G.R. No.

L-21676

February 28, 1969

VICENTE ALDABA, ET AL., petitioners, vs. COURT OF APPEALS, CESAR ALDABA, ET AL., respondents. Rodas and Almeda for petitioners. Dakila F. Castro and Associates for respondents. ZALDIVAR, J.: This is a petition to review the decision of the Court of Appeals in case CA-G.R. No. 27561-R, entitled "Vicente Aldaba, et al., plaintiffs-appellants, versus Cesar Aldaba, et al., defendants-appellees", affirming the decision of the Court of First Instance of Manila in its Civil Case No. 41260. When Belen Aldaba, a rich woman of Malolos, Bulacan, died on February 25, 1955, she left as her presumptive heirs her surviving husband Estanislao Bautista, and her brother Cesar Aldaba. Belen Aldaba was childless. Among the properties that she left were the two lots involved in this case, situated at 427 Maganda Street, Santa Mesa, Manila. Petitioners Dr. Vicente Aldaba and Jane Aldaba, father and daughter, respectively, lived during the last war in their house in Malate, Manila. Belen Aldaba used to go to their house to seek the advice and medical assistance of Dr. Vicente Aldaba. When the latter's house was burned during the liberation of Manila in 1945, Belen Aldaba invited Dr. Aldaba and his daughter, who was then a student in medicine, to live in one of her two houses standing on the lots in question, and the Aldaba father and daughter accepted the offer of Belen and they actually lived in one of those two houses until sometime in 1957 when respondent Emmanuel Bautista filed an ejectment case against them in the city court of Manila. Dr. Vicente Aldaba continued to act as a sort of adviser of Belen and Jane, after becoming a qualified doctor of medicine, became the personal physician of Belen until the latter's death on February 25, 1955. On June 24, 1955, the presumptive heirs Estanislao Bautista and Cesar Aldaba, executed a deed of extrajudicial partition of the properties left by the deceased Belen Aldaba, by virtue of which deed the two lots in question were alloted to Cesar Aldaba. Subsequently, on August 26, 1957, herein respondents Cesar Aldaba and Emmanuel Bautista, the latter being a grandson of Estanislao Bautista by his first marriage, executed a deed whereby the two lots that were alloted to Cesar Aldaba were ceded to Emmanuel Bautista in exchange of the latter's lot situated at San Juan, Rizal. By virtue of the deed of extra-judicial partition and the deed of exchange, Transfer certificates of Title Nos. 1334 and 1335, respectively, covering lots Nos. 32 and 34 now in question both in the name of Belen Aldaba, were cancelled by the Register of Deeds of Manila, and Transfer Certificates of Title Nos. 49996 and 49997 in the name of Emmanuel Bautista were issued in lieu thereof. Emmanuel Bautista then required Dr. Vicente Aldaba to vacate the lots in question and, upon the latter's refusal, filed an ejectment case against him in the City Court of Manila. Without awaiting the final result of the ejectment case, herein petitioners filed, on August 22, 1959, a complaint in the Court of First Instance of Manila, docketed as Civil Case No. 41260, against herein respondents Cesar Aldaba and Emmanuel Bautista and the Register of Deeds of Manila, alleging that they had become the owners of the two lots in question, and praying that the deed of partition entered into by Estanislao Bautista and Cesar Aldaba be declared null and void with respect to Lot No. 32, covered by Transfer Certificate of Title No. 1334, and lot No. 34 covered by Transfer Certificate of Title No 1335; that said lots be declared the property of therein plaintiffs (herein petitioners); and that the Register of Deeds of Manila be ordered to cancel TCT Nos. 49996 and 49997 in the name of Emmanuel Bautista and in lieu thereof issue two new TCTs in the name of therein plaintiffs. After hearing, the court a quo rendered a decision dismissing the complaint, and declaring, among others, that if the deceased Belen Aldaba intended to convey the lots in question to Vicente Aldaba and Jane Aldaba, by way of donation, the conveyance should be considered a donation inter vivos, for the validity of which a public instrument was necessary pursuant to Article 749 of the Civil Code. The dispositive portion of the decision of the trial court reads as follows: IN VIEW WHEREOF both complaint and counterclaim dismissed; the Court holds Emmanuel Bautista to be the absolute owner of the property in question, land and improvement, but with the right of plaintiffs to stay until they should have been reimbursed of P5,000.00 but without any obligation, until such reimbursement, to pay any rental unto defendant Emmanuel Bautista. No pronouncement as to costs.

From this decision, therein plaintiffs appealed to the Court of Appeals, and the latter court rendered a decision, on June 21, 1963, raising from P5,000 to P8,000 the amount to be reimbursed to plaintiffs-appellants, but affirming in all other respects the decision of the lower court. Herein petitioners' motion for reconsideration of the decision having been denied by the Court of Appeals, they forthwith filed the present petition in this Court. Before this Court, petitioners now contend that the Court of Appeals erred: (1) in affirming the decision of the Court of First Instance; (2) in holding that the donation, as found by the Court of First Instance of Manila, was a simple donation inter vivos and not a donation "con causa onerosa and so it was void for it did not follow the requirements of Article 749 of the Civil Code; (3) in not holding that the property in question had already been donated to herein petitioners in consideration of the latter's services; (4) in not declaring petitioners to be the absolute owners of the property in dispute; and (5) in considering testimonies which had been stricken out. The errors assigned by petitioners being interrelated, We are going to discuss them together. Petitioners contend that petitioners Dr. Vicente Aldaba and Jane Aldaba had rendered services to the deceased Belen Aldaba for more than ten years without receiving any compensation, and so in compensation for their services Belen Aldaba gave them the lots in dispute including the improvements thereon. It is the stand of petitioners that the property in question was conveyed to them by way of an onerous donation which is governed by Article 733, and not Article 749, of the Civil Code. Under Article 733 of the Civil Code an onerous donation does not have to be done by virtue of a public instrument. The petitioners point to the note, Exhibit 6, as indicating that a donation had been made, which note reads as follows: June 18, 1953 Jane, Huag kayong umalis diyan. Talagang iyan ay para sa inyo. Alam nila na iyan ay sa inyo. Belen A. Bautista. Petitioners maintain that the note, although it could not transmit title, showed, nevertheless, that a donation had already been made long before its writing, in consideration of the services rendered before the writing and to be rendered after its writing. And the donation being with an onerous cause, petitioners maintain that it was valid even if it was done orally. Petitioners further maintain that if Exhibit 6 labors under some ambiguity, this ambiguity is cured by Exhibit 7, which reads as follows: June 27, 1956 Dear Nana Tering, Narito po ang notice tungkol sa amillaramiento na pagbabayaran diyan sa lupa at bahay na kinatatayuan ninyo. Sa Malolos po ito tinanggap. Ang pagbabayaran po ng Inkong ay bayad na. Gumagalang, "Cely." The addressee, Tering, was the wife of Dr. Vicente Aldaba, and the sender, Cely was the wife of respondent Emmanuel Bautista. This note, petitioners argue, proves that respondents had recognized the ownership of the petitioners of the house and lot, for, otherwise, Cely should have sent the notice of real estate tax to respondent Cesar Aldaba, to whom was alloted the property in question by virtue of the extra-judicial partition. Respondents, Cesar Aldaba and Emmanuel Bautista, on the other hand, contend that the evidence of the plaintiff does not disclose clearly that a donation had been made. Respondents point out that the note, Exhibit 6, as worded, is vague, in that it could not be interpreted as referring to the lots in question, or that which was given therein was given for a valuable consideration. And finally, respondents contend that if the property had really been given to petitioners, why did they not take any step to transfer the property in their names? The Court of Appeals, in its decision, made the following findings and conclusions:

(1) The note Exhibit 6 did not make any reference to the lots in question, nor to the services rendered, or to be rendered, in favor of Belen. The note was insufficient is a conveyance, and hence could not be considered as evidence of a donation with onerous cause. This note can be considered, at most, as indicative of the intention to donate. (2) There is no satisfactory explanation why from 1945 to 1955, no notarial document was executed by Belen in favor of petitioners who were educated persons. The reason given was "extremada delicadeza" which reason the Court of Appeals considered as unsatisfactory. (3) The evidence regarding the value of the services (P53,000.00) rendered by petitioners (father and daughter) to Belen does not improve the proof regarding the alleged donation. If petitioners believed that the gratuitous use of the property was not sufficient to compensate them for their services, they could have presented their claims in the intestate proceedings, which they themselves could have initiated, if none was instituted. The conclusion of the Court of Appeals, as well as that of the trial court, that there was no onerous donation made by Belen Aldaba to petitioners is based upon their appreciation of the evidence, and this Court will not disturb the factual findings of those courts.
l awphi1.nt

The question to be resolved in the instant case is: Was there a disposition of the property in question made by the deceased Belen Aldaba in favor of herein petitioners? The note, Exhibit 6, considered alone, was, as held by the Court of Appeals, confirming the opinion of the lower court, only an indication of the intention of Belen Aldaba to donate to the petitioners the property occupied by the latter. We agree with this conclusion of the trial court and the Court of Appeals. The note, in fact, expressed that the property was really intended for the petitioners, "talagang iyan ay para sa inyo." If the property was only intended for petitioners then, at the time of its writing, the property had not yet been disposed of in their favor. There is no evidence in the record that such intention was effectively carried out after the writing of the note. Inasmuch as the mere expression of an intention is not a promise, because a promise is an undertaking to carry the intention into effect, 1 We cannot, considering Exhibit 6 alone, conclude that the deceased promised, much less did convey, the property in question to the petitioners. That the note, Exhibit 6, was only an indication of an intention to give was also the interpretation given by petitioners themselves, when they said in their memorandum, dated February 2, 1960, in the lower court 2 thus: Legally speaking, there was a contractual relation created between Belen Aldaba and the plaintiff since 1945 whereby the former would give to the latter the two parcels of land, together with the house standing thereon, upon the rendition of said services. This fact can be gleaned from the note (Exh. "6", Plaintiffs) which in part says: TALAGANG IYAN AY PARA SAINYO We have said that Exhibit 6 expressed only the intention to donate. Let us suppose, for the sake of argument, that previous to the writing of the note there had already been a disposition of the property in favor of the petitioners. This disposition alone, would not make the donation a donation for a valuable consideration. We still have to ask: What was the consideration of such disposition? We do not find in the record that there had been an express agreement between petitioners and Belen Aldaba that the latter would pay for the services of the former. If there was no express agreement, could it not be at least implied? There could not be an implied contract for payment because We find in the record that Jane did not expect to be paid for her services. In the memorandum of counsel for the petitioners in the trial court We find this statement: For all she did to her aunt she expected not to be paid.3 When a person does not expect to be paid for his services, there cannot be a contract implied in fact to make compensation for said services. However, no contract implied in fact to make compensation for personal services performed for another arises unless the party furnishing the services then expected or had reason to expect the payment or compensation by the other party. To give rise to an implied contract to pay for services, they must have been rendered by one party in expectation that the other party would pay for them, and have been accepted by the other party with knowledge of that expectation. (58 Am. Jur. p. 512 and cases cited therein). In the same manner when the person rendering the services has renounced his fees, the services are not demandable obligations. 4

Even if it be assumed for the sake of argument that the services of petitioners constituted a demandable debt, We still have to ask whether in the instant case this was the consideration for which the deceased made the (alleged) disposition of the property to the petitioners. As we have adverted to, we have not come across in the record even a claim that there was an express agreement between petitioners and Belen Aldaba that the latter would give the property in question in consideration of the services of petitioners. All that petitioners could claim regarding this matter was that "it was impliedly understood" between them. 5 How said agreement was implied and from what facts it was implied, petitioners did not make clear. The question of whether or not what is relied upon as a consideration had been knowingly accepted by the parties as a consideration, is a question of fact, 6 and the Court of Appeals has not found in the instant case that the lots in question were given to petitioners in consideration of the services rendered by them to Belen Aldaba. We find, therefore, that the conditions to constitute a donation cum causa onerosa are not present in the instant case, and the claim of petitioners that the two lots in question were donated to them by Belen Aldaba cannot be sustained. WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against the petitioners. It is so ordered.

[G.R. No. 127206. September 12, 2003]

PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL, petitioners, vs. HON. COURT OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO MAGLANA, AGAPITO PACETES & The REGISTER OF DEEDS OF DAVAO CITY, respondents. DECISION
CALLEJO, SR., J.:

For review on appeal by certiorari are the Decision of the Court of Appeals in CA-G.R. CV. No. 43188 promulgated on March 19, 1996, and its Resolution dated October 17, 1996, denying the petitioners Motion for Reconsideration of the said decision.
[1] [2]

The appealed decision affirmed in toto the judgment of the Regional Trial Court, Davao City, Branch 16, in Civil Case No. 15,356 which dismissed the complaint of the herein petitioners. The Antecedents Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were the co-owners of a parcel of commercial land with an area of 829 square meters, identified as Lot No. 59-C, covered by Transfer Certificate of Title (TCT) No. 432 located in Davao City. The spouses Angel and Nieves Villarica had constructed a two-storey commercial building on the property. On October 13, 1953, Concepcion filed a complaint against her sister Nieves with the then Court of First Instance of Davao City, docketed asCivil Case No. 1160 for specific performance, to compel the defendant to cede and deliver to her an undivided portion of the said property with an area of 256.2 square meters. After due proceedings, the court rendered judgment on April 7, 1954 in favor of

Concepcion, ordering the defendant to deliver to the plaintiff an undivided portion of the said property with an area of 256.2 square meters: A la vista de los datos expuestos, el Juzgado dicta sentencia condenando a la demanda, Nieves Palma Gil de Villarica, cumpla con los terminos del documento (Exh. A) ordenando a aquella que otogue los documentos necesarios traspasando a favor de la demandante (CONCEPCION PALMA GIL), 256 metros cuadrados con 20 centimetros del Lote No. 56-C descrito mas particularmente en el Certificado de Titulo No. 432.
[3]

Nieves appealed to the Court of Appeals which affirmed the assailed decision. In due course, the decision became final and executory. On motion of the plaintiff (Concepcion), the court issued a writ of execution. Nieves, however, refused to execute the requisite deed in favor of her sister. On April 27, 1956, the court issued an order authorizing exofficio Sheriff Eriberto Unson to execute the requisite deed of transfer to the plaintiff over an undivided portion of the property with a total area of 256.2 square meters. Instead of doing so, the sheriff had the property subdivided into four lots namely, Lot 59-C-1, with an area of 218 square meters; Lot 59-C-2, with an area of 38 square meters; Lot 59-C-3, with an area of 14 square meters; and Lot 59-C-4, with an area of 560 square meters, all covered by a subdivision plan. The sheriff thereafter executed a Deed of Transfer to Concepcion over Lot 59-C-1 and Lot 59-C-2 with a total area of 256.2 square meters. On October 24, 1956, Concepcion executed a deed of absolute sale over Lot 59-C-1 in favor of Iluminada Pacetes. In the said deed, the area of Lot 59-C-1 appeared as 256 square meters although under the subdivision plan, the area of the property was only 218 square meters. The vendee obliged herself to pay the said amount, to wit: 1. The purchase price of P21,600.00 shall be paid as follows: P7,500.00 to be paid upon the signing of this instrument; and the balance of P14,100.00 to be paid upon the delivery of the corresponding Certificate of Title in the name of the VENDEE.
[4]

Under the deed of absolute sale, the parties further agreed as follows: 2. That the VENDOR shall, within the period of ONE HUNDRED TWENTY (120) DAYS, from the signing of this agreement, undertake and work for the issuance of the corresponding Certificate of Title of the said Lot No. 59-C-1 in her favor with the proper government office or offices, to the end that the same can be duly transferred in the name of the herein VENDEE, by virtue thereof. 3. That pending the full and complete payment of the purchase price to the VENDOR, the VENDEE shall collect and receive any and all rentals and such other income from the land abovedescribed for her own account and benefit, this right of the VENDEE to begin from December 1, 1956.
[5]

In the meantime, Nieves filed a motion in Civil Case No. 1160 to compel the sheriff to report on his compliance with the courts Order dated April 27, 1956. The motion was denied. A motion for reconsideration of the denial met the same fate. Nieves appealed to the Court of Appeals, which appeal was docketed as CA-G.R. No. 22438-R.

In a parallel development, Concepcion filed a complaint for unlawful detainer against the spouses Angel and Nieves Villarica with the Municipal Trial Court docketed as Civil Case No. 2246. On October 4, 1956, the court rendered judgment in favor of the plaintiff and against the defendants, the decretal portion of which reads as follows: From the foregoing, it is indeed evident and clear that the herein defendants have been unlawfully withholding possession of the land from the plaintiff, and hereby finds in favor of the plaintiff, and against the defendants, ordering the latter to vacate the premises described in the complaint, removing whatever improvements they have constructed thereon. The defendants are further judged to pay the plaintiff the amount of ONE HUNDRED FIFTY PESOS (P150.00) a month from the time of the filing of this complaint until the lot is finally vacated in concept of rentals, deprived of the plaintiff due to the unlawful possession of the defendants, and to pay the costs of this suit.
[6]

The decision became final and executory but the plaintiff did not file any motion for a writ of execution. The spouses Angel and Nieves Villarica filed a complaint on October 24, 1956 against the sheriff and Concepcion with the Court of First Instance of Davao City, docketed as Civil Case No. 2151 for the nullification of the deed of transfer executed by the sheriff.
[7]

On December 21, 1956, Iluminada Pacetes filed a motion to intervene in Civil Case No. 2151, as vendee of the property subject of the case, which was granted by the court. She then filed a motion to dismiss the complaint. The court granted the motion. Nieves appealed to the Court of Appeals which appeal was docketed as CA-G.R. No. 22008-R. Nieves appeals in Civil Cases Nos. 1160 and 2151 were certified by the CA to this Court, docketed as G.R. No. L-15799 and G.R. No. L-15801. On the basis of the deed of transfer executed by Sheriff Iriberto A. Unson, the Register of Deeds issued TCT No. 7450 over Lot 59-C-1 and 59-C-2 on July 17, 1957 in the name of Concepcion, with a total area of 256.2 square meters. However, the latter failed to transfer title to the property to and under the name of Iluminada Pacetes. Consequently, the latter did not remit the balance of the purchase price of the property to Concepcion. In the interim, the spouses Angel and Nieves Villarica executed a real estate mortgage over Lot 59-C-4 in favor of Prudential Bank as security for a loan. On August 4, 1959,Concepcion died intestate and was survived by Nieves Villarica and her nephews and nieces. Iluminada filed a motion in Civil Case No. 1160 for her substitution as partyplaintiff in lieu of the deceased Concepcion. On August 2, 1961, the court issued an order granting the motion. On August 31, 1961, this Court rendered judgment in G.R. Nos. L-15799 and L-15801 setting aside the deed of transfer executed by the sheriff in favor of Concepcion Palma Gil, and remanding the records to the trial court for further proceedings. In compliance with the Decision of this Court in G.R. No. L-15801, the trial court conducted further proceedings in Civil Case No. 1160 and discovered that the defendant had mortgaged Lot 59-C-4 to the Prudential Bank. Consequently, the court issued an order on February 17, 1964, declaring that the defendant had waived the benefits of the Decision of the Court on August 31, 1961 in G.R. No. L-15801; thus, the conveyance of the property made byConcepcion in favor of Iluminada on October 24, 1956 must stand. Nieves filed a
[8]

motion for the reconsideration of the said order but the court denied the same in an Order datedFebruary 29, 1964. Nieves appealed the order to the CA which dismissed the appeal for her failure to file a record on appeal. Nieves filed a petition for review with this Court docketed as G.R. No. L-28363. More than five years having elapsed without the decision in Civil Case No. 2246 being enforced, Iluminada filed a complaint docketed as Civil Case No. 4413 in the Court of First Instance of Davao City, for the revival and execution of the decision of the Municipal Trial Court in Civil Case No. 2246 (the unlawful detainer case). The plaintiff therein averred that, as Concepcions successor-in-interest, she acquired the right of action to enforce the decision in Civil Case No. 2246. The defendants, on the other hand, averred that Iluminada had not yet paid the balance of the purchase price of Lot 59-C-1; hence, she had not acquired title over the lot and the right to evict the defendant. The deed of absolute sale executed by Concepcion in favor of the plaintiff was an executory, not an executed deed. On January 26, 1965, the court rendered judgment in favor of the defendants and dismissed the complaint. The decretal portion reads: IN VIEW OF THE FOREGOING, the Court believes that the plaintiff herein has not been properly and legally subrogated to the rights and action of deceased Concepcion Palma Gil and, hence, for these reasons the Court dismisses this case without pronouncement as to costs. The counterclaim is also hereby ordered dismissed.
[9]

