G.R. No.

138814 April 16, 2009

MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON
C. PAPA, NORBERTO C. NAZARENO, GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B.
ARNAIZ, LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs.
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS,1 Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision2 dated
11 February 1997 and Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No.
38455.

The facts of the case are as follows:

SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos,
who filed with the Securities, Investigation and Clearing Department (SICD) of the Securities and
Exchange Commission (SEC), a Petition against herein petitioners Makati Stock Exchange, Inc.
(MKSE) and MKSE directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa, Norberto C.
Nazareno, George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio
Garcia, Jr. Respondent, in said Petition, sought: (1) the nullification of the Resolution dated 3 June
1993 of the MKSE Board of Directors, which allegedly deprived him of his right to participate equally
in the allocation of Initial Public Offerings (IPO) of corporations registered with MKSE; (2) the
delivery of the IPO shares he was allegedly deprived of, for which he would pay IPO prices; and (3)
the payment of ₱2 million as moral damages, ₱1 million as exemplary damages, and ₱500,000.00
as attorney’s fees and litigation expenses.

On 14 February 1994, the SICD issued an Order granting respondent’s prayer for the issuance of a
Temporary Restraining Order to enjoin petitioners from implementing or enforcing the 3 June 1993
Resolution of the MKSE Board of Directors.

The SICD subsequently issued another Order on 10 March 1994 granting respondent’s application
for a Writ of Preliminary Injunction, to continuously enjoin, during the pendency of SEC Case No. 02-
94-4678, the implementation or enforcement of the MKSE Board Resolution in question. Petitioners
assailed this SICD Order dated 10 March 1994 in a Petition for Certiorari filed with the SEC en banc,
docketed as SEC-EB No. 393.

On 11 March 1994, petitioners filed a Motion to Dismiss respondent’s Petition in SEC Case No. 02-
94-4678, based on the following grounds: (1) the Petition became moot due to the cancellation of the
license of MKSE; (2) the SICD had no jurisdiction over the Petition; and (3) the Petition failed to state
a cause of action.

The SICD denied petitioner’s Motion to Dismiss in an Order dated 4 May 1994. Petitioners again
challenged the 4 May 1994 Order of SICD before the SEC en banc through another Petition for
Certiorari, docketed as SEC-EB No. 403.

In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en banc nullified the 10 March 1994
Order of SICD in SEC Case No. 02-94-4678 granting a Writ of Preliminary Injunction in favor of
respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB No. 403, the SEC en banc
annulled the 4 May 1994 Order of SICD in SEC Case No. 02-94-4678 denying petitioners’ Motion to
Dismiss, and accordingly ordered the dismissal of respondent’s Petition before the SICD.

Respondent filed a Petition for Certiorari with the Court of Appeals assailing the Orders of the SEC
en banc dated 31 May 1995 and 14 August 1995 in SEC-EB No. 393 and SEC-EB No. 403,
respectively. Respondent’s Petition before the appellate court was docketed as CA-G.R. SP No.
38455.

On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 38455,
granting respondent’s Petition for Certiorari, thus:

WHEREFORE, the petition in so far as it prays for annulment of the Orders dated May 31, 1995 and
August 14, 1995 in SEC-EB Case Nos. 393 and 403 is GRANTED. The said orders are hereby
rendered null and void and set aside.

Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was denied by the
Court of Appeals in a Resolution dated 18 May 1999.

Hence, the present Petition for Review raising the following arguments:

I.

THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION FILED BY RESPONDENT
BECAUSE ON ITS FACE, IT FAILED TO STATE A CAUSE OF ACTION.

II.

THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE

ACCOMMODATION GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF THE MAKATI STOCK
EXCHANGE, INC.

III.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
MADE AN EXTENDED INQUIRY AND PROCEEDED TO MAKE A DETERMINATION AS TO THE
TRUTH OF RESPONDENT’S ALLEGATIONS IN HIS PETITION AND USED AS BASIS THE
EVIDENCE ADDUCED DURING THE HEARING ON THE APPLICATION FOR THE WRIT OF
PRELIMINARY INJUNCTION TO DETERMINE THE EXISTENCE OR VALIDITY OF A STATED
CAUSE OF ACTION.

IV.

IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE BROKERS

FOR THEMSELVES BUT ARE TO BE DISTRIBUTED TO THE INVESTING PUBLIC. HENCE,
RESPONDENT’S CLAIM FOR DAMAGES IS ILLUSORY AND HIS PETITION A NUISANCE SUIT.3
On 18 September 2001, counsel for respondent manifested to this Court that his client died on 7
May 2001. In a Resolution dated 24 October 2001, the Court directed the substitution of respondent
by his surviving spouse, Julia Ortigas vda. de Campos.

Petitioners want this Court to affirm the dismissal by the SEC en banc of respondent’s Petition in
SEC Case No. 02-94-4678 for failure to state a cause of action. On the other hand, respondent
insists on the sufficiency of his Petition and seeks the continuation of the proceedings before the
SICD.

A cause of action is the act or omission by which a party violates a right of another.4 A complaint
states a cause of action where it contains three essential elements of a cause of action, namely: (1)
the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or
omission of the defendant in violation of said legal right. If these elements are absent, the complaint
becomes vulnerable to dismissal on the ground of failure to state a cause of action.

If a defendant moves to dismiss the complaint on the ground of lack of cause of action, he is
regarded as having hypothetically admitted all the averments thereof. The test of sufficiency of the
facts found in a complaint as constituting a cause of action is whether or not admitting the facts
alleged, the court can render a valid judgment upon the same in accordance with the prayer thereof.
The hypothetical admission extends to the relevant and material facts well pleaded in the complaint
and inferences fairly deducible therefrom. Hence, if the allegations in the complaint furnish sufficient
basis by which the complaint can be maintained, the same should not be dismissed regardless of
the defense that may be assessed by the defendant.5

Given the foregoing, the issue of whether respondent’s Petition in SEC Case No. 02-94-4678
sufficiently states a cause of action may be alternatively stated as whether, hypothetically admitting
to be true the allegations in respondent’s Petition in SEC Case No. 02-94-4678, the SICD may
render a valid judgment in accordance with the prayer of said Petition.

A reading of the exact text of respondent’s Petition in SEC Case No. 02-94-4678 is, therefore,
unavoidable. Pertinent portions of the said Petition reads:

7. In recognition of petitioner’s invaluable services, the general membership of respondent

corporation [MKSE] passed a resolution sometime in 1989 amending its Articles of Incorporation, to
include the following provision therein:

"ELEVENTH – WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the Makati Stock
Exchange, Inc. who has maintained his membership;

"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor from 1977
to the present and as President from 1972 to 1976 and again as President from 1988 to the present;

"WHEREAS, such dedicated service and leadership which has contributed to the advancement and
well being not only of the Exchange and its members but also to the Securities industry, needs to be
recognized and appreciated;

"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has
correspondingly adopted a resolution recognizing his valuable service to the Exchange, reward the
same, and preserve for posterity such recognition by proposing a resolution to the membership body
which would make him as Chairman Emeritus for life and install in the Exchange premises a
commemorative bronze plaque in his honor;
"NOW, THEREFORE, for and in consideration of the above premises, the position of the "Chairman
Emeritus" to be occupied by Mr. Miguel Campos during his lifetime and irregardless of his continued
membership in the Exchange with the Privilege to attend all membership meetings as well as the
meetings of the Board of Governors of the Exchange, is hereby created."

8. Hence, to this day, petitioner is not only an active member of the respondent corporation, but its
Chairman Emeritus as well.

9. Correspondingly, at all times material to this petition, as an active member and Chairman
Emeritus of respondent corporation, petitioner has always enjoyed the right given to all the other
members to participate equally in the Initial Public Offerings (IPOs for brevity) of corporations.

10. IPOs are shares of corporations offered for sale to the public, prior to the listing in the trading
floor of the country’s two stock exchanges. Normally, Twenty Five Percent (25%) of these shares are
divided equally between the two stock exchanges which in turn divide these equally among their
members, who pay therefor at the offering price.

11. However, on June 3, 1993, during a meeting of the Board of Directors of respondent-corporation,
individual respondents passed a resolution to stop giving petitioner the IPOs he is entitled to, based
on the ground that these shares were allegedly benefiting Gerardo O. Lanuza, Jr., who these
individual respondents wanted to get even with, for having filed cases before the Securities and
Exchange (SEC) for their disqualification as member of the Board of Directors of respondent
corporation.

12. Hence, from June 3, 1993 up to the present time, petitioner has been deprived of his right to
subscribe to the IPOs of corporations listing in the stock market at their offering prices.

13. The collective act of the individual respondents in depriving petitioner of his right to a share in the
IPOs for the aforementioned reason, is unjust, dishonest and done in bad faith, causing petitioner
substantial financial damage.6

There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor of
respondent, particularly, respondent’s alleged right to subscribe to the IPOs of corporations listed in
the stock market at their offering prices; and stipulates the correlative obligation of petitioners to
respect respondent’s right, specifically, by continuing to allow respondent to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.

However, the terms right and obligation in respondent’s Petition are not magic words that would
automatically lead to the conclusion that such Petition sufficiently states a cause of action. Right and
obligation are legal terms with specific legal meaning. A right is a claim or title to an interest in
anything whatsoever that is enforceable by law.7 An obligation is defined in the Civil Code as a
juridical necessity to give, to do or not to do.8 For every right enjoyed by any person, there is a
corresponding obligation on the part of another person to respect such right. Thus, Justice J.B.L.
Reyes offers9 the definition given by Arias Ramos as a more complete definition:

An obligation is a juridical relation whereby a person (called the creditor) may demand from another
(called the debtor) the observance of a determinative conduct (the giving, doing or not doing), and in
case of breach, may demand satisfaction from the assets of the latter.

The Civil Code enumerates the sources of obligations:

Art. 1157. Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts.

Therefore, an obligation imposed on a person, and the corresponding right granted to another, must
be rooted in at least one of these five sources. The mere assertion of a right and claim of an
obligation in an initiatory pleading, whether a Complaint or Petition, without identifying the basis or
source thereof, is merely a conclusion of fact and law. A pleading should state the ultimate facts
essential to the rights of action or defense asserted, as distinguished from mere conclusions of fact
or conclusions of law.10 Thus, a Complaint or Petition filed by a person claiming a right to the Office
of the President of this Republic, but without stating the source of his purported right, cannot be said
to have sufficiently stated a cause of action. Also, a person claiming to be the owner of a parcel of
land cannot merely state that he has a right to the ownership thereof, but must likewise assert in the
Complaint either a mode of acquisition of ownership or at least a certificate of title in his name.

In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondent’s right
to subscribe to the IPOs of corporations listed in the stock market at their offering prices, and
petitioners’ obligation to continue respecting and observing such right, the Petition utterly failed to lay
down the source or basis of respondent’s right and/or petitioners’ obligation.

Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989,
granting him the position of Chairman Emeritus of MKSE for life. However, there is nothing in the
said Petition from which the Court can deduce that respondent, by virtue of his position as Chairman
Emeritus of MKSE, was granted by law, contract, or any other legal source, the right to subscribe to
the IPOs of corporations listed in the stock market at their offering prices.

A meticulous review of the Petition reveals that the allocation of IPO shares was merely alleged to
have been done in accord with a practice normally observed by the members of the stock exchange,
to wit:

IPOs are shares of corporations offered for sale to the public, prior to their listing in the trading floor
of the country’s two stock exchanges. Normally, Twenty-Five Percent (25%) of these shares are
divided equally between the two stock exchanges which in turn divide these equally among their
members, who pay therefor at the offering price.11(Emphasis supplied)

A practice or custom is, as a general rule, not a source of a legally demandable or enforceable
right.12 Indeed, in labor cases, benefits which were voluntarily given by the employer, and which
have ripened into company practice, are considered as rights that cannot be diminished by the
employer.13 Nevertheless, even in such cases, the source of the employees’ right is not custom, but
ultimately, the law, since Article 100 of the Labor Code explicitly prohibits elimination or diminution of
benefits.
There is no such law in this case that converts the practice of allocating IPO shares to MKSE
members, for subscription at their offering prices, into an enforceable or demandable right. Thus,
even if it is hypothetically admitted that normally, twenty five percent (25%) of the IPOs are divided
equally between the two stock exchanges -- which, in turn, divide their respective allocation equally
among their members, including the Chairman Emeritus, who pay for IPO shares at the offering
price -- the Court cannot grant respondent’s prayer for damages which allegedly resulted from the
MKSE Board Resolution dated 3 June 1993 deviating from said practice by no longer allocating any
shares to respondent. 1avv phi 1

Accordingly, the instant Petition should be granted. The Petition in SEC Case No. 02-94-4678
should be dismissed for failure to state a cause of action. It does not matter that the SEC en banc, in
its Order dated 14 August 1995 in SEC-EB No. 403, overstepped its bounds by not limiting itself to
the issue of whether respondent’s Petition before the SICD sufficiently stated a cause of action. The
SEC en banc may have been mistaken in considering extraneous evidence in granting petitioners’
Motion to Dismiss, but its discussion thereof are merely superfluous and obiter dictum. In the main,
the SEC en banc did correctly dismiss the Petition in SEC Case No. 02-94-4678 for its failure to
state the basis for respondent’s alleged right, to wit:

Private respondent Campos has failed to establish the basis or authority for his alleged right to
participate equally in the IPO allocations of the Exchange. He cited paragraph 11 of the amended
articles of incorporation of the Exchange in support of his position but a careful reading of the said
provision shows nothing therein that would bear out his claim. The provision merely created the
position of chairman emeritus of the Exchange but it mentioned nothing about conferring upon the
occupant thereof the right to receive IPO allocations.14

With the dismissal of respondent’s Petition in SEC Case No. 02-94-4678, there is no more need for
this Court to resolve the propriety of the issuance by SCID of a writ of preliminary injunction in said
case.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 11 February
1997 and its Resolution dated 18 May 1999 in CA-G.R. SP No. 38455 are REVERSED and SET
ASIDE. The Orders dated 31 May 1995 and 14 August 1995 of the Securities and Exchange
Commission en banc in SEC-EB Case No. 393 and No. 403, respectively, are hereby reinstated. No
pronouncement as to costs.

SO ORDERED

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,

vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.

Antonio M. Albano for petitioners.

Umali, Soriano & Associates for private respondent.

VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December
1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of
execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-
41058.

The antecedents are recited in good detail by the appellate court thusly:

On July 29, 1987 a Second Amended Complaint for Specific Performance was filed
by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil
Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as Nos. 630-638
Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and
have been religiously paying the rental and complying with all the conditions of the
lease contract; that on several occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a
price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and conditions of the offer to
sell; that when plaintiffs did not receive any reply, they sent another letter dated
January 28, 1987 with the same request; that since defendants failed to specify the
terms and conditions of the offer to sell and because of information received that
defendants were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them.

Defendants filed their answer denying the material allegations of the complaint and
interposing a special defense of lack of cause of action.

After the issues were joined, defendants filed a motion for summary judgment which
was granted by the lower court. The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no contract of sale at
all. Nonetheless, the lower court ruled that should the defendants subsequently offer
their property for sale at a price of P11-million or below, plaintiffs will have the right of
first refusal. Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the

defendants and against the plaintiffs summarily dismissing the
complaint subject to the aforementioned condition that if the
defendants subsequently decide to offer their property for sale for a
purchase price of Eleven Million Pesos or lower, then the plaintiffs
has the option to purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if the purchase
price is higher than Eleven Million Pesos.

SO ORDERED.

Aggrieved by the decision, plaintiffs appealed to this Court in

CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned
by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and
Fernando A. Santiago), this Court affirmed with modification the lower court's
judgment, holding:

In resume, there was no meeting of the minds between the parties

concerning the sale of the property. Absent such requirement, the
claim for specific performance will not lie. Appellants' demand for
actual, moral and exemplary damages will likewise fail as there exists
no justifiable ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary judgment when
there is no genuine issue as to any material fact and the moving party
is entitled to a judgment as a matter of law (Garcia vs. Court of
Appeals, 176 SCRA 815). All requisites obtaining, the decision of the
court a quo is legally justifiable.

WHEREFORE, finding the appeal unmeritorious, the judgment

appealed from is hereby AFFIRMED, but subject to the following
modification: The court a quo in the aforestated decision gave the
plaintiffs-appellants the right of first refusal only if the property is sold
for a purchase price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our market
economy today. We find no reason not to grant the same right of first
refusal to herein appellants in the event that the subject property is
sold for a price in excess of Eleven Million pesos. No pronouncement
as to costs.

SO ORDERED.

The decision of this Court was brought to the Supreme Court by petition for review
on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency
in form and substances" (Annex H, Petition).

On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by
this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner Buen Realty and
Development Corporation, subject to the following terms and conditions:

1. That for and in consideration of the sum of FIFTEEN MILLION

PESOS (P15,000,000.00), receipt of which in full is hereby
acknowledged, the VENDORS hereby sells, transfers and conveys
for and in favor of the VENDEE, his heirs, executors, administrators
or assigns, the above-described property with all the improvements
found therein including all the rights and interest in the said property
free from all liens and encumbrances of whatever nature, except the
pending ejectment proceeding;

2. That the VENDEE shall pay the Documentary Stamp Tax,

registration fees for the transfer of title in his favor and other
expenses incidental to the sale of above-described property including
capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name
of petitioner on December 3, 1990.

