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below, plaintiffs will have the right of first refusal. Thus the dispositive
portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the
defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned
condition that if the defendants subsequently decide to
offer their property for sale for a purchase price of Eleven
Million Pesos or lower, then the plaintiffs has the option to
purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if
the purchase price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21,
1990 (penned by Justice Segundino G. Chua and concurred in by
Justices Vicente V. Mendoza and Fernando A. Santiago), this Court
affirmed with modification the lower court's judgment, holding:
In resume, there was no meeting of the minds between
the parties concerning the sale of the property. Absent
such requirement, the claim for specific performance will
not lie. Appellants' demand for actual, moral and
exemplary damages will likewise fail as there exists no
justifiable ground for its award. Summary judgment for
defendants was properly granted. Courts may render
summary judgment when there is no genuine issue as to
any material fact and the moving party is entitled to a
judgment as a matter of law (Garcia vs. Court of Appeals,
176 SCRA 815). All requisites obtaining, the decision of
the court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the
judgment appealed from is hereby AFFIRMED, but subject
to the following modification: The court a quo in the
aforestated decision gave the plaintiffs-appellants the
right of first refusal only if the property is sold for a
purchase price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our
market economy today. We find no reason not to grant the
same right of first refusal to herein appellants in the event
that the subject property is sold for a price in excess of
Eleven Million pesos. No pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by
petition for review on certiorari. The Supreme Court denied the appeal
on May 6, 1991 "for insufficiency in form and substances" (Annex H,
Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending
consideration by this Court, the Cu Unjieng spouses executed a Deed
if an acceptance has been made, before the offeror's coming to know of such fact,
by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also
Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural
Bank of Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA
368). The right to withdraw, however, must not be exercised whimsically or
arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the
Civil Code which ordains that "every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is
deemed perfected, and it would be a breach of that contract to withdraw the offer
during the agreed period. The option, however, is an independent contract by itself,
and it is to be distinguished from the projected main agreement (subject matter of
the option) which is obviously yet to be concluded. If, in fact, the optionerofferor withdraws the offer before its acceptance(exercise of the option) by the
optionee-offeree, the latter may not sue for specific performance on the proposed
contract ("object" of the option) since it has failed to reach its own stage of
perfection. The optioner-offeror, however, renders himself liable for damages for
breach of the option. In these cases, care should be taken of the real nature of
the consideration given, for if, in fact, it has been intended to be part of the
consideration for the main contract with a right of withdrawal on the part of the
optionee, the main contract could be deemed perfected; a similar instance would be
an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482,
Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of sale
under Article 1458 of the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within the purview of an option
under the second paragraph of Article 1479, aforequoted, or possibly of an offer
under Article 1319 9 of the same Code. An option or an offer would require, among
other things, 10 a clear certainty on both the object and the cause or consideration of
the envisioned contract. In a right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be dependent not only on
the grantor's eventual intention to enter into a binding juridical relation with another
but also on terms, including the price, that obviously are yet to be later firmed up.
Prior thereto, it can at best be so described as merely belonging to a class of
preparatory juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and inconclusive)
but by, among other laws of general application, the pertinent scattered provisions
of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ
of execution under a judgment that merely recognizes its existence, nor would it
sanction an action for specific performance without thereby negating the
indispensable element of consensuality in the perfection of contracts. 11 It is not to
say, however, that the right of first refusal would be inconsequential for, such as
already intimated above, an unjustified disregard thereof, given, for instance, the
circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for
damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely
accorded a "right of first refusal" in favor of petitioners. The consequence of such a
declaration entails no more than what has heretofore been said. In fine, if, as it is
here so conveyed to us, petitioners are aggrieved by the failure of private
respondents to honor the right of first refusal, the remedy is not a writ of execution
on the judgment, since there is none to execute, but an action for damages in a
proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation,
the alleged purchaser of the property, has acted in good faith or bad faith and
whether or not it should, in any case, be considered bound to respect the
registration of the lis pendens in Civil Case No. 87-41058 are matters that must be
independently addressed in appropriate proceedings. Buen Realty, not having been
impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone ousted from the ownership and
possession of the property, without first being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in
holding that the writ of execution varies the terms of the judgment in Civil Case No.
87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard,
has observed:
Finally, the questioned writ of execution is in variance with the decision
of the trial court as modified by this Court. As already stated, there was
nothing in said decision 13 that decreed the execution of a deed of sale
between the Cu Unjiengs and respondent lessees, or the fixing of the
price of the sale, or the cancellation of title in the name of petitioner
(Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs.
IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA,
122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could
not have decreed at the time the execution of any deed of sale between the Cu
Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the
questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a
quo. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason,
Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
EN BANC
[G.R. No. L-27454. April 30, 1970.]
ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO
GONZALES, Defendant-Appellee.
Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.
repair of the typewriter, the plaintiff went to the house of the defendant and asked
for the return of the typewriter. The defendant delivered the typewriter in a wrapped
package. On reaching home, the plaintiff examined the typewriter returned to him
by the defendant and found out that the same was in shambles, with the interior
cover and some parts and screws missing. On October 29, 1963. the plaintiff sent a
letter to the defendant formally demanding the return of the missing parts, the
interior cover and the sum of P6.00 (Exhibit D). The following day, the defendant
returned to the plaintiff some of the missing parts, the interior cover and the P6.00.
"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business
Machines, and the repair job cost him a total of P89.85, including labor and
materials (Exhibit C).
"On August 23, 1965, the plaintiff commenced this action before the City Court of
Manila, demanding from the defendant the payment of P90.00 as actual and
compensatory damages, P100.00 for temperate damages, P500.00 for moral
damages, and P500.00 as attorneys fees.
"In his answer as well as in his testimony given before this court, the defendant
made no denials of the facts narrated above, except the claim of the plaintiff that
the typewriter was delivered to the defendant through a certain Julio Bocalin, which
the defendant denied allegedly because the typewriter was delivered to him
personally by the plaintiff.
"The repair done on the typewriter by Freixas Business Machines with the total cost
of P89.85 should not, however, be fully chargeable against the defendant. The
repair invoice, Exhibit C, shows that the missing parts had a total value of only
P31.10.
"WHEREFORE, judgment is hereby rendered ordering the defendant to pay the
plaintiff the sum of P31.10, and the costs of suit.
"SO ORDERED."cralaw virtua1aw library
The error of the court a quo, according to the plaintiff-appellant, Rosendo O. Chaves,
is that it awarded only the value of the missing parts of the typewriter, instead of
the whole cost of labor and materials that went into the repair of the machine, as
provided for in Article 1167 of the Civil Code, reading as
follows:jgc:chanrobles.com.ph
"ART. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore it may be decreed that what has been poorly done he
undone."cralaw virtua1aw library
On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is
that he is not liable at all, not even for the sum of P31.10, because his contract with
plaintiff-appellant did not contain a period, so that plaintiff-appellant should have
first filed a petition for the court to fix the period, under Article 1197 of the Civil
Code, within which the defendant appellee was to comply with the contract before
said defendant-appellee could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the appellee did
not interpose any appeal, the facts, as found by the trial court, are now conclusive
and non-reviewable. 1
The appealed judgment states that the "plaintiff delivered to the defendant . . . a
portable typewriter for routine cleaning and servicing" ; that the defendant was not
able to finish the job after some time despite repeated reminders made by the
plaintiff" ; that the "defendant merely gave assurances, but failed to comply with
the same" ; and that "after getting exasperated with the delay of the repair of the
typewriter", the plaintiff went to the house of the defendant and asked for its return,
which was done. The inferences derivable from these findings of fact are that the
appellant and the appellee had a perfected contract for cleaning and servicing a
typewriter; that they intended that the defendant was to finish it at some future
time although such time was not specified; and that such time had passed without
the work having been accomplished, far the defendant returned the typewriter
cannibalized and unrepaired, which in itself is a breach of his obligation, without
demanding that he should be given more time to finish the job, or compensation for
the work he had already done. The time for compliance having evidently expired,
and there being a breach of contract by non-performance, it was academic for the
plaintiff to have first petitioned the court to fix a period for the performance of the
contract before filing his complaint in this case. Defendant cannot invoke Article
1197 of the Civil Code for he virtually admitted non-performance by returning the
typewriter that he was obliged to repair in a non-working condition, with essential
parts missing. The fixing of a period would thus be a mere formality and would
serve no purpose than to delay (cf. Tiglao. Et. Al. V. Manila Railroad Co. 98 Phil. 18l).
It is clear that the defendant-appellee contravened the tenor of his obligation
because he not only did not repair the typewriter but returned it "in shambles",
according to the appealed decision. For such contravention, as appellant contends,
he is liable under Article 1167 of the Civil Code. jam quot, for the cost of executing
the obligation in a proper manner. The cost of the execution of the obligation in this
case should be the cost of the labor or service expended in the repair of the
typewriter, which is in the amount of P58.75. because the obligation or contract was
to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code,
for the cost of the missing parts, in the amount of P31.10, for in his obligation to
repair the typewriter he was bound, but failed or neglected, to return it in the same
condition it was when he received it.
Appellants claims for moral and temperate damages and attorneys fees were,
however, correctly rejected by the trial court, for these were not alleged in his
complaint (Record on Appeal, pages 1-5). Claims for damages and attorneys fees
must be pleaded, and the existence of the actual basis thereof must be proved. 2
The appealed judgment thus made no findings on these claims, nor on the fraud or
malice charged to the appellee. As no findings of fact were made on the claims for
damages and attorneys fees, there is no factual basis upon which to make an
award therefor. Appellant is bound by such judgment of the court, a quo, by reason
of his having resorted directly to the Supreme Court on questions of law.
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified,
by ordering the defendant-appellee to pay, as he is hereby ordered to pay, the
plaintiff-appellant the sum of P89.85, with interest at the legal rate from the filing of
the complaint. Costs in all instances against appellee Fructuoso Gonzales.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and
Villamor, JJ., concur.
Barredo, J., did not take part.
[G.R. No. 115129. February 12, 1997]
IGNACIO BARZAGA, petitioner, vs. COURT OF APPEALS and ANGELITO
ALVIAR, respondents.
DECISION
BELLOSILLO, J.:
The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and his
family. On the nineteenth of December Ignacio's wife succumbed to a debilitating
ailment after prolonged pain and suffering. Forewarned by her attending physicians
of her impending death, she expressed her wish to be laid to rest before Christmas
day to spare her family from keeping lonely vigil over her remains while the whole
of Christendom celebrate the Nativity of their Redeemer.
Drained to the bone from the tragedy that befell his family yet preoccupied with
overseeing the wake for his departed wife, Ignacio Barzaga set out to arrange for
her interment on the twenty-fourth of December in obedience semper fidelis to her
dying wish. But her final entreaty, unfortunately, could not be carried out. Dire
events conspired to block his plans that forthwith gave him and his family their
gloomiest Christmas ever.
This is Barzaga's story. On 21 December 1990, at about three o`clock in the
afternoon, he went to the hardware store of respondent Angelito Alviar to inquire
about the availability of certain materials to be used in the construction of a niche
for his wife. He also asked if the materials could be delivered at once. Marina
Boncales, Alviar's storekeeper, replied that she had yet to verify if the store had
pending deliveries that afternoon because if there were then all subsequent
purchases would have to be delivered the following day. With that reply petitioner
left.
At seven o' clock the following morning, 22 December, Barzaga returned to
Alviar's hardware store to follow up his purchase of construction materials. He told
the store employees that the materials he was buying would have to be delivered at
the Memorial Cemetery in Dasmarias, Cavite, by eight o'clock that morning since
his hired workers were already at the burial site and time was of the
essence. Marina Boncales agreed to deliver the items at the designated time,
date and place. With this assurance, Barzaga purchased the materials and paid in
full the amount of P2,110.00. Thereafter he joined his workers at the cemetery,
which was only a kilometer away, to await the delivery.
The construction materials did not arrive at eight o'clock as promised. At nine o'
clock, the delivery was still nowhere in sight. Barzaga returned to the hardware
store to inquire about the delay. Boncales assured him that although the delivery
truck was not yet around it had already left the garage and that as soon as it
arrived the materials would be brought over to the cemetery in no time at all. That
left petitioner no choice but to rejoin his workers at the memorial park and wait for
the materials.
By ten o'clock, there was still no delivery. This prompted petitioner to return to
the store to inquire about the materials. But he received the same answer from
respondent's employees who even cajoled him to go back to the burial place as
they would just follow with his construction materials.
After hours of waiting - which seemed interminable to him - Barzaga became
extremely upset. He decided to dismiss his laborers for the day. He proceeded to
the police station, which was just nearby, and lodged a complaint against Alviar. He
had his complaint entered in the police blotter. When he returned again to the
store he saw the delivery truck already there but the materials he purchased were
not yet ready for loading. Distressed that Alviar's employees were not the least
concerned, despite his impassioned pleas, Barzaga decided to cancel his
transaction with the store and look for construction materials elsewhere.
In the afternoon of that day, petitioner was able to buy from another store. But
since darkness was already setting in and his workers had left, he made up his mind
to start his project the following morning, 23 December. But he knew that the niche
would not be finish in time for the scheduled burial the following day. His laborers
had to take a break on Christmas Day and they could only resume in the morning of
the twenty-sixth. The niche was completed in the afternoon and Barzaga's wife was
finally laid to rest. However, it was two-and-a-half (2-1/2) days behind schedule.
On 21 January 1991, tormented perhaps by his inability to fulfill his wife's dying
wish, Barzaga wrote private respondent Alviar demanding recompense for the
damage he suffered. Alviar did not respond. Consequently, petitioner sued him
before the Regional Trial Court. [1]
Resisting petitioner's claim, private respondent contended that legal delay could
not be validly ascribed to him because no specific time of delivery was agreed upon
between them. He pointed out that the invoices evidencing the sale did not contain
any stipulation as to the exact time of delivery and that assuming that the
materials were not delivered within the period desired by petitioner, the delivery
truck suffered a flat tire on the way to the store to pick up the materials. Besides,
his men were ready to make the delivery by ten-thirty in the morning of 22
December but petitioner refused to accept them. According to Alviar, it was this
obstinate refusal of petitioner to accept delivery that caused the delay in the
construction of the niche and the consequent failure of the family to inter their
loved one on the twenty-fourth of December, and that, if at all, it was petitioner and
no other who brought about all his personal woes.
Upholding the proposition that respondent incurred in delay in the delivery of
the construction materials resulting in undue prejudice to petitioner, the trial court
ordered respondent Alviar to pay petitioner (a) P2,110.00 as refund for the purchase
price of the materials with interest per annum computed at the legal rate from the
date of the filing of the complaint, (b)P5,000.00 as temperate damages,
(c) P20,000.00 as moral damages, (d) P5,000.00 as litigation expenses, and
(e) P5,000.00 as attorney's fees.
On appeal, respondent Court of Appeals reversed the lower court and ruled that
there was no contractual commitment as to the exact time of delivery since this was
not indicated in the invoice receipts covering the sale. [2]
The arrangement to deliver the materials merely implied that delivery should be
made within a reasonable time but that the conclusion that since petitioner's
workers were already at the graveyard the delivery had to be made at that precise
moment, is non-sequitur. The Court of Appeals also held that assuming that there
was delay, petitioner still had sufficient time to construct the tomb and hold his
wife's burial as she wished.
We sustain the trial court. An assiduous scrutiny of the record convinces us that
respondent Angelito Alviar was negligent and incurred in delay in the performance
of his contractual obligation. This sufficiently entitles petitioner Ignacio Barzaga to
be indemnified for the damage he suffered as a consequence of delay or a
contractual breach. The law expressly provides that 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 for damages. [3]
Contrary to the appellate court's factual determination, there was a specific
time agreed upon for the delivery of the materials to the cemetery. Petitioner went
letter proposals submitted by petitioner to respondent. [2] It noted that "[i]f the
intention of the parties is to include the construction of the deep well in the project,
the same should be stated in the proposals. In the absence of such an agreement,
it could be safely concluded that the construction of the deep well is not a part of
the project undertaken by the plaintiff." [3] With respect to the repair of the windmill,
the trial court found that "there is no clear and convincing proof that the windmill
system fell down due to the defect of the construction." [4]
The Court of Appeals reversed the trial court. It ruled that the construction of
the deep well was included in the agreement of the parties because the term "deep
well" was mentioned in both proposals. It also gave credence to the testimony of
respondent's witness Guillermo Pili, the proprietor of SPGMI which installed the deep
well, that petitioner Tanguilig told him that the cost of constructing the deep well
would be deducted from the contract price of P60,000.00. Upon these premises the
appellate court concluded that respondent's payment of P15,000.00 to SPGMI
should be applied to his remaining balance with petitioner thus effectively
extinguishing his contractual obligation. However, it rejected petitioner's claim
of force majeure and ordered the latter to reconstruct the windmill in accordance
with the stipulated one-year guaranty.
His motion for reconsideration having been denied by the Court of Appeals,
petitioner now seeks relief from this Court. He raises two issues: firstly, whether
the agreement to construct the windmill system included the installation of a deep
well and, secondly, whether petitioner is under obligation to reconstruct the
windmill after it collapsed.
We reverse the appellate court on the first issue but sustain it on the second.
The preponderance of evidence supports the finding of the trial court that the
installation of a deep well was not included in the proposals of petitioner to
construct a windmill system for respondent. There were in fact two (2)
proposals: one dated 19 May 1987 which pegged the contract price at P87,000.00
(Exh. "1"). This was rejected by respondent. The other was submitted three days
later, i.e., on 22 May 1987 which contained more specifications but proposed a
lower contract price of P60,000.00 (Exh. "A"). The latter proposal was accepted by
respondent and the construction immediately followed. The pertinent portions of
the first letter-proposal (Exh. "1") are reproduced hereunder In connection with your Windmill System and Installation, we would like to quote to
you as follows:
One (1) Set - Windmill suitable for 2 inches diameter deepwell, 2 HP, capacity, 14
feet in diameter, with 20 pieces blade, Tower 40 feet high, including mechanism
which is not advisable to operate during extra-intensity wind. Excluding cylinder
pump.
UNIT CONTRACT PRICE P87,000.00
The second letter-proposal (Exh. "A") provides as follows:
In connection with your Windmill system Supply of Labor Materials and Installation,
operated water pump, we would like to quote to you as follows -
One (1) set - Windmill assembly for 2 inches or 3 inches deep-well pump, 6 Stroke,
14 feet diameter, 1-lot blade materials, 40 feet Tower complete with standard
appurtenances up to Cylinder pump, shafting U.S. adjustable International Metal.
One (1) lot - Angle bar, G. I. pipe, Reducer Coupling, Elbow Gate valve, cross Tee
coupling.
One (1) lot - Float valve.
One (1) lot - Concreting materials foundation.
F. O. B. Laguna
Contract Price P60,000.00
Notably, nowhere in either proposal is the installation of a deep well mentioned,
even remotely. Neither is there an itemization or description of the materials to be
used in constructing the deep well. There is absolutely no mention in the two (2)
documents that a deep well pump is a component of the proposed windmill
system. The contract prices fixed in both proposals cover only the features
specifically described therein and no other. While the words "deep well" and "deep
well pump" are mentioned in both, these do not indicate that a deep well is part of
the windmill system. They merely describe the type of deep well pump for which
the proposed windmill would be suitable. As correctly pointed out by petitioner, the
words "deep well" preceded by the prepositions "for" and "suitable for" were
meant only to convey the idea that the proposed windmill would be appropriate for
a deep well pump with a diameter of 2 to 3 inches. For if the real intent of
petitioner was to include a deep well in the agreement to construct a windmill, he
would have used instead the conjunctions"and" or "with." Since the terms of the
instruments are clear and leave no doubt as to their meaning they should not be
disturbed.
Moreover, it is a cardinal rule in the interpretation of contracts
that the intention of
the
parties
shall
be
accorded
primordial
[5]
consideration and, in case of doubt, their contemporaneous and subsequent acts
shall be principally considered. [6] An examination of such contemporaneous and
subsequent acts of respondent as well as the attendant circumstances does not
persuade us to uphold him.
Respondent insists that petitioner verbally agreed that the contract price
of P60,000.00 covered the installation of a deep well pump. He contends that since
petitioner did not have the capacity to install the pump the latter agreed to have a
third party do the work the cost of which was to be deducted from the contract
price. To prove his point, he presented Guillermo Pili of SPGMI who declared that
petitioner Tanguilig approached him with a letter from respondent Herce Jr. asking
him to build a deep well pump as "part of the price/contract which Engineer (Herce)
had with Mr. Tanguilig."[7]
We are disinclined to accept the version of respondent. The claim of Pili that
Herce Jr. wrote him a letter is unsubstantiated. The alleged letter was never
presented in court by private respondent for reasons known only to him. But
granting
that
this
written
communication
existed,
it
could
not
have simply contained a request for Pili to install a deep well; it would have also
mentioned the party who would pay for the undertaking. It strains credulity that
respondent would keep silent on this matter and leave it all to petitioner Tanguilig to
verbally convey to Pili that the deep well was part of the windmill construction and
that its payment would come from the contract price of P60,000.00.
We find it also unusual that Pili would readily consent to build a deep well the
payment for which would come supposedly from the windmill contract price on the
mere representation of petitioner, whom he had never met before, without a written
commitment at least from the former. For if indeed the deep well were part of the
windmill project, the contract for its installation would have been strictly a matter
between petitioner and Pili himself with the former assuming the obligation to pay
the price. That it was respondent Herce Jr. himself who paid for the deep well by
handing over to Pili the amount of P15,000.00 clearly indicates that the contract for
the deep well was not part of the windmill project but a separate agreement
between respondent and Pili. Besides, if the price of P60,000.00 included the deep
well, the obligation of respondent was to pay the entire amount to petitioner
without prejudice to any action that Guillermo Pili or SPGMI may take, if any, against
the latter. Significantly, when asked why he tendered payment directly to Pili and
not to petitioner, respondent explained, rather lamely, that he did it "because he
has (sic) the money, so (he) just paid the money in his possession." [8]
Can respondent claim that Pili accepted his payment on behalf of
petitioner? No. While the law is clear that "payment shall be made to the
person in whose favor the obligation has been constituted, or his successor in
interest, or any person authorized to receive it,".[9] It does not appear from the
record that Pili and/or SPGMI was so authorized.
Respondent cannot claim the benefit of the law concerning "payments made by
a third person."[10] The Civil Code provisions do not apply in the instant case
because no creditor-debtor relationship between petitioner and Guillermo Pili and/or
SPGMI has been established regarding the construction of the deep
well. Specifically, witness Pili did not testify that he entered into a contract with
petitioner for the construction of respondent's deep well. If SPGMI was really
commissioned by petitioner to construct the deep well, an agreement particularly to
this effect should have been entered into.
The contemporaneous and subsequent acts of the parties concerned effectively
belie respondent's assertions. These circumstances only show that the
construction of the well by SPGMI was for the sole account of respondent and that
petitioner merely supervised the installation of the well because the windmill was to
be connected to it. There is no legal nor factual basis by which this Court can
impose upon petitioner an obligation he did not expressly assume nor ratify.
The second issue is not a novel one. In a long line of cases [11] this Court has
consistently held that in order for a party to claim exemption from liability by reason
of fortuitous event under Art. 1174 of the Civil Code the event should be the sole
and proximate cause of the loss or destruction of the object of the
contract. In Nakpil vs. Court of Appeals,[12] four (4) requisites must concur: (a) the
cause of the breach of the obligation must be independent of the will of the debtor;
(b) the event must be either unforeseeable or unavoidable; (c) the event must be
such as to render it impossible for the debtor to fulfill his obligation in a normal
manner; and, (d) the debtor must be free from any participation in or aggravation of
the injury to the creditor.
Petitioner failed to show that the collapse of the windmill was due solely to a
fortuitous event. Interestingly, the evidence does not disclose that there was
actually a typhoon on the day the windmill collapsed. Petitioner merely stated that
there was a "strong wind." But a strong wind in this case cannot be fortuitous
- unforeseeable nor unavoidable. On the contrary, a strong wind should be present
in places where windmills are constructed, otherwise the windmills will not turn.
The appellate court correctly observed that "given the newly-constructed
windmill system, the same would not have collapsed had there been no inherent
defect in it which could only be attributable to the appellee." [13] It emphasized that
respondent had in his favor the
presumption that
"things have happened according to the ordinary course of nature and the
ordinary habits of life."[14] This presumption has not been rebutted by petitioner.
Finally, petitioner's argument that private respondent was already in default in
the payment of his outstanding balance of P15,000.00 and hence should bear his
own loss, is untenable. In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him.[15] When the windmill failed to function properly it became
incumbent upon petitioner to institute the proper repairs in accordance with the
guaranty stated in the contract. Thus, respondent cannot be said to have incurred
in delay; instead, it is petitioner who should bear the expenses for the
reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this point
that if a person obliged to do something fails to do it, the same shall be executed at
his cost.
WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE
JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00
with interest at the legal rate from the date of the filing of the complaint. In return,
petitioner is ordered to "reconstruct subject defective windmill system, in
accordance with the one-year guaranty" [16]and to complete the same within three
(3) months from the finality of this decision.
SO ORDERED.
Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, JJ., concur.
MENDOZA, J.:
This is a petition for review of the decision [1] of the Court of Appeals in CA-G.R.
CV No. 36551 affirming the decision of the Regional Trial Court, Branch IX, Cebu City
which dismissed a complaint for damages filed by petitioners against respondents.
The facts are as follows:
Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The other
petitioners, namely, Rose Nahdja, Johnny, Lloyd, and Kristine, all surnamed Reyes,
were their children.Five days before his death on January 8, 1987, Jorge had been
suffering from a recurring fever with chills. After he failed to get relief from some
home medication he was taking, which consisted of analgesic, antipyretic, and
antibiotics, he decided to see the doctor.
On January 8, 1987, he was taken to the Mercy Community Clinic by his wife. He
was attended to by respondent Dr. Marlyn Rico, resident physician and admitting
physician on duty, who gave Jorge a physical examination and took his medical
history. She noted that at the time of his admission, Jorge was conscious,
ambulatory, oriented, coherent, and with respiratory distress. [2] Typhoid fever was
then prevalent in the locality, as the clinic had been getting from 15 to 20 cases of
typhoid per month.[3] Suspecting that Jorge could be suffering from this disease, Dr.
Rico ordered a Widal Test, a standard test for typhoid fever, to be performed on
Jorge. Blood count, routine urinalysis, stool examination, and malarial smear were
also made.[4] After about an hour, the medical technician submitted the results of
the test from which Dr. Rico concluded that Jorge was positive for typhoid fever. As
her shift was only up to 5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr. Marvie
Blanes.
Dr. Marvie Blanes attended to Jorge at around six in the evening. She also took
Jorges history and gave him a physical examination. Like Dr. Rico, her impression
was that Jorge had typhoid fever. Antibiotics being the accepted treatment for
typhoid fever, she ordered that a compatibility test with the antibiotic chloromycetin
be done on Jorge. Said test was administered by nurse Josephine Pagente who also
gave the patient a dose of triglobe. As she did not observe any adverse reaction by
the patient to chloromycetin, Dr. Blanes ordered the first five hundred milligrams of
said antibiotic to be administered on Jorge at around 9:00 p.m. A second dose was
administered on Jorge about three hours later just before midnight.
At around 1:00 a.m. of January 9, 1987, Dr. Blanes was called as Jorges
temperature rose to 41C. The patient also experienced chills and exhibited
respiratory distress, nausea, vomiting, and convulsions. Dr. Blanes put him under
oxygen, used a suction machine, and administered hydrocortisone, temporarily
easing the patients convulsions. When he regained consciousness, the patient was
asked by Dr. Blanes whether he had a previous heart ailment or had suffered from
chest pains in the past. Jorge replied he did not.[5] After about 15 minutes, however,
Jorge again started to vomit, showed restlessness, and his convulsions returned. Dr.
Blanes re-applied the emergency measures taken before and, in addition, valium
was administered. Jorge, however, did not respond to the treatment and slipped into
cyanosis, a bluish or purplish discoloration of the skin or mucous membrane due to
deficient oxygenation of the blood. At around 2:00 a.m., Jorge died. He was forty
years old. The cause of his death was Ventricular Arrythemia Secondary to
Hyperpyrexia and typhoid fever.
