Documente Academic
Documente Profesional
Documente Cultură
SUPREME COURT
Manila This has reference to your overdue loan of P6.0 Million.
THIRD DIVISION We regret to inform you that despite efforts to restructure the
same, you have failed up to this time, to submit the required
G.R. No. 176246 February 13, 2009 documents and come up with equity necessary to implement the
restructuring scheme.
PREMIERE DEVELOPMENT BANK, Petitioner,
vs. In view thereof, we regret that unless the above loan is settled
CENTRAL SURETY & INSURANCE COMPANY, on or before five (5) days from the date hereof, we shall
INC., Respondent. exercise our option to have the Stock Certificate No. 217 with
Serial No. 1793 duly issued by Wack Wack Golf and Country
DECISION Club, Inc. transferred in the name of Premiere Development
Bank in accordance with the terms and conditions of the Deed
of Assignment with Pledge executed in favor of Premiere
NACHURA, J.: Development Bank.
Before us is a petition for review on certiorari assailing the Court We shall appreciate your prompt compliance.
of Appeals (CA) Decision1 in CA-G.R. CV No. 85930, which
reversed and set aside the decision of the Regional Trial Court
(RTC), Branch 132, Makati City in Civil Case No. 0051306.2 Very truly yours,
We write on behalf of our client, Premiere Development Bank, in On October 13, 2000, Premiere Bank responded and signified
connection with your above-captioned loan account. acceptance of Central Suretys checks under the following
application of payments:
While our client has given you all the concessions, facilities and
opportunities to service your loans, we regret to inform you that 13 October 2000
you have failed to settle the same despite their past due status.
ATTY. EPIFANIO E. CUA
In view of the foregoing and to protect the interest of our client, 2/F Universalre Condominium
please be advised that unless the outstanding balances of your 106 Paseo de Roxas
loan accounts as of date plus interest, penalties and other fees Legaspi Village, Makati City
and charges are paid in full or necessary arrangements
acceptable to our client is made by you within ten (10) days Dear Atty. Cua:
from date hereof, we shall be constrained much to our regret, to
file foreclosure proceedings against the collateral of the loan Thank you for your two (2) letters both dated 29 September
mortgaged to the Bank or pursue such action necessary in the 2000 on behalf of your clients with the enclosed check nos.
premises. 0008114 and 0008115 for the total of P8,600,000.00.
We trust, therefore, that you will give this matter your As previously relayed to your client, Premiere Bank cannot
preferential attention. accept the two (2) checks as full settlement of the obligation
under Account Nos. PN #714-Y and PN # 717-X, as the amount
Very truly yours, is insufficient.
Strongly objecting to Premiere Banks application of payments, Hence, this recourse by Premiere Bank positing the following
Central Suretys counsel wrote Premiere Bank and reiterated issues:
Central Suretys demand for the application of the check
payments to the loans covered by PN Nos. 714-X and 714-Y. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
Additionally, Central Surety asked that the Wack Wack COMMITTED REVERSIBLE AND PALPABLE ERROR WHEN
Membership pledge, the security for the P6,000,000.00 loan, IT APPLIED THE PRINCIPLE OF WAIVER AND ESTOPPEL IN
should be released. THE PRESENT CASE INSOFAR AS THE DEMAND LETTER
SENT TO [CENTRAL SURETY] IS CONCERNED NULLIFYING
In the final exchange of correspondence, Premiere Bank, THE APPLICATION OF PAYMENTS EXERCISED BY
through its SAVP/Acting Head-LGC, Atty. Pacita Araos, [PREMIERE BANK]
responded and refused to accede to Central Suretys demand.
Premiere Bank insisted that the PN covering the P6,000,000.00 WHETHER OR NOT THE FINDING OF WAIVER AND
loan granted Premiere Bank sole discretion respecting: (1) ESTOPPEL BY THE HONORABLE COURT OF APPEALS
debts to which payments should be applied in cases of several COULD PREVAIL OVER THE CLEAR AND UNMISTAKABLE
obligations by an obligor and/or debtor; and (2) the initial STATUTORY AND CONTRACTUAL RIGHT OF [PREMIERE
application of payments to other costs, advances, expenses, BANK] TO EXERCISE APPLICATION OF PAYMENT AS
and past due interest stipulated thereunder. WARRANTED BY THE PROMISSORY NOTE
As a result, Central Surety filed a complaint for damages and EVEN ASSUMING EX GRATIA THAT THE 6 MILLION
release of security collateral, specifically praying that the court SHOULD BE APPLIED TO THE SUBJECT LOAN OF
render judgment: (1) declaring Central Suretys P6,000,000.00 RESPONDENT, WHETHER OR NOT THE SUBJECT WACK-
loan covered by PN No. 714-Y as fully paid; (2) ordering WACK SHARES COULD BE RELEASE[D] DESPITE THE
Premiere Bank to release to Central Surety its membership CROSS DEFAULT AND CROSS GUARANTEE PROVISIONS
certificate of shares in Wack Wack; (3) ordering Premiere Bank OF THE DEED OF ASSIGNMENT WITH PLEDGE AND
to pay Central Surety compensatory and actual damages, RELEVANT REAL ESTATE MORTGAGE CONTRACTS
exemplary damages, attorneys fees, and expenses of litigation; EXECUTED BY [CENTRAL SURETY], CASENT REALTY AND
and (4) directing Premiere Bank to pay the cost of suit. SPS. CASTAEDA.
On July 12, 2005, the RTC rendered a decision dismissing WHETHER OR NOT THERE IS A VALID TENDER OF
Central Suretys complaint and ordering it to pay Premiere PAYMENT AND CONSIGNATION OF THE SUBJECT TWO
Bank P100,000.00 as attorneys fees. The RTC ruled that the CHECK PAYMENTS BY [CENTRAL SURETY].
stipulation in the PN granting Premiere Bank sole discretion in
the application of payments, although it partook of a contract of
adhesion, was valid. It disposed of the case, to wit: WHETHER OR NOT, AS CORRECTLY FOUND BY THE
COURT A QUO [CENTRAL SURETY] IS ESTOPPED FROM
CONTESTING THE STIPULATIONS OR PROVISIONS OF
Now that the issue as to the validity of the stipulation is settled, THE PROMISSORY NOTES AUTHORIZING [PREMIERE
[Premiere Bank] was right in contending that it had the right to BANK] TO MAKE SUCH APPLICATION OF PAYMENTS
apply [Central Suretys] payment to the most onerous obligation
or to the one it sees fit to be paid first from among the several
obligations. The application of the payment to the other two WHETHER OR NOT AS CORRECTLY FOUND BY THE
loans of Central Surety namely, account nos. COM 367-Z and LOWER COURT [PREMIERE BANK] IS ENTITLED TO AN
IND 714-Y was within [Premiere Banks] valid exercise of its AWARD OF DAMAGES AS OCCASIONED BY THE
right according the stipulation.lawphil.net However, [Premiere MALICIOUS FILING OF THIS SUIT.19
Bank] erred in applying the payment to the loan of Casent
Realty and to the personal obligation of Mr. Engracio Castaeda At the outset, we qualify that this case deals only with the
despite their connection with one another. Therefore, [Premiere extinguishment of Central Suretys P6,000,000.00 loan secured
Bank] cannot apply the payment tendered by Central Surety to by the Wack Wack Membership pledge. We do not dispose
the other two entities capriciously and expressly violating the herein the matter of the P2,600,000.00 loan covered by PN No.
law and pertinent Central Bank rules and regulations. Hence, 717-X subject of BC Check No. 08115.
the application of the payment to the loan of Casent Realty
(Account No. COM 236-Z) and to the loan of Mr. Engracio We note that both lower courts were one in annulling Premiere
Castaeda (Account No. IND 717-X) is void and must be Banks application of payments to the loans of Casent Realty
annulled. and the Spouses Castaeda under PN Nos. 235-Z and 717-X,
respectively, thus:
As to the issue of whether or not [Central Surety] is entitled to
the release of Membership Fee Certificate in the Wack Wack It bears stressing that the parties to PN No. 714-Y secured by
Golf and Country Club, considering now that [Central Surety] Wack Wack membership certificate are only Central Surety, as
cannot compel [Premiere Bank] to release the subject collateral. debtor and [Premiere Bank], as creditor. Thus, when the
questioned stipulation speaks of "several obligations", it only
With regard to the issue of damages and attorneys fees, the refers to the obligations of [Central Surety] and nobody else.
court finds no basis to grant [Premiere Banks] prayer for moral
and exemplary damages but deems it just and equitable to [I]t is plain that [Central Surety] has only two loan obligations,
award in its favor attorneys fees in the sum of Php 100,000.00. namely: 1.) Account No. 714-Y secured by Wack Wack
membership certificate; and 2.) Account No. 367-Z secured
WHEREFORE, judgment is hereby rendered dismissing the by Condominium Certificate of Title. The two loans are secured
complaint and ordering [Central Surety] to pay [Premiere Bank] by separate and different collaterals. The collateral for Account
Php 100,000.00 as attorneys fees.18 (emphasis supplied) No. 714-Y, which is the Wack Wack membership certificate
answers only for that account and nothing else. The collateral
On appeal by Central Surety, the CA reversed and set aside the for Account No. 367-Z, which is the Condominium Certificate of
trial courts ruling. The appellate court held that with Premiere Title, is answerable only for the said account.
Banks letter dated August 22, 2000 specifically demanding
payment of Central Suretys P6,000,000.00 loan, it was deemed The fact that the loan obligations of [Central Surety] are secured
to have waived the stipulation in PN No. 714-Y granting it the by separate and distinct collateral simply shows that each
right to solely determine application of payments, and was, collateral secures only a particular loan obligation and does not
consequently, estopped from enforcing the same. In this regard, cover loans including future loans or advancements.
As regards the loan covered by Account No. 235-Z, this was the time of making the payment, to which of the same must be
obtained by Casent Realty, not by [Central Surety]. Although Mr. applied."
Engracio Castaeda is the vice-president of [Central Surety],
and president of Casent Realty, it does not follow that the two Indeed, the debtors right to apply payment has been
corporations are one and the same. Both are invested by law considered merely directory, and not mandatory,21 following this
with a personality separate and distinct from each other. Courts earlier pronouncement that "the ordinary acceptation of
the terms may and shall may be resorted to as guides in
Thus, [Central Surety] cannot be held liable for the obligation of ascertaining the mandatory or directory character of statutory
Casent Realty, absent evidence showing that the latter is being provisions."22
used to defeat public convenience, justify wrong, protect fraud
or defend crime; or used as a shield to confuse the legitimate Article 1252 gives the right to the debtor to choose to which of
issues, or when it is merely an adjunct, a business conduit or an several obligations to apply a particular payment that he tenders
alter ego of [Central Surety] or of another corporation; or used to the creditor. But likewise granted in the same provision is the
as a cloak to cover for fraud or illegality, or to work injustice, or right of the creditor to apply such payment in case the debtor
where necessary to achieve equity or for the protection of fails to direct its application. This is obvious in Art. 1252, par. 2,
creditors.1avvphi1 viz.: "If the debtor accepts from the creditor a receipt in which an
application of payment is made, the former cannot complain of
Likewise, [Central Surety] cannot be held accountable for the the same." It is the directory nature of this right and the
loan obligation of spouses Castaeda under Account No. IND subsidiary right of the creditor to apply payments when the
717-X. Settled is the rule that a corporation is invested by law debtor does not elect to do so that make this right, like any other
with a personality separate and distinct from those of the right, waivable.
persons composing it. The corporate debt or credit is not the
debt or credit of the stockholder nor is the stockholders debt or Rights may be waived, unless the waiver is contrary to law,
credit that of the corporation. public order, public policy, morals or good customs, or
prejudicial to a third person with a right recognized by law. 23
The mere fact that a person is a president of the corporation
does not render the property he owns or possesses the property A debtor, in making a voluntary payment, may at the time of
of the corporation, since that president, as an individual, and the payment direct an application of it to whatever account he
corporation are separate entities.20 chooses, unless he has assigned or waived that right. If the
debtor does not do so, the right passes to the creditor, who may
In fact, Premiere Bank did not appeal or question the RTCs make such application as he chooses. But if neither party has
ruling specifically annulling the application of the P6,000,000.00 exercised its option, the court will apply the payment according
check payment to the respective loans of Casent Realty and the to the justice and equity of the case, taking into consideration all
Spouses Castaeda. Undoubtedly, Premiere Bank cannot be its circumstances.24
allowed, through this petition, to surreptitiously include the
validity of its application of payments concerning the loans to Verily, the debtors right to apply payment can be waived and
Casent Realty and the Spouses Castaeda. even granted to the creditor if the debtor so agrees.25This was
explained by former Senator Arturo M. Tolentino, an
Thus, we sift through the issues posited by Premiere Bank and acknowledged expert on the Civil Code, thus:
restate the same, to wit:
The following are some limitations on the right of the debtor to
1. Whether Premiere Bank waived its right of apply his payment:
application of payments on the loans of Central Surety.
xxxx
2. In the alternative, whether the P6,000,000.00 loan of
Central Surety was extinguished by the encashment of 5) when there is an agreement as to the debts which are to be
BC Check No. 08114. paid first, the debtor cannot vary this agreement.26
3. Corollarily, whether the release of the Wack Wack Relevantly, in a Decision of the Supreme Court of Kansas in a
Membership pledge is in order. case with parallel facts, it was held that:
The Petition is meritorious. The debtor requested Planters apply the payments to the 1981
loan rather than to the 1978 loan. Planters refused. Planters
We shall take the first and the second issues in tandem. notes it was expressly provided in the security agreement on the
1981 loan that Planters had a legal right to direct application of
Creditor given right to apply payments payments in its sole discretion. Appellees do not refute this.
Hence, the debtors had no right by agreement to direct the
payments. This also precludes the application of the U.S. Rule,
At the hub of the controversy is the statutory provision on which applies only in absence of a statute or specific
application of payments, specifically Article 1252 of the Civil agreement. Thus the trial court erred. Planters was entitled to
Code, viz.: apply the Hi-Plains payments as it saw fit.27
Article 1252. He who has various debts of the same kind in In the case at bench, the records show that Premiere Bank and
favor of one and the same creditor, may declare at the time of Central Surety entered into several contracts of loan, securities
making the payment, to which of them the same must be by way of pledges, and suretyship agreements. In at least two
applied. Unless the parties so stipulate, or when the application (2) promissory notes between the parties, Promissory Note No.
of payment is made by the party for whose benefit the term has 714-Y and Promissory Note No. 376-X, Central Surety
been constituted, application shall not be made as to debts expressly agreed to grant Premiere Bank the authority to apply
which are not yet due. any and all of Central Suretys payments, thus:
If the debtor accepts from the creditor a receipt in which an In case I/We have several obligations with [Premiere Bank],
application of the payment is made, the former cannot complain I/We hereby empower [Premiere Bank] to apply without notice
of the same, unless there is a cause for invalidating the and in any manner it sees fit, any or all of my/our deposits and
contract. payments to any of my/our obligations whether due or not. Any
such application of deposits or payments shall be conclusive
The debtors right to apply payment is not mandatory. This is and binding upon us.
clear from the use of the word "may" rather than the word "shall"
in the provision which reads: "He who has various debts of the
same kind in favor of one and the same creditor, may declare at
This proviso is representative of all the other Promissory Notes the bank shall be entitled to declare this Note and all sums
involved in this case. It is in the exercise of this express payable hereunder to be immediately due and payable, without
authority under the Promissory Notes, and following Bangko need of presentment, demand, protest or notice of nay kind, all
Sentral ng Pilipinas Regulations, that Premiere Bank applied of which I/We hereby expressly waive, upon occurrence of any
payments made by Central Surety, as it deemed fit, to the of the following events: x x x (ii) My/Our failure to pay
several debts of the latter. any amortization or installment due hereunder; (iii) My/Our
failure to pay money due under any other document or
All debts were due; There was no agreement evidencing obligations for borrowed money x x x.32
waiver on the part of petitioner
by virtue of which, it follows that the obligation under Promissory
Undoubtedly, at the time of conflict between the parties material Note 367-Z had become past due and demandable, with further
to this case, Promissory Note No. 714-Y dated August 20, 1999, notice expressly waived, when Central Surety defaulted on its
in the amount of P6,000,000.00 and secured by the pledge of obligations under Promissory Note No. 714-Y.
the Wack Wack Membership, was past the due and demand
stage. By its terms, Premiere Bank was entitled to declare said Mendoza v. Court of Appeals33 forecloses any doubt that an
Note and all sums payable thereunder immediately due and acceleration clause is valid and produces legal effects. In fact, in
payable, without need of "presentment, demand, protest or Selegna Management and Development Corporation v. United
notice of any kind." The subsequent demand made by Premiere Coconut Planters Bank,34 we held that:
Bank was, therefore, merely a superfluity, which cannot be
equated with a waiver of the right to demand payment of all the Considering that the contract is the law between the parties,
matured obligations of Central Surety to Premiere Bank. respondent is justified in invoking the acceleration clause
declaring the entire obligation immediately due and payable.
Moreover, this Court may take judicial notice that the standard That clause obliged petitioners to pay the entire loan on January
practice in commercial transactions to send demand letters has 29, 1999, the date fixed by respondent.
become part and parcel of every collection effort, especially in
light of the legal requirement that demand is a prerequisite It is worth noting that after the delayed payment
before default may set in, subject to certain well-known of P6,000,000.00 was tendered by Central Surety, Premiere
exceptions, including the situation where the law or the Bank returned the amount as insufficient, ostensibly because
obligations expressly declare it unnecessary.28 there was, at least, another account that was likewise due.
Obviously, in its demand of 28 September 2000, petitioner
Neither can it be said that Premiere Bank waived its right to sought payment, not just of the P6,000,000.00, but of all these
apply payments when it specifically demanded payment of past due accounts. There is extant testimony to support this
the P6,000,000.00 loan under Promissory Note No. 714-Y. It is claim, as the transcript of stenographic notes on the testimony
an elementary rule that the existence of a waiver must be of Atty. Araos reveals:
positively demonstrated since a waiver by implication is not
normally countenanced. The norm is that a waiver must not only Atty. Opinion: Q. But you accepted this payment of Six Million
be voluntary, but must have been made knowingly, intelligently, (P6,000,000.00) later on when together with this was paid
and with sufficient awareness of the relevant circumstances and another check for 1.8 Million?
likely consequences. There must be persuasive evidence to
show an actual intention to relinquish the right. Mere silence on
the part of the holder of the right should not be construed as a Witness: A. We accepted.
surrender thereof; the courts must indulge every reasonable
presumption against the existence and validity of such waiver.29 Atty. Opinion: Q. And you applied this to four (4) other accounts
three (3) other accounts or to four (4) accounts mentioned in
Besides, in this case, any inference of a waiver of Premiere Exhibit "J." Is that correct?
Banks, as creditor, right to apply payments is eschewed by the
express provision of the Promissory Note that: "no failure on the Atty. Tagalog: We can stipulate on that. Your Honor.
part of [Premiere Bank] to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver Court: This was stipulated?
thereof."
Contract of Adhesion From these transactions and the proviso in the Deed of
Assignment with Pledge, it is clear that the security, which
To the extent that the subject promissory notes were prepared peculiarly specified an amount at P15,000,000.00 (notably
by the Premiere Bank and presented to Central Surety for greater than the amount of the promissory note it secured), was
signature, these agreements were, indeed, contracts of intended to guarantee not just the obligation under PN 714-Y,
adhesion. But contracts of adhesion are not invalid per se. but also future advances. Thus, the said deed is explicit:
Contracts of adhesion, where one party imposes a ready-made
form of contract on the other, are not entirely prohibited. The As security for the payment of loan obtained by the
one who adheres to the contract is, in reality, free to reject it ASSIGNOR/PLEDGOR from the ASSIGNEE/PLEDGEE in the
entirely; if he adheres, he gives his consent. amount of FIFTEEN MILLION PESOS (15,000,000.00)
Philippine Currency in accordance with the Promissory Note
In interpreting such contracts, however, courts are expected to attached hereto and made an integral part hereof as Annex
observe greater vigilance in order to shield the unwary or "A" and/or such Promissory Note/s which the
weaker party from deceptive schemes contained in ready-made ASSIGNOR/PLEDGOR shall hereafter execute in favor of the
covenants.36 Thus, Article 24 of the Civil Code pertinently ASSIGNEE/PLEDGEE, the ASSIGNOR/PLEDGOR hereby
states: transfers, assigns, conveys, endorses, encumbers and delivers
by way of first pledge unto the ASSIGNEE/PLEDGEE, its
successors and assigns, that certain Membership fee Certificate
In all contractual, property or other relations, when one of the
parties is at a disadvantage on Date Instrument Amount Stipulation
account of his moral dependence,
ignorance, indigence, mental Notarized, Sept. 22, Continuing P40,898,000.00 In consideration of the loan and/or any
weakness, tender age or other 1999 Guaranty/Comprehensive credit accommodation which you
handicap, the courts must be vigilant Surety Agreement (petitioner) have extended and/or will
for his protection. extend to Central Surety and Insurance
Co.
Share in Wack Wack Golf and Country Club Incorporate
But in this case, Central Surety does not appear so weak as to
covered by Stock Certificate No. 217 with Serial No. 1793 duly
be placed at a distinct disadvantage vis--vis the bank. As found
by the lower court: issue by Wack Wack Golf and Country Club Incorporated on
August 27, 1996 in the name of the ASSIGNOR." (Emphasis
made in the Petition.)
Considering that [Central Surety] is a known business entity, the
[Premiere Bank] was right in assuming that the [Central Surety]
Then, a Continuing Guaranty/Comprehensive Surety Agreement
could not have been cheated or misled in agreeing thereto, it
was later executed by Central Surety as follows:
could have negotiated with the bank on a more favorable term
considering that it has already established a certain reputation
with the [Premiere Bank]
as evidenced by its Date
Instrument
Amount
Stipulation
numerous transactions. It covered
is therefore absurd that an
established company such August 20, 1999 PN 714-Y P6M
as the [Central Surety] has
no knowledge of the law
August 29, 1999 Deed of Assignment with P 15 M As security for PN 714-Y and/or such
regarding bank practice in Pledge Promissory Note/s which the ASSIGNOR /
loan transactions. PLEDGOR shall hereafter execute in favor of
the ASSIGNEE/PLEDGEE
The Dragnet Clause.
Notarized, Continuing P40,898,000.00 In consideration of the loan and/or any credit
The factual circumstances Sept. 22, 1999 Guaranty/Comprehensive accommodation which you (petitioner) have
Surety Agreement extended and/or will extend to Central Surety
of this case showing the
and Insurance Co.
chain of transactions and
long-standing relationship
between Premiere Bank October 10, 2000 Promissory Note 376-X (PN P40,898,000.00
and Central Surety militate 367-Z)
against the latters prayer And on October 10, 2000, Promissory Note 376-X was entered
in its complaint for the release of the Wack Wack Membership, into, a renewal of the prior Promissory Note 367-Z, in the
the security attached to Promissory Note 714-Y. amount of P40,898,000.00. In all, the transactions that
transpired between Premiere Bank and Central Surety manifest
A tally of the facts shows the following transactions between themselves, thusly:
Premiere Bank and Central Surety:
From the foregoing, it is more than apparent that when, on
August 29, 1999, the parties executed the Deed of Assignment
Date Instrument Amount Stipulation with Pledge (of the Wack Wack Membership), to serve as
covered security for an obligation in the amount of P15,000,000.00
(when the actual loan covered by PN No. 714-Y was
only P6,000,000.00), the intent of the parties was for the Wack
August 20, 1999 PN 714-Y P6M Wack Membership to serve as security also for future
advancements. The subsequent loan was nothing more than a
fulfillment of the intention of the parties. Of course, because the
August 29, 1999 Deed of P 15 M As security for subsequent loan was for a much greater amount
Assignment with PN 714-Y (P40,898,000.00), it became necessary to put up another
Pledge and/or such security, in addition to the Wack Wack Membership. Thus, the
Promissory subsequent surety agreement and the specific security for PN
Note/s which
No. 367-X were, like the Wack Wack Membership, meant to clause" so worded as to be broad enough to cover all other
secure the ballooning debt of the Central Surety. debts in addition to the one specifically secured will be
construed to cover a different debt, although such other debt is
The above-quoted provision in the Deed of Assignment, also secured by another mortgage. The contrary thinking maintains
known as the "dragnet clause" in American jurisprudence, would that a mortgage with such a clause will not secure a note that
subsume all debts of respondent of past and future origins. It is expresses on its face that it is otherwise secured as to its
a valid and legal undertaking, and the amounts specified as entirety, at least to anything other than a deficiency after
consideration in the contracts do not limit the amount for which exhausting the security specified therein, such deficiency being
the pledge or mortgage stands as security, if from the four an indebtedness within the meaning of the mortgage, in the
corners of the instrument, the intent to secure future and other absence of a special contract excluding it from the arrangement.
indebtedness can be gathered. A pledge or mortgage given to
secure future advancements is a continuing security and is not The latter school represents the better position. The parties
discharged by the repayment of the amount named in the having conformed to the "blanket mortgage clause" or "dragnet
mortgage until the full amount of all advancements shall have clause," it is reasonable to conclude that they also agreed to an
been paid.37 implied understanding that subsequent loans need not be
secured by other securities, as the subsequent loans will be
Our ruling in Prudential Bank v. Alviar38 is instructive: secured by the first mortgage. In other words, the sufficiency of
the first security is a corollary component of the "dragnet
clause." But of course, there is no prohibition, as in the
A "blanket mortgage clause," also known as a "dragnet clause" mortgage contract in issue, against contractually requiring other
in American jurisprudence, is one which is specifically phrased securities for the subsequent loans. Thus, when the mortgagor
to subsume all debts of past or future origins. Such clauses are takes another loan for which another security was given it could
"carefully scrutinized and strictly construed." Mortgages of this not be inferred that such loan was made in reliance solely on
character enable the parties to provide continuous dealings, the the original security with the "dragnet clause," but rather, on the
nature or extent of which may not be known or anticipated at the new security given. This is the "reliance on the security test."
time, and they avoid the expense and inconvenience of
executing a new security on each new transaction. A "dragnet
clause" operates as a convenience and accommodation to the Hence, based on the "reliance on the security test," the
borrowers as it makes available additional funds without their California court in the cited case made an inquiry whether the
having to execute additional security documents, thereby saving second loan was made in reliance on the original security
time, travel, loan closing costs, costs of extra legal services, containing a "dragnet clause." Accordingly, finding a different
recording fees, et cetera. Indeed, it has been settled in a long security was taken for the second loan no intent that the parties
line of decisions that mortgages given to secure future relied on the security of the first loan could be inferred, so it was
advancements are valid and legal contracts, and the amounts held. The rationale involved, the court said, was that the
named as consideration in said contracts do not limit the "dragnet clause" in the first security instrument constituted a
amount for which the mortgage may stand as security if from the continuing offer by the borrower to secure further loans under
four corners of the instrument the intent to secure future and the security of the first security instrument, and that when the
other indebtedness can be gathered. lender accepted a different security he did not accept the offer.
The "blanket mortgage clause" in the instant case states: In another case, it was held that a mortgage with a "dragnet
clause" is an "offer" by the mortgagor to the bank to provide the
security of the mortgage for advances of and when they were
That for and in consideration of certain loans, overdraft and made. Thus, it was concluded that the "offer" was not accepted
other credit accommodations obtained from the Mortgagee by by the bank when a subsequent advance was made because
the Mortgagor and/or ________________ hereinafter referred (1) the second note was secured by a chattel mortgage on
to, irrespective of number, as DEBTOR, and to secure the certain vehicles, and the clause therein stated that the note was
payment of the same and those that may hereafter be secured by such chattel mortgage; (2) there was no reference in
obtained, the principal or all of which is hereby fixed at Two the second note or chattel mortgage indicating a connection
Hundred Fifty Thousand (P250,000.00) Pesos, Philippine between the real estate mortgage and the advance; (3) the
Currency, as well as those that the Mortgagee may extend to mortgagor signed the real estate mortgage by her name alone,
the Mortgagor and/or DEBTOR, including interest and expenses whereas the second note and chattel mortgage were signed by
or any other obligation owing to the Mortgagee, whether direct the mortgagor doing business under an assumed name; and (4)
or indirect, principal or secondary as appears in the accounts, there was no allegation by the bank, and apparently no proof,
books and records of the Mortgagee, the Mortgagor does that it relied on the security of the real estate mortgage in
hereby transfer and convey by way of mortgage unto the making the advance.
Mortgagee, its successors or assigns, the parcels of land which
are described in the list inserted on the back of this document,
and/or appended hereto, together with all the buildings and Indeed, in some instances, it has been held that in the absence
improvements now existing or which may hereafter be erected of clear, supportive evidence of a contrary intention, a mortgage
or constructed thereon, of which the Mortgagor declares that containing a "dragnet clause" will not be extended to cover
he/it is the absolute owner free from all liens and incumbrances. future advances unless the document evidencing the
... subsequent advance refers to the mortgage as providing
security therefor.
xxxx
It was therefore improper for petitioner in this case to seek
foreclosure of the mortgaged property because of non-payment
In the case at bar, the subsequent loans obtained by of all the three promissory notes. While the existence and
respondents were secured by other securities, thus: PN validity of the "dragnet clause" cannot be denied, there is a
BD#76/C-345, executed by Don Alviar was secured by a "hold- need to respect the existence of the other security given for PN
out" on his foreign currency savings account, while PN BD#76/C-345. The foreclosure of the mortgaged property
BD#76/C-430, executed by respondents for Donalco Trading, should only be for the P250,000.00 loan covered by PN
Inc., was secured by "Clean-Phase out TOD CA 3923" and BD#75/C-252, and for any amount not covered by the security
eventually by a deed of assignment on two promissory notes for the second promissory note. As held in one case, where
executed by Bancom Realty Corporation with Deed of deeds absolute in form were executed to secure any and all
Guarantee in favor of A.U. Valencia and Co., and by a chattel kinds of indebtedness that might subsequently become due, a
mortgage on various heavy and transportation equipment. The balance due on a note, after exhausting the special security
matter of PN BD#76/C-430 has already been discussed. Thus, given for the payment of such note, was in the absence of a
the critical issue is whether the "blanket mortgage" clause special agreement to the contrary, within the protection of the
applies even to subsequent advancements for which other mortgage, notwithstanding the giving of the special security.
securities were intended, or particularly, to PN BD#76/C-345. This is recognition that while the "dragnet clause" subsists, the
security specifically executed for subsequent loans must first be
Under American jurisprudence, two schools of thought have exhausted before the mortgaged property can be resorted to.
emerged on this question. One school advocates that a "dragnet
The security clause involved in the case at bar shows that, by its Petitioner, however, is not without recourse. Both the Court of
terms: Appeals and the trial court found that respondents have not yet
paid the P250,000.00 and gave no credence to their claim that
As security for the payment of loan obtained by the they paid the said amount when they paid
ASSIGNOR/PLEDGOR from the ASSIGNEE/PLEDGEE in the petitioner P2,000,000.00. Thus, the mortgaged property could
amount of FIFTEEN MILLION PESOS (15,000,000.00) still be properly subjected to foreclosure proceedings for the
Philippine Currency in accordance with the Promissory Note unpaid P250,000.00 loan, and as mentioned earlier, for any
attached hereto and made an integral part hereof as Annex "A" deficiency after D/A SFDX#129, security for PN BD#76/c-345,
and/or such Promissory Note/s which the has been exhausted, subject of course to defenses which are
ASSIGNOR/PLEDGOR shall hereafter execute in favor of the available to respondents.
ASSIGNEE/PLEDGEE, the ASSIGNOR/ PLEDGOR hereby
transfers, assigns, conveys, endorses, encumbers and delivers In any event, even without this Courts prescription in Prudential,
by way of first pledge unto the ASSIGNEE/PLEDGEE, its the release of the Wack Wack Membership as the pledged
successors and assigns, that certain Membership fee Certificate security for Promissory Note 714-Y cannot yet be done as
Share in Wack Wack Golf and Country Club Incorporated sought by Central Surety. The chain of contracts concluded
covered by Stock Certificate No. 217 with Serial No. 1793 duly between Premiere Bank and Central Surety reveals that the
issue by Wack Wack Golf and Country Club Incorporated on Wack Wack Membership, which stood as security for
August 27, 1996 in the name of the ASSIGNOR." Promissory Note 714-Y, and which also stands as security for
subsequent debts of Central Surety, is a security in the form of a
it is comparable with the security clause in the case of pledge. Its return to Central Surety upon the pretext that Central
Prudential, viz.: Surety is entitled to pay only the obligation in Promissory Note
No. 714-Y, will result in the extinguishment of the pledge, even
with respect to the subsequent obligations, because Article
That for and in consideration of certain loans, overdraft and 2110 of the Civil Code provides:
other credit accommodations obtained from the Mortgagee by
the Mortgagor and/or ________________ hereinafter referred
to, irrespective of number, as DEBTOR, and to secure the (I)f the thing pledged is returned by the pledgor or owner, the
payment of the same and those that may hereafter be pledge is extinguished. Any stipulation to the contrary is void.
obtained, the principal or all of which is hereby fixed at Two
Hundred Fifty Thousand (P250,000.00) Pesos, Philippine This is contrary to the express agreement of the parties,
Currency, as well as those that the Mortgagee may extend to something which Central Surety wants this Court to undo. We
the Mortgagor and/or DEBTOR, including interest and expenses reiterate that, as a rule, courts cannot intervene to save parties
or any other obligation owing to the Mortgagee, whether direct from disadvantageous provisions of their contracts if they
or indirect, principal or secondary as appears in the accounts, consented to the same freely and voluntarily.39
books and records of the Mortgagee, the Mortgagor does
hereby transfer and convey by way of mortgage unto the Attorneys Fees
Mortgagee, its successors or assigns, the parcels of land which
are described in the list inserted on the back of this document,
and/or appended hereto, together with all the buildings and The final issue is the propriety of attorneys fees. The trial court
improvements now existing or which may hereafter be erected based its award on the supposed malice of Central Surety in
or constructed thereon, of which the Mortgagor declares that instituting this case against Premiere Bank. We find no malice
he/it is the absolute owner free from all liens and incumbrances. on the part of Central Surety; indeed, we are convinced that
... Central Surety filed the case in the lower court in good faith,
upon the honest belief that it had the prerogative to choose to
which loan its payments should be applied.
and there is no substantive difference between the terms
utilized in both clauses securing future advances.
Malicious prosecution, both in criminal and civil cases, requires
the presence of two elements, to wit: (a) malice and (b) absence
To recall, the critical issue resolved in Prudential was whether of probable cause. Moreover, there must be proof that the
the "blanket mortgage" clause applies even to subsequent prosecution was prompted by a sinister design to vex and
advancements for which other securities were intended. We humiliate a person; and that it was initiated deliberately,
then declared that the special security for subsequent loans knowing that the charge was false and baseless. Hence, the
must first be exhausted in a situation where the creditor desires mere filing of what turns out to be an unsuccessful suit does not
to foreclose on the "subsequent" loans that are due. However, render a person liable for malicious prosecution, for the law
the "dragnet clause" allows the creditor to hold on to the first could not have meant to impose a penalty on the right to
security in case of deficiency after foreclosure on the special litigate.40 Malice must be proved with clear and convincing
security for the subsequent loans. evidence, which we find wanting in this case.
In Prudential, we disallowed the petitioners attempt at multiple WHEREFORE, the instant petition is PARTIALLY GRANTED.
foreclosures, as it foreclosed on all of the mortgaged properties The assailed Decision of the Court of Appeals in CA-G.R. CV
serving as individual securities for each of the three loans. This No. 85930 dated July 31, 2006, as well as its Resolution dated
Court then laid down the rule, thus: January 4, 2007, are REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Makati City, Branch 132,
where deeds absolute in form were executed to secure any and in Civil Case No. 00-1536, dated July 12, 2005, is
all kinds of indebtedness that might subsequently become due, REINSTATED with the MODIFICATION that the award of
a balance due on a note, after exhausting the special security attorneys fees to petitioner is DELETED. No pronouncement as
given for the payment of such note, was, in the absence of a to costs.
special agreement to the contrary, within the protection of the
mortgage, notwithstanding the giving of the special security. SO ORDERED.
This is recognition that while the "dragnet clause" subsists, the
security specifically executed for subsequent loans must first be
exhausted before the mortgaged property can be resorted to. ANTONIO EDUARDO B. NACHURA
Associate Justice
However, this does not prevent the creditor from foreclosing on
the security for the first loan if that loan is past due, because WE CONCUR:
there is nothing in law that prohibits the exercise of that right.
Hence, in the case at bench, Premiere Bank has the right to CONSUELO YNARES-SANTIAGO
foreclose on the Wack Wack Membership, the security Associate Justice
corresponding to the first promissory note, with the deed of Chairperson
assignment that originated the "dragnet clause." This conforms
to the doctrine in Prudential, as, in fact, acknowledged in the
decisions penultimate paragraph, viz.: MA. ALICIA AUSTRIA- MINITA V. CHICO-
40
MARTINEZ NAZARIO Ceballos v. Intestate Estate of the Late Emigdio Mercado, G.R. No. 155856,
Associate Justice Associate Justice May 28, 2004, 430 SCRA 323, 336, citing China Banking Corporation v. Court of
Appeals, 231 SCRA 472 (1994).
ATTESTATION
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice
Footnotes
* Per Raffle dated February 18, 2008.
1 Penned by Presiding Justice Ruben T. Reyes (now a retired member of this
thereof.
18 Rollo, pp. 79-80.
19
Id. at 9-10.
20 Id. at 61-64.
21 Baltazar v. Lingayen Gulf Electric Power Co., Inc., 121 Phil. 1308, 1321
(1965).
22 Social Security Commission v. Court of Appeals, G.R. No. 152058, September
Accepted Masons, April 25, 1896, 10 Haw. 273, 1896 WL 1624 (Hawaii Rep.).
25 IV Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, 311 (1985), citing Salvat 104-105, 7 Planiol & Ripert 542, De Buen,
3 Colin & Capitant, 188, 296.
26
Id.
27 The Ram Company, Inc. v. The Estate of Clyde K. Kobbeman, et al. and
Planters Bank and Trust Company, Appellant, No. 56408, March 2, 1985, 236
Kan. 751, 696 P. 2d 936, citing Gray v. Amoco Production Company, 1 Kan.
App. 2d 338, P 11, 564 P. 2d 579 (1977) affd in part, revd in part 223 Kan.
441, 573 P. 2d 1080 (1978),
28 CIVIL CODE, Art. 1169.
29 Valderama v. Macalde, G.R. No. 165005, September 16, 2005, 470 SCRA 168,
4. P200,000.00 Check No. 301248 March 14, 1992 We resolve the issue in favor of petitioner.
5. P200,000.00 Check No. 301249 April 4, 1992 According to respondent Diaz, the provisional deed of sale that
was subsequently executed by the parties novated the original
existing contract of lease. The contention cannot be sustained.
6. P200,000.00 Check No. 301250 April 25, 1992 (pp. Respondent originally occupied the condominium unit in
59-61, Rollo). question in 1987 as a lessee. 8 While he occupied the premises
as lessee, petitioner agreed to sell the condominium unit to
Subsequently, in a letter dated January 22, 1992, petitioner respondent by installments. 9 The agreement to sell was
informed private respondent that his checking account with PCI provisional as the consideration was payable in installments.
Bank has been closed and a new checking account with the
same drawee bank is opened for practical purposes. The letter The question is, did the provisional deed of sale novate the
further stated that the postdated checks issued will be replaced existing lease contract? The answer is no. The novation must
with new ones in the same drawee bank (p. 63, Rollo). be clearly proved since its existence is not presumed. 10 "In this
light, novation is never presumed; it must be proven as a fact
On January 25, 1992, petitioner through Ms. Socorro Diaz, wife either by express stipulation of the parties or by implication
of petitioner, paid private respondent Mario Espina derived from an irreconcilable incompatibility between old and
P200,000.00, acknowledged by him as partial payment for the new obligations or contracts." 11 Novation takes place only if the
condominium unit subject of this controversy (p. 64, Rollo). parties expressly so provide, otherwise, the original contract
remains in force. In other words, the parties to a contract must
On July 26, 1992, private respondent sent petitioner a "Notice of expressly agree that they are abrogating their old contract in
Cancellation" of the Provisional Deed of Sale (p. 48, Rollo). favor of a new one. 12 Where there is no clear agreement to
create a new contract in place of the existing one, novation
cannot be presumed to take place, unless the terms of the new
However, despite the Notice of Cancellation from private contract are fully incompatible with the former agreement on
respondent, the latter accepted payment from petitioner per every point. 13 Thus, a deed of cession of the right to repurchase
Metrobank Check No. 395694 dated and encashed on October a piece of land does not supersede a contract of lease over the
28, 1992 in the amount of P100,000.00 (p. 64, Rollo). same property. 14 In the provisional deed of sale in this case,
after the initial down payment, respondent's checks in payment
On February 24, 1993, private respondent filed a complaint of six installments all bounced and were dishonored upon
docketed as Civil Case No. 2104 for Unlawful Detainer against presentment for the reason that the bank account was
petitioner before the Municipal Trial Court of Antipolo, Branch 1. closed. 15 Consequently, on July 26, 1992, petitioner terminated
the provisional deed of sale by a notarial notice of
cancellation. 16 Nonetheless, respondent Diaz continued to
occupy the premises, as lessee, but failed to pay the rentals
due. On October 28, 1992, respondent made a payment of
P100,000.00 that may be applied either to the back rentals or
for the purchase of the condominium unit. On February 13,
1993, petitioner gave respondent a notice to vacate the
premises and to pay his back rentals. 17 Failing to do so,
respondent's possession became unlawful and his eviction was
proper. Hence, on February 24, 1993, petitioner filed with the
Municipal Trial Court, Antipolo, Rizal, Branch 01 an action for
unlawful detainer against respondent Diaz. 18
No costs.
SO ORDERED.1wphi1.nt
Footnotes
1
In CA-G.R. SP No. 34214, promulgated on July 20, 1994, Labitoria,
J., ponente, Cui and Martin, Jr., JJ., concurring.
2
In Civil Case No. 94-2997, decision, dated April 29, 1994, Judge Felix
S. Caballes, presiding.
3
In Civil Case No. 2104, decision, dated November 12, 1993, Judge
Ruth C. Santos, presiding.
4
Petition, Annex "G", Rollo, pp. 64-69.
5
Ibid., Annex "H", Rollo, pp. 70-87.
6
Petition, Annex "I", Rollo, p. 89.
7
Filed on October 5, 1994, Petition for Review on Certiorari, Rollo, pp.
9-34. On November 22, 1995, we gave due course to the petition, Rollo,
p. 199.
8
Petition for Review on Certiorari, paragraph 18, Section (b), Rollo,
p.13.
9
Petition, Annex "K", Rollo, pp. 105-108.
10
Rillo v. Court of Appeals, 274 SCRA 461, 469 [1997], citing Pacific
Mills, Inc. v. Court of Appeals, 206 SCRA 317 [1992]; Bisaya Land
Transportation v. Sanchez, 153 SCRA 532 [1987].
11
Uraca v. Court of Appeals, 278 SCRA 702, 710 [1997].
12
Rillo v. Court of Appeals, supra, citing Ajax Marketing and
Development Corporation v. Court of Appeals, 248 SCRA 222 [1995].
13
Rillo v. Court of Appeals, supra; Nyco Sales Corporation v. BA
Finance Corporation, 200 SCRA 637 [1991]; Lim Tay v. Court of
Appeals, 293 SCRA 634, 657 [1998].
14
Tolentino, Civil Code of the Philippines, Vol. IV, 1993 Reprinting, p.
383-384.
15
Petition for Review on Certiorari, paragraph 18, Section (e), Rollo, p.
13.
16
Ibid., Section (f), Rollo, p. 14.
17
Ibid., Section (g), Rollo, p. 14.
18
CA Decision, Rollo, p. 65.
19
Art. 1254, Civil Code.
20
In CA-G.R. SP No. 34214.
21
In Civil Case No. 94-2997, dated April 29, 1994.
22
In Civil Case No. 2104, dated November 12, 1993.
Republic of the Philippines EIGHTY FOUR CENTAVOS (P53,642.84) shall be paid
SUPREME COURT within 24 months from the date of complete delivery thereof,
Manila the balance shall be paid in the manner herein stated as
shown in the Schedule of Payments, 2 ... to wit:
SECOND DIVISION
TOTAL F.O.B. COST P536,428.44
A.M. No. 21901-96 June 27, 1978
AMOUNT OF 1st INSTALLMENT (10% OF F.O.B. COST)
REPARATIONS COMMISSION, plaintiff-appellants, P53,642.84
vs.
UNIVERSAL DEEP-SEA FISHING CORPORATION and DUE DATE OF 1st INSTALLMENT May 8, 1961
MANILA SURETY AND FIDELITY CO., INC., defendant-
appellants. TERM: Ten (10) EQUAL YEARLY INSTALLMENTS
MANILA SURETY & FIDELITY CO., INC., third-party RATE OF INTEREST: THREE PERCENT (3%) PER
plaintiff-appellee, ANNUM
vs.
PABLO S. SARMIENTO, third-party defendant-appellant.
No. of Date Due Amount
Installmen
CONCEPCION JR., J.: ts
No. of
The terms of the contracts for the purchase and sale of the
Installments
Date Due Amount reparations vessels, however, are very clear and leave no
doubt as to the intent of the contracting parties. Thus, in the
1 Oct. 17, 1962 P57,501.57 contract concerning the M/S UNIFISH 1 and M/S UNIFISH 2,
the parties expressly agreed that the first installment
2 Oct. 17, 1963 P57,501.57 representing 10% of the purchase price or P53,642.84 shall
be paid within 24 months from the date of complete delivery
3 Oct. 17, 1964 P57,501.57 of the vessel or on May 8, 1961, and the balance to be paid
in ten (10) equal yearly installments. The amount of
4 Oct. 17, 1965 P57,501.57 P56,597.20 due on May 8, 1962, which is also claimed to be
a "first installment," is but the first of the ten (10) equal yearly
5 Oct. 17, 1966 P57,501.57 installments of balance of judgment, purchase price. In
judgment, case of Reparations Commission vs. Northern
6 Oct. 17, 1967 P57,501.57 Lines, Inc. et al., 12 where judgment, Schedule of Payments,
likewise on RC-LEGAL DEPT FORM NO. 1, also allegedly
7 Oct. 17, 1968 P57,501.57 indicated two (2) due dates for judgment, payment of judgment,
first installment, judgment, Court said:
8 Oct. 17, 1969 P57,501.57
(a) The major premise in appellants' process of reasoning is
9 Oct. 17, 1970 P57,501.57
that the first installments due on April 25, 1963, and May 26,
1963, are 'first installments. although they are not so
10 Oct. 17, 1971 P57,501.57 9
designated in judgment, schedule appended to each of
judgment, contracts between judgment, parties. Appellant's,
A performance bond in judgment, amount of P54,500.00 moreover, assume that judgment, 'first' installment
issued by judgment, Manila Surety & Fidelity Co., Inc., 10was is included in judgment, ten (10) equal yearly installments'
submitted, and an indemnity agreement was executed by mentioned subsequently to said 'first' installment. In feet,
UNIVERSAL in favor of judgment, surety company. 11 however, only one installment is labeled as 'first' in each one
of said schedules, and that is judgment, installment due on
'April 25, 1962' - as regards M/S Don Salvador or
On August 10, 1962, judgment, Reparations Commission
Magsaysay - and that due on 'May 26, 1962'- as regards
instituted judgment, present action against UNIVERSAL and
M/S Don Amando or Estancia. The schedules do not
describe judgment, 'ten (10) equal yearly installments' vessels was already due and demandable when the present
following the one characterized therein as 'first' meaning action was commenced on August 10, 1962. Also due and
'number,' not order or sequence, of installments and the demanded from UNIVERSAL were the first of the ten (10)
numerals 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 written before each of equal yearly installments on the balance of the purchase
said 'ten (10) equal yearly installments following the 'first' to price of the M/S UNIFISH I and M/S UNIFISH 2 in the
accrue after the due date of said 'first' installment. Just the amount of P56,597.20 and P72,565.68 on judgment, M/S
same, the parties have not so described (as 'first') in the UNIFISH 3 and M/S UNIFISH 4. The first accrued on May 8,
schedules forming part of their contracts the installments 1962, while judgment, second fell due on July 31, 1962.
numbered '1' in the list contained in each. Moreover,
considering that the words 'TERMS: Ten (10) EQUAL (2) The claim of judgment, surety company to the effect that
YEARLY INSTALLMENTS,' appear after the lines reading: the trial court erred in not awarding it the amount of
'AMOUNT OF 1st INSTALLMENT (10% OF F.O.B. COSTS) P7,251.42, as premium is the performance bonds, is well
P174,761.42' and DUE DATE OF 1st INSTALLMENT April taken. The payment of premiums on the bonds to the surety
25, 1962 (or May 26, 1962) and that, subsequently to said company had been expressly undertaken by UNIVERSAL in
'TERM: Ten (10) EQUAL YEARLY INSTALLMENTS,' there the indemnity agreements executed by it in favor of
is a list of ten (10) equal yearly installments, it is clear that judgment, surety company. The premium is judgment,
the latter do not include the one designated as 'first' consideration for furnishing judgment, bonds and judgment,
installment. obligation to pay judgment, same subsists for as long as
judgment, liability of judgment, surety shall exist. 13 Hence,
xxx xxx xxx UNIVERSAL should pay judgment, amount of P7,251.42 to
judgment, surety company.
(b) The pertinent part of Section 12 of Rep. Act No. 1789,
pursuant to which the vessels in question were sold to the (3) The surety company also claims that judgment, trial court
Buyer reads: erred in not applying judgment, amount of P10,000.00, paid
as down payment by UNIVERSAL to judgment, Reparations
. . . Capital goods . . . disposed of to private parties as Commission, to judgment, guaranteed indebtedness.
provided for in subsection (a) of Section two hereof shall be According to judgment, surety company, under Article 1254
sold on a cash or credit basis, under rules and regulations as of judgment, Civil rode, where there is no imputation of
may be determined by the Commission. Sales on a credit payment made by either judgment, debtor or creditor, The
basis shall be payable in installments: Provided, That debt which is the most onerous to the debtor shall be
judgment, first installment shall be paid within twenty-four deemed to have been satisfied, so that the amount of
months after complete delivery of judgment, capital goods P10,000.00 paid by UNIVERSAL as down payment on the
and judgment, balance within a period not exceeding ten purchase of the, M/S UNIFISH 1 and M/S UNIFISH 2 should
years, . . . plus judgment, service provided for in section ten be applied to the guaranteed portion of the debt, this
thereof; Provided further, That judgment, unpaid balance of releasing part of the liability hence the obligation of 'The
judgment, price thereof shall bear interest at judgment, rate surety company shall be only P43,643.00, instead of
of not more than three percent per annum. . . . . P53,643.00.
