property, and for this purpose we shall consider the
complaint amended so as to make it conform to the
facts established by the evidence, we hold that
Salvador Panganiban may repurchase the property
if he so desires; and the court below is accordingly
directed to require the said Panganiban to comply
with the provisions of article 1518 of the Civil Code,
and in case he complies therewith to the satisfaction
of the court, to enter judgment authorizing the
repurchase and requiring Agustin Cuevas to
execute the deed of resale, canceling the former
deed of sale and the entry thereof made in the
Registry of Property, or otherwise to dismiss the
action. After the expiration of twenty days let
judgment be entered in accordance herewith and G.R. No. L-17182 September 30, 1963
ten days thereafter the case be remanded to the
court below for execution. So ordered.
NATIVIDAD CASTELLVI RAQUIZA, petitioner,
vs.
RAYMUNDA CAREAGA OFILADA, ANDRADA
OFILADA VENERACION and COURT OF
APPEALS, respondents.
PADILLA, J.:
This is a petition for a writ of certiorari to review
judgment of the Court of Appeals affirming that
render by the Court of First Instance of Manila in
Civil Case No 34025.
In this Court the petitioner assigns the following
error claimed to have been committed by the Court
of Appeals:
(1) in not holding that, by their inadequate
allegations in the complaint as well as their
immaterial evidence adduce during the trial,
the respondents failed to establish liability
on the part of the petitioner to pay them
P1,500.00;
(2) in admitting in evidence check for P1,500
(Exhibit C) which was not alleged in the
complaint;
(3) in leaving unsolved the petitioner's
motion for new trial;
(4) in not holding that the respondent's claim
for P1,086.00 was already paid;
(5) in not holding that plaintiff's claim for
P14,500 was neither adequately alleged in
the complaint nor proved during the trial;
(6) in admitting in evidence of the power of
attorney (Exh. F) with which respondents
intend to prove their above claim of
P14,500;
(7) in holding that Exh. F (power of attorney)
alone constitutes sufficient evidence that
Mrs. Raquiza owed the Ofiladas P14,500;
and
(8) in admitting Exhs. G, G-1, G-2 and G-3
against the objection of the defendant for
not being alleged in the complaint.
The findings of the Court of Appeals are the
following:
It appears that sometime in July 1950,
plaintiff Raymunda C. Ofilada purchased
from a certain Rufina Vinoya a pair of
diamond earrings for P1,500. But to
accommodate defendant Natividad Castellvi
Raquiza, the earrings had previously been
pledged by Mrs. Vinoya to one Mrs. Maria
de Guzman. In order to redeem the jewelry,
the buyer thereof issued a check (Exh. C) in
the amount of P1,500.00 in favor of Mrs.
Raquiza for the redemption of the articles
pledged. The check was cashed at the
Philippine National Bank by Mrs. Raquiza
who did not utilize the money for the
purchase intended. Thus, no earrings were
delivered to Mrs. Ofilada.
The paying teller of the Philippine National
Bank by the name of Pedro Melendrez
positively declared that the check was
cashed by Mrs. Raquiza. He testified thus
Q. Would you tell the Court the
procedure when a check is
presented to you?
A. When a check is presented to me
for payment I verify the signature of
the drawer; after verifying the
signature of the drawer I send the
check to the bookkeeper for further
verification of the drawer's signature
and the balance; then the check is
given to me for payment. Before I
pay the check, of course I will have
to let the payee, the one who is
cashing the check, to sign in my
presence.
Q. I am showing to you now a PNB
check bearing No. 2094321-K which
has been marked as Exhibit C, do
you know this check?
A. Yes.
Q. Do you know the person who
cashed the check?
A. Of course the signature on the
back will show that she was the one
who cashed the check.
Q. Who cashed the check?
A. Mrs. Natividad Raquiza.
Q. Do I get you right that before you
paid this check to Mrs. Natividad C.
