OBLIGATIONS AND CONTRACTS ARTICLE 1160 on the same date, the PCIB sent the check to the PNB,
same date, the PCIB sent the check to the PNB, for clearance, through
G.R. No. L-26001 October 29, 1968
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS and PHILIPPINE COMMERCIAL AND
INDUSTRIAL BANK, respondents.
Tomas Besa, Jose B. Galang and Juan C. Jimenez for petitioner.
San Juan, Africa & Benedicto for respondents.
CONCEPCION, C.J.:
The Philippine National Bank hereinafter referred to as the PNB seeks
the review by certiorari of a decision of the Court of Appeals, which affirmed
that of the Court of First Instance of Manila, dismissing plaintiff's complaint
against the Philippine Commercial and Industrial Bank hereinafter referred
to as the PCIB for the recovery of P57,415.00.
A partial stipulation of facts entered into by the parties and the decision of the
Court of Appeals show that, on about January 15, 1962, one Augusto Lim
deposited in his current account with the PCIB branch at Padre Faura, Manila,
GSIS Check No. 645915- B, in the sum of P57,415.00, drawn against the PNB;
that, following an established banking practice in the Philippines, the check
was, on the same date, forwarded, for clearing, through the Central Bank, to
the PNB, which did not return said check the next day, or at any other time,
but retained it and paid its amount to the PCIB, as well as debited it against
the account of the GSIS in the PNB; that, subsequently, or on January 31,
1962, upon demand from the GSIS, said sum of P57,415.00 was re-credited
to the latter's account, for the reason that the signatures of its officers on the
check were forged; and that, thereupon, or on February 2, 1962, the PNB
demanded from the PCIB the refund of said sum, which the PCIB refused to
do. Hence, the present action against the PCIB, which was dismissed by the
Court of First Instance of Manila, whose decision was, in turn, affirmed by the
Court of Appeals.
It is not disputed that the signatures of the General Manager and the Auditor
of the GSIS on the check, as drawer thereof, are forged; that the person named
in the check as its payee was one Mariano D. Pulido, who purportedly indorsed
it to one Manuel Go; that the check purports to have been indorsed by Manuel
Go to Augusto Lim, who, in turn, deposited it with the PCIB, on January 15,
1962; that, thereupon, the PCIB stamped the following on the back of the
check: "All prior indorsements and/or Lack of Endorsement Guaranteed,
Philippine Commercial and Industrial Bank," Padre Faura Branch, Manila; that,
the Central Bank; and that, over two (2) months before, or on November 13,
1961, the GSIS had notified the PNB, which acknowledged receipt of the
notice, that said check had been lost, and, accordingly, requested that its
payment be stopped.
In its brief, the PNB maintains that the lower court erred: (1) in not finding the
PCIB guilty of negligence; (2) in not finding that the indorsements at the back
of the check are forged; (3) in not finding the PCIB liable to the PNB by virtue
of the former's warranty on the back of the check; (4) in not holding that
"clearing" is not "acceptance", in contemplation of the Negotiable Instruments
law; (5) in not finding that, since the check had not been accepted by the PNB,
the latter is entitled to reimbursement therefor; and (6) in denying the PNB's
right to recover from the PCIB.
The first assignment of error will be discussed later, together with the last,with
which it is interrelated.
As regards the second assignment of error, the PNB argues that, since the
signatures of the drawer are forged, so must the signatures of the supposed
indorsers be; but this conclusion does not necessarily follow from said
premise. Besides, there is absolutely no evidence, and the PNB has not even
tried to prove that the aforementioned indorsements are spurious. Again, the
PNB refunded the amount of the check to the GSIS, on account of the forgery
in the signatures, not of the indorsers or supposed indorsers, but of the officers
of the GSISas drawer of the instrument. In other words, the question whether
or not the indorsements have been falsified is immaterial to the PNB's liability
as a drawee, or to its right to recover from the PCIB, 1 for, as against the
drawee, the indorsement of an intermediate bank does not guarantee the
signature of the drawer,2 since the forgery of the indorsement is not the cause
of the loss.3
With respect to the warranty on the back of the check, to which the third
assignment of error refers, it should be noted that the PCIB thereby
guaranteed "all prior indorsements," not the authenticity of the signatures of
the officers of the GSIS who signed on its behalf, because the GSIS is not an
indorser of the check, but its drawer.4Said warranty is irrelevant, therefore, to
the PNB's alleged right to recover from the PCIB. It could have been availed
of by a subsequent indorsee5 or a holder in due course6 subsequent to the
PCIB, but, the PNB is neither.7 Indeed, upon payment by the PNB, as drawee,
the check ceased to be a negotiable instrument, and became a mere voucher
or proof of payment.8
Referring to the fourth and fifth assignments of error, we must bear in mind
that, in general, "acceptance", in the sense in which this term is used in the
Negotiable Instruments Law9 is not required for checks, for the same are
payable on demand.10 Indeed, "acceptance" and "payment" are, within the
purview of said Law, essentially different things, for the former is "a promise to
perform an act," whereas the latter is the "actual performance" thereof.11 In the
words of the Law,12 "the acceptance of a bill is the signification by the drawee
of his assent to the order of the drawer," which, in the case of checks, is the
payment, on demand, of a given sum of money. Upon the other hand, actual
payment of the amount of a check implies not only an assent to said order of
the drawer and a recognition of the drawer's obligation to pay the
aforementioned sum, but, also, a compliance with such obligation.
Let us now consider the first and the last assignments of error. The PNB
maintains that the lower court erred in not finding that the PCIB had been guilty
of negligence in not discovering that the check was forged. Assuming that
there had been such negligence on the part of the PCIB, it is undeniable,
however, that the PNB has, also, been negligent, with the particularity that the
PNB had been guilty of a greater degree of negligence, because it had a
previous and formal notice from the GSIS that the check had been lost, with
the request that payment thereof be stopped. Just as important, if not more
important and decisive, is the fact that the PNB's negligence was the main or
proximate cause for the corresponding loss.
In this connection, it will be recalled that the PCIB did not cash the
check upon its presentation by Augusto Lim; that the latter had
merely deposited it in his current account with the PCIB; that, on the same
day, the PCIB sent it, through the Central Bank, to the PNB, for clearing; that
the PNB did not return the check to the PCIB the next day or at any other time;
that said failure to return the check to the PCIB implied, under the current
banking practice, that the PNB considered the check good and would honor it;
that, in fact, the PNB honored the check and paid its amount to the PCIB; and
that only then did the PCIB allow Augusto Lim to draw said amount from his
aforementioned current account.
