[G.R. No. 127695.

December 3, 2001]

HEIRS OF LUIS BACUS, namely: CLARA RESMA BACUS, ROQUE R. BACUS, SR., SATURNINO R.
BACUS, PRISCILA VDA. DE CABANERO, CARMELITA B. SUQUIB, BERNARDITA B.
CARDENAS, RAUL R. BACUS, MEDARDO R. BACUS, ANSELMA B. ALBAN, RICARDO R.
BACUS, FELICISIMA B. JUDICO, and DOMINICIANA B. TANGAL, petitioners, vs. HON.
COURT OF APPEALS and SPOUSES FAUSTINO DURAY and VICTORIANA
DURAY, respondents.
DECISION
QUISUMBING, J.:
This petition assails the decision dated November 29, 1996, of the Court of Appeals in CA-G.R. CV
No. 37566, affirming the decision dated August 3, 1991, of the Regional Trial Court of Cebu City, Branch
6, in Civil Case No. CEB-8935.
The facts, as culled from the records, are as follows:
On June 1, 1984, Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural
land in Bulacao, Talisay, Cebu. Designated as Lot No. 3661-A-3-B-2, it had an area of 3,002 square
meters, covered by Transfer Certificate of Title No. 48866. The lease was for six years, ending May 31,
1990. The contract contained an option to buy clause. Under said option, the lessee had the exclusive
and irrevocable right to buy 2,000 square meters of the property within five years from a year after the
effectivity of the contract, at P200 per square meter. That rate shall be proportionately adjusted depending
on the peso rate against the US dollar, which at the time of the execution of the contract was fourteen
pesos. [1]
Close to the expiration of the contract, Luis Bacus died on October 10, 1989. Thereafter, on March
15, 1990, the Duray spouses informed Roque Bacus, one of the heirs of Luis Bacus, that they were willing
and ready to purchase the property under the option to buy clause. They requested Roque Bacus to
prepare the necessary documents, such as a Special Power of Attorney authorizing him to enter into a
contract of sale,[2] on behalf of his sisters who were then abroad.
On March 30, 1990, due to the refusal of petitioners to sell the property, Faustino Durays adverse
claim was annotated by the Register of Deeds of Cebu, at the back of TCT No. 63269, covering the
segregated 2,000 square meter portion of Lot No. 3661-A-3-B-2-A. [3]
Subsequently, on April 5, 1990, Duray filed a complaint for specific performance against the heirs of
Luis Bacus with the Lupon Tagapamayapa of Barangay Bulacao, asking that he be allowed to purchase
the lot specifically referred to in the lease contract with option to buy. At the hearing, Duray presented a
certification[4] from the manager of Standard Chartered Bank, Cebu City, addressed to Luis Bacus, stating
that at the request of Mr. Lawrence Glauber, a bank client, arrangements were being made to allow
Faustino Duray to borrow funds of approximately P700,000 to enable him to meet his obligations under
the contract with Luis Bacus.[5]
Having failed to reach an agreement before the Lupon, on April 27, 1990, private respondents filed a
complaint for specific performance with damages against petitioners before the Regional Trial Court,
praying that the latter, (a) execute a deed of sale over the subject property in favor of private respondents;
(b) receive the payment of the purchase price; and (c) pay the damages.
On the other hand, petitioners alleged that before Luis Bacus death, private respondents conveyed
to them the formers lack of interest to exercise their option because of insufficiency of funds, but they

were surprised to learn of private respondents demand. In turn, they requested private respondents to
pay the purchase price in full but the latter refused. They further alleged that private respondents did not
deposit the money as required by the Lupon and instead presented a bank certification which cannot be
deemed legal tender.
On October 30, 1990, private respondents manifested in court that they caused the issuance of a
cashiers check in the amount of P650,000[6] payable to petitioners at anytime upon demand.
On August 3, 1991, the Regional Trial Court ruled in favor of private respondents, the dispositive
portion of which reads:
Premises considered, the court finds for the plaintiffs and orders the defendants to specifically perform
their obligation in the option to buy and to execute a document of sale over the property covered by
Transfer Certificate of Title # T-63269 upon payment by the plaintiffs to them in the amount of Six
Hundred Seventy-Five Thousand Six Hundred Seventy-Five (P675,675.00) Pesos within a period of thirty
(30) days from the date this decision becomes final.
SO ORDERED.[7]
Unsatisfied, petitioners appealed to the respondent Court of Appeals which denied the appeal on
November 29, 1996, on the ground that the private respondents exercised their option to buy the leased
property before the expiration of the contract of lease. It held:
... After a careful review of the entire records of this case, we are convinced that the plaintiffs-appellees
validly and effectively exercised their option to buy the subject property. As opined by the lower court, the
readiness and preparedness of the plaintiff on his part, is manifested by his cautionary letters, the
prepared bank certification long before the date of May 31, 1990, the final day of the option, and his filing
of this suit before said date. If the plaintiff-appellee Francisco Duray had no intention to purchase the
property, he would not have bothered to write those letters to the defendant-appellants (which were all
received by them) and neither would he be interested in having his adverse claim annotated at the back
of the T.C.T. of the subject property, two (2) months before the expiration of the lease. Moreover, he even
went to the extent of seeking the help of the Lupon Tagapamayapa to compel the defendants-appellants
to recognize his right to purchase the property and for them to perform their corresponding obligation. [8]
xxx
We therefore find no merit in this appeal.
WHEREFORE, the decision appealed from is hereby AFFIRMED. [9]
Hence, this petition where petitioners aver that the Court of Appeals gravely erred and abused its
discretion in:
I. ...UPHOLDING THE TRIAL COURTS RULING IN THE SPECIFIC PERFORMANCE CASE
BY ORDERING PETITIONERS (DEFENDANTS THEREIN) TO EXECUTE A DOCUMENT
OF SALE OVER THE PROPERTY IN QUESTION (WITH TCT NO. T-63269) TO THEM IN
THE AMOUNT OF P675,675.00 WITHIN THIRTY (30) DAYS FROM THE DATE THE
DECISION BECOMES FINAL;
II. ...DISREGARDING LEGAL PRINCIPLES, SPECIFIC PROVISIONS OF LAW AND
JURISPRUDENCE IN UPHOLDING THE DECISION OF THE TRIAL COURT TO THE
EFFECT THAT PRIVATE RESPONDENTS HAD EXERCISED THEIR RIGHT OF OPTION
TO BUY ON TIME; THUS THE PRESENTATION OF THE CERTIFICATION OF THE BANK
MANAGER OF A BANK DEPOSIT IN THE NAME OF ANOTHER PERSON FOR LOAN TO
RESPONDENTS WAS EQUIVALENT TO A VALID TENDER OF PAYMENT AND A

SUFFICIENT COMPLAINCE (SIC) OF A CONDITION FOR THE EXERCISE OF THE

OPTION TO BUY; AND
III UPHOLDING THE TRIAL COURTS RULING THAT THE PRESENTATION OF A CASHERS
(SIC) CHECK BY THE RESPONDENTS IN THE AMOUNT OF P625,000.00 EVEN AFTER
THE TERMINATION OF THE TRIAL ON THE MERITS WITH BOTH PARTIES ALREADY
HAVING RESTED THEIR CASE, WAS STILL VALID COMPLIANCE OF THE CONDITION
FOR THE PRIVATE RESPONDENTS (PLAINTIFFS THEREIN) EXERCISE OF RIGHT OF
OPTION TO BUY AND HAD A FORCE OF VALID AND FULL TENDER OF PAYMENT
WITHIN THE AGREED PERIOD.[10]
Petitioners insist that they cannot be compelled to sell the disputed property by virtue of the
nonfulfillment of the obligation under the option contract of the private respondents.
Private respondents first aver that petitioners are unclear if Rule 65 or Rule 45 of the Rules of Court
govern their petition, and that petitioners only raised questions of facts which this Court cannot properly
entertain in a petition for review. They claim that even assuming that the instant petition is one under Rule
45, the same must be denied for the Court of Appeals has correctly determined that they had validly
exercised their option to buy the leased property before the contract expired.
In response, petitioners state that private respondents erred in initially classifying the instant petition
as one under Rule 65 of the Rules of Court. They argue that the petition is one under Rule 45 where
errors of the Court of Appeals, whether evidentiary or legal in nature, may be reviewed.
We agree with private respondents that in a petition for review under Rule 45, only questions of law
may be raised.[11] However, a close reading of petitioners arguments reveal the following legal issues
which may properly be entertained in the instant petition:
a) When private respondents opted to buy the property covered by the lease contract with
option to buy, were they already required to deliver the money or consign it in court before
petitioner executes a deed of transfer?
b) Did private respondents incur in delay when they did not deliver the purchase price or
consign it in court on or before the expiration of the contract?
On the first issue, petitioners contend that private respondents failed to comply with their obligation
because there was neither actual delivery to them nor consignation in court or with the Municipal, City or
Provincial Treasurer of the purchase price before the contract expired. Private respondents bank
certificate stating that arrangements were being made by the bank to release P700,000 as a loan to
private respondents cannot be considered as legal tender that may substitute for delivery of payment to
petitioners nor was it a consignation.
Obligations under an option to buy are reciprocal obligations. [12] The performance of one obligation is
conditioned on the simultaneous fulfillment of the other obligation. [13] In other words, in an option to buy,
the payment of the purchase price by the creditor is contingent upon the execution and delivery of a deed
of sale by the debtor. In this case, when private respondents opted to buy the property, their obligation
was to advise petitioners of their decision and their readiness to pay the price. They were not yet obliged
to make actual payment. Only upon petitioners actual execution and delivery of the deed of sale were
they required to pay. As earlier stated, the latter was contingent upon the former. In Nietes vs. Court of
Appeals, 46 SCRA 654 (1972), we held that notice of the creditors decision to exercise his option to buy
need not be coupled with actual payment of the price, so long as this is delivered to the owner of the
property upon performance of his part of the agreement. Consequently, since the obligation was not yet
due, consignation in court of the purchase price was not yet required.
Consignation is the act of depositing the thing due with the court or judicial authorities whenever the
creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. In
instances, where no debt is due and owing, consignation is not proper. [14] Therefore, petitioners contention
that private respondents failed to comply with their obligation under the option to buy because they failed
to actually deliver the purchase price or consign it in court before the contract expired and before they
execute a deed, has no leg to stand on.

Corollary, private respondents did not incur in delay when they did not yet deliver payment nor make
a consignation before the expiration of the contract. In reciprocal obligations, neither party incurs in delay
if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon
him. Only from the moment one of the parties fulfills his obligation, does delay by the other begin. [15]
In this case, private respondents, as early as March 15, 1990, communicated to petitioners their
intention to buy the property and they were at that time undertaking to meet their obligation before the
expiration of the contract on May 31, 1990. However, petitioners refused to execute the deed of sale and
it was their demand to private respondents to first deliver the money before they would execute the same
which prompted private respondents to institute a case for specific performance in the Lupong
Tagapamayapa and then in the RTC. On October 30, 1990, after the case had been submitted for
decision but before the trial court rendered its decision, private respondents issued a cashiers check in
petitioners favor purportedly to bolster their claim that they were ready to pay the purchase price. The trial
court considered this in private respondents favor and we believe that it rightly did so, because at the time
the check was issued, petitioners had not yet executed a deed of sale nor expressed readiness to do so.
Accordingly, as there was no compliance yet with what was incumbent upon petitioners under the option
to buy, private respondents had not incurred in delay when the cashiers check was issued even after the
contract expired.
WHEREFORE, the instant petition is DENIED. The decision dated November 29, 1996 of the Court
of Appeals is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 167434 February 19, 2007

SPOUSES RAMON M. NISCE and A. NATIVIDAD PARAS-NISCE, Petitioners,
vs.
EQUITABLE PCI BANK, INC., Respondent.

