Cases assignment from title 2 contracts ra1305-1317

1. puig vs. sellner 2.insular life vs. asset builder 3. perez vs. pomar 4, ortigas co., vs. feati bank and asia trust 5, curpoz vs. ca

Republic of the Philippines SUPREME COURT Manila EN BANC DECISION October 18, 1923 G.R. No. L-20013 ANDRES PUIG, plaintiff-appellee, vs. GEO. C. SELLNER and B. A. GREEN, defendants-appellants. Williams and Ferrier for appellants. Salinas and Salinas for appellee. Villamor (Ignacio), J.: This litigation arose from the non-payment of a promissory note signed by the defendants, which is as follows: On or before July 12, 1921, we promise to pay jointly and severally at Manila to the order of D. Andres Puig or his general attorney-in-fact, D. Ramon Salinas, the sum of forty seven thousand pesos (P47,000), Philippine currency, which we received on this date from said Mr. Salinas by way of loan at 10 per cent per annum; and we hereby guarantee our said obligation with five hundred seventy (570) preferred shares of the Manila Improvement Co. of the face value of one hundred pesos (P100) each, which will be issued within fifteen (15) days in the name of Mr. Puig, who shall hold them until we fulfill this obligation. In case we fail to make payment

on July 12, 1921, the shares pledged shall become the property of D. Andres Puig. Manila, July 12, 1920. (Sgd.) Geo. C. Sellner. (Sgd.) B. A. Green. The Honorable Geo. R. Harvey, judge, rendered a carefully prepared decision, sentencing the defendants Geo. C. Sellner and B. A. Green to pay the plaintiff jointly and severally the sum of forty-seven thousand pesos (P47,000), as principal, thirty-five pesos (P35), balance of the interest for the fourth quarter of 1921, the interest on said principal at the rate of ten per cent (10%) per annum from January 1, 1922, until the judgment is paid, and the cost; and ordering, moreover, in the event that the defendants should fail to pay the full amount of the judgment within three (3) months from the date thereof, that the sheriff of this city proceed to sell the five hundred seventy (570) shares pledged at public auction to the highest bidder, after attaching the same and advertising said sale during the legal period in two local newspapers, one in English and another in Spanish, in order that the plaintiff may recover the amount of the judgment after compliance with the formalities prescribed by law. From this judgment the defendants have appealed, and in their brief they assign seven errors, which, to our mind, can be reduced to one, namely, that numbered 2, which is as follows: The trial court erred in not holding that the condition contained in the note, to wit, In case we fail to make payment on July 12, 1921, the shares pledged shall become the property of D. Andres Puig, was valid and binding against the plaintiff, as well as against the defendants. The question as to the validity of a stipulation, such as that now before us, was already decided by the supreme court of Spain in the negative, as may be seen, among others, in a decision dated November 3, 1902, wherein it is said: That while it is true that contracts are binding, whatever may be the form in which they may have been entered into, if the essential conditions required for their validity exist, and that the obligations arising therefrom have the force of law between the contracting parties, who must fulfill them according to the terms thereof, it is likewise evident that these two percepts of articles 1278 and 1091 of the Civil Code are subject to the provisions of article 1255, which does not permit the making of stipulations contrary to law, morals or public order, one of which stipulations would be, according to the general language of article 1859, that wherein it is agreed that the debtor (creditor) may appropriate the thing pledged, as if it were sold to him, by the mere lapse of the term of the contract of loan, and said stipulation being void, under article 1884 of said Code, as to the mortgagee, there is no reasonable ground, in view of the precedents of our old law, for holding it lawful with respect to the pledgee, who in the absence of other conditions validly stipulated may not ignore the requirements of article 1872 in the alienation of the property pledged, for it is a right granted the creditor and can be waived by him, it

is also a guaranty given the debtor, which he should not lose by the will alone of the creditor, or by making a stipulation that is void in law. (94 Jur. Civ., 412, 420.) And in this jurisdiction, a similar question was presented several times to this court of decision. In the case of Mahoney vs. Tuason (39 Phil., 952), it was held: The creditor has no right to appropriate to himself the personal property and chattels pledged, nor he can he make payment by himself and to himself for his own credit with the value of the said property, because he is only permitted to recover his credit from the proceeds of the sale at public auction of the chattels and personal property pledged not in the manner prescribed by article 1872 of the Civil Code but in that provided for in section 14 of the said Act No. 1508, which is the one force. And it was further held: The vice of nullity which vitiates the additional agreement entered into by the contracting parties authorizing the creditor to appropriate the property and effects pledged in payment of his credit does not affect substantially the principal contract of chattel mortgage with regard to its validity and efficacy, for the reason that the principal contract of pledge or chattel mortgage having been perfected it can subsist although the contracting parties have not agreed as to the manner the creditor could recover his credit from the value of the things pledged, in case of the insolvency of the debtor, inasmuch as the law has expressly established the procedure in order that the creditor may not be defrauded or deceived in his right to recover his credit from the proceeds of the chattels retained by him as a security, in case the debtor does not comply with his obligation, because, if the debtor could not pay his debt, there exist no just or legal reason which prevents the creditor from recovering his credit from the proceeds of the effects pledged sold at a sale effected in accordance with law. Adhering, therefore, to the doctrines laid down by this court in the case aforecited, we hold that the judgment appealed from is in accordance with law, and must be, as is hereby, affirmed with costs against the appellants. So ordered. Street, Malcolm, Avancea, Johns and Romualdez, JJ., concur. Johnson, J., took no part.

FIRST DIVISION

[G.R. No. 147410. February 5, 2004]

THE INSULAR LIFE ASSURANCE COMPANY, LTD., petitioner, vs. ASSET BUILDERS CORPORATION, respondent. DECISION
PANGANIBAN, J.:

Where the parties merely exchange offers and counteroffers, no agreement or contract is perfected. A party may withdraw its offer or counteroffer prior to its receipt of the other partys acceptance thereof. To produce an agreement, the offer must be certain and the acceptance timely and absolute.

The Case Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, assailing the September 20, 2000 Decision[2] and the March 7, 2001 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 61607. The dispositive part of the Decision reads as follows:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the [petitioner] is DISMISSED. The Decision of the Court a quo is AFFIRMED.
[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts The appellate court summarized the facts of the case as follows:

Sometime in November, 1992, the Insular Life Assurance Company, Limited, [petitioner], invited companies/corporations engaged in the building construction business to participate in the bidding of [petitioners] proposed Insular Life building in Lucena City. [Petitioner] distributed copies of Bid Document[s], including the general construction x x x contract, with the winning bidder and Bid Proposal Forms[,] and furnished copies of the Instruction to Bidders to participating bidders, containing the rules to be followed in the bidding, including the following rules: (a) all bond proposals shall be accompanied with a bid bond from the Insular General Insurance Company, Inc., in an amount equivalent to ten (10) percent of the bid or five (5) percent of the bid in Managers or Cashiers check payable to Insular

Life, which bid bonds will be returned to the bidder after sixty (60) days from opening of bids or after award of the project, whichever date comes first; (b) the bid shall be valid for sixty (60) days [after] opening of bids[,] but the owner of the project (the [petitioner]) had the option to request the bidder to extend the bid validity period after expiration of the original validity period; [and] (c) the bidder, whose proposal had been deemed acceptable and complying with the requirements of the owner ([petitioner]) and the project, shall be notified in writing to personally appear to execute the Contract Agreements within five (5) days after the receipt of the Notice of Award[,] and that failure on the part of the winning bidder to execute the contract shall constitute a breach of the agreement, as effected by acceptance of the proposal, resulting in the nullification of the award; and that the bond heretofore, offered by the winning bidder shall be retained by the owner ([petitioner]) as payment due for liquidated damages.
[5] [6] [7]

Asset Builders Corporation, [respondent], with four (4) other bidders, namely, Q.K. Calderon Construction [Co., Inc.], Specified Contractors, A.[A.] Alarilla Construction[,] and Serg Construction, submitted their respective bid proposals secured by bid bonds, valid for sixty (60) days. Under its Proposal Form which the [respondent] submitted to the [petitioner], [respondent] bound and obliged itself to enter into aContract with the petitioner within ten (10) days from notice of the award, with good and sufficient securities for the faithful compliance thereof.
[8] [9]

On November 9, 1993, the respective proposals of the bidders were opened. The [petitioner] forwarded a Summary of Bids and Tender Documents to Adrian Wilson International Associate[s], Inc. (AWIA for brevity), [petitioners] designated Project Manager[,] for the proposed Insular Life Building in Lucena City for its evaluation and analysis. AWIA, in due time, submitted a report of its evaluation to the Real Property Division of the [petitioner]. As [could] be gleaned from the Report of AWIA, [respondents] P12,962,845.54 bid was the lowest among the bidders.
[10] [11]

On January 21, 1994, Engineer Pete S. Espiritu (Espiritu for brevity) of the Real Property Department, who was designated as Project Coordinator of the petitioner[,] recommended that [respondent] and the other bidders, Q.K. CALDERON [CONSTRUCTION] CO., INC. AND SPECIFIED CONTRACTORS, be subjected to post-qualification proceedings, including the inspection of their respective offices, equipment, as well as past and present projects, and that said bidders be subjected to credit and financial investigations.
[12]

[Petitioner] concurred with the recommendation of Espiritu and, indeed, postqualification, inspection[,] and evaluations of [respondent] and Q.K. Calderon Construction Co., Inc. were effected. On January 25, 1994, [petitioner], with

concurrence of [respondent], visited [respondents] main office at the Tektite Tower and its past and present projects, i.e., the four (4) and two (2) storey Air Transportation buildings in its compound; the Government Service Insurance System (GSIS) Headquarters Complex; and the National Historical Institute Building, and [respondents] equipment. On February 14, 1994, Espiritu suggested that a bid clarification and negotiation be undertaken with prospective contractors. On February 23, 1994, Abraham Torrijos of [petitioners] Real Property Department (hereinafter referred to as Torrijos) recommended the approval by the Board of Directors of [petitioner] of the award of the general construction of the Proposed Lucena Building, in favor of [respondent], emphasizing that: 2. Asset Builders Corporation is a (sic) AAA category Contractor. It has extensive experience in vertical and horizontal projects. The company [has been] subjected to a post qualification and credit investigation, the results of which are satisfactory and acceptable, thus making it technically competent and financially capable of contracting the work.
[13]

On February 24, 1994, a conference was held by and among the representatives of the [petitioner] and of the [respondent], including [respondents] Operations Manager, Engineer Ramon Abu, for some clarifications. [Petitioner] proposed that [respondent] adjust its bid from P12,961,845.54 to P13,000,000.00 to accommodate the wage increase brought about by Wage Order No. 03, series of 1993, effective December 3, 1993. However, [respondents] representatives were noncommittal, declaring that they had [to] report to the management of the [respondent] the proposal of [petitioners] representatives, for its consideration and approval. Subsequently, the [respondent] agreed to the readjustment of the amount of its bid as proposed by the [petitioner]. On March 9, 1994, Januario L. Flores (Flores for brevity), head of the Real Property Department and Assistant Vice-President of the [petitioner], submitted to Mabini L. Juan, the Chief Operating Officer and Senior Executive Vice-President of the [petitioner], his findings on the post-qualification, evaluation and credit investigation of [respondent], with the recommendation that the award be given to the [respondent]: 2. On the basis of the above very positive indicators, RPD[,] E.L. Mariano, [F. B.] Mariano Associates and Co.[,] and Adrian Wilson Intl Associates, [Inc.] recommen[d] to award the Lucena [p]roject to Asset Builders Corporation. We honestly believe that they will do a good job. 3. For your consideratio[n/a]pproval.
[14]

On March 14, 1994, [Flores] signed a Notice to Proceed, addressed to the [respondent], for the conformity of the latters President, Rogelio P. Centeno. Under the [ultimate] paragraph of the Notice to Proceed, the [respondent] may start its mobilization and proceed with the construction immediately[,] pending execution of the Construction Agreement. The [petitioner prepared] a draft of the contract to be executed by the [petitioner] and the [respondent].
[15]

On the same day, [Torrijos] informed, by letter, Engineer Bernardo A. Sajorda (Sajorda for brevitys sake), Project Manager of AWIA, that [petitioner] had awarded the general construction contract of the proposed Lucena Building to the [respondent] and advised AWIA to coordinate with [respondent] and inform the latter that a pre-construction meeting [would] be held on March 22, 1994 at the job site. A copy of theNotice of Award was appended to said letter. Sajorda forthwith informed Rogelio P. Centeno, the President of [respondent], by Memorandum that, pursuant to the AWARD to [respondent], of the general construction of the Proposed Lucena Building, a pre-construction conference [would] be held on March 22, 1994 at the job site, during which the following will be discussed:
[16] [17]

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Contract Amount and completion time Role of AWIA Project Contractors Key [p]ersonnel [l]ist with [s]ignatures and [p]ositions Channel of [c]ommunications among Architect, Insular Life, ASSET and AWIA [Contractor submittals i.e. Work Schedule, Schedule of] Prices, etc. As-built[s] drawings Submitt[al] of shop drawings prior to use of materials Sanitation Safety programs (first aid kit and hard hats) Night work CAR (Contractors All Ris[k I]nsurance)

12. 13. 14. 15. 16. 17. 18.

Owners review of payrolls, vouchers, etc. (sic) payments etc. Sub-contracting [for] approval of subs. Photographs every month Billings based on actual work accomplishments. Undistributed materials not billable Security measures Tests as required by spec[]s Take note of specific requirements before final payment is made
[18]

The [respondent] received a copy of the Memorandum of Sajorda, on March 17, 1994. On March 18, 1994, the [petitioner] transmitted to the [respondent] the following documents, evidenced by a Transmittal Sheet, received by Roy Roxas, for the [respondent], to enable the latter to secure a Building Permit for the project: ONE (1) LOT DOCUMENTS/PLANS FOR BUILDING PERMIT 4 SETS OF STRUCTURAL COMPUTATION 5 SETS OF SPECS FOR GENERAL CONSTRUCTION 3 SETS OF ELECTRICAL LOAD COMPUTATION 5 COPIES OF PRC ID [&] PTR OF DESIGN ENGRS. 6 SETS OF ELMA PLANS 5 SETS OF [R]MDA PLANS/SPECS
[19]

On March 22, 1994, the Pre-Construction Conference ensued with the representatives of the [petitioner] and its Project Manager and of the [respondent], in the person of its Project Engineer, J.G. Quizon, in attendance: Attendees: CARLOS M. ESPIRITU -AWIA Asst. Project Manager

BERNARDO [A]. SAJORDA -AWIA Project Manager EDMUNDO C. SABATER -AWIA Resident Engineer JANUARIO L. FLORES -IL/RPD Manager J.G. QUIZON -ASSET Project Manager PETE S. ESPIRITU -IL/RPD Project Coordinator ABRAHAM P. TORRIJOS -IL/RPD Asst. Manager

[20]

During the conference, the following were discussed and clarified: 1. Contract Amount and Completion Time: Contract is for P13,000,000.00, to be completed within 210 calendar days; day one to be 5 days after receipt of NTP by the Contractor. Actual site mobilization to be first week of April 1994, per Mr. J.G. Quizon. Issuance of building and other permits being worked out by the Contractor.
[21]

On March 26, 1994, Jacobo G. Quizon, the Project Manager of [respondent], sent to AWIA a letter requesting for the TCT lot description for the purpose of relocation of the monuments and the staking out of the building: We have the honor to request your good office, in relocating the monuments[,] as per TCT lot description[s,] prior to staking out the building[;] likewise, we can do the relocation[,] provided the cost will be reimbursed to the Owner[,] with an approximate fee of P5,000.00 lump sum. Further, problems may occur regarding structur[al] excavation for footing [and footing] tie beams at Grid Line A & 4. As per plan, the proposed depth [of] excavation of about 2.5[0M] along the existing adjacent building walls will expose the CHB footing.
[22]

Thereafter, a Ground Breaking ceremony was held at the project site, with Rogelio B. Centeno, the President of [respondent], [and] Pete S. Espiritu and Januario L. Flores of the [petitioner] in attendance. A billboard announcing the construction of [the] Insular Life Building in Lucena City, with the [respondent] as the General Contractor, was also erected in the project site. However, the [respondent] did not affix its conformity to any Notice of Award, much less commence its construction of the project. Neither did it execute any Construction Agreement. Subsequently, the [respondent] wrote the [petitioner] a letter dated April 5, 1994, informing the [petitioner] that the [respondent would] not be able to undertake the project anymore[,] because the prerequisite paper work and attendant processing could not be fast-trac[k]ed and that, since the previous two (2) weeks, prices had escalated, which rendered its bid unattractive. On April 25, 1994, the [petitioner] wrote a letter to the [respondent], in response to its April 5, 1994 [letter], informing the [respondent] that, in view of the unjust withdrawal of the [respondent] from the project, despite the award of the project to the [respondent], the [petitioner] was impelled to engage the services of another contractor to complete the project[,] without prejudice to further action of the [petitioner] against the [respondent] for its withdrawal, pursuant to Section 10 of the Instruction to Bidders, quoted, infra:
[23]