Thus, by not returning the check to the PCIB, by thereby indicating that the
PNB had found nothing wrong with the check and would honor the same, and
by actually paying its amount to the PCIB, the PNB induced the latter, not only
to believe that the check was genuine and good in every respect, but, also, to
pay its amount to Augusto Lim. In other words, the PNB was the primary or
proximate cause of the loss, and, hence, may not recover from the PCIB. 13
It is a well-settled maxim of law and equity that when one of two (2) innocent
persons must suffer by the wrongful act of a third person, the loss must be
borne by the one whose negligence was the proximate cause of the loss or
who put it into the power of the third person to perpetrate the wrong.14
Then, again, it has, likewise, been held that, where the collecting (PCIB) and
the drawee (PNB) banks are equally at fault, the court will leave the parties
where it finds them.15
Lastly, Section 62 of Act No. 2031 provides:
The acceptor by accepting the instrument engages that he will pay it
according to the tenor of his acceptance; and admits:
(a) The existence of the drawer, the genuineness of his signature, and
his capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
The prevailing view is that the same rule applies in the case of a drawee who
pays a bill without having previously accepted it.16
WHEREFORE, the decision appealed from is hereby affirmed, with costs
against the Philippine National Bank. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and
Capistrano, JJ., concur.
Zaldivar, J., took no part.
G.R. No. L-44546 January 29, 1988
RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO,
TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and
SANTIAGO ASEJO, respondents.
SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of
controversy and a wellspring of enormous conflict that has led not only to
protracted legal entanglements but to even more bitter consequences, like
strained relationships and even the forfeiture of lives. It is a question that
likewise reflects a tragic commentary on prevailing social and cultural values
and institutions, where, as one observer notes, wealth and its accumulation
are the basis of self-fulfillment and where property is held as sacred as life
itself. "It is in the defense of his property," says this modern thinker, that one
"will mobilize his deepest protective devices, and anybody that threatens his
possessions will arouse his most passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the
burden of reconstructing the social order is shouldered by the political
leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our
responsibility is to give them that relief pursuant to the decree of law.
The antecedent facts are quoted from the decision 2 appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of Albay
located in Legaspi City with an area of some 11,325 sq. m. originally
belonged to one Felisa Alzul as her own private property; she married
twice in her lifetime; the first, with one Bernabe Adille, with whom she
had as an only child, herein defendant Rustico Adille; in her second
marriage with one Procopio Asejo, her children were herein plaintiffs,
now, sometime in 1939, said Felisa sold the property in pacto de
retro to certain 3rd persons, period of repurchase being 3 years, but
she died in 1942 without being able to redeem and after her death, but
during the period of redemption, herein defendant repurchased, by
himself alone, and after that, he executed a deed of extra-judicial
partition representing himself to be the only heir and child of his mother
Felisa with the consequence that he was able to secure title in his
name alone also, so that OCT. No. 21137 in the name of his mother
was transferred to his name, that was in 1955; that was why after
some efforts of compromise had failed, his half-brothers and sisters,
herein plaintiffs, filed present case for partition with accounting on the
position that he was only a trustee on an implied trust when he
redeemed,-and this is the evidence, but as it also turned out that one
of plaintiffs, Emeteria Asejo was occupying a portion, defendant
counterclaimed for her to vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant
in his position that he was and became absolute owner, he was not a
trustee, and therefore, dismissed case and also condemned plaintiff
occupant, Emeteria to vacate; it is because of this that plaintiffs have
come here and contend that trial court erred in:
I. ... declaring the defendant absolute owner of the property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion
of the property to vacate the land, p. 1 Appellant's brief which can be
reduced to simple question of whether or not on the basis of evidence
and law, judgment appealed from should be maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for the
plaintiffs-appellants, the private respondents herein. The petitioner now
appeals, by way of certiorari, from the Court's decision.
We required the private respondents to file a comment and thereafter, having
given due course to the petition, directed the parties to file their briefs. Only
the petitioner, however, filed a brief, and the private respondents having failed
to file one, we declared the case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive
ownership over the property held in common?
Essentially, it is the petitioner's contention that the property subject of dispute
devolved upon him upon the failure of his co-heirs to join him in its redemption
within the period required by law. He relies on the provisions of Article 1515 of
the old Civil Article 1613 of the present Code, giving the vendee a retro the
right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with aspect to his
share alone. 5 While the records show that the petitioner redeemed the
property in its entirety, shouldering the expenses therefor, that did not make
him the owner of all of it. In other words, it did not put to end the existing state
of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his right to
collect reimbursement from the remaining co-owners. 6 There is no doubt that
redemption of property entails a necessary expense. Under the Civil Code:
ART. 488. Each co-owner shall have a right to compel the other co-
owners to contribute to the expenses of preservation of the thing or
right owned in common and to the taxes. Any one of the latter may
exempt himself from this obligation by renouncing so much of his
undivided interest as may be equivalent to his share of the expenses
and taxes. No such waiver shall be made if it is prejudicial to the co-
ownership.
The result is that the property remains to be in a condition of co-ownership.
While a vendee a retro, under Article 1613 of the Code, "may not be compelled
to consent to a partial redemption," the redemption by one co-heir or co-owner
of the property in its totality does not vest in him ownership over it. Failure on
the part of all the co-owners to redeem it entitles the vendee a retro to retain
the property and consolidate title thereto in his name. 7But the provision does
not give to the redeeming co-owner the right to the entire property. It does not
provide for a mode of terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over
the parcel in his name terminate the existing co-ownership. While his half-
brothers and sisters are, as we said, liable to him for reimbursement as and
for their shares in redemption expenses, he cannot claim exclusive right to the
property owned in common. Registration of property is not a means of
acquiring ownership. It operates as a mere notice of existing title, that is, if
there is one.
The petitioner must then be said to be a trustee of the property on behalf of
the private respondents. The Civil Code states:
ART. 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust
for the benefit of the person from whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the
registration of the property. The petitioner's pretension that he was the sole
heir to the land in the affidavit of extrajudicial settlement he executed
preliminary to the registration thereof betrays a clear effort on his part to
defraud his brothers and sisters and to exercise sole dominion over the
property. The aforequoted provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the
property, did so either on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Article 2144 of the Civil Code,
or for his exclusive benefit, in which case, he is guilty of fraud, and must act
as trustee, the private respondents being the beneficiaries, under the Article
1456. The evidence, of course, points to the second alternative the petitioner
having asserted claims of exclusive ownership over the property and having
acted in fraud of his co-heirs. He cannot therefore be said to have assume the
mere management of the property abandoned by his co-heirs, the situation
Article 2144 of the Code contemplates. In any case, as the respondent Court
itself affirms, the result would be the same whether it is one or the other. The
petitioner would remain liable to the Private respondents, his co-heirs.
This Court is not unaware of the well-established principle that prescription
bars any demand on property (owned in common) held by another (co-owner)
following the required number of years. In that event, the party in possession
acquires title to the property and the state of co-ownership is ended . 8 In the
case at bar, the property was registered in 1955 by the petitioner, solely in his
name, while the claim of the private respondents was presented in 1974. Has
prescription then, set in?
We hold in the negative. Prescription, as a mode of terminating a relation of
co-ownership, must have been preceded by repudiation (of the co-ownership).