On March 16, 1966, Iluminada Pacetes and Agapito Pacetes executed a deed of absolute sale over Lot 59-C-1 and Lot 59-C-2 in favor of Constancio B. Maglana forP110,000.00, covered by TCT No. 7450. The spouses-vendors undertook to secure title over the lots under the name of the vendee within ninety days.
[10]

On May 15, 1974, this Court denied the petition for certiorari filed by Nieves in G.R. No. L-28363. The Court, in part, ruled:
[11]

But while the issue at bar exclusively involves the timeliness of the appeal of the petitioners to the Court of Appeals, this Court has nonetheless examined and analyzed the substantive aspects of this case and is satisfied that the ORDERS of the trial court complained of are morally just. Accordingly, the instant appeal is dismissed and the resolution of the Court of Appeals dated July 31, 1967 and its resolution dated October 18, 1967 are affirmed.
[12]

The decision of the Court became final and executory. On May 5, 1975, the spouses Agapito and Iluminada Pacetes filed a complaint against Nieves in the Court of First Instance of Davao City, docketed as Civil Case No. 8836 for the recovery of possession of Lot 59-C-1 and Lot 59-C-2. The Pacetes spouses claimed that Lot 59-C-2 was included in TCT No. 7450 under the name of Concepcion. The spouses prayed that judgment be rendered in their favor after due proceedings thus: PRAYER

PREMISES CONSIDERED, it is most respectfully prayed that: 1. a. During the pendency of this case, Defendant be ordered: To refrain from collecting rentals from the tenants or occupants of the building erected in said Lot 59-C-1; in that the tenants be directed to pay their rental to the plaintiff; To demolish her aforesaid building of strong materials and vacate the premises of Lot 59-C-1 and Lot 59-C-2. After hearing, Defendant be ordered to: Pay the Plaintiffs the amount consisting of compensation for the use of the land they have been depribed (sic) of to receive and enjoy since October 24, 1956 due to the unwarranted and illegal occupation of the said lots by defendant; Pay Plaintiffs moral and exemplary damages in such amount as the Honorable Court may fix considering the facts and the law; Pay Plaintiffs such expenses of litigation as may be proven during the trial, and Pay Plaintiffs expenses for services of counsel they had to incurr (sic) in this complaint. OTHER RELIEFS consonant with justice and equity are prayed for.
[13]

b. 2. a.

b. c. d. 3.

On May 10, 1977, Nieves Villarica executed a lease agreement with Virginia Jorge and Anita Vergara over Lots 59-C-1 and 59-C-2. The lessees took actual possession of the leased property. In their Answer to the complaint in Civil Case No. 8836, the defendants averred, by way of defense, that the complaint was barred by the decision of the CFI in Civil Case No. 4413, which ruled that the Deed of Absolute Sale executed by Concepcion in favor of Iluminada was merely an executory, but not an executed contract. After the plaintiffs had rested their case, the defendants filed a motion to dismiss (demurrer to evidence). On October 29, 1975, the court issued an order dismissing the complaint on the ground that the action was barred by the decision of the court in Civil Case No. 4413. Thus, Virginia Jorge and Anita Vergara continued to be in physical possession of the property.
[14]

In the meantime, on August 8, 1977, Iluminada consigned with the court in Civil Case No. 1160 the amount of P11,983.00 only as payment of the purchase price of the property. Iluminada was issued receipts for the amount. As successor-in-interest of Concepcion, she likewise filed a motion for execution in Civil Case No. 1160 for the eviction of the defendant Nieves Villarica and all those acting for and in her behalf. The court issued an order on August 19, 1977 granting the motion. The defendants filed a motion for reconsideration of the order claiming that Iluminada was not a party to the case which the court denied on September 2, 1977. The defendant filed another motion for
[15]

reconsideration which was likewise denied on September 16, 1977. The defendant filed a petition for certiorari with the Court of Appeals docketed as CA-G.R. No. 62957-R, which petition was dismissed on August 26, 1980. The CA ruled that Iluminada Pacetes was the real party-in-interest as the vendee of the property. The defendant filed a petition with this Court docketed as G.R. No. L-56399. In the meantime, Iluminada filed a petition with the RTC docketed as Miscellaneous Case No. 4715 for the issuance of an owners duplicate of TCT No. 7450. On March 22, 1978, the court granted the petition and ordered the Register of Deeds to issue an owners duplicate of the said title under the name of Concepcion Gil. Iluminada presented the said order and the deed of absolute sale executed by Concepcion in her favor. On May 9, 1978, the Register of Deeds issued TCT No. 61514 over Lot 59-C-1, with an area of 218 square meters, in the name of Iluminada Pacetes.
[16]

On April 21, 1980, TCT No. 73412 was issued by the Register of Deeds of Davao City in favor of Constancio Maglana over Lot 59-C-1 only. The next day, Constancio Maglana executed a deed of sale not only over Lot 59-C-1 but also Lot 59-C-2, in favor of Emilio Matulac for the purchase price of P150,000.00. On the basis of the said deed, the Register of Deeds issued TCT No. 80631 to and under the name of Emilio Matulac over the two lots.
[17] [18]

In the meantime, Angel Villarica had died on April 20, 1974. On July 7, 1981, his heirs, including his widow Nieves, executed an Extra-Judicial Settlement of Estate of Deceased in which the latter waived, ceded and transferred to her children Teresita Magpantay, Antero P.G. Villarica, Zenaida V. Alovera, Emperatriz V. Garcia, Napoleon P.G. Villarica and Rupendo P.G. Villarica her rights and interests over the property covered by TCT No. 7450.
[19]

On January 13, 1982, this Court affirmed the resolution of the Court of Appeals, in CAG.R. No. 62975-R and dismissed the petition for certiorari in G.R. No. L-56399, thus, paving the way for the execution of the decision of the trial court in Civil Case No. 1160, per its Order dated August 19, 1977. Emilio Matulac filed a motion for the issuance of a writ of execution. The Court granted the motion on February 18, 1982. Nieves filed a motion for the reconsideration of the order which the court denied in its Order dated March 17, 1982. Virginia Jorge and Anita Vergara, the lessees, filed a motion for reconsideration but the court denied the motion. Nonetheless, the lessees were allowed to stay in the property until April 9, 1982. However, the lessees refused to vacate the property after said date. On April 10, 1982, Emilio Matulac filed a motion in Civil Case No. 1160 for the issuance of a writ of execution and an order of demolition. On April 20, 1982, the trial court issued an order granting the motion for a writ of execution on April 30, 1982. The court also issued a special order for the demolition of the buildings on the property. The buildings on the property, including the properties owned by Virginia Jorge and Anita Vergara, were demolished on June 14, 1982. Emilio Matulac thereafter commenced the construction of a building thereon. The defendant Nieves Villarica, in the meantime, filed a motion in Civil Case No. 1160 to annul the proceedings, including the writ of execution issued by the court, and the issuance of a restraining order.

For their part, Virginia Jorge and Anita Vergara filed a petition for certiorari with this Court docketed as G.R. No. L-60690 for the nullification of the aforesaid orders and the writ of demolition issued by the trial court in Civil Case No. 1160. Three of the surviving heirs of Concepcion Gil, namely, Perla Palma Gil, Vicente Hizon, Jr. and Angel Palma Gil, through their first cousin, Atty. Vicente Villarica, one of Nieves Villaricas children, filed on June 17, 1982, a complaint against Emilio Matulac, Constancio Maglana, Agapito Pacetes, and the Register of Deeds, with the Court of First Instance, docketed as Civil Case No. 15,356 for the cancellation of the deed of sale executed by Concepcion in favor of Iliminada Pacetes; the deed of sale executed by the latter in favor of Constancio Maglana; the deed of sale executed by the latter in favor of Emilio Matulac, as well as TCT Nos. 61514, 73412 and 80631 under the respective names of the vendees. The plaintiffs alleged, inter alia, that the deed of absolute sale executed by Concepcion in favor of Iluminada over Lots 59-C-1 and 59-C-2 was a contract to sell, an executory contract, as declared by the Court of First Instance in Civil Cases Nos. 4413 and 8836, and not an executed contract; the defendant spouses Agapito and Iluminada Pacetes failed to pay the balance of the purchase price of the property during the lifetime of Concepcion; hence, what was embodied in the said deed was not fulfilled by the vendee. Consequently, the sale is null and void. The plaintiffs prayed for the issuance of a temporary restraining order and a writ of preliminary injunction to enjoin the defendant Emilio Matulac from continuing with the construction of a building on the property. The plaintiffs likewise prayed that after due proceedings, judgment be rendered in their favor and against the defendants, thus: WHEREFORE, in view of the aforecited reasons it is most respectfully prayed that: 1) An order be rendered immediately enjoining defendant Matulac from doing further work in the construction of the building and enjoining him from entering the premises and the land subject of this complaint and after trial making the injunction above-mentioned permanent, ordering the removal of any structure and other construction within the plaintiffs above-described property and thereafter, upon said defendants failure to do so authorizing plaintiffs to order said removal at defendants expense. 2) Judgment be rendered ordering:

a. Defendant Register of Deeds to cancel TCT No. T-61514, T-73412 and T-80631 and issued (sic) a new Transfer Certificate of Title in the name of the above-mentioned heirs of the late Concepcion Palma Gil nullifying the deeds of sale, Annexes B, C, and D hereof; b. Defendants Pacetes, Maglana and Matulac jointly and solidarily liable to plaintiffs for moral and exemplary damages as may be granted by this Honorable Court and the amount ofP25,000.00 as attorneys fees; and

c. Litigation expenses and other reliefs as may be justified under this case.

[20]

In his answer to the complaint, defendant Emilio Matulac interposed the following special and affirmative defenses: (a) he is the lawful owner of the property; (b) the action is barred by the Decision of this Court in G.R. No. L-56399; (c) the plaintiffs are estopped from assailing the sale to him of the property; and (d) he is a purchaser in good faith. On November 29, 1982, the court issued an order in Civil Case No. 1160, denying the motion for the nullification of the proceedings and for a writ of preliminary injunction. Nieves filed a motion for reconsideration of the order. On February 18, 1983, the court issued an order denying the motion. Nieves filed a petition with the Court of Appeals for the nullification of the same. In the meantime, Emilio Matulac died intestate and was substituted by his heirs Sonia Matulac, Josephine Matulac and Gregorio Matulac. A petition was filed with the RTC of Davao City for the settlement of his estate docketed as SP-No. 2747. The Court appointed Sonia Matulac as administratrix of the estate.
[21]

The CA rendered a decision granting the petition and ordering the trial court to conduct further proceedings to implement the August 19, 1977 Order. Sonia Matulac filed a petition for review on certiorari with this Court docketed as G.R. No. 85538 for the nullification of the decision of the CA. On November 24, 1989, this Court rendered a Decision dismissing the petition in G.R. No. L-60690. This Court said: When We dismissed on September 16, 1974, the petition for certiorari filed by defendants questioning the orders, dated December 7, 1961 and December 17, 1964, in effect We had confirmed the sale by plaintiff in Civil case No. 1160, Concepcion Palma Gil, of Lot 59-C-1 and 59-C-2 to Illuminada Pacetes and affirmed the ruling of the trial court that defendants had waived the benefit of Our Resolution rendered on August 31, 1961.
[22]

Meanwhile, one of the plaintiffs, Perla Palma Gil in Civil Case No. 15,356, was appointed by the court as administratrix of the estate of Concepcion on December 29, 1989, and filed in the said case a motion to intervene as plaintiff in her capacity as administratrix in behalf of all the heirs of Concepcion. The heirs of Emilio Matulac opposed the motion considering that they, and not the estate of Concepcion, owned the subject property; thus the claim of the plaintiff should be filed in SP-No. 2747. On April 7, 1990, the said motion was denied by the trial court. The said court declared:
[23] [24] [25]

Being already a plaintiff together with the other plaintiffs in thise (sic) case, said intervention by plaintiff Perla Palma Gil is not absolutely necessary and imperative. It would only delay the early disposition of the case if allowed. On January 8, 1990, this Court dismissed the petition in G.R. No. 85538. The petitioners filed a motion for reconsideration and on July 2, 1992, this Court granted the motion and reversed the decision of the CA. This Court ruled in the said case as follows:

When Concepcion Palma Gil, plaintiff in Civil Case No. 1160 sold the land in question to Iluminada Pacetes on October 24, 1956, the latter became the new owner of the property. By virtue of the order of substitution issued by the court, said new owner (Pacetes) became a formal party--the party plaintiff. As the new party plaintiff, Pacetes had the right to move for the issuance of a writ of execution, which was correctly granted by the trial court in the questioned Order dated August 19, 1977. The subsequent transfers of the property from Pacetes to Maglana, and then from Maglana to herein movant Matulac, was acquired pendente lite. The latter (Matulac) as the latest owner of the property, was, as aptly put by the trial court, subrogated to all the rights and obligations of Pacetes. He is thus the party who now has a substantial interest in the property. Matulac is a real party-in- interest subrogated to all the rights of Iluminada Pacetes, including the right to the issuance of a writ of execution in his name. Hence, the questioned orders of the lower court dated November 29, 1982 andFebruary 18, 1983 as well as the Writ of Possession issued pursuant to the aforementioned orders are valid. They do not in any way run counter to the order of the lower court dated August 19, 1977, which granted the motion for execution filed by Pacetes, who, as earlier pointed out, was succeeded in all his rights and interests, by herein petitioner, Matulac. Although the dispositive portion of the judgment rendered in Civil Case No. 1160 did not award the parties their respective shares in the property, the power of the court to issue the order of execution cannot be limited to what is stated in the dispositive portion of the judgment. As held in Paylago vs. Nicolas (189 SCRA 728 [1990]), the body of the decision must be consulted in case of ambiguity in the dispositive portion. Hence, in Jorge vs. Consolacion (supra), we ruled that the execution of the judgment cannot be limited to its dispositive portion, considering the continued failure of the defendant Nieves Palma Gil-Villarica, to comply with what was required of her in the judgment. Respondents deprived petitioner Concepcion Palma Gil and her successors-in-interest of their legal right to possess the land. (Underscoring supplied)
[26]

On June 11, 1993, the trial court rendered judgment in Civil Case No. 15,356 in favor of the defendants. The trial court ruled that this Court had affirmed, in G.R. No. 85538 and G.R. No. L-60690, the sales of the property from Concepcion Palma Gil to Iluminada Pacetes, then to Constancio Maglana and to Emilio Matulac; hence, the trial court was barred by the rulings of this Court. The plaintiffs appealed to the CA with the following assignment of errors: I. II. The trial court erred in not holding that Iluminada Pacetes had no right to sell or transfer the two (2) parcels of land to Constancio Maglana; That the trial court erred in not declaring the sale of the properties in question from Iluminada Pacetes to Constancio Maglana, thence, from Constancio Maglana to Emilio Matulac NULL and VOID; That the trial court erred in dismissing the complaint; That the trial court erred in not ordering the cancellation of transfer Certificate of Title No. T-80631 in the name of Emilio Matulac and the issuance of a new title in the name of Concepcion Palma Gil;

III. IV.

V.

That the trial court erred in not holding the appellees liable for damages to the appellants.
[27]

In the meantime, on June 29, 1994, the estate of Emilio Matulac executed a deed of sale of real estate in which the estate sold Lots 59-C-1 and 59-C-2 and the building thereon to the Prudential Education Plan, Inc. for P7,000,000.00. On March 19, 1996, the CA rendered a decision affirming the decision assailed therein and dismissing the appeal. The CA ruled that the deed of absolute sale executed by Concepcion in favor of Iluminada Pacetes was a deed of absolute sale over Lots 59-C-1 and 59-C-2, under which the ownership over the property subject thereof was transferred to the vendee. Moreover, the validity of the sales of the subject lots by Concepcion to Iluminada, by the latter to Constancio Maglana, and by the latter to Emilio Matulac, had been confirmed by this Court in G.R. No. L-60690 and G.R. No. 85538. Although Iluminada paid the balance of the purchase price of the property only on August 8, 1977, the payment was still timely, in light of Article 1592 of the New Civil Code. Besides, the property had already been sold to the respondents Constancio Maglana and Emilio Matulac.
[28]

The appellants, now petitioners in this case, assert that private respondents Agapito and Iluminada Pacetes failed to pay the balance of the purchase price in the amount ofP14,100.00. They did consign and deposit the amount of P11,983.00, but only on August 8, 1977, twenty one years from the execution of the Deed of Absolute Sale in favor of the said spouses, without the latter instituting an action for the cancellation of their obligation. According to the petitioners, the consignation made by Iluminada Pacetes of the amount did not produce any legal effect. Furthermore, private respondents Constancio Maglana and Emilio Matulac were not purchasers in good faith because at the time they purchased the respective properties, the two-storey building constructed by the spouses Angel and Nieves Villarica on the said property was still existing. Hence, the decision of the CA should be reversed and set aside. In their Comment on the petition, private respondents Constancio Maglana and Agapito Pacetes averred that the action of the petitioners in the court a quo was barred by the Decision of this Court in G.R. No. L-60690 on November 24, 1989. THE RULING OF THE COURT The petition is denied due course. We note that the petitioners failed to implead all the compulsory heirs of the deceased Concepcion Gil in their complaint. When she died intestate, Concepcion Gil, a spinster, was survived by her sister Nieves, and her nephews and nieces, three of whom are the petitioners herein. Upon Concepcions demise, all her rights and interests over her properties, and the rights and obligations under the Deed of Absolute Sale executed in favor of Iluminada Pacetes, were transmitted to her sister, and her nephews and nieces by way of succession, a mode of acquiring the property, rights and obligation of the decedent to
[29]

the extent of the value of the inheritance of the heirs. The heirs stepped into the shoes of the decedent upon the latters death.
[30]

In their complaint, the petitioners alleged that: 7. That upon the death of the late Concepcion Palma Gil, her heirs namely: A. Children of the deceased Pilar Palma Gil Rodriguez; B. Children of the deceased Asuncion Palma Gil Hizon one of whom is plaintiff Vicente Hizon, Jr.; C. Nieves Palma Gil Villarica; D. David Palma Gil one of whom is plaintiff Angel Palma Gil; E. Perla Palma Gil; and F. Children of the deceased Jose Palma Gil, ipso facto became co-owners of the said subject property by operation of law;
[31]

When she testified, petitioner Palma Gil stated that:

ATTY. GALLARDO: With the Courts permission. Q A Q A You said that you are one of the 3 plaintiffs in this case? Yes, sir. Now, aside from these 3 plaintiffs who are supposed to be the heirs of the late Concepcion Palma Gil, there are also other heirs who were not included as plaintiffs in this case? Yes, because that time when they demolished the building and I accompanied Atty. Villarica at the site where they had the demolition, we found out that during the confrontation that we have to hurry and file the case right away. So we were not able to contact all the heirs and I have contacted . . .since 3 of us were there during the demolition, so we decided that I will be one, and Angel Palma Gil was also there and also Vicente Hizon Jr. whom I contacted at the Apo View Hotel and I contacted also Julian Rodriguez, another cousin thru telephone and he told us to go ahead and file the case. We cannot get all the heirs. We cannot gather all of them and we will have a hard time asking them to sign, so we just filed the case. You are telling the court that the other heirs were not included because they were not available to sign the complaint? They were not there during the demolition. When was the case filed? June 14, the demolition was on June 14, 1982.