The exact amount of damages to the Owner due to the failure to execute the Contract may be deemed difficult to determine. Failure, thereof, to execute the Contract within five (5) days after the receipt of the Notice of Award shall cause [the] annulment of the award. The amount of bid bond deposited with the proposal shall be retained by the Owner as payment due for liquidated damages incurred. By way of riposte, the [respondent] sent a letter to the [petitioner] averring that: (a) it never received any written Notice of Award from the [petitioner]; [and] (b) since its bid offer had a lifetime of sixty (60) days from November 9, 1993 or until January 8, 1993 (sic)[,] its offer was automatically withdrawn after said date, since the [petitioner] had not requested the [respondent] for the extension of the lifetime thereof. On December 23, 1994, the [petitioner] filed a complaint against the [respondent], with the Regional Trial Court of Makati City, for Damages, x x x:
[24] [25]

xxx

xxx

xxx

The [petitioner] alleged, inter alia, in its complain[t t]hat the [respondent] was duly notified by AWIA of the award, in its favor, by the [petitioner], of the project[,] but the [respondent] unjustly and arbitrarily withdrew from the project and refused to

execute the Construction Contract with the [petitioner,] which impelled the latter to engage the services of another contractor for the project at the price of P14,500,000.00 and that, consequently, the [petitioner] was obliged to pay the amount of P1,500,000.00 which was [the] difference between the contract price of the project with the [respondent] in the amount of P13,000,000.00 andP14,500,000.00, by way of actual damages or, alternatively, by way of liquidated damages. In its Answer to the complaint, the [respondent] alleged, inter alia, that it never received any Notice of Award or Notice to Proceed; its bid had expired by January 8, 1994, without the [petitioner] asking the [respondent] for the extension thereof[,] and interposed counterclaims for damages against the [petitioner], praying that, after due proceedings, judgment be rendered in its favor, x x x:
[26]

xxx

xxx
[27]

xxx

After due proceedings, the Court a quo rendered a Decision, dated December [5], 1997, in favor of the [respondent] and against the [petitioner], ordering the dismissal of the complaint of the [petitioner] and ordering the latter to pay damages to the [respondent], the dispositive portion of which is quoted, infra: WHEREFORE, judgment is rendered DISMISSING the Complaint with costs against [petitioner]. On the counter-claim, Insular Life Assurance Co., Ltd., is hereby ordered to pay Asset Builders Corporation the sums of Pesos: Five Hundred Thousand (P500,000.00) as compensation for the injury to the latters business standing, and Pesos: Seventy Five Thousand (P75,000.00) by way of attorneys fees and expenses of litigation. Filing fees on the amount of P2,135,000.00 [respondent] sought in the counter-claim shall constitute a first lien on the recovery from [petitioner].
xxx xxx xxx

The [petitioner] interposed its appeal from the Decision of the Court a quo and posed, for [the CAs] resolution, the threshold issues of whether or not: (a) a construction contract was perfected by and between the [petitioner] and the [respondent] for the construction of petitioners building project in Lucena City; (b) the [respondent] waived Section 9 of the Instruction to Bidders and was estopped from claiming that no construction contract was perfected between it and the [petitioner]; [and] (c) the [respondent] was liable for damages to the [petitioner].
[28]

Ruling of the Court of Appeals The CA affirmed the lower courts Decision. According to the appellate courts ruling, the failure of petitioner to prove that it gave respondent a written notice of the formers unqualified acceptance of the latters bid, as required in the Instruction to Bidders, did not give birth to consent. The appellate court explained that when the exact terms desired were not in the offer, any modification or variation therefrom would annul that offer. Furthermore, estoppel did not apply because of petitioners own carelessness or want of diligence. Hence this Petition.[29]

The Issues
I. The Court of Appeals gravely erred in not holding that there exists a valid contract for the construction of the building project between IL[30] and ABC.[31] II. The Court of Appeals gravely erred in not holding that IL has notified ABC of the award of the construction of the building project to it before it withdrew its bid proposal. III. The Court of Appeals gravely erred in not holding that ABCs withdrawal from the contract constituted a breach of that contract. IV. The Court of Appeals gravely erred in not holding that the contract had been perfected and that its consummation stage [had] in fact been commenced. V. The Court of Appeals gravely erred in not holding that ABC is estopped from claiming the contract was not perfected. VI. The Court of Appeals gravely erred in not holding that ABC, instead of IL, is liable for damages[,] and that, at worst, there is no evidence that supported the award in favor of ABC. VII. In any event, there is no basis to penalize IL for going to court.[32]

There is really only one major issue: Was there a valid contract between petitioner and respondent? The Courts Ruling The Petition is unmeritorious.

Sole Issue: Existence of a Contract

No Notice of Award, No Contract It is elementary that, being consensual,[33] a contract[34] is perfected[35] by mere consent.[36] From the moment of a meeting[37] of the offer and the acceptance[38] upon the object and the cause that would constitute the contract,[39] consent arises.[40] However, the offer must be certain[41] and the acceptance seasonable and absolute; [42] if qualified,[43] the acceptance[44] would merely constitute a counter-offer.[45] Equally important are the three distinct stages of a contract -- its preparation or negotiation, its perfection, and finally, its consummation.[46] Negotiation begins when the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. The perfection or birth of the contract[47] occurs when they agree upon the essential elements thereof.[48] The last stage is its consummation, wherein they fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.[49] In the case at bar, the parties did not get past the negotiation stage. The events that transpired between them were indeed initiated by a formal offer, but this policitacin was merely an imperfect promise that could not be considered a binding commitment.[50] At any time, either of the prospective contracting parties may stop the negotiation and withdraw the offer. In the present case, in fact, there was only an offer and a counteroffer[51] that did not sum up to any final arrangement containing the elements of a contract. [52] Clearly, no meeting of minds was established.[53] First, only after the bid bond had lapsed were post-qualification proceedings, inspections, and credit investigations conducted. Second, the inter-office memoranda issued by petitioner, as well as other memoranda between it and its own project manager, were simply documents to which respondent was not privy. Third, petitioner proposed a counteroffer to adjust respondents bid to accommodate the wage increase of December 3, 1993. In effect, the rule on the concurrence of the offer and its acceptance [54] did not apply, because other matters or details -- in addition to the subject matter and the consideration -- would still be stipulated and agreed upon by the parties. [55] While there was an initial offer made, there was no acceptance; but when there allegedly came an acceptance that could have had a binding effect, the offer was already lacking. The offer and its acceptance did not meet to give birth to a contract.[56] Moreover, the Civil Code provides that no contract shall arise unless its acceptance is communicated to the offeror.[57] That is, the mere determination to accept the proposal of a bidder does not constitute a contract; that decision must be communicated to the bidder.[58] Although consent may be either express or implied, [59] the Instruction to Bidders prepared by petitioner itselfexpressly required (1) a formal acceptance and (2) a period within which such acceptance was to be made known to respondent. The effect of giving the Notice of Award to the latter would have been the perfection of the contract.[60] No such acceptance was communicated to respondent; therefore, no consent was given. Without that express manifestation, as required by the terms of its

proposal, there was no contract. The due execution of documents representing a contract is one thing, but its perfection is another.[61] There is no issue as regards the subject of the contract or the cause of the obligation. The controversy lies in the consent -- whether there was an acceptance by petitioner of the offer made by respondent; and, if so, whether that acceptance was communicated to the latter, thereby perfecting the contract. The period given to the former within which to accept the offer was not itself founded upon or supported by any consideration. Therefore, under the law, respondent still had the freedom and the right to withdraw the offer by communicating such withdrawal to petitioner [62]before the latters acceptance of the offer;[63] or, if the offer has been accepted,[64] before the acceptance came to be known by respondent.[65] Petitioner avers that an acceptance was made, but this allegation has not been proven. Respondent had no knowledge of such acceptance when it communicated its withdrawal to the former. Notably, this right to withdraw was not exercised whimsically or arbitrarily by respondent. It did send a formal letter on April 5, 1994, expressing and explaining its withdrawal. As of that date, the decision to award the contract had not been made according to the terms of the Instruction to Bidders. Besides, the subsequent acts between the parties did not even serve as a confirmation of that decision. The existence of a second proposal -- petitioners request for an adjustment of the bid to accommodate the wage increase -- in fact belies the perfection of any contract arising from the first.[66] To the Courts mind, there was indeed no acceptance of the offer made by respondent. Such failure to comply with a condition imposed for the perfection of a contract resulted in failure of the contract.[67]

Subsistence of an Offer Even Without a Bid Bond Certainly, the bid bond is an indispensable requirement for the validation of a bid proposal.[68] This requisite ensures the good faith of bidders and binds them to enter into a contract with the owner, should their proposal be accepted.[69] One who submits a bid not only signifies assent to the terms and conditions of a proposal, but impliedly binds oneself to them, if and when the bid is considered. The Invitation to Bidders even provided that incomplete proposals might be sufficient cause for their rejection. [70] If mere insufficiency of a bond required of a bidder is a ground for rejection, a fortiori, all the more so is the total want thereof. The proposal of respondent was merely validated by its bid bond, which was considered by petitioner. The expiration of the bond on January 8, 1994,[71] did not mean that the bid also lapsed on the same date. The bond, which was an accessory, merely guaranteed the performance of the principal obligation and could not exist without the latter.[72] The former was given for the benefit of petitioner, which could legally waive it. The bid continued without a bond, but still no formal acceptance was made. Again, on that basis, no contract was perfected.

In the interpretation of a contract, the literal meaning of its stipulations controls, if their terms are clear and leave no doubt as to the intention of the contracting parties.[73] When there is no ambiguity in the language of a contract, there is no room for construction,[74] only compliance.[75] This rule applies to the Instruction to Bidders, which provides that failure to execute the Contract shall constitute a breach of agreement as effected by acceptance of the proposal.[76] The language is clear and, like contracts in general, is the law between the parties.[77] The contract must be fulfilled according to its literal sense.[78]

No Estoppel As aptly held by the appellate court, respondents acts subsequent to the expiration of the bid bond did not constitute a waiver of Section 9 of the Instruction to Bidders. To be valid and effective, waivers must be couched in clear and unequivocal terms, leaving no doubt as to the intention of those giving up a right or a benefit that legally pertains to them.[79] Respondent, contrary to the claim of petitioner, despite its repeated requests, never received a copy of the Notice of Award. Indeed, the former never adopted an inconsistent position, attitude or course of conduct that caused loss or injury to the latter.[80] The attendance of respondent in the pre-construction conference and the ground-breaking ceremony was part of the negotiation process. Thus, petitioners claim of estoppel against it could not be applied. Estoppel cannot be sustained by mere argument or doubtful inference; it must be clearly proved in all its essential elements by clear, convincing and satisfactory evidence.[81] It is hardly separable from the waiver of a right. [82] The party claiming estoppel must show the following elements: (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (3) action or inaction based thereon of such character as to change the position or status of the party claiming the estoppel, to his injury, detriment or prejudice.[83] None of these elements was proven. First, petitioner had the knowledge and the means of knowledge of the truth as to the facts in question. It had the means of knowing if respondent had been served a copy of the Notice of Award, yet the former did not preserve a copy of such Notice, which supposedly bore the signature of the latters employee who had received it. Petitioner did not even enter in its corporate logbooks the release to and receipt by respondent of that copy. The latter had every reason to withdraw its bid, given that the prerequisite paper work and attendant processing could not be fast-tracked.[84] Second, respondents conduct and statements were always consistent and reliable. The manner of acceptance of all bids was prescribed by petitioner itself. Applying Article 1321 of the Civil Code, such prescription must be complied with,[85] yet it did not follow its own rules. Of no moment was its reliance in good faith upon respondent. Good faith is always presumed, unless contrary evidence is adduced.[86]

Third, the action or inaction of petitioner that caused its own injury was its own fault. The written Notice of Award, which constituted the acceptance of the proposal, was a sine qua non to the perfection of the contract.[87] The misplacement of such vital document was inexcusable. Without it, there was no contract. Moreover, the March 14, 1994 Notice to Proceed clearly stated that its issuance would depend upon the execution of the construction agreement. Estoppel is a shield against injustice; the party invoking its protection should not be allowed to use it to conceal its own lack of diligence [88] or want of reasonable care and circumspection.[89] WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Carpio, JJ., concur. Azcuna, J., on official leave.
Republic of the Philippines SUPREME COURT Manila EN BANC November 16, 1903 G.R. No. 1299 VICENTE PEREZ, plaintiff-appellee, vs. EUGENIO POMAR, Agent of the Compaia General de Tabacos, defendantappellant. Francisco Dominguez for appellant. Ledesma, Sumulong and Quintos for appellee. TORRES, J.: In a decision dated February 9, 1903, the judge of the Sixth Judicial District, deciding a case brought by the plaintiff against the defendant for the recovery of wages due and unpaid, gave judgment against the latter for the sum of $600 and the costs of suit, less the sum of $50, Mexican. On August 27, 1902, Don Vicente Perez filed in the Court of First Instance of Laguna a complaint, which was amended on the 17th of January of this year, asking that the court determine the amount due the plaintiff, at the customary rate of compensation for interpreting in these Islands, for services rendered in the Tabacalera Company, and that, in view of the circumstances of the case, judgment be rendered in his favor for such sum. The complaint also asked that the defendant be condemned to the payment of damages in the sum of $3,200, gold, together

with the costs of suit. In this complaint it was alleged that Don Eugenio Pomar, as general agent of the Compaia General de Tabacos in the said province, verbally requested the plaintiff on the 8th of December, 1901, to act as interpreter between himself and the military authorities; that after the date mentioned the plaintiff continued to render such services up to and including May 31, 1902; that he had accompanied the defendant, Pomar, during that time at conferences between the latter and the colonel commanding the local garrison, and with various officers and doctors residing in the capital, and at conferences with Captain Lemen in the town of Pilar, and with the major in command at the town of Pagsanjan, concerning the shipment of goods from Manila, and with respect to Pagsanjan to this city; that the plaintiff during this period held himself in readiness to render services whenever required; that on this account his private business, and especially a soap factory established in the capital, was entirely abandoned; that to the end that such services might be punctually rendered, the agent, Pomar, assured him that the Tabacalera Company always generously repaid services rendered it, and that he therefore did not trouble himself about his inability to devote the necessary amount of time to his business, the defendant going so far as to make him flattering promises of employment with the company, which he did not accept; that these statements were made in the absence of witnesses and that therefore his only proof as to the same was Mr. Pomars word as a gentleman; that the employees of the company did not understand English, and by reason of the plaintiffs mediation between the agent, and the military authorities large profits were obtained, as would appear from the account and letterpress books of the agency corresponding to those dates. In the amended complaint it was added that the defendant, on behalf of the company, offered to renumerate the plaintiff for the services rendered in the most advantageous manner in which such services are compensated, in view of the circumstances under which they were requested; and that the plaintiff, by rendering the company such services, was obliged to abandon his own business, the manufacture of soap, and thereby suffered damages in the sum of $3,200, United States currency. The defendant, on the 25th of September, 1902, filed an answer asking for the dismissal of the complaint, with costs to the plaintiff. In his answer the defendant denied the allegation in the first paragraph of the complaint, stating that it was wholly untrue that the company, and the defendant as its agent, had solicited the services of the plaintiff as interpreter before the military authorities for the period stated, or for any other period, or that the plaintiff had accompanied Pomar at the conferences mentioned, concerning shipments from Manila and exports from some of the towns of the province to this capital. He stated that he especially denied paragraphs 2 of the complaint, as it was absolutely untrue that the plaintiff had been at the disposal of the defendant for the purpose of rendering such services;

that he therefore had not been obliged to abandon his occupation or his soap factory, and that the statement that an offer of employment with the company had been made to him was false. The defendant also denied that through the mediation of the plaintiff the company and himself had obtained large profits. The statements in paragraphs 6, 7, 8, and 9 of the complaint were also denied. The defendant stated that, on account of the friendly relations which sprang up between the plaintiff and himself, the former borrowed from him from time to time money amounting to $175 for the purposes of his business, and that he had also delivered to the plaintiff 36 arrobas of oil worth $106, and three packages of resin for use in coloring his soap; that the plaintiff accompanied the defendant to Pagsanjan, Pilar, and other towns when the latter made business trips to them for the purpose of extending his business and mercantile relations therein; that on these excursions, as well as on private and official visits which he had to make, the plaintiff occasionally accompanied him through motives of friendship, and especially because of the free transportation given him, and not on behalf of the company of which he was never interpreter and for which he rendered no services; that the plaintiff in these conferences acted as interpreter of his own free will, without being requested to do so by the defendant and without any offer of payment or compensation; that therefore there existed no legal relation whatever between the company and the plaintiff, and that the defendant, when accepting the spontaneous, voluntary and officious services of the plaintiff, did so in his private capacity and not as agent of the company, and that it was for this reason that he refused to enter into negotiations with the plaintiff, he being in no way indebted to the latter. The defendant concluded by saying that he answered in his individual capacity. A complaint having been filed against the Compaia General de Tabacos and Don Eugenio Pomar, its agent in the Province of Laguna, the latter, having been duly summoned, replied to the complaint, which was subsequently amended, and stated that he made such reply in his individual capacity and not as agent of the company, with which the plaintiff had had no legal relations. The suit was instituted between the plaintiff and Pomar, who, as such, accepted the issue and entered into the controversy without objection, opposed the claim of the plaintiff, and concluded by asking that the complaint be dismissed, with the costs to the plaintiff. Under these circumstances and construing the statutes liberally, we think it proper to decide the case pending between both parties in accordance with law and the strict principles of justice. From the oral testimony introduced at the trial, it appears that the plaintiff, Perez, did on various occasions render Don Eugenio Pomar services as interpreter of English; and that he obtained passes and accompanied the defendant upon his journeys to some of the towns in the Province of Laguna. It does not appear from

the evidence, however, that the plaintiff was constantly at the disposal of the defendant during the period of six months, or that he rendered services as such interpreter continuously and daily during that period of time. It does not appear that any written contract was entered into between the parties for the employment of the plaintiff as interpreter, or that any other innominate contract was entered into; but whether the plaintiffs services were solicited or whether they were offered to the defendant for his assistance, inasmuch as these services were accepted and made use of by the latter, we must consider that there was a tacit and mutual consent as to the rendition of the services. This gives rise to the obligation upon the person benefited by the services to make compensation therefor, since the bilateral obligation to render services as interpreter, on the one hand, and on the other to pay for the services rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code). The supreme court of Spain in its decision of February 12, 1889, holds, among other things, that not only is there an express and tacit consent which produces real contract but there is also a presumptive consent which is the basis of quasi contracts, this giving rise to the multiple juridical relations which result in obligations for the delivery of a thing or the rendition of a service. Notwithstanding the denial of that defendant, it is unquestionable that it was with his consent that the plaintiff rendered him services as interpreter, thus aiding him at a time when, owing to the existence of an insurrection in the province, the most disturbed conditions prevailed. It follows, hence, that there was consent on the part of both in the rendition of such services as interpreter. Such service not being contrary to law or to good custom, it was a perfectly licit object of contract, and such a contract must necessarily have existed between the parties, as alleged by the plaintiff. (Art. 1271, Civil Code.) The consideration for the contract is also evident, it being clear that a mutual benefit was derived in consequence of the service rendered. It is to be supposed that the defendant accepted these services and that the plaintiff in turn rendered them with the expectation that the benefit would be reciprocal. This shows the concurrence of the three elements necessary under article 1261 of the Civil Code to constitute a contract of lease of service, or other innominate contract, from which an obligation has arisen and whose fulfillment is now demanded. Article 1254 of the Civil Code provides that a contract exists the moment that one or more persons consent to be bound, with respect to another or others, to deliver some thing or to render some service. Article 1255 provides that the contracting parties may establish such covenants, terms, and conditions as they deem convenient, provided they are not contrary to law, morals or public policy. Whether the service was solicited or offered, the fact remains that Perez rendered to Pomar