DECISION
CALLEJO, SR., J.:
On November 26, 2002, Equitable PCI Bank1 (Bank) as creditor-mortgagee filed a petition for extrajudicial
foreclosure before the Office of the Clerk of Court as Ex-Officio Sheriff of the Regional Trial Court (RTC)
of Makati City. It sought to foreclose the following real estate mortgage contracts executed by the spouses
Ramon and Natividad Nisce over two parcels of land covered by Transfer Certificate of Title (TCT) Nos.
S-83466 and S-83467 of the Registry of Deeds of Rizal: one dated February 26, 1974; two (2) sets of
"Additional Real Estate Mortgage" dated September 27, 1978 and June 3, 1996; and an "Amendment to
Real Estate Mortgage" dated February 28, 2000. The mortgage contracts were executed by the spouses
Nisce to secure their obligation under Promissory Note Nos. 1042793 and BD-150369, including a
Suretyship Agreement executed by Natividad. The obligation of the Nisce spouses
totaled P34,087,725.76 broken down as follows:
Spouses Ramon & Natividad Nisce - - - - - P17,422,285.99
Natividad P. Nisce (surety) - - - - - - - - - - US$57,306.59
and - - - - - - - - - - - - P16,665,439.772
On December 2, 2002, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on January 14,
2003,3 or on January 30, 2003 in the event the public auction would not take place on the earlier setting.
On January 28, 2003, the Nisce spouses filed before the RTC of Makati City a complaint for "nullity of the
Suretyship Agreement, damages and legal compensation" with prayer for injunctive relief against the
Bank and the Ex-Officio Sheriff. They alleged the following: in a letter 4 dated December 7, 2000 they had
requested the bank (through their lawyer-son Atty. Rosanno P. Nisce) to setoff the peso equivalent of their
obligation against their US dollar account with PCI Capital Asia Limited (Hong Kong), a subsidiary of the
Bank, under Certificate Deposit No. 016125 and Account No. 090-0104 (Passbook No. 83-3041);6 the
Bank accepted their offer and requested for an estimate of the balance of their account; they complied
with the Banks request and in a letter dated February 11, 2002, informed it that the estimated balance of
their account as of December 1991 (including the 11.875% per annum interest) was US$51,000.42, 7 and
that as of December 2002, Natividads US dollar deposit with it amounted to at least P9,000,000.00; they
were surprised when they received a letter from the Bank demanding payment of their loan account, and
later a petition for extrajudicial foreclosure.
The spouses Nisce also pointed out that the petition for foreclosure filed by the Bank included the alleged
obligation of Natividad as surety for the loan of Vista Norte Trading Corporation, a company owned and
managed by their son Dino Giovanni P. Nisce (P16,665,439.77 and US$57,306.59). They insisted,
however, that the suretyship agreement was null and void for the following reasons:
(a) x x x [I]t was executed without the knowledge and consent of plaintiff Ramon M. Nisce, who is
by law the administrator of the conjugal partnership;

(b) The suretyship agreement did not redound to the benefit of the conjugal partnership and
therefore did not bind the same;
(c) Assuming, arguendo, that the suretyship contract was valid and binding, any obligation arising
therefrom is not covered by plaintiffs real estate mortgages which were constituted to secure the
payment of certain specific obligations only.8
The spouses Nisce likewise alleged that since they and the Bank were creditors and debtors with respect
to each other, their obligations should have been offset by legal compensation to the extent of their
account with the Bank.
To support their plea for a writ of preliminary and prohibitory injunction, the spouses Nisce alleged that the
amount for which their property was being sold at public auction (P34,087,725.76) was grossly excessive;
the US dollar deposit of Natividad with PCI Capital Asia Ltd. (Hong Kong), and the obligation covered by
the suretyship agreement had not been deducted. They insisted that their property rights would be
violated if the sale at public auction would push through. Thus, the spouses Nisce prayed that they be
granted the following reliefs:
(1) that upon the filing of this Complaint and/or after due notice and summary hearing, the
Honorable Court immediately issue a temporary restraining order (TRO) restraining defendants,
their representatives and/or deputies, and other persons acting for and on their behalf from
proceeding with the extrajudicial foreclosure sale of plaintiffs mortgaged properties on 30 January
2003 or on any other dates subsequent thereto;
(2) that after due notice and hearing and posting of the appropriate bond, the Honorable Court
convert the TRO to a writ of preliminary prohibitory injunction;
(3) that after trial on the merits, the Honorable Court render judgment
(a) making the preliminary injunction final and permanent;
(b) ordering defendant Bank to set off the present peso value of Mrs. Nisces US dollar
time deposit, inclusive of stipulated interest, against plaintiffs loan obligations with
defendant Bank;
(c) declaring the Deed of Suretyship dated 25 May 1998 null and valid and without any
binding effect as to plaintiff spouses, and ordering defendant Bank to exclude the
amounts covered by said suretyship contract from plaintiffs obligations with defendant
Bank;
(d) ordering defendant Bank to pay plaintiffs the following sums:
(i) at least P3,000,000.00 as moral damages;
(ii) at least P1,500,000.00 as exemplary damages; and
(iii) at least P500,000.00 as attorneys fees and for other expenses of litigation.
Plaintiffs further pray for costs of suit and such other reliefs as may be deemed just and equitable. 9
On same day, the Bank filed an "Amended Petition" with the Office of the Executive Judge for extrajudicial
foreclosure of the Real Estate Mortgage to satisfy the spouses loan account of P30,533,552.24,

exclusive of interests, penalties and other charges; and the amounts of P16,665,439.77 and
US$57,306.59 covered by the suretyship agreement executed by Natividad Nisce. 10
In the meantime, the parties agreed to have the sale at public auction reset to January 30, 2003.
In its Answer to the complaint, the Bank alleged that the spouses had no cause of action for legal
compensation since PCI Capital was a different corporation with a separate and distinct personality; if at
all, offsetting may occur only with respect to the spouses US$500.00 deposit account in its Paseo de
Roxas branch.
In the meantime, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on March 5 and 27,
2003.11The spouses Nisce then filed a Supplemental Complaint with plea for a temporary restraining order
to enjoin the sale at public auction.12 Thereafter, the RTC conducted hearings on the plaintiffs plea for a
temporary restraining order, and the parties adduced testimonial and documentary evidence on their
respective arguments.
The Case for the Spouses Nisce
Natividad frequently traveled abroad and needed a facility with easy access to foreign exchange. She
inquired from E.P. Nery, the Bank Manager for PCI Bank Paseo de Roxas Branch, about opening an
account. He assured her that she would be able to access it from anywhere in the world. She and Nery
also agreed that any balance of account remaining at maturity date would be rolled over until further
instructions, or until she terminated the facility.13 Convinced, Natividad deposited US$20,500.00 on July
19, 1984, and was issued Passbook No. 83-3041.14 Upon her request, the bank transferred the
US$20,000.00 to PCI Capital Asia Ltd. in Hong Kong via cable order.15
On July 11, 1996, the spouses Nisce secured a P20,000,000.00 loan from the Bank under Promissory
Note No. BD-150369.16 The maturity date of the loan was July 11, 2001, payable in monthly installments
at 16.731% interest per annum. To secure the payment of the loan account, they executed an
Amendment to the Real Estate Mortgage over the properties 17 located in Makati City covered by TCT
Nos. S-83466 and S-83467.18 They later secured another loan of P13,089,936.90 on March 1, 2000 (to
mature on March 1, 2005) payable quarterly at 13.9869% interest per annum; this loan agreement is
evidenced by Promissory Note (PN) No. 104279319 and covered by a Real Estate Mortgage 20 executed
on February 28, 2000. They made a partial payment ofP13,866,666.50 on the principal of their loan
account covered by PN No. BD-150369, and P5,348,239.82 on the interests.21 These payments are
evidenced by receipts and checks.22 However, there were payments totalingP4,600,000.00 received by
the Bank but were not covered by checks or receipts. 23 As of September 2000, the balance of their loan
account under PN No. BD-150369 was only P4,333,333.46.24 They also made partial payment on their
loan account under PN No. 1042793 which, as of May 30, 2001, amounted to P2,218,793.61.25
On July 20, 1984, PCI Capital issued Certificate of Deposit No. CD-01612; 26 proof of receipt of the
US$20,000.00 transferred to it by PCI Bank Paseo de Roxas Branch as requested by Natividad. The
deposit account was to earn interest at the rate of 11.875% per annum, and would mature on October 22,
1984, thereafter to be payable at the office of the depositary in Hong Kong upon presentation of the
Certificate of Deposit.
In June 1991, two sons of the Nisce spouses were stranded in Hong Kong. Natividad called the Bank and
requested for a partial release of her dollar deposit to her sons. However, she was informed that
according to its computer records, no such dollar account existed. Sometime in November 1991, she
submitted her US dollar passbook with a xerox copy of the Certificate of Deposit for the PCIB to
determine the whereabouts of the account.27 She reiterated her request to the Bank on January 27,
199228 and September 11, 2000.29

In the meantime, in 1994, the Equitable Banking Corporation and the PCIB were merged under the
corporate name Equitable PCI Bank.
In a letter dated December 7, 2000, Natividad confirmed to the Bank, through Ms. Shellane R.
Casaysayan, her offer to settle their loan account by offsetting the peso equivalent of her dollar account
with PCI Capital under Account No. 090-0104.30 Their son, Atty. Rosanno Nisce, later wrote the Bank,
declaring that the estimated balance of the US dollar account with PCI Capital as of December 1991 was
US$51,000.42.31 Atty. Nisce corroborated this in his testimony, and stated that Ms. Casaysayan had
declared that she would refer the matter to her superiors. 32 A certain Rene Esteven also told him that
another offer to setoff his parents account had been accepted, and he was assured that its
implementation was being processed.33 On cross examination, Atty. Nisce declared that there was no
response to his request for setoff,34 and that Esteven assured him that the Bank would look for the
records of his mothers US dollar savings deposit.35 He was later told that the Bank had accepted the offer
to setoff the account.36
The Case for the Bank
The Bank adduced evidence that, as of January 31, 2003, the balance of the spouses account under the
two promissory notes, including interest and penalties, was P30,533,552.24.37 It had agreed to restructure
their loans on March 31, 1998, but they nevertheless failed to pay despite repeated demands. 38 The
spouses had also been furnished with a statement of their account as of June 2001. Thus, under the
terms of the Real Estate Mortgage and Promissory Notes, it had the right to the remedy of foreclosure. It
insisted that there is no showing in its records that the spouses had delivered checks amounting
to P4,600,000.00.39
According to the Bank, Natividads US$20,000.00 deposit with the PCIB Paseo de Roxas branch was
transferred to PCI Capital via cable order,40 and that it later issued Certificate of Deposit No. 01612 (Nontransferrable).41 In a letter dated May 9, 2001, it informed Natividad that it had acted merely as a conduit
in facilitating the transfer of the funds, and that her deposit was made with PCI Capital and not with PCIB.
PCI Capital had a separate and distinct personality from the PCIB, and a claim against the former cannot
be made against the latter. It was later advised that PCI Capital had already ceased operations. 42
The spouses Nisce presented rebuttal documentary evidence to show that PCI Capital was registered in
Hong Kong as a corporation under Registration No. 84555 on February 27, 1989 43 with an authorized
capital stock of 50,000,000 (with par value of HKD1.00); the PCIB subscribed to 29,039,993 issued
shares at the par value of HKD1.00 per share;44 on October 25, 2004, the corporate name of PCI Capital
was changed to PCI Express Padala (HK) Ltd.;45 and the stockholdings of PCIB remained at 29,039,999
shares.46
On March 24, 2003, the RTC issued an Order47 granting the spouses Nisces plea for a writ of preliminary
injunction on a bond of P10,000,000.00. The dispositive portion of the Order reads:
WHEREFORE, in order not to render the judgment ineffectual, upon filing by the plaintiffs and the
approval thereof by the court of a bond in the amount of Php10,000,000.00, which shall answer for any
damage should the court finally decide that plaintiffs are not entitled thereto, let a writ of preliminary
injunction issue enjoining defendants Equitable-PCI Bank, Atty. Engracio M. Escasinas, Jr., and any
person or entity acting for and in their behalf from proceeding with the extrajudicial foreclosure sale of
TCT Nos. 437678 and 437679 registered in the names of the plaintiffs. 48
After weighing the parties arguments along with their documentary evidence, the RTC declared that
justice would be best served if a writ of preliminary injunction would be issued to preserve the status quo.
It had yet to resolve the issue of setoff since only Natividad dealt with the Bank regarding her dollar
account. It also had to resolve the issue of whether the Bank had failed to credit the amount
of P4,600,000.00 to the spouses Nisces account under PN No. BD-150369, and their claim that the Bank

had effectively accelerated the respective maturity dates of their loan. 49 The spouses Nisce posted the
requisite bond which was approved by the RTC.1awphi1.net
The Bank opted not to file a motion for reconsideration of the order, and instead assailed the trial courts
order before the CA via petition for certiorari under Rule 65 of the Rules of Court. The Bank alleged that
the RTC had acted without or in excess of its jurisdiction, or with grave abuse of its discretion amounting
to lack or excess of jurisdiction when it issued the assailed order; 50 the spouses Nisce had failed to prove
the requisites for the issuance of a writ of preliminary injunction; respondents claim that their account with
petitioner had been extinguished by legal compensation has no factual and legal basis. It further asserted
that according to the evidence, Natividad made the US$20,000.00 deposit with PCI Capital before it
merged with Equitable Bank hence, the Bank was not the debtor of Natividad relative to the dollar
account. The Bank cited the ruling of this Court in Escao v. Heirs of Escao and Navarro 51 to support its
arguments. It insisted that the spouses Nisce had failed to establish "irreparable injury" in case of denial
of their plea for injunctive relief.
The spouses, for their part, pointed out that the Bank failed to file a motion for reconsideration of the trial
courts order, a condition sine qua non to the filing of a petition for certiorari under Rule 65 of the Rules of
Court. Moreover, the error committed by the trial court is a mere error of judgment not correctible by
certiorari; hence, the petition should have been dismissed outright by the CA. They reiterated their claim
that they had made a partial payment of P4,600,000.00 on their loan account which petitioner failed to
credit in their favor. The Bank had agreed to debit their US dollar savings deposit in the PCI Capital as
payment of their loan account. They insisted that they had never deposited their US dollar account with
PCI Capital but with the Bank, and that they had never defaulted on their loan account. Contrary to the
Banks claim, they would have suffered irreparable injury had the trial court not enjoined the extrajudicial
foreclosure of the real estate mortgage.
On December 22, 2004, the CA rendered judgment granting the petition and nullifying the assailed Order
of the RTC.52 The appellate court declared that a petition for certiorari under Rule 65 of the Rules of Court
may be filed despite the failure to file a motion for reconsideration, particularly in instances where the
issue raised is one of law; where the error is patent; the assailed order is void, or the questions raised are
the same as those already ruled upon by the lower court. According to the appellate court, the issue
raised before it was purely one of law: whether the loan account of the spouses was extinguished by legal
compensation. Thus, a motion for the reconsideration of the assailed order was not a prerequisite to a
petition for certiorari under Rule 65.
The appellate court further declared that the trial court committed grave abuse of its discretion in issuing
the assailed order, since no plausible reason was given by the spouses Nisce to justify the injunction of
the extrajudicial foreclosure of the real estate mortgage. Given their admission that they had not settled
the obligations secured by the mortgage, the Bank had a clear right to seek the remedy of foreclosure.
The CA further declared as devoid of factual basis the spouses Nisces argument that the Bank should
have applied, by way of legal compensation, the peso equivalent of their time deposit with PCI Capital as
partial settlement of their obligations. It held that for compensation to take place, the requirements set
forth in Articles 1278 and 1279 of the Civil Code of the Philippines must be present; in this case, the
parties are not mutually creditors and debtors of each other. It pointed out that the time deposit which the
spouses Nisce sought to offset against their obligations to the Bank is maintained with PCI Capital. Even
if PCI Capital is a subsidiary of the Bank, compensation cannot validly take place because the Bank and
PCI Capital are two separate and distinct corporations. It pointed out the settled principle "that a
corporation has a personality separate and distinct from its stockholders and from other corporations to
which it may be connected."
The CA further declared that the alleged P4,600,000.00 payment on PN No. BD-150369 was not pleaded
in the spouses complaint and supplemental complaint before the court a quo. What they alleged, aside
from legal compensation, was that the mortgage is not liable for the obligation of Natividad Nisce as
surety for the loans obtained by a trading firm owned and managed by their son. The CA further pointed