It should be noted that, pursuant to judgment, schedules The rules contained in Articles 1252 to 1254 of judgment,
attached to judgment, contracts with judgment, Buyer, Civil Code apply to a person owing several debts of
judgment, 'complete delivery' of judgment, vessels took judgment, same kind to a single creditor. They cannot be
place on April 25, and May 26, 1960, respectively, so that made applicable to a person whose obligation as a mere
judgment, the 24 months taxed by law for judgment, surety is both contingent and singular, 14 which in this case is
the full and faithful compliance with the terms of the contract of
payment of judgment, 'First installment expired on April 25,
conditional purchase and sale of reparations goods, The
1962 and May 26,1962, which are judgment, very dates
obligation included the payment, not only of the first installment
stated in judgment, aforementioned schedules for judgment, in the amount of P53,643.00, but also of the ten (10) equal
payment of judgment, respective '1st' installments. What is yearly installments of P56,597.20 per annum. The amount of
more, in view of said legal provision, judgment, P10,000.00 was, indeed, deducted from judgment, amount of
Commission had no authority to agree that the 1st P53,643.00, but then judgment, first of judgment, ten (10) equal
installment shall be paid on any later date, and judgment, yearly installments had also accrued, hence, no error was
Buyer must have been aware of this fact. Hence, judgment, committed in holding judgment, surety company to judgment,
parties could not have intended judgment, first installments full extent of its undertaking.
to become due on April 25, and May 26, 1963 It is, likewise,
obvious - particularly when considered in relation to (4) Finally, We find no merit in judgment, claim of judgment,
judgment, provision above quoted - that judgment, 'ten (10) third-party defendant Pablo S. Sarmiento that he is not
equal yearly installments.' mentioned in the schedules, refer personally liable having merely executed judgment,
to the 'balance' of the price to be paid by the indemnity agreements 15 in his capacity as acting general
buyer, after deducting judgment, 'first' installment, so hat, manager of UNIVERSAL. Pablo S. Sarmiento appears to have
altogether, there would be 'eleven' installments, namely, the signed the indemnity agreement twice the first, in this
first , which would be the 10% of the F.O.B. cost of the capacity as acting general manager of UNIVERSAL, and the
vessel as agreed upon between 'The Governments of the second, in his individual capacity. The indemnity agreements in
Philippines and Japan and 'ten (10) yearly installments,' question state the following. among others:
representing the balance of "he amount due to he
Commission from judgment, Buyer, including tile interest In consideration of judgment, responsibility undertaken by
thereon. judgment, Company, for judgment, original bond, and for any
renewal, extension or substitution thereof, judgment,
Viewing judgment, contracts between judgment, parties in undersigned, jointly and severally, bind themselves in favor
judgment, light of the foregoing exposition, judgment, first of judgment, said COMPANY in judgment, following terms:
installment on judgment, M/S UNIFISH 1 and M/S UNIFISH
2 of judgment, amount of P53,642.84 was due on May 8, xxx xxx xxx
1961, while judgment, first installments on judgment, M/S
UNIFISH 3 and M/S UNIFISH 4, and judgment, M/S
UNIFISH 5 and M/S UNIFISH 6 in judgment, amounts of Dated at City of Manila this - - - - day of July l969.
P68,777.77 and P54,500.00 were due on July 31, 1961 and
October 17, 1961, respectively. Accordingly judgment, 600 Cottage 3, UNIVERSAL DEEP-SEA FISHING CORP.
obligation of UNIVERSAL to pay judgment, first installments
on the purchase price of judgment, six (6) reparations Aguinaldo Com- BY:
pound, Echague, s/PABLO S. SARMIENTO Manila t/PABLO
S. SARMIENTO Signature
SO ORDERED.
Footnotes
FIRST DIVISION On January 31, 1994, the Metropolitan Trial Court, Quezon City
rendered a decision in favor of respondent, the dispositive
G.R. No. 123855 November 20, 2000 portion of which reads:
Aside from the above lease, petitioner leased eleven (11) other In time, petitioner appealed to the Regional Trial Court, Quezon
property from respondent, ten (10) of which were located within City, Branch 220.11
the Fairview compound, while the eleventh was located along
Quirino Highway, Quezon City. Petitioner also purchased from On February 19, 1994, respondent, with the support of fifty (50)
respondent eight (8) units of heavy equipment and vehicles in armed security guards forcibly entered the property and took
the aggregate amount of P1,020,000.00. possession of the wet market building.12
On account of petitioners failure to pay P361,895.55 2 in rental On July 6, 1994, the Regional Trial Court, Quezon City, Branch
for the month of May, 1992, and the monthly rental of 220 rendered a decision affirming in toto the decision of the
P450,000.00 for the months of June and July 1992, on July 6, Metropolitan Trial Court, to wit:
1992, respondent sent a demand letter to petitioner demanding
payment of the back rentals, and if no payment was made within
fifteen (15) days from receipt of the letter, it would cause the "WHEREFORE, the appealed decision dated January 31, 1994,
cancellation of the lease contract.3 Another demand letter for being in accordance with the evidence presented and the
followed this on July 17, 1992, reiterating the demand for law on the matter, is hereby affirmed in toto.
payment and for petitioner to vacate the subject premises.4
"Let a writ of execution issue against defendant and his surety,
Without the knowledge of petitioner, on August 3, 1992, to answer for the decision of the lower court."13
respondent mortgaged the land subject of the lease contract,
including the improvements which petitioner introduced into the On the same day, the Regional Trial Court issued a writ of
land amounting to P35,000,000.00, to Monte de Piedad Savings execution14 whereupon, petitioner vacated the subject premises
Bank, as security for a loan in the amount of P20,000,000.00. 5 voluntarily. By July 12, 1994, petitioner had completely turned
over possession of subject property to respondent.
On August 12, 1992, and on subsequent dates thereafter,
respondent refused to accept petitioners daily rental payments. 6 Meanwhile, on July 21, 1994, petitioner filed a petition for review
with the Court of Appeals.15 He alleged that he had paid the
On August 20, 1992, petitioner filed with the Regional Trial amount of P11,478,121.85 for security deposit and rentals on
Court, Quezon City an action for injunction and damages the wet market building, but respondent, without his consent,
seeking to enjoin respondent from disturbing his possession of applied portions of the payment to his other obligations. The
the property subject of the lease contract.7 On the same day, vouchers and receipts indicated that the payments made were
respondent filed with the Metropolitan Trial Court, Quezon City a for rentals. Thus, at the time of payment petitioner had declared
complaint for ejectment against petitioner. Attached to the as to which obligation the payment must be applied.
complaint were the two (2) demand letters dated July 6 and July
17, 1992.8 On February 10, 1995, the Court of Appeals promulgated its
decision finding that petitioner impliedly consented to
On August 25, 1992, five (5) days after the filing of the respondents application of payment to his other obligations
ejectment complaint, respondent moved to withdraw the and, thus, dismissed the petition for lack of merit. 16
complaint on the ground that certain details had been omitted in
the complaint and must be re-computed. On March 3, 1995, petitioner filed a motion for
reconsideration;17 however, on February 9, 1996 the Court of
On April 22, 1993, respondent re-filed the ejectment complaint Appeals denied the motion.18
with the Metropolitan Trial Court, Quezon City.Computed from
Hence, this appeal.19 If the debtor accepts from the creditor a receipt in which an
application of the payment is made, the former cannot complain
At issue is whether petitioner was truly in arrears in the payment of the same, unless there is a cause for invalidating the
of rentals on the subject property at the time of the filing of the contract."23
complaint for ejectment.
At the time petitioner made the payments, he made it clear to
As found by the Metropolitan Trial Court and Regional Trial respondent that they were to be applied to his rental obligations
Court, petitioner made a total payment of P10,949,447.18, to on the Fairview wet market property. Though he entered into
respondent as of July 2, 1992. various contracts and obligations with respondent, including a
lease contract over eleven (11) property in Quezon City and
sale of eight (8) heavy equipment, all the payments made, about
If the payment made by respondent applied to petitioners other P11, 000,000.00, were to be applied to rental and security
obligations is set aside, and the amount petitioner paid be deposit on the Fairview wet market property.
applied purely to the rentals on the Fairview wet market
building, there would be an excess payment of P1,049,447.18
as of July 2, 1992. The computation in such case would be as Respondent Regalado argues that assuming that petitioner
follows: expressed at the time of payment which among his obligations
were to be satisfied first, petitioner is estopped by his assent to
the application made by the respondent. This assent is inferred
Amount paid as of July 2, 1992 P10,949,447.18 from the silence of petitioner on the July 15, 1991
letter24 containing a statement of the application of payments,
Less: which was different from the application made by petitioner. A
big chunk of the amount paid by petitioner went into the
Monthly rent from January 1991- satisfaction of an obligation which was not yet due and
July 1992 demandable--the payment of the eight (8) heavy equipment
P450,000.00 x 19 months P 8,550,000.00 amounting to about P1,020,000.00.
Less:
The statement of account prepared by respondent was not the
Security deposit P 1,350,000.00 receipt contemplated under the law. The receipt is the evidence
============== of payment executed at the time of payment, and not the
statement of account executed several days thereafter.
Excess amount paid P 1,049,447.18
There was no clear assent by petitioner to the change in the
manner of application of payment.1wphi1 The petitioners
In the letter dated November 19, 1991, respondent proposed silence as regards the application of payment by respondent
that petitioners security deposit for the Quirino lot, in the cannot mean that he consented thereto. There was no meeting
amount of P643,276.48, be applied as partial payment for his of the minds. Though an offer may be made, the acceptance of
account under the subject lot as well as to real estate taxes on such offer must be unconditional and unbounded in order that
the Quirino lot.20 Petitioner interposed no objection, as concurrence can give rise to a perfected contract.25 Hence,
evidenced by his signature signifying his conformity thereto. petitioner could not be in estoppel.
In an earlier letter, dated July 15, 1991,21 respondent informed Assuming arguendo that, as alleged by respondent, petitioner
petitioner that the payment was to be applied not only to did not, at the time the payments were made, choose the
petitioners accounts under both the subject land and the obligation to be satisfied first, respondent may exercise the right
Quirino lot but also to heavy equipment bought by the latter from to apply the payments to the other obligations of petitioner. But
respondent. Petitioner claimed that the amount applied as this is subject to the condition that the petitioner must give his
payment for the heavy equipment was critical because it was consent. Petitioners silence is not tantamount to consent. The
equivalent to more than two (2) months rental of the subject consent must be clear and definite.
property, which was the basis for the ejectment case in the
Metropolitan Trial Court.
Under the law, if the debtor did not declare at the time he made
the payment to which of his debts with the creditor the payment
The controversy stemmed from the fact that unlike the is to be applied, the law provided the guideline--no payment is
November 19, 1991 letter, which bore a conformity portion with to be made to a debt that is not yet due26 and the payment has
petitioners signature, the July 15, 1991 letter did not contain the to be applied first to the debt most onerous to the debtor. 27
signature of petitioner.
In the instant case, the purchase price of the eight (8) heavy
In nevertheless concluding that petitioner gave his consent equipment was not yet due at the time the payment was made,
thereto, the Court of Appeals upheld both the lower courts and for there was no date set for such payment. Neither was there a
trial courts findings that petitioner received the second letter demand by the creditor to make the obligation to pay the
and its attachment and he raised no objection thereto. purchase price due and demandable.28 Hence, the application
made by respondent is contrary to the provisions of the law.
In other words, would petitioners failure to object to the letter of
July 15, 1991 and its proposed application of payments amount The lease over the Fairview wet market property is the most
to consent to such application? onerous among all the obligations of petitioner to respondent. It
was established that the wet market is a going-concern and that
Petitioner submits that his silence is not consent but is in fact a petitioner has invested about P35,000,000.00, in the form of
rejection. improvements, on the property. Hence, petitioner would stand to
lose more if the lease would be rescinded, than if the contract of
The right to specify which among his various obligations to the sale of heavy equipment would not proceed.
same creditor is to be satisfied first rests with the debtor, 22 as
provided by law, to wit: The decision of the Court of Appeals was based on a
misapprehension of the facts and the law on the application of
"Article 1252. He who has various debts of the same kind in payment. Hence, the ejectment case subject of the instant
favor of one and the same creditor, may declare at the time of petition must be dismissed, without prejudice to the
making the payment, to which of them the same must be determination and settlement of the money claims of the
parties inter se.
applied. Unless the parties so stipulate, or when the application
of payment is made by the party for whose benefit the term has
been constituted, application shall not be made as to debts WHEREFORE, the Court GRANTS the petition. The Court
which are not yet due. REVERSES and SETS ASIDE the decision of the Court of
Appeals in CA-G. R. SP No. 34634.
ACCORDINGLY, the Court REVERSES the decision of the
Regional Trial Court, Quezon City, Branch 220 in Civil Case No.
94-20813, and dismisses the complaint filed with the
Metropolitan Trial Court, Quezon City, Branch 36 in Civil Case
No. MTC XXXVI-7089.
No costs.
SO ORDERED.
Footnotes
1
In CA-G. R. SP No. 34634, promulgated on February 10, 1995, Reyes, R. T.,
J., ponente, Herrera, O. M. and Gutierrez, A. S., JJ., concurring, Rollo, pp. 138-
148.
2 This represents the balance of the rental payment due from petitioner,
Footnotes
1
La Insular v. Machuaca Go Tauco, 39 Phil. 567.
2 Socony-Vacuum Corp. v. Miraflores, 67 Phil. 304.
3 Baltazar v. Lingayen Gulf Electric Co., Inc., G.R. Nos. L-16236-38, June 30,
1965.
4
Martinez v. Cavives, 25 Phil. 581; Tiu Sinco v. Havana, 45 Phil. 417; Asia
Banking Corporation v. Lacson, 48 Phil. 482; Pascual v. Lacsamana, 53 O.G.
2467; Dugo v. Lopena, et al., G.R. No. L-18377, Dec. 29, 1962.
5 Inchausti v. Yulo, 34 Phil. 978; Pablo v. Sapungan, 71 Phil. 145.
6 Ramos v. Gibbon, 67 Phil. 371; Dugo v. Lopena, supra.
[G.R. No. L-48448. February 20, 1984.] immediate member not being the owner of any other available
residential unit.
CRESENCIO, MAGIN, JUANITO, SOCRATES, and IMELDA,
all surnamed VELEZ, Petitioners, v. HON. CELSO AVELINO, DECISION
Presiding Judge, CFI Cebu Branch XIII, ALDING ACEDERA,
FABIANA ALLISON, RAFAEL ALQUISALAS, VICTOR
ALFAFARA, FORTUNATO BARGAYO, NATIVIDAD GUERRERO, J.:
BAJARIAS, ELISEO BELARMA, MAURA BELARMA, VIDAL
BUSTAMANTE, MARCIAL BURGOS, MAXIMO CABAHUG,
FLORO COROCOTO, HILARIO GAVIOLA, ROSITA GARCIA, This is a petition for certiorari filed by Cresencio, Magin, Juanito,
LEOPOLDO LINES, MAGDALENA TESORO, RAMON Socrates and Imelda, all surnamed Velez, seeking the reversal,
TEJANO, PLACIDA TEJANO, JUANITA VERGARA, and for grave abuse of discretion, the decision dated May 22, 1978
AMBROSIO VILLACES, Respondents. of the Court of First Instance of Cebu, Branch XIII dismissing
their complaint for recovery of possession of five parcels of land
E. P. Gabriel, Jr., for Petitioners. pursuant to Presidential Decree No. 20.
Pedro L. Albino for Private Respondents. The evidence shows that the five parcels of land all located at
Katipunan Street, Cebu City, then assessed at P17,000.00 and
known as Lots 5311-A-2-A, 5311-A-2-B, 5311-A-2-C, 5311-A-2-
SYLLABUS D and 5311-A-2-F, were formerly owned by Rodrigo Velez, the
father of petitioners. In an extrajudicial partition, the said lots
were adjudicated to petitioners herein on June 16, 1970. As
1. CIVIL LAW; PROPERTY; ACCION PUBLICIANA; NATURE early as 1970, petitioners made a demand to vacate upon
THEREOF AS DIFFERENTIATED FROM FORCIBLE ENTRY respondents who asked an extension of one year but thereafter,
AND UNLAWFUL DETAINER; CASE AT BAR. Whether or respondents changed their minds and refused to vacate. Around
not respondent Judge acted with grave abuse of discretion must the end of 1973, petitioners again advised respondents that they
be resolved in the affirmative. It should be recalled that this is a needed the premises for their own use and ordered them to
case of accion publiciana, the purpose of which is being to vacate the premises by removing their dwelling units from the
establish who have a better right to possess. (Bernabe, Et. Al. v. lots. Upon their refusal, petitioners filed an ejectment case
Judge Dayrit, Et Al., G.R. No. 58399, Oct. 27, 1983). There is before the City Court of Cebu, which case was docketed as Civil
no allegation of forcible entry in the complaint. Neither is it a Case No. R-17011. On motion of respondents, the City Court
case of unlawful detainer because the preponderance of dismissed the case without prejudice in an Order dated August
evidence shows that the occupancy of private respondents on 3, 1974 on the ground that there exists no cause of action,
the lot in question is due to the tolerance of the owners thereof following the suspension of judicial ejectment by Presidential
and against the latters will. Private respondents admit that they Decree No. 20. On July 3, 1976, petitioners made again an
have no written contract of lease with the petitioners not with extrajudicial demand in a letter which required respondents to
petitioners predecessor in interest. Only Marcial Burgos alleged vacate the premises within 15 days at the same time
that he had an oral agreement with Rodrigo Velez, all others threatening them with prosecution under Presidential Decree
surprisingly failed to testify that they had such an oral No. 772 for the crime of squatting. On August 5, 1976,
agreement of lease. They likewise admit that their houses were petitioners filed the complaint for recovery of possession of the
constructed without building permits. In the true sense of the aforesaid five parcels of land alleging that except for Magin
word, respondents are squatters. As such, their possession is Velez, they have no other lot of their own and are living on other
by tolerance. (Pangilinan v. Aguilar, 43 SCRA 136). Although persons premises; that respondents are not only occupying the
respondents had been paying nominal rentals ranging from premises but also accepting boarders and/or using the same for
P4.00 to P12.00 per month for some time, they did not thereby commercial purposes and that several demands have been
acquire the legal status of tenants. Squatting is unlawful and no made to give way to the needs of petitioners and their
amount of acquiescence converts it into a lawful act. Illegal respective families but respondents maliciously, abusively and
constructions constitute public nuisance per se. They pose defiantly refused to accede to petitioners lawful
problems of health and sanitation. (Cf. City of Manila v. Garcia, demands.chanrobles.com : virtual law library
Et Al., 19 SCRA 413).
In their answer, respondents admitted the ownership of the land
2. ID.; LEASE; EJECTMENT UNDER PRESIDENTIAL by petitioners. But in their special and affirmative defenses, they
DECREE NO. 20; NONPAYMENT OF RENTAL, A GROUND alleged that they have been occupying portions of the lots by
THEREFOR; CASE AT BAR. Even if the case were to be virtue of oral agreements of lease for an indefinite period,
decided as an ejectment case, the insistence of respondents paying monthly rentals for their respective portions ranging from
that they are lessees and, therefore, under the protective mantle P4.00 to P12.00; that the present action is barred by res
of Presidential Decree No. 20 loses ground when We consider judicata and or prior judgment and that the present action, if at
the finding of fact that respondents had not been paying any all there is any cause of action, is essentially one for unlawful
consideration for the occupancy of their respective premises. detainer since the last demand to vacate was made less than a
Said Presidential Decree No. 20 suspended ejectment when the year ago.
lease is for an indefinite period. It did not suspend ejectment on
other grounds like lack of payment of the rental stipulated. Eight of the twenty respondents testified that they are the
original occupants of the lots while two of them, Segundo
3. ID.; ID.; ID.; ID.; REMEDY OF LESSEES WHEN OWNERS Macatol and Hilario Gaviola, claimed to have bought their
OF LOT FAIL TO COLLECT OR REFUSE TO ACCEPT houses from third persons with the understanding that they
RENTALS. The failure of the owners to collect, or their should pay rentals to the landowner, Rodrigo Velez. They also
refusal to accept the rentals are not valid defenses. Article 1256 testified that they have been paying rentals for their respective
of the Civil Code provides that "if the creditor to whom tender of portions ranging from P4.00 to P12.00. In support of their claim
payment has been made refuses without just cause to accept it, of payment of rentals, at least six of them presented one or two
the debtor shall be released from responsibility by the receipts dated 1973 or earlier (Exhibits 2, 2-A to 2-I) and
consignation of the thing or sum due."cralaw virtua1aw library claimed that other receipts were lost. But all respondents
admitted not having paid rentals since 1973, some reasoning
4. ID.; ID.; ID.; NEED OF OWNER/LESSOR TO REPOSSESS out that nobody collected and others claiming that Fabiola Velez
PROPERTY FOR HIS OWN USE OR FOR THE USE OF ANY Garganera, Rodrigo Velez daughter, refused to accept their
MEMBER OF HIS FAMILY AS A RESIDENTIAL UNIT, A rentals. At least one of them, Hilario Gaviola, produced what he
GROUND THEREFOR; CASE AT BAR. The petitioners claimed as a building permit but the same turned out to be a
need of the premises for their own use or for the use of any mere application.chanrobles virtual lawlibrary
member of his family as a residential unit entitles them to the
possession of the lots in question. Batas Pambansa Blg. 25, After the case was submitted for decision, the trial court
which took effect on April 10, 1979, provides as additional ruled:jgc:chanrobles.com.ph
ground for judicial ejectment the need of the owner/lessor to
repossess his property for his own use or for the use of any "It appearing that the defendants are lessees of the portions of
member of his family as a residential unit, such owner or the land in question wherein their respective dwelling units are
erected, personal use by the plaintiffs and/or then families of the had not been paying any consideration for the occupancy of
said land, cannot be a valid ground for judicial ejectment of the their respective premises. Said Presidential Decree No. 20
former, pursuant to Presidential Decree No. 20, issued by the suspended ejectment when the lease is for an indefinite period.
President on March 15, 1977." (sic, should be October 12, It did not suspend ejectment on other grounds like lack of
1972). (Decision of the CFI, p. 5; Rollo, p. 30). payment of the rental stipulated.chanrobles virtual lawlibrary
On the ground that respondent Judge of the Court of First The failure of the owners to collect, or their refusal to accept the
Instance of Cebu acted with grave abuse of discretion in the rentals are not valid defenses. Article 1256 of the Civil Code
exercise of his judicial functions by holding that private provides that "if the creditor to whom tender of payment has
respondents are lessees and, therefore, privileged to continue been made refuses without just cause to accept it, the debtor
staying on the lots in question pursuant to Presidential Decree shall be released from responsibility by the consignation of the
No. 20, the plaintiffs below brought this instant petition thing or sum due."cralaw virtua1aw library
for certiorari.
Independently of the foregoing, the petitioners need of the
Petitioners contend that the preponderance of evidence shows premises for their own use or for the use of any member of his
that the occupancy of private respondents on the lots in family as a residential unit entitles them to the possession of the
question is due to the tolerance of the owners thereof and lots in question. Batas Pambansa Blg. 25, which took effect on
against the latters will. April 10, 1979, provides as additional ground for judicial
ejectment the need of the owner/lessor to repossess his
Conceding that respondents are lessees, petitioners claim that property for his own use or for the use of any member of his
Presidential Decree No. 20 does not mean that (1) they are family as a residential unit, such owner or immediate member
freed from paying rentals for the lots in question; (2) they can not being the owner of any other available residential
use the lots for commercial purposes; and (3) they can refuse to unit.chanrobles.com.ph : virtual law library
adduce evidence specifically referring to the twelve
respondents who did not testify on their behalf. Even before the effectivity of Batas Pambansa Blg. 25,
Presidential Decree No. 20 had been held to be not without
In answer to the argument of respondents that they are willing to exception. In Ongchengco v. City Court of Zamboanga, 95
pay rentals if petitioners send collectors, petitioners cite Article SCRA 313, this Court ruled that "extreme necessity for personal
1256 of the Civil Code where mere willingness to pay is not use of the property entitles the owner to exemption from the
payment, thus:jgc:chanrobles.com.ph operation of PD 20 which suspends the provision of Article 1673
of the Civil Code on judicial ejectment." The case of Betts v.
"Art. 1256. If the creditor to whom tender of payment has been Matias, 97 SCRA 439, reaffirmed that "Presidential Decree No.
made refuses without just cause to accept it, the debtor shall be 20 does not sanction the deprivation of a lessor of residential
released from responsibility by the consignation of the thing or property in extreme need of the leased premises for his own use
sum due."cralaw virtua1aw library of his right to terminate the lease and recover possession of his
property." Then, in Sinclair v. Court of Appeals, 115 SCRA 318,
Petitioners also claim that they had presented evidence that this Court held that "a strict and rigid compliance with
some respondents, particularly Natividad Bajaras, Maura Presidential Decree No. 20 is not in order, for an exemption
Belarma and Placida Tejano, are using the premises not only as from its provisions is warranted for humanitarian reasons."
residences but also stores while Alding Acedera is using her Again, in Tan Tok Lee v. CFI of Kaloocan City, 121 SCRA 438,
residence as a boarding house, thereby removing said this Court said that "petitioners reliance on the provision of
respondents from the protective mantle of Presidential Decree Presidential Decree No. 20 is not well taken. It could not have
No. 20. been the intention of the said decree to deprive the owner of the
rightful use of her home, more so, when petitioners reneged on
Finally, petitioners invoke the equal protection rights guaranteed their promise to look for another house in the mistaken belief
by the Constitution contending that respondent Judges undue that PD 20 gave them a preferential right over that of the owner.
application of Presidential Decree No. 20 in spite of the To deny the owner of the use and possession of her property
undisputed fact that petitioners have no other lot of their own would be tantamount to depriving her of her constitutional right
and are renting other peoples properties, except Magin Velez to abode." In Rantael v. Court of Appeals, Et Al., 97 SCRA 453,
(who nevertheless wants to recover his property for the use of this Court upheld the right of the lessor to judicially eject the
one of his children who is married), constitutes a denial of said lessee on the ground not only that "expiration of period of
constitutional provision.chanrobles law library : red written lease contract is manifestly present" but also because
Batas Pambansa Blg. 25 which superseded P.D. 20 "buttresses
Whether or not respondent Judge acted with grave abuse of the right of respondent Llave to judicially eject petitioner Rantael
discretion must be resolved in the affirmative. It should be from the leased premises." In Santos v. Court of Appeals and
recalled that this is a case of accion publiciana, the purpose of Paraguas, G.R. No. L-45071, May 30, 1983, this Court held that
which is being to establish who have a better right to possess. "the retroactive application of Batas Pambansa Blg. 25 to
(Bernabe, Et. Al. v. Judge Dayrit, Et Al., G.R. No. 58399, Oct. pending ejectment cases is already a settled matter and may no
27, 1983). There is no allegation of forcible entry in the longer be questioned. (Alejandro Melchor, Jr., etc. v. Hon. Jose
complaint. Neither is it a case of unlawful detainer because the L. Morja, etc., Et Al., G.R. No. L-35256, March 17, 1983;
preponderance of evidence shows that the occupancy of private Gutierrez v. Cantada, 90 SCRA 1; Ongchengco v. City Court of
respondents on the lot in question is due to the tolerance of the Zamboanga, 95 SCRA 313; Betts v. Matias, 97 SCRA 439). It
owners thereof and against the latters will. Private respondents was also held therein that "the right of the private respondents
admit that they have no written contract of lease with the over the property which they own in order to use the same as
petitioners not with petitioners predecessor in interest. Only their residence, not being owners of any other dwelling place,
Marcial Burgos alleged that he had an oral agreement with may not be denied. Such right is expressly recognized by Batas
Rodrigo Velez, all others surprisingly failed to testify that they Pambansa Blg. 25. Elemental sense of justice and fairness
had such an oral agreement of lease. They likewise admit that dictates that it must be so." chanrobles.com.ph : virtual law
their houses were constructed without building permits. In the library
true sense of the word, respondents are squatters. As such,
their possession is by tolerance. (Pangilinan v. Aguilar, 43 WHEREFORE, the petition for certiorari is granted. The decision
SCRA 136). Although respondents had been paying nominal of the defunct Court of First Instance of Cebu, Branch XIII,
rentals ranging from P4.00 to P12.00 per month for some time, dismissing the complaint of petitioners, is hereby REVERSED
they did not thereby acquire the legal status of tenants. and SET ASIDE. A new judgment is hereby entered in favor of
Squatting is unlawful and no amount of acquiescence converts it petitioners, ordering respondents to vacate the premises in
into a lawful act. Illegal constructions constitute public nuisance question and to remove their respective constructions and/or
per se. They pose problems of health and sanitation. (Cf. City of improvements therefrom within sixty (60) days from notice.
Manila v. Garcia, Et Al., 19 SCRA 413).
SO ORDERED.
Even if the case were to be decided as an ejectment case, the
insistence of respondents that they are lessees and, therefore, Makasiar (Chairman), Aquino, Concepcion, Jr., Abad Santos,
under the protective mantle of Presidential Decree No. 20 loses De Castro and Escolin, JJ., concur.
ground when We consider the finding of fact that respondents
Republic of the Philippines AFPMBAI made oral and written demands for petitioners to
SUPREME COURT pay the loan/ consideration for the property.10
Manila
In July 2003, petitioners filed a Complaint11 for consignation
SECOND DIVISION of loan payment, recovery of title and cancellation of
mortgage annotation against AFPMBAI, PDIC and the
G.R. No. 171298 April 15, 2013 Register of Deeds of Puerto Princesa City. The case was
docketed as Civil Case No. 3812 and raffled to Branch 47 of
the Regional Trial Court (RTC) of Puerto Princesa City
SPOUSES OSCAR and THELMA
(Puerto Princesa RTC). Petitioners alleged in their Complaint
CACAYORIN, Petitioners,
that as a result of the Rural Banks closure and PDICs claim
vs.
that their loan papers could not be located, they were left in
ARMED FORCES AND POLICE MUTUAL BENEFIT
a quandary as to where they should tender full payment of
ASSOCIATION, INC., Respondent.
the loan and how to secure cancellation of the mortgage
annotation on TCT No. 37017. Petitioners prayed, thus:
DECISION
a. That after the filing of this complaint an order be made
DEL CASTILLO, J.: allowing the consignation x x x of Php77,418.00.
Consignation is necessarily judicial. Article 1258 of the Civil b. For the court to compute and declare the amount of
Code specifically provides that consignation shall be made interest to be paid by the plaintiffs and thereafter to allow the
by depositing the thing or things due at the disposal of consignation of the interest payments in order to give way for
judicial authority. The said provision clearly precludes the full discharge of the loan.
consignation in venues other than the courts.
c. To order the AFPMBAI to turn over to the custody of the
Assailed in this Petition for Review on Certiorari1 are the court the loan records and title (T.C.T. No. 37017) of the
September 29, 2005 Decision2 of the Court of Appeals (CA) plaintiffs if the same are in their possession.
which granted the Petition for Certiorari in CA-G.R. SP No.
84446 and its January 12, 2006 Resolution3denying
d. To declare the full payment of the principal loan and
petitioners' Motion for Reconsideration.4
interest and ordering the full discharge from mortgage of the
property covered by T.C.T. No. 37017.
Factual Antecedents
e. To order the Register of Deeds of Puerto Princesa City to
Petitioner Oscar Cacayorin (Oscar) is a member of cancel the annotation of real estate mortgage under Entry
respondent Armed Forces and Police Mutual Benefit No. 3364 at the back of T.C.T. No. 37017.
Association, Inc. (AFPMBAI), a mutual benefit association
duly organized and existing under Philippine laws and
f. Thereafter, to turn over to the plaintiffs their title free from
engaged in the business of developing low-cost housing the aforesaid mortgage loan.12
projects for personnel of the Armed Forces of the
Philippines, Philippine National Police, Bureau of Fire
Protection, Bureau of Jail Management and Penology, and AFPMBAI filed a Motion to Dismiss13 claiming that
Philippine Coast Guard. He filed an application with petitioners Complaint falls within the jurisdiction of the
AFPMBAI to purchase a piece of property which the latter Housing and Land Use Regulatory Board (HLURB) and not
owned, specifically Lot 5, Block 8, Phase I, Kalikasan Mutual the Puerto Princesa RTC, as it was filed by petitioners in
Homes, San Pedro, Puerto Princesa City (the property), their capacity as buyers of a subdivision lot and it prays for
through a loan facility. specific performance of contractual and legal obligations
decreed under Presidential Decree No. 95714 (PD 957). It
added that since no prior valid tender of payment was made
On July 4, 1994, Oscar and his wife and co-petitioner herein,
by petitioners, the consignation case was fatally defective
Thelma, on one hand, and the Rural Bank of San Teodoro and susceptible to dismissal.
(the Rural Bank) on the other, executed a Loan and
Mortgage Agreement5 with the former as borrowers and the
Rural Bank as lender, under the auspices of Pag-IBIG or Ruling of the Regional Trial Court
Home Development Mutual Funds Home Financing
Program. In an October 16, 2003 Order,15 the trial court denied
AFPMBAIs Motion to Dismiss, declaring that since title has
The Rural Bank issued an August 22, 1994 letter of been transferred in the name of petitioners and the action
guaranty6 informing AFPMBAI that the proceeds of involves consignation of loan payments, it possessed
petitioners approved loan in the amount of P77,418.00 shall jurisdiction to continue with the case. It further held that the
be released to AFPMBAI after title to the property is only remaining unsettled transaction is between petitioners
transferred in petitioners name and after the registration and and PDIC as the appointed receiver of the Rural Bank.
annotation of the parties mortgage agreement.
AFPMBAI filed a Motion for Reconsideration,16 which the trial
On the basis of the Rural Banks letter of guaranty, court denied in its March 19, 2004 Order.17
AFPMBAI executed in petitioners favor a Deed of Absolute
Sale,7 and a new title Transfer Certificate of Title No. Ruling of the Court of Appeals
370178 (TCT No. 37017) was issued in their name, with the
corresponding annotation of their mortgage agreement with AFPMBAI thus instituted CA-G.R. SP No. 84446, which is a
the Rural Bank, under Entry No. 3364.9 Petition for Certiorari18 raising the issue of jurisdiction. On
September 29, 2005, the CA rendered the assailed Decision
Unfortunately, the Pag-IBIG loan facility did not push through decreeing as follows:
and the Rural Bank closed and was placed under
receivership by the Philippine Deposit Insurance Corporation WHEREFORE, premises considered, this Petition is
(PDIC). Meanwhile, AFPMBAI somehow was able to take GRANTED. The Assailed 16 October 2003 and 19 March
possession of petitioners loan documents and TCT No. 2004 Orders of the public respondent judge are hereby
37017, while petitioners were unable to pay the ordered VACATED and SET ASIDE.
loan/consideration for the property.
SO ORDERED.19 the payment of their loan but were told that it has no
information or record of the said loan. This made [sic] the
The CA held that Civil Case No. 3812 is a case for specific plaintiffs in quandary as to where or whom they will pay their
performance of AFPMBAIs contractual and statutory loan, which they intend to pay in full, so as to cancel the
obligations as owner/developer of Kalikasan Mutual Homes, annotation of mortgage in their title.
which makes PD 957 applicable and thus places the case
within the jurisdiction of the HLURB. It said that since one of 7.0 It was discovered that the loan papers of the plaintiffs,
the remedies prayed for is the delivery to petitioners of TCT including the duplicate original of their title, were in the
No. 37017, the case is cognizable exclusively by the possession of defendant AFPMBAI. It was unclear though
HLURB. why the said documents including the title were in the
possession of AFPMBAI. These papers should have been in
Petitioners moved for reconsideration which was denied by RBSTs possession and given to PDIC after its closure in the
the CA in its January 12, 2006 Resolution. latters capacity as receiver.
Hence, the instant Petition. 8.0 Plaintiffs are now intending to pay in full their real
estate loan but could not decide where to pay the same
because of RBST [sic] closure and PDICs failure to locate
Issue
the loan records and title. This courts intervention is now
needed in order to determine to [sic] where or whom the loan
The sole issue that must be resolved in this Petition is: Does should be paid.
the Complaint in Civil Case No. 3812 fall within the exclusive
jurisdiction of the HLURB?
9.0 Plaintiffs hereby respectfully prays [sic] for this court to
allow the deposit of the amount of Php77,418.00 as full
Petitioners Arguments payment of their principal loan, excluding interest, pursuant
to the Loan and Mortgage Agreement on 4 July 1994.23
Petitioners assert that the elements which make up a valid
case for consignation are present in their Complaint. They From the above allegations, it appears that the petitioners
add that since a deed of absolute sale has been issued in debt is outstanding; that the Rural Banks receiver, PDIC,
their favor, and possession of the property has been informed petitioners that it has no record of their loan even
surrendered to them, not to mention that title has been as it took over the affairs of the Rural Bank, which on record
placed in their name, the HLURB lost jurisdiction over their is the petitioners creditor as per the July 4, 1994 Loan and
case. And for this same reason, petitioners argue that their Mortgage Agreement; that one way or another, AFPMBAI
case may not be said to be one for specific performance of came into possession of the loan documents as well as TCT
contractual and legal obligations under PD 957 as nothing No. 37017; that petitioners are ready to pay the loan in full;
more was left to be done in order to perfect or consolidate however, under the circumstances, they do not know which
their title. of the two the Rural Bank or AFPMBAI should receive
full payment of the purchase price, or to whom tender of
Petitioners thus pray that the herein assailed Decision and payment must validly be made.
Resolution of the CA be set aside, and that the trial court be
ordered to continue with the proceedings in Civil Case No. Under Article 1256 of the Civil Code,24 the debtor shall be
3812. released from responsibility by the consignation of the thing
or sum due, without need of prior tender of payment, when
Respondent's Arguments the creditor is absent or unknown, or when he is
incapacitated to receive the payment at the time it is due, or
Respondent, on the other hand, insists in its Comment20 that when two or more persons claim the same right to collect, or
jurisdiction over petitioners case lies with the HLURB, as it when the title to the obligation has been lost. Applying Article
springs from their contractual relation as seller and buyer, 1256 to the petitioners case as shaped by the allegations in
respectively, of a subdivision lot. The prayer in petitioners their Complaint, the Court finds that a case for consignation
Complaint involves the surrender or delivery of the title after has been made out, as it now appears that there are two
full payment of the purchase price, which respondent claims entities which petitioners must deal with in order to fully
are reciprocal obligations in a sale transaction covered by secure their title to the property: 1) the Rural Bank (through
PD 957. Respondent adds that in effect, petitioners are PDIC), which is the apparent creditor under the July 4, 1994
exacting specific performance from it, which places their Loan and Mortgage Agreement; and 2) AFPMBAI, which is
case within the jurisdiction of the HLURB. currently in possession of the loan documents and the
certificate of title, and the one making demands upon
petitioners to pay. Clearly, the allegations in the Complaint
Our Ruling present a situation where the creditor is unknown, or that two
or more entities appear to possess the same right to collect
The Court grants the Petition. from petitioners. Whatever transpired between the Rural
Bank or PDIC and AFPMBAI in respect of petitioners loan
The Complaint makes out a case for consignation. account, if any, such that AFPMBAI came into possession of
the loan documents and TCT No. 37017, it appears that
petitioners were not informed thereof, nor made privy
The settled principle is that "the allegations of the Complaint
thereto.
determine the nature of the action and consequently the
jurisdiction of the courts. This rule applies whether or not the
plaintiff is entitled to recover upon all or some of the claims Indeed, the instant case presents a unique situation where
asserted therein as this is a matter that can be resolved only the buyer, through no fault of his own, was able to obtain title
after and as a result of the trial."21 to real property in his name even before he could pay the
purchase price in full. There appears to be no vitiated
consent, nor is there any other impediment to the
Does the Complaint in Civil Case No. 3812 make out a case
consummation of their agreement, just as it appears that it
for consignation? It alleges that:
would be to the best interests of all parties to the sale that it
be once and for all completed and terminated. For this
6.0 Not long after however, RBST22 closed shop and reason, Civil Case No. 3812 should at this juncture be
defendant Philippine Deposit Insurance Corporation (PDIC) allowed to proceed.
was appointed as its receiver. The plaintiffs, through a
representative, made a verbal inquiry to the PDIC regarding
Moreover, petitioners position is buttressed by AFPMBAIs MARIANO C. DEL CASTILLO
own admission in its Comment25 that it made oral and written Associate Justice
demands upon the former, which naturally aggravated their
confusion as to who was their rightful creditor to whom WE CONCUR:
payment should be made the Rural Bank or AFPMBAI. Its
subsequent filing of the Motion to Dismiss runs counter to its
ANTONIO T. CARPIO
demands to pay. If it wanted to be paid with alacrity, then it
Associate Justice
should not have moved to dismiss Civil Case No. 3812,
Chairperson
which was brought precisely by the petitioners in order to be
able to finally settle their obligation in full.
DIOSDADO M. JOSE PORTUGAL
Finally, the lack of prior tender of payment by the petitioners PERALTA* PEREZ
is not fatal to their consignation case. They filed the case for Associate Justice Associate Justice
the exact reason that they were at a loss as to which
between the two the Rural Bank or AFPMBAI was ESTELA M. PERLAS-BERNABE
entitled to such a tender of payment. Besides, as earlier Associate Justice
stated, Article 1256 authorizes consignation alone, without
need of prior tender of payment, where the ground for
ATTESTATION
consignation is that the creditor is unknown, or does not
appear at the place of payment; or is incapacitated to
receive the payment at the time it is due; or when, without I attest that the conclusions in the above Decision had been
just cause, he refuses to give a receipt; or when two or more reached in consultation before the case was assigned to the
persons claim the same right to collect; or when the title of writer of the opinion of the Court's Division.
the obligation has been lost.
ANTONIO T. CARPIO
Consignation is necessarily judicial; hence, jurisdiction lies Associate Justice
with the RTC, not with the HLURB. Chairperson
G.R. No. 172346 July 24, 2013 In their Answer with Compulsory Counterclaim,9 the spouses
Bonrostro averred that they were willing to pay their total
balance of P630,000.00 to the spouses Luna after they sought
SPOUSES NAMEAL and LOURDES from them a 60-day extension to pay the same.10 However,
BONROSTRO, Petitioners, during the time that they were ready to pay the said amount in
vs. the last week of October 1993, Constancia and her lawyer, Atty.
SPOUSES JUAN and CONSTANCIA LUNA, Respondents. Arlene Carbon (Atty. Carbon), did not show up at their
rendezvous. On November 24, 1993, Lourdes sent Atty. Carbon
DECISION a letter11 expressing her desire to pay the balance, but received
no response from the latter. Claiming that they are still willing to
DEL CASTILLO, J.: settle their obligation, the spouses Bonrostro prayed that the
court fix the period within which they can pay the spouses Luna.
(d) P417,000.00 payable to the New Capitol 3.) Ordering the defendants to pay plaintiffs within sixty
Estate, for 15 years at P6,867.12 a month, (60) days from receipt of this decision the sum
of P330,000.00 plus an interest of 2% per month from
July 1993 to November 1993.
2. x x x In the event the VENDEE fails to pay the
second installment on time, the VENDEE will pay
starting May 1, 1993 a 2% interest on the P300,000.00 4.) Ordering the defendants to reimburse plaintiffs the
monthly. Likewise, in the event the VENDEE fails to sum of P214,492.62 which plaintiffs paid to Bliss
pay the amount of P630,000.00 on the stipulated time, Development Corporation.
this CONTRACT TO SELL shall likewise be deemed
cancelled and rescinded and x x x 5% of the total No pronouncement as to Cost.
contract price of P1,250,000.00 shall be deemed
forfeited in favor of the VENDOR. Unpaid monthly
amortization shall likewise be deducted from the initial SO ORDERED.14
down payment in favor of the VENDOR.7
As their Motion for Reconsideration15 was likewise denied in an
Immediately after the execution of the said second contract, the Order16 dated July 15, 1997, the spouses Luna appealed to the
spouses Bonrostro took possession of the property. However, CA.17
except for the P200,000.00 down payment, Lourdes failed to
pay any of the stipulated subsequent amortization payments. Ruling of the Court of Appeals
Ruling of the Regional Trial Court In its Decision18 of April 15, 2005, the CA concluded that since
the contract entered into by and between the parties is a
On January 11, 1994, Constancia and her husband, respondent Contract to Sell, rescission is not the proper remedy. Moreover,
Juan Luna (spouses Luna), filed before the RTC a the subject contract being specifically a contract to sell a real
property on installment basis, it is governed by Republic Act No. Hence, this Petition for Review on Certiorari.
655219 or the Maceda Law, Section 4 of which states:
Issue
Sec. 4. In case where less than two years of installment were
paid, the seller shall give the buyer a grace period of not less The basic issue in this case is whether the CA correctly
than sixty days from the date the installment became due. modified the RTC Decision with respect to interests.
If the buyer fails to pay the installments due at the expiration of The Parties Arguments
the grace period, the seller may cancel the contract after thirty
days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act. As may be recalled, the RTC under paragraphs 2 and 3 of the
(Emphases supplied) dispositive portion of its Decision ordered the spouses
Bonrostro to pay the spouses Luna the sums of P300,000.00
plus interest of 2% per month from April 1993 to November
The CA held that while the spouses Luna sent the spouses 1993 and P330,000.00 plus interest of 2% per month from July
Bonrostro letters20 rescinding the contract for non-payment of 1993 to November 1993, respectively. The CA modified these
the sum of P630,000.00, the same could not be considered as by reckoning the payment of the 2% interest on
valid and effective cancellation under the Maceda Law since the P300,000.00 from May 1, 1993 until fully paid and by
they were made within the 60-day grace period and were not imposing interest at the legal rate on the P330,000.00 reckoned
notarized. The CA concluded that there being no cancellation from August 1, 1993 until fully paid.
effected in accordance with the procedure prescribed by law,
the contract therefore remains valid and subsisting.
The spouses Bonrostro harp on the factual finding of the RTC,
as affirmed by the CA, that Lourdes was willing and ready to
The CA also affirmed the RTCs finding that Lourdes was ready pay her obligation as evidenced by her November 24, 1993
to pay her obligation on November 24, 1993. letter to Atty. Carbon. They also assert that the sending of the
said letter constitutes a valid tender of payment on their part.
However, the CA modified the RTC Decision with respect to Hence, they argue that they should not be assessed any
interest, viz: interest subsequent to the date of the said letter. Neither should
they be ordered to pay interest on the amount of P214,492.62
Nevertheless, there is a need to modify the appealed decision which covers the amortizations paid by the spouses Luna to
insofar as (i) the interest imposed on the sum of P300,000.00 is Bliss. They point out that it was Constancia who prevented them
only for the period April 1993 to November 1993; (ii) the interest from fulfilling their obligation to pay the amortizations when she
imposed on the sum of P330,000.00 is 2% per month and is instructed Bliss not to accept payment from them.25
only for the period July 1993 to November 1993; (iii) it does not
impose interest on the amount of P214,492.62 which was paid The spouses Luna, on the other hand, aver that the November
by Constancia to BLISS in behalf of Lourdes x x x 24, 1993 letter of Lourdes is not equivalent to tender of payment
since the mere sending of a letter expressing the intention to
The rule is that no interest shall be due unless it has been pay, without the accompanying payment, cannot be considered
expressly stipulated in writing (Art. 1956, Civil Code). However, a valid tender of payment. Also, if the spouses Bonrostro were
the contract does not provide for interest in case of default in really willing and ready to pay at that time and assuming that the
payment of the sum of P330,000.00 to Constancia and the spouses Luna indeed refused to accept payment, the former
monthly amortizations to BLISS. should have resorted to consignation. Anent the payment of
amortization, the spouses Luna explain that under the parties
Contract to Sell, Lourdes was to assume Constancias balance
Considering that Lourdes had incurred x x x delay in the to Bliss by paying the monthly amortization in order to avoid the
performance of her obligations, she should pay (i) interest at the cancellation of the earlier Contract to Sell entered into by
rate of 2% per month on the sum of P300,000.00 from May 1, Constancia with Bliss.26 However, since Lourdes was remiss in
1993 until fully paid and (ii) interest at the legal rate on the paying the same, the spouses Luna were constrained to pay the
amounts of P330,000.00 and P214,492.62 from the date of amortization. They thus assert that reimbursement to them of
default (August 1, 1993 and April 4, 1997 date of the appealed the said amount with interest is proper considering that by
decision, respectively) until the same are fully paid x x x21 reason of such payment, the spouses Bonrostro were spared
from the interests and penalties which would have been
Hence, the dispositive portion of the said Decision: imposed by Bliss if the amortizations remained unpaid.
2.) Ordering the defendants to pay plaintiffs the sum The spouses Bonrostros reliance on the RTCs factual finding
of P300,000.00 plus interest thereon at the rate of 2% that Lourdes was willing and ready to pay on November 24,
per month from May 1, 1993 until fully paid; 1993 is misplaced.
3.) Ordering the defendants to pay plaintiffs the sum As mentioned, the RTC in resolving the Complaint focused on
of P330,000.00 plus interest thereon at the legal rate the sole issue of whether the failure of spouses Bonrostro to pay
from August 1, 1993 until fully paid; and the installments of P300,000.00 on April 30, 1993
and P330,000.00 on July 31, 1993 is a substantial breach of
4.) Ordering the defendants to reimburse plaintiffs the their obligation under the contract as to warrant the rescission of
sum of P214,492.62, which plaintiffs paid to Bliss the same.27 The said court ratiocinated, viz:
Development Corporation, plus interest thereon at the
legal rate from filing of the complaint until fully After careful evaluation of the evidence testimonial and
reimbursed. documentary, the Court believes that the defendants delay in
the payment of the two installments is not so substantial as to
SO ORDERED.22 warrant rescission of contract. Although, the defendant failed to
pay the two installments in due time, she was able to
The spouses Luna no longer assailed the ruling. On the other communicate with the plaintiffs through letters requesting for an
hand, the spouses Bonrostro filed a Partial Motion for extension of two months within which to pay the installments. In
Reconsideration23 questioning the above-mentioned fact, on November 24, 1993 defendant informed Atty. Arlene
modifications. The CA, however, denied for lack of merit the Carbon that she was ready to pay the installments and the
said motion in a Resolution24 dated April 17, 2006. money is ready for pick-up. However, plaintiff did not bother to
get or pick-up the money without any valid reason. It would be
very prejudicial on the part of the defendant if the contract to sell Here, the subject letter merely states Lourdes willingness and
be rescinded considering that she made a downpayment readiness to pay but it was not accompanied by payment. She
of P200,000.00 and made partial amortization to the Bliss claimed that she made numerous telephone calls to Atty.
Development Corporation. In fact, the defendant testified that Carbon reminding the latter to collect her payment, but, neither
she is willing and ready to pay the balance including the interest said lawyer nor Constancia came to collect the payment. After
on November 24, 1993. that, the spouses Bonrostro took no further steps to effect
payment. They did not resort to consignation of the payment
The Court is of the opinion that the delay in the payment of the with the proper court despite knowledge that under the contract,
balance of the purchase price of the house and lot is not so non-payment of the installments on the agreed date would make
substantial as to warrant the rescission of the contract to sell. them liable for interest thereon. The spouses Bonrostro
The question of whether a breach of contract is substantial erroneously assumed that their notice to pay would excuse
depends upon the attendant circumstance. x x x28 them from paying interest. Their claimed tender of payment did
not produce any effect whatsoever because it was not
accompanied by actual payment or followed by consignation.
Clearly, the RTC arrived at the above-quoted conclusion based Hence, it did not suspend the running of interest. The spouses
on its mistaken premise that rescission is applicable to the case. Bonrostro are therefore liable for interest on the subject
Hence, its determination of whether there was substantial installments from the date of default until full payment of the
breach. As may be recalled, however, the CA, in its assailed sums of P300,000.00 and P330,000.00.
Decision, found the contract between the parties as a contract
to sell, specifically of a real property on installment basis, and as
such categorically declared rescission to be not the proper The spouses Bonrostro are likewise liable for interest on the
remedy. This is considering that in a contract to sell, payment of amount paid by the spouses Luna to Bliss as amortization.
the price is a positive suspensive condition, failure of which is
not a breach of contract warranting rescission under Article The spouses Bonrostro want to be relieved from paying interest
119129 of the Civil Code but rather just an event that prevents on the amount of P214,492.62 which the spouses Luna paid to
the supposed seller from being bound to convey title to the Bliss as amortizations by asserting that they were prevented by
supposed buyer.30 Also, and as correctly ruled by the CA, Article the latter from fulfilling such obligation. They invoke Art. 1186 of
1191 cannot be applied to sales of real property on installment the Civil Code which provides that "the condition shall be
since they are governed by the Maceda Law.31 deemed fulfilled when the obligor voluntarily prevents its
fulfillment."