services as interpreter. As it does not appear that he did this gratuitously, the duty is imposed upon the defendant, having accepted the benefit of the service, to pay a just compensation therefor, by virtue of the innominate contract of facio ut des implicitly established. The obligations arising from this contract are reciprocal, and, apart from the general provisions with respect to contracts and obligations, the special provisions concerning contracts for lease of services are applicable by analogy. In this special contract, as determined by article 1544 of the Civil Code, one of the parties undertakes to render the other a service for a price certain. The tacit agreement and consent of both parties with respect to the service rendered by the plaintiff, and the reciprocal benefits accruing to each, are the best evidence of the fact that there was an implied contract sufficient to create a legal bond, from which arose enforceable rights and obligations of a bilateral character. In contracts the will of the contracting parties is law, this being a legal doctrine based upon the provisions of articles 1254, 1258, 1262, 1278, 1281, 1282, and 1289 of the Civil Code. If it is a fact sufficiently proven that the defendant, Pomar, on various occasions consented to accept an interpreters services, rendered in his behalf and not gratuitously, it is but just that he should pay a reasonable remuneration therefor, because it is a well-known principle of law that no one should be permitted to enrich himself to the damage of another. With respect to the value of the services rendered on different occasions, the most important of which was the first, as it does not appear that any salary was fixed upon by the parties at the time the services were accepted, it devolves upon the court to determine, upon the evidence presented, the value of such services, taking into consideration the few occasions on which they were rendered. The fact that no fixed or determined consideration for the rendition of the services was agreed upon does not necessarily involve a violation of the provisions of article 1544 of the Civil Code, because at the time of the agreement this consideration was capable of being made certain. The discretionary power of the court, conferred upon it by the law, is also supported by the decisions of the supreme court of Spain, among which may be cited that of October 18, 1899, which holds as follows: That as stated in the article of the Code cited, which follows the provisions of law 1, title 8, of the fifth partida, the contract for lease of services is one in which one of the parties undertakes to make some thing or to render some service to the other for a certain price, the existence of such a price being understood, as this court has held not only when the price has been expressly agreed upon but also when it may be determined by the custom and frequent use of the place in which such services were rendered.

No exception was taken to the judgment below by the plaintiff on account of the rejection of his claim for damages. The decision upon this point is, furthermore, correct. Upon the supposition that the recovery of the plaintiff should not exceed 200 Mexican pesos, owing to the inconsiderable number of times he acted as interpreter, it is evident that the contract thus implicitly entered into was not required to be in writing and that therefore it does not fall within article 1280 of the Civil Code; nor is it included within the provisions of section 335 of the Code of Civil Procedure, as this innominate contract is not covered by that section. The contract of lease of services is not included in any of the cases expressly designated by that section of the procedural law, as affirmed by the appellant. The interpretation of the other articles of the Code alleged to have been infringed has also been stated fully in this opinion. For the reasons stated, we are of the opinion that judgment should be rendered against Don Eugenio Pomar for the payment to the plaintiff of the sum of 200 Mexican pesos, from which will be deducted the sum of 50 pesos is made as to the costs of this instance. The judgment below is accordingly affirmed in so far as it agrees with this opinion, and reversed in so far as it may be in conflict therewith. Judgment will be entered accordingly twenty days after this decision is filed. Arellano, C.J., Willard, and Mapa, JJ., concur.

Separate Opinions
MCDONOUGH, J., dissenting: I dissent from the opinion of the majority. In my opinion there is no legal evidence in the case from which the court may conclude that the recovery should be 200 Mexican pesos. I am therefore in favor of affirming the judgment.

Perez vs. Pomar (G.R. No. L-1299, November 16, 1903)

I wish to digest the said case below, for legal research purposes of the visitors of this blog. Thus:

Facts:

The petitioner Don Vicente Perez filed before the Court of First Instance of Laguna a complaint asking the court to determine the amount due to him for the services he rendered in the Tabacalera Company and that the defendant Eugenio Pomar be condemned to the payment of damages amounting to $3,200, gold, together with the costs of suit. Prior to this event, the petitioner was asked to be an English interpreter between the defendant and the military authorities and that after that incident, the petitioner continued to render his services to the respondent and that he obtained passes and accompanied Pomar upon his journeys to some of the towns in Province of Laguna( e.g conferences between the respondent and the colonel commanding the local garrison, conferences with Captain Lemen in the town of Pilar, major in command in Pagsanjan about the shipment of goods from Manila) and that the plaintiff was assured by the respondent that in every rendered service to the said company, there would be such payment. Thus, caused him to abandon his soap business and suffered damages in the sum of $3,200. The defendant filed for dismissal of the complaint denying the allegations stated by the petitioner. He also stated that Perez borrowed from time to time money amounting to $175 for his soap business, that Perez purposes in accompanying him is to extend his business and mercantile relations, free transportation, and that Perez

had acted as interpreter of his own free will without any offer of payment and therefore no legal relation between them existed.

Issue: Whether or not the respondent is oblige to pay the continued service rendered by the petitioner.

Held: Yes. The Court decision is that the judgement should be rendered against Don Eugenio Pomar for the payment to the plaintiff of the sum of 200 Mexican pesos.

Ratio: The Court ruled out that if there is a tacit and mutual consent as to the rendition of the services, the defendant is still obliged to pay such compensation to the petitioner even if there is no written contract entered between the two parties on the basis of quasi-contract. When one party knowingly receives something for nothing, the courts may impose a quasi contract. Under a quasi contract, neither party is originally

intended to create an agreement. Instead, an arrangement is imposed by a judge to rectify an occurrence of unjust enrichment. On the services rendered by the petitioner in the province of Laguna, it follows that there was a bilateral obligation on the part of both parties because the defendant accepted the benefit of the service rendered by the petitioner and that in turn the petitioner expected him to pay his rendition of service. Provided in Article 22 of the Civil Code, Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. The fact that the defendant consented to accept an interpreter's services on various occasions, rendered in his behalf and not considered as free, it is just that he should pay the reasonable payment because it is wellknown principle of law that no one should be permitted to enrich himself to the damage of another.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-24670 December 14, 1979

ORTIGAS & CO., LIMITED PARTNERSHIP, plaintiff-appellant, vs. FEATI BANK AND TRUST CO., defendant-appellee. Ramirez & Ortigas for appellant. Taada, Teehankee & Carreon for appellee.

SANTOS, J.: An appeal interposed on June 23, 1965 by plaintiff-appellant, Ortigas & Co., Limited Partnership, from the decision of the Court of First Instance of Rizal, Branch VI, at Pasig, Hon. Andres Reyes presiding, which dismissed its complaint in Civil Case No. 7706, entitled, "Ortigas & Company, Limited Partnership, plaintiff, v. Feati Bank and Trust Company, defendant," for lack of merit. The following facts a reproduction of the lower court's findings, which, in turn, are based on a stipulation of facts entered into by the parties are not disputed. Plaintiff (formerly known as "Ortigas, Madrigal y Cia") is a limited partnership and defendant Feati Bank and Trust Co., is a corporation duly organized and existing in accordance with the laws of the Philippines. Plaintiff is engaged in real estate business, developing and selling lots to the public, particularly the Highway Hills Subdivision along Epifanio de los Santos Avenue, Mandaluyong, Rizal. 1 On March 4, 1952, plaintiff, as vendor, and Augusto Padilla y Angeles and Natividad Angeles, as vendees, entered into separate agreements of sale on installments over two parcels of land, known as Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated at Mandaluyong, Rizal. On July 19, 1962, the said vendees transferred their rights and interests over the aforesaid lots in favor of one Emma Chavez. Upon completion of payment of the purchase price, the plaintiff executed the corresponding deeds of sale in favor of Emma Chavez. Both the agreements (of sale on installment) and the deeds of sale contained the stipulations or restrictions that: 1. The parcel of land subject of this deed of sale shall be used the Buyer exclusively for residential purposes, and she shall not be entitled to take or remove soil, stones or gravel from it or any other lots belonging to the Seller.
2. All buildings and other improvements (except the fence) which may be constructed at any time in said lot must be, (a) of strong materials and properly painted, (b) provided with modern sanitary installations connected either to the public sewer or to an approved

septic tank, and (c) shall not be at a distance of less than two (2) meters from its 2 boundary lines.

The above restrictions were later annotated in TCT Nos. 101509 and 101511 of the Register of Deeds of Rizal, covering the said lots and issued in the name of Emma Chavez. 3 Eventually, defendant-appellee acquired Lots Nos. 5 and 6, with TCT Nos. 101613 and 106092 issued in its name, respectively and the building restrictions were also annotated therein. 4 Defendant-appellee bought Lot No. 5 directly from Emma Chavez, "free from all liens and encumbrances as stated in Annex 'D', 5 while Lot No. 6 was acquired from Republic Flour Mills through a "Deed of Exchange," Annex "E". 6 TCT No. 101719 in the name of Republic Flour Mills likewise contained the same restrictions, although defendant-appellee claims that Republic Flour Mills purchased the said Lot No. 6 "in good faith. free from all liens and encumbrances," as stated in the Deed of Sale, Annex "F" 7 between it and Emma Chavez. Plaintiff-appellant claims that the restrictions annotated on TCT Nos. 101509, 101511, 101719, 101613, and 106092 were imposed as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision which forms part of the big landed estate of plaintiff-appellant where commercial and industrial sites are also designated or established. 8 Defendant-appellee, upon the other hand, maintains that the area along the western part of Epifanio de los Santos Avenue (EDSA) from Shaw Boulevard to Pasig River, has been declared a commercial and industrial zone, per Resolution No. 27, dated February 4, 1960 of the Municipal Council of Mandaluyong, Rizal. 9 It alleges that plaintiff-appellant 'completely sold and transferred to third persons all lots in said subdivision facing Epifanio de los Santos Avenue" 10 and the subject lots thereunder were acquired by it "only on July 23, 1962 or more than two (2) years after the area ... had been declared a commercial and industrial zone ... 11 On or about May 5, 1963, defendant-appellee began laying the foundation and commenced the construction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes, but which defendant-appellee claims could also be devoted to, and used exclusively for, residential purposes. The following day, plaintiffappellant demanded in writing that defendant-appellee stop the construction of the commerical building on the said lots. The latter refused to comply with the demand, contending that the building was being constructed in accordance with the zoning regulations, defendant-appellee having filed building and planning permit applications with the Municipality of Mandaluyong, and it had accordingly obtained building and planning permits to proceed with the construction. 12

On the basis of the foregoing facts, Civil Case No. 7706, supra, was submitted in the lower court for decision. The complaint sought, among other things, the issuance of "a writ of preliminary injunction ... restraining and enjoining defendant, its agents, assigns, and those acting on its or their behalf from continuing or completing the construction of a commercial bank building in the premises ... involved, with the view to commanding the defendant to observe and comply with the building restrictions annotated in the defendant's transfer certificate of title." In deciding the said case, the trial court considered, as the fundamental issue, whether or not the resolution of the Municipal Council of Mandaluyong declaring Lots Nos. 5 and 6, among others, as part of the commercial and industrial zone of the municipality, prevailed over the building restrictions imposed by plaintiffappellant on the lots in question. 13 The records do not show that a writ of preliminary injunction was issued. The trial court upheld the defendant-appellee and dismissed the complaint, holding that the subject restrictions were subordinate to Municipal Resolution No. 27, supra. It predicated its conclusion on the exercise of police power of the said municipality, and stressed that private interest should "bow down to general interest and welfare. " In short, it upheld the classification by the Municipal Council of the area along Epifanio de los Santos Avenue as a commercial and industrial zone, and held that the same rendered "ineffective and unenforceable" the restrictions in question as against defendant-appellee. 14 The trial court decision further emphasized that it "assumes said resolution to be valid, considering that there is no issue raised by either of the parties as to whether the same is null and void. 15 On March 2, 1965, plaintiff-appellant filed a motion for reconsideration of the above decision, 16 which motion was opposed by defendant-appellee on March 17, 1965. 17 It averred, among others, in the motion for reconsideration that defendant- appellee "was duty bound to comply with the conditions of the contract of sale in its favor, which conditions were duly annotated in the Transfer Certificates of Title issued in her (Emma Chavez) favor." It also invited the trial court's attention to its claim that the Municipal Council had (no) power to nullify the contractual obligations assumed by the defendant corporation." 18 The trial court denied the motion for reconsideration in its order of March 26, 1965. 19 On April 2, 1965 plaintiff-appellant filed its notice of appeal from the decision dismissing the complaint and from the order of March 26, 1965 denying the motion for reconsideration, its record on appeal, and a cash appeal bond." 20 On

April 14, the appeal was given due course 21 and the records of the case were elevated directly to this Court, since only questions of law are raised. 22 Plaintiff-appellant alleges in its brief that the trial court erred I. When it sustained the view that Resolution No. 27, series of 1960 of the Municipal Council of Mandaluyong, Rizal declaring Lots Nos. 5 and 6, among others, as part of the commercial and industrial zone, is valid because it did so in the exercise of its police power; and
II. When it failed to consider whether or not the Municipal Council had the power to nullify the contractual obligations assumed by defendant-appellee and when it did not make a finding that the building was erected along the property line, when it should have been 23 erected two meters away from said property line.

The defendant-appellee submitted its counter-assignment of errors. In this connection, We already had occasion to hold in Relativo v. Castro 24 that "(I)t is not incumbent on the appellee, who occupies a purely defensive position, and is seeking no affirmative relief, to make assignments of error, " The only issues to be resolved, therefore, are: (1) whether Resolution No. 27 s1960 is a valid exercise of police power; and (2) whether the said Resolution can nullify or supersede the contractual obligations assumed by defendant-appellee. 1. The contention that the trial court erred in sustaining the validity of Resolution No. 27 as an exercise of police power is without merit. In the first place, the validity of the said resolution was never questioned before it. The rule is that the question of law or of fact which may be included in the appellant's assignment of errors must be those which have been raised in the court below, and are within the issues framed by the parties. 25 The object of requiring the parties to present all questions and issues to the lower court before they can be presented to the appellate court is to enable the lower court to pass thereon, so that the appellate court upon appeal may determine whether or not such ruling was erroneous. The requirement is in furtherance of justice in that the other party may not be taken by surprise. 26 The rule against the practice of blowing "hot and cold" by assuming one position in the trial court and another on appeal will, in the words of Elliot, prevent deception. 27 For it is well-settled that issues or defenses not raised 28 or properly litigated 29 or pleaded 30 in the Court below cannot be raised or entertained on appeal. In this particular case, the validity of the resolution was admitted at least impliedly, in the stipulation of facts below. when plaintiff-appellant did not dispute the same. The only controversy then as stated by the trial court was whether or not the resolution of the Municipal Council of Mandaluyong ... which declared lots

Nos. 4 and 5 among others, as a part of the commercial and industrial zone of the municipality, prevails over the restrictions constituting as encumbrances on the lots in question. 31 Having admitted the validity of the subject resolution below, even if impliedly, plaintiff-appellant cannot now change its position on appeal. But, assuming arguendo that it is not yet too late in the day for plaintiff-appellant to raise the issue of the invalidity of the municipal resolution in question, We are of the opinion that its posture is unsustainable. Section 3 of R.A. No. 2264, otherwise known as the Local Autonomy Act," 32 empowers a Municipal Council "to adopt zoning and subdivision ordinances or regulations"; 33 for the municipality. Clearly, the law does not restrict the exercise of the power through an ordinance. Therefore, granting that Resolution No. 27 is not an ordinance, it certainly is a regulatory measure within the intendment or ambit of the word "regulation" under the provision. As a matter of fact the same section declares that the power exists "(A)ny provision of law to the contrary notwithstanding ... " An examination of Section 12 of the same law 34 which prescribes the rules for its interpretation likewise reveals that the implied power of a municipality should be "liberally construed in its favor" and that "(A)ny fair and reasonable doubt as to the existence of the power should be interpreted in favor of the local government and it shall be presumed to exist." The same section further mandates that the general welfare clause be liberally interpreted in case of doubt, so as to give more power to local governments in promoting the economic conditions, social welfare and material progress of the people in the community. The only exceptions under Section 12 are existing vested rights arising out of a contract between "a province, city or municipality on one hand and a third party on the other," in which case the original terms and provisions of the contract should govern. The exceptions, clearly, do not apply in the case at bar. 2. With regard to the contention that said resolution cannot nullify the contractual obligations assumed by the defendant-appellee referring to the restrictions incorporated in the deeds of sale and later in the corresponding Transfer Certificates of Title issued to defendant-appellee it should be stressed, that while non-impairment of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be reconciled with the legitimate exercise of police power, i.e., "the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the people. 35 Invariably described as "the most essential, insistent, and illimitable of powers" 36 and "in a sense, the greatest and most powerful attribute of government, 37 the exercise of the power may be judicially inquired into and corrected only if it is capricious, 'whimsical, unjust or unreasonable, there having been a denial of due process or a violation of any other applicable constitutional guarantee. 38 As this Court held through Justice Jose P. Bengzon in Philippine

Long Distance Company vs. City of Davao, et al. 39 police power "is elastic and must be responsive to various social conditions; it is not, confined within narrow circumscriptions of precedents resting on past conditions; it must follow the legal progress of a democratic way of life." We were even more emphatic in Vda. de Genuino vs. The Court of Agrarian Relations, et al., 40 when We declared: "We do not see why public welfare when clashing with the individual right to property should not be made to prevail through the state's exercise of its police power. Resolution No. 27, s-1960 declaring the western part of highway 54, now E. de los Santos Avenue (EDSA, for short) from Shaw Boulevard to the Pasig River as an industrial and commercial zone, was obviously passed by the Municipal Council of Mandaluyong, Rizal in the exercise of police power to safeguard or promote the health, safety, peace, good order and general welfare of the people in the locality, Judicial notice may be taken of the conditions prevailing in the area, especially where lots Nos. 5 and 6 are located. The lots themselves not only front the highway; industrial and commercial complexes have flourished about the place. EDSA, a main traffic artery which runs through several cities and municipalities in the Metro Manila area, supports an endless stream of traffic and the resulting activity, noise and pollution are hardly conducive to the health, safety or welfare of the residents in its route. Having been expressly granted the power to adopt zoning and subdivision ordinances or regulations, the municipality of Mandaluyong, through its Municipal 'council, was reasonably, if not perfectly, justified under the circumstances, in passing the subject resolution. The scope of police power keeps expanding as civilization advances, stressed this Court, speaking thru Justice Laurel in the leading case of Calalang v. Williams et al., 41 ThusAs was said in the case of Dobbins v. Los Angeles (195 US 223, 238 49 L. ed. 169), 'the right to exercise the police power is a continuing one, and a business lawful today may in the future, because of changed situation, the growth of population or other causes, become a menace to the public health and welfare, and be required to yield to the public good.' And in People v. Pomar (46 Phil. 440), it was observed that 'advancing civilization is bringing within the scope of police power of the state today things which were not thought of as being with in such power yesterday. The development of civilization), the rapidly increasing population, the growth of public opinion, with an increasing desire on the part of the masses and of the government to look after and care for the interests of the individuals of the state, have brought within the police power many questions for 42 regulation which formerly were not so considered. (Emphasis, supplied.)