On June 3, 1987, petitioners filed before the Regional Trial Court of Cebu City a
complaint[6]for damages against respondents Sisters of Mercy, Sister Rose Palacio,
Dr. Marvie Blanes, Dr. Marlyn Rico, and nurse Josephine Pagente. On September 24,
1987, petitioners amended their complaint to implead respondent Mercy
Community Clinic as additional defendant and to drop the name of Josephine
Pagente as defendant since she was no longer connected with respondent
hospital. Their principal contention was that Jorge did not die of typhoid fever.
[7]
Instead, his death was due to the wrongful administration of chloromycetin. They
contended that had respondent doctors exercised due care and diligence, they
would not have recommended and rushed the performance of the Widal Test, hastily
concluded that Jorge was suffering from typhoid fever, and administered
chloromycetin without first conducting sufficient tests on the patients compatibility
with said drug. They charged respondent clinic and its directress, Sister Rose
Palacio, with negligence in failing to provide adequate facilities and in hiring
negligent doctors and nurses. [8]
Respondents denied the charges. During the pre-trial conference, the parties
agreed to limit the issues on the following: (1) whether the death of Jorge Reyes was
due to or caused by the negligence, carelessness, imprudence, and lack of skill or
foresight on the part of defendants; (2) whether respondent Mercy Community
Clinic was negligent in the hiring of its employees; and (3) whether either party was
entitled to damages. The case was then heard by the trial court during which, in
addition to the testimonies of the parties, the testimonies of doctors as expert
witnesses were presented.
Petitioners offered the testimony of Dr. Apolinar Vacalares, Chief Pathologist at
the Northern Mindanao Training Hospital, Cagayan de Oro City. On January 9, 1987,
Dr. Vacalares performed an autopsy on Jorge Reyes to determine the cause of his
death. However, he did not open the skull to examine the brain. His
findings[9] showed that the gastro-intestinal tract was normal and without any
ulceration or enlargement of the nodules. Dr. Vacalares testified that Jorge did not
die of typhoid fever. He also stated that he had not seen a patient die of typhoid
fever within five days from the onset of the disease.
For their part, respondents offered the testimonies of Dr. Peter Gotiong and Dr.
Ibarra Panopio. Dr. Gotiong is a diplomate in internal medicine whose expertise is
microbiology and infectious diseases. He is also a consultant at the Cebu City
Medical Center and an associate professor of medicine at the South Western
University College of Medicine in Cebu City.He had treated over a thousand cases of
typhoid patients. According to Dr. Gotiong, the patients history and positive Widal
Test results ratio of 1:320 would make him suspect that the patient had typhoid
fever. As to Dr. Vacalares observation regarding the absence of ulceration in Jorges
gastro-intestinal tract, Dr. Gotiong said that such hyperplasia in the intestines of a
typhoid victim may be microscopic. He noted that since the toxic effect of typhoid
fever may lead to meningitis, Dr. Vacalares autopsy should have included an
examination of the brain.[10]
The other doctor presented was Dr. Ibarra Panopio, a member of the American
Board of Pathology, examiner of the Philippine Board of Pathology from 1978 to
1991, fellow of the Philippine Society of Pathologist, associate professor of the Cebu
Institute of Medicine, and chief pathologist of the Andres Soriano Jr. Memorial
Hospital in Toledo City. Dr. Panopio stated that although he was partial to the use of
the culture test for its greater reliability in the diagnosis of typhoid fever, the Widal
Test may also be used. Like Dr. Gotiong, he agreed that the 1:320 ratio in Jorges
case was already the maximum by which a conclusion of typhoid fever may be
made. No additional information may be deduced from a higher dilution. [11]He said
that Dr. Vacalares autopsy on Jorge was incomplete and thus inconclusive.
On September 12, 1991, the trial court rendered its decision absolving
respondents from the charges of negligence and dismissing petitioners action for
damages. The trial court likewise dismissed respondents counterclaim, holding
that, in seeking damages from respondents, petitioners were impelled by the honest
belief that Jorges death was due to the latters negligence.
Petitioners brought the matter to the Court of Appeals. On July 31, 1997, the
Court of Appeals affirmed the decision of the trial court.
Hence this petition.
Petitioners raise the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
WHEN IT RULED THAT THE DOCTRINE OF RES IPSA LOQUITUR IS NOT
APPLICABLE IN THE INSTANT CASE.
II. THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT MADE AN UNFOUNDED ASSUMPTION THAT THE LEVEL OF
MEDICAL PRACTICE IS LOWER IN ILIGAN CITY.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED
FOR A LESSER STANDARD OF CARE AND DEGREE OF DILIGENCE FOR
MEDICAL PRACTICE IN ILIGAN CITY WHEN IT APPRECIATE[D] NO DOCTORS
NEGLIGENCE IN THE TREATMENT OF JORGE REYES.
Petitioners action is for medical malpractice. This is a particular form of
negligence which consists in the failure of a physician or surgeon to apply to his
practice of medicine that degree of care and skill which is ordinarily employed by
the profession generally, under similar conditions, and in like surrounding
circumstances.[12] In order to successfully pursue such a claim, a patient must prove
that the physician or surgeon either failed to do something which a reasonably
prudent physician or surgeon would have done, or that he or she did something that
a reasonably prudent physician or surgeon would not have done, and that the
failure or action caused injury to the patient. [13] There are thus four elements
involved in medical negligence cases, namely: duty, breach, injury, and proximate
causation.
In the present case, there is no doubt that a physician-patient relationship
existed between respondent doctors and Jorge Reyes. Respondents were thus dutybound to use at least the same level of care that any reasonably competent doctor
would use to treat a condition under the same circumstances. It is breach of this
duty which constitutes actionable malpractice. [14] As to this aspect of medical
malpractice, the determination of the reasonable level of care and the breach
thereof, expert testimony is essential. Inasmuch as the causes of the injuries
involved in malpractice actions are determinable only in the light of scientific
knowledge, it has been recognized that expert testimony is usually necessary to
support the conclusion as to causation.[15]
Res Ipsa Loquitur
There is a case when expert testimony may be dispensed with, and that is
under the doctrine of res ipsa loquitur. As held in Ramos v. Court of Appeals:[16]
Although generally, expert medical testimony is relied upon in malpractice suits to
prove that a physician has done a negligent act or that he has deviated from the
standard medical procedure, when the doctrine ofres ipsa loquitor is availed by the
plaintiff, the need for expert medical testimony is dispensed with because the injury
itself provides the proof of negligence. The reason is that the general rule on the
necessity of expert testimony applies only to such matters clearly within the domain
of medical science, and not to matters that are within the common knowledge of
mankind which may be testified to by anyone familiar with the facts. Ordinarily, only
physicians and surgeons of skill and experience are competent to testify as to
whether a patient has been treated or operated upon with a reasonable degree of
skill and care. However, testimony as to the statements and acts of physicians and
surgeons, external appearances, and manifest conditions which are observable by
any one may be given by non-expert witnesses. Hence, in cases where the res ipsa
loquitur is applicable, the court is permitted to find a physician negligent upon
proper proof of injury to the patient, without the aid of expert testimony, where the
court from its fund of common knowledge can determine the proper standard of
care. Where common knowledge and experience teach that a resulting injury would
not have occurred to the patient if due care had been exercised, an inference of
negligence may be drawn giving rise to an application of the doctrine of res ipsa
loquitur without medical evidence, which is ordinarily required to show not only
what occurred but how and why it occurred.When the doctrine is appropriate, all
that the patient must do is prove a nexus between the particular act or omission
complained of and the injury sustained while under the custody and management of
the defendant without need to produce expert medical testimony to establish the
standard of care. Resort to res ipsa loquitor is allowed because there is no other
way, under usual and ordinary conditions, by which the patient can obtain redress
for injury suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the following
situations: leaving of a foreign object in the body of the patient after an operation,
injuries sustained on a healthy part of the body which was not under, or in the area,
of treatment, removal of the wrong part of the body when another part was
intended, knocking out a tooth while a patients jaw was under anesthetic for the
removal of his tonsils, and loss of an eye while the patient was under the influence
of anesthetic, during or following an operation for appendicitis, among others. [17]
Petitioners asserted in the Court of Appeals that the doctrine of res ipsa
loquitur applies to the present case because Jorge Reyes was merely experiencing
fever and chills for five days and was fully conscious, coherent, and ambulant when
he went to the hospital. Yet, he died after only ten hours from the time of his
admission.
This contention was rejected by the appellate court.
Petitioners now contend that all requisites for the application of res ipsa
loquitur were present, namely: (1) the accident was of a kind which does not
ordinarily occur unless someone is negligent; (2) the instrumentality or agency
which caused the injury was under the exclusive control of the person in charge;
and (3) the injury suffered must not have been due to any voluntary action or
contribution of the person injured.[18]
The contention is without merit. We agree with the ruling of the Court of
Appeals. In the Ramos case, the question was whether a surgeon, an
anesthesiologist, and a hospital should be made liable for the comatose condition of
a patient scheduled for cholecystectomy. [19] In that case, the patient was given
anesthesia prior to her operation. Noting that the patient was neurologically sound
at the time of her operation, the Court applied the doctrine of res ipsa loquitur as
mental brain damage does not normally occur in a gallblader operation in the
absence of negligence of the anesthesiologist. Taking judicial notice that anesthesia
procedures had become so common that even an ordinary person could tell if it was
administered properly, we allowed the testimony of a witness who was not an
expert. In this case, while it is true that the patient died just a few hours after
fever.[28] As to the treatment of the disease, he stated that chloromycetin was the
drug of choice.[29] He also explained that despite the measures taken by respondent
doctors and the intravenous administration of two doses of chloromycetin,
complications of the disease could not be discounted. His testimony is as follows:[30]
ATTY. PASCUAL:
Q If with that count with the test of positive for 1 is to 320, what treatment if any
would be given?
A If those are the findings that would be presented to me, the first thing I would
consider would be typhoid fever.
Q And presently what are the treatments commonly used?
A Drug of choice of chloramphenical.
Q Doctor, if given the same patient and after you have administered
chloramphenical about 3 1/2 hours later, the patient associated with chills,
temperature - 41oC, what could possibly come to your mind?
A Well, when it is change in the clinical finding, you have to think of complication.
Q And what will you consider on the complication of typhoid?
A One must first understand that typhoid fever is toximia. The problem is
complications are caused by toxins produced by the bacteria . . . whether you
have suffered complications to think of -- heart toxic myocardities; then you
can consider a toxic meningitis and other complications and perforations and
bleeding in the ilium.
Q Even that 40-year old married patient who received medication of
chloromycetin of 500 milligrams intravenous, after the skin test, and received
a second dose of chloromycetin of 500 miligrams, 3 hours later, the patient
developed chills . . . rise in temperature to 41 oC, and then about 40 minutes
later the temperature rose to 100oF, cardiac rate of 150 per minute who
appeared to be coherent, restless, nauseating, with seizures: what
significance could you attach to these clinical changes?
A I would then think of toxemia, which was toxic meningitis and probably a toxic
meningitis because of the high cardiac rate.
Q Even if the same patient who, after having given intramuscular valium, became
conscious and coherent about 20 minutes later, have seizure and cyanosis
and rolling of eyeballs and vomitting . . . and death: what significance would
you attach to this development?
A We are probably dealing with typhoid to meningitis.
Q In such case, Doctor, what finding if any could you expect on the post-mortem
examination?
A No, the finding would be more on the meninges or covering of the brain.
Q And in order to see those changes would it require opening the skull?
A Yes.
As regards Dr. Vacalares finding
intestinal tract was normal, Dr.
payers patches or layers of the
same may not always be grossly
texture of the cells.[32]
during the autopsy that the deceaseds gastroRico explained that, while hyperplasia [31] in the
small intestines is present in typhoid fever, the
visible and a microscope was needed to see the
The facts are succinctly summarized by the respondent Court of Appeals, as follows:
On August 4, 1964, plaintiff Engineering Construction, Inc., being a
successful bidder, executed a contract in Manila with the National
Waterworks and Sewerage Authority (NAWASA), whereby the former
undertook to furnish all tools, labor, equipment, and materials (not
furnished by Owner), and to construct the proposed 2nd lpo-Bicti
Tunnel, Intake and Outlet Structures, and Appurtenant Structures, and
Appurtenant Features, at Norzagaray, Bulacan, and to complete said
works within eight hundred (800) calendar days from the date the
Contractor receives the formal notice to proceed (Exh. A).
The project involved two (2) major phases: the first phase comprising,
the tunnel work covering a distance of seven (7) kilometers, passing
through the mountain, from the Ipo river, a part of Norzagaray,
Bulacan, where the Ipo Dam of the defendant National Power
Corporation is located, to Bicti; the other phase consisting of the
outworks at both ends of the tunnel.
By September 1967, the plaintiff corporation already had completed
the first major phase of the work, namely, the tunnel excavation work.
Some portions of the outworks at the Bicti site were still under
construction. As soon as the plaintiff corporation had finished the
tunnel excavation work at the Bicti site, all the equipment no longer
needed there were transferred to the Ipo site where some projects
were yet to be completed.
The record shows that on November 4,1967, typhoon 'Welming' hit
Central Luzon, passing through defendant's Angat Hydro-electric
Project and Dam at lpo, Norzagaray, Bulacan. Strong winds struck the
project area, and heavy rains intermittently fell. Due to the heavy
downpour, the water in the reservoir of the Angat Dam was rising
perilously at the rate of sixty (60) centimeters per hour. To prevent an
overflow of water from the dam, since the water level had reached the
danger height of 212 meters above sea level, the defendant
corporation caused the opening of the spillway gates." (pp. 45-46, L47379, Rollo)
The appellate court sustained the findings of the trial court that the evidence
preponlderantly established the fact that due to the negligent manner with which
the spillway gates of the Angat Dam were opened, an extraordinary large volume of
water rushed out of the gates, and hit the installations and construction works of
ECI at the lpo site with terrific impact, as a result of which the latter's stockpile of
materials and supplies, camp facilities and permanent structures and accessories
either washed away, lost or destroyed.
The appellate court further found that:
It cannot be pretended that there was no negligence or that the
appellant exercised extraordinary care in the opening of the spillway
gates of the Angat Dam. Maintainers of the dam knew very well that it
was far more safe to open them gradually. But the spillway gates were
opened only when typhoon Welming was already at its height, in a vain
effort to race against time and prevent the overflow of water from the
dam as it 'was rising dangerously at the rate of sixty centimeters per
the incident occurred after more than three (3) years or one thousand one hundred
seventy (1,170) days. The court also eliminated the award of exemplary damages
as there was no gross negligence on the part of NPC and reduced the amount of
attorney's fees from P50,000.00 to P30,000.00.
In these consolidated petitions, NPC assails the appellate court's decision as being
erroneous on the ground that the destruction and loss of the ECI's equipment and
facilities were due to force majeure. It argues that the rapid rise of the water level in
the reservoir of its Angat Dam due to heavy rains brought about by the typhoon was
an extraordinary occurrence that could not have been foreseen, and thus, the
subsequent release of water through the spillway gates and its resultant effect, if
any, on ECI's equipment and facilities may rightly be attributed to force majeure.
On the other hand, ECI assails the reduction of the consequential damages from
P333,200.00 to P19,000.00 on the grounds that the appellate court had no basis in
concluding that ECI acquired a new Crawler-type crane and therefore, it only can
claim rentals for the temporary use of the leased crane for a period of one month;
and that the award of P4,000.00 a day or P120,000.00 a month bonus is justified
since the period limitation on ECI's contract with NAWASA had dual effects, i.e.,
bonus for earlier completion and liquidated damages for delayed performance; and
in either case at the rate of P4,000.00 daily. Thus, since NPC's negligence compelled
work stoppage for a period of one month, the said award of P120,000.00 is justified.
ECI further assailes the reduction of attorney's fees and the total elimination of
exemplary damages.
Both petitions are without merit.
It is clear from the appellate court's decision that based on its findings of fact and
that of the trial court's, petitioner NPC was undoubtedly negligent because it
opened the spillway gates of the Angat Dam only at the height of typhoon
"Welming" when it knew very well that it was safer to have opened the same
gradually and earlier, as it was also undeniable that NPC knew of the coming
typhoon at least four days before it actually struck. And even though the typhoon
was an act of God or what we may call force majeure, NPC cannot escape liability
because its negligence was the proximate cause of the loss and damage. As we
have ruled in Juan F. Nakpil & Sons v. Court of Appeals, (144 SCRA 596, 606-607):
Thus, if upon the happening of a fortuitous event or an act of God,
there concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided
for in Article 1170 of the Civil Code, which results in loss or damage,
the obligor cannot escape liability.
The principle embodied in the act of God doctrine strictly requires that
the act must be one occasioned exclusively by the violence of nature
and human agencies are to be excluded from creating or entering into
the cause of the mischief. When the effect, the cause of which is to be
considered, is found to be in part the result of the participation of man,
whether it be from active intervention or neglect, or failure to act, the
whole occurrence is thereby humanized, as it was, and removed from
the rules applicable to the acts of God. (1 Corpus Juris, pp. 1174-1175).
Thus, it has been held that when the negligence of a person concurs
with an act of God in producing a loss, such person is not exempt from
liability by showing that the immediate cause of the damage was the
presented in the records of these petitions. It is not shown that NAWASA imposed
them.
As to the question of exemplary damages, we sustain the appellate court in
eliminating the same since it found that there was no bad faith on the part of NPC
and that neither can the latter's negligence be considered gross. InDee Hua Liong
Electrical Equipment Corp. v. Reyes, (145 SCRA 713, 719) we ruled:
Neither may private respondent recover exemplary damages since he
is not entitled to moral or compensatory damages, and again because
the petitioner is not shown to have acted in a wanton, fraudulent,
reckless or oppressive manner (Art. 2234, Civil Code; Yutuk v. Manila
Electric Co., 2 SCRA 377; Francisco v. Government Service Insurance
System, 7 SCRA 577; Gutierrez v. Villegas, 8 SCRA 527; Air France v.
Carrascoso, 18 SCRA 155; Pan Pacific (Phil.) v. Phil. Advertising Corp.,
23 SCRA 977; Marchan v. Mendoza, 24 SCRA 888).
We also affirm the reduction of attorney's fees from P50,000.00 to P30,000.00.
There are no compelling reasons why we should set aside the appellate court's
finding that the latter amount suffices for the services rendered by ECI's counsel.
WHEREFORE, the petitions in G.R. No. 47379 and G.R. No. 47481 are both
DISMISSED for LACK OF MERIT. The decision appealed from is AFFIRMED.
SO ORDERED.
Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.
BELLOSILLO, J.:
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the
decision of the Court of Appeals which reversed that of the Regional Trial Court of
Iloilo City directing petitioner to reconvey to private respondents the property
donated to it by their predecessor-in-interest.
Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the
Board of Trustees of the Central Philippine College (now Central Philippine University
[CPU]), executed a deed of donation in favor of the latter of a parcel of land
identified as Lot No. 3174-B-1 of the subdivision plan Psd-1144, then a portion of Lot
No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was issued in the
name of the donee CPU with the following annotations copied from the deed of
donation
1. The land described shall be utilized by the CPU exclusively for the
establishment and use of a medical college with all its buildings as part
of the curriculum;
2. The said college shall not sell, transfer or convey to any third party
nor in any way encumber said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said
college shall be under obligation to erect a cornerstone bearing that
name. Any net income from the land or any of its parks shall be put in
a fund to be known as the "RAMON LOPEZ CAMPUS FUND" to be used
for improvements of said campus and erection of a building thereon. 1
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr.,
filed an action for annulment of donation, reconveyance and damages against CPU
alleging that since 1939 up to the time the action was filed the latter had not
complied with the conditions of the donation. Private respondents also argued that
petitioner had in fact negotiated with the National Housing Authority (NHA) to
exchange the donated property with another land owned by the latter.
In its answer petitioner alleged that the right of private respondents to file the
action had prescribed; that it did not violate any of the conditions in the deed of
donation because it never used the donated property for any other purpose than
that for which it was intended; and, that it did not sell, transfer or convey it to any
third party.
On 31 May 1991, the trial court held that petitioner failed to comply with the
conditions of the donation and declared it null and void. The court a quo further
directed petitioner to execute a deed of the reconveyance of the property in favor of
the heirs of the donor, namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the
annotations at the back of petitioner's certificate of title were resolutory conditions
breach of which should terminate the rights of the donee thus making the donation
revocable.
The appellate court also found that while the first condition mandated petitioner to
utilize the donated property for the establishment of a medical school, the donor did
not fix a period within which the condition must be fulfilled, hence, until a period
was fixed for the fulfillment of the condition, petitioner could not be considered as
having failed to comply with its part of the bargain. Thus, the appellate court
rendered its decision reversing the appealed decision and remanding the case to
the court of origin for the determination of the time within which petitioner should
comply with the first condition annotated in the certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted
annotations in the certificate of title of petitioner are onerous obligations and
The period of time for the establishment of a medical college and the necessary
buildings and improvements on the property cannot be quantified in a specific
number of years because of the presence of several factors and circumstances
involved in the erection of an educational institution, such as government laws and
regulations pertaining to education, building requirements and property restrictions
which are beyond the control of the donee.
Thus, when the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended, the general rule
provided in Art. 1197 of the Civil Code applies, which provides that the courts may
fix the duration thereof because the fulfillment of the obligation itself cannot be
demanded until after the court has fixed the period for compliance therewith and
such period has arrived. 8
This general rule however cannot be applied considering the different set of
circumstances existing in the instant case. More than a reasonable period of fifty
(50) years has already been allowed petitioner to avail of the opportunity to comply
with the condition even if it be burdensome, to make the donation in its favor
forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to
fix the duration of a term of the obligation when such procedure would be a mere
technicality and formality and would serve no purpose than to delay or lead to an
unnecessary and expensive multiplication of suits. 9 Moreover, under Art. 1191 of
the Civil Code, when one of the obligors cannot comply with what is incumbent
upon him, the obligee may seek rescission and the court shall decree the same
unless there is just cause authorizing the fixing of a period. In the absence of any
just cause for the court to determine the period of the compliance, there is no more
obstacle for the court to decree the rescission claimed.
Finally, since the questioned deed of donation herein is basically a gratuitous one,
doubts referring to incidental circumstances of a gratuitous contract should be
resolved in favor of the least transmission of rights and interests. 10 Records are clear
and facts are undisputed that since the execution of the deed of donation up to the
time of filing of the instant action, petitioner has failed to comply with its obligation
as donee. Petitioner has slept on its obligation for an unreasonable length of time.
Hence, it is only just and equitable now to declare the subject donation already
ineffective and, for all purposes, revoked so that petitioner as donee should now
return the donated property to the heirs of the donor, private respondents herein,
by means of reconveyance.
WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991
is REINSTATED and AFFIRMED, and the decision of the Court of Appeals of 18 June
1993 is accordingly MODIFIED. Consequently, petitioner is directed to reconvey to
private respondents Lot No. 3174-B-1 of the subdivision plan Psd-1144 covered by
Transfer Certificate of Title No. T-3910-A within thirty (30) days from the finality of
this judgment.
Costs against petitioner.
SO ORDERED.
Quiason and Kapunan, JJ., concur.
2)
Under Art. 1197, when the obligation does not fix a period but from its nature &
circumstance it can be inferred that the period was intended, the court may fix the
duration thereof because the fulfillment of the obligation itself cannot be demanded
until after the court has fixed the period for compliance therewith & such period has
arrived. However, this general rule cannot be applied in this case considering the
different set of circumstances existing more than a reasonable period of 50yrs has
already been allowed to petitioner to avail of the opportunity to comply but
unfortunately, it failed to do so. Hence, there is no need to fix a period when such
procedure would be a mere technicality & formality & would serve no purpose than
to delay or load to unnecessary and expensive multiplication of suits.
Under Art. 1191, when one of the obligors cannot comply with what is incumbent
upon him, the obligee may seek rescission before the court unless there is just
cause authorizing the fixing of a period. In the absence of any just cause for the
court to determine the period of compliance there is no more obstacle for the court
to decree recission.
FERNAN, C.J.:
This is a petition for review on certiorari of the July 2, 1984 decision of the Third
Special Cases Division, Intermediate Appellate Court, in AC-G.R. SP. No. 01230,
entitled "Heirs of Fausta Dimaculangan v. Hon. Baltazar R. Dizon, et al." dismissing
for lack of merit the petition for review of the Orders dated June 6, 1983 and July 13,
1983, issued by the Regional Trial Court of Pasay City, Branch CXIII in Civil Case No.
8865-P which in turn affirmed on appeal the October 16, 1980 decision of Hon.
Mariano A. Lacsamana, then presiding judge, Pasay City Court, Branch 11, in Civil
Case No. 13591, entitled "Felimon Uy v. Fausta Dimaculangan, for Ejectment".
Fausta Dimaculangan and her children, petitioners herein, occupy by lease an
apartment located at No. 2490 E. Zamora St., Pasay City, at a monthly rental of
P260.00. They have been living in said premises since 1961. To augment its income,
the family maintains therein a sari-sari store and bakes hot pan de sal to sell to the
general public. The capital investment involved is claimed to be P3,200.00 only.
On Appeal, the Regional Trial Court, Branch CXIII, Pasay City, affirmed the aforesaid
decision of the City Court and denied petitioner's motion for reconsideration. 4
Similarly, it is well settled that a lease contract "on a month-to month basis"
provides for a definite period and may be terminated at the end of any month.
express exception of P.D. No. 20, judicial ejectment lies when the lease is for a
definite period or when the fixed or definite period agreed upon has expired. 9
By
Even more recently, this Court clarified that "(I)n exempting from suspension
ejectments on the ground of the expiration of the lease period, Section 4 of
Presidential Decree No. 20 made no distinction between oral and written lease
contracts and no distinction may, therefore, be inferred. Consequently, at the time
of filing her action the private respondent had a clear and indubitable right to eject
the petitioners, the period of the latter's lease expiring at the end of every monthly
period ... 10 The Court further pointed out that the Rent Control Law now in force,
Batas Pambansa Blg. 877, has erased the distinction between oral and written
leases insofar as expiration of the lease period as a ground for judicial ejectment in
leases covered by said law, is concerned. 11
In view of the foregoing, there appears to be no necessity to discuss the other
issues in this case; more specifically whether or not the trial court may increase the
rental and/or alter the period of the lease from an indefinite period to a definite
period; both issues having become moot and academic.
Citing the case of Mabalot v. Madela Jr. 12 the Court of Appeals ruled that the petition
has been rendered moot and academic by the death of the lessee Fausta
Dimaculangan, which terminated the lease in her favor. It will be noted however,
that in the aforecited case, those seeking to continue in possession of the premises
were not the heirs of the lessee but merely members of the lessee's household,
which does not apply in the case at bar, where petitioners are the lessee's children.
Authorities are of the view that lease is not essentially personal in character, thus
the right is transmissible to the heirs. 13
At any rate, the period fixed by respondent Judge which appears acceptable to the
lessor has expired in 1982 and has therefore become moot and academic, aside
from the fact that with private respondent's conformity, it has become the latter's
term which is well within his authority; that is, to terminate the contract and enter
into a new one.
WHEREFORE, the petition is hereby dismissed for lack of merit, with costs against
the petitioner.
SO ORDERED.
Feliciano, Bidin and Cortes JJ., concur.
Gutierrez, Jr., J., In the result.
SECOND DIVISION
[G.R. No. 138842. October 18, 2000]
NATIVIDAD P. NAZARENO, MAXIMINO P. NAZARENO, JR., petitioners, vs.
COURT OF APPEALS, ESTATE OF MAXIMINO A. NAZARENO, SR.,
ROMEO P. NAZARENO and ELIZA NAZARENO, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision [1] of the Court of Appeals
in CA-GR CV No. 39441 dated May 29, 1998 affirming with modifications the
decision of the Regional Trial Court, Branch 107, Quezon City, in an action for
annulment of sale and damages.
The facts are as follows:
Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died
on April 15, 1970, while Maximino, Sr. died on December 18, 1980. They had five
children, namely, Natividad, Romeo, Jose, Pacifico, and Maximino, Jr. Natividad and
Maximino, Jr. are the petitioners in this case, while the estate of Maximino, Sr.,
Romeo, and his wife Eliza Nazareno are the respondents.