There being no breach to speak of in case of non-payment of
the purchase price in a contract to sell, as in this case, the However, the Court finds Art. 1186 inapplicable to this case.
RTCs factual finding that Lourdes was willing and able to pay The said provision explicitly speaks of a situation where it is the
her obligation a conclusion arrived at in connection with the obligor who voluntarily prevents fulfillment of the condition.
said courts determination of whether the non-payment of the Here, Constancia is not the obligor but the obligee. Moreover,
purchase price in accordance with the terms of the contract was even if this significant detail is to be ignored, the mere intention
a substantial breach warranting rescission therefore loses to prevent the happening of the condition or the mere placing of
significance. The spouses Bonrostros reliance on the said ineffective obstacles to its compliance, without actually
factual finding is thus misplaced. They cannot invoke their preventing fulfillment is not sufficient for the application of Art.
readiness and willingness to pay their obligation on November 1186.37 Two requisites must concur for its application, to wit: (1)
24, 1993 as an excuse from being made liable for interest intent to prevent fulfillment of the condition; and, (2) actual
beyond the said date. prevention of compliance.38
The spouses Bonrostro are liable for interest on the installments In this case, while it is undisputed that Constancia indeed
due from the date of default until fully paid. instructed Bliss on March 4, 1994 not to accept payment from
anyone but her, there is nothing on record to show that Bliss
The spouses Bonrostro assert that Lourdes letter of November heeded the instruction of Constancia as to actually prevent the
24, 1993 amounts to tender of payment of the remaining spouses Bonrostro from making payments to Bliss. There is no
balance amounting to P630,000.00. Accordingly, thenceforth, showing that subsequent to the said letter, the spouses
accrual of interest should be suspended. Bonrostro attempted to make payment to and was refused by
Bliss. Neither was there a witness presented to prove that Bliss
indeed gave effect to the instruction contained in Constancias
Tender of payment "is the manifestation by the debtor of a letter. While Bliss Project Development Officer, Mr. Ariel
desire to comply with or pay an obligation. If refused without just Cordero, testified during trial, nothing could be gathered from
cause, the tender of payment will discharge the debtor of the his testimony regarding this except for the fact that Bliss
obligation to pay but only after a valid consignation of the sum received the said letter.39 In view of these, the spouses Luna
due shall have been made with the proper could not be said to have placed an effective obstacle as to
court."32 "Consignation is the deposit of the proper amount with actually prevent the spouses Bonrostro from making
a judicial authority in accordance with rules prescribed by law, amortization payments to Bliss.
after the tender of payment has been refused or because of
circumstances which render direct payment to the creditor
impossible or inadvisable."33 On the other hand, there are telling circumstances which militate
against the spouses Bonrostros claimed keenness to comply
with their obligation to pay the monthly amortization. After the
"Tender of payment, without more, produces no effect."34 "To execution of the contract in January 1993, they immediately
have the effect of payment and the consequent extinguishment took possession of the property but failed to make amortization
of the obligation to pay, the law requires the companion acts of payments. It was only after seven months or on November 18,
tender of payment and consignation."35 1993 that they made payments to Bliss in the amount
of P46,303.44.40 Whether the same covers previous unpaid
As to the effect of tender of payment on interest, noted civilist amortizations is also not clear as the receipt does not indicate
Arturo M. Tolentino explained as follows: the same41 and per Statement of Account42 as of March 8, 1994
issued by Bliss, the unpaid monthly amortizations for February
When a tender of payment is made in such a form that the to November 1993 in the total amount of P78,271.69 remained
creditor could have immediately realized payment if he had outstanding. There was also no payment made of the
accepted the tender, followed by a prompt attempt of the debtor amortizations due on December 4, 1993 and January 4,
to deposit the means of payment in court by way of 199443 before the filing of the Complaint on January 11, 1994.
consignation, the accrual of interest on the obligation will be
suspended from the date of such tender. But when the tender of On the part of the spouses Luna, it is understandable that they
payment is not accompanied by the means of payment, and the paid the amortizations due.1wphi1 The assumption of payment
debtor did not take any immediate step to make a consignation, of the monthly amortization to Bliss was made part of the
then interest is not suspended from the time of such tender. x x obligations of the spouses Bonrostro under their contract with
x x36(Emphasis supplied) the spouses Luna precisely to avoid the cancellation of the
earlier contract entered into by Constancia with Bliss. But as the
spouses Bonrostro failed in this obligation, the spouses Luna ANTONIO T. CARPIO
were constrained to pay Bliss to avoid the adverse effect of Associate Justice
such failure. This act of the spouses Luna proved to be even Chairperson
more beneficial to the spouses Bonrostro as the cancellation of
the Contract to Sell between Constancia and Bliss would result CERTIFICATION
in the cancellation of the subsequent Contract to Sell between
Constancia and Lourdes. Also, the spouses Bonrostro were
relieved from paying the penalties that would have been Pursuant to Section 13, Article VITI of the Constitution and the
imposed by Bliss if the monthly amortizations covered by the Division Chairperson's Attestation, I certify that the conclusions
said payment remained unpaid. The Statements of in the above Decision had been reached in consultation before
Account44 issued by Bliss clearly state that each monthly the case was assigned to the writer of the opinion of the Court's
amortization is due on or before the fourth day of every month Division.
and a penalty equivalent to 1/10th of 1% per day of delay shall
be imposed for all payments made after due date. That MARIA LOURDES P. A. SERENO
translates to 3% monthly or 36% per annum rate of interest, Chief Justice
three times higher than the 12% per annum rate of interest
correctly imposed by the CA. Footnotes
1 Rollo, pp. 8-23.
2 CA rollo, pp. 69-78; penned by Associate Justice Edgardo P. Cruz and concurred in by
Hence, the resulting situation is that the spouses Luna are Presiding Justice Romeo A. Brawner and Associate Justice Jose C. Mendoza (now a
constrained to part with their money while the spouses member of this Court).
Bonrostro, despite being remiss in their obligation to pay the 3 Records, pp. 300-302; penned by Judge Angel V. Colet.
4 CA rollo, pp. 101-103; penned by Associate Justice Edgardo P. Cruz and concurred in by
monthly amortization, are relieved from paying higher penalties
Associate Justices Noel G. Tijam and Vicente S.E. Veloso.
at the expense of the former. This is aside from the fact that the 5 Records, pp. 8-13.
spouses Bonrostro are in continued possession of the subject 6 Id. at 14.
property and are enjoying the beneficial use thereof. Under the 7 Id.
8 Id. at 1-7.
circumstances and considering that the spouses Bonrostro are
9 Id. at 56-60.
obviously in delay in complying with their obligation to pay the 10 See Letter of Lourdes dated August 18, 1993, id. at 63.
amortizations due from February 1993 to January 1995 for 11 Id. at 64.
which the spouses Luna paid P214,492.62,45 the CA correctly 12 Id. at 224. It states as follows:
ordered the reimbursement to the latter of the said amount with xxxx
interest. "Delay in the performance of an obligation is looked This is to formally inform you of my previous verbal notice that I have not authorized
anyone to negotiate and pay in my behalf my unit at Block 26 Lot 19 New Capitol Estates
upon with disfavor because, when a party to a contract incurs
Project.
delay, the other party who performs his part of the contract Any alleged authority is a forgery or a result of a misrepresentation.
suffers damages thereby."46 As discussed, the spouses Luna Please communicate with the undersigned in the event anyone pretends to negotiate on
obviously suffered damages brought about by the failure of the the said unit.
spouses Bonrostro to comply with their obligation on time. "And, Very truly yours,
Sgd.
sans elaboration of the matter at hand, damages take the form CONSTANCIA LUNA
of interest x x x."47 13 Id. at 300-302.
14 Id. at 302.
15 Id. at 303-310.
Under Article 2209 of the Civil Code, "if the obligation consists in 16 Id. at 327-328.
the payment of a sum of money, and the debtor incurs in delay, 17 See Notice of Appeal, id. at 329-330.
the indemnity for damages, there being no stipulation to the 18 CA rollo, pp. 69-78.
19 Also known as the Realty Installment Buyer Protection Act.
contrary, shall be the payment of the interest agreed upon, and
20 Dated August 2, 1993, records, p.147; dated September 16, 1993, id. at 149-151; dated
in the absence of stipulation, the legal interest x x x." There
November 15, 1993, id. 152-153.
being no stipulation on interest in case of delay in the payment 21 CA rollo, p. 77.
of amortization, the CA thus correctly imposed interest at the 22 Id. at 77-78.
WHEREFORE, the Petition for Review on Certiorari is DENIED 26 Article 8.01 of the Contract to Sell entered into by Constancia with Bliss provides:
and the assailed Decision dated April 15, 2005 and the In the event the BUYER fails to pay any installment [when] due or fails to pay all
Resolution dated April 17, 2006 of the Court of Appeals in CA- installments and interests in arrears at the expiration of the grace period when such grace
period is available to the BUYER, or otherwise fails to comply with any of the terms and
G.R. CV No. 56414 are AFFIRMED. conditions of this contract, the SELLER may, at its sole option, cause the cancellation of
this contract by giving the buyer a notice of cancellation or demand for rescission of the
SO ORDERED. contract without need of judicial action. x x x (Id. at 10.)
27 See relevant portion of the RTC Decision, id. at 301.
28 Id.
29 Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
MARIANO C. DEL CASTILLO
the obligors should not comply with what is incumbent upon him.
Associate Justice
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he
WE CONCUR: has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
ANTONIO T. CARPIO xxxx
30 Reyes v. Tuparan, G.R. No. 188064, June 1, 2011, 650 SCRA 283, 296.
Associate Justice 31 DESIDERIO, JURADO P., Comments and Jurisprudence on Obligations and Contracts,
Chairperson Twelfth Revised Edition, 2010, pp. 138-139.
32 Allandale Sportsline Inc. v. The Good Development Corporation, G.R. No. 164521,
FIRST DIVISION On November 29, 1996, the trial court rendered a decision
declaring the consignation invalid for failure to prove that
G.R. No. 156846 February 23, 2004 petitioner tendered payment to respondent and that the latter
refused to receive the same. It further held that even assuming
that respondent refused the tender, the same is justified
TEDDY G. PABUGAIS, petitioner because the managers check allegedly offered by petitioner
vs. was not legal tender, hence, there was no valid tender of
DAVE P. SAHIJWANI, respondent. payment. The trial court ordered petitioner to pay respondent
the amount of P600,000.00 with interest of 18% per annum from
DECISION December 3, 1993 until fully paid, plus moral damages and
attorneys fees.14
YNARES-SANTIAGO, J.:
Petitioner appealed the decision to the Court of Appeals.
Assailed in this petition for review on certiorari is the January Meanwhile, his counsel, Atty. Wilhelmina V. Joven, died and
16, 2003 Amended Decision1 of the Court of Appeals2in CA- she was substituted by Atty. Salvador P. De Guzman, Jr.15 On
G.R. CV No. 55740 which set aside the November 29, 1996 December 20, 2001, petitioner executed a "Deed of
Decision3 of the Regional Trial Court of Makati, Branch 64, in Assignment"16 assigning in favor of Atty. De Guzman, Jr., part of
Civil Case No. 94-2363. the P672,900.00 consigned with the trial court as partial
payment of the latters attorneys fees.17 Thereafter, on January
7, 2002, petitioner filed an Ex Parte Motion to Withdraw
Pursuant to an "Agreement And Undertaking"4 dated December Consigned Money.18 This was followed by a "Motion to
3, 1993, petitioner Teddy G. Pabugais, in consideration of the Intervene" filed by Atty. De Guzman, Jr., praying that the
amount of Fifteen Million Four Hundred Eighty Seven Thousand amount consigned be released to him by virtue of the Deed of
Five Hundred Pesos (P15,487,500.00), agreed to sell to Assignment.19
respondent Dave P. Sahijwani a lot containing 1,239 square
meters located at Jacaranda Street, North Forbes Park, Makati,
Metro Manila. Respondent paid petitioner the amount of Petitioners motion to withdraw the amount consigned was
P600,000.00 as option/reservation fee and the balance of denied by the Court of Appeals and the decision of the trial court
P14,887,500.00 to be paid within 60 days from the execution of was affirmed with modification as to the amount of moral
the contract, simultaneous with delivery of the owners duplicate damages and attorneys fees.20
Transfer Certificate of Title in respondents name the Deed of
Absolute Sale; the Certificate of Non-Tax Delinquency on real On a motion for reconsideration, the Court of Appeals declared
estate taxes and Clearance on Payment of Association Dues. the consignation as valid in an Amended Decision dated
The parties further agreed that failure on the part of respondent January 16, 2003. It held that the validity of the consignation
to pay the balance of the purchase price entitles petitioner to had the effect of extinguishing petitioners obligation to return
forfeit the P600,000.00 option/reservation fee; while non- the option/reservation fee to respondent. Hence, petitioner can
delivery by the latter of the necessary documents obliges him to no longer withdraw the same. The decretal portion of the
return to respondent the said option/reservation fee with interest Amended Decision states:
at 18% per annum, thus
WHEREFORE, premises considered, our decision dated April
5. DEFAULT In case the FIRST PARTY [herein respondent] 26, 2002 is RECONSIDERED. The trial courts decision is
fails to pay the balance of the purchase price within the hereby REVERSED and SET ASIDE, and a new one is entered
stipulated due date, the sum of P600,000.00 shall be deemed (1) DECLARING as valid the consignation by the plaintiff-
forfeited, on the other hand, should the SECOND PARTY appellant in favor of defendant-appellee of the amount of
[herein petitioner] fail to deliver within the stipulated period the P672,900.00 with the Makati City RTC Clerk of Court and
documents hereby undertaken, the SECOND PARTY shall deposited under Official Receipt No. 379061 dated 15 August
return the sum of P600,000.00 with interest at 18% per annum. 5 1994 and (2) DECLARING as extinguished appellants
obligation in favor of appellee under paragraph 5 of the parties
Petitioner failed to deliver the required documents. In "AGREEMENT AND UNDERTAKING". Neither party shall
compliance with their agreement, he returned to respondent the recover costs from the other.
latters P600,000.00 option/reservation fee by way of Far East
Bank & Trust Company Check No. 25AO54252P, which was, SO ORDERED.21
however, dishonored.
Unfazed, petitioner filed the instant petition for review
What transpired thereafter is disputed by both parties. Petitioner contending, inter alia, that he can withdraw the amount
claimed that he twice tendered to respondent, through his deposited with the trial court as a matter of right because at the
counsel, the amount of P672,900.00 (representing the time he moved for the withdrawal thereof, the Court of Appeals
P600,000.00 option/reservation fee plus 18% interest per has yet to rule on the consignations validity and the respondent
annum computed from December 3, 1993 to August 3, 1994) in had not yet accepted the same.
the form of Far East Bank & Trust Company Managers Check
No. 088498, dated August 3, 1994, but said counsel refused to The resolution of the case at bar hinges on the following issues:
accept the same. His first attempt to tender payment was (1) Was there a valid consignation? and (2) Can petitioner
allegedly made on August 3, 1994 through his withdraw the amount consigned as a matter of right?
messenger;6 while the second one was on August 8,
1994,7 when he sent via DHL Worldwide Services, the
managers check attached to a letter dated August 5, 1994. 8 On Consignation is the act of depositing the thing due with the court
August 11, 1994, petitioner wrote a letter to respondent saying or judicial authorities whenever the creditor cannot accept or
that he is consigning the amount tendered with the Regional refuses to accept payment and it generally requires a prior
Trial Court of Makati City.9 On August 15, 1994, petitioner filed a tender of payment.22 In order that consignation may be effective,
complaint for consignation.10 the debtor must show that: (1) there was a debt due; (2) the
consignation of the obligation had been made because the
creditor to whom tender of payment was made refused to
Respondents counsel, on the other hand, admitted that his accept it, or because he was absent or incapacitated, or
office received petitioners letter dated August 5, 1994, but because several persons claimed to be entitled to receive the
claimed that no check was appended thereto.11 He averred that amount due or because the title to the obligation has been lost;
there was no valid tender of payment because no check was (3) previous notice of the consignation had been given to the
tendered and the computation of the amount to be tendered was person interested in the performance of the obligation; (4) the
insufficient,12 because petitioner verbally promised to pay 3% amount due was placed at the disposal of the court; and (5)
after the consignation had been made the person interested Professional Ethics provides that "the lawyer should not
was notified thereof. Failure in any of these requirements is purchase any interest in the subject matter of the litigation which
enough ground to render a consignation ineffective. 23 he is conducting." The assailed transaction falls within the
prohibition because the Deed assigning the amount of
The issues to be resolved in the instant case concerns one of P672,900.00 to Atty. De Guzman, Jr., as part of his attorneys
the important requisites of consignation, i.e, the existence of a fees was executed during the pendency of this case with the
valid tender of payment. As testified by the counsel for Court of Appeals. In his Motion to Intervene, Atty. De Guzman,
respondent, the reasons why his client did not accept Jr., not only asserted ownership over said amount, but likewise
petitioners tender of payment were (1) the check mentioned prayed that the same be released to him. That petitioner
in the August 5, 1994 letter of petitioner manifesting that he is knowingly and voluntarily assigned the subject amount to his
settling the obligation was not attached to the said letter; and (2) counsel did not remove their agreement within the ambit of the
the amount tendered was insufficient to cover the obligation. It is prohibitory provisions.28 To grant the withdrawal would be to
obvious that the reason for respondents non-acceptance of the sanction a void contract.29
tender of payment was the alleged insufficiency thereof and
not because the said check was not tendered to respondent, or WHEREFORE, in view of all the foregoing, the instant petition
because it was in the form of managers check. While it is true for review is DENIED. The January 16, 2003 Amended Decision
that in general, a managers check is not legal tender, the of the Court of Appeals in CA-G.R. CV No. 55740, which
creditor has the option of refusing or accepting it. 24 Payment in declared the consignation by the petitioner in favor of
check by the debtor may be acceptable as valid, if no prompt respondent of the amount of P672,900.00 with the Clerk of
objection to said payment is made.25 Consequently, petitioners Court of the Regional Trial Court of Makati City valid, and which
tender of payment in the form of managers check is valid. declared petitioners obligation to respondent under paragraph 5
of the "Agreement And Undertaking" as having been
Anent the sufficiency of the amount tendered, it appears that extinguished, is AFFIRMED. No costs.
only the interest of 18% per annum on the P600,000.00
option/reservation fee stated in the default clause of the SO ORDERED.
"Agreement And Undertaking" was agreed upon by the parties,
thus Davide, Jr., C.J. (Chairman), Panganiban, and Azcuna, JJ.,
concur.
5. DEFAULT In case the FIRST PARTY [herein respondent] Carpio, J., no part, former counsel of a party.
fails to pay the balance of the purchase price within the
stipulated due date, the sum of P600,000.00 shall be deemed Footnotes
forfeited, on the other hand, should the SECOND PARTY 1 Rollo, p. 18.
2 Penned by Associate Justice Eliezer R. De Los Santos and concurred in by Associate
[herein petitioner] fail to deliver within the stipulated period the
Justices Cancio C. Garcia and Marina L. Buzon.
documents hereby undertaken, the SECOND PARTY shall 3 Records, p. 157.
return the sum of P600,000.00 with interest at 18% per 4 Id., p. 85.
July 4, 2000, was noted in the October 30, 2000 Resolution of said court (CA Rollo, p.
There being a valid tender of payment in an amount sufficient to 114).
extinguish the obligation, the consignation is valid. 16 Rollo, p. 116.
17 Pertinent portion thereof, reads:
WHEREAS, in order that he may pay the estate of the late Atty. Wilhelmina Joven and at
As regards petitioners right to withdraw the amount consigned, the same time give partial payment to herein ASSIGNEE of the latters attorneys fees, the
reliance on Article 1260 of the Civil Code is misplaced. The said ASSIGNOR has decided to assign the consigned money to herein ASSIGNEE;
Article provides NOW, THEREFORE, for and in consideration of the foregoing premises, and of the terms
and conditions hereinafter stated, the ASSIGNOR, by these presents, irrevocably ASSIGNS
to the herein ASSIGNEE the P672,900.00 now on deposit with the Clerk of Court of the
Art. 1260. Once the consignation has been duly made, the Regional Trial Court of Makati City under Official Receipt No. 3790631 dated August 15,
debtor may ask the judge to order the cancellation of the 1994 in Civil Case No. 94-2363 entitled "Teddy G. Pabugais, petitioner v. Dave Sahijwani,
obligation. respondent", provided that at least 40% of said amount is paid to the Estate of the late
Atty. Wilhelmina Joven.
xxx xxx xxx
Before the creditor has accepted the consignation, or before a TEDDY G. PABUGAIS SALVADOR P. DE GUZMAN, JR.
Assignor Assignee
judicial confirmation that the consignation has been properly 18 CA Rollo, p. 117.
made, the debtor may withdraw the thing or the sum deposited, 19 Id., p. 158.
allowing the obligation to remain in force. 20 Id., p. 123.
21 Rollo, p. 29.
22 Legaspi v. Court of Appeals, 226 Phil. 24, 29 (1986); citing Limkako v. Teodoro, 74 Phil.
The amount consigned with the trial court can no longer be 313 (1943).
withdrawn by petitioner because respondents prayer in his 23 Soco v. Militante, 208 Phil. 151, 160 (1983); citing Jose Ponce de Leon v. Santiago
answer that the amount consigned be awarded to him is Syjuco, Inc., 90 Phil. 311 (1951); Civil Code, Articles 1256-1258.
24 Far East Bank & Trust Company v. Diaz Realty, Inc., G.R. No. 138588, 23 August 2001,
equivalent to an acceptance of the consignation, which has the
363 SCRA 659, 667; citing Tibajia, Jr. v. Court of Appeals, G.R. No. 100290, 4 June 1993,
effect of extinguishing petitioners obligation. 223 SCRA 163; Roman Catholic Bishop of Malolos, Inc. v. Intermediate Appellate Court,
G.R. No. 72110, 16 November 1990, 191 SCRA 411.
25 Soco v. Militante, supra.
Moreover, petitioner failed to manifest his intention to comply 26 Records, p. 86.
with the "Agreement And Undertaking" by delivering the 27 Article 1491. The following persons cannot acquire by purchase, even at a public or
necessary documents and the lot subject of the sale to judicial auction, either in person or through the mediation of another:
respondent in exchange for the amount deposited. Withdrawal xxx xxx xxx
of the money consigned would enrich petitioner and unjustly (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the property
prejudice respondent.
and rights in litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions; this prohibition includes
The withdrawal of the amount deposited in order to pay the act of acquiring by assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they may take part by virtue
attorneys fees to petitioners counsel, Atty. De Guzman, Jr., of their profession.
violates Article 1491 of the Civil Code which forbids lawyers 28 Ordinio v. Palongan Eduarte, A.M. No. 3216, 16 March 1992, 207 SCRA 229, 231-232;
from acquiring by assignment, property and rights which are the citing In re: Atty. Melchor E. Ruste, 70 Phil. 243 (1940).
29 Rubias v. Batiller, 151-A Phil. 584, 600 (1973); Fornilda v. Branch 164, RTC IVth Judicial
object of any litigation in which they may take part by virtue of
their profession.27 Furthermore, Rule 10 of the Canons of Region, Pasig, G.R. No. L-72306, 5 October 1988, 166 SCRA 281, 288-289.
WHEREFORE, premises considered, judgment is hereby
Republic of the Philippines rendered in favor of the plaintiff and against the defendants as
SUPREME COURT follows:
Manila
1. Ordering each of the defendants to vacate the
SECOND DIVISION portion of the land in question they respectively occupy
and to restore the possession thereof to the plaintiff
and her co-owners;
G.R. No. 142882 May 2, 2006
2. Ordering each of the defendants to pay to the
SPS. RICARDO AND LYDIA LLOBRERA, SPS. BENJAMIN plaintiff the amount of P300.00 per month from January
AND ESTHER LLOBRERA, SPS. MIKE AND RESIDA MALA, 17, 1997 until they vacate the land in question as the
SPS. OTOR AND DOLINANG BAGONTE, SPS. EDUARDO reasonable compensation for the use and occupation
AND DAMIANA ICO, SPS. ANTONIO AND MERLY of the premises;
SOLOMON, SPS. ANSELMO AND VICKY SOLOMON, SPS.
ALEX AND CARMELITA CALLEJO, SPS. DEMETRIO AND
JOSEFINA FERRER, SPS. BENJAMIN AND ANITA 3. Ordering the defendants to pay proportionately the
MISLANG, SPS. DOMINGO AND FELICIDAD SANCHEZ, amount of P10,000.00 as attorneys fee and P2,000.00
SPS. FERNANDO AND CARMELITA QUEBRAL, SPS. as litigation expenses, and to pay the cost of suit.
BERNARDO AND PRISCILLA MOLINA, PRISCILLA BAGA
AND BELEN SEMBRANO, Petitioners, SO ORDERED.
vs.
JOSEFINA V. FERNANDEZ, Respondent. On petitioners appeal to the RTC of Dagupan City, Branch 41
thereof, in its decision of August 7, 1998, affirmed the foregoing
DECISION judgment.
By way of defense, petitioners alleged in their Answer that they Petitioners failed to present any written memorandum of the
had been occupying the property in question beginning the year alleged lease arrangements between them and Gualberto De
1945 onwards, when their predecessors-in-interest, with the Venecia. The receipts claimed to have been issued by the
permission of Gualberto de Venecia, one of the other co-owners owner were not presented on the excuse that the March 19,
of said land, developed and occupied the same on condition 1996 fire burned the same. Simply put, there is a dearth of
that they will pay their monthly rental of P20.00 each. From then evidence to substantiate the averred lessor-lessee relationship.
on, they have continuously paid their monthly rentals to x x x.3
Gualberto de Venecia or Rosita de Venecia or their
representatives, such payments being duly acknowledged by
receipts. Beginning sometime June 1996, however, the Consistent with this Courts long-standing policy, when the three
representative of Gualberto de Venecia refused to accept their courts below have consistently and unanimously ruled on a
rentals, prompting them to consign the same to Banco San factual issue, such ruling is deemed final and conclusive upon
Juan, which bank deposit they continued to maintain and update this Court, especially in the absence of any cogent reason to
with their monthly rental payments. depart therefrom.
In a decision dated February 18, 1998, the MTCC rendered From the absence of proof of any contractual basis for
judgment for the respondent as plaintiff, thus: petitioners possession of the subject premises, the only legal
implication is that their possession thereof is by mere tolerance. CANCIO C. GARCIA
In Roxas vs. Court of Appeals,4 we ruled: Associate Justice
Sec. 17. Judgment. If after trial the court finds that the 4 G.R. No. 138955, Oct. 29, 2002; 391 SCRA 351
allegations of the complaint are true, it shall render judgment in [2002].
favor of the plaintiff for the restitution of the premises, the sum
justly due as arrears of rent or as reasonable compensation for
the use and occupation of the premises, attorneys fees and
costs. If it finds that said allegations are not true, it shall render
judgment for the defendant to recover his costs. If a
counterclaim is established, the court shall render judgment for
the sum found in arrears from either party and award costs as
justice requires. (Emphasis supplied).
SO ORDERED.
Republic of the Philippines No pronouncement as to damages on the ground that
SUPREME COURT no premium should be assessed on the right to litigate.
Manila
No costs.
FIRST DIVISION
SO ORDERED.7
G.R. No. 172259 December 5, 2006
The Lawilao spouses appealed before the Regional Trial Court
SPS. JAIME BENOS and MARINA BENOS, petitioners, which reversed the Municipal Circuit Trial Court and declared
vs. the ownership of the subject property consolidated in favor of
SPS. GREGORIO LAWILAO and JANICE GAIL the Lawilao spouses.8
LAWILAO, respondents.
The Benos spouses appealed to the Court of Appeals which
DECISION affirmed the Regional Trial Court on December 5, 2005. The
dispositive portion of the Decision reads:
YNARES-SANTIAGO, J.:
WHEREFORE, the petition for review is DISMISSED
This petition for review under Rule 45 of the Rules of Court for lack of sufficient merit. The decision rendered by
assails the December 5, 2005 Decision1 of the Court of Appeals the Regional Trial Court, Branch 35, Bontoc, Mountain
in CA-G.R. SP No. 78845, affirming the Judgment2 dated July 1, Province in Civil Case No. 1091 on 1 July 2003,
2003 of the Regional Trial Court of Bontoc, Mountain Province, reversing the decision of the Municipal Circuit Trial
Branch 35, in Civil Case No. 1091. The Regional Trial Court Court of Bauko-Sabangan, Mountain Province in (Civil
reversed the Decision3dated November 14, 2002 of the Case No.) 314, is AFFIRMED.
Municipal Circuit Trial Court of Bauko, Mountain Province in
Civil Case No. 314, and ordered the consolidation of ownership SO ORDERED.9
of subject property in the name of respondent-spouses Gregorio
and Janice Gail Lawilao. Also assailed is the March 17, 2006 The appellate court denied petitioners motion for
Resolution4 denying petitioners motion for reconsideration. reconsideration, hence, the instant petition on the following
assignment of errors:
The antecedent facts are as follows:
4.0. It was error for the Regional Trial Court and,
On February 11, 1999, petitioner-spouses Jaime and Marina subsequently, the Court of Appeals to rule that
Benos ("the Benos spouses") and respondent-spouses Gregorio respondents can consolidate ownership over the
and Janice Gail Lawilao ("the Lawilao spouses") executed a subject property.
Pacto de Retro Sale5 where the Benos spouses sold their lot
covered by Tax Declaration No. 25300 and the building erected 4.1. It was likewise error for said lower courts not to
thereon for P300,000.00, one half of which was to be paid in have ruled that the contract between the parties is
cash to the Benos spouses and the other half to be paid to the actually an equitable mortgage.10
bank to pay off the loan of the Benos spouses which was
secured by the same lot and building. Under the contract, the
Benos spouses could redeem the property within 18 months The Benos spouses argue that consolidation is not proper
from date of execution by returning the contract price, because the Lawilao spouses violated the terms of the contract
otherwise, the sale would become irrevocable without necessity by not paying the bank loan; that having breached the terms of
of a final deed to consolidate ownership over the property in the the contract, the Lawilao spouses cannot insist on the
name of the Lawilao spouses. performance thereof by the Benos spouses; that the contract
was actually an equitable mortgage as shown by the
inadequacy of the consideration for the subject property; and
After paying the P150,000.00, the Lawilao spouses immediately that respondent-spouses remedy should have been for
took possession of the property and leased out the building recovery of the loan or foreclosure of mortgage.
thereon. However, instead of paying the loan to the bank,
Janice Lawilao restructured it twice. Eventually, the loan
became due and demandable. The Lawilao spouses, on the other hand, assert that the Pacto
de Retro Sale reflected the parties true agreement; that the
Benos spouses cannot vary its terms and conditions because
On August 14, 2000, a son of the Benos spouses paid the bank they did not put in issue in their pleadings its ambiguity, mistake
P159,000.00 representing the principal and interest. On the or imperfection as well as its failure to express the parties true
same day, the Lawilao spouses also went to the bank and intention; that the Benos spouses admitted its genuineness and
offered to pay the loan, but the bank refused to accept the due execution; and that the delivery of the property to the
payment. The Lawilao spouses then filed with the Municipal Lawilao spouses after the execution of the contract shows that
Circuit Trial Court a petition6 docketed as Civil Case No. 310 for the agreement was a sale with a right of repurchase and not an
consignation against the bank and simultaneously deposited the equitable mortgage.
amount of P159,000.00. Upon the banks motion, the court
dismissed the petition for lack of cause of action.
The Lawilao spouses also claim that they complied with their
obligation when they offered to pay the loan to the bank and
Subsequently, the Lawilao spouses filed with the Municipal filed a petition for consignation; and that because of the failure
Circuit Trial Court a complaint docketed as Civil Case No. 314, of the Benos spouses to redeem the property, the title and
for consolidation of ownership. This complaint is the precursor ownership thereof immediately vested in them (Lawilao
of the instant petition. The Benos spouses moved to dismiss on spouses).
grounds of lack of jurisdiction and lack of cause of action but it
was denied and the parties went to trial.
The issue for resolution is whether the Lawilao spouses can
consolidate ownership over the subject property.
On November 14, 2002, the Municipal Circuit Trial Court
rendered judgment in favor of the Benos spouses, the
dispositive portion of which states: The petition is impressed with merit.
IN THE LIGHT of all the foregoing considerations, for In ruling for respondents, the Court of Appeals held that: (1) the
lack of legal and factual basis to demand consolidation pacto de retro sale was perfected because the parties
of ownership over the subject property, the above- voluntarily agreed upon the object thereof and the price; (2) the
entitled case is hereby ordered dismissed. Lawilao spouses acquired possession over the property
immediately after execution of the pacto de retro sale; (3) the
pacto de retro sale does not provide for automatic rescission in
case the Lawilao spouses fail to pay the full price; (4) the Benos This is understood to be without prejudice to the rights
spouses did not rescind the contract after the Lawilao spouses of third persons who have acquired the thing, in
failed to pay the P150,000.00 loan; (5) Janice Lawilao offered to accordance with Articles 1385 and 1388 of the
pay the loan and deposited P150,000.00 to the bank although Mortgage Law.
the period for payment had expired thus, complying with Article
1592 of the Civil Code allowing payment even after expiration of Art. 1592. In the sale of immovable property, even
the period as long as no demand for rescission of the contract though it may have been stipulated that upon failure to
had been made either judicially or by a notarial act; (6) the title pay the price at the time agreed upon the rescission of
and ownership of the Lawilao spouses became absolute when the contract shall of right take place, the vendee may
the Benos spouses failed to repurchase the lot within the pay, even after the expiration of the period, as long as
redemption period; and (7) the payment by the Benos spouses no demand for rescission of the contract has been
son of P159,000.00 to the bank does not amount to a made upon him either judicially or by a notarial act.
repurchase as it violates Article 1616 of the Civil Code requiring After the demand, the court may not grant him a new
the vendor to return to the vendee the price of the sale, the term.
expenses of the contract and other necessary and useful
expenses.11
In the instant case, while the Benos spouses did not rescind the
Pacto de Retro Sale through a notarial act, they nevertheless
Contrary to the aforesaid findings, the evidence shows that the rescinded the same in their Answer with Counterclaim where
Lawilao spouses did not make a valid tender of payment and they stated that:
consignation of the balance of the contract price. As correctly
found by the Regional Trial Court:
14. Plaintiffs did not perform their obligation as spelled
out in the Pacto de Retro Sale (ANNEX "A"),
As matters stand, no valid tender of payment and/or particularly the assumption of the obligation of
consignation of the P150,000.00 which the Appellant defendants to the Rural Bank of Bontoc. Defendants
(Lawilaos) still owes the Appellee (Benos) has been were the ones who paid their loan through their son,
effected by the former. The amount of P159,000.00 ZALDY BENOS. As a result, ANNEX "A" is rendered
deposited with the MCTC is in relation to Civil Case null and of no effect. Therefore, the VENDEE a retro
No. 310 earlier dismissed by said court, and not to the who is one of plaintiffs herein cannot consolidate her
instant action. Hence, this Court cannot automatically ownership over the property subject of the null and
apply such sum in satisfaction of the aforesaid debt of ineffective instrument.
the Appellant and order the Appellee creditor to accept
the same.12 (Emphasis supplied)
15. Since plaintiffs did not perform their corresponding
obligation under ANNEX "A", defendants have been all
The Lawilao spouses did not appeal said finding, and it has too willing to return the amount of ON[E] HUNDRED
become final and binding on them. Although they had FIFTY THOUSAND PESOS (P150,000.00) and
repeatedly alleged in their pleadings that the amount of reasonable interest thereon to plaintiffs. But plaintiffs
P159,000.00 was still with the trial court which the Benos refused to accept the same.
spouses could withdraw anytime, they never made any step to
withdraw the amount and thereafter consign it. Compliance with
the requirements of tender and consignation to have the effect With the filing of this answer, defendants pray that this
of payment are mandatory. Thus serves as a notice of tender of payment, and they shall
consign the amount with the proper court as soon as it
is legally feasible.14
Tender of payment is the manifestation by debtors of
their desire to comply with or to pay their obligation. If
the creditor refuses the tender of payment without just They also prayed that the Municipal Circuit Trial Court render
cause, the debtors are discharged from the obligation judgment "[d]eclaring the Pacto de Retro Sale rescinded or
by the consignation of the sum due. Consignation is ineffective or void for lack of, or insufficient consideration."15
made by depositing the proper amount to the judicial
authority, before whom the tender of payment and the In Iringan v. Court of Appeals,16 we ruled that "even a
announcement of the consignation shall be proved. All crossclaim found in the Answer could constitute a judicial
interested parties are to be notified of the consignation. demand for rescission that satisfies the requirement of the law."
Compliance with these requisites is Similarly, the counterclaim of the Benos spouses in their answer
mandatory.13(Emphasis supplied) satisfied the requisites for the judicial rescission of the subject
Pacto de Retro Sale.
In the instant case, records show that the Lawilao spouses filed
the petition for consignation against the bank in Civil Case No. The Municipal Circuit Trial Court thus correctly dismissed the
310 without notifying the Benos spouses. The petition was complaint for consolidation of ownership filed by the Lawilao
dismissed for lack of cause of action against the bank. Hence, spouses for their failure to comply with the conditions of the
the Lawilao spouses failed to prove their offer to pay the Pacto de Retro Sale. Nevertheless, it refused to declare the
balance of the purchase price and consignation. In fact, even rescission of the Pacto de Retro Sale as prayed for in the
before the filing of the consignation case, the Lawilao spouses counterclaim of the Benos spouses, stating that:
never notified the Benos spouses of their offer to pay.
How about the other obligations and/or rights owing to
Thus, as far as the Benos are concerned, there was no full and either party by virtue of the Pacto de Retro Sale? This,
complete payment of the contract price, which gives them the the court opines that it can not delve into without
right to rescind the contract pursuant to Articles 1191 in relation overstepping the limits of his functions there being
to Article 1592 of the Civil Code, which provide: appropriate remedies. It is hornbook in our
jurisprudence that a right in law may be enforced and a
Art. 1191. The power to rescind obligations is implied wrong way be remedied but always through the
in reciprocal ones, in case one of the obligors should appropriate action.17
not comply with what is incumbent upon him.
The issue of rescission having been put in issue in the answer
The injured party may choose between the fulfillment and the same having been litigated upon without objections by
and the rescission of the obligation, with the payment the Lawilao spouses on grounds of jurisdiction, the Municipal
of damages in either case. He may also seek Circuit Trial Court should have ruled on the same and wrote finis
rescission, even after he has chosen fulfillment, if the to the controversy.
latter should become impossible.
Thus, as a necessary consequence of its ruling that the Lawilao
The court shall decree the rescission claimed, unless spouses breached the terms of the Pacto de Retro Sale, the
there be just cause authorizing the fixing of a period. Municipal Circuit Trial Court should have rescinded the Pacto de
Retro Sale and directed the Benos spouses to return November 14, 2002 of the Municipal Circuit Trial Court of
P150,000.00 to the Lawilao spouses, pursuant to our ruling in Bauko, Mountain Province in Civil Case No. No. 314 dismissing
Cannu v. Galang,18 to wit: respondents complaint for consolidation of ownership and
damages is REINSTATED WITH THE MODIFICATION that the
Petitioners maintain that inasmuch as respondents- Pacto de Retro Sale dated February 11, 1999 is declared
spouses Galang were not granted the right to rescinded and petitioners are ordered to return the amount of
unilaterally rescind the sale under the Deed of Sale P150,000.00 to respondents. No costs.
with Assumption of Mortgage, they should have first
asked the court for the rescission thereof before they SO ORDERED.
fully paid the outstanding balance of the mortgage loan
with the NHMFC. They claim that such payment is a Panganiban, C.J. (Chairperson), Austria-Martinez, Callejo, Sr.,
unilateral act of rescission which violates existing and Chico-Nazario, JJ., concur.
jurisprudence.
On February 10, 1975, [respondent] Rosario T. Alzul purchased "We, however, agree with the observation made by movants
from [petitioner] B.E. San Diego, Inc. four (4) subdivision lots that no time limit was set by the respondent Court of Appeals in
with an aggregate area of 1,275 square meters located at its assailed Decision for the private respondent herein, Rosario
Aurora Subdivision, Maysilo, Malabon. These lots, which are Alzul, to pay B.E. San Diego, Inc. the original owner of the
now subject of this petition, were bought through installment properties in litigation. To rectify such oversight, private
under Contract to Sell No. 867 at One Hundred Pesos respondent Rosario T. Alzul is hereby given a non-extendible
(100.00) per square meter, with a downpayment [sic] of period of thirty (30) days from entry of judgment, within which to
Twelve Thousand Seven Hundred Fifty Pesos (12,750.00), make full payment for the properties in question. xxx" (Emphasis
and monthly installments of One Thousand Two Hundred Forty- supplied.)
Nine Pesos (1,249.50). The interest agreed upon was 12
percent (12%) per annum until fully paid, thus, the total On July 12, 1996, an Entry of Judgment was issued. In an
purchase price was Two Hundred Thirty Seven Thousand Six attempt to comply with the Supreme Courts directive, herein
Hundred Sixty Pesos (237,660.00). [respondent] tried to serve payment upon [petitioner] on August
29, 1996, August 30, 1996 and September 28, 1996. On all
[Respondent] took immediate possession of the subject these dates, however, [petitioner] allegedly refused to accept
property, setting up a perimeter fence and constructing a house payment from [respondent].
thereon.
On November 11, 1996, [respondent] filed a Manifestation in
On July 25, 1977, [respondent] signed a "Conditional Deed of GR No. 109078 informing the Supreme Court that [petitioner],
Assignment and Transfer of Rights" which assigned to a certain on three (3) occasions, refused to accept [her] payment of the
Wilson P. Yu her rights under the Contract to Sell. [Petitioner] balance in the amount of 187,380.00. On January 29, 1997, a
was notified of the execution of such deed. Later on, the Resolution was issued by the Supreme Court referring the case
Contract to Sell in [respondents] name was cancelled, and to the court of origin for appropriate action, on account of
[petitioner] issued a new one in favor of Yu although it was also [respondents] manifestation.
denominated as "Contract to Sell No. 867".
On October 21, 1997, [respondents] counsel wrote a letter to
On July 4, 1979, [respondent] informed [petitioner] about Yus [petitioner] citing the latters refusal to accept her payment on
failure and refusal to pay the amounts due under the conditional several occasions. It was also mentioned therein that due to its
deed. She also manifested that she would be the one to pay the refusal, [respondent] would just consign the balance due to
installments due to respondent on account of Yus default. [petitioner] before the proper judicial authority.
On August 25, 1980, [respondent] commenced an action for On January 14, 1998, a reply was sent by [petitioner] through a
rescission of the conditional deed of assignment against Yu certain Flora San Diego. [Respondents] request was rejected
before the Regional Trial Court of Caloocan City. Subsequently, on account of the following:
on September 30, 1985, [respondent] caused the annotation of
notices of lis pendens on the titles covering the subject lots. 1. We have long legally rescinded the sale in her favor in view of
her failure to pay the monthly amortization as per contract.
The trial court ruled in [respondents] favor in the rescission
case. The decision was even affirmed by this [appellate] Court.
2. She sold her rights to Mr. Wilson Yu who failed to pay his [Respondent] filed a Motion for Reconsideration [of] the above
monthly amortizations, too. Resolution, but this was denied with finality on December 2,
2003.6
3. We are not and have never been a part of the case you are
alluding to hence we cannot be bound by the same. The Ruling of the Court of Appeals
4. The property in question is now under process to be Respondent Alzul brought before the CA a petition for certiorari
reconveyed to us as ordered by the court by virtue of a docketed as CA-G.R. SP No. 67637, ascribing grave abuse of
compromised (sic) agreement entered into in Civil Case No. discretion to the OP in dismissing her appeal in O.P. Case No.
2655 MN of the Malabon RTC Branch entitled Spouses Carlos 01-1-097 and affirming the March 17, 2000 Decision7 and July
Ventura and Sandra Ventura vs. B.E. San Diego, Inc. xxx 31, 2001 Resolution8 of the HLURB First Division in HLURB
Case No. REM-A-990907-0167.
Thinking that an action for consignation alone would not be
sufficient to allow for the execution of a final judgment in her On February 18, 2005, the CA rendered its assailed Decision
favor, [respondent] decided to file an action for consignation and reversing the September 18, 2003 Resolution and December 2,
specific performance against [petitioner] before the Housing and 2003 Order of the OP, the fallo of which reads:
Land Use Regulatory Board on March 12, 1998. The complaint,
docketed as REM-031298-10039, prayed that a) [respondent] WHEREFORE, in the higher interest of justice, the assailed
be considered to have fully paid the total purchase price of the Decision, Resolution and Order dated March 17, 2000,
subject properties; b) TCT Nos. N-155545 to 48 which were September 18, 2003 and December 2, 2003, respectively, are
declared void in CA GR No. L-109078 be cancelled; c) new hereby REVERSED and SET ASIDE. Accordingly, [respondent
certificates of title over the subject properties be issued in the Alzul] is hereby ordered to pay [petitioner B.E. San Diego, Inc.]
name of [respondent]; and d) [petitioner] be ordered to the balance due for the sale of the subject four parcels of land
reimburse [respondent] the sum of Fifty Thousand Pesos within five (5) days from receipt of this decision. [Petitioner B.E.
(50,000.00) as attorneys fees and litigation expenses. San Diego, Inc.], on the other hand, is ordered to accept such
payment from [respondent Alzul], after which, the corresponding
On July 12, 1999, a decision was rendered by the HLURB Deed of Sale must be issued.
through Housing and Land Use Arbiter Dunstan T. San Vicente.
It was held, thus: SO ORDERED.9
"The purported "consignation" in this case is thus of no moment, The CA agreed with the HLURB that no valid consignation was
inasmuch as the amount allegedly due was not even deposited made by respondent but found that justice would be better
or placed at the disposal of this Office by the complainant. served by allowing respondent Alzul to effect the consignation,
albeit belatedly. It cited the respondents right over the disputed
In any event, we agree with [petitioner] that even if the lots as confirmed by this Court in G.R. No. 109078, which, if
complainant had actually made the consignation of the amount, taken away on account of the delay in completing the payment,
such consignation is still ineffective and void for having been would amount to a grave injustice.
done long after the expiration of the non-extendible period set
forth in the 17 June 1996 Supreme Court Resolution that Moreover, the CA pointed out that respondents counsel
expired on 20 September 1996. concededly lacked the vigilance and competence in defending
his clients right when he failed to consign the balance on time;
WHEREFORE, Premises Considered, a judgment is hereby nonetheless, such may be disregarded in the interest of justice.
rendered DISMISSING the complaint. Cost against complainant. It considered the failure of respondents counsel to avail of the
remedy of consignation as a procedural lapse, citing the
IT (sic) SO ORDERED." principle that where a rigid application of the rules will result in a
manifest failure or miscarriage of justice, technicalities can be
ignored.
Aggrieved by the above decision, [respondent] filed a Petition
for Review before the HLURBs First Division. On March 17,
2000, a decision was rendered dismissing the petition for lack of A copy of the February 18, 2005 CA Decision was received by
merit, and affirming the decision dated July 12, 1999. respondent Alzul through her counsel on February 24, 2005.
[Respondent] filed a Motion for Reconsideration, but this was
denied on July 31, 2001. On March 4, 2005, respondent filed a Compliance and Motion
for Extension of Time to Comply with the Decision of the
[Respondent] then filed an appeal to the Office of the President. [CA]10 praying that she be given an extension of ten (10) days or
This was, however, dismissed on June 2, 2003 for having been from March 2 to 11, 2005 to comply with the CA Decision. On
filed out of time. Again, [respondent] moved for its the other hand, on March 8, 2005, petitioner filed its Motion for
reconsideration. On September 18, 2003, the Office of the Reconsideration with Opposition to Petitioners "Motion for
President gave due course to [respondents] motion, and Extension of Time to Comply with the Decision of the [CA]."11
resolved the motion according to its merits. The single question
resolved was whether or not [respondents] offer of consignation Through its assailed August 31, 2005 Resolution, the CA denied
was correctly denied by the HLURB. Said office ruled in the petitioners Motion for Reconsideration, and finding that
affirmative, and We quote: respondent duly exerted efforts to comply with its Decision and
a valid consignation was made by respondent, it granted the
"From the foregoing, it is evident that there was no valid requested 10-day extension of time to comply with the February
consignation of the balance of the purchase price. The 30-day 18, 2005 Decision and her motion for consignation. The fallo of
non-extendible period set forth in the 17 June 1996 resolution said Resolution reads:
had already expired on 20 September 1996. The HLURB is
therefore justified in refusing the consignation, otherwise it IN VIEW OF THE FOREGOING, the motion for extension to
would be accused of extending the period beyond that provided comply with the Decision is hereby GRANTED, the motion for
by the Supreme Court. A valid consignation is effected when reconsideration is DENIED and the motion for consignation is
there is an actual consignation of the amount due within the GRANTED. [Petitioner] B.E. San Diego, Inc. is hereby ordered
prescribed period (St. Dominic Corporation vs. Intermediate to receive the payment of [respondent] Rosario T. Alzul and to
Appellate Court, 138 SCRA 242). x x x issue, in her favor, the corresponding Deed of Sale.12
When a petition does not have the complete annexes or the On the other hand, respondent contends that the June 17, 1996
required number of copies, the Chief of the Judicial Records Resolution of this Court should not be construed against her
Division shall require the petitioner to complete the annexes or inability to effect payment due to the obstinate and unjust
file the necessary number of copies of the petition before refusal by petitionera supervening circumstance beyond her
docketing the case. Pleadings improperly filed in court shall be control. Respondent underscores that within the 30-day period,
returned to the sender by the Chief of the Judicial Records she repeatedly attempted to effect the payment to no avail.
Division.18 Moreover, the much delayed response of petitioner embodied in
its January 14, 1998 letter23 confirming its refusal was based on
In Rosa Yap Paras, et al. v. Judge Ismael O. Baldado, et al., the untenable, baseless, and contrived grounds.
Court preferred the determination of cases on the merits over
technicality or procedural imperfections so that the ends of Moreover, she argues that the December 26, 1995 Resolution in
justice would be served better, thus: G.R. No. 109078 granting her proprietary rights over the subject
lots has long become final and executory.
At the same time, the Rules of Court encourage a reading of the
procedural requirements in a manner that will help secure and Anent the issue of laches and estoppel, respondent strongly
not defeat justice. Thus: contends that such do not apply in the instant case as
incontrovertible circumstances show that she has relentlessly
Section 6. Construction.These Rules shall be liberally pursued the protection and enforcement of her rights over the
construed in order to promote their objective of securing a just, disputed lots for over a quarter of a century.
speedy and inexpensive disposition of every action and
proceeding. After a careful study of the factual milieu, applicable laws, and
jurisprudence, we find the petition meritorious.