Thus, the state, in order to promote the general welfare, may interfere with personal liberty, with property, and with business and occupations. Persons may be subjected to all kinds of restraints and burdens, in order to secure the general comfort health and prosperity of the state 43 and to this fundamental aim of our Government, the rights of the individual are subordinated. 44

The need for reconciling the non-impairment clause of the Constitution and the valid exercise of police power may also be gleaned from Helvering v. Davis 45 wherein Mr. Justice Cardozo, speaking for the Court, resolved the conflict "between one welfare and another, between particular and general, thus
Nor is the concept of the general welfare static. Needs that were narrow or parochial a century ago may be interwoven in our day with the well-being of the nation What is critical 46 or urgent changes with the times.

The motives behind the passage of the questioned resolution being reasonable, and it being a " legitimate response to a felt public need," 47 not whimsical or oppressive, the non-impairment of contracts clause of the Constitution will not bar the municipality's proper exercise of the power. Now Chief Justice Fernando puts it aptly when he declared: "Police power legislation then is not likely to succumb to the challenge that thereby contractual rights are rendered nugatory." 48 Furthermore, We restated in Philippine American Life Ins. Co. v. Auditor General 49 that laws and reservation of essential attributes of sovereign power are read into contracts agreed upon by the parties. Thus Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. The policy of protecting contracts against impairments presupposes the maintenance of a government by virtue of which contractual relations are worthwhile a government which retains adequate authority to secure the peace and good order of society. Again, We held in Liberation Steamship Co., Inc. v. Court of Industrial Relations, 50 through Justice J.B.L. Reyes, that ... the law forms part of, and is read into, every contract, unless clearly excluded therefrom in those cases where such exclusion is allowed." The decision in Maritime Company of the Philippines v. Reparations Commission, 51 written for the Court by Justice Fernando, now Chief Justice, restates the rule. One last observation. Appellant has placed unqualified reliance on American jurisprudence and authorities 52 to bolster its theory that the municipal resolution in question cannot nullify or supersede the agreement of the parties embodied in the sales contract, as that, it claims, would impair the obligation of contracts in violation of the Constitution. Such reliance is misplaced.

In the first place, the views set forth in American decisions and authorities are not per se controlling in the Philippines, the laws of which must necessarily be construed in accordance with the intention of its own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. 53 and Burgess, et al v. Magarian, et al., 55 two Of the cases cited by plaintiff-appellant, lend support to the conclusion reached by the trial court, i.e. that the municipal resolution supersedes/supervenes over the contractual undertaking between the parties. Dolan v. Brown, states that "Equity will not, as a rule, enforce a restriction upon the use of property by injunction where the property has so changed in character and environment as to make it unfit or unprofitable for use should the restriction be enforced, but will, in such a case, leave the complainant to whatever remedy he may have at law. 56 (Emphasis supplied.) Hence, the remedy of injunction in Dolan vs. Brown was denied on the specific holding that "A grantor may lawfully insert in his deed conditions or restrictions which are not against public policy and do not materially impair the beneficial enjoyment of the estate. 57 Applying the principle just stated to the present controversy, We can say that since it is now unprofitable, nay a hazard to the health and comfort, to use Lots Nos. 5 and 6 for strictly residential purposes, defendants- appellees should be permitted, on the strength of the resolution promulgated under the police power of the municipality, to use the same for commercial purposes. In Burgess v. Magarian et al. it was, held that "restrictive covenants running with the land are binding on all subsequent purchasers ... " However, Section 23 of the zoning ordinance involved therein contained a proviso expressly declaring that the ordinance was not intended "to interfere with or abrogate or annul any easements, covenants or other agreement between parties." 58 In the case at bar, no such proviso is found in the subject resolution. It is, therefore, clear that even if the subject building restrictions were assumed by the defendant-appellee as vendee of Lots Nos. 5 and 6, in the corresponding deeds of sale, and later, in Transfer Certificates of Title Nos. 101613 and 106092, the contractual obligations so assumed cannot prevail over Resolution No. 27, of the Municipality of Mandaluyong, which has validly exercised its police power through the said resolution. Accordingly, the building restrictions, which declare Lots Nos. 5 and 6 as residential, cannot be enforced. IN VIEW OF THE FOREGOING, the decision appealed from, dismissing the complaint, is hereby AFFIRMED. "without pronouncement as to costs. SO ORDERED

Case Digest: Ortigas & Co. vs Feati Bank & Trust Co.

Facts: On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway Hills Subdivision at Mandaluyong to Augusto Padilla y Angeles and Natividad Angeles. The latter transferred their rights in favour of Emma Chavez, upon completion of payment a deed was executed with stipulations, one of which is that the use of the lots are to be exclusive for residential purposes only. This was annotated in the Transfer Certificate of Titles No. 101509 and 101511. Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic Flour Mills. On May 5, 1963, Feati started construction of a building on both lots to be devoted for banking purposes but could also be for residential use. Ortigas sent a written demand to stop construction but Feati continued contending that the building was being constructed according to the zoning regulations as stated in Municipal Resolution 27 declaring the area along the West part of EDSA to be a commercial and industrial zone. Civil case No. 7706 was made and decided in favour of Feati. Issue: Whether or not Resolution number 27 declaring Lot 5 and 6 to be part of an industrial and commercial zone is valid considering the contract stipulation in the Transfer Certificate of Titles. Held: Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the Municipality. Section 12 or RA 2264 states that implied power of the municipality should be liberally construed in its favour, to give more power to the local government in promoting economic conditions, social welfare, and material progress in the community. This is found in the General Welfare Clause of the said act. Although non-impairment of contracts is constitutionally guaranteed, it is not absolute since it has to be reconciled with the legitimate exercise of police power, e.g. the power to promote health, morals, peace, education, good order or safety and general welfare of the people. Resolution No. 27 was obviously passed in exercise of police power to safeguard health, safety, peace and order and the general welfare of the people in the locality as it would not be a conducive residential area

considering the amount of traffic, pollution, and noise which results in the surrounding industrial and commercial establishments. Decision dismissing the complaint of Ortigas is AFFIRMED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-40424 June 30, 1980 R. MARINO CORPUS, petitioner, vs. COURT OF APPEALS and JUAN T. DAVID, respondents

MAKASIAR, J.: This is a petition for review on certiorari of the decision of the Court of Appeals promulgated on February 14, 1975 in CA-G.R. No. 40583-R, affirming the decision of the court of Instance of Manila, Branch V. dated september 4, 1967, in Civil Case no. 61802 entitled "Juan T. David,plaintiff, versus R. Mariano Corpus, defendant', for the recovery of attorneys fees for professional services rendered by the plaintiff, private respondent herein, to defendant, petitioner herein. A Having been close friends, aside from being membres Civil Liberties Union, petitioner Corpus intimately calls respondent David by his nickname "Juaning" and the latter addresses the former simply as "Marino". The factual setting of this case is stated in the decision of the lower court, thus:

It appears that in March, 1958, the defendant was charged administratively by several employee of the Central Bank Export Department of which the defendant is the director. The defendant was represented by Atty. Rosauro Alvarez. Pending the investigation and effective March 18, 1958, he defendant was suspended from office. After the investigating committee found the administrative charges to be without merit, and subsequently recommended the immediate reinstatement of the defendant, the then Governor of Central Bank, Miguel Cuaderno, Sr., recommended that the defendant be considered resigned as on the ground that he had lost confidence in him. The Monetary Board, by a resolution of July 20, 1959, declared the defendant as resigned as of the date of suspension. On August 18, 1959, the defendant, thru Atty. Alvarez, filed the Court of First Instance of Manila a petition for certiorari, mandamus and quo warranto with preliminary mandatory injuction and damages against Miguel Cuaderno, Sr., the Central Bank and Mario Marcos who was appointed to the position of the defendant, said case having been docketed as Civil Case No. 41226 and assigned to Branch VII presided over by Judge Gregorio T. Lantin. On September 7, 1959, the respondent filed a motion to dismiss the petition, alleging among other grounds, the failure of the defendant to exhaust, available administrative remedies (Exh. X). On September 25, 1959, the defendant, thru Atty. Alvarez, filed his opposition to the said motion. On March 17, 1960, during the course of the presentation of the evidence for the petition for a writ of preliminary mandatory injunction, Atty. Alvarez manifested that the defendant was abandoning his prayer for a writ of preliminary mandatory injunction and asked for a ruling on the motion to dismiss. On June 14, 1960, Judge Lantin dismissed Civil Case No. 41226 for failure to exhaust she administrative remedies available to the herein defendant. On June 24, 1960, Atty. Alverez received a copy of the order of dismissal It was at this state that the plaintiff entered into the case under circumstances about which the parties herein have given divergent versions. According to the plaintiff, six or seven days prior to the expiration of the period for appeal from the order of dismissal, he chanced to meet the late Rafael Corpus, father of the defendant, at the Taza de Oro coffee shop. After they talked about the defendant's having lost

his case before Judge Lantin, and knowing that the plaintiff and the defendant were both members of the Civil Liberties Union, Rafael Corpus requested the plaintiff to go over the case and further said that he would send his son, the herein defendant, to the plaintiff to find out what could be done about the case. The defendant called up the plaintiff the following morning for an appointment, and the plaintiff agreed to am him in the latter's office. At said conference, the defendant requested the plaintiff to handle the case because Atty. Alvarez had already been disenchanted and wanted to give up the case. Although at first reluctant to handle the case, the plaintiff finally agreed on condition that he and Atty. Alverez would collaborate in the case. The defendant's version of how the plaintiff came into the case is as follows: After the order of dismissal issued by Judge Lantin was published in the newspapers, the plaintiff sought a conference with the defendant at Taza de Oro, but the defendant told him that he would rather meet the plaintiff at the Swiss Inn. Even before the case was dismissed the plaintiff had shown interest in the same by being present during the hearings of said case in the sala of Judge Lantin When the plaintiff and the defendant met at the Swiss Inn, the plaintiff handed the defendant a memorandum prepared by him on how he can secure the reversal of the order of dismissal by means of a formula stated in said memorandum. During the said occasion the plaintiff scribbled some notes on a paper napkin (Exhibit 19). On June 28, 1960, the defendant wrote the plaintiff, sending with it a copy of the order of Judge Lantin dated June 14, 1960 (Exhibit S Inasmuch as said letter, Exhibit S already mentions the 'memorandum' of the plaintiff, the defendant contends that it was not six or seven days prior to the expiration of the period of appeal (which should be on or about July 2 or 3, 1960) but on a date even earlier than June 28, 1960 that the plaintiff and the defendant met together to discuss the latter's case. Laying aside for the moment the true circumstances under which the plaintiff started rendering professional services to the defendant, the undisputed evidence shows that on July 7, 1960, the plaintiff filed a motion for reconsideration of the order of dismissal under the joint signatures of the plaintiff and Atty. Alverez (Exhibit B). The plaintiff argued the said motion during the hearing thereof On August 8, 1960, he file a 13-page 'Memorandum of Authorities in support of

said motion for reconsideration (Exhibit C). A 3-page supplemental memorandum of authorities was filed by the plaintiff on September 6, 1960 (Exhibit D) On November 15, 1960, Judge Lantin denied the motion for reconsideration. On November 19, 1960, the plaintiff perfected the appeal from the order of dismissal dated June 14, 1960. For purposes of said appeal the plaintiff prepared a 232-page brief and submitted the same before the Supreme Court in Baguio City on April 20, 1961. The plaintiff was the one who orally argued the case before the Supreme Court. In connection with the trip to Baguio for the said oral argument, the plaintiff used his car hich broke down and necessitated extensive repairs paid for by the plaintiff himself. On March 30, 1962, the Supreme Court promulgated its decision reversing the order of dismissal and remanding the case for further proceedings. On April 18, 1962, after the promulgation of the decision of the Supreme Court reversing the dismissal of the case the defendant wrote the plaintiff the following letter, Exhibit 'Q'. . xxxxxxxxx Dear Juaning Will you please accept the attached check in the amount of TWO THOUSAND P2,000.00) PESOS for legal services in the handling of L-17860 recently decided by the Court? I wish I could give more but as y u know we were banking on a SC decision reinstating me and reimburse my backstage I had been wanting to offer some token of my appreciation of your legal fight for and in my behalf, and it was only last week that I received something on account of a pending claim. Looking forward to a continuation of the case in the lower court, I remain Sincerely yours, Illegible xxxxxxxxx In a reply letter dated April 25, 1962, the plaintiff returned the check, explaining said act as follows:

April 25, 1962 My dear Marino: Yesterday, I received your letter of April 18th with its enclosure. I wished thank you for your kind thoughts, however, please don't take offense if I have to return the check. I will explain. When I decided to render professional services in your case, I was motivated by the value to me of the very intimate relations which you and I have enjoyed during the past many years. It was nor primarily, for a professional fee. Although we were not fortunate to have obtained a decision in your case which should have put an end to it. I feel that we have reason to be jubilant over the outcome, because, the final favorable outcome of the case seems certain irrespective of the length of time required to terminate the same. Your appreciation of the efforts I have invested in your case is enough compensation therefor, however, when you shall have obtained a decision which would have finally resolved the case in your favor, remembering me then will make me happy. In the meantime, you will make me happier by just keeping the check. Sincerely yours, JUANING xxxxxxxxx When the case was remanded for further proceedings before Judge Lantin, the evidence for the defendant was presented by Atty. 'Alvarez with the plaintiff cooperating in the same-'On June 24, 1963, Judge Lantin rendered his decision in favor of the defendant declaring illegal the resolution of the Monetary Board of July 20, 1959, and ordering the defendant's reinstatement and the payment of his back salaries and allowances - The respondents in said Civil Case No. 41226 filed a motion for reconsideration which was opposed by the herein plaintiff. The said decision was appealed by the respondents, as well as by the herein defendant with respect to the award of P5, 000. 00 attorney's feed The plaintiff prepared two briefs for submission to the Court of Appeals one as appellee

(Exhibit H) and the other as appellant (Exhibit H-1). The Court of Appeal however, certified the case to the Supreme Court in 1964. On March 31, 1965, the Supreme Court rendered a decision affirming the judgment of the Court of first Instance of Manila. On April 19, 1965 the plaintiffs law office made a formal de command upon the defendant for collection of 50% of the amount recovered by the defendant as back salaries and other emoluments from the Central Bank (Exhibit N). This letter was written after the defendant failed to appear at an appointment with the plaintiff so that they could go together to the Central Bank to claim the possession of the office to which the defendant was reinstated and after a confrontation in the office of the plaintiff wherein the plaintiff was remanding 50% of the back salaries and other emoluments amounting to P203,000.00 recoverable by the defendant. The defendant demurred to this demand inasmuch as he had plenty of outstanding obligations and that his tax liability for said back salaries was around P90,000.00, and that he expected to net only around P10,000.00 after deducting all expenses and taxes. On the same date, April 19,1965 the plaintiff wrote the Governor for of Central Bank requesting that the amount representing the sack salaries of the defendant be made out in two one in favor of the defendant and the other representing the professional fees equivalent to 50% of the said back salaries being claimed by the plaintiff (Exhibit 8). F to obtain the relief from the Governor of Central Bank, the plaintiff instituted this action before this Court on July 20, 1965 (Emphasis supplied). As therein defendant, herein petitioner Marino Corpus filed in August 5, 1965 an answer with counter-claim. On August 30, 1965, private respondent Atty. Juan T. David, plaintiff therein, filed a reply with answer to the counterclaim of petitioner. After due trial, the lower court rendered judgment on September 4, 1967, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered, ordering the defendant to pay plaintiff the sum of P30,000.00 in the concept of professional fees, and to pay the costs (pp. 112-113, CA Record on Appeal p. 54, rec.)