During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired
properties in Quezon City and in the Province of Cavite. It is the ownership of some
of these properties that is in question in this case.
It appears that after the death of Maximino, Sr., Romeo filed an intestate case in
the Court of First Instance of Cavite, Branch XV, where the case was docketed as Sp.
Proc. No. NC-28. Upon the reorganization of the courts in 1983, the case was
transferred to the Regional Trial Court of Naic, Cavite. Romeo was appointed
administrator of his fathers estate.
In the course of the intestate proceedings, Romeo discovered that his parents
had executed several deeds of sale conveying a number of real properties in favor
of his sister, Natividad. One of the deeds involved six lots in Quezon City which were
allegedly sold by Maximino, Sr., with the consent of Aurea, to Natividad on January
29, 1970 for the total amount of P47,800.00. The Deed of Absolute Sale reads as
follows:
DEED OF ABSOLUTE SALE
KNOW ALL MEN BY THESE PRESENTS:
I, MAXIMINO A. NAZARENO, Filipino, married to Aurea Poblete-Nazareno, of legal age
and a resident of the Mun. of Naic, Prov. of Cavite, Philippines,
-WITNESSETHThat I am the absolute registered owner of six (6) parcels of land with the
improvements thereon situated in Quezon City, Philippines, which parcels of land
are herewith described and bounded as follows, to wit:
TRANS. CERT. OF TITLE NO. 140946
A parcel of land (Lot 3-B of the subdivision plan Psd-47404, being a portion of Lot 3,
Block D-3 described on plan Bsd-10642, G.L.R.O. Record No.) situated in the Quirino
District, Quezon City. Bounded on the N., along line 1-2 by Lot 15, Block D-3 of plan
Bsd - 10642; along line 2-3 by Lot 4, Block D-3 of plan Bsd-10642; along line 3-4 by
Aurora Boulevard (Road Lot-1, Bsd-10642); and along line 4-1 by Lot 3-D of the
subdivision plan. Beginning at a point marked 1 on plan, being S.29 deg. 26E.,
1156.22 m. from B.L.L.M. 9, Quezon City,
thence N. 79 deg. 53E., 12.50 m. to point 2;
thence S. 10 deg. 07E., 40.00 m. to point 3;
thence S. 79 deg. 53W., 12.50 m. to point 4;
thence N. 10 deg. 07W., 40.00 m. to the point
of beginning; containing an area of FIVE HUNDRED (500) SQUARE METERS. All
points referred to are indicated on the plan and are marked on the ground as
follows: points 1 and 4 by P.L.S. Cyl. Conc. Mons. bearings true; date of the
original survey, April 8-July 15, 1920 and that of the subdivision survey, March 25,
1956.
TRANS. CERT. OF TITLE NO. 132019
A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970 being a portion
of Lot 6, Pcs-4786, G.L.R.O. Rec. No. 917) situated in Quirino District Quezon
City. Bounded on the NW., along line 1-2, by Lot 1, Block 93; on the NE., along line 23, by Road Lot 101; on the SE., along line 3-4, by Road Lot 100; on the SW., along
line 4-1, by Lot 4, Block 93; all of the subdivision plan. Beginning at point marked
1 on plan, being S. 65 deg. 40 3339.92 m. from B.L.L.M. No. 1, Marikina, Rizal;
thence N. 23 deg. 28 min. E., 11.70 m. to point 2;
thence S. 66 deg. 32 min. E., 18.00 m. to point 3;
thence S. 23 deg. 28 min. W., 11.70 m. to point 4;
thence N. 66 deg. 32. min. W., 18.00 m. to the point
of beginning; containing an area of TWO HUNDRED TEN SQUARE METERS AND SIXTY
SQUARE DECIMETERS (210.60). All points referred to are indicated on the plan and
are marked on the ground by B.L. Cyl. Conc. Mons. 15 x 60 cm.; bearings true; date
of the original survey, Nov. 10, 1920 and Jan. 31-March 31, 1924 and that of the
subdivision survey, February 1 to September 30, 1954. Date approved - March 9,
1962.
TRANS. CERT. OF TITLE NO. 118885
A parcel of land (Lot No. 10, of the consolidation and subdivision plan Pcs-988,
being a portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos.
27-A and 27-B, Psd-14901, G.L.R.O.Record No. 917), situated in the District of
Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No. 4 of the
consolidation and subdivision plan; on the SE., by Lot No. 11 of the consolidation
and subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision
plan; and on the NW., by Lot No. 9 of the consolidation and subdivision
plan. Beginning at a point marked 1 on the plan, being S. 7 deg. 26W., 4269.90
m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00E., 12.00 m. to point 2;
On June 15, 1988, Romeo in turn filed, on behalf of the estate of Maximino, Sr.,
the present case for annulment of sale with damages against Natividad and
Maximino, Jr. The case was filed in the Regional Trial Court of Quezon City, where it
was docketed as Civil Case No. 88-58. [11] Romeo sought the declaration of nullity of
the sale made on January 29, 1970 to Natividad and that made on July 31, 1982 to
Maximino, Jr. on the ground that both sales were void for lack of consideration.
On March 1, 1990, Natividad and Maximino, Jr. filed a third-party complaint
against the spouses Romeo and Eliza. [12] They alleged that Lot 3, which was included
in the Deed of Absolute Sale of January 29, 1970 to Natividad, had been
surreptitiously appropriated by Romeo by securing for himself a new title (TCT No.
277968) in his name.[13] They alleged that Lot 3 is being leased by the spouses
Romeo and Eliza to third persons. They therefore sought the annulment of the
transfer to Romeo and the cancellation of his title, the eviction of Romeo and his
wife Eliza and all persons claiming rights from Lot 3, and the payment of damages.
The issues having been joined, the case was set for trial. Romeo presented
evidence to show that Maximino and Aurea Nazareno never intended to sell the six
lots to Natividad and that Natividad was only to hold the said lots in trust for her
siblings. He presented the Deed of Partition and Distribution dated June 28, 1962
executed by Maximino Sr. and Aurea and duly signed by all of their children, except
Jose, who was then abroad and was represented by their mother, Aurea. By virtue of
this deed, the nine lots subject of this Deed of Partition were assigned by raffle as
follows:
1. Romeo - Lot 25-L (642 m2)
2. Natividad - Lots 23 (312 m2) and 24 (379 m2)
3. Maximino, Jr. - Lots 6 (338 m2) and 7 (338 m2)
4. Pacifico - Lots 13 (360 m2) and 14 (360 m2)
5. Jose - Lots 10 (360 m2) and 11 (360 m2)
Romeo received the title to Lot 25-L under his name, [14] while Maximino, Jr.
received Lots 6 and 7 through a Deed of Sale dated August 16, 1966 for the amount
of P9,500.00.[15]Pacifico and Joses shares were allegedly given to Natividad, who
agreed to give Lots 10 and 11 to Jose, in the event the latter came back from
abroad. Natividads share, on the other hand, was sold to third persons [16] because
she allegedly did not like the location of the two lots. But, Romeo said, the money
realized from the sale was given to Natividad.
Romeo also testified that Lot 3-B was bought for him by his father, while Lot 3
was sold to him for P7,000.00 by his parents on July 4, 1969. [17] However, he
admitted that a document was executed by his parents transferring six properties in
Quezon City, i.e., Lots 3, 3-B, 10, 11, 13, and 14, to Natividad.
Romeo further testified that, although the deeds of sale executed by his parents
in their favor stated that the sale was for a consideration, they never really paid any
amount for the supposed sale. The transfer was made in this manner in order to
avoid the payment of inheritance taxes. [18] Romeo denied stealing Lot 3 from his
sister but instead claimed that the title to said lot was given to him by Natividad in
1981 after their father died.
Natividad and Maximino, Jr. claimed that the Deed of Partition and Distribution
executed in 1962 was not really carried out. Instead, in December of 1969, their
parents offered to sell to them the six lots in Quezon City, i.e., Lots 3, 3-B, 10, 11, 13
and 14. However, it was only Natividad who bought the six properties because she
was the only one financially able to do so. Natividad said she sold Lots 13 and 14 to
Ros-Alva Marketing Corp.[19] and Lot 3-B to Maximino, Jr. for P175,000.00.
[20]
Natividad admitted that Romeo and the latters wife were occupying Lot 3-B at
that time and that she did not tell the latter about the sale she had made to
Maximino, Jr.
Natividad said that she had the title to Lot 3 but it somehow got lost. She could
not get an original copy of the said title because the records of the Registrar of
Deeds had been destroyed by fire. She claimed she was surprised to learn that
Romeo was able to obtain a title to Lot 3 in his name.
Natividad insisted that she paid the amount stated in the Deed of Absolute Sale
dated January 29, 1970. She alleged that their parents had sold these properties to
their children instead of merely giving the same to them in order to impose on them
the value of hardwork.
Natividad accused Romeo of filing this case to harass her after Romeo lost in the
action for recovery of possession (Civil Case No. Q-39018) which had been brought
against him by Maximino, Jr. It appears that before the case filed by Romeo could be
decided, the Court of Appeals rendered a decision in CA-GR CV No. 12932 affirming
the trial courts decision in favor of Maximino, Jr.
On August 10, 1992, the trial court rendered a decision, the dispositive portion
of which states:
WHEREFORE, judgment is hereby rendered declaring the nullity of the Deed of Sale
dated January 29, 1970. Except as to Lots 3, 3-B, 13 and 14 which had passed on to
third persons, the defendant Natividad shall hold the rest in trust for Jose Nazareno
to whom the same had been adjudicated. The Register of Deeds of Quezon City is
directed to annotate this judgment on Transfer Certificate of Titles Nos. 162735 and
162736 as a lien in the titles of Natividad P. Nazareno.
Natividad P. Nazareno had long been the exclusive owner of the property in
question. There was no way therefore that the aforesaid property could belong to
the estate of the spouses Maximino Nazareno, Sr. and Aurea Poblete. The mere fact
that Romeo P. Nazareno included the same property in an inventory of the
properties of the deceased Maximino A. Nazareno, Sr. will not adversely affect the
ownership of the said realty. Appellant Romeo P. Nazarenos suspicion that his
parents had entrusted all their assets under the care and in the name of Natividad P.
Nazareno, their eldest living sister who was still single, to be divided upon their
demise to all the compulsory heirs, has not progressed beyond mere
speculation. His barefaced allegation on the point not only is without any
corroboration but is even belied by documentary evidence. The deed of absolute
sale (Exhibit B), being a public document (Rule 132, Secs. 19 and 23, Revised
Rules on Evidence), is entitled to great weight; to contradict the same, there must
be evidence that is clear, convincing and more than merely preponderant (Yturralde
vs. Aganon, 28 SCRA 407; Favor vs. Court of Appeals, 194 SCRA 308). Defendantsappellants own conduct disproves their claim of co-ownership over the property in
question. Being themselves the owner of a ten-unit apartment building along
Stanford St., Cubao Quezon City, defendants-appellants, in a letter of demand to
vacate addressed to their tenants (Exhibits P, P-1 and P-2) in said apartment,
admitted that the house and lot located at No. 979 Aurora Blvd., Quezon City where
they were residing did not belong to them. Also, when they applied for a permit to
repair the subject property in 1977, they stated that the property belonged to and
was registered in the name of Natividad P. Nazareno. Among the documents
submitted to support their application for a building permit was a copy of TCT No.
162738 of the Registry of Deeds of Quezon City in the name of Natividad Nazareno
(Exhibit O and submarkings; tsn March 15, 1985, pp. 4-5). [27]
To be sure, that case was for recovery of possession based on ownership of Lot
3-B. The parties in that case were Maximino, Jr., as plaintiff, and the spouses Romeo
and Eliza, as defendants. On the other hand, the parties in the present case for
annulment of sale are the estate of Maximino, Sr., as plaintiff, and Natividad and
Maximino, Jr., as defendants. Romeo and Eliza were named third-party defendants
after a third-party complaint was filed by Natividad and Maximino, Jr. As already
stated, however, this third-party complaint concerned Lot 3, and not Lot 3-B.
The estate of a deceased person is a juridical entity that has a personality of its
own.[28] Though Romeo represented at one time the estate of Maximino, Sr., the
latter has a separate and distinct personality from the former. Hence, the judgment
in CA-GR CV No. 12932 regarding the ownership of Maximino, Jr. over Lot 3-B binds
Romeo and Eliza only, and not the estate of Maximino, Sr., which also has a right to
recover properties which were wrongfully disposed.
Furthermore, Natividads title was clearly not an issue in the first case. In other
words, the title to the other five lots subject of the present deed of sale was not in
issue in that case. If the first case resolved anything, it was the ownership of
Maximino, Jr. over Lot 3-B alone.
Third. Petitioners allege that, as shown by several deeds of sale executed by
Maximino, Sr. and Aurea during their lifetime, the intention to dispose of their real
properties is clear.Consequently, they argue that the Deed of Sale of January 29,
1970 should also be deemed valid.
This is a non-sequitur. The fact that other properties had allegedly been sold by
the spouses Maximino, Sr. and Aurea does not necessarily show that the Deed of
Sale made on January 29, 1970 is valid.
Romeo does not dispute that their parents had executed deeds of sale. The
question, however, is whether these sales were made for a consideration. The trial
court and the Court of Appeals found that the Nazareno spouses transferred their
properties to their children by fictitious sales in order to avoid the payment of
inheritance taxes.
Indeed, it was found both by the trial court and by the Court of Appeals that
Natividad had no means to pay for the six lots subject of the Deed of Sale.
All these convince the Court that Natividad had no means to pay for all the lots she
purportedly purchased from her parents. What is more, Romeos admission that he
did not pay for the transfer to him of lots 3 and 25-L despite the considerations
stated in the deed of sale is a declaration against interest and must ring with
resounding truth. The question is, why should Natividad be treated any
differently, i.e., with consideration for the sale to her, when she is admittedly the
closest to her parents and the one staying with them and managing their affairs? It
just seems without reason. Anyway, the Court is convinced that the questioned
Deed of Sale dated January 29, 1970 (Exh. A or 1) is simulated for lack of
consideration, and therefore ineffective and void. [29]
In affirming this ruling, the Court of Appeals said:
Facts and circumstances indicate badges of a simulated sale which make the Deed
of Absolute Sale dated 29 January 1970 void and of no effect. In the case of Suntay
vs. Court of Appeals (251 SCRA 430 [1995]), the Supreme Court held that badges of
simulation make a deed of sale null and void since parties thereto enter into a
transaction to which they did not intend to be legally bound.
It appears that it was the practice in the Nazareno family to make simulated
transfers of ownership of real properties to their children in order to avoid the
payment of inheritance taxes. Per the testimony of Romeo, he acquired Lot 25-L
from his parents through a fictitious or simulated sale wherein no consideration was
paid by him. He even truthfully admitted that the sale of Lot 3 to him on 04 July
1969 (Deed of Absolute Sale, Records, Vol. II, p. 453) likewise had no
consideration. This document was signed by the spouses Max, Sr. and Aurea as
vendors while defendant-appellant Natividad signed as witness. [30]
Fourth. Petitioners argue further:
The Deed of Absolute Sale dated January 29, 1970 is an indivisible contract founded
on an indivisible obligation. As such, it being indivisible, it can not be annulled by
only one of them. And since this suit was filed only by the estate of Maximino A.
Nazareno, Sr. without including the estate of Aurea Poblete, the present suit must
fail. The estate of Maximino A. Nazareno, Sr. can not cause its annulment while its
validity is sustained by the estate of Aurea Poblete. [31]
An obligation is indivisible when it cannot be validly performed in parts,
whatever may be the nature of the thing which is the object thereof. The
indivisibility refers to the prestation and not to the object thereof. [32] In the present
case, the Deed of Sale of January 29, 1970 supposedly conveyed the six lots to
Natividad. The obligation is clearly indivisible because the performance of the
contract cannot be done in parts, otherwise the value of what is transferred is
diminished. Petitioners are therefore mistaken in basing the indivisibility of a
contract on the number of obligors.
In any case, if petitioners only point is that the estate of Maximino, Sr. alone
cannot contest the validity of the Deed of Sale because the estate of Aurea has not
yet been settled, the argument would nonetheless be without merit. The validity of
the contract can be questioned by anyone affected by it. [33] A void contract is
inexistent from the beginning. Hence, even if the estate of Maximino, Sr. alone
contests the validity of the sale, the outcome of the suit will bind the estate of
Aurea as if no sale took place at all.
Fifth. As to the third-party complaint concerning Lot 3, we find that this has been
passed upon by the trial court and the Court of Appeals. As Romeo admitted, no
consideration was paid by him to his parents for the Deed of Sale. Therefore, the
sale was void for having been simulated. Natividad never acquired ownership over
the property because the Deed of Sale in her favor is also void for being without
consideration and title to Lot 3 cannot be issued in her name.
Nonetheless, it cannot be denied that Maximino, Sr. intended to give the six
Quezon City lots to Natividad. As Romeo testified, their parents executed the Deed
of Sale in favor of Natividad because the latter was the only female and the only
unmarried member of the family.[34] She was thus entrusted with the real properties
in behalf of her siblings. As she herself admitted, she intended to convey Lots 10
and 11 to Jose in the event the latter returned from abroad. There was thus an
implied trust constituted in her favor. Art. 1449 of the Civil Code states:
There is also an implied trust when a donation is made to a person but it appears
that although the legal estate is transmitted to the donee, he nevertheless is either
to have no beneficial interest or only a part thereof.
There being an implied trust, the lots in question are therefore subject to
collation in accordance with Art. 1061 which states:
Every compulsory heir, who succeeds with other compulsory heirs, must bring into
the mass of the estate any property or right which he may have received from the
decedent, during the lifetime of the latter, by way of donation, or any other
gratuitous title, in order that it may be computed in the determination of the
legitime of each heir, and in the account of the partition.
As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva Marketing,
Corp. on April 20, 1979[35] will have to be upheld for Ros-Alva Marketing is an
innocent purchaser for value which relied on the title of Natividad. The rule is
settled that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige
him to go behind the certificate to determine the condition of the property. [36]
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, and De Leon, Jr., JJ., concur.
Buena, J., no part.
Period Applicable
P21,000.00
P22,000.00
P23,000.00
P24,000.00
of lease without the same being renewed, the LESSEE shall vacate the
Leased Property at its expense.
On 7 January 1986, petitioner obtained from the Ministry of Human Settlements
a Temporary Use Permit[2] for the proposed rock crushing project. The permit was to
be valid for two years unless sooner revoked by the Ministry.
On 16 January 1986, private respondents wrote petitioner requesting payment
of the first annual rental in the amount of P240,000 which was due and payable
upon the execution of the contract. They also assured the latter that they had
already stopped considering the proposals of other aggregates plants to lease the
property because of the existing contract with petitioner. [3]
In its reply-letter, petitioner argued that under paragraph 1 of the lease
contract, payment of rental would commence on the date of the issuance of an
industrial clearance by the Ministry of Human Settlements, and not from the date of
signing of the contract. It then expressed its intention to terminate the contract, as
it had decided to cancel or discontinue with the rock crushing project "due to
financial, as well as technical, difficulties." [4]
The private respondents refused to accede to petitioner's request for the
pretermination of the lease contract. They insisted on the performance of
petitioner's obligation and reiterated their demand for the payment of the first
annual rental.[5]
Petitioner objected to the claim of the private respondents and argued that it
was "only obligated to pay ... the amount of P20,000.00 as rental payments for the
one-month period of lease, counted from 07 January 1986 when the Industrial
Permit was issued by the Ministry of Human Settlements up to 07 February 1986
when the Notice of Termination was served" [6]on private respondents.
On 19 May 1986, the private respondents instituted with the Regional Trial Court
of Pasig an action against petitioner for Specific Performance with Damages. [7] The
case was docketed as Civil Case No. 53444 at Branch 160 of the said court. After
the filing by petitioner of its Answer with Counterclaim, the case was set for trial on
the merits.
What transpired next was summarized by the trial court in this wise:
Plaintiffs rested their case on September 7, 1987 (p. 87 rec.). Defendant asked for
postponement of the reception of its evidence scheduled on August 10, 1988 and as
prayed for, was reset to August 25, 1988 (p. 91 rec.) Counsel for defendant again
asked for postponement, through representative, as he was presently
indisposed. The case was reset, intransferable to September 15 and 26, 1988 (p. 94
rec.) On September 2, 1988, the office of the Government Corporate Counsel
entered its appearance for defendant (p. 95, rec.) and the original counsel later
withdrew his appearance. On September 15, 1988 the Government Corporate
Counsel asked for postponement, represented by Atty. Elpidio de Vega, and with his
conformity in open court, the hearing was reset, intransferable to September 26 and
October 17, 1988. (p. 98, rec.) On September 26, 1988 during the hearing,
defendant's counsel filed a motion for postponement (urgent) as he had "sore
eyes", a medical certificate attached.
Counsel for plaintiffs objected to the postponement and the court considered the
evidence of the government terminated or waived. The case was deemed
submitted for decision upon the filing of the memorandum. Plaintiffs filed their
memorandum on October 26, 1988. (p. 111, rec.).
On October 18, 1988 in the meantime, the defendant filed a motion for
reconsideration of the order of the court on September 26, 1988 (p. 107, rec.) The
motion was not asked to be set for hearing (p. 110 rec.)There was also no proof of
notice and service to counsel for plaintiff. The court in the interest of justice set the
hearing on the motion on November 29, 1988. (p. 120, rec.) but despite notice,
again defendant's counsel was absent (p. 120-A, dorsal side, rec.) without
reason. The court reset the motion to December 16, 1988, in the interest of
justice. The motion for reconsideration was denied by the court. A second motion
for reconsideration was filed and counsel set for hearing the motion on January 19,
1989. During the hearing, counsel for the government was absent. The motion was
deemed abandoned but the court at any rate, after a review of the incidents and the
grounds relied upon in the earlier motion of defendant, found no reason to disturb
its previous order.[8]
On 12 April 1989, the trial court rendered a decision ordering petitioner to pay
the private respondents the amount of P492,000 which represented the rentals for
two years, with legal interest from 7 January 1986 until the amount was fully paid,
plus attorney's fees in the amount of P20,000 and costs.[9]
Petitioner then appealed to the Court of Appeals alleging that the trial court
erred in ordering it to pay the private respondent the amount of P492,000 and in
denying it the right to be heard.
Upon the affirmance of the trial court's decision [10] and the denial of its motion
for reconsideration, petitioner came to this Court ascribing to the respondent Court
of Appeals the same alleged errors and reiterating their arguments.
First. Petitioner invites the attention of this Court to paragraph 1 of the lease
contract, which reads: "This lease shall be for a period of five (5) years,
commencing on the date of issuance of the industrial clearance by the Ministry of
Human Settlements...." It then submits that the issuance of an industrial clearance
is a suspensive condition without which the rights under the contract would not be
acquired. The Temporary Use Permit is not the industrial clearance referred to in
the contract; for the said permit requires that a clearance from the National
Production Control Commission be first secured, and besides, there is a finding in
the permit that the proposed project does not conform to the Zoning Ordinance of
Rodriguez, (formerly Montalban), Rizal, where the leased property is
located. Without the industrial clearance the lease contract could not become
effective and petitioner could not be compelled to perform its obligation under the
contract.
Petitioner is now estopped from claiming that the Temporary Use Permit was not
the industrial clearance contemplated in the contract. In its letter dated 24 April
1986, petitioner states:
We wish to reiterate PNCC Management's previous stand that it is only obligated
to pay your clients the amount of P20,000.00 as rental payments for the onemonth period of the lease, counted from 07 January 1986 when the Industrial
Permit was issued by the Ministry of Human Settlements up to 07 February
1986 when the Notice of Termination was served on your clients.
[11]
(Underscoring Supplied).
The "Industrial Permit" mentioned in the said letter could only refer to the
Temporary Use Permit issued by the Ministry of Human Settlements on 7 January
1986. And it can be gleaned from this letter that petitioner has considered the
permit as industrial clearance; otherwise, petitioner could have simply told the
private respondents that its obligation to pay rentals has not yet arisen because the
Temporary Use Permit is not the industrial clearance contemplated by
them. Instead, petitioner recognized its obligation to pay rental counted from the
date the permit was issued.
Also worth noting is the earlier letter of petitioner; thus:
[P]lease be advised of PNCC Management's decision to cancel or discontinue
with the rock crushing project due to financial as well as technical
difficulties. In view thereof, we would like to terminate our Lease Contract
dated 18 November, 1985. Should you agree to the mutual termination of
our Lease Contract, kindly indicate your conformity hereto by affixing your
signature on the space provided below. May we likewise request Messrs.
Rene, Jose and Antonio, all surnamed Raymundo and Mrs. Socorro A.
Raymundo as Attorney-in-Fact of Amador S. Raymundo to sign on the spaces
indicated below.[12]
It can be deduced from this letter that the suspensive condition - issuance of
industrial clearance - has already been fulfilled and that the lease contract has
become operative. Otherwise, petitioner did not have to solicit the conformity of the
private respondents to the termination of the contract for the simple reason that no
juridical relation was created because of the non-fulfillment of the condition.
Moreover, the reason of petitioner in discontinuing with its project and in
consequently cancelling the lease contract was financial as well as technical
difficulties, not the alleged insufficiency of the Temporary Use Permit.
Second. Invoking Article 1266 and the principle of rebus sic stantibus,
petitioner asserts that it should be released from the obligatory force of the contract
of lease because the purpose of the contract did not materialize due to unforeseen
events and causes beyond its control, i.e., due to abrupt change in political climate
after the EDSA Revolution and financial difficulties.
It is a fundamental rule that contracts, once perfected, bind both contracting
parties, and obligations arising therefrom have the force of law between the parties
and should be complied with in good faith. [13] But the law recognizes exceptions to
the principle of the obligatory force of contracts. One exception is laid down in
Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall
also be released when the prestation becomes legally or physically impossible
without the fault of the obligor."
Petitioner cannot, however, successfully take refuge in the said article, since it is
applicable only to obligations "to do", and not to obligations "to give". [14] An
obligation "to do" includes all kinds of work or service; while an obligation "to give"
is a prestation which consists in the delivery of a movable or an immovable thing in
order to create a real right, or for the use of the recipient, or for its simple
possession, or in order to return it to its owner. [15]
The obligation to pay rentals[16] or deliver the thing in a contract of lease [17] falls
within the prestation to give; hence, it is not covered within the scope of Article
1266. At any rate, the unforeseen event and causes mentioned by petitioner are
contract does not affect the validity or existence of the contract; an exception is
when the realization of such motive or particular purpose has been made a
condition upon which the contract is made to depend. [24] The exception is not apply
here.
Third. According to petitioner, the award of P492,000 representing the rent for
two years is excessive, considering that it did not benefit from the
property. Besides, the temporary permit, conformably with the express provision
therein, was deemed automatically revoked for failure of petitioner to use the same
within one year from the issuance thereof. Hence, the rent payable should only be
for one year.
Petitioner cannot be heard to complain that the award is excessive. The
temporary permit was valid for two years but was automatically revoked because of
its non-use within one year from its issuance. The non-use of the permit and the
non-entry into the property subject of the lease contract were both imputable to
petitioner and cannot, therefore, be taken advantage of in order to evade or lessen
petitioners monetary obligation. The damage or prejudice to private respondents is
beyond dispute. They unquestionably suffered pecuniary losses because of their
inability to use the leased premises. Thus, in accordance with Article 1659 of the
Civil Code,[25] they are entitled to indemnification for damages; and the award
of P492,000 is fair and just under the circumstances of the case.
Finally, petitioner submits that the trial court gravely abused its discretion in
denying petitioner the right to be heard.
We disagree. The trial court was in fact liberal in granting several
postponements[26] to petitioner before it deemed terminated and waived the
presentation of evidence in petitioners behalf.