As expressed in Alberto vs. Court of Appeals, "(w)hat should
guide judicial action is the principle that a party-litigant is to be Respondent Alzul was accorded legal rights over subject
given the fullest opportunity to establish the merits of his properties
complaint or defense rather than for him to lose life, liberty,
honor or property on technicalities. x x x (T)he rules of In G.R. No. 109078, finding no reversible error on the part of the
procedure should be viewed as mere tools designed to facilitate CA, we denied Wilson P. Yus petition and affirmed the
the attainment of justice. Their strict and rigid application, which appellate courts ruling that as between Wilson P. Yu, the
would result in technicalities that tend to frustrate rather than Ventura spouses, petitioner B.E. San Diego, Inc., and
promote substantial justice, must always be eschewed."19 respondent Alzul, respondent has inchoate proprietary rights
over the disputed lots. We upheld the CA ruling declaring as
Now we will address the main issuewhether respondent Alzul "null and void" the titles issued in the name of the Ventura
is still entitled to consignation despite the lapse of the period spouses and reinstating them in the name of B.E. San Diego,
provided by the Court in G.R. No. 109078 entitled Yu v. Court of Inc., with the corresponding notices of lis pendens annotated on
Appeals. them in favor of respondent until such time that ownership of the
subject parcels of land is transferred to respondent Rosario
Petitioner stresses the fact that respondent Alzul did not comply Alzul.
with this Courts June 17, 1996 Resolution20 which gave a non-
extendible period of thirty (30) days from entry of judgment It is thus clear that we accorded respondent Alzul expectant
within which to make full payment for the subject properties. The rights over the disputed lots, but such is conditioned on the
entry of judgment shows that the December 26, 1995 payment of the balance of the purchase price. Having been
Resolution21 in G.R. No. 109078 became final and executory on conceded such rights, respondent had the obligation to pay the
July 2, 1996. Respondent Alzul received through counsel a copy remaining balance to vest absolute title and rights of ownership
of the entry of judgment on August 21, 1996. Thus, respondent in his name over the subject properties.
had until September 20, 1996 within which to make the full
payment. In our June 17, 1996 Resolution, we clearly specified thirty (30)
days from entry of judgment for respondent to promptly effect
After three (3) unsuccessful tenders of payment, respondent the full payment of the balance of the purchase price for the
Alzul made no consignation of the amount to the court of origin. subject properties, thus:
It was only on March 12, 1998 or about a year and a half later
that respondent offered to consign said amount in an action for We however agree with the observation made by movants that
consignment before the HLURB. Relying on the case of St. no time limit was set by the respondent Court of Appeals in its
Dominic Corporation v. Intermediate Appellate assailed Decision for the private respondent herein, Rosario
Court,22 petitioner strongly asserts that upon its refusal to accept Alzul, to pay B.E. San Diego, Inc., the original owner of the
the tendered payment, respondent ought to have consigned it properties in litigation. To rectify such oversight, private
with the court of origin also within the 30-day period or within a respondent Rosario T. Alzul is hereby given a non-extendible
reasonable time thereafter. Respondent failed to do this as she period of thirty (30) days from entry of judgment, within which to
waited for a year and a half before instituting the instant action make full payment for the properties in question.24 (Emphasis
for specific performance and consignment before the HLURB. supplied.)
Moreover, petitioner argues that respondents delay of a year The non-compliance with our June 17, 1996 Resolution is fatal
and a half to pursue full payment must be regarded as a waiver to respondent Alzuls action for consignation and specific
on her part to claim whatever residual remedies she might still performance
have for the enforcement of the June 17, 1996 Resolution in
G.R. No. 109078.
Unfortunately, respondent failed to effect such full payment of
the balance of the purchase price for the subject properties.
No consignation within the 30-day period or at a reasonable Respondent still failed to take the cue by her inaction to consign
time thereafter the amount with the court of origin. Undoubtedly, pursuing the
action for consignation on March 12, 1998 or over a year after
It is clear as day that respondent did not attempt nor pursue the Court issued its January 28, 1997 Resolution is way beyond
consignation within the 30-day period given to her in a "reasonable time thereafter." Indeed, we have accorded
accordance with the prescribed legal procedure. She received a respondent, through said Resolution, all the opportunity to
copy of the entry of judgment on August 21, 1996 and had 30 pursue consignation with the court of origin and yet, respondent
days or until September 20, 1996 to pay the balance of the failed to make a valid consignation. This is already inexcusable
purchase price to petitioner. She made a tender of payment on neglect on the part of respondent.
August 29, 1996, August 30, 1996, and September 28, 1996, all
of which were refused by petitioner possibly because the latter No valid consignation made
is of the view that it is not bound by the November 27, 1992
Decision in CA-G.R. CV No. 33619 nor the December 26, 1995 We agree with petitioners assertion that even granting
Resolution in G.R. No. 109078, and the fact that respondent has arguendo that the instant case for consignation was instituted
forfeited her rights to the lots because of her failure to pay the within the 30-day period or within a reasonable time thereafter, it
monthly amortizations. would still not accord respondent relief as no valid consignation
was made. Certainly, the records show that there was no valid
It must be borne in mind however that a mere tender of payment consignation made by respondent before the HLURB as she did
is not enough to extinguish an obligation. In Meat Packing not deposit the amount with the quasi-judicial body as required
Corporation of the Philippines v. Sandiganbayan, we by law and the rules.
distinguished consignation from tender of payment and
reiterated the rule that both must be validly done in order to Pertinently, the first paragraph of Article 1258 of the Civil Code
effect the extinguishment of the obligation, thus: provides that "[c]onsignation shall be made by depositing the
things due at the disposal of judicial authority, before whom the
Consignation is the act of depositing the thing due with the court tender of payment shall be proved, in a proper case, and the
or judicial authorities whenever the creditor cannot accept or announcement of the consignation in other cases (emphasis
refuses to accept payment, and it generally requires a prior supplied)."
tender of payment. It should be distinguished from tender of
payment. Tender is the antecedent of consignation, that is, an It is true enough that respondent tendered payment to petitioner
act preparatory to the consignation, which is the principal, and three (3) times through a Solidbank Managers Check No. 1146
from which are derived the immediate consequences which the in the amount of PhP 187,38028 on August 29 and 30, 1996 and
debtor desires or seeks to obtain. Tender of payment may be September 28, 1996. It is true likewise that petitioner refused to
extrajudicial, while consignation is necessarily judicial, and the accept it but not without good reasons. Petitioner was not
priority of the first is the attempt to make a private settlement impleaded as a party by the Ventura spouses in the Malabon
before proceeding to the solemnities of consignation. Tender City RTC case for quieting of title against Wilson Yu nor in the
and consignation, where validly made, produces the effect of appealed case to the CA nor in G.R. No. 109078.
payment and extinguishes the obligation. 25 (Emphasis supplied.)
Petitioner is of the view that there was no jurisdiction acquired
There is no dispute that a valid tender of payment had been over its person and hence, it is not bound by the final judgment
made by respondent. Absent however a valid consignation, and June 17, 1996 Resolution in G.R. No. 109078. Secondly,
mere tender will not suffice to extinguish her obligation and petitioner believed that respondent Alzul has lost her rights over
consummate the acquisition of the subject properties. the subject lot by the rescission of the sale in her favor due to
the latters failure to pay the installments and also as a result of
In St. Dominic Corporation involving the payment of the her transferees failure to pay the agreed amortizations. And
installment balance for the purchase of a lot similar to the case even in the face of the refusal by petitioner to accept tender of
at bar, where a period has been judicially directed to effect the payment, respondent is not left without a remedy. It is basic that
payment, the Court held that a valid consignation is made when consignation is an available remedy, and respondent, with the
the amount is consigned with the court within the required aid of her counsel, could have easily availed of such course of
period or within a reasonable time thereafter. We ruled as action sanctioned under the Civil Code.
follows:
Considering the tenor of our June 17, 1996 Resolution,
First of all, the decision of the then Court of Appeals which was respondent ought to have consigned the amount with the court
promulgated on October 21, 1981, is quite clear when it ordered of origin within the non-extendible period of 30 days that was
the payment of the balance of the purchase price for the accorded her or within a reasonable time thereafter.
disputed lot within 60 days "from receipt hereof" meaning from
the receipt of the decision by the respondents. It is an admitted As cited earlier, consignation is the act of depositing the thing
fact that the respondents received a copy of the decision on due with the court or judicial authorities whenever the creditor
October 30, 1981. Hence, they had up to December 29, 1981 to cannot accept or refuses to accept payment and it generally
make the payment. Upon refusal by the petitioner to receive requires a prior tender of payment.29 It is of no moment if the
such payment, the proper procedure was for the respondent to refusal to accept payment be reasonable or not. Indeed,
consign the same with the court also within the 60-day period or consignation is the remedy for an unjust refusal to accept
within a reasonable time thereafter.26 (Emphasis supplied.) payment. The first paragraph of Art. 1256 of the Civil Code
precisely provides that "[i]f the creditor to whom tender of
The records also reveal that respondent failed to effect payment has been made refuses without just cause to
consignation within a reasonable time after the 30-day period accept it, the debtor shall be released from responsibility by
which expired on September 20, 1996. Instead of consigning the consignation of the thing or sum due (emphasis
the amount with the court of origin, respondent filed her supplied)."
November 11, 1996 Manifestation informing this Court of
petitioners unjust refusal of the tender of payment. We acted The proper and valid consignation of the amount due with the
favorably to it by issuing our January 28, 1997 Resolution which court of origin, which shall judicially pronounce the validity of the
ordered, thus: consignation and declare the debtor to be released from his/her
responsibility, shall extinguish the corresponding obligation.
Considering the manifestation, dated November 11, 1996, filed
by counsel for private respondent Rosario T. Alzul, stating that Moreover, in order that consignation may be effective, the
private respondent tendered to B.E. San Diego, Inc. the debtor must show that: (1) there was a debt due; (2) the
payment of the sum of P187,380.00 representing the balance of consignation of the obligation had been made because the
the purchase price of the properties which are the subject of this creditor to whom tender of payment was made refused to
litigation, but B.E. San Diego, Inc., refused to accept the same, accept it, or because s/he was absent or incapacitated, or
the Court resolved to REFER the case to the court of origin, for because several persons claimed to be entitled to receive the
appropriate action.27 amount due or because the title to the obligation had been lost;
(3) previous notice of the consignation had been given to the The lacuna in the CA Decision was sought to be corrected in its
person interested in the performance of the obligation; (4) the June 17, 1996 Resolution in G.R. No. 109078 where respondent
amount due was placed at the disposal of the court; and (5) was given "a non-extendible period of thirty (30) days from entry
after the consignation had been made, the person interested of judgment, within which to make full payment for the
was notified of the action.30 properties in question." Pursuant to this Resolution, what was
established was the right of respondent to pay the balance of
Respondent did not comply with the provisions of law the purchase price within 30 days. Again, the query iscan this
particularly with the fourth and fifth requirements specified Court, the CA, or the trial court compel petitioner to accept the
above for a valid consignation. In her complaint for consignation tender of payment from respondent?
and specific performance, respondent only prayed that she be
allowed to make the consignation without placing or depositing The answer is no. The reason is obvious as jurisdiction was
the amount due at the disposal of the court of origin. Verily, never acquired over the person of petitioner. The action for
respondent made no valid consignation. quieting of title is characterized as quasi in rem. In Realty Sales
Enterprise, Inc. v. Intermediate Appellate Court, it was held that:
The rights of petitioner and respondent over the 1,275 square
meter lot subject of this petition will be determined by the Suits to quiet title are not technically suits in rem, nor are they,
significance and effects of the December 26, 1995 Resolution strictly speaking, in personam, but being against the person in
rendered in G.R. No. 109078 entitled Yu v. Court of Appeals. 31 respect of the res, these proceedings are characterized as quasi
in rem. (McDaniel v. McElvy, 108 So. 820 [1926].) The judgment
The subject matter of G.R. No. 109078 is the November 27, in such proceedings is conclusive only between the parties.
1992 Decision rendered in CA-G.R. CV No. 33619 entitled (Emphasis supplied.)35
Carlos N. Ventura and Sandra L. Ventura v. Rosario T. Alzul, et
al., the fallo of which reads: Not being impleaded as a necessary or indispensable party,
petitioner is not bound by the dispositions in the CA Decision in
WHEREFORE, the appealed decision is hereby REVERSED CA-G.R. CV No. 33619 and the Resolutions of this Court in
AND SET ASIDE, and the complaint therein is ordered G.R. No. 109078. Moreover, there is no explicit and clear
dismissed. Transfer Certificates of Title Nos. N-1922, N-1923, directive for petitioner to accept the payment of the balance of
N-1924, and N-1925, all of the Register of Deeds of Metro the price.
Manila, District III, Malabon Branch, in the names of plaintiffs-
appellees Carlos N. Ventura and Sandra L. Ventura are hereby It is for this reason that respondent cannot ask for a writ of
declared null and void, and the titles of ownership reinstated in execution from the trial court where the complaint was originally
the name of B.E. San Diego, Inc., with the corresponding instituted as said court has no jurisdiction over the person of
notices of lis pendens therein annotated in favor of defendant- petitioner. Even if a writ is issued, it should conform to the
appellant until such time that ownership of the subject parcels of judgment, and the fallo of the CA Decision does not impose the
land is transferred to herein defendant-appellant Rosario Alzul. duty or obligation on the part of petitioner to accept the payment
Costs against plaintiff-appellees. from respondent. It is the settled doctrine that a writ of execution
must conform to the judgment and if it is different from or
SO ORDERED.32 exceeds the terms of the judgment, then it is a nullity.36
On December 26, 1995, this Court issued the Resolution in G.R. In addition, Sec. 10, Rule 39 provides the procedure for
No. 109078 wherein it found no reversible error in the actions of execution of judgments for specific acts, thus:
the CA in its aforequoted disposition in CA-G.R. CV No. 33619,
and resolved to deny the petition for lack of merit. On February Sec. 10. Execution of judgments for specific act.(a)
5, 1996, this Court denied with finality the Motion for Conveyance, delivery of deeds, or other specific acts; vesting
Reconsideration filed by petitioner Wilson Yu. title.If a judgment directs a party to execute a conveyance of
land or personal property, or to deliver deeds or other
However, on June 17, 1996, this Court, in resolving the Motion documents, or to perform any other specific act in connection
for Reconsideration of private respondents Spouses Carlos and therewith, and the party fails to comply within the time specified,
Sandra Ventura, granted respondent Alzul "a non-extendible the court may direct the act to be done at the cost of the
period of thirty (30) days from entry of judgment, within which to disobedient party by some other person appointed by the court
make full payment for the properties in question."33 and the act when so done shall have like effect as if done by the
party. If real or personal property is situated within the
Philippines, the court in lieu of directing a conveyance thereof
The question iscan the Court, the CA, or the Malabon City may by an order divest the title of any party and vest it in others,
RTC order petitioner B.E. San Diego, Inc. to accept the tender which shall have the force and effect of a conveyance executed
of payment made by respondent Alzul? in due form of law.
Definitely, they cannot. The reason is that petitioner was not The rule mentions the directive to a "party." It is therefore
impleaded as a party in the Malabon City RTC civil case, CA- essential that the person tasked to perform the specific act is
G.R. CV No. 33619, nor in G.R. No. 109078 and hence is not impleaded as a party to the case. Otherwise, the judgment
under the jurisdiction of said courts. What were determined and cannot be executed. In the case at bar, petitioner should have
decided in the CA Decision in CA-G.R. CV No. 33619 were the been impleaded as a party so as to compel it to accept payment
annulment of the titles of spouses Carlos and Sandra Ventura, and execute the deed of sale over the disputed lots in favor of
the reinstatement of said titles to the name of petitioner, and the respondent. As petitioner was not impleaded as a party, then
declaration that the ownership of the lots subject of said titles the CA Decision in CA-G.R. CV No. 33619 as affirmed in G.R.
will be transferred to respondent. There is no directive to No. 109078 cannot be enforced against it.
respondent granting her the right to pay the balance of the price
to petitioner and, more importantly, there is no order for
petitioner to accept the payment. The dispositive or fallo of the The cause of action available to respondent is to file an action
decision is what actually constitutes the judgment or resolution for consignation against petitioner which she did by registering a
of the court that can be the subject of execution. Where there is complaint for consignation before the HLURB on March 12,
a conflict between the dispositive portion of the decision and its 1998. Unfortunately, it was filed way beyond the 30-day period
body, the dispositive portion controls irrespective of what which lapsed on September 20, 1996 or immediately thereafter.
appears in the body of the decision.34 Such being the case, Because of the failure of respondent to effect payment to
petitioner is not duty bound to accept any tender of payment petitioner within the 30-day period or soon thereafter, her rights
from respondent precisely because such diktat is absent in the to buy the disputed lots have been forfeited, lost, and
fallo of the CA Decision which was affirmed by this Court in its extinguished.
December 26, 1995 Resolution in G.R. No. 109078.
In St. Dominic Corporation, which is substantially similar to the
case at bar, we explained the procedure when a party is
directed to pay the balance of the purchase price based on a WHEREFORE, the petition is GRANTED, the February 18,
court decision, thus: 2005 Decision and August 31, 2005 Resolution of the CA are
REVERSED and SET ASIDE, and the September 18, 2003
First of all, the decision of the then Court of Appeals which was Resolution and December 2, 2003 Order of the OP are hereby
promulgated on October 21, 1981, is quite clear when it ordered REINSTATED. Petitioner is ORDERED to reimburse
the payment of the balance of the purchase price for the respondent whatever amount the latter has paid for the subject
disputed lot within 60 days "from receipt hereof," meaning from properties per the Contract to Sell No. 867. Petitioner is
the receipt of the decision by the respondents. It is an admitted DECLARED to be the true and legal owner of Lots Nos. 5, 6, 7,
fact that the respondents received a copy of the decision on and 8, Block 18, Aurora Subdivision, Maysilo, Malabon City. The
October 30, 1981. Hence, they had up to December 29, 1981 to Register of Deeds of Manila, District III, Malabon City Branch is
make the payment. Upon refusal by the petitioner to receive ORDERED to cancel Transfer Certificates of Title Nos. N-1922,
such payment, the proper procedure was for the respondent to N-1923, N-1924, and N-1925 in the names of spouses Carlos N.
consign the same with the court also within the 60-day period or Ventura and Sandra L. Ventura and register the same in the
within a reasonable time thereafter. The fact that efforts were name of petitioner. The lis pendens in favor of respondent
made by the petitioner to reach an agreement with the annotated on the Transfer Certificates of Title over the subject
respondents after the promulgation of the decision did not in properties is hereby LIFTED, and the Register of Deeds for
anyway affect the finality of the judgment. This was clearly Metro Manila, District III is DIRECTED to CANCEL said lis
emphasized in the order of the appellate court on May 6, 1982. pendens. Respondent and all persons claiming under her are
ORDERED to vacate the subject properties and surrender them
to petitioner within sixty (60) days from finality of this judgment.
Secondly, even if we reckon the 60-day period from the date of No pronouncement as to costs.
the finality of the decision as interpreted by the appellate court,
such finality should be counted from March 5, 1982, which was
the date the decision became final as indicated in the entry of SO ORDERED.
judgment and not from August 26, 1982 which is the date the
entry was made. The date of a finality of a decision is entirely PRESBITERO J. VELASCO, JR.
distinct from the date of its entry and the delay in the latter does Associate Justice
not affect the effectivity of the former as such is counted from
the expiration of the period to appeal.37 x x x WE CONCUR:
In the aforecited case, the lot owner was made a party to the LEONARDO A. QUISUMBING
case and the judgment of the court was for the plaintiff to pay to Associate Justice
the lot owner the balance of the purchase price within 60 days Chairperson
from receipt of the Decision. Even assuming arguendo that
petitioner B.E. San Diego, Inc., though not a party in the
complaint for quieting of title, can be compelled to receive the ANTONIO T. CARPIO CONCHITA CARPIO
purchase price, still, the refusal to receive the money requires Associate Justice MORALES
respondent Alzul to follow the procedure in St. Dominic Associate Justice
Corporation and consign the money with the court of origin.
Having failed in this respect, respondents rights to the property DANTE O. TINGA
have been forfeited as a result of non-payment within the Associate Justice
prescribed time frame.
In the light of the foregoing considerations, we find that the grant Footnotes
of respondents petition in CA-G.R. SP No. 81341 and the 1
Rollo, pp. 3-37.
2
recognition of the belated consignation of the amount find no Id. at 44-57. The Decision was penned by Associate Justice Eugenio
support nor basis in law, rule, or jurisprudence. The CAs S. Labitoria (Chairperson) and concurred in by Associate Justices
holding that the non-consignation of the amount due is merely a Eliezer R. Delos Santos and Arturo D. Brion.
3
Id. at 97-99.
procedural lapse on the part of respondents counsel is 4
Id. at 100.
misplaced and is contrary to settled jurisprudence. Plainly, 5
Id. at 59-62. The Resolution was penned by Associate Justice Eliezer
respondents rights over the subject property are now lost and R. de los Santos (Acting Chairperson) and concurred in by Associate
forfeited. Justices Arturo D. Brion and Vicente Q. Roxas.
6
Supra note 2, at 45-51.
7
Rollo, pp. 162-168.
Having resolved the core issue on the validity of the 8
Id. at 262-263.
consignation, the Court sees no further need to discuss the 9
Supra note 2, at 56.
remaining issues raised in the petition. 10
Rollo, pp. 340-344.
11
Id. at 345-364.
12
Petitioner to reimburse payments Supra note 5, at 62.
13
Rollo, pp. 467-468.
14
Atillo v. Bombay, G.R. No. 136096, February 7, 2001, 351 SCRA 361,
However, respondent had made payments over the subject 369; cited in San Miguel Corporation v. Aballa, G.R. No. 149011, June
properties based on her agreement with petitioner. So as not to 28, 2005, 461 SCRA 392.
enrich itself at the expense of respondent, petitioner is obliged
15
H. Black, Blacks Law Dictionary 976 (6th ed., 1990).
16
to reimburse respondent whatever amount was paid by her in Sec. 2.
17
G.R. No. 128772, February 3, 2000, 324 SCRA 619, 625.
form of monthly amortizations. On the other hand, if respondent 18
G.R. No. 140436, July 18, 2000, 336 SCRA 113, 120; citing the CA
is in possession of the subject properties, she and all persons Revised Internal Rules, Rule 3, Sec. 3(d).
claiming under her should surrender the possession to 19
G.R. No. 140713, March 8, 2001, 354 SCRA 141, 145; citing the
petitioner. Revised Rules of Court, Rule 1.
20
Rollo, pp. 131-132.
21
Yu v. Court of Appeals, 251 SCRA 509.
22
No. L-67207, August 26, 1985, 138 SCRA 242.
23
Rollo, p. 140.
24
Supra note 20, at 131.
25
G.R. No. 103068, June 22, 2001, 359 SCRA 409, 421.
26
Supra note 22, at 250-251.
27
Rollo, p. 134.
28
Id. at 136.
29
Supra note 25.
30
Banco Filipino Savings and Mortgate Bank v. Diaz, G.R. No. 153134,
June 27, 2006, 493 SCRA 248, 263, citing Pabugais v. Sahijwani, G.R.
No. 156846, February 23, 2004, 423 SCRA 596, 601.
31
Supra note 21.
32
Rollo, p. 119.
33
Id. at 131.
34
1 Regalado, Remedial Law Compendium 371.
35
No. L-67451, September 28, 1987, 154 SCRA 328, 348.
36
Villoria v. Piccio, etc., et al., 95 Phil. 802, 805-806 (1954).
37
Supra note 22.
38
Supra note 2, at 56.
39
Mendiola v. Court of Appeals, G.R. No. 122807, July 5, 1996, 258
SCRA 492, 502.
40
Aguila v. Court of First Instance of Batangas, Branch I, No. L-48335,
April 15, 1988, 160 SCRA 352, 359-360.
41
Mesina v. Meer, G.R. No. 146845, July 2, 2002, 383 SCRA 625, 635.
Republic of the Philippines 2. That, immediately upon receipt of either amounts within the
SUPREME COURT periods so contemplated, defendants undertake to immediately
Manila execute the necessary legal instruments to transfer to plaintiff
the title to the parcels of land subject of the above-mentioned
SECOND DIVISION Contract to Sell, free from liens and encumbrances but with the
understanding that all the expenses necessary for the issuance
of a new Transfer Certificate of Title in favor of plaintiff or her
G.R. No. L-52733 July 23, 1985 assigns including documentary stamp taxes, science stamp
taxes and legal research fund fees shall be for her sole and
PILAR DE GUZMAN, ROLANDO GESTUVO, and MINERVA exclusive account;
GESTUVO, petitioners,
vs. 3. That defendants would temporarily desist from enforcing their
THE HON. COURT OF APPEALS, THE HON. JUDGE PEDRO right or possession over the properties involved herein until
JL. BAUTISTA, Presiding Judge of the Court of First January 27, 1978, but this shall not be construed as an
Instance of Rizal, Branch III, Pasay City, and LEONIDA P. abandonment or waiver of its causes of action as embodied in
SINGH, respondents. her Complaint in Civil Case No. 12446 entitled "Pilar de
Guzman vs. Wilfredo C. Tan, etc." for Ejectment pending before
Barredo, Reyno & Tomacruz Law Office for petitioners. Branch IV of the Pasay City Court;
Adriano T Bruno for private respondent. 4. Should plaintiff fail to pay either of the amounts abovestated
within the period herein stipulated, the aforesaid Contract to Sell
CONCEPCION, JR., J.: dated February 17, 1971 shall be deemed rescinded and
defendants would immediately enforce its right of possession of
the premises and plaintiff agrees to voluntarily surrender and
Petition for the reversal of the decision of the respondent appeal vacate the same without further notice or demand;
appellate court which dismissed the petition to annul and set
aside the orders of the Court of First Instance of Rizal, Pasay
City Branch, dismissing the petitioners' appeal in Civil Case No. 5. That payment of either amounts above-stated shall take place
5247- P and to restrain the respondents from enforcing the before the Honorable Judge Pedro Jl. Bautista in the courtroom
same. Acting upon the petition, the Court issued a temporary of the Court of First Instance of Rizal, Branch III in Pasay City at
restraining order on May 16, 1980, restraining the respondents 10:00 a.m. Friday, January 27, 1978 unless payment has been
from enforcing and/or carrying out the decision in question. 1 earlier made, in which case plaintiff shall produce receipt of the
same at the same time and place, otherwise defendants shag
immediately be entitled to a Writ of Execution on its right of
The facts of record show that on February 17, 1971, the possession over the premises;
petitioners, as SELLER, and the private respondent, as BUYER,
executed a Contract to Sell covering two (2) parcels of land
owned by the petitioners located at Cementina Street, Pasay 6. Lastly, that both parties waive and abandon, by reason
City and covered by TCT Nos. 11326 and 11327 of the Register hereof, their respective claims and counterclaims as embodied
in the Complaint and Answer. 2
of Deeds of Pasay City. It was stipulated therein that the private
respondent should pay the balance of the purchase price of
P133,640.00 on or before February 17, 1975. Two days before On January 28, 1978, the petitioners filed a motion for the
the said date, or on February 15, 1975, the private respondent issuance of a writ of execution, claiming that the private
asked the petitioners to furnish her with a statement of account respondent had failed to abide by the terms of the compromise
of the balance due; copies of the certificates of title covering the agreement and pay the amount specified in their compromise
two parcels of land subject of the sale; and a copy of the power agreement within the period stipulated. 3 The private respondent
of attorney executed by Rolando Gestuvo in favor of Pilar de opposed the motion, saying that she had complied with the
Guzman. But, the petitioners denied the request. As a result, the terms and conditions of the compromise agreement and asked
private respondent filed a complaint for specific performance the court to direct the petitioners to comply with the court's
with damages against the petitioners before the Court of First decision and execute the necessary documents to effect the
Instance of Rizal. The case, however, was dismissed for failure transfer of ownership of the two parcels of land in question to
to prosecute. But, the private respondent subsequently refiled her. 4
the case. The case was docketed in court as Civil Case No.
5247-P. In her complaint, the private respondent charged that Acting upon the motions, the respondent judge issued an order
the petitioners, by refusing to furnish her with copies of the on March 27, 1978, denying the petitioners' motion for
documents requested, deliberately intended not to comply with execution, and instead, directed the petitioners to immediately
their obligations under the contract to sell, as a result of which execute the necessary documents, transferring to private
the said petitioners committed a breach of contract, and had respondent the title to the properties. He also ordered the Clerk
also acted unfairly and in manifest bad faith for which they of Court to release to the petitioners the amount of
should be held liable for damages. Answering the complaint, the P250,000.00, which had been deposited by the private
petitioners claimed that the complaint failed to state a cause of respondent, upon proper receipt therefor. 5
action; that the balance due was already pre-determined in the
contract; that the petitioners have no obligation to furnish the
private respondent with copies of the documents requested; and The petitioners filed a motion for the reconsideration of the
that the private respondent's failure to pay the balance of the order, 6 but the trial court denied the same in an order dated
purchase price on the date specified had caused the contract to July 24, 1978. 7
expire and become ineffective without necessity of notice or of
any judicial declaration to that effect. Whereupon, the petitioners filed a notice of appeal, appeal
bond, 8 and a motion for extension of time (20 days) within
On November 29, 1977, the trial court rendered a decision which to submit a record on appeal. 9 On August 21, 1978, they
approving the compromise agreement submitted by the parties filed a second motion for extension of time (5 days) within which
wherein they agreed on the following: to file their record on appeal, 10 and on August 26, 1978, they
submitted their record on appeal.
1. That, not later than December 18, 1977, plaintiff will pay
defendants the total amount of TWO HUNDRED FORTY On September 30, 1978, the private respondent filed a motion
THOUSAND (P240,000.00) PESOS, Philippine Currency and in to dismiss the appeal on the grounds that: (1) the orders
case of failure to do so, she shall have only until January 27, appealed from are inappealable; and (2) that the record on
1978 within which to pay the total amount of TWO HUNDRED appeal is defective as it does not contain the material data
FIFTY THOUSAND (P250,000.00) PESOS, Philippine showing that the appeal was perfected on time. 11 The trial court
Currency, which shall be treated as complete and final payment found merit in the motion and dismissed the appeal of the
of the consideration in the contract to sell, dated February 17, petitioners. 12 As a result, the petitioners filed a petition for
1971. (Annex "A", Complaint); certiorari with the respondent Court of Appeals to nullify the
order of the trial court which dismissed their appeal. On
February 5, 1980, the said appellate court rendered judgment I dissent. On November 29, 1977 the trial court rendered a decision
sustaining the decision of the trial court. 13 Hence, the present approving a compromise between Pilar de Guzman, Rolando Gestuvo
recourse. and Minerva Gestuvo, as sellers, and Leonida P. Singh, buyer. Singh
agreed to pay de Guzman and the Gestuvos, now petitioners, P250,000
for two lots located at Cementina Street, Pasay City at ten o'clock in the
Passing upon the propriety of the petitioners' appeal, the rule is morning of January 27, 1978 in the courtroom of Judge Bautista of
that a judgment rendered in accordance with a compromise Pasay City. In case no payment was made, then the petitioners would
agreement is not appealable. It is immediately executory unless be immediately entitled to a writ of execution for the possession of the
a motion is filed to set aside the compromise agreement on the said lots.
ground of fraud, mistake or duress, in which case an appeal
may be taken from the order denying the motion. 14 It is also a Singh did not pay the P250,000. Ben Restrivera, in behalf of Singh,
settled rule that an order of execution of judgment is not on January 24, 1978 deposited P220,000 with the clerk of court.
appealable. However, where such order of execution in the Restrivera on January 27, 1978 tried to deliver to Antonio G. Barredo,
petitioners' counsel, P5,000 cash and P25,000 in postdated checks, or
opinion of the defeated party varies the terms of the judgment
P30,000 to complete the price of P250,000. Barredo refused to accept
and does not conform to the essence thereof, or when the terms that payment. On January 30, 1978 (3 days after the deadline) Singh
of the judgment are not clear and there is room for interpretation deposited with the clerk of court cash of P30,000.
and the interpretation given by the trial court as contained in its
order of execution is wrong in the opinion of the defeated party,
On that same day, January 30, the petitioners filed a motion for
the latter should be allowed to appeal from said order so that execution. It was opposed by Singh. Judge Bautista in his order of
the Appellate Tribunal may pass upon the legality and March 27, 1978 denied the motion and ordered the petitioners to
correctness of the said order. 15 execute the corresponding deed of sale. He ordered the clerk of court to
release the P250,000 to them.
In the instant case, the legality or enforceability of the
compromise agreement or the decision of the trial court The petitioners filed a motion for reconsideration which the trial court
approving the compromise agreement is not disputed. The denied in an order dated July 24, 1978, a copy of which was received by
parties both want the said compromise agreement to be the petitioners on July 31, 1978. The next day, August 1, the petitioners
filed a notice of appeal and an appeal bond and asked for an extension
implemented. The petitioners question the ruling of the trial
of twenty days within which to file their record on appeal. They asked for
court that the private respondent had complied with the terms of a second extension of five days. The record on appeal was filed
the compromise agreement. The issue raised, albeit one of fact, on August 26, 1978.
is appealable.
The trial court did not give due course to the appeal. The petitioners
As to the sufficiency of the record on appeal filed by the filed a petition for mandamus with the Court of Appeals to compel the
petitioners, the rule is that the submission of a record on appeal, trial court to elevate their appeal. The Court of Appeals in its decision
for purposes of appeal, is no longer required as the original dated February 5, 1980 sustained the trial court. The petitioners
record is elevated to the appellate court, except in appeals in appealed to this Court.
special proceedings in accordance with Rule 109 of the Rules of
Court and other cases wherein multiple appeals are The trial court erred in ordering the petitioners to execute the deed of
allowed. 16 Since the appeal of the petitioners is not one of sale. Singh did not comply with the compromise agreement. She did not
those mentioned above, the late filing or insufficiency of the pay the P250,000 on January 27, 1978. The petitioners were entitled to
a writ of execution
record on appeal filed by the petitioners is no longer a ground
for dismissing their appeal.
The appeal should have been given due course. It was filed on time.
The technicality that the petitioners did not comply with the "material
On the merits of the case, We agree with the findings of the trial data" rule may be disregarded. That rule has been relaxed in later
court that the private respondent had substantially complied with the cases. See Berkenkotter vs. Court of Appeals, L-36629, September 28,
terms and conditions of the compromise agreement. Her failure to 1973, 53 SCRA 228 and later cases.
deliver to the petitioners the full amount on January 27, 1978 was not
her fault. The blame lies with the petitioners. The record shows that the
private respondent went to the sala of Judge Bautista on the appointed Instead of ordering the Pasay court to elevate the record of the case to
day to make payment, as agreed upon in their compromise agreement. the Intermediate Appellate Court, we should now resolve the case or the
But, the petitioners were not there to receive it. Only the petitioners' merits of the appeal.
counsel appeared later, but, he informed the private respondent that he
had no authority to receive and accept payment. Instead, he invited the It is indubitable that Singh violated the compromise agreement. She lost
private respondent and her companions to the house of the petitioners the right to purchase the two lots. The petitioners are entitled to possess
to effect payment. But, the petitioners were not there either. They were them.
informed that the petitioner Pilar de Guzman would arrive late in the
afternoon, possibly at around 4:00 o'clock. The private respondent was
assured, however, that she would be informed as soon as the Footnotes
petitioners arrived. The private respondent, in her eagerness to settle 1 Rollo, p. 121.
her obligation, consented and waited for the call which did not come and 2 Id, p. 89.
unwittingly let the period lapse. The next day, January 28, 1978, the 3 Id, p.91.
private respondent went to the office of the Clerk of the Court of First 4 Id, p. 98.
Instance of Rizal, Pasay City Branch, to deposit the balance of the 5 Id, p. 52.
purchase price. But, it being a Saturday, the cashier was not there to 6 Id, p. 59.
receive it. So, on the next working day, Monday, January 30, 1978, the 7 Id, p. 56.
private respondent deposited the amount of P30,000.00 with the cashier 8 Id, p. 100.
of the Office of the Clerk of the Court of First Instance of Rizal, Pasay
9 Id, p. 101.
City Branch, to complete the payment of the purchase price of
10 Id, p. 103,
P250,000.00. Since the deposit of the balance of the purchase price
was made in good faith and that the failure of the private respondent to 11 Id, p. 110.
deposit the purchase price on the date specified was due to the 12 Id, p. 49.
petitioners who also make no claim that they had sustained damages 13 Id, p. 40.
because of the two days delay, there was substantial compliance with 14 Periquet vs. Reyes, 129 Phil. 764.
the terms and conditions of the compromise agreement. 15 Manaois-Salanga vs. Natividad, 107 Phil. 268.
16 Secs. 18, 19, 20, Interim Rules & Guidelines, Rules of Court.
WHEREFORE, the petition should be, as it is hereby DISMISSED. The
temporary restraining order heretofore issued is LIFTED and SET
ASIDE. With costs against the petitioners.
SO ORDERED.
Republic of the Philippines
Makasiar (Chairman), Abad Santos, Escolin and Cuevas, JJ., concur.
SUPREME COURT
Manila
Separate Opinions
EN BANC
AQUINO, J., dissenting:
On May 27, 1972, petitioner filed its Motion to withdraw the
sums it deposited, as "the order dismissing the ... case as well
G.R. No. L-35381 October 31, 1972 as the complaint in intervention without a resolution having been
made as to the right of the plaintiff or the defendants to the
rentals deposited by the intervenor, left the intervenor without
TLG INTERNATIONAL CONTINENTAL ENTERPRISING, any recourse but to apply for authority to withdraw the ...
INC., petitioner, amount ... and turn over the same to the defendants in
vs. accordance with the understanding arrived at between the
HON. DELFIN B. FLORES, Presiding Judge, Court of First parties hereto". This was denied by Respondent in its order of
Instance of Rizal, Branch XI, respondent. June 23, 1972. The motion for reconsideration of petitioner was
likewise denied by Respondent on July 15, 1972.
L. V. Simbulan, Tiongson and Associates for petitioner.
Hence this petition for certiorari.
Respondent Judge in his own behalf.
The only issue is whether or not Respondent could authorize
RESOLUTION the withdrawal of the deposits considering that according to
Respondent, the Court "has not ordered the intervenor to make
any deposit in connection" with the case.
October 27, 1971 P900.00 WHEREFORE, the orders dated June 23, 1972 and July 15,
November 29, 1971 600.00 1972 subject of the petition for certiorari are hereby set aside
January 19, 1972 750.00 and Respondent directed to grant the withdrawal of the deposit
March 8, 1972 1,500.00 in accordance with the foregoing. Without pronouncement as to
costs.
or a total of P3,750.00, which deposits are properly covered by
official receipts. Concepcion, C.J., Zaldivar, Castro, Fernando, Teehankee,
Barredo, Makasiar and Esguerra, JJ., concur.
On October 20, 1971, defendants in Civil Case No. 14880, filed
with said Court, an "Omnibus Motion" in which they prayed that Makalintal, J., is on leave.
the complaint, as well as the Complaint In Intervention, be
dismissed on the ground that the subject matter thereof could
be better ventilated in the ejectment case filed by Juan Fabella
against Bearcon Trading Co., Inc. (Civil Case No. 3979) then
pending before the municipal court of Mandaluyong Rizal.
R.C. Domingo Jr. & Associates for private respondent. On October 30, 1980, private respondent sent a letter to
petitioner signifying his willingness and intention to pay the full
balance of P69,059.71, and at the same time demanding to see
the certificate of title of the property and the tax payment
receipts.
FERIA, Actg. C.J.
Private respondent states on page 14 of his brief that on
This is an appeal by certiorari from the decision of the Court of November 3, 1980, the first working day of said month, he
Appeals, the dispositive part of which reads as follows: tendered payment to petitioner but this was refused acceptance
by petitioner. However, this does not appear in the decision of
IN VIEW OF THE FOREGOING PREMISES, the petition for the Court of Appeals.
certiorari and mandamus is hereby GRANTED and the Orders
of respondent court dated November 21 and 27 both 1980 are On November 7, 1980, petitioner filed a Motion for Writ of
hereby nullified and set aside and respondent Judge is ordered Execution alleging that private respondent failed to pay the
to order private respondent to accept petitioner's Pacific installment due on June 1980 and that since June 1980 he had
Banking Corporation certified manager's Check No. MC-A- failed to pay the monthly rental of P l,000.00. Petitioner prayed
000311 dated November 17, 1980 in the amount of P76,059.71 that a) the deed of conditional sale of real property be declared
in full settlement of petitioner's obligation, or another check of rescinded with forfeiture of all payments as liquidated damages;
equivalent kind and value, the earlier check having become and b) the court order the payment of Pl,000.00 back rentals
stale. since June 1980 and the eviction of private respondent.
On February 28, 1977, petitioner Luisa F. McLaughlin and On November 14, 1980, the trial court granted the motion for
private respondent Ramon Flores entered into a contract of writ of execution.
conditional sale of real property. Paragraph one of the deed of
conditional sale fixed the total purchase price of P140,000.00 On November 17, 1980, private respondent filed a motion for
payable as follows: a) P26,550.00 upon the execution of the reconsideration tendering at the same time a Pacific Banking
deed; and b) the balance of P113,450.00 to be paid not later Corporation certified manager's check in the amount of
than May 31, 1977. The parties also agreed that the balance P76,059.71, payable to the order of petitioner and covering the
shall bear interest at the rate of 1% per month to commence entire obligation including the installment due on December 31,
from December 1, 1976, until the full purchase price was paid. 1980. However, the trial court denied the motion for
reconsideration in an order dated November 21, 1980 and
On June 19, 1979, petitioner filed a complaint in the then Court issued the writ of execution on November 25, 1980.
of First Instance of Rizal (Civil Case No. 33573) for the
rescission of the deed of conditional sale due to the failure of In an order dated November 27, 1980, the trial court granted
private respondent to pay the balance due on May 31, 1977. petitioner's ex-parte motion for clarification of the order of
execution rescinding the deed of conditional sale of real
On December 27, 1979, the parties submitted a Compromise property.
Agreement on the basis of which the court rendered a decision
on January 22, 1980. In said compromise agreement, private On November 28, 1980, private respondent filed with the Court
respondent acknowledged his indebtedness to petitioner under of Appeals a petition for certiorari and prohibition assailing the
the deed of conditional sale in the amount of P119,050.71, and orders dated November 21 and 27, 1980.
the parties agreed that said amount would be payable as
follows: a) P50,000.00 upon signing of the agreement; and b)
the balance of P69,059.71 in two equal installments on June 30, As initially stated above, the appellate court nullified and set
1980 and December 31, 1980. aside the disputed orders of the lower court. In its decision, the
appellate court ruled in part as follows:
As agreed upon, private respondent paid P50,000.00 upon the
signing of the agreement and in addition he also paid an The issue here is whether respondent court committed a grave
"escalation cost" of P25,000.00. abuse of discretion in issuing the orders dated November 21,
1980 and November 27,1980.
Under paragraph 3 of the Compromise Agreement, private
respondent agreed to pay one thousand (P l,000.00) pesos The general rule is that rescission will not be permitted for a
monthly rental beginning December 5, 1979 until the obligation slight or casual breach of the contract, but only for such
is duly paid, for the use of the property subject matter of the breaches as are substantial and fundamental as to defeat the
deed of conditional sale. object of the parties in making the agreement. (Song Fo & Co.
vs. Hawaiian-Philippine Co., 47 Phil. 821)
Paragraphs 6 and 7 of the Compromise Agreement further
state: In aforesaid case, it was held that a delay in payment for a small
quantity of molasses, for some twenty days is not such a
violation of an essential condition of the contract as warrants
That the parties are agreed that in the event the defendant rescission for non-performance.
(private respondent) fails to comply with his obligations herein
provided, the plaintiff (petitioner) will be entitled to the issuance
of a writ of execution rescinding the Deed of Conditional Sale of In Universal Food Corp. vs. Court of Appeals, 33 SCRA 1, the
Real Property. In such eventuality, defendant (private Song Fo ruling was reaffirmed.
respondent) hereby waives his right to appeal to (from) the
Order of Rescission and the Writ of Execution which the Court
In the case at bar, McLaughlin wrote Flores on October 15, On the other hand, private respondent also invokes said law as
1980 demanding that Flores pay the balance of P69,059.71 on an expression of public policy to protect buyers of real estate on
or before October 31, 1980. Thus it is undeniable that despite installments against onerous and oppressive conditions (Section
Flores' failure to make the payment which was due on June 2 of Republic Act No. 6552).
1980, McLaughlin waived whatever right she had under the
compromise agreement as incorporated in the decision of Section 4 of Republic Act No. 6552 which took effect on
respondent court, to demand rescission. September 14, 1972 provides as follows:
xxx xxx xxx In case where less than two years of installments were paid, the
seller shall give the buyer a grace period of not less than sixty
It is significant to note that on November 17, 1980, or just days from the date the installment became due. If the buyer fails
seventeen (17) days after October 31, 1980, the deadline set by to pay the installments due at the expiration of the grace period,
McLaughlin, Flores tendered the certified manager's check. We the seller may cancel the contract after thirty days from receipt
hold that the Song Fo ruling is applicable herein considering that by the buyer of the notice of the cancellation or the demand for
in the latter case, there was a 20-day delay in the payment of rescission of the contract by a notarial act.
the obligation as compared to a 17-day delay in the instant
case. Section 7 of said law provides as follows:
Furthermore, as held in the recent case of New Pacific Timber & Any stipulation in any contract hereafter entered into contrary to
Supply Co., Inc. vs. Hon. Alberto Seneris, L-41764, December the provisions of Sections 3, 4, 5 and 6, shall be null and void.
19, 1980, it is the accepted practice in business to consider a
cashier's or manager's check as cash and that upon certification
of a check, it is equivalent to its acceptance (Section 187, The spirit of these provisions further supports the decision of the
Negotiable Instrument Law) and the funds are thereby appellate court. The record does not contain the complete text
transferred to the credit of the creditor (Araneta v. Tuason, 49 of the compromise agreement dated December 20, 1979 and
O.G. p. 59). the decision approving it. However, assuming that under the
terms of said agreement the December 31, 1980 installment
was due and payable when on October 15, 1980, petitioner
In the New Pacific Timber & Supply Co., Inc. case, the Supreme demanded payment of the balance of P69,059.71 on or before
Court further held that the object of certifying a check is to October 31, 1980, petitioner could cancel the contract after thirty
enable the holder thereof to use it as money, citing the ruling days from receipt by private respondent of the notice of
in PNB vs. National City Bank of New York, 63 Phil. 711. cancellation. Considering petitioner's motion for execution filed
on November 7, 1980 as a notice of cancellation, petitioner
In the New Pacific Timber case, it was also ruled that the could cancel the contract of conditional sale after thirty days
exception in Section 63 of the Central Bank Act that the clearing from receipt by private respondent of said motion. Private
of a check and the subsequent crediting of the amount thereof respondent's tender of payment of the amount of P76,059.71
to the account of the creditor is equivalent to delivery of cash, is together with his motion for reconsideration on November 17,
applicable to a payment through a certified check. 1980 was, therefore, well within the thirty-day period grants by
law..
Considering that Flores had already paid P101,550.00 under the
contract to sell, excluding the monthly rentals paid, certainly it The tender made by private respondent of a certified bank
would be the height of inequity to have this amount forfeited in manager's check payable to petitioner was a valid tender of
favor McLaughlin. Under the questioned orders, McLaughlin payment. The certified check covered not only the balance of
would get back the property and still keep P101,550.00. the purchase price in the amount of P69,059.71, but also the
arrears in the rental payments from June to December, 1980 in
Petitioner contends that the appellate court erred in not the amount of P7,000.00, or a total of P76,059.71. On this point
observing the provisions of Article No. 1306 of the Civil Code of the appellate court correctly applied the ruling in the case of
the Philippines and in having arbitrarily abused its judicial New Pacific Timber & Supply Co., Inc. vs. Seneris (101 SCRA
discretion by disregarding the penal clause stipulated by the 686, 692-694) to the case at bar.
parties in the compromise agreement which was the basis of the
decision of the lower court. Moreover, Section 49, Rule 130 of the Revised Rules of Court
provides that:
We agree with the appellate court that it would be inequitable to
cancel the contract of conditional sale and to have the amount An offer in writing to pay a particular sum of money or to deliver
of P101,550.00 (P l48,126.97 according to private respondent in a written instrument or specific property is, if rejected, equivalent
his brief) already paid by him under said contract, excluding the to the actual production and tender of the money, instrument, or
monthly rentals paid, forfeited in favor of petitioner, particularly property.
after private respondent had tendered the amount of
P76,059.71 in full payment of his obligation. However, although private respondent had made a valid tender
of payment which preserved his rights as a vendee in the
In the analogous case of De Guzman vs. Court of Appeals, this contract of conditional sale of real property, he did not follow it
Court sustained the order of the respondent judge denying the with a consignation or deposit of the sum due with the court. As
petitioners' motion for execution on the ground that the private this Court has held:
respondent had substantially complied with the terms and
conditions of the compromise agreement, and directing the The rule regarding payment of redemption prices is invoked.
petitioners to immediately execute the necessary documents True that consignation of the redemption price is not necessary
transferring to the private respondent the title to the properties in order that the vendor may compel the vendee to allow the
(July 23, 1985, 137 SCRA 730). In the case at bar, there was repurchase within the time provided by law or by contract.
also substantial compliance with the compromise agreement. (Rosales vs. Reyes and Ordoveza, 25 Phil. 495.) We have held
that in such cases a mere tender of payment is enough, if made
Petitioner invokes the ruling of the Court in its Resolution of on time, as a basis for action against the vendee to compel him
November 16, 1978 in the case of Luzon Brokerage Co., Inc. vs. to resell. But that tender does not in itself relieve the vendor
Maritime Building Co., Inc., to the effect that Republic Act 6552 from his obligation to pay the price when redemption is allowed
(the Maceda Law) "recognizes and reaffirms the vendor's right by the court. In other words, tender of payment is sufficient to
to cancel the contract to sell upon breach and non-payment of compel redemption but is not in itself a payment that relieves
the stipulated installments but requires a grace period after at the vendor from his liability to pay the redemption price. " (Paez
least two years of regular installment payments ... . " (86 SCRA vs. Magno, 83 Phil. 403, 405)
305, 329)
On September 1, 1986, the Court issued the following resolution
Considering the allegation in petitioner's reply brief that the WHEREFORE, the decision of the Court of Appeals is
Manager's Check tendered by private respondent on November AFFIRMED with the following modifications:
17, 1980 was subsequently cancelled and converted into cash,
the Court RESOLVED to REQUIRE the parties within ten (10) (a) Petitioner is ordered to accept from private respondent the
days from notice to inform the Court whether or not the amount Metrobank Cashier's Check No. CC 004233 in her favor in the
thereof was deposited in court and whether or not private amount of P76,059.71 or another certified check of a reputable
respondent continued paying the monthly rental of P1,000.00 bank drawn in her favor in the same amount;
stipulated in the Compromise Agreement.
(b) Private respondent is ordered to pay petitioner, within sixty
In compliance with this resolution, both parties submitted their (60) days from the finality of this decision, the rentals in arrears
respective manifestations which confirm that the Manager's of P l,000.00 a month from January 1, 1981 until full payment
Check in question was subsequently withdrawn and replaced by thereof; and
cash, but the cash was not deposited with the court.
(c) Petitioner is ordered to execute a deed of absolute sale in
According to Article 1256 of the Civil Code of the Philippines, if favor of private respondent over the real property in question
the creditor to whom tender of payment has been made refuses upon full payment of the amounts as provided in paragraphs (a)
without just cause to accept it, the debtor shall be released from and (b) above. No costs.
responsibility by the consignation of the thing or sum due, and
that consignation alone shall produce the same effect in the five
cases enumerated therein; Article 1257 provides that in order SO ORDERED.
that the consignation of the thing (or sum) due may release the
obligor, it must first be announced to the persons interested in Fernan, Alampay, Gutierrez, Jr. and Paras, JJ., concur.
the fulfillment of the obligation; and Article 1258 provides that
consignation shall be made by depositing the thing (or sum) due
at the disposal of the judicial authority and that the interested
parties shall also be notified thereof.