After receipt on September 7, 1967 of a copy of the aforequoted judgment, petitioner Marino Corpus, defendant therein, filed on October 7, 1967 a notice of appeal from said judgment to the Court of Appeals. In his appeal, he alleged that the lower court erred: 1. In not holding that the plaintiff's professional services were offered and rendered gratuitously; 2. Assuming that plaintiff is entitled to compensation in holding that he was entitled to attorney's fees in the amount of P30,000.00 when at most he would be entitled to only P2,500.00; 3. In not dismissing plaintiff's complaint; and 4. In not awarding damages and attorney's fees to the defendant (p. 2, CA Decision, p. 26, rec.) Likewise, private respondent Atty. Juan T. David, plaintiff therein, appealed to the Court of Appeals on October 9, 1967 assigning one error, to wit: The lower court erred in ordering the defendant to pay the plaintiff only the sum of P30,000.00 in the concept of attorney's fees (p. 1, CA Decision, p. 25, rec.). On February 14, 1975, respondent Court of Appeals promulgated its decision affirming in toto the decision of the lower court, with costs against petitioner Marino Corpus (Annex A, Petition for Certiorari, p. 25, rec.) Hence, the instant petition for review on certiorari, petitioner contending that the respondent Court of Appeals erred in finding that petitioner accepted private respondent's services "with the understanding of both that he (private respondent) was to be compensated" in money; and that the fee of private respondent was contingent (pp. 3 & 5, Petition for Certiorari, pp. 17 & 19, rec.). On October 1, 1975, the case was deemed submitted for decision (p. 177, rec.), after the parties filed their respective memoranda. B On January 31, 1978, private respondent Atty. Juan T. David filed a petition to remand the case to the court a quofor execution of the latter's decision in Civil Case No. 61802, dated September 4, 1967, alleging that said decision is already deemed affirmed pursuant to Section 11(2), Article X of the New Constitution by reason of the failure of this Tribunal to decide the case within 18 months. Then

on July 7, 1978, another petition to remand the case to the lower court to execution was filed by herein private respondent. Subsequently, private respondent Atty. Juan T. David filed with The court a quo a motion dated September 13, 1978 for the issuance of a writ of execution of the lower court's decision in the aforesaid civil case, also invoking Section 11 (2), Article X of the 1973 Constitution. In an order dated September 19, 1978, the lower court, through Judge Jose H. Tecson, directed the issuance of a writ of execution. The writ of execution was issued on October 2, 1978 and a notice of garnishment was also issued n October 13, 1978 to garnish the bank deposits of herein petitioner Marino Corpus in the Commercial Bank and Trust Company, Makati Branch. It appears that on October 13, 1978, herein petitioner filed a motion for reconsideration of the September 19, 1978 order. Private respondent Atty. Juan T. David filed on October 19, 1978 an opposition to said motion and herein petitioner filed a reply on October 30, 1978. The lower court denied said motion for reconsideration in its over dated November 7, 1978. It appears also that in a letter dated October 18, 1978, herein petitioner Marino Corpus requested this Court to inquire into what appears to be an irregularity in the issuance of the aforesaid garnishment notice to the Commercial Bank and Trust Company, by virtue of which his bank deposits were garnished and he was prevented from making withdrawals from his bank account. In OUR resolution of November 3, 1978, WE required private respondent Atty. Juan T. David and the Commercial Bank and Trust Company to comment on petitioner's letter, and for the bank to explain why it did not honor petitioner's withdrawals from his bank deposits when no garnishment order has been issued by the Supreme Court. This Court further inquired from the lower court whether it has issued any garnishment order during the pendency of the present case. On November 27, 1978, the Commercial Bank and Trust Company filed its comment which was noted in the Court's resolution of December 4, 1978. In said resolution, the Court also required Judge Jose H. Tecson to comply with the resolution of November 3, 1978, inquiring as to whether he had issued any garnishment order, and to explain why a writ of execution was issued despite the pendency of the present case before the Supreme Court. Further, WE required private respondent Atty. Juan T. David Lo explain his failure to file his comment, and to file the same as directed by the resolution of the Court dated November 3, 1978. Private respondent's compliance came on December 13, 1978, requesting to be excused from the filing of his comment

because herein petitioner's letter was unverified. Judge Tecson's compliance was filed on December 15, 1978, to which herein petitioner replied on January 11, 1979. In OUR resolution dated January 3, 1979, WE set aside the order of Judge Jose H. Tecson dated September 19, 1978, the writ of execution as well as the notice of garnishment, and required private respondent Atty. Juan T. David to show cause why he should not be cited for contempt for his failure to file his comment as directed by the resolution of the Court dated December 4, 1978, and for filing a motion for execution knowing that the case is pending appeal and review before this Court Likewise, the Court required Judge Jose H. Tecson to show cause why he should not be cited for contempt for issuing an order directing the issuance of a writ of execution and for issuing such writ despite the pendency of the present case in the Supreme Court. On January 12, 1979, Judge Jose H. Tecson filed his compliance explanation as directed by the aforesaid resolution of January 3, 1979, while private respondent Atty. Juan T. David filed on January 30, 19 79 his compliance and motion for reconsideration after the Court has granted him an extension of time to file his compliance. Private respondent Atty. Juan T. David filed on February 28, 1979, a petition praying that the merits of his compliance be resolved by the Court en banc. Subsequently, on March 26, 1979, another petition was filed by herein private respondent asking the Chief Justice and the members of the First Division to inhibit themselves from participating in the determination of the merits of his compliance and for its merits to be resolved by the Court en banc. C The main thrust of this petition for review is whether or not private respondent Atty. Juan T. David is entitled to attorney's fees. Petitioner Marino Corpus contends that respondent David is not entitled to attorney's fees because there was no contract to that effect. On the other hand, respondent David contends that the absence of a formal contract for the payment of the attorney's fees will not negate the payment thereof because the contract may be express or implied, and there was an implied understanding between the petitioner and private respondent that the former will pay the latter attorney's fees when a final decision shall have been rendered in favor of the petitioner

reinstating him to -his former position in the Central Bank and paying his back salaries. I WE find respondent David's position meritorious. While there was express agreement between petitioner Corpus and respondent David as regards attorney's fees, the facts of the case support the position of respondent David that there was at least an implied agreement for the payment of attorney's fees. Petitioner's act of giving the check for P2,000.00 through his aforestated April 18, 1962 letter to respondent David indicates petitioner's commitment to pay the former attorney's fees, which is stressed by expressing that "I wish I could give more but as you know we were banking on a SC decision reinstating me and reimbursing my back salaries This last sentiment constitutes a promise to pay more upon his reinstatement and payment of his back salaries. Petitioner ended his letter that he was "looking forward to a continuation of the case in the lower court, ... to which the certiorari-mandamus-quo warranto case was remanded by the Supreme Court for further proceedings. Moreover, respondent David's letter-reply of April 25, 1962 confirms the promise of petitioner Corpus to pay attorney's fees upon his reinstatement and payment of back salaries. Said reply states that respondent David decided to be his counsel in the case because of the value to him of their intimate relationship over the years and "not, primarily, for a professional fee." It is patent then, that respondent David agreed to render professional services to petitioner Corpus secondarily for a professional fee. This is stressed by the last paragraph of said reply which states that "however, when you shall have obtained a decision which would have finally resolved the case in your favor, remembering me then will make me happy. In the meantime, you will make me happier by just keeping the check." Thereafter, respondent David continued to render legal services to petitioner Corpus, in collaboration with Atty. Alverez until he and Atty. Alvarez secured the decision directing petitioner's reinstatement with back salaries, which legal services were undisputedly accepted by, and benefited petitioner. Moreover, there is no reason to doubt respondent David's assertion that Don Rafael Corpus, the late father of petitioner Corpus, requested respondent to help his son, whose suit for reinstatement was dismissed by the lower court; that pursuant to such request, respondent conferred in his office with petitioner, who requested respondent to handle the case as his lawyer, Atty. Alvarez, was already disenchanted and wanted to give up the case; and that respondent agreed on the case. It would have been unethical for respondent to even offer his services when petitioner had a competent counsel in the person of Atty. Alvarez,

who has been teaching political, constitutional and administrative law for over twenty years. Likewise, it appears that after the Supreme Court affirmed on March 31, 1965 the order of the lower court reinstating petitioner Corpus with back salaries and awarding attorney's fees of P5,000.00, respondent David made a written demand on April 19, 1965 upon petitioner Corpus for the payment of his attorney's fees in an amount equivalent to 50% of what was paid as back salaries (Exh. N p. 75, Folder of Exhibits, Civil Case No. 61802). Petitioner Corpus, in his reply dated May 7, 1965 to the aforesaid written demand, while disagreeing as to the amount of attorney's fees demanded, did not categorically deny the right of respondent David to attorney's fees but on the contrary gave the latter the amount of P2,500.00, which is one-half () of the court-awarded attorney's fees of P5,000.00, thus impliedly admitting the right of respondent David to attorney's fees (Exh. K, p. 57, Folder of Exhibits, Civil Case No. 61802). It is further shown by the records that in the motion filed on March 5, 1975 by petitioner Corpus before the Court of Appeals for the reconsideration of its decision the order of the lower court granting P30,000.00 attorney's fee's to respondent David, he admitted that he was the first to acknowledge that respondent David was entitled to tion for legal services rendered when he sent the chock for P2,000.00 in his letter of April 18, 1962, and he is still to compensate the respondent but only to the extent of P10,000.00 (p. 44, rec.). This admission serves only to further emphasize the fact that petitioner Corpus was aware all the time that he was liable to pay attorney's fees to respondent David which is therefore inconsistent with his position that the services of respondent David were gratuitous, which did not entitle said respondent to compensation. It may be advanced that respondent David may be faulted for not reducing the agreement for attorney's fees with petitioner Corpus in writing. However, this should be viewed from their special relationship. It appears that both have been friends for several years and were co-members of the Civil Liberties Union. In addition, respondent David and petitioner's father, the late Rafael Corpus, were also close friends. Thus, the absence of an express contract for attorney's fees between respondent David and petitioner Corpus is no argument against the payment of attorney's fees, considering their close relationship which signifies mutual trust and confidence between them. II Moreover, the payment of attorney's fees to respondent David may also be justified by virtue of the innominate contract of facio ut des (I do and you give

which is based on the principle that "no one shall unjustly enrich himself at the expense of another." innominate contracts have been elevated to a codal provision in the New Civil Code by providing under Article 1307 that such contracts shall be regulated by the stipulations of the parties, by the general provisions or principles of obligations and contracts, by the rules governing the most analogous nominate contracts, and by the customs of the people. The rationale of this article was stated in the 1903 case of Perez vs. Pomar (2 Phil. 982). In that case, the Court sustained the claim of plaintiff Perez for payment of services rendered against defendant Pomar despite the absence of an express contract to that effect, thus: It does not appear that any written contract was entered into between the parties for the employment of the plaintiff as interpreter, or that any other innominate contract was entered into but whethertheplaintiffsservicesweresolicitedorwhethertheywereoffered to the defendant for his assistance, inasmuch as these services were accepted and made use of by the latter, we must consider that there was a tacit and mutual consent as to the rendition of the services. This gives rise to the obligation upon the person benefited by the services to make compensation therefor, since the bilateral obligation to render service as interpreter, on the one hand, and on the other to pay for the service rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code). xxxxxxxxx ... Whether the service was solicited or offered, the fact remains that Perez rendered to Pomar services as interpreter. As it does not appear that he did this gratuitously, the duty is imposed upon the defendant, he having accepted the benefit of the service, to pay a just compensation therefor, by virtue of the innominate contract of facio ut des implicitly established. xxxxxxxxx ... because it is a well-known principle of law that no one should permitted to enrich himself to the damage of another" (emphasis supplied; see also Tolentino, Civil Code of the Philippines, p. 388, Vol. IV 119621, citing Estate of Reguera vs. Tandra 81 Phil. 404 [1948]; Arroyo vs. Azur 76 Phil. 493119461; and Perez vs. Pomar. 2 Phil. 682 [1903]).

WE reiterated this rule in Pacific Merchandising Corp. vs. Consolacion Insurance & Surety Co., Inc. (73 SCRA 564 [1976]) citing the case of Perez v. Pomar, supra thus: Where one has rendered services to another, and these services are accepted by the latter, in the absence of proof that the service was rendered gratuitously, it is but just that he should pay a reasonable remuneration therefor because 'it is a well-known principle of law, that no one should be permitted to enrich himself to the damage of another (emphasis supplied). Likewise, under American law, the same rule obtains (7 CJS 1079; FL Still & Co. v. Powell, 114 So 375). III There was no contract for contingent fee between Corpus and respondent David. Contingent fees depend on an express contract therefor. Thus, "an attorney is not entitled to a percentage of the amount recovered by his client in the absence of an express contract to that effect" (7 C.J.S. 1063 citing Thurston v. Travelers Ins. Co., 258 N.W. 66, 128 Neb. 141). Where services were rendered without any agreement whatever as to the amount or terms of compensation, the attorney is not acting under a contract for a contingent fee, and a letter by the attorney to the client stating that a certain sum would be a reasonable amount to charge for his services and adding that a rate of not less than five percent nor more than ten would be reasonable and customary does not convert the original agreement into a contract for a contingent fee (7 C.J.S. 1063 citing Fleming v. Phinizy 134 S.E. 814). While there was no express contract between the parties for the payment of attorney's fees, the fact remains that respondent David rendered legal services to petitioner Corpus and therefore as aforestated, is entitled to compensation under the innominate contract of facio lit des And such being the case, respondent David is entitled to a reasonable compensation. IV In determining a reasonable fee to be paid to respondent David as compensation for his services, on a quantum meruit basis, it is proper to consider all the facts and circumstances obtaining in this case particularly the following:

The extent of the services rendered by respondent David should be considered together with the extent of the services of Petitioner's other counsel, Atty. Rosauro Alvarez, It is undisputed that Atty. Rosauro Alvarez had rendered legal services as principal counsel for more shall six (6) years while respondent David has rendered legal services as collaborating counsel for almost four (4) years. It appears that Atty. Alvarez started to render legal services after the administrative case was filed on March 7, 1958 against petitioner Corpus. He represented petitioner Corpus in the hearing of said case which was conducted from May 5, 1958 to October 8, 1958, involving 56 sessions, and this resulted in the complete exoneration by the Investigating Committee of all the charges against the petitioner. It appears further that after the Monetary Board, in its resolution of July 20, 1959, declared petitioner Corpus as being considered resigned from the service, Atty. Alvarez instituted on August 18, 1958 Civil Case No. 41126 in the Court of First Instance of Manila for the setting aside of the aforestated resolution and for the reinstatement of petitioner Corpus. Atty. Alvarez actively participated in the proceedings. On the other hand, respondent David entered his appearance as counsel for petitioner Corpus sometime after the dismissal on June 14, 1960 of the aforesaid civil case. From the time he entered his appearance, both he and Atty. Alvarez rendered legal services to petitioner Corpus in connection with the appeals of the aforementioned civil case to the Court of Appeals and to the Supreme Court. The records disclose that in connection with the appeal from the June 14, 1960 order of dismissal, respondent David prepared and signed pleadings although the same were made for and on behalf of Atty. Alvarez and himself And it is not farfetched to conclude that all appearances were made by both counsels considering that Atty. Alverez was the principal counsel and respondent David was the collaborating counsel. Thus, when the case was called for oral argument on April 20, 1961 before the Supreme Court, respondent David and Atty. Alverez appeared for petitioner Corpus although it was David who orally argued the case. When the Supreme Court, in its decision of March 30, 1962, remanded the case to the lower court for further it was Atty. Alverez who conducted the presentation of evidence while respondent David assisted him The records also review that respondent David prepared and signed for Atty. Alverez and himself. certain pleadings, including a memorandum. Moreover, after the lower court rendered judgment on June 2 4, 1963 ordering the reinstatement and payment of back salaries to petitioner Corpus and awarding him P5,000.00 by way of attorney's fees, both petitioner Corpus and the respondents in said case appealed the judgment. At that stage, respondent David again prepared and signed for Atty. Alvarez and himself, the necessary pleadings, including two appeal briefs. And in addition, he made oral arguments in the hearings of motions filed in the lower court before the records of the case were forwarded to the appellate court.

Furthermore, while it appears that it was Atty. Alvarez who laid down the basic theory and foundation of the case of petitioner Corpus in the administrative case and later in the civil case, respondent David also advanced legal propositions. Petitioner Corpus contends that said legal propositions were invariably rejected by the courts. This is, however, of no moment because the fact remains that respondent David faithfully rendered legal services for the success of petitioner's case. The benefits secured for petitioner Corpus may also be considered in ascertaining what should be the compensation of respondent David. It cannot be denied that both Atty. Alvarez and respondent David were instrumental in obtaining substantial benefits for petitioner Corpus which consisted primarily of his reinstatement, recovery of back salaries and the vindication of his honor and reputation. But, note should also be taken of the fact that respondent David came at the crucial stage when the case of petitioner Corpus was dismissed by the lower court. Atty. Rosauro Alvarez admittedly was paid by petitioner Corpus the sum of P20,000.00 or at most P22,500.00 (T.s.n., Jan. 11, 1967, pp. 34-35; T.s.n., Feb. 10, 1967, pp. 48-49). On the other hand, petitioner Corpus, after WE suggested on August 15, 1975 that they settle the case amicably has, in his September 15, 1975 pleading filed before this Court (p. 166, rec.), manifested his willingness to pay P10,000.00 for the services of respondent David. However, respondent David has not manifested his intention to accept the offer. In his complaint in the instant case, he asked for P75,000.00 as his attorney's fees. The records reveal that petitioner Corpus actually received only P150,158.50 as back salaries and emoluments after deducting taxes as well as retirement and life insurance premiums due to the GSIS. The amount thus claimed by respondent David represents 50% of the amount actually received by petitioner Corpus. The lower court, however, awarded only P30,000.00 and it was affirmed by the Court of Appeals. Considering the aforestated circumstances, WE are of the opinion that the reasonable compensation of respondent David should be P20,000.00. V WE find private respondent Juan T. David and Judge Jose H. Tecson, Presiding Judge of the Court of First Instance of Manila, Branch V, guilty of contempt of court.