The act of repudiation, in turn is subject to certain conditions: (1) a co-owner
repudiates the co-ownership; (2) such an act of repudiation is clearly made
known to the other co-owners; (3) the evidence thereon is clear and
conclusive, and (4) he has been in possession through open, continuous,
exclusive, and notorious possession of the property for the period required by
law. 9
The instant case shows that the petitioner had not complied with these
requisites. We are not convinced that he had repudiated the co-ownership; on
the contrary, he had deliberately kept the private respondents in the dark by
feigning sole heirship over the estate under dispute. He cannot therefore be
said to have "made known" his efforts to deny the co-ownership. Moreover,
one of the private respondents, Emeteria Asejo, is occupying a portion of the
land up to the present, yet, the petitioner has not taken pains to eject her
therefrom. As a matter of fact, he sought to recover possession of that portion
Emeteria is occupying only as a counterclaim, and only after the private
respondents had first sought judicial relief.
It is true that registration under the Torrens system is constructive notice of
title, 10 but it has likewise been our holding that the Torrens title does not
furnish a shield for fraud. 11 It is therefore no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was one,
notwithstanding the long-standing rule that registration operates as a universal
notice of title.
For the same reason, we cannot dismiss the private respondents' claims
commenced in 1974 over the estate registered in 1955. While actions to
enforce a constructive trust prescribes in ten years, 12 reckoned from the date
of the registration of the property, 13 we, as we said, are not prepared to count
the period from such a date in this case. We note the petitioner's sub
rosa efforts to get hold of the property exclusively for himself beginning with
his fraudulent misrepresentation in his unilateral affidavit of extrajudicial
settlement that he is "the only heir and child of his mother Feliza with the
consequence that he was able to secure title in his name also." 14 Accordingly,
we hold that the right of the private respondents commenced from the time
they actually discovered the petitioner's act of defraudation. 15 According to the
respondent Court of Appeals, they "came to know [of it] apparently only during
the progress of the litigation." 16 Hence, prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must be
pleaded either in a motion to dismiss or in the answer otherwise it is deemed
waived, 17 and here, the petitioner never raised that defense. 18 There are
recognized exceptions to this rule, but the petitioner has not shown why they
apply.
WHEREFORE, there being no reversible error committed by the respondent
Court of Appeals, the petition is DENIED. The Decision sought to be reviewed
is hereby AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED,
Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.
G.R. No. 119745. June 20, 1997
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA
R.QUIAMBAO and PHILIPPINE NATIONAL BANK, respondents.
DECISION
PANGANIBAN, J.:
Is the sellers failure to eject the lessees from a lot that is the subject of a
contract of sale with assumption of mortgage a ground (1) for rescission of
such contract and (2) for a return by the mortgagee of the amortization
payments made by the buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for
review on certiorari of the March 27, 1995 Decision[1] of the Court of Appeals,
Eighth Division, in CA-G.R. CV Case No. 32298 upholding the validity of the
contract of sale with assumption of mortgage and absolving the mortgagee
from the liability of returning the mortgage payments already made.[2]
The Facts
Petitioner Power Commercial & Industrial Development Corporation, an
industrial asbestos manufacturer, needed a bigger office space and
warehouse for its products. For this purpose, on January 31, 1979, it entered
into a contract of sale with the spouses Reynaldo and Angelita R. Quiambao,
herein private respondents. The contract involved a 612-sq. m. parcel of land
covered by Transfer Certificate of Title No. S-6686 located at the corner of
Bagtican and St. Paul Streets, San Antonio Village, Makati City. The parties
agreed that petitioner would pay private respondents P108,000.00 as down
payment, and the balance of P295,000.00 upon the execution of the deed of
transfer of the title over the property. Further, petitioner assumed, as part of
the purchase price, the existing mortgage on the land. In full satisfaction
thereof, he paid P79,145.77 to Respondent Philippine National Bank (PNB for
brevity).
On June 1, 1979, respondent spouses mortgaged again said land to PNB
to guarantee a loan of P145,000.00, P80,000.00 of which was paid to
respondent spouses. Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale With
Assumption of Mortgage which contained the following terms and conditions: [3]
That for and in consideration of the sum of Two Hundred Ninety-Five
Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid in
cash, and which we hereby acknowledge to be payment in full and received to
our entire satisfaction, by POWER COMMERCIAL AND INDUSTRIAL
DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized
and existing under and by virtue of Philippine Laws with offices located at 252-
C Vito Cruz Extension, we hereby by these presents SELL, TRANSFER and
CONVEY by way of absolute sale the above described property with all the
improvements existing thereon unto the said Power Commercial and Industrial
Development Corporation, its successors and assigns, free from all liens and
encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered by
the provisions of the Land Reform Code -- the same having no agricultural
lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession thereof
in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any
and all third persons; subject, however, to the provisions hereunder provided
to wit:
That the above described property is mortgaged to the Philippine National
Bank, Cubao, Branch, Quezon City for the amount of one hundred forty-five
thousand pesos, Philippine, evidenced by document No. 163, found on page
No. 34 of Book No. XV, Series of 1979 of Notary Public Herita L. Altamirano
registered with the Register of Deeds of Pasig (Makati), Rizal xxx;
That the said Power Commercial and Industrial Development Corporation
assumes to pay in full the entire amount of the said mortgage above described
plus interest and bank charges, to the said mortgagee bank, thus holding the
herein vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and approval
of the said Philippine National Bank to the herein sale of this property, hereby
agreeing to abide by any and all requirements of the said bank, agreeing that
failure to do so shall give to the bank first lieu (sic) over the herein described
property.
On the same date, Mrs. C.D. Constantino, then General Manager of
petitioner-corporation, submitted to PNB said deed with a formal application
for assumption of mortgage.[4]
On February 15, 1980, PNB informed respondent spouses that, for
petitioners failure to submit the papers necessary for approval pursuant to the
formers letter dated January 15, 1980, the application for assumption of
mortgage was considered withdrawn; that the outstanding balance
of P145,000.00 was deemed fully due and demandable; and that said loan
was to be paid in full within fifteen (15) days from notice.[5]
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on
December 23, 1980, payments which were to be applied to the outstanding
loan. On December 23, 1980, PNB received a letter from petitioner which
reads:[6]
With regard to the presence of the people who are currently in physical
occupancy of the (l)ot xxx it is our desire as buyers and new owners of this lot
to make use of this lot for our own purpose, which is why it is our desire and
intention that all the people who are currently physically present and in
occupation of said lot should be removed immediately.
For this purpose we respectfully request that xxx our assumption of mortgage
be given favorable consideration, and that the mortgage and title be
transferred to our name so that we may undertake the necessary procedures
to make use of this lot ourselves.
It was our understanding that this lot was free and clear of problems of this
nature, and that the previous owner would be responsible for the removal of
the people who were there. Inasmuch as the previous owner has not been
able to keep his commitment, it will be necessary for us to take legal
possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows:[7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was
assumed by you on June 4, 1979 for P101,500.00. It was last renewed on
December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last maturity with
interest arrearages amounting to P25,826.08 as of February 19, 1982. The
last payment received by us was on December 24, 1980 for P20,283.14. In
order to place your account in current form, we request you to remit payments
to cover interest, charges, and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against
respondent spouses for rescission and damages before the Regional Trial
Court of Pasig, Branch 159. Then, in its reply to PNBs letter of February 19,
1982, petitioner demanded the return of the payments it made on the ground
that its assumption of mortgage was never approved. On May 31, 1983,[8]while
this case was pending, the mortgage was foreclosed. The property was
subsequently bought by PNB during the public auction. Thus, an amended
complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court[9] ruled that the failure of respondent
spouses to deliver actual possession to petitioner entitled the latter to rescind
the sale, and in view of such failure and of the denial of the latters assumption
of mortgage, PNB was obliged to return the payments made by the latter. The
dispositive portion of said decision states:[10]
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in
favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage
executed between plaintiff and defendants Spouses Quiambao, dated June
26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount
of P187,144.77 (P108,000.00 plus P79,145.77) with legal interest of 12% per
annum from date of filing of herein complaint, that is, March 17, 1982 until the
same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59
(P41,880.45 and P20,283.14) with 12% interest thereon from date of herein
judgment until the same is fully paid.