out that the Bank precisely amended the petition for foreclosure sale by deleting the claim for Natividads
obligation as surety. The appellate court concluded that the injunctive writ was issued by the RTC without
factual and legal basis.53
The spouses Nisce moved to have the decision reconsidered, but the appellate court denied the motion.
They thus filed the instant petition for review on the following grounds:
5.1. THE HONORABLE COURT OF APPEALS ERRED IN TAKING COGNIZANCE OF THE
PETITION FOR CERTIORARI DESPITE THE BANKS FAILURE TO FILE A MOTION FOR
RECONSIDERATION WITH THE TRIAL COURT.
5.2. THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
PREMATURELY RULED ON THE MERITS OF THE MAIN CASE.
5.3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT
JUDGE HAD COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN ISSUING A TEMPORARY RESTRAINING ORDER AND A WRIT
OF PRELIMINARY INJUNCTION IN FAVOR OF THE SPOUSES NISCE.54
Petitioners aver that the CA erred in not dismissing respondent Banks petition for certiorari outright
because of the absence of a condition precedent: the filing of a motion for reconsideration of the assailed
Order of the RTC before filing the petition for certiorari in the CA. They insist that respondent banks
failure to file a motion for reconsideration of the assailed Order deprived the RTC of its option to resolve
the issue of whether it erred in issuing the writ of preliminary injunction in their favor.
Petitioners insist that in resolving whether a petition for a writ of preliminary injunction should be granted,
the trial court and the appellate court are not to resolve the merits of the main case. In this case, however,
the CA resolved the bone of contention of the parties in the trial court: whether the loan account of
petitioners with respondent bank had been extinguished by legal compensation against petitioner
Natividad Nisces US dollar savings account with PCI Capital in Hong Kong. The CA reversed the
assailed order of the trial court by resolving the main issue in the trial court on its merits, and declaring
that the US dollar savings deposit of the petitioner Natividad Nisce with the PCI Capital cannot be used to
offset the loan account of petitioners with respondent bank. In fine, according to petitioners, the CA
preempted the ruling of the RTC on the main issue even before the parties could be given an opportunity
to complete the presentation of their respective evidences. Petitioners point out that in the assailed Order,
the RTC declared that to determine whether respondent had credited petitioners for the amount
of P4,600,000.00 under PN No. BD-150369 and whether respondent as mortgagee-creditor accelerated
the maturities of the two (2) promissory notes executed by petitioner, there was a need for a full-blown
trial and an exhaustive consideration of the evidence of the parties.
Petitioners further insist that a petition for a writ of certiorari is designed solely to correct errors of
jurisdiction and not errors of judgment, such as errors in the findings and conclusions of the trial court.
Petitioners maintain that the trial courts erroneous findings and conclusions (according to respondent
bank) are not the proper subjects for a petition for certiorari. Contrary to the findings of the CA, they did
not admit in the trial court that they were in default in the payment of their loan obligations. They had
always maintained that they had no outstanding obligation to respondent bank precisely because their
loan account had been offset by the US dollar deposit of petitioner Natividad Nisce, and that they had
made check payments of P4,600,000.00 which respondent bank had not credited in their favor. Likewise
erroneous is the CA ruling that they would not suffer irreparable damage or injury if their properties would
be sold at public auction following the extrajudicial foreclosure of the mortgage. Petitioners point out that
their conjugal home stands on the subject properties and would be lost if sold at public auction. Besides,
petitioners aver, the injury to respondent bank resulting from the issuance of a writ of preliminary
injunction is amply secured by the P10,000,000.00 injunction bond which they had posted.

For its part, respondent avers that, as held by the CA, the requirement of the filing of a motion for
reconsideration of the assailed Order admits of exceptions, such as where the issue presented in the
appellate court is the same issue presented and resolved by the trial court. It insists that petitioners failed
to prove a clear legal right to injunctive relief; hence, the trial court committed grave abuse of discretion in
issuing a writ of preliminary injunction.
Respondent maintains that the sole issue involved in the petition for certiorari of respondent in the CA
was whether or not the trial court committed grave abuse of its discretion in issuing the writ of preliminary
injunction. Necessarily, the CA would have to delve into the circumstances behind such issuance. In so
doing, the CA had to consider and calibrate the testimonial and documentary evidence adduced by the
parties. However, the RTC and the CA did not resolve with finality the threshold factual and legal issue of
whether the loan account of petitioners had been paid in full before it filed its petition for extrajudicial
foreclosure of the real estate mortgage.
The Ruling of the Court
The Petition in the
Court of Appeals
Not Premature
The general rule is that before filing a petition for certiorari under Rule 65 of the Rules of Court, the
petitioner is mandated to comply with a condition precedent: the filing of a motion for reconsideration of
the assailed order, and the subsequent denial of the court a quo. It must be stressed that a petition for
certiorari is an extraordinary remedy and should be filed only as a last resort. The filing of a motion for
reconsideration is intended to afford the public respondent an opportunity to correct any actual error
attributed to it by way of re-examination of the legal and factual issues. 55 However, the rule is subject to
the following recognized exceptions:
(a) where the order is a patent nullity, as where the court a quo has no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower court,
or are the same as those raised and passed upon in the lower court; (c) where there is an urgent
necessity for the resolution of the question and any further delay would prejudice the interests of the
Government or of the petitioner or the subject matter of the action is perishable; (d) where, under the
circumstances, a motion for reconsideration would be useless; (e) where petitioner was deprived of due
process and there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest
is urgent and the granting of such relief by the trial court is improbable; (g) where the proceedings in the
lower court are a nullity for lack of due process; (h) where the proceedings was ex parte or in which the
petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or public
interest is involved.56
As will be shown later, the March 24, 2003 Order of the trial court granting petitioners plea for a writ of
preliminary injunction was issued with grave abuse of discretion amounting to excess or lack of
jurisdiction and thus a nullity. If the trial court issues a writ of preliminary injunction despite the absence of
proof of a legal right and the injury sustained by the plaintiff, the writ is a nullity.57
Petitioners Are Not
Entitled to a Writ of
Preliminary Prohibitory
Injunction
Section 3, Rule 58 of the Rules of Court provides that a preliminary injunction may be granted when the
following have been established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained of, or in
requiring the performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or nonperformance of the act or acts complained of during
the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tendering to render the judgment
ineffectual.
The grant of a preliminary injunction in a case rests on the sound discretion of the court with the caveat
that it should be made with great caution. The exercise of sound judicial discretion by the lower court
should not be interfered with except in cases of manifest abuse. Injunction is a preservative remedy for
the protection of the parties substantive rights and interests. The sole aim of a preliminary injunction is to
preserve the status quo within the last actual status that preceded the pending controversy until the merits
of the case can be heard fully. Moreover, a petition for a preliminary injunction is an equitable remedy, and
one who comes to claim for equity must do so with clean hands. It is to be resorted to by a litigant to
prevent or preserve a right or interest where there is a pressing necessity to avoid injurious
consequences which cannot be remedied under any standard of compensation. A petition for a writ of
preliminary injunction rests upon an alleged existence of an emergency or of a special reason for such a
writ before the case can be regularly tried. By issuing a writ of preliminary injunction, the court can
thereby prevent a threatened or continued irreparable injury to the plaintiff before a judgment can be
rendered on the claim.58
The plaintiff praying for a writ of preliminary injunction must further establish that he or she has a present
and unmistakable right to be protected; that the facts against which injunction is directed violate such
right;59 and there is a special and paramount necessity for the writ to prevent serious damages. In the
absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a writ
of preliminary injunction will be nullified. Thus, where the plaintiffs right is doubtful or disputed, a
preliminary injunction is not proper. The possibility of irreparable damage without proof of an actual
existing right is not a ground for a preliminary injunction. 60
However, to establish the essential requisites for a preliminary injunction, the evidence to be submitted by
the plaintiff need not be conclusive and complete.61 The plaintiffs are only required to show that they have
an ostensible right to the final relief prayed for in their complaint. 62 A writ of preliminary injunction is
generally based solely on initial or incomplete evidence. 63 Such evidence need only be a sampling
intended merely to give the court an evidence of justification for a preliminary injunction pending the
decision on the merits of the case, and is not conclusive of the principal action which has yet to be
decided.64
It bears stressing that findings of the trial court granting or denying a petition for a writ of preliminary
injunction based on the evidence on record are merely provisional until after the trial on the merits of the
case shall have been concluded.65
The trial court, in granting or dismissing an application for a writ of preliminary injunction based on the
pleadings of the parties and their respective evidence must state in its order the findings and conclusions
based on the evidence and the law. This is to enable the appellate court to determine whether the trial
court committed grave abuse of its discretion amounting to excess or lack of jurisdiction in resolving, one
way or the other, the plea for injunctive relief. The trial courts exercise of its judicial discretion whether to
grant or deny an application for a writ of preliminary injunction involves the assessment and evaluation of
the evidence, and its findings of facts are ordinarily binding and conclusive on the appellate court and this
Court.66

We agree with respondents contention that as creditor-mortgagee, it has the right under the real estate
mortgage contract and the amendment thereto to foreclose extrajudicially, the real estate mortgage and
sell the property at public auction, considering that petitioners had failed to pay their loans, plus interests
and other incremental amounts as provided for in the deeds. Petitioners contend, however, that if
respondent bank extrajudicially forecloses the real estate mortgage and has petitioners property sold at
public auction for an amount in excess of the balance of their loan account, petitioners contractual and
substantive rights under the real estate mortgage would be violated; in such a case, the extrajudicial
foreclosure sale may be enjoined by a writ of preliminary injunction.
Respondent bank sought the extrajudicial foreclosure of the real estate mortgage and was to sell the
property at public auction for P30,533,552.24. The amount is based on Promissory Notes No. 1042793
and BD-150369, interests, penalty charges, and attorneys fees, as of January 31, 2003, exclusive of all
interests, penalties, other charges, and foreclosure costs accruing thereafter.67 Petitioners asserted before
the trial court that respondents sought the extrajudicial foreclosure of the mortgaged deed for an amount
far in excess of what they owed, because the latter failed to credit P4,600,000.00 paid in checks but
without any receipts having been issued therefor; and the P9,000,000.00 peso equivalent of the
US$20,000.00 deposit of petitioner Natividad Nisce with PCIB under Passbook No. 83-3041 and
Certificate of Deposit No. CD-01612 issued by PCI Capital on July 23, 1984. Petitioners maintain that the
US$20,000.00 dollar deposit should be setoff against their account with respondent against their loan
account, on their claim that respondent is their debtor insofar as said deposit is concerned.
It was the burden of petitioners, as plaintiffs below, to adduce preponderant evidence to prove their claim
that respondent bank was the debtor of petitioner Natividad Nisce relative to her dollar deposit with PCIB,
and later transferred to PCI Capital in Hong Kong, a subsidiary of respondent Bank. Petitioners, however,
failed to discharge their burden.
Under Article 1278 of the New Civil Code, compensation shall take place when two persons, in their own
right, are creditors and debtors of each other. In order that compensation may be proper, petitioners were
burdened to establish the following:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.68
Compensation takes effect by operation of law when all the requisites mentioned in Article 1279 of the
New Civil Code are present and extinguishes both debts to the concurrent amount even though the
creditors and debtors are not aware of the compensation. Legal compensation operates even against the
will of the interested parties and even without their consent. 69 Such compensation takes place ipso jure;
its effects arise on the very day on which all requisites concur.70
As its minimum, compensation presupposes two persons who, in their own right and as principals, are
mutually indebted to each other respecting equally demandable and liquidated obligations over any of
which no retention or controversy commenced and communicated in due time to the debtor exists.
Compensation, be it legal or conventional, requires confluence in the parties of the characters of mutual