Raquiza you required her to sign?
A. In my presence, yes.
COURT:
Q. Where is she now, do you know?
 A. She is there.... (t.s.n. pp. 38-39,
Samson)
It also appears that on September 21, 1950,
one transaction about jewelry was entered
into by and between Mrs. Ofilada and Mrs.
Raquiza who executed the corresponding
promissory note
I promise to pay Mrs. R.C. Ofilada the
amount of P1,086.50 before December 31,
1950.
1awphl.nt
(Sgd.) NATIVIDAD RAQUIZA
Horse Shoe Drive
(Exhibit "A")
On July 23, 1956, Mrs. Raquiza executed a
special power of attorney in favor of Mrs.
Carmen Vda. de Castellvi authorizing her to
pay the total amount of P14,500.00 to Mrs.
Raymunda C. Ofilada and Mrs. Andrea
Ofilada Veneracion.
Defendant, however, insists that the amount
of P1,086.50 which she had promised to pay
before December 31, 1950, to plaintiff
Raymunda C. Ofilada had already been paid
in behalf of the former by a certain Mrs.
Castellvi who was said to have paid the sum
of P2,00.00 (t.s.n., p. 55, April 10, 1955).But,
the promissory note evidencing the
indebtedness (Exh. "A") has not been
retrived from the creditor, plaintiff Mrs.
Ofilada, and there is nothing on its bare face
to show that it was ever paid by the
promissory, defendant Natividad Raquiza,
who admitted having executed the same
(t.s.n., p. 18, January 23, 1958). Under this
circumstance, we could not believe that
plaintiff Ofilada would have the temerity of
going to the extent of suing herein
defendant if the latter had already satisfied
her indebtedness as embodied in Exhibit
"A". If the creditor required the debtor to sign
the corresponding promissory note (Exh.
"A") like the instant case, then the latter
should have reasonably asked the former to
hand in the note and to indicate thereon that
the same has already been paid. That is the
normal and ordinary way of dealing on this
kind of transaction. And since this has not
been done, we are not inclined, much less
satisfied, to believe defendant's pretention
that she had already paid her obligation
under Exhibit "A".
The complaint as well as the evidence
satisfactorily establishes the fact that herein
defendant is under obligation to plaintiff
Ofilada in the sum of Pl,500.00 which was
advanced to the former by the latter in the
form of a check for the purpose of
redeeming the pair of diamond earrings from
a certain Mrs. Maria de Guzman. Defendant,
however, did not redeem the precious
articles and so nothing was delivered to Mrs.
Ofilada who lost money and earrings. This
is, what they say in ordinary parlance
"pornada". Of course defendant in trying to
shake off liability under the check denied
having cashed the same, for, according to
her, the signature appearing at the back
thereof is not her genuine signature. In other
words, she wants us to believe that
somebody had forged her signature and
thereafter the forger or somebody else
cashed the check. But, the paying teller,
who does not appear to have any ill-motive
towards herein defendant, positively
declared that she was the very one who
signed the check on the back as payee.
While there is an apparent dissimilarity
between the admittedly genuine signature of
the defendant and the signature appearing
on the back of the check, yet we cannot rule
out or do away with the testimony of the
teller who, from all indications, simply
testified on what he knew. It may be stated
in this connection that the signature
appearing at the bottom of Exhibit "A" and
those appearing on Exhibits "F" and "G" are
not quite similar-an indication that defendant
at times sign her name in different ways. For
this reason, it would not be reasonable to
say that she may have signed her name in a
different way when she cashed the cheek
(Exh. "C"). For all these considerations, we
hold and declare that plaintiff never put up a
theory different from What she alleged in the
complaint about Exhibit "B".
The check (Exh. "C") is an evidence in
support of what has been alleged in the
complaint regarding the transaction relating
to the pair of earrings that were previously
pledged to Mrs. Maria de Guzman and later
on sold by Mrs. Vinoya to herein plaintiff. It
was established that the pledge was
constituted for the benefit of the defendant.