On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to
the lessees demanding that the latter vacate the premises.

On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner
brought the property subject to the notice of lis pendens regarding Civil Case No. 87-
41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in
Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No.
21123.

On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted
as follows:

Presented before the Court is a Motion for Execution filed by plaintiff

represented by Atty. Antonio Albano. Both defendants Bobby Cu
Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and
Atty. Anacleto Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber stamp and
signatures upon the copy of the Motion for Execution.

The gist of the motion is that the Decision of the Court dated
September 21, 1990 as modified by the Court of Appeals in its
decision in CA G.R. CV-21123, and elevated to the Supreme Court
upon the petition for review and that the same was denied by the
highest tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence,
there was an Entry of Judgment by the Supreme Court as of June 6,
1991, stating that the aforesaid modified decision had already
become final and executory.

It is the observation of the Court that this property in dispute was the
subject of the Notice of Lis Pendens and that the modified decision of
this Court promulgated by the Court of Appeals which had become
final to the effect that should the defendants decide to offer the
property for sale for a price of P11 Million or lower, and considering
the mercurial and uncertain forces in our market economy today, the
same right of first refusal to herein plaintiffs/appellants in the event
that the subject property is sold for a price in excess of Eleven Million
pesos or more.

WHEREFORE, defendants are hereby ordered to execute the

necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of plaintiffs' right of
first refusal and that a new Transfer Certificate of Title be issued in
favor of the buyer.
 All previous transactions involving the same property notwithstanding
the issuance of another title to Buen Realty Corporation, is hereby set
aside as having been executed in bad faith.

SO ORDERED.

On September 22, 1991 respondent Judge issued another order, the dispositive
portion of which reads:

WHEREFORE, let there be Writ of Execution issue in the above-

entitled case directing the Deputy Sheriff Ramon Enriquez of this
Court to implement said Writ of Execution ordering the defendants
among others to comply with the aforesaid Order of this Court within
a period of one (1) week from receipt of this Order and for defendants
to execute the necessary Deed of Sale of the property in litigation in
favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for
the consideration of P15,000,000.00 and ordering the Register of
Deeds of the City of Manila, to cancel and set aside the title already
issued in favor of Buen Realty Corporation which was previously
executed between the latter and defendants and to register the new
title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong
and Arthur Go.

SO ORDERED.

On the same day, September 27, 1991 the corresponding writ of execution (Annex
C, Petition) was issued.1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and
declared without force and effect the above questioned orders of the court a quo.

In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the
writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the
name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from
the Cu Unjiengs.

We affirm the decision of the appellate court.

A not too recent development in real estate transactions is the adoption of such arrangements as the
right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out
some fundamental precepts that may find some relevance to this discussion.

An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation
is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum
juris or juridical tie which is the efficient cause established by the various sources of obligations (law,
contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who,
viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor)
subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give something or to
render some service (Art. 1305, Civil Code). A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the
period from the time the prospective contracting parties indicate interest in the contract to the time
the contract is concluded (perfected). The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract which is consensual as to perfection is so
established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the
object and on the cause thereof. A contract which requires, in addition to the above, the delivery of
the object of the agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as
in a donation of real property, is essential in order to make the act valid, the prescribed form being
thereby an essential element thereof. The stage of consummation begins when the parties perform
their respective undertakings under the contract culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the topic for discussion about the case at bench
belongs, the contract is perfected when a person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over
which the latter agrees. Article 1458 of the Civil Code provides:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the
ownership of the thing sold is retained until the fulfillment of a positive suspensive condition
(normally, the full payment of the purchase price), the breach of the condition will prevent the
obligation to convey title from acquiring an obligatory force.2 In Dignos vs. Court of Appeals (158
SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still
absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the
property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of
the condition would prevent such perfection.3 If the condition is imposed on the obligation of a party
which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale
(Art. 1545, Civil Code).4

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the
price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be
exacted.5

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and separate from the price, is what may properly be
termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with
the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .
 An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promissor if the promise is supported by a consideration distinct
from the price. (1451a)6

Observe, however, that the option is not the contract of sale itself.7 The optionee has the right, but
not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a
breach of the option, a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings.8

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect

promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are
ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a
contract is perfected, are not considered binding commitments. Thus, at any time prior to the
perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage,
may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its
mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil.
270). Where a period is given to the offeree within which to accept the offer, the following rules
generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and
has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before
the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art.
1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is
applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of
Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to
withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a
damage claim under Article 19 of the Civil Code which ordains that "every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it
would be a breach of that contract to withdraw the offer during the agreed period. The option,
however, is an independent contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the proposed contract ("object" of the
option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option. In these cases, care should be taken of the real
nature of the consideration given, for if, in fact, it has been intended to be part of the consideration
for the main contract with a right of withdrawal on the part of the optionee, the main contract could
be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can
evidence its perfection (Art. 1482, Civil Code).

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to
point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.
Neither can the right of first refusal, understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer
under Article 13199 of the same Code. An option or an offer would require, among other things,10 a
clear certainty on both the object and the cause or consideration of the envisioned contract. In a right
of first refusal, while the object might be made determinate, the exercise of the right, however, would
be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with
another but also on terms, including the price, that obviously are yet to be later firmed up. Prior
thereto, it can at best be so described as merely belonging to a class of preparatory juridical
relations governed not by contracts (since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by, among other laws of general application, the
pertinent scattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like
here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of contracts.11 It is not
to say, however, that the right of first refusal would be inconsequential for, such as already intimated
above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article
1912 of the Civil Code, can warrant a recovery for damages.

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of
first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what
has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the
failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution
on the judgment, since there is none to execute, but an action for damages in a proper forum for the
purpose.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged
purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any
case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058
are matters that must be independently addressed in appropriate proceedings. Buen Realty, not
having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution
issued by respondent Judge, let alone ousted from the ownership and possession of the property,
without first being duly afforded its day in court.

We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the
writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-
G.R. CV-21123. The Court of Appeals, in this regard, has observed:

Finally, the questioned writ of execution is in variance with the decision of the trial
court as modified by this Court. As already stated, there was nothing in said
decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and
respondent lessees, or the fixing of the price of the sale, or the cancellation of title in
the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng
Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA,
122 SCRA 885).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed
at the time the execution of any deed of sale between the Cu Unjiengs and petitioners.

WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders,
dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners.

SO ORDERED.

G.R. No. 102007 September 2, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.

The Solicitor General for plaintiff-appellee.

Public Attorney's Office for accused-appellant.

ROMERO, J.:

In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas y Cordova
was charged with Rape and eventually convicted thereof on June 19, 1991 in a decision penned by
Judge Manuel E. Autajay. Pending appeal of his conviction, Bayotas died on February 4, 1992 at
the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic encephalopathy
secondary to hipato carcinoma gastric malingering. Consequently, the Supreme Court in its
Resolution of May 20, 1992 dismissed the criminal aspect of the appeal. However, it required the
Solicitor General to file its comment with regard to Bayotas' civil liability arising from his commission
of the offense charged.

In his comment, the Solicitor General expressed his view that the death of accused-appellant did not
extinguish his civil liability as a result of his commission of the offense charged. The Solicitor
General, relying on the case of People v. Sendaydiego 1 insists that the appeal should still be
resolved for the purpose of reviewing his conviction by the lower court on which the civil liability is
based.

Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor General
arguing that the death of the accused while judgment of conviction is pending appeal extinguishes
both his criminal and civil penalties. In support of his position, said counsel invoked the ruling of the
Court of Appeals in People v. Castillo and Ocfemia 2 which held that the civil obligation in a criminal
case takes root in the criminal liability and, therefore, civil liability is extinguished if accused should
die before final judgment is rendered.

We are thus confronted with a single issue: Does death of the accused pending appeal of his
conviction extinguish his civil liability?

In the aforementioned case of People v. Castillo, this issue was settled in the affirmative. This same
issue posed therein was phrased thus: Does the death of Alfredo Castillo affect both his criminal
responsibility and his civil liability as a consequence of the alleged crime?

It resolved this issue thru the following disquisition:

Article 89 of the Revised Penal Code is the controlling statute. It reads, in part:

Art. 89. How criminal liability is totally extinguished. — Criminal

liability is totally extinguished:

1. By the death of the convict, as to the personal penalties; and as to

the pecuniary penalties liability therefor is extinguished only when the
death of the offender occurs before final judgment;
With reference to Castillo's criminal liability, there is no question. The law is plain.
Statutory construction is unnecessary. Said liability is extinguished.

The civil liability, however, poses a problem. Such liability is extinguished only when
the death of the offender occurs before final judgment. Saddled upon us is the task of
ascertaining the legal import of the term "final judgment." Is it final judgment as
contradistinguished from an interlocutory order? Or, is it a judgment which is final
and executory?

We go to the genesis of the law. The legal precept contained in Article 89 of the
Revised Penal Code heretofore transcribed is lifted from Article 132 of the Spanish El
Codigo Penal de 1870 which, in part, recites:

La responsabilidad penal se extingue.

1. Por la muerte del reo en cuanto a las penas personales siempre, y

respecto a las pecuniarias, solo cuando a su fallecimiento no hubiere
recaido sentencia firme.

xxx xxx xxx

The code of 1870 . . . it will be observed employs the term "sentencia firme." What is
"sentencia firme" under the old statute?

XXVIII Enciclopedia Juridica Española, p. 473, furnishes the ready answer: It says:

SENTENCIA FIRME. La sentencia que adquiere la fuerza de las

definitivas por no haberse utilizado por las partes litigantes recurso
alguno contra ella dentro de los terminos y plazos legales concedidos
al efecto.

"Sentencia firme" really should be understood as one which is definite. Because, it is

only when judgment is such that, as Medina y Maranon puts it, the crime is confirmed
— "en condena determinada;" or, in the words of Groizard, the guilt of the accused
becomes — "una verdad legal." Prior thereto, should the accused die, according to
Viada, "no hay legalmente, en tal caso, ni reo, ni delito, ni responsabilidad criminal
de ninguna clase." And, as Judge Kapunan well explained, when a defendant dies
before judgment becomes executory, "there cannot be any determination by final
judgment whether or not the felony upon which the civil action might arise exists," for
the simple reason that "there is no party defendant." (I Kapunan, Revised Penal
Code, Annotated, p. 421. Senator Francisco holds the same view. Francisco,
Revised Penal Code, Book One, 2nd ed., pp. 859-860)

The legal import of the term "final judgment" is similarly reflected in the Revised
Penal Code. Articles 72 and 78 of that legal body mention the term "final judgment"
in the sense that it is already enforceable. This also brings to mind Section 7, Rule
116 of the Rules of Court which states that a judgment in a criminal case becomes
final "after the lapse of the period for perfecting an appeal or when the sentence has
been partially or totally satisfied or served, or the defendant has expressly waived in
writing his right to appeal."
 By fair intendment, the legal precepts and opinions here collected funnel down to one
positive conclusion: The term final judgment employed in the Revised Penal Code
means judgment beyond recall. Really, as long as a judgment has not become
executory, it cannot be truthfully said that defendant is definitely guilty of the felony
charged against him.

Not that the meaning thus given to final judgment is without reason. For where, as in
this case, the right to institute a separate civil action is not reserved, the decision to
be rendered must, of necessity, cover "both the criminal and the civil aspects of the
case." People vs. Yusico (November 9, 1942), 2 O.G., No. 100, p. 964. See
also: People vs. Moll, 68 Phil., 626, 634; Francisco, Criminal Procedure, 1958 ed.,
Vol. I, pp. 234, 236. Correctly, Judge Kapunan observed that as "the civil action is
based solely on the felony committed and of which the offender might be found
guilty, the death of the offender extinguishes the civil liability." I Kapunan, Revised
Penal Code, Annotated, supra.

Here is the situation obtaining in the present case: Castillo's criminal liability is out.
His civil liability is sought to be enforced by reason of that criminal liability. But then, if
we dismiss, as we must, the criminal action and let the civil aspect remain, we will be
faced with the anomalous situation whereby we will be called upon to clamp civil
liability in a case where the source thereof — criminal liability — does not exist. And,
as was well stated in Bautista, et al. vs. Estrella, et al., CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found and held criminally liable in
a civil suit," which solely would remain if we are to divorce it from the criminal
proceeding."

This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme Court in the
cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the Philippines v. Jaime
Jose, et al. 5 and People of the Philippines v. Satorre 6 by dismissing the appeal in view of the death
of the accused pending appeal of said cases.

As held by then Supreme Court Justice Fernando in the Alison case:

The death of accused-appellant Bonifacio Alison having been established, and

considering that there is as yet no final judgment in view of the pendency of the
appeal, the criminal and civil liability of the said accused-appellant Alison was
extinguished by his death (Art. 89, Revised Penal Code; Reyes' Criminal Law, 1971
Rev. Ed., p. 717, citing People v. Castillo and Ofemia C.A., 56 O.G. 4045);
consequently, the case against him should be dismissed.

On the other hand, this Court in the subsequent cases of Buenaventura Belamala v. Marcelino
Polinar 7 and Lamberto Torrijos v. The Honorable Court of Appeals 8 ruled differently. In the former,
the issue decided by this court was: Whether the civil liability of one accused of physical injuries who
died before final judgment is extinguished by his demise to the extent of barring any claim therefore
against his estate. It was the contention of the administrator-appellant therein that the death of the
accused prior to final judgment extinguished all criminal and civil liabilities resulting from the offense,
in view of Article 89, paragraph 1 of the Revised Penal Code. However, this court ruled therein:

We see no merit in the plea that the civil liability has been extinguished, in view of the
provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386) that
became operative eighteen years after the revised Penal Code. As pointed out by the
 Court below, Article 33 of the Civil Code establishes a civil action for damages on
account of physical injuries, entirely separate and distinct from the criminal action.

Art. 33. In cases of defamation, fraud, and physical injuries, a civil

action for damages, entirely separate and distinct from the criminal
action, may be brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution, and shall require
only a preponderance of evidence.

Assuming that for lack of express reservation, Belamala's civil action for damages
was to be considered instituted together with the criminal action still, since both
proceedings were terminated without final adjudication, the civil action of the
offended party under Article 33 may yet be enforced separately.

In Torrijos, the Supreme Court held that:

xxx xxx xxx

It should be stressed that the extinction of civil liability follows the extinction of the
criminal liability under Article 89, only when the civil liability arises from the criminal
act as its only basis. Stated differently, where the civil liability does not exist
independently of the criminal responsibility, the extinction of the latter by death, ipso
facto extinguishes the former, provided, of course, that death supervenes before final
judgment. The said principle does not apply in instant case wherein the civil liability
springs neither solely nor originally from the crime itself but from a civil contract of
purchase and sale. (Emphasis ours)

xxx xxx xxx

In the above case, the court was convinced that the civil liability of the accused who was
charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of the Civil
Code since said accused had swindled the first and second vendees of the property subject
matter of the contract of sale. It therefore concluded: "Consequently, while the death of the
accused herein extinguished his criminal liability including fine, his civil liability based on the
laws of human relations remains."

Thus it allowed the appeal to proceed with respect to the civil liability of the accused, notwithstanding
the extinction of his criminal liability due to his death pending appeal of his conviction.

To further justify its decision to allow the civil liability to survive, the court relied on the following
ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires the dismissal of all money
claims against the defendant whose death occurred prior to the final judgment of the Court of First
Instance (CFI), then it can be inferred that actions for recovery of money may continue to be heard
on appeal, when the death of the defendant supervenes after the CFI had rendered its judgment. In
such case, explained this tribunal, "the name of the offended party shall be included in the title of the
case as plaintiff-appellee and the legal representative or the heirs of the deceased-accused should
be substituted as defendants-appellants."

It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule established was
that the survival of the civil liability depends on whether the same can be predicated on sources of
obligations other than delict. Stated differently, the claim for civil liability is also extinguished together
with the criminal action if it were solely based thereon, i.e., civil liability ex delicto.
However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this long-established
principle of law. In this case, accused Sendaydiego was charged with and convicted by the lower
court of malversation thru falsification of public documents. Sendaydiego's death supervened during
the pendency of the appeal of his conviction.

This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but only to the
extent of his criminal liability. His civil liability was allowed to survive although it was clear that such
claim thereon was exclusively dependent on the criminal action already extinguished. The legal
import of such decision was for the court to continue exercising appellate jurisdiction over the entire
appeal, passing upon the correctness of Sendaydiego's conviction despite dismissal of the criminal
action, for the purpose of determining if he is civilly liable. In doing so, this Court issued a Resolution
of July 8, 1977 stating thus:

The claim of complainant Province of Pangasinan for the civil liability survived
Sendaydiego because his death occurred after final judgment was rendered by the
Court of First Instance of Pangasinan, which convicted him of three complex crimes
of malversation through falsification and ordered him to indemnify the Province in the
total sum of P61,048.23 (should be P57,048.23).