debtors and creditors, although their rights as such creditors or their obligations as such debtors need not
spring from one and the same contract or transaction. 71
Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in banks
and similar institutions shall be governed by the provisions concerning simple loans. Under Article 1953,
of the same Code, a person who secures a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay the creditor an equal amount of the same kind and quality. The
relationship of the depositors and the Bank or similar institution is that of creditor-debtor. Such deposit
may be setoff against the obligation of the depositor with the bank or similar institution.
When petitioner Natividad Nisce deposited her US$20,500.00 with the PCIB on July 19, 1984, PCIB
became the debtor of petitioner. However, when upon petitioners request, the amount of US$20,000.00
was transferred to PCI Capital (which forthwith issued Certificate of Deposit No. 01612), PCI Capital, in
turn, became the debtor of Natividad Nisce. Indeed, a certificate of deposit is a written acknowledgment
by a bank or borrower of the receipt of a sum of money or deposit which the Bank or borrower promises
to pay to the depositor, to the order of the depositor; or to some other person; or to his order whereby the
relation of debtor and creditor between the bank and the depositor is created. 72 The issuance of a
certificate of deposit in exchange for currency creates a debtor-creditor relationship. 73
Admittedly, PCI Capital is a subsidiary of respondent Bank. Even then, PCI Capital [PCI Express Padala
(HK) Ltd.] has an independent and separate juridical personality from that of the respondent Bank, its
parent company; hence, any claim against the subsidiary is not a claim against the parent company and
vice versa.74 The evidence on record shows that PCIB, which had been merged with Equitable Bank,
owns almost all of the stocks of PCI Capital. However, the fact that a corporation owns all of the stocks of
another corporation, taken alone, is not sufficient to justify their being treated as one entity. If used to
perform legitimate functions, a subsidiarys separate existence shall be respected, and the liability of the
parent corporation, as well as the subsidiary shall be confined to those arising in their respective
business.75 A corporation has a separate personality distinct from its stockholders and from other
corporations to which it may be conducted. This separate and distinct personality of a corporation is a
fiction created by law for convenience and to prevent injustice.
This Court, in Martinez v. Court of Appeals 76 held that, being a mere fiction of law, peculiar situations or
valid grounds can exist to warrant, albeit sparingly, the disregard of its independent being and the piercing
of the corporate veil. The veil of separate corporate personality may be lifted when, inter alia, the
corporation is merely an adjunct, a business conduit or an alter ego of another corporation or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation; or when the corporation is used as a
cloak or cover for fraud or illegality; or to work injustice; or where necessary to achieve equity or for the
protection of the creditors. In those cases where valid grounds exist for piercing the veil of corporate
entity, the corporation will be considered as a mere association of persons. The liability will directly attach
to them.77
The Court likewise declared in the same case that the test in determining the application of the
instrumentality or alter ego doctrine is as follows:
1. Control, not mere majority or complete stock control, but complete dominion, not only of
finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention
of plaintiffs legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complaint of.
The Court emphasized that the absence of any one of these elements prevents "piercing the corporate
veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendants relationship to that operation. 78
Petitioners failed to adduce sufficient evidence to justify the piercing of the veil of corporate entity and
render respondent Bank liable for the US$20,000.00 deposit of petitioner Natividad Nisce as debtor.
On hindsight, petitioners could have spared themselves the expenses and tribulation of a litigation had
they just withdrawn their deposit from the PCI Capital and remitted the same to respondent. However,
petitioner insisted on their contention of setoff.
On the P4,600,000.00 paid in checks allegedly remitted by petitioners to respondent in partial payment of
their loan account, petitioners failed to adduce in evidence the checks to show that, indeed, the checks
were drawn by petitioners and delivered to respondent, and that respondent was able to cash the checks.
The only evidence adduced by petitioners is a piece of paper listing the serial numbers of the checks and
the amount of each check:
PAYMENTS MADE & RECEIVED BY EBC BUT W/O RECEIPTS
1. Dec. 29, 1997 - EBC-0000039462 -

P2,000,000.00

2. Jan. 22, 1998 - EBC-213016118C -

1,000,000.00

3. Feb. 24, 1998 - UB -0000074619 -

800,000.00

4. Mar. 23, 1998 - EBC-213016121C -

800,000.00
P4,600,000.00

79

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The Decision of the Court
of Appeals is AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. L-7308

January 9, 1913

RAFAEL MOLINA y SALVADOR, plaintiff-appellant,

vs.
ENRIQUE F. SOMES, ET AL., defendants-appellants.
Bruce, Lawrence, Ross and Block, for plaintiff and appellant.
A.D. Gibbs, for defendants and appellants.
MORELAND, J.:
In 1903 Rafael Molina, the plaintiff herein, sold his business in the Island of Catanduanes to Antonio de la
Riva for $135,000 Mexican currency, to be paid by de la Riva in four equal installments, the first to be
made at the time of the execution of the document, the second year from the date thereof, the third at the
end of two years from that date, with interest at the rate of 5 per cent per annum to be paid at the end of
each year. No payment was made by De la Riva under said contract except the first payment, which was
that made at the date of the execution of the contract. Upon the second installment from Molina brought
suit in the Court of First Instance of Manila (No. 3402) and was given a judgment. An appeal was taken
from said judgment by De la Riva and the Supreme Court affirmed it on the 22nd of March,
1906.1 Pending the appeal execution was stayed upon the filing of a supersedeas bond, with Enrique F.
Somes, the defendant herein, as one of the sureties. While the suit for this installment was pending, the
succeeding installment, amounting to P38,000, fell due. Default in its payment having been made, suit
was brought in the Court of First Instance of the city of Manila (No. 3829). In this case, at the instance of
Molina, a receiver was appointed to take possession of the property of De la Riva. Molina succeeded in
this action. De la Riva again appealed to the Supreme Court, where the judgement was affirmed, 2 while
the receivership granted in that action was declared void. When the first case (No. 3402) was returned to
the Court of First Instance after affirmance, De la Riva's property was still in the hands of the receiver;
and, as execution against property thus in custodia legis could not be had, the Court of First Instance, on
motion, entered judgment against the sureties on the supersedeas bond, including Somes, defendant
herein. The sureties appealed from this judgment, their appeal being docketed as 3412, 3 and the order of
the Court of First Instance was affirmed. The judgment in case No. 3402, which was the judgment on the
first unpaid installment, was then satisfied out of the property of Somes. On the 19th of February, 1907,
said Molina obtained another judgment against De la Riva in the Court of First Instance on the last
installment due under the contract. Therefore, early in 1907 the situation was this: Somes had paid the
judgment in case 3402 and was, therefore, a creditor of De la Riva for about P34,000. Molina had two
judgments against De la Riva, in cases 3829 and 4766, aggregating about P18,000. The property of the
debtor was released from the receivership and the question of priority arose between the creditors Somes
and Molina. Gibbs, Gale and Carr, who had served De la Riva as attorneys, had taken judgment by
default against De la Riva for P4,500 and had levied upon practically all his real estate. The levy had
been suspended by the receivership, but was revive when the receivership was terminated by the
judgment of the Supreme Court and said levy was terminated by a sale in the month of January, 1907.
Molina obtained writs of execution on his two judgments, and levied on the property of De la Riva,
including the equity of redemption of the real estate sold under the execution in favor of Gibbs, Gale and
Carr. On the 26th of April, 1907, the defendant Somes filed a complaint against Molina and others in the
Court of First Instance of Manila (No. 5448), alleging that by his payment of the judgment he had become
subrogated to the rights of the judgment creditor in case No. 3402, and that , because this judgment was
senior to Molina's judgments in cases Nos. 3829 and 4766, he was entitled to a postponement of Molina's
executions above mentioned until he, Somes, should have reimbursed himself out of De la Riva's
property. Molina entered a demurrer to this complaint, which was sustained. Somes appealed, the case
becoming in this court R.G. No. 4149.4 On this appeal Somes asked for and obtained from the Supreme
Court a preliminary injunction in said action dated August 3, 1907, restraining further proceedings in the
execution of Molina's judgments in cases Nos. 3829 and 4766. A bond for the injunction in the sum of

P10,000 was given, signed by Gabriel Schmid, Cristina Gaskell and Fridolin Wiget as sureties. It was not
signed by Somes.
The Supreme Court reversed the judgment of the Court of First Instance entered on the order sustaining
the demurrer and returned the case for further proceedings, leaving the injunction above referred to in full
force and effect. (9 Phil. Rep., 653.) The Court of First Instance found in favor of Somes, holding that he
was entitled to satisfy his judgment of P34,000 out of the specific property levied upon by Molina and
belonging to De la Riva in preference to and ahead of Molina. Molina appealed but was unable to furnish
a supersedeas bond; and Somes secured a writ of execution in case No. 3402, levied on all the property
of De la Riva, sold it at public sale in due form of law, and bought it himself for P10,000. The legality and
validity of the sale are not in question. On that appeal this court reversed the Court of First Instance,
holding that, as to the specific property levied upon and then in the hands of the sheriff, Molina's judgment
were entitled to preference over that of Somes (15 Phil. Rep., 133) in the distribution of the proceeds.
Molina thereupon in July, 1910, began the present action against Somes and the sureties on the bond
given to obtain the injunction of August 3, 1907, praying for judgment against the sureties for the amount
of the bond, P10,000, and against Somes for the value of the property of De la Riva out of which Molina
might have satisfied his executions in 1907, except for what he terms Somes' unjustifiable interference.
The Court of First Instance after trial, gave judgment against the sureties for P10,000 upon the bond, and
against Somes for P11,000 on some other theory. No appeal has been taken from the judgment against
the sureties. Both Molina and Somes have appealed from the judgment of P11,000 against the latter.
The argument on this appeal discloses that there is a contest between the parties as to the nature of the
action brought by the plaintiff and as to the theory upon which it was tried in the court below. In that
connection the plaintiff says in his brief in this court:
Plaintiff in 1907 held final judgments against Antonio de la Riva aggregating P81,000, and was engaged
in the execution of those judgments against the property of the debtor then available for the purpose. The
defendant Somes interfered with plaintiff's execution, and successfully maintained his position until all the
property of the debtor De la Riva had disappeared and De la Riva had become absolutely executionproof. This interference on the part of Somes was unlawful, as this court decided in R.G. No. 5160 (15
Phil. Rep., 133). It follows that plaintiff has been damaged by defendant's conduct in the amount of the
value of De la Riva's property subjected to plaintiff's levy in 1907, if that amount was within the figure of
plaintiff's judgments. The only question is the determination of this value, which the trial court found to be
P11,000.
He also says: "The complaint in this case, directed as it is against the sureties on the injunction bond as
well as against their principal, is based principally upon the improvident granting of the injunction, but it
also contains the statement of a cause of action, fully proven by the evidence, against the defendant
Somes independently on the injunction proceedings. The Court of First Instance, in case No. 5448,
entered a judgment in favor of Somes declaring that he was entitled to execute his judgment in case No.
3402 in preference to the execution of plaintiff's judgment in cases 3829 and 4766. This decision of the
Court was subsequently reversed by the Supreme Court in R.G. No. 5160 (15 Phil. Rep., 133). If plaintiff
had been able to furnish a supersedeas bond in case No. 5448, he would have enjoyed the fruits of his
successful appeal in that case. As he was not able to effect the supersedeas, Somes proceeded to
execute his judgment by obtaining a writ of execution in No. 3402 and enforcing it, taking the risk of a
reversal upon plaintiff's appeal. It can hardly be doubted that if Somes had retained the property of De la
Riva which he bought on his execution sale in case No. 3402, Molina, upon securing the reversal in R.G.
No. 5160, could have levied in execution of his judgments upon the property in Somes' possession. It
necessarily follows that as Somes had conveyed that property to a third person, Jose Fortis, so that
plaintiff could no longer follow it, Somes had damaged plaintiff to the extent of the value of the property on
which Somes levied in consequence of the erroneous judgment of the Court of First Instance in Case No.
5448. It is submitted that when an appeal is taken without supersedeas, and the judgment appealed from
is executed, and subsequently reversed, the appellee is bound to restore the status quo ante or respond
in damages for his failure or inability so to do. Regardless of the injunction proceedings, therefore, Sr.