No award of other damages and attorneys fees, the same not being warranted
under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are
dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court of
Appeals reversed the trial court. In the assailed Decision, it held that the deed
of sale between respondent spouses and petitioner did not obligate the former
to eject the lessees from the land in question as a condition of the sale, nor
was the occupation thereof by said lessees a violation of the warranty against
eviction. Hence, there was no substantial breach to justify the rescission of
said contract or the return of the payments made. The dispositive portion of
said Decision reads:[11]
WHEREFORE, the Decision appealed from is hereby REVERSED and the
complaint filed by Power Commercial and Industrial Development Corporation
against the spouses Reynaldo and Angelita Quiambao and the Philippine
National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial breach of the contract
between the parties warranting rescission; and (2) there was a mistake in
payment made by petitioner, obligating PNB to return such payments. In its
Memorandum, it specifically assigns the following errors of law on the part of
Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing to consider in
its decision that a breach of implied warranty under Article 1547 in
relation to Article 1545 of the Civil Code applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing to consider in
its decision that a mistake in payment giving rise to a situation where
the principle of solutio indebiti applies is obtaining in the case-at-bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the difference between
a condition and a warranty and the consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged failure of respondent spouses to eject the lessees from the
lot in question and to deliver actual and physical possession thereof cannot be
considered a substantial breach of a condition for two reasons: first, such
failure was not stipulated as a condition -- whether resolutory or suspensive --
in the contract; and second, its effects and consequences were not specified
either.[13]
The provision adverted to by petitioner does not impose a condition or an
obligation to eject the lessees from the lot. The deed of sale provides in part:[14]
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession thereof
in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any
and all third persons; subject, however, to the provisions hereunder provided
to wit:
By his own admission, Anthony Powers, General Manager of petitioner-
corporation, did not ask the corporations lawyers to stipulate in the contract
that Respondent Reynaldo was guaranteeing the ejectment of the occupants,
because there was already a proviso in said deed of sale that the sellers were
guaranteeing the peaceful possession by the buyer of the land in
question.[15] Any obscurity in a contract, if the above-quoted provision can be
so described, must be construed against the party who caused it.[16] Petitioner
itself caused the obscurity because it omitted this alleged condition when its
lawyer drafted said contract.
If the parties intended to impose on respondent spouses the obligation to
eject the tenants from the lot sold, it should have included in the contract a
provision similar to that referred to in Romero vs. Court of Appeals,[17] where
the ejectment of the occupants of the lot sold by private respondent was the
operative act which set into motion the period of petitioners compliance with
his own obligation, i.e., to pay the balance of the purchase price. Failure to
remove the squatters within the stipulated period gave the other party the right
to either refuse to proceed with the agreement or to waive that condition of
ejectment in consonance with Article 1545 of the Civil Code. In the case cited,
the contract specifically stipulated that the ejectment was a condition to be
fulfilled; otherwise, the obligation to pay the balance would not arise. This is
not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties intended to
make its nonfulfillment a ground for rescission. If they did intend this, their
contract should have expressly stipulated so. In Ang vs. C.A.,[18] rescission
was sought on the ground that the petitioners had failed to fulfill their obligation
to remove and clear the lot sold, the performance of which would have given
rise to the payment of the consideration by private respondent. Rescission was
not allowed, however, because the breach was not substantial and
fundamental to the fulfillment by the petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual
warranty against eviction, and not to a condition that was not met. The terms
of the contract are so clear as to leave no room for any other interpretation. [19]
Futhermore, petitioner was well aware of the presence of the tenants at
the time it entered into the sales transaction. As testified to by
Reynaldo,[20] petitioners counsel during the sales negotiation even undertook
the job of ejecting the squatters. In fact, petitioner actually filed suit to eject the
occupants. Finally, petitioner in its letter to PNB of December 23, 1980
admitted that it was the buyer(s) and new owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the respondent
spouses failed to deliver the lot sold. Petitioner asserts that the legal fiction of
symbolic delivery yielded to the truth that, at the execution of the deed of sale,
transfer of possession of said lot was impossible due to the presence of
occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary
purpose of sale, delivery remains an indispensable requisite as our law does
not admit the doctrine of transfer of property by mere consent. [21] The Civil
Code provides that delivery can either be (1) actual (Article 1497) or (2)
constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a
species of constructive delivery, effects the transfer of ownership through the
execution of a public document. Its efficacy can, however, be prevented if the
vendor does not possess control over the thing sold,[22] in which case this legal
fiction must yield to reality.
The key word is control, not possession, of the land as petitioner would
like us to believe. The Court has consistently held that:[23]
x x x (I)n order that this symbolic delivery may produce the effect of tradition,
it is necessary that the vendor shall have had such control over the thing sold
that xxx its material delivery could have been made. It is not enough to confer
upon the purchaser the ownership and the right of possession. The thing sold
must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole
will of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of the instrument,
the purchaser cannot have the enjoyment and material tenancy of the thing
and make use of it himself or through another in his name, because such
tenancy and enjoyment are opposed by the interposition of another will, then
fiction yields to reality -- the delivery has not been effected.
Considering that the deed of sale between the parties did not stipulate or
infer otherwise, delivery was effected through the execution of said deed. The
lot sold had been placed under the control of petitioner; thus, the filing of the
ejectment suit was subsequently done. It signified that its new owner intended
to obtain for itself and to terminate said occupants actual possession
thereof. Prior physical delivery or possession is not legally required and the
execution of the deed of sale is deemed equivalent to delivery. [24] This deed
operates as a formal or symbolic delivery of the property sold and authorizes
the buyer to use the document as proof of ownership. Nothing more is
required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to
establish any breach of the warranty against eviction. Despite its protestation
that its acquisition of the lot was to enable it to set up a warehouse for its
asbestos products and that failure to deliver actual possession thereof
defeated this purpose, still no breach of warranty against eviction can be
appreciated because the facts of the case do not show that the requisites for
such breach have been satisfied. A breach of this warranty requires the
concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing
sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by
the vendor; and
(4) The vendor has been summoned and made co-defendant in the
suit for eviction at the instance of the vendee.[25]
In the absence of these requisites, a breach of the warranty against eviction
under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the
occupants of said lot, and not that it has been evicted therefrom. As correctly
pointed out by Respondent Court, the presence of lessees does not constitute
an encumbrance of the land,[26] nor does it deprive petitioner of its control
thereof.