The civil action for the civil liability is deemed impliedly instituted with the criminal
action in the absence of express waiver or its reservation in a separate action (Sec.
1, Rule 111 of the Rules of Court). The civil action for the civil liability is separate and
distinct from the criminal action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa
vs. De la Cruz, 107 Phil. 8).

When the action is for the recovery of money and the defendant dies before final
judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the
manner especially provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the
Rules of Court).

The implication is that, if the defendant dies after a money judgment had been
rendered against him by the Court of First Instance, the action survives him. It may
be continued on appeal (Torrijos vs. Court of Appeals, L-40336, October 24, 1975;
67 SCRA 394).

The accountable public officer may still be civilly liable for the funds improperly
disbursed although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230;
Philippine National Bank vs. Tugab, 66 Phil. 583).

In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to
continue exercising appellate jurisdiction over his possible civil liability for the money
claims of the Province of Pangasinan arising from the alleged criminal acts
complained of, as if no criminal case had been instituted against him, thus making
applicable, in determining his civil liability, Article 30 of the Civil Code . . . and, for
that purpose, his counsel is directed to inform this Court within ten (10) days of the
names and addresses of the decedent's heirs or whether or not his estate is under
administration and has a duly appointed judicial administrator. Said heirs or
administrator will be substituted for the deceased insofar as the civil action for the
civil liability is concerned (Secs. 16 and 17, Rule 3, Rules of Court).
Succeeding cases 11 raising the identical issue have maintained adherence to our ruling
in Sendaydiego; in other words, they were a reaffirmance of our abandonment of the settled rule that
a civil liability solely anchored on the criminal (civil liability ex delicto) is extinguished upon dismissal
of the entire appeal due to the demise of the accused.

But was it judicious to have abandoned this old ruling? A re-examination of our decision
in Sendaydiego impels us to revert to the old ruling.

To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil action impliedly
instituted in the criminal action can proceed irrespective of the latter's extinction due to death of the
accused pending appeal of his conviction, pursuant to Article 30 of the Civil Code and Section 21,
Rule 3 of the Revised Rules of Court.

Article 30 of the Civil Code provides:

When a separate civil action is brought to demand civil liability arising from a criminal
offense, and no criminal proceedings are instituted during the pendency of the civil
case, a preponderance of evidence shall likewise be sufficient to prove the act
complained of.

Clearly, the text of Article 30 could not possibly lend support to the ruling in Sendaydiego. Nowhere
in its text is there a grant of authority to continue exercising appellate jurisdiction over the accused's
civil liability ex delicto when his death supervenes during appeal. What Article 30 recognizes is an
alternative and separate civil action which may be brought to demand civil liability arising from a
criminal offense independently of any criminal action. In the event that no criminal proceedings are
instituted during the pendency of said civil case, the quantum of evidence needed to prove the
criminal act will have to be that which is compatible with civil liability and that is, preponderance of
evidence and not proof of guilt beyond reasonable doubt. Citing or invoking Article 30 to justify the
survival of the civil action despite extinction of the criminal would in effect merely beg the question of
whether civil liability ex delicto survives upon extinction of the criminal action due to death of the
accused during appeal of his conviction. This is because whether asserted in
the criminal action or in a separate civil action, civil liability ex delicto is extinguished by the death of
the accused while his conviction is on appeal. Article 89 of the Revised Penal Code is clear on this
matter:

Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally
extinguished:

1. By the death of the convict, as to the personal penalties; and as to pecuniary

penalties, liability therefor is extinguished only when the death of the offender occurs
before final judgment;

xxx xxx xxx

However, the ruling in Sendaydiego deviated from the expressed intent of Article 89. It allowed
claims for civil liability ex delicto to survive by ipso facto treating the civil action impliedly instituted
with the criminal, as one filed under Article 30, as though no criminal proceedings had been filed but
merely a separate civil action. This had the effect of converting such claims from one which is
dependent on the outcome of the criminal action to an entirely new and separate one, the
prosecution of which does not even necessitate the filing of criminal proceedings. 12 One would be
hard put to pinpoint the statutory authority for such a transformation. It is to be borne in mind that in
recovering civil liability ex delicto, the same has perforce to be determined in the criminal action,
rooted as it is in the court's pronouncement of the guilt or innocence of the accused. This is but to
render fealty to the intendment of Article 100 of the Revised Penal Code which provides that "every
person criminally liable for a felony is also civilly liable." In such cases, extinction of the criminal
action due to death of the accused pending appeal inevitably signifies the concomitant extinction of
the civil liability. Mors Omnia Solvi. Death dissolves all things.

In sum, in pursuing recovery of civil liability arising from crime, the final determination of the criminal
liability is a condition precedent to the prosecution of the civil action, such that when the criminal
action is extinguished by the demise of accused-appellant pending appeal thereof, said civil action
cannot survive. The claim for civil liability springs out of and is dependent upon facts which, if true,
would constitute a crime. Such civil liability is an inevitable consequence of the criminal liability and
is to be declared and enforced in the criminal proceeding. This is to be distinguished from that which
is contemplated under Article 30 of the Civil Code which refers to the institution of a separate civil
action that does not draw its life from a criminal proceeding. The Sendaydiego resolution of July 8,
1977, however, failed to take note of this fundamental distinction when it allowed the survival of the
civil action for the recovery of civil liability ex delicto by treating the same as a separate civil action
referred to under Article 30. Surely, it will take more than just a summary judicial pronouncement to
authorize the conversion of said civil action to an independent one such as that contemplated under
Article 30.

Ironically however, the main decision in Sendaydiego did not apply Article 30, the resolution of July
8, 1977 notwithstanding. Thus, it was held in the main decision:

Sendaydiego's appeal will be resolved only for the purpose of showing his criminal
liability which is the basis of the civil liability for which his estate would be liable. 13

In other words, the Court, in resolving the issue of his civil liability, concomitantly made a
determination on whether Sendaydiego, on the basis of evidenced adduced, was indeed guilty
beyond reasonable doubt of committing the offense charged. Thus, it upheld Sendaydiego's
conviction and pronounced the same as the source of his civil liability. Consequently, although
Article 30 was not applied in the final determination of Sendaydiego's civil liability, there was a
reopening of the criminal action already extinguished which served as basis for Sendaydiego's civil
liability. We reiterate: Upon death of the accused pending appeal of his conviction, the criminal
action is extinguished inasmuch as there is no longer a defendant to stand as the accused; the civil
action instituted therein for recovery of civil liability ex delicto is ipso facto extinguished, grounded as
it is on the criminal.

Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for
the Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of Court, the Court
made the inference that civil actions of the type involved in Sendaydiego consist of money claims,
the recovery of which may be continued on appeal if defendant dies pending appeal of his conviction
by holding his estate liable therefor. Hence, the Court's conclusion:

"When the action is for the recovery of money" "and the defendant dies before final
judgment in the court of First Instance, it shall be dismissed to be prosecuted in the
manner especially provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the
Rules of Court).

The implication is that, if the defendant dies after a money judgment had been
rendered against him by the Court of First Instance, the action survives him. It may
be continued on appeal.
Sadly, reliance on this provision of law is misplaced. From the standpoint of procedural law, this
course taken in Sendaydiego cannot be sanctioned. As correctly observed by Justice Regalado:

xxx xxx xxx

I do not, however, agree with the justification advanced in

both Torrijos and Sendaydiego which, relying on the provisions of Section 21, Rule 3
of the Rules of Court, drew the strained implication therefrom that where the civil
liability instituted together with the criminal liabilities had already passed beyond the
judgment of the then Court of First Instance (now the Regional Trial Court), the Court
of Appeals can continue to exercise appellate jurisdiction thereover despite the
extinguishment of the component criminal liability of the deceased. This
pronouncement, which has been followed in the Court's judgments subsequent and
consonant to Torrijos and Sendaydiego, should be set aside and abandoned as
being clearly erroneous and unjustifiable.

Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There is
neither authority nor justification for its application in criminal procedure to civil
actions instituted together with and as part of criminal actions. Nor is there any
authority in law for the summary conversion from the latter category of an ordinary
civil action upon the death of the offender. . . .

Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of civil liability ex
delicto can hardly be categorized as an ordinary money claim such as that referred to in Sec. 21,
Rule 3 enforceable before the estate of the deceased accused.

Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of the provisions of
Section 5, Rule 86 involving claims against the estate, which in Sendaydiego was held liable for
Sendaydiego's civil liability. "What are contemplated in Section 21 of Rule 3, in relation to Section 5
of Rule 86, 14 are contractual money claims while the claims involved in civil liability ex delicto may
include even the restitution of personal or real property." 15 Section 5, Rule 86 provides an exclusive
enumeration of what claims may be filed against the estate. These are: funeral expenses, expenses
for the last illness, judgments for money and claim arising from contracts, expressed or implied. It is
clear that money claims arising from delict do not form part of this exclusive enumeration. Hence,
there could be no legal basis in (1) treating a civil action ex delicto as an ordinary contractual money
claim referred to in Section 21, Rule 3 of the Rules of Court and (2) allowing it to survive by filing a
claim therefor before the estate of the deceased accused. Rather, it should be extinguished upon
extinction of the criminal action engendered by the death of the accused pending finality of his
conviction.

Accordingly, we rule: if the private offended party, upon extinction of the civil liability ex
delicto desires to recover damages from the same act or omission complained of, he must subject to
Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as amended) file a separate civil action,
this time predicated not on the felony previously charged but on other sources of obligation. The
source of obligation upon which the separate civil action is premised determines against whom the
same shall be enforced.

If the same act or omission complained of also arises from quasi-delict or may, by provision of law,
result in an injury to person or property (real or personal), the separate civil action must be filed
against the executor or administrator 17 of the estate of the accused pursuant to Sec. 1, Rule 87 of
the Rules of Court:
 Sec. 1. Actions which may and which may not be brought against executor or
administrator. — No action upon a claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or administrator; but actions to
recover real or personal property, or an interest therein, from the estate, or to enforce
a lien thereon, and actions to recover damages for an injury to person or property,
real or personal, may be commenced against him.

This is in consonance with our ruling in Belamala 18 where we held that, in recovering damages for
injury to persons thru an independent civil action based on Article 33 of the Civil Code, the same
must be filed against the executor or administrator of the estate of deceased accused and not
against the estate under Sec. 5, Rule 86 because this rule explicitly limits the claim to those for
funeral expenses, expenses for the last sickness of the decedent, judgment for money and claims
arising from contract, express or implied. Contractual money claims, we stressed, refers only
topurely personal obligations other than those which have their source in delict or tort.

Conversely, if the same act or omission complained of also arises from contract, the separate civil
action must be filed against the estate of the accused, pursuant to Sec. 5, Rule 86 of the Rules of
Court.

From this lengthy disquisition, we summarize our ruling herein:

1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as
the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the death of
the accused prior to final judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the same
may also be predicated on a source of obligation other than delict. 19 Article 1157 of the Civil Code
enumerates these other sources of obligation from which the civil liability may arise as a result of the
same act or omission:

a) Law 20

b) Contracts

c) Quasi-contracts

d) . . .

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery therefor
may be pursued but only by way of filing a separate civil action and subject to Section 1, Rule 111 of
the 1985 Rules on Criminal Procedure as amended. This separate civil action may be enforced
either against the executor/administrator or the estate of the accused, depending on the source of
obligation upon which the same is based as explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil
action by prescription, in cases where during the prosecution of the criminal action and prior to its
extinction, the private-offended party instituted together therewith the civil action. In such case, the
statute of limitations on the civil liability is deemed interrupted during the pendency of the criminal
case, conformably with provisions of Article 1155 21 of the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by prescription. 22

Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas
extinguished his criminal liability and the civil liability based solely on the act complained of, i.e.,
rape. Consequently, the appeal is hereby dismissed without qualification.

WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de oficio.

SO ORDERED.

G.R. No. 82562 April 11, 1997

LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO VILLEGAS, JR., and ANTONIETTE

VILLEGAS, petitioners,
vs.
THE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES and ANTONIO V.
RAQUIZA, respondents.

G.R. No. 82592 April 11, 1997

ANTONIO V. RAQUIZA, petitioner,

vs.
COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO VILLEGAS, JR., MA. ANTONETTE
VILLEGAS, MA. LYDIA VILLEGAS and ESTATE OF ANTONIO J. VILLEGAS, respondents.

ROMERO, J.:

This case originated from a libel suit filed by then Assemblyman Antonio V. Raquiza against then
Manila Mayor Antonio J. Villegas, who allegedly publicly imputed to him acts constituting violations
of the Anti-Graft and Corrupt Practices Act. He did this on several occasions in August 1968 through
(a) a speech before the Lion's Club of Malasiqui, Pangasinan on August 10; (b) public statements in
Manila on August 13 and in Davao on August 17, which was coupled with a radio-TV interview; and
(c) a public statement shortly prior to his appearance before the Senate Committee on Public Works
(the Committee) on August 20 to formally submit a letter-complaint implicating Raquiza, among other
government officials.

The Committee, however, observed that all the allegations in the complaint were based mainly on
the uncorroborated testimony of a certain Pedro U. Fernandez, whose credibility turned out to be
highly questionable. Villegas also failed to submit the original copies of his documentary evidence.
Thus, after thorough investigation, Raquiza was cleared of all charges by the Committee. 1 All these
acts of political grandstanding received extensive media coverage.

On July 25, 1969, an information for libel was filed by the Office of the City Fiscal of Manila with the
then Court of First Instance of Manila against Villegas who denied the charge. After losing in the
1971 elections, Villegas left for the United States where he stayed until his death on November 16,
1984. Nevertheless, trial proceeded on absentia by the time of his death the in 1984, the prosecution
had already rested its case Two months after notice of his death, the court issued an order
dismissing the crimal aspect of the case but reserving the right to resolve its civil aspect. No
memorandum was ever filed in his behalf.

Judge Marcelo R. Obien 2 rendered judgment on March 7, 1985, the dispositive portion of which was
amended on March 26 to read as follows:

WHEREFORE, and in view of the foregoing considerations, judgment is hereby

rendered as follows:

1. The dismissal of the criminal case against Antonio J. Vlllegas, on account of his
death on November 16, 1984. is hereby reiterated.

2. Ordenng the estate of Antonio J. Villegas, represented herein by his legal heirs,
namely: Lydia A Villegas, Ma. Teresita Villegas, Antonio Villegas, Jr., Ma.
Anton(i)ette Villegas, and Ma. Lydia Villegas (sic), to pay plaintiff Antonio V. Raquiza
Two Hundred Million Pesos (P200,000,000.00), itemized as follows:

a) One Hundred Fifty Million Pesos (P150.000.000.00) as moral damages:

b) Two Hundred Thousand Pesos (P200.000.00) as actual damages:

c) Forty-nine Million Eight Hundred Thousand Pesos (P49,800,000.00) as exemplary

damages; and

d) The cost of suit.

SO ORDERED. 3 (Amendments underscored)

The heirs of Villegas (the Heirs), through their father's counsel, Atty. Norberto, Quisumbing appealed
the decision on these three main grounds:

1. Whether the trial court, three months after notice of the death of the accused and
before his counsel could file a memorandum in his behalf, could velidly render
judgment in the case?

2. Whether in the absence of formal substitution of parties, the trial court could validly
render judgment against the heirs and estate of a deceased accused?

3 Whether, under the facts of the instant case, deceased Villegas was liable for libel,
and assuming he was, whether the damages awarded by the trial court were just and
reasonable?

On March 15, 1988, the Court of Appeals rendered a decision affirming the trial court's judgment
modified only with respect to the award of damages which was reduced to P2 million representing
P1.5 million, P300,000.00, and P200,000.00 in moral exemplary and actual damages, respectively.
Both parties elevated said decision to this Court for review

In their petition (G.R. No. 82562), the Heirs once again raise the very same issues brought before
the Court of Appeals, albeit reworded. On the other hand, petitioner Requiza (G.R. No. 82592)
questions the extensions of time to file appellant's brief granted by the appellate court to the Heirs,
as well as the drastic reduction in the award of damages.
It is immediately apparent that the focal issue in these petitions is the effect of the death of Villegas
before the case was decided by the trial court. Stated otherwise, did the death of the accused before
final judgment extinguish his civil liability?

Fortunately, this Court has already settled this issue with the promulgation of the case of People
v. Bayotas (G.R. No. 102007) on September 2, 1994, 4 viz.:

It is thus evident that as jurisprudence evolved from Castillo 5 to Torrijos, 6 the rule
established was that the survival of the civil liability depends on whether the same
can be predicated on sources of obligations other than delict. Stated differently, the
claim for civil liability is also extinguished together with the criminal action if it were
solely based thereon, i.e., civil liability ex delicto.

xxx xxx xxx

(I)n recovering damages for injury to persons thru an independent civil action based
on Article 33 of the Civil Code, the same must be filed against the executor or
administrator of the estate of deceased accused (undet Sec. 1, Rule 87, infra.) and
not against the estate under Sec. 5, Rule 86 because this rule explicitly limits the
claim to those for funeral expenses, expenses for the last sickness of the decedent,
judgment for money and claims arising from contract, express or implied. 7

xxx xxx xxx

From this lengthy dlsquisition, we summarize our ruling herein:

1 Death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as the civil liability based solely thereon As opined by Justice
Regalado, in this regard, "the death of the accused prior to final judgment terminates
his criminal liability and only the civil liability directly arising from and based solely on
the offense committed, i.e., civil liability ex delicto in senso strictiore."