It is not true that plaintiffs failed to
adequately alleged in the complaint the
claim of P14,500.00. It is enough to
reproduce in this connection the pertinent
paragraph
6. That on July 23, 1956, defendant
herein executed a power of attorney
in favor of Carmen Vda. de Castellvi
for the purpose of paying the sum of
P14,500.00 to the plaintiffs herein as
shown in said SPECIAL POWER OF
ATTORNEY a copy of which is
 hereto attached and marked as special power of attorney executed by the petitioner
Annex "D" which forms a part of this on 23 July 1956 in favor of Carmen Viuda de
complaint. Castellvi, was a consolidation of all the receipts
signed by the petitioner for money paid by the
It should also be stated that defendant former and received by the latter, the Exhibits G and
admitted the genuineness of her signature G-2, receipts signed by the petitioner 17 February
appearing on the special power of attorney 1958 and 16 May 1957, respectively, long after the
(Exh. "F"), authorizing her attorney-in-fact, execution of the special power of attorney (Exhibit
Mrs. Carmen Vda. de Castellvi, to pay Mrs. F) on 23 July 1956, could not have been included in
R.C. Ofilada and Mrs. Andrea Ofilada the amounts appearing in Exhibit F. But the Court of
Veneracion the total sum of P14,500.00. Appeals found that counsel for the petitioner,
contrary to his claim, objected to the admission of
The special power of attorney (Exh. "F") is Exhibit G-2 only. Be that as it may, the fact is that in
written in English, a language which, we can Exhibit F the petitioner acknowledged to be
reasonably say, is understood by the indebted to the respondents in the sum therein
executor thereof, Mrs. Castellvi Raquiza, stated and authorized Carmen Viuda de Castellvi to
considering that she testified in said pay the sums to the respondents.
language (Pls. see t.s.n., p. 17, hearing,
Jan. 21, 1958). For this reason, we cannot The third error assigned is untenable, because by
reasonably say that she was duped to sign finally deciding the case without even mention of the
the same. We are, therefore, satisfied that new trial prayed for, the Court in effect denied the
Exhibit "F" was duly executed for some motion.
lawful obligation, and not for any
undesirable purpose. The judgment under review is affirmed, without
pronouncement as to costs in this instance.
Exhibits G, G-1 and G-3 were correctly
admitted for they may be considered for
whatever they are worth connection with the
allegations in the complaint and other
evidence duly presented. It may be stated
that defendant's counsel interposed his
objection as to the admission of Exhibit G-2
only. All of these Exhibits (G, G-1 and G-2)
reflect sale of defendant's share in the
expropriated estate of her father, Alfonso
Castellvi. Plaintiff Raymunda C. Ofilada
declare that everytime she sold to me a
portion of her land she executed a
document, and these are the documents
that she executed (t.s. pp. 21-24, Jan. 10,
1958). A cursory reading of Exhibits G G-1,
G-2 and G-3 readily confirms the sale of
Mrs. Ofilada and Mrs. Veneracion of
defendant's participation in estate of her late
father.

Ultimate and not evidentiary facts are to be pleaded

in a complaint. The test of sufficiency of a complaint
is could a competent court render a valid judgment
upon facts alleged in it if admitted or proved? If it
could then the allegations are sufficient. The
indebtedness the petitioner has been established as
found by the Court of Appeals. This Court does not
find any error of law claimed by the petitioner to
have been committed by Court of Appeals, except
an error of fact upon which this Court is not allowed
to pass. The error is to have taken into account
Exhibit G executed by the petition on 17 February
1958 and Exhibit G-2 executed on 1 May 1957 to
support in part the items of P12,000.00 and P900.00
appearing in the special power of attorney (Exhibit
F, Annex D to the complaint) executed on 23 July
1956. If, as testified to by respondent Ofilada, the