We note, however, that petitioners deprivation of ownership and control
finally occurred when it failed and/or discontinued paying the amortizations on
the mortgage, causing the lot to be foreclosed and sold at public auction. But
this deprivation is due to petitioners fault, and not to any act attributable to the
vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is presumed,
under the law, to be valid and subsisting.
 Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it
made to PNB is warranted under Article 2154 of the Code, solutio indebiti does
not apply in this case. This doctrine applies where: (1) a payment is made
when there exists no binding relation between the payor, who has no duty to
pay, and the person who received the payment, and (2) the payment is made
through mistake, and not through liberality or some other cause.[27]
In this case, petitioner was under obligation to pay the amortizations on
the mortgage under the contract of sale and the deed of real estate
mortgage. Under the deed of sale (Exh. 2),[28] both parties agreed to abide by
any and all the requirements of PNB in connection with the real estate
mortgage. Petitioner was aware that the deed of mortgage (Exh. C) made it
solidarily and, therefore, primarily[29] liable for the mortgage obligation:[30]
(e) The Mortgagor shall neither lease the mortgaged property xxx nor sell or
dispose of the same in any manner, without the written consent of the
Mortgagee. However, if not withstanding this stipulation and during the
existence of this mortgage, the property herein mortgaged, or any portion
thereof, is xxx sold, it shall be the obligation of the Mortgagor to impose as a
condition of the sale, alienation or encumbrance that the vendee, or the party
in whose favor the alienation or encumbrance is to be made, should take the
property subject to the obligation of this mortgage in the same terms and
condition under which it is constituted, it being understood that the Mortgagor
is not in any manner relieved of his obligation to the Mortgagee under this
mortgage by such sale, alienation or encumbrance; on the contrary both the
vendor and the vendee, or the party in whose favor the alienation or
encumbrance is made shall be jointly and severally liable for said mortgage
obligations. xxx.
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake
because PNB disapproved its assumption of mortgage after it failed to submit
the necessary papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the
land purchased, the payment of the loan by petitioner was a condition clearly
imposed by the contract of sale.This fact alone disproves petitioners insistence
that there was a mistake in payment. On the contrary, such payments were
necessary to protect its interest as a the buyer(s) and new owner(s) of the lot.
The quasi-contract of solutio indebiti is one of the concrete manifestations
of the ancient principle that no one shall enrich himself unjustly at the expense
of another.[31] But as shown earlier, the payment of the mortgage was an
obligation petitioner assumed under the contract of sale. There is no unjust
enrichment where the transaction, as in this case, is quid pro quo,value for
value.
All told, respondent Court did not commit any reversible error which would
warrant the reversal of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed Decision
is AFFIRMED.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., and Melo, JJ., concur.
Francisco, J., on leave.
G.R. No. 82670 September 15, 1989
DOMETILA M. ANDRES, doing business under the name and style
"IRENE'S WEARING APPAREL,"petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT
OF APPEALS, respondents.
Roque A. Tamayo for petitioner.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private
respondent.
CORTES, J.:
Assailed in this petition for review on certiorari is the judgment of the Court of
Appeals, which, applying the doctrine of solutio indebiti, reversed the decision
of the Regional Trial Court, Branch CV, Quezon City by deciding in favor of
private respondent.
Petitioner, using the business name "Irene's Wearing Apparel," was engaged
in the manufacture of ladies garments, children's wear, men's apparel and
linens for local and foreign buyers. Among its foreign buyers was Facets
Funwear, Inc. (hereinafter referred to as FACETS) of the United States.
In the course of the business transaction between the two, FACETS from time
to time remitted certain amounts of money to petitioner in payment for the
items it had purchased. Sometime in August 1980, FACETS instructed the
First National State Bank of New Jersey, Newark, New Jersey, U.S.A.
(hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via
Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as
PNB).
Acting on said instruction, FNSB instructed private respondent Manufacturers
Hanover and Trust Corporation to effect the above- mentioned transfer
through its facilities and to charge the amount to the account of FNSB with
private respondent. Although private respondent was able to send a telex to
PNB to pay petitioner $10,000.00 through the Pilipinas Bank, where petitioner
had an account, the payment was not effected immediately because the payee
designated in the telex was only "Wearing Apparel." Upon query by PNB,
private respondent sent PNB another telex dated August 27, 1980 stating that
the payment was to be made to "Irene's Wearing Apparel." On August 28,
1980, petitioner received the remittance of $10,000.00 through Demand Draft
No. 225654 of the PNB.
Meanwhile, on August 25, 1980, after learning about the delay in the
remittance of the money to petitioner, FACETS informed FNSB about the
situation. On September 8, 1980, unaware that petitioner had already received
the remittance, FACETS informed private respondent about the delay and at
the same time amended its instruction by asking it to effect the payment
through the Philippine Commercial and Industrial Bank (hereinafter referred to
as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner had
already received the remittance of $10,000.00 from PNB instructed the PCIB
to pay $10,000.00 to petitioner. Hence, on September 11, 1980, petitioner
received a second $10,000.00 remittance.
Private respondent debited the account of FNSB for the second $10,000.00
remittance effected through PCIB. However, when FNSB discovered that
private respondent had made a duplication of the remittance, it asked for a
recredit of its account in the amount of $10,000.00. Private respondent
complied with the request.
Private respondent asked petitioner for the return of the second remittance of
$10,000.00 but the latter refused to pay. On May 12, 1982 a complaint was
filed with the Regional Trial Court, Branch CV, Quezon City which was decided
in favor of petitioner as defendant. The trial court ruled that Art. 2154 of the
New Civil Code is not applicable to the case because the second remittance
was made not by mistake but by negligence and petitioner was not unjustly
enriched by virtue thereof [Record, p. 234]. On appeal, the Court of Appeals
held that Art. 2154 is applicable and reversed the RTC decision. The
dispositive portion of the Court of Appeals' decision reads as follows:
WHEREFORE, the appealed decision is hereby REVERSED and SET
ASIDE and another one entered in favor of plaintiff-appellant and
against defendant-appellee Domelita (sic) M. Andres, doing business
under the name and style "Irene's Wearing Apparel" to reimburse
and/or return to plaintiff-appellant the amount of $10,000.00, its
equivalent in Philippine currency, with interests at the legal rate from
the filing of the complaint on May 12, 1982 until the whole amount is
fully paid, plus twenty percent (20%) of the amount due as attomey's
fees; and to pay the costs.
With costs against defendant-appellee.
SO ORDERED. [Rollo, pp. 29-30.]
Thereafter, this petition was filed. The sole issue in this case is whether or not
the private respondent has the right to recover the second $10,000.00
remittance it had delivered to petitioner. The resolution of this issue would
hinge on the applicability of Art. 2154 of the New Civil Code which provides
that:
Art. 2154. If something received when there is no right to
demand it, and it was unduly delivered through mistake, the
obligation to return it arises.
This provision is taken from Art. 1895 of the Spanish Civil Code which provided
that:
Art. 1895. If a thing is received when there was no right to claim it and
which, through an error, has been unduly delivered, an obligation to
restore it arises.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr.