It must be recalled that private respondents rested their case on 7 September
1987 yet.[27] Almost a year after, or on 10 August 1988 when it was petitioners turn
to present evidence, petitioners counsel asked for postponement of the hearing to
25 August 1988 due to conflict of schedules, [28] and this was granted.[29] At the
rescheduled hearing, petitioners counsel, through a representative, moved anew
for postponement, as he was allegedly indisposed. [30] The case was then reset
intransferable to September 15 and 26, 1988. [31] On 2 September 1988, the Office
of the Government Corporate Counsel, through Atty. Elpidio J. Vega, entered its
appearance for the petitioner,[32] and later the original counsel withdrew his
appearance.[33] On 15 September 1988, Atty. Vega requested for postponement to
enable him to go over the records of the case. [34] With his conformity, the hearing
was reset intransferable to September 26 and October 17, 1988. [35] In the morning
of 26 September 1988, the court received Atty. Vegas Urgent Motion for
Postponement on the ground that he was afflicted with conjunctivitis or sore eyes.
[36]
This time, private respondents objected; and upon their motion, the court
deemed terminated and waived the presentation of evidence for the petitioner.
[37]
Nevertheless, before the court considered the case submitted for decision, it
required the parties to submit their respective memoranda within thirty days. [38] But
petitioner failed to file one.
Likewise, the court was liberal in respect to petitioners motion for
reconsideration. Notwithstanding the lack of request for hearing and proof of notice
and service to private respondents, the court set the hearing of the said motion on
29 November 1988.[39] Upon the denial of the said motion for lack of merit,
[40]
petitioner filed a second motion for reconsideration. But during the hearing of
the motion on a date selected by him, Atty. Vega was absent for no reason at all,
despite due notice.[41]
From the foregoing narration of procedural antecedents, it cannot be said that
the petitioner was deprived of its day in court. The essence of due process is simply
an opportunity to be heard.[42] To be heard does not only mean oral arguments in
court; one may be heard also through pleadings. Where opportunity to be heard,
either through oral arguments or pleadings, is accorded, there is no denial of
procedural due process.[43]
WHEREFORE, the instant petition is DENIED and the challenged decision of the
Court of Appeals is AFFIRMED in toto.
No pronouncements as to costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.
This is the main principle used in denying the present Petition for Review under
Rule 45 of the Rules of Court. Petitioner assails the December 22, 1998 Decision [1] of
the Court of Appeals (CA) in CA-GR CV No. 56203, the dispositive portion of which
reads as follows:
WHEREFORE, the judgment appealed from is hereby amended in the sense that
defendant-appellant Rodolfo M. Cuenca [herein respondent] is RELEASED from
liability to pay any amount stated in the judgment.
Furthermore, [Respondent] Rodolfo M. Cuencas counterclaim is
hereby DISMISSED for lack of merit.
Appellants individually and collectively refused to pay the [Petitioner] SBTC. Thus,
SBTC filed a complaint for collection of sum of money on 14 June 1993, resulting
after trial on the merits in a decision by the court a quo, x x x from which
[Respondent] Cuenca appealed.
Ruling of the Court of Appeals
In releasing Respondent Cuenca from liability, the CA ruled that the 1989 Loan
Agreement had novated the 1980 credit accommodation earlier granted by the
bank to Sta. Ines.Accordingly, such novation extinguished the Indemnity
Agreement, by which Cuenca, who was then the Board chairman and president of
Sta. Ines, had bound himself solidarily liable for the payment of the loans secured
by that credit accommodation. It noted that the 1989 Loan Agreement had been
executed without notice to, much less consent from, Cuenca who at the time was no
longer a stockholder of the corporation.
The appellate court also noted that the Credit Approval Memorandum had
specified that the credit accommodation was for a total amount of P8 million, and
that its expiry date was November 30, 1981. Hence, it ruled that Cuenca was liable
only for loans obtained prior to November 30, 1981, and only for an amount not
exceeding P8 million.
It further held that the restructuring of Sta. Ines obligation under the 1989 Loan
Agreement was tantamount to a grant of an extension of time to the debtor without
the consent of the surety. Under Article 2079 of the Civil Code, such extension
extinguished the surety.
The CA also opined that the surety was entitled to notice, in case the bank and
Sta. Ines decided to materially alter or modify the principal obligation after the
expiry date of the credit accommodation.
Hence, this recourse to this Court.[7]
The Issues
In its Memorandum, petitioner submits the following for our consideration: [8]
A. Whether or not the Honorable Court of Appeals erred in releasing
Respondent Cuenca from liability as surety under the Indemnity
Agreement for the payment of the principal amount of twelve million two
hundred thousand pesos (P12,200,000.00) under Promissory Note No.
RL/74/596/88 dated 9 March 1988 and Promissory Note No. RL/74/597/88
dated 9 March 1988, plus stipulated interests, penalties and other
charges due thereon;
i. Whether or not the Honorable Court of Appeals erred in ruling
that Respondent Cuencas liability under the Indemnity
Agreement covered only availments on SIMCs credit line to the
extent of eight million pesos (P8,000,000.00) and made on or
before 30 November 1981;
ii. Whether or not the Honorable Court of Appeals erred in ruling
that the restructuring of SIMCs indebtedness under the P8
million credit accommodation was tantamount to an extension
granted to SIMC without Respondent Cuencas consent, thus
appeal by a literal application of the procedural rules relating to pro forma motions
for reconsideration.
Service by Registered Mail Sufficiently Explained
the 1980 credit accomodation. This is evident from its explicit provision to
liquidate the principal and the interest of the earlier indebtedness, as the
following shows:
1.02. Purpose. The First Loan shall be applied to liquidate the principal portion of
the Borrowers present total outstanding Indebtedness to the Lender (the
Indebtedness) while the Second Loan shall be applied to liquidate the past due
interest and penalty portion of the Indebtedness. [19] (Italics supplied.)
The testimony of an officer[20] of the bank that the proceeds of the 1989 Loan
Agreement were used to pay-off the original indebtedness serves to strengthen
this ruling.[21]
Furthermore, several incompatibilities between the 1989 Agreement and the
1980 original obligation demonstrate that the two cannot coexist. While the 1980
credit accommodation had stipulated that the amount of loan was not to exceed P8
million,[22] the 1989 Agreement provided that the loan was P12.2 million. The
periods for payment were also different.
Likewise, the later contract contained conditions, positive covenants and
negative covenants not found in the earlier obligation. As an example of a positive
covenant, Sta. Ines undertook from time to time and upon request by the Lender,
[to] perform such further acts and/or execute and deliver such additional documents
and writings as may be necessary or proper to effectively carry out the provisions
and purposes of this Loan Agreement. [23] Likewise, SIMC agreed that it would not
create any mortgage or encumbrance on any asset owned or hereafter acquired,
nor would it participate in any merger or consolidation. [24]
Since the 1989 Loan Agreement had extinguished the original credit
accommodation, the Indemnity Agreement, an accessory obligation, was
necessarily extinguished also, pursuant to Article 1296 of the Civil Code, which
provides:
ART. 1296. When the principal obligation is extinguished in consequence of a
novation, accessory obligations may subsist only insofar as they may benefit third
persons who did not give their consent.
Alleged Extension
Petitioner insists that the 1989 Loan Agreement was a mere renewal or
extension of the P8 million original accommodation; it was not a novation. [25]
This argument must be rejected. To begin with, the 1989 Loan Agreement
expressly stipulated that its purpose was to liquidate, not to renew or extend, the
outstanding indebtedness. Moreover, respondent did not sign or consent to the
1989 Loan Agreement, which had allegedly extended the original P8 million credit
facility. Hence, his obligation as a surety should be deemed extinguished, pursuant
to Article 2079 of the Civil Code, which specifically states that [a]n extension
granted to the debtor by the creditor without the consent of the guarantor
extinguishes the guaranty. x x x. In an earlier case,[26] the Court explained the
rationale of this provision in this wise:
The theory behind Article 2079 is that an extension of time given to the principal
debtor by the creditor without the suretys consent would deprive the surety of his
right to pay the creditor and to be immediately subrogated to the creditors
remedies against the principal debtor upon the maturity date. The surety is said to
be entitled to protect himself against the contingency of the principal debtor or the
indemnitors becoming insolvent during the extended period.
Binding Nature of the Credit Approval Memorandum
As noted earlier, the appellate court relied on the provisions of the Credit
Approval Memorandum in holding that the credit accommodation was only for P8
million, and that it was for a period of one year ending on November 30,
1981. Petitioner objects to the appellate courts reliance on that document,
contending that it was not a binding agreement because it was not signed by the
parties. It adds that it was merely for its internal use.
We disagree. It was petitioner itself which presented the said document to prove
the accommodation. Attached to the Complaint as Annex A was a copy thereof
evidencing the accommodation. [27] Moreover, in its Petition before this Court, it
alluded to the Credit Approval Memorandum in this wise:
4.1 On 10 November 1980, Sta. Ines Melale Corporation (SIMC) was granted by
the Bank a credit line in the aggregate amount of Eight Million Pesos
(P8,000,000.00) to assist SIMC in meeting the additional capitalization requirements
for its logging operations. For this purpose, the Bank issued a Credit Approval
Memorandum dated 10 November 1980.
Clearly, respondent is estopped from denying the terms and conditions of the P8
million credit accommodation as contained in the very document it presented to the
courts. Indeed, it cannot take advantage of that document by agreeing to be bound
only by those portions that are favorable to it, while denying those that are
disadvantageous.
Second Issue: Alleged Waiver of Consent
Pursuing
another
course,
petitioner
contends
that
Respondent
Cuenca impliedly gave his consent to any modification of the credit
accommodation or otherwise waived his right to be notified of, or to give consent to,
the same.[28] Respondents consent or waiver thereof is allegedly found in the
Indemnity Agreement, in which he held himself liable for the credit accommodation
including
[its]
substitutions, renewals,
extensions, increases,
amendments,
conversions and revival. It explains that the novation of the original credit
accommodation by the 1989 Loan Agreement is merely its renewal, which
connotes cessation of an old contract and birth of another one x x x.[29]
At the outset, we should emphasize that an essential alteration in the terms of
the Loan Agreement without the consent of the surety extinguishes the latters
obligation. As the Court held in National Bank v. Veraguth,[30] [i]t is fundamental in
the law of suretyship that any agreement between the creditor and the principal
debtor which essentially varies the terms of the principal contract, without the
consent of the surety, will release the surety from liability.
In this case, petitioners assertion - that respondent consented to the alterations
in the credit accommodation -- finds no support in the text of the Indemnity
Agreement, which isreproduced hereunder:
Rodolfo M. Cuenca of legal age, with postal address c/o Sta. Ines Malale Forest
Products Corp., Alco Bldg., 391 Buendia Avenue Ext., Makati Metro Manila for and in
valid as to Sta. Ines if no notice were given; but would still be valid as to respondent
to whom no notice need be given. The latters liability would thus be more
burdensome than that of the former. Such untenable theory is contrary to the
principle that a surety cannot assume an obligation more onerous than that of the
principal.[35]
The present controversy must be distinguished from Philamgen v. Mutuc,[36] in
which the Court sustained a stipulation whereby the surety consented to be bound
not only for the specified period, but to any extension thereafter made, an
extension x x x that could be had without his having to be notified.
In that case, the surety agreement contained this unequivocal stipulation: It is
hereby further agreed that in case of any extension of renewal of the bond, we
equally bind ourselves to the Company under the same terms and conditions as
herein provided without the necessity of executing another indemnity agreement for
the purpose and that we hereby equally waive our right to be notified of any
renewal or extension of the bond which may be granted under this indemnity
agreement.
In the present case, there is no such express stipulation. At most, the alleged
basis of respondents waiver is vague and uncertain. It confers no clear
authorization on the bank orSta. Ines to modify or extend the original obligation
without the consent of the surety or notice thereto.
Continuing Surety
continuing one which shall remain in full force and effect until this bank is notified
of its revocation. Since the bank had not been notified of such revocation, the
surety was held liable even for the subsequent obligations of the principal borrower.
No similar provision is found in the present case. On the contrary, respondents
liability was confined to the 1980 credit accommodation, the amount and the expiry
date of which were set down in the Credit Approval Memorandum.
Special Nature of the JSS
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
Issues
Petitioners assign the following errors in the appealed Decision:
1.
that the Court of Appeals erred in declaring that surety can exist even if there
was no existing indebtedness at the time of its execution.
2.
that the Court of Appeals erred when it declared that there was no novation.
3.
that the Court of Appeals erred when it declared, that the evidence was
sufficient to prove the amount of the claim.[12]
Petitioners argue that future debts which can be guaranteed under Article 2053
of the Civil Code refer only to debts existing at the time of the constitution of the
guaranty but the amount thereof is unknown, and that a guaranty being an
accessory obligation cannot exist without a principal obligation. Petitioners claim
that the surety undertakings cannot be made to cover the Financing Agreement
executed by Fortune, Filinvest and CARCO since the latter contract was not yet in
existence when said surety contracts were entered into.
Petitioners further aver that the Financing Agreement would effect a novation of
the surety contracts since it changed the principal terms of the surety contracts and
imposed additional and onerous obligations upon the sureties.
Lastly, petitioners claim that no accounting of the payments made by Petitioner
Fortune to Respondent Filinvest was done by the latter. Hence, there could be no
way by which the sureties can ascertain the correct amount of the balance, if any.
Respondent Filinvest, on the other hand, imputes estoppel (by pleadings or by
judicial admission) upon petitioners when in their Motion to Discharge
Attachment, they admitted their liability as sureties thus:
Defendants Chua and Rodrigueza could not have perpetrated fraud because they
are only sureties of defendant Fortune Motors x x x;
x x x The defendants (referring to Rodrigueza and Chua) are not parties to the trust
receipts agreements since they are ONLY sureties x x x. [13]
In rejecting the arguments of petitioners and in holding that they (Fortune and
the sureties) were jointly and solidarily liable to Filinvest, the trial court declared:
As to the alleged non-existence of a principal obligation when the surety
agreement was signed, it is enought (sic) to state that a guaranty may also be
given as security for future debts, the amount of which is not known (Art. 2053, New
Civil Code). In the case of NARIC vs. Fojas, L-11517, promulgated April 10, 1958, it
was ruled that a bond posted to secure additional credit that the principal debtor
had applied for, is not void just because the said bond was signed and filed before
the additional credit was extended by the creditor. The obligation of the sureties on
future obligations of Fortune is apparent from a proviso under the Surety
Undertakings marked Exhs. B and C that the sureties agree with the plaintiff as
follows:
In consideration of your entering into an arrangement with the party (Fortune)
named above, x x x x by which you may purchase or otherwise require from, and
or enter into with obligor x x x trust receipt x x x arising out of wholesale and/or
liability under the AWFA. Instead, quite uncharacteristic of persons who have just
been asked to pay an obligation to which they believe they are not liable, Chua and
Rodrigueza elected or chose not to answer said demand letters. Then, too,
considering that appellant Chua is the corporate president of Fortune and a
signatory to the AWFA, he should have simply had it stated in the AWFA or in a
separate document that the Surety Undertakings do not cover Fortunes
obligations in the aforementioned AWFA, trust receipts or demand drafts.
Appellants argue that it was unfair for Filinvest to have executed the AWFA only
after two (2) years from the date of the Surety undertakings because Chua and
Rodrigueza were thereby made to wait for said number of years just to know what
kind of obligation they had to guarantee.
The argument cannot hold water. In the first place, the Surety Undertakings did
not provide that after a period of time the same will lose its force and effect. In the
second place, if Chua and Rodrigueza did not want to guarantee the obligations of
Fortune under the AWFA, trust receipts and demand drafts, then why did they not
simply terminate the Surety Undertakings by serving ten (10) days written notice
to Filinvest as expressly allowed in said surety agreements. It is highly plausible
that the reason why the Surety Undertakings were not terminated was because the
execution of the same was part of the consideration why Filinvest and CARCO
agreed to enter into the AWFA with Fortune. [15]
The Courts Ruling
We affirm the decisions of the trial and appellate courts.
First Issue: Surety May Secure Future Obligations
The case at bench falls on all fours with Atok Finance Corporation vs. Court of
Appeals[16] which reiterated our rulings in National Rice and Corn Corporation
(NARIC) vs. Court of Appeals[17] and Rizal Commercial Banking Corporation vs. Arro.
[18]
In Atok Finance, Sanyu Chemical as principal, and Sanyu Trading along with
individual private stockholders of Sanyu Chemical, namely, spouses Daniel and
Nenita Arrieta, Leopoldo Halili and Pablito Bermundo, as sureties, executed a
continuing suretyship agreement in favor of Atok Finance as creditor. Under the
agreement, Sanyu Trading and the individual private stockholders and officers of
Sanyu Chemical jointly and severally unconditionally guarantee(d) to Atok Finance
Corporation (hereinafter called Creditor), the full, faithful and prompt payment and
discharge of any and all indebtedness of [Sanyu Chemical] x x x to the
Creditor. Subsequently, Sanyu Chemical assigned its trade receivables outstanding
with a total face value of P125,871.00 to Atok Finance in consideration of receipt of
the amount ofP105,000.00. Later, additional trade receivables with a total face
value of P100,378.45 were also assigned. Due to nonpayment upon maturity, Atok
Finance commenced action against Sanyu Chemical, the Arrieta spouses, Bermundo
and Halili to collect the sum of P120,240.00 plus penalty charges due and
payable. The individual private respondents contended that the continuing
suretyship agreement, being an accessory contract, was null and void since, at the
time of its execution, Sanyu Chemical had no pre-existing obligation due to Atok
Finance. The trial court rendered a decision in favor of Atok Finance and ordered
defendants to pay, jointly and severally, aforesaid amount to Atok.
On appeal, the then Intermediate Appellate Court reversed the trial court and
dismissed the complaint on the ground that there was no proof that when the
suretyship agreement was entered into, there was a pre-existing obligation which
served as the principal obligation between the parties. Furthermore, the future
debts alluded to in Article 2053 refer to debts already existing at the time of the
constitution of the agreement but the amount thereof is unknown, unlike in the case
at bar where the obligation was acquired two years after the agreement.
We ruled then that the appellate court was in serious error. The distinction
which said court sought to make with respect to Article 2053 (that future debts
referred to therein relate to debts already existing at the time of the constitution of
the agreement but the amount [of which] is unknown and not to debts not yet
incurred and existing at that time) has previously been rejected, citing
the RCBC and NARIC cases. We further said:
x x x Of course, a surety is not bound under any particular principal obligation
until that principal obligation is born. But there is no theoretical or doctrinal
difficulty inherent in saying that the suretyship agreement itself is valid and binding
even before the principal obligation intended to be secured thereby is born, any
more than there would be in saying that obligations which are subject to a condition
precedent are valid and binding before the occurrence of the condition precedent.
Comprehensive or continuing surety agreements are in fact quite commonplace in
present day financial and commercial practice. A bank or financing company which
anticipates entering into a series of credit transactions with a particular company,
commonly requires the projected principal debtor to execute a continuing surety
agreement along with its sureties. By executing such an agreement, the principal
places itself in a position to enter into the projected series of transactions with its
creditor; with such suretyship agreement, there would be no need to execute a
separate surety contract or bond for each financing or credit accommodation
extended to the principal debtor.
In Dio vs. Court of Appeals,[19] we again had occasion to discourse on
continuing guaranty/suretyship thus:
x x x A continuing guaranty is one which is not limited to a single transaction, but
which contemplates a future course of dealing, covering a series of transactions,
generally for an indefinite time or until revoked. It is prospective in its operation
and is generally intended to provide security with respect to future transactions
within certain limits, and contemplates a succession of liabilities, for which, as they
accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is
one which covers all transactions, including those arising in the future, which are
within the description or contemplation of the contract, of guaranty, until the
expiration or termination thereof. A guaranty shall be construed as continuing when
by the terms thereof it is evident that the object is to give a standing credit to the
principal debtor to be used from time to time either indefinitely or until a certain
period; especially if the right to recall the guaranty is expressly reserved. Hence,
where the contract of guaranty states that the same is to secure advances to be
made from time to time the guaranty will be construed to be a continuing one.
In other jurisdictions, it has been held that the use of particular words and
expressions such as payment of any debt, any indebtedness, any deficiency, or
any sum, or the guaranty of any transaction or money to be furnished the
principal debtor at any time, or on such time that the principal debtor may
require, have been construed to indicate a continuing guaranty. [20]
We have no reason to depart from our uniform ruling in the above-cited
cases. The facts of the instant case bring us to no other conclusion than that the
agreement or by the acts of the parties clearly demonstrating the intent to dissolve
the old obligation as a consideration for the emergence of the new one. The will to
novate, whether totally or partially, must appear by express agreement of the
parties, or by their acts which are too clear and unequivocal to be mistaken. [25]
Under the surety undertakings however, the obligation of the sureties referred
to absolutely, unconditionally and solidarily guaranteeing the full, faithful and
prompt performance, payment and discharge of all obligations of Petitioner Fortune
with respect to any and all contracts and other agreements with Respondent
Filinvest in force at that time or thereafter made. There were no qualifications,
conditions or reservations stated therein as to the extent of the suretyship. The
Financing Agreement, on the other hand, merely detailed the obligations of Fortune
to CARCO (succeeded by Filinvest as assignee). The allegation of novation by
petitioners is, therefore, misplaced. There is no incompatibility of obligations to
speak of in the two contracts. They can stand together without conflict.
Furthermore, the parties have not performed any explicit and unequivocal act to
manifest their agreement or intention to novate their contract. Neither did the
sureties object to the Financing Agreement nor try to avoid liability thereunder at
the time of its execution. As aptly discussed by the Court of Appeals:
x x x For another, if Chua and Rodrigueza truly believed that the surety
undertakings they executed should not cover Fortunes obligations under the AWFA
(Financing Agreement), then why did they not inform Filinvest of such fact when the
latter sent them the aforementioned demand letters (Exhs. K and L) urging them
to pay Fortunes liability under the AWFA. Instead, quite uncharacteristic of persons
who have just been asked to pay an obligation to which they are not liable, Chua
and Rodrigueza elected or chose not to answer said demand letters. Then, too,
considering that appellant Chua is the corporate president of Fortune and a
signatory to the AWFA, he should have simply had it stated in the AWFA or in a
separate document that the Surety Undertakings do not cover Fortunes
obligations in the aforementioned AWFA, trust receipts or demand drafts. [26]
Third Issue: Amount of Claim Substantiated
The contest on the correct amount of the liability of petitioners is a purely
factual issue. It is an oft repeated maxim that the jurisdiction of this Court in cases
brought before it from the Court of Appeals under Rule 45 of the Rules of Court is
limited to reviewing or revising errors of law. It is not the function of this Court to
analyze or weigh evidence all over again unless there is a showing that the findings
of the lower court are totally devoid of support or are glaringly erroneous as to
constitute serious abuse of discretion. Factual findings of the Court of Appeals are
conclusive on the parties and carry even more weight when said court affirms the
factual findings of the trial court. [27]
In the case at bar, the findings of the trial court and the Court of Appeals with
respect to the assigned error are based on substantial evidence which were not
refuted with contrary proof by petitioners. Hence, there is no necessity to depart
from the above judicial dictum.
WHEREFORE, premises considered, the petition is DENIED and the assailed
Decision of the Court of Appeals concurring with the decision of the trial court is
hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
vs. ANTONIO
P.
DECISION
GONZAGA-REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court. The petition seeks to reverse and set aside the Decision [1] dated February 10,
2000 of the Court of Appeals and its Resolution [2] dated April 7, 2000 denying
petitioners Motion for Reconsideration thereto. The appellate court decision
reversed the Decision[3] dated November 11, 1997 of the Regional Trial Court of
Makati, Branch 145 in Civil Case No. 96-1211.
The facts of the case, as stated in the Decision of the Court of Appeals dated
February 10, 2000, are as follows:
The Anglo-Asean Bank and Trust Limited (Anglo-Asean, for brevity), is a private
bank registered and organized to do business under the laws of the Republic of
Vanuatu but not in the Philippines. Its business consists primarily in receiving fund
placements by way of deposits from institutions and individual investors from
different parts of the world and thereafter investing such deposits in money market
placements and potentially profitable capital ventures in Hongkong, Europe and the
United States for the purpose of maximizing the returns on those investments.
Enticed by the lucrative prospects of doing business with Anglo-Asean, Abelardo
Licaros, a Filipino businessman, decided to make a fund placement with said bank
sometime in the 1980s. As it turned out, the grim outcome of Licaros foray in
overseas fund investment was not exactly what he envisioned it to be. More
particularly, Licaros, after having invested in Anglo-Asean, encountered tremendous
and unexplained difficulties in retrieving, not only the interest or profits, but even
the very investments he had put in Anglo-Asean.
Confronted with the dire prospect of not getting back any of his investments,
Licaros then decided to seek the counsel of Antonio P. Gatmaitan, a reputable
banker and investment manager who had been extending managerial, financial and
investment consultancy services to various firms and corporations both here and
abroad. To Licaros relief, Gatmaitan was only too willing enough to
help. Gatmaitan voluntarily offered to assume the payment of Anglo-Aseans
indebtedness to Licaros subject to certain terms and conditions. In order to
effectuate and formalize the parties respective commitments, the two executed a
notarized MEMORANDUM OF AGREEMENT on July 29, 1988 (Exh. B; also Exhibit
1), the full text of which reads:
Memorandum of Agreement
b.
Grant the PARTY OF THE SECOND PART the full power and authority, for his
own use and benefit, but at his own cost and expense, to demand, collect, receive,
compound, compromise and give acquittance for the same or any part thereof, and
in the name of the PARTY OF THE FIRST PART, to prosecute, and withdraw any suit
or proceedings therefor;
c.
Agree and stipulate that the debt assigned herein is justly owing and due to
the PARTY OF THE FIRST PART from the said OFFSHORE BANK, and that the PARTY
OF THE FIRST PART has not done and will not cause anything to be done to diminish
or discharge said debt, or to delay or prevent the PARTY OF THE SECOND PART from
collecting the same; and;
d.
At the request of the PARTY OF SECOND PART and the latters own cost and
expense, to execute and do all such further acts and deeds as shall be reasonably
necessary for proving said debt and to more effectually enable the PARTY OF THE
SECOND PART to recover the same in accordance with the true intent and meaning
of the arrangements herein.
IN WITNESS WHEREOF, the parties have caused this MEMORANDUM OF AGREEMENT
to be signed on the date and place first written above.
Sgd.
Sgd.
ABELARDO B. LICAROS
PARTY OF THE FIRST PART
ANTONIO P. GATMAITAN
PARTY OF THE FIRST PART
________________________
On or before July 15, 1993, I promise to pay to Abelardo B. Licaros the sum of
Philippine Pesos 3,150,000 (P3,150,000) without interest as material consideration
for the full settlement of his money claims from ANGLO-ASEAN BANK, referred to in
the Memorandum of Agreement as the OFFSHORE BANK.
As security for the payment of this Promissory Note, I hereby ASSIGN, CEDE and
TRANSFER, Seventy Percent (70%) of ALL CASH DIVIDENDS, that may be due or
owing to me as the registered owner of ___________________ (__________) shares of
stock in the Prudential Life Realty, Inc.
This assignment shall likewise include SEVENTY PERCENT (70%) of cash dividends
that may be declared by Prudential Life Realty, Inc. and due or owing to Prudential
Life Plan, Inc., of which I am a stockholder, to the extent of or in proportion to my
aforesaid shareholding in Prudential Life Plan, Inc., the latter being the holding
company of Prudential Life Realty, Inc.
In the event that I decide to sell or transfer my aforesaid shares in either or both the
Prudential Life Plan, Inc. or Prudential Life Realty, Inc. and the Promissory Note
remains unpaid or outstanding, I hereby give Mr. Abelardo B. Licaros the first option
to buy the said shares.
Manila, Philippines
July _____, 1988
(SGD.)
Antonio P. Gatmaitan
__________________
Francisco A. Alba
President, Prudential Life Plan, Inc..
Thereafter, Gatmaitan presented to Anglo-Asean the Memorandum of Agreement
earlier executed by him and Licaros for the purpose of collecting the latters
placement thereat of U.S.$150,000.00. Albeit the officers of Anglo-Asean allegedly
committed themselves to look into [this matter], no formal response was ever
made by said bank to either Licaros or Gatmaitan. To date, Anglo-Asean has not
acted on Gatmaitans monetary claims.
Evidently, because of his inability to collect from Anglo-Asean, Gatmaitan did not
bother anymore to make good his promise to pay Licaros the amount stated in his
promissory note (Exh. A; also Exh. 2). Licaros, however, thought differently. He
felt that he had a right to collect on the basis of the promissory note regardless of
the outcome of Gatmaitan's recovery efforts. Thus, in July 1996, Licaros, thru
counsel, addressed successive demand letters to Gatmaitan (Exhs. C and D),
demanding payment of the latters obligations under the promissory
note. Gatmaitan, however, did not accede to these demands.