SECOND DIVISION The antecedent facts are substantially recited in the decision
under review, as follows:
G.R. No. L-58961 June 28, 1983
It appears from the evidence that the plaintiff-appellee-Soco, for
SOLEDAD SOCO, petitioner, short-and the 'defendant-appellant-Francisco, for brevity-
vs. entered into a contract of lease on January 17, 1973, whereby
HON. FRANCIS MILITANTE, Incumbent Presiding Judge of Soco leased her commercial building and lot situated at Manalili
the Court of First Instance of Cebu, Branch XII, Cebu City Street, Cebu City, to Francisco for a monthly rental of P 800.00
and REGINO FRANCISCO, JR., respondents. for a period of 10 years renewable for another 10 years at the
option of the lessee. The terms of the contract are embodied in
the Contract of Lease (Exhibit "A" for Soco and Exhibit "2" for
Chua & Associates Law Office (collaborating counsel) and Francisco). It can readily be discerned from Exhibit "A" that
Andales, Andales & Associates Law Office for petitioner. paragraphs 10 and 11 appear to have been cancelled while in
Exhibit "2" only paragraph 10 has been cancelled. Claiming that
Francis M. Zosa for private respondent. paragraph 11 of the Contract of Lease was in fact not part of the
contract because it was cancelled, Soco filed Civil Case No. R-
GUERRERO, J.: 16261 in the Court of First Instance of Cebu seeking the
annulment and/or reformation of the Contract of Lease. ...
The decision subject of the present petition for review holds the
view that there was substantial compliance with the requisites of Sometime before the filing of Civil Case No. R-16261 Francisco
consignation and so ruled in favor of private respondent, Regino noticed that Soco did not anymore send her collector for the
Francisco, Jr., lessee of the building owned by petitioner lessor, payment of rentals and at times there were payments made but
Soledad Soco in the case for illegal detainer originally filed in no receipts were issued. This situation prompted Francisco to
the City Court of Cebu City, declaring the payments of the write Soco the letter dated February 7, 1975 (Exhibit "3") which
rentals valid and effective, dismissed the complaint and ordered the latter received as shown in Exhibit "3-A". After writing this
the lessor to pay the lessee moral and exemplary damages in letter, Francisco sent his payment for rentals by checks issued
the amount of P10,000.00 and the further sum of P3,000.00 as by the Commercial Bank and Trust Company. Obviously, these
attorney's fees. payments in checks were received because Soco admitted that
prior to May, 1977, defendant had been religiously paying the
rental. ....
We do not agree with the questioned decision. We hold that the
essential requisites of a valid consignation must be complied
with fully and strictly in accordance with the law, Articles 1256 to 1. The factual background setting of this case clearly indicates
1261, New Civil Code. That these Articles must be accorded a that soon after Soco learned that Francisco sub-leased a portion
mandatory construction is clearly evident and plain from the of the building to NACIDA, at a monthly rental of more than
very language of the codal provisions themselves which require P3,000.00 which is definitely very much higher than what
absolute compliance with the essential requisites therein Francisco was paying to Soco under the Contract of Lease, the
provided. Substantial compliance is not enough for that would latter felt that she was on the losing end of the lease agreement
render only a directory construction to the law. The use of the so she tried to look for ways and means to terminate the
words "shall" and "must" which are imperative, operating to contract. ...
impose a duty which may be enforced, positively indicate that all
the essential requisites of a valid consignation must be complied In view of this alleged non-payment of rental of the leased
with. The Civil Code Articles expressly and explicitly direct what premises beginning May, 1977, Soco through her lawyer sent a
must be essentially done in order that consignation shall be letter dated November 23, 1978 (Exhibit "B") to Francisco
valid and effectual. Thus, the law provides: serving notice to the latter 'to vacate the premises leased.' In
answer to this letter, Francisco through his lawyer informed
1257. In order that the consignation of the thing due may Soco and her lawyer that all payments of rental due her were in
release the obligor, it must first be announced to the persons fact paid by Commercial Bank and Trust Company through the
interested in the fulfillment of the obligation. Clerk of Court of the City Court of Cebu (Exhibit " 1 "). Despite
this explanation, Soco filed this instant case of Illegal Detainer
on January 8, 1979. ...
The consignation shall be ineffectual if it is not made strictly in
consonance with the provisions which regulate payment.
2. Pursuant to his letter dated February 7, 1975(Exhibit"3") and
for reasons stated therein, Francisco paid his monthly rentals to
Art. 1258. Consignation shall be made by depositing the things Soco by issuing checks of the Commercial Bank and Trust
due at the disposal of judicial authority, before whom the tender Company where he had a checking account. On May 13, 1975,
of payment shall be proved, in a proper case, and the Francisco wrote the Vice-President of Comtrust, Cebu Branch
announcement of the consignation in other cases. (Exhibit "4") requesting the latter to issue checks to Soco in the
amount of P 840.00 every 10th of the month, obviously for
The consignation having been made, the interested parties shall payment of his monthly rentals. This request of Francisco was
also be notified thereof. complied with by Comtrust in its letter dated June 4, 1975
(Exhibit "5"). Obviously, these payments by checks through
Comtrust were received by Soco from June, 1975 to April, 1977
Art. 1249. The payment of debts in money shall be made in the
because Soco admitted that an rentals due her were paid
currency stipulated, and if it is not possible to deliver such
except the rentals beginning May, 1977. While Soco alleged in
currency, then in the currency which is legal tender in the
her direct examination that 'since May, 1977 he (meaning
Philippines.
Francisco) stopped paying the monthly rentals' (TSN, Palicte, p.
6, Hearing of October 24, 1979), yet on cross examination she
The delivery of promissory notes payable to order, or bills of admitted that before the filing of her complaint in the instant
exchange or other mercantile documents shall produce the case, she knew that payments for monthly rentals were
effect of payment only when they have been cashed, or when deposited with the Clerk of Court except rentals for the months
through the fault of the creditor they have been impaired. of May, June, July and August, 1977. ...
In the meantime, the action derived from the original obligation Pressing her point, Soco alleged that 'we personally demanded
shall be held in abeyance. from Engr. Francisco for the months of May, June, July and
August, but Engr. Francisco did not pay for the reason that he
had no funds available at that time.' (TSN-Palicte, p. 28, Hearing
October 24, 1979). This allegation of Soco is denied by
Francisco because per his instructions, the Commercial Bank SOORDERED.
and Trust Company, Cebu Branch, in fact, issued checks in
favor of Soco representing payments for monthly rentals for the Cebu City, Philippines, November 21, 1980.
months of May, June, July and August, 1977 as shown in Debit
Memorandum issued by Comtrust as follows:
According to the findings of fact made by the City Court, the
defendant Francisco had religiously paid to the plaintiff Soco the
(a) Exhibit "6"-Debit Memo dated May 11, 1977 for P926.10 as corresponding rentals according to the terms of the Least
payment for May, 1977; Contract while enjoying the leased premises until one day the
plaintiff had to demand upon the defendant for the payment of
(b) Exhibit"7"-Debit Memo dated June l5, 197 7for P926.10 as the rentals for the month of May, 1977 and of the succeeding
payment for June, 1977; months. The plaintiff also demanded upon the defendant to
vacate the premises and from that time he failed or refused to
(c) Exhibit "8"-Debit Memo dated July 11, 1977 for P1926.10 as vacate his possession thereof; that beginning with the month of
payment for July, 1977; May, 1977 until at present, the defendant has not made valid
payments of rentals to the plaintiff who, as a consequence, has
not received any rental payment from the defendant or anybody
(d) Exhibit "9"-Debit Memo dated August 10, 1977 for P926. 10 else; that for the months of May to August, 1977, evidence
as payment for August, 1977. shows that the plaintiff through her daughter, Teolita Soco and
salesgirl, Vilma Arong, went to the office or residence of
These payments are further bolstered by the certification issued defendant at Sanciangko St., Cebu City, on various occasions
by Comtrust dated October 29, 1979 (Exhibit "13"). Indeed the to effect payment of rentals but were unable to collect on
Court is convinced that payments for rentals for the months of account of the defendant's refusal to pay; that defendant
May, June, July and August, 1977 were made by Francisco to contended that payments of rental thru checks for said four
Soco thru Comtrust and deposited with the Clerk of Court of the months were made to the plaintiff but the latter refused to
City Court of Cebu. There is no need to determine whether accept them; that in 1975, defendant authorized the Commercial
payments by consignation were made from September, 1977 up Bank and Trust Company to issue checks to the plaintiff
to the filing of the complaint in January, 1979 because as earlier chargeable against his bank account, for the payment of said
stated Soco admitted that the rentals for these months were rentals, and the delivery of said checks was coursed by the
deposited with the Clerk of Court. ... bank thru the messengerial services of the FAR Corporation,
but the plaintiff refused to accept them and because of such
Taking into account the factual background setting of this case, refusal, defendant instructed said bank to make consignation
the Court holds that there was in fact a tender of payment of the with the Clerk of Court of the City Court of Cebu as regard said
rentals made by Francisco to Soco through Comtrust and since rentals for May to August, 1977 and for subsequent months.
these payments were not accepted by Soco evidently because
of her intention to evict Francisco, by all means, culminating in The City Court further found that there is no showing that the
the filing of Civil Case R-16261, Francisco was impelled to letter allegedly delivered to the plaintiff in May, 1977 by
deposit the rentals with the Clerk of Court of the City Court of Filomeno Soon, messenger of the FAR Corporation contained
Cebu. Soco was notified of this deposit by virtue of the letter of cash money, check, money order, or any other form of note of
Atty. Pampio Abarientos dated June 9, 1977 (Exhibit "10") and value, hence there could never be any tender of payment, and
the letter of Atty. Pampio Abarientos dated July 6. 1977 (Exhibit even granting that there was, but plaintiff refused to accept it
" 12") as well as in the answer of Francisco in Civil Case R- without any reason, still no consignation for May, 1977 rental
16261 (Exhibit "14") particularly paragraph 7 of the Special and could be considered in favor of the defendant unless evidence is
Affirmative Defenses. She was further notified of these presented to establish that he actually made rental deposit with
payments by consignation in the letter of Atty. Menchavez dated the court in cash money and prior and subsequent to such
November 28, 1978 (Exhibit " 1 "). There was therefore deposit, he notified the plaintiff thereof.
substantial compliance of the requisites of consignation, hence
his payments were valid and effective. Consequently, Francisco Notwithstanding the contradictory findings of fact and the
cannot be ejected from the leased premises for non-payment of resulting opposite conclusions of law by the City Court and the
rentals. ... Court of First Instance, both are agreed, however, that the case
presents the issue of whether the lessee failed to pay the
As indicated earlier, the above decision of the Court of First monthly rentals beginning May, 1977 up to the time the
Instance reversed the judgment of the City Court of Cebu, complaint for eviction was filed on January 8, 1979. This issue
Branch 11, the dispositive portion of the latter reading as in turn revolves on whether the consignation of the rentals was
follows: valid or not to discharge effectively the lessee's obligation to pay
the same. The City Court ruled that the consignation was not
WHEREFORE, judgment is hereby rendered in favor of the valid. The Court of First Instance, on the other hand, held that
plaintiff, ordering the defendant, Regino Francisco, Jr.: there was substantial compliance with the requisites of the law
on consignation.
(2) To pay to the plaintiff the sum of P40,490.46 for the rentals,
covering the period from May, 1977 to August, 1980, and According to Article 1256, New Civil Code, if the creditor to
starting with the month of September, 1980, to pay to the whom tender of payment has been made refuses without just
plaintiff for one (1) year a monthly rental of P l,072.076 and an cause to accept it, the debtor shall be released from
additional amount of 5 per cent of said amount, and for so much responsibility by the consignation of the thing or sum due.
amount every month thereafter equivalent to the rental of the Consignation alone shall produce the same effect in the
month of every preceding year plus 5 percent of same monthly following cases: (1) When the creditor is absent or unknown, or
rental until the defendant shall finally vacate said premises and does not appear at the place of payment; (2) When he is
possession thereof wholly restored to the plaintiff-all plus legal incapacitated to receive the payment at the time it is due; (3)
interest from date of filing of the complaint; When, without just cause, he refuses to give a receipt; (4) When
two or more persons claim the same right to collect; (5) When
the title of the obligation has been lost.
(3) To pay to the plaintiff the sum of P9,000.00 for attorney's
fee;
Consignation is the act of depositing the thing due with the court
or judicial authorities whenever the creditor cannot accept or
(4) To pay to the plaintiff the sum of P5,000.00 for damages and refuses to accept payment and it generally requires a prior
incidental litigation expenses; and tender of payment. (Limkako vs. Teodoro, 74 Phil. 313).
We have analyzed and scrutinized closely the above exhibits (3) Exhibit 14, paragraph 7 of the Answer (see p. 246, Records)
and We find that the respondent Judge's conclusion is alleges:
manifestly wrong and based on misapprehension of facts. Thus-
7. That ever since, defendant had been religiously paying his
(1) Exhibit 10 reads: (see p. 17, Records) rentals without any delay which, however, the plaintiff had in so
many occasions refused to accept obviously in the hope that
Miss Soledad Soco she may declare non-payment of rentals and claim it as a
Soledad Soco Retazo ground for the cancellation of the contract of lease. This, after
P. Gullas St., Cebu City seeing the improvements in the area which were effected, at no
small expense by the defendant. To preserve defendant's rights
and to show good faith in up to date payment of rentals,
Dear Miss Soco: defendant had authorized his bank to issue regularly cashier's
check in favor of the plaintiff as payment of rentals which the
This is in connection with the payment of rental of my client, plaintiff had been accepting during the past years and even for
Engr. Regino Francisco, Jr., of your building situated at Manalili the months of January up to May of this year, 1977 way past
St., Cebu City. plaintiff's claim of lease expiration. For the months of June and
July, however, plaintiff again started refusing to accept the
It appears that twice you refused acceptance of the said payments in going back to her previous strategy which forced
payment made by my client. the defendant to consign his monthly rental with the City Clerk
of Court and which is now the present state of affairs in so far as
payment of rentals is concerned. These events only goes to
show that the wily plaintiff had thought of this mischievous
scheme only very recently and filed herein malicious and immediately notify us everytime you have the check ready so
unfounded complaint. we may send somebody over to get it. " And this is exactly what
the bank agreed: "Please be advised that we are in conformity
The above exhibit which is lifted from Civil Case No. R-16261 to the above arrangement with the understanding that you shall
between the parties for annulment of the lease contract, is self- send somebody over to pick up the cashier's check from us."
serving. The statements therein are mere allegations of (Exhibit 4, see p. 230, Original Records; Exhibit 5, p. 231,
conclusions which are not evidentiary. Original Records)
(4) Exhibit 1 (see p. 15, Records) is quoted thus: Evidently, from this arrangement, it was the lessee's duty to
send someone to get the cashier's check from the bank and
logically, the lessee has the obligation to make and tender the
Atty. Luis V. Diores check to the lessor. This the lessee failed to do, which is fatal to
Suite 504, SSS Bldg. his defense.
Jones Avenue, Cebu City
Third, respondent lessee likewise failed to prove the second
Dear Compaero: notice, that is after consignation has been made, to the lessor
except the consignation referred to in Exhibit 12 which are the
Your letter dated November 23, 1978 which was addressed to cashier's check Nos. 478439 and 47907 CBTC dated May 11,
my client, Engr. Regino Francisco, Jr. has been referred to me 1977 and June 15, 1977 under Official Receipt No. 04369 dated
for reply. July 6, 1977.
It is not true that my client has not paid the rentals as claimed in Respondent lessee, attempting to prove compliance with the
your letter. As a matter of fact, he has been religiously paying requisites of valid consignation, presented the representative of
the rentals in advance. Payment was made by Commercial the Commercial Bank and Trust Co., Edgar Ocaada, Bank
Bank and Trust Company to the Clerk of Court, Cebu City. Comptroller, who unfortunately belied respondent's claim. We
Attached herewith is the receipt of payment made by him for the quote below excerpts from his testimony, as follows:
month of November, 1978 which is dated November 16, 1978.
ATTY. LUIS DIORES:
You can check this up with the City Clerk of Court for Q What month did you say you made ,you started making the deposit? When
satisfaction. you first deposited the check to the Clerk of Court?
A The payment of cashier's check in favor of Miss Soledad Soco was coursed
thru the City Clerk of Court from the letter of request by our client Regino
Regards.) Francisco, Jr., dated September 8, 1977. From that time on, based on his
request, we delivered the check direct to the City Clerk of Court.
Again, Exhibit 1 merely proves rental deposit for the particular Q What date, what month was that, you first delivered the check to the Clerk
month of November, 1978 and no other. It is no proof of tender of Court.?
of payment to the lessor, not even proof of notice to consign. A We started September 12, 1977.
Q September 1977 up to the present time, you delivered the cashier's check to
We hold that the best evidence of the rental deposits with the
the City Clerk of Court?
Clerk of Court are the official receipts issued by the Clerk of
A Yes.
Court. These the respondent lessee utterly failed to present and Q You were issued the receipts of those checks?
produce during the trial of the case. As pointed out in petitioner's A Well, we have an acknowledgment letter to be signed by the one who
Memorandum, no single official receipt was presented in the received the check.
trial court as nowhere in the formal offer of exhibits for lessee Q You mean you were issued, or you were not issued any official receipt? My
Francisco can a single official receipt of any deposit made be question is whether you were issued any official receipt? So, were you issued,
found (pp. 8-9, Memorandum for Petitioner; pp. 163-164, or you were not issued?
Records). A We were not issued.
Q On September, 1977, after you deposited the manager's check for that
Summing up Our review of the above four (4) exhibits, We hold month with the Clerk of Court, did you serve notice upon Soledad Soco that
the deposit was made on such amount for the month of September, 1977 and
that the respondent lessee has utterly failed to prove the
now to the Clerk of Court? Did you or did you not?
following requisites of a valid consignation: First, tender of
A Well, we only act on something upon the request of our client.
payment of the monthly rentals to the lessor except that Q Please answer my question. I know that you are acting upon instruction of
indicated in the June 9, l977 Letter, Exhibit 10. In the original your client. My question was-after you made the deposit of the manager's
records of the case, We note that the certification, Exhibit 11 of check whether or not you notified Soledad Soco that such manager's check
Filemon Soon, messenger of the FAR Corporation, certifying was deposited in the Clerk of Court from the month of September, 1977?
that the letter of Soledad Soco sent last May 10 by Commercial A We are not bound to.
Bank and Trust Co. was marked RTS (return to sender) for the Q I am not asking whether you are bound to or not. I'masking whether you did
reason that the addressee refused to receive it, was rejected by or you did not?
the court for being immaterial, irrelevant and impertinent per its A I did not.
Order dated November 20, 1980. (See p. 117, CFI Records). Q Alright, for October, 1977, after having made a deposit for that particular
month, did you notify Miss Soledad Soco that the deposit was in the Clerk of
Court?
Second, respondent lessee also failed to prove the first notice to A No, we did not.
the lessor prior to consignation, except the payment referred to Q Now, on November, 1977, did you notify Soledad Soco that you deposited
in Exhibit 10. the manager's check to the City Clerk of Court for that month?
A I did not.
In this connection, the purpose of the notice is in order to give Q You did not also notify Soledad Soco for the month December, 1977, so also
the creditor an opportunity to reconsider his unjustified refusal from January, February, March, April, May, June, July until December, 1978,
and to accept payment thereby avoiding consignation and the you did not also notify Miss Soledad Soco all the deposits of the manager's
subsequent litigation. This previous notice is essential to the check which you said you deposited with the Clerk of Court in every end of the
validity of the consignation and its lack invalidates the same. month? So also from each and every month from January 1979 up to
December 1979, you did not also serve notice upon Soledad Socco of the
(Cabanos vs. Calo, 104 Phil. 1058; Limkako vs. Teodoro, 74
deposit in the Clerk of Court, is that correct?
Phil. 313).
A Yes.
Q So also in January 1980 up to this month 1980, you did not instructed by
There is no factual basis for the lower court's finding that the your client Mr. and Mrs. Regino Francisco, jr. to make also serve notice upon
lessee had tendered payment of the monthly rentals, thru his Soledad Soco of the Manager's check which you said you deposited to the
bank, citing the lessee's letter (Exh. 4) requesting the bank to Clerk of Court?
issue checks in favor of Soco in the amount of P840.00 every A I did not.
10th of each month and to deduct the full amount and service Q Now, you did not make such notices because you were not such notices
fee from his current account, as well as Exhibit 5, letter of the after the deposits you made, is that correct?
Vice President agreeing with the request. But scrutinizing A Yes, sir.
carefully Exhibit 4, this is what the lessee also wrote: "Please
Q Now, from 1977, September up to the present time, before the deposit was lessor. On this vital point, the lessee miserably failed to present any
made with the Clerk of Court, did you serve notice to Soledad Soco that a proof that he complied with the arrangement.
deposit was going to be made in each and every month?
A Not. We, therefore, find and rule that the lessee has failed to prove tender of
Q In other words, from September 1977 up to the present time, you did not payment except that in Exh. 10; he has failed to prove the first notice to
notify Soledad Soco that you were going to make the deposit with the Clerk of the lessor prior to consignation except that given in Exh. 10; he has
Court, and you did not also notify Soledad Soco after the deposit was made, failed to prove the second notice after consignation except the two
that a deposit has been made in each and every month during that period, is made in Exh. 12; and he has failed to pay the rentals for the months of
that correct? July and August, 1977 as of the time the complaint was filed for the
A Yes eviction of the lessee. We hold that the evidence is clear, competent
Q And the reason was because you were not instructed by Mr. and Mrs. and convincing showing that the lessee has violated the terms of the
Regino Francisco, Jr. that such notification should be made before the deposit lease contract and he may, therefore, be judicially ejected.
and after the deposit was made, is that correct?
A No, I did not. (Testimony of Ocanada pp. 32-41, Hearing on June 3, 1980). The other matters raised in the appeal are of no moment. The motion to
dismiss filed by respondent on the ground of "want of specific
assignment of errors in the appellant's brief, or of page references to the
Recapitulating the above testimony of the Bank Comptroller, it is
records as required in Section 16(d) of Rule 46," is without merit. The
clear that the bank did not send notice to Soco that the checks petition itself has attached the decision sought to be reviewed. Both
will be deposited in consignation with the Clerk of Court (the first Petition and Memorandum of the petitioner contain the summary
notice) and also, the bank did not send notice to Soco that the statement of facts; they discuss the essential requisites of a valid
checks were in fact deposited (the second notice) because no consignation; the erroneous conclusion of the respondent Judge in
instructions were given by its depositor, the lessee, to this reversing the decision of the City Court, his grave abuse of discretion
effect, and this lack of notices started from September, 1977 to which, the petitioner argues, "has so far departed from the accepted and
the time of the trial, that is June 3, 1980. usual course of judicial proceeding in the matter of applying the law and
jurisprudence on the matter." The Memorandum further cites other basis
for petitioner's plea.
The reason for the notification to the persons interested in the
fulfillment of the obligation after consignation had been made, In Our mind, the errors in the appealed decision are sufficiently stated
which is separate and distinct from the notification which is and assigned. Moreover, under Our rulings, We have stated that:
made prior to the consignation, is stated in Cabanos vs. Calo,
G.R. No. L-10927, October 30, 1958, 104 Phil. 1058. thus:
This Court is clothed with ample authority to review matters, even if they
"There should be notice to the creditor prior and after are not assigned as errors in the appeal, if it finds that their
consignation as required by the Civil Code. The reason for this consideration is necessary in arriving at a just decision of the case.
is obvious, namely, to enable the creditor to withdraw the goods Also, an unassigned error closely related to an error properly assigned
or money deposited. Indeed, it would be unjust to make him or upon which the determination of the questioned raised by the error
suffer the risk for any deterioration, depreciation or loss of such properly assigned is dependent, will be considered by the appellate
goods or money by reason of lack of knowledge of the court notwithstanding the failure to assign it as an error." (Ortigas, Jr. vs.
consignation." Lufthansa German Airlines, L-28773, June 30, 1975, 64 SCRA 610)
And the fourth requisite that respondent lessee failed to prove is Under Section 5 of Rule 53, the appellate court is authorized to consider
a plain error, although it was not specifically assigned by appellants."
the actual deposit or consignation of the monthly rentals except (Dilag vs. Heirs of Resurreccion, 76 Phil. 649)
the two cashier's checks referred to in Exhibit 12. As indicated
earlier, not a single copy of the official receipts issued by the
Clerk of Court was presented at the trial of the case to prove the Appellants need not make specific assignment of errors provided they
discuss at length and assail in their brief the correctness of the trial
actual deposit or consignation. We find, however, reference to court's findings regarding the matter. Said discussion warrants the
some 45 copies of official receipts issued by the Clerk of Court appellate court to rule upon the point because it substantially complies
marked Annexes "B-1 " to "B-40" to the Motion for with Section 7, Rule 51 of the Revised Rules of Court, intended merely
Reconsideration of the Order granting execution pending appeal to compel the appellant to specify the questions which he wants to raise
filed by defendant Francisco in the City Court of Cebu (pp, 150- and be disposed of in his appeal. A clear discussion regarding an error
194, CFI Original Records) as well as in the Motion for allegedly committed by the trial court accomplishes the purpose of a
Reconsideration of the CFI decision, filed by plaintiff lessor (pp. particular assignment of error." (Cabrera vs. Belen, 95 Phil. 54; Miguel
39-50, Records, marked Annex "E ") the allegation that "there vs Court of Appeals, L- 20274, Oct. 30, 1969, 29 SCRA 760-773, cited
in Moran, Comments on the Rules of Court, Vol. 11, 1970 ed., p. 534).
was no receipt at all showing that defendant Francisco has
deposited with the Clerk of Court the monthly rentals
corresponding to the months of May and June, 1977. And for Pleadings as well as remedial laws should be construed liberally in
the months of July and August, 1977, the rentals were only order that the litigants may have ample opportunity to prove their
respective claims, and that a possible denial of substantial justice, due
deposited with the Clerk of Court on 20 November 1979 (or to legal technicalities, may be avoided." (Concepcion, et al. vs. The
more than two years later)."... The deposits of these monthly Payatas Estate Improvement Co., Inc., 103 Phil. 10 17).
rentals for July and August, 1977 on 20 November 1979, is very
significant because on 24 October 1979, plaintiff Soco had
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the
testified before the trial court that defendant had not paid the
Court of First Instance of Cebu, 14th Judicial District, Branch XII is
monthly rentals for these months. Thus, defendant had to make hereby REVERSED and SET ASIDE, and the derision of the City Court
a hurried deposit on the following month to repair his failure. " of Cebu, Branch II is hereby reinstated, with costs in favor of the
(pp. 43-44, Records). petitioner.
We have verified the truth of the above claim or allegation and We find SO ORDERED.
that indeed, under Official Receipt No. 1697161Z, the rental deposit for
August, 1977 in cashier's check No. 502782 dated 8-10-77 was
deposited on November 20, 1979 (Annex "B-15", p. 169, Original CFI Makasiar (Chairman), Concepcion, Jr., Abad Santos, and De Castro,
Records) and under Official Receipt No. 1697159Z, the rental deposit JJ., concur.
for July under Check No. 479647 was deposited on November 20, 1979
(Annex "B-16", p. 170, Original CFI Records). Indeed, these two rental Aquino and Escolin JJ., concurs in the result,
deposits were made on November 20, 1979, two years late and after the
filing of the complaint for illegal detainer.
FIRST DIVISION In ruling that there was a valid consignation and that the
respondent creditor could accept the same with a reservation of
G.R. No. 90359 June 9, 1992 his damages and other claims, the Court of Appeals relied on
the 1924 case of Sing Juco vs. Cuaycong, 46 Phil. 81. In that
case, the defendants consigned in court the amount which they
JOHANNES RIESENBECK, petitioner, had received from the plaintiff as the price of sugar, the sale of
vs. which did not materialize. The defendants were given the
THE HON. COURT OF APPEALS, and JUERGEN alternative of delivering the sugar or returning the price per
MAILE, respondents. stipulation in the contract. We ruled that plaintiff's acceptance of
the money consigned, unconditionally and without reservation,
was a waiver of his other claims under the contract.
GRIO-AQUINO, J.: A sensu contrario, when the creditor's acceptance of the money
consigned is conditional and with reservations, he is not
This is a petition for review on certiorari to annul the decision deemed to have waived the claims he reserved against his
dated April 21, 1989 of the Court of Appeals which dismissed for debtor. Thus, when the amount consigned does not cover the
lack of merit the petition for certiorari against two (2) orders of entire obligation, the creditor may accept it, reserving his right to
Regional Trial Court Judge Teodoro K. Risos. the balance (Tolentino, Civil Code of the Phil., Vol. IV, 1973 Ed.,
p. 317, citing 3 Llerena 263). The same factual milieu obtains
here because the respondent creditor accepted with reservation
On July 25, 1988, petitioner Riesenbeck filed in the Regional the amount consigned in court by the petitioner-debtor.
Trial Court of Cebu, Branch 27, a complaint for consignation Therefore, the creditor is not barred from raising his other
and damages against respondent Juergen Maile. On July 27, claims, as he did in his answer with special defenses and
1988, petitioner consigned and deposited with the Clerk of Court counterclaim against the petitioner-debtor.
of the Regional Trial Court of Cebu the sum of P113,750. The
private respondent subsequently filed a Manifestation Accepting
Consignation and Motion to Dismiss dated August 1, 1988, As respondent-creditor's acceptance of the amount consigned
wherein he stated, inter alia, that "without necessarily admitting was with reservations, it did not completely extinguish the entire
the correctness of obligation of plaintiff to defendant, the latter indebtedness of the petitioner-debtor. It is apposite to note here
hereby manifests to accept the said amount of P113,750 which that consignation is completed at the time the creditor accepts
is consigned by plaintiff, provided that the present complaint be the same without objections, or, if he objects, at the time the
dismissed outright with cost against plaintiff." (p. 14, CA Rollo.) court declares that it has been validly made in accordance with
The petitioner opposed the manifestation, respondent Maile filed law. (Tolentino, Civil Code of the Phil., Vol. IV, 1973 Ed., p.
an Answer with Special Defenses and Counterclaim. On August 315.)
23, 1988, petitioner filed his Answer to Counterclaim. Private
respondent filed a rejoinder/reply to the petitioner's opposition. Since the lower court in this case declared on September 28,
1988 that there was a valid consignation by the petitioner, the
Thereafter, on September 28, 1988, respondent Judge issued latter cannot tenably argue that he is still the owner of the
the first questioned order reading in part as follows: amount consigned and that he can still withdraw it.
After a thorough evaluation of the issues involved in the The consignation has retroactive effect. The payment is deemed
manifestation and the opposition thereto, the Court is of the to have been made at the time of the deposit of the money in
opinion that there was a valid consignation, and defendant could court, or when it was placed at the disposal of the judicial
legally accept the payment by consignation with reservation to authority, supra. In this case, payment is considered made on
prove damages and other claims as held by the Supreme Court July 27, 1988 when petitioner consigned and deposited with the
in the case of Sing Juco vs. Cuaycong, 46 Phil. 81. respondent court the sum of P113,750.
WHEREFORE the Clerk of Court of this Court is hereby ordered WHEREFORE, the instant petition is hereby DISMISSED for
to deliver to defendant Juergen Maile the sum of P113,750.00 lack of merit.
immediately, but the motion to dismiss is hereby in the
meantime DENIED. (p.31, CA, Rollo.) SO ORDERED.
On November 11. 1988, Judge Risos denied petitioner's motion Cruz, Medialdea and Bellosillo, JJ., concur.
for reconsideration.
This is a petition for review by way of certiorari of the The pertinent facts arrived from the stipulation of facts entered
decision 1 of the Court of Appeals in CA-G.R. No. 39760-R into by the parties as stated by respondent Court of Appeals are
entitled "Maxima Castro, plaintiff-appellee, versus Severino as follows:
Valencia, et al., defendants; Rural Bank of Caloocan, Inc., Jose
Desiderio, Jr. and Arsenio Reyes, defendants-appellants," which
affirmed in toto the decision of the Court of First Instance of Spawning the present litigation are the facts contained in the
Manila in favor of plaintiff- appellee, the herein private following stipulation of facts submitted by the parties themselves
respondent Maxima Castro.
1. That the capacity and addresses of all the parties in this case
On December 7, 1959, respondent Maxima Castro, are admitted .
accompanied by Severino Valencia, went to the Rural Bank of
Caloocan to apply for an industrial loan. It was Severino 2. That the plaintiff was the registered owner of a residential
Valencia who arranged everything about the loan with the bank house and lot located at Nos. 1268-1270 Carola Street,
and who supplied to the latter the personal data required for Sampaloc, Manila, containing an area of one hundred fifty (150)
Castro's loan application. On December 11, 1959, after the bank square meters, more or less, covered by T.C.T. No. 7419 of the
approved the loan for the amount of P3,000.00, Castro, Office of the Register of Deeds of Manila;
accompanied by the Valencia spouses, signed a promissory
note corresponding to her loan in favor of the bank. 3. That the signatures of the plaintiff appearing on the following
documents are genuine:
On the same day, December 11, 1959, the Valencia spouses
obtained from the bank an equal amount of loan for P3,000.00. a) Application for Industrial Loan with the Rural Bank of
They signed a promissory note (Exhibit "2") corresponding to Caloocan, dated December 7, 1959 in the amount of P3,000.00
their loan in favor of the bank and had Castro affixed thereon attached as Annex A of this partial stipulation of facts;
her signature as co-maker.
b) Promissory Note dated December 11, 1959 signed by the
The two loans were secured by a real-estate mortgage (Exhibit plaintiff in favor of the Rural Bank of Caloocan for the amount of
"6") on Castro's house and lot of 150 square meters, covered by P3,000.00 as per Annex B of this partial stipulation of facts;
Transfer Certificate of Title No. 7419 of the Office of the
Register of Deeds of Manila.
c) Application for Industrial Loan with the Rural Bank of
Caloocan, dated December 11, 1959, signed only by the
On February 13, 1961, the sheriff of Manila, thru Acting Chief defendants, Severino Valencia and Catalina Valencia, attached
Deputy Sheriff Basilio Magsambol, sent a notice of sheriff's sale as Annex C, of this partial stipulation of facts;
addressed to Castro, announcing that her property covered by
T.C.T. No. 7419 would be sold at public auction on March 10,
1961 to satisfy the obligation covering the two promissory notes d) Promissory note in favor of the Rural Bank of Caloocan,
plus interest and attorney's fees. dated December 11, 1959 for the amount of P3000.00, signed
by the spouses Severino Valencia and Catalina Valencia as
borrowers, and plaintiff Maxima Castro, as a co-maker, attached
Upon request by Castro and the Valencias and with conformity as Annex D of this partial stipulation of facts;
of the bank, the auction sale that was scheduled for March 10,
1961 was postponed for April 10, 1961. But when April 10, 1961
was subsequently declared a special holiday, the sheriff of e) Real estate mortgage dated December 11, 1959 executed by
Manila sold the property covered by T.C.T. No. 7419 at a public plaintiff Maxima Castro, in favor of the Rural Bank of Caloocan,
auction sale that was held on April 11, 1961, which was the next to secure the obligation of P6,000.00 attached herein as Annex
succeeding business day following the special holiday. E of this partial stipulation of facts;
Castro alleged that it was only when she received the letter from All the parties herein expressly reserved their right to present
the Acting Deputy Sheriff on February 13, 1961, when she any evidence they may desire on the circumstances regarding
learned for the first time that the mortgage contract (Exhibit "6") the execution of the above-mentioned documents.
which was an encumbrance on her property was for P6.000.00
and not for P3,000.00 and that she was made to sign as co- 4. That the sheriff of Manila, thru Acting Chief Deputy Sheriff,
maker of the promissory note (Exhibit "2") without her being Basilio Magsambol, sent a notice of sheriff's sale, address to the
informed of this. plaintiff, dated February 13, 1961, announcing that plaintiff's
property covered by TCT No. 7419 of the Register of Deeds of
On April 4, 1961, Castro filed a suit denominated "Re: Sum of the City of Manila, would be sold at public auction on March 10,
Money," against petitioners Bank and Desiderio, the Spouses 1961 to satisfy the total obligation of P5,728.50, plus interest,
Valencia, Basilio Magsambol and Arsenio Reyes as defendants attorney's fees, etc., as evidenced by the Notice of Sheriff's Sale
in Civil Case No. 46698 before the Court of First Instance of and Notice of Extrajudicial Auction Sale of the Mortgaged
Manila upon the charge, amongst others, that thru mistake on property, attached herewith as Annexes F and F-1, respectively,
her part or fraud on the part of Valencias she was induced to of this stipulation of facts;
sign as co-maker of a promissory note (Exhibit "2") and to
constitute a mortgage on her house and lot to secure the 5. That upon the request of the plaintiff and defendants-spouses
questioned note. At the time of filing her complaint, respondent Severino Valencia and Catalina Valencia, and with the
conformity of the Rural Bank of Caloocan, the Sheriff of Manila
postponed the auction sale scheduled for March 10, 1961 for The auction sale set for March 10, 1961 was postponed co April
thirty (30) days and the sheriff re-set the auction sale for April 10, 1961 upon the request of defendant spouses Valencia who
10, 1961; needed more time within which to pay their loan of P3,000.00
with the defendant bank; plaintiff claims that when she filed the
6. That April 10, 1961 was declared a special public holiday; complaint she deposited with the Clerk of Court the sum of
(Note: No. 7 is omitted upon agreement of the parties.) P3,383.00 in full payment of her loan of P3,000.00 with the
defendant bank, plus interest at the rate of 12% per annum up
to April 3, 1961 (Exh. D).
8. That on April 11, 1961, the Sheriff of Manila, sold at public
auction plaintiff's property covered by T.C.T. No. 7419 and
defendant, Arsenio Reyes, was the highest bidder and the As additional evidence for the defendant bank, its manager
corresponding certificate of sale was issued to him as per declared that sometime in December, 1959, plaintiff was
Annex G of this partial stipulation of facts; brought to the Office of the Bank by an employee- (t.s.n., p 4,
January 27, 1966). She wept, there to inquire if she could get a
loan from the bank. The claims he asked the amount and the
9. That on April 16, 1962, the defendant Arsenio Reyes, purpose of the loan and the security to he given and plaintiff
executed an Affidavit of Consolidation of Ownership, a copy of said she would need P3.000.00 to be invested in a drugstore in
which is hereto attached as Annex H of this partial stipulation of which she was a partner (t.s.n., p. 811. She offered as security
facts; for the loan her lot and house at Carola St., Sampaloc, Manila,
which was promptly investigated by the defendant bank's
10. That on May 9, 1962, the Rural Bank of Caloocan inspector. Then a few days later, plaintiff came back to the bank
Incorporated executed the final deed of sale in favor of the with the wife of defendant Valencia A date was allegedly set for
defendant, Arsenio Reyes, in the amount of P7,000.00, a copy plaintiff and the defendant spouses for the processing of their
of which is attached as Annex I of this partial stipulation of facts; application, but on the day fixed, plaintiff came without the
defendant spouses. She signed the application and the other
11. That the Register of Deeds of the City of Manila issued the papers pertinent to the loan after she was interviewed by the
Transfer Certificate of Title No. 67297 in favor of the defendant, manager of the defendant. After the application of plaintiff was
Arsenio Reyes, in lieu of Transfer Certificate of Title No. 7419 made, defendant spouses had their application for a loan also
which was in the name of plaintiff, Maxima Castro, which was prepared and signed (see Exh. 13). In his interview of plaintiff
cancelled; and defendant spouses, the manager of the bank was able to
gather that plaintiff was in joint venture with the defendant
spouses wherein she agreed to invest P3,000.00 as additional
12. That after defendant, Arsenio Reyes, had consolidated his capital in the laboratory owned by said spouses (t.s.n., pp. 16-
title to the property as per T.C.T. No. 67299, plaintiff filed a 17) 3
notice of lis pendens with the Register of Deeds of Manila and
the same was annotated in the back of T.C.T. No. 67299 as per
Annex J of this partial stipulation of facts; and The Court of Appeals, upon evaluation of the evidence,
affirmed in toto the decision of the Court of First Instance of
Manila, the dispositive portion of which reads:
13. That the parties hereby reserved their rights to present
additional evidence on matters not covered by this partial
stipulation of facts. FOR ALL THE FOREGOING CONSIDERATIONS, the Court
renders judgment and:
As for the evidence presented during the trial, We quote from (2) Declares that the contract of mortgage, Exhibit '6', is null and
the decision of the Court of Appeals the statement thereof, as void, in so far as the amount thereof exceeds the sum of
follows: P3,000.00 representing the principal obligation of plaintiff, plus
the interest thereon at 12% per annum;
VI
Art. 1342. Misrepresentation by a third person does not vitiate
consent, unless such misrepresentation has created substantial
THE COURT OF APPEALS ERRED IN NOT DECLARING AS mistake and the same is mutual.
VALID AND BINDING UPON RESPONDENT CASTRO THE
HOLDING OF THE SALE ON FORECLOSURE ON THE
BUSINESS DAY NEXT FOLLOWING THE ORIGINALLY We cannot declare the promissory note (Exhibit 2) valid
SCHEDULED DATE THEREFOR WHICH WAS DECLARED A between the bank and Castro and the mortgage contract
HOLIDAY WITHOUT NECESSITY OF FURTHER NOTICE (Exhibit 6) binding on Castro beyond the amount of P3,000.00,
THEREOF. for while the contracts may not be invalidated insofar as they
affect the bank and Castro on the ground of fraud because the
bank was not a participant thereto, such may however be
The issue raised in the first three (3) assignment of errors is invalidated on the ground of substantial mistake mutually
whether or not respondent court correctly affirmed the lower committed by them as a consequence of the fraud and
court in declaring the promissory note (Exhibit 2) invalid insofar
misrepresentation inflicted by the Valencias. Thus, in the case authority to the Valencia to borrow in her behalf, it should have
of Hill vs. Veloso, 10 this Court declared that a contract may be required a special power of attorney executed by Castro in their
annulled on the ground of vitiated consent if deceit by a third favor. Since the bank did not, We can rightly assume that it did
person, even without connivance or complicity with one of the not entertain the notion, that the Valencia spouses were in any
contracting parties, resulted in mutual error on the part of the manner acting as an agent of Castro.
parties to the contract.
When the Valencias borrowed from the Bank a personal loan of
Petitioners argued that the amended complaint fails to contain P3,000.00 evidenced by a promissory note (Exhibit 2) and
even a general averment of fraud or mistake, and its mention in mortgaged (Exhibit 6) Castro's property to secure said loan, the
the prayer is definitely not a substantial compliance with the Valencias acted for their own behalf. Considering however that
requirement of Section 5, Rule 8 of the Rules of Court. The for the loan in which the Valencias appeared as principal
records of the case, however, will show that the amended borrowers, it was the property of Castro that was being
complaint contained a particular averment of fraud against the mortgaged to secure said loan, the Bank should have exercised
Valencias in full compliance with the provision of the Rules of due care and prudence by making proper inquiry if Castro's
Court. Although, the amended complaint made no mention of consent to the mortgage was without any taint or defect. The
mistake being incurred in by the bank and Castro, such mention possibility of her not knowing that she signed the promissory
is not essential in order that the promissory note (Exhibit 2) may note (Exhibit 2) as co-maker with the Valencias and that her
be declared of no binding effect between them and the property was mortgaged to secure the two loans instead of her
mortgage (Exhibit 6) valid up to the amount of P3,000.00 only. own personal loan only, in view of her personal circumstances
The reason is that the mistake they mutually suffered was a ignorance, lack of education and old age should have placed
mere consequence of the fraud perpetrated by the Valencias the Bank on prudent inquiry to protect its interest and that of the
against them. Thus, the fraud particularly averred in the public it serves. With the recent occurrence of events that have
complaint, having been proven, is deemed sufficient basis for supposedly affected adversely our banking system, attributable
the declaration of the promissory note (Exhibit 2) invalid insofar to laxity in the conduct of bank business by its officials, the need
as it affects Castro vis-a-vis the bank, and the mortgage of extreme caution and prudence by said officials and
contract (Exhibit 6) valid only up to the amount of P3,000.00. employees in the discharge of their functions cannot be over-
emphasized.
The second issue raised in the fourth assignment of errors is
who between Castro and the bank should suffer the Question is, likewise, raised as to the propriety of respondent
consequences of the fraud perpetrated by the Valencias. court's decision which declared that Castro's consignation in
court of the amount of P3,383.00 was validly made. It is
In attributing to Castro an consequences of the loss, petitioners contended that the consignation was made without prior offer or
argue that it was her negligence or acquiescence if not her tender of payment to the Bank, and it therefore, not valid. In
actual connivance that made the fraud possible. holding that there is a substantial compliance with the provision
of Article 1256 of the Civil Code, respondent court considered
the fact that the Bank was holding Castro liable for the sum of
Petitioners' argument utterly disregards the findings of P6,000.00 plus 12% interest per annum, while the amount
respondent Court of Appeals wherein petitioners' negligence in consigned was only P3,000.00 plus 12% interest; that at the
the contracts has been aptly demonstrated, to wit: time of consignation, the Bank had long foreclosed the
mortgage extrajudicially and the sale of the mortgage property
A witness for the defendant bank, Rodolfo Desiderio claims he had already been scheduled for April 10, 1961 for non-payment
had subjected the plaintiff-appellee to several interviews. If this of the obligation, and that despite the fact that the Bank already
were true why is it that her age was placed at 61 instead of 70; knew of the deposit made by Castro because the receipt of the
why was she described in the application (Exh. B-1-9) as drug deposit was attached to the record of the case, said Bank had
manufacturer when in fact she was not; why was it placed in the not made any claim of such deposit, and that therefore, Castro
application that she has income of P20,000.00 when according was right in thinking that it was futile and useless for her to
to plaintiff-appellee, she his not even given such kind of make previous offer and tender of payment directly to the Bank
information -the true fact being that she was being paid P1.20 only in the aforesaid amount of P3,000.00 plus 12% interest.
per picul of the sugarcane production in her hacienda and 500 Under the foregoing circumstances, the consignation made by
cavans on the palay production. 11 Castro was valid. if not under the strict provision of the law,
under the more liberal considerations of equity.
From the foregoing, it is evident that the bank was as much ,
guilty as Castro was, of negligence in giving its consent to the The final issue raised is the validity or invalidity of the
contracts. It apparently relied on representations made by the extrajudicial foreclosure sale at public auction of the mortgaged
Valencia spouses when it should have directly obtained the property that was held on April 11, 1961.
needed data from Castro who was the acknowledged owner of
the property offered as collateral. Moreover, considering Petitioners contended that the public auction sale that was held
Castro's personal circumstances her lack of education, on April 11, 1961 which was the next business day after the
ignorance and old age she cannot be considered utterly scheduled date of the sale on April 10, 1961, a special public
neglectful for having been defrauded. On the contrary, it is holiday, was permissible and valid pursuant to the provisions of
demanded of petitioners to exercise the highest order of care Section 31 of the Revised Administrative Code which ordains:
and prudence in its business dealings with the Valencias
considering that it is engaged in a banking business a
business affected with public interest. It should have Pretermission of holiday. Where the day, or the last day, for
ascertained Castro's awareness of what she was signing or doing any act required or permitted by law falls on a holiday, the
made her understand what obligations she was assuming, act may be done on the next succeeding business day.
considering that she was giving accommodation to, without any
consideration from the Valencia spouses. Respondent court ruled that the aforesaid sale is null and void, it
not having been carried out in accordance with Section 9 of Act
Petitioners further argue that Castro's act of holding the No. 3135, which provides:
Valencias as her agent led the bank to believe that they were
authorized to speak and bind her. She cannot now be permitted Section 9. Notice shall be given by posting notices of the sale
to deny the authority of the Valencias to act as her agent for one for not less than twenty days in at least three public places of
who clothes another with apparent authority as her agent is not the municipality or city where the property is situated, and if
permitted to deny such authority. such property is worth more than four hundred pesos, such
notice shall also be published once a week for at least three
The authority of the Valencias was only to follow-up Castro's consecutive weeks in a newspaper of general circulation in the
loan application with the bank. They were not authorized to municipality or city.
borrow for her. This is apparent from the fact that Castro went to
the Bank to sign the promissory note for her loan of P3,000.00. We agree with respondent court. The pretermission of a holiday
If her act had been understood by the Bank to be a grant of an applies only "where the day, or the last day for doing any
act required or permitted by law falls on a holiday," or when the
last day of a given period for doing an act falls on a holiday. It
does not apply to a day fixed by an office or officer of the
government for an act to be done, as distinguished from a
period of time within which an act should be done, which may
be on any day within that specified period. For example, if a
party is required by law to file his answer to a complaint within
fifteen (15) days from receipt of the summons and the last day
falls on a holiday, the last day is deemed moved to the next
succeeding business day. But, if the court fixes the trial of a
case on a certain day but the said date is subsequently declared
a public holiday, the trial thereof is not automatically transferred
to the next succeeding business day. Since April 10, 1961 was
not the day or the last day set by law for the extrajudicial
foreclosure sale, nor the last day of a given period but a date
fixed by the deputy sheriff, the aforesaid sale cannot legally be
made on the next succeeding business day without the notices
of the sale on that day being posted as prescribed in Section 9,
Act No. 3135.
SO ORDERED.
Footnotes
* Mr. Justice de Castro was designated to sit with the First Division under
Special Order No. 225.
1 Rollo, pp. 112-133.
2 Record on Appeal, pp. 84-89.
3 Rollo, pp. 112-117.
4 Rollo, pp. 117-118.
5 Motion for Reconsideration, Rollo, pp. 134-167.
6 Resolution of the Court of Appeals, dated May 25, 1970, Rollo, p. 168.
7 Art. 24. In all contractual property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection.
8 Art. 1332. When one of the parties is unable to read or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully
explained to the former.
9 Guico vs. Mayuga 63 Phil. 328; Velasco vs. Court of Appeals, 90 Phil. 688;
Fonacier vs. Court of Appeals, 96 Phil. 417.
10 31 Phil. 160.
11 pp. 13-14, CA decision.
Republic of the Philippines On September 13, 1978, petitioner filed Civil Case No. 037226-
SUPREME COURT V with the City Court of Manila, Branch VII, presided over by
Manila Hon. Priscilla C. Mijares against private respondent for unlawful
detainer with damages (Rollo, pp. 11-13). In the same,
FIRST DIVISION petitioner alleged, among others, that private respondent had
failed to pay her monthly rentals from April to September, 1978,
amounting to Pl,080.00; that a demand letter dated August 23,
G.R. No. L-59805 July 21, 1989 1978, was sent and received by private respondent on August
30, 1978, wherein it is demanded that she pay her rentals in
LEONILA J. LICUANAN, petitioner, arrears and to vacate the premises; and that despite repeated
vs. demands, written and verbal, she refuses to pay her rentals in
HON. RICARDO D. DIAZ, Judge, Branch XXVII Court of First arrears and to vacate the premises.
Instance of Manila, and AIDA PINEDA, respondents.