Respondent David filed on or about September 13, 1978 a motion with the court a quo for the issuance of a writ of execution to enforce its decision in Civil Case No 61802, subject of the present petition, knowing fully well that it was then still pending appeal before this Court. In addition, no certification that the aforesaid decision is already deemed affirmed had as yet been issued by the Chief Justice pursuant to Section 11, paragraph 2, Article X of the New Constitution; because respondent David's petitions filed with the Supreme Court on January 31, 1978 and on July 7, 1978 to remand the case to the trial court for execution and for the issuance of such certification had not yet been acted upon as the same were still pending consideration by this Court. In fact, this Court has not as of this time made any pronouncement on the aforesaid provision of the New Constitution. This act of respondent David constitutes disrespect to, as well as disregard of, the authority of this Court as the final arbiter of all cases duly appealed to it, especially constitutional questions. It must be emphasized that as a member of the Philippine Bar he is required "to observe and maintain the respect due to the court of justice and judicial officers" (Section 20 (b), 138 of the Revised Rules of Court). Likewise, Canon 1 of. the Canons of Professional Ethic expressly provide that: "It is the duty of the lawyer to maintain towards the Courts a respectful attitude, not for the sake of the temporary incumbent of the judgement office, but for the maintenance of its supreme importance." And this Court had stressed that "the duty of an attorney to the courts 'can only be maintained by rendering no service involving any disrespect to the judicial office which he is bound to uphold'" (Rheem of the Philippines v. Ferrer, 20 SCRA 441, 444 [1967] citing the case of Lualhati v. Albert, 67 Phil. 86, 92 [1932]). Moreover, this Court takes judicial notice of the fact that herein respondent David, in the previous case of Integrated Construction Services, Inc. and Engineering Construction, Inc. v. Relova (65 SCRA 638 [1975]), had sent letters addressed to the then Chief Justice Querube C. Makalintal and later to the late Chief Justice Fred Ruiz Castro, requesting for the issuance of certification on the basis of the aforementioned provision of the New Constitution which were not given due consideration. And knowing this, respondent David should have been more prudent and cautious in g with the court a quo any motion for execution. Furthermore, there was even a taint of arrogance and defiance on the part of respondent David in not filing his comment to the letter- complaint dated October 18, 1978 of petitioner Corpus, as required by this Court in its November 3, 1978 and December 4,1978 resolutions which were duly received by him, and instead, he sent on December 13, 1978 a letter requesting to be excused from the filing of his comment on the lame excuse that petitioner's letter-complaint was not verified.

On the part of Judge Jose H. Tecson, his presumptuous and precipitate act of granting the motion for execution of dent David likewise constitutes disrespect to, as well as of, the authority of this Court because he know for a that the case was still pending apply as the had not yet been remanded to it and that no certification has been issued by this Court. As a judicial officer, Judge Tecson is charged with the knowledge of the fact that this Court has yet to make a definite pronouncement on Section 11, paragraph 2, Article X of the New Constitution. Judge Tecson should know that only the Supreme Court can authoritatively interpret Section 11 (2) of Article X of the 1973 Constitution. Yet, Judge Tecson assumed the role of the Highest Court of the Land. He should be reminded of what Justice Laurel speaking for the Court, has said in People v. Vera (65 Phil 56, 82 [1937]): A becoming modesty of inferior courts demands conscious realization of the position that they occupy in the interrelation and operation of the integrated judged system of the nation. It may also be added that the improvident act of respondent David in firing the motion for execution and the precipitate act of Judge Tecson in issuing the writ of execution are intriguing as they invite suspicion that there was connivance between the two. Respondent David would seem to imply that his claim for attorney's fees should be given preference over the other cams now pending in this Court. Certainly, such should not be the case because there are cases which by their nature require immediate or preferential attention by this Tribunal like habeas corpus cases, labor cases and c cases involving death sentence, let alone cases involving properties and property rights of poor litigants pending decision or resolution long before the New Constitution of 1973. Nobility and exempt forbearance were expected of Atty. David, who is old and experienced in the practice of the legal profession, from which he has derived a great measure. of economic well-being and independence Consequently, the filing of the motion for immediate tion and the issuance of the writ of execution constitute a defiance and usurpation of the jurisdiction of the Supreme Court. As a disciplinary measure for the preservation and vindication of the dignity of this Supreme Tribunal respondent Atty. Juan T. David should be REPRIMANDED for his precipitate action of filing a motion for execution as well as Judge Jose H. Tecson for his improvident issuance of a writ of execution while the case is pending appeal before the Supreme Court, and a repetition of said acts would be dealt with more severely. WHEREFORE, PETITIONER R. MARINO CORPUS IS HEREBY DIRECTED TO PAY RESPONDENT ATTY. JUAN T. DAVID THE SUM OF TWENTY THOUSAND (P20,000.00) PESOS AS ATTORNEY'S FEES.

RESPONDENT ATTY. JUAN T. DAVID AND JUDGE JOSE H. TECSON OF THE COURT OF FIRST INSTANCE OF MANILA, BRANCH V, ARE HEREBY DECLARED GUILTY OF CONTEMPT AND ARE HEREBY REPRIMANDED, WITH A WARNING THAT REPETITION TION OF THE SAME OR SIMILAR ACTS WILL BE DEALT WITH MORE SEVERELY. COSTS AGAINST PETITIONER. SO ORDERED.

FIRST DIVISION
[G.R. No. 118248. April 5, 2000]

DKC HOLDINGS CORPORATION, petitioner, vs. COURT OF APPEALS, VICTOR U. BARTOLOME and REGISTER OF DEEDS FOR METRO MANILA, DISTRICT III, respondents. francis DECISION
YNARES_SANTIAGO, J.: This is a petition for review on certiorari seeking the reversal of the December 5, 1994 Decision of the Court of Appeals in CA-G.R. CV No. 40849 entitled "DKC Holdings Corporation vs. Victor U. Bartolome, et al.",[1] affirming in toto the January 4, 1993 Decision of the Regional Trial Court of Valenzuela, Branch 172,[2] which dismissed Civil Case No. 3337-V-90 and ordered petitioner to pay P30,000.00 as attorneys fees. The subject of the controversy is a 14,021 square meter parcel of land located in Malinta, Valenzuela, Metro Manila which was originally owned by private respondent Victor U. Bartolomes deceased mother, Encarnacion Bartolome, under Transfer Certificate of Title No. B-37615 of the Register of Deeds of Metro Manila, District III. This lot was in front of one of the textile plants of petitioner and, as such, was seen by the latter as a potential warehouse site. On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome, whereby petitioner was given the option to lease or lease with purchase the subject land, which option must be exercised within a period of two years counted from the signing of the Contract. In turn, petitioner undertook to pay P3,000.00 a month as consideration for the reservation of its option. Within the two-year period, petitioner shall serve formal written notice upon the lessor Encarnacion Bartolome of its

desire to exercise its option. The contract also provided that in case petitioner chose to lease the property, it may take actual possession of the premises. In such an event, the lease shall be for a period of six years, renewable for another six years, and the monthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next six years, in case of renewal. Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to Encarnacion until her death in January 1990. Thereafter, petitioner coursed its payment to private respondent Victor Bartolome, being the sole heir of Encarnacion. Victor, however, refused to accept these payments. iska Meanwhile, on January 10, 1990, Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion, including the subject lot. Accordingly, respondent Register of Deeds cancelled Transfer Certificate of Title No. B-37615 and issued Transfer Certificate of Title No. V-14249 in the name of Victor Bartolome. On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it was exercising its option to lease the property, tendering the amount of P15,000.00 as rent for the month of March. Again, Victor refused to accept the tendered rental fee and to surrender possession of the property to petitioner. Petitioner thus opened Savings Account No. 1-04-02558-I-1 with the China Banking Corporation, Cubao Branch, in the name of Victor Bartolome and deposited therein the P15,000.00 rental fee for March as well as P6,000.00 reservation fees for the months of February and March. Petitioner also tried to register and annotate the Contract on the title of Victor to the property. Although respondent Register of Deeds accepted the required fees, he nevertheless refused to register or annotate the same or even enter it in the day book or primary register. Thus, on April 23, 1990, petitioner filed a complaint for specific performance and damages against Victor and the Register of Deeds,[3] docketed as Civil Case No. 3337V-90 which was raffled off to Branch 171 of the Regional Trial Court of Valenzuela. Petitioner prayed for the surrender and delivery of possession of the subject land in accordance with the Contract terms; the surrender of title for registration and annotation thereon of the Contract; and the payment of P500,000.00 as actual damages, P500,000.00 as moral damages, P500,000.00 as exemplary damages and P300,000.00 as attorneys fees. Meanwhile, on May 8, 1990, a Motion for Intervention with Motion to Dismiss [4] was filed by one Andres Lanozo, who claimed that he was and has been a tenant-tiller of the subject property, which was agricultural riceland, for forty-five years. He questioned the jurisdiction of the lower court over the property and invoked the Comprehensive Agrarian Reform Law to protect his rights that would be affected by the dispute between the original parties to the case. ella

On May 18, 1990, the lower court issued an Order[5] referring the case to the Department of Agrarian Reform for preliminary determination and certification as to whether it was proper for trial by said court. On July 4, 1990, the lower court issued another Order[6] referring the case to Branch 172 of the RTC of Valenzuela which was designated to hear cases involving agrarian land, after the Department of Agrarian Reform issued a letter-certification stating that referral to it for preliminary determination is no longer required. On July 16, 1990, the lower court issued an Order denying the Motion to Intervene,[7] holding that Lanozos rights may well be ventilated in another proceeding in due time. After trial on the merits, the RTC of Valenzuela, branch 172 rendered its Decision on January 4, 1993, dismissing the Complaint and ordering petitioner to pay Victor P30,000.00 as attorneys fees. On appeal to the CA, the Decision was affirmed in toto. Hence, the instant Petition assigning the following errors: (A) FIRST ASSIGNMENT OF ERROR THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PROVISION ON THE NOTICE TO EXERCISE OPTION WAS NOT TRANSMISSIBLE. (B) SECOND ASSIGNMENT OF ERROR THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE NOTICE OF OPTION MUST BE SERVED BY DKC UPON ENCARNACION BARTOLOME PERSONALLY. (C) nigel THIRD ASSIGNMENT OF ERROR THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACT WAS ONE-SIDED AND ONEROUS IN FAVOR OF DKC. (D) FOURTH ASSIGNMENT OF ERROR

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE EXISTENCE OF A REGISTERED TENANCY WAS FATAL TO THE VALIDITY OF THE CONTRACT. (E) FIFTH ASSIGNMENT OF ERROR THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PLAINTIFF-APPELLANT WAS LIABLE TO DEFENDANT-APPELLEE FOR ATTORNEYS FEES.[8] The issue to be resolved in this case is whether or not the Contract of Lease with Option to Buy entered into by the late Encarnacion Bartolome with petitioner was terminated upon her death or whether it binds her sole heir, Victor, even after her demise. Both the lower court and the Court of Appeals held that the said contract was terminated upon the death of Encarnacion Bartolome and did not bind Victor because he was not a party thereto. Article 1311 of the Civil Code provides, as follows"ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. brnado xxx xxx x x x."

The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of law. In the case at bar, there is neither contractual stipulation nor legal provision making the rights and obligations under the contract intransmissible. More importantly, the nature of the rights and obligations therein are, by their nature, transmissible. The nature of intransmissible rights as explained by Arturo Tolentino, an eminent civilist, is as follows: "Among contracts which are intransmissible are those which are purely personal, either by provision of law, such as in cases of partnerships and agency, or by the very nature of the obligations arising therefrom, such as those requiring special personal qualifications of the obligor. It may also be stated that contracts for the payment of money debts are not

transmitted to the heirs of a party, but constitute a charge against his estate. Thus, where the client in a contract for professional services of a lawyer died, leaving minor heirs, and the lawyer, instead of presenting his claim for professional services under the contract to the probate court, substituted the minors as parties for his client, it was held that the contract could not be enforced against the minors; the lawyer was limited to a recovery on the basis of quantum meruit."[9] In American jurisprudence, "(W)here acts stipulated in a contract require the exercise of special knowledge, genius, skill, taste, ability, experience, judgment, discretion, integrity, or other personal qualification of one or both parties, the agreement is of a personal nature, and terminates on the death of the party who is required to render such service."[10] marinella It has also been held that a good measure for determining whether a contract terminates upon the death of one of the parties is whether it is of such a character that it may be performed by the promissors personal representative. Contracts to perform personal acts which cannot be as well performed by others are discharged by the death of the promissor. Conversely, where the service or act is of such a character that it may as well be performed by another, or where the contract, by its terms, shows that performance by others was contemplated, death does not terminate the contract or excuse nonperformance.[11] In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the obligation of Encarnacion in the contract to deliver possession of the subject property to petitioner upon the exercise by the latter of its option to lease the same may very well be performed by her heir Victor. As early as 1903, it was held that "(H)e who contracts does so for himself and his heirs."[12] In 1952, it was ruled that if the predecessor was duty-bound to reconvey land to another, and at his death the reconveyance had not been made, the heirs can be compelled to execute the proper deed for reconveyance. This was grounded upon the principle that heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting their common ancestor.[13] It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article 1311 of the Civil Code. Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds to what rights his mother had and what is valid and binding against her is also valid and binding as against him.[14] This is clear fromParaaque Kings Enterprises vs. Court of Appeals,[15] where this Court rejected a similar defense-alonzo With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the lessor nor the lessee referred to therein, he could thus not have violated its provisions, but he is

nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the land as, by virtue of his purchase, he assumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form of rental payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the properties to him. Both pleadings also alleged collusion between him and respondent Santos which defeated the exercise by petitioner of its right of first refusal. In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable, party to the case. A favorable judgment for the petitioner will necessarily affect the rights of respondent Raymundo as the buyer of the property over which petitioner would like to assert its right of first option to buy. In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. The death of a party does not excuse nonperformance of a contract which involves a property right, and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.[16] Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject Contract of Lease with Option to Buy. That being resolved, we now rule on the issue of whether petitioner had complied with its obligations under the contract and with the requisites to exercise its option. The payment by petitioner of the reservation fees during the two-year period within which it had the option to lease or purchase the property is not disputed. In fact, the payment of such reservation fees, except those for February and March, 1990 were admitted by Victor.[17] This is clear from the transcripts, to wit"ATTY. MOJADO: One request, Your Honor. The last payment which was allegedly made in January 1990 just indicate in that stipulation that it was issued November of 1989 and postdated Janaury 1990 and then we will admit all. rodp;fo COURT: All reservation fee? ATTY. MOJADO: Yes, Your Honor.

COURT: All as part of the lease? ATTY. MOJADO: Reservation fee, Your Honor. There was no payment with respect to payment of rentals."[18] Petitioner also paid the P15,000.00 monthly rental fee on the subject property by depositing the same in China Bank Savings Account No. 1-04-02558-I-1, in the name of Victor as the sole heir of Encarnacion Bartolome,[19] for the months of March to July 30, 1990, or a total of five (5) months, despite the refusal of Victor to turn over the subject property.[20] Likewise, petitioner complied with its duty to inform the other party of its intention to exercise its option to lease through its letter dated Match 12, 1990,[21] well within the twoyear period for it to exercise its option. Considering that at that time Encarnacion Bartolome had already passed away, it was legitimate for petitioner to have addressed its letter to her heir. It appears, therefore, that the exercise by petitioner of its option to lease the subject property was made in accordance with the contractual provisions. Concomitantly, private respondent Victor Bartolome has the obligation to surrender possession of and lease the premises to petitioner for a period of six (6) years, pursuant to the Contract of Lease with Option to Buy. micks Coming now to the issue of tenancy, we find that this is not for this Court to pass upon in the present petition. We note that the Motion to Intervene and to Dismiss of the alleged tenant, Andres Lanozo, was denied by the lower court and that such denial was never made the subject of an appeal. As the lower court stated in its Order, the alleged right of the tenant may well be ventilated in another proceeding in due time. WHEREFORE, in view of the foregoing, the instant Petition for Review is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 40849 and that of the Regional Trial Court of Valenzuela in Civil Case No. 3337-V-90 are both SET ASIDE and a new one rendered ordering private respondent Victor Bartolome to: (a) surrender and deliver possession of that parcel of land covered by Transfer Certificate of Title No. V-14249 by way of lease to petitioner and to perform all obligations of his predecessor-in-interest, Encarnacion Bartolome, under the subject Contract of Lease with Option to Buy; (b) surrender and deliver his copy of Transfer Certificate of Title No. V14249 to respondent Register of Deeds for registration and annotation thereon of the subject Contract of Lease with Option to Buy;

(c) pay costs of suit. Sc Respondent Register of Deeds is, accordingly, ordered to register and annotate the subject Contract of Lease with Option to Buy at the back of Transfer Certificate of Title No. V-14249 upon submission by petitioner of a copy thereof to his office. SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur. Scmis
-

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 16454 September 29, 1921

GEORGE A. KAUFFMAN, plaintiff-appellee, vs. THE PHILIPPINE NATIONAL BANK, defendant-appellant. Roman J. Lacson for appellant. Ross and Lawrence for appellee. STREET, J.: At the time of the transaction which gave rise to this litigation the plaintiff, George A. Kauffman, was the president of a domestic corporation engaged chiefly in the exportation of hemp from the Philippine Islands and known as the Philippine Fiber and Produce Company, of which company the plaintiff apparently held in his own right nearly the entire issue of capital stock. On February 5, 1918, the board of directors of said company, declared a dividend of P100,000 from its surplus earnings for the year 1917, of which the plaintiff was entitled to the sum of P98,000. This amount was accordingly placed to his credit on the books of the company, and so remained until in October of the same year when an unsuccessful effort was made to transmit the whole, or a greater part thereof, to the plaintiff in New York City. In this connection it appears that on October 9, 1918, George B. Wicks, treasurer of the Philippine Fiber and Produce Company, presented himself in the exchange department of the Philippine National Bank in Manila and requested that a

telegraphic transfer of $45,000 should be made to the plaintiff in New York City, upon account of the Philippine Fiber and Produce Company. He was informed that the total cost of said transfer, including exchange and cost of message, would be P90,355.50. Accordingly, Wicks, as treasurer of the Philippine Fiber and Produce Company, thereupon drew and delivered a check for that amount on the Philippine National Bank; and the same was accepted by the officer selling the exchange in payment of the transfer in question. As evidence of this transaction a document was made out and delivered to Wicks, which is referred to by the bank's assistant cashier as its official receipt. This memorandum receipt is in the following language: October 9th, 1918. CABLE TRANSFER BOUGHT FROM PHILIPPINE NATIONAL BANK, Manila, P.I. Stamp P18 Foreign $45,000. Amount 3/8 % Rate P90,337.50