2 Corollarily the claim for civil liability survives notwithstanding the death of (the)
accused, if the same may also be predicated on a source of obligation other than
delict. Article 1157 of the Civil Code enumerates these other sources of obligation
from which the civil liability may arise as a result of the same act or omission:

a) Law

b) Contracts

c) Quasi-contracts

d) x x x x x x x x x

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for
recovery therefor may be pursued but only by way of filing a separate civil action and
subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. 8 This separate civil action may be enforced either against the
 executor/administrator o(f) the estate of the accused, depending on the source of
obligation upon which the same is based as explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private offended party instituted together
therewith the civil action. In such case, the statute of limitations on the civil liability is
deemed interrupted during the pendency of the criminal case, conformably with (the)
provisions of Article 1155 of the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by prescription. (Emphasis supplied).

The source of Villegas' civil liability in the present case is the felonious act of libel he allegedly
committed. Yet, this act could also be deemed a quasi-delict within the purview of Article 33 9 in
relation to Article 1157 of the Civil Code. If the Court ruled in Bayotas that the death of an accused
during the pendency of his appeal extinguishes not only his criminal but also his civil liability unless
the latter can be predicated on a source of obligation other than the act or omission complained of,
with more reason should it apply to the case at bar where the accused died shortly after the
prosecution had rested its case and before he was able to submit his memorandum and all this
before any decision could even be reached by the trial court.

The Bayotas ruling, however, makes the enforcement of a deceased accused's civil liability
dependent on two factors, namely, that it be pursued by filing a separate civil action and that it be
made subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure, as amended.
Obviously, in the case at bar, the civil action was deemed instituted with the criminal. There was no
waiver of the civil action and no reservation of the right to institute the same, nor was it instituted
prior to the criminal action. What then is the recourse of the private offended party in a criminal case
such as this which must be dismissed in accordance with the Bayotas doctrine, where the civil action
was impliedly instituted with it?

The answer is likewise provided in Bayatas, thus:

Assuming that for lack of express reservation, Belamala's civil civil for damages was
to be considered instituted together with the crinimal action still, since both
proceedings were terminated without finals adjudication the civil action of the
offended party under Article 33 may yet be enforced separately 10(Emphasis
supplied)

Hence, logically, the court a quo should have dismissed both actions against Vilegas which
dismissal will not, however, bar Raquiza as the private offended party from pursuing his claim for
damages against the executor or administrator of the former's estate, notwitnstanding the fact that
he did not reserve the right to institute a civil separate civil action based on Article 33 of the Civil
Code.

It cannot be argued either that to follow Bayotas would result in further delay in this protracted
litigation. This is because the resolution of the civil aspect of the case after the dismissal of the main
criminal action by the trial court was technically defective There was no proper substitution of
parties, as correctly pointed out by the Heirs and repeatedly put in issue by Atty. Quisumbing. What
should have been followed by the court a quo was the procedure laid down in the Rules of Court,
specifically, Section 17, Rule 3, in connection with Section 1, Rule 87. The pertinent provisions state
as follws:

Rule 3
 Sec.17. Death of party. — After a party dies and the claim is not there
extinguished, the court shall order upon proper notice the legal representative of the
deceased to appear and to be substituted for the deceased, within a period of thirty
(30) days, or within such time as may be·granted. . . . The heirs of the deceased may
be allowed to be for the deceased, without requiring the appointment of an executor
or administrator and the court may appoint guardian ad litem for the minor heirs.

Rule 87

Sec. 1. Actions which may and which may not be brought against or executor or
administrator. — No action upon a claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or administrator; but actions to
recover real or personal property, or an interest therein, from the estate, or to enforce
a lien thereon, and actions to recover damages for an injury to person or property,
real or personal may be commenced against him.

Accordingly, the Court sees no more necessity in resolving the other issues used by both parties in
these petitions.

WHEREFORE, the petition in G.R. No. 82562 is GRANTED and the petition in G.R. No. 82592 is
DENIED. The decisions of the Court of Appeals in CA-G.R. CR No. 82186 dated March 15, 1988,
and of the Manila Regional Trial Court, Branch 44, dated March 7, 1985, as amended, are hereby
REVERSED and SET ASIDE, without prejudice to the right of the private offended party Antonio
V. Raquiza, to file the appropriate civil action for damages against the executor or administrator of
the estate or the heirs of the late Antonto J. Villegas in accordance with the foregoing procedure.

SO ORDERED.

G.R. No. L-4089 January 12, 1909

ARTURO PELAYO, plaintiff-appellant,

vs.
MARCELO LAURON, ET AL., defendants-appellees.

J.H. Junquera, for appellant.

Filemon Sotto, for appellee.

TORRES, J.:

On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint
against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of said
year, at night, the plaintiff was called to the house of the defendants, situated in San Nicolas, and
that upon arrival he was requested by them to render medical assistance to their daughter-in-law
who was about to give birth to a child; that therefore, and after consultation with the attending
physician, Dr. Escaño, it was found necessary, on account of the difficult birth, to remove the fetus
by means of forceps which operation was performed by the plaintiff, who also had to remove the
afterbirth, in which services he was occupied until the following morning, and that afterwards, on the
same day, he visited the patient several times; that the just and equitable value of the services
rendered by him was P500, which the defendants refuse to pay without alleging any good reason
therefor; that for said reason he prayed that the judgment be entered in his favor as against the
defendants, or any of them, for the sum of P500 and costs, together with any other relief that might
be deemed proper.
In answer to the complaint counsel for the defendants denied all of the allegation therein contained
and alleged as a special defense, that their daughter-in-law had died in consequence of the said
childbirth, and that when she was alive she lived with her husband independently and in a separate
house without any relation whatever with them, and that, if on the day when she gave birth she was
in the house of the defendants, her stay their was accidental and due to fortuitous circumstances;
therefore, he prayed that the defendants be absolved of the complaint with costs against the plaintiff.

The plaintiff demurred to the above answer, and the court below sustained the demurrer, directing
the defendants, on the 23rd of January, 1907, to amend their answer. In compliance with this order
the defendants presented, on the same date, their amended answer, denying each and every one of
the allegations contained in the complaint, and requesting that the same be dismissed with costs.

As a result of the evidence adduced by both parties, judgment was entered by the court below on
the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on account
of the lack of sufficient evidence to establish a right of action against the defendants, with costs
against the plaintiff, who excepted to the said judgment and in addition moved for a new trial on the
ground that the judgment was contrary to law; the motion was overruled and the plaintiff excepted
and in due course presented the corresponding bill of exceptions. The motion of the defendants
requesting that the declaration contained in the judgment that the defendants had demanded
therefrom, for the reason that, according to the evidence, no such request had been made, was also
denied, and to the decision the defendants excepted.

Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of having
been sent for by the former, attended a physician and rendered professional services to a daughter-
in-law of the said defendants during a difficult and laborious childbirth, in order to decide the claim of
the said physician regarding the recovery of his fees, it becomes necessary to decide who is bound
to pay the bill, whether the father and mother-in-law of the patient, or the husband of the latter.

According to article 1089 of the Civil Code, obligations are created by law, by contracts, by quasi-
contracts, and by illicit acts and omissions or by those in which any kind of fault or negligence
occurs.

Obligations arising from law are not presumed. Those expressly determined in the code or in special
laws, etc., are the only demandable ones. Obligations arising from contracts have legal force
between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts.
1090 and 1091.)

The rendering of medical assistance in case of illness is comprised among the mutual obligations to
which the spouses are bound by way of mutual support. (Arts. 142 and 143.)

If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are
mutually bound to support each other, there can be no question but that, when either of them by
reason of illness should be in need of medical assistance, the other is under the unavoidable
obligation to furnish the necessary services of a physician in order that health may be restored, and
he or she may be freed from the sickness by which life is jeopardized; the party bound to furnish
such support is therefore liable for all expenses, including the fees of the medical expert for his
professional services. This liability originates from the above-cited mutual obligation which the law
has expressly established between the married couple.

In the face of the above legal precepts it is unquestionable that the person bound to pay the fees
due to the plaintiff for the professional services that he rendered to the daughter-in-law of the
defendants during her childbirth, is the husband of the patient and not her father and mother- in-law,
the defendants herein. The fact that it was not the husband who called the plaintiff and requested his
assistance for his wife is no bar to the fulfillment of the said obligation, as the defendants, in view of
the imminent danger, to which the life of the patient was at that moment exposed, considered that
medical assistance was urgently needed, and the obligation of the husband to furnish his wife in the
indispensable services of a physician at such critical moments is specially established by the law, as
has been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who believes that
he is entitled to recover his fees, must direct his action against the husband who is under obligation
to furnish medical assistance to his lawful wife in such an emergency.

From the foregoing it may readily be understood that it was improper to have brought an action
against the defendants simply because they were the parties who called the plaintiff and requested
him to assist the patient during her difficult confinement, and also, possibly, because they were her
father and mother-in-law and the sickness occurred in their house. The defendants were not, nor are
they now, under any obligation by virtue of any legal provision, to pay the fees claimed, nor in
consequence of any contract entered into between them and the plaintiff from which such obligation
might have arisen.

In applying the provisions of the Civil Code in an action for support, the supreme court of Spain,
while recognizing the validity and efficiency of a contract to furnish support wherein a person bound
himself to support another who was not his relative, established the rule that the law does impose
the obligation to pay for the support of a stranger, but as the liability arose out of a contract, the
stipulations of the agreement must be held. (Decision of May 11, 1897.)

Within the meaning of the law, the father and mother-in-law are strangers with respect to the
obligation that devolves upon the husband to provide support, among which is the furnishing of
medical assistance to his wife at the time of her confinement; and, on the other hand, it does not
appear that a contract existed between the defendants and the plaintiff physician, for which reason it
is obvious that the former can not be compelled to pay fees which they are under no liability to pay
because it does not appear that they consented to bind themselves.

The foregoing suffices to demonstrate that the first and second errors assigned to the judgment
below are unfounded, because, if the plaintiff has no right of action against the defendants, it is
needless to declare whether or not the use of forceps is a surgical operation.

Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the judgment
appealed from should be affirmed with the costs against the appellant. So ordered.

G.R. No. L-13602 April 6, 1918

LEUNG BEN, plaintiff,

vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of
Manila,defendants.

Thos. D. Aitken and W. A. Armstrong for plaintiff.

Kincaid & Perkins for defendants.

STREET, J.:

This is an application for a writ of certiorari, the purpose of which is to quash an attachment issued
from the Court of First Instance of the City of Manila under circumstances hereinbelow stated.
Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila
by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been lost by the
plaintiff to the defendant in a series of gambling, banking and percentage games conducted ruing
the two or three months prior to the institution of the suit. In his verified complaint the plaintiff asked
for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the
property of the defendant, on the ground that the latter was about to depart from the Philippine
islands with intent to defraud his creditors. This attachment was issued; and acting under the
authority thereof, the sheriff attached the sum of P15,000 which had been deposited by the
defendant with the International Banking Corporation.

The defendant thereupon appeared by his attorney and moved the court to quash the attachment.
Said motion having dismissed in the Court of First Instance, the petitioner, Leung Ben, the defendant
in that action, presented to this court, upon January 8, 1918 his petition for the writ
of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of the city of
Manila whose names are mentioned in the caption hereof. The prayer is that the Honorable James
A. Ostrand, as the judge having cognizance of the action in said court be required to certify the
record to this court for review and that the order of attachment which had been issued should be
revoked and discharged. with costs. Upon the filing of said petition in this court the usual order was
entered requiring the defendants to show cause why the writ should not issue. The response of the
defendants, in the nature of a demurrer, was filed upon January 21, 1918; and the matter is now
heard upon the pleadings thus presented.

The provision of law under which this attachment was issued requires that there should be accuse of
action arising upon contract, express or implied. The contention of the petitioner is that the statutory
action to recover money lost at gaming is that the statutory action to recover money lost at gaming is
no such an action as is contemplated in this provision, and he therefore insists that the original
complaint shows on its face that the remedy of attachment is not available in aid thereof; that the
Court of First Instance acted in excess of its jurisdiction in granting the writ of attachment; that the
petitioner has no plain, speedy, and adequate remedy by appeal or otherwise; and that consequently
the writ of certiorari supplies the appropriate remedy for his relief.

The case presents the two following questions of law, either of which, if decided unfavorably to the
petitioner, will be fatal to his application:

(1) Supposing that the Court of First Instance has granted an attachment for which there is no
statutory authority, can this court entertain the present petition and grant the desired relief?

(2) Is the statutory obligation to restore money won at gaming an obligation arising from "contract,
express or implied?"

We are of the opinion that the answer to the first question should be in the affirmative. Under section
514 of the Code of Civil Procedure the Supreme Court has original jurisdiction by the writ
of certiorari over the proceedings of Courts of First Instance, wherever said courts have exceeded
their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same section, it is
further declared that the proceedings in the Supreme Court in such cases hall be as prescribed for
Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme Court, so far as
applicable, the provisions contained in those section to the same extent as if they had been
reproduced verbatim immediately after section 514. Turning to section 217, we find that, in defining
the conditions under which certiorari can be maintained in a Court of First Instance substantially the
same language is used as is the same remedy can be maintained in the Supreme Court of First
Instance, substantially the same language is used as is found in section 514 relative to the
conditions under which the same remedy can be maintained in the Supreme Court, namely, when
the inferior tribunal has exceeded its jurisdiction and there is no appeal, nor any plain, speedy and
adequate remedy. In using these expressions the author of the Code of Civil Procedure merely
adopted the language which, in American jurisdictions at least, had long ago reached the stage of
stereotyped formula.

In section 220 of the same Code, we have a provision relative to the final proceedings in certiorari,
and herein it is stated that the court shall determine whether the inferior tribunal has regularly
pursued its authority it shall give judgment either affirming annulling, or modifying the proceedings
below, as the law requires. The expression, has not regularly pursued its authority as here used, is
suggestive, and we think it should be construed in connection with the other expressions have
exceeded their jurisdiction, as used in section 514, and has exceeded their jurisdiction as used in
section 217. Taking the three together, it results in our opinion that any irregular exercise of juridical
power by a Court of First Instance, in excess of its lawful jurisdiction, is remediable by the writ
of certiorari, provided there is no other plain, speedy, and adequate remedy; and in order to make
out a case for the granting of the writ it is not necessary that the court should have acted in the
matter without any jurisdiction whatever. Indeed the repeated use of expression excess of
jurisdiction shows that the lawmaker contemplated the situation where a court, having jurisdiction
should irregularly transcend its authority as well as the situation where the court is totally devoid of
lawful power.

It may be observed in this connection that the word jurisdiction as used in attachment cases, has
reference not only to the authority of the court to entertain the principal action but also to its authority
to issue the attachment, as dependent upon the existence of the statutory ground. (6 C. J., 89.) This
distinction between jurisdiction to issue the attachment as an ancillary remedy incident to the
principal litigation is of importance; as a court's jurisdiction over the main action may be complete,
and yet it may lack authority to grant an attachment as ancillary to such action. This distinction
between jurisdiction over the ancillary has been recognized by this court in connection with actions
involving the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil.
Rep., 355), a receiver had been appointed without legal justification. It was held that the order
making the appointment was beyond the jurisdiction of the court; and though the court admittedly
had jurisdiction of the main cause, the order was vacated by this court upon application a writ
of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil.
Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.)

By parity of reasoning it must follow that when a court issues a writ of attachment for which there is
no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the sense necessary
to justify the Supreme Court in granting relief by the writ of certiorari. In applying this proposition it is
of course necessary to take account of the difference between a ground of attachment based on the
nature of the action and a ground of attachment based on the acts or the conditions of the
defendant. Every complaint must show a cause of action some sort; and when the statue declares
that the attachment may issue in an action arising upon contract, the express or implied, it
announces a criterion which may be determined from an inspection of the language of the complaint.
The determination of this question is purely a matter of law. On the other hand, when the stature
declares that an attachment may be issued when the defendant is about to depart from the Islands,
a criterion is announced which is wholly foreign to the cause of action; and the determination of it
may involve a disputed question of fact which must be decided by the court. In making this
determination, the court obviously acts within its powers; and it would be idle to suppose that the writ
of certiorari would be available to reverse the action of a Court of First Instance in determining the
sufficiency of the proof on such a disputed point, and in granting or refusing the attachment
accordingly.