Somes is bound to give effect to the decision of this court that the judgments of Molina were entitled to
preference over that of Somes and to undo the consequences of the erroneous judgment of the Court of
First Instance."
We cannot agree with the appellant Molina that the action is not only one for the recovery of damages by
reason of the issuance of an injunction but also one to recover damages sustained by reason of the
execution of a judgment which was afterwards reversed on appeal. It appears to us from the complaint
and the opinion of the court below and the general attitude of the parties, both in the court below and
here, that the complaint presents, from every possible legal aspect, simply an action to recover damages
alleged to have been occasioned by the defendant Somes suing out a temporary injunction which was
subsequently vacated by a final judgment of the Supreme Court. It seems to have been tried altogether
on that theory. The judgment of the Court of First Instance seems also to rest entirely upon that theory.
The results of that theory, as well as the theory itself, have been accepted by the plaintiff not only as
against the sureties on the bond, who have not appealed from the judgment rendered against them on
that undertaking, but also as against Somes, the judgment against whom in the Court of First Instance
based on the injunction theory has been accepted by him (the plaintiff) in that court, as in this, he
appealing from such judgment only by reason of the amount.
Paragraph II of the complaint sets out the ownership of certain judgments upon which he (plaintiff) had
issued executions. Paragraph III alleges the obtaining by Somes of the preliminary injunction from the
Supreme Court, restraining Molina from proceeding further in the execution of those two judgments.
Paragraph IV alleges the making of the bond preliminary to the injunction and states who were the
persons signing the same. Paragraph V alleges the ownership by Somes of a judgment against De la
Riva, against whom the plaintiff also held the two judgments theretofore referred to in the complaint and
alleges that "on the 10th day of May, 1909, he executed said judgment, and upon said execution had
sold, and himself bought, all the property, real and personal, of the aforesaid Antonio de la Riva, while this
plaintiff was still under the restraint of the aforesaid preliminary injunction, and thereafter sold and
transferred to a third party all of the property by him acquired as aforesaid on the execution sale." The last
paragraph of the complaint alleges the value of the property and the fact that De la Riva is insolvent and
has no property out of which the plaintiff's judgments may be paid. It also alleges "that the aforesaid
preliminary injunction, notwithstanding diligent effort on the part of this plaintiff to have the same vacated,
remained continuously in force until after the aforesaid execution sale of the defendant Enrique F. Somes,
and until after the disposition by said Somes of the property by him acquired as aforesaid at said sale.
That said injunction was improperly issued, and that the defendant Enrique F. Somes was not entitled to
said injunction nor to restrain the execution by this plaintiff of the latter's judgments against Antonio de la
Riva, and that said execution was issued solely upon the affidavit of the defendant Enrique F. Somes, and
that the allegations of said affidavit had been conclusively adjudged to be untrue by the Supreme Court of
the Philippine Islands in cause No. 5448 of the docket of this court." Then follows the prayer for relief, as
follows:
Wherefore plaintiff prays that judgment be rendered against defendant Enrique F. Somes for the sum of
P80,818.06 Philippine currency, with interest thereon at 5 per cent per annum from July 27, 1903, and
against the defendants Gabriel Schmid, Cristina Gaskell de Schmid, and Fridolin Wiget, jointly and
severally, for the sum of P10,000 Philippine currency, and that plaintiff recover his costs in this action, and
for such other and further relief as the court may deem just and proper.
In its opinion the Court of First Instance says:
This case is before the court for trial upon a complaint by the plaintiff to recover from the defendant
Enrique F. Somes the sum of P80,818.06 and from the other defendants the sum of P10,000, alleged to
be damages suffered by the plaintiff on account of an injunction issued at the request of the defendant
Somes, and a bond given upon which the other defendants were sureties and by which the plaintiff was
restrained from levying an execution to satisfy judgments obtained by him.

The defendant Somes answered admitting practically all the allegations of the complaint, except those
which alleged that he was the owner of a judgment against one Antonio de la Riva and had levied
execution issued on it, and had sold all of De la Riva's property, and that the property sold was sufficient
to satisfy all of plaintiff's judgments: That De la Riva was insolvent, and alleged as a special defense that
he had obtained an injunction against the plaintiff and several other persons which after being set aside
was finally left in full effect, and that prior to all proceedings Gibbs, Gale & Carr had obtained judgment
against Antonio de la Riva, levied execution under it, and sold all of the real estate of De la Riva in the
Island of Catanduanes, and also alleged that he, the defendant Somes, had never levied upon or sold
such real estate; but that having obtained judgment against De la Riva execution issued, and was levied
upon the property of De la Riva, and the property sold for P10,000.
The court further says:
The defendants insist that the plaintiff cannot recover in this action because the damages suffered on
account of conditions which appear from the pleadings must be assessed in the action or proceeding and
in the court trying the action; that is, the action in which the injunction was issued, which was the basis of
the damages.
The court then takes up the questions of procedure relative to the recovery of damages sustained by
reason of the issuance of an injunction, and discusses whether or not the proceedings instituted for that
purpose should be brought in the same action in which the injunction was issued as an incident thereof,
or whether they should be carried on in a separate action. After thorough consideration it was held that
such proceedings must be brought and carried on in the same action as an incident thereof. The decision
concludes as follows:
The defendant Somes having stopped the plaintiff from recovering upon his judgments, for reasons which
were afterwards found to be not valid, is liable for any damages which the plaintiff may have suffered on
account thereof, and the other defendants, as his sureties, are also liable to the extent of their bond.
The defendant Somes, while the injunction was in force, having levied upon and sold the property which
the plaintiff was restrained from selling, under his execution, having left the plaintiff without other property
of his judgment debtor against which to proceed, has damaged the plaintiff to the extent of the value of
the property which plaintiff has levied upon, at the time he was restrained from proceeding with the sale.
On his appeal to this court, the plaintiff presented the following assignment of errors:
1. That the said Court of First Instance found as a fact that the damages suffered by plaintiff amounted
only to P11,000.
2. That the said Court of First Instance of Manila rendered judgment against the defendant Enrique F.
Somes in the sum of P11,000 instead of in accordance with the prayer of plaintiff's complaint.
The opening paragraph of plaintiff's brief on appeal is as follows:
Plaintiff in 1907 held final judgments against Antonio de la Riva aggregating P81,000, and was engaged
in the execution of those judgments against the property of the debtor then available for the purpose. The
defendant Somes interfered with plaintiff's execution, and successfully maintained his position until all the
property of the debtor De la Riva had disappeared and De la Riva had become absolutely execution
proof. This interference on the part of Somes was unlawful, as this court decided in R.G. No. 5160 (15
Phil. Rep., 133). It follows that plaintiff has been damaged by defendant's conduct in the amount of the
value of De la Riva's property subjected to plaintiff's levy in 1907, if that amount was within the figure of
plaintiff's judgments. The only question is the determination of this value, which the trial court found to be
P11,000.

The first intimation that the defendant had, so far as shown by the record, that plaintiff based his right to
recover upon the theory of restitution appears in that portion of plaintiff's brief devoted to answering
defendant's brief on appeal. Although one of the special defenses interposed by the defendant Somes to
plaintiff's complaint in the court below was that the property of De la Riva was not lost to plaintiff by
reason of the injunction, which was the basis of his compliant, but, rather, by reason of the execution of
the judgment of the Court of First Instance in case No. 5448 which determined that Somes' judgment was
entitled to preference over the two judgments of Molina, in spite of this plain contention of the defendant
that the cause of all the damages, if any, was the execution of said judgment, nevertheless, the plaintiff
did not amend his complaint to meet the suggestion, but, instead, elected to proceed and did proceed and
tried his case upon the theory upon which he had already placed himself.
We conclude, then, that the plaintiff cannot, under these circumstances, be allowed, at this time, to
change the theory and nature of his cause of action and recover upon grounds never heretofore set forth.
This conclusion is necessary for several reasons, in addition to the surprise of the defendant which would
naturally follow such a change:
First. Because the findings and judgment of the court of first instance, based upon the improvident
issuance of an injunction, have been accepted by the plaintiff in every particular except that relating to
the amount of damages.
Second. Because of the theory of an action based upon the improvident issuance of an injunction is
incompatible with a cause of action based upon the theory of restitution, for, if the damages were actually
caused by the execution of the judgment in cause No. 5448, then they could not have been caused by the
issuance of the injunction. The injunction did no more than tell Molina to hold on. It did not order him to
turn the property over to Somes or anybody else. It was restraining, not mandatory. But even if Molina
had been under the restraint alleged, he suffered no injury thereby, as the judgment in case No. 5448 was
in force against Molina and he could not, in the face of it, have applied such property to the payment of
his own debt. Under the judgment, Somes had the sole right to do that. Molina was powerless to benefit
himself with De la Riva's property if there had been no injunction whatever. Somes took and Molina lost
the property not because of any restraint imposed on the latter, but by reason of judgment rights of the
former.
Third. The plaintiff already has a judgment against the sureties upon the bond given to secure the
injunction and also a judgment against Somes based expressly upon the improvident issuance of that
injunction. To permit the plaintiff now to recover upon the theory of restitution would be permit him to
obtain two final judgments in the same cause, each of which is based upon the theory that the other is
wrong. If the damages were caused by the execution of the judgment of the Court of First Instance in
case No. 5448, then the final judgment against the original co-defendants of Somes on the theory that the
damages were caused by the injunction is entirely without foundation. We do not believe that the plaintiff
ought to be permitted to retain the benefits of the final judgment against the bondsmen and also to
recover and take the benefits of a judgment against the principal upon a cause of action which proceeds
on the theory that said bondsmen are not liable.
The plaintiff, then, must recover, if he recover at all, upon the allegations of his complaint which presents
a cause of action solely of damages sustained by the obtaining of an injunction, and upon which theory
the cause was presented, tried, decided, and judgment accepted.
We are unable to see how the plaintiff can recover on the theory presented. It is conceded that Somes did
not sign or otherwise agree to the bond upon which the injunction was obtained. He cannot, therefore, be
held upon it. The statute which provides for the issuance of injunctions and for the undertakings which are
the basis of their issuance nowhere lays down a different rule of liability than that established by the
general principles of the law. The statute prescribed the method by which a party may make himself liable
for the damages resulting from an injunction. It nowhere makes him responsible in any way apart from the

bond itself. As a necessary consequence, in determining whether or not Somes, in this view of the case,
is liable in the action at bar, we must revert to the general principles of the law. In doing this we observe at
the outset that the complaint does not allege any facts upon which the defendant can be held liable; nor
does the evidence, as disclosed by the opinion of the court below, contain a particle of proof which would
tend to establish his liability. In an action for improperly suing out an injunction, the same principles apply
as in cases where it is sought to make a plaintiff liable for bringing an action. The two essential requisites
are malicious prosecution and lack of probable cause. These are neither alleged nor proved in the case
before us.
It may be true that Molina would have gone and collected his executions if Somes had not begun his
action, and that he probably would have been the gainer by so much as he received from such collection,
but it in nowise follows that because Somes brought the action he is liable for anything that Molina may
have failed to collect by reason thereof. In every case where one brings an action against another and
fails to recover, the one against whom the action was brought has in a real sense been injured and
damaged by the action. He has been troubled. He has hired lawyers. He has procured witnesses. He has
paid out money. He may have been obliged to neglect his business and his profits may have materially
decreased. He may have been injured in his credit and standing. That does not mean, however, that he
can recover from the plaintiff the damages which he suffered by reason of the action having been
brought. If that were the case, there would be an end of actions in court. It is to prevent such a condition
that the law has laid down a rule relative to the liability incurred in bringing an action different from that
applicable in cases where damages are sustained by reason of a direct act. Before one can recover
damages from another by reason of an action having been brought against him, he must show not only
that there was a lack of probable cause but that the action was maliciously brought. In the case at bar,
nothing happened to Molina by reason of any act of Somes except that which naturally followed from the
bringing of the action, assisted by the voluntary acts of Molina, for which latter the bringing of the action
was in no way responsible.
What we have said relative to the bringing of an action will apply to the issuing of an injunction. In many
actions the obtaining of an injunction is the essence of the recovery, and without it a judgment would be
worthless. One who brings an action has a right to all of the incidents and aids which the law joins to that
action. Therefore, in the absence of a statute to the contrary, there is no more liability incurred in securing
an injunction that there is in bringing an action; and damages for the improper suing out of an injunction
will lie only upon the same basis and for the same reasons as actions for damages for bringing an action.
This proposition is founded upon reason as well as authority. It is apparent that in many cases actions are
entirely futile unless the plaintiff can take advantage of some preliminary remedy. To that end, legislatures
have provided, in various states and countries, that in certain kinds of action the plaintiff may, upon
meeting expressed conditions do certain things as preliminary remedies, which will insure the efficacy of
his judgment, if he secures one. A familiar example of such a preliminary remedy is the injunction. It is
clear, and is demonstrated every day in actual practice, that many actions would be fruitless if the plaintiff
could not obtain an injunction to maintain the status quo until the final determination of the rights of the
parties. It having been ascertained by the settled experienced of society that an injunction is, in many
cases, a necessary prerequisite to an action, reason as well as logic would, so far as the liability of the
person suing out the injunction is concerned, require that the same principles apply as govern in an action
brought to recover damages for the wrongful bringing of an action. In other words, the principles of liability
which control where a plaintiff is suit for wrongfully bringing an action should be the same principles which
govern in an action brought for the wrongful suing out of an injunction. The injunction is a necessary
incident or part of the action. It is absolutely essential to the action. The action is worthless without it. It
would be surprising to see the act relating to the main thing, namely, the action, governed by one
principle, while the act relating to that which is the essential incident or part of the action, namely, the
injunction, governed by another and different principle.
The attempt to secure that which the law gives for the purpose of making the action worth bringing, and
without which it would be entirely barren, should not entail a greater responsibility than would the bringing
of the action itself, to which it is appurtenant, and to which it necessarily and really belongs.