Q A Q A

ATTY. QUITAIN: The best evidence would be the complaint, Your Honor. ATTY. GALLARDO: Q A Q It appears in the complaint that it was filed sometime on June 16, 1982? We had it on June 14 the demolition, and we filed it right away because we were in a hurry. Since June 16, 1982 up to the present the other heirs did not do anything to be included in the complaint?

ATTY. QUITAIN: The best evidence would be the motion for intervention and it would seem that compaero is contending that there is a need to include all heirs. Under the civil law on property even one coowner may file a case.[32]

Although the petitioners sought leave from the trial court to amend their complaint to implead the intestate estate of the deceased Concepcion Gil through her administratrix Perla Palma Gil, as party plaintiff, the trial court denied the petitioners plea. The petitioners manifested to the trial court that they would assign the denial of their plea as one of the assigned errors in case of appeal to the CA. They failed to do so. The petitioners were duty bound to implead all their cousins as parties-plaintiffs; otherwise, the trial court could not validly grant relief as to the present parties and as to those who were not impleaded.
[33]

Being indispensable parties, the absence of the surviving sister, nephews and nieces of the decedent in the complaint as parties-plaintiffs, and in this case, as partiespetitioners, renders all subsequent actions of the trial court null and void for want of authority to act, not only as to the absent parties, but even as to those present. Hence, the petition at bar should be dismissed.
[34]

Even if we were to brush aside this procedural lapse and delve into the merits of the case, a denial in due course is inevitable. Article 1191 in tandem with Article 1592 of the New Civil Code are central to the issues at bar. Under the last paragraph of Article 1169 of the New Civil Code, in reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay in the other begins. Thus, reciprocal obligations are to be performed simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment of the other. The right of rescission of a party to an obligation under Article 1191 of the New Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them.
[35] [36] [37] [38]

That the deed of absolute sale executed by Concepcion Gil in favor of Iluminada Pacetes is an executory contract and not an executed contract is a settled matter. In a perfected contract of sale of realty, the right to rescind the said contract depends upon the fulfillment or non-fulfillment of the prescribed condition. We ruled that the condition pertains in reality to the compliance by one party of an undertaking the fulfillment of which would give rise to the demandability of the reciprocal obligation pertaining to the other party. The reciprocal obligation envisaged would normally be, in the case of the vendee, the payment by the vendee of the agreed purchase price and in the case of the vendor, the fulfillment of certain express warranties.
[39] [40]

In another case, we ruled that the non-payment of the purchase price of property constitutes a very good reason to rescind a sale for it violates the very essence of the contract of sale. In Central Bank of the Philippines v. Bichara, we held that the nonpayment of the purchase price of property is a resolutory condition for which the remedy is either rescission or specific performance under Article 1191 of the New Civil Code. This is true for reciprocal obligations where the obligation is a resolutory condition of the other. The vendee is entitled to retain the purchase price or a part of the purchase price of realty if the vendor fails to perform any essential obligation of the contract. Such right is premised on the general principles of reciprocal obligations.
[41] [42] [43]

In this case, Concepcion Gil sold Lot 59-C-1 to Iluminada Pacetes for P21,600.00 payable as follows: 1. The purchase price of P21,600.00 shall be paid as follows: P7,500.00, to be paid upon the signing of this instrument; and the balance of P14,100.00, to be paid upon the delivery of the corresponding Certificate of Title in the name of the VENDEE. Concepcion Gil obliged herself to transfer title over the property to and under the name of the vendee within 120 days from the execution of the deed. 2. That the VENDOR shall, within the period of ONE HUNDRED TWENTY (120) DAYS, from the signing of this agreement, undertake and work for the issuance of the corresponding Certificate of Title of the said Lot No. 59-C-1 in her favor with the proper government office or offices, to the end that the same can be duly transferred in the name of the herein VENDEE, by virtue thereof. 3. That pending the full and complete payment of the purchase price to the VENDOR, the VENDEE shall collect and receive any and all rentals and such other income from the land abovedescribed for her own account and benefit, this right of the VENDEE to begin from December 1, 1956. That it is further stipulated that this contract shall be binding upon the heirs, executors and administrators of the respective parties hereof. And I, CONCEPCION PALMA GIL, with all the personal circumstances above-stated, hereby confirm all the terms and conditions stipulated in this instrument.
[44]

The vendee paid the downpayment of P7,500.00. By the terms of the contract, the obligation of the vendee to pay the balance of the purchase price ensued only upon the issuance of the certificate of title by the Register of Deeds over the property sold to and under the name of the vendee, and the delivery thereof by the vendor Concepcion Gil to the latter. Concepcion failed to secure a certificate of title over the property. When she died intestate on August 4, 1959, her obligation to deliver the said title to the vendee devolved upon her heirs, including the petitioners. The said heirs, including the petitioners failed to do so, despite the lapse of eighteen years since Concepcions death. Iluminada was not yet obliged on August 8, 1977 to pay the balance of the purchase price of the property, but as a sign of good faith, she nevertheless consigned the amount ofP11,983.00, part of the balance of the purchase price of P14,000.00, with the court in Civil Case No. 1160. The court accepted the consignation and she was issued receipts therefor. Still, the heirs of Concepcion Gil, including the petitioners, failed to deliver the said title to the vendee. Iluminada was compelled to file, at her expense, a petition with the RTC docketed as Miscellaneous Case No. 4715 for the issuance of an owners duplicate of TCT No. 7450 covering the property sold which was granted by the court on March 22, 1978. It was only on May 9, 1978 that Iluminada managed to secure TCT No. 61514 over the property under her name. Upon the failure of the heirs to comply with the decedents prestation, Iluminada Pacetes was impelled to resort to legal means to protect her rights and interests.

The petitioners, as successors-in-interest of the vendor, are not the injured parties entitled to a rescission of the deed of absolute sale. It was Concepcions heirs, including the petitioners, who were obliged to deliver to the vendee a certificate of title over the property under the latters name, free from all liens and encumbrances within 120 days from the execution of the deed of absolute sale on October 24, 1956, but had failed to comply with the obligation. The consignation by the vendee of the purchase price of the property is sufficient to defeat the right of the petitioners to demand for a rescission of the said deed of absolute sale.
[45]

It bears stressing that when the vendee consigned part of the purchase price with the Court and secured title over the property in her name, the heirs of Concepcion, including the petitioners, had not yet sent any notarial demand for the rescission of the deed of absolute sale to the vendee, or filed any action for the rescission of the said deed with the appropriate court. Although the vendee consigned with the Court only the amount of P11,983.00, P2,017.00 short of the purchase price of P14,000.00, it cannot be claimed that Concepcion was an unpaid seller because under the deed of sale, she was still obligated to transfer the property in the name of the vendee, which she failed to do so. According to Article 1167 of the New Civil Code: Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (1098) The vendee (Iluminada) had to obtain the owners duplicate of TCT No. 7450 and thereafter secure its transfer in her name. Pursuant to Article 1167, the expenses incurred by the vendee should be charged against the amount of P2,617.00 due to the heirs of Concepcion Gil as the vendors successors-in-interest. In sum, the decision of the CA affirming the decision of the RTC dismissing the complaint of the petitioners is affirmed. IN LIGHT OF ALL THE FOREGOING, the petition for review is DENIED for lack of merit. SO ORDERED.

G.R. No. L-30736 July 11, 1975 LIRAG TEXTILE MILLS, INC. and FELIX K. LIRAG, petitioners, vs. COURTOF APPEALS and CRISTAN ALCANTARA, respondents. RESOLUTION

ESGUERRA, J.:
The issues raised in the petitioners' motion for reconsideration having been extensively discussed in the decision, this Court pronounces with definite certainty that the provisions of Republic Act 1052, as amended, are not applicable to the case at bar. The reason is simple and obvious. There is an express agreement between petitioner Lirag Textile Mills, Inc. and private respondent Cristan Alcantara as to the period of the latter's employment in theformer's firm, that definite period starting from Alcantara's employment up tothe time Alcantara may voluntarily resign or when petitioner Lirag Textile Mills may remove Alcantara for a valid cause or causes. It is clear that the duration of the employment agreed upon extends from the time when the employment of Alcantara commenced up to the time when he voluntarily resigns, or up to the time Alcantara by his act or acts creates a valid cause or causeswhich would justify petitioner Lirag Textile Mills in terminating his employment. Here petitioner Lirag Textile Mills, Inc. terminated private respondent Alcantara's employment without a valid causebecause its contention of "serious reverses, both in terms of pecuniary loss and in market opportunities"was found by both the trial and appellate courts and by us as false and allegedin bad faith. It thereby committed a breach of contract which made it liable toAlcantara for damages (Art. 1170 of the Civil Code). We clearly stated in the decision that the original nature of the complaint in this case was for damages and that petitioner Lirag Textile Mills, Inc. acted in bad faith when it committed that breach of contract because it "tried its very best both in the trial court and in the respondent Appellate Court to convince both courts that it suffered "serious losses both in terms of pecuniary loss and in market opportunities" as a valid cause for the termination of private respondent Alcantara's employment, said petitioners knowing fully well that such was not the truth as said allegation was a falsehood". As this Court said: Its bad faith in committing the breach of the contract of employment was compounded when petitioners as appellants in the respondent Appellate Court tried to raise for the first time the question of private respondent Alcantara's alleged lack of skill in its desperate effort to find a "valid cause" for that wrongful breach. The very act of petitioners in trying to pull the wool over the eyes of both the trial court and the respondent Appellate Court as to its true financial condition in its attempt to establisha false valid cause for its wrongful act is not only indicative of fraud and bad faith but likewise highly reprehensible because it is a deliberate distortion of the truth to subvert the ends of justice. (Emphasis supplied) . As to the belated contention that the award in the decision of the trial court,which has been affirmed by the Appellate Court and by Us, of "P500.00 a month until the whole amounts due the private respondent are fully paid and settled by petitioner" is in the "nature of a penalty founded exclusively on delay in making payment of the amounts awarded and in the context of attending circumstances is oppressive and unconscionable, aside from being a penalty on the right to litigate", it is enough to say that the trial court awarded that amount in the concept of actual damages for salaries not received because of the wrongful act or breach of contract committed by petitioner Lirag Textile Mills, Inc. and Felix Lirag as defendants in that case. It is to be noted thatalthough the trial court awarded in addition moral damages and attorney's feesto respondent Alcantara, the respective amounts of P5,000 and P3,000 given to him are nominal, considering the nature and extent of the breach of contract perpetrated in bad faith by petitioner Lirag Textile Mills, Inc. It is significant also that no award of exemplary damage was awarded, although it wasproper to give it. We do not consider the award as oppressive and unconscionable, nor a penalty on the right to litigate because the amount givenis reasonable taking into account the character of the breach of obligation andthe damage incurred by private respondent Alcantara who gave up a permanent jobupon inducement of petitioner Felix Lirag, only to suffer later by the wrongfulact of the employer. The award of damages is just to compensate, by a close approximation as far as human calculation may permit, the adverse effects of the wrong done to the victim. It cannot be considered as imposing a penalty on the right to litigate because the entity under obligation to pay the award has been clearlyshown by the evidence to be liable. If that circumstance notwithstanding the entity still persisted in sustaining this litigation, then its persistence would but show its readiness to assume the risk and bear the consequences of its tenacity in refusing to give the adverse party its just due. WHEREFORE, the motion for reconsideration is denied and this denial is final and conclusive. G.R. No. L-49308 May 13, 1948

MARIA LUISA MARTINEZ, petitioner, vs. MANUEL H. BARREDO, ET AL., respondents.

Delfin L. Gonzales for petitioner. Antonio Barredo for respondents. PARAS, J.: On April 11, 1940, a taxicab owned by Fausto Barredo and driven by Rosendo Digman collided in Manila thoroughfare with Chevrolet car driven by Maria Luisa Martinez. The collision gave rise to mutual charges to damage to property through reckless imprudence, one by Maria Luisa Martinez against Digman, and the other by Fausto Barredo against Maria Luisa Martinez. After investigation, the fiscal filed an information against Digman and quashed Barredo's complaint. Digman entered a plea of guilty of criminal case and was therefore sentenced to pay a fine of P605.97 and to indemnify Maria Luisa Martinez in the same amount, with subsidiary imprisonment in case of insolvency, and the costs. Digman failed to pay any of these amounts and had to undergo corresponding subsidiary imprisonment. Due to the inability of Digman to pay the indemnity, Maria Luisa Martinez, filed an action in the Court of First Instance of Manila against Fausto Barredo, as Digman's employer, for the purpose of holding him subsidiarily liable for said indemnity under articles 102 and 103 of the Revised Penal Code. At the trial Maria Luisa Martinez relied solely of the judgment of conviction against Rosendo Digman, the writ of execution issued against him, a certificate of the Director of Prisons regarding Digman's service of subsidiary imprisonment, and the information filed against Digman. Maria Luisa Martinez obtained a favorable judgment from which Barredo appealed to the Court of Appeals. The letter court, reversing the decision of the Court of First Instance, held that the judgment of conviction was not conclusive against Barredo and its weight as prima facieevidence was overcome by the evidence presented by Barredo. Hence the present appeal of Maria Luisa Martinez by way of certiorari. The important question is whether a judgment of conviction sentencing the defendant to pay an indemnity is conclusive in an action against his employer for enforcement of the latter's subsidiary liability under articles 102 and 103 of the Revised Penal Code. The appealed decision makes reference to two earlier decision of this Court, namely, City of Manila vs. Manila Electric Co., 52 Phil., 586, holding that such judgment of conviction is not admissible, and Arambulo vs. Manila Electric Co., 55 Phil., 75, in effect holding that it is merely prima facieevidence, and to the prevailing view in the United States to the effect that the person subsidiary liable is bound by the judgment if the former had the notice of the criminal case and could have defendant it had he seen fit to do so, and that otherwise such judgment is only prima facie evidence. After very careful reflection, we have arrived at the opinion that the judgment of conviction, in the absence of any collusion between the defendant and the offended party, should bind the person subsidiary liable. The stigma of a criminal conviction surpasses in effect and implications mere civil liability. Common sense dictates that a finding of guilt in a criminal case in which proof beyond reasonable doubt is necessary, should be nullified in a subsequent civil action requiring only preponderance of evidence to support a judgment, unless those who support the contrary rule should also hold that an absolution in a civil case will operate to automatically set aside the verdict against the defendant in a criminal case. It is anomalous, to say the least, to suppose that the driver, excelling that "Dr. Jekyll and Mr. Hyde", could be guilty of reckless negligence in so far as his obligation to pay indemnity is concerned, and at the same time could be free from any blame when said indemnity is concerned, and at the same time could be free from any blame when said indemnity is sought to be collected in his employer, although the right to indemnity arose from and was based on one and the same act of the driver. The employer can not be said to have been deprive of his day in court, because the situation before us is not one wherein the employer is sued for a primary liability under article 1903 of the Civil Code, but one in which enforcement is sought of a subsidiary civil liability incident to and defendant upon his driver's criminal negligence which is a proper issue to be tried and decided only in criminal action. In other words, the employer becomes ipso facto subsidiary liable upon his driver's conviction and upon proof of the latter's insolvency, in the same way that acquittal wipes out not only the employee's primary civil liability but also his employer's subsidiary liability for such criminal negligence. (Almeida et al., vs. Abaroa, 8 Phil., 178, affirmed in 218 U.S., 476; Law ed., 1116; Wise and Co. vs. Lariton, 45 Phil., 314, 320; Francisco vs. Onrubia, 46 Phil., 327; Province of Ilocos Sur vs. Tolentino, G.R. No. 34186, 56 Phil., 829; Moran, Comments on the Rules of Court, Vol. II, p. 403.). It is high time that the employer exercise the greatest care in selecting his employees, taking real and deep interest in their welfare; intervening in any criminal action brought against them by reason of or as a result of the performance of their duties if only in the way of giving them the benefit of counsel; and consequently doing away with practice of leaving them to their fates. If this be done, the American rule requiring notice on the part of the employer shall have been satisfied. It becomes unnecessary to rely on the circumstance that the filing of mutual charges by Fausto Barredo and Maria Luisa Martinez, with the result, as abovestated, that while the fiscal proceeded in filing the information against Digman, he quashed the charges of Fausto Barredo, may easily lead to the presumption that the latter should have had knowledge of

the criminal case against his driver. We need not also make any pronouncement to the effect that the prevailing American view is based upon substantive and procedural laws not similar to those obtaining to his jurisdiction. Wherefore, the decision of the Court of Appeals is reversed, and Fausto Barredo, now substituted by his heirs and legal representatives, are hereby sentenced to pay, subject to Executive Order No. 32 on Moratorium, to the petitioner, Maria Luisa Martinez, the sum of P605.97, with legal interest from the date of the filing of complaint. So ordered with costs against the respondents. Pablo and Bengzon, JJ., concur. G.R. No. L-30115 September 28, 1973 FE PEREZ, plaintiff-appellant, vs. JOSEFINA GUTIERREZ, defendant third-party plaintiff-appellee, PANFILO ALAJAR, third-party defendant-appellee. Julian C. Gonzales, Jr. for plaintiff-appellant. Gerardo E. Angeles for defendant-third-party plaintiff-appellee. Apostadera, Palabrica and Muyco for third-party defendant-appellee.