Payable through Philippine National Bank, New York. To G. A. Kauffman, New York. Total P90,355.50. Account of Philippine Fiber and Produce Company. Sold to Messrs. Philippine Fiber and Produce Company, Manila. (Sgd.) Y LERMA, Manager, Foreign Department. On the same day the Philippine National Bank dispatched to its New York agency a cablegram to the following effect: Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE NATIONAL BANK, Manila. Upon receiving this telegraphic message, the bank's representative in New York sent a cable message in reply suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the Philippine Fiber and Produce Company. The Philippine National Bank acquiesced in this and on October 11 dispatched to its New York agency another message to withhold the Kauffman payment as suggested. Meanwhile Wicks, the treasurer of the Philippine Fiber and Produce Company, cabled to Kauffman in New York, advising him that $45,000 had been placed to

his credit in the New York agency of the Philippine National Bank; and in response to this advice Kauffman presented himself at the office of the Philippine National Bank in New York City on October 15, 1918, and demanded the money. By this time, however, the message from the Philippine National Bank of October 11, directing the withholding of payment had been received in New York, and payment was therefore refused. In view of these facts, the plaintiff Kauffman instituted the present action in the Court of First Instance of the city of Manila to recover said sum, with interest and costs; and judgment having been there entered favorably to the plaintiff, the defendant appealed. Among additional facts pertinent to the case we note the circumstance that at the time of the transaction above-mentioned, the Philippines Fiber and Produce Company did not have on deposit in the Philippine National Bank money adequate to pay the check for P90,355.50, which was delivered in payment of the telegraphic order; but the company did have credit to that extent, or more, for overdraft in current account, and the check in question was charged as an overdraft against the Philippine Fiber and Produce Company and has remained on the books of the bank as an interest-bearing item in the account of said company. It is furthermore noteworthy that no evidence has been introduced tending to show failure of consideration with respect to the amount paid for said telegraphic order. It is true that in the defendant's answer it is suggested that the failure of the bank to pay over the amount of this remittance to the plaintiff in New York City, pursuant to its agreement, was due to a desire to protect the bank in its relations with the Philippine Fiber and Produce Company, whose credit was secured at the bank by warehouse receipts on Philippine products; and it is alleged that after the exchange in question was sold the bank found that it did not have sufficient to warrant payment of the remittance. In view, however, of the failure of the bank to substantiate these allegations, or to offer any other proof showing failure of consideration, it must be assumed that the obligation of the bank was supported by adequate consideration. In this court the defense is mainly, if not exclusively, based upon the proposition that, inasmuch as the plaintiff Kauffman was not a party to the contract with the bank for the transmission of this credit, no right of action can be vested in him for the breach thereof. "In this situation," we here quote the words of the appellant's brief, "if there exists a cause of action against the defendant, it would not be in favor of the plaintiff who had taken no part at all in the transaction nor had entered into any contract with the plaintiff, but in favor of the Philippine

Fiber and Produce Company, the party which contracted in its own name with the defendant." The question thus placed before us is one purely of law; and at the very threshold of the discussion it can be stated that the provisions of the Negotiable Instruments Law can come into operation there must be a document in existence of the character described in section 1 of the Law; and no rights properly speaking arise in respect to said instrument until it is delivered. In the case before us there was an order, it is true, transmitted by the defendant bank to its New York branch, for the payment of a specified sum of money to George A. Kauffman. But this order was not made payable "to order or "to bearer," as required in subsection (d) of that Act; and inasmuch as it never left the possession of the bank, or its representative in New York City, there was no delivery in the sense intended in section 16 of the same Law. In this connection it is unnecessary to point out that the official receipt delivered by the bank to the purchaser of the telegraphic order, and already set out above, cannot itself be viewed in the light of a negotiable instrument, although it affords complete proof of the obligation actually assumed by the bank. Stated in bare simplicity the admitted facts show that the defendant bank for a valuable consideration paid by the Philippine Fiber and Produce Company agreed on October 9, 1918, to cause a sum of money to be paid to the plaintiff in New York City; and the question is whether the plaintiff can maintain an action against the bank for the nonperformance of said undertaking. In other words, is the lack of privity with the contract on the part of the plaintiff fatal to the maintenance of an action by him? The only express provision of law that has been cited as bearing directly on this question is the second paragraph of article 1257 of the Civil Code; and unless the present action can be maintained under the provision, the plaintiff admittedly has no case. This provision states an exception to the more general rule expressed in the first paragraph of the same article to the effect that contracts are productive of effects only between the parties who execute them; and in harmony with this general rule are numerous decisions of this court (Wolfson vs. Estate of Martinez, 20 Phil., 340; Ibaez de Aldecoa vs. Hongkong and Shanghai Banking Corporation, 22 Phil., 572, 584; Manila Railroad Co. vs. Compaia Trasatlantica and Atlantic, Gulf and Pacific Co., 38 Phil., 873, 894.) The paragraph introducing the exception which we are now to consider is in these words:

Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.) In the case of Uy Tam and Uy Yet vs. Leonard (30 Phil., 471), is found an elaborate dissertation upon the history and interpretation of the paragraph above quoted and so complete is the discussion contained in that opinion that it would be idle for us here to go over the same matter. Suffice it to say that Justice Trent, speaking for the court in that case, sums up its conclusions upon the conditions governing the right of the person for whose benefit a contract is made to maintain an action for the breach thereof in the following words: So, we believe the fairest test, in this jurisdiction at least, whereby to determine whether the interest of a third person in a contract is a stipulation pour autrui, or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. If a third person claims an enforcible interest in the contract, the question must be settled by determining whether the contracting parties desired to tender him such an interest. Did they deliberately insert terms in their agreement with the avowed purpose of conferring a favor upon such third person? In resolving this question, of course, the ordinary rules of construction and interpretation of writings must be observed. (Uy Tam and Uy Yet vs. Leonard, supra.) Further on in the same opinion he adds: "In applying this test to a stipulation pour autrui, it matters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promise to the third person. That no such obligation exists may in some degree assist in determining whether the parties intended to benefit a third person, whether they stipulated for him." (Uy Tam and Uy Yet vs. Leonard, supra.) In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have the money upon demand in New York City. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it; and indeed if the provision in question were not

applicable to the facts now before us, it would be difficult to conceive of a case arising under it. It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although the Philippine National Bank had already directed its New York agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing he exchange. In the course of the argument attention was directed to the case of Legniti vs. Mechanics, etc. Bank (130 N.E. Rep., 597), decided by the Court of Appeals of the State of New York on March 1, 1921, wherein it is held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a simple contractual obligation, and cannot be considered as holding the money which was paid for the transfer in the character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and that on receipt of the cable directing the transfer his correspondent at such point will make payment to the beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust relationship." As we view it there is nothing in the decision referred to decisive of the question now before us, wish is merely that of the right of the beneficiary to maintain an action against the bank selling the transfer. Upon the considerations already stated, we are of the opinion that the right of action exists, and the judgment must be affirmed. It is so ordered, with costs against the appellant. Interest will be computed as prescribed in section 510 of the Code of Civil Procedure. Johnson, Araullo, Avancea and Villamor, JJ., concur. Kauffman vs. PNB (contracts; stipulation pour autrui) Held: Yes; it is a stipulation pour autrui. Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ.

Code.) In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in NYC is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have the money upon demand in NYC. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it. It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although PNB had already directed its NY agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing he exchange. Note: Legniti vs. Mechanics, etc. Bank (130 N.E. Rep., 597), decided by CA of NYC on March 1, 1921, it was held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a simple contractual obligation, and cannot be considered as holding the money which was paid for the transfer in the character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and that on receipt of the cable directing the transfer his correspondent at such point will make payment to the beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust relationship." Facts: Kauffman, based in NYC, was the president of a Philippine Company; he was entitled to receive a dividend so the treasurer of the company went to the exchange department of PNB and requested to that a telegraphic transfer of the money Kauffman was supposed to receive from the company. The PNB agreed with additional charges for the transaction. The treasurer issued a check to PNB and it was accepted. The PNBs representative in New York sent a message suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the company. PNB acquiesced in this and dispatched to its NY agency a message to withhold the Kauffman payment as suggested. Meanwhile, Wicks then he informed Kauffman that his dividends had been wired to his credit in the NY agency of PNB. So Kauffman went to PNB

office in NYC and demanded the money, however, he was refused payment. So he filed this complaint. Does Kauffman have a right of action against PNB?

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-65425 November 5, 1987 IRENEO LEAL, JOSE LEAL, CATALINA LEAL, BERNABELA LEAL, VICENTE LEAL EUIOGIA LEAL PATERNO RAMOS, MACARIO DEL ROSARIO, MARGARITA ALBERTO, VICTORIA TORRES, JUSTINA MANUEL, JULIAN MANUEL, MELANIA SANTOS, CLEMENTE SAMARIO, MARIKINA VALLEY, INC., MIGUELA MENDOZA, and REGISTER OF DEEDS OF RIZAL, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT (4th Civil Cases Division), and VICENTE SANTIAGO (Substituted by SALUD M. SANTIAGO), respondents.

SARMIENTO, J.: In its resolution dated September 27, 1983, the respondent Intermediate Appellate Court, 1 speaking through Justice Porfirio V, Sison, ordered, in part, the petitioners to accept the sum of P5,600.00 from the private respondent as repurchase price of the lots described in the "Compraventa" and, thereafter, to execute a Deed of Repurchase to effect transfer over ownership over the same properties to the private respondent. This ruling was a complete reversal of the earlier decision, 2 dated June 28, 1.978, penned by Justice Paras, of the Court of Appeals, in the same case, affirming the trial court's dismissal of the private respondent's complaint. The petitioners, feeling aggrieved and astonished by the complete turnaround of the respondent court, come to Us with this petition for review by certiorari.

The antecedent facts are undisputed. This case brings us back almost half a century ago, on March 21, 1941, when a document entitled "Compraventa," written entirely in the Spanish language, involving three parcels of land, was executed by the private respondent's predecessors-in-interest, Vicente Santiago and his brother, Luis Santiago, in favor of Cirilio Leal the deceased father of some of the petitioners, Pursuant to this "Compraventa," the title over the three parcels of land in the name of the vendors was cancelled and a new one was issued in the name of Cirilo Leal who immediately took possession and exercised ownership over the said lands. When Cirilo died on December 10, 1959, the subject lands were inherited by his six children, who are among the petitioners, and who caused the consolidation and subdivision of the properties among themselves. Between the years 1960 and 1965, the properties were either mortgaged or leased by the petitioners-children of Cirilo Leal to their co-petitioners. Sometime before the agricultural year 1966-1967, Vicente Santiago approached the petitioners and offered re- repurchase the subject properties. Petitioners, however, refused the offer. Consequently, Vicente Santiago instituted a complaint for specific performance before the then Court of First Instance of Quezon City on August 2, 1967. All the trial, the court a quo rendered its decision,-dismissing the complaint on the ground that the same was still premature considering that there was, as yet, no sale nor any alienation equivalent to a sale. Not satisfied with this decision, the private respondent appealed to the Court of Appeals and the latter, acting through the Fourth Division and with Justice Edgardo Paras as ponente affirmed the decision of the court a quo. The petitioners seasonably filed a motion to amend the dispositive portion of the decision so as to include an order for the cancellation of the annotations at the back of the Transfer certificates of Title issued in their favor. The private respondent,-on the other hand, filed a-timely motion for reconsideration of the above decision and an opposition to petitioners' motion to amend. These incidents were not resolved until then Court of Appeals was abolished and in lieu of which the Intermideate Appellate Court was established In view of the said reorganization, case was reassigned to the Fourth Civil in this cases Division. Resolving the abovestated motion for reconsideration, the respondent court, in a resolution penned by Justice Sison and promulgated on September 27, 1983, ruled, as follows:

WHEREFORE, Our decision of June 28, 1978 is hereby reversed and set aside and another one is rendered ordering: (1) defendantsappellees surnamed Leal to accept the sum of P5,600.00 from plaintiff-appellant (substituted by Salud M. Santiago) as repurchase price of the lots described in the "Compraventa" of March 21, 1941, and thereafter to execute a deed of repurchase sufficient in law to transfer ownership of the properties to appellant Salud M. Santiago, the same to be done within five (5) days from payment; (2) ordering the same defendants Leals and defendant Clemente Samario to indemnify appellant in the sum of P3,087.50 as rental for the year 1967-1968 and the same amount every year thereafter; (3) ordering an the defendants jointly and severally to pay the sum of Pl,500.00 as attorney's fees and other expenses of litigation; and (4) ordering defendant Register of Deeds of Rizal to cancel Transfer Certificate of Title No. 42535 in the names of Vicente Santiago and Luis Santiago upon presentation of the deed of sale herein ordered to be executed by the appellees in favor of Salud M. Santiago and to issue thereof another Transfer Certificate of Title in the name alone of Salud M. Santiago. No costs here and in the courts (sic) below. SO ORDERED. Verily, the well-spring whence the present controversy arose is the abovementioned "Compraventa," more particularly paragraph (b) thereof, to wit: xxx xxx xxx
(b) En caso de venta, no podran vender a otros dichos tres lotes de terreno sino al aqui vendedor Vicente Santiago, o los herederos o sucesores de este por el niismo precio de CINCO MIL SEISCIENTOS PESOS (P5,600.00) siempre y cuando estos ultimos pueden 3 hacer la compra.

xxx xxx xxx which is now the subject of varying and conflicting interpretations. xxx xxx xxx It is admitted by both parties that the phrase "they shall not sell to others these three lots but only to the seller Vicente Santiago or to his heirs or successors" is an express prohibition against the sale of the lots described in the "Compraventa" to third persons or strangers to the contract. However, while private respondent naturally lauds the resolution of Justice Sison, which sustains

the validity of this prohibition, the petitioners, on the other hand, endorse the decision penned by Justice Paras, which states, in part: xxx xxx xxx
Finally, there is grave doubt re the validity of the ostensible resolutory condition here, namely, the prohibition to sell the lots to persons other than the vendor (appellant); uncertainly, a prohibition to alienate should not exceed at most a period of twenty years, otherwise there would be subversion of public policy, which naturally frowns on 4 unwarranted restrictions on the right of ownership.

xxx xxx xxx We agree with the Paras ponencia. Contracts are generally binding between the parties, their assigns and heirs; however, under Art. 1255 of the Civil Code of Spain, which is applicable in this instance, pacts, clauses, and conditions which are contrary to public order are null and void, thus, without any binding effect. Parenthetically, the equivalent provision in the Civil Code of the Philippines is that of Art. 1306, which states: "That contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Public order signifies the public weal public policy. 5 Essentially, therefore, public order and public policy mean one and the same thing. Public policy is simply the English equivalent of "order publico" in Art. 1255 of the Civil Code of Spain. 6 One such condition which is contrary to public policy is the present prohibition to self to third parties, because the same virtually amounts to a perpetual restriction to the right of ownership, specifically the owner's right to freely dispose of his properties. This, we hold that any such prohibition, indefinite and stated as to time, so much so that it shall continue to be applicable even beyond the lifetime of the original parties to the contract, is, without doubt, a nullity. In the light of this pronouncement, we grant the petitioners' prayer for the cancellation of the annotations of this prohibition at the back of their Transfer Certificates 'Title. It will be noted, moreover, that the petitioners have never sold, or even attempted to sell, the properties subject of the "Compraventa. " We now come to what we believe is the very issue in this case which is, whether or not under the aforequoted paragraph (b) of the "Compraventa" a right of repurchase in favor of the private respondent exist.

The ruling of the Fourth Division (Justice Paras) is that the said stipulation does not grant a right to repurchase. Contrarily, the resolution of the Fourth Civil Cases Division (Justice P. V. Sison) interpreted the same provision as granting the right to repurchase subject to a condition precedent. Thus, the assailed Resolution, reversing the earlier decision of the same respondent court, ruled xxx xxx xxx The all-importartant phrase "en caso de venta," must of necessity refer to the sale of the properties either by Cirilo or his heirs to the Santiago brothers themselves or to their heirs, including appellants Vicente Santiago including appellants Vicente Santiago and Salud M Santiago, for the same sum of P5,600.00, "siempre y cuando estos ultimos pueden hacer la compra" (when the latter shall be able to buy it). xxx xxx xxx
... We repeat, The words envision the situation contemplated by the contracting parties themselves, the resale of the lots to their owners, and NOT to a sale of the lots to third 7 parties or strangers to the contracts. ...

xxx xxx xxx The law provides that for conventional redemption to take place, the vendor should reserve, in no uncertain terms, the right to repurchase the thing sold. 8 Thus, the right to redeem must be expressly stipulated in the contract of sale in order that it may have legal existence. In the case before us, we cannot and any express or implied grant of a right to repurchase, nor can we infer, from any word or words in the questioned paragraph, the existence of any such right. The interpretation in the resolution (Justice Sison) is rather strained. The phrase "in case case" of should be construed to mean "should the buyers wish to sell which is the plain and simple import of the words, and not "the buyers should sell," which is clearly a contorted construction of the same phrase. The resort to Article 1373 of the Civil Code of the Philippines is erroneous. The subject phrase is patent and unambiguous, hence, it must not be given another interpretation But even assuming that such a right of repurchase is granted under the "Compraventa," the petitioner correctly asserts that the same has already prescribed. Under Art. 1508 of the Civil Code of Spain (Art,. 1606 of the Civil

Code of the Philippines), the right to redeem or repurchase, in the absence of an express agreement as to time, shall last four years from the date of the contract. In this case then, the right to repurchase, if it was at four guaranteed under in the "Compraventa," should have been exercise within four years from March 21, 1941 (indubitably the date of execution of the contract), or at the latest in 1945. In the respondent court's resolution, it is further ruled that the right to repurchase was given birth by the condition precedent provided for in the phrase "siempre y cuando estos ultimos pueden hacer la compra" (when the buyer has money to buy). In other words, it is the respondent court's contention that the right may be exercised only when the buyer has money to buy. If this were so, the second paragraph of Article 1508 would apply there is agreement as to the time, although it is indefinite, therefore, the right should be exercised within ten years, because the law does not favor suspended ownership. Since the alleged right to repurchase was attempted to be exercised by Vicente Santiago only in 1966, or 25 years from the date of the contract, the said right has undoubtedly expired. WHEREFORE, in view of the foregoing, the Resolution dated September 27, 1983, of the respondent court is SET ASIDE and the Decision promulgated on June 28, 1978 is hereby REINSTATED. The annotations of the prohibition to sell at the back of TCT Nos. 138837, 138838, 138839, 138840, 138841, and 138842 are hereby ordered CANCELLED. Costs against the private respondent. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-27696 September 30, 1977 MIGUEL FLORENTINO, ROSARIO ENCARNACION de FLORENTINO, MANUEL ARCE, JOSE FLORENTINO, VICTORINO FLORENTINO, ANTONIO FLORENTINO, REMEDION ENCARNACION and SEVERINA ENCARNACION, petitioners-appellants,

vs. SALVADOR ENCARNACION, SR., SALVADOR ENCARNACION, JR., and ANGEL ENCARNACION, oppositors to encumbrance-petitioners-appelles. Jose F. Singson and Miguel Florentino for appellants. Pedro Singson for appellees.