We should not be understood, in anything that has been said, as intending to infringe the doctrine
enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly
applied. It was there held that we would not, upon application for a writ of certiorari, dissolve an
interlocutory mandatory injunction that had been issued in a Court of First Instance as an incident in
an action of mandamus. The issuance of an interlocutory injunction depends upon conditions
essentially different from those involved in the issuance of an attachment. The injunction is designed
primarily for the prevention of irreparable injury and the use of the remedy is in a great measure
dependent upon the exercise of discretion. Generally, it may be said that the exercise of the
injunctive powers is inherent in judicial authority; and ordinarily it would be impossible to distinguish
between the jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory
injunction, for the latter is involved in the former. That the writ of certiorari can not be used to reverse
an order denying a motion for a preliminary injunction is of course not to cavil. (Somes vs. Crossfield
and Molina, 8 Phil. Rep., 284.)

But it will be said that the writ of certiorari is not available in this cae, because the petitioner is
protected by the attachment bond, and that he has a plain, speedy, and adequate remedy appeal.
This suggestion seems to be sufficiently answered in the case of Rocha & Co vs. Crossfield and
Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there cited. The remedy by
appeal is not sufficiently speedy to meet the exigencies of the case. An attachment is extremely
violent, and its abuse may often result in infliction of damage which could never be repaired by any
pecuniary award at the final hearing. To postpone the granting of the writ in such a case until the
final hearing and to compel the petitioner to bring the case here upon appeal merely in order to
correct the action of the trial court in the matter of allowing the attachment would seem both unjust
and unnecessary.

Passing to the problem propounded in the second question it may be observed that, upon general
principles,. recognize both the civil and common law, money lost in gaming and voluntarily paid by
the loser to the winner can not in the absence of statue, be recovered in a civil action. But Act No.
1757 of the Philippine Commission, which defines and penalizes several forms of gambling, contains
numerous provisions recognizing the right to recover money lost in gambling or in the playing of
certain games (secs. 6, 7, 8, 9, 11). The original complaint in the action in the Court of First Instance
is not clear as to the particular section of Act No. 1757 under which the action is brought, but it is
alleged that the money was lost at gambling, banking, and percentage game in which the defendant
was banker. It must therefore be assumed that the action is based upon the right of recovery given
in Section 7 of said Act, which declares that an action may be brought against the banker by any
person losing money at a banking or percentage game.

Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the
Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil Procedure
is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally admitted to be proper
in the interpretation of any statute, to consider its historical antecedents and its juris prudential
sources. The Code of Civil Procedure, as is well known, is an American contribution to Philippine
legislation. It therefore speaks the language of the common-law and for the most part reflects its
ideas. When the draftsman of this Code used the expression contract, express or implied, he used a
phrase that has been long current among writers on American and English law; and it is therefore
appropriate to resort to that system of law to discover the appropriate to resort to that system of law
to discover the meaning which the legislator intended to convey by those meaning which the
legislator intended to convey by those terms. We remark in passing that the expression contrato
tracito, used in the official translation of the Code of Civil Procedure as the Spanish equivalent of
implied contract, does not appear to render the full sense of the English expression.

The English contract law, so far as relates to simple contracts is planted upon two foundations,
which are supplied by two very different conceptions of legal liability. These two conceptions are
revealed in the ideas respectively underlying (1) the common- law debt and (2) the assumptual
promise. In the early and formative stages of the common-law the only simple contract of which the
courts took account was the real contract or contract re, in which the contractual duty imposed by
law arises upon the delivery of a chattle, as in the mutuum, commodatum, depositum, and the like;
and the purely consensual agreements of the Roman Law found no congenial place in the early
common law system.

In course of time the idea underlying the contract re was extended so as to include from one person
to another under such circumstances as to constitute a justa cuas debendi. The obligation thereby
created was a debt. The constitutive element in this litigation is found in the fact that the debtor has
received something from the creditor, which he is bound by the obligation of law to return or pay for.
From an early day this element was denominated the quid pro quo, an ungainly phrase coined by
Mediaeval Latinity. The quid pro quo was primarily a materials or physical object, and its constituted
the recompense or equivalent acquired by the debtor. Upon the passage of the quid pro quo from
one party to the other, the law imposed that real contractual duty peculiar to the debt. No one
conversant with the early history of English law would ever conceive of the debt as an obligation
created by promise. It is the legal duty to pay or deliver a sum certain of money or an ascertainable
quantity of ponderable or measurable chattles.

The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to the
debtor at the time of the creation of the debt, but the term is equally applicable to duties imposed by
custom or statute, or by judgment of a court.

The existence of a debt supposes one person to have possession of thing (res) which he owes and
hence ought to turn over the owner. This obligation is the oldest conception of contract with which
the common law is familiar; and notwithstanding the centuries that have rolled over Westminster Hall
that conception remains as one of the fundamental bases of the common-law contract.

Near the end of the fifteenth century there was evolved in England a new conception of contractual
liability, which embodied the idea of obligation resulting from promise and which found expression in
the common law assumpsit, or parol promise supported by a consideration. The application of this
novel conception had the effect of greatly extending the filed of contractual liability and by this
means rights of action came to be recognized which had been unknown before. The action of
assumpsit which was the instrument for giving effect to this obligation was found to be a useful
remedy; and presently this action came to be used for the enforcement of common-law debts. The
result was to give to our contract law the superficial appearance of being based more or less
exclusively upon the notion of the obligation of promise.

An idea is widely entertained to the effect that all simple contracts recognized in the common-law
system are referable to a singly category. They all have their roots, so many of us imagine, in one
general notion of obligation; and of course the obligation of promise is supposed to supply this
general notion, being considered a sort of menstruum in which all other forms of contractual
obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the debt
which was the first conception of contract liability revealed in the common law, has remained,
although it was detained to be in a measure obscured by the more modern conception of obligation
resulting from promise.

What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of
money or an ascertainable quantity of ponderable or measurable chattles — which is indicated by
them debt — has ever been recognized, in the common-law system, as a true contract, regardless,
of the source of the duty or the manner in which it is create — whether derived from custom, statue
or some consensual transaction depending upon the voluntary acts of the parties. the form of
contract known as the debt is of the most ancient lineage; and when reference is had to historical
antecedents, the right of the debt to be classed as a contract cannot be questioned. Indeed when
the new form of engagement consisting of the parol promise supported by a consideration first
appeared, it was looked upon as an upstart and its right to be considered a true contract was
questioned. It was long customary to refer to it exclusively as an assumpsit, agreement, undertaking,
or parol promise, in fact anything but a contract. Only in time did the new form of engagement attain
the dignity of being classed among true contract.

The term implied takers us into shadowy domain of those obligations the theoretical classification of
which has engaged the attention of scholars from the time of Gaius until our own day and has been
a source of as much difficulty to the civilian as to the common-law jurist. There we are concerned
with those acts which make one person debtor to another without there having intervened between
them any true agreement tending to produce a legal bond (vinculum juris). Of late years some
American and English writers have adopted the term quasi-contract as descriptive of these
obligations or some of them; but the expression more commonly used is implied contract.

Upon examination of these obligations, from the view point of the common-law jurisprudence, it will
be found that they fall readily into two divisions according as they bear an analogy to the common-
law debt or to the common law assumpsit. To exhibit the scope of these different classes of
obligations is here impracticable. It is only necessary in this connection to observe that the most
conspicuous division is that which comprises duties in the nature of debt. The characteristic feature
of these obligations is that upon certain states of fact the law imposes an obligation to pay a sum
certain of money; and it is characteristic of this obligation that the money in respect to which the duty
is raised is conceived as being equivalent of something taken or detained under circumstances
giving rise to the duty to return or compensate therefore. The proposition that no one shall be
allowed to enrich himself unduly at the expense of another embodies the general principle here lying
at the basis of obligation. The right to recover money improperly paid (repeticion de lo indebido) is
also recognized as belong to this class of duties.

It will observed that according to the Civil Code obligations are supposed to be derived either from
(1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some
sort ob lame or negligence is present. This enumeration of sources of obligations and the obligation
imposed by law are different types. The learned Italian jurist, Jorge Giorgi, criticises this assumption
and says that the classification embodied in the code is theoretically erroneous. His conclusion is
that one or the other of these categories should have been suppressed and merged in the other.
(Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5 arts. 5, 7, 9.) The validity of this criticism is,
we thin, self-evident; and it is of interest to note that the common law makes no distinction between
the two sources of liability. The obligations which in the Code are indicated as quasi-contracts, as
well as those arising ex lege, are in the common la system, merged into the category of obligations
imposed by law, and all are denominated implied contracts.

Many refinements, more or less illusory, have been attempted by various writers in distinguishing
different sorts of implied contracts, as for example, the contract implied as of fact and the contract
implied as of law. No explanation of these distinctions will be here attempted. Suffice it to say that
the term contract, express or implied, is used to by common-law jurists to include all purely personal
obligations other than those which have their source in delict, or tort. As to these it may be said that,
generally speaking, the law does not impose a contractual duty upon a wrongdoer to compensate for
injury done. It is true that in certain situations where a wrongdoer unjustly acquired something at the
expense of another, the law imposes on him a duty to surrender his unjust acquisitions, and the
injured party may here elect to sue upon this contractual duty instead of suing upon the tort; but
even here the distinction between the two liabilities, in contract and in tort, is never lost to sight; and
it is always recognized that the liability arising out of the tort is delictual and not of a contractual or
quasi-contractual nature.
In the case now under consideration the duty of the defendant to refund the money which he won
from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore, it is
a duty to return a certain sum which had passed from the plaintiff to the defendant. By all the criteria
which the common law supplies, this a duty in the nature of debt and is properly classified as an
implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery,
if recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money
had and received. (Clarke vs. Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs.
Fisher, 25 Vt., 514.) This means that in the common law the duty to return money won in this way is
an implied contract, or quasi-contract.

It is no argument to say in reply to this that the obligation here recognized is called an implied
contract merely because the remedy commonly used in suing upon ordinary contract can be here
used, or that the law adopted the fiction of promise in order to bring the obligation within the scope of
the action of assumpsit. Such statements fail to express the true import of the phenomenon. Before
the remedy was the idea; and the use of the remedy could not have been approved if it had not been
for historical antecedents which made the recognition of this remedy at one logical and proper.
Furthermore, it should not be forgotten that the question is not how this duty but what sort of
obligation did the author of the Code of Civil Procedure intend to describe when he sued the term
implied contract in section 412.

In what has been said we have assumed that the obligation which is at the foundation of the original
action in the court below is not a quasi-contract, when judge by the principles of the civil law. A few
observations will show that this assumption is not by any means free from doubt. The obligation in
question certainly does not fall under the definition of either of the two-quasi- contracts which are
made the subject of special treatment in the Civil Code, for its does not arise from a licit act as
contemplated in article 1895. The obligation is clearly a creation of the positive law — a
circumstance which brings it within the purview of article 1090, in relation with article, 1089; and it is
also derived from an illicit act, namely, the playing of a prohibited game. It is thus seen that the
provisions of the Civil Code which might be consulted with a view to the correct theoretical
classification of this obligation are unsatisfactory and confusing.

The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the
obligation incident to the officious management of the affairs of other person (gestion de negocios
ajenos) and (2) the recovery of what has been improperly paid (cabro de lo indebido). That the
authors of the Civil Code selected these two obligations for special treatment does not signify an
intention to deny the possibility of the existence of other quasi-contractual obligations. As is well said
by the commentator Manresa.

The number of the quasi-contracts may be indefinite as may be the number of lawful facts,
the generations of the said obligations; but the Code, just as we shall see further on, in the
impracticableness of enumerating or including them all in a methodical and orderly
classification, has concerned itself with two only — namely, the management of the affairs of
other person and the recovery of things improperly paid — without attempting by this to
exclude the others. (Manresa, 2d ed., vol. 12, p. 549.)

It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence of
more than a thousand years, should have arbitrarily assumed to limit the quasi-contract to two
obligations. The author from whom we have just quoted further observes that the two obligations in
question were selected for special treatment in the Code not only because they were the most
conspicuous of the quasi-contracts, but because they had not been the subject of consideration in
other parts of the Code. (Opus citat., 550.)
It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide range.
The Italian jurist, Jorge Giorgi, to whom we have already referred, considers under this head, among
other obligations, the following: payments made upon a future consideration which is not realized or
upon an existing consideration which fails; payments wrongfully made upon a consideration which is
contrary to law, or opposed to public policy; and payments made upon a vicious consideration or
obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.)

Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the
application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these articles relate to
gambling contracts, while article 1305 treats of the nullity of contracts proceeding from a vicious or
illicit consideration. Taking all these provisions together, it must be apparent that the obligation to
return money lost at play has a decided affinity to contractual obligations; and we believe that it
could, without violence to the doctrines of the civil law, be held that such obligations is an innominate
quasi-contract. It is, however, unnecessary to place the decision on this ground.

From what has been said it follows that in our opinion the cause of action stated in the complaints in
the court below is based on a contract, express or implied and is therefore of such nature that the
court had authority to issue writ of attachment. The application for the writ of certiorari must therefore
be denied and the proceedings dismissed. So ordered.

ROMAN CATHOLIC BISHOP OF MALOLOS, INC., petitioner, vs. INTERMEDIATEAPPELLATE

COURT, and ROBES-FRANCISCO REALTY AND DEVELOPMENTCORPORATION,
respondents.Rodrigo Law Office for petitioner.Antonio P. Barredo and Napoleon M. Malinas
for private respondent.