Justice Bocobo explained the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code abovequoted, is
therefore applicable. This legal provision, which determines the quasi-
contract of solution indebiti, is one of the concrete manifestations of
the ancient principle that no one shall enrich himself unjustly at the
expense of another. In the Roman Law Digest the maxim was
formulated thus: "Jure naturae acquum est, neminem cum alterius
detrimento et injuria fieri locupletiorem." And the Partidas
declared: "Ninguno non deue enriquecerse tortizeramente con dano
de otro." Such axiom has grown through the centuries in legislation, in
the science of law and in court decisions. The lawmaker has found it
one of the helpful guides in framing statutes and codes. Thus, it is
 unfolded in many articles scattered in the Spanish Civil Code. (See for
example, articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295,
1303, 1304, 1893 and 1895, Civil Code.) This time-honored aphorism
has also been adopted by jurists in their study of the conflict of rights.
It has been accepted by the courts, which have not hesitated to apply
it when the exigencies of right and equity demanded its assertion. It is
a part of that affluent reservoir of justice upon which judicial discretion
draws whenever the statutory laws are inadequate because they do
not speak or do so with a confused voice. [at p. 632.]
For this article to apply the following requisites must concur: "(1) that he who
paid was not under obligation to do so; and, (2) that payment was made by
reason of an essential mistake of fact" [City of Cebu v. Piccio, 110 Phil. 558,
563 (1960)].
It is undisputed that private respondent delivered the second $10,000.00
remittance. However, petitioner contends that the doctrine of solutio indebiti,
does not apply because its requisites are absent.
First, it is argued that petitioner had the right to demand and therefore to retain
the second $10,000.00 remittance. It is alleged that even after the two
$10,000.00 remittances are credited to petitioner's receivables from FACETS,
the latter allegedly still had a balance of $49,324.00. Hence, it is argued that
the last $10,000.00 remittance being in payment of a pre-existing debt,
petitioner was not thereby unjustly enriched.
The contention is without merit.
The contract of petitioner, as regards the sale of garments and other textile
products, was with FACETS. It was the latter and not private respondent which
was indebted to petitioner. On the other hand, the contract for the transmittal
of dollars from the United States to petitioner was entered into by private
respondent with FNSB. Petitioner, although named as the payee was not privy
to the contract of remittance of dollars. Neither was private respondent a party
to the contract of sale between petitioner and FACETS. There being no
contractual relation between them, petitioner has no right to apply the second
$10,000.00 remittance delivered by mistake by private respondent to the
outstanding account of FACETS.
Petitioner next contends that the payment by respondent bank of the second
$10,000.00 remittance was not made by mistake but was the result of
negligence of its employees. In connection with this the Court of Appeals made
the following finding of facts:
The fact that Facets sent only one remittance of $10,000.00 is not
disputed. In the written interrogatories sent to the First National State
Bank of New Jersey through the Consulate General of the Philippines
in New York, Adelaide C. Schachel, the investigation and
reconciliation clerk in the said bank testified that a request to remit a
payment for Facet Funwear Inc. was made in August, 1980. The total
amount which the First National State Bank of New Jersey actually
requested the plaintiff-appellant Manufacturers Hanover & Trust
Corporation to remit to Irene's Wearing Apparel was US $10,000.00.
Only one remittance was requested by First National State Bank of
New Jersey as per instruction of Facets Funwear (Exhibit "J", pp. 4-
5).
That there was a mistake in the second remittance of US $10,000.00
is borne out by the fact that both remittances have the same reference
invoice number which is 263 80. (Exhibits "A-1- Deposition of Mr.
Stanley Panasow" and "A-2-Deposition of Mr. Stanley Panasow").
Plaintiff-appellant made the second remittance on the wrong
assumption that defendant-appellee did not receive the first
remittance of US $10,000.00. [Rollo, pp. 26-27.]
It is evident that the claim of petitioner is anchored on the appreciation of the
attendant facts which petitioner would have this Court review. The Court holds
that the finding by the Court of Appeals that the second $10,000.00 remittance
was made by mistake, being based on substantial evidence, is final and
conclusive. The rule regarding questions of fact being raised with this Court in
a petition for certiorari under Rule 45 of the Revised Rules of Court has been
stated in Remalante v. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA
138, thus:
The rule in this jurisdiction is that only questions of law may be raised
in a petition for certiorari under Rule 45 of the Revised Rules of Court.
"The jurisdiction of the Supreme Court in cases brought to it from the
Court of Appeals is limited to reviewing and revising the errors of law
imputed to it, its findings of fact being conclusive" [Chan v. Court of
Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating
a long line of decisions]. This Court has emphatically declared that "it
is not the function of the Supreme Court to analyze or weigh such
evidence all over again, its jurisdiction being limited to reviewing errors
of law that might have been committed by the lower court" [Tiongco v.
De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona
v. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865;
Baniqued v. Court of Appeals, G. R. No. L-47531, February 20, 1984,
127 SCRA 596]. "Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record, or that they
 are so glaringly erroneous as to constitute serious abuse of discretion,
such findings must stand, for this Court is not expected or required to
examine or contrast the oral and documentary evidence submitted by
the parties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394,
December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]
Petitioner invokes the equitable principle that when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must be
borne by the one whose negligence was the proximate cause of the loss.
The rule is that principles of equity cannot be applied if there is a provision of
law specifically applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga,
G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v. Court of
Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural Bank of
Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA
409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De
Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971, 37 SCRA
129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31, 1965, 13 SCRA
486, held:
... The common law principle that where one of two innocent persons
must suffer by a fraud perpetrated by another, the law imposes the
loss upon the party who, by his misplaced confidence, has enabled
the fraud to be committed, cannot be applied in a case which is
covered by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and a statutory
provision, the latter must prevail in this jurisdiction. [at p. 135.]
Having shown that Art. 2154 of the Civil Code, which embodies the doctrine
of solutio indebiti, applies in the case at bar, the Court must reject the common
law principle invoked by petitioner.
Finally, in her attempt to defeat private respondent's claim, petitioner makes
much of the fact that from the time the second $10,000.00 remittance was
made, five hundred and ten days had elapsed before private respondent
demanded the return thereof. Needless to say, private respondent instituted
the complaint for recovery of the second $10,000.00 remittance well within the
six years prescriptive period for actions based upon a quasi-contract [Art. 1145
of the New Civil Code].
WHEREFORE, the petition is DENIED and the decision of the Court of
Appeals is hereby AFFIRMED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.
Feliciano, J., is on leave.
G.R. No. 82511 March 3, 1992
GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and IMELDA
SALAZAR, respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
Gerardo S. Alansalon for private respondent.
ROMERO, J.:
For private respondent Imelda L. Salazar, it would seem that her close
association with Delfin Saldivar would mean the loss of her job. In May 1982,
private respondent was employed by Globe-Mackay Cable and Radio
Corporation (GMCR) as general systems analyst. Also employed by petitioner
as manager for technical operations' support was Delfin Saldivar with whom
private respondent was allegedly very close.