Hence, on August 1, 1996, in the Regional Trial Court at Makati, Licaros filed the
complaint in this case. In his complaint, docketed in the court below as Civil Case
No. 96-1211, Licaros prayed for a judgment ordering Gatmaitan to pay him the
following:
a) Principal Obligation in the amount of Three Million Five Hundred Thousand Pesos
(P3,500,000.00);
b) Legal interest thereon at the rate of six (6%) percent per annum from July 16,
1993 when the amount became due until the obligation is fully paid;
c) Twenty percent (20%) of the amount due as reasonable attorneys fees;
d) Costs of the suit.[4]
After trial on the merits, the court a quo rendered judgment in favor of
petitioner Licaros and found respondent Gatmaitan liable under the Memorandum of
Agreement and Promissory Note for P3,150,000.00 plus 12% interest per annum
from July 16, 1993 until the amount is fully paid. Respondent was likewise ordered
to pay attorneys fees of P200,000.00.[5]
Respondent Gatmaitan appealed the trial courts decision to the Court of
Appeals. In a decision promulgated on February 10, 2000, the appellate court
reversed the decision of the trial court and held that respondent Gatmaitan did not
at any point become obligated to pay to petitioner Licaros the amount stated in the
promissory note. In a Resolution dated April 7, 2000, the Court of Appeals denied
petitioners Motion for Reconsideration of its February 10, 2000 Decision.
Hence this petition for review on certiorari where petitioner prays for the
reversal of the February 10, 2000 Decision of the Court of Appeals and the
reinstatement of the November 11, 1997 decision of the Regional Trial Court.
The threshold issue for the determination of this Court is whether the
Memorandum of Agreement between petitioner and respondent is one of
assignment of credit or one of conventional subrogation. This matter is
determinative of whether or not respondent became liable to petitioner under the
promissory note considering that its efficacy is dependent on the Memorandum of
Agreement, the note being merely an annex to the said memorandum. [6]
An assignment of credit has been defined as the process of transferring the
right of the assignor to the assignee who would then have the right to proceed
against the debtor. The assignment may be done gratuitously or onerously, in
which case, the assignment has an effect similar to that of a sale. [7]
On the other hand, subrogation has been defined as the transfer of all the rights
of the creditor to a third person, who substitutes him in all his rights. It may either
be legal or conventional. Legal subrogation is that which takes place without
agreement but by operation of law because of certain acts. Conventional
subrogation is that which takes place by agreement of parties. [8]
The general tenor of the foregoing definitions of the terms subrogation and
assignment of credit may make it seem that they are one and the same which
they are not. A noted expert in civil law notes their distinctions thus:
Under our Code, however, conventional subrogation is not identical to assignment
of credit. In the former, the debtors consent is necessary; in the latter it is not
required. Subrogation extinguishes the obligation and gives rise to a new one;
assignment refers to the same right which passes from one person to another. The
nullity of an old obligation may be cured by subrogation, such that a new obligation
will be perfectly valid; but the nullity of an obligation is not remedied by the
assignment of the creditors right to another. [9]
For our purposes, the crucial distinction deals with the necessity of the consent
of the debtor in the original transaction. In an assignment of credit, the consent of
the debtor is not necessary in order that the assignment may fully produce legal
effects.[10] What the law requires in an assignment of credit is not the consent of the
debtor but merely notice to him as the assignment takes effect only from the time
he has knowledge thereof. [11] A creditor may, therefore, validly assign his credit and
its accessories without the debtors consent. [12] On the other hand, conventional
subrogation requires an agreement among the three parties concerned the
original creditor, the debtor, and the new creditor. It is a new contractual relation
based on the mutual agreement among all the necessary parties. Thus, Article
1301 of the Civil Code explicitly states that (C)onventional subrogation of a third
person requires the consent of the original parties and of the third person.
The trial court, in finding for the petitioner, ruled that the Memorandum of
Agreement was in the nature of an assignment of credit. As such, the court a quo
held respondent liable for the amount stated in the said agreement even if the
parties thereto failed to obtain the consent of Anglo-Asean Bank. On the other
hand, the appellate court held that the agreement was one of conventional
subrogation which necessarily requires the agreement of all the parties
concerned. The Court of Appeals thus ruled that the Memorandum of Agreement
never came into effect due to the failure of the parties to get the consent of AngloAsean Bank to the agreement and, as such, respondent never became liable for the
amount stipulated.
We agree with the finding of the Court of Appeals that the Memorandum of
Agreement dated July 29, 1988 was in the nature of a conventional subrogation
which requires the consent of the debtor, Anglo-Asean Bank, for its validity. We note
with approval the following pronouncement of the Court of Appeals:
Immediately discernible from above is the common feature of contracts involving
conventional subrogation, namely, the approval of the debtor to the subrogation of
a third person in place of the creditor. That Gatmaitan and Licaros had intended to
treat their agreement as one of conventional subrogation is plainly borne by a
stipulation in their Memorandum of Agreement, to wit:
WHEREAS, the parties herein have come to an agreement on the nature, form and
extent of their mutual prestations which they now record herein with the express
conformity of the third parties concerned (emphasis supplied),
which third party is admittedly Anglo-Asean Bank.
Had the intention been merely to confer on appellant the status of a mere
assignee of appellees credit, there is simply no sense for them to have stipulated
in their agreement that the same is conditioned on the express conformity thereto
of Anglo-Asean Bank. That they did so only accentuates their intention to treat the
agreement as one of conventional subrogation. And it is basic in the interpretation
of contracts that the intention of the parties must be the one pursued (Rule 130,
Section 12, Rules of Court).
Given our finding that the Memorandum of Agreement (Exh. B; also Exh. 1), is
not one of assignment of credit but is actually a conventional subrogation, the
next question that comes to mind is whether such agreement was ever perfected at
all. Needless to state, the perfection or non-perfection of the subject agreement
is of utmost relevance at this point. For, if the same Memorandum of Agreement
was actually perfected, then it cannot be denied that Gatmaitan still has a
subsisting commitment to pay Licaros on the basis of his promissory note. If not,
Licaros suit for collection must necessarily fail.
Here, it bears stressing that the subject Memorandum of Agreement expressly
requires the consent of Anglo-Asean to the subrogation. Upon whom the task of
securing such consent devolves, be it on Licaros or Gatmaitan, is of no
significance. What counts most is the hard reality that there has been an abject
failure to get Anglo-Aseans nod of approval over Gatmaitans being subrogated in
the place of Licaros. Doubtless, the absence of such conformity on the part of AngloAsean, which is thereby made a party to the same Memorandum of Agreement,
prevented the agreement from becoming effective, much less from being a source
of any cause of action for the signatories thereto. [13]
Aside for the whereas clause cited by the appellate court in its decision, we
likewise note that on the signature page, right under the place reserved for the
signatures of petitioner and respondent, there is, typewritten, the words WITH OUR
CONFORME. Under this notation, the words ANGLO-ASEAN BANK AND TRUST
were written by hand.[14] To our mind, this provision which contemplates the signed
conformity of Anglo-Asean Bank, taken together with the aforementioned
preambulatory clause leads to the conclusion that both parties intended that AngloAsean Bank should signify its agreement and conformity to the contractual
arrangement between petitioner and respondent. The fact that Anglo-Asean Bank
did not give such consent rendered the agreement inoperative considering that, as
previously discussed, the consent of the debtor is needed in the subrogation of a
third person to the rights of a creditor.
In this petition, petitioner assails the ruling of the Court of Appeals that what
was entered into by the parties was a conventional subrogation of petitioners rights
as creditor of the Anglo-Asean Bank which necessarily requires the consent of the
latter. In support, petitioner alleges that: (1) the Memorandum of Agreement did
not create a new obligation and, as such, the same cannot be a conventional
subrogation; (2) the consent of Anglo-Asean Bank was not necessary for the validity
of the Memorandum of Agreement; (3) assuming that such consent was necessary,
respondent failed to secure the same as was incumbent upon him; and (4)
respondent himself admitted that the transaction was one of assignment of credit.
Petitioner argues that the parties to the Memorandum of Agreement could not
have intended the same to be a conventional subrogation considering that no new
obligation was created. According to petitioner, the obligation of Anglo-Asean Bank
to pay under Contract No. 00193 was not extinguished and in fact, it was the basic
intention of the parties to the Memorandum of Agreement to enforce the same
obligation of Anglo-Asean Bank under its contract with petitioner. Considering that
the old obligation of Anglo-Asean Bank under Contract No. 00193 was never
Petitioner next argues that assuming that the conformity of Anglo-Asean was
necessary to the validity of the Memorandum of Agreement, respondent only had
himself to blame for the failure to secure such conformity as was, allegedly,
incumbent upon him under the memorandum.
As to this argument regarding the party responsible for securing the conformity
of Anglo-Asean Bank, we fail to see how this question would have any relevance on
the outcome of this case. Having ruled that the consent of Anglo-Asean was
necessary for the validity of the Memorandum of Agreement, the determinative fact
is that such consent was not secured by either petitioner or respondent which
consequently resulted in the invalidity of the said memorandum.
With respect to the argument of petitioner that respondent himself allegedly
admitted in open court that an assignment of credit was intended, it is enough to
say that respondent apparently used the word assignment in his testimony in the
general sense. Respondent is not a lawyer and as such, he is not so well versed in
law that he would be able to distinguish between the concepts of conventional
subrogation and of assignment of credit. Moreover, even assuming that there was
an admission on his part, such admission is not conclusive on this court as the
nature and interpretation of the Memorandum of Agreement is a question of law
which may not be the subject of stipulations and admissions. [18]
Considering the foregoing, it cannot then be said that the consent of the debtor
Anglo-Asean Bank is not necessary to the validity of the Memorandum of
Agreement. As above stated, the Memorandum of Agreement embodies a contract
for conventional subrogation and in such a case, the consent of the original parties
and the third person is required.[19] The absence of such conformity by Anglo-Asean
Bank prevented the Memorandum of Agreement from becoming valid and
effective. Accordingly, the Court of Appeals did not err when it ruled that the
Memorandum of Agreement was never perfected.
Having arrived at the above conclusion, the Court finds no need to discuss the
other issues raised by petitioner.
WHEREFORE, the instant petition is DENIED and the Decision of the Court of
Appeals dated February 10, 2000 and its Resolution dated April 7, 2000 are hereby
AFFIRMED.
Melo, (Chairman), Vitug, and Panganiban, JJ., concur.
Sandoval-Gutierrez, J., on leave.
This is a petition for review on certiorari seeking the reversal of the December 5,
1994 Decision of the Court of Appeals in CA-G.R. CV No. 40849 entitled "DKC
Holdings Corporation vs. Victor U. Bartolome, et al.",[1] affirming in toto the January
4, 1993 Decision of the Regional Trial Court of Valenzuela, Branch 172, [2] which
dismissed Civil Case No. 3337-V-90 and ordered petitioner to pay P30,000.00 as
attorneys fees.
The subject of the controversy is a 14,021 square meter parcel of land located in
Malinta, Valenzuela, Metro Manila which was originally owned by private respondent
Victor U. Bartolomes deceased mother, Encarnacion Bartolome, under Transfer
Certificate of Title No. B-37615 of the Register of Deeds of Metro Manila, District III.
This lot was in front of one of the textile plants of petitioner and, as such, was seen
by the latter as a potential warehouse site.
On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy
with Encarnacion Bartolome, whereby petitioner was given the option to lease or
lease with purchase the subject land, which option must be exercised within a
period of two years counted from the signing of the Contract. In turn, petitioner
undertook to pay P3,000.00 a month as consideration for the reservation of its
option. Within the two-year period, petitioner shall serve formal written notice upon
the lessor Encarnacion Bartolome of its desire to exercise its option. The contract
also provided that in case petitioner chose to lease the property, it may take actual
possession of the premises. In such an event, the lease shall be for a period of six
years, renewable for another six years, and the monthly rental fee shall be
P15,000.00 for the first six years and P18,000.00 for the next six years, in case of
renewal.
Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to
Encarnacion until her death in January 1990. Thereafter, petitioner coursed its
payment to private respondent Victor Bartolome, being the sole heir of Encarnacion.
Victor, however, refused to accept these payments. iska
Meanwhile, on January 10, 1990, Victor executed an Affidavit of Self-Adjudication
over all the properties of Encarnacion, including the subject lot. Accordingly,
respondent Register of Deeds cancelled Transfer Certificate of Title No. B-37615 and
issued Transfer Certificate of Title No. V-14249 in the name of Victor Bartolome.
On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it
was exercising its option to lease the property, tendering the amount of P15,000.00
as rent for the month of March. Again, Victor refused to accept the tendered rental
fee and to surrender possession of the property to petitioner.
Petitioner thus opened Savings Account No. 1-04-02558-I-1 with the China Banking
Corporation, Cubao Branch, in the name of Victor Bartolome and deposited therein
the P15,000.00 rental fee for March as well as P6,000.00 reservation fees for the
months of February and March.
Petitioner also tried to register and annotate the Contract on the title of Victor to the
property. Although respondent Register of Deeds accepted the required fees, he
nevertheless refused to register or annotate the same or even enter it in the day
book or primary register.
Thus, on April 23, 1990, petitioner filed a complaint for specific performance and
damages against Victor and the Register of Deeds, [3] docketed as Civil Case No.
3337-V-90 which was raffled off to Branch 171 of the Regional Trial Court of
Valenzuela. Petitioner prayed for the surrender and delivery of possession of the
subject land in accordance with the Contract terms; the surrender of title for
registration and annotation thereon of the Contract; and the payment of
P500,000.00 as actual damages, P500,000.00 as moral damages, P500,000.00 as
exemplary damages and P300,000.00 as attorneys fees.
Meanwhile, on May 8, 1990, a Motion for Intervention with Motion to Dismiss [4] was
filed by one Andres Lanozo, who claimed that he was and has been a tenant-tiller of
the subject property, which was agricultural riceland, for forty-five years. He
questioned the jurisdiction of the lower court over the property and invoked the
Comprehensive Agrarian Reform Law to protect his rights that would be affected by
the dispute between the original parties to the case. ella
On May 18, 1990, the lower court issued an Order [5] referring the case to the
Department of Agrarian Reform for preliminary determination and certification as to
whether it was proper for trial by said court.
On July 4, 1990, the lower court issued another Order [6] referring the case to Branch
172 of the RTC of Valenzuela which was designated to hear cases involving agrarian
land, after the Department of Agrarian Reform issued a letter-certification stating
that referral to it for preliminary determination is no longer required.
On July 16, 1990, the lower court issued an Order denying the Motion to Intervene,
[7]
holding that Lanozos rights may well be ventilated in another proceeding in due
time.
After trial on the merits, the RTC of Valenzuela, branch 172 rendered its Decision on
January 4, 1993, dismissing the Complaint and ordering petitioner to pay Victor
P30,000.00 as attorneys fees. On appeal to the CA, the Decision was affirmed in
toto.
Hence, the instant Petition assigning the following errors:
(A)
FIRST ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
PROVISION ON THE NOTICE TO EXERCISE OPTION WAS NOT
TRANSMISSIBLE.
(B)
SECOND ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
NOTICE OF OPTION MUST BE SERVED BY DKC UPON ENCARNACION
BARTOLOME PERSONALLY.
(C) nigel
THIRD ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
CONTRACT WAS ONE-SIDED AND ONEROUS IN FAVOR OF DKC.
(D)
FOURTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
EXISTENCE OF A REGISTERED TENANCY WAS FATAL TO THE VALIDITY
OF THE CONTRACT.
(E)
FIFTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
PLAINTIFF-APPELLANT WAS LIABLE TO DEFENDANT-APPELLEE FOR
ATTORNEYS FEES.[8]
The issue to be resolved in this case is whether or not the Contract of Lease with
Option to Buy entered into by the late Encarnacion Bartolome with petitioner was
terminated upon her death or whether it binds her sole heir, Victor, even after her
demise.
Both the lower court and the Court of Appeals held that the said contract was
terminated upon the death of Encarnacion Bartolome and did not bind Victor
because he was not a party thereto.
Article 1311 of the Civil Code provides, as follows"ART. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the
value of the property he received from the decedent. brnado
xxx
xxx
x x x."
The general rule, therefore, is that heirs are bound by contracts entered into by
their predecessors-in-interest except when the rights and obligations arising
therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of
law.
In the case at bar, there is neither contractual stipulation nor legal provision making
the rights and obligations under the contract intransmissible. More importantly, the
nature of the rights and obligations therein are, by their nature, transmissible.
The nature of intransmissible rights as explained by Arturo Tolentino, an eminent
civilist, is as follows:
"Among contracts which are intransmissible are those which are purely
personal, either by provision of law, such as in cases of partnerships
and agency, or by the very nature of the obligations arising therefrom,
such as those requiring special personal qualifications of the obligor. It
may also be stated that contracts for the payment of money debts are
not transmitted to the heirs of a party, but constitute a charge against
his estate. Thus, where the client in a contract for professional services
of a lawyer died, leaving minor heirs, and the lawyer, instead of
presenting his claim for professional services under the contract to the
probate court, substituted the minors as parties for his client, it was
held that the contract could not be enforced against the minors; the
lawyer was limited to a recovery on the basis of quantum meruit."[9]
In American jurisprudence, "(W)here acts stipulated in a contract require the
exercise of special knowledge, genius, skill, taste, ability, experience, judgment,
discretion, integrity, or other personal qualification of one or both parties, the
agreement is of a personal nature, and terminates on the death of the party who is
required to render such service." [10] marinella
It has also been held that a good measure for determining whether a contract
terminates upon the death of one of the parties is whether it is of such a character
that it may be performed by the promissors personal representative. Contracts to
perform personal acts which cannot be as well performed by others are discharged
by the death of the promissor. Conversely, where the service or act is of such a
character that it may as well be performed by another, or where the contract, by its
terms, shows that performance by others was contemplated, death does not
terminate the contract or excuse nonperformance. [11]
In the case at bar, there is no personal act required from the late Encarnacion
Bartolome. Rather, the obligation of Encarnacion in the contract to deliver
possession of the subject property to petitioner upon the exercise by the latter of its
option to lease the same may very well be performed by her heir Victor.
As early as 1903, it was held that "(H)e who contracts does so for himself and his
heirs."[12] In 1952, it was ruled that if the predecessor was duty-bound to reconvey
land to another, and at his death the reconveyance had not been made, the heirs
can be compelled to execute the proper deed for reconveyance. This was grounded
upon the principle that heirs cannot escape the legal consequence of a transaction
entered into by their predecessor-in-interest because they have inherited the
property subject to the liability affecting their common ancestor. [13]
It is futile for Victor to insist that he is not a party to the contract because of the
clear provision of Article 1311 of the Civil Code. Indeed, being an heir of
Encarnacion, there is privity of interest between him and his deceased mother. He
only succeeds to what rights his mother had and what is valid and binding against
her is also valid and binding as against him. [14]This is clear from Paraaque Kings
Enterprises vs. Court of Appeals,[15] where this Court rejected a similar defensealonzo
With respect to the contention of respondent Raymundo that he is not
privy to the lease contract, not being the lessor nor the lessee referred
to therein, he could thus not have violated its provisions, but he is
nevertheless a proper party. Clearly, he stepped into the shoes of the
owner-lessor of the land as, by virtue of his purchase, he assumed all
the obligations of the lessor under the lease contract. Moreover, he
received benefits in the form of rental payments. Furthermore, the
complaint, as well as the petition, prayed for the annulment of the sale
of the properties to him. Both pleadings also alleged collusion between
him and respondent Santos which defeated the exercise by petitioner
of its right of first refusal.
In order then to accord complete relief to petitioner, respondent
Raymundo was a necessary, if not indispensable, party to the case. A
favorable judgment for the petitioner will necessarily affect the rights
of respondent Raymundo as the buyer of the property over which
petitioner would like to assert its right of first option to buy.
In the case at bar, the subject matter of the contract is likewise a lease, which is a
property right. The death of a party does not excuse nonperformance of a contract
which involves a property right, and the rights and obligations thereunder pass to
the personal representatives of the deceased. Similarly, nonperformance is not
excused by the death of the party when the other party has a property interest in
the subject matter of the contract.[16]
Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is
bound by the subject Contract of Lease with Option to Buy.
That being resolved, we now rule on the issue of whether petitioner had complied
with its obligations under the contract and with the requisites to exercise its option.
The payment by petitioner of the reservation fees during the two-year period within
which it had the option to lease or purchase the property is not disputed. In fact, the
payment of such reservation fees, except those for February and March, 1990 were
admitted by Victor.[17] This is clear from the transcripts, to wit"ATTY. MOJADO:
One request, Your Honor. The last payment which was allegedly
made in January 1990 just indicate in that stipulation that it was issued
November of 1989 and postdated Janaury 1990 and then we will admit
all. rodp;fo
COURT:
All reservation fee?
ATTY. MOJADO:
Yes, Your Honor.
COURT:
All as part of the lease?
ATTY. MOJADO:
Reservation fee, Your Honor. There was no payment with respect
to payment of rentals."[18]
Petitioner also paid the P15,000.00 monthly rental fee on the subject property by
depositing the same in China Bank Savings Account No. 1-04-02558-I-1, in the name
of Victor as the sole heir of Encarnacion Bartolome, [19] for the months of March to
July 30, 1990, or a total of five (5) months, despite the refusal of Victor to turn over
the subject property.[20]
Likewise, petitioner complied with its duty to inform the other party of its intention
to exercise its option to lease through its letter dated Match 12, 1990, [21] well within
the two-year period for it to exercise its option. Considering that at that time
Encarnacion Bartolome had already passed away, it was legitimate for petitioner to
have addressed its letter to her heir.
It appears, therefore, that the exercise by petitioner of its option to lease the
subject property was made in accordance with the contractual provisions.
Concomitantly, private respondent Victor Bartolome has the obligation to surrender
possession of and lease the premises to petitioner for a period of six (6) years,
pursuant to the Contract of Lease with Option to Buy. micks
Coming now to the issue of tenancy, we find that this is not for this Court to pass
upon in the present petition. We note that the Motion to Intervene and to Dismiss of
the alleged tenant, Andres Lanozo, was denied by the lower court and that such
denial was never made the subject of an appeal. As the lower court stated in its
Order, the alleged right of the tenant may well be ventilated in another proceeding
in due time.
WHEREFORE, in view of the foregoing, the instant Petition for Review is GRANTED.
The Decision of the Court of Appeals in CA-G.R. CV No. 40849 and that of the
Regional Trial Court of Valenzuela in Civil Case No. 3337-V-90 are both SET ASIDE
and a new one rendered ordering private respondent Victor Bartolome to:
(a) surrender and deliver possession of that parcel of land covered by
Transfer Certificate of Title No. V-14249 by way of lease to petitioner
and to perform all obligations of his predecessor-in-interest,
Encarnacion Bartolome, under the subject Contract of Lease with
Option to Buy;
(b) surrender and deliver his copy of Transfer Certificate of Title No. V14249 to respondent Register of Deeds for registration and annotation
thereon of the subject Contract of Lease with Option to Buy;
(c) pay costs of suit. Sc
Respondent Register of Deeds is, accordingly, ordered to register and annotate the
subject Contract of Lease with Option to Buy at the back of Transfer Certificate of
Title No. V-14249 upon submission by petitioner of a copy thereof to his office.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur. Scmis
[G.R. No. 119850. June 20, 1996]
MANDARIN VILLA, INC., petitioner, vs. COURT OF APPEALS and CLODUALDO
DE JESUS, respondents.
RESOLUTION
FRANCISCO, J.:
With ample evidentiary support are the following antecedent facts:
In the evening of October 19, 1989, private respondent, Clodualdo de Jesus, a
practicing lawyer and businessman, hosted a dinner for his friends at the
petitioner's restaurant the Mandarin Villa Seafoods Village, Greenhills, Mandaluyong
City. After dinner the waiter handed to him the bill in the amount of
P2,658.50. Private respondent offered to pay the bill through his credit card issued
by Philippine Commercial Credit Card Inc. (BANKARD). This card was accepted by
the waiter who immediately proceeded to the restaurant's cashier for card
verification. Ten minutes later, however, the waiter returned and audibly informed
private respondent that his credit card had expired. [1] Private respondent
remonstrated that said credit card had yet to expire on September 1990, as
embossed on its face.[2] The waiter was unmoved, thus, private respondent and two
of his guests approached the restaurant's cashier who again passed the credit card
over the verification computer. The same information was produced, i.e., CARD
EXPIRED. Private respondent and his guests returned to their table and at this
juncture, Professor Lirag, another guest, uttered the following remarks: "Clody
[referring to Clodualdo de Jesus], may problema ba? Baka kailangang maghugas na
kami ng pinggan?"[3] Thereupon, private respondent left the restaurant and got his
BPI Express Credit Card from his car and offered it to pay their bill. This was
accepted and honored by the cashier after verification. [4] Petitioner and his
companions left afterwards.
The incident triggered the filing of a suit for damages by private
respondent. Following a full-dress trial, judgment was rendered directing the
petitioner and BANKARD to pay jointly and severally the private respondent: (a)
moral damages in the amount of P250,000.00; (b) exemplary damages in the
amount of P100,000.00; and (c) attorney's fees and litigation expenses in the
amount of P50,000.00.
Both the petitioner and BANKARD appealed to the respondent Court of Appeals
which rendered a decision, thus:
"WHEREFORE, the decision appealed from is hereby MODIFIED by:
1. Finding appellant MANDARIN solely responsible for damages in favor of appellee;
2. Absolving appellant BANKARD of any responsibility for damages;
3. Reducing moral damages awarded to appellee to TWENTY FIVE THOUSAND and
00/100 (P25,000.00) PESOS;
4. Reducing exemplary damages awarded to appellee to TEN THOUSAND and
00/100 (P10,000.00) PESOS;
5. Reversing and setting aside the award of P50,000.00 for attorney's fees as well
as interest awarded; and
6. AFFIRMING the dismissal of all counterclaims and cross-claims.
Costs against appellant Mandarin.
SO ORDERED."[5]
Mandarin Villa, thus, interposed this present petition, faulting the respondent
court with six (6) assigned errors which may be reduced to the following issues, to
wit: (1) whether or not petitioner is bound to accept payment by means of credit
card; (2) whether or not petitioner is negligent under the circumstances obtaining in
this case; and (3) if negligent, whether or not such negligence is the proximate
cause of the private respondent's damage.
Petitioner contends that it cannot be faulted for its cashier's refusal to accept
private respondent's BANKARD credit card, the same not being a legal tender. It
argues that private respondent's offer to pay by means of credit card partook of the
nature of a proposal to novate an existing obligation for which petitioner, as
creditor, must first give its consent otherwise there will be no binding contract
between them. Petitioner cannot seek refuge behind this averment.
We note that Mandarin Villa Seafood Village is affiliated with BANKARD. In fact,
an "Agreement"[6] entered into by petitioner and BANKARD dated June 23, 1989,
provides inter alia:
"The MERCHANT shall honor validly issued PCCCI credit cards presented by their
corresponding holders in the purchase of goods and/or services supplied by it
provided that the card expiration date has not elapsed and the card number does
not appear on the latest cancellation bulletin of lost, suspended and cancelled
PCCCI credit cards and, no signs of tampering, alterations or irregularities appear on
the face of the credit card."[7]
While private respondent may not be a party to the said agreement, the abovequoted stipulation conferred a favor upon the private respondent, a holder of credit
card validly issued by BANKARD. This stipulation is a stipulation pour autri and
under Article 1311 of the Civil Code private respondent may demand its fulfillment
provided he communicated his acceptance to the petitioner before its revocation.
[8]
In this case, private respondent's offer to pay by means of his BANKARD credit
card constitutes not only an acceptance of the said stipulation but also an explicit
communication of his acceptance to the obligor.