DECISION

SARMIENTO, J

This is a petition for review on certiorari which seeks the reversal and setting aside of thedecision 1
of the Court of Appeals, 2 the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby reversed and set aside and another
oneentered for the plaintiff ordering the defendant-appellee Roman Catholic Bishop of Malolos,
Inc.to accept the balance of P124,000.00 being paid by plaintiff-appellant and thereafter to executein
favor of Robes-Francisco Realty Corporation a registerable Deed of Absolute Sale over 20,655
square meters portion of that parcel of land situated in San Jose del Monte, Bulacan described
inOCT No. 575 (now Transfer Certificates of Title Nos. T-169493, 169494,169495 and 169496) of
the Register of Deeds of Bulacan. In case of refusal of the defendant to execute the Deed of Final
Sale, the clerk of court is directed to execute the said document. Without pronouncementas to
damages and attorney’s fees. Costs against the defendant-appellee. The case at bar arose from a
complaint filed by the private respondent, then plaintiff, against thepetitioner, then defendant, in the
Court of First Instance (now Regional Trial Court) of Bulacan, atSta. Maria, Bulacan, 4 for specific
performance with damages, based on a contract 5 executedon July 7, 1971. The property subject
matter of the contract consists of a 20,655 sq.m.-portion, out of the 30,655sq.m. total area, of a
parcel of land covered by Original Certificate of Title No. 575 of theProvince of Bulacan, issued and
registered in the name of the petitioner which it sold to theprivate respondent for and in
consideration of P123,930.00. cdphilThe crux of the instant controversy lies in the compliance or
non-compliance by the privaterespondent with the provision for payment to the petitioner of the
principal balance of P100,000.00 and the accrued interest of P24,000.00 within the grace period.A
chronological narration of the antecedent facts is as follows:On July 7, 1971, the subject contract
over the land in question was executed between thepetitioner as vendor and the private respondent
through its then president, Mr. Carlos F. Robes,as vendee, stipulating for a downpayment of
P23,930.00 and the balance of P100,000.00 plus12% interest per annum to be paid within four (4)
years from execution of the contract, that is, onor before July 7, 1975. The contract likewise provides
for cancellation, forfeiture of previouspayments, and reconveyance of the land in question in case
the private respondent would fail tocomplete payment within the said period. On March 12, 1973, the
private respondent, through its new president, Atty. Adalia Francisco,addressed a letter 6 to Father
Vasquez, parish priest of San Jose Del Monte, Bulacan,requesting to be furnished with a copy of the
subject contract and the supporting documents. On July 17, 1975, admittedly after the expiration of
the stipulated period for payment, the sameAtty. Francisco wrote the petitioner a formal request 7
that her company be allowed to pay theprincipal amount of P100,000.00 in three (3) equal
installments of six (6) months each with thefirst installment and the accrued interest of P24,000.00 to
be paid immediately upon approval of the said request. On July 29, 1975, the petitioner, through its
counsel, Atty. Carmelo Fernandez, formally deniedthe said request of the private respondent, but
granted the latter a grace period of five (5) daysfrom the receipt of the denial 8 to pay the total
balance of P124,000.00, otherwise, the provisionsof the contract regarding cancellation, forfeiture,
and reconveyance would be implemented. On August 4, 1975, the private respondent, through its
president, Atty. Francisco, wrote 9 thecounsel of the petitioner requesting an extension of 30 days
from said date to fully settle itsaccount. The counsel for the petitioner, Atty. Fernandez, received the
said letter on the sameday. Upon consultation with the petitioner in Malolos, Bulacan, Atty.
Fernandez, as instructed,wrote the private respondent a letter 10 dated August 7, 1975 informing the
latter of the denial of the request for an extension of the grace period. Consequently, Atty. Francisco,
the private respondent’s president, wrote a letter 11 dated August22, 1975, directly addressed to the
petitioner, protesting the alleged refusal of the latter to accepttender of payment purportedly made
by the former on August 5, 1975, the last day of the graceperiod. In the same letter of August 22,
1975, received on the following day by the petitioner, theprivate respondent demanded the execution
of a deed of absolute sale over the land in questionand after which it would pay its account in full,
otherwise, judicial action would be resorted to.On August 27, 1975, the petitioner’s counsel, Atty.
Fernandez, wrote a reply 12 to the privaterespondent stating the refusal of his client to execute the
deed of absolute sale due to its (privaterespondent’s) failure to pay its full obligation. Moreover, the
petitioner denied that the privaterespondent had made any tender of payment whatsoever within the
grace period. In view of thisalleged breach of contract, the petitioner cancelled the contract and
considered all previouspayments forfeited and the land as ipso facto reconveyed. From a perusal of
the foregoing facts, we find that both the contending parties have conflictingversions on the main
question of tender of payment.The trial court, in its ratiocination, preferred not to give credence to
the evidence presented bythe private respondent. According to the trial court:. . . What made Atty.
Francisco suddenly decide to pay plaintiff’s obligation on August 5, 1975, goto defendant’s office at
Malolos, and there tender her payment, when her request of August 4,1975 had not yet been acted
upon until August 7, 1975? If Atty. Francisco had decided to pay theobligation and had available
funds for the purpose on August 5, 1975, then there would havebeen no need for her to write
defendant on August 4, 1975 to request an extension of time.Indeed, Atty. Francisco’s claim that she
made a tender of payment on August 5, 1975 — suchalleged act, considered in relation to the
circumstances both antecedent and subsequent thereto,being not in accord with the normal pattern
of human conduct — is not worthy of credence. The trial court likewise noted the inconsistency in the
testimony of Atty. Francisco, president of the private respondent, who earlier testified that a certain
Mila Policarpio accompanied her onAugust 5, 1975 to the office of the petitioner. Another person,
however, named Aurora Oracion,was presented to testify as the secretary-companion of Atty.
Francisco on that same occasion. Furthermore, the trial court considered as fatal the failure of Atty.
Francisco to present in courtthe certified personal check allegedly tendered as payment or, at least,
its xerox copy, or evenbank records thereof. Finally, the trial court found that the private respondent
had insufficientfunds available to fulfill the entire obligation considering that the latter, through its
president, Atty.Francisco, only had a savings account deposit of P64,840.00, and although the latter
had a money-market placement of P300,000.00, the same was to mature only after the expiration of
the 5-day grace period.Based on the above considerations, the trial court rendered a decision in
favor of the petitioner,the dispositive portion of which reads:WHEREFORE, finding plaintiff to have
failed to make out its case, the court hereby declares thesubject contract cancelled and plaintiff’s
downpayment of P23,930.00 forfeited in favor of defendant, and hereby dismisses the complaint;
and on the counterclaim, the Court ordersplaintiff to pay defendant.(1) Attorney’s fees of
P10,000.00;(2) Litigation expenses of P2,000.00; and(3) Judicial costs. SO ORDERED. 14Not
satisfied with the said decision, the private respondent appealed to the respondentIntermediate
Appellate Court (now Court of Appeals) assigning as reversible errors, amongothers, the findings of
the trial court that the available funds of the private respondent wereinsufficient and that the latter did
not effect a valid tender of payment and consignation. The respondent court, in reversing the
decision of the trial court, essentially relies on thefollowing findings: . . . We are convinced from the
testimony of Atty. Adalia Francisco and her witnesses that inbehalf of the plaintiff-appellant they
have a total available sum of P364,840.00 at her and at theplaintiff’s disposal on or before August 4,
1975 to answer for the obligation of the plaintiff-appellant. It was not correct for the trial court to
conclude that the plaintiff-appellant had onlyabout P64,840.00 in savings deposit on or before
August 5, 1975, a sum not enough to pay theoutstanding account of P124,000.00. The plaintiff-
appellant, through Atty. Francisco proved andthe trial court even acknowledged that Atty. Adalia
Francisco had about P300,000.00 in moneymarket placement. The error of the trial court has in
concluding that the money market placementof P300,000.00 was out of reach of Atty. Francisco. But
as testified to by Mr. Catalino Estrella, arepresentative of the Insular Bank of Asia and America, Atty.
Francisco could withdraw anytimeher money market placement and place it at her disposal, thus
proving her financial capability of meeting more than the whole of P124,000.00 then due per
contract. This situation, We believe,proves the truth that Atty. Francisco apprehensive that her
request for a 30-day grace periodwould be denied, she tendered payment on August 4, 1975 which
offer defendant through itsrepresentative and counsel refused to receive. . .15 (Emphasis supplied)
In other words, the respondent court, finding that the private respondent had sufficient
availablefunds, ipso facto concluded that the latter had tendered payment. Is such conclusion
warrantedby the facts proven? The petitioner submits that it is not. LexLibHence, this petition. 16The
petitioner presents the following issues for resolution:xxx xxx xxxA. Is a finding that private
respondent had sufficient available funds on or before the graceperiod for the payment of its
obligation proof that it (private respondent) did tender of (sic)payment for its said obligation within
said period?xxx xxx xxxB. Is it the legal obligation of the petitioner (as vendor) to execute a deed of
absolute sale infavor of the private respondent (as vendee) before the latter has actually paid the
completeconsideration of the sale — where the contract between and executed by the parties
stipulates—“That upon complete payment of the agreed consideration by the herein VENDEE, the
VENDORshall cause the execution of a Deed of Absolute Sale in favor of the VENDEE.”xxx xxx
xxx.C. Is an offer of a check a valid tender of payment of an obligation under a contract
whichstipulates that the consideration of the sale is in Philippine Currency? 17We find the petition
impressed with merit. With respect to the first issue, we agree with the petitioner that a finding that
the privaterespondent had sufficient available funds on or before the grace period for the payment of
itsobligation does not constitute proof of tender of payment by the latter for its obligation within
thesaid period. Tender of payment involves a positive and unconditional act by the obligor of
offeringlegal tender currency as payment to the obligee for the former’s obligation and demanding
thatthe latter accept the same. Thus, tender of payment cannot be presumed by a mere
inferencefrom surrounding circumstances. At most, sufficiency of available funds is only affirmative
of thecapacity or ability of the obligor to fulfill his part of the bargain. But whether or not the obligor
avails himself of such funds to settle his outstanding account remains to be proven byindependent
and credible evidence. Tender of payment presupposes not only that the obligor isable, ready, and
willing, but more so, in the act of performing his obligation. Ab posse ad actunon vale illatio. “A proof
that an act could have been done is no proof that it was actually done.” The respondent court was
therefore in error to have concluded from the sheer proof of sufficientavailable funds on the part of
the private respondent to meet more than the total obligation withinthe grace period, the alleged truth
of tender of payment. The same is a classic case of non-sequitur.On the contrary, the respondent
court finds itself remiss in overlooking or taking lightly the moreimportant findings of fact made by the
trial court which we have earlier mentioned and which as arule, are entitled to great weight on
appeal and should be accorded full consideration and respectand should not be disturbed unless for
strong and cogent reasons. While the Court is not a trier of facts, yet, when the findings of fact of the
Court of Appeals are atvariance with those of the trial court, 19 or when the inference of the Court of
Appeals from itsfindings of fact is manifestly mistaken, 20 the Court has to review the evidence in
order to arriveat the correct findings based on the record.Apropos the second issue raised, although
admittedly the documents for the deed of absolutesale had not been prepared, the subject contract
clearly provides that the full payment by theprivate respondent is an a priori condition for the
execution of the said documents by thepetitioner.That upon complete payment of the agreed
consideration by the herein VENDEE, the VENDORshall cause the execution of a Deed of Absolute
Sale in favor of the VENDEE. The private respondent is therefore in estoppel to claim otherwise as
the latter did in thetestimony in cross-examination of its president, Atty. Francisco, which reads:Q
Now, you mentioned, Atty. Francisco, that you wanted the defendant to execute the finaldeed of sale
before you would given (sic) the personal certified check in payment of your balance, is that
correct?A Yes, sir. 22xxx xxx xxxArt. 1159 of the Civil Code of the Philippines provides that
“obligations arising from contractshave the force of law between the contracting parties and should
be complied with in good faith.”And unless the stipulations in said contract are contrary to law,
morals, good customs, publicorder, or public policy, the same are binding as between the parties.
What the private respondent should have done if it was indeed desirous of complying with
itsobligations would have been to pay the petitioner within the grace period and obtain a receipt of
such payment duly issued by the latter. Thereafter, or, allowing a reasonable time, the
privaterespondent could have demanded from the petitioner the execution of the necessary
documents.In case the petitioner refused, the private respondent could have had always resorted to
judicialaction for the legitimate enforcement of its right. For the failure of the private respondent
toundertake this more judicious course of action, it alone shall suffer the consequences. With regard
to the third issue, granting arguendo that we would rule affirmatively on the twopreceding issues, the
case of the private respondent still can not succeed in view of the fact thatthe latter used a certified
personal check which is not legal tender nor the currency stipulated,and therefore, can not constitute
valid tender of payment. The first paragraph of Art. 1249 of theCivil Code provides that “the payment
of debts in money shall be made in the currencystipulated, and if it is not possible to deliver such
currency, then in the currency which is legaltender in the Philippines. The Court en banc in the
recent case of Philippine Airlines v. Court of Appeals, 24 G.R. No. L-49188, stated thus:Since a
negotiable instrument is only a substitute for money and not money, the delivery of suchan
instrument does not, by itself, operate as payment (citing Sec. 189, Act 2031 on Negs. Insts.;Art.
1249, Civil Code; Bryan London Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9Phil. 44;
21 R.C.L. 60, 61). A check, whether a manager’s check or ordinary check, is not legaltender, and an
offer of a check in payment of a debt is not a valid tender of payment and may berefused receipt by
the obligee or creditor. Hence, where the tender of payment by the private respondent was not valid
for failure to complywith the requisite payment in legal tender or currency stipulated within the grace
period and assuch, was validly refused receipt by the petitioner, the subsequent consignation did not
operateto discharge the former from its obligation to the latter.In view of the foregoing, the petitioner
in the legitimate exercise of its rights pursuant to thesubject contract, did validly order therefore the
cancellation of the said contract, the forfeiture of the previous payment, and the reconveyance ipso
facto of the land in question.

WHEREFORE, the petition for review on certiorari is GRANTED and the DECISION of the
respondent court promulgated on April 25, 1985 is hereby SET ASIDE and ANNULLED and the
DECISION of the trial court dated May 25, 1981 is hereby REINSTATED. Costs against the private
respondent.SO ORDERED

G.R. No. 13228 September 13, 1918

WILLIAM OLLENDORFF, plaintiff-appellee,
vs.
IRA ABRAHAMSON, defendant-appellant.

Lawrence & Ross for appellant.

Wolfson & Wolfson for appellee.

FISHER, J.:

This is an appeal by defendant from a judgment of the Court of First Instance of Manila by which he
was enjoined for a term of five years, from September 10, 1915, from engaging in the Philippine
Islands in any business similar to or competitive with that of plaintiff.

The record discloses that plaintiff is and for a long time past has been engaged in the city of Manila
and elsewhere in the Philippine Islands in the business of manufacturing ladies embroidered
underwear for export. Plaintiff imports the material from which this underwear is made and adopts
decorative designs which are embroidered upon it by Filipino needle workers from patterns selected
and supplied by him. Most of the embroidery work is done in the homes of the workers. The
embroidered material is then returned to plaintiff's factory in Manila where it is made into finished
garments and prepared for export. The embroiderers employed by plaintiff are under contract to
work for plaintiff exclusively. Some fifteen thousand home workers and eight hundred factory
workers are engaged in this work for plaintiff, and some two and a half million pesos are invested in
his business.

On September 10, 1915, plaintiff and defendant entered into a contract in the following terms:

Contract of agreement made and entered into this date by and between William Ollendorff, of
Manila, Philippine Islands, party of the first part, and Ira Abrahamson, of Manila, Philippine
Islands, party of the second part:

The party of first part hereby agrees to employ the party of the second part, and the party of
the second part hereby obligates and binds himself to work for the party of the first part for a
term of two years from date commencing from the sixth of September, one thousand nine
hundred and fifteen and ending on the fifth day of September, one thousand nine hundred
seventeen, at a salary of fifty peso (50) per week payable at the end of each week.

The party of the second part hereby obligates and binds himself to devote his entire time,
attention, energies and industry to the promotion of the furtherance of the business and
interest of the party of the first part and to perform during the term of this contract such duties
as may be assigned to him by the party of the first part, and failure by the said party of the
second part to comply with these conditions to the satisfaction of the party of the first shall
entitle the party of the first part to discharge and dismiss the said party of the second part
from the employ of the party of the first part.

It is mutually understood and agreed by the parties hereto that this contract, upon its
termination, may be extended for a like for a longer or a shorter period by the mutual consent
of both contracting parties.

The said party of the second part hereby further binds and obligates himself, his heirs,
successors and assigns, that he will not enter into or engage himself directly or indirectly, nor
permit any other person under his control to enter in or engage in a similar or competitive
 business to that of the said party of the first part anywhere within the Philippine Islands for a
period of five years from this date.

Under the terms of this agreement defendant entered the employ of plaintiff and worked for him until
April, 1916, when defendant, on account of ill health, left plaintiff's employ and went to the United
States. While in plaintiff's establishment, and had full opportunity to acquaint himself with plaintiff's
business method and business connection. The duties performed by him were such as to make it
necessary that he should have this knowledge of plaintiff's business. Defendant had a general
knowledge of the Philippine embroidery business before his employment by plaintiff, having been
engaged in similar work for several years.

Some months after his departure for the United States, defendant returned to Manila as the manager
of the Philippine Underwear Company, a corporation. This corporation does not maintain a factory in
the Philippine Islands, but send material and embroidery designs from New York to its local
representative here who employs Filipino needle workers to embroider the designs and make up the
garments in their homes. The only difference between plaintiff's business and that of the firm by
which the defendant is employed, is the method of doing the finishing work -- the manufacture of the
embroidered material into finished garments. Defendant admits that both firms turn out the same
class of goods and that they are exported to the same market. It also clearly appears from the
evidence that defendant has employed to work his form some of the same workers employed by the
plaintiff.

Shortly after defendant's return to Manila and the commencement by him of the discharge of the
duties of his position as local manager of the Philippine Embroidery Company, as local manager of
the Philippine Embroidery Company, plaintiff commenced this action, the principal purpose of which
is to prevent by injunction, any further breach of that part of defendant's contract of employment by
plaintiff, by which he agreed that he would not "enter into or engage himself directly or indirectly . . .
in a similar or competitive business to that of (plaintiff) anywhere within the Philippine Islands for a
period of five years . . ." from the date of the agreement. The lower court granted a preliminary
injunction, and upon trial the injunction was made perpetual.

Defendant, as appellant, argues that plaintiff failed to substantiate the averments of his complaints to
the effect that the business in which the defendant is employed is competitive with that of plaintiff.
The court below found from the evidence that the business was "very similar." We have examined
the evidence and rare of the opinion that the business in which defendant is engaged is not only very
similar to that of plaintiff, but that it is conducted in open competition with that business within the
meaning of the contract in question. Defendant himself expressly admitted, on cross-examination,
that the firm by which he is now employed puts out the same class of foods as that which plaintiff is
engaged in producing. When two concerns operate in the same field, produce the same class of
goods and dispose them in the same market, their businesses are of necessity competitive.
Defendant having engaged in the Philippine Islands in a business directly competitive with that of
plaintiff, within five years from the date of his contract of employment by plaintiff, under the terms of
which he expressly agreed that he would refrain form doing that very thing, his conduct constitutes a
breach of that agreement.

Defendant argues that even assuming that there has been a breach of the agreement, the judgment
of the court below is nevertheless erroneous, contending that (1) the contract is void for lack of
mutuality; (2) that the contract is void as constituting an unreasonable restraint of trade; (3) that
plaintiff has failed to show that he has suffered any estimable pecuniary damage; and (4) that even
assuming that such damage as to warrant the court in restraining by injunction its continuance.
The contention that the contract is void for lack of mutuality is based upon that part of the agreement
which authorizes plaintiff to discharge the defendant before the expiration of the stipulated term,
should defendant fail to comply with its conditions to plaintiff's satisfaction. It is argued that by this
contracts it was sought to impose upon defendant the absolute obligation of rendering service, while
reserving to plaintiff the right to rescind it at will. We are of the opinion that this question is largely
academic. It is admitted that defendant left plaintiff's employ at his own request before the expiration
of the stipulated terms of the contract. Had plaintiff sought to discharge defendant without just cause,
before the expiration of the term of the employment, it might have been a serious question whether
he could lawfully do so, notwithstanding the terms in which the contract was drawn. (Civil Code, art.
1256.) But even assuming this particular clause of the contract to be invalid, this would not
necessarily affect the rest of the agreement. The inclusion is an agreement of one or more pacts
which are invalid does not of necessity invalidate the whole contract.