On September 27,1978, private respondent filed her answer
(Ibid., pp. 14-17). In the same, private respondent, among
others, denies that she failed in paying her monthly rentals,
PARAS, J.: claiming that petitioner has refused the rental being tendered
and that upon advice of the Office of the Civil Relations, AFP,
she deposited her monthly rentals with that office for the months
This is a petition for review on certiorari of the October 15, 1981 of April to September, 1978, inclusive at P80.00 a month; and
Decision of the then Court of First Instance of Manila affirming that she admits having received the letter of demand dated
the August 8, 1979 Decision of the City Court of Manila. August 23, 1978, and claims that upon receipt of the said letter,
she called up by telephone petitioner's counsel, Atty. Manuel
Herein petitioner is the owner of an apartment situated at 3415 Melo, informing him that the rentals due for the months of April
F. Aguilar St., Bo. Obrero, Tondo, Manila, being rented by to August, 1978 have been deposited with the Office of Civil
herein private respondent since March, 1973. On January 22, Relations, AFP, and that petitioner can withdraw the said
1974, they executed a lease contract, and stipulated therein, amount due from the said office.
among others, that the monthly rental is One Hundred Eighty
Pesos (Pl80.00) to be paid within the first five (5) days of every The trial court, in a Decision dated August 8, 1979, ruled in
month. favor of private respondent (Ibid., pp. 37-42). The dispositive
portion of the said decision reads:
On April 4, 1978, the law office of Amado E. Salalongos and
Associates sent private respondent a letter, the body of which, In view thereof, the complaint for unlawful detainer with
reads: damages is hereby dismissed for lack of merit. The petition for
consignation having been rendered moot and academic, said
Upon arrival of your lessor, Mrs. Leonila Licuanan from the petition is also hereby dismissed.
United States, she found out that you have occupied her garage
situated at 3415 F. Aguilar, Bo. Obrero, Tondo, Manila, which Petitioner appealed the decision, but the then Court of First
portion is not included in your lease contract, and that despite Instance of Manila, presided over by herein respondent judge, in
her request that you remove the aparador and other things a Decision dated October 15, 1981, affirmed the appealed
which you have placed there as your stockpile, you have failed judgment (lbid., pp. 71-74). The decretal portion of the said
and refused to do so, and instead showed arrogance by telling decision reads:
her that it will need a court order before she removes the same
and restores possession to you, in violation of the terms of your
contract. WHEREFORE, the decision of the lower Court dismissing the
instant cases for unlawful detainer with damages and for
consignation is hereby AFFIRMED.
In view thereof, we are giving you five (5) days from receipt
hereof within which to vacate the premises at 3415 F. Aguilar,
otherwise, we shall be constrained to file an ejectment suit Defendant-appellee, Aida Pineda, is hereby ordered to pay the
against you. plaintiff the monthly rentals as provided for in the lease contract
for all the succeeding months from September, 1981.
May I have the honor to solicit the help of your good office with
regard to the letter I received from the law office of Amado C. Petitioner raised six (6) assignments of error to wit:
Sagalongos & Associates attached herein.
Error 1, the finding as valid and legal 'consignation' Pineda's
The accusations implied therein are not true and for your deposit with the Office of Civilian Relations of the Armed Forces
information, Sir, I have faithfully paid my monthly rentals from at Camp Aguinaldo, her rent due to Licuanan, instead of making
the time we occupied our apartment on March, 1973 up to proper CONSIGNATION with a court or with a bank as provided
March, 1978. by law.
On April 24, 1978, both petitioner and private respondent Error 2, the finding as sufficient and valid in the law the
appeared before Lt. Col. Antonio Penala, Hearing Officer of the testimony of Pineda one year after the alleged deposit with the
Civil Relations Service, but since the parties failed to reach any Army.
agreement, Lt. Col. Penala placed the notation "HOLD" on the
pertinent document; and as precautionary measure, instructed Error 3, in affirming the lower Court's grave legal error of
private respondent to deposit the amount of rental due for that injecting a totally outlandish matter into the case and improperly
month so that she could not be charged with non-payment, converting the same to form part of the ground for its erroneous
which directive private respondent readily complied with and decision.
she was issued the corresponding receipt.
Error 4, in not finding as REASONABLE COMPENSATION for
On August 30,1978, private respondent received a letter from illegally detained property the payments made by Pineda to
Atty. Manuel Melo, counsel for petitioner, demanding payment Licuanan which were delayed far beyond the three months at
of the April to August, 1978 rentals amounting to P900.00. any one time provided by the rental law.
Error 5, in finding as bona fide rent what Pineda paid which was PREMISES CONSIDERED, the October 15,1981, Decision of
delayed for sixteen months (16) from October of 1978 to the then Court of First Instance of Manila is REVERSED and
January of 1980, which was five times the three (3) months at SET ASIDE, and the respondent is ordered to vacate the
any one time provided by law. premises and to pay all accrued rentals.
In the instant case, perusal of the records will readily show that
private respondent failed to comply with this requirement. Even
granting that petitioner was present when the hearing officer of
the Office for Civil Relations, AFP, instructed private respondent
to deposit the April rental, it will be noted that petitioner
thereafter was never notified that a deposit was made in the
said office; and in the succeeding monthly rentals, no tender of
payment was made to petitioner, nor was she given any notice
that consignation will be made or that consignation had been
made.
Republic of the Philippines WHEREFORE, judgment is hereby rendered as follows:
SUPREME COURT
Manila 1. The court declares that the roof top of the building at 442
Elcano corner Urbistondo Street, Manila is included in the lease;
FIRST DIVISION
2. The court fixes the term of the lease over the subject
premises until June 30, 1992 upon the expiration of which,
petitioner [Grace Cu] is ordered to vacate the said premises;
G.R. No. 109020 March 3, 1994
3. The court declares the consignation of rentals made by the
FELISA CHAN, petitioner, petitioner to be valid and legal and hereby release[s] the
vs. petitioner from the obligation of paying the said rentals;
HON. COURT OF APPEALS, and GRACE CU, respondents.
4. All the respective claims of the parties against each other for
Arthur D. Lim Law Office for petitioner. damages and attorney's fees are hereby dismissed.
The monthly rental was raised every year. In January, 1989, it Thus, the respondent [Chan] allowed the petitioner [Cu] to hold
was increased to P3,484.80. classes in the premises only until March, 1981. 7 Obviously,
from respondent landlord's point of view, beyond March,
Sometime in November, 1989, Felisa padlock the way to the 1989, 8 (1) the petitioner may no longer be considered as lessee
roof top. Thereafter, there was an exchange of communications or debtor who may relieve herself of liability by tendering
between the parties. Grace insisted that she should be allowed payment of the rentals and if refused, by consigning them in
to use the roof top of Room 442, while Felisa maintained that court; and that (2) the petitioner is a squatter or trespasser who
only Room 401 was leased and that the use of the roof top has occupied the premises not only without any agreement with
which, according to her poses danger to the students, was the respondent but against her will. So, as far as the respondent
merely tolerated. Eventually, Felisa terminated the lease, giving is concerned, this consignation may not come under the
Grace until January 1, 1990 to vacate the premises. provisions of Article 1256 of the Civil Code cited above. Simply
put, respondent's refusal to accept petitioner['s] rental
payments was with just cause and that, therefore, the
Because of the dispute between the parties, Felisa did not respondent may not be compelled to accept such rental
collect the rental for December, 1989. Whereupon, Grace payments. 9
tendered to Felisa a check amounting to P3,310.56. The latter
refused to accept the check. So Grace's lawyer tendered the
payment in cash in the same amount of P3,310.56, with notice On the issue of ejectment, the Court of Appeals made the
to Felisa that if she will not accept the payment, the same will be following observations:
deposited in court by way of consignation. At this juncture,
Felisa allowed Grace to hold classes only up the March, 1990. Now, for a digression, We cannot see our way clear why the
MTC and the RTC passed upon the issue of ejectment raised in
On January 15, 1990, Grace filed Civil Case No. 131203 for respondent's counterclaim and fixed the term of the lease up to
consignation with the Metropolitan Trial Court of Manila, Branch June 10, 1992. Under Section 1, Rule 70 of the Revised Rules
15, alleging in her complaint that Felisa refused to accept, of Court, an action for ejectment can only be initiated through a
without justifiable cause, the rentals for the premises in verified complaint, not counterclaim. This is basic. Thus, the
question. Felisa interposed in her answer a counterclaim for said courts should not have fixed the terms of the lease. This
ejectment, contending that the lease, being month to month, issue can only be decided in a case of ejectment filed pursuant
had expired but that despite demand, Grace refused to vacate to the said rule. The supreme Court, in Ching Pue
the premises. 4 vs. Gonzales [87 Phil. 81] held:
On 18 December 1990, the MTC rendered its decision, the Consignation in court under article 1176 of the Civil Code, is not
dispositive portion of which reads: the proper proceedings to determine the relation between
landlord and tenant, the period or life of the lease or tenancy,
the reasonableness of the rental, the right of the tenant to keep consignation cases were filed with the Court of First Instance of
the premises against the will of landlord, etc. These questions Manila which did not have jurisdiction to pass upon the unlawful
should be decided in a case of ejectment or detainer like those detainer cases that were properly cognizable by the Municipal
two cases brought by Gonzales against two of the petitioners Court. In the instant case, the consignation case was filed with
under the provisions of Rule 72 of the Rules of Court. In a case the MTC which also has jurisdiction over the counterclaim for
of ejectment, the landlord claims either that the lease has ended ejectment. The Court of Appeals should have ordered the
or been terminated or that the lessee has forfeited his right as ejectment of Cu not only because it found that her refusal to
such because of his failure to pay the rents as agreed upon or accept the payment was with just cause, thereby impliedly
because he failed or refused to pay the new rentals fixed and holding that Cu has no right to stay in the premises in question,
demanded by the lessor. The lessee in his turn may put up the but also because when it promulgated its decision on 20
defense that according to law, the rental demanded of him is January 1993, the extended period (until 30 June 1992) fixed by
unreasonable, exorbitant and illegal, or that the period of the the trial court and the Regional Trial Court had already expired.
lease has not yet expired, or that if the rental law is applicable,
and that the premises are destined solely for dwelling, he may Chan further asserts that the Court of Appeals' decision gives
not be ousted therefrom because the owner does not need them Cu undue and unwarranted benefits since Cu was granted
for his own use, etc. We repeat that all these questions should much more than what she prayed for in her complaint for
be submitted and decided in a case of ejectment and cannot be consignation and Chan's counterclaim was dismissed. A new
decided in a case of consignation. 10 ejectment suit may last for years, even beyond March 1995
which is the expiration date originally prayed for by Cu, for the
Chan's motion to reconsider the decision 11 having been denied duration of which Chan would be precluded from increasing the
by the Court of Appeals in its Resolution of 23 February rentals.
1993, 12 she filed the instant petition wherein she alleges that:
In her Comment, 15 Cu claims that the Court of Appeals decided
1. THE HONORABLE COURT OF APPEALS HAS DECIDED the case properly and in accord with applicable law and
THE CASE IN A WAY PROBABLY NOT IN ACCORD WITH jurisprudence. As to the dismissal of the counterclaim for
THE LAW OR APPLICABLE JURISPRUDENCE OF THE ejectment, Cu cites Metals Engineering Resources
SUPREME COURT (SECTION 4 (A), RULE 45 OF THE RULES Corp. vs. Court of Appeals 16 which holds that where there is no
OF COURT); claim against the counterclaimant, the counterclaim is improper
and should be dismissed, and that a compulsary counterclaim is
2. THE HONORABLE COURT OF APPEALS, WITH UTMOST auxiliary to the proceeding in the original suit and derives its
RESPECT, COMMITTED AN ERROR: jurisdictional support therefrom inasmuch as it arises out of or is
necessarily connected with the transaction or occurrence that is
the subject matter of the complaint. It follows that if the court
(A) IN HOLDING THAT THE COUNTERCLAIM FOR does not have jurisdiction to entertain the main action of the
UNLAWFUL DETAINER WAS IMPROPERLY INCLUDED IN case and dismisses the same, then the compulsory
THE COMPLAINT FOR CONSIGNATION; counterclaim, being ancillary to the principal controversy, must
likewise be dismissed since no jurisdiction remained for any
(B) IN RELYING ON THE CASE OF CHING PUE grant of relief under the counterclaim.
VS. GONZALES (87 PHIL. 81) AS BASIS FOR NOT ACTING
UPON THE COUNTERCLAIM FOR UNLAWFUL DETAINER In her Reply to the Comment, 17 Chan maintains that the Court
AND IN IMPLIEDLY DISMISSING THE SAME; of Appeals should not have dismissed the counterclaim because
such dismissal would deny her justice and give undue
(C) IN RENDERING A DECISION WHICH PROMOTES, advantage to Cu. She set up the counterclaim for ejectment to
INSTEAD OF AVOID, A MULTIPLICITY OF SUITS; avoid the effects of Section 4, Rule 9 of the Rules of Court
which bars a counterclaim not set up and Section 2(A) of the
(D) IN RENDERING A DECISION WHICH GAVE THE Rules of Summary Procedure which states that a compulsory
PRIVATE RESPONDENT UNWARRANTED BENEFITS counterclaim "must be asserted in the answer, or be considered
BECAUSE SHE IS PRACTICALLY ALLOWED TO CONTINUE barred." The Metals case is not applicable to this case because
OCCUPYING PETITIONER'S PREMISES WHILE the issue therein was lack of jurisdiction by reason of non-
PETITIONER, WHOSE RIGHTS OVER THE PREMISES payment of docket fees.
WERE UPHELD, IS FORCED TO LITIGATE ANEW AND/OR
TO RE-COMMENCE UNLAWFUL DETAINER Cu filled a Rejoinder to the Reply. 18
PROCEEDINGS. 13
After deliberating on the allegations, issues, and arguments
Chan maintains that the Court of Appeals erred in giving due raised by the parties in their pleadings, we find merit in the
course to Cu's petition for review and in deciding upon issues petition.
which Cu never raised in her petition. Chan contends that the
Court of Appeals should have limited itself to the matter of the It must be stressed that the validity of the consignation and the
extension of the lease period and not on the jurisdiction over the propriety of the counterclaim for ejectment were not raised
action or subject matter of the suit which was never raised, nor before the Court of Appeals. As to the first, both the MTC and
on the propriety of the counterclaim for ejectment. the RTC ruled that the consignation was valid. The MTC
specifically stated in its decision:
Chan submits that while it is true that her cause of action for
unlawful detainer was incorporated in her answer to the On the validity of the consignation, both parties agree that the
complaint for consignation, the Rules of Court do not prohibit controlling case is Ponce de Leon vs. Syjuco Inc., 90 Phil. 311.
such procedure, and in her case the MTC has exclusive original The court believes that under the undisputed facts earlier
jurisdiction on the counterclaim for ejectment. The summary narrated, petitioner has complied with all the requisites laid
disposition of the complaint for consignation as determined by down in the said case, namely; "The debtor must show (1) that
the trial court was not affected by the filing of the counterclaim there was a debt due; (2) that the consignation of the obligation
since it is a counterclaim allowed under Section 1 of the Rule on had been made because the creditor to whom tender of
Summary Procedure as it did not involve any question of payment was made refused to accept it, or because he was
ownership nor did it allege any claim in excess of P20,000.00. absent or incapacitated, or because several persons claimed to
She then concludes that what the Court of Appeals has be entitled to receive the amount due (Art 1176, Civil Code); (3)
impliedly suggested was for her to file a separate complaint for that previous notice of the consignation had been given to the
unlawful detainer, which would be laborious and would person interested in the performance of the obligation (Art.
encourage multiplicity of suits; hence, the counterclaim for 1177, Civil Code); (4) that the amount due was placed at the
unlawful detainer should not have been dismissed. disposal of the court and (5) that after the consignation had
been made the person interested was notified thereof. 19
Chan also contends that the case of Ching Pue
vs. Gonzales 14 is not applicable because in Ching Pue the The RTC explicitly affirmed the MTC on this issue, thus:
3. With respect to the validity of the consignation, the Court barred if it arises out of or is necessarily connected with the
affirms the finding of the trial court that indeed plaintiff transaction or occurrence that is the subject matter of the
substantially complied with all the requirements of consignation opposing party's claim and does not require for its adjudication
and, therefore, the same was valid and effective. 20 the presence of third parties of whom the court cannot acquire
jurisdiction. A counterclaim may be compulsary or permissive.
Chan filed no petition for the review of the RTC decision and The former is that covered by Section 4 of Rule 9.
had, therefore, accepted the said ruling. Cu did not, for obvious
reasons, raise the issue on consignation in her petition for Chan's counterclaim for ejectment is a compulsary counterclaim
review in CA-G.R. SP No. 28870. Since the validity of the because it is necessarily connected with the transaction or
consignation was not raised before it, the Court of Appeals occurrence which is the subject matter of Cu's complaint, viz.,
seriously erred when it dismissed the complaint for consignation the lease contract between them. Consequently, the Court of
on the ground that it has no merit. Section 7, Rule 51 of the Appeals erred when it held that Chan's cause of action for
Revised Rules of Court provides: ejectment should not be set up in a counterclaim.
Sec. 7. Question that may be decided. No error which does We agreed with Chan that Ching Pue vs. Gonzales is
not effect the jurisdiction over the subject matter will be inapplicable because in Ching Pue the consignation cases were
considered unless stated in the assignment of errors and filed with the Court of First Instance which did not have
properly argued in the brief, save as the court, at its option, may jurisdiction over ejectment cases; necessarily, no counterclaim
notice plain errors not specified, and also clerical errors. for ejectment could have been interposed therein. The ratio
decidendi of the said case is that consignation is not proper
Jurisdiction is not involved in the consignation case, and no where the refusal of the creditor to accept tender of payment is
plain errors with respect thereto are discernible from the MTC with just cause. One will search therein in vain even for
and RTC decisions. an obiter dictum which suggests that an action for ejection
cannot be set up in a counterclaim. In the instant case, the
ejectment was set up as a counterclaim in the MTC which has
As to the counterclaim for ejectment, it must be emphasized that jurisdiction over it and Cu joined that issue and the incidents
the parties have conceded its propriety and accepted the MTC's thereto by her answer to the counterclaim and the counterclaim
jurisdiction thereon. As a matter of fact, the consignation was to the counterclaim.
relegated to the background and the parties heatedly tangled on
the nagging issues on the duration of the lease after the
expiration of the last written contract, the power of the court to The Court of Appeals therefore should have confined itself to
extend the lease, and the length of the extension all of which the principal error raised in Cu's petition in CA-G.R. SP No.
were provoked by and linked to the counterclaim for ejectment. 28870, viz., the duration of the extended term of the lease fixed
In her Position Paper for the Plaintiff filed with the MTC, 21 Cu in the decision of the MTC and affirmed by the RTC. As fixed,
admitted having filed an answer to the counterclaim and even a the term of the lease was extended to 30 June 1992. That
counterclaim to the counterclaim: period had expired six months before the Court of Appeals
promulgated its challenged decision. Considering that Chan did
not file any petition for the review of the RTC decision and was,
In answer to the counterclaim, plaintiff [Cu] asserted that the therefore, deemed to have agreed to the extension; and
lease is not on a month-to-month basis but for as long as the considering further that Cu, as petitioner in CA-G.R. SP No.
premises is being used as a learning center. She contends that 28870 , did not come to us on a petition for review to seek
it will be highly iniquitous that after undergoing so much reversal of the decision therein and should thus be considered
expenses, her occupancy of the premises will be abruptly to have agreed to the dismissal of her consignation case, the
terminated. . . . that on the basis of justice and equity, the period parties must be deemed bound by the extended term, which
of plaintiff's lease should be fixed for at least five years from has, nevertheless, already lapsed.
February
1990 . . .
We hold that the MTC had the authority to extend the period of
22
the lease. The parties started with a written contract of lease
As counterclaim to the counterclaim, plaintiff alleged . . . with a term for one year from 1 February 1983 to 1 February
1984. This was renewed every year for two successive years, or
and assigned as one of the errors to be resolved by the court up to 1 February 1986. No written contract was made thereafter,
the following: but Cu was allowed to occupy the premises at a monthly rental
which was increased every year. In November 1989, Chan
2. Whether or not the plaintiff may be ejected from the subject informed Cu of the termination of the lease and gave her until 1
premises. 23 January 1990 to vacate the premises. Articles 1670 and 1687 of
the Civil Code thus came into play:
The Sandiganbayan, in a Resolution dated May 4, Accordingly, upon the posting of the requisite bond, the Writ of
1989,11 ordered the PCGG to submit its comment as to the Preliminary Injunction was issued on July 10, 1989, enjoining
veracity of the alleged turnover of the management, control and the Presidential Commission on Good Government, its officers,
possession of PIMECO to the GSIS or MPCP, and if true, to representatives, nominees or agents, from proceeding or
furnish movant Sabido a copy of the PCGG resolution approving consummating the projected turn-over of PIMECO to GSIS-
the same. MPCP or to interfere with its present management and
operations, until further orders from this Court.16
PCGG filed a Motion for Reconsideration of the Resolution of installments and causing the cancellation of the lease-purchase
June 22, 1989. On August 3, 1989, the Sandiganbayan issued agreement. Hence, PIMECO prayed for a declaration that it is
its Resolution, viz: no longer bound by the provisions of the above-quoted
paragraph 5 of the lease-purchase agreement.
WHEREFORE, premises considered, plaintiffs "Motion
for Reconsideration (Re: Resolution dated June 22, In the meantime, PCGG tendered to MPCP two checks in the
1989)" dated July 3, 1989 is hereby GRANTED, and amounts of P3,000,000.00 and P2,000,000.00, or a total of
the dispositive portion of Our Resolution of June 22, P5,000,000.00, representing partial payment of accrued rentals
1989, ordered amended to read as follows: on the meat packing plant, which MPCP refused to accept on
the theory that the lease-purchase agreement had been
"WHEREFORE, finding the verified application for issuance of a rescinded. Thus, the PCGG filed an Urgent Motion20 praying
writ of preliminary injunction to be sufficient in form and that the Sandiganbayan order MPCP to accept the tendered
substance and that after due hearing, it appears that great and amount of P5,000,000.00.
irreparable injury will be caused not only to defendant-applicant
but also to PIMECO should the acts sought to be enjoined be The Sandiganbayan set the aforesaid Urgent Motion for
allowed to be done or performed, accordingly, upon defendant- hearing. On April 3, 1991, MPCP, by special appearance, filed
applicants posting of a bond of P50,000.00, let the its Comment,21 alleging that the Sandiganbayan had no
corresponding writ of preliminary injunction issue commanding jurisdiction over MPCP since it was not a party in Civil Case No.
the Presidential Commission on Good Government, its officers, 0024; that its lease-purchase agreement with PIMECO has
representatives, nominees or agents from proceeding or been rescinded as early as November 19, 1986; and that
consummating the projected turnover of PIMECO to the GSIS- PIMECO was in arrears in the payment of rentals in the amount
MPCP until further orders of this Court and from replacing, of P12,378,171.06, which is more than the equivalent of three
dismissing, demoting, reassigning, grounding, or otherwise cumulative rentals at the annual rate of P3,346,269.70.
prejudicing the present members of the PCGG management
team in PIMECO, except for valid and serious reasons not On July 2, 1991, the Sandiganbayan issued the first assailed
attributable to or arising from their objection or opposition to or Resolution, as follows:
activities of statements against the said turnover."
WHEREFORE, the Court declares that the tender of
SO ORDERED.17 payment and consignation of P5,000,000.00 in the
form of two checks, namely: China Banking
Thereafter, the Sandiganbayan continued to conduct hearings Corporation Check No. LIB M 003697 for
on the issue of the validity of the turn-over of the meat packing P3,000,000.00 and Far East Bank and Trust Company
plant to GSIS. On November 29, 1989, it issued a Resolution Check No. 29A A 021341 for P2,000,000.00, both
disposing thus: dated January 30, 1991, and payable to GSIS-MPCP,
have been validly made in accordance with law and,
WHEREFORE, considering the attendant accordingly, orders Meat Packing Corporation of the
circumstances of the present incident in light of the Philippines to accept the payment and issue the
standard laid down by the Supreme Court, this Court corresponding receipt.
finds and holds:
SO ORDERED.22
(1) That the PCGG gravely abused its discretion when
it passed the resolutions dated September 20, 1988, MPCP, still under a special appearance, filed a Motion for
and January 24, 1989, turning over the "meat packing Reconsideration of the above Resolution.23 On November 29,
complex including the land located at Barrio Ugong, 1991, the Sandiganbayan issued the second assailed
Pasig, Metro Manila," to the GSIS/MPCP (Exh. E). Resolution,24 denying MPCPs Motion for Reconsideration. Said
the Sandiganbayan:
(2) That the PCGG commissioner concerned exceeded
his authority when he executed the Memorandum of When the PCGG sequestered the assets and records
Agreement with MPCP on April 28, 1989, transferring of PIMECO, including the lease-purchase agreement
the management and operation of PIMECO to the over MPCPs meat packing plant, it assumed the duty
GSIS/MPCP (Record, pp. 1828-1832). to preserve and conserve those assets and documents
while they remained in its possession and control. That
(3) That, accordingly, the said turnovers or transfers duty did not disappear when the writ was deemed ipso
are declared null and void ab initio, and facto lifted. On the contrary, it continued until the
sequestered assets and records where returned to
PIMECO. And in the performance of that duty in order
(4) That the PCGG, its commissioners, officers, to prevent the cancellation of the lease-purchase
representatives, and agents are permanently enjoined agreement by reason of the failure to pay three
from implementing the same turnovers or transfers. accumulated yearly rentals-installments, the PCGG
made the timely tender of payment and consignation
SO ORDERED.18 which the Resolution sought to be reconsidered
sustained. To rule otherwise would be unfair and unjust
On August 30, 1990, PIMECO filed with the Sandiganbayan a to PIMECO considering that during the time the PCGG
petition, docketed as Civil Case No. 0108, entitled, "Philippine had possession and control of the sequestered assets
Integrated Meat Corporation (PIMECO), Petitioner versus Meat and records, PIMECO was not in the position to take
Packing Corporation of the Philippines (MPCP) and Presidential steps necessary for the preservation and conservation
Commission on Good Government (PCGG), of those assets and records.25
Respondents," captioned as for "Declaratory Relief and Other
Similar Remedies (Related to PCGG Case No. 25 and Civil Meanwhile, on December 2, 1991, the Sandiganbayan
Case No. 0024)."19 dismissed Civil Case No. 0108, i.e., the petition for declaratory
relief, it appearing that while the unpaid rentals as of January
In its petition, PIMECO alleged that from 1981 to 1985, PIMECO 27, 1991 have reached P7,530,036.21, PCGGs tender of
has been regularly paying the annual rentals in the amount of payment and consignation of the amount of P5,000,000.00,
P3,346,269.70; and that prior to its sequestration in January which was upheld by the Sandiganbayan in Civil Case No.
1986, PIMECO was able to pay MPCP the amount of 0024, averted the accumulation of the unpaid rentals to three
P846,269.70. However, after its sequestration, the PCGG yearly rentals-installments. Consequently, the petition for
Management Team that took over the plant became erratic and declaratory relief has become moot and academic.26
irregular in its payments of the annual rentals to MPCP, thus
presenting the danger that PIMECO may be declared in default Hence, MPCP brought this petition for certiorari, mandamus and
in the payment of rentals equivalent to three (3) annual prohibition, arguing in fine that the Sandiganbayan did not have
jurisdiction over its person since it was not a party to Civil Case (2) When he is incapacitated to receive the payment at
No. 0024; that the Sandiganbayan likewise did not acquire the time it is due;
jurisdiction over the person of PIMECO since it has not been
served summons; and that the PCGG is in estoppel because it (3) When, without just cause, he refuses to give a
has already admitted in its en banc resolutions that the lease- receipt;
purchase agreement between MPCP and PIMECO has been
rescinded. MPCP prays for injunctive relief and for judgment
setting aside the assailed Resolutions of the Sandiganbayan; (4) When two or more persons claim the same right to
ordering the Sandiganbayan to deny the PCGGs motion for collect;
consignation and to compel MPCP to accept the tendered
amount of P5,000,000.00; and prohibiting the Sandiganbayan (5) When the title of the obligation has been lost.35
from accepting any papers or pleadings from PCGG or PIMECO
against MPCP in Civil Case No. 0024. In the case at bar, there was prior tender by PCGG of the
amount of P5,000,000.00 for payment of the rentals in arrears.
Counsel for Peter Sabido filed his Comment,27 with the MPCPs refusal to accept the same, on the ground merely that
qualification that the same was being filed only on behalf of its lease-purchase agreement with PIMECO had been
Sabido, a stockholder of PIMECO, and not on behalf of the rescinded, was unjustified. As found by the Sandiganbayan,
corporation. He argued that the Sandiganbayan correctly held from January 29, 1986 to January 30, 1990, PIMECO paid, and
that the MPCP voluntarily submitted itself to the courts GSIS/MPCP received, several amounts due under the lease-
jurisdiction; that there was a valid consignation made by PCGG; purchase agreement, such as annual amortizations or rentals,
and that the Sandiganbayan did not commit grave abuse of advances, insurance, and taxes, in total sum of
discretion in issuing the assailed resolutions. P15,921,205.83.36 Surely, the acceptance by MPCP and GSIS
of such payments for rentals and amortizations negates any
PCGG filed its Comment,28 also contending that MPCP rescission of the lease-purchase agreement. Parenthetically, the
voluntarily submitted itself to the jurisdiction of the factual findings of the Sandiganbayan are conclusive upon this
Sandiganbayan; and that the consignation was validly made. Court, subject to certain exceptions.37 The aforesaid factual
findings, moreover, have not been disputed by petitioner.
Copies of this Courts resolutions were furnished PIMECO at its
principal office at 117 E. Rodriguez, Sr. Ave., Barrio Ugong, In support of its contention that the lease-purchase agreement
Pasig City. However, all of these were returned unserved with has been rescinded, MPCP makes reference to the resolutions
the notation, "RTS Closed."29 Thus, on June 19, 1995, this of the PCGG turning over to the GSIS the meat packing
Court resolved to dispense with the comment of PIMECO.30 complex and the land on which it is situated. MPCP argues that
PCGG was estopped from taking a contrary position. A closer
perusal of the resolutions, however, readily shows that the turn-
The petition, being one for certiorari, mandamus and prohibition, over was explicitly made dependent on certain conditions
is mainly anchored on the alleged grave abuse of discretion precedent, among which was the approval by the
amounting to want of jurisdiction on the part of the Sandiganbayan and the execution of a Memorandum of
Sandiganbayan. Agreement between PCGG and MPCP.38 A Memorandum of
Agreement was in fact executed on April 28, 1989, although the
Grave abuse of discretion implies a capricious and whimsical same suffers from formal and substantial infirmities. However,
exercise of judgment as is equivalent to lack of jurisdiction, or, no approval was sought from the Sandiganbayan. On the
when the power is exercised in an arbitrary or despotic manner contrary, the Sandiganbayan, in its Resolution declaring the
by reason of passion or personal hostility, and it must be so turn-over null and void, refused to honor the PCGG resolutions,
patent and gross as to amount to an evasion of positive duty reasoning thus:
enjoined or to act at all in contemplation of law. 31 It is not
sufficient that a tribunal, in the exercise of its power, abused its First, what was approved by the PCGG in its
discretion; such abuse must be grave.32 resolutions of September 20, 1988, and January 24,
1989, is the transfer of the "meat packing complex
In the assailed resolutions, the Sandiganbayan approved the including the land located at Barrio Ugong, Pasig,
consignation by PCGG of the amount of P5,000,000.00 as Metro Manila," and not "the management and
payment for back rentals or accrued amortizations on the meat operation of PIMECO." It is, however, the latter that the
packing plant, after the MPCP refused the tender of payment of Memorandum of Agreement, executed on April 28,
the same. 1989, pursuant to the said resolutions, transferred to
the GSIS.
Consignation is the act of depositing the thing due with the court
or judicial authorities whenever the creditor cannot accept or Second, the second resolution made the turnover of
refuses to accept payment, and it generally requires a prior the "meat packing complex including the land located
tender of payment.33 It should be distinguished from tender of at Barrio Ugong, Pasig Metro Manila," "upon
payment. Tender is the antecedent of consignation, that is, an compliance with these conditions, to be implemented
act preparatory to the consignation, which is the principal, and by the [PCGG] Operations and Legal Departments: . . .
from which are derived the immediate consequences which the (b) approval by the Sandiganbayan . . ." Until now,
debtor desires or seeks to obtain. Tender of payment may be however, no motion has been presented to secure that
extrajudicial, while consignation is necessarily judicial, and the approval, and none can be expected because the
priority of the first is the attempt to make a private settlement same Memorandum of Agreement changed the
before proceeding to the solemnities of consignation. 34 Tender requirement of approval to "(t)he Sandiganbayan shall
and consignation, where validly made, produces the effect of be advised of this Agreement." Even the advice
payment and extinguishes the obligation. stipulated has never been given by the PCGG.
If the creditor to whom tender of payment has been Since the Memorandum of Agreement was executed
made refuses without just cause to accept it, the debtor by one PCGG commissioner only, the same cannot
shall be released from responsibility by the validly amend the resolutions passed by the PCGG
consignation of the thing or sum due. itself. Consequently, the turnover of the management
and operation of PIMECO, which, of course, include
Consignation alone shall produce the same effect in the meat packing complex and the land of which it
the following cases: stands, stipulated in the Memorandum of Agreement,
cannot be legally enforced. Needless to say, the
commissioners should be the first to abide by the
(1) When the creditor is absent or unknown, or does PCGGs resolutions.39
not appear at the place of payment;
Under the terms of the lease-purchase agreement, the amount
of arrears in rentals or amortizations must be equivalent to the
cumulative sum of three annual installments, in order to warrant affirmative relief. The Sandiganbayan did not commit grave
the rescission of the contract. Therefore, it must be shown that abuse of discretion in saying so.1wphi1.nt
PIMECO failed to pay the aggregate amount of at least
P10,038,809.10 before the lease-purchase agreement can be WHEREFORE, in view of the foregoing, the instant petition
deemed automatically cancelled. Assuming in the extreme that, is DISMISSED for lack of merit.
as alleged by MPCP, the arrears at the time of tender on
January 30, 1991 amounted to P12,578,171.00,40 the tender
and consignation of the sum of P5,000,000.00, which had the SO ORDERED.
effect of payment, reduced the back rentals to only
P7,578,171.00, an amount less than the equivalent of three Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan,
annual installments. Thus, with the Sandiganbayans approval Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-
of the consignation and directive for MPCP to accept the Reyes, De Leon, Jr., Sandoval-Gutierrez, JJ., concur.
tendered payment, the lease-purchase agreement could not be
said to have been rescinded. Footnote
1 Rollo, pp. 25-39.
Solicitor General echoed the stand of MPCP that the 35 CIVIL CODE, Article 1256.
rescinded. And in the present Urgent Motion, MPCP 37 (1) When the conclusion is a finding grounded entirely on speculation,
again appeared. In fact, it appeared in Case No. 0024 surmise and conjecture; (2) when the inference made is manifestly an error or
even if the matter at hand was not the said motion. founded on a mistake; (3) when there is grave abuse of discretion; (4) when
Although MPCPs lawyer entered a special appearance the judgment is based on a misapprehension of facts; and (5) when the
in the present incident, he did not confine himself to findings of fact are premised on a want of evidence and/or contradicted by
assailing the jurisdiction of this Court over MPCP, but evidence on record. (Espinosa v. Sandiganbayan, G.R. No. 119285, May 9,
went to the extent of participating in the oral argument 2000; Diaz v. Sandiganbayan, 302 SCRA 118 [1999]).
38 Op. cit., note 7.
on the merits of the motion,. Indeed, his Comment 39 Record, Civil Case No. 0024, Vol. V, pp. 2463-2464.
devoted only one page on the issue of jurisdiction and 40 Rollo, p. 132.
seven pages to the alleged untenability of the motion. 41 Ibid., pp. 130-131.
Although MPCP did not expressly pray for the denial of 42 Ang Ping v. Court of Appeals, 310 SCRA 343, 349 [1999]; Avon Insurance PLC
the urgent motion, not even for lack of jurisdiction over v. Court of Appeals, 278 SCRA 312 [1997].
it, by setting forth therein arguments not only on the 43 Melendres, Jr. v. Comelec, 319 SCRA 262, 282 [1999].
jurisdictional issue, but more extensively on the alleged
lack of merit of the motion, it thereby impliedly prayed
for affirmative relief in its favor. Under these
circumstances, MPCP voluntarily submitted itself to the
jurisdiction of the Court.41
On October 23, 1978, private respondent OSSA remitted to (b) Ordering defendant Development Bank of the Philippines
DBP the initial payment of P90,000.00, in addition to the to furnish plaintiff with a statement of payments and balance,
amount of P10,000.00 previously paid to the petitioner. if any, still due from defendant de Mesa after applying all
payments already received, including the amounts placed
On February 22, 1979, DBP granted petitioner's request to under consignation;
repurchase the foreclosed properties such that in March
1979 a "Deed of Conditional Sale" was executed under (c) Upon payment by the plaintiff of the balance if any, still
which DBP agreed to sell the said properties to the petitioner due on the properties, defendant Development Bank of the
for the sum of P363,408.20, P90,000.00 of which was to be Philippines shall execute a Deed of Absolute Sale in favor of
paid as initial payment and the balance in seven (7) years on the plaintiff over the properties subject matter of the Deed of
a quarterly amortization plan, with a first quarterly installment Absolute Sale with Assumption of Mortgage executed by and
of P15,475.17. between plaintiff and defendant de Mesa;
Private respondent OSSA paid DBP the first to eight (d) Ordering plaintiff to pay defendant de Mesa the
quarterly installments from April 11, 1979 to May 8, 1991, in difference, if any, between the agreed purchase price of
the total amount of P137,595.31, which installment P500,000.00 and the payments made to the defendant
payments were applied to petitioner's obligation with DBP Development Bank of the Philippines, less the P10,000,00
pursuant to the Deed of Conditional Sale. down payment already paid and the P34,363.08 consigned
with the Court; and
On March 11, 1981, petitioner de Mesa notified private
respondent OSSA that she was rescinding the Deed of Sale (e) Ordering defendant de Mesa to pay plaintiff the sum of
with Assumption of Mortgage she executed in favor of the P10,000.00 as attorneys fees.
SO ORDERED. 5 (i) Whether or not the requirements of Articles 1256 to 1261 can be
"relaxed" or "substantially complied with".
WHEREFORE, the decision appealed from is hereby (iii) Whether or not petitioner de Mesa can be held in estoppel for the
MODIFIED: acts of the DBP.
(a) declaring the consignation made by OSSA as proper and Art. 1370 of the New Civil Code, reads:
valid as far as de Mesa is concerned, and ordering de Mesa
to receive the said amount consigned with the court and pay Art. 1370. If the terms of a contract are clear and leave no doubt upon
DBP with the said amount; the intention of the contracting parties, the literal meaning of its
stipulation shall control.
(b) ordering DBP to furnish de Mesa with a statement of xxx xxx xxx
payments and the balance, if any, still due from de Mesa
after applying all payments already received, including the
When the words of a contract are plain and readily understood, there is
amounts paid under consignation; no room for construction. As the agreement of the parties are reduced to
writing, such agreement is considered as containing all its terms and
(c) ordering de Mesa to furnish OSSA with a copy of the there can be, between the parties and their successors-in-interest, no
evidence of the terms of the written agreement other than the contents
statement of payments described in the preceding
of the writing. 8
paragraph, and the balance appearing therein, if any, shall
be paid by OSSA for the account of de Mesa;
In the case under consideration, the terms of the "Deed of Sale with
Assumption of Mortgage Debt" are clear and leave no doubt as to what
(d) ordering DBP to execute a Deed of Absolute Sale in were sold thereunder. It provided as follows:
favor of de Mesa over the properties subject of the Deed of
Conditional Sale; WHEREAS, the VENDOR has agreed to sell to the VENDEE (plaintiff
Ossa House, Inc.), and the VENDEE has agreed to purchase form the
VENDOR, all the properties described in Items I, II, and III, of the First
(e) ordering Ossa to pay de Mesa the difference, if any, Whereas Clause, for the price and under the terms hereinafter
between the agreed purchase price of P500,000.00 and the contained;
payments made to DBP, less the P10,000.00 down payment
and the P34,363.08 consigned with the court; NOW, THEREFORE, for and in consideration of the premises and the
sum of TEN THOUSAND PESOS (P10,000.00), the receipt whereof is
(f) ordering de Mesa thereafter, to execute a Deed of hereby acknowledged, and the assumption by the VENDEE of the total
mortgage obligation of the VENDOR has sold, transferred, and
Absolute Sale in favor of OSSA over the properties subject conveyed, and by these presents does sell, transfer and convey, unto
of the Deed of Sale with assumption of Mortgage; and the said VENDEE, its administrators and assigns, free from all liens and
encumbrances except as noted herein, the parcels of land hereinabove
(g) ordering de Mesa to pay OSSA the sum of P10,000.00 described in Items I, II, and III, together with all the buildings and
improvements thereon;
as and for attorney's fees.
The VENDEE does hereby assume the payment of the mortgage
No pronouncement as to costs. obligations by repurchase of all the properties mortgaged on installment,
with an initial payment of P90,000.00 representing payment 20% of the
total obligation; and consequently, the within sale is subject to the
SO ORDERED. 6 mortgage in favor of the Development Bank of the Philippines;
On May 5, 1992, petitioner interposed a motion for Nowhere is it provided in the aforequoted provisions, as the petitioner
reconsideration of the aforesaid decision, theorizing that: insists, that what she sold to respondent OSSA was merely the right to
redeem the mortgaged properties and not the foreclosed properties
I themselves. On the contrary, the very words of the contract reveal that
the subject of the sale were "all the properties described in items I, II, III
of the First Whereas Clause."
THIS COURT ERRED WHEN IT HELD THAT WHAT WAS SOLD
UNDER THE "DEED OF SALE WITH ASSUMPTION OF MORTGAGE"
WERE THE PROPERTIES LISTED THEREIN AND NOT MERELY THE Indeed, the contract under scrutiny is so explicit and unambiguous that it
RIGHT OF REDEMPTION DESPITE THE TESTIMONIES OF BOTH does not justify any attempt to read into it any supposed intention of the
CONTRACTING PARTIES THAT WHAT SOLD AND BOUGHT WAS parties, as the said contract is to be understood literally, just as they
MERELY THE RIGHT OF REDEMPTION. appear on its
face. 9
II
Petitioner capitalizes on the following prefatory clause of the contract, to
wit:
THIS COURT ERRED IN HOLDING THAT DE MESA'S REQUEST TO
REPURCHASE THE FORECLOSED PROPERTIES FROM DBP
REDOUNDED TO THE BENEFIT OF OSSA HOUSE, INC. WHEREAS, the VENDOR (defendant De Mesa) is the registered owner
with a preferential right of redemption of the following mortgaged
properties with the Development Bank of the Philippines, more
III particularly described as follows:
THIS COURT ERRED IN HOLDING DE MESA IN ESTOPPEL. However, not the slightest indication can be gleaned from the
abovequoted provision that the subject of the "Deed of Sale with
Assumption of Mortgage" was petitioner's right of redemption. The said
IV
provision merely speaks of the preferential right of the latter to redeem
the real properties involved.
THIS COURT ERRED IN RULING THAT THE MANDATORY
REQUIREMENTS OF THE CIVIL CODE ON CONSIGNATION CAN BE
Furthermore, the court discerns no inconsistency between the contract's
WAIVED BY THE TRIAL COURT. 7
recognition of the preferential right of petitioner to redeem the
mortgaged properties, and the sale of the said properties to respondent
With the denial of her aforestated motion for reconsideration, petitioner OSSA. Petitioner can validly redeem subject properties and still
found her way to this Court via the present petition, raising the issues: recognize the sale thereof to the respondent corporation because
nothing therein is contrary to law, morals, good customs, public order or
public policy. Besides, it is a well-settled doctrine that in the construction
of an instrument where there are several provisions, or particulars, such II. Three parcels of land situated in Pasay City, with TCT No. 14673 containing an area of
a construction is, if possible, to be adopted as will give effect to 402 square meters and TCT No. 14672 containing an area of 35 square meters and 330
all. 10 Thus, the recognition of both the preferential right of the petitioner square meters.
to redeem the mortgaged properties and the sale of the same properties III. A parcel of land situated in Naic, Cavite, with TCT No. T-3993 containing an area of
to respondent OSSA is in order, as it would harmonize and give effect to 39,580 square meters.
IV. Two parcels of land situated in Makan, General Santos City, with TCT No. T-11067
all the provisions of the "Deed of Sale with Assumption of Mortgage"
containing an area of 837 square meters.
under controversy. 4 xxx xxx xxx
WHEREAS, the VENDOR (defendant De Mesa) is the registered owner with a preferential
As aptly ruled by the respondent court, the grant by DBP of petitioner's right of redemption of the following mortgaged properties with the Development Bank of
request to repurchase the mortgaged properties redounded to the the Philippines, more particularly described as follows:
I. Two (2) parcels of land situated in Makati, Metro Manila, with TCT no. (232345) S-60337
benefit of respondent OSSA, the sale of the said properties having been
containing an area of 188 square meters and TCT No. (232344) S-50336 containing an
previously agreed upon by the petitioner and respondent
area of 236 square meters.
OSSA.1wphi1.nt II. Three parcels of land situated in Pasay City, with TCT No. 14673 containing an area of
402 square * meters and TCT No. 14672 containing an area of 35 square meters and 330
Petitioner contends that she is not estopped from questioning DBP's square meters.
application to her account of OSSA's initial payment of P90,000.00 as III. A parcel of land situated in Naic, Cavite, with TCT No. T-3993 containing an area of
39,580 square meters.
well as the first to eight quarterly installments. It bears stressing,
IV. Two parcels of land situated in Makan, General Santos City, with TCT No. T-11067
however, that the remittance of the said payment was made in
containing an area of 837 square meters.
implementation of the provisions of their contract. The belated claim of * Approximately, One-Half (1/2) has been taken by public works improvements.
the petitioner, which was not given credence by the trial court, that she WHEREAS, the above-described parcels of land and buildings and improvements thereon
objected to the application by DBP to her account of all the remittances were mortgaged in favor of the Development Bank of the Philippines, and the total
of OSSA is tainted with bad faith as this is an attempt to renegade amount of the VENDOR'S obligation amounting to P455,636.92 as of May 10, 1978;
against her contract with respondent OSSA. Besides, the issue of WHEREAS, the VENDOR has agreed to sell to the VENDEE (plaintiff Ossa House, Inc.), and
whether or not petitioner objected is a question of fact that has already the VENDEE has agreed to purchase form the VENDOR, all the properties described in
been settled by the trial court which best performs the matter of Items I, II, and III, of the First Whereas Clause, for the price and under the terms
assigning values to the testimony of witnesses, 11 and whose findings hereinafter contained;
are accorded great weight especially when affirmed by the Court of NOW, THEREFORE, for and in consideration of the premises and the sum of TEN
Appeals 12, as in the case at bar. THOUSAND PESOS (P10,000.00), the receipt whereof is hereby acknowledged, and the
assumption by the VENDEE of the total mortgage obligation of the VENDOR has sold,
transferred, and conveyed, and by these presents does sell, transfer and convey, unto the
Petitioner next argues that there was no notice to her regarding OSSA's said VENDEE, its administrators and assigns, free from all liens and encumbrances except
consignation of the amounts corresponding to the 12th up to the 20th as noted herein, the parcels of land hereinabove described in Items I, II, and III, together
quarterly installments. The records, however, show that several tenders with all the buildings and improvements thereon;
of payment were consistently turned down by the petitioner, so much so The VENDEE does hereby assume the payment of the mortgage obligations by repurchase
that the respondent OSSA found it pointless to keep on making formal of all the properties mortgaged on installment, with an initial payment of P90,000.00
tenders of payment and serving notices of consignation to petitioner. representing payment 20% of the total obligation; and consequently, the within sale is
subject to the mortgage in favor of the Development Bank of the Philippines;
Moreover, in a motion dated May 7, 1987, OSSA prayed before the
The VENDEE does hereby undertake to obtain from the Development Bank of the
lower court that it be allowed to deposit by way of consignation all the
Philippines the release in favor of the VENDOR a discharge and cancellation of the
quarterly installments, without making formal tenders of payment and mortgage on the property listed in Item IV of the First Whereas Clause;
serving notice of consignation, which prayer was granted by the trial The total purchase price of the properties listed in Items I, II, and III is P500,0000.00 and
court in the Order dated July 3, 1982. The motion and the subsequent should the total obligation as of even date be less than P500,000.00 as the difference be
court order served on the petitioner in the consignation proceedings paid to the VENDOR minus the P10,000.00 representing P5,000.00 of the option money
sufficiently served as notice to petitioner of OSSA's willingness to pay previously paid to the VENDOR, and another P5,000.00 upon the execution of this
the quarterly installments and the consignation of such payments with document;
the court. For reasons of equity, the procedural requirements of It is further expressly understood and agreed that for the full transmission of rights in the
consignation are deemed substantially complied with in the present properties above-mentioned in Items I, II, and III, to herein VENDEE Corporation, VENDOR
case. 13 shall sign any other document necessary therefor.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at Manila,
Philippines, on this 23rd day of October, 1978 (Decision, Rollo, p. 38-41)
Petitioner also insists that there was no valid tender of payment 5 Id., p. 37.
because the amount tendered was P34,363.08, not P51,243.26, and 6 Decision, Rollo, pp. 49-50.
assuming ex gratia argumenti that it was the correct amount, the tender 7 Petition, Rollo, p. 19.
thereof was still not valid, the same having been made by check. This 8 Dihiasan vs. Court of Appeal, 153 SCRA 712, p. 717, citing: Siasat vs. Intermediate
claim, however, does not accord with the records on hand. Thus, the Appellate Court, 134 SCRA 238, p. 246.
Court of Appeals ratiocinated: 9 Tolentino, p. 559, Volume IV, Civil Code of the Philippines, 1997 Reprinting, citing:
Alburo vs. Villanueva, 7 Phil. 277; Azarraga vs. Rodriguez, 9 Phil. 637; Palacios vs.
Municipality of Cavite, 12 Phil. 140; Nolan vs. Majinay, 12 Phil. 559; De Lizardi vs. Yaptico,
The "Deed of Sale with Assumption of Mortgage", was for a 30 Phil. 211; Escario vs. Regis, 31 Phil. 618; Chinchilla vs. Rafael, 39 Phil. 888; Kasilag vs.
consideration of P500,000.00, from which shall be deducted de Mesas's Rodriguez, Off. Gaz. Supp., August 16, 1941, p. 247; Jollye vs. Barcelon, Off. Gaz. Supp.,
outstanding obligation, with the DBP pegged as of May 10, 1978, by the July 19, 1941, p. 217; Puyat and Sons vs. Acro Amusement Company, Off. Gaz. August 16,
parties themselves, at P455,636,92. This amount of P455,636.92 owing 1941, p. 1434; Gonzales Mondragon vs. Santos, 48 Off. Gaz. 560, Feb. 1952; Victorias
DBP, is what OSSA agreed to assume. What remained to be paid de Planters Assn. vs. Victorias Milling Co., G.R. No. L-6648, July 25, 1955; Pacific Oxygen and
Acetylene Co. vs. Central Bank, 22 SCRA 917; Commission of Internal Revenue vs.
Mesa was P44,636.08, but OSSA made an advance payment of
Cadwallader Pacific Company, 73 SCRA 59-61; Phil. Air Lines, Inc. vs. Phil. Airlines
P10,000.00, hence the remaining amount payable to de Mesa is
Employees Association, 70 SCRA 180-181; Cebu Portland Cement Company vs. Dumon, 61
P34,363.08, which OSSA tendered in cash (Exhibits "X", "BB" and SCRA 218; Piczon vs. Piczon, 61 SCRA 67-68; Philippine-American General Insurance Co.,
"CC"). 14 Inc. vs. Mutuc, 61 SCRA 22-23; San Mauricio Mining Co. vs. Ancheta, 105 SCRA 371; Pichel
vs. Alonzo, 111 SCRA 341; Ascalon vs. Court of Appeals, 158 SCRA 542; Bagadiong vs.