In addition, the record shows that petitioner posted a logo inside Mandarin Villa
Seafood Village stating that "Bankard is accepted here." [9] This representation is
conclusive upon the petitioner which it cannot deny or disprove as against the
private respondent, the party relying thereon. Petitioner, therefore, cannot disclaim
its obligation to accept private respondent's BANKARD credit card without violating
the equitable principle of estoppel.[10]
Anent the second issue, petitioner insists that it is not negligent. In support
thereof, petitioner cites its good faith in checking, not just once but twice, the
validity of the aforementioned credit card prior to its dishonor. It argues that since
the verification machine flashed an information that the credit card has expired,
petitioner could not be expected to honor the same much less be adjudged
negligent for dishonoring it. Further, petitioner asseverates that it only followed the
guidelines and instructions issued by BANKARD in dishonoring the aforementioned
credit card. The argument is untenable.
The test for determining the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use the
reasonable care and caution which an ordinary prudent person would have used in
the same situation? If not, then he is guilty of negligence. [11] The Point of Sale (POS)
Guidelines which outlined the steps that petitioner must follow under the
circumstances provides:
"x x x
"CARD EXPIRED
a.
xxx
xxx
b.
b.1.
b.2.
b.3.
c.
A cursory reading of said rule reveals that whenever the words CARD EXPIRED
flashes on the screen of the verification machine, petitioner should check the credit
card's expiry date embossed on the card itself. If unexpired, petitioner should honor
the card provided it is not invalid, cancelled or otherwise suspended. But if expired,
petitioner should not honor the card. In this case, private respondent's BANKARD
credit card has an embossed expiry date of September 1990. [13] Clearly, it has not
yet expired on October 19,1989, when the same was wrongfully dishonored by the
petitioner. Hence, petitioner did not use the reasonable care and caution which an
ordinary prudent person would have used in the same situation and as such
petitioner is guilty of negligence. In this connection, we quote with approval the
following observations of the respondent Court.
"Mandarin argues that based on the POS Guidelines (supra), it has three options
in case the verification machine flashes 'CARD EXPIRED.' It chose to exercise option
(c) by not honoring appellee's credit card. However, appellant apparently
intentionally glossed over option '(a) Check expiry date on card" (id.) which would
have shown without any shadow of doubt that the expiry date embossed on the
BANKARD was 'SEP 90.' (Exhibit "D".) A cursory look at the appellee's BANKARD
would also reveal that appellee had been as of that date a cardholder since 1982, a
fact which would have entitled the customer the courtesy of better treatment." [14]
Petitioner, however, argues that private respondent's own negligence in not
bringing with him sufficient cash was the proximate cause of his damage. It
likewise sought exculpation by contending that the remark of Professor Lirag [15] is a
supervening event and at the same time the proximate cause of private
respondent's injury.
We find this contention also devoid of merit. While it is true that private
respondent did not have sufficient cash on hand when he hosted a dinner at
petitioner's restaurant, this fact alone does not constitute negligence on his
part. Neither can it be claimed that the same was the proximate cause of private
respondent's damage. We take judicial notice[16] of the current practice among
major establishments, petitioner included, to accept payment by means of credit
cards in lieu of cash. Thus, petitioner accepted private respondent's BPI Express
Credit Card after verifying its validity, [17] a fact which all the more refutes
petitioner's imputation of negligence on the private respondent.
Neither can we conclude that the remark of Professor Lirag was a supervening
event and the proximate cause of private respondent's injury. The humiliation and
embarrassment of the private respondent was brought about not by such a remark
of Professor Lirag but by the fact of dishonor by the petitioner of private
respondent's valid BANKARD credit card. If at all, the remark of Professor Lirag
served only to aggravate the embarrassment then felt by private respondent, albeit
silently within himself.
MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of Appeals
rendered on May 26, 1987, upholding the validity of the sale of a parcel of land by
petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent
Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod, Southern Leyte, declared
in the name of Segundo Dalion, under Tax Declaration No. 11148, with
an area of 8947 hectares, assessed at P 180.00, and bounded on the
North, by Sergio Destriza and Titon Veloso, East, by Feliciano Destriza,
by Barbara Bonesa (sic); and West, by Catalino Espina. (pp. 36-37,
Rollo)
The decision affirms in toto the ruling of the trial court
the dispositive portion of which provides as follows:
reason fail to do so, the deed shall be executed in their behalf by the
Provincial Sheriff or his Deputy;
(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as
attorney's fees and P 500.00 as litigation expenses, and to pay the
costs; and
(c) Dismissing the counter-claim. (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on
a private document of absolute sale, dated July 1, 1965 (Exhibit "A"), allegedly
executed by Dalion, who, however denied the fact of sale, contending that the
document sued upon is fictitious, his signature thereon, a forgery, and that subject
land is conjugal property, which he and his wife acquired in 1960 from Saturnina
Sabesaje as evidenced by the "Escritura de Venta Absoluta" (Exhibit "B"). The
spouses denied claims of Sabesaje that after executing a deed of sale over the
parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to
administer the land because Dalion did not have any means of livelihood. They
admitted, however, administering since 1958, five (5) parcels of land in Sogod,
Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje,
who died in 1956. They never received their agreed 10% and 15% commission on
the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was
intended merely to harass, preempt and forestall Dalion's threat to sue for these
unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning errors some
of which, however, were disregarded by the appellate court, not having been raised
in the court below. While the Court of Appeals duly recognizes Our authority to
review matters even if not assigned as errors in the appeal, We are not inclined to
do so since a review of the case at bar reveals that the lower court has judicially
decided the case on its merits.
As to the controversy regarding the identity of the land, We have no reason to
dispute the Court of Appeals' findings as follows:
To be sure, the parcel of land described in Exhibit "A" is the same
property deeded out in Exhibit "B". The boundaries delineating it from
adjacent lots are identical. Both documents detail out the following
boundaries, to wit:
On the North-property of Sergio Destriza and Titon Veloso;
On the East-property of Feliciano Destriza;
On the South-property of Barbara Boniza and
On the West-Catalino Espina.
(pp. 41-42, Rollo)
The issues in this case may thus be limited to: a) the validity of the contract of sale
of a parcel of land and b) the necessity of a public document for transfer of
ownership thereto.
The appellate court upheld the validity of the sale on the basis of Secs. 21 and 23 of
Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how proved.Before any private writing may be received in evidence, its due
execution and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness
xxx xxx xxx
SEC. 23. Handwriting, how proved. The handwriting of a person may
be proved by any witness who believes it to be the handwriting of such
person, and has seen the person write, or has seen writing purporting
to be his upon which the witness has acted or been charged, and has
thus acquired knowledge of the handwriting of such person. Evidence
respecting the handwriting may also be given by a comparison, made
by the witness or the court, with writings admitted or treated as
genuine by the party against whom the evidence is offered, or proved
to be genuine to the satisfaction of the judge. (Rule 132, Revised Rules
of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed positively
testified on the authenticity thereof. They categorically stated that it
had been executed and signed by the signatories thereto. In fact, one
of such witnesses, Gerardo M. Ogsoc, declared on the witness stand
that he was the one who prepared said deed of sale and had copied
parts thereof from the "Escritura De Venta Absoluta" (Exhibit B) by
which one Saturnina Sabesaje sold the same parcel of land to appellant
Segundo Dalion. Ogsoc copied the bounderies thereof and the name of
appellant Segundo Dalion's wife, erroneously written as "Esmenia" in
Exhibit "A" and "Esmenia" in Exhibit "B". (p. 41, Rollo)
xxx xxx xxx
Against defendant's mere denial that he signed the document, the
positive testimonies of the instrumental Witnesses Ogsoc and Espina,
aside from the testimony of the plaintiff, must prevail. Defendant has
affirmatively alleged forgery, but he never presented any witness or
evidence to prove his claim of forgery. Each party must prove his own
affirmative allegations (Section 1, Rule 131, Rules of Court).
Furthermore, it is presumed that a person is innocent of a crime or
wrong (Section 5 (a), Idem), and defense should have come forward
with clear and convincing evidence to show that plaintiff committed
forgery or caused said forgery to be committed, to overcome the
presumption of innocence. Mere denial of having signed, does not
suffice to show forgery.
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the
parcel of land and to execute corresponding formal deed of conveyance in a public
document. Under Art. 1498, NCC, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing. Delivery
may either be actual (real) or constructive. Thus delivery of a parcel of land may be
done by placing the vendee in control and possession of the land (real) or by
embodying the sale in a public instrument (constructive).
As regards petitioners' contention that the proper action should have been one for
specific performance, We believe that the suit for recovery of ownership is proper.
As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected
contract of sale the right to reciprocally demand performance, and to observe a
particular form, if warranted, (Art. 1357). The trial court, aptly observed that
Sabesaje's complaint sufficiently alleged a cause of action to compel Dalion to
execute a formal deed of sale, and the suit for recovery of ownership, which is
premised on the binding effect and validity inter partes of the contract of sale,
merely seeks consummation of said contract.
... . A sale of a real property may be in a private instrument but that
contract is valid and binding between the parties upon its perfection.
And a party may compel the other party to execute a public instrument
embodying their contract affecting real rights once the contract
appearing in a private instrument hag been perfected (See Art. 1357).
... . (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals
upholding the ruling of the trial court is hereby AFFIRMED. No costs.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grino-Aquino, JJ., concur.
FIRST DIVISION
CAMILO F. BORROMEO,
Petitioner,
- versus -
ANTONIETTA O. DESCALLAR,
Respondent.
x--------------------------------------------------x
DECISION
PUNO, C.J.:
What are the rights of an alien (and his successor-in-interest) who acquired
real properties in the country as against his former Filipina girlfriend in whose sole
name the properties were registered under the Torrens system?
The facts are as follows:
Wilhelm Jambrich, an Austrian, arrived in the Philippines in 1983 after he was
assigned by his employer, Simmering-Graz Panker A.G., an Austrian company, to
work at a project in Mindoro. In 1984, he transferred to Cebu and worked at the
Naga II Project of the National Power Corporation. There, he met respondent
Antonietta Opalla-Descallar, a separated mother of two boys who was working as a
waitress at St. Moritz Hotel. Jambrich befriended respondent and asked her to tutor
him in English. In dire need of additional income to support her children,
respondent agreed. The tutorials were held in Antoniettas residence at a squatters
area in Gorordo Avenue.
Jambrich and respondent fell in love and decided to live together in a rented
house in Hernan Cortes, Mandaue City. Later, they transferred to their own house
and lots at Agro-Macro Subdivision, Cabancalan, Mandaue City. In the Contracts to
Sell dated November 18, 1985[1] and March 10, 1986[2] covering the
properties, Jambrich and respondent were referred to as the buyers. A Deed of
Absolute Sale dated November 16, 1987 [3] was likewise issued in their
favor. However, when the Deed of Absolute Sale was presented for registration
before the Register of Deeds, registration was refused on the ground that Jambrich
was an alien and could not acquire alienable lands of the public
domain. Consequently, Jambrichs name was erased from the document. But it
could be noted that his signature remained on the left hand margin of page 1,
beside respondents signature as buyer on page 3, and at the bottom of page 4
which is the last page. Transfer Certificate of Title (TCT) Nos. 24790, 24791 and
24792 over the properties were issued in respondents name alone.
Jambrich also formally adopted respondents two sons in Sp. Proc. No. 39MAN,[4] and per Decision of the Regional Trial Court of Mandaue City dated May 5,
1988.[5]
However, the idyll lasted only until April 1991. By then, respondent found a
new boyfriend while Jambrich began to live with another woman
in Danao City. Jambrich supported respondents sons for only two months after the
break up.
Jambrich met petitioner Camilo F. Borromeo sometime in 1986. Petitioner
was engaged in the real estate business. He also built and repaired speedboats as
a hobby. In 1989, Jambrich purchased an engine and some accessories for his boat
from petitioner, for which he became indebted to the latter for
about P150,000.00. To pay for his debt, he sold his rights and interests in the AgroMacro properties to petitioner for P250,000, as evidenced by a Deed of Absolute
Sale/Assignment.[6] On July 26, 1991, when petitioner sought to register the deed
of assignment, he discovered that titles to the three lots have been transferred in
the name of respondent, and that the subject property has already been
mortgaged.
On August 2, 1991, petitioner filed a complaint against respondent for
recovery of real property before the Regional Trial Court of Mandaue City. Petitioner
alleged that the Contracts to Sell dated November 18, 1985 and March 10, 1986
and the Deed of Absolute Sale dated November 16, 1987 over the properties which
identified both Jambrich and respondent as buyers do not reflect the true
agreement of the parties since respondent did not pay a single centavo of the
purchase price and was not in fact a buyer; that it was Jambrich alone who paid for
the properties using his exclusive funds; that Jambrich was the real and absolute
owner of the properties; and, that petitioner acquired absolute ownership by virtue
of the Deed of Absolute Sale/Assignment dated July 11, 1991 which Jambrich
executed in his favor.
In her Answer, respondent belied the allegation that she did not pay a single
centavo of the purchase price. On the contrary, she claimed that she solely and
exclusively used her own personal funds to defray and pay for the purchase price of
the subject lots in question, and that Jambrich, being an alien, was prohibited to
acquire or own real property in the Philippines.
At the trial, respondent presented evidence showing her alleged financial
capacity to buy the disputed property with money from a supposed copra
III.
Thus, Jambrich has all authority to transfer all his rights, interests and
participation over the subject properties to petitioner by virtue of the Deed of
Assignment he executed on July 11, 1991.
Well-settled is the rule that this Court is not a trier of facts. The findings of
fact of the trial court are accorded great weight and respect, if not finality by this
Court, subject to a number of exceptions. In the instant case, we find no reason to
disturb the factual findings of the trial court. Even the appellate court did not
controvert the factual findings of the trial court. They differed only in their
conclusions of law.
Further, the fact that the disputed properties were acquired during the
couples cohabitation also does not help respondent. The rule that co-ownership
applies to a man and a woman living exclusively with each other as husband and
wife without the benefit of marriage, but are otherwise capacitated to marry each
other, does not apply.[19] In the instant case, respondent was still legally married to
another when she and Jambrich lived together. In such an adulterous relationship,
no co-ownership exists between the parties. It is necessary for each of the partners
to prove his or her actual contribution to the acquisition of property in order to be
able to lay claim to any portion of it. Presumptions of co-ownership and equal
contribution do not apply.[20]
Second, we dispose of the issue of registration of the properties in the name
of respondent alone. Having found that the true buyer of the disputed house and
lots was the Austrian Wilhelm Jambrich, what now is the effect of registration of the
properties in the name of respondent?
It is settled that registration is not a mode of acquiring ownership. [21] It is only
a means of confirming the fact of its existence with notice to the world at large.
[22]
Certificates of title are not a source of right. The mere possession of a title does
not make one the true owner of the property. Thus, the mere fact that respondent
has the titles of the disputed properties in her name does not necessarily,
conclusively and absolutely make her the owner. The rule on indefeasibility of title
likewise does not apply to respondent. A certificate of title implies that the title is
quiet,[23] and that it is perfect, absolute and indefeasible. [24] However, there are
well-defined exceptions to this rule, as when the transferee is not a holder in good
faith and did not acquire the subject properties for a valuable consideration. [25] This
is the situation in the instant case. Respondent did not contribute a single centavo
in the acquisition of the properties. She had no income of her own at that time, nor
did she have any savings. She and her two sons were then fully supported by
Jambrich.
Respondent argued that aliens are prohibited from acquiring private
land. This is embodied in Section 7, Article XII of the 1987 Constitution, [26] which is
basically a reproduction of Section 5, Article XIII of the 1935 Constitution, [27] and
Section 14, Article XIV of the 1973 Constitution. [28] The capacity to acquire private
land is dependent on the capacity to acquire or hold lands of the public
domain. Private land may be transferred only to individuals or entities qualified to
acquire or hold lands of the public domain. Only Filipino citizens or corporations at
least 60% of the capital of which is owned by Filipinos are qualified to acquire or
hold lands of the public domain. Thus, as the rule now stands, the fundamental law
explicitly prohibits non-Filipinos from acquiring or holding title to private lands,
except only by way of legal succession or if the acquisition was made by a former
natural-born citizen.[29]
Therefore, in the instant case, the transfer of land from Agro-Macro
Development Corporation to Jambrich, who is an Austrian, would have been
declared invalid if challenged, had not Jambrich conveyed the properties to
petitioner who is a Filipino citizen. In United Church Board for World Ministries v.
Sebastian,[30] the Court reiterated the consistent ruling in a number of cases [31] that
if land is invalidly transferred to an alien who subsequently becomes a Filipino
citizen or transfers it to a Filipino, the flaw in the original transaction is considered
cured and the title of the transferee is rendered valid. Applying United Church
Board for World Ministries, the trial court ruled in favor of petitioner, viz.:
[W]hile the acquisition and the purchase of (sic) Wilhelm
Jambrich of the properties under litigation [were] void ab initio since
[they were] contrary to the Constitution of the Philippines, he being a
foreigner, yet, the acquisition of these properties by plaintiff who is a
Filipino citizen from him, has cured the flaw in the original transaction
and the title of the transferee is valid.
The trial court upheld the sale by Jambrich in favor of petitioner and ordered the
cancellation of the TCTs in the name of respondent. It declared petitioner as owner
in fee simple of the residential house of strong materials and three parcels of land
designated as Lot Nos. 1, 3 and 5, and ordered the Register of Deeds of Mandaue
City to issue new certificates of title in his name. The trial court likewise ordered
respondent to pay petitioner P25,000 as attorneys fees and P10,000 as litigation
expenses, as well as the costs of suit.
We affirm the Regional Trial Court.
The rationale behind the Courts ruling in United Church Board for World
Ministries, as reiterated in subsequent cases, [32] is this since the ban on aliens is
intended to preserve the nations land for future generations of Filipinos, that aim is
achieved by making lawful the acquisition of real estate by aliens who became
Filipino citizens by naturalization or those transfers made by aliens to Filipino
citizens. As the property in dispute is already in the hands of a qualified person, a
Filipino citizen, there would be no more public policy to be protected. The objective
of the constitutional provision to keep our lands in Filipino hands has been achieved.
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of
Appeals in C.A. G.R. CV No. 42929 dated April 10, 2002 and its Resolution dated July
8,
2003
are
REVERSED
and
SET
ASIDE. The
Decision
of
the Regional Trial Court of Mandaue City in Civil Case No. MAN-1148 is REINSTATED.
SO ORDERED.
mortgage had been refused so they filed the complaint in order to recover the three
parcels of land.
The defendants asserted that they had acquired the lots from the plaintiffs by
purchase and subsequent delivery to them. The trial court sustained the claim of
the defendants and rendered the following judgment:
a. declaring the defendants to be the lawful owners of the property
subject of the present litigation;
b. declaring the complaint in the present action to be without merit
and is therefore hereby ordered dismissed;
c. ordering the plaintiffs to pay to the defendants the amount of
P2,000.00 as reasonable attorney's fees and to pay the costs of the
suit.
The plaintiffs appealed the decision to the Court of Appeals which rendered the
following judgment:
PREMISES CONSIDERED, the decision appealed from is hereby
REVERSED and SET ASIDE, and a new one is hereby RENDERED,
ordering the defendants-appellees to surrender the lots in question as
well as the plaintiffs'-appellants' muniments of title thereof to said
plaintiffs-appellants, to make an accounting of the produce derived
from the lands including expenses incurred since 1951, and to
solidarity turn over to the plaintiffs-appellants the NET monetary value
of the profits, after deducting the sum of P1,800.00. No attorney's fees
nor moral damages are awarded for lack of any legal justification
therefor. No. costs.
The ratio of the judgment is stated in the following paragraphs of the decision
penned by Justice Edgardo L. Paras with the concurrence of Justices Venicio Escolin
and Mariano A. Zosa:
One of the principal issues in the case involves the nature of the
aforementioned conveyance or transaction, with appellants claiming
the same to be an oral contract of mortgage or antichresis, the
redemption of which could be done anytime upon repayment of the
P1,800.00 involved (incidentally the only thing written about the
transaction is the aforementioned receipt re the P1,800). Upon the
other hand, appellees claim that the transaction was one of sale,
accordingly, redemption was improper. The appellees claim that
plaintiffs never conveyed the property because of a loan or mortgage
or antichresis and that what really transpired was the execution of a
contract of sale thru a private document designated as a 'Deed of
Purchase and Sale' (Exhibit 1), the execution having been made by
Gimena Almosara in favor of appellee Hermogena V. Felipe.
After a study of this case, we have come to the conclusion that the
appellants are entitled to recover the ownership of the lots in question.
We so hold because although Exh. 1 concerning the sale made in 1951
of the disputed lots is, in Our opinion, not a forgery the fact is that the
sale made by Gimena Almosara is invalid, having been executed
without the needed consent of her husband, the lots being conjugal.
Appellees' argument that this was an issue not raised in the pleadings
is baseless, considering the fact that the complaint alleges that the
parcels 'were purchased by plaintiff Gimena Almosara and her late
husband Maximo Aldon' (the lots having been purchased during the
existence of the marriage, the same are presumed conjugal) and
inferentially, by force of law, could not, be disposed of by a wife
without her husband's consent.
The defendants are now the appellants in this petition for review. They invoke
several grounds in seeking the reversal of the decision of the Court of Appeals. One
of the grounds is factual in nature; petitioners claim that "respondent Court of
Appeals has found as a fact that the 'Deed of Purchase and Sale' executed by
respondent Gimena Almosara is not a forgery and therefore its authenticity and due
execution is already beyond question." We cannot consider this ground because as
a rule only questions of law are reviewed in proceedings under Rule 45 of the Rules
of Court subject to well-defined exceptions not present in the instant case.
The legal ground which deserves attention is the legal effect of a sale of lands
belonging to the conjugal partnership made by the wife without the consent of the
husband.
It is useful at this point to re-state some elementary rules: The husband is the
administrator of the conjugal partnership. (Art. 165, Civil Code.) Subject to certain
exceptions, the husband cannot alienate or encumber any real property of the
conjugal partnership without the wife's consent. (Art. 166, Idem.) And the wife
cannot bind the conjugal partnership without the husband's consent, except in
cases provided by law. (Art. 172, Idem.)
In the instant case, Gimena, the wife, sold lands belonging to the conjugal
partnership without the consent of the husband and the sale is not covered by the
phrase "except in cases provided by law." The Court of Appeals described the sale
as "invalid" - a term which is imprecise when used in relation to contracts because
the Civil Code uses specific names in designating defective contracts,
namely: rescissible (Arts. 1380 et seq.), voidable(Arts. 1390 et
seq.), unenforceable (Arts. 1403, et seq.), and void or inexistent (Arts. 1409 et seq.)
The sale made by Gimena is certainly a defective contract but of what category?
The answer: it is a voidable contract.
According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose
where one of the parties is incapable of giving consent to the contract." (Par. 1.) In
the instant case-Gimena had no capacity to give consent to the contract of sale.
The capacity to give consent belonged not even to the husband alone but to both
spouses.
The view that the contract made by Gimena is a voidable contract is supported by
the legal provision that contracts entered by the husband without the consent of the
wife when such consent is required, are annullable at her instance during the
marriage and within ten years from the transaction questioned. (Art. 173, Civil
Code.)
Gimena's contract is not rescissible for in such contract all the essential elements
are untainted but Gimena's consent was tainted. Neither can the contract be
classified as unenforceable because it does not fit any of those described in Art.
1403 of the Civil Code. And finally, the contract cannot be void or inexistent
because it is not one of those mentioned in Art. 1409 of the Civil Code. By process
of elimination, it must perforce be a voidable contract.
The voidable contract of Gimena was subject to annulment by her husband only
during the marriage because he was the victim who had an interest in the contract.
Gimena, who was the party responsible for the defect, could not ask for its
annulment. Their children could not likewise seek the annulment of the contract
while the marriage subsisted because they merely had an inchoate right to the
lands sold.
The termination of the marriage and the dissolution of the conjugal partnership by
the death of Maximo Aldon did not improve the situation of Gimena. What she could
not do during the marriage, she could not do thereafter.
The case of Sofia and Salvador Aldon is different. After the death of Maximo they
acquired the right to question the defective contract insofar as it deprived them of
their hereditary rights in their father's share in the lands. The father's share is onehalf (1/2) of the lands and their share is two-thirds (2/3) thereof, one-third (1/3)
pertaining to the widow.
The petitioners have been in possession of the lands since 1951. It was only in 1976
when the respondents filed action to recover the lands. In the meantime, Maximo
Aldon died.
Two questions come to mind, namely: (1) Have the petitioners acquired the lands by
acquisitive prescription? (2) Is the right of action of Sofia and Salvador Aldon barred
by the statute of limitations?
Anent the first question, We quote with approval the following statement of the
Court of Appeals:
We would like to state further that appellees [petitioners herein] could
not have acquired ownership of the lots by prescription in view of what
we regard as their bad faith. This bad faith is revealed by testimony to
the effect that defendant-appellee Vicente V. Felipe (son of appellees
Eduardo Felipe and Hermogena V. Felipe) attempted in December 1970
to have Gimena Almosara sign a ready-made document purporting to
self the disputed lots to the appellees. This actuation clearly indicated
that the appellees knew the lots did not still belong to them, otherwise,
why were they interested in a document of sale in their favor? Again
why did Vicente V. Felipe tell Gimena that the purpose of the document
was to obtain Gimena's consent to the construction of an irrigation
pump on the lots in question? The only possible reason for purporting
to obtain such consent is that the appellees knew the lots were not
theirs. Why was there an attempted improvement (the irrigation tank)
only in 1970? Why was the declaration of property made only in 1974?
Why were no attempts made to obtain the husband's signature,
despite the fact that Gimena and Hermogena were close relatives? An
these indicate the bad faith of the appellees. Now then, even if we
were to consider appellees' possession in bad faith as a possession in
the concept of owners, this possession at the earliest started in 1951,
hence the period for extraordinary prescription (30 years) had not yet
lapsed when the present action was instituted on April 26, 1976.
As to the second question, the children's cause of action accrued from the death of
their father in 1959 and they had thirty (30) years to institute it (Art. 1141, Civil
Code.) They filed action in 1976 which is well within the period.
WHEREFORE, the decision of the Court of Appeals is hereby modified. Judgment is
entered awarding to Sofia and Salvador Aldon their shares of the lands as stated in
the body of this decision; and the petitioners as possessors in bad faith shall make
an accounting of the fruits corresponding to the share aforementioned from 1959
and solidarity pay their value to Sofia and Salvador Aldon; costs against the
petitioners.
SO ORDERED.
Concepcion Jr., Guerrero and De Castro, JJ., concur.
Makasiar, (Chairman), J., In the result.
Escolin J., took no part.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. The issue is whether the wife's sale in 1651 of an unregistered
sixteen-hectare conjugal land, without the consent of her husband (he died in
1959), can be annulled in 1976 by the wife and her two children.
As a rule, the husband cannot dispose of the conjugal realty without the wife's
consent (Art. 166, Civil Code). Thus, a sale by the husband of the conjugal realty
without the wife's consent was declared void (Tolentino vs. Cardenas, 123 Phil. 517;
Villocino vs. Doyon, L-19797, December 17, 1966, 18 SCRA 1094 and L-28871, April
25, 1975, 63 SCRA 460; Reyes vs. De Leon, L-22331, June 6,1967, 20 SCRA 369;
Bucoy vs. Paulino, L-25775, April 26, 1968, 23 SCRA 248; Tinitigan vs. Tinitigan, L45418, October 30,1980, 100 SCRA 619).
With more reason, the wife cannot make such a disposition without the husband's
consent since the husband is the administrator of the conjugal assets.
In the instant case, the Court of Appeals did not err in voiding the wife's sale of the
conjugal land without the husband's consent. As that sale is contrary to law, the
action to have it declared void or inexistent does not prescribe.
Moreover, there are indications that the contract between the parties was an
antichresis, a transaction which is very common in rural areas.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. The issue is whether the wife's sale in 1651 of an unregistered
sixteen-hectare conjugal land, without the consent of her husband (he died in
1959), can be annulled in 1976 by the wife and her two children.
As a rule, the husband cannot dispose of the conjugal realty without the wife's
consent (Art. 166, Civil Code). Thus, a sale by the husband of the conjugal realty
without the wife's consent was declared void (Tolentino vs. Cardenas, 123 Phil. 517;
Villocino vs. Doyon, L-19797, December 17, 1966, 18 SCRA 1094 and L-28871, April
25, 1975, 63 SCRA 460; Reyes vs. De Leon, L-22331, June 6,1967, 20 SCRA 369;
Bucoy vs. Paulino, L-25775, April 26, 1968, 23 SCRA 248; Tinitigan vs. Tinitigan, L45418, October 30,1980, 100 SCRA 619).