CASTRO, J.: This appeal from the decision dated June 9, 1967 of the Court of First Instance of Davao in its civil case 3163 poses objections to the manner the trial court adjudicated the claim for damages filed by the plaintiff-appellant Fe Perez against the defendant-third-party plaintiff-appellee Josefina Gutierrez. The complaint (later amended) filed on October 29, 1959 by Fe Perez with the Court of First Instance of Davao against Josefina Gutierrez, for breach of contract of carriage, alleges that on September 6, 1959 while she, together with nine coteachers, was a passenger of an AC jeepney registered under the name of the defendant Gutierrez, the said vehicle, due to the reckless negligence of its driver Leopoldo Cordero, met with an accident, resulting in injuries to herself which required her hospitalization. In her answer, Josefina Gutierrez averred that if the claim of Fe Perez is at all justified, responsibility therefor should devolve on one Panfilo Alajar, the actual owner, by purchase, of the said passenger jeepney when the accident occurred and against whom she has filed a third-party complaint. The deed of sale attached to the third-party complaint recites, inter alia, That it is mutually agreed by the herein vendor and vendee that the TITLE to the aforementioned vehicle shall remain with the VENDOR, pending approval of the herein SALE by the Public Service Commission, said motor vehicle being registered as a public utility auto-calesa under "AC" denomination; ... That the vendee herein, by these presents, do [sic] hereby binds himself and do [sic] hereby assume, [sic] responsibility for all actions, claims, demands, and rights of action, and whatever kind and nature, that may hereafter develop as a consequence of or in the course of operation of the aforementioned vehicle; ... In his answer to the third-party complaint, Panfilo Alajar disclaimed responsibility for the accident, alleging that (a) the mentioned deed of sale is null and void because it has not been registered with the Public Service Commission despite repeated demands on the 3rd-party complainant to do so; (b) the said passenger jeepney remained in the control of the 3rd-party complainant who, together with her lawyer-husband, had been collecting rentals from him for the use of the said vehicle; and (c) by express agreement, title to the said vehicle remained with the 3rd-party complainant pending approval of the sale by the Public Service Commission. The defendant Leopoldo Cordero was declared in default and did not appeal.

On June 9, 1967, after trial on the merits, the court a quo rendered its decision, in the main finding Leopoldo Cordero guilty of reckless imprudence, and finding that Panfilo Alajar owned and operated the auto calesa in question and, in fact, after the accident, even assumed responsibility for the payment of the hospital bills due to the Brokenshire Memorial Hospital for treatment of the injuries suffered by Fe Perez. Based on these findings as well as the proof of the damages suffered by Fe Perez, the court adjudged as follows: WHEREFORE, premises considered, judgment is hereby rendered ordering third-party defendant Panfilo Alajar to pay plaintiff the amount of P1,552.20 hospital expenses; P2,000.00, actual damages; P5,000.00 moral damages; P500.00 incidental expenses; and P2,000.00 attorney's fees. Ordering likewise Panfilo Alajar to pay defendant third-party plaintiff Josefina Gutierrez P500.00 moral damages; and P1,000.00 attorney's fees, and to pay the costs of the proceedings on both cases. The present appeal questions the correctness of the dispositive portion of the decision a quo which adjudged Panfilo Alajar, instead of Josefina Gutierrez, as the party liable to her for the payment of the damages adjudicated in her favor. Specifically, Fe Perez argues that the registered owner of a motor vehicle should be the one held liable for damages resulting from breach of contract of carriage by a common carrier. We find the appeal meritorious and in accord with settled law on the matter. In Peralta vs. Mangusang 1 this Court, in approbation of a similar argument, said: The law (Sec. 20 [g], Public Service Act) really requires the approval of the Public Service Commission in order that a franchise, or any privileges pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be submitted for approval of the Public Service Commission, so that the latter may take proper safeguards to protect the interest of the public. It follows that if the property covered by the franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding on the Public Service Commission and, in contemplation of law, the grantee continues to be responsible under the franchise in relation to the Commission and to the public for the consequences incident to the operation of the vehicle, one of them being the collision under consideration. (Montoya v. Ignacio, 50 O.G. No. 1. 108; Vda. de Medina, et al. v. Cresencia, et al., 52 O.G. No. 10, 4604; Erezo v. Jepte, et al., G.R. No. L-9605, Sept. 30, 1957; Tamayo v. Aquino, 56 O.G. No. 36,5617). In the earlier case of Erezo vs. Jepte, 2 which is cited in the foregoing opinion, this Court held that the doctrine making the registered owner of a common carrier answerable to the public for negligence injuries to its passengers or third persons, even though the vehicle had already been transferred to another, is based upon the principle ... that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle. In Tamayo vs. Aquino, 3 also cited in Mangusang, supra, this Court, reiterating what was stated en passant inJepte, supra, described the nature of the liability of the actual transferee of a vehicle the negligent operation of which gives rise to injuries to its passengers: The question that is posed, therefore, is how should the holder of the certificate of public convenience Tamayo participate with his transferee operator Rayos, in the damages recoverable by the heirs of the deceased passenger, if their liability is not that of joint tortfeasors in accordance with Article 2194 of the Civil Code. The following considerations must be borne in mind in determining this question. As Tamayo is the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct, for the reasons given in our decision in the case of Erezo vs. Jepte, supra, as quoted above. But as the transferee, who operated the vehicle when the passenger died, is the one directly responsible for the accident and death, he should in turn be made responsible to the registered

owner for what the latter may have been adjudged to pay. In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to him (the registered owner), for any damages that he may cause the latter by his negligence." Upon the foregoing, it is quite clear that the court below erred in holding Panfilo Alajar, rather than Josefina Gutierrez, as the one directly liable to Fe Perez for the latter's injuries and the corresponding damages incurred. This Court notes moreover, that the court below inexplicably failed to hold the driver (Leopoldo Cordero), whom it found guilty of reckless imprudence, jointly and solidarily liable with Josefina Gutierrez to Fe Perez in accordance with the provisions of article 2184 in relation to article 2180 of the new Civil Code. 4 ACCORDINGLY, the judgment below is hereby modified in the sense that Josefina Gutierrez and Leopoldo Cordero are hereby adjudged directly and jointly and solidarily liable to Fe Perez for the sums adjudicated in the judgment below in her (Fe Perez') favor, while Panfilo Alajar is, in turn, hereby held answerable to Josefina Gutierrez for such amount as the latter may pay to Fe Perez in satisfaction of the judgment appealed from. Costs against both the defendant-third party plaintiff-appellee Josefina Gutierrez and the third party defendant-appellee Panfilo Alajar. Makalintal, Actg.. C.J., Zaldivar, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

G.R. No. L-47851 October 3, 1986 JUAN F. NAKPIL & SONS, and JUAN F. NAKPIL, petitioners, vs. THE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN J. CARLOS, and the PHILIPPINE BAR ASSOCIATION, respondents. G.R. No. L-47863 October 3, 1986 THE UNITED CONSTRUCTION CO., INC., petitioner, vs. COURT OF APPEALS, ET AL., respondents. G.R. No. L-47896 October 3, 1986 PHILIPPINE BAR ASSOCIATION, ET AL., petitioners, vs. COURT OF APPEALS, ET AL., respondents.
PARAS, J.:

These are petitions for review on certiorari of the November 28, 1977 decision of the Court of Appeals in CA-G.R. No. 51771-R modifying the decision of the Court of First Instance of Manila, Branch V, in Civil Case No. 74958 dated September 21, 1971 as modified by the Order of the lower court dated December 8, 1971. The Court of Appeals in modifying the decision of the lower court included an award of an additional amount of P200,000.00 to the Philippine Bar Association to be paid jointly and severally by the defendant United Construction Co. and by the third-party defendants Juan F. Nakpil and Sons and Juan F. Nakpil. The dispositive portion of the modified decision of the lower court reads: WHEREFORE, judgment is hereby rendered: (a) Ordering defendant United Construction Co., Inc. and third-party defendants (except Roman Ozaeta) to pay the plaintiff, jointly and severally, the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment; (b) Dismissing the complaint with respect to defendant Juan J. Carlos;

(c) Dismissing the third-party complaint; (d) Dismissing the defendant's and third-party defendants' counterclaims for lack of merit; (e) Ordering defendant United Construction Co., Inc. and third-party defendants (except Roman Ozaeta) to pay the costs in equal shares. SO ORDERED. (Record on Appeal p. 521; Rollo, L- 47851, p. 169). The dispositive portion of the decision of the Court of Appeals reads: WHEREFORE, the judgment appealed from is modified to include an award of P200,000.00 in favor of plaintiff-appellant Philippine Bar Association, with interest at the legal rate from November 29, 1968 until full payment to be paid jointly and severally by defendant United Construction Co., Inc. and third party defendants (except Roman Ozaeta). In all other respects, the judgment dated September 21, 1971 as modified in the December 8, 1971 Order of the lower court is hereby affirmed with COSTS to be paid by the defendant and third party defendant (except Roman Ozaeta) in equal shares. SO ORDERED. Petitioners Juan F. Nakpil & Sons in L-47851 and United Construction Co., Inc. and Juan J. Carlos in L-47863 seek the reversal of the decision of the Court of Appeals, among other things, for exoneration from liability while petitioner Philippine Bar Association in L-47896 seeks the modification of aforesaid decision to obtain an award of P1,830,000.00 for the loss of the PBA building plus four (4) times such amount as damages resulting in increased cost of the building, P100,000.00 as exemplary damages; and P100,000.00 as attorney's fees. These petitions arising from the same case filed in the Court of First Instance of Manila were consolidated by this Court in the resolution of May 10, 1978 requiring the respective respondents to comment. (Rollo, L-47851, p. 172). The facts as found by the lower court (Decision, C.C. No. 74958; Record on Appeal, pp. 269-348; pp. 520-521; Rollo, L47851, p. 169) and affirmed by the Court of Appeals are as follows: The plaintiff, Philippine Bar Association, a civic-non-profit association, incorporated under the Corporation Law, decided to construct an office building on its 840 square meters lot located at the comer of Aduana and Arzobispo Streets, Intramuros, Manila. The construction was undertaken by the United Construction, Inc. on an "administration" basis, on the suggestion of Juan J. Carlos, the president and general manager of said corporation. The proposal was approved by plaintiff's board of directors and signed by its president Roman Ozaeta, a third-party defendant in this case. The plans and specifications for the building were prepared by the other third-party defendants Juan F. Nakpil & Sons. The building was completed in June, 1966. In the early morning of August 2, 1968 an unusually strong earthquake hit Manila and its environs and the building in question sustained major damage. The front columns of the building buckled, causing the building to tilt forward dangerously. The tenants vacated the building in view of its precarious condition. As a temporary remedial measure, the building was shored up by United Construction, Inc. at the cost of P13,661.28. On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising from the partial collapse of the building against United Construction, Inc. and its President and General Manager Juan J. Carlos as defendants. Plaintiff alleges that the collapse of the building was accused by defects in the construction, the failure of the contractors to follow plans and specifications and violations by the defendants of the terms of the contract. Defendants in turn filed a third-party complaint against the architects who prepared the plans and specifications, alleging in essence that the collapse of the building was due to the defects in the said plans and specifications. Roman Ozaeta, the then president of the plaintiff Bar Association was included as a third-party defendant for damages for having included Juan J. Carlos, President of the United Construction Co., Inc. as party defendant. On March 3, 1969, the plaintiff and third-party defendants Juan F. Nakpil & Sons and Juan F. Nakpil presented a written stipulation which reads:

1. That in relation to defendants' answer with counterclaims and third- party complaints and the third-party defendants Nakpil & Sons' answer thereto, the plaintiff need not amend its complaint by including the said Juan F. Nakpil & Sons and Juan F. Nakpil personally as parties defendant. 2. That in the event (unexpected by the undersigned) that the Court should find after the trial that the above-named defendants Juan J. Carlos and United Construction Co., Inc. are free from any blame and liability for the collapse of the PBA Building, and should further find that the collapse of said building was due to defects and/or inadequacy of the plans, designs, and specifications p by the third-party defendants, or in the event that the Court may find Juan F. Nakpil and Sons and/or Juan F. Nakpil contributorily negligent or in any way jointly and solidarily liable with the defendants, judgment may be rendered in whole or in part. as the case may be, against Juan F. Nakpil & Sons and/or Juan F. Nakpil in favor of the plaintiff to all intents and purposes as if plaintiff's complaint has been duly amended by including the said Juan F. Nakpil & Sons and Juan F. Nakpil as parties defendant and by alleging causes of action against them including, among others, the defects or inadequacy of the plans, designs, and specifications prepared by them and/or failure in the performance of their contract with plaintiff. 3. Both parties hereby jointly petition this Honorable Court to approve this stipulation. (Record on Appeal, pp. 274-275; Rollo, L-47851,p.169). Upon the issues being joined, a pre-trial was conducted on March 7, 1969, during which among others, the parties agreed to refer the technical issues involved in the case to a Commissioner. Mr. Andres O. Hizon, who was ultimately appointed by the trial court, assumed his office as Commissioner, charged with the duty to try the following issues: 1. Whether the damage sustained by the PBA building during the August 2, 1968 earthquake had been caused, directly or indirectly, by: (a) The inadequacies or defects in the plans and specifications prepared by third-party defendants; (b) The deviations, if any, made by the defendants from said plans and specifications and how said deviations contributed to the damage sustained; (c) The alleged failure of defendants to observe the requisite quality of materials and workmanship in the construction of the building; (d) The alleged failure to exercise the requisite degree of supervision expected of the architect, the contractor and/or the owner of the building; (e) An act of God or a fortuitous event; and (f) Any other cause not herein above specified. 2. If the cause of the damage suffered by the building arose from a combination of the above-enumerated factors, the degree or proportion in which each individual factor contributed to the damage sustained; 3. Whether the building is now a total loss and should be completely demolished or whether it may still be repaired and restored to a tenantable condition. In the latter case, the determination of the cost of such restoration or repair, and the value of any remaining construction, such as the foundation, which may still be utilized or availed of (Record on Appeal, pp. 275-276; Rollo, L-47851, p. 169). Thus, the issues of this case were divided into technical issues and non-technical issues. As aforestated the technical issues were referred to the Commissioner. The non-technical issues were tried by the Court. Meanwhile, plaintiff moved twice for the demolition of the building on the ground that it may topple down in case of a strong earthquake. The motions were opposed by the defendants and the matter was referred to the Commissioner. Finally, on April 30, 1979 the building was authorized to be demolished at the expense of the plaintiff, but not another earthquake of high intensity on April 7, 1970 followed by other strong earthquakes on April 9, and 12, 1970, caused further damage to the property. The actual demolition was undertaken by the buyer of the damaged building. (Record on Appeal, pp. 278-280; Ibid.)

After the protracted hearings, the Commissioner eventually submitted his report on September 25, 1970 with the findings that while the damage sustained by the PBA building was caused directly by the August 2, 1968 earthquake whose magnitude was estimated at 7.3 they were also caused by the defects in the plans and specifications prepared by the third-party defendants' architects, deviations from said plans and specifications by the defendant contractors and failure of the latter to observe the requisite workmanship in the construction of the building and of the contractors, architects and even the owners to exercise the requisite degree of supervision in the construction of subject building. All the parties registered their objections to aforesaid findings which in turn were answered by the Commissioner. The trial court agreed with the findings of the Commissioner except as to the holding that the owner is charged with full nine supervision of the construction. The Court sees no legal or contractual basis for such conclusion. (Record on Appeal, pp. 309-328; Ibid). Thus, on September 21, 1971, the lower court rendered the assailed decision which was modified by the Intermediate Appellate Court on November 28, 1977. All the parties herein appealed from the decision of the Intermediate Appellate Court. Hence, these petitions. On May 11, 1978, the United Architects of the Philippines, the Association of Civil Engineers, and the Philippine Institute of Architects filed with the Court a motion to intervene as amicus curiae. They proposed to present a position paper on the liability of architects when a building collapses and to submit likewise a critical analysis with computations on the divergent views on the design and plans as submitted by the experts procured by the parties. The motion having been granted, the amicus curiae were granted a period of 60 days within which to submit their position. After the parties had all filed their comments, We gave due course to the petitions in Our Resolution of July 21, 1978. The position papers of the amicus curiae (submitted on November 24, 1978) were duly noted. The amicus curiae gave the opinion that the plans and specifications of the Nakpils were not defective. But the Commissioner, when asked by Us to comment, reiterated his conclusion that the defects in the plans and specifications indeed existed. Using the same authorities availed of by the amicus curiae such as the Manila Code (Ord. No. 4131) and the 1966 Asep Code, the Commissioner added that even if it can be proved that the defects in theconstruction alone (and not in the plans and design) caused the damage to the building, still the deficiency in the original design and jack of specific provisions against torsion in the original plans and the overload on the ground floor columns (found by an the experts including the original designer) certainly contributed to the damage which occurred. (Ibid, p. 174). In their respective briefs petitioners, among others, raised the following assignments of errors: Philippine Bar Association claimed that the measure of damages should not be limited to P1,100,000.00 as estimated cost of repairs or to the period of six (6) months for loss of rentals while United Construction Co., Inc. and the Nakpils claimed that it was an act of God that caused the failure of the building which should exempt them from responsibility and not the defective construction, poor workmanship, deviations from plans and specifications and other imperfections in the case of United Construction Co., Inc. or the deficiencies in the design, plans and specifications prepared by petitioners in the case of the Nakpils. Both UCCI and the Nakpils object to the payment of the additional amount of P200,000.00 imposed by the Court of Appeals. UCCI also claimed that it should be reimbursed the expenses of shoring the building in the amount of P13,661.28 while the Nakpils opposed the payment of damages jointly and solidarity with UCCI. The pivotal issue in this case is whether or not an act of God-an unusually strong earthquake-which caused the failure of the building, exempts from liability, parties who are otherwise liable because of their negligence. The applicable law governing the rights and liabilities of the parties herein is Article 1723 of the New Civil Code, which provides: Art. 1723. The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damage if the edifice fags within the same period on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms

of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor. Acceptance of the building, after completion, does not imply waiver of any of the causes of action by reason of any defect mentioned in the preceding paragraph. The action must be brought within ten years following the collapse of the building. On the other hand, the general rule is that no person shall be responsible for events which could not be foreseen or which though foreseen, were inevitable (Article 1174, New Civil Code). An act of God has been defined as an accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented. (1 Corpus Juris 1174). There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or an act of God. To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v. Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657). Thus, if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided for in Article 1170 of the Civil Code, which results in loss or damage, the obligor cannot escape liability. The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and all human agencies are to be excluded from creating or entering into the cause of the mischief. When the effect, the cause of which is to be considered, is found to be in part the result of the participation of man, whether it be from active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and removed from the rules applicable to the acts of God. (1 Corpus Juris, pp. 1174-1175). Thus it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129; Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v. Yangco Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657). The negligence of the defendant and the third-party defendants petitioners was established beyond dispute both in the lower court and in the Intermediate Appellate Court. Defendant United Construction Co., Inc. was found to have made substantial deviations from the plans and specifications. and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision; while the third-party defendants were found to have inadequacies or defects in the plans and specifications prepared by them. As correctly assessed by both courts, the defects in the construction and in the plans and specifications were the proximate causes that rendered the PBA building unable to withstand the earthquake of August 2, 1968. For this reason the defendant and third-party defendants cannot claim exemption from liability. (Decision, Court of Appeals, pp. 30-31). It is well settled that the findings of facts of the Court of Appeals are conclusive on the parties and on this court (cases cited in Tolentino vs. de Jesus, 56 SCRA 67; Cesar vs. Sandiganbayan, January 17, 1985, 134 SCRA 105, 121), unless (1) the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the findings of fact are conflicting , (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees (Ramos vs. Pepsi-Cola Bottling Co., February 8, 1967, 19 SCRA 289, 291-292; Roque vs. Buan, Oct. 31, 1967, 21 SCRA 648, 651); (7) the findings of facts of the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents (Garcia vs. CA, June 30, 1970, 33 SCRA 622; Alsua-Bett vs. Court of Appeals, July 30, 1979, 92 SCRA 322,