It is thus beyond cavil that the respondent OSSA tendered the correct Abundo, 165 SCRA 459; Ramos vs. Court of Appeals, 180 SCRA 635.1wphi1.nt
10 Reparations Commission v. Northern Lines Inc., 34 SCRA 203, p. 211, citing: Mangila v.
amount, the tender of which was in cash and not by check, as theorized
Lantin, L-24735, Oct. 31, 1969; UP Board of Regents v. Auditor General, L-19617, Oct. 31,
by petitioner.
1969, Asturias Sugar Central, Inc. v. Commissioners of Customs, L-19337, Sept. 30, 1969;
PNB v. Court of Appeals, L-27117, July 30, 1969; Neilson & Co., Inc. v. Lepanto Cosolidated
Premises studiedly considered, the Court is of the ineluctable Mining Co., L-21601, Dec. 28, 1968; Rivera v. San Miguel Corp., L-26197, Aug. 30, 1968;
conclusion, and so holds, that the Court of Appeals erred not in affirming People v. Doriquez, L-24444, July 29, 1968; Alhambra Cigar and Cigarette Co. v. Securities
the decision of the trial court of origin. & Exchange Commission, L-23606, July 29, 1968; Andico vs. Judge Roan, L-26563, April 16,
1968; Le Hua Sia v. Hon. Reyes, L-21686, April 16, 1968; Bachrach Trans. Co. Inc. v. Rural
Transit Employees Assn., L-21768, Aug. 23, 1966; Republic v. Reyes, L-22550, May 19,
WHEREFORE, the petition is DENIED and the assailed Decision of the 1966.
Court of Appeals in CA-G.R. Nos. 19145 and 19156 dated March 31, 11 People vs. Fabro, 278 SCRA 304 p. 309, citing: People vs. Bondoc, 232 SCRA 478 [1994];
1992 AFFIRMED. No pronouncement as to costs. People vs. Nimo, 277 SCRA 69 [1993].
12 Meneses vs. Court of Appeals 246 SRCA 162, p. 171 [1995], citing Binalay vs. Manalo,
195 SCRA 374 [1994].
SO ORDERED. 13 Rural Bank of Caloocan vs. Court of Appeals, 104 SCRA 151, p. 170.
14 Decision, Rollo, p. 48.
Footnotes
1 Rollo, pp. 36-51.
2 First Division, composed of Associate Justices: Cezar D. Francisco (ponente), Emeterio C.
Cui, and Antonio M. Martinez (Acting Chairman). Republic of the Philippines
3 I. Two (2) parcels of land situated in Makati, Metro Manila, with TCT no. (232345) S- SUPREME COURT
60337 containing an area of 188 square meters and TCT No. (232344) S-50336 containing
an area of 236 square meters. Manila
THIRD DIVISION Examinations conducted on the records of said lots revealed
that you once contracted to purchase said lots but your
G.R. No. 112733 October 24, 1997 contracts were cancelled for non-payment of the stipulated
installments.
PEOPLE'S INDUSTRIAL AND COMMERCIAL
CORPORATION, petitioner, Desirous of maintaining good and neighborly relations with you,
vs. we caused to send you this formal demand for you to remove
COURT OF APPEALS and MAR-ICK INVESTMENT your said wall within fifteen (15) days from your receipt hereof,
CORPORATION, respondents. otherwise, much to our regret, we shall be constrained to seek
redress before the Courts and at the same time charge you with
reasonable rentals for the use of said lots at the rate of One
ROMERO, J.: (P1.00) Peso per square meter per month until you shall have
finally removed said wall. 6
This petition for review on certiorari of the Decision 1 of the
Court of Appeals arose from the complaint for accion publiciana Private respondent reiterated its protest against the
de posesion over several subdivision lots that was premised on encroachment in a letter dated February 16, 1981. 7 It added
the automatic cancellation of the contracts to sell those lots. that petitioner had failed to abide by its promise to remove the
encroachment, or to purchase the lots involved "at the current
Private respondent Mar-ick Investment Corporation is the price or pay the rentals on the basis of the total area occupied,
exclusive and registered owner of Mar-ick Subdivision in Barrio all within a short period of time." It also demanded the removal
Buli, Cainta, Rizal. On May 29, 1961, private respondent of the illegal constructions on the property that had prejudiced
entered into six (6) agreements with petitioner People's the subdivision and its neighbors.
Industrial and Commercial Corporation whereby it agreed to sell
to petitioner six (6) subdivision lots. 2Except for Lot No. 8 that After a series of negotiations between the parties, they agreed
has an area of 253 square meters, all the lots measure 240 to enter into a new contract to sell 8 involving seven (7) lots,
square meters each. Five of the agreements, involving Lots namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total area of
Nos. 3, 4, 5, 6 and 7, similarly stipulate that the petitioner 1,693 square meters. The contract stipulates that the previous
agreed to pay private respondent for each lot, the amount of contracts involving the same lots (actually minus Lot No. 2)
P7,333.20 with a down payment of P480.00. The balance of "have been cancelled due to the failure of the PURCHASER to
P6,853.20 shall be payable in 120 equal monthly installments of pay the stipulated installments." It states further that the new
P57.11 every 30th of the month, for a period of ten years. With contract was entered into "to avoid litigation, considering that
respect to Lot No. 8, the parties agreed to the purchase price of the PURCHASER has already made use of the premises since
P7,730.00 with a down payment of P506.00 and equal monthly 1981 to the present without paying the stipulated installments."
installments of P60.20. The parties agreed that the contract price would be
P423,250.00 with a down payment of P42,325.00 payable upon
All the agreements have the following provisions: the signing of the contract and the balance of P380,925.00
payable in forty-eight (48) equal monthly amortization payments
9. Should the PURCHASER fail to make the payment of any of of P7,935.94.
the monthly installments as agreed herein, within One Hundred
Twenty (120) days from its due date, this contract shall, by the The new contract bears the date of October 11, 1983 but neither
mere fact of nonpayment, expire by itself and become null and of the parties signed it. Thereafter, Tomas Siatianum issued the
void without necessity of notice to the PURCHASER or of any following checks in the total amount of P37,642.72 to private
judicial declaration to the effect, and any and all sums of money respondent: (a) dated March 4, 1984 for P10,000.00; (b) dated
paid under this contract shall be considered and become rentals March 31, 1984 for P10,000.00; (c) dated April 30, 1984 for
on the property, and in this event, the PURCHASER should P10,000.00; (d) dated May 31, 1984 for P7,079.00, and (e)
he/she be in possession of the property shall become a mere dated May 31, 1984 for P563.72. 9
intruder or unlawful detainer of the same and may be ejected
therefrom by the means provided by law for trespassers or Private respondent received but did not encash those checks.
unlawful detainers. Immediately after the expiration of the 120 Instead, on July 12, 1984 it filed in the Regional Trial Court of
days provided for in this clause, the OWNER shall be at liberty Antipolo, Rizal, a complaint for accion publiciana de
to dispose of and sell said parcel of land to any other person in posesion against petitioner and Tomas Siatianum, as president
the same manner as if this contract had never been executed or and majority stockholder of petitioner. 10 It prayed that petitioner
entered into. be ordered to remove the wall on the premises and to surrender
possession of Lots Nos. 2 to 8 of Block 11 of the Mar-ick
The breach by the PURCHASER of any of the conditions Subdivision, and that petitioner and Tomas Siatianum be
considered herein shall have the same effect as non-payment of ordered to pay: (a) P259,074.00 as reasonable rentals for the
the installments of the purchase price. use of the lots from 1961, "plus P1,680.00 per month from July
1, 1984 up to and until the premises shall have been vacated
In any of the above cases the PURCHASER authorizes the and the wall demolished"; (b) P10,000.00 as attorney's fees; (c)
OWNER or her representatives to enter into the property to take moral and exemplary damages, and (d) costs of suit. In the
possession of the same and take whatever action is necessary alternative, the complaint prayed that should the agreements be
or advisable to protect its rights and interests in the property, deemed not automatically cancelled, the same agreements
and nothing that may be done or made by the PURCHASER should be declared null and void.
shall be considered as revoking this authority or a denial
thereof. 3 In due course, the lower court 11 rendered a decision finding that
the original agreements of the parties were validly cancelled in
After the lapse of ten years, however, petitioner still had not fully accordance with provision No. 9 of each agreement. The parties
paid for the six lots; it had paid only the down payment and eight did not enter into a new contract in accordance with Art. 1403
(8) installments, even after private respondent had given (2) of the Civil Code as the parties did not sign the draft
petitioner a grace period of four months to pay the arrears. 4 As contract. Receipt by private respondent of the five checks could
of May 1, 1980, the total amount due to private respondent not amount to perfection of the contract because private
under the contract was P214,418.00. 5 respondent never encashed and benefited from those checks.
Furthermore, there was no meeting of the minds between the
parties because Art. 475 of the Civil Code should be read with
In his letter of March 30, 1980 to Mr. Tomas Siatianum the Statute of Frauds that requires the embodiment of the
(Siatianun) who signed the agreements for petitioner, private contract in a note or memorandum.
respondent's counsel protested petitioner's encroachment upon
a portion of its subdivision particularly Lots Nos. 2, 3, 4, 5, 6, 7
and 8. A portion of the letter reads: The lower court opined that the checks represented the deposit
under the new contract because petitioner failed to prove that
those were monthly installments that private respondent refused
to accept. What petitioner proved instead was the fact that it
was not able to pay the rest of the installments because of a the National Housing Authority to issue a writ of execution in the
strike, fire and storm that affected its operations. Be that as it enforcement of its decisions under P.D. No. 957.
may, what was clearly proven was that both parties negotiated a
new contract after the termination of the first. Thus, the fact that These decrees, however, were not yet in existence when private
the parties tried to negotiate a new contract indicated that they respondent invoked provision No. 9 of the agreements or
considered the first contract as "already cancelled." contracts to sell and cancelled these in October 1971. 18 Article
4 of the Civil Code provides that laws shall have no retroactive
With respect to petitioner's allegation on a "free right-of-way" effect unless the contrary is provided. Thus, it is necessary that
constituted on Lot No. 2, the lower court found that the an express provision for its retroactive application must be
agreement thereon was oral and not in writing. As such, it was made in the law. 19 There being no such provision in both P.D.
not in accordance with Art. 749 of the Civil Code requiring that, Nos. 957 and 1344, these decrees cannot be applied to a
to be valid, a donation must be in a public document. situation that occurred years before their promulgation.
Consequently, because of the principle against unjust Moreover, granting that said decrees indeed provide for a
enrichment, petitioner must pay rentals for the occupancy of the retroactive application, still, these may not be applied in this
property. The lower court disposed of the case as follows: case.
IN VIEW OF ALL THE FOREGOING, defendant corporation is The contracts to sell of 1961 were cancelled in virtue of
hereby directed to return subject Lots Nos. 2, 3, 4, 5, 6, 7 and 8 provision No. 9 thereof to which the parties voluntarily bound
to plaintiff corporation, and to pay to the latter the following themselves. In Manila Bay Club Corp. v. Court of
amounts: Appeals, 20 this Court interpreted as requiring mandatory
compliance by the parties, a provision in a lease contract that
1. reasonable rental of P1.00 per square meter per month from May 29, 1961, failure or neglect to perform or comply with any of the
for Lots Nos. 3, 4, 5, 6, 7 and 8, and from July 12, 1984, for Lot No. 2, up to the covenants, conditions, agreements or restrictions stipulated
date they will vacate said lots. The amount of P4,735.12 (Exhibit "R") already shall result in the automatic termination and cancellation of the
paid by defendant corporation to plaintiff corporation for the six (6) lots under lease. The Court added:
the original contracts shall be deducted from the said rental;
2. attorney's fees in the amount of P10,000.00; and . . . . Certainly, there is nothing wrong if the parties to the lease
3. costs of the suit.
contract agreed on certain mandatory provisions concerning
their respective rights and obligations, such as the procurement
SO ORDERED. of insurance and the rescission clause. For it is well to recall
that contracts are respected as the law between the contracting
Petitioner elevated the case to the Court of Appeals. However, parties, and they may establish such stipulations, clauses, terms
on October 16, 1992, the Court of Appeals affirmed in toto the and conditions as they may want to include. As long as such
lower court's decision. Petitioner's motion for reconsideration agreements are not contrary to law, morals, good customs,
having been denied, it instituted the instant petition for review public policy or public order they shall have the force of law
on certiorari raising the following issues for resolution: between them.
(1) whether or not the lower court had jurisdiction over the Consequently, when petitioner failed to abide by its obligation to
subject matter of the case in view of the provisions of Republic pay the installments in accordance with the contracts to sell,
Act No. 6552 and Presidential Decree No. 1344; provision No. 9 automatically took effect. That private
respondent failed to observe Section 4 of Republic Act No.
6552, the "Realty Installment Buyer Protection Act," is of no
(2) whether or not there was a perfected and enforceable moment. That section provides that "(I)f the buyer fails to pay
contract of sale (sic) on October 11, 1983 which modified the the installments due at the expiration of the grace period, the
earlier contracts to sell which had not been validly rescinded; seller may cancel the contract after thirty days from receipt by
the buyer of the notice of cancellation or the demand for
(3) whether or not there was a valid grant of right of way rescission of the contract by a notarial act. Private respondent's
involving Lot No. 2 in favor of petitioner; and cancellation of the agreements without a duly notarized demand
for rescission did not mean that it violated said provision of law.
(4) whether or not there was a justification for the grant of Republic Act No. 6552 was approved on August 26, 1972, long
rentals and the award of attorney's fees in favor of private after provision No. 9 of the contracts to sell had become
respondent. 12 automatically operational. As with P.D. Nos. 957 and 1344,
Republic Act No. 6552 does not expressly provide for its
retroactive application and, therefore, it could not have
The issue of jurisdiction has been precluded by the principle of encompassed the cancellation of the contracts to sell in this
estoppel. It is settled that lack of jurisdiction may be assailed at case.
any stage of the proceedings. However, a party's participation
therein estops such party from raising the issue. 13 Petitioner
undoubtedly has actively participated in the proceedings from its At this juncture, it is apropos to stress that the 1961 agreements
inception to date. In its answer to the complaint, petitioner did are contracts to sell and not contracts of sale. The distinction
not assail the lower court's jurisdiction; instead, it prayed for between these contracts is graphically depicted in Adelfa
"affirmative relief. 14 Even after the lower court had decided Properties, Inc. v. Court of
against it, petitioner continued to affirm the lower court's Appeals, 21 as follows:
jurisdiction by elevating the decision to the appellate
court, 15 hoping to obtain a favorable decision but the Court of . . . . The distinction between the two is important for in a
Appeals affirmed the court a quo's ruling. Then and only then contract of sale, the title passes to the vendee upon the delivery
did petitioner raise the issue of jurisdiction in its motion for of the thing sold; whereas in a contract to sell, by agreement the
reconsideration of the appellate court's decision. Such a ownership is reserved in the vendor and is not to pass until the
practice, according to Tijam v. Sibonghanoy, 16 cannot be full payment of the price. In a contract of sale, the vendor has
countenanced for reasons of public policy. lost and cannot recover ownership until and unless the contract
is resolved or rescinded; whereas, in a contract to sell, title is
Granting, however, that the issue was raised seasonably at the retained by the vendor until the full payment of the price, such
first opportunity, still, petitioner has incorrectly considered as payment being a positive suspensive condition and failure of
legal bases for its position on the issue of jurisdiction the which is not a breach but an event that prevents the obligation
provisions of P.D. Nos. 957 and 1344 and Republic Act No. of the vendor to convey title from becoming effective. Thus, a
6552. P.D. No. 957, the "Subdivision and Condominium Buyers' deed of sale is considered absolute in nature where there is
Protective Decree" which took effect upon its approval on July neither a stipulation in the deed that title to the property sold is
12, 1976, vests upon the National Housing Authority (NHA) reserved in the seller until the full payment of the price, nor one
"exclusive jurisdiction to regulate the real estate trade and giving the vendor the right to unilaterally resolve the contract the
business" in accordance with the provisions of the same moment the buyer fails to pay within a fixed period.
decree. 17 P.D. No. 1344, issued on April 2, 1978, empowered
That the agreements of 1961 are contracts to sell is clear from respondent dealt with petitioner with admirable patience,
the following provisions thereof: probably in view of the strike, the fire in 1968 that burned
petitioner's factory, and the typhoon in 1970. 28 If exercised its
3. Title to said parcel of land shall remain in the name of the contractual authority to cancel the agreements only after
OWNER until complete payment by the PURCHASER of all petitioner had reneged in its obligation after paying only eight (8)
obligations herein stipulated, at which time the OWNER agrees installments. When the contracts matured, it still gave petitioner
to execute a final deed of sale in favor of the PURCHASER and a grace period of four (4) months within which to comply with its
cause the issuance of a certificate of title in the name of the obligations. It considered the contracts cancelled only as of
latter, free from liens and encumbrances except those provided October 1971 or several years after petitioner's last installment
in the Land Registration Act, those imposed by the authorities, payment 29 and definitely more than ten years after the
and those contained in Clauses Nos. Five (5) and Six (6) of this agreements were entered into.
agreement.
Because the contracts to sell had long been cancelled when
xxx xxx xxx private respondent filed the accion publiciana de posesion on
July 12, 1984, it was the proper Regional Trial Court that had
jurisdiction over the case. By then, there was no more
4. The PURCHASER shall be deemed for all legal purposes to installment buyer and seller relationship to speak of. It had been
take possession of the parcel of land upon payment of the down recuded to a mere case of an owner claiming possession of its
or first payment; provided, however, that his/her possession property that had long been illegally withheld from it by another.
under this section shall be only that of a tenant or lessee and
subject to ejectment proceedings during all the period of this
agreement. Petitioner alleges that there was a "new perfected and
enforceable contract of sale" between the parties in October
1983 for two reasons. First, it paid private respondent the down
5. The parcel of land subject of this agreement shall be used by payment or "deposit of Contract" 30 through the five checks.
the PURCHASER exclusively for legal purposes, and he shall Second, the receipt signed by private respondent's
not be entitled to take or remove soil, stones, or gravel from it or representative satisfies the requirement of a "note or
any other lots belonging to the OWNER. memorandum" under Article 1403 (2) of the Civil Code because
it states the object of the contract (six lots of Mar-Ick Subdivision
Hence, being contracts to sell, Article 1592 of the Civil Code measuring 1,453 square meters), the price (P250.00 per square
which requires rescission either by judicial action or notarial act meter with a down payment of 10% or P37,542.72), and the
is not applicable. 22 receipt itself opens with a statement referring to the "purchase"
of the six lots of Mar-Ick Subdivision. 31
Neither may petitioner claim ignorance of the cancellation of the
contracts. Aside from his letters of March 30, 1980 and The contract of October 1983 which private respondent offered
February 16, 1981, private respondent's counsel, Atty. Manuel in evidence as Exhibit S, is entitled "CONTRACT TO SELL."
Villamayor, had sent petitioner other formal protests and While the title of a contract is not controlling, its stipulations
demands. 23 These letters adequately satisfied the notice confirm the nature of that contract. Thus, it provides:
requirement stipulated in provision No. 9 of the contracts to sell.
If petitioner had not agreed to the automatic and extrajudicial 5. Title to said parcels of land shall remain in the name of the
cancellation of the contracts, it could have gone to court to OWNER until complete payment by the PURCHASER of all
impugn the same but it did not. Instead, it sought to enter into a obligations herein stipulated, at which time, the OWNER agrees
new contract to sell, thereby confirming its veracity and validity to execute a final deed of sale in favor of the PURCHASER and
of the extrajudicial rescission. 24 Had not private respondent filed cause the issuance of certificates of title in the name of the
the accion publiciana de posesion, petitioner would have latter, free from all liens and encumbrances except those
remained silent about the whole situation. It is now estopped provided in the Land Registration Act, those imposed by the
from questioning the validity of the cancellation of the contracts. authorities, and those contained in the stipulations that follow.
An unopposed rescission of a contract has legal effects. 25
Under the law, there is a binding contract between the parties whose
Petitioner's reliance on the portion of the Court of Appeals' minds have met on a certain matter notwithstanding that they did not
Decision stating that private respondent had not made known to affix their signatures to its written form.
petitioner its supposed rescission of the contract, 26 is
misplaced. Moreover, it quoted only the portion that appears In the case at bar, it was private respondent's company lawyer and sole
favorable to its case. To be sure, the Court of Appeals quoted witness, Atty. Manuel Villamayor, who volunteered that after the
provision No. 9 which requires that "actual cancellation shall cancellation of the 1961 agreements, the parties should negotiate and
take place thirty days from receipt by the buyer of the notice of enter into "a new agreement based on the current price" or at P400.00
cancellation or the demand for rescission of the contract by a per square meter. However, there was a hitch in the negotiations
notarial act and upon full payment of the cash surrender value," because after he had drafted the contract and sent it to petitioner, the
latter "deposited a check for downpayment" but its representative
and added that "R.A. 6552 even more underscored the refused to sign the prepared contract. 32 Private respondent even offered
indispensability of such notice to the defaulting buyer." the contract to sell as its Exhibit S. 33 In the absence of proof to the
However, the same appellate court continued: contrary, this draft contract may be deemed to embody the agreement
of the parties. Moreover, when Tomas Siatianun, petitioner's president,
The absence of the aforesaid notice in the case at bar in the testified, private respondent cross-examined him as regards the October
1983 contract. 34 Private respondent did not and has not denied the
forms respectively deemed efficacious before and after the existence of that contract.
passage of R.A. 6552 does not, however, necessarily impress
merit in the appellant's position. Extrajudicial rescission, after all,
has legal effect where the other party does not oppose Under these facts, therefore, the parties may ideally be considered as
having perfected the contract of October 1983. Again in Adelfa
it (Zulueta vs. Mariano, 111 SCRA 206; Nera vs. Vacante, 3
Properties, Inc. v. Court of Appeals, the Court said that
SCRA 505; Magdalena Estate vs. Myrick, 71 Phil. 344). Where
it is objected to, a judicial determination of the issue is still
necessary. In other words, resolution of reciprocal contracts . . . a contract, like a contract to sell, involves a meeting of the minds
between two persons whereby one binds himself, with respect to the
may be made extrajudicially unless successfully impugned in
other, to give something or to render some service. Contracts, in
Court. If the debtor impugns the declaration, it shall be subject general, are perfected by mere consent, which is manifested by the
to judicial determination (Jison vs. Court of Appeals, 164 SCRA meeting of the offer and the acceptance upon the thing and the cause
339, citing Palay Inc. vs. Clave, supra; Univ. of the Philippines which are to constitute the contract. The offer must be certain and the
vs. Angeles, supra). In its July 5, 1984 complaint, the appellee acceptance absolute. 35
had, in fact, significantly prayed for the cancellation of the said
sales agreement in the alternative (p. 4, orig. rec.). 27 (Emphasis Moreover, private respondent's offer to sell and petitioner's acceptance
supplied.) thereof are manifest in the documentary evidence presented by the
parties. Thus, private respondent presented the five (5) checks 36 that,
through Atty. Villamayor, it admitted as the down payment under the
Moreover, private respondent's act of cancelling the contracts to
October 1983 contract. Private respondent's intentional non-
sell was not done arbitrarily. The record shows that private
encashment of the check cannot serve to belie the fact of its tender as petitioner's rejection of private respondent's demands for rentals 45 and
down payment. For its part, petitioner presented Exhibit 10, a receipt its unjustified refusal to settle private respondent's claims, 46 the award
dated February 28, 1984, showing that private respondent's authorized of attorney's fees of P10,000.00 is more than just and reasonable. 47
representative received the total amount of P37,642.72 represented by
said five checks as "deposit of Contract (sic)." As this Court also held in
WHEREFORE, the instant petition for review on certiorari is hereby
the Adelfa Properties case, acceptance may be evidenced by some acts
denied and the questioned Decision of the Court of Appeals is
or conduct communicated to the offeror, either in a formal or an informal
AFFIRMED. This Decision is immediately executory. Costs against
manner, that clearly manifest the intention or determination to accept
petitioner.
the offer to buy or
sell. 37
Melo, Francisco and Panganiban, JJ., concur.
Justice and equity, however, will not be served by a positive ruling on
the perfection and performance of the contract to sell. There are facts Narvasa, C.J., is on leave.
on record proving that, after all, the parties had not arrived at a definite
agreement. By Atty. Villamayor's admission, the checks were not
Footnotes
encashed because Tomas Siatianun did not sign the draft contract that 1 Penned by Associate Justice Nathanael P. de Pano, Jr. and concurred in by Associate
he had prepared. 38 On his part, Tomas Siatianun explained that he did Justices Jesus M. Elbinias and Angelina S. Gutierrez.
not sign the contract because it covered seven (7) lots while their 2 Exhs. I, J, K, L, M & N.
agreement was only for six (6) lots. According to him, private 3 Exh. I-1.
respondent had conceded that Lot No. 2 was meant for petitioner's right 4 Exh. R.
of way 39 and, therefore, it could not have been part of the properties it 5 Exh. 9.
wanted to buy. It is on record, moreover, that the only agreement that 6 Exh. O.
the parties arrived at in a conference at the Silahis Hotel was the price 7 Exh. P.
indicated in the draft contract. 40 8 Exh. S.
9 Exhs, Q, Q-1, Q-2, Q-3 & Q-4.
10 Rollo, p. 33.
The number of lots to be sold is a material component of the contract to 11 Presided by Judge Ma. Cristina C. Estrada.
sell. Without an agreement on the matter, the parties may not in any 12 Petition, p. 7.
way be considered as having arrived at a contract under the law. The 13 Romualdez v. RTC, Br. 7, Tacloban City, G.R. No. 104960, September 14, 1993, 226
parties' failure to agree on a fundamental provision of the contract was SCRA 408, 414 citing Aquino v. Court of Appeals, G.R. No. 91896, November 21, 1991, 204
aggravated by petitioner's failure to deposit the installments agreed SCRA 240; Salen v. Dinglasan, G.R. No. 59082, June 28, 1991, 198 SCRA 623; Tijam v.
upon. Neither did it attempt to make a consignation of the installments. Sibonghanoy, 131 Phil. 556 (1968).
This Court's disquisition on the matter in the Adelfa Properties case is 14 Rollo, pp. 37-40.
15 Ibid., pp. 58-74.
relevant. Thus:
16 Supra, at p. 564-565 cited in Cloma v. Court of Appeals, G.R. No. 100153, August 2,
1994, 234 SCRA 665, 673 and Pilipinas Shell Petroleum Corporation v. Dumlao, L-44888,
The mere sending of a letter by the vendee expressing the intention to February 7, 1992, 206 SCRA 40, 50.
pay, without the accompanying payment, is not considered a valid 17 Sec. 3.
tender of payment. Besides, a mere tender of payment is not sufficient 18 Exh. R.
to compel private respondents to deliver the property and execute the 19 Nilo v. Court of Appeals, 213 Phil. 460, 467 (1984).
20 315 Phil. 805, 826 (1995).
deed of absolute sale. It is consignation which is essential in order to
21 310 Phil. 623, 637 (1995).
extinguish petitioner's obligation to pay the balance of the purchase
22 Ibid., at p. 650 citing Albea v. Inquimboy, 86 Phil. 477 (1950); Alfonso v. Court of
price. The rule is different in case of an option contract or in legal Appeals, G.R. No. 63745 June 8, 1990, 186 SCRA 400.
redemption or in a sale with right to repurchase, wherein consignation is 23 TSN, July 24, 1987, p. 28.
not necessary because these cases involve an exercise of a right or 24 TSN, October 9, 1987, p. 19.
privilege (to buy, redeem or repurchase) rather than the discharge of an 25 Adelfa Properties, Inc. v. Court of Appeals, supra, at p. 651.
obligation, hence tender of payment would be sufficient to preserve the 26 Petition, p. 14.
right or privilege. This is because the provisions on consignation are not 27 CA Decision, p. 11.
applicable when there is no obligation to pay. A contract to sell, as in the 28 TSN, January 5, 1989, pp. 4-5; March 9, 1989, p. 27.
case before us, involves the performance of an obligation, not merely 29 Exh. R.
the exercise of a privilege or a right. Consequently, performance or 30 Exh. 10.
payment may be effected not by tender of payment alone but by both 31 Petition, p. 16.
tender and consignation. 41 (Emphasis supplied.) 32 TSN, June 18, 1987, p. 18.
33 TSN, October 9, 1987, p. 31.
34 TSN, March 9, 1989, p. 29.
As earlier noted, petitioner did not lift a finger towards the performance 35 Supra, at p. 641.
of the contract other than the tender of down payment. There is no 36 Exhs. Q to Q-4.
record that it even bothered to tender payment of the installments or to 37 Supra, at p. 642.
amend the contract to reflect the true intention of the parties as regards 36 TSN, October 9, 1987, pp. 4-5.
the number of lots to be sold. Indeed, by petitioner's inaction, private 37 TSN, January 5, 1989, pp. 29-30.
40 TSN, October 9, 1987, pp. 9-12.
respondent may not be judicially enjoined to validate a contract that the
41 Supra, at pp. 649-650.
former appeared to have taken for granted. As in the earlier
42 Exh. 4.
agreements, petitioner ignored opportunities to resuscitate a contract to 43 Exh. 5.
sell that was rendered moribund and inoperative by its inaction. 44 Cited in Delta Motor Sales Corporation v. Niu Kim Duan, G.R. No. 61043, September 2,
1992, 213 SCRA 259, 263.
In view of the foregoing, there is no need to discuss the issue of whether 45 Rizal Surety & Insurance Company v. Court of Appeals, G.R. No. 96727, August 28,
1996, 261 SCRA 69, 88-89 citing Solid Homes, Inc. v. Court of Appeals, G.R. No. 97255,
or not there was a valid grant of right of way in favor of petitioners.
August 12, 1994, 235 SCRA 299, 303-304 and Universal Shipping Lines, Inc. v. IAC, G.R. No.
Suffice it to say that the documentary evidence offered by petitioner on 74125, July 31, 1990, 188 SCRA 170, 174.
the matter manifests that that right of way on an unidentified 46 Baliwag Transit, Inc. v. Court of Appeals, G.R. No. 116110, May 15, 1996, 256 SCRA
property was granted in April 1961 by private respondent's board of 746, 755.
directors to W. Ick & Sons, Inc. and Julian Martinez. 42 On May 12, 1961, 47 Heirs of Amparo de los Santos v. Court of Appeals, G.R. No. 51165, June 21, 1990, 186
Fritz Ick, the president of W. Ick & Sons, Inc., in turn indorsed the SCRA 649, 663.
unidentified property to petitioner. 43
As to attorney's fees, Article 2208 of the Civil Code allows the award of
such fees when its claimant is compelled to litigate with third persons or
to incur expenses to protect its just and valid claim. In view of
Republic of the Philippines Grijaldo to appear and be substituted as appellants in
SUPREME COURT accordance with Section 17 of Rule 3 of the Rules of Court.
Manila
In the present appeal the appellant contends: (1) that the
EN BANC appellee has no cause of action against the appellant; (2) that if
the appellee has a cause of action at all, that action had
G.R. No. L-20240 December 31, 1965 prescribed; and (3) that the lower court erred in ordering the
appellant to pay the amount of P2,377.23.
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs. In discussing the first point of contention, the appellant
JOSE GRIJALDO, defendant-appellant. maintains that the appellee has no privity of contract with the
appellant. It is claimed that the transaction between the Taiwan
Bank, Ltd. and the appellant, so that the appellee, Republic of
Office of the Solicitor General for plaintiff-appellee. the Philippines, could not legally bring action against the
Isabelo P. Samson for defendant-appellant. appellant for the enforcement of the obligation involved in said
transaction. This contention has no merit. It is true that the Bank
ZALDIVAR, J.: of Taiwan, Ltd. was the original creditor and the transaction
between the appellant and the Bank of Taiwan was a private
In the year 1943 appellant Jose Grijaldo obtained five loans contract of loan. However, pursuant to the Trading with the
from the branch office of the Bank of Taiwan, Ltd. in Bacolod Enemy Act, as amended, and Executive Order No. 9095 of the
City, in the total sum of P1,281.97 with interest at the rate of 6% United States; and under Vesting Order No. P-4, dated January
per annum, compounded quarterly. These loans are evidenced 21, 1946, the properties of the Bank of Taiwan, Ltd., an entity
by five promissory notes executed by the appellant in favor of which was declared to be under the jurisdiction of the enemy
the Bank of Taiwan, Ltd., as follows: On June 1, 1943, P600.00; country (Japan), were vested in the United States Government
on June 3, 1943, P159.11; on June 18, 1943, P22.86; on and the Republic of the Philippines, the assets of the Bank of
August 9, 1943,P300.00; on August 13, 1943, P200.00, all Taiwan, Ltd. were transferred to and vested in the Republic of
notes without due dates, but because the loans were due one the Philippines. The successive transfer of the rights over the
year after they were incurred. To secure the payment of the loans in question from the Bank of Taiwan, Ltd. to the United
loans the appellant executed a chattel mortgage on the standing States Government, and from the United States Government to
crops on his land, Lot No. 1494 known as Hacienda Campugas the government of the Republic of the Philippines, made the
in Hinigiran, Negros Occidental. Republic of the Philippines the successor of the rights, title and
interest in said loans, thereby creating a privity of contract
between the appellee and the appellant. In defining the word
By virtue of Vesting Order No. P-4, dated January 21, 1946, and "privy" this Court, in a case, said:
under the authority provided for in the Trading with the Enemy
Act, as amended, the assets in the Philippines of the Bank of
Taiwan, Ltd. were vested in the Government of the United The word "privy" denotes the idea of succession ...
States. Pursuant to the Philippine Property Act of 1946 of the hence an assignee of a credit, and one subrogated to
United States, these assets, including the loans in question, it, etc. will be privies; in short, he who by succession is
were subsequently transferred to the Republic of the Philippines placed in the position of one of those who contracted
by the Government of the United States under Transfer the judicial relation and executed the private document
Agreement dated July 20, 1954. These assets were among the and appears to be substituting him in the personal
properties that were placed under the administration of the rights and obligation is a privy (Alpurto vs. Perez, 38
Board of Liquidators created under Executive Order No. 372, Phil. 785, 790).
dated November 24, 1950, and in accordance with Republic
Acts Nos. 8 and 477 and other pertinent laws. The United States of America acting as a belligerent sovereign
power seized the assets of the Bank of Taiwan, Ltd. which
On September 29, 1954 the appellee, Republic of the belonged to an enemy country. The confiscation of the assets of
Philippines, represented by the Chairman of the Board of the Bank of Taiwan, Ltd. being an involuntary act of war, and
Liquidators, made a written extrajudicial demand upon the sanctioned by international law, the United States succeeded to
appellant for the payment of the account in question. The record the rights and interests of said Bank of Taiwan, Ltd. over the
shows that the appellant had actually received the written assets of said bank. As successor in interest in, and transferee
demand for payment, but he failed to pay. of, the property rights of the United States of America over the
loans in question, the Republic of the Philippines had thereby
become a privy to the original contracts of loan between the
The aggregate amount due as principal of the five loans in Bank of Taiwan, Ltd. and the appellant. It follows, therefore, that
question, computed under the Ballantyne scale of values as of the Republic of the Philippines has a legal right to bring the
the time that the loans were incurred in 1943, was P889.64; and present action against the appellant Jose Grijaldo.
the interest due thereon at the rate of 6% per annum
compounded quarterly, computed as of December 31, 1959 was
P2,377.23. The appellant likewise maintains, in support of his contention
that the appellee has no cause of action, that because the loans
were secured by a chattel mortgage on the standing crops on a
On January 17, 1961 the appellee filed a complaint in the land owned by him and these crops were lost or destroyed
Justice of the Peace Court of Hinigaran, Negros Occidental, to through enemy action his obligation to pay the loans was
collect from the appellant the unpaid account in question. The thereby extinguished. This argument is untenable. The terms of
Justice of the Peace Of Hinigaran, after hearing, dismissed the the promissory notes and the chattel mortgage that the
case on the ground that the action had prescribed. The appellee appellant executed in favor of the Bank of Taiwan, Ltd. do not
appealed to the Court of First Instance of Negros Occidental support the claim of appellant. The obligation of the appellant
and on March 26, 1962 the court a quo rendered a decision under the five promissory notes was not to deliver a determinate
ordering the appellant to pay the appellee the sum of P2,377.23 thing namely, the crops to be harvested from his land, or the
as of December 31, 1959, plus interest at the rate of 6% per value of the crops that would be harvested from his land.
annum compounded quarterly from the date of the filing of the Rather, his obligation was to pay a generic thing the amount
complaint until full payment was made. The appellant was also of money representing the total sum of the five loans, with
ordered to pay the sum equivalent to 10% of the amount due as interest. The transaction between the appellant and the Bank of
attorney's fees and costs. Taiwan, Ltd. was a series of five contracts of simple loan of
sums of money. "By a contract of (simple) loan, one of the
The appellant appealed directly to this Court. During the parties delivers to another ... money or other consumable thing
pendency of this appeal the appellant Jose Grijaldo died. Upon upon the condition that the same amount of the same kind and
motion by the Solicitor General this Court, in a resolution of May quality shall be paid." (Article 1933, Civil Code) The obligation of
13, 1963, required Manuel Lagtapon, Jacinto Lagtapon, Ruben the appellant under the five promissory notes evidencing the
Lagtapon and Anita L. Aguilar, who are the legal heirs of Jose loans in questions is to pay the value thereof; that is, to deliver a
sum of money a clear case of an obligation to deliver, a time the loans became due, and that was in June 1944. This
generic thing. Article 1263 of the Civil Code provides: contention of the appellant is also without merit.
In an obligation to deliver a generic thing, the loss or The decision of the court a quo ordered the appellant to pay the
destruction of anything of the same kind does not sum of P2,377.23 as of December 31, 1959, plus interest rate of
extinguish the obligation. 6% per annum compounded quarterly from the date of the filing
of the complaint. The sum total of the five loans obtained by the
The chattel mortgage on the crops growing on appellant's land appellant from the Bank of Taiwan, Ltd. was P1,281.97 in
simply stood as a security for the fulfillment of appellant's Japanese war notes. Computed under the Ballantyne Scale of
obligation covered by the five promissory notes, and the loss of values as of June 1943, this sum of P1,281.97 in Japanese war
the crops did not extinguish his obligation to pay, because the notes in June 1943 is equivalent to P889.64 in genuine
account could still be paid from other sources aside from the Philippine currency which was considered the aggregate
mortgaged crops. amount due as principal of the five loans, and the amount of
P2,377.23 as of December 31, 1959 was arrived at after
computing the interest on the principal sum of P889.64
In his second point of contention, the appellant maintains that compounded quarterly from the time the obligations were
the action of the appellee had prescribed. The appellant points incurred in 1943.
out that the loans became due on June 1, 1944; and when the
complaint was filed on January 17,1961 a period of more than
16 years had already elapsed far beyond the period of ten It is the stand of the appellee that the Ballantyne scale of values
years when an action based on a written contract should be should be applied as of the time the obligation was incurred,
brought to court. and that was in June 1943. This stand of the appellee was
upheld by the lower court; and the decision of the lower court is
supported by the ruling of this Court in the case of Hilado vs. De
This contention of the appellant has no merit. Firstly, it should la Costa (G.R. No. L-150, April 30, 1949; 46 O.G. 5472), which
be considered that the complaint in the present case was states:
brought by the Republic of the Philippines not as a nominal
party but in the exercise of its sovereign functions, to protect the
interests of the State over a public property. Under paragraph 4 ... Contracts stipulating for payments presumably in
of Article 1108 of the Civil Code prescription, both acquisitive Japanese war notes may be enforced in our Courts
and extinctive, does not run against the State. This Court has after the liberation to the extent of the just obligation of
held that the statute of limitations does not run against the right the contracting parties and, as said notes have
of action of the Government of the Philippines (Government of become worthless, in order that justice may be done
the Philippine Islands vs. Monte de Piedad, etc., 35 Phil. 738- and the party entitled to be paid can recover their
751).Secondly, the running of the period of prescription of the actual value in Philippine Currency, what the debtor or
action to collect the loan from the appellant was interrupted by defendant bank should return or pay is the value of the
the moratorium laws (Executive Orders No. 25, dated November Japanese military notes in relation to the peso in
18, 1944; Executive Order No. 32. dated March 10, 1945; and Philippine Currency obtaining on the date when and at
Republic Act No. 342, approved on July 26, 1948). The loan in the place where the obligation was incurred unless the
question, as evidenced by the five promissory notes, were parties had agreed otherwise. ... . (italics supplied)
incurred in the year 1943, or during the period of Japanese
occupation of the Philippines. This case is squarely covered by IN VIEW OF THE FOREGOING, the decision appealed from is
Executive Order No. 25, which became effective on November affirmed, with costs against the appellant. Inasmuch as the
18, 1944, providing for the suspension of payments of debts appellant Jose Grijaldo died during the pendency of this appeal,
incurred after December 31, 1941. The period of prescription his estate must answer in the execution of the judgment in the
was, therefore, suspended beginning November 18, 1944. This present case.
Court, in the case of Rutter vs. Esteban (L-3708, May 18, 1953,
93 Phil. 68), declared on May 18, 1953 that the Moratorium Bengzon, C.J., Concepcion, Barrera, Regala, Bautista Angelo,
Laws, R.A. No. 342 and Executive Orders Nos. 25 and 32, are Reyes, J.B.L., Makalintal and Bengzon, J.P., JJ., concur.
unconstitutional; but in that case this Court ruled that the
moratorium laws had suspended the prescriptive period until
May 18, 1953. This ruling was categorically reiterated in the
decision in the case of Manila Motors vs. Flores, L-9396, August
16, 1956. It follows, therefore, that the prescriptive period in the
case now before US was suspended from November 18,1944,
when Executive Orders Nos. 25 and 32 were declared
unconstitutional by this Court. Computed accordingly, the
prescriptive period was suspended for 8 years and 6 months. By
the appellant's own admission, the cause of action on the five
promissory notes in question arose on June 1, 1944. The
complaint in the present case was filed on January 17, 1961, or
after a period of 16 years, 6 months and 16 days when the
cause of action arose. If the prescriptive period was not
interrupted by the moratorium laws, the action would have
prescribed already; but, as We have stated, the prescriptive
period was suspended by the moratorium laws for a period of 8
years and 6 months. If we deduct the period of suspension (8
years and 6 months) from the period that elapsed from the time
the cause of action arose to the time when the complaint was
filed (16 years, 6 months and 16 days) there remains a period of
8 years and 16 days. In other words, the prescriptive period ran
for only 8 years and 16 days. There still remained a period of
one year, 11 months and 14 days of the prescriptive period
when the complaint was filed.
This petition for review on certiorari has its roots in Civil Case Private respondents refused to accede to petitioner's request for
No. 53444, which was sparked by petitioner's refusal to pay the the pretermination of the lease contract. They insisted on the
rentals as stipulated in the contract of lease 1 on an undivided performance of petitioner's obligation and reiterated their
portion of 30,000 square meters of a parcel of land owned by demand for the payment of the first annual rental. 5
private respondents.
Petitioner objected to private respondents' claim and argued
The lease contract, executed on 18 November 1985, reads in that it was "only obligated to pay . . . the amount of P20,000.00
part as follows: as rental payments for the one-month period of lease, counted
from 07 January 1986 when the Industrial Permit was issued by
1. TERM OF LEASE This lease shall be for a period of five the Ministry of Human Settlements up to 07 February 1986
(5) years, commencing on the date of issuance of the industrial when the Notice of Termination was served" 6 on private
clearance by the Ministry of Human Settlements, renewable for respondents.
a like or other period at the option of the LESSEE under the
same terms and conditions. On 19 May 1986, private respondents instituted with the
Regional Trial Court of Pasig an action against petitioner for
2. RATE OF RENT LESSEE shall pay to the LESSOR rent at Specific Performance with Damages. 7 The case was docketed
the monthly rate of TWENTY THOUSAND PESOS as Civil Case No. 53444 at Branch 160 of the said court. After
(P20,000.00), Philippine Currency, in the manner set forth in the filing by petitioner of its Answer with Counterclaim, the case
Paragraph 3 below. This rate shall be increased yearly by Five was set for trial on the merits.
Percent (5%) based on the agreed monthly rate of P20,000.00
as follows: What transpired next was summarized by the trial court in this
wise:
Monthly Rate Period Applicable
Plaintiffs rested their case on September 7, 1987 (p. 87 rec.).
P21,000.00 Starting on the 2nd year Defendant asked for postponement of the reception of its
evidence scheduled on August 10, 1988 and as prayed for, was
P22,000.00 Starting on the 3rd year 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
P23,000.00 Starting on the 4th year September 15 and 26, 1988 (p. 94 rec.) On September 2, 1988,
the office of the Government Corporate Counsel entered its
P24,000.00 Starting on the 5th year 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,
3. TERMS OF PAYMENT The rent stipulated in Paragraph 2
represented by Atty. Elpidio de Vega, and with his conformity in
above shall be paid yearly in advance by the LESSEE. The first
open court, the hearing was reset, intransferable to September
annual rent in the amount of TWO HUNDRED FORTY
26 and October 17, 1988, (p. 98, rec.) On September 26, 1988
THOUSAND PESOS (P240,000.00), Philippine currency, shall
during the hearing, defendant's counsel filed a motion for
be due and payable upon the execution of this Agreement and
postponement (urgent) as he had "sore eyes", a medical
the succeeding annual rents shall be payable every twelve (12)
certificate attached.
months thereafter during the effectivity of this Agreement.
Second. Invoking Article 1266 and the principle of rebus sic stantibus, With regard to the non-materialization of petitioner's particular
petitioner asserts that it should be released from the obligatory force of purpose in entering into the contract of lease, i.e., to use the
the contract of lease because the purpose of the contract did not leased premises as a site of a rock crushing plant, the same will
materialize due to unforeseen events and causes beyond its
not invalidate the contract. The cause or essential purpose in a
control, i.e., due to the abrupt change in political climate after the EDSA
Revolution and financial difficulties. contract of lease is the use or enjoyment of a thing. 23 As a
general principle, the motive or particular purpose of a party in
entering into a contract does not affect the validity nor existence
It is a fundamental rule that contracts, once perfected, bind both
of the contract; an exception is when the realization of such
contracting parties, and obligations arising therefrom have the force of
law between the parties and should be complied with in good motive or particular purpose has been made a condition upon
faith. 13 But the law recognizes exceptions to the principle of the which the contract is made to depend. 24 The exception does
obligatory force of contracts. One exception is laid down in Article 1266 not apply here.
Third. According to petitioner, the award of P492,000.00 SO ORDERED.
representing the rent for two years is excessive, considering
that it did not benefit from the property. Besides, the temporary Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.
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 Footnotes
1 Exhibit "A," Original Record (OR), 68.
payable should only be for one year.
2 Exhibit "C," OR, 77; Rollo, 57.
3 Exhibit "B," OR, 76.
Petitioner cannot be heard to complain that the award is 4 Exhibit "D," OR, 78.
excessive. The temporary permit was valid for two years but 5 Exhibit "E," Id., 80.
was automatically revoked because of its non-use within one 6 Exhibit "F," Id., 81-82.
year from its issuance. The non-use of the permit and the non- 7 Id., 1-7.
entry into the property subject of the lease contract were both 8 Order of 19 January 1989, OR, 129-130; Decision, 2-3.
imputable to petitioner and cannot, therefore, be taken 9 OR 134-137; Rollo, 53-56. Per Judge Mariano M. Umali.
advantage of in order to evade or lessen petitioner's monetary 10 Rollo, 24-31. Per then Associate Justice Justo P. Torres, Jr. (now Associate
obligation. The damage or prejudice to private respondents is Justice of the Supreme Court), with the concurrence of then Associate Justice
Bernardo P. Pardo and Associate Justice Corona Ibay-Somera.
beyond dispute. They unquestionably suffered pecuniary losses
11 Exhibit "F-1," OR, 82.
because of their inability to use the leased premises. Thus, in
12 Exhibit "D," Id., 78-79.
accordance with Article 1659 of the Civil Code, 25 they are
13 Articles 1159, 1308, 1315, and 1356 of the Civil Code.
entitled to indemnification for damages; and the award of 14 DESIDERIO P. JURADO, Comments and Jurisprudence on Obligations and
P492,000.00 is fair and just under the circumstances of the Contracts 292 ( 10th revised ed. 1993) (hereafter JURADO).
case. 15 IV ARTURO M. TOLENTINO, Commentaries and Jurisprudence on the Civil
Code of the Philippines 57 (1991) (hereafter IV TOLENTINO).
Finally, petitioner submits that the trial court gravely abused its 16 JURADO, 283.
discretion in denying petitioner the right to be heard. 17 IV TOLENTINO 57.
18 At this point of affairs; in these circumstances. A name given to a tacit
condition, said to attach to all treaties, that they shall cease to be obligatory so
We disagree. The trial court was in fact liberal in granting soon as the state of facts and conditions upon which they were founded has
several postponements 26 to petitioner before it deemed substantially changed. (Black's Law Dictionary, 1139 [5th ed., 1979]).
terminated and waived the presentation of evidence in 19 Naga Telephone Co. v. Court of Appeals, 230 SCRA 351, 365 [1994] citing IV
petitioner's behalf. TOLENTINO 347.
20 IV TOLENTINO 347.
21 Memorandum for the Private Respondents, 17; Rollo, 160.
It must be recalled that private respondents rested their case on
22 139 SCRA 46 [1985], citing Repide v. Afzelius, 39 Phil. 190 [1918].
7 September 1987 yet. 27 Almost a year after, or on 10 August
23 V TOLENTINO 206 [1992]; V EDGARDO E. PARAS, Civil Code of the
1988 when it was petitioner's turn to present evidence, Philippines, 307 [1995].
petitioner's counsel asked for postponement of the hearing to 25 24 V TOLENTINO 535.
August 1988 due to conflict of schedules, 28 and this was 25 It provides:
granted. 29 At the rescheduled hearing, petitioner's counsel, Art. 1659. If the lessor or the lessee should not comply with the obligations set
through a representative, moved anew for postponement, as he forth in Articles 1654 and 1657, the aggrieved party may ask for rescission of
was allegedly the contract and indemnification for damages, or only the latter, allowing the
indisposed. 30 The case was then reset "intransferable" to contract to remain in force.
September 15 and 26, 1988. 31 On 2 September 1988, the 26 Ocampo v. Arboleda, 153 SCRA 374, 381 [1987].
Office of the Government Corporate Counsel, through Atty. 27 OR, 87.
Elpidio J. Vega, entered its appearance for the 28 OR, 89.
petitioner, 32 and later the original counsel withdrew his 29 Id., 91.
appearance. 33 On 15 September 1988, Atty. Vega requested 30 Id., 94.
for postponement to enable him to go over the records of the 31 Id.
case. 34 With his conformity, the hearing was reset 32 Id., 95.
"intransferable" to September 26 and October 17, 1988. 35 In the 33 Id., 99.
34 Id., 98.
morning of 26 September 1988, the court received Atty. Vega's
35 Id.
Urgent Motion for Postponement on the ground that he was
36 Id., 101.
afflicted with conjunctivitis or sore eyes. 36 This time, private 37 Id., 106.
respondents objected; and upon their motion, the court deemed 38 Id.
terminated and waived the presentation of evidence for the 39 Id., 120.
petitioner. 37 Nevertheless, before the court considered the case 40 Id., 128.
submitted for decision, it required the parties to submit their 41 Id., 127.
respective memoranda within thirty days. 38 But petitioner failed 42 Roces v. Aportadera, 243 SCRA 108, 114 [1995]; Vallende v. NLRC, 245 SCRA
to comply. 662, 666-667 [1995]; Navarro III v. Damasco, 246 SCRA 260, 265 [1995].