With more reason, the wife cannot make such a disposition without the husband's
consent since the husband is the administrator of the conjugal assets.
In the instant case, the Court of Appeals did not err in voiding the wife's sale of the
conjugal land without the husband's consent. As that sale is contrary to law, the
action to have it declared void or inexistent does not prescribe.
Moreover, there are indications that the contract between the parties was an
antichresis, a transaction which is very common in rural areas.
FIRST DIVISION
[G.R. No. 134685. November 19, 1999]
MARIA ANTONIA SIGUAN, petitioner, vs. ROSA LIM, LINDE LIM, INGRID LIM
and NEIL LIM, respondents.
DECISION
DAVIDE, JR., C.J.:
May the Deed of Donation executed by respondent Rosa Lim (hereafter LIM) in
favor of her children be rescinded for being in fraud of her alleged creditor,
petitioner Maria Antonia Siguan? This is the pivotal issue to be resolved in this
petition for review on certiorari under Rule 45 of the Revised Rules of Court.
The relevant facts, as borne out of the records, are as follows:
On 25 and 26 August 1990, LIM issued two Metrobank checks in the sums
of P300,000 and P241,668, respectively, payable to cash. Upon presentment by
petitioner with the drawee bank, the checks were dishonored for the reason
account closed. Demands to make good the checks proved futile. As a
consequence, a criminal case for violation of Batas Pambansa Blg. 22, docketed as
Criminal Cases Nos. 22127-28, were filed by petitioner against LIM with Branch 23
of the Regional Trial Court (RTC) of Cebu City. In its decision[1] dated 29 December
1992, the court a quo convicted LIM as charged. The case is pending before this
Court for review and docketed as G.R. No. 134685.
It also appears that on 31 July 1990 LIM was convicted of estafa by the RTC of
Quezon City in Criminal Case No. Q-89-2216 [2] filed by a certain Victoria
Suarez. This decision was affirmed by the Court of Appeals. On appeal, however,
this Court, in a decision[3] promulgated on 7 April 1997, acquitted LIM but held her
civilly liable in the amount of P169,000, as actual damages, plus legal interest.
Meanwhile, on 2 July 1991, a Deed of Donation [4] conveying the following parcels
of land and purportedly executed by LIM on 10 August 1989 in favor of her children,
Linde, Ingrid and Neil, was registered with the Office of the Register of Deeds of
Cebu City:
(1) a parcel of land situated at Barrio Lahug, Cebu City, containing an area
of 563 sq. m. and covered by TCT No. 93433;
(2) a parcel of land situated at Barrio Lahug, Cebu City, containing an area
of 600 sq. m. and covered by TCT No. 93434;
(3) a parcel of land situated at Cebu City containing an area of 368 sq. m.
and covered by TCT No. 87019; and
(4) a parcel of land situated at Cebu City, Cebu containing an area of 511
sq. m. and covered by TCT No. 87020.
New transfer certificates of title were thereafter issued in the names of the
donees.[5]
On 23 June 1993, petitioner filed an accion pauliana against LIM and her
children before Branch 18 of the RTC of Cebu City to rescind the questioned Deed of
Donation and to declare as null and void the new transfer certificates of title issued
for the lots covered by the questioned Deed. The complaint was docketed as Civil
Case No. CEB-14181. Petitioner claimed therein that sometime in July 1991, LIM,
through a Deed of Donation, fraudulently transferred all her real property to her
children in bad faith and in fraud of creditors, including her; that LIM conspired and
confederated with her children in antedating the questioned Deed of Donation, to
petitioners and other creditors prejudice; and that LIM, at the time of the
fraudulent conveyance, left no sufficient properties to pay her obligations.
On the other hand, LIM denied any liability to petitioner. She claimed that her
convictions in Criminal Cases Nos. 22127-28 were erroneous, which was the reason
why she appealed said decision to the Court of Appeals. As regards the questioned
Deed of Donation, she maintained that it was not antedated but was made in good
faith at a time when she had sufficient property. Finally, she alleged that the Deed
of Donation was registered only on 2 July 1991 because she was seriously ill.
In its decision of 31 December 1994, [6] the trial court ordered the rescission of
the questioned deed of donation; (2) declared null and void the transfer certificates
of title issued in the names of private respondents Linde, Ingrid and Neil Lim; (3)
ordered the Register of Deeds of Cebu City to cancel said titles and to reinstate the
previous titles in the name of Rosa Lim; and (4) directed the LIMs to pay the
petitioner, jointly and severally, the sum of P10,000 as moral damages; P10,000 as
attorneys fees; and P5,000 as expenses of litigation.
On appeal, the Court of Appeals, in a decision [7] promulgated on 20 February
1998, reversed the decision of the trial court and dismissed petitioners accion
pauliana. It held that two of the requisites for filing an accion pauliana were absent,
namely, (1) there must be a credit existing prior to the celebration of the contract;
and (2) there must be a fraud, or at least the intent to commit fraud, to the
prejudice of the creditor seeking the rescission.
According to the Court of
and acknowledged before a
executed on 10 August 1989.
the questioned Deed, being a
rise to its execution and of the date thereof. No antedating of the Deed of Donation
was made, there being no convincing evidence on record to indicate that the notary
public and the parties did antedate it. Since LIMs indebtedness to petitioner was
incurred in August 1990, or a year after the execution of the Deed of Donation, the
first requirement for accion pauliana was not met.
Anent petitioners contention that assuming that the Deed of Donation was not
antedated it was nevertheless in fraud of creditors because Victoria Suarez became
LIMs creditor on 8 October 1987, the Court of Appeals found the same untenable,
for the rule is basic that the fraud must prejudice the creditor seeking the
rescission.
Her motion for reconsideration having been denied, petitioner came to this
Court and submits the following issue:
WHETHER OR NOT THE DEED OF DONATION, EXH. 1, WAS ENTERED INTO IN
FRAUD OF [THE] CREDITORS OF RESPONDENT ROSA [LIM].
Petitioner argues that the finding of the Court of Appeals that the Deed of
Donation was not in fraud of creditors is contrary to well-settled jurisprudence laid
down by this Court as early as 1912 in the case of Oria v. McMicking,[8] which
enumerated the various circumstances indicating the existence of fraud in a
transaction. She reiterates her arguments below, and adds that another fact found
by the trial court and admitted by the parties but untouched by the Court of Appeals
is the existence of a prior final judgment against LIM in Criminal Case No. Q-89-2216
declaring Victoria Suarez as LIMs judgment creditor before the execution of the
Deed of Donation.
Petitioner further argues that the Court of Appeals incorrectly applied or
interpreted Section 23,[9] Rule 132 of the Rules of Court, in holding that being a
public document, the said deed of donation is evidence of the fact which gave rise
to its execution and of the date of the latter. Said provision should be read with
Section 30[10] of the same Rule which provides that notarial documents are prima
facieevidence of their execution, not of the facts which gave rise to their execution
and of the date of the latter.
Finally, petitioner avers that the Court of Appeals overlooked Article 759 of the
New Civil Code, which provides: The donation is always presumed to be in fraud of
creditors when at the time of the execution thereof the donor did not reserve
sufficient property to pay his debts prior to the donation. In this case, LIM made no
reservation of sufficient property to pay her creditors prior to the execution of the
Deed of Donation.
On the other hand, respondents argue that (a) having agreed on the law and
requisites of accion pauliana, petitioner cannot take shelter under a different law;
(b) petitioner cannot invoke the credit of Victoria Suarez, who is not a party to this
case, to support her accion pauliana; (c) the Court of Appeals correctly applied or
interpreted Section 23 of Rule 132 of the Rules of Court; (d) petitioner failed to
present convincing evidence that the Deed of Donation was antedated and
executed in fraud of petitioner; and (e) the Court of Appeals correctly struck down
the awards of damages, attorneys fees and expenses of litigation because there is
no factual basis therefor in the body of the trial courts decision.
The primordial issue for resolution is whether the questioned Deed of Donation
was made in fraud of petitioner and, therefore, rescissible. A corollary issue is
whether the awards of damages, attorneys fees and expenses of litigation are
proper.
We resolve these issues in the negative.
The rule is well settled that the jurisdiction of this Court in cases brought before
it from the Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing
errors of law. Findings of fact of the latter court are conclusive, except in a number
of instances.[11] In the case at bar, one of the recognized exceptions warranting a
review by this Court of the factual findings of the Court of Appeals exists, to wit, the
factual findings and conclusions of the lower court and Court of Appeals are
conflicting, especially on the issue of whether the Deed of Donation in question was
in fraud of creditors.
Article 1381 of the Civil Code enumerates the contracts which are rescissible,
and among them are those contracts undertaken in fraud of creditors when the
latter cannot in any other manner collect the claims due them.
The action to rescind contracts in fraud of creditors is known as accion
pauliana. For this action to prosper, the following requisites must be present: (1)
the plaintiff asking for rescission has a credit prior to the alienation, [12] although
demandable later; (2) the debtor has made a subsequent contract conveying a
patrimonial benefit to a third person; (3) the creditor has no other legal remedy to
satisfy his claim; [13](4) the act being impugned is fraudulent; [14] (5) the third person
who received the property conveyed, if it is by onerous title, has been an
accomplice in the fraud.[15]
The general rule is that rescission requires the existence of creditors at the time
of the alleged fraudulent alienation, and this must be proved as one of the bases of
the judicial pronouncement setting aside the contract. [16] Without any prior existing
debt, there can neither be injury nor fraud. While it is necessary that the credit of
the plaintiff in the accion pauliana must exist prior to the fraudulent alienation, the
date of the judgment enforcing it is immaterial. Even if the judgment be
subsequent to the alienation, it is merely declaratory, with retroactive effect to the
date when the credit was constituted.[17]
In the instant case, the alleged debt of LIM in favor of petitioner was incurred in
August 1990, while the deed of donation was purportedly executed on 10 August
1989.
We are not convinced with the allegation of the petitioner that the questioned
deed was antedated to make it appear that it was made prior to petitioners
credit. Notably, that deed is a public document, it having been acknowledged
before a notary public.[18] As such, it is evidence of the fact which gave rise to its
execution and of its date, pursuant to Section 23, Rule 132 of the Rules of Court.
Petitioners contention that the public documents referred to in said Section 23
are only those entries in public records made in the performance of a duty by a
public officer does not hold water. Section 23 reads:
SEC. 23. Public documents as evidence. Documents consisting of entries in public
records made in the performance of a duty by a public officer are prima
facie evidence of the facts therein stated. All other public documents are evidence,
even against a third person, of the fact which gave rise to their execution and of the
date of the latter. (Emphasis supplied).
The phrase all other public documents in the second sentence of Section 23
means those public documents other than the entries in public records made in the
performance of a duty by a public officer. And these include notarial documents, like
the subject deed of donation. Section 19, Rule 132 of the Rules of Court provides:
SEC. 19. Classes of documents. -- For the purpose of their presentation in
evidence, documents are either public or private.
Public documents are:
(a) . . .
(b) Documents acknowledged before a notary public except last wills and
testaments. . . .
It bears repeating that notarial documents, except last wills and testaments, are
public documents and are evidence of the facts that gave rise to their execution and
of their date.
In the present case, the fact that the questioned Deed was registered only on 2
July 1991 is not enough to overcome the presumption as to the truthfulness of the
statement of the date in the questioned deed, which is 10 August 1989. Petitioners
claim against LIM was constituted only in August 1990, or a year after the
questioned alienation. Thus, the first two requisites for the rescission of contracts
are absent.
Even assuming arguendo that petitioner became a creditor of LIM prior to the
celebration of the contract of donation, still her action for rescission would not fare
well because the third requisite was not met. Under Article 1381 of the Civil Code,
contracts entered into in fraud of creditors may be rescinded only when the
creditors cannot in any manner collect the claims due them. Also, Article 1383 of
the same Code provides that the action for rescission is but a subsidiary remedy
which cannot be instituted except when the party suffering damage has no other
legal means to obtain reparation for the same. The term subsidiary remedy has
been defined as the exhaustion of all remedies by the prejudiced creditor to collect
claims due him before rescission is resorted to. [19] It is, therefore, essential that the
party asking for rescission prove that he has exhausted all other legal means to
obtain satisfaction of his claim. [20] Petitioner neither alleged nor proved that she did
so. On this score, her action for the rescission of the questioned deed is not
maintainable even if the fraud charged actually did exist. [21]
The fourth requisite for an accion pauliana to prosper is not present either.
Article 1387, first paragraph, of the Civil Code provides: All contracts by virtue
of which the debtor alienates property by gratuitous title are presumed to have
been entered into in fraud of creditors when the donor did not reserve sufficient
property to pay all debts contracted before the donation. Likewise, Article 759 of
the same Code, second paragraph, states that the donation is always presumed to
be in fraud of creditors when at the time thereof the donor did not reserve sufficient
property to pay his debts prior to the donation.
For this presumption of fraud to apply, it must be established that the donor did
not leave adequate properties which creditors might have recourse for the
collection of their credits existing before the execution of the donation.
As earlier discussed, petitioners alleged credit existed only a year after the
deed of donation was executed. She cannot, therefore, be said to have been
prejudiced or defrauded by such alienation. Besides, the evidence disclose that as
of 10 August 1989, when the deed of donation was executed, LIM had the following
properties:
(1)
A parcel of land containing an area of 220 square meters,
together with the house constructed thereon, situated in Sto. Nio
Village, Mandaue City, Cebu, registered in the name of Rosa Lim and
covered by TCT No. 19706;[22]
(2)
A parcel of land located in Benros Subdivision, Lawa-an, Talisay,
[23]
Cebu;
(3)
A parcel of land containing an area of 2.152 hectares, with
coconut trees thereon, situated at Hindag-an, St. Bernard, Southern
Leyte, and covered by Tax Declaration No. 13572. [24]
(4)
A parcel of land containing an area of 3.6 hectares, with coconut
trees thereon, situated at Hindag-an, St. Bernard, Southern Leyte, and
covered by Tax Declaration No. 13571.[25]
During her cross-examination, LIM declared that the house and lot mentioned in
no. 1 was bought by her in the amount of about P800,000 to P900,000.[26] Thus:
ATTY. FLORIDO:
Q
A
Q
These properties at the Sto. Nio Village, how much did you acquire this
property?
Including the residential house P800,000.00 to P900,000.00.
How about the lot which includes the house. How much was the price in the
Deed of Sale of the house and lot at Sto. Nio Violage [sic]?
I forgot.
Petitioner did not adduce any evidence that the price of said property was
lower. Anent the property in no. 2, LIM testified that she sold it in 1990. [27] As to the
properties in nos. 3 and 4, the total market value stated in the tax declarations
dated 23 November 1993 was P56,871.60. Aside from these tax declarations,
petitioner did not present evidence that would indicate the actual market value of
said properties. It was not, therefore, sufficiently established that the properties left
behind by LIM were not sufficient to cover her debts existing before the donation
was made. Hence, the presumption of fraud will not come into play.
Nevertheless, a creditor need not depend solely upon the presumption laid
down in Articles 759 and 1387 of the Civil Code. Under the third paragraph of
Article 1387, the design to defraud may be proved in any other manner recognized
by the law of evidence. Thus in the consideration of whether certain transfers are
fraudulent, the Court has laid down specific rules by which the character of the
justification for the same in the ratio decidendi. Hence, the Court of Appeals
correctly deleted these awards for want of basis in fact, law or equity.
WHEREFORE, the petition is hereby DISMISSED and the challenged decision of
the Court of Appeals in CA-G.R. CV. No. 50091 is AFFIRMED in toto.
No pronouncement as to costs.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
FELICIANO, J.:
The two (2) Petitions before us G.R. Nos. 74938-39 and 75524-25 assail the
decision of the then Intermediate Appellate Court in A.C.-G.R. CV Nos. 05136-05137
dated 31 January 1986, which reversed the decision of the Regional Trial Court in
two (2) consolidated cases, namely: Civil Case No. R-81-416 and Civil Case No. R-826789. Upon motion of petitioners, we ordered the consolidation of the two (2)
Petitions.
Respondent Gaw Ching instituted two (2) cases against petitioners Angelina
Malabanan, Leonida Senolos, et al. in connection with the sale of piece of land
located in Binondo, Manila. The first case, Civil Case No. R-81-416, sought to annul
such sale and to enjoin the demolition of a building standing on that piece of land,
and also prayed for the award of damages. The second case, Civil Case No. G.R. 826798, demanded damages from petitioner Senolos for bringing about the demolition
of the building.
The following facts found by the trial court, and adopted and incorporated by the
appellate court, are undisputed:
Evidence for plaintiff showed that Gaw Ching has been leasing the
house and lot located [in] 697-699 Asuncion Street, Binondo, Manila
from Mr. Jabit since 1951. Plaintiff conducted his business (Victoria
Blacksmith Shop) on the ground floor and lived on the second floor.
When Mr. Jabit died, his daughter, defendant Malabanan continued to
lease the premises to plaintiff but at an increased rental of P1,000.00
per month. Before the increase, Gaw Ching paid P700.00 per month, as
evidenced by receipts of rentals. There was no written contract of lease
between plaintiff and Mr. Jabit as to its duration but the rentals were
evidently, paid monthly. On April 27, 1980, Angelina Malabanan told
him that she was selling the house and lot for P5,000.00 per square
meter. Plaintiff told her however, that the price is prohibitive. On May
13, 1980, defendant Malabanan wrote plaintiff, reiterating that she was
selling the house and lot at P5,000.00 per square meter and that if he
is not agreeable, she will sell it to another person. After receiving the
letter, plaintiff turned over the letter to his counsel, Atty. Sugay. Gaw
Ching claims that he is not in a position to buy the property at
P5,000.00 per square meter because it was expensive. Subsequently,
Gaw Ching tried to pay the rent for June, 1980, but Malabanan refused
to accept it. Plaintiff's counsel advised him to deposit the rentals in a
bank which he did, after which, his counsel wrote Malabanan informing
her about the deposit (Exh. B). On October 2, 1980, plaintiff received
another letter from defendant Malabanan which he gave to his counsel
who told him that said defendant is offering the house and lot at
P5,000.00 per square meter and that if he is not agreeable, she will sell
the premises to another person at P4,000.00 per square meter. Plaintiff
testified that he was willing to buy the subject property at P4,000.00
but hastened to add that it was still expensive and did not ask his
counsel to write Malabanan about it. So, also, it was the opinion of his
counsel that it was not necessary to reply because the context of the
letter was invariably a threat. On November 3, 1980, plaintiff received
another letter from Defendant Malabanan, informing him that the
premises in question had already been sold to defendant Leonida
Senolos. This time, Atty. Sugay sent a reply dated November 24, 1980,
requesting that the pertinent documents of the sale be sent to them
but according to plaintiff, they were not furnished a copy of said sale.
Consequently, plaintiff received a letter from Atty. Techico dated
December 5, 1980 demanding that he vacate the premises and to pay
the arrearages in rentals from October to December, as they were
more importantly, going to repair and convert the dwelling into a
warehouse. Atty. Sugay sent a reply dated February 17, 1981 (Exh. C)
requesting Atty. Techico to furnish them with the Deed of Sale and TCT
because he doubted the veracity of the sale. It took a long time before
Atty. Sugay's letter was answered and he was never furnished a copy
of the Deed of Sale and Transfer Certificate of Title. After exerting all
efforts, plaintiff finally was able to procure a copy of the Deed of Sale
and TCT No. 14789 (Exh- A) which reflected that the date of entry of
the Deed of Sale was December 9, 1980, whereas the Deed of Sale
was dated August 23, 1979 (Exh. I). Plaintiff then told Atty. Sugay to file
a civil case against defendants. On October 7, 1981, Atty. Techico sent
a reply to Atty. Sugay's letter of February 17, 1981 (Exh K). Plaintiff
presented the receipt of rentals he paid (Exhs. L to L-6). He deposited
On 10 August 1984, the trial court rendered a decision which upheld the validity of
the contract of sale between petitioner Malabanan and petitioner Senolos. The trial
court declared that petitioner Malabanan had not violated Sections 4 and 6 of
Presidential Decree No. 1517 in relation to Presidential Proclamation No. 1893 and
Letter of Instruction (LOI) No. 935 which provide for a preemptive right on the part
of a lessee over leased property. The trial court stressed that respondent Gaw Ching
had been given ample opportunity to exercise any right of first refusal he might
have had, but he had chosen not to do so.
Respondent Gaw Ching went on appeal to the then Intermediate Appellate Court. By
a vote of three (3) to two (2), the appellate court voted to reverse the decision of
the trial court and hence to nullify the contract of sale between petitioners
Malabanan and Senolos inter se. 2 The majority also held that the transaction
between petitioners was vitiated by fraud, deceit and bad faith allegedly causing
damage to respondent Gaw Ching. Petitioners were held liable jointly and severally
to respondent for moral, exemplary and actual damages in the amount of
P350,000.00 and for attorney's fees in the amount of P20,000.00
for the indulgence in inequitous conduct to plaintiff-appellant's
(respondent Gaw Ching) prejudice and for the unwarranted demolition
of the building by defendants-appellees (petitioners herein) after the
issuance of the cease-and-desist order on October 30, 1981.
While holding that the land in question was located outside the Urban Land
Reform Zone declared by Proclamations Nos. 1767 and 1967, the majority
ruled that circumstances surrounding the sale of the land to petitioner
Senolos had rendered that sale null and void. The majority were here
referring to the finding that when petitioner Malabanan offered in October
1980 to sell the land involved to respondent Gaw Ching at P5,000.00 per
square meter, that land had already been sold to petitioner Senolos as early
as August 1979 for only P1,176.48 per square meter. On the matter of the
demolition of the building, the majority held that the same was unwarranted
and that even if petitioner Senolos had a demolition order,
that order of demolition was valid only if there are no more tenants
residing in the building. If there are tenants and they refused to vacate,
the order of demolition is unavailing. It could not rise higher than the
Civil Code and the Rules of Court. 3
In the instant Petitions for Certiorari, petitioners assail both the annulment of the
deed of sale and the grant of P350,000.00 worth of "moral, exemplary and actual
damages" to respondent Gaw Ching.
We believe that the Petitions must be granted.
I
The firmly settled rule is that strangers to a contract cannot sue either or both of
the contracting parties to annul and set aside that contract. Article 1397 of the Civil
Code embodies that rule in the following formulation:
Art. 1397. The action for the annulment of contracts may be instituted
by all who are thereby obliged principally or subsidiarily. However,
persons who are capable cannot allege the incapacity of those with
whom they contracted; nor can those who exerted intimidation,
violence, or undue influence, or employed fraud, or caused mistake
base their action upon these flaws of the contract. (Emphasis supplied)
Article 1397 itself follows from Article 1311 of the Civil Code which
establishes the fundamental rule that:
Art. 1311. Contracts take effect only between the parties, their assigns
and heirs, except in case where the rights and obligations arising from
the contract are not transmissible by their nature, or by stipulation or
by provision of law. The heir is not liable beyond the value of the
property he received from the decedent.
xxx xxx xxx
(Emphasis supplied)
As long ago as 1912, this Court in Ibanez v. Hongkong and Shanghai
Bank, 4 pointed out that it is the existence of an interest in a particular
contract that is the basis of one's right to sue for nullification of that contract
and that essential interest in a given contract is, in general, possessed only
by one who is a party to the contract. In Ibanez, Mr. Justice Torres wrote:
From these legal provisions it is deduced that it is the interest had in a
given contract, that is the determining reason of the right which lies in
favor of the party obligated principally or subsidiarily to enable him to
bring an action for the nullity of the contract in which he
intervened, and, therefore, he who has no right in a contract is not
entitled to prosecute an action for nullity, for, according to the
precedents established by the courts, the person who is not a party to
a contract nor has any cause of action or representation from those
who intervened therein, is manifestly without right of action and
personality such as to enable him to assail the validity of the contract.
(Decisions of the Supreme Court of Spain, of April 18, 1901, and
November 23, 1903, pronounced in cases requiring an application of
the preinserted article 1302 of the Civil Code. 5
Mr. Justice Torres went on to indicate a possible qualification to the above
general principle, that is, a situation where a non-party to a contract could be
allowed to bring an action for declaring that contract null:
He who is not the party obligated principally or subsidiarily in a
contract may perhaps be entitled to exercise an action for nullity, if he
is prejudiced in his rights with respect to one of the contracting
parties; but, in order that such be the case, it is indispensable to show
the detriment which positively would result to him from the contract in
which he had no intervention
xxx xxx xxx
(Emphasis supplied)
There is an important and clear, albeit implicit, limitation upon the right of a
person who is in fact injured by the very operation of a contract between two
(2) third parties to sue to nullify that contract: that contract may be nullified
only to the extent that such nullification is absolutely necessary to protect the
plaintiff's lawful rights. It may be expected that in most instances, an
injunction restraining the carrying out of acts in fact injurious to the plaintiff's
rights would be sufficient and that there should be no need to set aside the
contract itself which is a res inter alios acta and which may have any number
of other provisions, implementation of which might have no impact at all
upon the plaintiff's rights and interests.
What is important for present purposes is that respondent Gaw Ching, admittedly a
stranger to the contract of sale of a piece of land between petitioners Malabanan
and Senolos inter se, does not fall within the possible exception recognized
in Ibanez v. Hongkong & Shanghai Bank. In the first place, Gaw Ching had no legal
right of preemption in respect of the house and lot here involved. The majority
opinion of the appellate court itself explicitly found that the subject piece of land is
located outside the Urban Land Reform Zones declared pursuant to P.D. No.
1517. 7 Even assuming for purposes of argument merely, that the land here
involved was in fact embraced in a declared Urban Land Reform Zone (which it was
not), Gaw Ching would still not have been entitled to a right of preemption in
respect of the land sold. In Santos v. Court of Appeals, 8 this Court held that the
preemptive or redemptive rights of a lessee under P.D. No. 1517 exists only in
respect of the urban land under lease on which the tenant or lessee had built his
home and in which he had resided for ten (10) years or more and that, in
consequence, where both land and building belong to the lessor, that preemptive or
redemptive right was simply not available under the law.
Finally, we are unable to understand the respondent appellate court's view that
respondent Gaw Ching having been a long-time tenant of the property in question,
had acquired a preferred right to purchase that property. This holding is simply
bereft of any legal basis. We know of no law, outside the Urban Land Reform Zone
or P.D. No. 1517, that grants such a right to a lessee no matter how long the period
of the lease has been. If such right existed at all, it could only have been created by
contract; 9 respondent Gaw Ching does not, however, pretend that there had been
such a contractual stipulation between him and petitioners.
In the second place, assuming once again, for present purposes only, that
respondent Gaw Ching did have a preemptive right to purchase the land from
petitioner Malabanan (which he did not), it must be stressed that petitioner
Malabanan did thrice offer the land to Gaw Ching but the latter had consistently
refused to buy. Since Gaw Ching did not in fact accept the offer to sell and did not
buy the land, he suffered no prejudice, and could not have suffered any prejudice,
by the sale of the same piece of land to petitioner Senolos. No fraud was thus
worked upon him notwithstanding his insinuation that the sale of the land to
petitioner Senolos had preceded the offer of the same piece of land to himself.
In the third place, and contrary to the holding of the majority appellate court
opinion, the fact that Gaw Ching had been lessee of the house and lot was simply
not enough basis for a right to bring an action to set aside the contract of sale
between the petitioners inter se. A lessee, it is elementary, cannot attack the title of
his lessor over the subject matter of the lease. 10 Moreover, the lease contract
between petitioner Malabanan and respondent Gaw Ching must in any case be held
to have lapsed when the leased house was condemned and the order of demolition
issued.
II
We consider next petitioners' claim that the appellate court erred grievously in
imposing upon them an award of P350,000.00 for "moral, exemplary and actual
damages" not only because petitioners had "indulged in inequitous conduct to
[respondent Gaw Ching's] prejudice" but also "for the unwarranted demolition of the
building by [petitioners] after the issuance of the cease and desist order on October
30, 1981."