Sometime in 1984, petitioner GMCR, prompted by reports that company
equipment and spare parts worth thousands of dollars under the custody of
Saldivar were missing, caused the investigation of the latter's activities. The
report dated September 25, 1984 prepared by the company's internal auditor,
Mr. Agustin Maramara, indicated that Saldivar had entered into a partnership
styled Concave Commercial and Industrial Company with Richard A. Yambao,
owner and manager of Elecon Engineering Services (Elecon), a supplier of
petitioner often recommended by Saldivar. The report also disclosed that
Saldivar had taken petitioner's missing Fedders airconditioning unit for his own
personal use without authorization and also connived with Yambao to defraud
petitioner of its property. The airconditioner was recovered only after petitioner
GMCR filed an action for replevin against Saldivar. 1
It likewise appeared in the course of Maramara's investigation that Imelda
Salazar violated company reglations by involving herself in transactions
conflicting with the company's interests. Evidence showed that she signed as
a witness to the articles of partnership between Yambao and Saldivar. It also
appeared that she had full knowledge of the loss and whereabouts of the
Fedders airconditioner but failed to inform her employer.
Consequently, in a letter dated October 8, 1984, petitioner company placed
private respondent Salazar under preventive suspension for one (1) month,
effective October 9, 1984, thus giving her thirty (30) days within which to,
explain her side. But instead of submitting an explanations three (3) days later
or on October 12, 1984 private respondent filed a complaint against petitioner
for illegal suspension, which she subsequently amended to include illegal
dismissal, vacation and sick leave benefits, 13th month pay and damages,
after petitioner notified her in writing that effective November 8, 1984, she was
considered dismissed "in view of (her) inability to refute and disprove these
findings. 2
After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered
petitioner company to reinstate private respondent to her former or equivalent
position and to pay her full backwages and other benefits she would have
received were it not for the illegal dismissal. Petitioner was also ordered to pay
private respondent moral damages of P50,000.00. 3
On appeal, public respondent National Labor Relations, Commission in the
questioned resolution dated December 29, 1987 affirmed the aforesaid
decision with respect to the reinstatement of private respondent but limited the
backwages to a period of two (2) years and deleted the award for moral
damages. 4
Hence, this petition assailing the Labor Tribunal for having committed grave
abuse of discretion in holding that the suspension and subsequent dismissal
of private respondent were illegal and in ordering her reinstatement with two
(2) years' backwages.
On the matter of preventive suspension, we find for petitioner GMCR.
The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's
acts in conflict with his position as technical operations manager, necessitated
immediate and decisive action on any employee closely, associated with
Saldivar. The suspension of Salazar was further impelled by th.e discovery of
the missing Fedders airconditioning unit inside the apartment private
respondent shared with Saldivar. Under such circumstances, preventive
suspension was the proper remedial recourse available to the company
pending Salazar's investigation. By itself, preventive suspension does, not
signify that the company has adjudged the employee guilty of the charges she
was asked to answer and explain. Such disciplinary measure is resorted to for
the protection of the company's property pending investigation any alleged
malfeasance or misfeasance committed by the employee. 5
Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's
right to due process when she was promptly suspended. If at all, the fault, lay
with private respondent when she ignored petitioner's memorandum of
October 8, 1984 "giving her ample opportunity to present (her) side to the
Management." Instead, she went directly to the Labor Department and filed
her complaint for illegal suspension without giving her employer a chance to
evaluate her side of the controversy.
But while we agree with the propriety of Salazar's preventive suspension, we
hold that her eventual separation from employment was not for cause.
What is the remedy in law to rectify an unlawful dismissal so as to "make
whole" the victim who has not merely lost her job which, under settled
Jurisprudence, is a property right of which a person is not to be deprived
without due process, but also the compensation that should have accrued to
her during the period when she was unemployed?
Art. 279 of the Labor Code, as amended, provides:
Security of Tenure. In cases of regular employment, the
employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual
reinstatement. 6 (Emphasis supplied)
Corollary thereto are the following provisions of the Implementing Rules and
Regulations of the Labor Code:
Sec. 2. Security of Tenure. In cases of regular employments, the
employer shall not terminate the services of an employee except for a
just cause as provided in the Labor Code or when authorized by
existing laws.
Sec. 3. Reinstatement. An employee who is unjustly dismissed from
work shall by entitled to reinstatement without loss of seniority rights
and to backwages." 7 (Emphasis supplied)
Before proceeding any furthers, it needs must be recalled that the present
Constitution has gone further than the 1973 Charter in guaranteeing vital social
and economic rights to marginalized groups of society, including labor. Given
the pro-poor orientation of several articulate Commissioners of the
Constitutional Commission of 1986, it was not surprising that a whole new
Article emerged on Social Justice and Human Rights designed, among other
things, to "protect and enhance the right of all the people to human dignity,
reduce social, economic and political inequalities, and remove cultural
inequities by equitably diffusing wealth and political power for the common
good." 8 Proof of the priority accorded to labor is that it leads the other areas
of concern in the Article on Social Justice, viz., Labor ranks ahead of such
topics as Agrarian and Natural Resources Reform, Urban Land Roform and
Housing, Health, Women, Role and Rights of Poople's Organizations and
Human Rights. 9
The opening paragraphs on Labor states
The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They
shall be entitled to security of tenure, humane conditions of work, and
a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits is may be provided by
law. 10 (Emphasis supplied)
Compare this with the sole.provision on Labor in the 1973 Constitution under
the Article an Declaration of Principles and State Policies that provides:
Sec. 9. The state shall afford protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employers. The State shall ensure the
rights of workers to self-organization, collective baegaining, security
of tenure, and just and humane conditions of work. The State may
provide for compulsory arbitration. 11
To be sure, both Charters recognize "security of tenure" as one of the rights of
labor which the State is mandated to protect. But there is no gainsaying the
fact that the intent of the framers of the present Constitution was to give
primacy to the rights of labor and afford the sector "full protection," at least
greater protection than heretofore accorded them, regardless of the
geographical location of the workers and whether they are organized or not.
It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who
substantially contributed to the present formulation of the protection to labor
provision and proposed that the same be incorporated in the Article on Social
Justice and not just in the Article on Declaration of Principles and State Policies
"in the light of the special importance that we are giving now to social justice
and the necessity of emphasizing the scope and role of social justice in
national development." 12
If we have taken pains to delve into the background of the labor provisions in
our Constitution and the Labor Code, it is but to stress that the right of an
employee not to be dismissed from his job except for a just or authorized cause
provided by law has assumed greater importance under the 1987 Constitution
with the singular prominence labor enjoys under the article on Social Justice.
And this transcendent policy has been translated into law in the Labor Code.
Under its terms, where a case of unlawful or unauthorized dismissal has been
proved by the aggrieved employee, or on the other hand, the employer whose
duty it is to prove the lawfulness or justness of his act of dismissal has failed
to do so, then the remedies provided in Article 279 should find, application.