366); (10) the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by evidence on record (Salazar vs. Gutierrez, May 29, 1970, 33 SCRA 243, 247; Cited in G.R. No. 66497-98, Sacay v. Sandiganbayan, July 10, 1986). It is evident that the case at bar does not fall under any of the exceptions above-mentioned. On the contrary, the records show that the lower court spared no effort in arriving at the correct appreciation of facts by the referral of technical issues to a Commissioner chosen by the parties whose findings and conclusions remained convincingly unrebutted by the intervenors/amicus curiae who were allowed to intervene in the Supreme Court. In any event, the relevant and logical observations of the trial court as affirmed by the Court of Appeals that "while it is not possible to state with certainty that the building would not have collapsed were those defects not present, the fact remains that several buildings in the same area withstood the earthquake to which the building of the plaintiff was similarly subjected," cannot be ignored. The next issue to be resolved is the amount of damages to be awarded to the PBA for the partial collapse (and eventual complete collapse) of its building. The Court of Appeals affirmed the finding of the trial court based on the report of the Commissioner that the total amount required to repair the PBA building and to restore it to tenantable condition was P900,000.00 inasmuch as it was not initially a total loss. However, while the trial court awarded the PBA said amount as damages, plus unrealized rental income for one-half year, the Court of Appeals modified the amount by awarding in favor of PBA an additional sum of P200,000.00 representing the damage suffered by the PBA building as a result of another earthquake that occurred on April 7, 1970 (L-47896, Vol. I, p. 92). The PBA in its brief insists that the proper award should be P1,830,000.00 representing the total value of the building (L47896, PBA's No. 1 Assignment of Error, p. 19), while both the NAKPILS and UNITED question the additional award of P200,000.00 in favor of the PBA (L- 47851, NAKPIL's Brief as Petitioner, p. 6, UNITED's Brief as Petitioner, p. 25). The PBA further urges that the unrealized rental income awarded to it should not be limited to a period of one-half year but should be computed on a continuing basis at the rate of P178,671.76 a year until the judgment for the principal amount shall have been satisfied L- 47896, PBA's No. 11 Assignment of Errors, p. 19). The collapse of the PBA building as a result of the August 2, 1968 earthquake was only partial and it is undisputed that the building could then still be repaired and restored to its tenantable condition. The PBA, however, in view of its lack of needed funding, was unable, thru no fault of its own, to have the building repaired. UNITED, on the other hand, spent P13,661.28 to shore up the building after the August 2, 1968 earthquake (L-47896, CA Decision, p. 46). Because of the earthquake on April 7, 1970, the trial court after the needed consultations, authorized the total demolition of the building (L-47896, Vol. 1, pp. 53-54). There should be no question that the NAKPILS and UNITED are liable for the damage resulting from the partial and eventual collapse of the PBA building as a result of the earthquakes. We quote with approval the following from the erudite decision penned by Justice Hugo E. Gutierrez (now an Associate Justice of the Supreme Court) while still an Associate Justice of the Court of Appeals: There is no question that an earthquake and other forces of nature such as cyclones, drought, floods, lightning, and perils of the sea are acts of God. It does not necessarily follow, however, that specific losses and suffering resulting from the occurrence of these natural force are also acts of God. We are not convinced on the basis of the evidence on record that from the thousands of structures in Manila, God singled out the blameless PBA building in Intramuros and around six or seven other buildings in various parts of the city for collapse or severe damage and that God alone was responsible for the damages and losses thus suffered. The record is replete with evidence of defects and deficiencies in the designs and plans, defective construction, poor workmanship, deviation from plans and specifications and other imperfections. These deficiencies are attributable to negligent men and not to a perfect God. The act-of-God arguments of the defendants- appellants and third party defendants-appellants presented in their briefs are premised on legal generalizations or speculations and on theological fatalism both of which ignore the plain facts. The lengthy discussion of United on ordinary earthquakes and unusually strong earthquakes and on ordinary fortuitous events and extraordinary fortuitous events leads to its

argument that the August 2, 1968 earthquake was of such an overwhelming and destructive character that by its own force and independent of the particular negligence alleged, the injury would have been produced. If we follow this line of speculative reasoning, we will be forced to conclude that under such a situation scores of buildings in the vicinity and in other parts of Manila would have toppled down. Following the same line of reasoning, Nakpil and Sons alleges that the designs were adequate in accordance with pre-August 2, 1968 knowledge and appear inadequate only in the light of engineering information acquired after the earthquake. If this were so, hundreds of ancient buildings which survived the earthquake better than the two-year old PBA building must have been designed and constructed by architects and contractors whose knowledge and foresight were unexplainably auspicious and prophetic. Fortunately, the facts on record allow a more down to earth explanation of the collapse. The failure of the PBA building, as a unique and distinct construction with no reference or comparison to other buildings, to weather the severe earthquake forces was traced to design deficiencies and defective construction, factors which are neither mysterious nor esoteric. The theological allusion of appellant United that God acts in mysterious ways His wonders to perform impresses us to be inappropriate. The evidence reveals defects and deficiencies in design and construction. There is no mystery about these acts of negligence. The collapse of the PBA building was no wonder performed by God. It was a result of the imperfections in the work of the architects and the people in the construction company. More relevant to our mind is the lesson from the parable of the wise man in the Sermon on the Mount "which built his house upon a rock; and the rain descended and the floods came and the winds blew and beat upon that house; and it fen not; for it was founded upon a rock" and of the "foolish upon the sand. And the rain descended and man which built his house the floods came, and the winds blew, and beat upon that house; and it fell and great was the fall of it. (St. Matthew 7: 24-27)." The requirement that a building should withstand rains, floods, winds, earthquakes, and natural forces is precisely the reason why we have professional experts like architects, and engineers. Designs and constructions vary under varying circumstances and conditions but the requirement to design and build well does not change. The findings of the lower Court on the cause of the collapse are more rational and accurate. Instead of laying the blame solely on the motions and forces generated by the earthquake, it also examined the ability of the PBA building, as designed and constructed, to withstand and successfully weather those forces. The evidence sufficiently supports a conclusion that the negligence and fault of both United and Nakpil and Sons, not a mysterious act of an inscrutable God, were responsible for the damages. The Report of the Commissioner, Plaintiff's Objections to the Report, Third Party Defendants' Objections to the Report, Defendants' Objections to the Report, Commissioner's Answer to the various Objections, Plaintiffs' Reply to the Commissioner's Answer, Defendants' Reply to the Commissioner's Answer, Counter-Reply to Defendants' Reply, and Third-Party Defendants' Reply to the Commissioner's Report not to mention the exhibits and the testimonies show that the main arguments raised on appeal were already raised during the trial and fully considered by the lower Court. A reiteration of these same arguments on appeal fails to convince us that we should reverse or disturb the lower Court's factual findings and its conclusions drawn from the facts, among them: The Commissioner also found merit in the allegations of the defendants as to the physical evidence before and after the earthquake showing the inadequacy of design, to wit: Physical evidence before the earthquake providing (sic) inadequacy of design; 1. inadequate design was the cause of the failure of the building. 2. Sun-baffles on the two sides and in front of the building; a. Increase the inertia forces that move the building laterally toward the Manila Fire Department. b. Create another stiffness imbalance. 3. The embedded 4" diameter cast iron down spout on all exterior columns reduces the cross-sectional area of each of the columns and the strength thereof. 4. Two front corners, A7 and D7 columns were very much less reinforced.

Physical Evidence After the Earthquake, Proving Inadequacy of design; 1. Column A7 suffered the severest fracture and maximum sagging. Also D7. 2. There are more damages in the front part of the building than towards the rear, not only in columns but also in slabs. 3. Building leaned and sagged more on the front part of the building. 4. Floors showed maximum sagging on the sides and toward the front corner parts of the building. 5. There was a lateral displacement of the building of about 8", Maximum sagging occurs at the column A7 where the floor is lower by 80 cm. than the highest slab level. 6. Slab at the corner column D7 sagged by 38 cm. The Commissioner concluded that there were deficiencies or defects in the design, plans and specifications of the PBA building which involved appreciable risks with respect to the accidental forces which may result from earthquake shocks. He conceded, however, that the fact that those deficiencies or defects may have arisen from an obsolete or not too conservative code or even a code that does not require a design for earthquake forces mitigates in a large measure the responsibility or liability of the architect and engineer designer. The Third-party defendants, who are the most concerned with this portion of the Commissioner's report, voiced opposition to the same on the grounds that (a) the finding is based on a basic erroneous conception as to the design concept of the building, to wit, that the design is essentially that of a heavy rectangular box on stilts with shear wan at one end; (b) the finding that there were defects and a deficiency in the design of the building would at best be based on an approximation and, therefore, rightly belonged to the realm of speculation, rather than of certainty and could very possibly be outright error; (c) the Commissioner has failed to back up or support his finding with extensive, complex and highly specialized computations and analyzes which he himself emphasizes are necessary in the determination of such a highly technical question; and (d) the Commissioner has analyzed the design of the PBA building not in the light of existing and available earthquake engineering knowledge at the time of the preparation of the design, but in the light of recent and current standards. The Commissioner answered the said objections alleging that third-party defendants' objections were based on estimates or exhibits not presented during the hearing that the resort to engineering references posterior to the date of the preparation of the plans was induced by the third-party defendants themselves who submitted computations of the third-party defendants are erroneous. The issue presently considered is admittedly a technical one of the highest degree. It involves questions not within the ordinary competence of the bench and the bar to resolve by themselves. Counsel for the third-party defendants has aptly remarked that "engineering, although dealing in mathematics, is not an exact science and that the present knowledge as to the nature of earthquakes and the behaviour of forces generated by them still leaves much to be desired; so much so "that the experts of the different parties, who are all engineers, cannot agree on what equation to use, as to what earthquake co-efficients are, on the codes to be used and even as to the type of structure that the PBA building (is) was (p. 29, Memo, of third- party defendants before the Commissioner). The difficulty expected by the Court if tills technical matter were to be tried and inquired into by the Court itself, coupled with the intrinsic nature of the questions involved therein, constituted the reason for the reference of the said issues to a Commissioner whose qualifications and experience have eminently qualified him for the task, and whose competence had not been questioned by the parties until he submitted his report. Within the pardonable limit of the Court's ability to comprehend the meaning of the Commissioner's report on this issue, and the objections voiced to the same, the Court sees no compelling reasons to disturb the findings of the Commissioner that there were defects and deficiencies in the design, plans and specifications prepared by third-party defendants, and that said defects and deficiencies involved appreciable risks with respect to the accidental forces which may result from earthquake shocks.

(2) (a) The deviations, if any, made by the defendants from the plans and specifications, and how said deviations contributed to the damage sustained by the building. (b) The alleged failure of defendants to observe the requisite quality of materials and workmanship in the construction of the building. These two issues, being interrelated with each other, will be discussed together. The findings of the Commissioner on these issues were as follows: We now turn to the construction of the PBA Building and the alleged deficiencies or defects in the construction and violations or deviations from the plans and specifications. All these may be summarized as follows: a. Summary of alleged defects as reported by Engineer Mario M. Bundalian. (1) Wrongful and defective placing of reinforcing bars. (2) Absence of effective and desirable integration of the 3 bars in the cluster. (3) Oversize coarse aggregates: 1-1/4 to 2" were used. Specification requires no larger than 1 inch. (4) Reinforcement assembly is not concentric with the column, eccentricity being 3" off when on one face the main bars are only 1 1/2' from the surface. (5) Prevalence of honeycombs, (6) Contraband construction joints, (7) Absence, or omission, or over spacing of spiral hoops, (8) Deliberate severance of spirals into semi-circles in noted on Col. A-5, ground floor, (9) Defective construction joints in Columns A-3, C-7, D-7 and D-4, ground floor, (10) Undergraduate concrete is evident, (11) Big cavity in core of Column 2A-4, second floor, (12) Columns buckled at different planes. Columns buckled worst where there are no spirals or where spirals are cut. Columns suffered worst displacement where the eccentricity of the columnar reinforcement assembly is more acute. b. Summary of alleged defects as reported by Engr. Antonio Avecilla. Columns are first (or ground) floor, unless otherwise stated. (1) Column D4 Spacing of spiral is changed from 2" to 5" on centers, (2) Column D5 No spiral up to a height of 22" from the ground floor, (3) Column D6 Spacing of spiral over 4 l/2, (4) Column D7 Lack of lateral ties, (5) Column C7 Absence of spiral to a height of 20" from the ground level, Spirals are at 2" from the exterior column face and 6" from the inner column face,

(6) Column B6 Lack of spiral on 2 feet below the floor beams, (7) Column B5 Lack of spirals at a distance of 26' below the beam, (8) Column B7 Spirals not tied to vertical reinforcing bars, Spirals are uneven 2" to 4", (9) Column A3 Lack of lateral ties, (10) Column A4 Spirals cut off and welded to two separate clustered vertical bars, (11) Column A4 (second floor Column is completely hollow to a height of 30" (12) Column A5 Spirals were cut from the floor level to the bottom of the spandrel beam to a height of 6 feet, (13) Column A6 No spirals up to a height of 30' above the ground floor level, (14) Column A7 Lack of lateralties or spirals, c. Summary of alleged defects as reported by the experts of the Third-Party defendants. Ground floor columns. (1) Column A4 Spirals are cut, (2) Column A5 Spirals are cut, (3) Column A6 At lower 18" spirals are absent, (4) Column A7 Ties are too far apart, (5) Column B5 At upper fourth of column spirals are either absent or improperly spliced, (6) Column B6 At upper 2 feet spirals are absent, (7) Column B7 At upper fourth of column spirals missing or improperly spliced. (8) Column C7 Spirals are absent at lowest 18" (9) Column D5 At lowest 2 feet spirals are absent, (10) Column D6 Spirals are too far apart and apparently improperly spliced, (11) Column D7 Lateral ties are too far apart, spaced 16" on centers. There is merit in many of these allegations. The explanations given by the engineering experts for the defendants are either contrary to general principles of engineering design for reinforced concrete or not applicable to the requirements for ductility and strength of reinforced concrete in earthquake-resistant design and construction. We shall first classify and consider defects which may have appreciable bearing or relation to' the earthquake-resistant property of the building. As heretofore mentioned, details which insure ductility at or near the connections between columns and girders are desirable in earthquake resistant design and construction. The omission of spirals and ties or hoops at the bottom and/or tops of columns contributed greatly to the loss of earthquake-resistant strength. The plans and specifications required that these spirals and ties be carried from the floor level to

the bottom reinforcement of the deeper beam (p. 1, Specifications, p. 970, Reference 11). There were several clear evidences where this was not done especially in some of the ground floor columns which failed. There were also unmistakable evidences that the spacings of the spirals and ties in the columns were in many cases greater than those called for in the plans and specifications resulting again in loss of earthquake-resistant strength. The assertion of the engineering experts for the defendants that the improper spacings and the cutting of the spirals did not result in loss of strength in the column cannot be maintained and is certainly contrary to the general principles of column design and construction. And even granting that there be no loss in strength at the yield point (an assumption which is very doubtful) the cutting or improper spacings of spirals will certainly result in the loss of the plastic range or ductility in the column and it is precisely this plastic range or ductility which is desirable and needed for earthquakeresistant strength. There is no excuse for the cavity or hollow portion in the column A4, second floor, and although this column did not fail, this is certainly an evidence on the part of the contractor of poor construction. The effect of eccentricities in the columns which were measured at about 2 1/2 inches maximum may be approximated in relation to column loads and column and beam moments. The main effect of eccentricity is to change the beam or girder span. The effect on the measured eccentricity of 2 inches, therefore, is to increase or diminish the column load by a maximum of about 1% and to increase or diminish the column or beam movements by about a maximum of 2%. While these can certainly be absorbed within the factor of safety, they nevertheless diminish said factor of safety. The cutting of the spirals in column A5, ground floor is the subject of great contention between the parties and deserves special consideration. The proper placing of the main reinforcements and spirals in column A5, ground floor, is the responsibility of the general contractor which is the UCCI. The burden of proof, therefore, that this cutting was done by others is upon the defendants. Other than a strong allegation and assertion that it is the plumber or his men who may have done the cutting (and this was flatly denied by the plumber) no conclusive proof was presented. The engineering experts for the defendants asserted that they could have no motivation for cutting the bar because they can simply replace the spirals by wrapping around a new set of spirals. This is not quite correct. There is evidence to show that the pouring of concrete for columns was sometimes done through the beam and girder reinforcements which were already in place as in the case of column A4 second floor. If the reinforcement for the girder and column is to subsequently wrap around the spirals, this would not do for the elasticity of steel would prevent the making of tight column spirals and loose or improper spirals would result. The proper way is to produce correct spirals down from the top of the main column bars, a procedure which can not be done if either the beam or girder reinforcement is already in place. The engineering experts for the defendants strongly assert and apparently believe that the cutting of the spirals did not materially diminish the strength of the column. This belief together with the difficulty of slipping the spirals on the top of the column once the beam reinforcement is in place may be a sufficient motivation for the cutting of the spirals themselves. The defendants, therefore, should be held responsible for the consequences arising from the loss of strength or ductility in column A5 which may have contributed to the damages sustained by the building. The lack of proper length of splicing of spirals was also proven in the visible spirals of the columns where spalling of the concrete cover had taken place. This lack of proper splicing contributed in a small measure to the loss of strength. The effects of all the other proven and visible defects although nor can certainly be accumulated so that they can contribute to an appreciable loss in earthquake-resistant strength. The engineering experts for the defendants submitted an estimate on some of these defects in the amount of a few percent. If accumulated, therefore, including the effect of eccentricity in the column the loss in strength due to these minor defects may run to as much as ten percent. To recapitulate: the omission or lack of spirals and ties at the bottom and/or at the top of some of the ground floor columns contributed greatly to the collapse of the PBA building since it is at these points where the greater part of the failure occurred. The liability for the cutting of the spirals in column A5,