Here again, we are compelled to hold that the appellate court lapsed into reversible
error. The relevant conclusions of fact which the trial court arrived at are set out in
its decision in the following manner:
On the legality of the demolition necessarily raising the question: (3)
whether or not plaintiff was notified within a reasonable period of time
of the demolition, and a fortiori whether this admittedly exercise of
police power, the validity of which was already being determined by
the Court could be stopped by a pretenatural [sic] administrative order
from the office of the Assistant Secretary for Operation of the MPWH
brought about by an appeal by a person other than the owner of the
building, which office had not done anything to immediately forestall
the imminent injury to person and damage to property. (Please see P.D.
1096, Rule XII, Sec. 5 thereof).
In the first place, the claim of the plaintiff that the demolition of the
house rented by him came as a surprise, is fiercely contradicted by his
own evidence. A copy of the demolition order is attached to the
complaint as Annex "L", now marked as Exhibit "9" for the defendant
Senolos, unmistakably show that plaintiff received a copy of the order
of demolition from the City Engineer's Office, approved by the Mayor,
on October 5, 1981.
Verily, the present action before the Court is procedurally and
substantially correct in abating a nuisance. This exercise of police
power is not only being cordoned sanitaired [sic] by the doctrinal
pronouncements, the provisions of Art. 482 in relation to Art. 436 of
the Civil Code, Sections 275 and 276 of the compilation of ordinances
of the City of Manila but also by Rule VII, par. 5 of the implementing
Rules and Regulations of the National Building Code of the Philippines
(P.D. 1096). Indeed, the latter law does not authorize any person other
than the owner, to appeal the order of the City Engineer to the Ministry
of Public Works and Highways. This is the position espoused by the City
Legal Officer of Manila in defense of the City Engineer and the Mayor,
in opposition to the move of the plaintiff to dismiss the order of
demolition as improvidently issued.
ACCORDINGLY, The Court Resolved to GRANT the Petition and to REVERSE and SET
ASIDE the Decision of the then Intermediate Appellate Court dated 31 January 1986
and its Resolution dated 5 June 1986, in AC-G.R. CV Nos. 05136-05137. The Decision
of the trial court dated 10 August 1984 in consolidated Civil Cases Nos. R-81-416
and R-82-6798, is hereby REINSTATED. No pronouncement as to costs.
Fernan C.J., Gutierrez, Jr. and Corts, JJ., concur.
Bidin J., took no part.
MELO, J.:
The issue in the petition before us is whether or not there was a perfected contract
between petitioner Limketkai Sons Milling, Inc. and respondent Bank of the
Philippine Islands (BPI) covering the sale of a parcel of land, approximately 3.3
hectares in area, and located in Barrio Bagong Ilog, Pasig City, Metro Manila.
Branch 151 of the Regional Trial Court of the National Capital Judicial Region
stationed in Pasig ruled that there was a perfected contract of sale between
petitioner and BPI. It stated that there was mutual consent between the parties; the
subject matter is definite; and the consideration was determined. It concluded that
all the elements of a consensual contract are attendant. It ordered the cancellation
of a sale effected by BPI to respondent National Book Store (NBS) while the case
was pending and the nullification of a title issued in favor of said respondent NBS.
Upon elevation of the case to the Court of Appeals, it was held that no contract of
sale was perfected because there was no concurrence of the three requisites
enumerated in Article 1318 of the Civil Code. The decision of the trial court was
reversed and the complaint dismissed.
Hence, the instant petition.
Shorn of the interpretations given to the acts of those who participated in the
disputed sale, the findings of facts of the trial court and the Court of Appeals narrate
basically the same events and occurrences. The records show that on May 14, 1976,
Philippine Remnants Co., Inc. constituted BPI as its trustee to manage, administer,
and sell its real estate property. One such piece of property placed under trust was
the disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig, Metro
Manila covered by Transfer Certificate of Title No. 493122.
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal
authority by BPI to sell the lot for P1,000.00 per square meter. This arrangement
was concurred in by the owners of the Philippine Remnants.
Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the
land. On July 8, 1988, petitioner's officials and Revilla were given permission by
Rolando V. Aromin, BPI Assistant Vice-President, to enter and view the property they
were buying.
On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein
petitioner. On July 11, 1988, petitioner's officials, Alfonso Lim and Albino Limketkai,
went to BPI to confirm the sale. They were entertained by Vice-President Merlin
Albano and Asst. Vice-President Aromin. Petitioner asked that the price of P1,000.00
per square meter be reduced to P900.00 while Albano stated the price to be
P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per
square meter to be paid in cash. Since the authority to sell was on a first come, first
served and non-exclusive basis, it may be mentioned at this juncture that there is
no dispute over petitioner's being the first comer and the buyer to be first served.
Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash
basis, Alfonso Lim asked if it was possible to pay on terms. The bank officials stated
that there was no harm in trying to ask for payment on terms because in previous
transactions, the same had been allowed. It was the understanding, however, that
should the term payment be disapproved, then the price shall be paid in cash.
It was Albano who dictated the terms under which the installment payment may be
approved, and acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote
BPI through Merlin Albano embodying the payment initially of 10% and the
remaining 90% within a period of 90 days.
Two or three days later, petitioner learned that its offer to pay on terms had been
frozen. Alfonso Lim went to BPI on July 18, 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because Albano stated that
the authority to sell that particular piece of property in Pasig had been withdrawn
from his unit. The same check was tendered to BPI Vice-President Nelson Bona who
also refused to receive payment.
An action for specific performance with damages was thereupon filed on August 25,
1988 by petitioner against BPI. In the course of the trial, BPI informed the trial court
that it had sold the property under litigation to NBS on July 14, 1989. The complaint
was thus amended to include NBS.
On June 10, 1991, the trial court rendered judgment in the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendants Bank of the Philippine Islands and National Book
Store, Inc.:
1. Declaring the Deed of Sale of the property covered by T.C.T. No.
493122 in the name of the Bank of the Philippine Islands, situated in
Barrio Bagong Ilog, Pasig, Metro Manila, in favor of National Book Store,
Inc., null and void;
2. Ordering the Register of Deeds of the Province of Rizal to cancel the
Transfer Certificate of Title which may have been issued in favor of
National Book Store, Inc. by virtue of the aforementioned Deed of Sale
dated July 14, 1989;
3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum
of P33,056,000.00, to execute a Deed of Sale in favor of plaintiff of the
aforementioned property at the price of P1,000.00 per square meter; in
default thereof, the Clerk of this Court is directed to execute the said
deed;
4. Ordering the Register of Deeds of Pasig, upon registration of the said
deed, whether executed by defendant BPI or the Clerk of Court and
payment of the corresponding fees and charges, to cancel said T.C.T.
No. 493122 and to issue, in lieu thereof, another transfer certificate of
title in the name of plaintiff;
5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly
and severally, to the plaintiff the sums of P10,000,000.00 as actual and
consequential damages and P150,000.00 as attorney's fees and
litigation expenses, both with interest at 12% per annum from date
hereof;
6. On the cross-claim of defendant bank against National Book Store,
ordering the latter to indemnify the former of whatever amounts BPI
shall have paid to the plaintiff by reason hereof; and
7. Dismissing the counterclaims of the defendants against the plaintiff
and National Book Store's cross-claim against defendant bank.
Costs against defendants.
(pp. 44-45, Rollo.)
As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena
[P], Rasul, and Mabutas,JJ.), on August 12, 1994, reversed the trial court's decision
and dismissed petitioner's complaint for specific performance and damages.
The issues raised by the parties revolve around the following four questions:
(1) Was there a meeting of the minds between petitioner Limketkai and respondent
BPI as to the subject matter of the contract and the cause of the obligation?
(2) Were the bank officials involved in the transaction authorized by BPI to enter into
the questioned contract?
(3) Is there competent and admissible evidence to support the alleged meeting of
the minds?
(4) Was the sale of the disputed land to the NBS during the pendency of trial
effected in good faith?
There is no dispute in regard to the following: (a) that BPI as trustee of the property
of Philippine Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot
for P1,000.00 per square meter; (b) that Philippine Remnants confirmed the
authority to sell of Revilla and the price at which he may sell the lot; (c) that
petitioner and Revilla agreed on the former buying the property; (d) that BPI
Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to
inspect the property; and (e) that BPI was formally informed about the broker
having procured a buyer.
The controversy revolves around the interpretation or the significance of the
happenings or events at this point.
Petitioner states that the contract to sell and to buy was perfected on July 11, 1988
when its top officials and broker Revilla finalized the details with BPI Vice-Presidents
Merlin Albano and Rolando V. Aromin at the BPI offices.
Respondents, however, contend that what transpired on this date were part of
continuing negotiations to buy the land and not the perfection of the sale. The
arguments of respondents center on two propositions (1) Vice-Presidents Aromin
and Albano had no authority to bind BPI on this particular transaction and (2) the
subsequent attempts of petitioner to pay under terms instead of full payment in
cash constitutes a counter-offer which negates the existence of a perfected
contract.
The alleged lack of authority of the bank officials acting in behalf of BPI is not
sustained by the record.
At the start of the transactions, broker Revilla by himself already had full authority
to sell the disputed lot. Exhibit B dated June 23, 1988 states, "this will serve as your
authority to sell on an as is, where is basis the property located at Pasig Blvd.,
Bagong Ilog . . . ." We agree with Revilla's testimony that the authority given to him
was to sell and not merely to look for a buyer, as contended by respondents.
Revilla testified that at the time he perfected the agreement to sell the litigated
property, he was acting for and in behalf of the BPI as if he were the Bank itself. This
notwithstanding and to firm up the sale of the land, Revilla saw it fit to bring BPI
officials into the transaction. If BPI could give the authority to sell to a licensed
broker, we see no reason to doubt the authority to sell of the two BPI VicePresidents whose precise job in the Bank was to manage and administer real estate
property.
Respondent BPI alleges that sales of trust property need the approval of a Trust
Committee made up of top bank officials. It appears from the record that this trust
committee meets rather infrequently and it does not have to pass on regular
transactions.
Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly
supervised the BPI Real Property Management Unit. He had been in the Real Estate
Division since 1985 and was the head supervising officer of real estate matters.
Aromin had been with the BPI Trust Department since 1968 and had been involved
in the handling of properties of beneficial owners since 1975 (tsn., December 3,
1990, p. 5).
Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo
Barcelon, while purporting to inform Aromin of his poor performance, is an
admission of BPI that Aromin was in charge of Torrens titles, lease contracts,
problems of tenants, insurance policies, installment receivables, management fees,
quitclaims, and other matters involving real estate transactions. His immediate
superior, Vice-President Merlin Albano had been with the Real Estate Division for
only one week but he was present and joined in the discussions with petitioner.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before
the incident. Revilla brought the brothers directly to Aromin upon entering the BPI
premises. Aromin acted in a perfectly natural manner on the transaction before him
with not the slightest indication that he was acting ultra vires. This shows that BPI
held Aromin out to the public as the officer routinely handling real estate
transactions and, as Trust Officer, entering into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this
particular trust property was later withdrawn from Trust Officer Aromin and his
entire unit. If Aromin did not have any authority to act as alleged, there was no
need to withdraw authority which he never possessed.
Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which
cited Prudential Bank vs. Court of Appeals (22 SCRA 350 [1993]), which in turn
relied upon McIntosh vs. Dakota Trust Co. (52 ND 752, 204 NW 818, 40 ALR 1021),
to wit:
Accordingly a banking corporation is liable to innocent third persons
where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in
the particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other
person for his own ultimate benefit.
(at pp. 652-653.)
In the present case, the position and title of Aromin alone, not to mention the
testimony and documentary evidence about his work, leave no doubt that he had
full authority to act for BPI in the questioned transaction. There is no allegation of
fraud, nor is there the least indication that Aromin was acting for his own ultimate
benefit. BPI later dismissed Aromin because it appeared that a top official of the
bank was personally interested in the sale of the Pasig property and did not like
Aromin's testimony. Aromin was charged with poor performance but his dismissal
was only sometime after he testified in court. More than two long years after the
disputed transaction, he was still Assistant Vice-President of BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner
of Philippine Remnants Co. regarding the sale of the firm's property was addressed
to Aromin. The P1,000.00 figure on the first page of broker Revilla's authority to sell
was changed to P1,100.00 by Aromin. The price was later brought down again to
P1,000.00, also by Aromin. The permission given to petitioner to view the lot was
signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988 from
broker Revilla informing BPI that he had a buyer was addressed to Aromin. The
conference on July 11, 1988 when the contract was perfected was with Aromin and
Vice-President Albano. Albano and Aromin were the ones who assured petitioner
Limketkai's officers that term payment was possible. It was Aromin who called up
Miguel Bicharra of Philippine Remnants to state that the BPI rejected payment on
terms and it was to Aromin that Philippine Remnants gave the go signal to proceed
with the cash sale. Everything in the record points to the full authority of Aromin to
bind the bank, except for the self-serving memoranda or letters later produced by
BPI that Aromin was an inefficient and undesirable officer and who, in fact, was
dismissed after he testified in this case. But, of course, Aromin's alleged inefficiency
is not proof that he was not fully clothed with authority to bind BPI.
Respondents' second contention is that there was no perfected contract because
petitioner's request to pay on terms constituted a counter-offer and that
negotiations were still in progress at that point.
Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner
during trial. Among his statements is one to the effect that
. . . Mr. Lim offered to buy the property at P900.00 per square meter
while Mr. Albano counter-offered to sell the property at P1,100.00 per
square meter but after the usual haggling, we finally agreed to sell the
property at the price of P1,000.00 per square meter . . .
(tsn, 12-3-90, p. 17; Emphasis supplied.)
Asked if there was a meeting of the minds between the buyer and the bank in
respect to the price of P1,000.00 per square meter, Aromin answered:
Yes, sir, as far as my evaluation there was a meeting of the minds as
far as the price is concerned, sir.
(ibid, p. 17.)
The requirements in the payment of the purchase price on terms instead of cash
were suggested by BPI Vice-President Albano. Since the authority given to broker
Revilla specified cash payment, the possibility of paying on terms was referred to
the Trust Committee but with the mutual agreement that "if the proposed payment
on terms will not be approved by our Trust Committee, Limketkai should pay in cash
. . . the amount was no longer subject to the approval or disapproval of the
Committee, it is only on the terms." (ibid, p. 19). This is incontrovertibly established
in the following testimony of Aromin:
A. After you were able to agree on the price of
P1,000.00/sq. m., since the letter or authority says the
payment must be in cash basis, what transpired later on?
B. After we have agreed on the price, the Lim brothers
inquired on how to go about submitting the covering
proposal if they will be allowed to pay on terms. They
requested us to give them a guide on how to prepare the
corresponding letter of proposal. I recall that, upon the
request of Mr. Albino Limketkai, we dictated a guide on
how to word a written firm offer that was to be submitted
by Mr. Lim to the bank setting out the terms of payment
but with the mutual agreement that if his proposed
payment on terms will not be approved by our trust
committee, Limketkai should pay the price in cash.
Q And did buyer Limketkai agree to pay in cash in case
the offer of terms will be cash (disapproved).
A Yes, sir.
Q At the start, did they show their willingness to pay in
cash?
A Yes, sir.
Q You said that the agreement on terms was to be
submitted to the trust committee for approval, are you
telling the Court that what was to be approved by the
trust committee was the provision on the payment on
terms?
A Yes, sir.
Q So the amount was no longer subject to the approval or
disapproval of the committee, it is only on the terms?
A Yes, sir.
(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)
The record shows that if payment was in cash, either broker Revilla or Aromin had
full authority. But because petitioner took advantage of the suggestion of VicePresident Albano, the matter was sent to higher officials. Immediately upon learning
that payment on terms was frozen and/or denied, Limketkai exercised his right
within the period given to him and tendered payment in full. The BPI rejected the
payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court
of Appeals (238 SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem
that the legal principles found in said case strengthen and support petitioner's
submission that the contract was perfected upon the meeting of the minds of the
parties.
The negotiation or preparation stage started with the authority given by Philippine
Remnants to BPI to sell the lot, followed by (a) the authority given by BPI and
confirmed by Philippine Remnants to broker Revilla to sell the property, (b) the offer
to sell to Limketkai, (c) the inspection of the property and finally (d) the negotiations
with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI,
agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai,
agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there
was the earlier agreement between petitioner and the authorized broker. There was
a concurrence of offer and acceptance, on the object, and on the cause thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of the
parties;
b. perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals in
CA-G.R. CV No. 06649 dated June 30, 1987 the decision of the Regional Trial Court of
Pasig in SP Proc. No. 8492 dated December 29, 1983; and its resolution dated
November 24, 1987 denying the motion for reconsideration.
The antecedent facts are as follows:
On October 18, 1969, private respondent Jose Vicente De Leon and petitioner Sylvia
Lichauco De Leon were united in wedlock before the Municipal Mayor of
Binangonan, Rizal. On August 28, 1971, a child named Susana L. De Leon was born
from this union.
Sometime in October, 1972, a de facto separation between the spouses occured
due to irreconcilable marital differences, with Sylvia leaving the conjugal home.
Sometime in March, 1973, Sylvia went to the United States where she obtained
American citizenship.
On November 23, 1973, Sylvia filed with the Superior Court of California, County of
San Francisco, a petition for dissolution of marriage against Jose Vicente. In the said
divorce proceedings, Sylvia also filed claims for support and distribution of
properties. It appears, however, that since Jose Vicente was then a Philippine
resident and did not have any assets in the United States, Sylvia chose to hold in
abeyance the divorce proceedings, and in the meantime, concentrated her efforts to
obtain some sort of property settlements with Jose Vicente in the Philippines.
Thus, on March 16, 1977, Sylvia succeeded in entering into a Letter-Agreement with
her mother-in-law, private respondent Macaria De Leon, which We quote in full, as
follows (pp. 40-42, Rollo):
March 16, 1977
Mrs. Macaria Madrigal de Leon
12 Jacaranda, North Forbes Park
Makati, Metro Manila
Dear Dora Macaria:
This letter represents a contractual undertaking among (A) the
undersigned (B) your son, Mr. Jose Vicente de Leon, represented by
you, and (C) yourself in your personal capacity.
You hereby bind yourself jointly and severally to answer for the
undertakings of Joe Vincent under this contract.
In consideration for a peaceful and amicable termination of relations
between the undersigned and her lawfully wedded husband, Jose
Vicente de Leon, your son, the following are agreed upon:
Obligations of Jose Vicente de Leon and/ or yourself in a joint and
several capacity:
1. To deliver with clear title free from all liens and encumbrances and
subject to no claims in any form whatsoever the following properties to
Sylvia Lichauco-de Leon hereinafter referred to as the wife:
5. To allow her daughter to spend two to three months each year with
the father upon mutual convenience.
Very truly yours,
(Sgd.) Sylvia de Leon t/ SYLVIA L. DE LEON
CONFORME:
s/t/MACARIA M. DE LEON
with my marital consent:
s/t/JUAN L. DE LEON
On the same date, Macaria made cash payments to Sylvia in the amount of
P100,000 and US$35,000.00 or P280,000.00, in compliance with her obligations as
stipulated in the aforestated Letter-Agreement.
On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First
Instance of Rizal a joint petition for judicial approval of dissolution of their conjugal
partnership, the main part of which reads as follows (pp. 37-38,Rollo):
5. For the best interest of each of them and of their minor child,
petitioners have agreed to dissolve their conjugal partnership and to
partition the assets thereof, under the following terms and conditionsthis document, a pleading being intended by them to embody and
evidence their agreement:
xxx xxx xxx
(c) The following properties shall be adjudicated to petitioner Sylvia
Lichauco De Leon. These properties will be free of any and all liens and
encumbrances, with clear title and subject to no claims by third
parties. Petitioner Jose Vicente De Leon fully assumes all responsibility
and liability in the event these properties shall not be as described in
the previous sentence:
Sedan (1972 model)
Suite 11-C, Avalon Condominium,
Ortigas Ave., comer Xavier St.,
Mandaluyong, Rizal, Philippines
Apt. 702, Wack-Wack Condominium,
Mandaluyong, Rizal, Philippines
The rights to assignment of 2 Ayala lots in Alabang Rizal (corner lots,
801 sq. meters each) (Fully paid)
2470 Wexford Ave., South San Francisco, California, U.S.A. (Lot 18,
Block 22 Westborough Unit 2) (Fully paid)
The sum of One Hundred Thousand Pesos (P100,000.00)
$30,000.00 at current exchange rate
$5,000.00 at current exchange rate
After ex-parte hearings, the trial court issued an Order dated February 19, 1980
approving the petition, the dispositive portion of which reads (p. 143, Rollo):
WHEREFORE, it is hereby declared that the conjugal partnership of the
Spouses is DISSOLVED henceforth, without prejudice to the terms of
their agreement that each spouse shall own, dispose of, possess,
administer and enjoy his or her separate estate, without the consent of
the other, and all earnings from any profession, business or industries
shall likewise belong to each spouse.
On March 17, 1980, Sylvia moved for the execution of the above-mentioned order.
However, Jose Vicente moved for a reconsideration of the order alleging that Sylvia
made a verbal reformation of the petition as there was no such agreement for the
payment of P4,500.00 monthly support to commence from the alleged date of
separation in April, 1973 and that there was no notice given to him that Sylvia
would attempt verbal reformation of the agreement contained in the joint petition
While the said motion for reconsideration was pending resolution, on April 20, 1980,
Macaria filed with the trial court a motion for leave to intervene alleging that she is
the owner of the properties involved in the case. The motion was granted. On
October 29, 1980, Macaria, assisted by her husband Juan De Leon, filed her
complaint in intervention. She assailed the validity and legality of the LetterAgreement which had for its purpose, according to her, the termination of marital
relationship between Sylvia and Jose Vicente. However, before any hearing could be
had, the judicial reorganization took place and the case was transferred to theRegional Trial Court of Pasig. On December 29, 1983, the trial court rendered
judgment, the dispositive portion of which reads (pp. 35-36, Rollo):
WHEREFORE, judgment is hereby rendered on the complaint in
intervention in favor of the intervenor, declaring null and void the
letter agreement dated March 16, 1977 (Exhibits 'E' to 'E-2'), and
ordering petitioner Sylvia Lichauco De Leon to restore to intervenor the
amount of P380,000.00 plus legal interest from date of complaint, and
to pay intervenor the amount of P100,000.00 as and for attorney's
fees, and to pay the costs of suit.
Judgment is likewise rendered affirming the order of the Court dated
February 19, 1980 declaring the conjugal partnership of the spouses
Jose Vicente De Leon and Sylvia Lichauco De Leon DISSOLVED; and
adjudicating to each of them his or her share of the properties and
assets of said conjugal partnership in accordance with the agreement
embodied in paragraph 5 of the petition, except insofar as the
adjudication to petitioner Sylvia L. De Leon of the properties belonging
to and owned by Intervenor Macaria De Leon is concerned.
Henceforth, (a) each spouse shall own, dispose of, possess, administer
and enjoy his or her separate estate, present and future without the
consent of the other; (b) an earnings from any profession, business or
industry shall likewise belong to each of them separately; (c) the minor
child Susana De Leon shall stay with petitioner Sylvia Lichauco De Leon
for two to three months every year-the transportation both ways of the
child for the trip to the Philippines to be at the expense of the
petitioner Jose Vicente De Leon; and (d) petitioner Jose Vicente De
Leon shall give petitioner Sylvia Lichauco De Leon the sum of
construed against the party who caused the ambiguity and could have also avoided
it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides:
"The interpretation of obscure words of stipulations in a contract shall not favor the
party who caused the obscurity" (see Equitable Banking Corp. vs. IAC, G.R. No.
74451, May 25, 1988, 161 SCRA 518).
Sylvia alleges further that since the nullity of the Letter-Agreement proceeds from
the unlawful consideration solely of Macaria, applying the pari delicto rule, it is clear
that she cannot recover what she has given by reason of the Letter-Agreement nor
ask for the fulfillment of what has been promised her. On her part, Macaria raises
the defenses of intimidation and mistake which led her to execute the LetterAgreement. In resolving this issue, the trial court said (pp. 148-151, Rollo):
In her second cause of action, intervenor claims that her signing of
Exhibits 'E' to 'E- 2' was due to a fear of an unpeaceful and
troublesome separation other son with petitioner Sylvia Lichauco de
Leon. In support of her claim, intervenor testified as follows:
Q Will you please inform us how did Sylvia Lichauco
disturb or threaten your son or yourself?
A Despite the fact that Sylvia Lichauco voluntarily left my
son Joe Vincent and abandoned him, she unashamedly
nagged Joe and me to get money and when her demands
were not met she resorted to threats like, she threatened
to bring Joe to court for support. Sylvia threatened to
scandalize our family by these baseless suits; in fact she
caused the service of summons to Joe when he went to
the United States. (Intervenor's deposition dated Sept. 6,
1983, p. 8).
On the other hand, petitioner Sylvia claims that it was intervenor and
petitioner Jose Vicente who initiated the move to convince her to agree
to a dissolution of their conjugal partnership due to the alleged extramarital activities of petitioner Jose Vicente de Leon. She testified as
follows:
Q Now in her testimony, Macaria Madrigal de Leon also
said that you threatened her by demanding money and
nagged her until she agreed to the letter agreement of
March 1977, what can you say about that?
A I think with all the people sitting around with Atty.
Quisumbing, Atty. Chuidian, my father-in-law, my sister-inlaw and I, you know, it can be shown that this was a
friendly amicable settlement that they were much really
interested in settling down as I was. I think there were
certain reasons that they wanted to get done or planned,
being at that time Jose was already remarried and had a
child. That since she then found out that since she was
worried about what might be, you know, involved in any
future matters. She just wanted to do what she could. She
just want me out of the picture. So in no way, it cannot be
said that I nagged and threatened her. (TSN dated
December 8, 1983, p. 137-138)
In resolving this issue, this Court leans heavily on Exhibit 'R'intervenor, which was not controverted by petitioner Sylvia. A reading
of Exhibit 'R' would show that petitioner Sylvia would consent to and
pardon petitioner Jose Vicente, son of intervenor, for possible crimes of
adultery and/or concubinage, with a sizing attached; that is, the
transfer of the properties subject herein to her. There appears some
truth to the apprehensions of intervenor for in petitioner Sylvia's
testimony she confirms the worry of intervenor as follows:'... being at
that time Jose (De Leon) was already remarried and had a child. That
since she (intervenor) found out that, she was worried about what
might be, you know, involved in any future matters. She just want me
out of the picture." The aforesaid fear of intervenor was further
corroborated by her witness Concepcion Tagudin who testified as
follows:
Q Now, you mentioned that you were present when Mrs.
Macaria De Leon signed this Exhibit 'E-2, ' will you inform
us whether there was anything unusual which you noticed
when Mrs. Macaria M. De Leon signed this Exhibit 'E-2'?
A Mrs. Macaria M. De Leon was in a state of tension and
anger. She was so mad that she remarked: 'Punetang
Sylvia ito bakit ba niya ako ginugulo. Ipakukulong daw
niya si Joe Vincent kung hindi ko pipirmahan ito. Sana
matapos na itong problemang ito pagkapirmang ito,' sabi
niya.' (Deposition-Concepcion Tagudin, Oct. 21, 1983, pp.
10-11)
In her third cause of action, intervenor claims mistake or error in
having signed Exhibits '1' to 'E-2' alleging in her testimony as follows:
Q Before you were told such by your lawyers what if any
were your basis to believe that Sylvia would no longer
have inheritance rights from your son, Joe Vincent?
A Well, that was what Sylvia told me. That she will
eliminate any inheritance rights from me or my son Joe
Vincent's properties if I sign the document amicably. ...
(Intervenor's deposition-Sept. 6, 1983, pp. 9-10).
On the other hand, petitioner Sylvia claims that intervenor could not
have been mistaken in her having signed the document as she was
under advice of counsel during the time that Exhibits 'E' to 'E-2' was
negotiated. To support such claims by Sylvia Lichauco De Leon, the
deposition testimony of Atty. Vicente Chuidian was presented before
this Court:
Atty. Herbosa: Now you mentioned Atty. Norberto
Quisumbing, would you be able to tell us in what capacity
he was present in that negotiation?
Atty. Chuidian: He was counsel for Dona Macaria and for
Joe Vincent, the spouse of Sylvia. (Deposition of V.
Chuidian, December 16, 1983, p. 8)