Consonant with this liberalized stance vis-a-vis labor, the legislature even went
further by enacting Republic Act No. 6715 which took effect on March 2, 1989
that amended said Article to remove any possible ambiguity that jurisprudence
may have generated which watered down the constitutional intent to grant to
labor "full protection."13
To go back to the instant case, there being no evidence to show an authorized,
much less a legal, cause for the dismissal of private respondent, she had every
right, not only to be entitled to reinstatement, but ay well, to full backwages." 14
The intendment of the law in prescribing the twin remedies of reinstatement
and payment of backwages is, in the former, to restore the dismissed
employee to her status before she lost her job, for the dictionary meaning of
the word "reinstate" is "to restore to a state, conditione positions etc. from
which one had been removed" 15 and in the latter, to give her back the income
lost during the period of unemployment. Both remedies, looking to the past,
would perforce make her "whole."
Sadly, the avowed intent of the law has at times been thwarted when
reinstatement has not been forthcoming and the hapless dismissed employee
finds himself on the outside looking in.
Over time, the following reasons have been advanced by the Court for denying
reinstatement under the facts of the case and the law applicable thereto; that
reinstatement can no longer be effected in view of the long passage of time
(22 years of litigation) or because of the realities of the situation; 16 or that it
would be "inimical to the employer's interest; " 17 or that reinstatement may no
longer be feasible; 18 or, that it will not serve the best interests of the parties
involved; 19 or that the company would be prejudiced by the workers' continued
employment; 20 or that it will not serve any prudent purpose as when
supervening facts have transpired which make execution on that score unjust
or inequitable 21 or, to an increasing extent, due to the resultant atmosphere of
"antipathy and antagonism" or "strained relations" or "irretrievable
estrangement" between the employer and the employee. 22
In lieu of reinstatement, the Court has variously ordered the payment of
backwages and separation pay 23 or solely separation pay. 24
In the case at bar, the law is on the side of private respondent. In the first place
the wording of the Labor Code is clear and unambiguous: "An employee who
is unjustly dismissed from work shall be entitled to reinstatement. . . . and to
his full backwages. . . ." 25 Under the principlesof statutory construction, if a
statute is clears plain and free from ambiguity, it must be given its literal
meaning and applied without attempted interpretation. This plain-meaning rule
or verba legis derived from the maxim index animi sermo est (speech is the
index of intention) rests on the valid presumption that the words employed by,
the legislature in a statute correctly express its intent or will and preclude the
court from construing it differently. 26 The legislature is presumed to know the
meaning of the words, to:have used words advisedly, and to have expressed
its intent by the use of such words as are found in the statute. 27 Verba legis
non est recedendum, or from the words of a statute there should be no
departure. Neither does the provision admit of any qualification. If in the
wisdom of the Court, there may be a ground or grounds for non-application of
the above-cited provision, this should be by way of exception, such as when
the reinstatement may be inadmissible due to ensuing strained relations
between the employer and the employee.
In such cases, it should be proved that the employee concerned occupies a
position where he enjoys the trust and confidence of his employer; and that it
is likely that if reinstated, an atmosphere of antipathy and antagonism may be
generated as to adversely affect the efficiency and productivity of the
employee concerned.
A few examples, will suffice to illustrate the Court's application of the above
principles: where the employee is a Vice-President for Marketing and as such,
enjoys the full trust and confidence of top management; 28 or is the Officer-In-
Charge of the extension office of the bank where he works; 29 or is an organizer
of a union who was in a position to sabotage the union's efforts to organize the
workers in commercial and industrial establishments; 30 or is a warehouseman
of a non-profit organization whose primary purpose is to facilitate and
maximize voluntary gifts. by foreign individuals and organizations to the
Philippines; 31 or is a manager of its Energy Equipment Sales. 32
Obviously, the principle of "strained relations" cannot be applied
indiscriminately. Otherwisey reinstatement can never be possible simply
because some hostility is invariably engendered between the parties as a
result of litigation. That is human nature. 33
Besides, no strained relations should arise from a valid and legal act of
asserting one's right; otherwise an employee who shall assert his right could
be easily separated from the service, by merely paying his separation pay on
the pretext that his relationship with his employer had already become
strained. 34
Here, it has not been proved that the position of private respondent as systems
analyst is one that may be characterized as a position of trust and confidence
such that if reinstated, it may well lead to strained relations between employer
and employee. Hence, this does not constitute an exception to the general rule
mandating reinstatement for an employee who has been unlawfully dismissed.
On the other hand, has she betrayed any confidence reposed in her by
engaging in transactions that may have created conflict of interest situations?
Petitioner GMCR points out that as a matter of company policy, it prohibits its
employees from involving themselves with any company that has business
dealings with GMCR. Consequently, when private respondent Salazar signed
as a witness to the partnership papers of Concave (a supplier of Ultra which
in turn is also a supplier of GMCR), she was deemed to have placed. herself
in an untenable position as far as petitioner was concerned.
However, on close scrutiny, we agree with public respondent that such a
circumstance did not create a conflict of interests situation. As a systems
analyst, Salazar was very far removed from operations involving the
procurement of supplies. Salazar's duties revolved around the development of
systems and analysis of designs on a continuing basis. In other words, Salazar
did not occupy a position of trust relative to the approval and purchase of
supplies and company assets.
In the instant case, petitioner has predicated its dismissal of Salazar on loss
of confidence. As we have held countless times, while loss of confidence or
breach of trust is a valid ground for terminations it must rest an some basis
which must be convincingly established. 35 An employee who not be dismissed
on mere presumptions and suppositions. Petitioner's allegation that since
Salazar and Saldivar lived together in the same apartment, it "presumed
reasonably that complainant's sympathy would be with Saldivar" and its
averment that Saldivar's investigation although unverified, was probably true,
do not pass this Court's test. 36 While we should not condone the acts of
disloyalty of an employee, neither should we dismiss him on the basis of
suspicion derived from speculative inferences.
To rely on the Maramara report as a basis for Salazar's dismissal would be
most inequitous because the bulk of the findings centered principally oh her
friend's alleged thievery and anomalous transactions as technical operations'
support manager. Said report merely insinuated that in view of Salazar's
special relationship with Saldivar, Salazar might have had direct knowledge of
Saldivar's questionable activities. Direct evidence implicating private
respondent is wanting from the records.

It is also worth emphasizing that the Maramara report came out after Saldivar
had already resigned from GMCR on May 31, 1984. Since Saldivar did not
have the opportunity to refute management's findings, the report remained
obviously one-sided. Since the main evidence obtained by petitioner dealt
principally on the alleged culpability of Saldivar, without his having had a
chance to voice his side in view of his prior resignation, stringent examination
should have been carried out to ascertain whether or not there existed
independent legal grounds to hold Salatar answerable as well and, thereby,
justify her dismissal. Finding none, from the records, we find her to have been
unlawfully dismissed.

WHEREFORE, the assailed resolution of public respondent National Labor

Relations Commission dated December 29, 1987 is hereby AFFIRMED.
Petitioner GMCR is ordered to REINSTATE private respondent Imelda Salazar
and to pay her backwages equivalent to her salary for a period of two (2) years
only.

This decision is immediately executory.

SO ORDERED.

Paras, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr. and Nocon, JJ.,
concur.

Cruz, J., concurs in the result.

Gutierrez, Jr., Feliciano and Padilla, JJ., took no part.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

I believe there is just cause for dismissal per investigative findings. (See
Decision, p. 2.)

Narvasa C.J., concurs