ground floor, in the considered opinion of the Commissioner rests on the shoulders of the defendants and the loss of strength in this column contributed to the damage which occurred. It is reasonable to conclude, therefore, that the proven defects, deficiencies and violations of the plans and specifications of the PBA building contributed to the damages which resulted during the earthquake of August 2, 1968 and the vice of these defects and deficiencies is that they not only increase but also aggravate the weakness mentioned in the design of the structure. In other words, these defects and deficiencies not only tend to add but also to multiply the effects of the shortcomings in the design of the building. We may say, therefore, that the defects and deficiencies in the construction contributed greatly to the damage which occurred. Since the execution and supervision of the construction work in the hands of the contractor is direct and positive, the presence of existence of all the major defects and deficiencies noted and proven manifests an element of negligence which may amount to imprudence in the construction work. (pp. 42-49, Commissioners Report). As the parties most directly concerned with this portion of the Commissioner's report, the defendants voiced their objections to the same on the grounds that the Commissioner should have specified the defects found by him to be "meritorious"; that the Commissioner failed to indicate the number of cases where the spirals and ties were not carried from the floor level to the bottom reinforcement of the deeper beam, or where the spacing of the spirals and ties in the columns were greater than that called for in the specifications; that the hollow in column A4, second floor, the eccentricities in the columns, the lack of proper length of splicing of spirals, and the cut in the spirals in column A5, ground floor, did not aggravate or contribute to the damage suffered by the building; that the defects in the construction were within the tolerable margin of safety; and that the cutting of the spirals in column A5, ground floor, was done by the plumber or his men, and not by the defendants. Answering the said objections, the Commissioner stated that, since many of the defects were minor only the totality of the defects was considered. As regards the objection as to failure to state the number of cases where the spirals and ties were not carried from the floor level to the bottom reinforcement, the Commissioner specified groundfloor columns B-6 and C-5 the first one without spirals for 03 inches at the top, and in the latter, there were no spirals for 10 inches at the bottom. The Commissioner likewise specified the first storey columns where the spacings were greater than that called for in the specifications to be columns B-5, B-6, C-7, C-6, C-5, D-5 and B-7. The objection to the failure of the Commissioner to specify the number of columns where there was lack of proper length of splicing of spirals, the Commissioner mentioned groundfloor columns B-6 and B-5 where all the splices were less than 1-1/2 turns and were not welded, resulting in some loss of strength which could be critical near the ends of the columns. He answered the supposition of the defendants that the spirals and the ties must have been looted, by calling attention to the fact that the missing spirals and ties were only in two out of the 25 columns, which rendered said supposition to be improbable. The Commissioner conceded that the hollow in column A-4, second floor, did not aggravate or contribute to the damage, but averred that it is "evidence of poor construction." On the claim that the eccentricity could be absorbed within the factor of safety, the Commissioner answered that, while the same may be true, it also contributed to or aggravated the damage suffered by the building. The objection regarding the cutting of the spirals in Column A-5, groundfloor, was answered by the Commissioner by reiterating the observation in his report that irrespective of who did the cutting of the spirals, the defendants should be held liable for the same as the general contractor of the building. The Commissioner further stated that the loss of strength of the cut spirals and inelastic deflections of the supposed lattice work defeated the purpose of the spiral containment in the column and resulted in the loss of strength, as evidenced by the actual failure of this column. Again, the Court concurs in the findings of the Commissioner on these issues and fails to find any sufficient cause to disregard or modify the same. As found by the Commissioner, the "deviations made by the defendants from the plans and specifications caused indirectly the damage sustained and that those deviations not only added but also aggravated the damage caused by the defects in the plans and specifications prepared by third-party defendants. (Rollo, Vol. I, pp. 128142) The afore-mentioned facts clearly indicate the wanton negligence of both the defendant and the third-party defendants in effecting the plans, designs, specifications, and construction of the PBA building and We hold such negligence as equivalent to bad faith in the performance of their respective tasks.

Relative thereto, the ruling of the Supreme Court in Tucker v. Milan (49 O.G. 4379, 4380) which may be in point in this case reads: One who negligently creates a dangerous condition cannot escape liability for the natural and probable consequences thereof, although the act of a third person, or an act of God for which he is not responsible, intervenes to precipitate the loss. As already discussed, the destruction was not purely an act of God. Truth to tell hundreds of ancient buildings in the vicinity were hardly affected by the earthquake. Only one thing spells out the fatal difference; gross negligence and evident bad faith, without which the damage would not have occurred. WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, We deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception of attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon afore-mentioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (except Roman Ozaeta). SO ORDERED.
February 17, 1906 G.R. No. L-2250 PEDRO REGALADO, plaintiff-appellant, vs. LUCHSINGER & CO., defendants-appellees. Gabriel and Borbon for appellant. Ruperto Montinola for appellees. WILLARD, J.:

This is the second appearance of this case in this court. The decision upon the first appeal is reported in 1 Phil. 619. The facts out of which the litigation grew are therein stated, and need not be repeated. Jose Regalado, the father, was prosecuted for the crime of estafa, alleged to have been committed in the sale of the warehouse to his son Pedro, the plaintiff in this case. The decision in that case is reported in 1 Phil. 125, under the name of United States vs. Jose Regalado y Santa Ana. It was charged in that criminal case that the father had sold a warehouse to his son, representing it as free from incumbrance, when in fact it was encumbered by the attachment which the defendants Luchsinger & Co. secured in the present case. In the criminal case this court acquitted the defendant, basing its decision exclusively upon the proposition that there was no evidence in the case that the attachment in question had ever been recorded in the office of the registrar of property; and not having been so recorded no incumbrance existed. The question as to whether there was any actual fraud or deceit on the part of the father was not involved nor considered in that case. The first claim made by the plaintiff and appellant in this case is that the judgment in the criminal case to the effect that the writ of attachment never had been recorded in the office of the registrar of property is conclusive against the defendants in this case, and therefore was not subject to investigation. The court in this case found, as a matter of fact, that the attachment had been recorded. No such finding was made in the criminal case e4gDHDltMl. Section 306 of the Code of Civil Procedure is as follows: Effect of judgment. ? The effect of a judgment or final order in an action or special proceeding before a court or judge of the Philippine Islands or of the United States, or of any State or Territory of the United States, having jurisdiction to pronounce

the judgment or order, may be as follows: 1. In case of a judgment or order against a specific thing, or in respect to the probate of a will, or the administration of the estate of a deceased person, or in respect to the personal, political, or legal condition or relation of a particular person, the judgment or order is conclusive upon the title of the thing, the will, or administration, or the condition or relation of the person: Provided, That the probate of a will or granting of letters of administration shall only be prima facie evidence of the death of the estator or intestate. 2. In other cases the judgment so ordered is, in respect to the matter directly adjudged, conclusive between the parties and their successors in interest by title subsequent to commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity G3aU. In view of this section, in order that the judgment in the criminal case upon this point should be binding and conclusive upon the parties, it was necessary for the plaintiff here to show that the parties in that case were the same as the parties in this case. This was not done. In that case the only persons who could possibly be called parties were the father, Jose Regalado, the defendants Luchsinger & Co., and the Government. The plaintiff, Pedro Regalado, who seeks the benefit of that judgment, was not a party to that proceeding, and does not claim under any one of the parties by a title subsequent to the commencement thereof. He therefore does not come within the provisions of section 306, and that judgment is not a conclusive adjudication in his favor in this case. The appellant also makes the point that the evidence was not sufficient to sustain the finding of the court below to the effect that this attachment had in fact been recorded. The books of the registry having been lost or destroyed, the parties had to resort to other testimony. The defendants presented a witness who swore positively that an order for the record of the attachment had been issued by the Court of First Instance, and that it had been returned by the registrar of property as having been complied with, and that he had seen such return. The only evidence to overcome this testimony was a statement made by the former this testimony was a statement made by the former clerk of the Court of First Instance to the effect that he drew the final judgment in the case in which the attachment was issued, and that it was his custom to make mention in final judgments of every proceeding in the case, and that the final judgment in question did not contain any reference to the recording of this attachment. In view of this condition of the evidence we can not say that it preponderates against the decision of the trial court. The real question in this case is whether the sale made in 1900, by Jose Regalado, the father, to the plaintiff, Pedro Regalado, his son, of the warehouse in question, was fraudulent as to the defendants Luchsinger & Co., who were then creditors of the father. Article 1297 of the Civil Code is as follows: Contracts by virtue of which the debtor alienates property, gratuitously, are presumed to be executed in fraud of creditors. Alienations for valuable considerations made by persons against whom a condemnatory judgment, in any instance, has been previously rendered, or a writ of seizure of property has been issued, shall also be presumed fraudulent. It appears in this case that a final judgment in the proceeding by Luchsinger & Co. against the father Jose Regalado, in which the attachment above mentioned was issued, was entered in 1896 in the Court of First Instance. An appeal was taken to the Royal Audiencia of Manila, and the judgment was there affirmed in 1897. It thus appears that each one of the cases mentioned in the last paragraph of article 1297 existed in this case, and that in 1900, when the father sold the warehouse to the son, there had not only been a judgment entered against him in the first and second instance but also a writ of execution had been issued, which had been levied upon this very warehouse. The sale by the father to the son, therefore, is presumed to have been fraudulent. That presumption of fraud has not been overcome by the evidence which has been presented in this case. A large amount of testimony was introduced as to the value of the warehouse in 1900, when the sale was made. The court below, after considering that evidence, decided that it was worth at least 25,000 pesos, 10,000 more than the amount claimed by the plaintiff to have been paid by him for it. We have examined this evidence, and we think that it preponderates in favor of the decision made by the trial court. It is to be observed, moreover, that it is more than probable that at the time of the sale in question Pedro Regalado, the son, did not have 15,000 pesos, or any other sum of importance, with which to buy, or pay for this property. The plaintiff also relies upon article 1291 of the Civil Code, which speaking of contracts that may be rescinded, declares as follows: The following may be rescinded:

xxx xxx xxx 3. Those executed in fraud of creditors, when the latter can not recover, in any other manner, what is due them. And he claims that the evidence in the case shows that at the time of the sale in question, and at the time of the trial of this case the father, Jose Regalado, had property other than the warehouse in question, out of which the defendants could have collected their debt against him. By the terms of article 1291 it is true that an action to set aside the contract on the ground that it is fraudulent as to creditors is subsidiary, and can not be maintained if the debtor has other property with which to pay the debt; but in this case we agree with the court below that the evidence shows that the father had no such other property, either at the time the sale was made or at the time this action was tried out of which the defendants could have collected this debt. The only property which it is said he had consisted of various debts owing to him, as he claimed, from third persons. All of these debts were created prior to the year 1888. One of them, the most important, for 10,000 pesos, was in litigation. The judgment of the court below is affirmed, with the costs of this instance against the appellant. After the expiration of twenty days judgment should be entered in accordance herewith and the case remanded to the lower court for execution. So ordered.

G.R. Nos. L-12634 and L-12720

May 29, 1959

JOSE G. TAMAYO, petitioner, vs. INOCENCIO AQUINO, ET AL., and SILVESTRE RAYOS, respondents. SILVESTRE RAYOS, petitioner, vs. JOSE G. TAMAYO and INOCENCIO AQUINO ET AL., respondents. Briones and Pascual for petitioner. Emiliano R. Navarro for respondent Inocencio Aquino et al. Jose C. Laureta and Naty-Belen N. Milan for respondent Silvestre Rayos. LABRADOR, J.: Inocencio Aquino and his children brought this action against Jose G. Tamayo, holder of a certificate of public convenience to operate two trucks for damages for the death of Inocencio's wife, Epifania Gonzales, while riding aboard Tamayo's trucks. It is alleged that while his (Inocencio Aquino) wife was making a trip aboard truck with Plate No. TPU735, it bumped against a culvert on the side of the road in Bugallon, Pangasinan; that as a consequence of this accident Epifania Gonzales was thrown away from the vehicle and two pieces of wood embedded in her skull, as a result of which she died; that the impact of the truck against the culvert was so violent that the roof of the vehicle was ripped off from its body, one fender was smashed and the engine damaged beyond repair. Complaint was filed for the recovery of P10,000 as actual damages, P10,000 as moral damages, and costs. Upon being summoned, defendant Tamayo answered alleging a that the truck is owned by Silvestre Rayos, so he filed a third-party complaint against the latter, alleging that he no longer had any interest whatsoever in the said truck, as he had sold the same before the accident to the third-party defendant Silvestre Rayos. Answering the third-party complaint, Rayos alleged that if any indemnity is due, it should come from Jose G. Tamayo, because he did not have any transaction with him regarding such sale. The Court of First Instance found that the truck with plate No. TPU-735 was one of the trucks of Tamayo under a certificate of public convenience issued to him; that he had sold it to Rayos in March, 1953, but did not inform the Public Service Commission of the sale until June 30, 1953, one month after the accident. On the basis of the above facts, the Court of First Instance ordered the defendant Tamayo and the third-party defendant Rayos to pay plaintiffs jointly and severally the sum of P6,000 as compensatory damages, and another sum of P5,000 as moral damages, with interest, and authorized the defendant or third-party defendant, whoever should pay the entire amount, to recover from the other any

sum in excess of one-half of the amount ordered to be paid, with interest. The Court also dismissed the third-party complaint. Appeals against the above decision was made to the Court of Appeals. This court affirmed the judgment of the Court of First Instance in all respects, and against this judgment certiorari was issued by us on separate petitions of Tamayo and Rayos. Tamayo claims exemption from liability, arguing that the owner and operator of the truck at the time the accident was not he but Rayos. In answer we state that we have already held in the cases of Medina vs. Cresencia, 99 Phil., 506; 52 Off. Gaz., (11) 4606; Timbol vs. Osias, 98 Phil., 432; 52 Off. Gaz. (3) 1392; Montoya vs. Ignacio, 94 Phil., 182; 50 Off. Gaz., 108, and Roque vs. Malibay, L-8561, Nov. 18, 1955, that the registered owner of a public service vehicle is responsible for damages that may be caused to any of the passengers therein, even if the said vehicle had already been sold, leased or transferred to another person who was, at the time of the accident, actually operating the vehicle. This principle was also reaffirmed in the case of Erezo vs. Jepte, 102 Phil., 103. The reason given by us for the above liability imposed upon the registered owner of the vehicle under a certificate of public convenience is as follows: . . . we hold with the trial court that the law does not allow him to do so; the law with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner alleged to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured. (Erezo vs. Jepte, supra). The decision of the Court of Appeals is also attacked insofar as it holds that inasmuch as the third-party defendant had used the truck on a route not covered by the registered owner's franchise, both the registered owner and the actual owner and operator should be considered as joint tortfeasors and should be made liable in accordance with Article 2194 of the Civil Code. This Article is as follows: Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary. But the action instituted in the case at bar is one for breach of contract, for failure of the defendant to carry safety the deceased for her destination. The liability for which he is made responsible, i.e., for the death of the passenger, may not be considered as arising from a quasi-delict. As the registered owner Tamayo and his transferee Rayos may not be held guilty of tort or a quasi-delict; their responsibility is not solidary as held by the Court of Appeals. The question that poses, therefore, is how should the holder of the certificate of public convenience Tamayo participate with his transferee, operator Rayos, in the damages recoverable by the heirs of the deceased passenger, if their liability is not that of Joint tortfeasors in accordance with Article 2194 of the Civil Code. The following considerations must be borne in mind in determining this question. As Tamayo is the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct, for the reasons given in our decision in the case of Erezo vs. Jepte, supra, as quoted above. But as the transferee, who operated the vehicle when the passenger died, is the one directly responsible for the accident and death he should in turn be made responsible to the registered owner for what the latter may have been adjudged to pay. In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to him (the registered owner), for any damages that he may cause the latter by his negligence. In the case at bar, the court found, furthermore, that inspite of the fact that the agreement between Tamayo and Rayos was for Rayos to use the truck in carrying of gasoline, the latter used the same in transporting passengers outside the route covered by the franchise of Tamayo. For this additional reason, the agent or Rayos must be held responsible to the registered owner, to the extent that the latter may suffer damage by reason of the death caused during the accident. The responsibility of the transferee was already adverted to by us in the case ofErezo vs. Jepte, supra, when we held expressly:

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant. (Erezo vs. Jepte, supra.) We hereby affirm that the responsibility of the transferee of the public vehicle be as above denied. The procedural means by which the liability of the transferee to the holder of the certificate should be enforced is that indicated by us in the above-quoted portion of the case of Erezo vs. Jepte. This procedure was adopted by Tamayo, the defendant herein, when he presented a third party complaint against Rayos. The courts below should not have dismissed this third-party complaint, and should have adjudged the responsibility to make indemnity in accordance therewith. The transferee is liable to indemnify the registered owner for the damages that the latter may be required to pay for the accident, hence the remedy is by third-party complaint (See Rule 12, Rules of the Court). We now come to the question of the damages that the Court of Appeals and the Court of First Instance awarded to the plaintiffs. The actual or compensatory damage of P6,000 is not seriously questioned by any of the defendants, but the award of P5,000 as moral damages is questioned by them in this appeal. We agree with the appellants that as the responsibility of Tamayo and his agent Rayos is culpa-contractual, no award of moral damages can be given. The law on this matter is expressed in Article 2220 of the Civil Code, which provides: Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Both the Court of First Instance and the Court of Appeals considered the violation of the rules of the Public Service Commission prohibiting transfer of public vehicles without approval by the Commission as justifying the award of moral damages. We believe that both courts erred. The law expressly provides that award of moral damages can be made in a suit for breach of contact only when the defendants acted fraudulently or in bad faith. We do not believe that the holder of the certificate, defendant Tamayo, was guilty of fraud or bad faith. There appears to be no fraud at all in the transfer. Transfers are prohibited only if made without approval by the Public Service Commission. There may have been a violation of the regulations because Tamayo did not secure a previous authority to transfer from said Commission, but he actually applied for and obtained said permission or approval about a month after the accident. Besides, the truck was transferred to Rayos with the understanding that the same was not to be used as a public convenience, so that insofar as Tamayo is concerned, there could have been no shade or tint of bad faith at all. Consequently, the ground upon which moral damages may be demanded from him by the plaintiffs does not exist. Neither can we find that there was fraud or bad faith committed on the part of the transferee or agent. There may have been a breach of the agreement between Tamayo and Rayos, but this was not the immediate cause of the accident. It was the negligence of the driver. What the law would seem to consider as bad faith which may furnish a ground for the award of moral damages in the case at bar would be bad faith in the securing and in the execution of the contract and in the enforcement of its terms (Article 1338, Civil Code), or any other kind of deceit which may have been used by both defendants. None can be said to have been present in the case at bar. There was no bad faith on the part of the agent Rayos; there was negligence of the driver employed by him, but this certainly not bad faith defendants' part contemplated by law. For the foregoing considerations, the judgment appealed from is hereby modified, in that the defendant-appellant Tamayo is hereby ordered to pay to the plaintiff-appellees the sum of P6,000 as compensatory damages for the death of the deceased, but that he (Tamayo) has the right to be indemnified by third-party defendant-appellant Rayos of the amount he is hereby ordered to pay. With costs against appellants. G.R. No. L-12164 May 22, 1959

BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants, vs. WORKMEN'S COMPENSATION COMMISSION, ET AL., respondents-appellees. J. de Guia for appellants. Estanislao R. Bayot for appellees. ENDENCIA, J.:

Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply, a commercial guard who while in line of duty, was skilled by criminal hands. His widow Ciriaca Vda. de Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama, in due time filed a claim for compensation with the Workmen's Compensation Commission, which was granted in an award worded as follows: WHEREFORE, the order of the referee under consideration should be, as it is hereby, affirmed and respondents Benito Liwanag and Maria Liwanag Reyes, ordered. 1. To pay jointly and severally the amount of three thousand Four Hundred Ninety Four and 40/100 (P3,494.40) Pesos to the claimants in lump sum; and To pay to the Workmen's Compensation Funds the sum of P4.00 (including P5.00 for this review) as fees, pursuant to Section 55 of the Act. In appealing the case to this Tribunal, appellants do not question the right of appellees to compensation nor the amount awarded. They only claim that, under the Workmen's Compensation Act, the compensation is divisible, hence the commission erred in ordering appellants to pay jointly and severally the amount awarded. They argue that there is nothing in the compensation Act which provides that the obligation of an employer arising from compensable injury or death of an employee should be solidary obligation, the same should have been specifically provided, and that, in absence of such clear provision, the responsibility of appellants should not be solidary but merely joint. At first blush appellants' contention would seem to be well, for ordinarily, the liability of the partners in a partnership is not solidary; but the law governing the liability of partners is not applicable to the case at bar wherein a claim for compensation by dependents of an employee who died in line of duty is involved. And although the Workmen's Compensation Act does not contain any provision expressly declaring solidary obligation of business partners like the herein appellants, there are other provisions of law from which it could be gathered that their liability must be solidary. Arts. 1711 and 1712 of the new Civil Code provide: ART. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. . . . . ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. . . . . And section 2 of the Workmen's Compensation Act, as amended reads in part as follows: . . . The right to compensation as provided in this Act shall not be defeated or impaired on the ground that the death, injury or disease was due to the negligence of a fellow servant or employee, without prejudice to the right of the employer to proceed against the negligence party. The provisions of the new Civil Code above quoted taken together with those of Section 2 of the Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of business partners, like appellants, should be solidary; otherwise, the right of the employee may be defeated, or at least crippled. If the responsibility of appellants were to be merely joint and solidary, and one of them happens to be insolvent, the amount awarded to the appellees would only be partially satisfied, which is evidently contrary to the intent and purposes of the Act. In the previous cases we have already held that the Workmen's Compensation Act should be construed fairly, reasonably and liberally in favor of and for the benefit of the employee and his dependents; that all doubts as to the right of compensation resolved in his favor; and that it should be interpreted to promote its purpose. Accordingly, the present controversy should be decided in favor of the appellees. Moreover, Art. 1207 of the new Civil Code provides: . . . . There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.