We are of the opinion that the contract was not void as constituting an unreasonable restraint of
trade. We have been cited to no statutory expression of the legislative will to which such an
agreement is directly obnoxious. The rule in this jurisdiction is that the obligations created by
contracts have the force of law between the contracting parties and must be enforce in accordance
with their tenor. (Civil Code, art 1091.) The only limitation upon the freedom of contractual
agreement is that the pacts established shall not be contrary to "law, morals or public order." (Civil
Code, Art. 1255.) The industry of counsel has failed to discover any direct expression of the
legislative will which prohibits such a contract as that before us. It certainly is not contrary to any
recognized moral precept, and it therefore only remains to consider whether it is contrary to "public
order." This term, as correctly stated by Manresa (Commentaries, vol. 8, p. 606) "does not mean, as
here used, the actual keeping of the public peace, but signifies the public weal . . . that which is
permanent, and essential in institutions . . . ." It is the equivalent, as here used and as defined by
Manresa, of the term "public policy" as used in the law of the United States. Public policy has been
defined as being that principle under which freedom of contract or private dealing is restricted for the
freedom of contract or private dealing is restricted for the good of the community. (People's
Bank vs. Dalton, 2 Okla., 476.) It is upon this theory that contracts between private individuals which
result in an unreasonable restraint of trade have frequently being recognized by article 1255 of our
Civil Code, the court of these Islands are vested with like authority.

In the nature of things, it is impossible to frame a general rule by which to determine in advance the
precise point at which the right of freedom of contract must yield to the superior interest of
community in keeping trade and commerce free from unreasonable restrictions. Originally the
English courts adopted the view that any agreement which imposed restrictions upon a man's right
to exercise his trade or calling was void as against public policy. (Cyc. vol. 9, p. 525.) In the course
of time this opinion was abandoned and the American and English courts adopted the doctrine that
where the restraint was unlimited as to space but unlimited as to time were valid. In recent years
there has been a tendency on the part of the courts of England and America to discard these fixed
rules and to decide each case according to its peculiar circumstances, and make the validity of the
restraint depend upon its reasonableness. If the restraint is no greater than is reasonably necessary
for the protection of the party in whose favor it is imposed it is upheld, but if it goes beyond this is
declared void. This is the principle followed in such cases by the Supreme Court of the United
States. In the case of Gibbs vs. Consolidated Gas Co. of Baltimore (130 U.S., 396) the court said:

The decision in Mitchel vs. Reynolds (1P. Wms. 181 [Smith's Leading Cases, Vol. 1, Pt. II,
508]), is the foundation of rule in relation to the invalidity of contracts in restraint of trade; but
as it was made under a condition of things, and a state of society, different from those which
now prevail, the rule laid down is not regarded as inflexible, and has been considerably
modified. Public welfare is first considered, and if it be not involved, and the restraint upon
one party is not greater than protection to the other party requires, the contract may be
sustained. The question is, whether, under the particular circumstances of the case and the
 nature of the particular contract involved in it, the contract is, or is not, unreasonable.
(Rousillon vs. Rousillon, L. R. 14 Ch. Div., 351; Leather Cloth Co. vs. Lorsont, L. R. 9 Eq.,
345.)

Following this opinion, we adopt the modern rule that the validity of restraints upon trade or
employment is to be determined by the intrinsinc reasonableness of restriction in each case, rather
than by any fixed rule, and that such restrictions may be upheld when not contrary to afford a fair
and reasonable protection to the party in whose favor it is imposed.

Examining the contract here in question from this stand point, it does not seem so with respect to an
employee whose duties are such as of necessity to give him an insight into the general scope and
details of his employers business. A business enterprise may and often does depend for its success
upon the owner's relations with other dealers, his skill in establishing favorable connections, his
methods of buying and selling -- a multitude of details, none vital if considered alone, but which in
the aggregate constitute the sum total of the advantages which the result of the experience or
individual aptitude and ability of the man or men by whom the business has been built up. Failure or
success may depend upon the possession of these intangible but all important assets, and it is
natural that their possessor should seek to keep them from falling into the hands of his competitors.
It is with this object in view that such restrictions as that now under consideration are written into
contracts of employment. Their purpose is the protection of the employer, and if they do not go
beyond what is reasonably necessary to effectuate this purpose they should be upheld. We are of
the opinion, and so hold, that in the light of the established facts the restraint imposed upon
defendant by his contract is not unreasonable. As was well said in the case of Underwood vs. Barker
(68 Law J. Ch., 201). "If there is one thing more than another which is essential to the trade and
commerce of this country, it is the inviolability of contract deliberately entered into; and to allow a
person of mature age, and not imposed upon, to enter into a contract, to obtain the benefit of it, and
then to repudiate it and the obligation which he has undertaken, is prima facie, at all events, contrary
to the interest of any and every country . . . . The public policy which allows a person to obtain
employment on certain terms understood by and agreed to by him, and to repudiate his contract,
conflicts with, and must, to avail the defendant, for some sufficient reason, prevail over, the manifest
public policy, which, as a rule holds him to his bond . . . .

Having held that the contract is valid, we pass to a consideration of defendant's objections to its
enforcement by injunction.

It is contended that plaintiff has not proved that he has suffered any estimable pecuniary damage by
reason of defendant's breach of the contract, and that for that reason his action must fail. It is further
contended that in no event is it proper to enforce such a contract as this by injunction, because it has
not been alleged and proved that the continuance of the acts complained of will cause plaintiff
"irreparable damage." These objections can conveniently be considered together.

The obligation imposed upon defendant by the particular clause of his contract now under
consideration is negative in character. Unless defendant voluntarily complies with his undertaking
there is no way by which the contract can be enforced except by the injunctive power of judicial
process. Such negative obligations have long been enforced by the courts in this manner. As stated
by High in his well-known work on Injunctions (vol. 2, pp. 877-878):

The remedy by injunction to prevent the violation of negative agreements, or contracts not to
do a particular thing, is closely akin to the remedy by way of specific performance of
agreements of an affirmative nature. In both cases the object sought is substantially one and
the same, and by enjoining the violation of a negative agreement the court of equity in effect
decrees its specific performance. (Lumley vs. Wagner, 1 DeGex, M. & G., 604.)
Where by the terms of a contract imposing a positive obligation the obligor is entitled to a specific
performance, it will not avail the defendant to show that plaintiff will suffer no pecuniary damage if
the contract is not performed. Upon like reasons, when the undertaking is negative in character and
defendant is violating the obligation imposed upon him the court may interfere without requiring proof
of actual damage. (High on Injunctions, par. 1135, citing Dickenson vs. Grand Junction Canal Co.,
15 Beav., 270.)

The admitted fact that plaintiff has failed to establish proof of pecuniary damage by reason of the
breach of the contract by defendant by the acts committed prior to the issuance of the preliminary
injunction is, of course, a bar or nay money judgment for damages for the breach of the contract, but
will not justify us in permitting defendant to continue to break his contract over plaintiff's objection.
The injury is a continuous one. The fact that the court may not be able to give damages for that part
of the breach of the contract which had already taken place when its aid was invoked is no reason
why it should countenance a continuance of such disregard of plaintiff's rights.

With respect to the contention that an injunction may only be granted to prevent irreparable injury,
the answer is that any continuing breach of a valid negative covenant is irreparable by the ordinary
process of courts of law. As stated by High, (vol. 2, p. 906) injunctive relief is granted in cases like
this "upon the ground that the parties cannot be placed in statu quo, and that damages at law can
afford no adequate compensation, the injury being a continuous one irreparable by the ordinary
process of courts of law."

In the case of Gilchrist vs. Cuddy (29 Phil. rep., 542), at page 552, this court said, citing with
approval the case of Wahle vs. Reinbach (76 Ill., 322):

By "irreparable injury" is not meant such injury as is beyond the possibility of repair, or
beyond possible compensation in damages, nor necessarily great injury or great damage,
but that species of injury, whether great or small, that ought not be submitted to on the one
hand or inflicted on the other; and, because it is so large on the one hand, or so small on the
other, is of such constant and frequent recurrence that no fair or reasonable redress can be
had therefor in a court of law.

This definition was quoted with approval by the Supreme Court of the United States in the case of
Donovan vs.Pennsylvania Co., (199 U.S., 279), in which the injury complained of was continuous in
its nature.

It is true, as held in the case of Liongson vs. Martinez (36 Phil. Rep., 948) that "an injunction should
never issue when an action for damages would adequately compensate the injuries caused" But it
frequently happens that the acts of the defendant, while constituting a very substantial invasion of
plaintiff's rights are of such a character that the damages which result therefrom "cannot be
measured by any certain pecuniary standard." (Eau Claire Water Co. vs. City of Eau Claire, 127
Wis., 154.) The Civil Code (art. 1908) casts upon real estate owners liability in damages for the
emission, upon their premises, of excessive smoke, which may be noxious to person or property.
The injury caused by such a nuisance might bring about a depreciation in the value of adjoining
properties, but there is no "certain pecuniary standard" by which such damages can be measured,
and in that sense the threatened injury is "irreparable" and may appropriately be restrained by
injunction.

. . . If the nuisance is a continuing one, invading substantial rights of the complainant in such
a manner that he would thereby lose such rights entirely but for the assistance of a court of
equity he will entitled but for the assistance of a court of equity he will be entitled to an
 injunction upon a proper showing, notwithstanding the fact the he might recover some
damages in an action at law. (Tise vs. Whitaker-Harvey Co., 144 N. C., 507.)

The injury done the business of a merchant by illegal or unfair competition is exceedingly difficult to
measure. A diminution of the volume of a business may be due to so many different causes that it is
often impossible to demonstrate that it has in fact been caused by the illegal competition of the
defendant. This is frequently the case in suit for the infringement of trademark rights, in which the
courts may enjoin the continued use of the infringing mark, although unable to assess damages for
the past injury.

The judgment of the trial court is affirmed with costs. So ordered.

G.R. No. 142971 May 7, 2002

THE CITY OF CEBU, petitioner,

vs.
SPOUSES APOLONIO and BLASA DEDAMO, respondents.

DAVIDE, JR., C.J.:

In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner
City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CA-G.R. CV No.
592041 affirming the judgment of 7 May 1996 of the Regional Trial Court, Branch 13, Cebu City, in
Civil Case No. CEB-14632, a case for eminent domain, which fixed the valuation of the land subject
thereof on the basis of the recommendation of the commissioners appointed by it.

The material operation facts are not disputed.

On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint for
eminent domain against respondents spouses Apolonio and Blasa Dedamo. The petitioner alleged
therein that it needed the following parcels of land of respondents, to wit:

Lot No. 1527

Area------------------------------------------------ 1,146 square

meters

Tax Declaration--------------------------------- 03472

-

Title No. ------------------------------------------ 31833

Market value------------------------------------- P240,660.00

Assessed Value--------------------------------- P72,200.00

-

Lot No. 1528

Area------------------------------------------------ 793 square meters

 Area sought to be expropriated ------------ 478 square meters
----

Tax Declaration -------------------------------- 03450

---

Title No. ------------------------------------------ 31832

--

Market value for the whole lot -------------- P1,666,530.00

----

Market value of the Area to be P100,380.00

expropriated --

Assessed Value -------------------------------- P49,960.00

----

for a public purpose, i.e., for the construction of a public road which shall serve as an access/relief
road of Gorordo Avenue to extend to the General Maxilum Avenue and the back of Magellan
International Hotel Roads in Cebu City. The lots are the most suitable site for the purpose. The total
area sought to be expropriated is 1,624 square meters with an assessed value of P1,786.400.
Petitioner deposited with the Philippine National Bank the amount of P51,156 representing 15% of
the fair market value of the property to enable the petitioner to take immediate possession of the
property pursuant to Section 19 of R.A. No. 7160.2

Respondents, filed a motion to dismiss the complaint because the purpose for which their property
was to be expropriated was not for a public purpose but for benefit of a single private entity, the
Cebu Holdings, Inc. Petitioner could simply buy directly from them the property at its fair market
value if it wanted to, just like what it did with the neighboring lots. Besides, the price offered was very
low in light of the consideration of P20,000 per square meter, more or less, which petitioner paid to
the neighboring lots. Finally, respondents alleged that they have no other land in Cebu City.

A pre-trial was thereafter had.

On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession pursuant to
Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21 September 1994.3

On 14 December 1994, the parties executed and submitted to the trial court an Agreement4 wherein
they declared that they have partially settled the case and in consideration thereof they agreed:

1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in
expropriating their parcels of land in the above-cited case as for public purpose and for the
benefit of the general public;

2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land
in favor of the FIRST PARTY provided the latter will pay just compensation for the same in
the amount determined by the court after due notice and hearing;

3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE
MILLION SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS
 (1,786,400.00) as provisional payment for the subject parcels of land, without prejudice to
the final valuation as maybe determined by the court;

4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated
September 21, 1994 issued by the Honorable Court, agreed to take possession over that
portion of the lot sought to be expropriated where the house of the SECOND PARTY was
located only after fifteen (15) days upon the receipt of the SECOND PARTY of the amount of
P1,786,400.00;

5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn
over to the FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days
grace period will voluntarily demolish their house and the other structure that may be located
thereon at their own expense;

6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to
render judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT;

7. That the judgment sought to be rendered under this agreement shall be followed by a
supplemental judgment fixing the just compensation for the property of the SECOND PARTY
after the Commissioners appointed by this Honorable Court to determine the same shall
have rendered their report and approved by the court.

Pursuant to said agreement, the trial court appointed three commissioners to determine the just
compensation of the lots sought to be expropriated. The commissioners were Palermo M. Lugo, who
was nominated by petitioner and who was designated as Chairman; Alfredo Cisneros, who was
nominated by respondents; and Herbert E. Buot, who was designated by the trial court. The parties
agreed to their appointment.

Thereafter, the commissioners submitted their report, which contained their respective assessments
of and recommendation as to the valuation of the property. 1âwphi 1.nêt

On the basis of the commissioners' report and after due deliberation thereon, the trial court rendered
its decision on 7 May 1996,5 the decretal portion o which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance with the
report of the commissioners.

Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum of
pesos: TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE THOUSAND AND NINE
HUNDRED THIRTY (P24,865.930.00) representing the compensation mentioned in the
Complaint.

Plaintiff and defendants are directed to pay the following commissioner's fee;

1. To Palermo Lugo - P21,000.00

2. To Herbert Buot - P19,000.00

3. To Alfredo Cisneros - P19,000.00

Without pronouncement as to cost.

 SO ORDERED.

Petitioner filed a motion for reconsideration on the ground that the commissioners' report was
inaccurate since it included an area which was not subject to expropriation. More specifically, it
contended that Lot No. 1528 contains 793 square meters but the actual area to be expropriated is
only 478 square meters. The remaining 315 square meters is the subject of a separate expropriation
proceeding in Civil Case No. CEB-8348, then pending before Branch 9 of the Regional Trial Court of
Cebu City.

On 16 August 1996, the commissioners submitted an amended assessment for the 478 square
meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount of
P20,826,339.50. The assessment was approved as the just compensation thereof by the trial court
in its Order of 27 December 1996.6 Accordingly, the dispositive portion of the decision was amended
to reflect the new valuation.

Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV No.
59204. Petitioner alleged that the lower court erred in fixing the amount of just compensation at
P20,826,339.50. The just compensation should be based on the prevailing market price of the
property at the commencement of the expropriation proceedings.

The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999,7 the Court of
Appeals affirmed in toto the decision of the trial court.

Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises the sole
issue of whether just compensation should be determined as of the date of the filing of the
complaint. It asserts that it should be, which in this case should be 17 September 1993 and not at
the time the property was actually taken in 1994, pursuant to the decision in "National Power
Corporation vs. Court of Appeals."8

In their Comment, respondents maintain that the Court of Appeals did not err in affirming the
decision of the trial court because (1) the trial court decided the case on the basis of the agreement
of the parties that just compensation shall be fixed by commissioners appointed by the court; (2)
petitioner did not interpose any serious objection to the commissioners' report of 12 August 1996
fixing the just compensation of the 1,624-square meter lot at P20,826,339.50; hence, it was
estopped from attacking the report on which the decision was based; and (3) the determined just
compensation fixed is even lower than the actual value of the property at the time of the actual
taking in 1994.

Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the
Government's right to appropriate, in the nature of a compulsory sale to the State, private property
for public use or purpose.9 However, the Government must pay the owner thereof just compensation
as consideration therefor.

In the case at bar, the applicable law as to the point of reckoning for the determination of just
compensation is Section 19 of R.A. No. 7160, which expressly provides that just compensation shall
be determined as of the time of actual taking. The Section reads as follows:

SECTION 19. Eminent Domain. – A local government unit may, through its chief executive
and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or
purpose or welfare for the benefit of the poor and the landless, upon payment of just
compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided,
however, That the power of eminent domain may not be exercised unless a valid and definite
 offer has been previously made to the owner, and such offer was not accepted: Provided,
further, That the local government unit may immediately take possession of the property
upon the filing of the expropriation proceedings and upon making a deposit with the proper
court of at least fifteen percent (15%) of the fair market value of the property based on the
current tax declaration of the property to be expropriated: Provided finally, That, the amount
to be paid for the expropriated property shall be determined by the proper court, based on
the fair market value at the time of the taking of the property.

The petitioner has misread our ruling in The National Power Corp. vs. Court of Appeals.10 We did not
categorically rule in that case that just compensation should be determined as of the filing of the
complaint. We explicitly stated therein that although the general rule in determining just
compensation in eminent domain is the value of the property as of the date of the filing of the
complaint, the rule "admits of an exception: where this Court fixed the value of the property as of the
date it was taken and not at the date of the commencement of the expropriation proceedings."