43 Mutuc v. Court of Appeals, 190 SCRA 43, 49 [1990].
Likewise, the court was liberal with respect to petitioner's 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
No pronouncements as to costs.
Republic of the Philippines ordered by me or by my duly designated
SUPREME COURT representative.1wphi1.nt
FIRST DIVISION "In carrying out the foregoing order you are hereby also
directed to see to it that reasonable means are
G.R. No. 124221 August 4, 2000 employed by you and your men and that injury to
persons and property must be carefully avoided."
VICTORINO MAGAT, JR. substituted by heirs, OLIVIA D.
MAGAT, and minors MA. DULCE MAGAT, MA. MAGNOLIA On September 25, 1972, pursuant to the aforequoted Letter of
MAGAT, RONALD MAGAT and DENNIS MAGAT, petitioners, Instruction, the Radio Control Office issued Administrative
vs. Circular No. 4 (hereinafter referred to as "the Admin. Circular"),
COURT OF APPEALS and SANTIAGO A. herein quoted in full:
GUERRERO, respondents.
"SUBJECT: SUSPENDING THE ACCEPTANCE AND
PARDO, J.: PROCESSING OF APPLICATIONS FOR RADIO STATION
CONSTRUCTION PERMITS AND FOR PERMITS TO OWN
AND/OR POSSESS RADIO TRANSMITTERS OR
The case is an appeal1 from the decision of the Court of TRANSCEIVERS.
Appeals2 reversing the decision of the Regional Trial Court of
Makati, Metro Manila,3 ruling in favor of respondent Santiago A.
Guerrero and dismissing petitioners' complaint. "In view of the existence of a state of emergency and the
declaration by the President of martial law in the entire country
under Proclamation No. 1081 dated September 21, 1972,
First, the facts. effective immediately the acceptance and processing by the
radio control office of applications for radio stations
Private respondent Santiago A. Guerrero (hereinafter referred to constructions permits and for permits to possess, own, transfer,
as "Guerrero") was President and Chairman of4"Guerrero purchase and sale of radio transmitters and transreceivers as
Transport Services", a single proprietorship.5 well as manufacturers and dealer's permits of said equipment is
hereby suspended.
Sometime in 1972, Guerrero Transport Services won a bid for
the operation of a fleet of taxicabs within the Subic Naval Base, "Exempted from this circular are applications for radio station
in Olongapo. As highest bidder, Guerrero was to "provide radio- construction permits and for permits to possess, own, transfer,
controlled taxi service within the U.S. Naval Base, Subic Bay, purchase and sell radio transmitters and transceivers for the
utilizing as demand requires . . . 160 operational taxis consisting following radio stations:
of four wheel, four-door, four passenger, radio controlled, meter
controlled, sedans, not more than one year . . . " 6 "1. Aeronautical Stations;
"2. Aeronautical Fixed Stations;
On September 22, 1972, with the advent of martial law, "3. Aircraft Stations;
President Ferdinand E. Marcos issued Letter of Instruction No. 1 "4. Coastal Stations; and
(hereinafter referred to as "the LOI"). We reproduce the text, as "5. Ship Stations.
follows:
"This circular shall be strictly observed until lifted upon proper
"Letter of Instruction No. 1 instructions from higher authorities."
"SUBJECT: SEIZURE AND CONTROL OF ALL PRIVATELY On September 25, 1972, Guerrero and Victorino D. Magat
OWNED NEWSPAPERS, MAGAZINES, RADIO AND (hereinafter referred to as Victorino), as General Manager of
TELEVISION FACILITIES AND ALL OTHER MEDIA OF Spectrum Electronic Laboratories, a single proprietorship,
COMMUNICATION. executed a letter-contract for the purchase of transceivers at a
quoted price of US$77,620.59, FOB Yokohoma. Victorino was
to deliver the transceivers within 60 to 90 days after receiving
"To: 1. The Press Secretary Office of the President notice from Guerrero of the assigned radio frequency,7 "taking
note of Government Regulations."8
Manila
The contract was signed and Victorino contacted his Japanese
"2. The Secretary Department of National supplier, Koide & Co., Ltd. and placed an order for the
transceivers.
Defense
On September 29, 1972, Navy Exchange Officer, A. G. Mason
Camp E. Aguinaldo, Q.C. confirmed that Guerrero won the bid for the commercial
transportation contract.9
On June 7, 1973, Guerrero moved to dismiss the complaint on The contract was valid; the radio transceivers were not
the ground that it did not state a cause of action.22 contraband.
On June 16, 1973, the trial court23 granted the motion and "Contraband" generally refers to "any property which is unlawful
dismissed the complaint.24 to produce or possess." It refers to goods which are exported
and imported into a country against its laws.38
On July 11, 1973, Victorino filed a petition for review on
certiorari with this Court assailing the dismissal of the In declaring the contract void ab initio, the Court of Appeals
complaint.25 ruled that the importation of the transceivers meant the
inevitable passing of such goods through Philippine Ports,
On April 20, 1983, this Court2 6 ruled that the complaint where the LOI and the Administrative Circular have to be
sufficiently averred a cause of action. We set aside the order of observed and applied with full force and effect.39 The Court of
dismissal and remanded the case to the trial court for further Appeals declared that the proposed importation of such goods
proceedings, to wit:27 was contrary to law, hence, the nullity of the contract.40
"ACCORDINGLY, the questioned order of dismissal is hereby We do not agree. The contract was not void ab initio. Nowhere
set aside and the case ordered remanded to the court of origin in the LOI and Admin. Circular is there an express ban on the
for further proceedings. No costs. importation of transceivers.
"SO ORDERED." The LOI and Administrative Circular did not render "radios and
transceivers" illegal per se. The Administrative Circular merely
On November 27, 1984, the trial court28 ordered that the case ordered the Radio Control Office to suspend the "acceptance
be archived for failure of Victorino to prosecute.29 and processing . . . . of applications . . . for permits to possess,
own, transfer, purchase and sell radio transmitters and
transceivers . . . "41 Therefore, possession and importation of
On March 11, 1985, petitioners, Olivia, Dulce, Ma. Magnolia, the radio transmitters and transceivers was legal provided one
Ronald and Dennis Magat (hereinafter referred to as "heirs of had the necessary license for it.42 Transceivers were not
Victorino"), moved to reinstate the case and to substitute prohibited but merely regulated goods. The LOI and
Victorino in its prosecution. Apparently, Victorino died on Administrative Circular did not render the transceivers outside
February 18, 1985.30 the commerce of man. They were valid objects of the contract. 43
On April 29, 1985, the trial court granted the motion. 31 Affirming the validity of the contract, we next discuss whether
the contract was breached.
On July 12, 1991, the trial court decided in favor of the heirs of
Victorino and ordered Guerrero to pay temperate, moral and Guerrero testified that a permit to import the transceivers from
exemplary damages, and attorney's fees, disposing of the case Japan was denied by the Radio Control Board. He stated that
in this wise:32 he, together with Aligada, Victorino and a certain John Dauden
personally went to the Radio Control Office, and were denied a
"WHEREFORE, judgment is rendered for the substituted permit to import. They also went to the Office of the President,
plaintiffs and against the defendant where Secretary Ronaldo B. Zamora explained that radios were
"banned like guns because of martial law."44 Guerrero testified
"1. Ordering defendant to pay substituted plaintiffs the sum of P25,000.00 for that this prevented him from securing a letter of credit from the
temperate damages for injury to plaintiff's business dealings with foreign and Central Bank.45 This testimony was not rebutted.
local businessmen;
"2. P50,000.00 as moral damages; The law provides that "[w]hen the service (required by the
"3. P25,000.00 as exemplary contract) has become so manifestly beyond the contemplation
damages; and of the parties, the obligor may also be released therefrom, in
"4. P20,000.00 as attorney's fees.
whole or in part."46 Here, Guerrero's inability to secure a letter of
"SO ORDERED."
credit and to comply with his obligation was a direct
consequence of the denial of the permit to import. For this, he
On August 21, 1991, Guerrero appealed to the Court of cannot be faulted.
Appeals.33
8
Even if we assume that there was a breach of contract, Regional Trial Court Record, pp. 9-10.
9 Regional Trial Court Record, p. 338.
damages cannot be awarded. Damnum absque injuria.
10 Ibid., pp. 377-378.
11 Ibid., p. 11.
There was no bad faith.47 Bad faith does not simply connote bad 12 34.2 MHz.
judgment or negligence. It imports a dishonest purpose or some 13 Regional Trial Court Record, p. 12.
moral obliquity and conscious doing of wrong. It means a 14 Ibid., p. 13.
breach of a known duty through some motive or interest or ill will 15 Ibid., p. 14.
that partakes of the nature of fraud.48 Guerrero honestly relied 16 Ibid., p. 150.
on the representations of the Radio Control Office and the 17 Regional Trial Court Record, p. 15.
who had the responsibility of securing the required Letter of Credit from the
True, Guerrero borrowed equipment from the Subic Naval Base
Central Bank (Regional Trial Court Record, p. 369).
authorities at zero cost.49 This does not automatically translate 20
Regional Trial Court Record, pp. 373-374.
to bad faith. Guerrero was faced with the danger of the 21 Ibid., pp. 1-8.
cancellation of his contract with Subic Naval Base. He borrowed 22 Ibid., pp. 18-20.
equipment as a prudent and swift alternative. There was no 23 Through the presiding Judge Leo D. Medialdea.
proof that he resorted to this option with a deliberate and 24 Regional Trial Court Record, p. 26.
malicious intent to dishonor his contract with Victorino. An 25 Ibid., pp. 27-33.
award of damages surely cannot be based on mere hypotheses, 26 G.R. No. L-37120, 121 SCRA 418 (1983), Justice Venicio Escolin, ponente,
conjectures and surmises. Good faith is presumed, the burden concurred in by Justices Felix Makasiar, Hermogenes Concepcion, Jr., Juvenal
of proving bad faith rests on the one alleging it. 50 Petitioners did K. Guerrero, and Vicente Abad Santos. Justice Ramon C. Aquino was on leave
not effectively discharge the burden in this case. and Justice Pacifico P. De Castro had no part (Second Division).
27
Regional Trial Court Record, p. 106.
28 Through presiding Judge Rosario R. Veloso.
To recover moral damages in an action for breach of contract, 29 Regional Trial Court Record, p. 107.
the breach must be palpably wanton, reckless, malicious, in bad 30 Ibid., pp. 114-116.
faith, oppressive or abusive.51 This is not the case here. 31 Regional Trial Court Record, p. 120.
32 Rollo, p. 111.
33 Docketed as CA-G. R. CV No. 34952.
Exemplary damages also cannot be awarded. Guerrero did not
34
act in a wanton, fraudulent, reckless, oppressive or malevolent Rollo, p. 23.
35 Rollo, p. 33.
manner.52 36 Rollo, p. 25.
37 Filed on April 26, 1996. On February 10, 1997, we resolved to give due
Neither can actual damages be awarded. True, indemnification course to the petition (Rollo, p. 177).
for damages contemplates not only actual loss suffered 38 Black's Law Dictionary, Abridged Fifth Edition, p. 170.
suspend transactions with his Japanese supplier for six (6) 45 Ibid., p. 372.
46
months. Aligada stated that the volume of Victorino's business Article 1267, Civil Code of the Philippines.
47 Claiming unrealized profits in the amount of P52,393.89, heirs of Victorino
with Subic Naval Base also diminished significantly. Aligada
approximated that Victorino's unrealized business opportunities bank on Article 2201 of the Civil Code and aver that Guerrero acted in bad
amounted to P400,000.00.58 Being a witness for Victorino's faith.
48 Ford Philippines, Inc. v. Court of Appeals, 267 SCRA 320, 328 (1997); Priscilla
heirs and standing to gain from the contract's fulfillment,
Aligada's testimony is self-serving. It is also hearsay. We fail to L. Tan v. Northwest Airlines, Inc., G.R. No. 135802, March 3, 2000.
49 Regional Trial Court Record, p. 430.
see how this "evidence" proves actual damages with a 50 AFP Mutual Benefit Association, Inc. v. Court of Appeals, G.R Nos. 104769-
"reasonable degree of certainty."59 If proof is "flimsy", we cannot
135016, March 3, 2000.
award actual damages.60 51
Far East Bank and Trust Company v. Court of Appeals, 241 SCRA 671
(1995); Go v. Court of Appeals, 272 SCRA 752 (1997).
52 Philippine Air Lines v. Miano, 242 SCRA 235 (1995).
WHEREFORE, we AFFIRM the decision of the Court of Appeals
53
promulgated on October 11, 1995, in CA-G. R. CV No. 34952, Integrated Packaging Corp. v. Court of Appeals, G.R. No. 115117, June 8,
dismissing the complaint.1wphi1.nt 2000.
54 Scott Consultants & Resource Development Corporation, Inc. v. Court of
Appeals, 242 SCRA 393 (1995); Kierulf v. Court of Appeals, 269 SCRA 433
No costs. (1997).
55 Bernardo v. Court of Appeals (Special Sixth Division), 275 SCRA 413 (1997).
56 People of the Philippines v. Carlito Ereno, G. R. No. 124706, February 22,
SO ORDERED.
2000.
57 Aligada testified that, "In the usual course of events, Mr. Magat could have
Davide, Jr., C .J ., Puno, Kapunan and Ynares-Santiago, JJ expected to net approximately ten per cent of that amount (contract price of
., concur. $77,809.19) or $7,780.00 as his profits from that transaction alone. (Regional
Trial Court Record, p. 152)."
58 Supra, Regional Trial Court Record, p. 152.
Footnotes:
1 Under Rule 45 of the 1964 Revised Rules of Court. 59 Del Mundo v. Court of Appeals, 240 SCRA 348 (1995).
60
2 In CA-G.R. CV No. 34952, promulgated on October 4, 1995, Justice Corona Sulpicio Lines, Inc. v. Court of Appeals, 246 SCRA 376 (1995); Central Bank of
Ibay-Somera, ponente, concurred in by Justices Nathanael P. de Pano, Jr. and the Philippines v. Spouses Alfonso, G.R. No. 131074, March 27, 2000.
Celia Lipana-Reyes, + sitting as Special Eleventh Division.
3
In Civil Case No. 17827, dated July 12, 1991, Judge Salvador S. Abad Santos,
presiding. The decision was actually signed by Judge Cecilio F. Balagot, as
"assisting judge" citing Supreme Court Adm. Order No. 65, dated September
25, 1989 (Rollo, p. 94) as basis for his authority to sign (Rollo, p. 111).
4
Regional Trial Court Record, p. 360.
5 Ibid., p. 310.
6 Ibid., pp. 321-337.
7 The radio frequency to be assigned by Subic Naval Base.
Republic of the Philippines Respondent court in its questioned resolution of June 28, 1976
SUPREME COURT set aside the preliminary injunction previously issued by it and
Manila dimissed petition on the ground that under Article 1267 of the
Civil Code which provides that
FIRST DIVISION
ART. 1267. When the service has become so difficult as to be
G.R. No. L-44349 October 29, 1976 manifestly beyond the contemplation of the parties, the obligor
may also be released therefrom, in whole or in part. 1
JESUS V. OCCENA and EFIGENIA C. OCCENA, petitioners,
vs. ... a positive right is created in favor of the obligor to be released
HON. RAMON V. JABSON, Presiding Judge of the Court Of from the performance of an obligation in full or in part when its
First Instance of Rizal, Branch XXVI; COURT OF APPEALS performance 'has become so difficult as to be manifestly beyond
and TROPICAL HOMES, INC., respondents. the contemplation of the parties.
Occena Law Office for petitioners. Hence, the petition at abar wherein petitioners insist that the
worldwide increase inprices cited by respondent does not
constitute a sufficient casue of action for modification of the
Serrano, Diokno & Serrano for respondents. subdivision contrct. After receipt of respondent's comment, the
Court in its Resolution of September 13, 1976 resolved to treat
the petition as special civil actionand declared the case
submitted for decision.
TEEHANKEE, J.:
The petition must be granted.
The Court reverses the Court of Appeals appealed resolution.
The Civil Code authorizes the release of an obligor when the While respondent court correctly cited in its decision the Code
service has become so difficult as to be manifestly beyond the Commission's report giving the rationale for Article 1267 of the
contemplation of the parties but does not authorize the courts to Civil Code, to wit;
modify or revise the subdivision contract between the parties or
fix a different sharing ratio from that contractually stipulated with The general rule is that impossibility of performance releases
the force of law between the parties. Private respondent's the obligor. However, it is submitted that when the service has
complaint for modification of the contract manifestly has no become so difficult as to be manifestly beyond the
basis in law and must therefore be dismissed for failure to state contemplation of the parties, the court should be authorized to
a cause of action. On February 25, 1975 private respondent release the obligor in whole or in part. The intention of the
Tropical Homes, Inc. filed a complaint for modification of the parties should govern and if it appears that the service turns out
terms and conditions of its subdivision contract with petitioners to be so difficult as have been beyond their contemplation, it
(landowners of a 55,330 square meter parcel of land in Davao would be doing violence to that intention to hold the obligor still
City), making the following allegations: responsible. ... 2
"That due to the increase in price of oil and its derivatives and It misapplied the same to respondent's complaint.
the concomitant worldwide spiralling of prices, which are not
within the control of plaintiff, of all commodities including basis
raw materials required for such development work, the cost of If respondent's complaint were to be released from having to
development has risen to levels which are unanticipated, comply with the subdivision contract, assuming it could show at
unimagined and not within the remotest contemplation of the the trial that the service undertaken contractually by it had
parties at the time said agreement was entered into and to such "become so difficult as to be manifestly beyond the
a degree that the conditions and factors which formed the contemplation of the parties", then respondent court's upholding
original basis of said contract, Annex 'A', have been totally of respondet's complaint and dismissal of the petition would be
changed; 'That further performance by the plaintiff under the justifiable under the cited codal article. Without said article,
contract. respondent would remain bound by its contract under the
theretofore prevailing doctrine that performance therewith is ot
excused "by the fact that the contract turns out to be hard and
That further performance by the plaintiff under the improvident, unprofitable, or unespectedly burdensome", 3 since
contract,Annex 'S', will result in situation where defendants in case a party desires to be excuse from performance in the
would be unustly enriched at the expense of the plaintiff; will event of such contingencies arising, it is his duty to provide
cause an inequitous distribution of proceeds from the sales of threfor in the contract.
subdivided lots in manifest actually result in the unjust and
intolerable exposure of plaintiff to implacable losses, all such
situations resulting in an unconscionable, unjust and immoral But respondent's complaint seeks not release from the
situation contrary to and in violation of the primordial concepts subdivision contract but that the court "render judgment I
of good faith, fairness and equity which should pervade all modifying the terms and Conditions of the Contract by fixing the
human relations. proper shares that should pertain to the herein parties out of the
gross proceed., from the sales of subdivided lots of subject
subdivision". The cited article does not grant the courts this
Under the subdivision contract, respondent "guaranteed authority to remake, modify or revise the contract or to fix the
(petitioners as landowners) as the latter's fixed and sole share division of shares between the parties as contractually
and participation an amount equivalent to forty (40%) percent of stipulated with the force of law between the parties, so as to
all cash receifpts fromthe sale of the subdivision lots" substitute its own terms for those covenanted by the
partiesthemselves. Respondent's complaint for modification of
Respondent pray of the Rizal court of first instance that "after contract manifestly has no basis in law and therefore states no
due trial, this Honorable Court render judgment modifying the cause of action. Under the particular allegations of respondent's
terms and conditions of the contract ... by fixing the proer shares complaint and the circumstances therein averred, the courts
that shouls pertain to the herein parties out of the gross cannot even in equity grant the relief sought.
proceeds from the sales of subdivided lots of subjects
subdivision". A final procedural note. Respondent cites the general rule that
an erroneous order denying a motion to dismiss is interlocutory
Petitioners moved to dismiss the complaint principally for lack of and should not be corrected by certiorari but by appeal in due
cause of action, and upon denial thereof and of reconsideration course. This case however manifestly falls within the recognized
by the lower court elevated the matter on certiorari to exception that certiorari will lie when appeal would not prove to
respondent Court of Appeals. be a speedy and adequate remedy.' Where the remedy of
appeal would not, as in this case, promptly relieve petitioners
from the injurious effects of the patently erroneous order
maintaining respondent's baseless action and compelling
petitioners needlessly to go through a protracted trial and
clogging the court dockets by one more futile case, certiorari will
issue as the plain, speedy and adequate remedy of an
aggrieved party.
Footnotes
The antecedent facts, as narrated by respondent Court of In petitioners' answer to the first cause of action, they
Appeals are, as follows: averred that it should be dismissed because (1) it does not
sufficiently state a cause of action for reformation of contract;
(2) it is barred by prescription, the same having been filed
Petitioner Naga Telephone Co., Inc. (NATELCO) is a
more than ten (10) years after the execution of the contract;
telephone company rendering local as well as long distance
and (3) it is barred by estoppel, since private respondent
telephone service in Naga City while private respondent
seeks to enforce the contract in the same action. Petitioners
Camarines Sur II Electric Cooperative, Inc. (CASURECO II)
further alleged that their utilization of private respondent's
is a private corporation established for the purpose of
posts could not have caused their deterioration because they
operating an electric power service in the same city.
have already been in use for eleven (11) years; and that the
value of their expenses for the ten (10) telephone lines long
On November 1, 1977, the parties entered into a contract enjoyed by private respondent free of charge are far in
(Exh. "A") for the use by petitioners in the operation of its excess of the amounts claimed by the latter for the use of
telephone service the electric light posts of private
the posts, so that if there was any inequity, it was suffered by (5) Finally, Atty. Luis General, Jr., private respondent's
them. counsel, testified that the Board of Directors asked him to
study the contract sometime during the latter part of 1982 or
Regarding the second cause of action, petitioners claimed in 1983, as it had appeared very disadvantageous to private
that private respondent had asked for telephone lines in respondent. Notwithstanding his recommendation for the
areas outside Naga City for which its posts were used by filing of a court action to reform the contract, the former
them; and that if petitioners had refused to comply with general managers of private respondent wanted to adopt a
private respondent's demands for payment for the use of the soft approach with petitioners about the matter until the term
posts outside Naga City, it was probably because what is of General Manager Henry Pascual who, after failing to
due to them from private respondent is more than its claim settle the matter amicably with petitioners, finally agreed for
against them. him to file the present action for reformation of contract.
And with respect to the third cause of action, petitioners On the other hand, petitioner Maggay testified to the
claimed, inter alia, that their telephone service had been following effect:
categorized by the National Telecommunication Corporation
(NTC) as "very high" and of "superior quality." (1) It is true that he was a member of the Board of Directors
of private respondent and at the same time the lawyer of
During the trial, private respondent presented the following petitioner when the contract was executed, but Atty.
witnesses: Gaudioso Tena, who was also a member of the Board of
Directors of private respondent, was the one who saw to it
that the contract was fair to both parties.
(1) Dioscoro Ragragio, one of the two officials who signed
the contract in its behalf, declared that it was petitioner
Maggay who prepared the contract; that the understanding (2) With regard to the first cause of action:
between private respondent and petitioners was that the
latter would only use the posts in Naga City because at that (a) Private respondent has the right under the contract to
time, petitioners' capability was very limited and they had no use ten (10) telephone units of petitioners for as long as it
expectation of expansion because of legal squabbles within wishes without paying anything therefor except for long
the company; that private respondent agreed to allow distance calls through PLDT out of which the latter get only
petitioners to use its posts in Naga City because there were 10% of the charges.
many subscribers therein who could not be served by them
because of lack of facilities; and that while the telephone (b) In most cases, only drop wires and not telephone cables
lines strung to the posts were very light in 1977, said posts have been strung to the posts, which posts have remained
have become heavily loaded in 1989. erect up to the present;
(2) Engr. Antonio Borja, Chief of private respondent's Line (c) Petitioner's linemen have strung only small messenger
Operation and Maintenance Department, declared that the wires to many of the posts and they need only small holes to
posts being used by petitioners totalled 1,403 as of April 17, pass through; and
1989, 192 of which were in the towns of Pili, Canaman, and
Magarao, all outside Naga City (Exhs. "B" and "B-1"); that
petitioners' cables strung to the posts in 1989 are much (d) Documents existing in the NTC show that the stringing of
petitioners' cables in Naga City are according to standard
bigger than those in November, 1977; that in 1987, almost
and comparable to those of PLDT. The accidents mentioned
100 posts were destroyed by typhoon Sisang: around 20
by private respondent involved trucks that were either
posts were located between Naga City and the town of Pili
overloaded or had loads that protruded upwards, causing
while the posts in barangay Concepcion, Naga City were
them to hit the cables.
broken at the middle which had been bored by petitioner's
linemen to enable them to string bigger telephone lines; that
while the cost per post in 1977 was only from P700.00 to (3) Concerning the second cause of action, the intention of
P1,000.00, their costs in 1989 went up from P1,500.00 to the parties when they entered into the contract was that the
P2,000.00, depending on the size; that some lines that were coverage thereof would include the whole area serviced by
strung to the posts did not follow the minimum vertical petitioners because at that time, they already had
clearance required by the National Building Code, so that subscribers outside Naga City. Private respondent, in fact,
there were cases in 1988 where, because of the low had asked for telephone connections outside Naga City for
clearance of the cables, passing trucks would accidentally its officers and employees residing there in addition to the
touch said cables causing the posts to fall and resulting in ten (10) telephone units mentioned in the contract.
brown-outs until the electric lines were repaired. Petitioners have not been charging private respondent for
the installation, transfers and re-connections of said
telephones so that naturally, they use the posts for those
(3) Dario Bernardez, Project Supervisor and Acting General
telephone lines.
Manager of private respondent and Manager of Region V of
NEA, declared that according to NEA guidelines in 1985
(Exh. "C"), for the use by private telephone systems of (4) With respect to the third cause of action, the NTC has
electric cooperatives' posts, they should pay a minimum found petitioners' cable installations to be in accordance with
monthly rental of P4.00 per post, and considering the engineering standards and practice and comparable to the
escalation of prices since 1985, electric cooperatives have best in the country.
been charging from P10.00 to P15.00 per post, which is
what petitioners should pay for the use of the posts. On the basis of the foregoing countervailing evidence of the
parties, the trial court found, as regards private respondent's
(4) Engineer Antonio Macandog, Department Head of the first cause of action, that while the contract appeared to be
Office of Services of private respondent, testified on the poor fair to both parties when it was entered into by them during
service rendered by petitioner's telephone lines, like the the first year of private respondent's operation and when its
telephone in their Complaints Section which was usually out Board of Directors did not yet have any experience in that
of order such that they could not respond to the calls of their business, it had become disadvantageous and unfair to
customers. In case of disruption of their telephone lines, it private respondent because of subsequent events and
would take two to three hours for petitioners to reactivate conditions, particularly the increase in the volume of the
them notwithstanding their calls on the emergency line. subscribers of petitioners for more than ten (10) years
without the corresponding increase in the number of
telephone connections to private respondent free of charge.
The trial court concluded that while in an action for
reformation of contract, it cannot make another contract for 3) in ruling that the contract was subject to a potestative
the parties, it can, however, for reasons of justice and equity, condition in favor of petitioners.
order that the contract be reformed to abolish the inequities
therein. Thus, said court ruled that the contract should be Petitioners assert earnestly that Article 1267 of the New Civil
reformed by ordering petitioners to pay private respondent Code is not applicable primarily because the contract does
compensation for the use of their posts in Naga City, while not involve the rendition of service or a personal prestation
private respondent should also be ordered to pay the and it is not for future service with future unusual change.
monthly bills for the use of the telephones also in Naga City. Instead, the ruling in the case of Occea, et al. v. Jabson,
And taking into consideration the guidelines of the NEA on etc., et al., 7 which interpreted the article, should be followed in
the rental of posts by telephone companies and the increase resolving this case. Besides, said article was never raised by
in the costs of such posts, the trial court opined that a the parties in their pleadings and was never the subject of trial
monthly rental of P10.00 for each post of private respondent and evidence.
used by petitioners is reasonable, which rental it should pay
from the filing of the complaint in this case on January 2, In applying Article 1267, respondent court rationalized:
1989. And in like manner, private respondent should pay
petitioners from the same date its monthly bills for the use
and transfers of its telephones in Naga City at the same rate We agree with appellant that in order that an action for
that the public are paying. reformation of contract would lie and may prosper, there
must be sufficient allegations as well as proof that the
contract in question failed to express the true intention of the
On private respondent's second cause of action, the trial parties due to error or mistake, accident, or fraud. Indeed, in
court found that the contract does not mention anything embodying the equitable remedy of reformation of
about the use by petitioners of private respondent's posts instruments in the New Civil Code, the Code Commission
outside Naga City. Therefore, the trial court held that for gave its reasons as follows:
reason of equity, the contract should be reformed by
including therein the provision that for the use of private
respondent's posts outside Naga City, petitioners should pay Equity dictates the reformation of an instrument in order that
a monthly rental of P10.00 per post, the payment to start on the true intention of the contracting parties may be
the date this case was filed, or on January 2, 1989, and expressed. The courts by the reformation do not attempt to
private respondent should also pay petitioners the monthly make a new contract for the parties, but to make the
dues on its telephone connections located outside Naga City instrument express their real agreement. The rationale of the
beginning January, 1989. doctrine is that it would be unjust and inequitable to allow the
enforcement of a written instrument which does not reflect or
disclose the real meeting of the minds of the parties. The
And with respect to private respondent's third cause of rigor of the legalistic rule that a written instrument should be
action, the trial court found the claim not sufficiently proved. the final and inflexible criterion and measure of the rights
and obligations of the contracting parties is thus tempered to
Thus, the following decretal portion of the trial court's forestall the effects of mistake, fraud, inequitable conduct, or
decision dated July 20, 1990: accident. (pp. 55-56, Report of Code Commission)
WHEREFORE, in view of all the foregoing, decision is Thus, Articles 1359, 1361, 1362, 1363 and 1364 of the New
hereby rendered ordering the reformation of the agreement Civil Code provide in essence that where through mistake or
(Exh. A); ordering the defendants to pay plaintiff's electric accident on the part of either or both of the parties or
poles in Naga City and in the towns of Milaor, Canaman, mistake or fraud on the part of the clerk or typist who
Magarao and Pili, Camarines Sur and in other places where prepared the instrument, the true intention of the parties is
defendant NATELCO uses plaintiff's electric poles, the sum not expressed therein, then the instrument may be reformed
of TEN (P10.00) PESOS per plaintiff's pole, per month at the instance of either party if there was mutual mistake on
beginning January, 1989 and ordering also the plaintiff to their part, or by the injured party if only he was mistaken.
pay defendant NATELCO the monthly dues of all its
telephones including those installed at the residence of its Here, plaintiff-appellee did not allege in its complaint, nor
officers, namely; Engr. Joventino Cruz, Engr. Antonio Borja, does its evidence prove, that there was a mistake on its part
Engr. Antonio Macandog, Mr. Jesus Opiana and Atty. Luis or mutual mistake on the part of both parties when they
General, Jr. beginning January, 1989. Plaintiff's claim for entered into the agreement Exh. "A", and that because of his
attorney's fees and expenses of litigation and defendants' mistake, said agreement failed to express their true
counterclaim are both hereby ordered dismissed. Without intention. Rather, plaintiff's evidence shows that said
pronouncement as to costs. agreement was prepared by Atty. Luciano Maggay, then a
member of plaintiff's Board of Directors and its legal counsel
Disagreeing with the foregoing judgment, petitioners at that time, who was also the legal counsel for defendant-
appealed to respondent Court of Appeals. In the decision appellant, so that as legal counsel for both companies and
dated May 28, 1992, respondent court affirmed the decision presumably with the interests of both companies in mind
of the trial court, 5 but based on different grounds to wit: (1) that when he prepared the aforesaid agreement, Atty. Maggay
Article 1267 of the New Civil Code is applicable and (2) that the must have considered the same fair and equitable to both
contract was subject to a potestative condition which rendered sides, and this was affirmed by the lower court when it found
said condition void. The motion for reconsideration was denied said contract to have been fair to both parties at the time of
in the resolution dated September 10, 1992. 6Hence, the present its execution. In fact, there were no complaints on the part of
petition. both sides at the time of and after the execution of said
contract, and according to 73-year old Justino de Jesus,
Petitioners assign the following pertinent errors committed Vice President and General manager of appellant at the time
by respondent court: who signed the agreement Exh. "A" in its behalf and who
was one of the witnesses for the plaintiff (sic), both parties
1) in making a contract for the parties by invoking Article complied with said contract "from the very beginning" (p. 5,
1267 of the New Civil Code; tsn, April 17, 1989).
2) in ruling that prescription of the action for reformation of That the aforesaid contract has become inequitous or
the contract in this case commenced from the time it became unfavorable or disadvantageous to the plaintiff with the
disadvantageous to private respondent; and expansion of the business of appellant and the increase in
the volume of its subscribers in Naga City and environs
through the years, necessitating the stringing of more and
bigger telephone cable wires by appellant to plaintiff's
electric posts without a corresponding increase in the ten outside Naga City (Exh. "B"). Add to this the destruction of
(10) telephone connections given by appellant to plaintiff free some of plaintiff's poles during typhoons like the strong
of charge in the agreement Exh. "A" as consideration for its typhoon Sisang in 1987 because of the heavy telephone
use of the latter's electric posts in Naga City, appear, cables attached thereto, and the escalation of the costs of
however, undisputed from the totality of the evidence on electric poles from 1977 to 1989, and the conclusion is
record and the lower court so found. And it was for this indeed ineluctable that the agreement Exh. "A" has already
reason that in the later (sic) part of 1982 or 1983 (or five or become too one-sided in favor of appellant to the great
six years after the subject agreement was entered into by disadvantage of plaintiff, in short, the continued enforcement
the parties), plaintiff's Board of Directors already asked Atty. of said contract has manifestly gone far beyond the
Luis General who had become their legal counsel in 1982, to contemplation of plaintiff, so much so that it should now be
study said agreement which they believed had become released therefrom under Art. 1267 of the New Civil Code to
disadvantageous to their company and to make the proper avoid appellant's unjust enrichment at its (plaintiff's)
recommendation, which study Atty. General did, and expense. As stated by Tolentino in his commentaries on the
thereafter, he already recommended to the Board the filing Civil Code citing foreign civilist Ruggiero, "equity demands a
of a court action to reform said contract, but no action was certain economic equilibrium between the prestation and the
taken on Atty. General's recommendation because the counter-prestation, and does not permit the unlimited
former general managers of plaintiff wanted to adopt a soft impoverishment of one party for the benefit of the other by
approach in discussing the matter with appellant, until, the excessive rigidity of the principle of the obligatory force
during the term of General Manager Henry Pascual, the of contracts (IV Tolentino, Civil Code of the Philippines, 1986
latter, after failing to settle the problem with Atty. Luciano ed.,
Maggay who had become the president and general pp. 247-248).
manager of appellant, already agreed for Atty. General's
filing of the present action. The fact that said contract has We therefore, find nothing wrong with the ruling of the trial
become inequitous or disadvantageous to plaintiff as the court, although based on a different and wrong premise (i.e.,
years went by did not, however, give plaintiff a cause of reformation of contract), that from the date of the filing of this
action for reformation of said contract, for the reasons case, appellant must pay for the use of plaintiff's electric
already pointed out earlier. But this does not mean that posts in Naga City at the reasonable monthly rental of
plaintiff is completely without a remedy, for we believe that P10.00 per post, while plaintiff should pay appellant for the
the allegations of its complaint herein and the evidence it telephones in the same City that it was formerly using free of
has presented sufficiently make out a cause of action under charge under the terms of the agreement Exh. "A" at the
Art. 1267 of the New Civil Code for its release from the same rate being paid by the general public. In affirming said
agreement in question. ruling, we are not making a new contract for the parties
herein, but we find it necessary to do so in order not to
xxx xxx xxx disrupt the basic and essential services being rendered by
both parties herein to the public and to avoid unjust
The understanding of the parties when they entered into the enrichment by appellant at the expense of plaintiff, said
Agreement Exh. "A" on November 1, 1977 and the prevailing arrangement to continue only until such time as said parties
circumstances and conditions at the time, were described by can re-negotiate another agreement over the same
Dioscoro Ragragio, the President of plaintiff in 1977 and one subject-matter covered by the agreement Exh. "A". Once
of its two officials who signed said agreement in its behalf, said agreement is reached and executed by the parties, the
as follows: aforesaid ruling of the lower court and affirmed by us shall
cease to exist and shall be substituted and superseded by
their new agreement. . . .. 8
Our understanding at that time is that we will allow
NATELCO to utilize the posts of CASURECO II only in the
City of Naga because at that time the capability of Article 1267 speaks of "service" which has become so
NATELCO was very limited, as a matter of fact we do [sic] difficult. Taking into consideration the rationale behind this
not expect to be able to expand because of the legal provision, 9 the term "service" should be understood as referring
squabbles going on in the NATELCO. So, even at that time to the "performance" of the obligation. In the present case, the
there were so many subscribers in Naga City that cannot be obligation of private respondent consists in allowing petitioners
to use its posts in Naga City, which is the service contemplated
served by the NATELCO, so as a mater of public service we
in said article. Furthermore, a bare reading of this article reveals
allowed them to sue (sic) our posts within the Naga City. (p.
that it is not a requirement thereunder that the contract be for
8, tsn April 3, 1989) future service with future unusual change. According to Senator
Arturo M. Tolentino, 10 Article 1267 states in our law the doctrine
Ragragio also declared that while the telephone wires strung of unforseen events. This is said to be based on the discredited
to the electric posts of plaintiff were very light and that very theory of rebus sic stantibus in public international law; under
few telephone lines were attached to the posts of this theory, the parties stipulate in the light of certain prevailing
CASURECO II in 1977, said posts have become "heavily conditions, and once these conditions cease to exist the
loaded" in 1989 (tsn, id.). contract also ceases to exist. Considering practical needs and
the demands of equity and good faith, the disappearance of the
basis of a contract gives rise to a right to relief in favor of the
In truth, as also correctly found by the lower court, despite party prejudiced.
the increase in the volume of appellant's subscribers and the
corresponding increase in the telephone cables and wires
strung by it to plaintiff's electric posts in Naga City for the In a nutshell, private respondent in the Occea case filed a
more 10 years that the agreement Exh. "A" of the parties has complaint against petitioner before the trial court praying
been in effect, there has been no corresponding increase in for modification of the terms and conditions of the contract
the ten (10) telephone units connected by appellant free of that they entered into by fixing the proper shares that should
charge to plaintiff's offices and other places chosen by pertain to them out of the gross proceeds from the sales of
plaintiff's general manager which was the only consideration subdivided lots. We ordered the dismissal of the complaint
provided for in said agreement for appellant's use of plaintiffs therein for failure to state a sufficient cause of action. We
electric posts. Not only that, appellant even started using rationalized that the Court of Appeals misapplied Article
plaintiff's electric posts outside Naga City although this was 1267 because:
not provided for in the agreement Exh. "A" as it extended
and expanded its telephone services to towns outside said . . . respondent's complaint seeks not release from the
city. Hence, while very few of plaintiff's electric posts were subdivision contract but that the court "render
being used by appellant in 1977 and they were all in the City judgment modifying the terms and conditions of the contract
of Naga, the number of plaintiff's electric posts that appellant . . . by fixing the proper shares that should pertain to the
was using in 1989 had jumped to 1,403,192 of which are herein parties out of the gross proceeds from the sales of
subdivided lots of subject subdivision". The cited article case in the best way and manner it can in the light of the
(Article 1267) does not grant the courts (the) authority to proven facts and the law or laws applicable thereto.
remake, modify or revise the contract or to fix the division of
shares between the parties as contractually stipulated with It is settled that when the trial court decides a case in favor
the force of law between the parties, so as to substitute its of a party on a certain ground, the appellant court may
own terms for those covenanted by the parties themselves. uphold the decision below upon some other point which was
Respondent's complaint for modification of contract ignored or erroneously decided by the trial court (Garcia
manifestly has no basis in law and therefore states no cause Valdez v. Tuazon, 40 Phil. 943; Relativo v. Castro, 76 Phil.
of action. Under the particular allegations of respondent's 563; Carillo v. Salak de Paz, 18 SCRA 467). Furthermore,
complaint and the circumstances therein averred, the courts the appellate court has the discretion to consider an
cannot even in equity grant the relief sought. 11 unassigned error that is closely related to an error properly
assigned (Paterno v. Jao Yan, 1 SCRA 631; Hernandez v.
The ruling in the Occea case is not applicable because we Andal, 78 Phil. 196). It has also been held that the Supreme
agree with respondent court that the allegations in private Court (and this Court as well) has the authority to review
respondent's complaint and the evidence it has presented matters, even if they are not assigned as errors in the
sufficiently made out a cause of action under Article 1267. appeal, if it is found that their consideration is necessary in
We, therefore, release the parties from their correlative arriving at a just decision of the case (Saura Import & Export
obligations under the contract. However, our disposition of Co., Inc. v. Phil. International Surety Co. and PNB, 8 SCRA
the present controversy does not end here. We have to take 143). For it is the material allegations of fact in the complaint,
into account the possible consequences of merely releasing not the legal conclusion made therein or the prayer, that
the parties therefrom: petitioners will remove the telephone determines the relief to which the plaintiff is entitled, and the
wires/cables in the posts of private respondent, resulting in plaintiff is entitled to as much relief as the facts warrant
disruption of their service to the public; while private although that relief is not specifically prayed for in the
respondent, in consonance with the contract 12 will return all complaint (Rosales v. Reyes and Ordoveza, 25 Phil. 495;
the telephone units to petitioners, causing prejudice to its Cabigao v. Lim, 50 Phil. 844; Baguioro v. Barrios, 77 Phil.
business. We shall not allow such eventuality. Rather, we 120). To quote an old but very illuminating decision of our
require, as ordered by the trial court: 1) petitioners to pay private Supreme Court through the pen of American jurist Adam C.
respondent for the use of its posts in Naga City and in the towns Carson:
of Milaor, Canaman, Magarao and Pili, Camarines Sur and in
other places where petitioners use private respondent's posts,
the sum of ten (P10.00) pesos per post, per month, beginning "Under our system of pleading it is the duty of the courts to
January, 1989; and 2) private respondent to pay petitioner the grant the relief to which the parties are shown to be entitled
monthly dues of all its telephones at the same rate being paid by the allegations in their pleadings and the facts proven at
by the public beginning January, 1989. The peculiar the trial, and the mere fact that they themselves misconstrue
circumstances of the present case, as distinguished further from the legal effect of the facts thus alleged and proven will not
the Occea case, necessitates exercise of our equity prevent the court from placing the just construction thereon
jurisdiction. 13 By way of emphasis, we reiterate the and adjudicating the issues accordingly." (Alzua v. Johnson,
rationalization of respondent court that: 21 Phil. 308)
. . . In affirming said ruling, we are not making a new contract And in the fairly recent case of Caltex Phil., Inc. v IAC, 176
for the parties herein, but we find it necessary to do so in SCRA 741, the Honorable Supreme Court also held:
order not to disrupt the basic and essential services being
rendered by both parties herein to the public and to avoid We rule that the respondent court did not commit any error in
unjust enrichment by appellant at the expense of plaintiff . . . taking cognizance of the aforesaid issues, although not
.14 raised before the trial court. The presence of strong
consideration of substantial justice has led this Court to relax
Petitioners' assertion that Article 1267 was never raised by the well-entrenched rule that, except questions on
the parties in their pleadings and was never the subject of jurisdiction, no question will be entertained on appeal unless
trial and evidence has been passed upon by respondent it has been raised in the court below and it is within the
court in its well reasoned resolution, which we hereunder issues made by the parties in their pleadings (Cordero v.
quote as our own: Cabral, L-36789, July 25, 1983, 123 SCRA 532). . . .
First, we do not agree with defendant-appellant that in We believe that the above authorities suffice to show that
applying Art. 1267 of the New Civil Code to this case, we this Court did not err in applying Art. 1267 of the New Civil
have changed its theory and decided the same on an issue Code to this case. Defendant-appellant stresses that the
not invoked by plaintiff in the lower court. For basically, the applicability of said provision is a question of fact, and that it
main and pivotal issue in this case is whether the continued should have been given the opportunity to present evidence
enforcement of the contract Exh. "A" between the parties on said question. But defendant-appellant cannot honestly
has, through the years (since 1977), become too inequitous and truthfully claim that it (did) not (have) the opportunity to
or disadvantageous to the plaintiff and too one-sided in favor present evidence on the issue of whether the continued
of defendant-appellant, so that a solution must be found to operation of the contract Exh. "A" has now become too one-
relieve plaintiff from the continued operation of said sided in its favor and too inequitous, unfair, and
agreement and to prevent defendant-appellant from further disadvantageous to plaintiff. As held in our decision, the
unjustly enriching itself at plaintiff's expense. It is indeed abundant and copious evidence presented by both parties in
unfortunate that defendant had turned deaf ears to plaintiffs this case and summarized in said decision established the
requests for renegotiation, constraining the latter to go to following essential and vital facts which led us to apply Art.
court. But although plaintiff cannot, as we have held, 1267 of the New Civil Code to this case:
correctly invoke reformation of contract as a proper remedy
(there having been no showing of a mistake or error in said xxx xxx xxx 15
contract on the part of any of the parties so as to result in its
failure to express their true intent), this does not mean that
plaintiff is absolutely without a remedy in order to relieve On the issue of prescription of private respondent's action for
itself from a contract that has gone far beyond its reformation of contract, petitioners allege that respondent
contemplation and has become so highly inequitous and court's ruling that the right of action "arose only after said
disadvantageous to it through the years because of the contract had already become disadvantageous and unfair to
expansion of defendant-appellant's business and the it due to subsequent events and conditions, which must be
increase in the volume of its subscribers. And as it is the sometime during the latter part of 1982 or in 1983 . . ." 16 is
erroneous. In reformation of contracts, what is reformed is not
duty of the Court to administer justice, it must do so in this
the contract itself, but the instrument embodying the contract. It
follows that whether the contract is disadvantageous or not is made to depend as long as appellant needs plaintiff's electric
irrelevant to reformation and therefore, cannot be an element in posts. And this is precisely why, since 1977 when said
the determination of the period for prescription of the action to agreement was executed and up to 1989 when this case
reform. was finally filed by plaintiff, it could do nothing to be released
from or terminate said agreement notwithstanding that its
Article 1144 of the New Civil Code provides, inter alia, that continued effectivity has become very disadvantageous and
an action upon a written contract must be brought within ten inequitous to it due to the expansion and increase of
(10) years from the time the right of action accrues. Clearly, appellant's telephone services within Naga City and even
the ten (10) year period is to be reckoned from the time the outside the same, without a corresponding increase in the
right of action accrues which is not necessarily the date of ten (10) telephone units being used by plaintiff free of
execution of the contract. As correctly ruled by respondent charge, as well as the bad and inefficient service of said
court, private respondent's right of action arose "sometime telephones to the prejudice and inconvenience of plaintiff
during the latter part of 1982 or in 1983 when according to and its customers. . . . 18
Atty. Luis General, Jr. . . ., he was asked by (private
respondent's) Board of Directors to study said contract as it Petitioners' allegations must be upheld in this regard. A
already appeared disadvantageous to (private respondent) potestative condition is a condition, the fulfillment of which
(p. 31, tsn, May 8, 1989). (Private respondent's) cause of depends upon the sole will of the debtor, in which case, the
action to ask for reformation of said contract should thus be conditional obligation is void. 19 Based on this definition,
considered to have arisen only in 1982 or 1983, and from respondent court's finding that the provision in the contract, to
1982 to January 2, 1989 when the complaint in this case wit:
was filed, ten (10) years had not yet elapsed." 17
(a) That the term or period of this contract shall be as long
Regarding the last issue, petitioners allege that there is as the party of the first part (petitioner) has need for the
nothing purely potestative about the prestations of either electric light posts of the party of the second part (private
party because petitioner's permission for free use of respondent) . . ..
telephones is not made to depend purely on their will, neither
is private respondent's permission for free use of its posts is a potestative condition, is correct. However, it must have
dependent purely on its will. overlooked the other conditions in the same provision, to wit:
Apart from applying Article 1267, respondent court cited . . . it being understood that this contract shall terminate
another legal remedy available to private respondent under when for any reason whatsoever, the party of the second
the allegations of its complaint and the preponderant part (private respondent) is forced to stop, abandoned (sic)
evidence presented by it: its operation as a public service and it becomes necessary to
remove the electric light post (sic);
. . . we believe that the provision in said agreement
which are casual conditions since they depend on chance,
(a) That the term or period of this contract shall be as long hazard, or the will of a third person. 20 In sum, the contract is
as the party of the first part [herein appellant] has need for subject to mixed conditions, that is, they depend partly on the
the electric light posts of the party of the second part [herein will of the debtor and partly on chance, hazard or the will of a
plaintiff] it being understood that this contract shall terminate third person, which do not invalidate the aforementioned
when for any reason whatsoever, the party of the second provision. 21 Nevertheless, in view of our discussions under the
part is forced to stop, abandoned [sic] its operation as a first and second issues raised by petitioners, there is no reason
public service and it becomes necessary to remove the to set aside the questioned decision and resolution of
electric light post [sic]"; (Emphasis supplied) respondent court.
is invalid for being purely potestative on the WHEREFORE, the petition is hereby DENIED. The decision
part of appellant as it leaves the continued of the Court of Appeals dated May 28, 1992 and its
effectivity of the aforesaid agreement to the resolution dated September 10, 1992 are AFFIRMED.
latter's sole and exclusive will as long as
plaintiff is in operation. A similar provision in SO ORDERED.
a contract of lease wherein the parties
agreed that the lessee could stay on the Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.
leased premises "for as long as the
defendant needed the premises and can Footnotes
meet and pay said increases" was recently 1 84 Phil. 654.
held by the Supreme Court in Lim v. C.A., 2 Report of the Code Commission, p. 133; cited in Rollo, p. 57.
191 SCRA 150, citing the much earlier case 3 Records, p. 6.
of Encarnacion v. Baldomar, 77 Phil. 470, 4 Ibid, pp. 6-7.
as invalid for being "a purely potestative 5 Rollo, p. 62.
condition because it leaves the effectivity 6 Rollo, p. 71.
and enjoyment of leasehold rights to the 7 G.R. No. L-44349, October 29, 1976, 73 SCRA 637.
8 Rollo, pp. 54-59.
sole and exclusive will of the lessee."
9 Supra.
Further held the High Court in the Lim case: 10 Commentaries and Jurisprudence on the Civil Code of the Philippines, 1991
Edition p. 347.
The continuance, effectivity and fulfillment of a contract of 11 At p. 641.
lease cannot be made to depend exclusively upon the free 12 Records, p. 7.
and uncontrolled choice of the lessee between continuing 13 Agne, et al. v. Director of Lands, et al., G.R. No. L-40399, February 9, 1990,
181 SCRA 793.
the payment of the rentals or not, completely depriving the
14 Rollo, p.59.
owner of any say in the matter. Mutuality does not obtain in 15 Rollo, pp. 66-69.
such a contract of lease of no equality exists between the 16 Rollo, pp. 53-54.
lessor and the lessee since the life of the contract is dictated 17 Rollo, pp. 53-54.
solely by the lessee. 18 Rollo, pp. 59-61.
19 Article 1182 of the New Civil Code.
20 Civil Code of the Philippines Annotated by Edgardo L. Paras, 1985 Edition,
The above can also be said of the agreement Exh. "A"
p. 171.
between the parties in this case. There is no mutuality and 21 Ibid.
equality between them under the afore-quoted provision
thereof since the life and continuity of said agreement is