Since the Workmen's Compensation Act was enacted to give full protection to the employee, reason demands that the nature of the obligation of the employers to pay compensation to the heirs of their employee who died in line of duty, should be solidary; otherwise, the purpose of the law could not be attained. Wherefore, finding no error in the award appealed from, the same is hereby affirmed, with costs against appellants. G.R. No. L-7721 March 25, 1914

INCHAUSTI & CO., plaintiff-appellant, vs. GREGORIO YULO, defendant-appellee. Hausserman, Cohn and Fisher for appellant. Rohde and Wright for appellee. Bruce, Lawrence, Ross and Block, Amici Curiae, for Manuel, Francisco and Carmen Yulo. ARELLANO, C.J.: This suit is brought for the recovery of a certain sum of money, the balance of a current account opened by the firm of Inchausti & Company with Teodoro Yulo and after his death continued with his widow and children, whose principal representative is Gregorio Yulo. Teodoro Yulo, a property owner of Iloilo, for the exploitation and cultivation of his numerous haciendas in the province of Occidental Negros, had been borrowing money from the firm of Inchausti & Company under specific conditions. On April 9, 1903; Teodoro Yulo died testate and for the execution of the provisions of his will he had appointed as administrators his widow and five of his sons, Gregorio Yulo being one of the latter. He thus left a widow, Gregoria Regalado, who died on October 22d of the following year, 1904, there remaining of the marriage the following legitimate children: Pedro, Francisco, Teodoro, Manuel, Gregorio, Mariano, Carmen, Concepcion, and Jose Yulo y Regalado. Of these children Concepcion and Jose were minors, while Teodoro was mentally incompetent. At the death of their predecessor in interest, Teodoro Yulo, his widow and children held the conjugal property in common and at the death of this said widow, Gregoria Regalado, these children preserved the same relations under the name of Hijos de T. Yulo continuing their current account with Inchausti & Company in the best and most harmonious reciprocity until said balance amounted to two hundred thousand pesos. In for the payment of the disbursements of money which until that time it had been making in favor of its debtors, the Yulos. First. Gregorio Yulo, for himself and in representation of his brothers Pedro Francisco, Manuel, Mariano, and Carmen, executed on June 26, 1908, a notarial document (Exhibit S) whereby all admitted their indebtedness to Inchausti & Company in the sum of P203,221.27 and, in order to secure the same with interest thereon at 10 per cent per annum, they especially mortgaged an undivided six-ninth of their thirty-eight rural properties, their remaining urban properties, lorchas, and family credits which were listed, obligating themselves to make a forma inventory and to describe in due form all the said properties, as well as to cure all the defects which might prevent the inscription of the said instrument in the registry of property and finally to extend by the necessary formalities the aforesaid mortgage over the remaining three-ninths part of all the property and rights belonging to their other brothers, the incompetent Teodoro, and the minors Concepcion and Jose. Second. On January 11, 1909, Gregorio Yulo in representation of Hijos de T. Yulo answered a letter of the firm of Inchausti & Company in these terms: "With your favor of the 2d inst. we have received an abstract of our current account with your important firm, closed on the 31st of last December, with which we desire to express our entire conformity as also with the balance in your favor of P271,863.12." On July 17, 1909, Inchausti & Company informed Hijos de T. Yulo of the reduction of the said balance to P253,445.42, with which balance Hijos de T. Yulo expressed its conformity by means of a letter of the 19th of the same month and year. Regarding this conformity a new document evidencing the mortgage credit was formalized. Third. On August 12, 1909, Gregorio Yulo, for himself and in representation of his brother Manuel Yulo, and in their own behalf Pedro Yulo, Francisco Yulo, Carmen Yulo, and Concepcion Yulo, the latter being of age at the time, executed the notarial instrument (Exhibit X). Through this, the said persons, including Concepcion Yulo ratified all the contents of the prior document of June 26, 1908, severally and jointly acknowledged and admitted their indebtedness to Inchausti & Company for the net amount of two hundred fifty-three thousand four hundred forty-five pesos and forty-two centavos (P253,445.42) which they obligated themselves to pay, with interest at ten per cent per annum, in five installments at the rate of fifty thousand pesos (P50,000), except the last, this being fifty-three thousand four hundred forty-five pesos and forty-two centavos (P53,445.42), beginning June 30, 1910, continuing successively on the 30th of each June until the last payment on June 30, 1914. Among other clauses, they expressly stipulated the following:

Fifth. The default in payment of any of the installments established in clause 3, or the noncompliance of any of the other obligations which by the present document and that of June 26, 1908, we, the Yulos, brothers and sisters, have assumed, will result in the maturity of all the said installments, and as a consequence thereof, if they so deem expedient Messrs. Inchausti & Company may exercise at once all the rights and actions which to them appertain in order to obtain the immediate and total payment of our debt, in the same manner that they would have so done at the maturity of the said installments. Fifteenth. All the obligations which by this, as well as by the document of June 26, 1908, concern us, will be understood as having been contradicted in solidum by all of us, the Yulos, brothers and sisters. Sixteenth. It is also agreed that this instrument shall be confirmed and ratified in all its parts, within the present week, by our brother Don Mariano Yulo y Regalado who resides in Bacolod, otherwise it will not be binding on Messrs. Inchausti & Company who can make use of their rights to demand and obtain immediate payment of their credit without any further extension or delay, in accordance with what we have agreed. Fourth. This instrument was neither ratified nor confirmed by Mariano Yulo. Fifth. The Yulos, brothers and sisters, who executed the preceding instrument, did not pay the first installment of the obligation. Sixth. Therefore, on March 27, 1911, Inchausti & Company brought an ordinary action in the Court of First Instance of Iloilo, against Gregorio Yulo for the payment of the said balance due of two hundred fifty-three thousand, four hundred forty-five pesos and forty-two centavos P253,445.42) with interest at ten per cent per annum, on that date aggregating forty-two thousand, nine hundred forty-four pesos and seventy-six centavos (P42,944.76) Seventh. But, on May 12, 1911, Francisco, Manuel, and Carmen Yulo y Regalado executed in favor Inchausti & Company another notarial instrument in recognition of the debt and obligation of payment in the following terms: "First, the debt is reduce for them to two hundred twenty-five thousand pesos (P225,000); second, the interest is likewise reduced for them to 6 percent per annum, from March 15, 1911; third, the installments are increase to eight, the first of P20,000, beginning on June 30, 1911, and the rest of P30,000 each on the same date of each successive year until the total obligation shall be finally and satisfactorily paid on June 30, 1919," it being expressly agreed "that if any of the partial payments specified in the foregoing clause be not paid at its maturity, the amount of the said partial payment together with its interest shall bear interest at the rate of 15 per cent per annum from the date of said maturity, without the necessity of demand until its complete payment;" that "if during two consecutive years the partial payments agreed upon be not made, they shall lose the right to make use of the period granted to them for the payment of the debt or the part thereof which remains unpaid, and that Messrs. Inchausti & Company may consider the total obligation due and demandable, and proceed to collect the same together with the interest for the delay above stipulated through all legal means." (4th clause.) Thus was it stipulated between Inchausti & Company and the said three Yulos, brothers and sisters by way of compromise so that Inchausti & Company might, as it did, withdraw the claims pending in the special proceedings for the probate of the will of Don Teodoro Yulo and of the intestacy of Doa Gregoria Regalado stipulating expressly however in the sixth clause that "Inchausti & Company should include in their suit brought in the Court of First Instance of Iloilo against Don Gregorio Yulo, his brother and joint co-obligee, Don Pedro Yulo, and they will procure by all legal means and in the least time possible a judgment in their favor against the said Don Gregorio and Don Pedro, sentencing the later to pay the total amount of the obligation acknowledged by them in the aforementioned instrument of August 12, 1909; with the understanding that if they should deem it convenient for their interests, Don Francisco, Don Manuel, and Doa Carmen Yulo may appoint an attorney to cooperate with the lawyers of Inchausti & Company in the proceedings of the said case." Eighth. Matters being thus on July 10, 1911, Gregorio Yulo answered the complaint and alleged as defenses; first, that an accumulation of interest had taken place and that compound interest was asked for the Philippine currency at par with Mexican; second, that in the instrument of August 21, 1909, two conditions were agreed one of which ought to be approved by the Court of First Instance, and the other ratified and confirmed by the other brother Mariano Yulo, neither of which was complied with; third , that with regard to the same debt claims were presented before the commissioners in the special proceedings over the inheritances of Teodoro Yulo and Gregoria Regalado, though later they were dismissed, pending the present suit; fourth and finally, that the instrument of August 12, 1909, was novated by that of May 12, 1911, executed by Manuel, Francisco and Carmen Yulo.

Ninth. The Court of First Instance of Iloilo decided the case "in favor of the defendant without prejudice to the plaintiff's bringing within the proper time another suit for his proportional part of the joint debt, and that the plaintiff pay the costs." (B. of E., 21.) The plaintiff appealed from this judgment by bill of exceptions and before this court made the following assignment of errors: I. That the court erred in considering the contract of May 12, 1911, as constituting a novation of that of August 12, 1909. II. That the court erred in rendering judgment in favor of the defendant. III. And that the court erred n denying the motion for a new trial. "No one denies in this case," says the trial judge, "that the estate of Teodoro Yulo or his heirs owe Inchausti & Company an amount of money, the object of this action, namely, P253,445.42" (B. of E. 18). "The fact is admitted," says the defendant, "that the plaintiff has not collected the debt, and that the same is owing" (Brief, 33). "In the arguments of the attorneys," the judge goes on, "it was really admitted that the plaintiff had a right to bring an action against Gregorio Yulo, as one of the conjoint and solidary obligors in the contract of August 12, 1909; but the defendant says that the plaintiff has no right to sue him alone, since after the present suit was brought, the plaintiff entered into a compromise with the other conjoint and solidary debtors, the result being the new contract of May 12, 1911, by virtue of which the payments were extended, the same constituting a novation of the contract which gave him the same privileges that were given his conjoint and solidary codebtors. This (the judge concludes) is the only question brought up by the parties." (B. of E., 19.) And this is the only one which the Supreme Court has to solve by virtue of the assignments of errors alleged. Consequently, there is no need of saying anything regarding the first three defenses of the answer, nor regarding the lack of the signature of Mariano Yulo ratifying and confirming the instrument of August 12, 1909, upon which the appellee still insists in his brief for this appeal; although it will not be superfluous to state the doctrine that a condition, such as is contained in the sixteenth clause of the said contract (third point in the statement of facts), is by no means of suspensive but a resolutory condition; the effect of the failure of compliance with the said clause, that is to say, the lack of the ratification and confirmance by Mariano Yulo being not to suspend but to resolve the contract, leaving Inchausti & Company at liberty, as stipulated, "to make use of its rights to demand and obtain the immediate payment of its credit." The only question indicated in the decision of the inferior court involves, however, these others: First, whether the plaintiff can sue Gregorio Yulo alone, there being other obligors; second, if so, whether it lost this right by the fact of its having agreed with the other obligors in the reduction of the debt, the proroguing of the obligation and the extension of the time for payment, in accordance with the instrument of May 12, 1911; third, whether this contract with the said three obligors constitutes a novation of that of August 12, 1909, entered into with the six debtors who assumed the payment of two hundred fifty-three thousand and some odd pesos, the subject matter of the suit; and fourth, if not so, whether it does have any effect at all in the action brought, and in this present suit. With respect to the first it cannot be doubted that, the debtors having obligated themselves in solidum, the creditor can bring its action in toto against any one of them, inasmuch as this was surely its purpose in demanding that the obligation contracted in its favor should be solidary having in mind the principle of law that, "when the obligation is constituted as a conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject matter of such obligation." (Civil Code, articles 1137 and 1144.) And even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions, as in this case, Inchausti & Company did with its debtors Manuel, Francisco, and Carmen Yulo through the instrument of May 12, 1911, this does not lead to the conclusion that the solidarity stipulated in the instrument of August 12, 1909 is broken, as we already know the law provides that "solidarity may exist even though the debtors are not bound in the same manner and for the same periods and under the same conditions." (Ibid, article 1140.) Whereby the second point is resolved. With respect to the third, there can also be no doubt that the contract of May 12, 1911, does not constitute a novation of the former one of August 12, 1909, with respect to the other debtors who executed this contract, or more concretely, with respect to the defendant Gregorio Yulo: First, because "in order that an obligation may be extinguished by another which substitutes it, it is necessary that it should be so expressly declared or that the old and the new be incompatible in all points" (Civil Code, article 1204); and the instrument of May 12, 1911, far from expressly declaring that the obligation of the three who executed it substitutes the former signed by Gregorio Yulo and the other debtors, expressly and clearly stated that the said obligation of Gregorio Yulo to pay the two hundred and fifty-three thousand and odd pesos sued for

exists, stipulating that the suit must continue its course and, if necessary, these three parties who executed the contract of May 12, 1911, would cooperate in order that the action against Gregorio Yulo might prosper (7th point in the statement of facts), with other undertakings concerning the execution of the judgment which might be rendered against Gregorio Yulo in this same suit. "It is always necessary to state that it is the intention of the contracting parties to extinguish the former obligation by the new one" (Judgment in cassation, July 8, 1909). There exist no incompatibility between the old and the new obligation as will be demonstrated in the resolution of the last point, and for the present we will merely reiterate the legal doctrine that an obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one. (Judgments in cassation of June 28, 1904 and of July 8, 1909.) With respect to the last point, the following must be borne in mind: Facts. First. Of the nine children of T. Yulo, six executed the mortgage of August 12, 1909, namely, Gregorio, Pedro, Francisco, Manuel, Carmen, and Concepcion, admitting a debt of P253,445.42 at 10 per cent per annum and mortgaging six-ninths of their hereditary properties. Second. Of those six children, Francisco, Manuel and Carmen executed the instrument of May 12, 1911, wherein was obtained a reduction of the capital to 225,000 pesos and of the interest to 6 per cent from the 15th of March of the same year of 1911. Third. The other children of T. Yulo named Mariano, Teodoro, and Jose have not taken part in these instruments and have not mortgaged their hereditary portions. Fourth. By the first instrument the maturity of the first installment was June 30, 1910, whereas by the second instrument, Francisco, Manuel, and Carmen had in their favor as the maturity of the first installment of their debt, June 30, 1912, and Fifth, on March 27, 1911, the action against Gregorio Yulo was already filed and judgment was pronounced on December 22, 1911, when the whole debt was not yet due nor even the first installment of the same respective the three aforesaid debtors, Francisco, Manuel, and Carmen. In jure it would follow that by sentencing Gregorio Yulo to pay 253,445 pesos and 42 centavos of August 12, 1909, this debtor, if he should pay all this sum, could not recover from his joint debtors Francisco, Manuel, and Carmen their proportional parts of the P253,445.42 which he had paid, inasmuch as the three were not obligated by virtue of the instrument of May 12, 1911, to pay only 225,000 pesos, thus constituting a violation of Gregorio Yulo's right under such hypothesis, of being reimbursed for the sum paid by him, with the interest of the amounts advanced at the rate of onesixth part from each of his five codebtors. (Civ. Code, article 1145, par. 2). This result would have been a ponderous obstacle against the prospering of the suit as it had been brought. It would have been very just then to have absolved the solidary debtor who having to pay the debt in its entirety would not be able to demand contribution from his codebtors in order that they might reimburse him pro rata for the amount advanced for them by him. But such hypothesis must be put out of consideration by reason of the fact that occurred during the pendency of the action, which fact the judge states in his decision. "In this contract of May last," he says, "the amount of the debt was reduced to P225,000 and the attorney of the plaintiff admits in his plea that Gregorio Yulo has a right to the benefit of this reduction." (B. of E., 19.) This is a fact which this Supreme Court must hold as firmly established, considering that the plaintiff in its brief, on page 27, corroborates the same in these words: "What effect," it says, "could this contract have over the rights and obligations of the defendant Gregorio Yulo with respect to the plaintiff company? In the first place, we are the first to realize that it benefits him with respect to the reduction of the amount of the debt. The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt that, in accordance with the provision of article 1143 of the Civil Code, the defendant has the right to enjoy the benefits of the partial remission of the debt granted by the creditor." Wherefore we hold that although the contract of May 12, 1911, has not novated that of August 12, 1909, it has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of P253,445.42; and in consequence thereof, the amount stated in the contract of August 12, 1909, cannot be recovered but only that stated in the contract of May 12, 1911, by virtue of the remission granted to the three of the solidary debtors in this instrument, in conformity with what is provided in article 1143 of the Civil Code, cited by the creditor itself. If the efficacy of the later instrument over the former touching the amount of the debt had been recognized, should such efficacy not likewise be recognized concerning the maturity of the same? If Francisco, Manuel, and Carmen had been included in the suit, they could have alleged the defense of the nonmaturity of the installments since the first installment did not mature until June 30, 1912, and without the least doubt the defense would have prospered, and the three would have been absolved from the suit. Cannot this defense of the prematurity of the action, which is implied in the last special defense set up in the answer of the defendant Gregorio Yulo be made available to him in this proceeding? The following commentary on article 1140 of the Civil Code sufficiently answers this question: ". . . . Before the performance of the condition, or before the execution of a term which affects one debtor alone proceedings may be had against him or against any of the others for the remainder which may be already demandable but the conditional obligation or that which has not yet matured cannot be demanded from any one of them. Article 1148 confirms the rule