The assertion by some text writers and courts that the one who sues out an injunction without legal cause
is liable on the theory that he wrongfully induced or moved the court to take the action which it did, is in
our judgment, without stable foundation. He who obtains a thing by permission of the law, and by strict
compliance with the law, ought not to be held liable in any manner except that specified in the law under
which he operates. He ought not to be held for a trespass or other wrong, as they assert he may be in
replevin, etc. How it can be logically said that one who, acting in good faith, obtains an injunction or
property under a replevin in precisely the manner required by law has committed alegal wrong against the
person as to whom the law authorizes him to obtain the injunction? The law itself, by virtue of the
conditions which it imposes, fully protects the defendant against the evil effects of the injunction; and that
if the party securing the injunction has performed all that the law requires of him as a condition precedent
to obtaining it, what more can be asked? In return for the restrictions of the injunction, the defendant has
been given certain legal rights against the plaintiff by way of an undertaking which, by virtue of the law
itself, fully compensates him for the change of position. The bond is full compensation for the privileges
which the plaintiff receives and for those which the defendant loses. The law says so. The statute asserts
that the doing of certain things by the plaintiff shall be a complete compensation to the defendant for that
which the law requires him to give up. If it is not complete compensation, then the law is unjust, in that it
requires the defendant to give up something for which he receives no compensation. It is not to be
presumed or believed that the legislature intended to do such a thing, and it is not to be presumed or
believed that it did do it. But, even if the law be unjust, an injustice of the law cannot be cured by an
injustice to a party. The giving of the undertaking legally equalizes the status of the two. To put upon the
plaintiff the additional burden of a trespass or other wrong would destroy the legal equilibrium and
produce an injustice.
The assertion of text writers that the party in cases of replevin or injunction, wrongfully put the court in
operation, and that, therefore, he is liable as in tort or otherwise apart from his bond to the defendant
therefore, is, in our judgment, also unfounded. Such a theory is bad not only for the reasons already given
but also for the further reason that it makes the plaintiff an insurer of the judgment of the court. In other
words, upon that theory, the plaintiff, before he can safely obtain an injunction or a replevin, must be
certain that the court will decide in his favor; that is, the plaintiff must insure a judgment of the court in his
favor, on the pain of being sued in tort or other legal wrong, in addition to his liability resulting from the
responsibility of his sureties on the bond. Such a theory nullifies the symmetry of the law and destroys the
equality between the parties which the law establishes. As we have said, the statute asserts conclusively
that the giving of a bond to the defendant is an exact equivalent for the loss which he sustains by reason
of his change of position. In other words, the plaintiff has paid the defendant in full for whatever benefits
he has obtained from him. If, now, we add to that payment the obligation to respond to a defense in
damage for the commission of a tort or other wrong, we at once destroy that equality which the law has
established, and lay a burden upon the plaintiff which, in equity, he ought not to bear and which, under the
law, he is not required to bear. The law expressly states what shall be his punishment if he is wrong.
Courts cannot by their own fiat add anything more. The injury is caused by operation of the law, not by the
act of plaintiff.
It is for these reasons, among others, that we have arrived at the conclusion that an action for damages
for the improper suing out of an injunction must be maintained upon the same principles which govern an
action for the wrongful bringing of an action.
In the case of Meyers vs. Block (120 U.S., 206, 211), the court, having under review this very question,
said, in speaking of the principles upon which an action may proceed which is brought for the purpose of
obtaining damages by reason of the wrongful suing out of an injunction:
Recover, how? By the law of Louisiana damages may be recovered for suing out an injunction without just
cause, independently of a bond. (3 La., 291.) But this cannot be done in the United States courts. Without
a bond no damage can be recovered at all. Without a bond for the payment of damages or other
obligation of like effect, a party against whom an injunction wrongfully issues can recover nothing but
costs, unless he can make out a case of malicious prosecution. It is only by reason of the bond, and upon
the bond, that he can recover anything.

In the case of Russell vs. Farley (105 U.S., 433, 438), Mr. Justice Bradley, in alluding to the practice of
courts of chancery in granting injunction, says relative to the fundamental reason why damages cannot be
obtained against a person wrongfully suing out an injunction:
And if the legal right is doubtful, either in point of law or of fact, the court is always reluctant to take a
course which may result in material injury to either party, for the damage arising from the act of the court
itself is a damnum absque injuria, for which there is no redress except a decree for the costs of the suit,
or in a particular [proper] case, an action for malicious prosecution. To remedy this defect [difficulty], the
court, in the exercise of its discretion, frequently resorts to the expedient of imposing terms and conditions
upon the party at whose instance it proposes to act.
The case of the City of St. Louis vs. the St. Louis Gaslight Company (82 Mo., 349-357), says:
Thus it will be seen that the liability of the plaintiff in an injunction suit to respond to the defendant for
damages after dissolution depended upon his voluntary undertaking contained in the conditions of the
decree, or in his separate agreement and bond given to the court or defendant for that purpose. Of
course, when the process has been sued out maliciously there may be a right of action in favor of the
defendant. But this right depends upon the law governing malicious prosecutions, and has no relation to
the claim for damages urged by defendant in this case. . . .
Such exemption of the plaintiff from damages, in the absence of any terms or conditions accepted by him
to pay them, rests upon the broad policy of the law which regards the courts open at all times to all
persons for the enforcement of their rights by civil action. Suitors are presumably acting in accordance
with law when they obtain in the courts what the courts award them, and should not be punished for
accepting what they could not obtain except by such orders and judgments. When a suitor procures a writ
or order of injunction upon a fair presentation of facts to the court in good faith he has never been
regarded as responsible in damages therefor, either in law or equity, unless he has made himself so by
some voluntary undertaking. In such case he stands before the law like a suitor in any other process or
proceeding. This I understand to be the rule, as universally recognized and approved. (Sturgis vs. Knapp,
33 Vt., 486; Gorton vs. Brown, 27 Ill., 489; Lawton vs. Green, 5 Hun, 157; L. & O.R.R. Co. vs. Applegate,
8 Dana, 289; Palmer vs.Foley, 71 N.Y., 106; Russell vs. Farley, 105 U.S., 433; Iron Mountain
Bank vs. Mercantile Bank, 4 Mo. App., 505.)
In the case of Palmer vs. Foley (71 N.Y., 106, 108), Judge Folger expresses this condition of the law:
It seems that, without some security given before the granting of an injunction order, or without some
order of the court or a judge, requiring some act on the part of the plaintiff, which is equivalent to the
giving of security such as a deposit of money in court the defendant has no remedy for any
damages which he may sustain from the issuing of the injunction, unless the conduct of the plaintiff has
been such as to give ground for an action for malicious prosecution.
To the same effect are the following cases: Lawton vs. Green (64 N.Y., 326), McLaren vs. Bradfrod (26
Ala., 616), Robinson vs. Kellum (6 Cal., 399), Asevado vs. Orr (100 Cal., 293, 34 Pac., 777),
Harless vs. Consumers' Gas Trust Co. (14 Ind. App., 545, 43 N.E., 456), Cox vs. Taylor's Admr. (49 Ky.,
17), Hayden vs. Keith (32 Minn., 277, 20 N.W., 195), Manlove vs. Vick (55 Miss., 567),
Keber vs. Mercantile Bank (4 Mo. App., 195), Iron Mountain Bank vs. same (id., 505), Campbell vs. Carrol
(35 Mo. App., 640), Ill., 489, 81 Am. dec., 245), Hutchins vs. Rogers (22 Wkly. Notes Cas., 79).
Here we have a case in which the action, in a sense, was improperly brought and the injunction was, in
the same sense, improperly obtained. That does not mean, as we have seen, that the plaintiff is, for that
reason, liable for the damages which the defendant may have suffered. Before that liability can attach, it
must appear that the action was brought and the injunction obtained maliciously and without probable
cause. Of course, if the injunction bond were relied upon, as it was as to part of the defendants, we would

have a case in which the lack of probable cause and the malice would be immaterial; but it is conceded
that Somes did not sign the bond and that he cannot, therefore, be held responsible thereon.
Having found that, conceding that the injunction remained in force until after the levy and sale by Somes,
the plaintiff cannot recover, it becomes unnecessary to determine whether the injunction was really
existent at that time or whether it was merged in the final judgment of the Supreme Court of January 20,
1908, or in the judgment of the Supreme Court of First Instance of December 7, 1908, the judgment
determining the relative rights of Molina and Somes in the proceeds of the property here in suit.
The judgment as to Somes is hereby reversed and the complaint as to him is dismissed upon the merits,
without special finding as to costs.

G.R. No. 70099 January 7, 1987

MODESTA BORCENA, ANTONIO GIMENO, JR., ESTELA GIMENO, ROLANDO GIMENO, EDGARDO
GlMENO and ANELIA GIMENO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, HON. CLEMENTE D. PAREDES, ROMULO C. BASA,
LEOVINO LEGASPI and HON. ZOTICO TOLETE respondents.

GUTIERREZ, JR., J.:

The petitioners question the amount which the respondent Court of Appeals and the trial court ordered to
be paid to their former lawyer, as his compensation.
On July 6, 1981, the petitioners engaged the legal services of respondent Gil P. de Guzman under the
following terms and conditions:
Dear Atty. de Guzman:
For purposes of handling our case against Nam Kwang, Socea Bonna, Metropolitan
Waterworks and Sewerage System and other persons who are parties to the total or
partial destruction of some of our road and residential lots at the Memorial Park
Subdivision, Bigti, Norzagaray, Bulacan, we hereby retain and employ the legal services
of your Law Office towards its prosecution. For your services, we hereby offer you the
following schedule:
a) 20% of our total claim, for and as attorney's fees,
b.) 5% of our total claim, for and as representation and miscellaneous expenses;
TOTAL: 25%
which shall be payable to you and may be collected from us anytime after its complete
payment by the said defendants, either solidarily or collectively. It is hereby understood
that apart from this, whatever judgment attorney's fees may be awarded by the court
against said defendants, the same shall accrue to you which shall not form part of our
contingent fee.
We hope that you will handle this case for us.
Very truly yours,
MODESTA BORCENA, ANTONIO GIMENO, JR.
ESTELA GIMENO, ROLANDO GIMENO, EDGARDO
GIMENO, AND ANELIA GIMENO
CONFORME: By:
GIL DE GUZMAN ROLANDO GIMENO

On this same date, respondent de Guzman filed a complaint for damages against the Metropolitan
Waterworks and Sewerage System, (hereinafter caged MWSS) Nam Kwang, Socea Bonna and Chun
Bae Kim, which was docketed as Civil Case No. SM-1208. The pertinent allegations of the complaint are
as follows:
xxx xxx xxx
11. That sometime in February, 1980, or immediately preceding or subsequent thereto
defendants, without any notice and against the will and consent of herein plaintfffs,
entered a portion of said property and bulldozed the fully developed lots, and committed
waste, destruction and depredation thereon, causing all monuments of title, drainage
system subdivision lots, ornamental trees resulting to total wreck to 23 fully developed
lots and flood of about 16 lots causing them wanton and unseconded (sic) damages
founded in the
xxx xxx xxx
13. That defendants, despite previous repeated demands from plaintiffs to indemnify
them for damages and losses they have caused the plaintiffs, failed and refused and still
continue to fail and refuse to pay actual and compensatory damages in the amount of
P670,000.00;
xxx xxx xxx
14. That due to the unlawful acts of the defendants violating the rights, plaintiffs, the latter
suffered and still continue to suffer sleepless nights, loss of business standing, serious
anxieties and besmirched reputation assessable as moral damages in the amount of
P30,000.00;
15. That to serve as an example to other would-be defendants similarly situated with
defendants herein plaintiffs are entitled against the defendants corrective and exemplary
damages in the amount of P10,000.00;
16. The plaintiffs in order to protect their rights and interest so unduly abused by herein
defendants are constrained to litigate and to retain the professional services of counsel in
the amount of 20% representing the total claim of plaintiffs against the defendants, for
and as reasonable attorney's fees;
The complaint was later amended by dropping Chun Bae Kim as defendant. Defendants Nam Kwang and
Socea Bonna were subsequently declared in default.
On June 18, 1982, Atty. de Guzman filed a motion for preliminary attachment praying that an order be
issued attaching properties of the defendants amounting to P710,000.00 plus 20% thereof representing
attorney's fees, or a total of P852,000.00. The motion was granted upon plaintiffs' posting a bond of
P852,000.00 issued by a bonding company acceptable to the court.
The MWSS was directed to hold in trust the P852,000.00 payable to Nam Kwang prompting the plaintiffs
to file a motion for them to take custody of the P852,000.00. The motion was denied in the order dated
October 20, 1982.
On December 7, 1982, the court directed the MWSS to turn over the P852,000.00 to the deputy sheriff
and for the latter to deposit the same with the Sta. Maria Municipal Treasury. The court also ordered that
withdrawals must be upon its orders. This order was amended on December 15, 1982 when MWSS was

directed to prepare and issue the check in the name of Rolando Gimeno for the amount of P852,000.00,
and to release said check to him upon proper Identification. At the same time, the deputy sheriff was
directed to receive the check from Rolando Gimeno and deposit the same with the municipal treasurer of
Sta. Maria, Bulacan.
In compliance with the court orders, MWSS issued and released-(l) PNB Check No. 070925 in the
amount of P 746,111.71 and (2) PNB Check No. 070928 in the amount of P105,888.29, both dated
December 20, 1982 payable to Rolando Gimeno for deposit with the Municipal Treasurer of Sta. Maria,
Bulacan.
On January 11, 1983, De Guzman filed a manifestation questioning the restriction on the checks that the
same be deposited only with the Municipal Treasurer of Sta. Maria, Bulacan as uncalled for and contrary
to the court's order of December 7, 1982 as modified by the December 15, 1982 order.
On March 17, 1983, Rolando Gimeno on behalf of the other plaintiffs (petitioners herein) and in his own
behalf sent a letter to Atty. de Guzman terminating his services as their counsel. The relevant portions of
the letter read as follows:
xxx xxx xxx
Sir:
We regret to inform you that your services as our Counsel in all our cases and legal
problems are terminated effective immediately.
The decision to terminate your services was engendered by your failure and/or refusal to
return to Mr. Rolando B. Gimeno the PNB Checks for deposit with the Municipal
Treasurer of Sta. Maria, Bulacan, although the same are now almost three (3) months old
and may become stale. Furthermore, transfer of said deposit to a bank may be asked
from the Court so that said money can earn interests. Undersigned have lost interest
earnings on said money for three (2) months now.
Kindly return to Mr. Rolando B. Gimeno all our case records involving all our legal
problems still in your possession; and bin us for your services rendered thus far, and we
assure your goodself you will be amply compensated.
xxx xxx xxx
On March 24, 1983, Atty. Perpetuo L. B. Alonzo entered his appearance as new counsel for the
petitioners.
On March 25, 1983, Atty. de Guzman filed an opposition to Gimeno's ex-parte motion to transfer deposit
of garnished amount. He claimed that he never received the PNB checks, that Gimeno's affidavit of loss
admits having received the checks from MWSS, and that Rolando Gimeno lost them. Atty. de Guzman
also filed his comment stating that he has no objection to the substitution of counsel provided that the
agreed honorarium is complied with, and subject to the attomey's lien.
On April 16, 1983, Atty. de Guzman filed an attorney's lien on the garnished amount of P852,000.00
pursuant to Section 26 of Rule 138. A motion dated April 18, 1983, prayed for the issuance of an order:
1. Ordering the deposit of PNB Checks Nos. 070925 and 070928 both dated December
20, 1982 with PNB Branch in Malolos, Bulacan in the name of plaintiff Rolando Gimeno
and movant Atty. Gil de Guzman under the following schedule, to wit:

(a) Rolando Gimeno, as plaintiff

and attorney-in-fact....................................P532,500.00
(b) Atty. Gilde Guzman, for
his attorney's fees........................................319,500.00
Total...............................................852,000.00
to be withdrawn only upon order of the Court.
2. Upon said deposit, ordering the depository bank to allow movant Atty. Gil de Guzman
to withdraw, deducting from said account the amount of P319,500.00 as his lawful fees;
3. Allowing the withdrawal of appearance of Atty. Gil de Guzman as counsel of record for
plaintiffs.
4. Granting such further and other reliefs just and equitable.
On May 14, 1983, the petitioners filed a manifestation and motion praying that: (1) the Court ascertain
and fix the fees of Atty. de Guzman to be paid after the judgment award to the petitioners shall have been
satisfied; and (2) that Atty. de Guzman be ordered to deposit in Court the PNB Checks and to deliver to
the petitioners all documents in his possession.
On June 1, 1983, the lower court issued the challenged order declaring the termination of the legal
services of Atty. de Guzman by the petitioners as unjustified. The dispositive portion of the order reads:
WHEREFORE, in view of all the foregoing, the Court hereby fixes counsel Atty. Gil de
Guzman's attorney's fees in the sum of P177,500.00 as per contract of legal services
plus and apart from 20% of whatever attorney's fees may be finally awarded to plaintiffs
should they ultimately prevail and it is hereby further ordered that:
l) Counsel Atty. Gil de Guzman, should deliver within a Period of 5 days from receipt
hereof PNB checks Nos. 070928 in the sum of P105,888.29 and 070925 in the sum of
P745,111.71 both dated December 20, 1982, to the Branch Clerk of this Court;
2) The Branch Clerk of Court of this Court, upon receipt thereof, shall immediately deposit
said checks in a savings deposit with the Malolos Branch of the Philippine National Bank
in Malolos, Bulacan, in the names of Atty. Gil de Guzman and plaintiff and attorney-in-fact
Rolando Gimeno, and to keep in his custody the savings deposit book, the deposit to be
withdrawable only upon orders of this court;
3) Plaintiffs to pay the sum of P177,500.00 to counsel Atty. Gil de Guzman in payment of
the 25% attorney's fees,
4) Atty. Gil de Guzman upon payment of his 25% attorney's fees by plaintiffs, shall turn
over to the latter all documents and records of the case, and thereafter, to cease as
counsel for plaintiffs; and

5) The P852,000.00 deposit to remain deposited with the depository Bank, until further
orders of this Court, subject to a first lien in favor of Atty. Gil de Guzman on account of his
20% judgment attomey's fees.
On October 20, 1983, the lower court denied the petitioners' motion for reconsideration and opposition to
the motion for execution pending appeal, and granted the motion for execution pending appeal.
On November 3, 1983, a writ of execution pending appeal for P177,500.00 attorney's compensation was
issued by the Court.
As stated earlier, the Intermediate Appellate Court denied due course to the petition questioning the
execution pending appeal.
Hence, this petition
The pivotal issue in this case hinges on the amount of compensation to which Atty. Gil de Guzman is
entitled for his legal services to the petitioners in Civil Case No. SM-1208.
The petitioners contend that the attomey's compensation provided for in the contract was neither fixed nor
absolute but was contingent on the outcome of the final judgment. They maintain that "total claim" in
paragraphs "a" and "b" of the contract should be construed in the context of the question sentence "which
shall be payable to you and may be collected from us anytime after its complete payment by the said
defendants, either solidarity or collectively." They also maintain that Atty. Gil de Guzman was dismissed
for a justifiable cause and that the amount of attomey's compensation granted by the lower court was
unconscionable and unreasonable. The petitioners submit that the compensation of Atty. de Guzman
should be determined and fixed on the basis ofquantum meruit
Both Sections 24 and 26 of Rule 138 of the Revised Rules of Court cited by the parties apply to the case
at bar. Paragraph 2, Section 26, provides:
A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of the
attorney was without justifiable cause, he shall be entitled to recover from the client the
full compensation stipulated in the contract. However, the attorney may, in the discretion
of the court, intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the payment of
money, and executions issued in pursuance of such judgment, rendered in the case
wherein his services had been retained by the client.
while Section 24 states:
An attorney shall be entitled to have and recover from his client no more than a
reasonable compensation for his services, with a view to the importance of the subject
matter of the controversy, the extent of the services rendered, and the professional
standing of the attorney. No court shall be bound by the opinion of attorneys as expert
witnesses as to the proper compensation, but may disregard such testimony and base its
conclusion on its own professional knowledge. A written contract "for services shall
control the amount to be paid therefor unless found by the court to be unconscionable or
unreasonable. " (Emphasis supplied)
The stipulation of attomey's compensation in a contract for professional services can be reduced by the
courts if found unconscionable and unreasonable. We have expired this well-entrenched principle:

Contracts for attorney's services in this jurisdiction stand upon an entirely different footing
from contracts for the payment of compensation for any other services. By express
provision of section 29 of the Code of Civil Procedure, an attorney is not entitled in the
absence of express contract to recover more than a reasonable compensation for his
services; and even when an express contract is made the court can ignore it and limit the
recovery to reasonable compensation if the amount of the stipulated fee is found by the
court to be unreasonable. This is a very different rule from that announced in section
1091 of the Civil Code with reference to the obligation of contracts in general where it is
said that such obligation has the force of law between the contracting parties. ...
Since then this Court has invariably fixed counsel fees on a quantum meruit basis
whenever the fees stipulated appear excessive, unconscionable, or unreasonable,
because a lawyer is primarily a court officer charged with the duty of assisting the court in
administering impartial justice between the parties, and hence, the fees should be subject
to judicial control. Nor should it be ignored that sound public policy demands that courts
disregard stipulations for counsel fees, whenever they appear to be a source of
speculative profit at the expense of the debtor or mortgagor. (See, Gorospe, et al. v.
Gochangco, L-12735, October 30, 1959).lwphl@it (Mambulao Lumber Co. v. Philippine
National Bank, 22 SCRA 359, 371).
The lower court fixed the attorney's compensation of Atty. Gil de Guzman as follows: (1) P177,500.00
payable immediately and (2) 20% of whatever attorney's fees the petitioners may be awarded in Civil
Case No. SM-1208 as attorney's lien.
Granting that the dismissal of Atty. Gil de Guzman was unjustified, it is obvious that, in the light of the
services rendered, the stipulation of attorney's fees in the contract for legal services becomes
unconscionable and unreasonable. Moreover, we tend to agree with the petitioners that Atty. de Guzman
was dismissed for a justifiable cause. The petitioners contend that Rolando Gimeno delivered to Atty. de
Guzman the PNB checks in the amount of P852,000.00 issued by the MWSS as a result of the writ of
attachment and ordered them to be deposited with the municipal treasurer of Sta. Maria, Bulacan; that
after three months, Atty. de Guzman had not delivered said checks so that Gimeno decided to take the
checks and deposit them himself but Atty. de Guzman denied having the checks and refused to return
them forcing the petitioners to dismiss him. This assertion is given credence considering the explanation
of the petitioners which is borne out by the records, to wit:
xxx xxx xxx
... [T]hat after claiming that he "never and did not receive said checks nor (had them) in
his possession," he finally admitted having possession thereof with a ludicrous
explanation of such possession in his motion dated April 18, 1983 above quoted wherein
he alleged that: "On April 11, 1983, about 4:00 p.m. plaintiff Rolando Gimeno came to the
office of the undersigned counsel and admitted his fault and turned over PNB Checks
Nos. 070925 and 070928 both dated December 20, 1982 in the total sum of P852,000.00
in the name of Rolando Gimeno as plaintiff and attorney-in-fact which are now in
counsel's possession and custody," after Atty. Alonzo had filed on April 14,1983 a motion
to declare him in contempt of court for denying and refusing to hand over said cheeks for
deposit pursuant to the court's order of December 15, 1983. Respondent Atty. de
Guzman's concreted claim that Rolando Gimeno turned over the said checks to him on
April 11, 1983 is patently incredible because it is preposterous and utterly untrue, but
typically characteristic of his dealings with petitioners as clients. If petitioner Rolando
Gimeno had the checks and he and his new counsel had been demanding that
respondent Atty. de Guzman hand over said checks in his possession to them so the
same can be deposited in compliance with the court's order and had dismissed him for
refusing to do so, why. will he (Rolando Gimeno) suddenly turn over the checks to
respondent Atty. de Guzman who is no longer his lawyer? ...

Considering that: (1) the stipulation on payment for legal services appears unconscionable and
unreasonable; and (2) Atty. Gil de Guzman was dismissed for justifiable cause, the amount due to the
lawyer should be fixed on a quantum meruit (Mambulao Lumber Co. v. Philippine National Bank, supra).
This Court has stated that:
In determining the compensation of an attorney, the following circumstances should be
considered: the amount and character of the services rendered, the responsibility
imposed; the amount of money or the value of the property affected by the controversy, or
involved in the employment; the skill and experience caged for in the performance of the
service; the professional standing of the attorney; the results secured; and whether or not
the fee is contingent or absolute, it being a recognized rule that an attorney may properly
charge a much larger fee when it is to be contingent than when it is not. (Delgado v. De la
Rama, 43 PhiL 419) ...
Within the period of his employment by the petitioners, Atty. de Guzman filed the complaint, had the
defendants Nam Kwang and Socea Bonna declared in default and finally, on his motion, the lower court
issued the writ of attachment against MWSS. At the time of Atty. de Guzman's termination as counsel, the
case had not gone through pre-trial.
Nothing in the case so far appears complicated and no extra ordinary skill was needed for Atty. de
Guzman to accomplish what he had done in the case before he was terminated. There was no way of
determining at that point how much the petitioners would recover or whether they would even recover
anything.
For these services of Atty. de Guzman, we rule that he is entitled to the amount of P10,000.00 as
reasonable attorney's compensation.
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the then Intermediate
Appellate Court is REVERSED and SET ASIDE. The petitioners are ordered to pay Atty. Gil de Guzman
the amount of TEN THOUSAND PESOS (P10,000.00) as payment for his legal services in Civil Case No.
SM-1208.
SO ORDERED.

G.R. No. L-24803 May 26, 1977

PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of Agapito Elcano,
deceased,plaintiffs-appellants,
vs.
REGINALD HILL, minor, and MARVIN HILL, as father and Natural Guardian of said
minor, defendants-appellees.
Cruz & Avecilla for appellants.
Marvin R. Hill & Associates for appellees.