Also, the trial court followed the then governing procedural law on the matter, which was Section 5 of
Rule 67 of the Rules of Court, which provided as follows:

SEC. 5. Ascertainment of compensation. – Upon the entry of the order of condemnation, the
court shall appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for the property
sought to be taken. The order of appointment shall designate the time and place of the first
session of the hearing to be held by the commissioners and specify the time within which
their report is to be filed with the court.

More than anything else, the parties, by a solemn document freely and voluntarily agreed upon by
them, agreed to be bound by the report of the commission and approved by the trial court. The
agreement is a contract between the parties. It has the force of law between them and should be
complied with in good faith. Article 1159 and 1315 of the Civil Code explicitly provides:

Art. 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage
and law.

Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a serious
objection.11 It is therefore too late for petitioner to question the valuation now without violating the
principle of equitable estoppel. Estoppel in pais arises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist and such other rightfully relies and acts
on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such
facts.12 Records show that petitioner consented to conform with the valuation recommended by the
commissioners. It cannot detract from its agreement now and assail correctness of the
commissioners' assessment. 1âwphi1.nêt

Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be
determined at the time of the filing of the complaint for expropriation,13 such law cannot prevail over
R.A. 7160, which is a substantive law.14
WHEREFORE, finding no reversible error in the assailed judgment on the Court of Appeals in CA-
G.R. CV No. 59204, the petition in this case is hereby DENIED.

No pronouncement as to costs.

SO ORDERED

G.R. No. L-6913 November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,

vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-
appellant.

J. Lopez Vito, for appellant.

Arroyo and Horrilleno, for appellee.

MORELAND, J.:

This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding
to the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of the action.

It is established in this case that the plaintiff is the trustee of a charitable bequest made for the
construction of a leper hospital and that father Agustin de la Peña was the duly authorized
representative of the plaintiff to receive the legacy. The defendant is the administrator of the estate
of Father De la Peña.

In the year 1898 the books Father De la Peña, as trustee, showed that he had on hand as such
trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year
he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly
thereafter and during the war of the revolution, Father De la Peña was arrested by the military
authorities as a political prisoner, and while thus detained made an order on said bank in favor of the
United States Army officer under whose charge he then was for the sum thus deposited in said
bank. The arrest of Father De la Peña and the confiscation of the funds in the bank were the result
of the claim of the military authorities that he was an insurgent and that the funds thus deposited had
been collected by him for revolutionary purposes. The money was taken from the bank by the
military authorities by virtue of such order, was confiscated and turned over to the Government.

While there is considerable dispute in the case over the question whether the P6,641 of trust funds
was included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case
leads us to the conclusion that said trust funds were a part of the funds deposited and which were
removed and confiscated by the military authorities of the United States.

That branch of the law known in England and America as the law of trusts had no exact counterpart
in the Roman law and has none under the Spanish law. In this jurisdiction, therefore, Father De la
Peña's liability is determined by those portions of the Civil Code which relate to obligations. (Book 4,
Title 1.)
Although the Civil Code states that "a person obliged to give something is also bound to preserve it
with the diligence pertaining to a good father of a family" (art. 1094), it also provides, following the
principle of the Roman law, major casus est, cui humana infirmitas resistere non potest, that "no one
shall be liable for events which could not be foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly mentioned in the law or those in which the
obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Peña did not thereby
assume an obligation different from that under which he would have lain if such deposit had not
been made, nor did he thereby make himself liable to repay the money at all hazards. If the had
been forcibly taken from his pocket or from his house by the military forces of one of the combatants
during a state of war, it is clear that under the provisions of the Civil Code he would have been
exempt from responsibility. The fact that he placed the trust fund in the bank in his personal account
does not add to his responsibility. Such deposit did not make him a debtor who must respond at all
hazards.

We do not enter into a discussion for the purpose of determining whether he acted more or less
negligently by depositing the money in the bank than he would if he had left it in his home; or
whether he was more or less negligent by depositing the money in his personal account than he
would have been if he had deposited it in a separate account as trustee. We regard such discussion
as substantially fruitless, inasmuch as the precise question is not one of negligence. There was no
law prohibiting him from depositing it as he did and there was no law which changed his
responsibility be reason of the deposit. While it may be true that one who is under obligation to do or
give a thing is in duty bound, when he sees events approaching the results of which will be
dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to
temper the effects of those events, we do not feel constrained to hold that, in choosing between two
means equally legal, he is culpably negligent in selecting one whereas he would not have been if he
had selected the other.

The court, therefore, finds and declares that the money which is the subject matter of this action was
deposited by Father De la Peña in the Hongkong and Shanghai Banking Corporation of Iloilo; that
said money was forcibly taken from the bank by the armed forces of the United States during the war
of the insurrection; and that said Father De la Peña was not responsible for its loss.

The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his
complaint.

C.A. No. 34 April 29, 1946

ENGRACIO OBEJERA and MERCEDES INTAK, plaintiffs-appellees,

vs.
IGA SY, defendant-appellant.

Pedro Panganiban for appellant.

Jose Mayo Librea for appellees.

JARANILLA, J.:

By virtue of the appeal filed against the decision of the Court of First Instance of Batangas annulling,
on the ground of force and intimidation, the deed of transfer executed on April 9, 1942 (Exhibit Y),
whereby the plaintiffs and appellees agreed to transfer to the defendant and appellant their property
assessed at P2,230 in case they failed to return to the defendant on December 31, 1942 the balance
of P3,697 and pieces of jewelry worth P400 allegedly deposited with the plaintiffs on January 2,
1942, the above-entitled case was submitted to this court for review.

On December 13, 1941, plaintiffs and defendant sought refuge in the house of Leon Villena, barrio
lieutenant of Dalig, Batangas, Batangas, on account of the Japanese invasion of the Philippines.

On January 2, 1942, news having spread that the Japanese forces were closing in and were
committing barbarous acts, which gripped the people in terror, plaintiffs and defendant, after
consultation with their host Leon Villena, decided to hide their things and valuables in a dug-out
belonging to Leon Villena about thirty meters away from his house. The defendant placed in said
dug-out her money allegedly amounting to P5,021 and jewelry worth P400 in her own container;
Leon Villena and his wife also placed therein their own things; the plaintiffs also placed their things
and money allegedly amounting to P3,000. They did this at night and covered the dug-out with palay
belonging to Leon Villena and the defendant Iga Sy.

On February 18, 1942, at the instance of the defendant who desired to move to another house, the
plaintiffs and the defendant, together with Leon Villena, among others, went to the dug-out to take
out the defendant's container and discovered, to their consternation, that their money and things,
except for a few papers, had been lost.

One day during the first week of April, 1942, the defendant reported the loss of her money and
jewels, causing the arrest and investigation of Leon Villena, two others and the plaintiff Engracio
Obejera, who where released shortly after, except Engracio Obejera who was released only on April
19, 1942 after he, with his wife, had consented to execute Exhibit Y which document was sought to
be annulled by the plaintiffs and appellees herein.

The defendant and appellant contends that she deposited her money and jewelry with the plaintiffs
and that the plaintiffs, acknowledging liability for the loss of her money and jewelry, offered to
transfer their property under Transfer Certificate of Title No. 666 and accordingly executed the
document in question. On the other hand, the plaintiffs deny the alleged deposit, deny knowledge of
the loss of the defendant's money and jewelry, and claim that their consent to the deed of transfer
was obtained through violence and intimidation.

After a careful consideration of the nine assignments of error and examination of the evidence of this
case, the contention of the defendant and appellant cannot be sustained. The alleged deposit cannot
be believed and is contrary to the ordinary course of nature and the ordinary habits of life (section 69
[z], Rule 123, Rules of Court). Leon Villena, the barrio lieutenant, policemen Ruperto Buenafe and
Apolonio Corpuz, and Mayor Berberabe were uniform in their testimony that in their investigation of
the case, the plaintiff Engracio Obejera admitted that he agreed to keep and be responsible for the
defendant's things. It appears, however, that Leon Villena himself and his son Balbino participated in
the hiding, and acknowledged liability for the loss, of the defendant's things. Exhibit 1, apparently
prepared for the benefit of the defendant, reads as follows, "I, Mercedes Intak, wife of Engracio
Obejera who was the companion of chief Leon Villena and the latter's son Balbino Villena in hiding
(under ground) the money and jewels of Iga Sy ...," and mentions nothing regarding the alleged
deposit. And the deed of the transfer (Exhibit Y) states, "... and we, on the other hand, the said Leon
Villena and Balbino Villena, because we are responsible for one-half of the money and jewels still
unrecovered, I, Leon Villena, promise to transfer to Engracio Obejera my four parcels of land ...."
Now, if Leon Villena and his son had taken part in the hiding of the defendant's money and jewelry
and acknowledged responsibility therefor, as evidenced by the said documents, then his claim and
the defendant's claim that Engracio Obejera alone agreed to keep and be responsible for those
things is false; and it follows that the same claim of policemen Ruperto Buenafe and Apolonio
Corpus and Mayor Berberabe are likewise false.
It should also be considered, in this connection, that the dug-out into which the plaintiffs and the
defendant hid their money and valuables belongs to Leon Villena; that the plaintiffs and the
defendant only sought refuge in his house; that neither the plaintiffs nor the defendant had,
therefore, control over, or absolute and exclusive access, to the dug-out, as proved by the fact that
when the defendant decided to take her things with her because she was going to move to another
house, two days before the discovery of the loss, she asked their host Leon Villena to allow and help
her removed her things. Under these circumstances, it is hard to believe that plaintiff Engracio
Obejera would assume responsibility over the defendant's things hidden in a place not belonging to
him but to Leon Villena, in whose house they only sought refuge and were like guests, and
especially at a time when the confusion and fear resulting from the Japanese invasion and fast
advance so gripped everyone that nobody could be sure of his own things and even of his life. The
more natural conclusion is that plaintiffs and defendant decided to hide their things in the dug-out of
their host Leon Villena, thinking it to be the safest place, and hoping, like many and all others, in
those horrible days, that they might recover them, if at all, after the confusion and uncertainty. This,
in case Leon Villena himself, as was the most natural thing to happen, did not offer to his guests to
take care of their things by hiding them in his dug-out, for he and his son, as a matter of fact, took
part in the safekeeping and they even covered the dug-out afterwards with their own palay together
with the palay of the defendant; later he had to give his consent and actually accompanied the
plaintiffs and the defendant when the latter wanted to take out her things from the dug-out; and then,
after the discovery of the loss, he and his son admitted liability for the loss of the defendant's things
as evidenced by both Exhibits 1 and Y.

Even if the defendant's theory of deposit were sustained, any obligation arising therefrom was
extinguished upon the loss, without the fault of the depositee and under circumstances which at the
time were inevitable (article 1182 in connection with article 1766, and article 1105, Civil Code), of the
things allegedly deposited. The evidence of record, in this regard, uniformly shows that the plaintiffs
were not in any way responsible for the loss of the defendant's money and jewelry. Both Mayor
Roman L. Perez and Chief of Police Apolonio Corpus testified that they did not find any evidence
that the plaintiffs, who also lost their own valuables, could be in any manner connected with the loss.
Even the documents, Exhibits 1 and Y, so much relied upon by the defendant and evidently
prepared for her benefit, having been written on the same typewriter, do not state any such
connection.

In the case of Lizares vs. Hernaez and Alunan (40 Phil., 981, 991), the Supreme Court held:

In this bailment ordinary care and diligence are required of the bailee and he is not liable for
the inevitable loss or destruction of the chattel, not attributable to his fault. If while the
bailment continues, the chattel is destroyed, or stolen, or perishes, without negligence on the
bailee's part, the loss as in other hirings, falls upon the owner, in accordance with the
maxim res perit domino . . . .

To the same effect are the cases of Crame Sy Panco vs. Gonzaga (10 Phil., 646, 648), in which it
was held that the death of the carabaos in that case being fortuitous, the obligation of the defendants
therein to return them was extinguished as a matter of fact and of law; of Insular Government vs.
Bingham (13 Phil., 558, 571), in which the defendant therein was absolved from the obligation to
deliver to the Government of the Philippine Islands a revolver with ammunition which went down and
were lost when his boat was sunk in a storm through no fault of his or his crew; and of Yap Kim
Chuan vs. Tiaoqui (31 Phil., 433, 440), in which the defendant therein was held not responsible for
the wetting sustained by the goods and merchandise of the plaintiffs therein as a result of the
torrential rainfall.
It necessarily follows that the deed of transfer dated April 19, 1942 (Exhibit Y), whereby the plaintiffs
paid P500 to the defendant and further promised to transfer their property under Transfer Certificate
of Title No. 666 in case they failed to return on December 31, 1942 the balance of the loss for which,
as already stated, they cannot be held liable, is null and void for lack of cause or consideration
(article 1275, Civil Code). This also applies to the document dated April 11, 1942, Exhibit 1.

But these two documents are also null and void upon the other ground that the consent of the
plaintiffs therein was obtained through duress and intimidation. The continued detention of the
plaintiff Engracio Obejera from April 11 to 19, 1942 by the mayor and policemen of Batangas, in
spite of the fact that they had not found any evidence against the plaintiffs; the fact that the municipal
policemen applied continuous pressure on the plaintiffs to make good the loss, so that the plaintiff's
wife, accompanied by policeman Ruperto Buenafe, had to raise, with much difficulty, the amount of
P500 to secure the settlement of the case; the fact that Mayor Roman L. Perez, although he never
intended to keep the plaintiff Engracio Obejera in detention as he did not believe him guilty at all and
did not consider himself empowered to order his detention, did not, nevertheless, release the plaintiff
until he and his wife consented to execute the deed of transfer, Exhibit Y, in spite of their continuous
protestations of innocence and supplications of mercy; and the fear created in the minds of the
plaintiffs that they would be delivered to the Japanese soldiers and suffer cruel punishment, if not
death, in their hands, unless they executed the said deed of transfer, all show very clearly the
irresistible force and intimidation employed, in this case, to coerce the plaintiffs into executing the
said document, rendering it, therefore, null and void for lack of free consent (articles 1265, 1267,
1268, Civil Code).

In Jalbuena vs. Ledesma (8 Phil., 601, 605), we held:

In this instance the signing of an undertaking appears to have been insisted upon by the
judge in the presence and at the instance of the opposing party, and to have been expressly
made the condition of non-imprisonment, amid circumstances of procedure quite unusual in
courts of justice, in a tribunal convened under military auspices and exercising extraordinary
powers. So that there would be reason to say that the consent of the surety was obtained by
coercion, even if the judge had jurisdiction over the case.

In this connection, we reaffirm what we declared in Vales vs. Villa (35 Phil., 769, 789, 790), thus:

But when his sense, judgment, and his will rebel and he refuses absolutely to act as
requested, but is nevertheless overcome by force or intimidation to such an extent that he
becomes a mere automaton and acts mechanically only, a new element enters, namely, a
disappearance of the personality of the actor. He ceases to exist as an independent entity
with faculties and judgment, and in his place is substituted another--the one exercising the
force or making use of the intimidation. While his hand signs, the will which moves it is
another's. While a contract is made, it has, in reality and in law, only one party to it; and,
there being only one party, the one using the force or the intimidation, it is unreasonable for
lack of a second party.

The contention that plaintiffs offered to transfer their property in acknowledgment of their
responsibility for the loss of her things appears groundless. Aside from the fact that it cannot be
believed, as already stated, that there was constituted in this case a deposit, we are of the opinion
that such an offer, made by way of compromise in order that plaintiff Engracio Obejera might only
escape continued detention and grueling punishment or even death in the hands of the Japanese
soldiers, for the alleged loss for which he was not in any way criminally liable, is not an admission of
debt and is not admissible in evidence against the plaintiffs (section 9, Rule 123, Rules of Court).
 An offer to compromise is not a confession of debt and is not admissible in evidence (Code
of Civ. Proc., section 346). In a criminal causes for theft (U. S. vs. Maqui, 27 Phil., Rep., 97)
this court said that the weight both of authority and reason sustains the rule which admits
evidence of offers to compromise, in criminal cases, but permits the accused to show that
such offers were not made under the consciousness of guilt, but merely to avoid the
inconvenience of imprisonment or for some other reason which would justify a claim by the
accused that the offer to compromise was not in truth an admission of his guilt and an
attempt to avoid the legal consequences which would ordinarily ensue therefrom. (United
States vs. Torres and Padilla, 34 Phil., 994, 999.) .

On account of its consensual character a compromise, to be valid and effective requires in its
performance meeting of the minds in a certain, spontaneous, and free way with regard to a
definite object or objects; and in case it be shown and proved that there was error, deceit,
violence, or intimidation the compromise would be null, because the consent given therein is
null and void through lack of the indispensable requisites for its validity and effectiveness."
(Hernandez vs. Barcelon, 23 Phil., 599, 608.) .

Wherefore, the decision of the court a quo is hereby affirmed in toto with costs against the defendant
and appellant. So ordered.