which we now enunciate inasmuch as in case the total claim is made by one creditor, which we believe improper if directed against the debtor affected by the condition or the term, the latter can make use of such exceptions as are peculiarly personal to his own obligation; and if against the other debtors, they might make use of those exceptions, even though they are personal to the other, inasmuch as they alleged they are personal to the other, inasmuch as they alleged them in connection with that part of the responsibility attaching in a special manner to the other." (8 Manresa, Sp. Civil Code, 196.) Article 1148 of the Civil Code. "The solidary debtor may utilize against the claims of the creditor of the defenses arising from the nature of the obligation and those which are personal to him. Those personally pertaining to the others may be employed by him only with regard to the share of the debt for which the latter may be liable." Gregorio Yulo cannot allege as a defense to the action that it is premature. When the suit was brought on March 27, 1911, the first installment of the obligation had already matured of June 30, 1910, and with the maturity of this installment, the first not having been paid, the whole debt had become mature, according to the express agreement of the parties, independently of the resolutory condition which gave the creditor the right to demand the immediate payment of the whole debt upon the expiration of the stipulated term of one week allowed to secure from Mariano Yulo the ratification and confirmation of the contract of August 12, 1909. Neither could he invoke a like exception for the shares of his solidary codebtors Pedro and Concepcion Yulo, they being in identical condition as he. But as regards Francisco, Manuel, and Carmen Yulo, none of the installments payable under their obligation, contracted later, had as yet matured. The first payment, as already stated, was to mature on June 30, 1912. This exception or personal defense of Francisco, Manuel, and Carmen Yulo "as to the part of the debt for which they were responsible" can be sent up by Gregorio Yulo as a partial defense to the action. The part of the debt for which these three are responsible is three-sixths of P225,000 or P112,500, so that Gregorio Yulo may claim that, even acknowledging that the debt for which he is liable is P225,000, nevertheless not all of it can now be demanded of him, for that part of it which pertained to his codebtors is not yet due, a state of affairs which not only prevents any action against the persons who were granted the term which has not yet matured, but also against the other solidary debtors who being ordered to pay could not now sue for a contribution, and for this reason the action will be only as to the P112,500. Against the propriety and legality of a judgment against Gregorio Yulo for this sum, to wit, the three-sixths part of the debt which forms the subject matter of the suit, we do not think that there was any reason or argument offered which sustains an opinion that for the present it is not proper to order him to pay all or part of the debt, the object of the action. It has been said in the brief of the appellee that the prematurity of the action is one of the defenses derived from the nature of the obligation, according to the opinion of the commentator of the Civil Code, Mucius Scaevola, and consequently the defendant Gregorio Yulo may make use of it in accordance with article 1148 of the said Code. It may be so and yet, taken in that light, the effect would not be different from that already stated in this decision; Gregorio Yulo could not be freed from making any payment whatever but only from the payment of that part of the debt which corresponds to his codebtors Francisco, Manuel, and Carmen. The same author, considering the case of the opposing contention of two solidary debtors as to one of whom the obligation is pure and unconditional and as to the other it is conditional and is not yet demandable, and comparing the disadvantages which must flow from holding that the obligation is demandable with these which must follow if the contrary view is adopted, favors this solution of the problem: There is a middle ground, (he says), from which we can safely set out, to wit, that the creditor may ofcourse, demand the payment of his credit against the debtor not favored by any condition or extension of time." And further on, he decides the question as to whether the whole debt may be recovered or only that part unconditionally owing or which has already matured, saying, "Without failing to proceed with juridical rigor, but without falling into extravagances or monstrosities, we believe that the solution of the difficulty is perfectly possible. How? By limiting the right of the creditor to the recovery of the amount owed by the debtors bound unconditionally or as to whom the obligation has matured, and leaving in suspense the right to demand the payment of the remainder until the expiration of the term of the fulfillment of the condition. But what then is the effect of solidarity? How can this restriction of right be reconciled with the duty imposed upon each one of the debtors to answer for the whole obligation? Simply this, by recognizing in the creditor the power, upon the performance of the condition or the expiration of the term of claiming from any one or all of the debtors that part of the obligation affected by those conditions. (Scaevola, Civil Code, 19, 800 and 801.) It has been said also by the trial judge in his decision that if a judgment be entered against Gregorio Yulo for the whole debt of P253,445.42, he cannot recover from Francisco, Manuel, and Carmen Yulo that part of the amount which is owed

by them because they are obliged to pay only 225,000 pesos and this is eight installments none of which was due. For this reason he was of the opinion that he (Gregorio Yulo) cannot be obliged to pay his part of the debt before the contract of May 12, 1911, may be enforced, and "consequently he decided the case in favor of the defendant, without prejudice to the plaintiff proceeding in due time against him for his proportional part of the joint debt." (B. of E., 21 and 22.) But in the first place, taking into consideration the conformity of the plaintiff and the provision of article 1143 of the Civil Code, it is no longer possible to sentence the defendant to pay the P253,445.42 of the instrument of August 12, 1909, but, if anything, the 225,000 of the instrument of May 12, 1911. In the second place, neither is it possible to curtail the defendant's right of recovery from the signers of the instrument of May 12, 1911, for he was justly exonerated from the payment of that part of the debt corresponding to them by reason of there having been upheld in his favor the exception of an unmatured installment which pertains to them. In the third place, it does not seem just, Mucius Scaevola considers it "absurd," that, there being a debtor who is unconditionally obligated as to when the debt has matured, the creditor should be forced to await the realization of the condition (or the expiration of the term.) Not only is there no reason for this, as stated by the author, but the court would even fail to consider the special law of the contract, neither repealed nor novated, which cannot be omitted without violating article 1091 of the Civil Code according to which "the obligations arising from contracts have the force of law between the contracting parties and must be complied with in accordance with the tenor of the same." Certain it is that the trial court, in holding that this action was premature but might be brought in the time, regarded the contract of August 12, 1909, as having been expressly novated; but it is absolutely impossible in law to sustain such supposed novation, in accordance with the legal principles already stated, and nevertheless the obligation of the contract of May 12, 1911, must likewise be complied with in accordance with its tenor, which is contrary in all respects to the supposed novation, by obliging the parties who signed the contract to carry on the suit brought against Gregorio Yulo. The contract of May 12, 1911, has affected the action and the suit, to the extent that Gregorio Yulo has been able to make in his favor the defense of remission of part of the debt, thanks to the provision of article 1148, because it is a defense derived from the nature of the obligation, so that although the said defendant was not party to the contract in question, yet because of the principle of solidarity he was benefited by it. The defendant Gregorio Yulo cannot be ordered to pay the P253,445.42 claimed from him in the suit here, because he has been benefited by the remission made by the plaintiff to three of his codebtors, many times named above. Consequently, the debt is reduced to 225,000 pesos. But, as it cannot be enforced against the defendant except as to the three-sixths part which is what he can recover from his joint codebtors Francisco, Manuel, and Carmen, at present, judgment can be rendered only as to the P112,500. We therefore sentence the defendant Gregorio Yulo to pay the plaintiff Inchausti & Company P112,500, with the interest stipulated in the instrument of May 12, 1911, from March 15, 1911, and the legal interest on this interest due, from the time that it was claimed judicially in accordance with article 1109 of the Civil Code, without any special finding as to costs. The judgment appealed from is reversed. So ordered. G.R. No. L-12471 April 13, 1959

ROSARIO L. DE BRAGANZA, ET AL., petitioners, vs. FERNANDO F. DE VILLA ABRILLE, respondent. Oscar M. Herrera for petitioners. R. P. Sarandi and F. Valdez Anama for respondents. BENGZON, J.: Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the Court of Appeal's decision whereby they were required solidarily to pay Fernando F. de Villa Abrille the sum of P10,000 plus 2 % interest from October 30, 1944. The above petitioners, it appears, received from Villa Abrille, as a loan, on October 30, 1944 P70,000 in Japanese war notes and in consideration thereof, promised in writing (Exhibit A) to pay him P10,000 "in legal currency of the P. I. two

years after the cessation of the present hostilities or as soon as International Exchange has been established in the Philippines", plus 2 % per annum. Because payment had not been made, Villa Abrille sued them in March 1949. In their answer before the Manila court of first Instance, defendants claimed to have received P40,000 only instead of P70,000 as plaintiff asserted. They also averred that Guillermo and Rodolfo were minors when they signed the promissory note Exhibit A. After hearing the parties and their evidence, said court rendered judgment, which the appellate court affirmed, in the terms above described. There can be no question about the responsibility of Mrs. Rosario L. Braganza because the minority of her consigners note release her from liability; since it is a personal defense of the minors. However, such defense will benefit her to the extent of the shares for which such minors may be responsible, (Art. 1148, Civil Code). It is not denied that at the time of signing Exhibit A, Guillermo and Rodolfo Braganza were minors-16 and 18 respectively. However, the Court of Appeals found them liable pursuant to the following reasoning: . . . . These two appellants did not make it appears in the promissory note that they were not yet of legal age. If they were really to their creditor, they should have appraised him on their incapacity, and if the former, in spite of the information relative to their age, parted with his money, then he should be contended with the consequence of his act. But, that was not the case. Perhaps defendants in their desire to acquire much needed money, they readily and willingly signed the promissory note, without disclosing the legal impediment with respect to Guillermo and Rodolfo. When minor, like in the instant case, pretended to be of legal age, in fact they were not, they will not later on be permitted to excuse themselves from the fulfillment of the obligation contracted by them or to have it annulled. (Mercado, et al. vs. Espiritu, 37 Phil., 215.) [Emphasis Ours.] We cannot agree to above conclusion. From the minors' failure to disclose their minority in the same promissory note they signed, it does not follow as a legal proposition, that they will not be permitted thereafter to assert it. They had no juridical duty to disclose their inability. In fact, according to Corpuz Juris Secundum, 43 p. 206; . . . . Some authorities consider that a false representation as to age including a contract as part of the contract and accordingly hold that it cannot be the basis of an action in tort. Other authorities hold that such misrepresentation may be the basis of such an action, on the theory that such misrepresentation is not a part of, and does not grow out of, the contract, or that the enforcement of liability for such misrepresentation as tort does not constitute an indirect of enforcing liability on the contract. In order to hold infant liable, however, the fraud must be actual and not constructure. It has been held that his mere silence when making a contract as to age does not constitute a fraud which can be made the basis of an action of decit. (Emphasis Ours.) The fraud of which an infant may be held liable to one who contracts with him in the belief that he is of full age must be actual not constructive, and mere failure of the infant to disclose his age is not sufficient. (27 American Jurisprudence, p. 819.) The Mecado case1 cited in the decision under review is different because the document signed therein by the minor specifically stated he was of age; here Exhibit A contained no such statement. In other words, in the Mercado case, the minor was guilty of active misrepresentation; whereas in this case, if the minors were guilty at all, which we doubt it is of passive (or constructive) misrepresentation. Indeed, there is a growing sentiment in favor of limiting the scope of the application of the Mercado ruling, what with the consideration that the very minority which incapacitated from contracting should likewise exempt them from the results of misrepresentation. We hold, on this point, that being minors, Rodolfo and Guillermo Braganza could not be legally bound by their signatures in Exhibit A. It is argued, nevertheless, by respondent that inasmuch as this defense was interposed only in 1951, and inasmuch as Rodolfo reached the age of majority in 1947, it was too late to invoke it because more than 4 years had elapsed after he had become emancipated upon reaching the age of majority. The provisions of Article 1301 of the Civil Code are quoted to the effect that "an action to annul a contract by reason of majority must be filed within 4 years" after the minor has reached majority age. The parties do not specify the exact date of Rodolfo's birth. It is undenied, however, that in October 1944, he was 18 years old. On the basis of such datum, it should be held that in October 1947, he was 21 years old, and in October 1951, he was 25 years old. So that when this defense was interposed in June 1951, four years had not yet completely elapsed from October 1947.

Furthermore, there is reason to doubt the pertinency of the 4-years period fixed by Article 1301 of the Civil Code where minority is set up only as a defense to an action, without the minors asking for any positive relief from the contract. For one thing, they have not filed in this case an action for annulment.2 They merely interposed an excuse from liability. Upon the other hand, these minors may not be entirely absolved from monetary responsibility. In accordance with the provisions of Civil Code, even if their written contact is unenforceable because of non-age, they shall make restitution to the extent that they have profited by the money they received. (Art. 1340) There is testimony that the funds delivered to them by Villa Abrille were used for their support during the Japanese occupation. Such being the case, it is but fair to hold that they had profited to the extent of the value of such money, which value has been authoritatively established in the socalled Ballantine Schedule: in October 1944, P40.00 Japanese notes were equivalent to P1 of current Philippine money. Wherefore, as the share of these minors was 2/3 of P70,000 of P46,666.66, they should now return P1,166.67. 3Their promise to pay P10,000 in Philippine currency, (Exhibit A) can not be enforced, as already stated, since they were minors incapable of binding themselves. Their liability, to repeat, is presently declared without regard of said Exhibit A, but solely in pursuance of Article 1304 of the Civil Code. Accordingly, the appealed decision should be modified in the sense that Rosario Braganza shall pay 1/3 of P10,000 i.e., P3,333.334 plus 2% interest from October 1944; and Rodolfo and Guillermo Braganza shall pay jointly5 to the same creditor the total amount of P1,166.67 plus 6% interest beginning March 7, 1949, when the complaint was filed. No costs in this instance. ANTONIO LO, petitioner, vs. THE HON. COURT OF APPEALS AND NATIONAL ONIONS GROWERS COOPERATIVE MARKETING ASSOCIATION, INC., respondents. DECISION CORONA, J.: Assailed in the instant petition for review on certiorari under Rule 45 of the Rules of Court is the May 26, 1998 [1] decision of the Court of Appeals modifying the decision of the Regional Trial Court of Malabon, Branch 74: WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the penalty imposed for each day of delay in surrendering the leased property is reduced from P5,000.00 toP1,000.00 per day of delay.[2] At the core of the present controversy are two parcels of land measuring a total of 2,147 square meters, with an office building constructed thereon, located at Bo. Potrero, Malabon, Metro Manila and covered by TCT Nos. M-13166 and M-13167. Petitioner acquired the subject parcels of land in an auction sale on November 9, 1995 for P20,170,000 from the Land Bank of the Philippines (Land Bank). Private respondent National Onion Growers Cooperative Marketing Association, Inc., an agricultural cooperative, was the occupant of the disputed parcels of land under a subsisting contract of lease with Land Bank. The lease was valid until December 31, 1995. Upon the expiration of the lease contract, petitioner demanded that private respondent vacate the leased premises and surrender its possession to him. Private respondent refused on the ground that it was, at the time, contesting petitioners acquisition of the parcels of land in question in an action for annulment of sale, redemption and damages. On February 23, 1996, petitioner filed an action for ejectment before the Metropolitan Trial Court of Malabon, Branch 55. He asked, inter alia, for the imposition of the contractually stipulated penalty of P5,000 per day of delay in surrendering the possession of the property to him. On September 3, 1996, the trial court decided the case in favor of petitioner: WHEREFORE, premises considered, the Court considers the allegations of the complaint to be true and duly substantiated except as to the amount of damages and attorneys fees, which are reduced accordingly, a decision is hereby rendered in favor of the plaintiffs and against the defendant, ordering the latter and all persons claiming rights under it: 1) 2) To vacate the leased premises immediately and turn over the same peacefully to the plaintiffs; To pay plaintiff Antonio Lo the sum of P5,000.00 for every day of delay from the time defendant is supposed to have vacated the premises;

3)

To pay the sum of P36,000.00 a month from January 1996 until it finally vacates the premises as payment for reasonable compensation for the use and occupancy thereof; To pay the sum of P20,000.00 by way of reasonable attorneys fees; and To pay the costs of suit.[3]

4) 5)

On appeal to the Regional Trial Court of Malabon, Branch 74, the MTC decision was affirmed in toto on August 29, [4] 1997. Private respondents subsequent motion for reconsideration of the RTC decision was denied on November 26, 1997. From the adverse decision of the trial court, private respondent elevated the case to the Court of Appeals via a petition for review. On May 26, 1999, the Court of Appeals rendered its assailed decision affirming the decision of the trial court, with the modification that the penalty imposed upon private respondent for the delay in turning over the leased property to petitioner was reduced from P 5,000 to P 1000 per day. Unsatisfied with the decision of the Court of Appeals, petitioner filed the instant petition for review, raising the sole issue of the alleged lack of authority of the Court of Appeals to reduce the penalty awarded by the trial court, the same having been stipulated by the parties in their Contract of Lease. The petition has no merit. Generally, courts are not at liberty to ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as they are not contrary to law, morals, good customs, public order or public policy. Nevertheless, courts may equitably reduce a stipulated penalty in the contract if it is iniquitous or unconscionable, or if the principal obligation [5] has been partly or irregularly complied with. This power of the courts is explicitly sanctioned by Article 1229 of the Civil Code which provides: Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. The question of whether a penalty is reasonable or iniquitous is addressed to the sound discretion of the court and depends on several factors, including, but not limited to, the following: the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and [6] relationship of the parties. In this case, the stipulated penalty was reduced by the appellate court for being unconscionable and iniquitous. As provided in the Contract of Lease, private respondent was obligated to pay a monthly rent of P30,000. On the other hand, the stipulated penalty was pegged at P5,000 for each day of delay or P150,000 per month, an amount five times the monthly rent. This penalty was not only exorbitant but also unconscionable, taking into account that private respondents delay in surrendering the leased premises was because of a well-founded belief that its right of preemption to purchase the subject premises had been violated. Considering further that private respondent was an agricultural cooperative, collectively owned by farmers with limited resources, ordering it to pay a penalty of P150,000 per month on top of the monthly rent of P30,000 would seriously deplete its income and drive it to bankruptcy. In Rizal Commercial Banking Corp. [7] vs. Court of Appeals, the Court tempered the penalty charges after taking into account the debtors pitiful financial condition. Accordingly, we rule that the Court of Appeals did not commit any reversible error in the exercise of its discretion when it reduced the award of penalty damages from P5,000 to P1,000 for each day of delay. WHEREFORE, petition is hereby DENIED. The decision of the Court of Appeals reducing the amount of penalty damages against private respondent is AFFIRMED. SO ORDERED.