BARREDO, J.:
Appeal from the order of the Court of First Instance of Quezon City dated January 29, 1965 in Civil Case
No. Q-8102, Pedro Elcano et al. vs. Reginald Hill et al. dismissing, upon motion to dismiss of defendants,
the complaint of plaintiffs for recovery of damages from defendant Reginald Hill, a minor, married at the
time of the occurrence, and his father, the defendant Marvin Hill, with whom he was living and getting
subsistence, for the killing by Reginald of the son of the plaintiffs, named Agapito Elcano, of which, when
criminally prosecuted, the said accused was acquitted on the ground that his act was not criminal,
because of "lack of intent to kill, coupled with mistake."
Actually, the motion to dismiss based on the following grounds:
1. The present action is not only against but a violation of section 1, Rule 107, which is
now Rule III, of the Revised Rules of Court;
2. The action is barred by a prior judgment which is now final and or in res-adjudicata;
3. The complaint had no cause of action against defendant Marvin Hill, because he was
relieved as guardian of the other defendant through emancipation by marriage.
(P. 23, Record [p. 4, Record on Appeal.])
was first denied by the trial court. It was only upon motion for reconsideration of the defendants of such
denial, reiterating the above grounds that the following order was issued:
Considering the motion for reconsideration filed by the defendants on January 14, 1965
and after thoroughly examining the arguments therein contained, the Court finds the
same to be meritorious and well-founded.
WHEREFORE, the Order of this Court on December 8, 1964 is hereby reconsidered by
ordering the dismissal of the above entitled case.
SO ORDERED.
Quezon City, Philippines, January 29, 1965. (p. 40, Record [p. 21, Record on Appeal.)
Hence, this appeal where plaintiffs-appellants, the spouses Elcano, are presenting for Our resolution the
following assignment of errors:

THE LOWER COURT ERRED IN DISMISSING THE CASE BY UPHOLDING THE

CLAIM OF DEFENDANTS THAT I
THE PRESENT ACTION IS NOT ONLY AGAINST BUT ALSO A VIOLATION OF
SECTION 1, RULE 107, NOW RULE 111, OF THE REVISED RULES OF COURT, AND
THAT SECTION 3(c) OF RULE 111, RULES OF COURT IS APPLICABLE;
II
THE ACTION IS BARRED BY A PRIOR JUDGMENT WHICH IS NOW FINAL OR RESADJUDICTA;
III
THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176 TO 2194 OF THE CIVIL
CODE, ARE INAPPLICABLE IN THE INSTANT CASE; and
IV
THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST DEFENDANT
MARVIN HILL BECAUSE HE WAS RELIEVED AS GUARDIAN OF THE OTHER
DEFENDANT THROUGH EMANCIPATION BY MARRIAGE. (page 4, Record.)
It appears that for the killing of the son, Agapito, of plaintiffs-appellants, defendant- appellee Reginald Hill
was prosecuted criminally in Criminal Case No. 5102 of the Court of First Instance of Quezon City. After
due trial, he was acquitted on the ground that his act was not criminal because of "lack of intent to kill,
coupled with mistake." Parenthetically, none of the parties has favored Us with a copy of the decision of
acquittal, presumably because appellants do not dispute that such indeed was the basis stated in the
court's decision. And so, when appellants filed their complaint against appellees Reginald and his father,
Atty. Marvin Hill, on account of the death of their son, the appellees filed the motion to dismiss abovereferred to.
As We view the foregoing background of this case, the two decisive issues presented for Our resolution
are:
1. Is the present civil action for damages barred by the acquittal of Reginald in the criminal case wherein
the action for civil liability, was not reversed?
2. May Article 2180 (2nd and last paragraphs) of the Civil Code he applied against Atty. Hill,
notwithstanding the undisputed fact that at the time of the occurrence complained of. Reginald, though a
minor, living with and getting subsistenee from his father, was already legally married?
The first issue presents no more problem than the need for a reiteration and further clarification of the
dual character, criminal and civil, of fault or negligence as a source of obligation which was firmly
established in this jurisdiction in Barredo vs. Garcia, 73 Phil. 607. In that case, this Court postulated, on
the basis of a scholarly dissertation by Justice Bocobo on the nature of culpa aquiliana in relation to culpa
criminal or delito and mereculpa or fault, with pertinent citation of decisions of the Supreme Court of
Spain, the works of recognized civilians, and earlier jurisprudence of our own, that the same given act can
result in civil liability not only under the Penal Code but also under the Civil Code. Thus, the opinion holds:

The, above case is pertinent because it shows that the same act machinist. come under
both the Penal Code and the Civil Code. In that case, the action of the agent killeth
unjustified and fraudulent and therefore could have been the subject of a criminal action.
And yet, it was held to be also a proper subject of a civil action under article 1902 of the
Civil Code. It is also to be noted that it was the employer and not the employee who was
being sued. (pp. 615-616, 73 Phil.). 1
It will be noticed that the defendant in the above case could have been prosecuted in a
criminal case because his negligence causing the death of the child was punishable by
the Penal Code. Here is therefore a clear instance of the same act of negligence being a
proper subject matter either of a criminal action with its consequent civil liability arising
from a crime or of an entirely separate and independent civil action for fault or negligence
under article 1902 of the Civil Code. Thus, in this jurisdiction, the separate individuality of
a cuasi-delito or culpa aquiliana, under the Civil Code has been fully and clearly
recognized, even with regard to a negligent act for which the wrongdoer could have been
prosecuted and convicted in a criminal case and for which, after such a conviction, he
could have been sued for this civil liability arising from his crime. (p. 617, 73 Phil.) 2
It is most significant that in the case just cited, this Court specifically applied article 1902
of the Civil Code. It is thus that although J. V. House could have been criminally
prosecuted for reckless or simple negligence and not only punished but also made civilly
liable because of his criminal negligence, nevertheless this Court awarded damages in
an independent civil action for fault or negligence under article 1902 of the Civil Code. (p.
618, 73 Phil.) 3
The legal provisions, authors, and cases already invoked should ordinarily be sufficient to
dispose of this case. But inasmuch as we are announcing doctrines that have been little
understood, in the past, it might not he inappropriate to indicate their foundations.
Firstly, the Revised Penal Code in articles 365 punishes not only reckless but also simple
negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to
fault or negligence not punished by law, accordingly to the literal import of article 1093 of
the Civil Code, the legal institution of culpa aquiliana would have very little scope and
application in actual life. Death or injury to persons and damage to property- through any
degree of negligence - even the slightest - would have to be Idemnified only through the
principle of civil liability arising from a crime. In such a state of affairs, what sphere would
remain for cuasi-delito or culpa aquiliana? We are loath to impute to the lawmaker any
intention to bring about a situation so absurd and anomalous. Nor are we, in the
interpretation of the laws, disposed to uphold the letter that killeth rather than the spirit
that giveth life. We will not use the literal meaning of the law to smother and render
almost lifeless a principle of such ancient origin and such full-grown development
as culpa aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902
to 1910 of the Spanish Civil Code.
Secondary, to find the accused guilty in a criminal case, proof of guilt beyond reasonable
doubt is required, while in a civil case, preponderance of evidence is sufficient to make
the defendant pay in damages. There are numerous cases of criminal negligence which
can not be shown beyond reasonable doubt, but can be proved by a preponderance of
evidence. In such cases, the defendant can and should be made responsible in a civil
action under articles 1902 to 1910 of the Civil Code. Otherwise. there would be many
instances of unvindicated civil wrongs. "Ubi jus Idemnified remedium." (p. 620,73 Phil.)
Fourthly, because of the broad sweep of the provisions of both the Penal Code and the
Civil Code on this subject, which has given rise to the overlapping or concurrence of
spheres already discussed, and for lack of understanding of the character and efficacy of

the action for culpa aquiliana, there has grown up a common practice to seek damages
only by virtue of the civil responsibility arising from a crime, forgetting that there is
another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this
habitual method is allowed by, our laws, it has nevertheless rendered practically useless
and nugatory the more expeditious and effective remedy based on culpa aquiliana or
culpa extra-contractual. In the present case, we are asked to help perpetuate this usual
course. But we believe it is high time we pointed out to the harms done by such practice
and to restore the principle of responsibility for fault or negligence under articles 1902 et
seq. of the Civil Code to its full rigor. It is high time we caused the stream of quasi-delict
or culpa aquiliana to flow on its own natural channel, so that its waters may no longer be
diverted into that of a crime under the Penal Code. This will, it is believed, make for the
better safeguarding or private rights because it realtor, an ancient and additional remedy,
and for the further reason that an independent civil action, not depending on the issues,
limitations and results of a criminal prosecution, and entirely directed by the party
wronged or his counsel, is more likely to secure adequate and efficacious redress. (p.
621, 73 Phil.)
Contrary to an immediate impression one might get upon a reading of the foregoing excerpts from the
opinion in Garcia that the concurrence of the Penal Code and the Civil Code therein referred to
contemplate only acts of negligence and not intentional voluntary acts - deeper reflection would reveal
that the thrust of the pronouncements therein is not so limited, but that in fact it actually extends to fault
or culpa. This can be seen in the reference made therein to the Sentence of the Supreme Court of Spain
of February 14, 1919, supra, which involved a case of fraud or estafa, not a negligent act. Indeed, Article
1093 of the Civil Code of Spain, in force here at the time of Garcia, provided textually that obligations
"which are derived from acts or omissions in which fault or negligence, not punishable by law, intervene
shall be the subject of Chapter II, Title XV of this book (which refers to quasi-delicts.)" And it is precisely
the underline qualification, "not punishable by law", that Justice Bocobo emphasized could lead to an
ultimo construction or interpretation of the letter of the law that "killeth, rather than the spirit that giveth lifthence, the ruling that "(W)e will not use the literal meaning of the law to smother and render almost
lifeless a principle of such ancient origin and such full-grown development as culpa aquiliana orquasidelito, which is conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code." And so,
because Justice Bacobo was Chairman of the Code Commission that drafted the original text of the new
Civil Code, it is to be noted that the said Code, which was enacted after the Garcia doctrine, no longer
uses the term, 11 not punishable by law," thereby making it clear that the concept of culpa
aquiliana includes acts which are criminal in character or in violation of the penal law, whether voluntary
or matter. Thus, the corresponding provisions to said Article 1093 in the new code, which is Article 1162,
simply says, "Obligations derived fromquasi-delicto shall be governed by the provisions of Chapter 2, Title
XVII of this Book, (on quasi-delicts) and by special laws." More precisely, a new provision, Article 2177 of
the new code provides:
ART. 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal Code.
But the plaintiff cannot recover damages twice for the same act or omission of the
defendant.
According to the Code Commission: "The foregoing provision (Article 2177) through at first sight startling,
is not so novel or extraordinary when we consider the exact nature of criminal and civil negligence. The
former is a violation of the criminal law, while the latter is a "culpa aquiliana" or quasi-delict, of ancient
origin, having always had its own foundation and individuality, separate from criminal negligence. Such
distinction between criminal negligence and "culpa extracontractual" or "cuasi-delito" has been sustained
by decision of the Supreme Court of Spain and maintained as clear, sound and perfectly tenable by
Maura, an outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an
accusation of criminal negligence, whether on reasonable doubt or not, shall not be a bar to a subsequent
civil action, not for civil liability arising from criminal negligence, but for damages due to a quasi-delict or
'culpa aquiliana'. But said article forestalls a double recovery.", (Report of the Code) Commission, p. 162.)

Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same
argument of Justice Bacobo about construction that upholds "the spirit that giveth lift- rather than that
which is literal that killeth the intent of the lawmaker should be observed in applying the same. And
considering that the preliminary chapter on human relations of the new Civil Code definitely establishes
the separability and independence of liability in a civil action for acts criminal in character (under Articles
29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the Revised Penal Code,
and, in a sense, the Rules of Court, under Sections 2 and 3 (c), Rule 111, contemplate also the same
separability, it is "more congruent with the spirit of law, equity and justice, and more in harmony with
modern progress"- to borrow the felicitous relevant language in Rakes vs. Atlantic. Gulf and Pacific Co., 7
Phil. 359, to hold, as We do hold, that Article 2176, where it refers to "fault or negligencia covers not only
acts "not punishable by law" but also acts criminal in character, whether intentional and voluntary or
negligent. Consequently, a separate civil action lies against the offender in a criminal act, whether or not
he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if
he is actually charged also criminally, to recover damages on both scores, and would be entitled in such
eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. In other
words, the extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil
liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act
considered as a quasi-delict only and not as a crime is not estinguished even by a declaration in the
criminal case that the criminal act charged has not happened or has not been committed by the accused.
Briefly stated, We here hold, in reiteration of Garcia, thatculpa aquiliana includes voluntary and negligent
acts which may be punishable by law.4
It results, therefore, that the acquittal of Reginal Hill in the criminal case has not extinguished his liability
for quasi-delict, hence that acquittal is not a bar to the instant action against him.
Coming now to the second issue about the effect of Reginald's emancipation by marriage on the possible
civil liability of Atty. Hill, his father, it is also Our considered opinion that the conclusion of appellees that
Atty. Hill is already free from responsibility cannot be upheld.
While it is true that parental authority is terminated upon emancipation of the child (Article 327, Civil
Code), and under Article 397, emancipation takes place "by the marriage of the minor (child)", it is,
however, also clear that pursuant to Article 399, emancipation by marriage of the minor is not really full or
absolute. Thus "(E)mancipation by marriage or by voluntary concession shall terminate parental authority
over the child's person. It shall enable the minor to administer his property as though he were of age, but
he cannot borrow money or alienate or encumber real property without the consent of his father or
mother, or guardian. He can sue and be sued in court only with the assistance of his father, mother or
guardian."
Now under Article 2180, "(T)he obligation imposed by article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible. The father and, in case of
his death or incapacity, the mother, are responsible. The father and, in case of his death or incapacity, the
mother, are responsible for the damages caused by the minor children who live in their company." In the
instant case, it is not controverted that Reginald, although married, was living with his father and getting
subsistence from him at the time of the occurrence in question. Factually, therefore, Reginald was still
subservient to and dependent on his father, a situation which is not unusual.
It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability of
presuncion with their offending child under Article 2180 is that is the obligation of the parent to supervise
their minor children in order to prevent them from causing damage to third persons. 5 On the other hand,
the clear implication of Article 399, in providing that a minor emancipated by marriage may not,
nevertheless, sue or be sued without the assistance of the parents, is that such emancipation does not
carry with it freedom to enter into transactions or do any act that can give rise to judicial litigation. (See
Manresa, Id., Vol. II, pp. 766-767, 776.) And surely, killing someone else invites judicial action. Otherwise
stated, the marriage of a minor child does not relieve the parents of the duty to see to it that the child,
while still a minor, does not give answerable for the borrowings of money and alienation or encumbering

of real property which cannot be done by their minor married child without their consent. (Art. 399;
Manresa, supra.)
Accordingly, in Our considered view, Article 2180 applies to Atty. Hill notwithstanding the emancipation by
marriage of Reginald. However, inasmuch as it is evident that Reginald is now of age, as a matter of
equity, the liability of Atty. Hill has become milling, subsidiary to that of his son.
WHEREFORE, the order appealed from is reversed and the trial court is ordered to proceed in
accordance with the foregoing opinion. Costs against appellees.