GUERRERO, J.: Appeal from the decision of the Court of First Instance of Ilocos Sur, acting as a land registration court, in Land Registration case No. N-310. On May 22, 1964, the petitioners-appellants Miguel Florentino, Remedios Encarnacion de Florentino, Manuel Arce, Jose Florentino, Victorino Florentino, Antonio Florentino, Remedior, Encarnacion and Severina Encamacion, and the Petitiners-appellees Salvador Encamacion, Sr., Salvador Encamacion, Jr. and Angel Encarnacion filed with the Court of First Instance of ilocos Sur an application for the registration under Act 496 of a parcel of agricultural land located at Barrio Lubong Dacquel Cabugao Ilocos Sur. The application alleged among other things that the applicants are the common and pro-indiviso owners in fee simple of the said land with the improvements existing thereon; that to the best of their knowledge and belief, there is no mortgage, lien or encumbrance of any kind whatever affecting said land, nor any other person having any estate or interest thereon, legal or equitable, remainder, reservation or in expectancy; that said applicants had acquired the aforesaid land thru and by inheritance from their predecessors in interest, lately from their aunt, Doa Encarnacion Florentino who died in Vigan, Ilocos Sur in 1941, and for which the said land was adjudicated to them by virtue of the deed of extrajudicial partition dated August 24, 1947; that applicants Salvador Encarnacion, Jr. and Angel Encarnacion acquired their respective shares of the land thru purchase from the original heirs, Jesus, Caridad, Lourdes and Dolores surnamed Singson one hand and from Asuncion Florentino on the other. After due notice and publication, the Court set the application for hearing. No Opposition whatsoever was filed except that of the Director of Lands which was later withdrawn, thereby leaving the option unopposed. Thereupon, an order of general default was withdrawn against the whole world. Upon application of the asets the Clerk Of court was commission will and to have the evidence of the agents and or to submit the for the Court's for resolution.

The crucial point in controversy in this registration case is centered in the stipulation marked Exhibit O-1 embodied in the deed of extrajudicial partition (Exhibit O) dated August 24, 1947 which states: Los productos de esta parcela de terreno situada en el Barrio Lubong Dacquel Cabugao Ilocos Sur, se destination para costear los tos de procesio de la Tercera Caida celebration y sermon de Siete Palbras Seis Estaciones de Cuaresma, procesion del Nino Jesus, tilaracion y conservacion de los mismos, construction le union camarin en conde se depositan los carros mesas y otras cosas que seven para lot leiracion de Siete Palabras y otras cosas mas Lo que sobra de lihos productos despues de descontados todos los gastos se repartira nosotros los herederos. In his testimony during the trial, applicant Miguel Florentino asked the court to include the said stipulation (Exhibit O-1) as an encumbrance on the land sought to be registered, and cause the entry of the same on the face of the title that will finally be issued. Opposing its entry on the title as an encumbrance, petitionersappellee Salvador Encamacion, Sr., Salvador Encarnaciori, Jr. and Angel Encarriacion filed on October 3, 1966 a manifestation seeking to withdraw their application on their respective shares of the land sought to be registered. The withdrawal was opposed by the petitioners-appellants. The Court after hearing the motion for withdrawal and the opposition thereto issued on November 17, 1966 an order and for the purpose of ascertaining and implifying the issues therein stated that all the applicants admit the truth of the following; (1) That just after the death of Encarnacion FIorentino in 1941 up to last year and as had always been the case since time immomorial the products of the land made subiect matter of this land has been used in answering for the payment for the religious functions specified in the Deed Extrajudicial Partition belated August 24, 1947: (2) That this arrangement about the products answering for the comment of experisence for religions functions as mentioned above was not registered in the office of the Register of Deeds under Act No 3344, Act 496 or and, other system of registration; (3) That all the herein applicants know of the existence of his arrangement as specified in the Deed of Extra judicial Partition of A adjust 24, 1947;

(4) That the Deed of Extrajudicial Partition of August 24, 194-, not signed by Angel Encarnacion or Salvador Encarnacion, Jr,. The court denied the petitioners-appellee motion to withdraw for lack of merit, and rendered a decision under date of November 29, 1966 confirming the title of the property in favor of the f appoints with their respective shares as follows: Spouses Miguel Florentino and Rosario Encarnacion de Florentino, both of legal age, Filipinos, and residents of Vigan, Ilocos Sur, consisting of an undivided 31/297 and 8.25/297 portions, respectively; Manuel Arce, of legal age, Filipino, married to Remedios Pichay and resident of Vigan, Ilocos Sur, consisting of an undivided 66/297 portion; Salvador Encarnacion, Jr., of legal age, Filipino, married to Angelita Nagar and resident of Vigan, Ilocos Sur, consisting of an undivided 66/297; Jose Florentino, of legal age, Filipino, married to Salvacion Florendo and resident of 16 South Ninth Diliman, Quezon City, consisting of an undivided 33/297 portion; Angel Encarnacion, of legal age, Filipino, single and resident of 1514 Milagros St., Sta. Cruz, Manila, consisting of an undivided 33/297 portion; Victorino Florentino, of legal age, Filipino, married to Mercedes L. Encarnacion and resident of Vigan, Ilocos Sur, consisting of an undivided 17.5/297 portion; Antonio Florentino, of legal age, Filipino, single and resident of Vigan, Ilocos Sur, consisting of an undivided 17.5/297; Salvador Encarnacion, Sr., of legal age, Filipino, married to Dolores Singson, consisting of an undivided 8.25/297; Remedios Encarnacion, of legal age, Filipino, single and resident of Vigan, Ilocos Sur, consisting of an undivided 8.25/297 portion; and Severina Encarnacion, of legal age, Filipino, single and resident of Vigan, Ilocos Sur, consisting of 8.25/297 undivided portion.

The court, after ruling "that the contention of the proponents of encumbrance is without merit bemuse, taking the self-imposed arrangement in favor of the Church as a pure and simple donation, the same is void for the that the donee here has riot accepted the donation (Art. 745, Civil Code) and for the further that, in the case of Salvador Encarnacion, Jr. and Angel Encarnacion, they had made no oral or written grant at all (Art. 748) as in fact they are even opposed to it," 1 held in the Positive portion, as follows: In view of all these, therefore, and insofar as the question of encumbrance is concerned, let the religious expenses as herein specified be made and entered on the undivided shares, interests and participations of all the applicants in this case, except that of Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel Encarnacion. On January 3, 1967, petitioners-appellants filed their Reply to the Opposition reiterating their previous arguments, and also attacking the junction of the registration court to pass upon the validity or invalidity of the agreement Exhibit O-1, alleging that such is specified only in an ordinary action and not proper in a land registration proceeding. The Motion for Reconsideration and of New Trial was denied on January 14, 1967 for lack of merit, but the court modified its earlier decision of November 29, 1966, to wit: This Court believes, and so holds, that the contention of the movants (proponents of the encumbrance) is without merit because the arrangement, stipulation or grant as embodied in Exhibit O (Escritura de Particion Extrajudicial), by whatever name it may be (called, whether donation, usufruct or ellemosynary gift, can be revoked as in fact the oppositors Salvador Encarnacion, Sr., who is the only one of the three oppositors who is a party to said Exhibit O (the two others, Salvador Encarnacion, Jr. and Angel Encarnacion no parties to it) did revoke it as shown by acts accompanying his refusal to have the same appear as an encumbrance on the title to be issued. In fact, legally, the same can also be ignored or discararded by will the three oppositors. The reasons are: First, if the said stipulation is pour bodies in Exhibit O-1 is to be viewed as a stipulation pour autrui the same cannot now be enforced because the Church in whose favor it was made has not communicated its acceptance to the oppositors before the latter revoked it. Says the 2nd par. of Art. 1311 of the New Civil Code:

"If a contract should contain some stipulation in favor of a third person he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person." No evide nee has ever been submitted by the Church to show its clear acceptance of the grant before its revocation by the oppositor Salvador Encarnacion, Sr. (or of the two other oppositors, Salvador Encarnacion, Jr. and Angel Encarnacion, who didn't even make any giant, in the first place), and so not even the movants who have officiously taken into themselves the right to enforce the grant cannot now maintain any action to compel compliance with it. (Bank of the P.I. v. Concepcion y Hijos, Inc., 53 Phil. 806). Second, the Church in whose favor the stipulation or grant had apparently been made ought to be the proper party to compel the herein three oppositors to abide with the stipulation. But it has not made any appearance nor registered its opposition to the application even before Oct. 18, 1965 when an order of general default was issued. Third, the movants are not, in the contemplation of Section 2, Rule 3 of the Rules of Court, the real party in interest to raise the present issue; and Fourth, the movants having once alleged in their application for registration that the land is without encumbrance (par. 3 thereof), cannot now be alloted by the rules of pleading to contradict said allegation of theirs. (McDaniel v. Apacible, 44 Phil. 248)
SO ORDERED.
2

After Motions for Reconsideration were denied by the court, the petitionersappellants appealed directly to this Court pursuant to Rule 4 1, Rules of Court, raising the following assign of error: I. The lower court erred in concluding that the stipulation embodied in Exhibit O on religious expenses is just an arrangement stipulation, or grant revocable at the unilateral option of the coowners. II. The lower court erred in finding and concluding that the encumbrance or religious expenses embodied in Exhibit O, the extrajudicial partition between the co-heirs, is binding only on the appoints Miguel Florentino, Rosario Encarnacion de Florentino, Manuel Arce, Jose Florentino, Antonio Florentino, Victorino Florentino, Remedios Encarnacion and Severina Encarnacion.

III. The lower court as a registration court erred in passing upon the merits of the encumbrance (Exhibit O-1) as the sanie was never put to issue and as the question involved is an adjudication of rights of the parties. We find the first and second assignments of error impressed with merit and, therefore, tenable. The stipulation embodied in Exhibit O-1 on religious expenses is not revocable at the unilateral option of the co-owners and neither is it binding only on the petitioners-appellants Miguel Florentino, Rosario Encarnacion de Florentino Manuel Arce, Jose Florentino, Victorino Florentino Antonio Florentino, Remedios Encarnacion and Severina E It is also binding on the oppositorsappellees Angel Encarnacion, The stipulation (Exhibit 411) in pan of an extrajudicial partition (Exh. O) duly agreed and signed by the parties, hence the sanie must bind the contracting parties thereto and its validity or compliance cannot be left to the with of one of them (Art. 1308, N.C.C.). Under Art 1311 of the New Civil Code, this stipulation takes effect between the parties, their assign and heirs. The article provides: Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain a stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. The second paragraph of Article 1311 above-quoted states the law on stipulations pour autrui. Consent the nature and purpose of the motion (Exh. O1), We hold that said stipulation is a station pour autrui. A stipulation pourautrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third person, and such third person and demand its fulfillment provoked that he communicates his to the obligor before it is revoked. 3 The requisites are: (1) that the stipulation in favor of a third person should be a part, not the whole, of the contract; (2) that the favorable stipulation should not be conditioned or compensated by any kind of

obligation whatever; and (3) neither of the contracting bears the legal represented or authorization of third person. To constitute a valid stipulation pour autrui it must be the purpose and intent of the stipulating parties to benefit the third and it is not sufficient that the third person may be incidentally benefited by the stipulation. The fairest test to determine whether the interest of third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In applying this test, it meters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promisee to the third person. That no such obsorption exists may in some degree assist in determining whether the parties intended to benefit a third person.4 In the case at bar, the determining point is whether the co-owners intended to benefit the Church when in their extrajudicial partition of several parcels of land inherited by them from Doa Encarnacion Florendo they agreed that with respect to the land situated in Barrio Lubong Dacquel Cabugao Ilocos Sur, the fruits thereof shall serve to defray the religious expenses specified in Exhibit O-1. The evidence on record shows that the true intent of the parties is to confer a direct and material benefit upon the Church. The fruits of the aforesaid land were used thenceforth to defray the expenses of the Church in the preparation and celebration of the Holy Week, an annual Church function. Suffice it to say that were it not for Exhibit O-1, the Church would have necessarily expended for this religious occasion, the annual relisgious procession during the Holy Wock and also for the repair and preservation of all the statutes, for the celebration of the Seven Last Word. We find that the trial court erred in holding that the stipulation, arrangement or grant (Exhibit O-1) is revocable at the option of the co-owners. While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored, the law does not provide when the third person must make his acceptance. As a rule, there is no time at such third person has after the time until the stipulation is revoked. Here, We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the co-owners, namely the petitioners-appellants herein. It is not disputed that from the time of the with of Doa Encarnacion Florentino in 1941, as had always been the case since time immemorial up to a year before the firing of their application in May 1964, the Church had been enjoying the benefits of the stipulation. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation.

The acceptance does not have to be in any particular form, even when the stipulation is for the third person an act of liberality or generosity on the part of the promisor or 5 promise. It need not be made expressly and formally. Notification of acceptance, other than such 6 as is involved in the making of demand, is unnecessary. A trust constituted between two contracting parties for the benefit of a third person is not subject to the rules governing donation of real property. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the this in a public document, upon mere acquiescence in the formation of the trust and 7 acceptance under the second paragraph of Art. 1257 of the Civil Code.

Hence, the stipulation (Exhibit O-1) cannot now be revoked by any of the stipulators at their own option. This must be so because of Article 1257, Civil Code and the cardinal rule of contracts that it has the force of law between the parties. 8 Thus, this Court ruled in Garcia v. Rita Legarda, Inc., 9 "Article 1309 is a virtual reproduction of Article 1256 of the Civil Code, so phrased to emphasize that the contract must bind both parties, based on the principles (1) that obligation arising from contracts have the force of law between the contracting parties; and (2) that there must be mutuality between the parties based on their principle equality, to which is repugnant to have one party bound by the contract leaving the other free therefrom." Consequently, Salvador Encarnacion, Sr. must bear with Exhibit O-1, being a signatory to the Deed of Extrajudicial Partition embodying such beneficial stipualtion. Likewise, with regards to Salvador, Jr. and Angel Encarnacion, they too are bound to the agreement. Being subsequent purchasers, they are privies or successors in interest; it is axiomatic that contracts are enforceable against the parties and their privies. 10 Furthermore, they are shown to have given their conformity to such agreement when they kept their peace in 1962 and 1963, having already bought their respective shares of the subject land but did not question the enforcement of the agreement as against them. They are also shown to have knowledge of Exhibit O-1 as they had admitted in a Deed of Real Mortgage executed by them on March 8, 1962 involving their shares of the subject land that, "This parcel of land is encumbered as evidenced by the document No. 420, page 94, Book 1, series 1947, executed by the heirs of the late Encarnacion Florentino, on August 26, 1947, before M. Francisco Ante, Notwy Public of Vigan, Ilocos Sur, in its page 10 of the said document of partition, and also by other documents." The annotation of Exhibit O-1 on the face of the title to be issued in this case is merely a guarantee of the continued enforcement and fulfillment of the beneficial stipulation. It is error for the lower court to rule that the petitioners-appellants are not the real parties in interest, but the Church. That one of the parties to a

contract pour autrui is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the other hand, that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provoked he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. 11 Petitioners-appellants' third assignment of error is not well-taken. Firstly, the otherwise rigid rule that the jurisdiction of the Land Registration Court, being special and limited in character and proceedings thereon summary in nature, does not extend to cases involving issues properly litigable in other independent suits or ordinary civil actions, has time and again been relaxed in special and exceptional circumstances. (See Government of the Phil. Islands v. Serafica, 61 Phil. 93 (1934); Caoibes v. Sison, 102 Phil. 19 (1957); Luna v. Santos, 102 Phil. 588 (1957); Cruz v. Tan, 93 Phil. 348 (1953); Gurbax Singh Pabla & Co. v. Reyes, 92 Phil. 177 (1952). From these cases, it may be gleaned and gathered that the peculiarity of the exceptions is based not only on the fact that Land Registration Courts are likewise the same Courts of First Instance, but also the following premises (1) Mutual consent of the parties or their acquired in submitting the at aforesaid determination by the court in the registration; (2) Full opportunity given to the parties in the presentation of their respective skies of the issues and of the evidence in support thereto; (3) Consideration by the court that the evidence already of record is sufficient and adequate for rendering a decision upon these issues. 12 In the case at bar, the records clearly show that the second and third premism enumerated abow are fully mt. With regards to first premise, the petioners-appellants cannot claim that the issues anent Exhibit O-1 were not put in issue because this is contrary to their stand before the lower court where they took the initial step in praying for the court's determination of the merits of Exhibit O-1 as an encumbrance to be annotated on the title to be issued by such court. On the other hand, the petitioners-appellees who had the right to invoke the limited jurisdiction of the registration court failed to do so but met the issues head-on. Secondly, for this very special reason, We win uphold the actuation of the lower court in determining the conflicting interests of the parties in the registration proceedings before it. This case has been languishing in our courts for thirteen tong years. To require that it be remanded to the lower court for another proceeding under its general jurisdiction is not in consonance with our avowed policy of speedy justice. It would not be amiss to note that if this case be remanded to the lower court, and should appeal again be made, the name issues will once more be raised before us hence, Our decision to resolve at once the issues in the instant petition.

IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Ilocos Sur in Land Registration Case No. N-310 is affirmed but modified to allow the annotation of Exhibit O-1 as an encumbrance on the face of the title to be finally issued in favor of all the applications (herein appellants and herein appellees) in the registration proceedings below. No pronouncement as to cost. SO ORDERED.